<PAGE>
TABLE OF CONTENTS
NEW ENGLAND ZENITH FUND
<TABLE>
<S> <C>
Back Bay Advisors Money Market Series....................................... 1
Back Bay Advisors Bond Income Series........................................ 7
Salomon Brothers Strategic Bond Opportunities Series........................ 14
Salomon Brothers U.S. Government Series..................................... 25
Back Bay Advisors Managed Series............................................ 31
Balanced Series............................................................. 41
Alger Equity Growth Series.................................................. 52
Capital Growth Series....................................................... 59
Davis Venture Value Series.................................................. 64
Harris Oakmark Mid Cap Value Series......................................... 71
Loomis Sayles Small Cap Series.............................................. 76
MFS Investors Series........................................................ 84
MFS Research Managers Series................................................ 91
Westpeak Growth and Income Series........................................... 98
Westpeak Stock Index Series................................................. 105
Morgan Stanley International Magnum Equity Series........................... 116
Notes to Financial Statements............................................... 127
Footnotes to Portfolio Managers Commentary.................................. 134
</TABLE>
IMPORTANT:
Some funds appearing in this report may not be available under your variable
annuity product.
<PAGE>
BACK BAY ADVISORS MONEY MARKET SERIES
PORTFOLIO MANAGER: JOHN MALONEY BACK BAY ADVISORS, L.P.
[PHOTO OF JOHN MALONEY]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Back Bay Advisors Money Market Series returned 2.9% for the six months
ending June 30, 2000 compared to the 2.9% return of the Three Month Treasury
Bill and the 2.8% return of the Lipper Variable Products Money Market Fund Av-
erage/1/ for the same period. The Series ranked 24th out of 106 funds over the
past six months, which placed it in the top quartile of its Lipper peer group.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: The U.S. economy was very strong over the last year. Retail sales, vehicle
sales, home sales, and industrial activity were all strong. Job and income
growth also showed solid gains throughout the year. The Federal Reserve, in
response to this above trend growth, raised the federal funds rate six times
by a total of 175 basis points over the past twelve months to 6.50%. These
moves were meant to slow down inflation.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: As the market began to experience additional year-end pressure due to Y2K
concerns, the Series took this opportunity to pick up additional yield by in-
vesting more of its assets into 2000. With the Federal Reserve being more ac-
tive in 2000, the Series shortened its average days to maturity to 53 days at
the end of the first quarter. We began to see some economic moderation in the
second quarter so the Series extended its average days to maturity to 71 days
at the end of the second quarter to lock in higher yields for a longer period
of time.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: If the economic indicators continue to support an economic slowdown, then
the Series will continue to look to extend its average days to maturity when-
ever we get the opportunity.
[CHECKMARK] FUND FACTS
GOAL: The highest possible level of current income consistent with the
preservation of capital.
START DATE: August 1, 1983
SIZE: $214 million as of June 30, 2000
MANAGER: John Maloney has served as portfolio manager since 1996. Mr. Maloney
also manages the Nvest Tax Exempt Money Market Fund.
The Back Bay Money Market Series is neither insured nor guaranteed by the U.S.
Government. The Series seeks but cannot assure a stable share price of
$100.00.
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 may fluctuate so that shares,
upon redemption, may be worth more or less than the original cost.
1
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
INVESTMENTS--100.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
<C> <S> <C> <C> <C>
BANK NOTES--4.7%
$5,000,000 J.P. Morgan & Company, Inc.(b).. 6.640% 07/17/2000 $ 5,000,000
5,000,000 First Union National Bank(b).... 6.674% 07/31/2000 5,000,000
------------
Total Bank Notes (Cost
$10,000,000)................... 10,000,000
------------
CERTIFICATES OF DEPOSIT--16.1%
4,000,000 Toronto Dominion Bank........... 6.210% 07/20/2000 3,999,908
2,500,000 Dresdner Bank AG New York....... 5.930% 08/07/2000 2,498,218
5,000,000 Deutsche Bank AG New York....... 6.750% 08/22/2000 5,000,008
5,000,000 Deutsche Bank AG New York....... 6.750% 08/25/2000 5,000,000
4,000,000 First Union National Bank....... 6.050% 09/25/2000 3,996,080
3,000,000 Barclays Bank, Plc.............. 5.900% 10/02/2000 2,991,588
4,000,000 Canadian Imperial Bank.......... 7.020% 11/20/2000 4,000,304
5,000,000 UBS AG Stamford, CT............. 6.240% 12/06/2000 4,998,762
2,000,000 UBS AG Stamford, CT............. 6.450% 01/02/2001 1,999,518
------------
Total Certificates of Deposit
(Cost $34,484,386)............. 34,484,386
------------
CERTIFICATES OF DEPOSIT-EURO
DOLLARS--11.7%
2,000,000 National Westminster Bank....... 6.140% 07/10/2000 1,999,924
2,000,000 Toronto Dominion Bank........... 6.300% 08/29/2000 1,998,355
7,000,000 Bank of Nova Scotia............. 6.430% 09/28/2000 6,993,597
3,000,000 Toronto Dominion Bank........... 6.420% 09/28/2000 2,999,810
2,000,000 Commerzbank AG New York......... 7.030% 11/20/2000 2,000,045
9,000,000 ABN-Amro Bank NV................ 7.010% 11/22/2000 9,000,226
------------
Total Certificates of Deposit-
Euro Dollars (Cost
$24,991,957)................... 24,991,957
------------
COMMERCIAL PAPER--67.6%
ASSET BACKED--4.6%
1,000,000 Clipper Receivables Corp........ 6.160% 07/10/2000 998,460
2,185,000 Clipper Receivables Corp........ 6.580% 07/21/2000 2,177,012
3,670,000 Clipper Receivables Corp........ 6.650% 08/16/2000 3,638,815
2,985,000 Clipper Receivables Corp........ 6.610% 09/08/2000 2,947,183
------------
9,761,470
------------
AUTOMOTIVE--10.8%
90,000 Ford Motor Credit Corp.......... 6.560% 07/07/2000 89,902
1,000,000 General Motors Acceptance Corp.. 6.150% 07/17/2000 997,267
2,890,000 American Honda Finance.......... 6.170% 07/24/2000 2,878,608
1,000,000 American Honda Finance.......... 6.220% 07/25/2000 995,853
2,000,000 General Motors Acceptance Corp.. 6.170% 07/25/2000 1,991,773
1,700,000 General Motors Acceptance Corp.. 6.190% 07/31/2000 1,691,231
1,555,000 American Honda Finance.......... 6.650% 08/10/2000 1,543,510
3,000,000 American Honda Finance.......... 6.640% 08/22/2000 2,971,227
1,000,000 American Honda Finance.......... 6.600% 09/07/2000 987,533
4,000,000 Ford Motor Credit Corp.......... 6.670% 09/11/2000 3,946,640
4,100,000 General Motors Acceptance Corp.. 6.610% 10/04/2000 4,028,483
1,000,000 General Motors Acceptance Corp.. 6.620% 10/05/2000 982,347
------------
23,104,374
------------
BANKING--9.4%
1,500,000 UBS Finance Delaware, Inc....... 6.960% 07/03/2000 1,499,420
4,000,000 Citicorp........................ 6.510% 07/05/2000 3,997,107
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
<C> <S> <C> <C> <C>
BANKING--(CONTINUED)
$2,000,000 UBS Finance Delaware, Inc........ 6.750% 07/05/2000 $ 1,998,500
2,345,000 Barclays Bank, Plc............... 6.670% 07/07/2000 2,342,393
4,000,000 Citicorp......................... 6.530% 07/11/2000 3,992,744
1,500,000 Citicorp......................... 6.540% 07/13/2000 1,496,730
5,000,000 Svenska Handelsbanken............ 6.770% 11/27/2000 4,859,899
------------
20,186,793
------------
COMMUNICATIONS EQUIPMENT--4.3%
6,000,000 Motorola, Inc. .................. 6.590% 10/06/2000 5,893,462
300,000 Motorola, Inc. .................. 6.590% 10/12/2000 294,344
3,000,000 Motorola, Inc. .................. 6.590% 10/26/2000 2,935,748
------------
9,123,554
------------
FINANCE--22.3%
2,105,000 American Express Credit Corp..... 6.550% 07/10/2000 2,101,553
4,920,000 Associates Corp North America.... 6.520% 07/12/2000 4,910,198
2,000,000 CIT Group Holdings, Inc.......... 6.150% 07/17/2000 1,994,533
3,100,000 Associates Corp. North America... 6.530% 07/19/2000 3,089,879
2,000,000 Transamerica Finance Corp........ 6.350% 07/24/2000 1,991,886
2,080,000 Dresdner U.S. Finance Corp....... 6.210% 07/27/2000 2,070,671
4,000,000 CIT Group Holdings, Inc.......... 6.410% 08/01/2000 3,977,921
2,000,000 CIT Group Holdings, Inc.......... 6.340% 08/04/2000 1,988,024
790,000 Transamerica Finance Corp........ 6.650% 08/31/2000 781,098
7,000,000 Transamerica Finance Corp........ 6.650% 09/08/2000 6,910,779
3,350,000 Household Finance Corp........... 6.610% 10/12/2000 3,286,645
2,000,000 General Electric Capital Corp.... 6.440% 10/18/2000 1,961,002
3,000,000 Dresdner U.S. Finance Corp....... 6.600% 10/19/2000 2,939,500
1,500,000 CIT Group Holdings, Inc.......... 6.590% 10/23/2000 1,468,698
4,000,000 General Electric Capital Corp.... 6.650% 10/24/2000 3,915,028
3,000,000 General Electric Capital Corp.... 6.760% 11/30/2000 2,914,373
1,500,000 Dresdner U.S. Finance Corp....... 6.790% 12/04/2000 1,455,865
------------
47,757,653
------------
INSURANCE--6.9%
2,180,000 Prudential Funding Corp. ........ 6.720% 07/03/2000 2,179,186
860,000 American General Corp. .......... 6.240% 07/31/2000 855,528
8,000,000 American General Corp. .......... 6.520% 08/24/2000 7,921,760
1,000,000 American General Corp. .......... 6.620% 10/05/2000 982,347
2,000,000 Prudential Funding Corp. ........ 6.750% 11/22/2000 1,946,000
1,000,000 Prudential Funding Corp. ........ 6.760% 11/30/2000 971,458
------------
14,856,279
------------
SECURITIES--9.3%
600,000 Goldman Sachs Group L.P.......... 6.950% 07/03/2000 599,768
4,535,000 Merrill Lynch & Company, Inc..... 6.170% 07/14/2000 4,524,896
605,000 Merrill Lynch & Company, Inc..... 6.170% 07/24/2000 602,615
3,000,000 Merrill Lynch & Company, Inc..... 6.650% 08/21/2000 2,971,738
2,500,000 Goldman Sachs Group L.P.......... 6.540% 10/06/2000 2,455,946
2,345,000 Goldman Sachs Group L.P.......... 6.560% 10/10/2000 2,301,842
1,500,000 J.P. Morgan & Company, Inc....... 6.600% 10/11/2000 1,471,950
2,000,000 Goldman Sachs Group L.P.......... 6.630% 11/01/2000 1,954,695
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
INVESTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
FACE INTEREST MATURITY VALUE
AMOUNT DESCRIPTION RATE DATE (NOTE 1A)
<C> <S> <C> <C> <C>
SECURITIES--(CONTINUED)
$2,000,000 Goldman Sachs Group L.P........ 6.640% 11/02/2000 $ 1,954,258
1,000,000 Goldman Sachs Group L.P........ 6.790% 11/06/2000 975,858
------------
19,813,566
------------
Total Commercial Paper (Cost
$144,603,689)................. 144,603,689
------------
Total Investments--100.1% (Cost
$214,080,032)(a).............. 214,080,032
Other assets less liabilities.. (127,162)
------------
TOTAL NET ASSETS--100%......... $213,952,870
============
</TABLE>
(a) The aggregate cost for federal income tax purposes was $214,080,032.
(b) Variable or floating rate security. Rate disclosed is as of June 30, 2000.
See accompanying notes to financial statements.
4
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MONEY MARKET SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
JUNE 30, 2000 (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $214,080,032
Cash................................................. 2,338
Receivable for:
Fund shares sold..................................... 2,507,183
Accrued interest..................................... 1,201,050
------------
Total Assets........................................ 217,790,603
LIABILITIES
Payable for:
Fund shares redeemed................................. $2,622,835
Dividends declared................................... 1,074,059
Accrued expenses:
Management fees...................................... 61,431
Deferred trustees fees............................... 41,879
Other expenses....................................... 37,529
----------
Total Liabilities................................... 3,837,733
------------
NET ASSETS............................................ $213,952,870
============
Net assets consist of:
Capital paid in...................................... $213,952,870
------------
NET ASSETS............................................ $213,952,870
============
Computation of offering price:
Net asset value and redemption price per share
($213,952,870 divided by 2,139,528 shares of
beneficial interest)................................. $ 100.00
============
Identified cost of investments........................ $214,080,032
============
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................. $7,071,627
----------
EXPENSES
Management fees........................................... $401,565
Trustees' fees and expenses............................... 9,219
Custodian................................................. 36,296
Audit and tax services.................................... 5,021
Legal..................................................... 3,117
Printing.................................................. 15,747
Miscellaneous............................................. 4,692
--------
Total Expenses........................................... 475,657
----------
NET INVESTMENT INCOME...................................... 6,595,970
----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS...... $6,595,970
==========
</TABLE>
See accompanying notes to financial statements.
5
<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, 2000 1999
------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income........................... $ 6,595,970 $ 11,115,752
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS..................................... 6,595,970 11,115,752
------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income........................... (6,595,970) (11,115,752)
------------- -------------
TOTAL DISTRIBUTIONS............................. (6,595,970) (11,115,752)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares.................... 292,060,431 564,522,098
Reinvestment of distributions................... 5,562,131 10,962,779
Cost of shares redeemed......................... (391,382,148) (471,369,435)
------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................. (93,759,586) 104,115,442
------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS......... (93,759,586) 104,115,442
NET ASSETS
Beginning of the period......................... 307,712,456 203,597,014
------------- -------------
End of the period............................... $ 213,952,870 $ 307,712,456
============= =============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................. 2,920,604 5,636,906
Issued in reinvestment of distributions......... 55,621 117,942
Redeemed........................................ (3,913,822) (4,713,694)
------------- -------------
Net Change...................................... (937,597) 1,041,154
============= =============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- -------- -------
<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.. 2.87 4.85 5.13 5.08 4.99 5.50
-------- -------- -------- -------- -------- -------
Total From Investment
Operations............ 2.87 4.85 5.13 5.08 4.99 5.50
-------- -------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income..... (2.87) (4.85) (5.13) (5.08) (4.99) (5.50)
-------- -------- -------- -------- -------- -------
Total Distributions.... (2.87) (4.85) (5.13) (5.08) (4.99) (5.50)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $ 100.00 $ 100.00 $ 100.00 $ 100.00 $ 100.00 $100.00
======== ======== ======== ======== ======== =======
TOTAL RETURN (%)........ 2.9 (b) 5.0 5.3 5.3 5.1 5.6
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.41 (a) 0.40 0.45 0.45 0.50 0.50
Ratio of Net Investment
Income to Average Net
Assets (%)............. 5.73 (a) 4.89 5.15 5.21 4.99 5.50
Net Assets, End of
Period (000)........... $213,953 $307,712 $203,597 $111,009 $116,999 $90,148
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- -- -- -- 0.50 0.51
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
See accompanying notes to financial statements.
6
<PAGE>
BACK BAY ADVISORS BOND INCOME SERIES
LEAD PORTFOLIO MANAGER: PETER W. PALFREY, CFA
PORTFOLIO MANAGER: RICHARD RACZKOWSKI
BACK BAY ADVISORS, L.P.
[PHOTO OF PETER PALFREY]
[PHOTO OF RICHARD RACZKOWSKI]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Back Bay Advisors Bond Income Series underperformed both its benchmark
and peer group during the first half of 2000. The Series returned 2.8% compared
to the 3.2% for the Lipper Variable Products A-Rated Corporate Debt Fund Aver-
age/6/ and the 3.2% for the Lehman Intermediate Government/Credit Index/5/--an
unmanaged index that does not include management and transaction fees. This
performance placed the Series 24th out of 31 in the peer group on a year-to-
date basis, and 2nd out of 29 and 1st out of 26 on a 3-year and 5-year basis,
respectively.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: Even with 100 basis points of tightening by the Federal Reserve in the first
half of the year, intermediate and long Treasury yields declined by approxi-
mately 40 and 58 basis points, respectively. The Treasury yield curve actually
inverted by 46 basis points, reflecting an unprecedented Treasury buyback pro-
gram funded from accelerating budget surpluses and investor confidence in the
Federal Reserve's aggressive monetary strategy. The corporate, Yankee, and high
yield sectors significantly underperformed Treasuries due to aggressive Federal
Reserve tightening, high equity market volatility, reduced capital allocation
by Wall Street dealers to fixed income spread products, a decline in hedge fund
participation in the fixed income markets, and the evolution of Libor-based
buyers as the marginal corporate-sector investor. Interestingly, corporate
spreads have widened to very attractive levels during a period of positive GDP
growth, an environment that usually implies stable or even narrowing spreads.
Q: GIVEN THIS ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT CHANGES DID
YOU MAKE SINCE THE START OF THE YEAR?
A: Given the underlying strength of the U.S. and global economies, we held a
full position in corporate, Yankee, and emerging market sectors. In addition to
our core holdings in defensive industries, including cable, media, and telecom,
we maintained a relatively large position in cyclical industries such as paper
and energy, which have benefited from stronger commodity prices. More recently,
we have added exposure to the mortgage pass-through sector, which remains at-
tractively priced and should perform well, given the positive supply
technicals, as mortgage issuance declines. Non-dollar exposure has been mod-
estly increased through the first half of 2000, reflecting our expectations of
a weaker U.S. dollar during the second half of 2000.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE SIX MONTHS? WHAT INVESTMENT DECISIONS
WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: While the Series generated solid returns for the first half of the year
(outpacing equity markets for the first time in years), its performance rela-
tive to the Lehman Index was negatively affected by an underweight exposure to
the long end of the Treasury sector, and an overweight exposure to the long end
of the credit sector, particularly long maturity domestic corporates. The Se-
ries' 8.4% exposure to certain non-dollar markets also negatively impacted per-
formance as the sharp decline in the Canadian, Australian and Euro currencies
versus the dollar outweighed the positive relative performance of the bonds un-
derlying these non-dollar positions. However, there was a 100 basis point re-
bound in June's performance relative to the Lehman benchmark, due primarily to
the Series' positions in spread product and non-dollar issues.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: In our view, the Federal Reserve is nearing the end of its tightening cycle
as recent data suggest the economy is downshifting to a slower, more sustain-
able pace. We continue to believe the corporate sector represents the most at-
tractive portion of the bond market. Currently, ten-year, single-A rated corpo-
rate bonds are yielding close to 8.0%. This is particularly attractive relative
to the year-over-year CPI inflation rate of 3.0%, given the increased likeli-
hood that the Federal Reserve will achieve its desired soft landing coupled
with moderating price pressures. In relation to benchmark Treasury levels, this
bond/inflation spread is at historically high levels. The Series' maturity
structure remains concentrated in five- to ten-year
7
<PAGE>
governments and long maturity spread product. These positions should prove
beneficial in a period of corporate spread compression and modestly lower in-
terest rates should the economy slow in the second half as anticipated. Fur-
thermore, the Series' exposure to the corporate sector is concentrated in tra-
ditionally defensive industries including cable, media, and telecommunica-
tions, which are expected to outperform as the U. S. economy slows to a more
sustainable growth rate.
[GRAPH]
A $10,000 Investment compared to the Lehman Brothers Intermediate
Government Corporate Bond Index over the past ten years
Back Bay Lehman Intermediate
Bond Income Series Governemnt/Corp
6/30/90 $10,000 10,000
6/30/91 $11,023 11,052
6/30/92 $12,789 12,505
6/30/93 $14,632 13,819
6/30/94 $14,442 13,785
6/30/95 $16,556 15,214
6/30/96 $17,452 15,974
6/30/97 $19,280 17,126
6/30/98 $21,454 18,587
6/30/99 $22,033 19,364
6/30/00 $22,971 20,179
Average Annual Total Return
Lehman Intermediate Lipper Variable A rated
Bond Income Government Corp Corp. Bond Avg.
6 Months 2.8% 3.2% 2.8%
1 Year 4.3% 4.2% 5.3%
3 Years 6.0% 5.6% 5.1%
5 Years 6.8% 5.8% 5.1%
10 Years 8.7% 7.3% 4.8%
Since Inception 9.5% 8.8%
[CHECKMARK] FUND FACTS
BACK BAY ADVISORS BOND INCOME SERIES
GOAL: A high level of current income consistent with the protection of capital.
START DATE: August 26, 1983
SIZE: $271 million as of June 30, 2000
MANAGER: Peter Palfrey has managed the Series since October 1999. He has also
served as portfolio manager of Back Bay Advisors Managed Series since 1994 and
the Nvest Bond Income Fund since 1999. He joined Back Bay Advisors in April
1993. Richard Raczkowski began co-managing the Series in May 2000. He joined
Back Bay Advisors in 1998.
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.
8
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--98.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--0.9%
$ 1,485,000 Lockheed Martin Corp.,
8.200%, 12/1/09................................... $ 1,501,547
890,000 Lockheed Martin Corp.,
8.500%, 12/1/29................................... 908,720
------------
2,410,267
------------
ASSET BACKED--0.8%
2,274,000 Americredit Automobile Receivables Trust, 7.150%,
8/5/04............................................ 2,267,610
------------
BANKS--5.4%
3,700,000 Bank of America Corp., 5.875%, 2/15/09............. 3,273,190
4,300,000 Bank of America Corp., 7.800%, 2/15/10............. 4,284,391
2,950,000 Merita Bank, Ltd., 7.500%, 12/29/49 (144A)......... 2,779,030
7,495,000 World Bank,
5.500%, 5/14/03 (AUD)............................. 4,370,325
------------
14,706,936
------------
BUSINESS SERVICES--1.0%
200,000 Aramark Services, Inc.,
7.000%, 7/15/06................................... 186,666
3,000,000 Equifax, Inc.,
6.900%, 7/1/28.................................... 2,608,503
------------
2,795,169
------------
CONTAINERS--0.9%
2,533,000 Owens-Illinois, Inc.,
8.100%, 5/15/07................................... 2,343,035
------------
ELECTRIC UTILITIES--6.0%
1,000,000 BVPS II Funding Corp., 8.680%, 6/1/17.............. 992,089
6,500,000 BVPS II Funding Corp., 8.890%, 6/1/17.............. 6,512,448
2,769,000 EIP Funding Corp.,
10.250%, 10/1/12.................................. 2,919,384
5,800,000 PVNGS II Funding Corp., 8.000%, 12/30/15........... 5,802,569
------------
16,226,490
------------
FEDERAL AGENCIES--22.1%
6,100,000 Federal Home Loan Mortgage Corp., 5.000%, 1/15/04.. 5,713,992
3,455 Federal Home Loan Mortgage Corp., 9.000%, 5/1/01... 3,426
1,993 Federal Home Loan Mortgage Corp., 9.000%, 9/1/01... 2,004
6,250,000 Federal National Mortgage Association, 5.250%,
1/15/09........................................... 5,508,813
</TABLE>
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
FEDERAL AGENCIES--(CONTINUED)
$ 5,220,774 Federal National Mortgage Association, 6.500%,
7/1/14............................................ $ 5,032,982
5,000,000 Federal National Mortgage Association, 6.500%,
8/15/04........................................... 4,903,900
5,587,659 Federal National Mortgage Association, 7.500%,
3/1/15............................................ 5,570,002
386,380 Federal National Mortgage Association, 7.500%,
6/1/03............................................ 380,944
14,013,621 Federal National Mortgage Association, 7.500%,
6/1/30............................................ 13,816,449
1,754,394 Government National Mortgage Association, 6.500%,
11/15/28.......................................... 1,665,885
3,908,061 Government National Mortgage Association, 6.500%,
5/15/29........................................... 3,710,899
2,863,701 Government National Mortgage Association, 7.000%,
2/15/24........................................... 2,793,111
1,772,530 Government National Mortgage Association, 7.000%,
9/15/25........................................... 1,726,072
2,565,999 Government National Mortgage Association, 7.000%,
9/15/29........................................... 2,494,716
1,145,803 Government National Mortgage Association, 7.500%,
10/15/25.......................................... 1,139,765
1,908,789 Government National Mortgage Association, 7.500%,
7/15/23........................................... 1,901,707
984,619 Government National Mortgage Association, 7.500%,
7/15/29........................................... 977,884
1,790,825 Government National Mortgage Association, 8.000%,
11/15/29.......................................... 1,811,097
676,681 Government National Mortgage Association, 8.500%,
with various maturities to 2022................... 696,259
91,089 Government National Mortgage Association, 9.000%,
10/15/16.......................................... 95,239
------------
59,945,146
------------
FIBER OPTICS--0.6%
1,685,000 Corning, Inc.,
5.625%, 2/18/05 (EUR)............................. 1,588,562
------------
FINANCIAL SERVICES--6.7%
7,180,000 American General Financing Corp., 8.450%, 10/15/09. 7,365,115
5,650,000 Ford Motor Co.,
7.450%, 7/16/31................................... 5,314,334
5,628,000 PDVSA Finance, Ltd., 8.750%, 2/15/04............... 5,557,650
------------
18,237,099
------------
FOREIGN CORPORATES--0.4%
1,100,000 Kappa Beheer BV,
10.625%, 7/15/09 (EUR)............................ 1,071,174
------------
</TABLE>
See accompanying notes to financial statements.
9
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
FOREIGN GOVERNMENT--4.8%
$ 3,600,000 Government of Canada, 7.250%, 6/1/07 (CAD)......... $ 2,607,811
9,225,000 Government of Canada, 7.500%, 12/1/03 (CAD)........ 6,512,975
4,500,000 Province of British Columbia, 7.750%, 6/16/03
(CAD)............................................. 3,168,304
1,000,000 Province of Manitoba,
5.650%, 7/15/04 (CAD)............................. 662,311
------------
12,951,401
------------
INSURANCE--0.4%
1,550,000 Conseco, Inc., 9.000%, 10/15/06.................... 1,092,750
------------
MEDIA & ENTERTAINMENT--8.2%
635,000 Clear Channel Communications Corp., 7.875%,
6/15/05........................................... 638,717
4,100,000 Continental Cablevision, Inc., 9.500%, 8/1/13...... 4,445,228
2,000,000 CSC Holdings, Inc.,
7.625%, 7/15/18................................... 1,797,952
2,300,000 CSC Holdings, Inc., 7.875%, 12/15/18............... 2,120,391
675,000 Metromedia Fiber Network, Inc., 10.000%, 12/15/09.. 668,250
1,800,000 News America Holdings, Inc., 7.750%, 2/1/24........ 1,640,495
330,000 Shaw Communications, Inc., 8.250%, 4/11/10......... 334,404
6,000,000 TCI Communications, Inc., 8.750%, 8/1/15........... 6,500,568
400,000 Tele Communications, Inc., 8.750%, 2/15/23......... 407,804
2,935,000 Tele Communications, Inc., 9.250%, 1/15/23......... 3,132,655
500,000 Tele Communications, Inc., 9.800%, 2/1/12.......... 574,845
------------
22,261,309
------------
MORTGAGE BACKED--0.9%
2,300,000 Peco Energy Transition Trust, 7.650%, 3/1/10....... 2,325,800
------------
OIL & GAS--1.5%
330,000 Phillips Petroleum Co., 8.500%, 5/25/05............ 341,841
370,000 Phillips Petroleum Co., 8.750%, 5/25/10............ 392,429
3,315,000 Pioneer Natural Resources Co., 9.625%, 4/1/10...... 3,428,565
------------
4,162,835
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
PAPER--1.5%
$ 2,410,000 Abitibi-Consolidated, Inc., 6.950%, 4/1/08......... $ 2,189,871
2,000,000 International Paper Co., 8.125%, 7/8/05 (144A)..... 2,019,680
------------
4,209,551
------------
RETAIL--1.5%
1,995,000 Great Atlantic & Pacific Tea Co., 7.750%, 4/15/07.. 1,805,078
1,645,000 J.C. Penney Company, Inc., 9.750%, 6/15/21......... 1,459,510
1,180,000 Rite Aid Corp., 7.125%, 1/15/07.................... 607,700
630,000 Rite Aid Corp., 7.700%, 2/15/27.................... 283,500
------------
4,155,788
------------
TELECOMMUNICATIONS--10.3%
3,000,000 AT & T Corp., 8.350%, 1/15/25...................... 3,003,159
930,000 AT & T Corp., 8.625%, 12/1/31...................... 941,417
1,660,000 Deutsche Telekom International, 8.000%, 6/15/10.... 1,676,836
1,000,000 Global Crossings Holdings, Ltd., 9.625%, 5/15/08... 975,000
4,800,000 GTE Corp., 7.900%, 2/1/27.......................... 4,563,533
3,090,000 KPNQuest, 7.125%, 6/1/09 (EUR)..................... 2,731,723
500,000 LCI International, Inc., 7.250%, 6/15/07........... 481,354
3,000,000 McLeodUSA, Inc., 8.125%, 2/15/09................... 2,715,000
1,186,000 Qwest Communications International, Inc., 10.875%,
4/1/07............................................ 1,289,775
2,000,000 Qwest Communications International, Inc., 7.500%,
11/1/08........................................... 1,944,102
615,000 Sprint Capital Corp., 6.900%, 5/1/19............... 547,237
6,900,000 Worldcom, Inc., 8.875%, 1/15/06.................... 7,117,667
------------
27,986,803
------------
U.S. GOVERNMENT--7.4%
1,500,000 U.S. Treasury Notes, 4.250%, 11/15/03.............. 1,407,657
9,000,000 U.S. Treasury Notes,
5.625%, 5/15/08................................... 8,682,210
1,650,000 U.S. Treasury Notes,
5.750%, 8/15/03................................... 1,622,156
1,200,000 U.S. Treasury Notes,
6.125%, 8/15/07................................... 1,193,250
4,000,000 U.S. Treasury Notes,
6.500%, 2/15/10................................... 4,136,880
3,000,000 U.S. Treasury Notes,
6.750%, 5/15/05................................... 3,069,840
------------
20,111,993
------------
</TABLE>
See accompanying notes to financial statements.
10
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED) SHORT-TERM INVESTMENT--0.4%
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
YANKEE--16.8%
$ 1,800,000 British Sky Broadcasting Group Plc., 8.200%,
7/15/09........................................... $ 1,691,465
3,800,000 Empresa Nacional de Chile, 8.500%, 4/1/09.......... 3,708,823
1,150,000 Endesa-Chile Overseas, 7.200%, 4/1/06.............. 1,072,628
5,600,000 Freeport Terminal Malta, Plc., 7.250%, 5/15/28
(144A)............................................ 5,006,540
4,000,000 Hydro Quebec,
8.050%, 7/7/24.................................... 4,245,068
900,000 Kappa Beheer BV,
10.625%, 7/15/09.................................. 918,000
615,000 Multicanal SA,
10.500%, 4/15/18.................................. 487,387
3,700,000 Multicanal SA,
13.125%, 4/15/09.................................. 3,561,250
1,750,000 Multicanal SA,
9.250%, 2/1/02.................................... 1,658,125
3,300,000 Orange, Plc.,
8.750%, 6/1/06.................................... 3,407,250
2,200,000 Pemex Finance, Ltd.,
8.020%, 5/15/07................................... 2,089,241
1,500,000 Pemex Finance, Ltd., 9.150%, 11/15/18.............. 1,529,422
1,000,000 Pemex Finance, Ltd.,
9.690%, 8/15/09................................... 1,054,885
1,000,000 Republic of Colombia, 7.250%, 2/23/04.............. 837,500
500,000 Republic of Colombia, 8.375%, 2/15/27.............. 318,750
1,070,000 Republic of Colombia, 9.750%, 4/23/09.............. 941,600
3,100,000 Republic of Korea,
8.875%, 4/15/08................................... 3,220,125
2,060,000 Republic of Panama,
8.875%, 9/30/27................................... 1,740,700
2,750,000 Republic of Philippines, 9.875%, 1/15/19........... 2,255,000
2,300,000 SK Telecom, Ltd.,
7.750%, 4/29/04................................... 2,245,087
600,000 United Mexican States, 9.875%, 2/1/10.............. 622,500
3,050,000 YPF Sociedad Anonima, 7.750%, 8/27/07.............. 2,897,500
------------
45,508,846
------------
Total Bonds & Notes
(Identified Cost $275,778,860).................... 266,358,564
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
$ 980,000 Household Finance Corp., 6.880%, 7/3/00............. $ 979,625
Total Short-Term Investment
(Identified Cost $979,625)......................... 979,625
------------
Total Investments--98.5%
(Identified Cost $276,758,485)(a).................. 267,338,189
Other assets less liabilities....................... 4,060,241
------------
TOTAL NET ASSETS--100%.............................. $271,398,430
============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized depreciation on investments based on
cost of $276,758,485 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.............. $ 1,889,008
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (11,309,304)
------------
Net unrealized depreciation................................... $ (9,420,296)
============
</TABLE>
Key to Abbreviations:
144A--Securities 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. At the period
end, the value of these securities amounted to $9,805,250 or 3.6% of net
assets.
AUD--Australian Dollar
CAD--Canadian Dollar
EUR--Euro Currency
See accompanying notes to financial statements.
11
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
JUNE 30, 2000 (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................ $267,338,189
Cash................................................ 4,752
Receivable for:
Securities sold..................................... 1,584,605
Fund shares sold.................................... 447,545
Accrued interest.................................... 5,007,553
------------
Total Assets....................................... 274,382,644
LIABILITIES
Payable for:
Fund shares redeemed................................ $ 525,960
Securities purchased................................ 2,281,257
Accrued expenses:
Management fees..................................... 88,590
Deferred trustees fees.............................. 50,704
Other expenses...................................... 37,703
----------
Total Liabilities.................................. 2,984,214
------------
NET ASSETS........................................... $271,398,430
============
Net assets consist of:
Capital paid in..................................... $278,658,115
Undistributed net investment income................. 10,004,928
Accumulated net realized gains (losses)............. (7,845,173)
Unrealized appreciation (depreciation) on
investments and foreign currency................... (9,419,440)
------------
NET ASSETS........................................... $271,398,430
============
Computation of offering price:
Net asset value and redemption price per share
($271,398,430 divided by 2,602,770 shares of
beneficial interest)................................ $ 104.27
============
Identified cost of investments....................... $276,758,485
============
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest........................................... $10,647,606
-----------
EXPENSES
Management fees.................................... $ 543,115
Trustees' fees and expenses........................ 9,714
Custodian.......................................... 46,422
Audit and tax services............................. 7,272
Legal.............................................. 3,193
Printing........................................... 28,233
Miscellaneous...................................... 1,061
-----------
Total Expenses.................................... 639,010
-----------
NET INVESTMENT INCOME............................... 10,008,596
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................... (5,613,799)
Foreign currency transactions--net................. (404) (5,614,203)
-----------
Unrealized appreciation (depreciation) on:
Investments--net................................... 3,148,372
Foreign currency transactions--net................. 488 3,148,860
----------- -----------
Net gain (loss)..................................... (2,465,343)
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS......................................... $ 7,543,253
===========
</TABLE>
See accompanying notes to financial statements.
12
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS BOND INCOME SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 10,008,596 $ 19,965,851
Net realized gain (loss).......................... (5,614,203) (1,978,706)
Unrealized appreciation (depreciation)............ 3,148,860 (19,270,744)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. 7,543,253 (1,283,599)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (20,098,991)
Net realized gain................................. 0 (428,181)
In excess of net realized gains................... 0 (252,955)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (20,780,127)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 36,526,725 111,246,990
Reinvestment of distributions..................... 0 20,780,127
Cost of shares redeemed........................... (56,527,340) (93,898,120)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... (20,000,615) 38,128,997
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (12,457,362) 16,065,271
NET ASSETS
Beginning of the period........................... 283,855,792 267,790,521
------------ ------------
End of the period................................. $271,398,430 $283,855,792
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 10,004,928 $ (3,668)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 357,713 1,020,882
Issued in reinvestment of distributions........... 0 204,310
Redeemed.......................................... (554,280) (862,791)
------------ ------------
Net Change........................................ (196,567) 362,401
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE ------------------------------------------------
30, 2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 101.40 $ 109.89 $ 108.52 $ 105.63 $ 108.67 $ 95.53
-------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income.. 3.85 7.67 6.76 7.43 7.72 7.34
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.98) (8.18) 3.00 4.05 (2.70) 12.85
-------- -------- -------- -------- -------- --------
Total From Investment
Operations............ 2.87 (0.51) 9.76 11.48 5.02 20.19
-------- -------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (7.72) (6.64) (7.51) (7.74) (7.05)
Distributions From Net
Realized Capital
Gains................. 0.00 (0.16) (1.75) (1.08) (0.32) 0.00
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 (0.10) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- --------
Total Distributions.... 0.00 (7.98) (8.39) (8.59) (8.06) (7.05)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 104.27 $ 101.40 $ 109.89 $ 108.52 $ 105.63 $ 108.67
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)........ 2.8 (b) (0.5) 9.0 10.9 4.6 21.2
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.47 (a) 0.48 0.48 0.52 0.52 0.55
Ratio of Net Investment
Income to Average Net
Assets (%)............. 7.35 (a) 7.12 6.66 6.97 7.22 7.22
Portfolio Turnover Rate
(%).................... 94 (a) 77 82 40 98 73
Net Assets, End of
Period (000)........... $271,398 $283,856 $267,791 $202,888 $180,359 $167,712
</TABLE>
(a) Computed on an annualized basis.
(b) Periods less than one year are not computed on an annualized basis.
See accompanying notes to financial statements.
13
<PAGE>
SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES
PORTFOLIO MANAGERS: ROGER LAVAN, PETER WILBY AND DAVID SCOTT SALOMON BROTHERS
ASSET MANAGEMENT INC
[PHOTO OF ROGER LAVAN]
[PHOTO OF PETER WILBY]
[PHOTO OF DAVID SCOTT]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Salomon Brothers Strategic Bond Opportunities Series returned 2.0% for
the six-month period ending June 30, 2000. This compares to the 1.6% return of
the Lipper Variable Product General Bond Fund Average/9/ and the 4.0% return of
the Lehman Brothers Aggregate Bond Index/2/.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST TWELVE
MONTHS.
A: Throughout the past year, strong domestic economic growth has sparked obsti-
nate fear over the prospect of higher inflation. The Federal Reserve has at-
tempted to ward off some of these concerns by raising interest rates six times
since June of 1999, thereby bringing the Federal Funds target rate from 4.75%
to 6.50%. Despite the Federal Reserve's action, economic data remains strong.
In general, the fixed income markets have had their worst year since 1994 due
to inflation jitters, a reduction in market liquidity, widening yield spreads,
Y2K concerns over the last half of 1999, and worries over the Federal Reserve's
intentions. Additionally, Treasury Secretary Lawrence Summers announced early
in the first quarter of 2000 that the Treasury, due to large budget surpluses,
would buy back as much as $30 billion of outstanding securities over the year.
This buyback program played a key role in the absolute decline in Treasury
yield levels. It also led to the sharp inversion (lower interest rates at
longer maturities than at intermediate or short maturities) across the yield
curve.
Investment grade bonds posted 4.5% for the year ending June 30, 2000 as repre-
sented by the Salomon Smith Barney Broad Investment Grade Bond Index. The cor-
porate issuance, after a long, steep slide in the later half of 1999, had a
jump start at the beginning of the year and continued an upward trend into
2000. In particular, the month of March had essentially been overrun by new is-
sues, whose total was 12% higher than the same month last year.
Emerging market debt had an outstanding year returning 20.0% for the one-year
period ending June 30, 2000 as represented by the Salomon Smith Barney Brady
Bond Index. Country fundamentals have improved as reflected by rising commodity
prices, evidence of cyclical economic recoveries, and the prospect of continued
Brady bond exchanges. The markets' fundamentals remain solid: Mexico was up-
graded by Moodys to investment grade, several Latin American countries have is-
sued new debt, and Russia has agreed to a deal that will restructure some old
Soviet debt.
The High Yield Bond market has been experiencing a bear market since May 1999,
declining 1.5% for the one year period ending June 30th as tracked by the Salo-
mon Smith Barney High Yield Market Index. Investors siphoned money from the
high yield sector in pursuit of the equity market's lofty returns throughout
most of the year. The lack of available cash suffocated the new-issue market
also prompting secondary levels to lower prices. However, towards the end of
the year, mutual fund inflows entered positive territory with the new-issue
calendar primarily dominated by euro-denominated issues. Over time, we believe
that the non-dollar high yield market will evolve much like the investment-
grade Eurodollar market has evolved.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: Since the start of the year, our most notable change has been a reduction in
our emerging market debt allocation. During most of 1999 and early 2000, the
Series' emerging market debt allocation was around 20%. We cut back this allo-
cation to approximately 10% at the start of the second quarter. Emerging market
debt has performed strongly since late 1998 and the spreads in this sector have
narrowed considerably versus investment grade corporate bonds and high yield
debt. With corporate spreads under pressure during most of the first quarter,
we felt it was prudent to reduce our allocation to the emerging market debt
sector.
14
<PAGE>
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST TWELVE MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: The greatest positive contributor to the Series' performance of the past
year has been the allocation to emerging market debt. Emerging market debt re-
turned 20.0% over the past year, significantly outperforming all other sectors
of the fixed income market. The allocation to high yield bonds has been the
biggest drag on performance. High yield bonds, as measured by the Salomon
Smith Barney High Yield Index, have declined 1.5%.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: While inflation has edged higher this year, the most recent price data has
not aggravated the picture and there is a reasonable chance that if demand is
cooling, an important source of potential wage and price pressures would be
contained. Thus, with a lot of tightening under its belt, and some tentative
signs that it's having an effect while inflation is still reasonably low, the
Fed can maintain that a pause may be warranted. Whatever their immediate in-
tentions, officials likely still see the risks toward higher inflation. The
slowing signs are too tentative, especially in the labor markets. We therefore
anticipate at least a quarter-point of further tightening will be forthcoming
this year, pushing the Fed Funds target rate to 6.75% or higher.
We expect spread sectors such as high yield, investment grade corporates, and
mortgage securities to perform well over the next six months due to a steepen-
ing yield curve and a relatively inactive Federal Reserve.
[GRAPH]
A $10,000 Investment compared to the Lehman Brothers Aggregate Bond Index
since the Series' Inception
Salomon Brothers
Strategic Lehman Aggregate
10/31/94 $10,000 $10,000
6/30/95 $11,074 11,197
6/30/96 $12,390 11,758
6/30/97 $14,146 12,717
6/30/98 $15,379 14,056
6/30/99 $15,222 14,496
6/30/00 $15,789 15,156
Average Annual Return
Lipper Variable
Strategic Bond Lehman General Bond
Opp. Series Aggregate Bond Fund Average
6 Months 2.0% 4.0% 1.6%
1 Year 3.7% 4.6% 2.7%
3 Years 3.7% 6.0% 4.2%
5 Years 7.4% 6.3% 6.1%
Since Inception 8.4% 7.6%
[CHECKMARK] FUND FACTS
GOAL: A high level of total return consistent with the preservation of capital.
START DATE: October 31, 1994
SIZE: $92 million as of June 30, 2000
MANAGERS: Peter Wilby and David Scott have co-managed the Series since its
inception in October 1994. Roger Lavan began co-managing the Series in June
1998. Mr. Wilby and Mr. Scott have also managed the Salomon Brothers Investment
Series--Strategic Bond Fund since March 1995 and the North American Strategic
Income Fund since March 1995. Mr. Wilby has also managed the Salomon Brothers
Investment Series--High Yield Bond Fund since March 1995. Mr. Lavan has also
managed the Salomon Brothers Investment Series--U.S. Government Income Fund and
North American U.S. Government Securities Fund since January 1992 and the
Salomon Brothers U.S. Government Series since 1994. He joined Salomon Brothers
in 1990.
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
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--98.1% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--0.4%
$ 250,000 Raytheon Co.,
6.150%, 11/1/08.................................. $ 222,226
125,000 Sequa Corp.,
9.000%, 8/1/09................................... 120,000
250,000 Stellex Industries, Inc.,
9.500%, 11/1/07(e)............................... 25,000
------------
367,226
------------
APPAREL & TEXTILES--0.5%
250,000 Collins & Aikman Floorcovering, 10.000%, 1/15/07.. 244,375
125,000 Levi Strauss & Co.,
7.000%, 11/1/06.................................. 95,625
150,000 Westpoint Stevens, Inc.,
7.875%, 6/15/05.................................. 125,250
------------
465,250
------------
AUTO RENTAL--0.3%
250,000 Avis Group Holdings, Inc.,
11.000%, 5/1/09.................................. 260,000
------------
AUTOMOTIVE--1.2%
250,000 Breed Technologies, Inc.,
9.250%, 4/15/08 (144A)(f)........................ 2,813
500,000 Daimler Chrysler North America Holdings Corp.,
7.750%, 5/27/03.................................. 504,035
250,000 Federal-Mogul Corp.,
7.375%, 1/15/06.................................. 183,750
250,000 Foamex L.P., 9.875%, 6/15/07...................... 191,563
250,000 Key Plastics, Inc. Series B
10.250%, 3/15/07(f).............................. 21,250
250,000 Lear Corp.,
8.110%, 5/15/09 (144A)........................... 228,051
------------
1,131,462
------------
BANKS--1.2%
125,000 Bangkok Sentral NG,
8.600%, 6/15/27.................................. 108,075
550,000 Bankamerica Corp.,
7.875%, 5/16/05.................................. 558,619
130,000 European Bank For Reconstruction & Development,
10.500%, 1/25/01 (PLN)........................... 28,437
75,000 Sovereign Bancorp, Inc.,
10.500%, 11/15/06................................ 75,000
1,000,000 Vnesheconombank,
6.062%, 12/15/15(c).............................. 311,250
------------
1,081,381
------------
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
CABLE & OTHER MEDIA--2.0%
$250,000 Adelphia Communications Corp. Series B, 10.500%,
7/15/04........................................ $ 251,250
500,000 Avalon Cable,
0/11.125%, 12/1/08(b).......................... 323,750
250,000 Capstar Broadcasting
9.250%, 7/1/07................................. 256,250
375,000 Century Communications Corp.,
Zero Coupon, 1/15/08........................... 155,625
500,000 Charter Communications Holdings Corp., 0/9.920%,
4/1/11(b)...................................... 285,000
150,000 CSC Holdings, Inc.
10.500%, 5/15/16............................... 160,125
150,000 Diamond Cable Communications 0/11.750%,
12/15/05(b).................................... 143,063
250,000 Telewest Communication Plc., 0/11.000%,
10/1/07(b)..................................... 238,125
------------
1,813,188
------------
CAPITAL GOODS/BUILDING PRODUCTS--0.8%
200,000 High Voltage Engineering Corp., 10.500%,
8/15/04........................................ 139,000
250,000 Jordan Industries, Inc. Series B, 0/11.750%,
4/1/09(b)...................................... 161,250
250,000 Motors & Gears, Inc. Series D, 10.750%,
11/15/06....................................... 241,875
250,000 Neenah Corp. Series D,
11.125%, 5/1/07................................ 185,000
------------
727,125
------------
CHEMICALS--0.5%
200,000 Borden Chemicals & Plastics Corp., 9.500%,
5/1/05......................................... 177,000
250,000 Lyondell Chemical Co.,
9.875%, 5/1/07................................. 247,500
------------
424,500
------------
CONSTRUCTION--0.3%
250,000 Nortek, Inc.,
9.875%, 3/1/04................................. 236,875
------------
CONSUMER PRODUCTS--1.0%
125,000 Anchor Advanced Products, Inc. 11.750%, 4/1/04.. 84,375
250,000 Indesco International, Inc.,
9.750%, 4/15/08................................ 93,750
250,000 North Atlantic Trading, Inc.,
11.000%, 6/15/04............................... 226,875
25,000 Revlon Worldwide,
8.625%, 2/1/08................................. 12,500
</TABLE>
See accompanying notes to financial statements.
16
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
CONSUMER PRODUCTS--(CONTINUED)
$250,000 Simmons Co.,
10.250%, 3/15/09................................. $ 223,125
375,000 United Industries Corp.,
9.875%, 4/1/09................................... 208,125
125,000 Windmere-Durable Holdings, Inc., 10.000%, 7/31/08. 123,125
------------
971,875
------------
CONTAINERS/PACKAGING--0.5%
150,000 Norampac, Inc.,
9.500%, 2/1/08................................... 145,500
125,000 Owens Illinois, Inc.,
7.500%, 5/15/10.................................. 108,408
200,000 Radnor Holdings Corp.,
10.000%, 12/1/03................................. 180,000
------------
433,908
------------
COSMETICS--0.2%
125,000 French Fragrances, Inc.,
10.375%, 5/15/07................................. 117,500
50,000 Revlon Consumer Products Corp., 9.000%, 11/1/06... 35,500
------------
153,000
------------
ELECTRONICS--0.2%
150,000 Amphenol Corp.,
9.875%, 5/15/07.................................. 152,063
------------
ENERGY--1.3%
250,000 Belco Oil & Gas Corp.,
8.875%, 9/15/07.................................. 231,250
150,000 Benton Oil & Gas Co.,
11.625%, 5/1/03.................................. 109,500
250,000 Calpine Corp.,
8.750%, 7/15/07.................................. 252,975
250,000 Continental Resources, Inc.,
10.250%, 8/1/08.................................. 223,125
250,000 Frontier Oil Corp.
9.125%, 2/15/06.................................. 222,500
250,000 United Refining Co. Series B,
10.750%, 6/15/07................................. 150,000
------------
1,189,350
------------
FINANCE--1.5%
620,000 KFW International Finance,
16.300%, 6/24/03 (PLN)........................... 140,961
600,000 Morgan Stanley Dean Witter,
7.750%, 6/15/05.................................. 603,739
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FINANCE--(CONTINUED)
$ 600,000 Paine Webber Group, Inc.,
6.450%, 12/1/03.................................. $ 571,608
100,000 TPSA Finance BV,
7.750%, 12/10/08 (144A).......................... 92,248
------------
1,408,556
------------
FINANCIAL/LEASING--0.9%
250,000 ContiFinancial Corp.
8.125%, 4/1/08(f)................................ 31,250
600,000 Countrywide Funding Corp.,
6.250%, 4/15/09.................................. 523,464
250,000 Navistar International Corp.,
8.000%, 2/1/08................................... 230,625
------------
785,339
------------
FOOD & BEVERAGES--0.9%
250,000 Delta Beverage Group, Inc.
9.750%, 12/15/03................................. 237,188
250,000 Imperial Holly Corp.,
9.750%, 12/15/07................................. 49,063
500,000 Kroger Co.,
7.650%, 4/15/07.................................. 489,855
350,000 NEBCO Evans Holdings Co., 0/12.375%,
7/15/07(b)(f).................................... 0
100,000 Vlasic Foods International, Inc., 10.250%, 7/1/09. 40,000
------------
816,106
------------
FOREIGN CORPORATE--0.1%
550,000 Sudwest Landes Bank,
17.500%, 5/5/03 (PLN)............................ 127,446
------------
FOREIGN GOVERNMENT--13.8%
365,000 Algeria Tranche,
6.750%, 3/4/10................................... 281,962
475,000 Federal Republic of Brazil,
14.500%, 10/15/09................................ 509,438
1,249,606 Federal Republic of Brazil,
8.000%, 4/15/14(c)............................... 921,584
700,000 Government of Spain,
6.000%, 1/31/08 (EUR)............................ 689,007
34,000 Government of Spain,
6.150%, 1/31/13 (EUR)............................ 33,916
825,000 Ivory Coast,
2.000%, 3/29/18(c)............................... 132,000
550,000 Kingdom of Sweden,
10.250%, 5/5/03 (SEK)............................ 70,415
600,000 Ministry Finance of Russia,
12.750%, 6/24/28................................. 514,890
291,166 Morocco Loan Tranche,
6.062%, 1/1/09................................... 260,593
</TABLE>
See accompanying notes to financial statements.
17
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FOREIGN GOVERNMENT--(CONTINUED)
$ 250,000 National Republic of Bulgaria,
3.000%, 7/28/12(c)................................ $ 183,750
220,000 National Republic of Bulgaria,
7.062%, 7/28/11(c)................................ 173,536
275,000 Republic of Argentina
11.750%, 4/7/09................................... 255,729
494,000 Republic of Argentina
11.750%, 6/15/15.................................. 447,784
275,000 Republic of Argentina
11.375%, 1/30/17.................................. 245,987
500,000 Republic of Argentina
6.000%, 3/31/23(c)................................ 331,875
280,000 Republic of Colombia,
10.875%, 3/9/04................................... 260,764
50,000 Republic of Colombia,
9.750%, 4/23/09................................... 44,000
296,021 Republic of Croatia
7.032%, 7/31/06(c)................................ 278,437
170,000 Republic of Deutschland,
6.500%, 7/15/03 (EUR)............................. 168,677
3,050,000 Republic of Deutschland,
7.375%, 1/3/05 (EUR).............................. 3,166,622
120,000 Republic of Deutschland,
5.625%, 1/4/28 (EUR).............................. 116,042
500,000 Republic of Ecuador
4.000%, 2/28/25(c)................................ 170,625
79,000,000 Republic of Greece,
9.700%, 5/27/01 (GRD)............................. 229,039
171,000 Republic of Italy,
9.500%, 2/1/01 (EUR).............................. 167,515
225,000 Republic of Panama
4.250%, 7/17/14(c)................................ 179,168
200,000 Republic of Panama
8.875%, 9/30/27................................... 168,432
300,000 Republic of Peru,
4.500%, 3/7/17(c)................................. 199,500
125,000 Republic of Philippines,
9.875%, 1/15/19................................... 106,221
166,665 Republic of Venezuela,
7.4375%, 3/31/07(c)............................... 136,249
333,332 Republic of Venezuela, Series B, 7.4375%,
3/31/07(c)........................................ 274,697
750,000 Republic of Venezuela
13.625%, 8/15/18.................................. 698,438
1,800,000 Russian Principal Loans,
6.063%, 12/15/20(c)............................... 550,710
175,000 United Mexican States,
10.375%, 2/17/09.................................. 184,634
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FOREIGN GOVERNMENT--(CONTINUED)
$ 450,000 United Mexican States,
11.375%, 9/15/16................................. $ 510,075
118,000 United Mexican States,
6.250%, 12/31/19................................. 97,645
------------
12,759,956
------------
FORESTRY PRODUCTS--0.1%
125,000 Tembec Industries, Inc.,
8.625%, 6/30/09.................................. 118,750
------------
GOVERNMENT AGENCIES--31.9%
91,823 Federal Home Loan Mortgage, 10.000%, 05/15/20..... 95,604
1,275 Federal Home Loan Mortgage, 1156.500%,
06/15/21(d)...................................... 37,205
311,549 Federal National Mortgage Association, 7.393%,
08/17/03......................................... 311,524
2,953,082 Federal National Mortgage Association, 7.368%,
01/17/13......................................... 2,990,083
9,829 Federal National Mortgage Association, 13.000%,
11/15/15......................................... 11,042
40,429 Federal National Mortgage Association, 10.400%,
04/25/19......................................... 42,626
3,385,915 Federal National Mortgage Association, 0.576%,
03/17/20(d)...................................... 71,951
707,535 Federal National Mortgage Association, 6.500%,
03/1/26.......................................... 670,608
82,867 Federal National Mortgage Association, 7.000%,
05/1/26.......................................... 80,303
4,517,183 Federal National Mortgage Association, 1.663%,
02/25/35(d)...................................... 305,033
8,397,150 Federal National Mortgage Association, 0.531%,
10/17/36(d)...................................... 189,745
9,791,799 Federal National Mortgage Association, 1.044%,
06/25/38(d)...................................... 538,549
9,500,000 Federal National Mortgage Association, 7.000%,
TBA.............................................. 9,171,965
9,000,000 Federal National Mortgage Association, 7.500%,
TBA.............................................. 8,872,020
6,000,000 Federal National Mortgage Association, 8.000%,
TBA.............................................. 6,025,320
------------
29,413,578
------------
HEALTHCARE--0.4%
250,000 Fresenius Medical Care Capital Trust I, 9.000%,
12/1/06.......................................... 238,125
175,000 Tenet Healthcare Corp., 9.250%, 9/1/10, (144A).... 176,530
------------
414,655
------------
</TABLE>
See accompanying notes to financial statements.
18
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
HOTEL/LODGING--0.9%
$ 250,000 Capstar Hotel Co.,
8.750%, 8/15/07.................................. $ 221,875
250,000 HMH Properties, Inc. Series B,
7.875%, 8/1/08................................... 225,625
400,000 Park Place Entertainment Corp.,
9.375%, 2/15/07, (144A).......................... 400,000
------------
847,500
------------
HOUSING RELATED--0.2%
250,000 CB Richards Ellis Services, Inc.
8.875%, 6/01/06.................................. 213,750
------------
INTERNET SOFTWARE--0.2%
125,000 Covad Communications Group, 12.000%, 2/15/10,
(144A)........................................... 98,125
50,000 PSINet, Inc.,
11.500%, 11/1/08................................. 47,000
------------
145,125
------------
LEISURE TIME--1.0%
75,000 Harrah's Operating Co., Inc.
7.875%, 12/15/05................................. 70,687
250,000 Horseshoe Gaming
9.375%, 6/15/07.................................. 245,000
150,000 Mohegan Tribal Gaming,
8.750%, 1/1/09................................... 143,250
250,000 Sun International Hotels,
8.625%, 12/15/07................................. 227,500
239,000 Waterford Gaming,
9.500%, 3/15/10, (144A).......................... 231,830
------------
918,267
------------
METALS/MINING/STEEL--0.3%
250,000 Murrin Murrin Holdings Property, Ltd. 9.375%,
8/31/07.......................................... 217,500
100,000 P&L Coal Holdings Corp.,
9.625%, 5/15/08.................................. 93,250
------------
310,750
------------
MORTGAGE--14.1%
246,925 Airplane Pass Through Trust,
10.875%, 3/15/19................................. 200,599
1,800,000 Commercial Mortgage Asset Trust 7.350%, 08/17/13.. 1,706,053
900,000 ContiMortgage Home Equity Loans, 7.000%, 12/25/01,
(144A)........................................... 562,359
877,838 Countrywide Mortgage Backed Securities Corp.,
7.750%, 06/25/24................................. 858,873
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
MORTGAGE--(CONTINUED)
$ 9,591,865 DLJ Commercial Mortgage Corp. 0.892%, 05/10/23(d). $ 377,919
8,847,577 DLJ Commercial Mortgage Corp. 1.068%, 11/12/31(d). 441,494
24,600,000 DLJ Mortgage Acceptance Corp., 1.3635%, 11/15/04,
(144A)(d)........................................ 1,237,161
242,015 First Union Residential Securitization, 7.000%,
08/25/28......................................... 214,183
982,243 GE Capital Mortgage Services, Inc. 6.750%,
11/25/28......................................... 876,652
1,570,708 Green Tree Financial Corp.,
7.070%, 01/15/29................................. 1,471,549
1,250,000 LB Commercial Conduit Mortgage Trust, 6.780%,
4/15/09.......................................... 1,197,182
1,314,391 Mid State Trust VI,
7.340%, 07/1/35.................................. 1,266,744
437,609 PNC Mortgage Securities Corp., 6.735%, 02/25/28... 374,155
342,451 PNC Mortgage Securities Corp. 6.750%, 05/25/28.... 292,796
464,531 PNC Mortgage Securities Corp., 6.838%, 05/25/28... 399,497
740,317 PNC Mortgage Securities Corp. 6.772%, 03/25/29.... 662,584
638,070 PNC Mortgage Securities Corp. 6.910%, 04/25/29.... 548,740
339,286 RG Receivables Co.,
9.600%, 2/28/05.................................. 291,786
------------
12,980,326
------------
MOTORCYCLES--0.1%
125,000 Derby Cycle Corp.,
10.000%, 5/15/08................................. 50,000
------------
OIL--0.9%
125,000 Gulf Canada Resources, Ltd.,
9.625%, 7/1/05................................... 127,187
125,000 Key Energy Services, Inc.,
14.000%, 1/15/09................................. 140,625
150,000 Plains Resources, Inc.,
10.250%, 3/15/06................................. 151,125
425,000 Union Oil Co.,
7.350%, 6/15/09.................................. 411,630
------------
830,567
------------
PAPER--0.1%
60,000 Repap New Brunswick, Inc.,
10.625%, 4/15/05................................. 52,800
------------
PHOTO EQUIPMENT--0.1%
125,000 Polaroid Corp.,
11.500%, 2/15/06................................. 129,688
------------
</TABLE>
See accompanying notes to financial statements.
19
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
REAL ESTATE--0.1%
$ 150,000 Spieker Properties L.P.,
7.250%, 5/1/09................................... $ 140,661
------------
RETAIL--1.2%
100,000 Cole National Group, Inc.
9.875%, 12/31/06................................. 73,500
250,000 Finlay Fine Jewelry Corp.,
8.375%, 5/01/08.................................. 225,000
321,000 Guitar Center Management Co., Inc. 11.000%,
7/1/06........................................... 311,370
125,000 Pueblo Xtra International,
9.500%, 8/1/03................................... 58,125
398,000 Wal-Mart Stores, Inc.,
7.550%, 2/15/30.................................. 407,405
------------
1,075,400
------------
SERVICES--2.0%
125,000 Allied Waste North America, Inc. 10.000%, 8/1/09,
(144A)........................................... 105,000
650,000 Cendant Corp.,
7.750%, 12/1/03.................................. 624,845
125,000 Integrated Electric Services, Inc., 9.375%,
2/1/09........................................... 101,250
250,000 Intertek Finance Plc, Series B,
10.250%, 11/1/06................................. 206,250
250,000 Iron Mountain, Inc.,
10.125%, 10/1/06................................. 251,250
250,000 Loomis Fargo & Co.,
10.000%, 1/15/04................................. 241,250
250,000 Primark Corp.,
9.250%, 12/15/08................................. 276,250
250,000 Safety Kleen Services,
9.250%, 6/1/08(f)................................ 21,250
------------
1,827,345
------------
STEEL--0.7%
175,000 AK Steel Corp.,
7.875%, 2/15/09.................................. 155,312
500,000 USX Corp.,
7.200%, 2/15/04.................................. 492,700
------------
648,012
------------
TELECOMMUNICATIONS--3.3%
100,000 Centennial Cellular Corp.,
10.750%, 12/15/08................................ 97,625
150,000 Crown Castle International Corp., 10.750%, 8/1/11. 152,062
125,000 Global Crossing Holdings, Ltd.,
9.125%, 11/15/06................................. 120,000
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
TELECOMMUNICATIONS--(CONTINUED)
$ 200,000 GTE Corp.
6.940%, 4/15/28.................................. $ 177,131
275,000 ICG Holdings, Inc.,
0/13.500%, 9/15/05(b)............................ 266,062
125,000 Intermedia Communications, Inc., 8.600%, 6/1/08... 116,250
350,000 International Cabletel, Inc.,
0/11.500%, 2/1/06(b)............................. 324,625
125,000 Leap Wireless International, Inc., 12.500%,
4/15/10.......................................... 107,500
500,000 Nextel Communications, Inc., 0/9.950%, 2/15/08(b). 368,750
250,000 Nextel Communications, Inc., 0/9.750%,
10/31/07(b)...................................... 187,500
125,000 Nextlink Communications, Inc., 10.750%, 6/1/09.... 123,125
150,000 Price Communications Wireless Corp., 11.750%,
7/15/07.......................................... 161,250
650,000 Sprint Capital Corp.,
5.700%, 11/15/03................................. 613,132
400,000 United International Holdings Series B, 0/10.750%,
2/15/08(b)....................................... 268,000
------------
3,083,012
------------
TRANSPORTATION--0.4%
150,000 Enterprises Shipholding Corp.
8.875%, 5/1/08................................... 84,750
200,000 Holt Group, Inc.,
9.750%, 1/15/06.................................. 20,000
125,000 Stena AB,
8.750%, 06/15/07................................. 109,062
265,000 TFM S.A.,
0/11.750%, 6/15/09(b)............................ 182,187
------------
395,999
------------
U.S. GOVERNMENT--12.4%
200,000 United States Treasury Bonds,
6.125%, 11/15/27................................. 199,438
2,000,000 United States Treasury Bonds,
5.250%, 11/15/28................................. 1,770,626
910,000 United States Treasury Bonds,
5.500%, 8/15/28.................................. 834,925
1,000,000 United States Treasury Bonds,
6.125%, 8/15/29.................................. 1,010,000
3,000,000 United States Treasury Bonds,
6.250%, 5/15/30.................................. 3,147,660
1,500,000 United States Treasury Notes,
5.250%, 5/31/01.................................. 1,483,830
</TABLE>
See accompanying notes to financial statements.
20
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
U.S. GOVERNMENT--(CONTINUED)
$ 2,000,000 United States Treasury Notes,
6.500%, 3/31/02................................... $ 2,001,240
1,000,000 United States Treasury Notes,
5.875%, 11/15/04.................................. 985,470
------------
11,433,189
------------
WATER--0.1%
125,000 Azurix Corp.,
10.750%, 2/15/10, (144A).......................... 120,938
------------
Total Bonds & Notes
(Identified Cost $95,139,035)..................... 90,454,918
------------
PREFERRED STOCKS--0.0%
<CAPTION>
SHARES
<C> <S> <C>
840 TCR Holdings, Class B.............................. 9
462 TCR Holdings, Class C.............................. 5
1,219 TCR Holdings, Class D.............................. 12
2,521 TCR Holdings, Class E.............................. 25
------------
Total Preferred Stocks
(Identified Cost $300)............................ 51
------------
WARRANTS--0.0%
200 In Flight Phone Corp............................... 0
------------
Total Warrants
(Identified Cost $0.00)........................... 0
------------
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM INVESTMENTS--26.5%
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
$12,407,000 Repurchase Agreement with State Street Corp.
dated 6/30/00 at 6.400% to be repurchased at
$12,413,617 on 7/03/00, collateralized by
$11,340,000 U.S. Treasury Bonds, 6.875% due
8/15/25 with a value of $12,658,275............. $ 12,407,000
12,000,000 Repurchase Agreement with Warburg Dillon Reed LLC
dated 6/30/00 at 6.550% to be repurchased at
$12,006,550 on 7/03/00, collateralized by
$10,384,000 U.S. Treasury Bonds, 7.625% due
11/15/22 with a value of $12,240,140............ 12,000,000
------------
Total Short-Term Investments
(Identified Cost $24,407,000)................... 24,407,000
------------
Total Investments--124.6%
(Identified Cost $119,546,335)(a)............... 114,861,969
Other assets less liabilities.................... (22,680,585)
------------
TOTAL NET ASSETS--100%........................... $ 92,181,384
============
</TABLE>
See accompanying notes to financial statements.
21
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
FORWARD CURRENCY CONTRACTS OUTSTANDING AT JUNE 30, 2000
<TABLE>
<CAPTION>
LOCAL AGGREGATE UNREALIZED
CURRENCY DELIVERY CURRENCY FACE TOTAL APPRECIATION/
CONTRACT DATE AMOUNT VALUE VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Canadian Dollar
(bought) 7/28/2000 768,410 $ 517,028 $ 519,571 $ 2,543
Canadian Dollar
(sold) 7/28/2000 2,168,410 1,467,305 1,466,202 1,102
Euro Currency
(bought) 7/28/2000 2,937,268 2,748,453 2,809,383 60,930
Euro Currency
(sold) 7/28/2000 2,905,720 2,727,944 2,779,209 (51,265)
Euro Currency
(sold) 7/28/2000 197,987 180,000 189,018 (9,018)
Pound Sterling
(bought) 7/28/2000 104,483 158,248 158,180 (67)
Pound Sterling
(sold) 7/28/2000 106,731 160,000 161,583 (1,583)
Greek Drachma
(sold) 7/28/2000 169,508,825 453,839 479,843 (26,004)
Greek Drachma
(bought) 7/28/2000 169,508,825 459,959 479,843 19,884
Japanese Yen (sold) 7/28/2000 201,770,383 1,880,140 1,911,774 (31,634)
Japanese Yen
(bought) 7/28/2000 121,204,237 1,130,943 1,148,410 17,467
Polish Zloty (sold) 7/28/2000 4,075,139 918,264 927,527 (9,263)
Polish Zloty
(bought) 7/28/2000 3,974,080 911,176 904,525 (6,651)
Swedish Krona
(sold) 7/28/2000 3,359,970 370,000 381,797 (11,797)
Swedish Krona
(bought) 7/28/2000 3,359,970 377,724 381,798 4,074
--------
Net unrealized depreciation on Forward Currency Contracts...... $(41,282)
========
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized depreciation on investments based on
cost of $119,546,335 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............... $ 1,432,700
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value............... (6,117,066)
-----------
Net unrealized depreciation.................................... $(4,684,366)
===========
</TABLE>
(b) 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.
(c) Variable or floating rate security. Rate disclosed is as of June 30, 2000.
(d) Interest only certificate. This security receives monthly interest payments
but is not entitled to principal payments.
(e) Non-Income producing security.
(f) Non-Income producing; issuer filed petition under Chapter 11 of the Federal
Bankruptcy Code.
Key to Abbreviations:
144A--Securities 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. At the period
end, the value of these securities amounted to $3,255,055 or 3.5% of net
assets.
EUR--Euro Currency
GRD--Greek Drachma
PLN--Polish Zloty
SEK--Swedish Krona
See accompanying notes to financial statements.
22
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
JUNE 30, 2000 (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................ $ 90,454,969
Investments in repurchase agreements at cost........ 24,407,000
------------
Total Investments.................................. 114,861,969
Receivable for:
Securities sold..................................... 598,672
Fund shares sold.................................... 279,244
Accrued interest.................................... 1,513,445
Foreign taxes....................................... 1,059
------------
Total Assets....................................... 117,254,389
LIABILITIES
Payable for:
Fund shares redeemed................................ $ 204,515
Securities purchased................................ 24,721,029
Due to custodian bank............................... 12,836
Open forward currency contracts--net................ 41,282
Withholding taxes................................... 1,518
Miscellaneous....................................... 158
Accrued expenses:
Management fees..................................... 48,599
Deferred trustees fees.............................. 8,825
Other expenses...................................... 34,243
-----------
Total Liabilities.................................. 25,073,005
------------
NET ASSETS.......................................... $ 92,181,384
============
Net assets consist of:
Capital paid in..................................... $ 99,914,849
Undistributed net investment income................. 2,925,500
Accumulated net realized gains (losses)............. (5,931,484)
Unrealized appreciation (depreciation) on
investments, foreign currency and forward
contracts.......................................... (4,727,481)
------------
NET ASSETS.......................................... $ 92,181,384
============
Computation of offering price:
Net asset value and redemption price per share
($92,181,384 divided by 8,470,070 shares of
beneficial interest)............................... $ 10.88
============
Identified cost of investments...................... $119,546,335
============
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest........................................... $ 3,356,562
-----------
EXPENSES
Management fees.................................... $ 298,234
Trustees' fees and expenses........................ 6,537
Custodian.......................................... 46,820
Audit and tax services............................. 7,571
Legal.............................................. 1,089
Printing........................................... 6,570
Miscellaneous...................................... 1,472
-----------
Total Expenses.................................... 368,293
-----------
NET INVESTMENT INCOME............................... 2,988,269
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................... 667,035
Options--net....................................... (176,497)
Foreign currency transactions--net................. (146,689) 343,849
-----------
Unrealized appreciation
(depreciation) on:
Investments--net................................... (1,474,099)
Foreign currency transactions--net................. (6,657) (1,480,756)
----------- -----------
Net gain (loss)..................................... (1,136,907)
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS......................................... $ 1,851,362
===========
</TABLE>
See accompanying notes to financial statements.
23
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS STRATEGIC BOND OPPORTUNITIES SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 2,988,269 $ 7,751,203
Net realized gain (loss).......................... 343,849 (3,919,652)
Unrealized appreciation (depreciation)............ (1,480,756) (2,464,503)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. 1,851,362 1,367,048
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (7,574,436)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (7,574,436)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 13,128,119 29,507,364
Reinvestment of distributions..................... 0 7,574,436
Cost of shares redeemed........................... (17,708,457) (31,413,923)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... (4,580,338) 5,667,877
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (2,728,976) (539,511)
NET ASSETS
Beginning of the period........................... 94,910,360 95,449,871
------------ ------------
End of the period................................. $ 92,181,384 $ 94,910,360
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 2,925,500 $ (62,769)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 1,223,773 2,585,620
Issued in reinvestment of distributions........... 0 709,882
Redeemed.......................................... (1,651,139) (2,751,781)
------------ ------------
Net Change........................................ (427,366) 543,721
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------
2000 1999 1998 1997 1996 1995
---------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.67 $ 11.43 $ 12.01 $ 11.62 $ 10.85 $ 9.74
------- ------- ------- ------- ------- ------
Income From Investment
Operations
Net Investment Income.. 0.35 0.95 0.80 0.75 0.51 0.58
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.14) (0.78) (0.56) 0.54 1.05 1.30
------- ------- ------- ------- ------- ------
Total From Investment
Operations............ 0.21 0.17 0.24 1.29 1.56 1.88
------- ------- ------- ------- ------- ------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (0.93) (0.79) (0.76) (0.60) (0.55)
Distributions From Net
Realized Capital
Gains................. 0.00 0.00 (0.02) (0.14) (0.19) (0.22)
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 0.00 (0.01) 0.00 0.00 0.00
------- ------- ------- ------- ------- ------
Total Distributions.... 0.00 (0.93) (0.82) (0.90) (0.79) (0.77)
------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $ 10.88 $ 10.67 $ 11.43 $ 12.01 $ 11.62 $10.85
======= ======= ======= ======= ======= ======
TOTAL RETURN (%)........ 2.0(b) 1.4 2.0 11.1 14.4 19.4
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.80(a) 0.81 0.85 0.85 0.85 0.85
Ratio of Net Investment
Income to Average Net
Assets (%)............. 6.50(a) 8.15 7.20 7.32 7.79 8.39
Portfolio Turnover Rate
(%).................... 356(a) 224 283 258 176 202
Net Assets, End of
Period (000) .......... $92,181 $94,910 $95,450 $71,202 $35,808 $9,484
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- -- -- 0.87 1.19 2.44
</TABLE>
(a)Computed on an annualized basis.
(b)Periods less than one year are not computed on an annualized basis.
24
<PAGE>
SALOMON BROTHERS U.S. GOVERNMENT SERIES
PORTFOLIO MANAGER: ROGER LAVAN SALOMON BROTHERS ASSET MANAGEMENT INC
[PHOTO APPEARS HERE]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Salomon Brothers US Government Series returned 3.4% for the six-month
period ending June 30, 2000 versus 3.5% return of the Lehman Brothers Interme-
diate Government Bond Index/4/ and a 3.6% return of the Lipper Variable Product
GNMA/US Mortgage Fund Average/17/.
This slight underperformance resulted from the Series' allocation to agencies
and mortgage pass-throughs. Treasury securities outperformed all sectors of the
fixed income market during the last six months.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST TWELVE
MONTHS.
A: Throughout the past year, strong domestic economic growth has sparked obsti-
nate fear over the prospect of higher inflation. The Federal Reserve has at-
tempted to ward off some of these concerns by raising interest rates six times
since June of 1999, thereby bringing the Federal Funds target rate from 4.75%
to 6.50%. Economic data, however, remains strong.
In general, the fixed income markets have had their worst year since 1994 due
to inflation jitters, a reduction in market liquidity, widening yield spreads,
Y2K concerns over the last half of 1999, and worries over the Federal Reserve's
intentions. Additionally, Treasury Secretary Lawrence Summers announced early
in the first quarter of 2000 that the Treasury, due to large budget surpluses,
would buy back as much as $30 billion of outstanding securities over the year.
This buyback program played a key role in the absolute decline in Treasury
yield levels. It also led to the sharp inversion across the yield curve.
In mid June the Treasury Department went on to announce that it will repurchase
up to $2 billion of outstanding government securities in a reverse auction.
Primary dealers of government securities submit offers and the Treasury decides
which offers to accept for repurchase in a reverse auction. The repurchase op-
eration will target 13 issues maturing between February 2019 and August 2023.
There also is sentiment in the market that the bond auction in August could be
the last such sale of 30-year securities after President Clinton announced that
the Treasury could eliminate the federal debt, now $3.5 trillion, by 2012.
So far this year, the 30-year Treasury bond has performed the best. Agency debt
is one sector of the bond market that considerably lagged the strong perfor-
mance of Treasuries. There is concern in the market about proposals to alter
federal regulation of such institutions as Fannie Mae and Freddie Mac, and,
among other things, to possibly end conditional government lines of credit to
them.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: At the start of the year, we felt that the economy was too strong and that
the Fed would need to continue to tighten monetary policy. Because inflation
was relatively benign, our view was the short end of the yield curve would bear
the brunt of the tightening moves, leading to a flat to inverted U.S. Treasury
yield curve. We implemented a "barbell" yield curve strategy where the Series
held a combination of very short and long maturities and avoided the middle (2-
5 year) part of the yield curve. This strategy proved to be very beneficial, as
there was a dramatic inversion in the yield curve with the 30-year bond ending
the first quarter 64 basis point lower in yield than the 2-year Treasury. The
barbell yield curve strategy offset considerably the poor performance that
agency bonds and mortgage pass-throughs had relative to U.S. Treasuries during
the past six months.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST TWELVE MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: During the past 12 months, rising interest rates, widening spreads on mort-
gages and agency bonds, and extreme inversion of the yield curve were the prin-
cipal factors affecting the Series' performance. Given this environment and re-
strictions placed on the Series regarding Treasury holdings, we are fairly
pleased with how the Series has performed over the past 12 months. On a gross
basis, the Series outperformed the benchmark by 60 basis points. Net of fees
and expenses, the Series' 3.41% return was 8 basis points shy of the benchmark.
25
<PAGE>
The biggest positive contributor to the Series' performance was the barbell
yield curve position, while the allocation away from Treasuries to mortgage
pass-throughs and agency debentures had the largest negative impact relative
to the benchmark.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: While inflation has edged higher this year, the most recent price data has
not aggravated the picture and there is a reasonable chance that if demand is
cooling, an important source of potential wage and price pressures would be
contained. Thus, with a lot of tightening under its belt, and some tentative
signs that it's having an effect while inflation is still reasonably low,
[GRAPH]
A $10,000 Investment compared to the Lehman Intermediate Government Index
since the Series' Inception
Salomon Brothers U.S. Lehman Intermediate
Government Securities Government Index
10/31/94 $10,000 $10,000
6/30/95 $11,009 $10,890
6/30/96 $11,445 $11,428
6/30/97 $12,318 $12,222
6/30/98 $13,410 $13,246
6/30/99 $13,820 $13,832
6/30/00 $14,455 $14,453
Average Annual Total Returns
Lipper Variable
US Government Lehman Intermediate US Mortgage
Series US Government and GNMA
6 months 3.4% 3.5% 3.6%
1 Year 4.6% 4.5% 4.4%
3 Years 5.5% 5.8% 5.5%
5 Years 5.6% 5.8% 5.9%
Since Inception 6.7% 6.7% n/a
[CHECKMARK] 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: $50 million as of June 30, 2000
MANAGERS: Roger Lavan has managed the Series since its inception in 1994. Mr.
Lavan has managed the Salomon Brothers Investment Series--U.S. Government Income
Fund and the North American U.S. Government Securities Fund since January 1992.
He joined Salomon Brothers Asset Management Inc in 1990. Mr. Lavan has also co-
managed the Strategic Bond Opportunities Series since June 1998.
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.
the Fed can maintain that a pause may be warranted. Whatever their immediate
intentions, officials likely still see the risks toward higher inflation. The
slowing signs are too tentative, especially in the labor markets. We therefore
anticipate at least a quarter-point of further tightening will be forthcoming
this year, pushing the Fed Funds target rate to 6.75% or higher.
The bond market should perform well as the Fed comes to an end of its tighten-
ing campaign. We look for the yield curve to revert to a somewhat normal shape
and government bonds to provide returns in the 6% to 9% range over the next
year. As the economy moderates and the Fed becomes less active, or perhaps be-
comes inactive, we will look to overweight the 2-5 year area of the yield
curve and increase the Series' allocation away from Treasuries.
26
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--85.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FEDERAL AGENCY--74.1%
$1,000,000 Federal Home Loan Banks, 5.800%, 9/2/08.............. $ 916,900
132,478 Federal Home Loan Mortgage Corp., 7.500%, 5/1/07..... 132,716
10,533 Federal Home Loan Mortgage Corp., 6.000%, 10/1/10.... 9,990
206,503 Federal Home Loan Mortgage Corp., 7.000%, 7/1/11..... 202,953
41,702 Federal Home Loan Mortgage Corp., 11.750%, 1/1/12.... 46,537
388,690 Federal Home Loan Mortgage Corp., 6.500%, 8/1/13..... 375,692
438,203 Federal Home Loan Mortgage Corp., 10.000%, 3/1/16.... 461,209
128,027 Federal Home Loan Mortgage Corp., 8.250%, 4/1/17..... 130,511
94,761 Federal Home Loan Mortgage Corp., 9.000%, 10/1/17.... 97,382
1,214,660 Federal Home Loan Mortgage Corp., 6.000%, 10/1/18.... 1,112,932
191,419 Federal Home Loan Mortgage Corp., 8.000%, 12/1/19.... 192,615
457,794 Federal Home Loan Mortgage Corp., 8.000%, 7/1/20..... 458,938
203,598 Federal Home Loan Mortgage Corp., 10.500%, 6/1/20.... 217,850
146,629 Federal Home Loan Mortgage Corp., 7.000%, 4/15/21.... 145,391
177,832 Federal Home Loan Mortgage Corp., 6.500%, 3/1/26..... 167,996
38,395 Federal Home Loan Mortgage Corp., 6.500%, 5/1/26..... 36,271
43,684 Federal Home Loan Mortgage Corp., 6.500%, 6/1/26..... 41,268
653,573 Federal Home Loan Mortgage Corp., 6.500%, 7/1/26..... 617,422
1,049,139 Federal Home Loan Mortgage Corp., 6.000%, 11/1/28.... 961,274
135,026 Federal National Mortgage Association, 6.500%,
6/1/08.............................................. 131,997
48,300 Federal National Mortgage Association, 6.500%,
12/1/10............................................. 46,972
577,454 Federal National Mortgage Association, 6.500%,
4/1/13.............................................. 557,601
135,881 Federal National Mortgage Association, 6.500%,
4/1/13.............................................. 131,210
29,098 Federal National Mortgage Association, 6.500%,
4/1/13.............................................. 28,097
524,457 Federal National Mortgage Association, 6.500%,
7/1/13.............................................. 506,426
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FEDERAL AGENCY--(CONTINUED)
$ 984,361 Federal National Mortgage Association, 7.368%,
1/17/13............................................. $ 996,694
10,678 Federal National Mortgage Association, 14.500%,
11/15/14............................................ 12,216
318,631 Federal National Mortgage Association, 12.000%,
10/1/15............................................. 351,488
35,620 Federal National Mortgage Association, 12.500%,
9/20/15............................................. 39,660
32,296 Federal National Mortgage Association, 13.000%,
11/15/15............................................ 36,282
18,536 Federal National Mortgage Association, 12.000%,
11/15/16............................................ 20,448
171,790 Federal National Mortgage Association, 12.500%,
1/15/16............................................. 191,276
9,435 Federal National Mortgage Association, 7.000%,
9/1/19.............................................. 10,319
124,111 Federal National Mortgage Association, 7.000%,
11/1/23............................................. 120,581
266,886 Federal National Mortgage Association, 6.500%,
3/1/26.............................................. 252,957
128,928 Federal National Mortgage Association, 7.000%,
7/1/26.............................................. 124,939
1,079,306 Federal National Mortgage Association, 6.604%,
12/28/28............................................ 1,038,832
446,613 Federal National Mortgage Association, 7.000%,
11/1/28............................................. 431,540
584,830 Federal National Mortgage Association, 7.000%,
2/1/28.............................................. 565,092
669,746 Federal National Mortgage Association, 7.000%,
10/1/28............................................. 647,142
1,366,310 Federal National Mortgage Association, 6.500%,
4/1/29.............................................. 1,289,455
659,930 Federal National Mortgage Association, 7.000%,
2/1/29.............................................. 637,658
115,392 Federal National Mortgage Association, 7.000%,
2/1/29.............................................. 111,498
1,255,000 Federal National Mortgage Association, 6.527%,
5/25/30............................................. 1,170,288
994,990 Federal National Mortgage Association, 7.000%,
1/1/30.............................................. 960,474
1,975,000 Federal National Mortgage Association, 8.000%, TBA... 1,983,334
5,000,000 Federal National Mortgage Association, 7.500%, TBA... 4,928,900
1,000,000 Federal National Mortgage Association, 7.000%, TBA... 965,470
1,400,000 Federal National Mortgage Association, 7.000%, TBA... 1,373,316
1,500,000 Federal National Mortgage Association, 6.500%, TBA... 1,414,215
</TABLE>
See accompanying notes to financial statements.
27
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED) SHORT-TERM INVESTMENTS--52.2%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FEDERAL AGENCY--(CONTINUED)
$3,975,000 Federal National Mortgage Association, 6.000%, TBA.. $ 3,637,761
169,025 Government National Mortgage Association 9.000%,
12/15/16........................................... 174,844
954,464 Government National Mortgage Association 9.000%,
12/20/19........................................... 983,474
5,000,000 Government National Mortgage Association 7.500%,
TBA................................................ 4,964,050
------------
37,162,353
------------
U.S. GOVERNMENT--11.4%
100,000 U.S. Treasury Bonds, 6.375%, 8/15/27................ 102,984
1,500,000 U.S. Treasury Notes, 5.250%, 5/15/04................ 1,447,260
4,000,000 U.S. Treasury Notes, 6.500%, 2/15/10................ 4,136,880
------------
5,687,124
------------
Total Bonds & Notes
(Identified Cost $43,509,293)...................... 42,849,477
============
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
$3,000,000 Boral, Ltd. 6.800%, 7/12/00......................... $ 2,993,767
3,000,000 Duke Energy Field Services, 6.930%, 7/12/00......... 2,993,647
3,000,000 Earthgrains Co., 6.800%, 7/12/00.................... 2,993,767
3,000,000 Houston Industries Financeco, L.P., 6.950%, 7/12/00. 2,993,629
3,000,000 Imperial Tobacco Group, PLC, 6.850%, 7/11/00........ 2,994,292
2,210,000 Repurchase Agreement with State Street Corp. dated
6/30/00 at 6.400% to be repurchased at $2,211,179
on 7/3/00, collateralized by $2,020,000 U.S.
Treasury Bonds, 6.875% due 8/15/25 with a value of
$2,254,825......................................... 2,210,000
9,000,000 Repurchase Agreement with Warburg Dillon Reed dated
6/30/00 at 6.550% to be repurchased at $9,004,913
on 7/3/00, collateralized by $9,000,000 U.S.
Treasury Bonds, 6.000% due 2/15/26 with a value of
$9,011,250......................................... 9,000,000
------------
Total Short-Term Investments
(Identified Cost $26,179,102)...................... 26,179,102
------------
Total Investments--137.7%
(Identified Cost $69,688,395)(a)................... 69,028,579
Other assets less liabilities....................... (18,894,143)
------------
TOTAL NET ASSETS--100%.............................. $ 50,134,436
============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized depreciation on investments based on
cost of $69,688,395 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............... $ 189,185
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value............... (849,001)
---------
Net unrealized depreciation.................................... $(659,816)
=========
</TABLE>
See accompanying notes to financial statements.
28
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
STATEMENT OF ASSETS & LIABILITIES STATEMENT OF OPERATIONS
JUNE 30, 2000 (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $57,818,579
Investments in repurchase agreements at cost......... 11,210,000
-----------
Total Investments.................................... 69,028,579
Cash................................................. 48,912
Receivable for:
Fund shares sold..................................... 211,082
Accrued interest..................................... 348,074
-----------
Total Assets........................................ 69,636,647
LIABILITIES
Payable for:
Fund shares redeemed................................. $ 214,274
Securities purchased................................. 19,229,356
Accrued expenses:
Management fees...................................... 29,665
Deferred trustees fees............................... 8,069
Other expenses....................................... 20,847
-----------
Total Liabilities................................... 19,502,211
-----------
NET ASSETS............................................ $50,134,436
===========
Net assets consist of:
Capital paid in...................................... $50,867,561
Undistributed net investment income.................. 1,590,209
Accumulated net realized gains (losses).............. (1,663,518)
Unrealized appreciation (depreciation) on
investments......................................... (659,816)
-----------
NET ASSETS............................................ $50,134,436
===========
Computation of offering price:
Net asset value and redemption price per share
($50,134,436 divided by 4,484,294 shares of
beneficial interest)................................. $ 11.18
===========
Identified cost of investments........................ $69,688,395
===========
</TABLE>
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest................................................ $1,764,525
----------
EXPENSES
Management fees......................................... $135,158
Trustees' fees and expenses............................. 6,115
Custodian............................................... 20,825
Audit and tax services.................................. 8,971
Legal................................................... 532
Printing................................................ 2,493
Miscellaneous........................................... 9,006
--------
Total expenses......................................... 183,100
Less expenses assumed by the investment adviser........ (11,078) 172,022
-------- ----------
NET INVESTMENT INCOME.................................... 1,592,503
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net........................................ (524,048)
Unrealized appreciation (depreciation) on:
Investments--net........................................ 601,866
----------
Net gain (loss).......................................... 77,818
----------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.... $1,670,321
==========
</TABLE>
See accompanying notes to financial statements.
29
<PAGE>
NEW ENGLAND ZENITH FUND
(SALOMON BROTHERS U.S. GOVERNMENT SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 1,592,503 $ 2,897,190
Net realized gain (loss).......................... (524,048) (1,147,477)
Unrealized appreciation (depreciation)............ 601,866 (1,664,506)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. 1,670,321 85,207
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (2,904,887)
Net realized gain................................. 0 (109,221)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (3,014,108)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 9,164,571 25,884,708
Reinvestment of distributions..................... 0 3,014,108
Cost of shares redeemed........................... (11,667,943) (20,808,995)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... (2,503,372) 8,089,821
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (833,051) 5,160,920
NET ASSETS
Beginning of the period........................... 50,967,487 45,806,567
------------ ------------
End of the period................................. $ 50,134,436 $ 50,967,487
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 1,590,209 $ (2,294)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 838,378 2,268,282
Issued in reinvestment of distributions........... 0 277,968
Redeemed.......................................... (1,070,660) (1,822,836)
------------ ------------
Net Change........................................ (232,282) 723,414
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------
2000 1999 1998 1997 1996 1995
---------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 10.81 $ 11.47 $ 11.14 $ 10.83 $ 11.04 $ 9.96
------- ------- ------- ------- ------- ------
Income From Investment
Operations
Net Investment Income.. 0.36 0.65 0.47 0.53 0.58 0.33
Net Realized and
Unrealized Gain (Loss)
on Investments........ 0.01 (0.62) 0.37 0.40 (0.21) 1.16
------- ------- ------- ------- ------- ------
Total From Investment
Operations............ 0.37 0.03 0.84 0.93 0.37 1.49
------- ------- ------- ------- ------- ------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (0.66) (0.45) (0.53) (0.56) (0.33)
Distributions From Net
Realized Capital
Gains................. 0.00 (0.03) (0.06) (0.05) (0.02) (0.08)
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 0.00 0.00 (0.04) 0.00 0.00
------- ------- ------- ------- ------- ------
Total Distributions.... 0.00 (0.69) (0.51) (0.62) (0.58) (0.41)
------- ------- ------- ------- ------- ------
Net Asset Value, End of
Period................. $ 11.18 $ 10.81 $ 11.47 $ 11.14 $ 10.83 $11.04
======= ======= ======= ======= ======= ======
TOTAL RETURN (%)........ 3.4(b) 0.2 7.5 8.6 3.3 15.0
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.70(a) 0.70 0.70 0.70 0.70 0.70
Ratio of Net Investment
Income to Average Net
Assets (%)............. 6.46(a) 5.89 5.70 6.42 6.13 5.62
Portfolio Turnover Rate
(%).................... 710(a) 530 496 572 388 415
Net Assets, End of
Period (000)........... $50,134 $50,967 $45,807 $22,143 $13,211 $7,542
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... 0.75(a) 0.72 0.77 0.98 1.37 2.90
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
See accompanying notes to financial statements.
30
<PAGE>
BACK BAY ADVISORS MANAGED SERIES
LEAD PORTFOLIO MANAGER: PETER W. PALFREY, CFA
PORTFOLIO MANAGERS: RICHARD RACZKOWSKI AND DANNY CHAN, CFA
BACK BAY ADVISORS, L.P.
[PHOTO OF PETER W. PALFREY]
[PHOTO OF RICHARD RACZKOWSKI]
[PHOTO OF DANNY CHAN]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Back Bay Advisors Managed Series performed below its peer group average
for the first six months of calendar year 2000, returning 0.6% versus a 1.9%
return of the Lipper Variable Product Flexible Fund Average/8/. This placed the
Series in the 65th percentile of its group. The Series also modestly
underperformed the 1.4% return of a blend of the S&P 500 Index/25/ (60%) and
the Lehman Aggregate Bond Index/2/ (40%).
This underperformance reflected the weaker performance of the stock portion of
the portfolio relative to the S&P 500 Index during the first quarter, coupled
with the underperformance of the bond portion of the portfolio during the
second quarter. On a positive note, the overall portfolio rebounded strongly in
June, as low P/E holdings within the stock portfolio, as well as corporate,
Yankee and non-dollar holdings in the bond portfolio provided significant
incremental return to the Series as Federal Reserve monetary tightening fears
abated. The Series remains well ahead of its peers on a 3-year and 5-year
basis, with annualized returns of 13.2% and 16.7%, respectively, versus mean
returns of 11.8% and 14.5%, respectively, for its Lipper peer group.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: Continued robust economic activity in the U.S., combined with tight labor
markets and upward pressure on asset prices (especially equities) prompted the
Federal Reserve to raise short term rates aggressively through the first half
of calendar 2000. However, despite this tighter monetary policy, yields on
longer maturity Treasuries actually declined by as much as 58 basis points, re-
flecting an unprecedented Treasury buyback program funded from accelerating
budget surpluses and investor confidence in the Federal Reserve's aggressive
monetary strategy. This reduction in market liquidity caused considerable vola-
tility in the equity market as investors reassessed corporate earnings pros-
pects in light of tighter monetary policy, with the
broader stock market ending modestly lower for the period. Similarly, non-Trea-
sury bond sectors, including corporates, Yankees, and non-dollar securities,
lagged the Treasury sector's strong performance, as investors showed little in-
terest in taking on liquidity, structure, or credit risk.
Q: GIVEN THIS ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT CHANGES DID
YOU MAKE SINCE THE START OF THE YEAR?
A: With the Federal Reserve aggressively tightening monetary policy through the
first half of calendar 2000, and with equity valuations at relatively "full"
historical levels, the Series has been managed more defensively than in recent
years. The equity allocation has been targeted at approximately 62%--a 20% un-
derweight position versus our "neutral" stock-bond split of 65% stock/35% bond
(stocks can comprise from between 50%-80% of the total portfolio). Proceeds
from equity rebalancings have been reinvested in bonds, including purchases of
5-year and 10-year Treasuries in mid-May as interest rates briefly rose on in-
creased Federal Reserve tightening fears. The bond portfolio's duration remains
long versus the Lehman Index, but has been reduced modestly over the last quar-
ter. Bond holdings continue to be concentrated in spread product, including
corporates and Yankees. Non-dollar exposure is primarily limited to Canada, but
includes intermediate maturity exposure to Australia and the Euro, as a hedge
against anticipated dollar weakness later in the year as the U.S. economy
slows. Canada exposure has been maintained in longer maturity Canadian govern-
ment and provincial issues, reflecting anticipated yield curve inversion in
Canada, as well as positive supply technicals.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE SIX MONTHS? WHAT INVESTMENT DECISIONS
WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: The Series' exposure to non-dollar, corporate, and lower grade Yankee bonds
negatively impacted the Series' overall performance during the first half of
the year, with credit spreads and non-
31
<PAGE>
dollar assets significantly weaker in April and May, rebounding only partially
in June. The Series equity portfolio lagged the market during the first quar-
ter, but turned in a strong performance during the second quarter, with both
the core and low P/E holdings outperforming both the S&P/Barra Value Index and
the broader S&P 500 Index. However, the Series' 62% weighting to equities was
a negative (versus the average balanced fund allocation of 60% equities) given
the 4.6% outperformance of bonds versus stocks for the first half of calendar
2000.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: In our view, the Federal Reserve is nearing the end of its tightening cycle
as recent data suggest that the economy is downshifting to a slower, more sus-
tainable pace. Retail sales and housing activity, in particular, appear to be
slowing under the pressure of significantly higher borrowing costs orches-
trated by Federal Reserve Chairman Alan Greenspan over the past 12 months. Un-
der this "soft landing" scenario and as liquidity returns to the market,
bonds, and in particular corporates, Yankees, and non-dollar securities held
by the Series, should benefit from the reduced threat of aggressive Federal
Reserve tightening. Equities, which have had a chance for earnings to catch up
to the lofty valuation levels set early in 2000, should also benefit from a
"sidelined" Federal Reserve. In particular, the relatively attractive valua-
tions on the low P/E portion of the Series' stock portfolio should allow it to
continue its strong performance versus the broader equity market.
[GRAPH]
A $10,000 Investment Compared to the S&P 500 and
Lehman Brothers Government/Corporate Indices for the past 10 years
Back Bay Lehman
Managed Series Government Corp. S&P 500
6/30/90 $10,000 10,000 10,000
6/30/91 $10,741 11,020 10,739
6/30/92 $12,100 12,580 12,185
6/30/93 $13,780 14,235 13,840
6/30/94 $13,620 14,028 14,027
6/30/95 $16,499 15,820 17,682
6/30/96 $19,507 16,555 22,290
6/30/97 $24,649 17,836 29,995
6/30/98 $30,352 19,849 39,055
6/30/99 $34,590 20,386 47,938
6/30/00 $35,730 21,263 51,487
Average Annual Total Return
Lehman Lipper Variable
Managed Series Government Corp. S&P 500 Flexible Avg.
6 Months 0.6% 4.2% -0.4% 1.9%
1 Year 3.3% 4.3% 7.4% 7.6%
3 Years 13.2% 6.0% 19.7% 11.8%
5 Years 16.7% 6.1% 23.8% 14.5%
10 Years 13.6% 7.8% 17.8% 12.9%
Since Inception 12.6% 8.1% 16.1% n/a
[CHECKMARK] FUND FACTS
GOAL: A favorable total return through investment in a diversified portfolio.
The Series' portfolio is expected to include a mix of common stocks and fixed
income securities.
START DATE: March 30, 1987
SIZE: $204 million as of June 30, 2000
MANAGER: Peter Palfrey has managed the Series since January 1994 and joined Back
Bay Advisors in 1993. Mr. Palfrey also manages Back Bay Advisors Bond Income
Series and several other fixed income and separate accounts. Richard Raczkowski
and Danny Chan began managing the Series in May 2000.
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.
32
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--62.7% OF TOTAL NET ASSETS
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AEROSPACE--0.3%
11,276 Boeing Co................................................ $ 471,478
2,700 Lockheed Martin Corp..................................... 66,994
500 Northrop Grumman Corp.................................... 33,125
3,200 Rockwell International Corp.............................. 100,800
-----------
672,397
-----------
AIR TRANSPORTATION--0.2%
1,000 AMR Corp.(b)............................................. 26,438
900 Delta Air Lines, Inc..................................... 45,506
10,400 FedEx Corp.(b)........................................... 395,200
-----------
467,144
-----------
APPAREL--0.0%
400 Liz Claiborne, Inc....................................... 14,100
800 VF Corp.................................................. 19,050
-----------
33,150
-----------
AUTOMOBILE & RELATED--0.8%
1,000 Autozone, Inc............................................ 22,000
500 Cooper Tire & Rubber Co.................................. 5,563
4,892 Delphi Automotive Systems Corp. ......................... 71,240
16,900 Ford Motor Co............................................ 726,700
11,400 General Motors Corp...................................... 661,913
1,100 Goodyear Tire & Rubber Co................................ 22,000
600 Johnson Controls, Inc.................................... 30,788
400 Navistar International Corp.(b).......................... 12,425
500 Paccar, Inc. ............................................ 19,844
800 TRW, Inc................................................. 34,700
2,213 Visteon Corp............................................. 26,830
-----------
1,634,003
-----------
BANKS--4.0%
25,889 Bank of America Corp..................................... 1,113,227
15,100 Bank of New York Co., Inc................................ 702,150
13,500 Chase Manhattan Corp..................................... 621,844
35,466 Citigroup, Inc........................................... 2,136,827
1,100 Comerica, Inc............................................ 49,363
17,300 First Union Corp......................................... 429,256
12,500 FleetBoston Financial Corp............................... 425,000
1,100 Golden West Financial Corp............................... 44,894
1,600 Huntington Bancshares, Inc............................... 25,300
3,100 KeyCorp.................................................. 54,638
4,800 J.P. Morgan & Company, Inc............................... 528,600
20,300 National City Corp....................................... 346,369
1,500 Regions Financial Corp................................... 29,813
1,200 Southtrust Corp.......................................... 27,150
1,200 Summit Bancorp........................................... 29,550
1,000 Union Planters Corp...................................... 27,938
15,900 U.S. Bancorp............................................. 306,075
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
BANKS--(CONTINUED)
18,400 Washington Mutual, Inc................................... $ 531,300
17,200 Wells Fargo & Co......................................... 666,500
-----------
8,095,794
-----------
BUSINESS MACHINES--2.6%
2,200 Apple Computer, Inc. .................................... 115,225
31,000 Dell Computer Corp.(b)................................... 1,528,688
2,200 Gateway, Inc.(b)......................................... 124,850
31,900 International Business Machines.......................... 3,495,044
-----------
5,263,807
-----------
BUSINESS SERVICES--0.8%
19,400 America Online, Inc.(b).................................. 1,023,350
1,000 Ceridian Corp.(b)........................................ 24,063
2,500 Compuware Corp.(b)....................................... 25,938
500 Deluxe Corp.............................................. 11,781
1,100 Dun & Bradstreet Corp.................................... 31,488
1,000 Equifax, Inc............................................. 26,250
9,900 H & R Block, Inc......................................... 320,513
1,900 Mckesson HBOC, Inc....................................... 39,781
800 Quintiles Transnational Corp.(b)......................... 11,300
900 R.R. Donnelley & Sons Co. ............................... 20,306
2,100 Unisys Corp.(b).......................................... 30,581
600 W.W. Grainger, Inc....................................... 18,488
-----------
1,583,839
-----------
CHEMICALS--0.5%
1,600 Air Products and Chemicals, Inc.......................... 49,300
4,500 Dow Chemical Co. ........................................ 135,844
15,100 E.I. Du Pont de Nemours.................................. 660,625
900 Engelhard Corp........................................... 15,356
200 FMC Corp.(b)............................................. 11,600
400 Great Lakes Chemical Corp................................ 12,600
700 Hercules, Inc............................................ 9,844
1,800 Pitney Bowes, Inc........................................ 72,000
1,200 PPG Industries, Inc...................................... 53,175
1,100 Praxair, Inc............................................. 41,181
500 W.R. Grace & Co.(b)...................................... 6,063
-----------
1,067,588
-----------
COMMUNICATION--6.3%
600 Andrew Corp.(b).......................................... 20,138
33,076 AT&T Corp................................................ 1,046,029
23,524 Bell Atlantic Corp....................................... 1,195,313
18,800 BellSouth Corp........................................... 801,350
1,000 CenturyTel, Inc.......................................... 28,750
26,400 Nortel Networks Corp..................................... 1,801,800
8,800 Qualcomm, Inc.(b)........................................ 528,000
32,960 SBC Communications, Inc.................................. 1,425,520
8,600 Sprint Corp.............................................. 438,600
32,550 WorldCom, Inc.(b)........................................ 1,493,231
</TABLE>
33
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
COMMUNICATION--(CONTINUED)
1,300 Cabletron Systems, Inc.(b)............................. $ 32,825
17,300 GTE Corp............................................... 1,076,925
48,436 Lucent Technologies, Inc............................... 2,869,833
-----------
12,758,314
-----------
COMPUTERS & BUSINESS EQUIPMENT--3.3%
700 Adaptec, Inc.(b)....................................... 15,925
56,400 Cisco Systems, Inc.(b)................................. 3,584,925
21,200 EMC Corp.(b)........................................... 1,631,075
700 NCR Corp.(b)........................................... 27,256
1,500 Seagate Technology, Inc.(b)............................ 82,500
16,000 Sun Microsystems, Inc.(b).............................. 1,455,000
-----------
6,796,681
-----------
CONGLOMERATES--0.3%
600 ITT Industries, Inc.................................... 18,225
6,200 Minnesota Mining & Manufacturing Co.................... 511,500
-----------
529,725
-----------
CONSTRUCTION--0.8%
27,000 Home Depot, Inc........................................ 1,348,313
300 Kaufman & Broad Home Corp.............................. 5,944
10,900 Masco Corp............................................. 196,881
400 Owens Corning.......................................... 3,700
300 Pulte Corp............................................. 6,488
-----------
1,561,326
-----------
CONSUMER DURABLES--3.9%
149,300 General Electric Co.................................... 7,912,900
800 Whirlpool Corp......................................... 37,300
-----------
7,950,200
-----------
CONTAINERS & PACKAGING--0.0%
200 Ball Corp. ............................................ 6,438
1,000 Owens-Illinois, Inc.(b)................................ 11,688
-----------
18,126
-----------
DATA PROCESSING--6.8%
12,900 Automatic Data Processing, Inc......................... 690,956
2,900 First Data Corp........................................ 143,913
30,000 Intel Corp............................................. 4,010,625
78,900 Microsoft Corp.(b)..................................... 6,312,000
2,300 Novell, Inc.(b)........................................ 21,275
23,250 Oracle Corp.(b)........................................ 1,954,453
1,900 Parametric Technology Corp.(b)......................... 20,900
5,300 Veritas Software Corp.(b).............................. 598,983
-----------
13,753,105
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
DOMESTIC OIL--0.5%
10,300 Halliburton Co........................................... $ 486,031
1,000 Tosco Corp............................................... 28,313
2,100 USX-Marathon Group....................................... 52,631
15,600 Unocal Corp.............................................. 516,750
-----------
1,083,725
-----------
DRUGS & MEDICINE--4.6%
10,600 Abbott Laboratories...................................... 472,363
16,100 American Home Products Corp.............................. 945,875
9,200 Amgen, Inc.(b)........................................... 646,300
400 C.R. Bard, Inc. ......................................... 19,250
2,000 Baxter International, Inc................................ 140,625
1,700 Becton, Dickinson & Co................................... 48,769
9,000 Eli Lilly & Co........................................... 898,875
19,300 Merck & Co., Inc. ....................................... 1,478,863
65,325 Pfizer, Inc.............................................. 3,135,600
11,600 Pharmacia Corp........................................... 599,575
18,400 Schering-Plough Corp..................................... 929,200
-----------
9,315,295
-----------
ELECTRONICS--3.4%
4,195 Agilent Technologies, Inc.(b)............................ 309,381
7,700 Analog Devices, Inc.(b).................................. 585,200
6,300 Applied Materials, Inc.(b)............................... 570,938
700 Cooper Industries, Inc................................... 22,794
12,200 Emerson Electric Co...................................... 736,575
11,000 Hewlett-Packard Co....................................... 1,373,625
5,500 Honeywell International, Inc............................. 185,281
8,600 Micron Technology, Inc.(b)............................... 757,338
300 Millipore Corp........................................... 22,613
1,400 Molex, Inc............................................... 67,375
24,000 Motorola, Inc............................................ 697,500
15,400 Raytheon Co., Class B.................................... 296,450
4,100 Solectron Corp.(b)....................................... 171,688
13,400 Texas Instruments, Inc................................... 920,413
400 Thomas & Betts Corp...................................... 7,650
2,200 Xilinx, Inc.(b).......................................... 181,638
-----------
6,906,459
-----------
ENERGY & UTILITIES--1.2%
900 American Electric Power, Inc............................. 26,663
800 CMS Energy Corp.......................................... 17,700
1,100 Cinergy Corp............................................. 27,981
13,200 Consolidated Edison, Inc................................. 391,050
1,000 DTE Energy Co............................................ 30,562
8,500 Duke Energy Corp......................................... 479,188
19,200 Edison International..................................... 393,600
1,600 FirstEnergy Corp......................................... 37,400
900 GPU, Inc................................................. 24,356
22,000 PG&E Corp................................................ 541,750
</TABLE>
34
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
ENERGY & UTILITIES--(CONTINUED)
1,000 PPL Corp................................................. $ 21,937
600 Pinnacle West Capital Corp............................... 20,325
1,500 Public Service Enterprise Group, Inc..................... 51,937
2,000 Reliant Energy, Inc...................................... 59,125
10,800 TXU Corp................................................. 318,600
-----------
2,442,174
-----------
ENERGY RAW MATERIALS--0.3%
800 Apache Corp.............................................. 47,050
100 Nacco Industries, Inc.................................... 3,512
29,700 Occidental Petroleum Corp................................ 625,556
-----------
676,118
-----------
FINANCE--2.2%
14,400 American Express Co...................................... 750,600
5,000 Associates First Capital Corp............................ 111,562
800 Bear Stearns Companies, Inc.............................. 33,300
800 Countrywide Credit Industries, Inc....................... 24,250
13,800 Federal Home Loan Mortgage Corp.......................... 558,900
11,000 Federal National Mortgage Association.................... 574,062
3,300 Household International, Inc............................. 137,156
800 Lehman Brothers Holdings, Inc............................ 75,650
9,100 Merrill Lynch & Co., Inc................................. 1,046,500
12,200 Morgan Stanley Dean Witter & Co.......................... 1,015,650
1,000 Paine Webber Group, Inc.................................. 45,500
1,100 SLM Holding Corp......................................... 41,181
-----------
4,414,311
-----------
FOOD & AGRICULTURE--2.1%
4,200 Archer Daniels Midland Co................................ 41,212
3,000 Campbell Soup Co......................................... 87,375
26,200 Coca-Cola Co. ........................................... 1,504,862
2,100 General Mills, Inc....................................... 80,325
22,950 H.J. Heinz Co. .......................................... 1,004,062
1,000 Hershey Foods Corp....................................... 48,500
15,600 PepsiCo, Inc............................................. 693,225
2,100 Ralston Purina Co........................................ 41,869
38,300 Sara Lee Corp............................................ 739,669
1,000 Supervalu, Inc........................................... 19,062
-----------
4,260,161
-----------
GAS UTILITIES--0.2%
200 Eastern Enterprises...................................... 12,600
6,700 Enron Corp............................................... 432,150
-----------
444,750
-----------
HEALTH CARE--1.0%
500 Mallinckrodt, Inc........................................ 21,719
9,900 Medtronic, Inc........................................... 493,144
1,400 PE Corp.................................................. 92,225
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
HEALTH CARE--(CONTINUED)
27,164 Tyco International, Ltd.................................. $ 1,286,894
1,200 United Health Group, Inc................................. 102,900
400 Wellpoint Health Networks, Inc.(b)....................... 28,975
-----------
2,025,857
-----------
HOTELS & RESTAURANTS--0.3%
2,600 Hilton Hotels Corp....................................... 24,375
14,200 McDonald's Corp.......................................... 467,712
1,000 Tricon Global Restaurants, Inc.(b)....................... 28,250
800 Wendy's International, Inc............................... 14,250
-----------
534,587
-----------
HOUSEHOLD PRODUCTS--0.0%
400 American Greetings Corp.................................. 7,600
600 Black & Decker Corp...................................... 23,587
400 Centex Corp.............................................. 9,400
600 Maytag Corp.............................................. 22,125
100 Springs Industries, Inc.................................. 3,200
400 Tupperware Corp.......................................... 8,800
-----------
74,712
-----------
INDUSTRIAL PARTS & MACHINERY--0.4%
200 Briggs & Stratton Corp................................... 6,850
13,600 Caterpillar, Inc......................................... 460,700
1,600 Deere & Co............................................... 59,200
2,100 Illinois Tool Works, Inc................................. 119,700
1,100 Ingersoll-Rand Co........................................ 44,275
300 Milacron, Inc............................................ 4,350
300 National Service Industries, Inc......................... 5,850
900 Pall Corp................................................ 16,650
800 Parker Hannifin Corp..................................... 27,400
400 Snap-On, Inc............................................. 10,650
400 Timken Co................................................ 7,450
-----------
763,075
-----------
INSURANCE--1.8%
1,000 Aetna, Inc............................................... 64,187
5,600 Allstate Corp............................................ 124,600
16,100 American General Corp.................................... 982,100
12,791 American International Group, Inc........................ 1,502,942
8,100 CIGNA Corp............................................... 757,350
2,800 Conseco, Inc............................................. 27,300
1,500 Hartford Financial Services Group, Inc................... 83,906
700 Jefferson-Pilot Corp..................................... 39,506
700 MGIC Investment Corp..................................... 31,850
900 Safeco Corp. ............................................ 17,887
1,600 St. Paul Companies, Inc.................................. 54,600
900 Torchmark Corp........................................... 22,219
-----------
3,708,447
-----------
</TABLE>
35
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
INTERNATIONAL OIL--2.3%
28,457 Exxon Mobil Corp........................................ $ 2,233,874
37,600 Royal Dutch Petroleum Co. (ADR)......................... 2,314,750
3,800 Texaco, Inc............................................. 202,350
------------
4,750,974
------------
INTERNET SERVICES--0.3%
5,000 Yahoo!, Inc.(b)......................................... 619,375
------------
LEISURE--0.2%
17,900 Carnival Corp........................................... 349,050
900 Darden Restaurants, Inc................................. 14,625
900 Harrah's Entertainment, Inc.(b)......................... 18,844
1,200 Hasbro, Inc............................................. 18,075
------------
400,594
------------
LIQUOR--0.4%
300 Adolph Coors Co......................................... 18,150
9,800 Anheuser-Busch Companies, Inc........................... 731,937
500 Brown-Forman Corp., Class B(b).......................... 26,875
------------
776,962
------------
MACHINERY--0.0%
1,400 Dover Corp. ............................................ 56,787
------------
MEDIA--1.9%
21,100 Comcast Corp............................................ 854,550
1,900 Gannett Company, Inc.................................... 113,644
13,900 MediaOne Group, Inc.(b)................................. 926,087
400 Meredith Corp........................................... 13,500
13,100 Time Warner, Inc........................................ 995,600
1,600 Tribune Co. ............................................ 56,000
12,573 Viacom, Inc. Class B(b)................................. 857,321
------------
3,816,702
------------
MISCELLANEOUS--0.2%
800 Avery Dennison Corp..................................... 53,700
22,100 IMS Health, Inc......................................... 397,800
------------
451,500
------------
NON-FERROUS METALS--0.3%
1,500 Alcan Aluminum, Ltd..................................... 46,500
13,000 Alcoa, Inc.............................................. 377,000
2,700 Barrick Gold Corp....................................... 49,106
7,926 Newmont Mining Corp..................................... 171,400
600 Worthington Industries, Inc............................. 6,300
------------
650,306
------------
OFFICE EQUIPMENT--0.1%
4,600 Xerox Corp.............................................. 95,450
------------
OPTICAL PHOTO EQUIPMENT--0.2%
5,800 Eastman Kodak Co........................................ 345,100
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
PAPER & FOREST PRODUCTS--0.4%
400 Boise Cascade Corp...................................... $ 10,350
8,400 Georgia Pacific Corp.................................... 220,500
9,100 Kimberly-Clark Corp..................................... 522,112
700 Louisiana-Pacific Corp.................................. 7,612
400 Temple-Inland, Inc...................................... 16,800
1,600 Weyerhaeuser Co......................................... 68,800
800 Willamette Industries, Inc.............................. 21,800
------------
867,974
------------
POLLUTION CONTROL--0.1%
6,887 Waste Management, Inc................................... 130,853
------------
PUBLISHING--0.0%
600 Knight-Ridder, Inc...................................... 31,912
------------
RAILROADS & SHIPPING--0.2%
13,100 Burlington Northern Santa Fe............................ 300,481
13,500 Norfolk Southern Corp................................... 200,812
------------
501,293
------------
RETAIL--3.2%
19,000 Albertson's, Inc........................................ 631,750
800 Consolidated Stores Corp.(b)............................ 9,600
700 Dillard's, Inc. ........................................ 8,575
1,500 Federated Department Stores, Inc.(b).................... 50,625
18,000 Gap, Inc................................................ 562,500
42,300 Kmart Corp.............................................. 288,169
3,000 Limited, Inc............................................ 64,875
300 Longs Drug Stores Corp.................................. 6,525
26,400 Mattel, Inc............................................. 348,150
14,000 May Department Stores Co................................ 336,000
900 Nordstrom, Inc.......................................... 21,712
2,300 Office Depot, Inc.(b)................................... 14,375
1,800 J.C. Penney Company, Inc................................ 33,187
1,800 Rite Aid Corp.(b)....................................... 11,812
3,500 Safeway, Inc.(b)........................................ 157,937
2,600 Sears, Roebuck & Co..................................... 84,825
1,100 Sherwin-Williams Co..................................... 23,306
3,300 Staples, Inc.(b)........................................ 50,737
2,100 TJX Companies, Inc...................................... 39,375
3,000 Target Corp............................................. 174,000
1,700 Toys "R" Us, Inc.(b).................................... 24,756
44,300 Wal-Mart Stores, Inc.................................... 2,552,787
30,000 Walgreen Co............................................. 965,625
------------
6,461,203
------------
SOAPS & COSMETICS--2.9%
400 Alberto Culver Co., Class B............................. 12,225
38,540 Bristol-Myers Squibb Co................................. 2,244,955
18,000 Gillette Co............................................. 628,875
16,500 Johnson & Johnson....................................... 1,680,937
</TABLE>
See accompanying notes to financial statements.
36
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
SOAPS & COSMETICS--(CONTINUED)
23,200 Procter & Gamble Co................................ $ 1,328,200
------------
5,895,192
------------
STEEL--0.0%
600 Nucor Corp......................................... 19,912
220 USX-U.S. Steel Group............................... 4,084
------------
23,996
------------
TELECOMMUNICATIONS--0.4%
8,600 Nextel Communications, Inc.(b)..................... 526,212
2,800 Tellabs, Inc.(b)................................... 191,625
2,400 3Com Corp.(b)...................................... 138,300
------------
856,137
------------
TOBACCO--0.6%
42,300 Philip Morris Companies, Inc....................... 1,123,594
1,200 UST, Inc........................................... 17,625
------------
1,141,219
------------
TRAVEL & RECREATION--0.4%
21,805 The Walt Disney Co................................. 846,307
------------
Total Common Stocks
(Identified Cost $81,873,366)..................... 127,554,706
------------
BONDS & NOTES--36.5%
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
AEROSPACE/DEFENSE--0.4%
$ 560,000 Lockheed Martin Corp., 8.200%, 12/1/09............. 566,240
220,000 Lockheed Martin Corp., 8.500%, 12/1/29............. 224,627
------------
790,867
------------
DOMESTIC OIL--0.6%
95,000 Phillips Petroleum Co., 8.500%, 5/25/05............ 98,409
105,000 Phillips Petroleum Co., 8.750%, 5/25/10............ 111,365
1,000,000 Pioneer National Resources Co., 9.625%, 4/1/10..... 1,034,258
------------
1,244,032
------------
FEDERAL AGENCIES--0.2%
164,311 Government National Mortgage Association, 11.500%,
with various maturities to 2013................... 179,606
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FEDERAL AGENCIES--(CONTINUED)
$ 153,682 Government National Mortgage Association, 10.000%,
9/15/18........................................... $ 163,143
------------
342,749
------------
FOREIGN--9.9%
485,000 Corning Inc., 5.625%, 2/18/05 (EUR)................ 457,242
5,000,000 Government of Canada, Zero Coupon, 3/15/21 (CAD)... 982,365
15,000,000 Government of Canada, Zero Coupon, 6/1/25 (CAD).... 2,507,331
1,700,000 Kappa Beheer BV, 10.625%, 7/15/09 (EUR)............ 1,734,000
1,000,000 KPNQwest BV, 7.125%, 6/1/09 (EUR).................. 884,053
3,000,000 Province of Ontario, 8.100%, 9/8/23 (CAD).......... 2,441,838
15,000,000 Province of Ontario, Zero Coupon, 9/8/23 (CAD)..... 2,317,905
15,000,000 Province of Quebec Stripped, Zero Coupon, 1/16/23
(CAD)............................................. 2,279,797
3,600,000 Province of Quebec, 8.500%, 4/1/26 (CAD)........... 3,015,170
6,000,000 The European Investment Bank,
6.000%, 7/15/05 (AUD)............................. 3,507,563
------------
20,127,264
------------
MEDIA & ENTERTAINMENT--2.0%
175,000 Clear Channel Communications, Inc., 7.875%,
6/15/05........................................... 176,024
3,000,000 CSC Holdings, Inc., 7.875%, 2/15/18................ 2,765,727
1,000,000 News America Holdings, Inc., 10.125%, 10/15/12..... 1,049,635
------------
3,991,386
------------
PAPER & FOREST PRODUCTS--0.3%
560,000 International Paper Co., 8.125%, 7/8/05, (144A).... 565,510
------------
RETAIL--2.4%
4,285,000 Great Atlantic & Pacific Tea, Inc., 7.750%,
4/15/07........................................... 3,877,072
1,000,000 J.C. Penney Company, Inc., 9.750%, 6/15/21......... 887,240
550,000 Rite Aid Corp., 7.125%, 1/15/27.................... 283,250
300,000 Rite Aid Corp., 7.125%, 2/15/27.................... 135,000
------------
5,182,562
------------
TELECOMMUNICATIONS--2.5%
255,000 Global Crossings Holdings, Ltd., 9.625%, 5/15/08... 248,625
</TABLE>
See accompanying notes to financial statements.
37
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
TELECOMUNNICATIONS--(CONTINUED)
$ 5,000,000 MCI Communications Corp.,
7.125%, 6/15/27................................... $ 4,949,685
------------
5,198,310
------------
TRANSPORTATION--0.5%
1,000,000 Norfolk Southern Corp.,
7.050%, 5/1/37.................................... 979,104
------------
U.S. GOVERNMENT--2.7%
500,000 U.S. Treasury Bonds,
5.250%, 2/15/29................................... 443,750
2,000,000 U.S. Treasury Notes,
6.000%, 8/15/09................................... 1,984,060
3,000,000 U.S. Treasury Notes, 6.750%, 5/5/15................ 3,069,840
------------
5,497,650
------------
YANKEE--15.0%
2,000,000 Empresa Nacional de Electricidad S.A., 8.500%,
4/1/09............................................ 1,952,012
1,300,000 Kappa Beheer BV, 10.625%, 7/15/09.................. 1,265,933
3,000,000 Kimberly-Clark de Mexico, S.A.,
8.875%, 8/1/09, (144A)............................ 3,037,500
2,000,000 Multicanal SA, 13.125%, 4/15/09.................... 1,925,000
3,250,000 NatSteel Electronics, Ltd.,
1.500%, 6/30/04, (144A)........................... 3,250,000
500,000 PDVSA Finance, Ltd.,
6.650%, 2/15/06................................... 436,644
1,172,500 PDVSA Finance, Ltd.,
8.750%, 2/15/04................................... 1,157,844
1,500,000 Pemex Finance, Ltd.,
9.150%, 11/15/18.................................. 1,529,423
2,000,000 Pemex Petroleos Mexicanos,
9.500%, 9/15/27................................... 1,935,000
925,000 Pindo Deli Finance Mauritius, Ltd., 10.750%,
10/1/07........................................... 557,313
2,000,000 Republic of Columbia,
9.750%, 4/23/09................................... 1,760,000
3,000,000 Republic of Korea, 8.875%, 4/15/08................. 3,116,250
4,000,000 Republic of Panama,
8.875%, 9/30/27................................... 3,380,000
500,000 Republic of Panama, 9.375%, 4/1/29................. 479,375
1,500,000 Republic of Philippines,
9.875%, 1/15/19................................... 1,230,000
100,000 Shaw Communications, Inc.,
8.25%, 4/11/10.................................... 101,335
2,000,000 Total Access Communication Public, 8.375%, 11/4/06,
(144A)............................................ 1,680,000
155,000 United Mexican States,
9.875%, 2/1/10.................................... 160,813
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
YANKEE--(CONTINUED)
$ 1,500,000 YPF Sociadad Anonima,
9.125%, 2/24/09................................... $ 1,524,375
------------
30,478,817
------------
Total Bonds & Notes
(Identified Cost $75,782,886)..................... 74,398,251
------------
SHORT-TERM INVESTMENT--0.1%
265,000 Household Finance Corp.,
6.880%, 7/3/00.................................... 264,899
------------
Total Short-Term Investment
(Identified Cost $264,899)........................ 264,899
------------
Total Investments--99.3%
(Identified Cost $157,921,151)(a)................. 202,217,856
Other assets less liabilities...................... 1,355,646
------------
TOTAL NET ASSETS--100%............................. $203,573,502
============
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $157,921,151 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost.............. $ 53,633,016
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (9,336,311)
------------
Net unrealized appreciation................................... $ 44,296,705
============
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
144A-- Securities 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. At the period
end, the value of these securities amounted to $8,533,010 or 4.2% of
net assets.
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt (GDR)
is a certificate issued by a Custodian Bank representing the right to
receive securities of the foreign issuer described. The value of ADRs
and GDRs are significantly influenced by trading on exchanges not
located in the United States or Canada.
AUD-- Australian Dollar
CAD-- Canadian Dollar
EUR-- Euro Currency
See accompanying notes to financial statements.
38
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................... $202,217,856
Cash.................................................... 52,489
Receivable for:
Fund shares sold........................................ 296,603
Dividends and interest.................................. 1,516,556
------------
Total Assets........................................... 204,083,504
LIABILITIES
Payable for:
Fund shares redeemed.................................... $324,021
Withholding taxes....................................... 10
Accrued expenses:
Management fees......................................... 83,640
Deferred trustees fees.................................. 96,732
Other expenses.......................................... 5,599
--------
Total Liabilities...................................... 510,002
------------
NET ASSETS............................................... $203,573,502
============
Net assets consist of:
Capital paid in......................................... $135,402,437
Undistributed net investment income..................... 3,186,676
Accumulated net realized gains (losses)................. 20,688,846
Unrealized appreciation (depreciation) on investments
and foreign currency................................... 44,295,543
------------
NET ASSETS............................................... $203,573,502
============
Computation of offering price:
Net asset value and redemption price per share
($203,573,502 divided by 1,027,974 shares of beneficial
interest)............................................... $ 198.03
============
Identified cost of investments........................... $157,921,151
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 889,057
Interest......................................... 2,904,405
------------
3,793,462
EXPENSES
Management fees.................................. $ 515,641
Trustees' fees and expenses...................... 8,148
Custodian........................................ 48,095
Audit and tax services........................... 7,271
Legal............................................ 2,507
Printing......................................... 16,634
Miscellaneous.................................... 1,017
------------
Total Expenses.................................. 599,313
------------
NET INVESTMENT INCOME............................. 3,194,149
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................. 16,268,950
Foreign currency transactions--net............... (68,678) 16,200,272
------------
Unrealized appreciation (depreciation) on:
Investments--net................................. (18,426,072)
Foreign currency translation--net................ (3,526) (18,429,598)
------------ ------------
Net gain (loss)................................... (2,229,326)
------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS....................................... $ 964,823
============
</TABLE>
See accompanying notes to financial statements.
39
<PAGE>
NEW ENGLAND ZENITH FUND
(BACK BAY ADVISORS MANAGED SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
---------------- ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income.......................... $ 3,194,149 $ 6,839,113
Net realized gain (loss)....................... 16,200,272 24,544,949
Unrealized appreciation (depreciation)......... (18,429,598) (10,963,195)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................... 964,823 20,420,867
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net Investment Income.......................... 0 (6,667,691)
Net realized gain.............................. 0 (24,078,071)
------------ ------------
TOTAL DISTRIBUTIONS............................ 0 (30,745,762)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares................... 17,220,041 35,751,814
Reinvestment of distributions.................. 0 30,745,762
Cost of shares redeemed........................ (33,492,107) (50,931,129)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................ (16,272,066) 15,566,447
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ (15,307,243) 5,241,552
NET ASSETS
Beginning of the period........................ 218,880,745 213,639,193
------------ ------------
End of the period.............................. $203,573,502 $218,880,745
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period.............................. $ 3,186,676 $ (7,473)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................. 88,255 165,739
Issued in reinvestment of distributions........ 0 155,035
Redeemed....................................... (172,381) (236,987)
------------ ------------
Net Change..................................... (84,126) 83,787
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ------------------------------------------------
2000 1999 1998 1997 1996 1995
---------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 196.82 $ 207.76 $ 189.85 $ 170.37 $ 163.52 $ 130.30
-------- -------- -------- -------- -------- --------
Income From Investment
Operations
Net Investment Income.. 3.11 6.98 6.56 6.38 6.43 6.34
Net Realized and
Unrealized Gain (Loss)
on Investments........ (1.90) 13.48 30.50 38.47 18.21 34.33
-------- -------- -------- -------- -------- --------
Total From Investment
Operations............ 1.21 20.46 37.06 44.85 24.64 40.67
-------- -------- -------- -------- -------- --------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (6.83) (6.51) (6.42) (6.34) (6.34)
Distributions in Excess
of Net Investment
Income................ 0.00 0.00 0.00 0.00 0.00 (0.23)
Distributions From Net
Realized Capital
Gains................. 0.00 (24.57) (12.64) (18.95) (11.45) (0.88)
-------- -------- -------- -------- -------- --------
Total Distributions.... 0.00 (31.40) (19.15) (25.37) (17.79) (7.45)
-------- -------- -------- -------- -------- --------
Net Asset Value, End of
Period................. $ 198.03 $ 196.82 $ 207.76 $ 189.85 $ 170.37 $ 163.52
======== ======== ======== ======== ======== ========
TOTAL RETURN (%)........ 0.6(b) 10.0 19.7 26.6 15.0 31.3
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.58(a) 0.58 0.58 0.61 0.62 0.64
Ratio of Net Investment
Income to Average Net
Assets (%)............. 3.09(a) 3.16 3.15 3.20 3.64 4.06
Portfolio Turnover Rate
(%).................... 50(a) 49 25 65 72 51
Net Assets, End of
Period (000)........... $203,574 $218,881 $213,639 $188,783 $160,888 $147,536
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
See accompanying notes to financial statements.
40
<PAGE>
BALANCED SERIES
PORTFOLIO MANAGERS: MAYA K. BITTAR, CFA AND THOMAS L. PAPPAS, CFA
WELLINGTON MANAGEMENT COMPANY, LLP
[PHOTO]
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST TWO MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEER GROUP?
A: Wellington Management assumed portfolio management responsibilities as in-
vestment sub-adviser to the Balanced Series (formerly Loomis Sayles Balanced
Series) on May 1, 2000. Over this time period (5/1/00-6/30/00), the Series re-
turned 1.2%, outperforming a blend of the S&P 500 Index/25/ (60%) and the Leh-
man Aggregate Index/2/ (40%). This composite returned 1.0% for the same period.
Including the performance prior to Wellington Management assuming management
responsibility, the Series returned 0.6% for the six months ended June 30,
2000. This compares to 1.5% of the composite index return. The average return
of all funds within the Lipper Variable Products Balanced Fund/7/ universe was
1.3%.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST TWO
MONTHS.
A: The US economy appears to be slowing, although the larger question is by how
much and for how long. Real GDP is still fairly strong with high-tech manufac-
turing leading the way, even as the consumer is starting to reduce spending
from lofty levels, influenced by stock and housing markets not being as robust
as they had been. Inflation has already ticked higher, with most optimists peg-
ging hopes for a reversal on an expected decline in the commodity markets, and
particularly on oil and gasoline prices.
In general, equity markets have been positive during the last two months. May
was weak as investors continued to be unsettled by strong economic data. During
June, however, the equity markets rebounded as higher interest rates finally
seemed to have an impact on the economy, which is now showing signs of slowing.
Both mid-cap and large-cap stocks were modestly positive during the two-month
period while small-cap stocks were strong. As we have seen for sometime now,
growth continued to outperform value.
Treasury rates declined over the last two months, as investors grew more com-
fortable with a "soft landing" scenario. This boosted interest in corporate
bonds and mortgages, whose performances nosed out Treasuries for this short pe-
riod. However, high yield lagged higher quality sectors as some evidence of
lending problems at a few banks and finance companies raised fears that de-
faults could be headed higher.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE MAY?
A: May was a month of transition for the Series as we repositioned it according
to our investment strategy. The asset mix of the portfolio continues to be
split roughly 60% in equity and 40% in fixed income, close to the target allo-
cation for each asset class defined in the prospectus.
Within the equity portion of the Series, we started May with overweight posi-
tions in energy, healthcare, telecom services, information & entertainment, and
materials. As economic data was released showing that the economy was beginning
to slow, we began to move back into technology and financials.
Within the fixed income portion of the Series, we increased the average quality
of the portfolio to AA by reducing exposure to corporate names, and replacing
those holdings with US Agency mortgage-backed securities. We also reduced the
duration, a measure of interest rate sensitivity, of the fixed income holdings
as the Federal Reserve threatened to raise interest rates further.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE DURING THE PAST
TWO MONTHS. WHAT INVESTMENT DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE
LEAST EFFECTIVE?
A: On the equity side, healthcare, technology, and energy were the sources of
strong relative performance during the past two months. Healthcare stocks are
finally discounting their strong fundamentals as investors have realized that
Medicare reform would not be draconian, if passed at all. Technology stocks,
particularly telecom equipment and electronics stocks, continue to perform
well, as business remains strong. Energy stocks have also performed well as oil
prices have remained high. Noteworthy performers during the period include Mi-
cron Technology, Cardinal Health, Immunex, Johnson & Johnson, Nortel Networks,
Pfizer, Microsoft, BP Amoco, and Exxon-Mobil. Utilities, specifically telecom
services and materials, were weak performers over the last two months. The
telecom stocks
41
<PAGE>
have languished as competition is fierce and investors remain unsettled with
regard to their prospects. Global Crossing and AT&T were our weakest holdings.
We continue to like Global Crossing's business strategy, but have eliminated
our position in AT&T as we became concerned about management's ability to exe-
cute. With the economy beginning to show signs of a slowdown, cyclical sectors
of the market weakened. Our holdings in Praxair, Dow Chemical, and Weyerhauser
hurt performance during the period. In bonds, given the interest rate rally, we
should have had a more aggressive duration posture, but our sector and security
selection helped us.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE THE
PORTFOLIO?
A: Federal Reserve tightening has been a source of volatility and recurrent
corrections in the US equity market over the last year. The rise in short-term
interest rates that began one year ago is expected to bring some slowing in US
economic activity during the remainder of 2000 and through 2001. We believe that
the Fed rate cycle and the prospect for stable interest rates will bring
improved equity market performance in the year ahead. From a cyclical
standpoint, the end of Fed tightening, slower US growth and re-ceding inflation
pressures should also provide a positive underpinning to the US bond market.
[GRAPH]
A $10,000 Investment compared to the S&P 500 and
Lehman Brothers Gov't/Corp. Indices
since the Series' Inception
Loomis Sayles
Balanced Lehman
Series Government/Corp. S&P 500
10/31/94 $10,000 $10,000 $10,000
6/30/95 $11,568 $11,234 $11,745
6/30/96 $12,999 $11,756 $14,806
6/30/97 $15,811 $12,665 $19,923
6/30/98 $17,992 $14,095 $25,942
6/30/99 $19,103 $14,476 $31,842
6/30/00 $17,635 $15,099 $34,200
Average Annual Total Return
Lipper Variable
Balanced Lehman Balanced Fund
Series Government/Corp. S&P 500 Average
6 Months 0.6% 4.2% -0.4% 1.3%
1 Year -7.7% 4.3% 7.4% 3.9%
3 Years 3.7% 6.0% 19.7% 11.4%
5 Years 8.8% 6.1% 23.8% 13.5%
Since Inception 10.5% 7.6% 24.2% n/a
The current positioning of the Series reflects our outlook for the year ahead.
This is based on our projections for the investment environment, the attrac-
tiveness of the market and the expected future returns of each asset category.
The current asset mix of approximately 60% equity and 40% fixed income may
increase/decrease by 10% in the future, however we expect asset allocation
changes to be gradual over time as the Series does not try to time the market.
[GRAPHIC] 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: $171 million as of June 30, 2000
MANAGERS: Maya Bittar and Thomas Pappas have served as portfolio managers of the
series since May 1, 2000.
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.
42
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--59.2% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--0.5%
14,100 United Technologies Corp.............................. $ 830,137
------------
BANKS--2.5%
35,950 Citigroup, Inc........................................ 2,165,988
25,500 FleetBoston Financial Corp............................ 867,000
12,200 State Street Corp. ................................... 1,293,962
------------
4,326,950
------------
BEVERAGES--1.1%
19,100 Coca-Cola Co.......................................... 1,097,056
23,700 PepsiCo, Inc. ........................................ 1,053,169
------------
2,150,225
------------
CHEMICALS--0.5%
29,100 Dow Chemical Co. ..................................... 878,456
------------
COMMUNICATIONS EQUIPMENT--5.8%
68,600 Cisco Systems, Inc.(b)................................ 4,360,387
6,000 JDS Uniphase Corp..................................... 719,250
27,000 Lucent Technologies, Inc.............................. 1,599,750
31,200 Nortel Networks Corp.................................. 2,129,400
15,400 Tellabs, Inc.......................................... 1,053,937
------------
9,862,724
------------
COMPUTER SOFTWARE & SERVICES--4.2%
28,500 Automatic Data Processing, Inc........................ 1,526,531
10,100 Computer Sciences Corp.(b)............................ 754,344
15,000 Electronic Data Systems Corp. ........................ 618,750
45,300 Microsoft Corp.(b).................................... 3,624,000
3,803 Verisign, Inc. ....................................... 671,141
------------
7,194,766
------------
COMPUTERS & OFFICE EQUIPMENT--3.7%
23,600 Dell Computer Corp.(b)................................ 1,163,775
19,400 EMC Corp.(b).......................................... 1,492,588
13,900 Hewlett-Packard Co.................................... 1,735,763
17,000 International Business Machines Corp.................. 1,862,563
------------
6,254,689
------------
ELECTRICAL EQUIPMENT--2.1%
67,200 General Electric Co................................... 3,561,600
------------
ELECTRONICS--5.6%
28,600 Intel Corp............................................ 3,823,463
20,900 Micron Technology, Inc.(b)............................ 1,840,506
35,100 Solectron Corp.(b).................................... 1,469,813
14,000 Teradyne, Inc.(b)..................................... 1,029,000
13,800 Texas Instruments, Inc. .............................. 947,887
6,000 Vitesse Semiconductor Corp............................ 441,375
------------
9,552,044
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
ENERGY--2.5%
43,000 Conoco, Inc. Class B.................................. $ 1,056,188
40,500 Exxon Mobil Corp. .................................... 3,179,250
------------
4,235,438
------------
ENERGY--SERVICES--0.6%
14,000 Schlumberger, Ltd..................................... 1,044,750
------------
FINANCIAL SERVICES--1.9%
52,000 Associates First Capital Corp......................... 1,160,250
11,200 Goldman Sachs Group, Inc.............................. 1,062,600
8,000 Merrill Lynch & Company, Inc.......................... 920,000
------------
3,142,850
------------
HEALTH CARE--DRUGS--6.3%
29,100 American Home Products Corp........................... 1,709,625
18,900 Bristol-Myers Squibb Co............................... 1,100,925
19,100 Immunex Corp.(b)...................................... 944,256
17,100 Johnson & Johnson..................................... 1,742,063
18,300 Merck & Company, Inc.................................. 1,402,238
44,600 Pfizer, Inc........................................... 2,140,800
31,500 Pharmacia Corp........................................ 1,628,156
------------
10,668,063
------------
HEALTH CARE--SERVICES--0.7%
15,100 Cardinal Health, Inc.................................. 1,117,400
------------
HOUSEHOLD PRODUCTS--1.6%
26,100 Gillette Co. ......................................... 911,869
17,100 Kimberly-Clark Corp................................... 981,112
14,800 Procter & Gamble Co................................... 847,300
------------
2,740,281
------------
INSURANCE--2.9%
14,200 American International Group, Inc..................... 1,668,500
18,600 Hartford Financial Services Group..................... 1,040,437
21,400 Marsh & McLennan Companies, Inc....................... 2,234,963
------------
4,943,900
------------
MACHINERY & MANUFACTURING--1.0%
10,000 Illinois Tool Works, Inc. ............................ 570,000
25,400 Tyco International, Ltd............................... 1,203,325
------------
1,773,325
------------
MEDIA--5.0%
34,000 America Online, Inc.(b)............................... 1,793,500
73,800 AT & T Corp. (Liberty Media Group)(b)................. 1,789,650
26,400 Gannett Company, Inc.................................. 1,579,050
12,300 General Motors Corp. Class H.......................... 1,079,325
15,600 Sprint Corp. (PCS Group).............................. 928,200
20,800 Viacom, Inc. Class B(b)............................... 1,418,300
------------
8,588,025
------------
</TABLE>
See accompanying notes to financial statements.
43
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
MEDICAL PRODUCTS--1.3%
22,900 Abbott Laboratories................................... $ 1,020,481
22,500 Guidant Corp.(b)...................................... 1,113,750
------------
2,134,231
------------
METALS & MINERALS--0.6%
34,600 Alcoa, Inc............................................ 1,003,400
------------
PAPER & FOREST PRODUCTS--0.4%
15,800 Weyerhaeuser Co....................................... 679,400
------------
PIPELINE--0.6%
6,600 Coastal Corp.......................................... 401,775
12,400 El Paso Energy Corp................................... 631,625
------------
1,033,400
------------
RESTAURANTS--0.9%
48,300 McDonald's Corp....................................... 1,590,881
------------
RETAIL--3.2%
17,200 CVS Corp.............................................. 688,000
26,500 Home Depot, Inc. ..................................... 1,323,344
28,000 Safeway, Inc.(b)...................................... 1,263,500
36,600 Wal-Mart Stores, Inc.................................. 2,109,075
------------
5,383,919
------------
TELEPHONE--3.7%
32,300 Global Crossing, Ltd.(b).............................. 849,894
20,600 GTE Corp.............................................. 1,282,350
35,496 SBC Communications, Inc............................... 1,535,202
58,150 WorldCom, Inc.(b)..................................... 2,667,631
------------
6,335,077
------------
Total Common Stocks
(Identified Cost $96,929,239)........................ 101,025,931
------------
</TABLE>
MEDIUM & LONG TERM BONDS & NOTES--38.1%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
AUTOMOTIVE--0.1%
$ 50,000 Delco Remy International, Inc., 8.625%, 12/15/07.... $ 46,062
50,000 Exide Corp., 10.000%, 4/15/05....................... 44,250
75,000 Federal-Mogul Corp., 7.875%, 7/1/10................. 51,375
50,000 Hayes Lemmerz International, Inc., 8.250, 12/15/08.. 42,000
25,000 LDM Technologies, Inc., 10.750%, 1/15/07............ 19,875
50,000 Lear Corp., 9.500%, 7/15/06......................... 48,835
25,000 Prestolite Electric, Inc., 9.625%, 2/1/08........... 16,000
------------
268,397
------------
BROADCASTING--0.4%
50,000 Classic Cable, Inc., 10.500% 3/1/10................. 46,125
50,000 CSC Holdings, Inc., 8.125%, 8/15/09................. 48,603
50,000 Fox/Liberty Networks LLC, 0/9.750%, 8/15/07(c)...... 40,750
50,000 Granite Broadcasting Corp., 8.875%, 5/15/08......... 42,250
75,000 Lin Holdings Corp., 0/10.000%, 3/1/08(c)............ 49,312
400,000 News American Holdings, Inc., 9.250%, 2/1/13........ 432,244
50,000 Young Broadcasting, Inc., 8.750%, 6/15/07........... 45,750
------------
705,034
------------
BUILDERS & BUILDING PRODUCTS--0.1%
25,000 American Standard, Inc., 7.375%, 2/1/08............. 22,687
50,000 Beazer Homes USA, 8.875%, 4/1/08.................... 44,750
25,000 Del Webb Corp., 10.250%, 2/15/10.................... 21,500
25,000 Henry Co., 10.000%, 4/15/08......................... 16,250
50,000 Nortek, Inc., 9.250%, 3/15/07....................... 46,750
50,000 Standard Pacific Corp. 8.500%, 4/1/09............... 44,375
------------
196,312
------------
BUSINESS SERVICES--0.0%
20,000 Iron Mountain, Inc., 10.125%, 10/1/06............... 20,000
------------
CHEMICALS--0.1%
50,000 Borden Chemicals & Plastics Operations, 9.500%,
5/1/05............................................. 44,250
50,000 Georgia Gulf Corp., 10.375%, 11/1/07................ 52,250
25,000 Lyondell Chemical Co., 9.625%, 5/1/07............... 24,750
50,000 Lyondell Chemical Co., 10.875%, 5/1/09.............. 49,750
</TABLE>
See accompanying notes to financial statements.
44
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
CHEMICALS--(CONTINUED)
$ 25,000 Sovereign Specialty Chemicals, 11.875%, 3/15/10,
(144A)............................................. $ 25,750
25,000 Sterling Chemicals, Inc., 11.750%, 8/15/06.......... 20,250
------------
217,000
------------
CIRCUIT BOARDS--0.1%
50,000 Details Cap Corp., 0/12.500%, 11/15/07(c)........... 32,000
50,000 Viasystems, Inc., 9.750%, 6/1/07.................... 43,250
------------
75,250
------------
COMMUNICATIONS--0.3%
100,000 Adelphia Communications Corp., 7.750%, 1/15/09...... 84,500
50,000 Allbritton Communications Co., 8.875%, 2/1/08....... 45,750
100,000 Charter Communication Holdings LLC., 8.250%, 4/1/07. 88,500
30,000 Exodus Communications, Inc., 10.750%, 9/12/15....... 28,950
50,000 Gray Communications Systems, Inc., 10.625%, 10/1/06. 49,875
25,000 Intermedia Communications, Inc., 8.600%, 6/1/08..... 23,000
25,000 L 3 Communications Corp., 8.500%, 5/15/08........... 23,000
75,000 Level 3 Communications, Inc., 9.125%, 8/5/01........ 67,312
100,000 Nextel Communications, Inc., 0/9.750%, 10/31/07(c).. 75,000
50,000 Winstar Communications, Inc., 12.500%, 8/4/15,
(144A)............................................. 47,500
------------
533,387
------------
CONSUMER GOODS & SERVICES--0.1%
25,000 Polaroid Corp., 11.5000%, 2/15/06................... 25,938
75,000 Sealy Mattress Co., 0/10.875, 12/15/07(c)........... 54,000
------------
79,938
------------
CONTAINERS--0.1%
50,000 Gaylord Container Corp., 9.375%, 6/15/07............ 39,000
25,000 Gaylord Container Corp., 9.875%, 2/15/08............ 16,250
50,000 Bway Corp., 10.250%, 4/15/07........................ 47,375
50,000 Owens--Illinois, Inc., 7.850%, 5/15/04.............. 47,867
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
CONTAINERS--(CONTINUED)
$ 50,000 Packaging Corporation of American, 9.625%, 4/1/09... $ 49,625
------------
200,117
------------
DISTRIBUTION/WHOLSALERS--0.1%
200,000 Boise Cascade Office Products Co., 7.050%, 5/15/05.. 189,854
25,000 Owens & Minor, Inc., 10.875%, 6/1/06................ 25,625
------------
215,479
------------
ENERGY--0.5%
700,000 Calenergy, Inc., 7.630%, 10/15/07................... 686,735
50,000 CMS Energy Corp., 7.625%, 11/15/04.................. 47,245
50,000 Key Energy Services, Inc., 14.00%, 1/15/09.......... 56,250
30,000 P&L Coal Holdings Corp., 9.625%, 5/15/08............ 27,825
------------
818,055
------------
FOOD & BEVERAGE--0.7%
239,000 Albertson's, Inc., 8.700, 5/1/30.................... 254,660
995,000 Coca Cola Enterprises, Inc., 6.750%, 1/15/38........ 833,342
50,000 Del Monte Foods Co., 0/12.500%, 12/15/07(c)......... 37,125
30,000 Stater Brothers Holdings, 10.750%, 8/15/06.......... 26,400
------------
1,151,527
------------
FINANCE--6.4%
300,000 American Financial Group, Inc., 7.125%, 4/15/09..... 263,418
250,000 Bank One Corp., 6.875%, 8/1/06...................... 239,302
225,000 Bankers Trust Corp., 7.625%, 8/15/05................ 223,675
540,000 Bear Stearns Companies, Inc., 6.750%, 12/15/07...... 496,973
260,000 Morgan Stanley/Dean Witter & Co., 6.750%, 1/1/16.... 230,742
200,000 Donaldson, Lufkin & Jenrette, Inc., 6.875%, 11/1/05. 192,366
1,000,000 Duke Capital Corp., 7.5000%, 10/1/09................ 985,491
175,000 EOP Operations, L.P., 6.763%, 6/15/07............... 161,485
400,000 John Hancock Global Funding II, 7.900%, 7/2/10
(144A)............................................. 403,032
200,000 Lehman Brothers, Inc., 7.360%, 12/15/03............. 196,656
1,280,000 Mellon Bank N.A., 7.000%, 3/15/06................... 1,240,781
50,000 Norwest Corp., 7.650%, 3/15/05...................... 50,339
</TABLE>
See accompanying notes to financial statements.
45
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
FINANCE--(CONTINUED)
$ 600,000 Popular North America, Inc., 6.625%, 1/15/04........ $ 573,150
1,130,000 Provident Companies, Inc., 6.375%, 7/15/05.......... 1,022,153
50,000 RBF Finance Co., 11.000%, 3/15/06................... 53,500
325,000 Reliastar Financial Corp., 7.125%, 3/1/03........... 323,593
145,000 Salomon, Inc., (Travelers Group) 7.500%, 2/1/03..... 144,649
480,000 Salomon Smith Barney Holdings, 7.000%, 3/15/04...... 469,920
520,000 Sears Roebuck Acceptance Corp., 6.950%, 5/15/02..... 514,457
100,000 Secured Finance, 9.050%, 12/15/04................... 104,765
25,000 Silgan Holdings, Inc., 9.000%, 6/1/09............... 23,063
25,000 Sovereign Bancorp, Inc., 10.500%, 11/15/06.......... 25,000
950,000 Sprint Spectrum L.P., 0/12.500%, 8/15/06(c)......... 915,059
400,000 U S Bancorp, 7.500%, 6/1/26......................... 397,616
680,000 U S West Capital Funding, Inc., 6.250%, 7/15/05..... 637,058
1,100,000 Wells Fargo Co., 6.625%, 7/15/04.................... 1,073,900
------------
10,962,143
------------
HEALTH CARE--0.3%
300,000 Allegiance Corp., 7.000%, 10/15/26.................. 291,027
50,000 Bio-Rad Laboratories, Inc., 11.625%, 2/15/07 (144A). 51,500
25,000 DJ Orthopedics LLC, 12.625%, 6/15/09................ 23,875
35,000 HCA Healthcare Corp., 7.250%, 5/20/08............... 30,800
50,000 Tenet Healthcare Corp., 8.125%, 12/1/08............. 45,625
25,000 Triad Hospitals, 11.000%, 5/15/09................... 25,594
25,000 Universal Hospital Services, Inc., 10.250%, 3/1/08.. 14,250
40,000 Warner Chilcott, Inc.,
12.625%, 2/15/08 (144A)............................ 41,050
------------
523,721
------------
INDUSTRIAL--0.6%
300,000 ICI Wilmington, Inc., 6.950%, 9/15/04............... 288,693
25,000 IT Group, Inc., 11.250%, 4/1/09..................... 22,375
730,000 Tosco Corp., 7.625%, 5/15/06........................ 724,430
------------
1,035,498
------------
INSTRUMENTS--0.1%
25,000 Fisher Scientific International, 9.000%, 2/1/08..... 22,875
50,000 Numatics, Inc., 9.625%, 4/1/08...................... 40,000
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
INSTRUMENTS--(CONTINUED)
$ 25,000 Packard Bioscience, Inc., 9.375%, 3/1/07............ $ 22,750
50,000 Wesco Distributors, Inc., 9.125%, 6/1/08............ 45,750
------------
131,375
------------
LEISURE--0.1%
50,000 Harrahs Operations, Inc., 7.875%, 12/15/05.......... 47,000
25,000 Hollywood Casino Corp., 11.250%, 5/1/07............. 25,375
50,000 John Q. Hammon Hotels, 8.875%, 2/15/04.............. 43,500
25,000 Loews Cineplex Entertainment Corp., 8.875%, 8/1/08.. 11,750
50,000 Station Casinos, Inc., 8.875%, 12/1/08.............. 47,625
50,000 True Temper Sports, Inc., 10.875%, 12/1/08.......... 47,563
------------
222,813
------------
MACHINERY--0.5%
900,000 Deere & Co. 6.550%, 7/15/04......................... 871,218
25,000 Grove Worldwide LLC, Inc., 9.250%, 5/1/08........... 9,687
------------
880,905
------------
MANUFACTORING--0.4%
670,000 Raytheon Co., 6.300%, 3/15/05....................... 632,011
------------
MORTGAGE BACKED--18.0%
350,000 Asset Securitization Corp., 7.400%, 4/14/27......... 349,946
250,000 Credit Suisse First Boston, 6.550%, 11/17/07........ 237,525
1,161,557 Federal Home Loan Mortgage, 6.000%, 12/1/27......... 1,071,164
992,012 Federal Home Loan Mortgage, 7.500%, 12/1/29......... 978,680
668,068 Federal Home Loan Mortgage, 7.000%, 1/1/30.......... 644,895
331,832 Federal Home Loan Mortgage, 7.000%, 4/1/30.......... 320,322
999,470 Federal Home Loan Mortgage, 7.500%, 5/1/30.......... 986,037
530,048 Federal National Mortgage Association, 6.950%,
10/1/06............................................ 519,610
442,675 Federal National Mortgage Association, 6.590%,
12/1/07............................................ 425,464
533,243 Federal National Mortgage Association, 6.419%,
6/1/08............................................. 506,610
</TABLE>
See accompanying notes to financial statements.
46
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
MORTGAGE BACKED--(CONTINUED)
$1,794,947 Federal National Mortgage Association, 5.500%,
1/1/14.............................................. $ 1,650,346
620,000 Federal National Mortgage Association, 6.000%,
2/25/24 (REMIC)..................................... 562,729
1,008,622 Federal National Mortgage Association, 6.000%,
3/1/28.............................................. 924,150
2,000,703 Federal National Mortgage Association, 6.000%,
4/1/28.............................................. 1,833,144
474,500 Federal National Mortgage Association, 7.000%,
11/1/29............................................. 458,040
35,250 Federal National Mortgage Association, 8.000%,
11/1/29............................................. 35,393
411,036 Federal National Mortgage Association, 7.000%,
12/1/29............................................. 396,778
893,329 Federal National Mortgage Association, 7.500%,
1/1/30.............................................. 880,483
386,494 Federal National Mortgage Association, 8.000%,
1/1/30.............................................. 387,701
471,558 Federal National Mortgage Association, 7.000%,
2/1/30.............................................. 455,200
613,407 Federal National Mortgage Association, 8.000%,
2/1/30.............................................. 615,324
1,960,955 Federal National Mortgage Association, 8.000%,
4/1/30.............................................. 1,968,916
588,133 Federal National Mortgage Association, 7.000%,
3/1/30.............................................. 567,731
697,618 Federal National Mortgage Association, 7.500%,
3/1/30.............................................. 687,587
53,073 Federal National Mortgage Association, 7.000%,
4/1/30.............................................. 51,232
894,917 Federal National Mortgage Association, 7.500%,
5/1/30.............................................. 882,048
515,000 First Union Lehman Brothers, 7.380%, 4/18/07......... 515,227
255,000 First Union Lehman Brothers, 6.600%, 5/18/07......... 246,529
2,416,719 Government National Mortgage Association, 7.500%,
12/15/23............................................ 2,406,907
6,809,951 Government National Mortgage Association, 6.500%,
4/15/29............................................. 6,465,300
191,875 Government National Mortgage Association, 8.500%,
5/15/29............................................. 196,432
477,007 Government National Mortgage Association, 8.500%,
10/15/29............................................ 488,336
35,204 Government National Mortgage Association, 7.500%,
2/15/30............................................. 34,951
330,309 Government National Mortgage Association, 8.500%,
3/15/30............................................. 338,153
46,536 Government National Mortgage Association, 7.500%,
4/15/30............................................. 46,202
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
MORTGAGE BACKED--(CONTINUED)
$ 918,261 Government National Mortgage Association, 7.500%,
6/15/30............................................ $ 912,457
500,000 Nomura Asset Securities Corp., 6.590%, 3/17/28...... 475,736
------------
30,523,285
------------
OIL & GAS--0.1%
50,000 Cross Timbers Oil Co., 9.250%, 4/1/07............... 48,750
50,000 Frontier Oil Corp., 11.750%, 11/15/09............... 50,000
50,000 Pioneer National Resources, 9.625%, 4/1/10.......... 51,500
25,000 Plains Resources, Inc., 10.250%, 3/15/06............ 24,813
50,000 Pride Petroleum Services, Inc., 9.375%, 5/1/07...... 49,000
------------
224,063
------------
PUBLISHING--0.2%
50,000 American Media Operations, Inc., 10.250%, 5/1/09.... 48,500
300,000 Scholastic Corp., 7.000%, 12/15/03.................. 292,359
50,000 World Color Press, Inc., 8.375%, 11/15/08........... 48,301
------------
389,160
------------
REAL ESTATE INVESTMENT TRUST--0.4%
790,000 Liberty Property L.P. 6.950%, 12/1/06............... 717,059
------------
RENTAL EQUIPMENT--0.3%
500,000 Hertz Corp., 8.250, 6/1/05.......................... 511,027
50,000 United Rentals, Inc., 9.000%, 4/1/09................ 44,250
------------
555,277
------------
RETAIL STORES--0.0%
25,000 Leslie's Poolmart, Inc., 10.375%, 7/15/04........... 18,625
------------
SEMICONDUCTORS--0.1%
50,000 Anthony Crane Rent L.P., 10.375%, 8/1/08............ 32,125
50,000 Fairchild Semiconductor Corp., 10.125%, 3/15/07..... 50,375
50,000 Zilog, Inc., 9.500%, 3/1/05......................... 43,250
------------
125,750
------------
STEEL--0.1%
50,000 AK Steel Corp., 9.125%, 12/15/06.................... 47,875
25,000 Bayou Steel Corp., 9.500%, 5/15/08.................. 20,500
50,000 LTV Corp., 11.750%, 11/15/09........................ 42,000
</TABLE>
See accompanying notes to financial statements.
47
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
STEEL--(CONTINUED)
$ 25,000 National Steel Corp., 9.875%, 3/1/09................ $ 21,250
25,000 Weirton Steel Corp., 11.375, 7/1/04................. 23,500
------------
155,125
------------
TECHNOLOGY--0.1%
50,000 Amkor Technologies, Inc., 10.500%, 5/1/09........... 49,875
25,000 Flextronics International, Ltd., 9.875%, 7/1/10
(144A)............................................. 25,318
25,000 Intersil Corp., 13.250%, 8/15/09.................... 28,518
50,000 Psinet, Inc., 10.000%, 2/15/05...................... 46,000
------------
149,711
------------
TELECOMMUNICATIONS--0.1%
50,000 GCI, Inc., 9.750%, 8/1/07........................... 46,062
60,000 Hyperion Telecommunications, Inc., 12.250%, 9/1/04.. 60,600
50,000 RCN Corp., 0/11.125, 10/15/07(c).................... 31,250
50,000 Teligent, Inc., 11.500%, 12/1/07.................... 39,500
60,000 Time Warner Telecom LLC, 9.750%, 7/15/08............ 58,200
------------
235,612
------------
TELECOM--WIRELESS--0.0%
50,000 Metromedia Fiber Network, Inc., 10.000%, 12/15/09... 49,500
------------
TELEPHONE--0.2%
25,000 Alaska Communications, 9.375%, 5/15/09.............. 22,937
75,000 Crown Castle International Corp., 9.500%, 8/1/11.... 71,250
50,000 Echostar DBS Corp., 9.375%, 2/1/09.................. 48,250
25,000 Insight Midwest L.P., 9.750, 10/1/09................ 24,500
50,000 KMC Telecom Holdings, Inc., 0/12.500%, 2/15/08(c)... 23,500
50,000 Loral Space & Communications, Ltd., 9.500%, 1/15/06. 36,250
75,000 McLeodUSA, Inc., 8.125%, 2/15/09.................... 67,688
100,000 Nextlink Communications, Inc., 0/12.125%, 12/1/09
(144A)(c).......................................... 58,000
50,000 NTL Communications Corp., 0/12.375%, 10/1/08(c)..... 32,750
25,000 RCN Corp., 10.000%, 10/15/07........................ 21,250
50,000 Viatel, Inc., 11.500%, 3/15/09...................... 37,500
------------
443,875
------------
</TABLE>
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
TEXTILES--0.0%
$ 25,000 Pillowtex Corp., 9.000%, 12/15/07................... $ 8,625
50,000 Westpoint Stevens, Inc., 7.875%, 6/15/05............ 41,750
------------
50,375
------------
TRANSPORTATION--0.4%
25,000 American Airlines, 10.180%, 1/2/13.................. 28,424
100,000 AMR Corp., 10.290, 3/8/21........................... 109,101
50,000 Atlas Air, Inc., 10.750%, 8/1/05.................... 50,500
460,000 Norfolk South Corp., 7.050%, 5/1/37................. 450,388
------------
638,413
------------
U.S. AGENCIES--1.3%
175,000 Federal National Mortgage Association, 5.625%,
5/14/04............................................ 166,715
1,730,000 Federal National Mortgage Association, 6.375%,
6/15/09............................................ 1,642,197
358,000 United State Department of Housing & Urban
Development, 7.498%, 8/1/11........................ 362,686
------------
2,171,598
------------
U.S. TREASURY--4.1%
2,000,000 United States Treasury Bonds, 12.000%, 8/15/13...... 2,700,000
1,000,000 United States Treasury Bonds, 8.875%, 2/15/19....... 1,287,030
900,000 United States Treasury Bonds, 8.750%, 8/15/20....... 1,157,058
1,000,000 United States Treasury Bonds, 8.125%, 8/15/21....... 1,221,720
624,828 United States Treasury Bonds, 3.875%, 4/15/29
(TIIS)............................................. 622,291
------------
6,988,099
------------
UTILITIES--0.1%
125,000 Coastal Corp., 8.125%, 9/15/02...................... 126,254
25,000 Flag, Ltd., 8.250%, 1/30/08......................... 22,000
------------
148,254
------------
WASTE DISPOSAL--0.1%
25,000 Allied Waste North America, Inc., 7.625%, 1/1/06.... 21,750
25,000 Allied Waste North America, Inc., 10.000%, 8/1/09... 21,125
------------
42,875
------------
WIRE & CABLE--0.0%
25,000 International Wire Group, 11.750%, 6/1/05........... 25,125
------------
</TABLE>
See accompanying notes to financial statements.
48
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
MEDIUM & LONG TERM BONDS & NOTES--(CONTINUED)
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
YANKEE--1.4%
$ 50,000 Acetex, 9.750%, 10/1/03............................. $ 47,250
50,000 Algoma Steel, Inc., 12.375, 7/15/05................. 43,500
50,000 Canadian Forest Oil, Ltd., 8.750%, 9/15/07.......... 47,000
60,000 Clearnet Communications, Inc., 0/10.125, 5/1/09(c).. 35,700
200,000 Deutsche Telekom International Fin Bv, 7.750%,
6/15/05............................................ 201,441
200,000 Deutsche Telekom International Fin Bv, 8.250%,
6/15/30............................................ 202,896
25,000 Doman Industries, Ltd., 12.000%, 7/1/04............. 25,000
25,000 Doman Industries, Ltd., 8.750%, 3/15/04............. 19,250
25,000 Flag Telecom Holdings, Ltd.
11.625%, 3/30/10 (144A)............................ 24,062
50,000 Global Crossing Holdings, Ltd., 9.125%, 11/15/06.... 48,000
50,000 Globo Comunicacoes E Part, 10.500%, 12/20/06........ 43,489
275,000 Government of France, 7.000%, 10/12/00 (EUR)........ 263,969
75,000 GT Group Telecom, Inc., 0/13.250%, 2/1/10(c) ....... 41,625
50,000 Hermes Europe Railtel Bv, 11.500%, 8/15/07.......... 40,875
25,000 Pacifica Papers, Inc., 10.000%, 03/15/09............ 24,875
25,000 Paperboard Industries International, Inc., 8.375%,
9/15/07............................................ 20,500
200,000 Philippines Republic, 10.625%, 3/16/25.............. 172,200
260,000 Phillips Electronics NV, 7.250%, 8/15/13............ 235,045
50,000 Repap New Brunswick, Inc., 10.625%, 4/15/05......... 44,000
170,000 Republic of Trinidad & Tobag,
9.750%, 7/1/20 (144A).............................. 164,856
50,000 Rogers Communications, Inc., 8.875%, 7/15/07........ 49,000
50,000 Sun Media Corp., 9.500%, 5/15/07.................... 48,000
25,000 Tembec Industrial, Inc., 8.625%, 6/30/09............ 23,750
25,000 TFM S.A. de CV, 10.250%, 6/15/07.................... 22,125
575,000 TransCanada Pipelines, Ltd., 7.150%, 6/15/06........ 564,191
------------
2,452,599
------------
Total Bonds & Notes (Identified Cost $65,794,506)... 64,973,342
------------
</TABLE>
SHORT-TERM INVESTMENTS--1.7%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
$1,608,000 Repurchase Agreement with Paribas Corp. dated
6/30/00 at 6.600% to be repurchased at $1,608,884
on 7/3/2000, collateralized by $1,610,000 U.S.
Treasury Notes, 6.625% due 3/31/2002 with a value
of $1,613,896, 6.600%, 7/3/00...................... $ 1,608,000
1,465,000 Government of France, 4.000%, 7/12/00 (EUR)......... 1,398,477
------------
Total Short-Term Investments
(Identified Cost $2,914,046)....................... 3,006,477
------------
Total Investments--99.0%
(Identified Cost $165,637,791)(a).................. 169,005,750
Other assets less liabilities....................... 1,648,389
------------
TOTAL NET ASSETS--100%.............................. $170,654,139
============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $165,637,791 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............... $ 8,953,843
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value............... (5,585,884)
-----------
Net unrealized appreciation.................................... $ 3,367,959
===========
</TABLE>
(b) Non-income producing security.
(c) 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.
Key to Abbreviations:
144A-- Securities 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. At the
period end, the value of these securities amounted to $841,068 or
0.5% of net assets.
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The
value of ADRs and GDRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
EUR-- Euro Currency
TIIS-- Treasury Inflation--Indexed Security has a fixed interest rate and
the principal is adjusted for inflation. At maturity, the securities
will be redeemed at the greater of their inflation-adjusted principal
or par amount at original issue.
See accompanying notes to financial statements.
49
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $169,005,750
Cash................................................... 672
Receivable for:
Securities sold........................................ 1,543,381
Fund shares sold....................................... 282,538
Foreign currency sold.................................. 457
Dividends and interest................................. 999,088
------------
Total Assets.......................................... 171,831,886
LIABILITIES
Payable for:
Fund shares redeemed................................... $348,417
Securities purchased................................... 677,118
Withholding taxes...................................... 477
Accrued expenses:
Management fees........................................ 97,984
Deferred trustees fees................................. 10,628
Other expenses......................................... 43,123
--------
Total Liabilities..................................... 1,177,747
------------
NET ASSETS.............................................. $170,654,139
============
Net assets consist of:
Capital paid in........................................ $174,189,818
Undistributed net investment income.................... 2,492,323
Accumulated net realized gains (losses)................ (9,398,771)
Unrealized appreciation (depreciation) on investments
and foreign currency.................................. 3,370,769
------------
NET ASSETS.............................................. $170,654,139
============
Computation of offering price:
Net asset value and redemption price per share
($170,654,139 divided by 12,247,116 shares of
beneficial interest)................................... $ 13.93
============
Identified cost of investments.......................... $165,637,791
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 740,938(a)
Interest......................................... 2,437,337
-----------
3,178,275
EXPENSES
Management fees.................................. $ 605,152
Trustees' fees and expenses...................... 7,456
Custodian........................................ 28,780
Audit and tax services........................... 10,271
Legal............................................ 3,018
Printing......................................... 30,770
Miscellaneous.................................... 1,275
-----------
Total expenses before expense reductions......... 686,722
Expense reductions............................... (4,424) 682,298
----------- -----------
NET INVESTMENT INCOME............................. 2,495,977
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................. (6,969,725)
Foreign currency transactions--net............... (1,148) (6,970,873)
-----------
Unrealized appreciation (depreciation) on:
Investments--net................................. 4,821,701
Foreign currency transactions--net............... 2,810 4,824,511
----------- -----------
Net gain (loss)................................... (2,146,362)
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS....................................... $ 349,615
===========
</TABLE>
(a) Net of foreign taxes of $5,215
See accompanying notes to financial statements.
50
<PAGE>
NEW ENGLAND ZENITH FUND
(BALANCED SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 2,495,977 $ 5,608,923
Net realized gain (loss).......................... (6,970,873) 2,710,748
Unrealized appreciation (depreciation)............. 4,824,511 (18,598,573)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. 349,615 (10,278,902)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.............................. 0 (5,625,861)
Net realized gain................................. 0 (3,435,942)
In excess of net investment income................ 0 (17,602)
In excess of net realized capital gains........... 0 (2,415,620)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (11,495,025)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 24,912,603 75,541,409
Reinvestment of distributions..................... 0 11,495,025
Cost of shares redeemed........................... (47,274,404) (63,173,242)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... (22,361,801) 23,863,192
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (22,012,186) 2,089,265
NET ASSETS
Beginning of the period........................... 192,666,325 190,577,060
------------ ------------
End of the period................................. $170,654,139 $192,666,325
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 2,492,323 $ (3,654)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 1,840,883 4,946,396
Issued in reinvestment of distributions........... 0 825,719
Redeemed.......................................... (3,500,634) (4,152,208)
------------ ------------
Net Change........................................ (1,659,751) 1,619,907
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------
2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 13.85 $ 15.51 $ 14.86 $ 13.55 $ 11.95 $ 9.94
-------- -------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.20 0.43 0.38 0.28 0.27 0.26
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.12) (1.21) 0.97 1.90 1.73 2.20
-------- -------- -------- -------- ------- -------
Total From Investment
Operations............ 0.08 (0.78) 1.35 2.18 2.00 2.46
-------- -------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (0.43) (0.38) (0.27) (0.27) (0.26)
Distributions From Net
Realized Capital
Gains................. 0.00 (0.26) (0.32) (0.60) (0.13) (0.19)
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 (0.19) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- ------- -------
Total Distributions.... 0.00 (0.88) (0.70) (0.87) (0.40) (0.45)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 13.93 $ 13.85 $ 15.51 $ 14.86 $ 13.55 $ 11.95
======== ======== ======== ======== ======= =======
TOTAL RETURN (%)........ 0.6 (b) (5.1) 9.1 16.2 16.9 24.8
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.79 (a) 0.77 0.82 0.85 0.85 0.85
Ratio of Operating
Expenses to Average Net
Assets after expense
reductions (%) (c)..... 0.79 (a) -- -- -- -- --
Ratio of Net Investment
Income to Average Net
Assets (%)............. 2.88 (a) 2.83 2.72 2.79 3.08 4.03
Portfolio Turnover Rate
(%).................... 191 (a) 63 72 60 59 72
Net Assets, End of
Period (000)........... $170,654 $192,666 $190,577 $137,443 $58,525 $18,823
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- -- -- 0.86 0.99 1.85
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
(c) The Series has entered into arrangements with certain brokers who paid a
portion of the Series' expenses.
See accompanying notes to financial statements.
51
<PAGE>
ALGER EQUITY GROWTH SERIES
PORTFOLIO MANAGERS: DAVID D. ALGER (PICTURED) AND RON TARTAROFRED ALGER
MANAGEMENT, INC.
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: For the six months ended June 30, 2000, the S&P 500/25/ returned -0.4% and
the average Lipper Variable Products Growth Fund/10/ returned 3.3%. Meanwhile,
the Alger Equity Growth Series outperformed both indices, posting a year to
date return of 4.4%.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: The stock market experienced an extremely volatile start to the new millen-
nium. Following an enormously strong fourth quarter of 1999 and an uneventful
Y2K, the market seemed poised to continue its rally during the traditionally
bullish month of January. However, stocks struggled during January, as profit-
taking and interest rate fears weighed on most equity indices. Soaring fuel
prices contributed heavily to inflation fears as oil neared $30 per barrel.
Also, third and fourth quarter GDP numbers represented the strongest two-quar-
ter GDP growth in more than a decade. Against this background of higher com-
modity prices and unrelenting economic expansion, the Federal Reserve raised
both the Fed Funds rate and the discount rate one quarter of a percent on Feb-
ruary 2nd. Two days before the Fed meeting, the S&P 500 Index ended January
with a -5.0% return.
February was a slightly better month for equity markets. While the S&P 500 and
the Dow Jones Industrial Average continued to flounder, technology and growth
stocks regained the momentum they had previously lost. The NASDAQ Composite
and Russell 2000 pushed higher, led by many of the same companies that had
driven the market towards the end of 1999. Biotechnology stocks posted espe-
cially strong gains. The re-emergence of growth stocks, combined with the con-
tinued struggles of most value stocks, brought increased public attention to
the ongoing bifurcated nature of the market.
While the media was shining a spotlight on "new economy" stocks, March rolled
around and the market quickly changed its pace. Many technology-oriented, new
economy growth stocks corrected severely during March, driven down by valua-
tion concerns and sector rotations. Money flowed out of technology stocks and
into so-called "old economy stocks," including financials, pharmaceuticals and
retailers. Many of the trading days during March saw the Dow moving strongly
in one direction and the NASDAQ moving decisively in the other, with each in-
dex taking turns in the lead. However, a reversal of fortunes was clearly the
general trend, with the Dow advancing while the NASDAQ was retreating. As
March neared its close, the market continued to struggle with the conflict be-
tween the new economy and the old economy. The Fed also raised interest rates
by another quarter point on March 21st, adding to interest rate fears.
Alarmingly, on Tuesday, April 4th, the NASDAQ fell in excess of 500 points to
an intra-day low of 3,649. Despite staging a strong intra-day recovery, the
NASDAQ continued to plummet throughout the first part of April, bottoming on
April 17th to a low of 3,227. This represented a drop of more than 37% from
high to low, which certainly qualifies as a full-fledged bear market. Equity
markets continued to be extraordinarily volatile throughout the remainder of
April, with most indices fluctuating wildly amidst an overall minor recovery.
However, the market's recovery was extremely short-lived. The NASDAQ's plummet
began anew during May, before finally bottoming at 3,043 on May 24th. This
brought the total drop in the technology heavy index to 41%. While the Dow and
value-oriented indices did fare somewhat better than the NASDAQ over this time
span, losses were widespread across the board.
Most equity market indices succeeded in rallying during late May and June.
From its May 24th low to its June 22nd high, the NASDAQ returned in excess of
33%, before retreating somewhat by quarter-end. This recovery was brought on
primarily by a series of economic reports that indicated a slowing of the
economy. Perhaps the most significant report was the May employment report,
which showed an increase in the unemployment rate to 4.1%. After the Fed had
hiked interest rates by 50 basis points during their May meeting, the employ-
ment report effectively soothed concerns about potential rampant interest rate
increases. By the time the Fed met again in late June, widespread interest
rate and inflation concerns had been
52
<PAGE>
greatly alleviated. On June 28th, the Fed announced that it would not be rais-
ing rates at all, thereby giving further credibility to the notion that the
economy has indeed been slowing.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: The management of the Series remained unchanged: a research intensive, bot-
tom-up approach focusing on rapidly growing stocks. On the whole, management's
growth stock philosophy was of benefit over a period of time during which value
tended to underperform growth. Strong positive cash inflows for the year helped
fuel investment opportunities and precluded the selling of core holdings in or-
der to satisfy redemptions.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST SIX MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: The Portolio's heavy technology weighting throughout the first half was the
principal factor affecting its performance over the six-month period. Specifi-
cally, the Portfolio benefited from its heavy technology weighting from January
through mid-March, as tech stocks outperformed the market. From mid-March
through late-May, the Portfolio's heavy technology weighting negatively im-
pacted returns, as many tech stocks suffered severe drops. Finally, from late-
May through June, the Portfolio once again benefited from its technology orien-
tation.
Maintaining an ongoing overweighting in technology-oriented growth stocks, de-
spite the acute market correction during April and May, was management's most
effective investment decision. Growth stocks rallied strongly during June, and
this allowed the Portfolio to finish the first half with strong YTD perfor-
mance. Management's least effective decisions were related to company specific
situations (e.g. Clear Channel Communications Inc. and Yahoo! Inc.), whereby
certain holdings struggled for much of the first half.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: The last time serious tightening occurred was 1994 when the Fed doubled the
Fed Funds rate from 3% to 6%, between April 1994 and December 1994. A strong
sell-off ensued and the highs were not revisited until early 1995 when the
tightening ended. It is our sense that by the time we get to August, the Fed
will no longer be inclined to raise rates. Of course, we will have to see if
the economic news continues to show a moderating economy. If it does, we should
have a sharp rally in both the bond and stock markets in the second half of the
year, much as we had in early 1995. We are maintaining our earlier forecast of
13,000 on the Dow by year-end and continue to believe that technology stocks
and growth stocks will have a strong second half.
Looking ahead, we will continue to seek out and invest in companies that we be-
lieve will grow their earnings rapidly and consistently. Regardless of market
conditions, we feel that the only way we are able to sustain superior long-term
performance is through an uncompromising commitment to a consistent approach.
53
<PAGE>
[GRAPH]
A $10,000 investment compared to the S&P Index since the Series' Inception
Alger Equity
Growth Series S&P 500
10/31/94 $10,000 $10,000
6/30/95 $12,688 11,745
6/30/96 $15,011 14,806
6/30/97 $18,814 19,923
6/30/98 $25,520 25,942
6/30/99 $34,810 31,842
6/30/00 $41,925 34,200
Average Annual Return
Equity Growth Lipper Variable Growth
Series S&P 500 Fund Average
6 months 4.4% -0.4% 3.3%
1 Year 20.4% 7.4% 20.8%
3 Years 30.6% 19.7% 24.0%
5 Years 27.0% 23.8% 23.8%
Since Inception 28.8% 24.2%
[GRAPHIC] FUND FACTS
GOAL: Long-term capital appreciation.
START DATE: October 31, 1994
SIZE: $1.1 billion as of June 30, 2000
MANAGERS: David D. Alger and Ron Tartaro have managed the Alger Equity Growth
Series since its inception in 1994. Mr. Alger is President and Chief Executive
Officer of Fred Alger Management, Inc., and has been portfolio manager of the
Alger Growth Portfolio since 1986, the Alger American Fund Growth Portfolio
since 1989 and the Alger Retirement Fund since 1993. Mr. Tartaro has been
employed by Alger since 1990 and has been a Senior Vice President since 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.
54
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--90.9% OF TOTAL NET ASSET
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--2.8%
521,600 United Technologies Corp. ............................ $ 30,709,200
--------------
AUTOMOTIVE--1.0%
284,800 Harley-Davidson, Inc.................................. 10,964,800
--------------
BANKS--2.6%
463,200 Citigroup, Inc. ...................................... 27,907,800
--------------
BROADCASTING--4.2%
619,000 AT&T Corp. (Liberty Media Group)(b)................... 15,010,750
158,400 Clear Channel Communications, Inc.(b)................. 11,880,000
106,900 CNET Networks, Inc.(b)................................ 2,625,731
207,350 Time Warner, Inc...................................... 15,758,600
--------------
45,275,081
--------------
BUSINESS SERVICES--0.5%
50,105 i2 Technologies, Inc.(b).............................. 5,224,229
--------------
COMMUNICATIONS--1.7%
199,200 Comcast Corp.......................................... 8,067,600
534,300 LM Ericsson Telephone Co. (ADR)....................... 10,686,000
--------------
18,753,600
--------------
COMPUTER RELATED & BUSINESS EQUIPMENT--16.0%
207,700 Altera Corp.(b)....................................... 21,172,419
583,500 Cisco Systems, Inc.(b)................................ 37,088,719
745,100 Dell Computer Corp.(b)................................ 36,742,744
197,100 Hewlett-Packard Co.................................... 24,612,863
235,200 Intel Corp............................................ 31,443,300
283,900 Linear Technology Corp................................ 18,151,856
59,000 Sun Microsystems, Inc.(b)............................. 5,365,313
--------------
174,577,214
--------------
COMPUTER SOFTWARE--4.7%
144,800 Intuit, Inc.(b)....................................... 5,991,100
487,000 Microsoft Corp.(b).................................... 38,960,000
68,900 Oracle Corp.(b)....................................... 5,791,906
--------------
50,743,006
--------------
CONSUMER PRODUCTS--3.0%
121,500 Corning, Inc. ........................................ 32,789,813
--------------
ELECTRONICS--9.6%
72,400 Maxim Integrated Products, Inc.(b).................... 4,918,675
275,700 Micron Technology, Inc.(b)............................ 24,278,831
803,100 Motorola, Inc......................................... 23,340,094
363,000 Solectron, Corp.(b)................................... 15,200,625
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
ELECTRONICS--(CONTINUED)
214,666 Teradyne Inc.(b)...................................... $ 15,777,951
293,800 Texas Instruments, Inc. .............................. 20,180,388
--------------
103,696,564
--------------
FINANCIAL SERVICES--4.5%
100,500 American Express Co. ................................. 5,238,563
350,175 Charles Schwab Corp................................... 11,774,634
57,200 Lehman Brothers Holdings, Inc......................... 5,408,975
47,200 Merrill Lynch & Co., Inc.............................. 5,428,000
252,800 Morgan Stanley Dean Witter & Co. ..................... 21,045,600
--------------
48,895,772
--------------
HEALTH CARE--1.8%
113,700 Cardinal Health, Inc.................................. 8,413,800
226,200 Medtronic, Inc........................................ 11,267,588
--------------
19,681,388
--------------
INTERNET SERVICES--4.6
306,000 America Online, Inc.(b)............................... 16,141,500
481,400 eBay, Inc.(b)......................................... 26,146,037
63,164 Yahoo!, Inc........................................... 7,824,440
--------------
50,111,977
--------------
OIL SERVICES--6.6%
397,000 Exxon Mobil Corp. .................................... 31,164,500
846,250 Halliburton Co........................................ 39,932,422
--------------
71,096,922
--------------
PHARMACEUTICALS--11.5%
578,456 American Home Products Corp........................... 33,984,290
547,400 Amgen, Inc.(b)........................................ 38,454,850
52,000 Eli Lilly & Co........................................ 5,193,500
989,450 Pfizer, Inc........................................... 47,493,600
--------------
125,126,240
--------------
RAILROAD--1.2%
146,700 Kansas City Southern Industries, Inc. ................ 13,010,456
--------------
RETAIL--9.5%
262,000 Best Buy Co., Inc..................................... 16,571,500
381,225 Home Depot, Inc. ..................................... 19,037,423
398,500 The Kroger Co.(b)..................................... 8,791,906
522,000 Safeway, Inc.(b)...................................... 23,555,250
609,600 Wal-Mart Stores, Inc.................................. 35,128,200
--------------
103,084,279
--------------
SEMI-CONDUCTORS--3.4%
409,700 Applied Materials, Inc.(b)............................ 37,129,062
--------------
</TABLE>
See accompanying notes to financial statements.
55
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
TELECOM NETWORKS--1.7%
184,450 Cox Communications, Inc.(b)........................... $ 8,404,003
107,300 Omnicom Group, Inc. .................................. 9,556,406
-------------
17,960,409
-------------
Total Common Stocks (Identified Cost $774,839,681).... 986,737,812
-------------
</TABLE>
SHORT-TERM INVESTMENTS--7.9%
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
$16,000,000 BMW US Capital Corp., 6.530%, 7/12/00............ $ 15,968,076
20,000,000 Countrywide Funding Corp., 6.650%, 7/25/00....... 19,911,333
20,000,000 Pfizer, Inc., 6.530%, 8/1/00..................... 19,887,539
16,000,000 Salomon Smith Barney Holdings, Inc., 6.3560%,
7/21/00......................................... 15,941,689
14,128,812 State Street Global Advisors, Money Market Fund.. 14,128,812
--------------
Total Short-Term Investments (Identified Cost
$85,837,449).................................... 85,837,449
--------------
Total Investments--98.8%
(Identified Cost $860,677,130)(a)............... 1,072,575,261
Other assets less liabilities.................... 13,337,611
--------------
TOTAL NET ASSETS--100%........................... $1,085,912,872
==============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $860,677,130 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.............. $242,145,391
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (30,247,260)
------------
Net unrealized appreciation................................... $211,898,131
============
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The
value of ADRs and GDRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
See accompanying notes to financial statements.
56
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value............................... $1,072,575,261
Receivable for:
Securities sold.................................... 22,854,683
Fund shares sold................................... 2,296,797
Dividends and interest............................. 162,966
--------------
Total Assets...................................... 1,097,889,707
LIABILITIES
Payable for:
Fund shares redeemed............................... $ 1,230,170
Securities purchased............................... 10,002,781
Accrued expenses:
Management fees.................................... 658,338
Deferred trustees fees............................. 24,335
Other expenses..................................... 61,211
-----------
Total Liabilities................................. 11,976,835
--------------
NET ASSETS.......................................... $1,085,912,872
==============
Net assets consist of:
Capital paid in.................................... $ 829,825,355
Undistributed net investment income................ 1,012,263
Accumulated net realized gains (losses)............ 43,177,123
Unrealized appreciation (depreciation) on
investments....................................... 211,898,131
--------------
NET ASSETS.......................................... $1,085,912,872
==============
Computation of offering price:
Net asset value and redemption price per share
($1,085,912,872 divided by 35,441,279 shares of
beneficial interest)............................... $ 30.64
==============
Identified cost of investments...................... $ 860,677,130
==============
</TABLE>
Statement of Operations
Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends.......................................... $ 1,932,365(a)
Interest........................................... 2,909,180
-----------
4,841,545
EXPENSES
Management fees.................................... $3,653,928
Trustees' fees and expenses........................ 16,878
Custodian.......................................... 62,431
Audit and tax services............................. 8,971
Legal.............................................. 12,787
Printing........................................... 59,768
Insurance.......................................... 926
Miscellaneous...................................... 8,206
----------
Total expenses..................................... 3,823,895
-----------
NET INVESTMENT INCOME............................... 1,017,650
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................... 35,208,339
Unrealized appreciation (depreciation) on:
Investments--net................................... 4,537,944
-----------
Net gain (loss)..................................... 39,746,283
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS......................................... $40,763,933
===========
</TABLE>
(a) Net of foreign taxes of $7,469
See accompanying notes to financial statements.
57
<PAGE>
NEW ENGLAND ZENITH FUND
(ALGER EQUITY GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
2000 1999
-------------- -------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)................... $ 1,017,650 $ (182,568)
Net realized gain (loss)....................... 35,208,339 85,117,053
Unrealized appreciation (depreciation)......... 4,537,944 100,091,250
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................... 40,763,933 185,025,735
-------------- -------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.......................... 0 (607)
Net realized gain.............................. 0 (100,705,836)
In excess of net investment income............. 0 (285,867)
-------------- -------------
TOTAL DISTRIBUTIONS............................ 0 (100,992,310)
-------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares................... 329,910,094 383,773,208
Reinvestment of distributions.................. 0 100,992,310
Cost of shares redeemed........................ (125,814,081) (138,471,646)
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................ 204,096,013 346,293,872
-------------- -------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 244,859,946 430,327,297
NET ASSETS
Beginning of the period........................ 841,052,926 410,725,629
-------------- -------------
End of the period.............................. $1,085,912,872 $ 841,052,926
============== =============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period.............................. $ 1,012,263 $ (5,387)
============== =============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................. 10,956,131 13,791,435
Issued in reinvestment of distributions........ 0 3,524,303
Redeemed....................................... (4,179,144) (5,005,319)
-------------- -------------
Net Change..................................... 6,776,987 12,310,419
============== =============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, -----------------------------------------------
2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 29.34 $ 25.11 $ 17.62 $ 15.58 $ 13.80 $ 9.56
---------- -------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income.. 0.03 (0.01) 0.04 0.02 0.04 0.01
Net Realized and
Unrealized Gain (Loss)
on Investments........ 1.27 8.34 8.37 3.92 1.78 4.65
---------- -------- -------- -------- -------- -------
Total From Investment
Operations............ 1.30 8.33 8.41 3.94 1.82 4.66
---------- -------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 0.00 (0.04) (0.02) (0.04) (0.01)
Distributions From Net
Realized Capital
Gains................. 0.00 (4.09) (0.88) (1.88) 0.00 (0.41)
Distributions in Excess
of Net Investment
Income................ 0.00 (0.01) 0.00 0.00 0.00 0.00
---------- -------- -------- -------- -------- -------
Total Distributions.... 0.00 (4.10) (0.92) (1.90) (0.04) (0.42)
---------- -------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $ 30.64 $ 29.34 $ 25.11 $ 17.62 $ 15.58 $ 13.80
========== ======== ======== ======== ======== =======
TOTAL RETURN (%)........ 4.4(b) 34.1 47.8 25.6 13.2 48.8
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.78(a) 0.80 0.83 0.87 0.90 0.85
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.21(a) (0.03) 0.19 0.12 0.24 0.14
Portfolio Turnover Rate
(%).................... 91(a) 128 119 137 78 107
Net Assets, End of
Period (000)........... $1,085,913 $841,053 $410,726 $205,318 $120,456 $46,386
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- -- -- -- 0.90 2.45
</TABLE>
(a) Computed on an annualized basis.
(b) Periods less than one year are not computed on an annualized basis.
See accompanying notes to financial statements.
58
<PAGE>
CAPITAL GROWTH SERIES
PORTFOLIO MANAGER: G. KENNETH HEEBNER
CAPITAL GROWTH MANAGEMENT LIMITED PARTNERSHIP
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: For the six months ended June 30, 2000, the return for the Capital Growth
Series was -5.8%, which lagged the Lipper Variable Products Growth Fund Aver-
age/10/ of +3.3% and the S&P 500/25/ return of -0.4%.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: During the first half of 2000, growth was robust throughout the world. The
U.S. economy continued to move forward and the economies in Latin America,
which had been in recession, improved. Asia continued to grow rapidly, with Ja-
pan and China, the laggards in the region over the past few years, showing
signs of accelerated growth. In the United States, the Federal Reserve Board
became increasingly concerned that the full utilization of the labor force
would generate more inflation, and thus raised short-term interest rates three
times over the course of the period. However, recent indications of slowing
growth were encouraging, leading us to believe that the Fed will not have to
raise rates again this year.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: The Series remained fully invested in anticipation that the strong growth
trends around the world would continue over the balance of the year and into
the year 2001. The business cycle in the United States--with an unemployment
rate hovering around 4%--is mature, unlike in Asia, Europe, and Latin America.
Therefore, we have looked for opportunities in ADRs, American Depositary Re-
ceipts, with which American investors can buy shares of foreign-based companies
on domestic stock exchanges. We invested in ADRs of foreign companies that we
believe would be unaffected by a slowdown in the US economy. For example, we
continued to hold shares of Telefonos de Mexico, Philips Electronics, an inter-
national conglomerate based in the Netherlands, and Pohang Iron and Steel of
Korea. We feel these companies should benefit from strong economic conditions
in Asia, Europe and Latin America.
In addition, we've sought to capture opportunities offered by companies dealing
in certain commodities that are enjoying price increases stemming from economic
strength. Examples include Pohang Iron and Steel and Inco, a nickel producer.
We also significantly added to the Series' position in energy stocks and real
estate investment trusts (REITs), and continued to maintain a stake in semi-
conductor and related stocks, although we reduced our positions there somewhat
because valuations were on the rise.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST SIX MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH WERE LEAST EFFECTIVE?
A: The Series benefited most from its semi-conductor holdings such as Micron
Technologies, and its investments in REITs, such as Vornado Realty Trust and
Boston Properties. The semi-conductor performance reflected strong earnings
growth generated by robust global demand. The REITs experienced significant ap-
preciation off a depressed base, against a background of strong cash flow
growth generated by rising occupancy levels and rents in many property types
and markets. On the down side, the Series' investments in metal firms such as
Pohang Iron and Steel and Inco declined significantly in price during the first
half of the year, despite the fact that the companies posted sharply rising
earnings. We continue to hold these stocks in anticipation of better stock-
price action.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: We anticipate strong global growth during the next 12 months, but recognize
that the U.S. economy needs to slow down to a more sustainable pace. We believe
the greatest opportunities are offered by companies that will participate in
foreign growth or in rising commodity prices. Domestically, we'll look for com-
panies whose earnings progress will not be negatively impacted by the economic
slowdown the Federal Reserve is seeking to engineer.
59
<PAGE>
[GRAPH]
A $10,000 Investment compared to the S&P 500 Index over the past 10 years
Capital Growth Series S&P 500
6/30/90 $10,000 10,000
6/30/91 $9,753 10,739
6/30/92 $11,021 12,185
6/30/93 $12,462 13,840
6/30/94 $12,606 14,027
6/30/95 $15,857 17,682
6/30/96 $18,068 22,290
6/30/97 $24,662 29,995
6/30/98 $32,605 39,055
6/30/99 $36,302 47,938
6/30/00 $37,482 51,487
Average Annual Total Returns
Capital Growth Lipper Variable Growth
Series S&P 500 Fund Average
6 Months -5.8% -0.4% 3.3%
1 Year 3.3% 7.4% 20.8%
3 Years 15.0% 19.7% 24.0%
5 Years 18.8% 23.8% 23.8%
10 Years 14.1% 17.8% 18.2%
Since Inception 22.1% 17.2%
[GRAPHIC] FUND FACTS
GOAL: Long-term growth of capital through investment primarily in equity
securities of companies whose earnings are expected to grow at a faster rate
than the United States economy.
START DATE: August 26, 1983
SIZE: $1.8 billion as of June 30, 2000
MANAGER: G. Kenneth Heebner has managed the Capital Growth Series since its
inception in 1983. He has also been portfolio manager of Nvest 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; CGM Focus
Fund since September 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.
60
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--99.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
ALUMINUM--6.0%
1,850,000 Alcan Aluminium, Ltd. .............................. $ 57,350,000
1,785,000 Alcoa, Inc. ........................................ 51,765,000
--------------
109,115,000
--------------
BEVERAGES & TOBACCO--8.6%
915,000 Anheuser-Busch Companies, Inc. ..................... 68,339,063
3,326,000 Philip Morris Companies, Inc........................ 88,346,875
--------------
156,685,938
--------------
COMPUTER SOFTWARE & SERVICES--1.8%
430,000 Computer Sciences Corp.(b).......................... 32,115,625
--------------
DRUGS--5.5%
1,164,000 United Health Group, Inc............................ 99,813,000
--------------
ELECTRONIC COMPONENTS--18.7%
1,140,000 Advanced Micro Devices, Inc.(b)..................... 88,065,000
2,100,000 Koninklijke Philips Electronics
N.V. (ADR)......................................... 99,750,000
1,748,000 Micron Technology, Inc.(b).......................... 153,933,250
--------------
341,748,250
--------------
FOOD--RETAILERS/WHOLESALERS--5.5%
1,475,000 Hershey Foods Corp.................................. 71,537,500
375,000 Quaker Oats Co...................................... 28,171,875
--------------
99,709,375
--------------
GAS PIPELINES--5.2%
1,880,000 AFLAC, Inc.......................................... 95,762,500
--------------
HEALTH CARE--1.4%
860,000 HCA Healthcare Co................................... 26,122,500
--------------
INSURANCE--2.0%
607,700 Chubb Corp.......................................... 37,373,550
--------------
METALS & MINING--4.9%
5,800,000 Inco, Ltd.(b)....................................... 89,175,000
--------------
OIL--MAJOR INTEGRATED--7.4%
790,000 Conoco, Inc., Class B............................... 19,404,375
1,500,000 TotalFina S.A. (ADR)................................ 115,218,750
--------------
134,623,125
--------------
OIL--SERVICE--5.1%
1,975,000 Halliburton Co. .................................... 93,195,312
--------------
REAL ESTATE INVESTMENT TRUSTS--12.3%
1,432,500 Apartment Investment & Management Co. .............. 61,955,625
1,465,000 Boston Properties, Inc.............................. 56,585,625
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
REAL ESTATE INVESTMENT TRUSTS--
(CONTINUED)
1,238,600 Spieker Properties, Inc. ......................... $ 56,975,600
1,415,000 Vornado Realty Trust.............................. 49,171,250
--------------
224,688,100
--------------
SEMICONDUCTORS--4.0%
1,300,000 National Semiconductor Corp. ..................... 73,775,000
--------------
STEEL--5.3%
4,000,000 Pohang Iron & Steel, Ltd. (ADR)................... 96,000,000
--------------
TELEPHONE--5.7%
1,840,000 Telefonos de Mexico, S.A. (ADR)................... 105,110,000
--------------
Total Common Stocks
(Identified Cost $1,778,490,541)................. 1,815,012,275
--------------
SHORT-TERM INVESTMENT--0.3%
<CAPTION>
FACE
AMOUNT VALUE(A)
<C> <S> <C>
$5,985,000 American Express Credit Corp., 6.88%, 7/03/00..... $ 5,985,000
--------------
Total Short-Term Investment (Identified Cost
$5,985,000)...................................... 5,985,000
--------------
Total Investments--99.7%
(Identified Cost $1,784,475,541)(a).............. 1,820,997,275
Other assets less liabilities..................... 4,629,147
--------------
TOTAL NET ASSETS--100%............................ $1,825,626,422
==============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $1,784,475,541 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.......... $ 156,595,088
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value.......... (120,073,354)
-------------
Net unrealized appreciation.................................. $ 36,521,734
=============
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The value
of ADRs and GDRs are significantly influenced by trading on exchanges
not located in the United States or Canada.
See accompanying notes to financial statements.
61
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value............................... $1,820,997,275
Cash............................................... 996
Receivable for:
Securities sold.................................... 24,287,119
Fund shares sold................................... 713,541
Dividends and interest............................. 6,102,020
Foreign taxes...................................... 203,040
--------------
Total Assets...................................... 1,852,303,991
LIABILITIES
Payable for:
Fund shares redeemed............................... $ 887,555
Securities purchased............................... 24,400,664
Withholding taxes.................................. 198,114
Accrued expenses:
Management fees.................................... 941,463
Deferred trustees fees............................. 125,368
Other expenses..................................... 124,405
-----------
Total Liabilities................................. 26,677,569
--------------
NET ASSETS.......................................... $1,825,626,422
==============
Net assets consist of:
Capital paid in.................................... $1,616,001,697
Undistributed net investment income................ 11,745,516
Accumulated net realized gains (losses)............ 161,357,475
Unrealized appreciation (depreciation) on
investments....................................... 36,521,734
--------------
NET ASSETS.......................................... $1,825,626,422
==============
Computation of offering price:
Net asset value and redemption price per share
($1,825,626,422 divided by 4,457,933 shares of
beneficial interest)............................... $ 409.52
==============
Identified cost of investments...................... $1,784,475,541
==============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 17,607,165(a)
Interest........................................ 357,130
-------------
17,964,295
EXPENSES
Management fees................................. $6,008,404
Trustees' fees and expenses..................... 22,624
Custodian....................................... 117,891
Audit and tax services.......................... 7,271
Legal........................................... 26,858
Printing........................................ 204,829
Miscellaneous................................... 1,548
----------
Total expenses before reductions................ 6,389,425
Expense reductions.............................. (50,491) 6,338,934
---------- -------------
NET INVESTMENT INCOME............................ 11,625,361
-------------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................ 163,624,633
Unrealized appreciation (depreciation) on:
Investments--net................................ (289,474,599)
-------------
Net gain (loss).................................. (125,849,966)
-------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS...................................... $(114,224,605)
=============
</TABLE>
(a) Net of foreign taxes of $585,674
See accompanying notes to financial statements.
62
<PAGE>
NEW ENGLAND ZENITH FUND
(CAPITAL GROWTH SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
2000 1999
-------------- --------------
<S> <C> <C>
FROM OPERATIONS
Net investment income......................... $ 11,625,361 $ 12,830,979
Net realized gain (loss)...................... 163,624,633 387,005,362
Unrealized appreciation (depreciation)........ (289,474,599) (115,634,353)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS................................... (114,224,605) 284,201,988
-------------- --------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income......................... 0 (12,714,702)
Net realized gain............................. 0 (387,005,362)
In excess of net realized gain................ 0 (1,467,043)
-------------- --------------
TOTAL DISTRIBUTIONS........................... 0 (401,187,107)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares.................. 146,630,304 300,316,607
Reinvestment of distributions................. 0 401,187,107
Cost of shares redeemed....................... (270,795,292) (416,251,052)
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS........................... (124,164,988) 285,252,662
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS....... (238,389,593) 168,267,543
NET ASSETS
Beginning of the period....................... 2,064,016,015 1,895,748,472
-------------- --------------
End of the period............................. $1,825,626,422 $2,064,016,015
============== ==============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period............................. $ 11,745,516 $ 120,155
============== ==============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................ 344,826 625,092
Issued in reinvestment of distributions....... 0 938,111
Redeemed...................................... (634,590) (865,998)
-------------- --------------
Net Change.................................... (289,764) 697,205
============== ==============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, --------------------------------------------------------
2000 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 434.74 $ 468.03 $ 399.60 $ 427.08 $ 374.62 $ 312.30
---------- ---------- ---------- ---------- ---------- --------
Income From Investment
Operations
Net Investment Income.. 2.61 3.35 5.29 2.52 3.08 3.47
Net Realized and
Unrealized Gain (Loss)
on Investments........ (27.83) 68.25 130.40 95.67 74.80 114.91
---------- ---------- ---------- ---------- ---------- --------
Total From Investment
Operations............ (25.22) 71.60 135.69 98.19 77.88 118.38
---------- ---------- ---------- ---------- ---------- --------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (3.33) (5.31) (2.52) (3.08) (3.48)
Distributions From Net
Realized Capital
Gains................. 0.00 (101.18) (61.73) (123.15) (22.34) (52.58)
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 (0.38) (0.22) 0.00 0.00 0.00
---------- ---------- ---------- ---------- ---------- --------
Total Distributions.... 0.00 (104.89) (67.26) (125.67) (25.42) (56.06)
---------- ---------- ---------- ---------- ---------- --------
Net Asset Value, End of
Period................. $ 409.52 $ 434.74 $ 468.03 $ 399.60 $ 427.08 $ 374.62
========== ========== ========== ========== ========== ========
TOTAL RETURN (%)........ (5.8)(b) 15.7 34.1 23.5 21.1 38.0
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.66 (a) 0.66 0.66 0.67 0.69 0.71
Ratio of Operating
Expenses to Average Net
Assets after expense
reductions (%) (c)..... 0.65 (a) -- -- -- -- --
Ratio of Net Investment
Income to Average Net
Assets (%)............. 1.19 (a) 0.67 1.18 0.52 0.79 0.92
Portfolio Turnover Rate
(%).................... 278 (a) 206 204 214 207 242
Net Assets, End of
Period (000)........... $1,825,626 $2,064,016 $1,895,748 $1,425,719 $1,142,660 $921,444
</TABLE>
(a) Computed on an annualized basis.
(b) Periods less than one year are not computed on an annualized basis.
(c) The Series has entered into arrangements with certain brokers who paid a
portion of the Series' expenses.
See accompanying notes to financial statements.
63
<PAGE>
DAVIS VENTURE VALUE SERIES
PORTFOLIO MANAGERS: CHRISTOPHER C. DAVIS AND KENNETH C. FEINBERG
DAVIS SELECTED ADVISERS, L.P.
[PHOTO]
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Davis Venture Value Series returned 7.1% for the six-month period ending
June 30, 2000 in the face of growing price volatility among large company
stocks and the continued domination of growth style stocks. The Standard &
Poor's 500 Index/25/ returned -0.4% and the Lipper Variable Product Growth Fund
Average/10/ returned 3.3% for the same period. At the same time, the S&P/BARRA
Large Cap Value Index returned -4.1%.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: Over the past six months, volatility in stock prices among large companies
has been growing. This is clear through dramatic shifts in market leadership as
well as sharp changes in market capitalization among such widely recognized
companies as Microsoft and Lucent Technologies. In recent months, investors
have consistently chosen to punish the stock prices of companies that fail to
achieve the quarterly earnings expectations of Wall Street analysts. This sense
of nervousness, combined with several successive interest rate hikes by the
Federal Reserve, has created a turbulent stock market that contrasts the un-
shakable bull market of the past few years. However, instead of being a detri-
ment to long-term investors, the current market offers exciting opportunities
to those who are willing to brave market volatility and carefully consider the
long-term prospects for different businesses.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: Our investment strategy remains consistent throughout any market environ-
ment. Davis actively seeks out high quality, well-managed companies with strong
potential for future earnings growth. Our investment team will identify a
short-list of what we believe are great companies, and will patiently wait un-
til the stock market presents us with opportunities to strategically build po-
sitions at value prices. We will hold our positions for the long-term.
Davis has defined a list of critical characteristics that foster long-term suc-
cess among businesses. This list includes: an outstanding executive management
team with a measurable track record, an entrepreneurial culture, a strong re-
turn on capital, a smart application of technology, a conservative financial
position, and a strategic position for long-term success within any given in-
dustry. We will not change our investment discipline in reaction to market vol-
atility, momentum, or investor "fads", as we strongly believe in our method and
our ability to build wealth over the long-term.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST SIX MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: Our strong performance so far this year is attributable to careful stock se-
lection and strategic allocation within our portfolio. Our portfolio has bene-
fited from strong returns among several top holdings. Key positions in Hewlett-
Packard (+41.1%) and Texas Instruments (+42.3%) posted outstanding returns dur-
ing the past six months. This has been in spite of tremendous price volatility
across companies of the technology sector. In addition, financial companies
such as American International Group (+8.8%), Household International (+12.6%),
Morgan Stanley Dean Witter (+17.3%), and Golden West Financial (+22.2%) have
provided a solid boost to portfolio performance. It is interesting to note that
these financial companies have achieved such returns in spite of today's higher
interest rate environment. Finally, to our satisfaction, two "contrarian" posi-
tions have rewarded us this year: American Home Products (+51.0%) and Tyco In-
ternational (+21.4%). We added to both positions over the past twelve months,
when their stock prices were depressed due to excessive investor concern over
litigation and accounting practices, respectively.
We have also experienced several recent disappointments among our holdings. Of
note, we experienced sharp declines in the stock prices of Bristol-Myers Squibb
(-8.5%), Lexmark International (-25.7%) and Motorola (-38.1%). Among financial
positions, Federal Home Loan Mortgage Company ("Freddie Mac") has also rendered
negative performance year-to-date (-13.2%). Thankfully, none of these positions
were among our top positions during the first and second quarter. In each case
our long-term thesis for holding these positions has not changed. In fact, we
have taken the opportunity presented by price weakness to add to several of the
above holdings in recent weeks.
64
<PAGE>
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: We believe that it will be increasingly difficult to achieve strong perfor-
mance through stocks in the coming years. We are unlikely to continue to enjoy
the big drivers of stock market returns, such as low inflation, falling inter-
est rates, and dramatically rising corporate profits, that benefited the mar-
ket in recent years. It is arguable that the Federal Reserve is finished rais-
ing short-term interest rates and tightening credit in the economy. Recent
comments by Chairman Greenspan indicate his confidence that the Fed has acted
appropriately to slow the torrid pace of U.S. economic growth and achieve a
"soft-landing". However, it is clear that the Fed Board of Governors remains
vigilant for any signs of inflation, and is not immediately biased to ease
rates. This dampens the potential for continued expansion of stock market val-
uations, and resulting broad equity market performance as well.
Investors must also acknowledge that corporate earnings, as a percent of GDP,
cannot continue to expand forever. The U.S. has benefited from a healthy eco-
nomic environment over the past decade that has allowed for dramatic increases
in company earnings. While the economy still supports further corporate profit
growth, it is likely that the rate of earnings expansion will decline. We also
note, with some concern, that many companies have distorted their earnings
through aggressive accounting policies. Such actions have become commonplace
as CEOs and CFOs strive to meet the high quarterly expectations of Wall
Street. Therefore, investors today must pay careful attention to the quality
of corporate earnings of every prospective investment.
We believe that the stock market may enter a wide trading range for the fore-
seeable future. This scenario offers tremendous opportunities for investors
who are willing to carefully select investments on the basis of sound funda-
mentals, and have the courage and discipline to sell positions that have
reached unjustifiable valuations. It is imperative that investors maintain a
"generational" or long-term view when choosing investments, and maintain the
patience necessary to see an investment thesis through a full-market cycle.
We will continue to apply the Davis investment discipline in the current mar-
ket environment, just as we have been doing for the past thirty years. We will
look to maintain strong positions in the highest quality companies with the
brightest leaders. Furthermore, we will strategically take advantage of situa-
tions when the stock market presents us with the opportunity to build a new
position in a great company, or add to an existing one, at value prices.
[GRAPH]
A $10,000 Investment compared to the S&P 500
since the Series' Inception
Davis Venture
Value Series S&P 500
10/31/94 $10,000 $10,000
6/30/95 $11,848 11,745
6/30/96 $14,478 14,806
6/30/97 $20,092 19,923
6/30/98 $24,928 25,942
6/30/99 $29,827 31,842
6/30/00 $32,522 34,200
Average Annual Returns
Davis Venture Lipper Variable
Value Series S&P 500 Growth
6 Months 7.1% -0.4% 3.3%
1 Year 9.0% 7.4% 20.8%
3 Years 17.4% 19.7% 24.0%
5 Years 22.4% 23.8% 23.8%
Since Inception 23.1% 24.2% n/a
FUND FACTS
GOAL: Growth of capital.
START DATE: October 31, 1994
SIZE: $803 million as of June 30, 2000
MANAGERS: Christopher C. Davis has been the manager of the Series since
February 1997. Previously, he co-managed the Series with Shelby M.C. Davis
from October 1995 to February 1997. Kenneth C. Feinberg has co-managed the
Series since April 1999. Mr. Feinberg has co-managed other equity funds for
Davis Selected since May 1998.
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.
65
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--92.7% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
BANKS AND SAVINGS & LOAN--10.2%
859 Bank of America Corp.................................... $ 36,937
546,880 Citigroup, Inc.......................................... 32,949,520
1,000 First Union Corp........................................ 24,813
406,200 Golden West Financial Corp.............................. 16,578,038
33,400 State Street Corp....................................... 3,542,488
127,300 U.S. Bancorp............................................ 2,450,525
676,600 Wells Fargo & Co........................................ 26,218,250
------------
81,800,571
------------
BUILDING MATERIALS--6.4%
142,700 Martin Marietta Materials, Inc.......................... 5,770,431
919,100 Masco Corp. ............................................ 16,601,244
613,400 Tyco International, Ltd. ............................... 29,059,825
------------
51,431,500
------------
BUSINESS SERVICES--0.1%
33 ACNielson Corp.(b)...................................... 726
100 Dun & Bradstreet Corp................................... 2,863
26 Gartner Group, Inc. Class B............................. 257
7,700 WPP Group, Plc. (ADR)................................... 559,213
------------
563,059
------------
CHEMICALS--1.0%
600 Dow Chemical Co......................................... 18,113
187,800 Vulcan Materials Co. ................................... 8,016,713
------------
8,034,826
------------
COMMUNICATIONS--5.6%
331,100 MediaOne Group, Inc.(b)................................. 22,059,538
206,100 Novell, Inc.(b)......................................... 1,906,425
310,900 Tellabs, Inc.(b)........................................ 21,277,219
------------
45,243,182
------------
COMPUTERS & PERIPHERALS--13.7%
236,100 BMC Software, Inc.(b)................................... 8,613,961
327,600 Hewlett-Packard Co...................................... 40,909,050
127,400 Intel Corp. ............................................ 17,031,788
234,100 International Business Machines Corp. .................. 25,648,581
244,500 Lexmark International Group, Inc.(b).................... 16,442,625
37,400 SAP AG (ADR)............................................ 1,755,463
------------
110,401,468
------------
CONSUMER PRODUCTS & SERVICES--1.6%
3,200 Coca-Cola Co. .......................................... 183,800
900 Fortune Brands, Inc..................................... 20,756
900 Gallaher Group, Plc. (ADR).............................. 19,294
10,200 General Electric Co..................................... 540,600
67,100 Gillette Co............................................. 2,344,306
800 Maytag Corp............................................. 29,500
362,500 Philip Morris Companies, Inc............................ 9,628,906
------------
12,767,162
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
DIVERSIFIED FINANCIAL SERVICES--12.3%
842,400 American Express Co..................................... $ 43,910,100
137,000 Donaldson, Lufkin & Jenrette, Inc....................... 5,813,938
140,900 Federal Home Loan Mortgage Corp. ....................... 5,706,450
712,000 Household International, Inc............................ 29,592,500
137,700 Providian Financial Corp. .............................. 12,393,000
63,200 Sun Life Financial Services of Canada, Inc.(b).......... 1,066,500
------------
98,482,488
------------
ELECTRONICS--5.3%
131,346 Agilent Technologies, Inc.(b)........................... 9,686,768
86,400 Koninklijke Philips Electronics N.V. (ADR).............. 4,104,000
122,933 Molex, Inc.............................................. 5,916,151
341,100 Texas Instruments, Inc.................................. 23,429,306
------------
43,136,225
------------
ENERGY--1.3%
400 Amerada Hess Corp. ..................................... 24,700
1,640 BP Amoco Plc (ADR)...................................... 92,763
200 Burlington Resources, Inc............................... 7,650
2,000 Chevron Corp. .......................................... 169,625
101,658 Devon Energy Corp....................................... 5,711,909
500 El Paso Energy Corp. ................................... 25,469
7,692 Exxon Mobil Corp........................................ 603,822
55,400 Schlumberger, Ltd....................................... 4,134,225
100 Sempra Energy........................................... 1,700
------------
10,771,863
------------
HOTELS & RESTAURANTS--3.5% .............................
169,600 Marriott International, Inc. ........................... 6,116,200
656,200 McDonald's Corp......................................... 21,613,588
------------
27,729,788
------------
INDUSTRIAL PARTS & EQUIPMENT--0.8%
157,800 Dover Corp.............................................. 6,400,763
------------
INVESTMENT FIRMS--2.7%
800 J.P. Morgan & Co., Inc. ................................ 88,100
263,610 Morgan Stanley Dean Witter & Co......................... 21,945,532
------------
22,033,632
------------
PACKAGING--1.4%
218,500 Sealed Air Corp.(b)..................................... 11,443,937
------------
PAPER PRODUCTS--0.0%
894 International Paper Co.................................. 26,652
------------
</TABLE>
See accompanying notes to financial statements.
66
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
PHARMACEUTICALS & HEALTH CARE--8.9%
535,300 American Home Products Corp. ........................... $ 31,448,875
324,400 Bristol-Myers Squibb Co................................. 18,896,300
63,000 Eli Lilly & Co. ........................................ 6,292,125
200 IMS Health, Inc......................................... 3,600
1,500 Johnson & Johnson....................................... 152,812
37,800 Merck & Co., Inc. ...................................... 2,896,425
10,200 Pfizer, Inc. ........................................... 489,600
47,000 Pharmacia Corp.......................................... 2,429,312
136,700 Smithkline Beecham, Plc. (ADR).......................... 8,911,131
------------
71,520,180
------------
PROPERTY & CASUALTY INSURANCE--7.9%
146,738 American International Group, Inc. ..................... 17,241,715
386 Berkshire Hathaway, Inc. Class B(b)..................... 19,361,720
68,700 Chubb Corp. ............................................ 4,225,050
114,700 Progressive Corp. ...................................... 8,487,800
135,350 Transatlantic Holdings, Inc. ........................... 11,335,562
120,631 UnumProvident Corp. .................................... 2,420,159
------------
63,072,006
------------
PUBLISHING--1.1%
31,800 Dow Jones & Company, Inc................................ 2,329,350
69,200 Gannett Company, Inc.................................... 4,139,025
20 R.H. Donnelley Corp. ................................... 387
66,900 Tribune Co. ............................................ 2,341,500
------------
8,810,262
------------
RAILROAD--0.1%
7,400 Kansas City Southern Industries, Inc.................... 656,287
------------
REAL ESTATE INVESTMENT TRUSTS--0.6%
14,200 Centerpoint Properties Trust............................ 578,650
21,500 Equity Residential Properties Trust..................... 989,000
98,300 General Growth Properties, Inc. ........................ 3,121,025
------------
4,688,675
------------
RETAIL--2.5%
603,500 Costco Whosale Corp.(b)................................. 19,915,500
------------
SEMICONDUCTORS--0.4%
39,400 Applied Materials, Inc.(b).............................. 3,570,625
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
TELECOMMUNICATIONS--5.3%
44,800 AT & T Corp. ........................................... $ 1,416,800
86,300 AT & T Corp. (Wireless Group)........................... 2,405,612
121,004 Globalstar Telecommunications, Ltd.(b).................. 1,089,036
235,200 Loral Space & Communications, Ltd.(b)................... 1,631,700
300,900 Lucent Technologies, Inc................................ 17,828,325
494,100 Motorola, Inc........................................... 14,359,781
600 SBC Communications, Inc................................. 25,950
31,900 Sprint Corp............................................. 1,626,900
43,300 WorldCom, Inc.(b)....................................... 1,986,387
------------
42,370,491
------------
UTILITIES--ELECTRIC--0.0%
300 Carolina Power & Light Co............................... 9,581
300 Duke Energy Corp........................................ 16,912
200 Edison International.................................... 4,100
600 Southern Co. ........................................... 13,987
200 Wisconsin Energy Corp. ................................. 3,962
------------
48,542
------------
WASTE MANAGEMENT--0.0%
390 Waste Management, Inc................................... 7,410
------------
Total Common Stocks
(Identified Cost $592,085,603)......................... 744,927,094
------------
PREFERRED STOCKS--0.2%
85,000 General Growth Properties, 7.25%........................ 1,848,750
2,000 Vornado Realty Trust, 6.50%............................. 103,625
------------
1,952,375
------------
Total Preferred Stocks
(Identified Cost $2,205,592)........................... 1,952,375
------------
</TABLE>
See accompanying notes to financial statements.
67
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
SHORT TERM INVESTMENT--7.2%
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
$57,404,000 Repurchase Agreement with State Street Corp. dated
6/30/2000 at 6.600% to be repurchased at
$57,435,572 on 7/3/2000, collateralized by
$49,015,000 Federal National Mortgage
Association, 5.300% due 1/6/2004 with a value of
$49,443,881 and $9,500,000 Federal Home Loan
Bank, 7.000% due 8/28/2001 with a value of
$9,690,000....................................... $ 57,404,000
------------
Total Short-Term Investment
(Identified Cost $57,404,000).................... 57,404,000
------------
Total Investments--100.1%
(Identified Cost $651,695,195)(a)................ 804,283,469
Other assets less liabilities..................... (1,026,942)
------------
TOTAL NET ASSETS--100%............................ $803,256,527
============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $651,695,195 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.............. $188,300,544
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (35,712,270)
------------
Net unrealized appreciation................................... $152,588,274
============
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt (GDR)
is a certificate issued by a Custodian Bank representing the right to
receive securities of the foreign issuer described. The value of ADRs
and GDRs are significantly influenced by trading on exchanges not
located in the United States or Canada.
See accompanying notes to financial statements.
68
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................. $804,283,469
Cash.................................................. 1,542
Receivable for:
Securities sold....................................... 116,695
Fund shares sold...................................... 2,281,958
Dividends and interest................................ 549,323
Foreign taxes......................................... 2,424
------------
Total Assets......................................... 807,235,411
LIABILITIES
Payable for:
Fund shares redeemed.................................. $1,249,048
Securities purchased.................................. 2,151,171
Withholding taxes..................................... 3,742
Accrued expenses:
Management fees....................................... 499,541
Deferred trustees fees................................ 20,141
Other expenses........................................ 55,241
----------
Total Liabilities.................................... 3,978,884
------------
NET ASSETS............................................. $803,256,527
============
Net assets consist of:
Capital paid in....................................... $582,966,875
Undistributed net investment income................... 1,815,056
Accumulated net realized gains (losses)............... 65,886,322
Unrealized appreciation (depreciation) on investments. 152,588,274
------------
NET ASSETS............................................. $803,256,527
============
Computation of offering price:
Net asset value and redemption price per share
($803,256,527 divided by 28,125,678 shares of
beneficial interest).................................. $ 28.56
============
Identified cost of investments......................... $651,695,195
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................ $ 3,076,860(a)
Interest......................................... 1,492,365
-----------
4,569,225
EXPENSES
Management fees.................................. $ 2,758,798
Trustees' fees and expenses...................... 13,926
Custodian........................................ 50,596
Audit and tax services........................... 8,971
Legal............................................ 9,051
Printing......................................... 60,290
Miscellaneous.................................... 7,376
-----------
Total expenses before reductions................ 2,909,008
Expense reductions.............................. (13,469) 2,895,539
----------- -----------
NET INVESTMENT INCOME............................. 1,673,686
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................. 67,978,380
Unrealized appreciation (depreciation) on:
Investments--net................................. (20,768,219)
Foreign currency transactions--net............... (21) (20,768,240)
----------- -----------
Net gain (loss).................................. 47,210,140
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS....................................... $48,883,826
===========
</TABLE>
(a) Net of foreign taxes of $13,473
See accompanying notes to financial statements.
69
<PAGE>
NEW ENGLAND ZENITH FUND
(DAVIS VENTURE VALUE SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 1,673,686 $ 2,936,571
Net realized gain (loss).......................... 67,978,380 4,915,990
Unrealized appreciation (depreciation)............ (20,768,240) 78,394,684
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. 48,883,826 86,247,245
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (2,768,802)
Net realized gain................................. 0 (7,489,451)
In excess of realized gain........................ 0 (2,132,319)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (12,390,572)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 195,605,630 256,605,757
Reinvestment of distributions..................... 0 12,390,572
Cost of shares redeemed........................... (96,832,244) (127,604,594)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... 98,773,386 141,391,735
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 147,657,212 215,248,408
NET ASSETS
Beginning of the period........................... 655,599,315 440,350,907
------------ ------------
End of the year................................... $803,256,527 $655,599,315
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 1,815,056 $ 141,370
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 7,019,331 10,192,408
Issued in reinvestment of distributions........... 0 471,756
Redeemed.......................................... (3,479,048) (5,101,465)
------------ ------------
Net Change........................................ 3,540,283 5,562,699
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE -----------------------------------------------
30, 2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10 $ 9.62
-------- -------- -------- -------- -------- -------
Income From Investment
Operations
Net Investment Income.. 0.06 0.12 0.16 0.18 0.13 0.10
Net Realized and
Unrealized Gain (Loss)
on Investments........ 1.83 3.93 2.84 5.20 3.26 3.68
-------- -------- -------- -------- -------- -------
Total From Investment
Operations............ 1.89 4.05 3.00 5.38 3.39 3.78
-------- -------- -------- -------- -------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (0.12) (0.16) (0.14) (0.13) (0.10)
Distributions From Net
Realized Capital
Gains................. 0.00 (0.32) (0.49) (0.53) (0.27) (0.20)
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 (0.09) 0.00 0.00 0.00 0.00
-------- -------- -------- -------- -------- -------
Total Distributions.... 0.00 (0.53) (0.65) (0.67) (0.40) (0.30)
-------- -------- -------- -------- -------- -------
Net Asset Value, End of
Period................. $ 28.56 $ 26.67 $ 23.15 $ 20.80 $ 16.09 $ 13.10
======== ======== ======== ======== ======== =======
TOTAL RETURN (%)........ 7.1(b) 17.5 14.4 33.5 25.8 39.3
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.79(a) 0.81 0.83 0.90 0.90 0.90
Ratio of Operating
Expenses to Average Net
Assets after expense
reductions (%) (c)..... 0.79(a) -- -- -- -- --
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.45(a) 0.55 0.82 0.94 1.25 1.39
Portfolio Turnover Rate
(%).................... 33(a) 22 25 17 18 20
Net Assets, End of
Period (000)........... $803,257 $655,599 $440,351 $280,448 $108,189 $35,045
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- -- -- 0.90 0.96 1.51
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
(c) The Series has entered into arrangements with certain brokers who paid a
portion of the Series expenses.
See accompanying notes to financial statements.
70
<PAGE>
HARRIS OAKMARK MID CAP VALUE SERIES
PORTFOLIO MANAGERS: WILLIAM C. NYGREN, CFA; HENRY BERGHOEF, CFA; FLOYD J.
BELLMAN, CFA
HARRIS ASSOCIATES L.P.
[PHOTO]
[PHOTO]
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST TWO MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A. Harris Associates assumed responsibility for managing the Harris Oakmark Mid
Cap Value Series (formerly Goldman Sachs Midcap Value Series) on May 1, 2000.
Therefore, a detailed performance track record is not yet available. Over this
very short time period (5/1/00-6/30/00), the Series returned
-6.3% compared to the 0.2% return of the Russell Midcap Index/22/ return and a
-2.1% return of the Russell Midcap Value Index/26/.
Including the performance prior to Harris Associates assuming management re-
sponsibility, the Series returned-1.1% for the six months ended June 30, 2000.
This compares to a 5.1% return of the Russell Midcap Index return and a-0.7%
return of the Russell Midcap Value Index. The average return of all funds
within the Lipper Variable Products Midcap Fund/14/ universe was 8.5%.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: The large market swings of the last several months arose from concerns over
the anticipated direction of interest rates, inflation, corporate earnings, and
rapid and unpredictable money flows.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: Volatility in both the market and individual stocks has allowed us to act
opportunistically during the portfolio construction process. Overall, the port-
folio consists of some very attrac-
tively valued stocks with large upside potential and limited downside risk. A
portfolio constructed in this fashion appears to be consistent with a market
environment that continues to experience large day-to-day and month-to-month
swings.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST SIX MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A. While some of our stocks were up significantly during the period, a few
stocks detracted from the portfolio's near-term performance due to their cycli-
cal characteristics or disappointing, but short-term, fundamental developments.
An example of a stock falling into the former category was USG Corp. USG stock
fell from $43.00 to $30.00 as construction spending slowed and earnings esti-
mates fell from $8.00 to $7.00. We believe this earnings decline is a result of
economic slowing and USG's annual earnings per share vacillation from $3.00 to
$9.00 based on the economic cycle. At 10 times trough earnings and just 3 times
peak earnings, we believe USG stock is very attractively priced.
Examples of stocks characterized by the latter category included Reynolds &
Reynolds (REY) and Electronic Data Systems. During the quarter, REY sold its
business forms division and plans to use the proceeds for its rapidly growing
automotive information business as well as for share repurchases. REY also an-
nounced a transaction with General Motors (GM) that will advance the company's
lead as the dominant information technology provider to dealers. Both transac-
tions sacrificed a small amount of near-term earnings in exchange for much more
rapid earnings growth. Because the immediate result of those transactions is a
higher P/E on next year's earnings, shareholders reacted negatively and the
stock fell from $24.50 to $19.00. Our estimate of REY's value is higher than it
was last quarter, and we believe the stock is now selling at a much greater
discount to its true intrinsic value.
Electronic Data Systems (EDS), a leader in IT consulting and MIS outsourcing,
announced that second quarter sales would grow more slowly than expected. EDS
stock, which we purchased at $53.50, already down from $72.00 in April, fell
further to $41.25. Based on our estimate for next year, EDS now sells at 14
times earnings, just over half of the S&P multiple.
From a broader perspective, value stocks as a group significantly
underperformed growth stocks during the month of June. Hence, performance re-
sults for the Series during the short two-month period suffered by comparison.
The two month returns for the Russell 1000 Value and Russell Midcap Value indi-
ces were-4.5% and-3.2% respectively while the S&P 500 Index was down only
0.74%.
71
<PAGE>
The trend of growth stocks doing better than value stocks was also a primary
factor in the underperformance of the Series prior to the change in managers.
Over the six months ending June 30, 2000, the Russell Midcap Value Index re-
turned-0.7%, while the Russell Midcap Growth Indexreturned+12.2%. With its
value orientation, the Series returned-1.1%.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: The wide market swings we have experienced recently are likely to continue
during the next six months. As previously discussed, owning a portfolio that,
in our opinion, offers more opportunity and less downside risk is consistent
with an uncertain market environment. Since our portfolio construction process
emphasizes individual stock selection rather than the utilization of market
and/or economic forecasting, we do not anticipate changes in our portfolio
management style. The necessity to focus on both upside opportunities and
downside risk--regardless of market environment--is an inherent component of
our investment philosophy and process.
[GRAPH]
A $10,000 Investment Compared to the S&P 500 and Russell Midcap Index
Since the Series' Inception
Goldman Sachs Midcap
Value Series Russell Midcap S&P 500
4/30/93 $10,000 $10,000 $10,000
6/30/93 $10,497 10,434 10,303
6/30/94 $10,526 10,573 10,442
6/30/95 $13,718 13,045 13,163
6/30/96 $16,523 15,979 16,593
6/30/97 $19,459 19,648 22,328
6/30/98 $21,945 24,561 29,073
6/30/99 $22,498 27,333 35,685
6/30/00 $19,296 30,789 38,327
Average Annual Total Returns
Lipper Variable
Russell Midcap Fund
Midcap Value Midcap S&P 500 Average
6 Months -1.1% 5.1% -0.4% 8.5%
1 Year -14.2% 12.6% 7.4% 35.8%
3 Years -0.3% 16.2% 19.7% 29.7%
5 Years 7.1% 18.7% 23.8% 23.0%
Since Inception 9.6% 17.0% 20.6%
[GRAPHIC] FUND FACTS
GOAL: Long-term capital appreciation. START DATE: April 30, 1993 SIZE: $103
million as of June 30, 2000
MANAGERS: William C. Nygren, Henry Berghoef and Floyd Bellman have managed the
Harris Oakmark Mid Cap Value Series since May 1, 2000.
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.
72
<PAGE>
NEW ENGLAND ZENITH FUND
(HARRIS OAKMARK MID CAP VALUE SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--91.8% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
BIOTECHNOLOGY--2.5%
53,500 Chiron Corp.(b)....................................... $ 2,541,250
-----------
BUILDING MATERIALS--7.3%
248,900 USG Corp.............................................. 7,560,338
-----------
ELECTRIC COMPANIES--0.2%
12,000 Citizens Communications Co............................ 207,000
-----------
FOODS--3.5%
183,600 Ralston Purina Co..................................... 3,660,525
-----------
HOUSEHOLD FURNISHINGS & APPAREL--4.2%
359,600 U.S. Industries, Inc.................................. 4,360,150
-----------
HOUSEHOLD PRODUCTS--4.3%
243,900 Energizer Holdings, Inc.(b)........................... 4,451,175
-----------
INSURANCE--PROPERTY/CASUALTY--8.2%
86,300 MBIA, Inc. ........................................... 4,158,581
119,200 PartnerRe, Ltd........................................ 4,224,150
-----------
8,382,731
-----------
MANUFACTORING--DIVERSIFIED--4.7%
230,200 Thermo Electron Corp.................................. 4,848,588
-----------
OFFICE EQUIPMENT & SUPPLIES--7.5%
425,600 The Reynolds & Reynolds Co............................ 7,767,200
-----------
RESTAURANTS--4.2%
154,600 Tricon Global Restaurants, Inc.(b).................... 4,367,450
-----------
RETAIL--SPECIALTY--8.2%
583,800 Toys "R" Us, Inc.(b).................................. 8,501,588
-----------
SAVINGS & LOAN COMPANIES--14.8%
529,700 Washington Mutual, Inc. .............................. 15,295,087
-----------
SERVICES--COMMERCIAL & CONSUMER--5.9%
42,000 H&R Block, Inc. ...................................... 1,359,750
165,200 Dun & Bradstreet Corp................................. 4,728,850
-----------
6,088,600
-----------
SERVICES--COMPUTER SYSTEMS--3.6%
88,300 Electronic Data Systems Corp.......................... 3,642,375
-----------
SERVICES--DATA PROCESSING--9.4%
224,200 Ceridian Corp.(b)..................................... 5,394,812
86,900 First Data Corp....................................... 4,312,412
-----------
9,707,224
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
TEXTILES--APPAREL--3.3%
95,700 Liz Claiborne, Inc.................................. $ 3,373,425
------------
Total Common Stocks
(Identified Cost $100,407,383)..................... 94,754,706
------------
SHORT-TERM INVESTMENTS--8.3%
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
$4,000,000 General Electric Capital Corp., 6.800%, 7/3/00...... $ 4,000,000
4,604,000 Repurchase Agreement with State Street Corp. dated
6/30/2000 at 6.25% to be repurchased at $4,606,398
on 7/3/2000, collateralized by $4,210,000 U.S.
Treasury Bonds, 6.875% due 8/15/2025 with a value
of $4,699,413...................................... 4,604,000
------------
Total Short-Term Investments
(Identified Cost $8,604,000)....................... 8,604,000
------------
Total Investments--100.1%
(Identified Cost $109,011,383)(a).................. 103,358,706
Other assets less liabilities....................... (145,137)
------------
TOTAL NET ASSETS--100%.............................. $103,213,569
============
</TABLE>
(a) Federal Tax Information:
<TABLE>
<S> <C>
At June 30, 2000 the net unrealized depreciation on investments based on cost
of $109,011,383 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all investments in
which there is an excess of value over tax cost................ $ 4,361,727
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value................ (10,014,404)
------------
Net unrealized depreciation..................................... $ (5,652,677)
============
</TABLE>
(b) Non-income producing security.
See accompanying notes to financial statements.
73
<PAGE>
NEW ENGLAND ZENITH FUND
(HARRIS OAKMARK MID CAP VALUE SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $103,358,706
Cash................................................... 724
Receivable for:
Fund shares sold....................................... 275,716
Dividends and interest................................. 38,964
Foreign taxes.......................................... 1,691
------------
Total Assets.......................................... 103,675,801
LIABILITIES
Payable for:
Fund shares redeemed................................... $338,226
Accrued expenses:
Management fees........................................ 53,308
Deferred trustees fees................................. 10,185
Other expenses......................................... 60,513
--------
Total Liabilities..................................... 462,232
------------
NET ASSETS.............................................. $103,213,569
============
Net assets consist of:
Capital paid in........................................ $118,463,485
Undistributed net investment income.................... 595,782
Accumulated net realized gains (losses)................ (10,193,021)
Unrealized appreciation (depreciation) on investments . (5,652,677)
------------
NET ASSETS.............................................. $103,213,569
============
Computation of offering price:
Net asset value and redemption price per share
($103,213,569 divided by 857,443 shares of beneficial
interest).............................................. $ 120.37
============
Identified cost of investments.......................... $109,011,383
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................... $ 880,404(a)
Interest............................................ 187,842
-----------
1,068,246
EXPENSES
Management fees..................................... $391,563
Trustees' fees and expenses......................... 6,581
Custodian........................................... 24,273
Audit and tax services.............................. 5,671
Legal............................................... 6,858
Printing............................................ 72,252
Miscellaneous....................................... 1,511
--------
Total expenses..................................... 508,709
Less expenses assumed by the investment adviser.... (38,833) 469,876
-------- -----------
NET INVESTMENT INCOME................................ 598,370
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net.................................... (2,096,236)
Unrealized appreciation (depreciation) on:
Investments--net.................................... (9,316)
-----------
Net gain (loss)..................................... (2,105,552)
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................................... $(1,507,182)
===========
</TABLE>
(a) Net of foreign taxes of $6,590.
See accompanying notes to financial statements.
74
<PAGE>
NEW ENGLAND ZENITH FUND
(HARRIS OAKMARK MID CAP VALUE SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 598,370 $ 1,205,828
Net realized gain (loss).......................... (2,096,236) (7,918,132)
Unrealized appreciation (depreciation)............ (9,316) 6,689,577
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. (1,507,182) (22,727)
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (1,205,828)
In excess of net investment income................ 0 (155,136)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (1,360,964)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 20,326,339 40,923,689
Reinvestment of distributions..................... 0 1,360,964
Cost of shares redeemed........................... (24,885,496) (44,618,082)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... (4,559,157) (2,333,429)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (6,066,339) (3,717,120)
NET ASSETS
Beginning of the period........................... 109,279,908 112,997,028
------------ ------------
End of the period................................. $103,213,569 $109,279,908
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 595,782 $ (2,588)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 167,690 322,118
Issued in reinvestment of distributions........... 0 11,333
Redeemed.......................................... (208,126) (355,388)
------------ ------------
Net Change........................................ (40,436) (21,937)
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE ----------------------------------------------
30, 2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 121.71 $ 122.85 $ 170.59 $ 157.88 $142.44 $112.77
-------- -------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.70 1.36 1.09 0.00 0.11 0.42
Net Realized and
Unrealized Gain (Loss)
on Investments........ (2.04) (0.97) (11.41) 27.12 24.88 33.80
-------- -------- -------- -------- ------- -------
Total From Investment
Operations............ (1.34) 0.39 (10.32) 27.12 24.99 34.22
-------- -------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (1.36) (1.09) 0.00 (0.13) (0.40)
Distributions From Net
Realized Capital
Gains................. 0.00 0.00 (36.08) (14.41) (9.42) (4.15)
Distributions in Excess
of Net Investment
Income................ 0.00 (0.17) 0.00 0.00 0.00 0.00
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 0.00 (0.25) 0.00 0.00 0.00
-------- -------- -------- -------- ------- -------
Total Distributions.... 0.00 (1.53) (37.42) (14.41) (9.55) (4.55)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 120.37 $ 121.71 $ 122.85 $ 170.59 $157.88 $142.44
======== ======== ======== ======== ======= =======
TOTAL RETURN (%)........ (1.1)(b) 0.3 (5.5) 17.4 17.6 30.4
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.90 (a) 0.88 0.88 0.85 0.85 0.85
Ratio of Net Investment
Income to Average Net
Assets (%)............. 1.14 (a) 1.08 0.66 (0.16) 0.08 0.37
Portfolio Turnover Rate
(%).................... 244 (a) 119 171 49 65 58
Net Assets, End of
Period (000)........... $103,214 $109,280 $112,997 $114,617 $82,667 $48,832
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... 0.97 (a) -- 0.90 0.86 0.92 1.06
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
See accompanying notes to financial statements.
75
<PAGE>
LOOMIS SAYLES SMALL CAP SERIES
LEAD PORTFOLIO MANAGERS (PICTURED): CHRIS R. ELY AND JOSEPH R. GATZ PORTFOLIO
MANAGERS: PHILIP C. FINE, DAVID L. SMITH AND DAN THELEN LOOMIS, SAYLES &
COMPANY, L.P.
[PHOTO] [PHOTO]
[PHOTO]
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Loomis Sayles Small Cap Series returned 7.9% during the six months end-
ing June 30, 2000, compared to a 3.0% return of the Russell 2000 Index/23/ and
a 6.9% return of the Lipper Variable Products Small Cap Fund Average/15/. The
effectiveness of the Series' use of both growth and value styles was exhibited
by the strong first quarter that was mainly powered by growth stocks with the
emphasis on technology names. Towards the end of March and through May these
growth stocks faltered sharply; however the value stocks in the portfolio held
up relatively well and cushioned the blow. The net result was a very strong pe-
riod where the Small Cap Series handily outperformed the Russell 2000 Index.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: For what is now a period of years, the market has seen volatility and rapid
rotation among stocks of different types, including sector and style shifts.
The last six months has been no exception. Last year's steep pre-Year 2000
spike in technology names seemed to melt down for a week in January, then just
as quickly technology stocks rebounded to new highs before correcting sharply
beginning in March. The most significant economic development of the period may
be that after the six rate increases and some help from escalating energy pric-
es, the Federal Reserve Bank appears to be achieving its goal of slowing the
economy. Investors finally responded to the Fed's
rate hikes, uncertainty about the direction of the economy, and concerns that a
bursting Internet bubble would have a broader impact on the market. In the sec-
ond quarter some traditional value plays showed strong performance, but not
enough to offset the damage from the drop in technology stocks.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: In the value portion of the portfolio, we have taken a mod-
estly more defensive posture in our stock selection, but have not changed our
investment strategy or selection process. Our particular focus at this time is
on identifying companies with a high degree of earnings predictability and vis-
ibility. Specifically, our relative weighting in the technology sector has been
marginally reduced, while consumer staples and financial services exposure has
been increased.
In the growth portion of the portfolio, we have tried to avoid being whip-sawed
by the daily market volatility. We did make some tactical adjustments to the
portfolio. Our first step was to reduce our exposure to companies that rely on
the Internet for their business; companies that for the most part had very high
valuations and in our view represented the highest risk in the portfolio. On
the other hand, we increased our exposure to growth companies outside of the
technology sector to further diversify the portfolio.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST SIX MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: Stock selection is generally the main driver of our investment performance.
During the first six months of 2000, both the value and growth portfolios
showed strong gains due to our stock picks. We decreased the number of holdings
(but not the overall dollar value) in the value portfolio in order to increase
the impact of our best stock ideas and weed out marginal companies. The vola-
tility in technology and biotech stocks had a great impact during the period.
However, significant weightings to technology among both growth and value names
helped returns for the entire period. Given the sell-off in technology, the di-
versified nature of the Small Cap Series allowed us to limit the damage when
times were tough.
76
<PAGE>
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: We expect the recent volatility in the markets to continue at least until
there is some kind of consensus on the results from the Fed's tightening
regime. Following the big correction in the NASDAQ, stock valuations seem to
be more reasonable and earnings continue to be strong. There remains a lot of
interest in small cap stocks in the market, so we believe that absent a major
economic event, the portfolio is well positioned for the near future.
[GRAPH]
A $10,000 Investment compared to the Russell 2000 Index
since the Series' Inception
Loomis Sayles
Small Cap Series Russell 2000
5/2/94 $10,000 $10,000
6/30/94 $9,628 9,552
6/30/95 $10,749 11,473
6/30/96 $14,449 14,216
6/30/97 $18,304 16,539
6/30/98 $20,901 19,266
6/30/99 $20,753 19,554
6/30/00 $28,439 22,356
Average Annual Returns
Small Cap Lipper Variable Small
Series Russell 2000 Company Fund Average
6 Months 7.9% 3.0% 6.9%
1 Year 37.0% 14.3% 34.6%
3 Years 15.8% 10.6% 19.6%
5 Years 21.5% 14.3% 20.1%
Since Inception 18.5% 13.9%
[GRAPHIC] FUND FACTS
GOAL: Long-term capital growth from investment in common stocks or their
equivalents.
START DATE: May 2, 1994
SIZE: $451 million as of June 30, 2000
MANAGERS: Chris Ely, Joseph Gatz, Philip Fine, David Smith and Dan Thelen.
They also manage the Loomis Sayles Small Cap Fund and the Maxim Series--Small
Cap Fund. Mr. Ely, Mr. Fine, and Mr. Smith began co-managing the Series in
April 1999. Mr. Ely has also managed the Loomis Sayles portion of the Nvest
Star Small Cap Fund since December 1996. He also manages the Loomis Sayles
Aggressive Fund and the Loomis Sayles Small Cap Growth Fund, series of the
Loomis Sayles Funds, and the Loomis Sayles Small Company Growth Fund, a series
of Loomis Sayles Investment Trust. Mr. Ely joined Loomis Sayles in 1996. Mr.
Gatz began co-managing the Series in January 2000. He joined Loomis Sayles in
1999.
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.
77
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--96.5% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AEROSPACE/DEFENSE--0.8%
22,400 Alliant Techsystems, Inc.(b)............................ $ 1,510,600
60,900 Newport News Shipbuilding, Inc. ........................ 2,238,075
------------
3,748,675
------------
AUTO & RELATED--0.5%
60,700 Oshkosh Truck Corp. .................................... 2,170,025
------------
BANKS & THRIFTS--3.3%
67,200 Astoria Financial Corp.................................. 1,730,400
36,800 City National Corp...................................... 1,278,800
97,800 Colonial BancGroup, Inc................................. 941,325
31,895 Commerce Bancorp, Inc................................... 1,467,170
70,412 Commercial Federal Corp................................. 1,095,787
59,000 First Midwest Bancorp, Inc.............................. 1,371,750
61,390 Hudson United Bancorp................................... 1,377,438
98,300 Silicon Valley Bancshares............................... 4,190,038
39,100 Wilmington Trust Corp................................... 1,671,525
------------
15,124,233
------------
BEVERAGES--0.4%
67,600 The Pepsi Bottling Group, Inc........................... 1,973,075
------------
BROADCAST--T.V./RADIO/CABLE--2.9%
37,800 Adelphia Communications Corp.(b)........................ 1,771,875
29,500 E.W. Scripps Co......................................... 1,452,875
23,300 Harcourt General, Inc................................... 1,266,938
143,400 Radio One, Inc.(b)...................................... 3,522,263
132,700 Regent Communications, Inc.(b).......................... 1,140,391
122,100 Westwood One, Inc.(b)................................... 4,166,663
------------
13,321,005
------------
BUILDING & RETALED--0.3%
100,800 D.R. Horton, Inc........................................ 1,367,100
------------
CHEMICALS--SPECIALTY--3.1%
25,800 Cabot Microelectronics Corp.(b)......................... 1,180,350
67,900 CUNO, Inc.(b)........................................... 1,570,188
44,900 Cytec Industries, Inc.(b)............................... 1,108,469
13,300 Dexter Corp............................................. 638,400
83,200 Ferro Corp.............................................. 1,747,200
51,100 Great Lakes Chemical Corp............................... 1,609,650
67,900 Olin Corp............................................... 1,120,350
21,500 OM Group, Inc........................................... 946,000
82,300 IMC Global, Inc......................................... 1,069,900
55,900 Spartech Corp.(b)....................................... 1,509,300
38,700 The Scotts Co.(b)....................................... 1,412,550
------------
13,912,357
------------
COMMUNICATIONS EQUIPMENT--8.3%
31,089 ADC Telecommunications, Inc.(b)......................... 2,607,590
74,300 Digital Lightwave, Inc.(b).............................. 7,467,150
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
COMMUNICATIONS EQUIPMENT--(CONTINUED)
37,100 Ditech Communications Corp.(b)...................... $ 3,508,269
11,750 EXFO Electro-Optical Engineering, Inc.(b)........... 515,531
38,800 Harris Corp......................................... 1,270,700
17,400 Marvell Technology Group, Ltd.(b)................... 991,800
33,400 Natural Microsystems Corp.(b)....................... 3,755,413
55,700 Polycom(R) Inc.(b).................................. 5,241,022
44,900 Powerwave Technologies, Inc.(b)..................... 1,975,600
23,900 SDL, Inc.(b)........................................ 6,815,981
2,000 Stratos Lightwave, Inc.(b).......................... 55,750
41,400 Tekelec(b).......................................... 1,994,963
14,550 Zygo Corp.(b)....................................... 1,321,322
------------
37,521,091
------------
COMPUTERS--HARDWARE--0.3%
27,400 National Instruments Corp.(b)....................... 1,195,325
------------
COMPUTERS--SOFTWARE/SERVICES--5.6%
39,800 Allaire Corp.(b).................................... 1,462,650
68,200 Complete Busines Solutions, Inc.(b)................. 1,197,763
55,900 Davox Corp.(b)...................................... 723,206
24,000 Great Plains Software, Inc.(b)...................... 471,000
67,000 Homestore.Com, Inc.(b).............................. 1,955,563
29,800 Hyperion Solutions Corp.(b)......................... 966,638
43,400 iBasis, Inc.(b)..................................... 1,868,913
53,100 Macromedia, Inc.(b)................................. 5,134,106
69,000 Mercury Interactive Corp.(b)........................ 6,675,750
64,100 Progress Software Corp.(b).......................... 1,149,794
54,900 Serena Software, Inc.(b)............................ 2,492,803
40,800 Sybase, Inc.(b)..................................... 938,400
------------
25,036,586
------------
CONSUMER--JEWERLY/NOVELTIES/GIFTS--0.4%
99,000 Fossil, Inc.(b)..................................... 1,924,313
------------
ELECTRIC COMPANIES--0.9%
57,500 Alliant Energy Corp................................. 1,495,000
27,700 MDU Resources Group, Inc............................ 599,013
48,100 NSTAR............................................... 1,957,069
4,100 Scana Corp.......................................... 98,913
------------
4,149,995
------------
ELECTRICAL EQUIPMENT--4.7%
53,100 American Superconductor Corp.(b).................... 2,562,075
38,700 C&D Technologies, Inc............................... 2,186,550
37,100 Capstone Turbine Corp.(b)........................... 1,671,819
57,700 CommScope, Inc.(b).................................. 2,365,700
47,500 PLX Technology, Inc.(b)............................. 1,971,250
16,940 Sanmina Corp........................................ 1,448,370
52,700 Sawtek Inc.......................................... 3,033,544
13,000 SCI Systems, Inc.(b)................................ 509,438
46,500 Sensormatic Electronics Corp.(b).................... 735,281
</TABLE>
See accompanying notes to financial statements.
78
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
ELECTRICAL EQUIPMENT--(CONTINUED)
45,800 Varian Semiconductor Equipment, Inc. (b)................ $ 2,876,813
48,375 Vishay Intertechnology, Inc.(b)......................... 1,835,227
------------
21,196,067
------------
ELECTRONICS--15.0%
96,600 Actel Corp.(b).......................................... 4,407,375
40,500 Advanced Energy Industries, Inc.(b)..................... 2,386,969
106,100 Alliance Semiconductor Corp.(b)......................... 2,606,081
21,650 Applied Micro Circuits Corp.(b)......................... 2,137,937
31,800 Beckman Coulter, Inc.................................... 1,856,325
24,500 C-COR.net Corp.(b)...................................... 661,500
42,300 C-Cube Microsystems, Inc.(b)............................ 830,137
69,200 Credence Systems Corp.(b)............................... 3,818,975
37,200 Cree Research, Inc.(b).................................. 4,966,200
39,400 CTS Corp. .............................................. 1,773,000
44,400 Dallas Semiconductor Corp............................... 1,809,300
24,800 DSP Group, Inc.(b)...................................... 1,388,800
22,400 DuPont Photomasks, Inc.(b).............................. 1,534,400
36,600 EMCORE Corp.(b)......................................... 4,392,000
31,200 Integrated Device Technology, Inc.(b)................... 1,868,100
92,900 Integrated Silicon Solution, Inc.(b).................... 3,530,200
36,900 International Rectifier Corp.(b)........................ 2,066,400
58,500 Kent Electronics Corp.(b)............................... 1,744,031
44,800 Kopin Corp.(b).......................................... 3,102,400
22,950 Microchip Technology, Inc.(b)........................... 1,337,196
41,100 Photon Dynamics, Inc.(b)................................ 3,069,656
55,300 PRI Automation, Inc.(b)................................. 3,616,102
21,200 REMEC, Inc.(b).......................................... 887,750
34,000 Silicon Storage Technology, Inc.(b)..................... 3,002,625
24,900 Tektronix, Inc.......................................... 1,842,600
66,350 TranSwitch Corp.(b)..................................... 5,121,391
28,800 Varian Medical Systems, Inc.(b)......................... 1,126,800
15,300 Xircom, Inc.(b)......................................... 726,750
------------
67,611,000
------------
FINANCIAL--CONSUMER/DIVERSIFIED--3.2%
46,900 American Capital Strategies, Ltd........................ 1,119,737
235,800 AmeriCredit Corp.(b).................................... 4,008,600
42,150 Digital Insight Corp.(b)................................ 1,433,100
78,400 GATX Corp............................................... 2,665,600
65,500 Heller Financial, Inc................................... 1,342,750
151,275 Metris Companies, Inc................................... 3,800,784
------------
14,370,571
------------
FOODS--1.3%
95,100 Corn Products International, Inc. ...................... 2,520,150
43,200 International Multifoods Corp........................... 747,900
118,700 Michael Foods, Inc. .................................... 2,908,150
------------
6,176,200
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
FREIGHT TRANSPORTATION--0.6%
42,600 Atlas Air, Inc.(b).................................... $ 1,528,275
38,300 USFreightways Corp. .................................. 940,744
------------
2,469,019
------------
HEALTH CARE--BIOTECHNOLOGY--4.4%
18,600 Abgenix, Inc.(b)...................................... 2,229,384
35,600 Alkermes, Inc.(b)..................................... 1,677,650
49,150 Aurora Biosciences Corp.(b)........................... 3,351,416
54,350 Exelixis, Inc.(b)..................................... 1,813,931
84,600 IDEXX Laboratories, Inc.(b)........................... 1,935,225
33,600 Medicis Pharmaceutical Corp.(b)....................... 1,915,200
52,700 MedImmune, Inc.(b).................................... 3,899,800
73,500 PathoGensis Corp.(b).................................. 1,911,000
14,200 Trimeris, Inc.(b)..................................... 993,112
------------
19,726,718
------------
HEALTH CARE--DRUGS--0.4%
63,000 AmeriSource Health Corp.(b)........................... 1,953,000
------------
HEALTH CARE--MEDICAL PRODUCT/SUPPLY--3.9%
79,800 Acuson Corp.(b)....................................... 1,077,300
75,400 CONMED Corp.(b)....................................... 1,950,975
39,800 Dionex Corp.(b)....................................... 1,064,650
170,100 Endosonics Corp.(b)................................... 956,812
32,000 Invitrogen Corp.(b)................................... 2,406,500
20,200 MiniMed, Inc.(b)...................................... 2,383,600
58,000 Priority Healthcare Corp. Class B(b).................. 4,310,125
123,700 Respironics, Inc.(b).................................. 2,226,600
140,000 Steris Corp.(b)....................................... 1,242,500
------------
17,619,062
------------
HEALTH CARE--SERVICES--1.1%
113,200 Health Management Associates, Inc.(b)................. 1,478,675
143,200 Per-Se Technologies, Inc.(b).......................... 1,342,500
91,500 Renal Care Group, Inc.(b)............................. 2,237,461
------------
5,058,636
------------
HEALTH CARE--BIOTECHNOLOGY--1.0%
49,300 Curagen Corp.(b)...................................... 1,876,481
8,600 Myriad Genetics, Inc.(b).............................. 1,273,472
------------
3,149,953
------------
INSURANCE--3.0%
81,900 Annuity and Life Re Holdings, Ltd.(b)................. 2,006,550
48,200 Arthur J. Gallagher & Co. ............................ 2,024,400
33,700 CNA Surety Corp....................................... 402,294
50,600 HSB Group, Inc. ...................................... 1,574,925
136,800 Old Republic International Corp....................... 2,257,200
</TABLE>
See accompanying notes to financial statements.
79
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
INSURANCE--(CONTINUED)
82,000 Protective Life Corp.................................... $ 2,183,250
42,600 Radian Group, Inc....................................... 2,204,550
15,200 Trigon Healthcare, Inc.(b).............................. 783,750
------------
13,436,919
------------
INVESTMENT BANKING/BROKER/ MANAGEMENT--1.1%
26,700 Affiliated Managers Group, Inc.(b)...................... 1,214,850
44,600 Federated Investors, Inc................................ 1,563,787
49,000 Investment Technology Group, Inc.(b).................... 2,085,562
------------
4,864,199
------------
LEISURE TIME--PRODUCTS--0.4%
26,000 Harman International Industries, Inc.................... 1,586,000
------------
MACHINERY--0.9%
38,100 Astec Industries, Inc.(b)............................... 966,787
34,500 Kulicke & Soffa Industries, Inc.(b)..................... 2,048,437
84,300 Milacron, Inc........................................... 1,222,350
------------
4,237,574
------------
MANUFACTORING--DIVERSIFIED--1.2%
41,400 Crane Co. .............................................. 1,006,537
30,200 National Service Industries, Inc........................ 588,900
43,400 Pentair, Inc. .......................................... 1,540,700
18,100 SPX Corp.(b)............................................ 2,188,969
------------
5,325,106
------------
MANUFACTORING--SPECIALIZED--0.3%
54,300 Diebold, Inc............................................ 1,513,612
------------
METALS & MINING--0.7%
60,600 Harsco Corp. ........................................... 1,545,300
47,400 Newmont Mining Corp. ................................... 1,025,025
89,700 Worthington Industries, Inc. ........................... 941,850
------------
3,512,175
------------
NATURAL GAS--1.1%
58,600 AGL Resources, Inc...................................... 933,937
23,600 New Jersey Resources Corp............................... 898,275
105,444 Vectren Corp............................................ 1,818,909
46,300 Washington Gas Light Co................................. 1,114,094
------------
4,765,215
------------
OFFICE EQUIPMENT & SUPPLIES--0.5%
34,300 Hon Industries, Inc..................................... 806,050
29,300 National Computer Systems, Inc.......................... 1,443,025
------------
2,249,075
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
OIL & GAS--DRILLING & EQUIPMENT--4.9%
45,300 Atwood Oceanics, Inc.................................... $ 2,010,187
138,000 Hanover Compressor Co.(b)............................... 5,244,000
119,500 Marine Drilling Companies, Inc.(b)...................... 3,346,000
55,800 Maverick Tube Corp.(b).................................. 1,625,175
46,500 Patterson Energy, Inc.(b)............................... 1,325,250
129,200 Pride International, Inc.(b)............................ 3,197,700
60,900 Santa Fe International Corp............................. 2,127,694
46,700 Tidewater, Inc. ........................................ 1,681,200
57,400 Veritas DGC, Inc.(b).................................... 1,492,400
------------
22,049,606
------------
OIL & GAS--EXPLORATION/PRODUCTION--0.3%
136,200 Santa Fe Snyder Corp.(b)................................ 1,549,275
------------
PAPER/FOREST PRODUCTS--0.1%
21,900 Chesapeake Corp......................................... 648,787
------------
PUBLISHING--0.4%
18,300 Houghton Mifflin Co..................................... 854,381
34,300 John Wiley & Sons, Inc. ................................ 771,750
------------
1,626,131
------------
REAL ESTATE INVESTMENT TRUST--3.6%
50,600 AvalonBay Communities, Inc.............................. 2,112,550
91,200 Liberty Property Trust.................................. 2,365,500
135,885 MeriStar Hospitality Corp............................... 2,853,585
74,100 Pacific Gulf Properties, Inc. .......................... 1,857,131
66,400 Pinnacle Holdings, Inc.(b).............................. 3,585,600
35,500 Prentiss Properties Trust............................... 852,000
103,500 Reckson Associates Realty Corp.......................... 2,458,125
------------
16,084,491
------------
RESTAURANTS--0.8%
69,600 Ruby Tuesday, Inc....................................... 874,350
148,700 Wendy's International, Inc. ............................ 2,648,719
------------
3,523,069
------------
RETAIL--DRUG STORES--0.5%
68,600 Sonic Corp.(b).......................................... 2,015,125
------------
RETAIL--GENERAL MERCHANDISE--0.4%
94,200 Family Dollar Stores, Inc............................... 1,842,787
------------
RETAIL--SPECIALTY--2.0%
23,000 Black Box Corp.(b)...................................... 1,820,953
137,500 Charming Shoppes, Inc.(b)............................... 700,391
46,300 The Men's Wearhouse, Inc.(b)............................ 1,033,069
111,700 Pier 1 Imports, Inc..................................... 1,089,075
82,300 Talbots, Inc. .......................................... 4,521,356
------------
9,164,844
------------
</TABLE>
See accompanying notes to financial statements.
80
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
SERVICES--8.9%
68,100 ACNielson Corp.(b)...................................... $ 1,498,200
59,100 ADVO, Inc.(b)........................................... 2,482,200
140,300 Burns International Services Corp.(b)................... 1,753,750
45,800 ChoicePoint, Inc.(b).................................... 2,038,100
39,800 Corporate Executive Board Co.(b)........................ 2,383,025
144,650 Devry, Inc.(b).......................................... 3,824,184
23,800 Diamond Technology Partners, Inc.(b).................... 2,094,400
77,000 Forrester Research, Inc.(b)............................. 5,606,562
77,500 Harte-Hanks, Inc........................................ 1,937,500
12,000 Information Resources, Inc.(b).......................... 47,250
84,900 Macrovision Corp.(b).................................... 5,426,967
47,400 Manpower, Inc.(b)....................................... 1,516,800
17,400 NetRatings, Inc.(b)..................................... 445,875
24,350 Plexus Corp.(b)......................................... 2,751,550
148,100 R.H. Donnelley Corp. ................................... 2,869,437
57,700 United Stationers, Inc.................................. 1,868,037
58,900 Viad Corp............................................... 1,605,025
------------
40,148,862
------------
SERVICES--COMPUTER/DATA PROCESSING--0.4%
58,800 SunGard Data Systems, Inc.(b)........................... 1,822,800
------------
SERVICES--FACILITIES/ENVIRONMENT--0.6%
42,500 American States Water Co................................ 1,264,375
70,775 Tetra Tech, Inc.(b)..................................... 1,618,978
------------
2,883,353
------------
SPECIAL PRINTING--0.1%
22,200 Deluxe Corp............................................. 523,087
------------
TELEPHONE--1.0%
209,250 ITC DeltaCom, Inc.(b)................................... 4,668,891
------------
TEXTILES/APPAREL--0.7%
51,500 Liz Claiborne, Inc...................................... 1,815,375
62,000 Russell Corp............................................ 1,240,000
------------
3,055,375
------------
WASTE MANAGEMENT--0.2%
57,900 Republic Sevices, Inc.(b)............................... 926,400
------------
Total Common Stocks (Identified Cost $361,267,317)...... 434,796,764
------------
</TABLE>
Short-Term Investments--4.4%
<TABLE>
<CAPTION>
VALUE
FACE AMOUNT (NOTE 1A)
<C> <S> <C>
$19,973,679 Associates Corp. of North America, 6.800%, 7/3/00.. $ 19,973,679
------------
Total Short-Term Investment
(Identified Cost $19,973,679)..................... 19,973,679
------------
Total Investments--100.9%
(Identified Cost $381,240,996)(a)................. 454,770,443
Other assets less liabilities...................... (3,961,856)
------------
TOTAL NET ASSETS--100%............................. $450,808,587
============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $381,240,996 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................ $ 88,849,619
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value................ (15,320,172)
------------
Net unrealized appreciation...................................... $ 73,529,447
============
</TABLE>
(b) Non-income producing security.
See accompanying notes to financial statements.
81
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $454,770,443
Receivable for:
Securities sold...................................... 6,685,575
Fund shares sold..................................... 1,313,155
Dividends and interest............................... 217,725
------------
Total Assets........................................ 462,986,898
LIABILITIES
Payable for:
Fund shares redeemed................................. $ 461,477
Securities purchased................................. 11,327,568
Accrued expenses:
Management fees...................................... 325,275
Deferred trustees fees............................... 15,342
Other expenses....................................... 48,649
-----------
Total Liabilities................................... 12,178,311
------------
NET ASSETS............................................ $450,808,587
============
Net assets consist of:
Capital paid in...................................... $342,667,202
Undistributed net investment income.................. 48,741
Accumulated net realized gains (losses).............. 34,563,197
Unrealized appreciation (depreciation) on
investments......................................... 73,529,447
------------
NET ASSETS............................................ $450,808,587
============
Computation of offering price:
Net asset value and redemption price per share
($450,808,587 divided by 2,070,753 shares of
beneficial interest)................................. $ 217.70
============
Identified cost of investments........................ $381,240,996
============
</TABLE>
Statement of Operations
Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT
INCOME
Dividends............................................ $ 1,210,238
Interest............................................. 737,206
-----------
1,947,444
EXPENSES
Management
fees................................................ $1,805,494
Trustees' fees
and expenses........................................ 10,203
Custodian............................................ 68,875
Audit and tax
services............................................ 5,671
Legal................................................ 5,248
Printing............................................. 40,021
Miscellaneous........................................ 3,772
----------
Total
expenses
before
reductions.......................................... 1,939,284
Expense
reductions.......................................... (37,052) 1,902,232
---------- -----------
NET INVESTMENT
INCOME............................................... 45,212
-----------
REALIZED AND
UNREALIZED
GAIN (LOSS)
Realized gain
(loss) on:
Investments--
net................................................. 33,364,297
Unrealized
appreciation
(depreciation) on:
Investments--
net................................................. (9,794,056)
-----------
Net gain
(loss)............................................... 23,570,241
-----------
NET INCREASE
(DECREASE) IN
NET ASSETS
FROM
OPERATIONS........................................... $23,615,453
===========
</TABLE>
See accompanying notes to financial statements.
82
<PAGE>
NEW ENGLAND ZENITH FUND
(LOOMIS SAYLES SMALL CAP SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 45,212 $ 811,766
Net realized gain (loss).......................... 33,364,297 8,092,335
Unrealized appreciation (depreciation)............ (9,794,056) 66,235,876
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. 23,615,453 75,139,977
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (839,651)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (839,651)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 167,404,794 93,092,709
Reinvestment of distributions..................... 0 839,651
Cost of shares redeemed........................... (62,529,588) (84,504,213)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... 104,875,206 9,428,147
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 128,490,659 83,728,473
NET ASSETS
Beginning of the period........................... 322,317,928 238,589,455
------------ ------------
End of the period................................. $450,808,587 $322,317,928
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 48,741 $ 3,529
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 759,559 599,062
Issued in reinvestment of distributions........... 0 4,296
Redeemed.......................................... (286,599) (559,646)
------------ ------------
Net Change........................................ 472,960 43,712
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE ----------------------------------------------
30, 2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 201.73 $ 153.52 $ 158.92 $ 144.29 $118.80 $ 96.61
-------- -------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.02 0.51 1.24 1.22 1.05 0.85
Net Realized and
Unrealized Gain (Loss)
on Investments........ 15.95 48.23 (4.01) 34.11 35.03 26.93
-------- -------- -------- -------- ------- -------
Total From Investment
Operations............ 15.97 48.74 (2.77) 35.33 36.08 27.78
-------- -------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (0.53) (1.24) (1.21) (1.03) (0.78)
Distributions From Net
Realized Capital
Gains................. 0.00 0.00 (1.32) (19.49) (9.56) (4.81)
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 0.00 (0.07) 0.00 0.00 0.00
-------- -------- -------- -------- ------- -------
Total Distributions.... 0.00 (0.53) (2.63) (20.70) (10.59) (5.59)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 217.70 $ 201.73 $ 153.52 $ 158.92 $144.29 $118.80
======== ======== ======== ======== ======= =======
TOTAL RETURN (%)........ 7.9(b) 31.8 (1.7) 24.9 30.7 28.9
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.97(a) 1.00 1.00 1.00 1.00 1.00
Ratio of Operating
Expenses to Average Net
Assets after expense
reductions(%)(c)....... 0.95(a) -- -- -- -- --
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.02(a) 0.34 0.88 0.97 1.15 1.26
Portfolio Turnover Rate
(%).................... 166(a) 146 111 87 62 98
Net Assets, End of
Period (000)........... $450,809 $322,318 $238,589 $200,105 $89,194 $27,741
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... 0.97(a) 1.10 1.10 1.14 1.29 1.91
</TABLE>
(a) Computed on an annualized basis.
(b) Not computed on an annualized basis.
(c) The Series has entered into arrangements with certain brokers who paid a
portion of the Series expenses.
See accompanying notes to financial statements.
83
<PAGE>
MFS INVESTORS SERIES
PORTFOLIO MANAGERS: JOHN D. LAUPHEIMER AND MITCHELL D. DYNAN
MASSACHUSETTS FINANCIAL SERVICES COMPANY
[PHOTO] [PHOTO]
Q. HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A. The MFS Investors Series returned 0.6% for the six months ending June 30,
2000 compared to a return of -0.4% for the Standard & Poor's 500 Index/25/.
The Lipper Variable Products Growth and Income Fund Average/11/ returned -1.1%
over the same time period.
Q. GIVEN THE CURRENT INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT
STRATEGY? WHAT CHANGES DID YOU MAKE SINCE THE START OF THE YEAR? WHAT WERE THE
PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN ABSOLUTE AND RELATIVE
BASIS) DURING THE PAST SIX MONTHS?
A. In the recently volatile market environment, our standard practice of keep-
ing a close eye on valuations in this portfolio resulted in our being
underweighted in technology stocks relative to the S&P 500. We believe this
has been a big advantage for us. At the same time, we're not simply value in-
vestors; we also try to seek out growth at the right price. Our broad-based
stock selection expresses this philosophy and proved to be a significant con-
tributor to performance. Our well-diversified portfolio of holdings such as
Hartford Financial Services, State Street Corp., Pharmacia, Pfizer, Safeway,
and BP Amoco are all great examples of stocks that we believe offer favorable
growth opportunities at reasonable valuations and that have provided excep-
tional performance.
Early in the year, when most investors were shunning the sector, we were buy-
ing pharmaceutical stocks. Many of these holdings have been rewarded recently
and there were several reasons why we were bullish on these stocks. First, we
believe many of the issues surrounding the industry's decline in 1999 have
subsided, including the threat of onerous government pricing regulation and
Medicare reform. Second, many drug stocks maintained strong growth rates in
1999 and 2000 but were hurt last year by concerns about fading product pipe-
lines. Today, we see plenty of new products in the pipeline, and with quicker
FDA approval rates, there is always the possibility that a new blockbuster
drug could be right around the corner. Finally, we feel health care and phar-
maceutical stocks historically have held up well in a weakening economy. If
the Federal Reserve Board's rate hikes succeed in slowing the economy, we be-
lieve traditionally stable and steady growers, such as health care stocks,
could outperform the overall market.
While we have recently decreased the portfolio's exposure to technology, we
think there are a lot of opportunities and potential for large profits in the
sector. We believe some of the fastest growing and most innovative companies
in the world are the ones that create new technologies. However, we also be-
lieve you can't ignore earnings and valuations. If stock prices get too far
ahead of earnings growth, which we felt they did in the first quarter of 2000,
the stocks have to tread water until the companies' growth can catch up. Ac-
cording to our research, very few industries can grow 30% a year over the
long-term, but last year many tech stocks were up well over 100%, and we felt
that was just too far too fast. With that in mind, although the portfolio has
remained underweighted in technology versus the S&P 500, it is still the larg-
est sector weighting in the portfolio because we continue to see great oppor-
tunities for long-term growth.
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A. While the holdings and sector weightings of the portfolio will constantly
shift depending on where we find opportunities, it's important to emphasize
that our overall strategy remains the same. We continue to try to balance the
portfolio by taking advantage of what we think are the best growth and value
stocks to own at the right time. When growth stocks are in favor, our objec-
tive is to keep pace with the market; in a value environment, our goal is to
outperform the market.
84
<PAGE>
[GRAPH]
A $10,000 Investment compared to the
S&P 500 Since the Series' Inception
MFS Investors Series S&P 500
4/30/99 $10,000 $10,000
6/30/99 $10,230 10,303
6/30/00 $10,343 11,066
Average Annual Total Return
MFS Investors Series S&P 500
6 Months 0.6% -0.4%
1 Year 1.1% 7.4%
Since Inception 2.9% 9.1%
[GRAPHIC] FUND FACTS
GOAL: Reasonable current income and long-term growth of capital and income.
START DATE: April 30, 1999
SIZE: $13 million as of June 30, 2000
MANAGERS: John Laupheimer and Mitchell Dynan have managed the Series since its
inception.
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.
85
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS INVESTORS SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--96.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--3.3%
2,640 Boeing Co. .............................................. $ 110,385
1,000 General Dynamics Corp. .................................. 52,250
750 TRW, Inc. ............................................... 32,531
4,080 United Technologies Corp. ............................... 240,210
-----------
435,376
-----------
AUTOMOTIVE--0.2%
1,720 Delphi Automotive Systems Corp.(b)....................... 25,048
60 Federal-Mogul Corp. ..................................... 574
-----------
25,622
-----------
BANKS & CREDIT COMPANIES--2.2%
470 Bank of New York Co. .................................... 21,855
660 Capital One Financial Corp. ............................. 29,453
400 Chase Manhattan Corp. ................................... 18,425
30 Comerica, Inc. .......................................... 1,346
2,230 HSBC Holdings, Plc. (GBP)................................ 25,492
280 Providian Financial Corp. ............................... 25,200
4,070 U.S. Bancorp............................................. 78,348
2,470 Wells Fargo & Co. ....................................... 95,713
-----------
295,832
-----------
BIOTECHNOLOGY--0.1%
120 PE Corp.-PE Biosystems Group............................. 7,905
-----------
BUSINESS MACHINES--6.4%
1,580 Compaq Computer Corp. ................................... 40,389
2,280 Dell Computer Corp.(b)................................... 112,433
2,510 Hewlett Packard Co. ..................................... 313,436
560 International Business Machines Corp. ................... 61,355
5,156 Motorola, Inc. .......................................... 149,846
1,950 Sun Microsystems, Inc.(b)................................ 177,328
-----------
854,787
-----------
BUSINESS SERVICES--1.9%
1,320 Computer Sciences Corp.(b)............................... 98,588
270 DST Systems, Inc.(b)..................................... 20,554
2,630 First Data Corp. ........................................ 130,514
-----------
249,656
-----------
CHEMICALS--1.3%
1,880 Air Products & Chemicals, Inc. .......................... 57,928
890 Akzo Nobel N.V. (EUR).................................... 37,811
150 Dow Chemical Co.......................................... 4,528
290 E.I. Du Pont de Nemours ................................. 12,688
1,910 Rohm & Haas Co. ......................................... 65,895
-----------
178,850
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
COMMUNICATIONS SERVICES--6.9%
2,060 ALLTEL Corp. ............................................ $ 127,591
3,800 Bell Atlantic Corp. ..................................... 193,088
750 BellSouth Corp. ......................................... 31,969
1,260 Broadwing, Inc. ......................................... 32,681
850 Koninklijke KPN NV (EUR)................................. 38,019
440 Qwest Communications International, Inc.(b).............. 21,863
2,703 SBC Communications, Inc. ................................ 116,905
3,120 Sprint Corp. ............................................ 171,445
12,974 Vodafone AirTouch, Plc. (GBP)............................ 52,415
2,825 WorldCom, Inc.(b)........................................ 129,597
-----------
915,573
-----------
COMPUTER SOFTWARE--PC--2.5%
4,130 Microsoft Corp.(b)....................................... 330,400
-----------
COMPUTER SOFTWARE--SYSTEMS--2.6%
500 BMC Software, Inc.(b).................................... 18,242
1,160 Computer Associates International, Inc. ................. 59,378
960 EMC Corp.(b)............................................. 73,860
1,510 Oracle Corp.(b).......................................... 126,934
470 Rational Software Corp.(b)............................... 43,681
270 Veritas Software Corp.(b)................................ 30,514
-----------
352,609
-----------
CONGLOMERATES--1.1%
3,030 Tyco International, Ltd. ................................ 143,546
-----------
CONSUMER GOODS & SERVICES--1.0%
440 Clorox Co. .............................................. 19,718
1,490 Colgate-Palmolive Co. ................................... 89,214
360 Gillette Co. ............................................ 12,578
100 Procter & Gamble Co. .................................... 5,725
-----------
127,235
-----------
ELECTRICAL EQUIPMENT--4.9%
1,250 Emerson Electric Co. .................................... 75,469
9,450 General Electric Co. .................................... 500,850
1,070 National Semiconductor Corp.(b).......................... 60,722
730 W.W. Grainger, Inc. ..................................... 22,493
-----------
659,534
-----------
ELECTRONICS--4.6%
123 Agilent Technologies, Inc.(b)............................ 9,071
310 Analog Devices, Inc.(b).................................. 23,560
3,730 Intel Corp. ............................................. 498,654
260 LSI Logic Corp.(b)....................................... 14,072
310 Micron Technology, Inc.(b)............................... 27,299
680 Solectron Corp.(b)....................................... 28,475
140 Texas Instruments Inc. .................................. 9,616
-----------
610,747
-----------
</TABLE>
See accompanying notes to financial statements.
86
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS INVESTORS SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
ENTERTAINMENT--1.6%
140 Comcast Corp. ........................................... $ 5,670
2,090 Time Warner, Inc. ....................................... 158,840
770 Viacom, Inc.(b) Class B.................................. 52,504
-----------
217,014
-----------
FINANCIAL INSTITUTIONS--4.7%
1,970 American Express Co. .................................... 102,686
1,690 Citigroup, Inc. ......................................... 101,822
3,760 Federal Home Loan Mortgage Corp. ........................ 152,280
1,300 Federal National Mortgage Association.................... 67,844
120 Merrill Lynch & Company, Inc. ........................... 13,800
1,770 State Street Corp. ...................................... 187,731
-----------
626,163
-----------
FOOD & BEVERAGES--2.4%
1,450 Anheuser-Busch Companies, Inc. .......................... 108,297
1,600 Coca-Cola Co. ........................................... 91,900
500 PepsiCo, Inc. ........................................... 22,219
1,370 Quaker Oats Co. ......................................... 102,921
-----------
325,337
-----------
INSURANCE--4.7%
1,270 American International Group, Inc. ...................... 149,225
2,690 Axa Financial, Inc. ..................................... 91,460
700 CIGNA Corp. ............................................. 65,450
3,585 Hartford Financial Services Group........................ 200,536
500 ING Groep NV (EUR)....................................... 33,796
400 Lincoln National Corp., Inc. ............................ 14,450
390 Marsh & Mclennan Companies, Inc. ........................ 40,731
720 St. Paul Companies, Inc. ................................ 24,570
-----------
620,218
-----------
INTERNET SERVICES--0.1%
270 America Online, Inc.(b).................................. 14,242
-----------
MACHINERY--1.4%
3,590 Deere & Co. ............................................. 132,830
1,330 Ingersoll-Rand Co. ...................................... 53,532
-----------
186,362
-----------
MEDICAL & HEALTH PRODUCTS--10.1%
890 Abbott Laboratories...................................... 39,661
1,440 American Home Products Corp. ............................ 84,600
990 AstraZeneca PLC (GBP).................................... 46,212
840 Bausch & Lomb, Inc. ..................................... 64,995
4,270 Bristol-Myers Squibb Co. ................................ 248,727
220 Johnson & Johnson........................................ 22,412
9,838 Pfizer, Inc. ............................................ 472,200
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
MEDICAL & HEALTH PRODUCTS--(CONTINUED)
6,217 Pharmacia Corp. ......................................... $ 321,341
1,000 Schering-Plough Corp. ................................... 50,500
-----------
1,350,648
-----------
MEDICAL & HEALTH TECHNOLOGY & SERVICES--1.3%
2,490 Medtronic, Inc. ......................................... 124,033
520 UnitedHealth Group, Inc. ................................ 44,590
-----------
168,623
-----------
OILS--9.1%
2,530 Baker Hughes, Inc. ...................................... 80,960
6,287 BP Amoco, Plc. (ADR)..................................... 355,608
500 Chevron Corp. ........................................... 42,406
2,450 Coastal Corp. ........................................... 149,144
4,850 Conoco, Inc. Class B..................................... 119,128
3,966 Exxon Mobil Corp. ....................................... 311,331
2,470 Royal Dutch Petroleum (EUR).............................. 153,513
20 USX-Marathon Group....................................... 501
-----------
1,212,591
-----------
PRINTING & PUBLISHING--2.8%
1,750 Gannett Company, Inc. ................................... 104,672
1,350 Infinity Broadcasting Corp.(b)........................... 49,191
2,430 New York Times Co. ...................................... 95,985
500 Reuters Group, Plc. (ADR)................................ 49,969
2,090 Tribune Co. ............................................. 73,150
-----------
372,967
-----------
SPECIAL PRODUCTS & SERVICES--2.0%
2,980 Automatic Data Processing, Inc. ......................... 159,616
375 Cintas Corp. ............................................ 13,758
720 Global Marine, Inc.(b)................................... 20,295
1,070 McDonalds Corp. ......................................... 35,243
800 Transocean Sedco Forex, Inc. ............................ 42,750
-----------
271,662
-----------
STORES--2.9%
4,210 CVS Corp. ............................................... 168,400
3,670 Wal-Mart Stores, Inc. ................................... 211,484
-----------
379,884
-----------
SUPERMARKETS--2.8%
3,060 Kroger Co.(b)............................................ 67,511
6,920 Safeway, Inc.(b)......................................... 312,265
-----------
379,776
-----------
</TABLE>
See accompanying notes to financial statements.
87
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS INVESTORS SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
TELECOMMUNICATIONS--9.1%
1,930 Cabletron Systems, Inc.(b)............................... $ 48,732
4,620 Cisco Systems, Inc.(b)................................... 293,659
1,190 Corning, Inc. ........................................... 321,151
1,950 Global Crossing Ltd.(b).................................. 51,309
825 Nippon Telephone & Telegraph Corp. (ADR)................. 56,409
1,070 Nokia Corp.(ADR)......................................... 53,433
4,390 Nortel Networks Corp. ................................... 299,617
1,310 Tellabs, Inc.(b)......................................... 89,653
-----------
1,213,963
-----------
TOBACCO--0.2%
810 Philip Morris Companies, Inc. ........................... 21,516
-----------
TRANSPORTATION--0.2%
1,039 Canadian National Railway Co. ........................... 30,326
-----------
UTILITIES--ELECTRIC--1.3%
2,300 PECO Energy Co. ......................................... 92,719
2,020 TXU Corp. ............................................... 59,590
480 Unicom Corp. ............................................ 18,570
-----------
170,879
-----------
UTILITIES--GAS--0.7%
520 Enron Corp. ............................................. 33,540
1,490 Williams Companies, Inc. ................................ 62,114
-----------
95,654
-----------
Total Common Stocks
(Identified Cost $12,219,438)........................... 12,845,497
-----------
PREFERRED STOCKS--0.3%
200 Global Crossing, Ltd.(b), 6.750%......................... 44,000
-----------
Total Preferred Stocks
(Identified Cost $50,000)............................... 44,000
-----------
</TABLE>
BONDS & NOTES--0.4%
<TABLE>
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
CONVERTIBLE BOND--0.4%
$13,000 Bell Atlantic Financial Services, Inc. 4.250%, 9/15/05,
(144A).................................................. 15,795
42,000 NTL, Inc.,
5.750%, 12/15/09, (144A)................................ 32,729
----------
48,524
----------
Total Bonds & Notes
(Identified Cost $56,145)............................... 48,524
----------
</TABLE>
SHORT-TERM INVESTMENT--10.5%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
$1,400,000 Federal Home Loan Bank,
6.540%, 7/03/00...................................... $ 1,399,364
-----------
Total Short-Term Investment
(Identified Cost $1,399,364)......................... 1,399,364
-----------
Total Investments--107.6%
(Identified Cost $13,724,947)(a)..................... 14,337,385
Other assets less liabilities......................... (1,006,758)
-----------
TOTAL NET ASSETS--100%................................ $13,330,627
===========
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $13,724,947 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.................. $1,155,780
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.................. (543,342)
----------
Net unrealized appreciation....................................... $ 612,438
==========
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
144A-- Securities 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. At the period
end, the value of these securities amounted to $48,524 or 0.4% of net
assets.
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The
value of ADRs and GDRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
EUR-- Euro Currency
GBP-- Pound Sterling
See accompanying notes to financial statements.
88
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS INVESTORS SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value.................................. $14,337,385
Cash.................................................. 30,467
Foreign cash at value
(Identified cost $1,141)............................. 1,145
Receivable for:
Securities sold....................................... 86,591
Fund shares sold...................................... 207,925
Dividends and interest................................ 11,557
Foreign taxes......................................... 61
Due from investment adviser........................... 12,514
-----------
Total Assets......................................... 14,687,645
LIABILITIES
Payable for:
Fund shares redeemed.................................. $ 53,885
Securities purchased.................................. 1,265,191
Withholding taxes..................................... 137
Accrued expenses:
Management fees....................................... 21,958
Deferred trustees fees................................ 3,887
Other expenses........................................ 11,960
----------
Total Liabilities.................................... 1,357,018
-----------
NET ASSETS............................................. $13,330,627
===========
Net assets consist of:
Capital paid in....................................... $12,910,899
Undistributed net investment income................... 27,913
Accumulated net realized gains (losses)............... (220,644)
Unrealized appreciation (depreciation) on investments
and foreign currency................................. 612,459
-----------
NET ASSETS............................................. $13,330,627
===========
Computation of offering price:
Net asset value and redemption price per share
($13,330,627 divided by 1,291,701 shares of beneficial
interest)............................................. $ 10.32
===========
Identified cost of investments......................... $13,724,947
===========
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends............................................... $ 54,130(a)
Interest................................................ 21,404
--------
75,534
EXPENSES
Management fees......................................... $ 38,073
Trustees' fees and expenses............................. 5,526
Custodian............................................... 46,339
Audit and tax services.................................. 3,000
Legal................................................... 116
Printing................................................ 609
Miscellaneous........................................... 1,296
--------
Total expenses before reductions....................... 94,959
Less expenses assumed by the investment adviser........ (49,272) 45,687
-------- --------
NET INVESTMENT INCOME.................................... 29,847
--------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net........................................ 32,568
Foreign currency transactions--net...................... (8,917) 23,651
--------
Unrealized appreciation (depreciation) on:
Investments--net........................................ 177,499
Foreign currency transactions--net...................... 4 177,503
-------- --------
Net gain (loss)......................................... 201,154
--------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS.... $231,001
========
</TABLE>
(a) Net of foreign taxes of $771
See accompanying notes to financial statements.
89
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS INVESTORS SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL 30, 1999(A)
JUNE 30, THROUGH DECEMBER
2000 31, 1999
----------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income.......................... $ 29,847 $ 15,627
Net realized gain (loss)....................... 23,651 (245,528)
Unrealized appreciation (depreciation)......... 177,503 434,957
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................... 231,001 205,056
----------- -----------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income.......................... 0 (16,328)
----------- -----------
TOTAL DISTRIBUTIONS............................ 0 (16,328)
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares................... 8,470,983 12,577,724
Reinvestment of distributions.................. 0 16,328
Cost of shares redeemed........................ (2,212,588) (5,941,549)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................ 6,258,395 6,652,503
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 6,489,396 6,841,231
NET ASSETS
Beginning of the period........................ 6,841,231 0
----------- -----------
End of the period.............................. $13,330,627 $ 6,841,231
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period.............................. $ 27,913 $ (1,934)
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................. 844,485 1,274,088
Issued in reinvestment of distributions........ 0 1,602
Redeemed....................................... (219,791) (608,684)
----------- -----------
Net Change..................................... 624,694 667,006
=========== ===========
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS APRIL 30, 1999(A)
ENDED JUNE THROUGH DECEMBER
30, 2000 31, 1999
---------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period........... $ 10.26 $10.00
------- ------
Income From Investment Operations
Net Investment Income......................... 0.03 0.02
Net Realized and Unrealized Gain (Loss) on
Investments.................................. 0.03 0.26
------- ------
Total From Investment Operations.............. 0.06 0.28
------- ------
Less Distributions
Distributions From Net Investment Income...... 0.00 (0.02)
------- ------
Total Distributions........................... 0.00 (0.02)
------- ------
Net Asset Value, End of Period................. $ 10.32 $10.26
======= ======
TOTAL RETURN (%)............................... 0.6(b) 2.9 (b)
Ratio of Operating Expenses to Average Net
Assets (%).................................... 0.90(c) 0.90 (c)
Ratio of Net Investment Income to Average Net
Assets (%).................................... 0.59(c) 0.45 (c)
Portfolio Turnover Rate (%).................... 81(c) 60 (c)
Net Assets, End of Period (000)................ $13,331 $6,841
Ratio of operating expenses to average net
assets without giving effect to the voluntary
expense agreement would have been (%)......... 1.87(c) 2.03 (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.
90
<PAGE>
MFS RESEARCH MANAGERS SERIES
PORTFOLIO MANAGERS: MANAGED BY A COMMITTEE OF MFS EQUITY RESEARCH ANALYSTS
OVERSEEN BY ALEC MURRAY, ASSOCIATE DIRECTOR OF EQUITY RESEARCH
MASSACHUSETTS FINANCIAL SERVICES COMPANY
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The MFS Research Managers Series returned 6.7% for the six months ending
June 30, 2000 compared to a return of -0.4% for the Standard & Poor's 500 In-
dex/25/. The Lipper Variable Products Growth Fund Average/10/ returned 3.3%
over the same time period.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST SIX
MONTHS.
A: Historically, investment trends and styles have gone in and out of favor
with investors. This partially explains the recent weakness we've seen in the
market. At MFS, we don't spend too much time trying to determine when value or
growth, small-cap or large-cap stocks will move in and out of the spotlight.
Instead, we focus on trying to find dominant business franchises with outstand-
ing management driving accelerating earnings growth. It's a bottom-up approach
that's based on intensive hands-on research and the best ideas of our analysts.
This approach has led us to some very rewarding growth opportunities, and we
believe it could continue to provide superior long-term performance relative to
our competitors.
There are a few select factors that help distinguish this portfolio from its
competitors. First and foremost, we believe the depth and talent of our
committee of analysts are big advantages. We have more than 35 analysts at MFS,
all contributing their best ideas to this portfolio. As a result, there is a
great deal of information sharing, starting with our in-depth balance sheet and
earnings analysis. At the same time, we all spend a great deal of time on the
road meeting with company managements, as well as with employees, competitors,
and suppliers. We also have a lot of flexibility with the portfolio. We can
look at any market capitalization and any location or any industry. Overall, we
lean toward the more dynamic areas of the economy, focusing on companies that
we believe are at the forefront of innovation and are capitalizing on their
competitive advantages.
Q: GIVEN THE CURRENT INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY?
WHAT CHANGES DID YOU MAKE SINCE THE START OF THE YEAR? WHAT WERE THE PRINCIPAL
FACTORS AFFECTING YOUR PERFORMANCE?
A: In the current volatile market environment, we've found opportunities in a
wide range of areas, but some industries that have recently performed well for
the portfolio are energy, insurance, and pharmaceuticals. In the energy sector,
exploration and production companies such as Global Marine and Transocean Sedco
Forex have rallied significantly due to the rebound in oil and natural gas
prices. Higher prices have spurred demand for drilling services, resulting in
strong revenue and earnings growth for many energy services companies. Despite
a fairly long stretch of weak performance from insurance stocks such as Hart-
ford Financial Services, we held on to these companies because we believed in
their long-term prospects and the possibility of consolidation in the industry.
Recently, we've seen an increase in merger and acquisition activity in this
group, which has boosted the performance of these holdings. In the first quar-
ter of 2000, we took advantage of weakness in pharmaceutical stocks to increase
our holdings in what we believe are top-notch companies with strong track rec-
ords, such as Pharmacia, American Home Products, and Bristol-Myers Squibb. Some
of these stocks have come back strong in the second quarter, and we believe
they still offer attractive growth prospects.
We also significantly increased the portfolio's exposure to wireless
communications companies recently. A few years ago, we found that roughly 3% of
worldwide communications were handled over wireless networks. But our research
shows that now the percentage has mushroomed to double-digits and we believe
similar growth lies ahead. We expect revenue growth for many wireless companies
to rise 25% to 50% per year, and international revenues could be even higher.
Given our outlook for dramatic growth in this industry, we like the risk/reward
profile of these stocks.
In other areas, despite what we think may be a somewhat less robust environment
for consumer spending, we like companies such as CVS and Safeway because
they're non-cyclical. People always have to buy prescriptions, household
products, and groceries, even if the economy slows down. We also happen to
think these are two of the best-run companies in their respective industries.
Additionally, we've increased our positions in Intel and EMC because we see
demand for their products and services increasing, we feel their fundamental
business prospects have been strong, and we ultimately believe they can
maintain their leadership positions in their markets.
91
<PAGE>
[GRAPH]
A $10,000 Investment compared to the
S&P 500 Since the Series' Inception
MFS Research Manager Series S&P 500
4/30/99 $10,000 $10,000
6/30/99 $10,540 10,303
6/30/00 $12,781 11,066
Average Annual Total Return
MFS Research Managers Series S&P 500
6 Months 6.7% -0.4%
1 Year 21.3% 7.4%
Since Inception 23.4% 9.1%
[GRAPHIC] FUND FACTS
GOAL: Long-term growth of capital.
START DATE: April 30, 1999
SIZE: $30 million as of June 30, 2000
MANAGERS: A committee of MFS equity research analysts overseen by Alec Murray.
Mr. Murray is the Associate Director of MFS Equity Research. The committee has
managed the Series since its inception.
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.
92
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS RESEARCH MANAGERS SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--94.3% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--2.3%
28,580 BAE Systems, Plc. (GBP)................................... $ 178,167
6,220 Boeing Co................................................. 260,074
1,220 General Dynamics Corp. ................................... 63,745
3,270 United Technologies Corp. ................................ 192,521
-----------
694,507
-----------
BANKS & CREDIT COMPANIES--2.5%
2,630 Capital One Financial Corp. .............................. 117,364
4,115 Chase Manhattan Corp. .................................... 189,547
7,840 HSBC Holdings, Plc. (GBP)................................. 89,623
31 Lloyds TSB Group, Plc. ................................... 293
2,540 PNC Financial Services Group, Inc. ....................... 119,063
1,800 Providian Financial Corp. ................................ 162,000
3,630 U.S. Bancorp.............................................. 69,878
-----------
747,768
-----------
BUSINESS MACHINES--5.9%
4,200 Compaq Computer Corp. .................................... 107,363
1,900 Dell Computer Corp.(b).................................... 93,694
2,800 Hewlett Packard Co. ...................................... 349,650
2,280 International Business Machines Corp. .................... 249,803
8,941 Motorola, Inc. ........................................... 259,848
8,030 Sun Microsystems, Inc.(b)................................. 730,228
-----------
1,790,586
-----------
BUSINESS SERVICES--2.5%
5,440 Automatic Data Processing, Inc. .......................... 291,380
4,320 Computer Sciences Corp.(b)................................ 322,650
1,920 Fiserv, Inc.(b)........................................... 83,040
670 Level 3 Communications, Inc.(b)........................... 58,960
-----------
756,030
-----------
CHEMICALS--0.8%
3,120 AstraZeneca Plc. (GBP).................................... 145,639
2,990 Rohm & Haas Co. .......................................... 103,155
-----------
248,794
-----------
COMMUNICATIONS SERVICES--5.2%
765 Ancor Communications, Inc.(b)............................. 27,361
2,780 Bell Atlantic Corp. ...................................... 141,259
4,040 Koninklijke KPN NV (EUR).................................. 180,700
4,140 Qwest Communications International, Inc.(b)............... 205,706
9,850 Sprint Corp. ............................................. 537,115
20,238 Vodafone AirTouch, Plc. (GBP)............................. 81,761
330 WinStar Communications, Inc.(b)........................... 11,179
8,405 Worldcom, Inc.(b)......................................... 385,579
-----------
1,570,660
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES 1A)
<C> <S> <C>
COMPUTER SOFTWARE--0.2%
750 Liberate Technologies, Inc.(b)............................ $ 21,984
1,900 Trintech Group Plc.(b) (ADR).............................. 37,436
-----------
59,420
-----------
COMPUTER SOFTWARE--PC--2.0%
580 Macromedia, Inc.(c)....................................... 56,079
7,070 Microsoft Corp.(b)........................................ 565,600
-----------
621,679
-----------
COMPUTER SOFTWARE--SYSTEMS--6.6%
640 Bea Systems, Inc.(b)...................................... 31,640
360 BMC Software, Inc.(b)..................................... 13,134
140 Business Objects S.A.(b) (ADR)............................ 12,338
2,040 Computer Associates International, Inc. .................. 104,423
430 E.Piphany, Inc.(b)........................................ 46,091
10,300 EMC Corp.(b).............................................. 792,456
820 i2 Technologies, Inc.(b).................................. 85,498
160 InterWorld Corp.(b)....................................... 3,280
5,270 Oracle Corp.(b)........................................... 443,009
440 Rational Software Corp.(b)................................ 40,893
3,710 Seagate Technology, Inc.(b)............................... 204,050
290 Siebel Systems, Inc.(b)................................... 47,433
1,645 Veritas Software Corp.(b)................................. 185,911
-----------
2,010,156
-----------
CONGLOMERATES--2.5%
15,850 Tyco International, Ltd. ................................. 750,894
-----------
CONSUMER GOODS & SERVICES--1.4%
4,340 Clorox Co. ............................................... 194,486
4,020 Colgate-Palmolive Co. .................................... 240,698
-----------
435,184
-----------
CONTAINERS--0.2%
4,310 Owens Illinois, Inc.(b)................................... 50,373
-----------
ELECTRICAL EQUIPMENT--2.8%
15,980 General Electric Co. ..................................... 846,940
-----------
ELECTRONICS--9.8%
1,910 Analog Devices, Inc.(b)................................... 145,160
3,200 Atmel Corp.(b)............................................ 118,000
20 Digimarc Corp.(b)......................................... 770
1,310 Fairchild Semiconductor International, Inc.(b)............ 53,055
4,109 Flextronics International, Ltd.(b)........................ 282,244
3,000 Hitachi, Ltd. (JPY)....................................... 43,259
9,540 Intel Corp. .............................................. 1,275,379
4,060 Lam Research Corp.(b)..................................... 152,250
1,990 LSI Logic Corp.(c)........................................ 107,709
</TABLE>
See accompanying notes to financial statements.
93
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS RESEARCH MANAGERS SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES 1A)
<C> <S> <C>
ELECTRONICS--(CONTINUED)
5,190 Micron Technology, Inc.(b)................................ $ 457,044
1,000 SCI Systems, Inc.(b)...................................... 39,188
3,850 Solectron Corp.(b)........................................ 161,219
2,220 Teradyne, Inc.(b)......................................... 163,170
-----------
2,998,447
-----------
ENTERTAINMENT--3.2%
4,100 Comcast Corp.(b).......................................... 166,050
6,940 Infinity Broadcasting Corp.(b)............................ 252,876
3,150 Time Warner, Inc. ........................................ 239,400
4,620 Viacom, Inc.(b) Class B................................... 315,026
-----------
973,352
-----------
FINANCIAL INSTITUTIONS--4.0%
9,690 Associates First Capital Corp. ........................... 216,208
6,210 Citigroup, Inc. .......................................... 374,153
5,810 Federal Home Loan Mortgage Corp. ......................... 235,305
770 Lehman Brothers Holdings, Inc. ........................... 72,813
1,450 Merrill Lynch & Co., Inc. ................................ 166,750
1,750 Morgan Stanley Dean Witter & Co. ......................... 145,688
160 State Street Corp. ....................................... 16,970
-----------
1,227,887
-----------
FOOD & BEVERAGE PRODUCTS--1.2%
3,190 Anheuser-Busch Companies, Inc. ........................... 238,253
1,910 Quaker Oats Co. .......................................... 143,489
-----------
381,742
-----------
FOREST & PAPER PRODUCTS--0.2%
1,170 Bowater, Inc. ............................................ 51,626
-----------
INSURANCE--3.0%
1,260 AFLAC, Inc. .............................................. 57,881
2,632 American International Group, Inc. ....................... 309,260
4,350 Axa Financial, Inc. ...................................... 147,900
3,720 Hartford Financial Services Group......................... 208,087
1,400 Marsh & Mclennan Companies, Inc. ......................... 146,212
1,530 St. Paul Companies, Inc. ................................. 52,211
-----------
921,551
-----------
INTERNET SERVICES--0.8%
4,260 America Online, Inc.(b)................................... 224,715
220 Selectica, Inc.(b)........................................ 15,414
-----------
240,129
-----------
MACHINERY--1.4%
4,540 Deere & Co. .............................................. 167,980
3,370 Ingersoll-Rand Co. ....................................... 135,642
980 SPX Corp.(b).............................................. 118,519
-----------
422,141
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES 1A)
<C> <S> <C>
MEDICAL & HEALTH PRODUCTS--6.3%
3,410 American Home Products Corp. ............................. $ 200,337
2,200 Bausch & Lomb, Inc. ...................................... 170,225
9,540 Bristol-Myers Squibb Co. ................................. 555,705
6,975 Pfizer, Inc. ............................................. 334,800
12,704 Pharmacia Corp. .......................................... 656,638
-----------
1,917,705
-----------
MEDICAL & HEALTH TECHNOLOGY & SERVICES--0.1%
350 McKesson HBOC, Inc. ...................................... 7,328
710 Medtronic, Inc. .......................................... 35,367
-----------
42,695
-----------
METALS & MINING--0.2%
2,290 Alcoa, Inc. .............................................. 66,410
-----------
OIL SERVICES--0.9%
3,260 Baker Hughes, Inc. ....................................... 104,320
540 Cooper Cameron Corp.(b)................................... 35,640
3,310 Weatherford International, Inc.(b)........................ 131,779
-----------
271,739
-----------
OILS--7.0%
7,271 BP Amoco, Plc. (ADR)...................................... 411,266
13,350 Conoco, Inc. Class B...................................... 327,909
1,000 Devon Energy Corp. ....................................... 56,187
3,070 EOG Resources, Inc. ...................................... 102,845
7,124 Exxon Mobil Corp. ........................................ 559,234
3,040 Noble Drilling Corp.(b)................................... 125,210
4,690 Royal Dutch Petroleum (EUR)............................... 291,488
360 Total Fina S.A. (EUR)..................................... 55,197
3,950 Transocean Sedco Forex, Inc............................... 211,078
-----------
2,140,414
-----------
PRINTING & PUBLISHING--0.4%
3,230 Tribune Co. .............................................. 113,050
-----------
SPECIAL PRODUCTS & SERVICES--2.0%
9,320 Global Marine, Inc.(b).................................... 262,707
1,920 VeriSign, Inc.(b)......................................... 338,880
-----------
601,587
-----------
STORES--3.8%
12,670 CVS Corp. ................................................ 506,800
200 Fast Retailing Company, Ltd. (JPY)........................ 83,691
14,120 Office Depot, Inc.(b)..................................... 88,250
5,480 RadioShack Corp. ......................................... 259,615
3,850 Wal-Mart Stores, Inc. .................................... 221,856
-----------
1,160,212
-----------
</TABLE>
See accompanying notes to financial statements.
94
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS RESEARCH MANAGERS SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE (NOTE
SHARES 1A)
<C> <S> <C>
SUPERMARKETS--1.7%
11,270 Safeway, Inc.(b).......................................... $ 508,559
-----------
TELECOMMUNICATIONS--12.3%
330 Allegiance Telecom, Inc.(b)............................... 21,120
3,650 Cabletron Systems, Inc.(b)................................ 92,162
2,140 CIENA Corp.(b)............................................ 356,711
15,540 Cisco Systems, Inc.(b).................................... 987,761
2,820 Comverse Technology, Inc,(b).............................. 262,260
2,009 Corning, Inc. ............................................ 542,071
4,460 FLAG Telecom Holdings, Ltd.(b)............................ 66,342
10,620 Global Crossing Ltd.(b)................................... 279,439
370 Intermedia Communications, Inc.(b)........................ 11,007
8,850 Metromedia Fiber Network, Inc.(b)......................... 351,234
3 Nippon Telephone & Telegraph Corp. (JPY).................. 39,866
8,910 Nortel Networks Corp. .................................... 608,107
10 Qualcomm, Inc.(b)......................................... 600
1,440 Tellabs, Inc.(b).......................................... 98,550
440 Time Warner Telecom, Inc.(b).............................. 28,325
-----------
3,745,555
-----------
UTILITIES--ELECTRIC--0.7%
4,590 AES Corp.(b).............................................. 209,419
-----------
UTILITIES--GAS--0.4%
2,720 Williams Companies, Inc. ................................. 113,390
-----------
Total Common Stocks
(Identified Cost $27,201,107)............................ 28,690,601
-----------
</TABLE>
SHORT-TERM INVESTMENT--4.3%
<TABLE>
<CAPTION>
FACE VALUE (NOTE
AMOUNT 1A)
<C> <S> <C>
$1,300,000 Federal Home loan Bank,
6.540%, 7/3/00....................................... $ 1,299,528
-----------
Total Short-Term Investment
(Identified Cost $1,299,528)......................... 1,299,528
-----------
Total Investments--98.6%
(Identified Cost $28,500,635)(a)..................... 29,990,129
Other assets less liabilities......................... 431,736
-----------
TOTAL NET ASSETS--100%................................ $30,421,865
===========
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $28,500,635 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............... $ 2,602,992
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value............... (1,113,498)
-----------
Net unrealized appreciation.................................... $ 1,489,494
===========
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The value
of ADRs and GDRs are significantly influenced by trading on exchanges
not located in the United States or Canada.
EUR-- Euro Currency
GBP-- Pound Sterling
JPY-- Japanese Yen
See accompanying notes to financial statements.
95
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS RESEARCH MANAGERS SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value....................................... $29,990,129
Cash....................................................... 44,303
Foreign cash at value (Identified cost $3,461)............. 3,476
Receivable for:
Securities sold............................................ 361,686
Fund shares sold........................................... 155,281
Dividends and interest..................................... 8,439
Foreign taxes.............................................. 961
-----------
Total Assets.............................................. 30,564,275
LIABILITIES
Payable for:
Fund shares redeemed....................................... $ 3,255
Securities purchased....................................... 89,836
Foreign currency purchased................................. 461
Withholding taxes.......................................... 258
Accrued expenses:
Management fees............................................ 41,116
Deferred trustees fees..................................... 3,977
Other expenses............................................. 3,507
-------
Total Liabilities......................................... 142,410
-----------
NET ASSETS.................................................. $30,421,865
===========
Net assets consist of:
Capital paid in............................................ $28,114,342
Undistributed net investment income........................ 12,902
Accumulated net realized gains (losses).................... 803,923
Unrealized appreciation (depreciation) on investments and
foreign currency.......................................... 1,490,698
-----------
NET ASSETS.................................................. $30,421,865
===========
Computation of offering price:
Net asset value and redemption price per share ($30,421,865
divided by 2,379,538 shares of beneficial interest)....... $ 12.78
===========
Identified cost of investments.............................. $28,500,635
===========
</TABLE>
Statement of Operations
Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................... $ 58,422 (a)
Interest............................................ 42,409
----------
100,831
EXPENSES
Management fees..................................... $ 68,284
Trustees' fees and expenses......................... 5,019
Custodian........................................... 80,170
Audit and tax services.............................. 3,000
Legal............................................... 237
Printing............................................ 631
Miscellaneous....................................... 1,267
--------
Total expenses before reductions................... 158,608
Less expenses assumed by the investment adviser.... (76,667) 81,941
-------- ----------
NET INVESTMENT INCOME................................ 18,890
----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net.................................... 845,858
Foreign currency transactions--net.................. (18,516) 827,342
--------
Unrealized appreciation (depreciation) on:
Investments--net.................................... 433,544
Foreign currency transactions--net.................. 1,212 434,756
-------- ----------
Net gain (loss)..................................... 1,262,098
----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................................... $1,280,988
==========
</TABLE>
(a)Net of foreign taxes $1,570
See accompanying notes to financial statements.
96
<PAGE>
NEW ENGLAND ZENITH FUND
(MFS RESEARCH MANAGERS SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED APRIL 30, 1999(A)
JUNE 30, THROUGH
2000 DECEMBER 31, 1999
----------- -----------------
<S> <C> <C>
FROM OPERATIONS
Net investment income (loss)................... $ 18,890 $ (2,032)
Net realized gain (loss)....................... 827,342 (27,375)
Unrealized appreciation (depreciation)......... 434,756 1,055,942
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.................................... 1,280,988 1,026,535
----------- -----------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares................... 26,134,193 11,362,688
Cost of shares redeemed........................ (3,865,368) (5,517,171)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................ 22,268,825 5,845,517
----------- -----------
TOTAL INCREASE (DECREASE) IN NET ASSETS........ 23,549,813 6,872,052
NET ASSETS
Beginning of the period........................ 6,872,052 0
----------- -----------
End of the period.............................. $30,421,865 $ 6,872,052
=========== ===========
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period.............................. $ 12,902 $ (5,988)
=========== ===========
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares................. 2,119,011 1,103,624
Redeemed....................................... (313,204) (529,894)
----------- -----------
Net Change..................................... 1,805,807 573,730
=========== ===========
</TABLE>
(a) Commencement of operations.
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS APRIL 30, 1999(A)
ENDED JUNE THROUGH DECEMBER
30, 2000 31, 1999
---------- -----------------
<S> <C> <C>
Net Asset Value, Beginning of Period.......... $ 11.98 $10.00
------- ------
Income From Investment Operations
Net Investment Income........................ 0.02 0.00
Net Realized and Unrealized Gain (Loss) on
Investments................................. 0.78 1.98
------- ------
Total From Investment Operations............. 0.80 1.98
------- ------
Net Asset Value, End of Period................ $ 12.78 $11.98
======= ======
TOTAL RETURN (%).............................. 6.7 (b) 19.8 (b)
Ratio of Operating Expenses to Average Net
Assets (%)................................... 0.90 (c) 0.90 (c)
Ratio of Net Investment Income to Average Net
Assets (%)................................... 0.21 (c) (0.06)(c)
Portfolio Turnover Rate (%)................... 90 (c) 84 (c)
Net Assets, End of Period (000)............... $30,422 $6,872
Ratio of operating expenses to average net
assets without giving effect to the voluntary
expense agreement would have been (%)........ 1.74 (c) 2.03 (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.
97
<PAGE>
WESTPEAK GROWTH AND INCOME SERIES
PORTFOLIO MANAGER: GERALD H. SCRIVER
WESTPEAK INVESTMENT ADVISORS, L.P.
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Westpeak Growth and Income Series returned -3.3% during the six months
ending June 30, 2000 versus a return of -0.4% for the Standard & Poor's 500 In-
dex/25/. The Lipper Variable Products Growth and Income Fund Average/11/ re-
turned -1.1% over the same period.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST TWELVE
MONTHS.
A: The last twelve months exhibited a healthy market environment with the Stan-
dard & Poor's 500 Index returning 7.4% and the Russell 2000 Index returning
14.3%. Although the overall market returns were strong, the returns were not
evenly distributed across all investment styles. Growth outperformed Value over
the past twelve months as the S&P/BARRA Growth Index returned +18.5% and the
S&P/BARRA Value Index returned -5.1%. Although it appears that "growth" drove
performance over the past twelve months, our research reveals that a relatively
small group of stocks exhibiting high volatility and poor fundamental valua-
tions actually led the market. Coincidentally, these same highly volatile
stocks also embody growth attributes, explaining why growth indices
outperformed. Although "growth" outperformed "value" over the past twelve
months, the pendulum appears to have swung toward "value" more recently. The
S&P/BARRA Value Index outperformed the S&P/BARRA Growth Index by over 8% in
April and May of this year.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A: We continue to maintain a bias in the portfolio toward attractively priced
stocks with strong earnings growth rates and the potential for positive earn-
ings surprises. The Series' 21.7 P/E ratio compares favorably to the S&P 500's
37.1. Our value orientation is also evidenced by the portfolio's Price/Book ra-
tio of 4.4 versus 6.7 for the S&P 500. Earnings are growing at a rate of 19.1%,
slightly higher than the S&P 500's 16.6% pace. Our lower P/E ratio and higher
growth rate translate into a PE/Growth ratio of 1.14, which compares favorably
to the S&P 500's 2.24. Although there were no material changes in the Series,
we decreased our exposure to the Technology sector over the last quarter.
Q: WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST TWELVE MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A: Our performance benefited most from owning companies with a smaller market
capitalization than the benchmark. Our positive exposure to companies with
higher than average earnings yield and value characteristics penalized perfor-
mance over the last twelve months. A below average exposure to companies with
volatility and momentum characteristics detracted from performance. An under-
weight to the consumer staples and consumer discretionary sectors contributed
positively to performance over the last twelve months. At the same time, an un-
derweight to the technology and energy related sectors detracted from perfor-
mance.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: Although the Fed did not raise interest rates at the June 28th meeting,
there is still some concern whether enough has been done to ensure that future
growth will remain at acceptable levels. There is still evidence of accelerat-
ing inflation in the tight labor market, in rising commodity prices, and in the
growing current-account deficit. The potential for accelerating inflation, cou-
pled with slower growth, could cause corporate profits to weaken in the future.
Stocks with below average P/E's, above-average growth, and the potential for
positive earnings surprises will likely be the leaders in this type of market
environment. We do not anticipate any significant changes in the management of
the portfolio in the coming months.
98
<PAGE>
A $10,000 Investment Compared to the S&P 500 Index Since the Series' Inception
[GRAPH]
Westlake Growth and
Income Series S&P 500
4/30/93 $10,000 $10,000
6/30/93 $10,437 $10,303
6/30/94 $10,775 $10,442
6/30/95 $13,625 $13,163
6/30/96 $16,157 $16,593
6/30/97 $21,751 $22,328
6/30/98 $28,886 $29,073
6/30/99 $33,422 $35,685
6/30/00 $31,997 $38,327
Average Annual Returns
Lipper Variable
Growth & Products Growth
Income Series S&P 500 and Income Average
6 Months -3.3% -0.4% -1.1%
1 Year -4.3% 7.4% 1.4%
3 Years 13.7% 19.7% 13.1%
5 Years 18.6% 23.8% 17.9%
Since Inception 17.6% 20.6% n/a
[GRAPHIC] FUND FACTS
GOAL: Long-term total return through investment in equity securities.
START DATE: April 30, 1993
SIZE: $404 million as of June 30, 2000
MANAGER: Gerald Scriver. Mr. Scriver has managed the Series from its inception
in 1993; he also has managed Westpeak Stock Index Series since August 1993,
Nvest Growth and Income Fund since May 1995 and Nvest Capital Growth Fund since
February 1998. Mr. Scriver joined Westpeak in July 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.
[CHART]
99
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH AND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--99.2% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--2.1%
36,700 Boeing Co. ............................................. $ 1,534,519
102,700 Northrop Grumman Corp. ................................. 6,803,875
------------
8,338,394
------------
AIRLINES--2.6%
96,100 AMR Corp.(b)............................................ 2,540,644
20,300 Delta Air Lines, Inc. .................................. 1,026,419
121,200 Ual Corp. .............................................. 7,052,325
------------
10,619,388
------------
AUTOMOTIVE--3.6%
184,800 Ford Motor Co. ......................................... 7,946,400
109,300 General Motors Corp. ................................... 6,346,231
24,196 Visteon Corp.(b)........................................ 293,382
------------
14,586,013
------------
BANKS--6.0%
103,650 Chase Manhattan Corp. .................................. 4,774,378
216,500 Citigroup, Inc. ........................................ 13,044,125
39,900 FleetBoston Financial Corp. ............................ 1,356,600
28,500 J.P. Morgan & Company, Inc. ............................ 3,138,563
113,300 Unionbancal Corp. ...................................... 2,103,131
------------
24,416,797
------------
CHEMICALS--2.7%
139,500 Dow Chemical Co. ....................................... 4,211,156
47,500 E.I. Du Pont de Nemours ................................ 2,078,125
55,300 Minnesota Mining & Manufacturing Co. ................... 4,562,250
------------
10,851,531
------------
COMPUTER HARDWARE--7.3%
63,000 Apple Computer(b)....................................... 3,299,625
143,900 Cisco Systems, Inc.(b).................................. 9,146,644
82,100 Hewlett Packard Co. .................................... 10,252,237
8,800 Sandisk Corp.(b)........................................ 538,450
49,500 Sun Microsystems, Inc.(b)............................... 4,501,406
37,300 Zebra Technologies Corp.(b)............................. 1,652,856
------------
29,391,218
------------
COMPUTER SOFTWARE--5.3%
100,000 International Business Machines......................... 10,956,250
60,500 Microsoft Corp.(b)...................................... 4,840,000
69,100 Oracle Corp.(b)......................................... 5,808,719
------------
21,604,969
------------
CONSTRUCTION--2.3%
38,700 Lafarge Corp. .......................................... 812,700
124,700 Southdown, Inc. ........................................ 7,201,425
47,700 USG Corp. .............................................. 1,448,888
------------
9,463,013
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
DRUGS--8.2%
31,800 Allergan, Inc. ......................................... $ 2,369,100
136,600 Bristol Myers Squibb Co. ............................... 7,956,950
101,800 Merck & Company, Inc. .................................. 7,800,425
247,600 Pfizer, Inc. ........................................... 11,884,800
66,200 Schering Plough Corp. .................................. 3,343,100
------------
33,354,375
------------
ELECTRIC EQUIPMENT--4.4%
6,100 Broadcom Corp.(b)....................................... 1,335,519
12,400 Corning, Inc. .......................................... 3,346,450
28,900 Cummins Engine, Inc. ................................... 787,525
63,500 Dover Corp. ............................................ 2,575,719
18,200 Eaton Corp. ............................................ 1,219,400
14,700 KLA-Tencor Corp.(b)..................................... 860,869
37,700 Nortel Networks Corp. .................................. 2,573,025
13,000 PE Corp. ............................................... 856,375
24,600 Rockwell International Corp. ........................... 774,900
14,700 Scientific Atlanta, Inc. ............................... 1,095,150
14,900 Teradyne, Inc.(b)....................................... 1,095,150
31,050 Vishay Intertechnology, Inc.(b)......................... 1,177,959
------------
17,698,041
------------
ELECTRIC UTILITIES--1.2%
116,700 Entergy Corp. .......................................... 3,172,781
24,000 Public Service Enterprise Group......................... 831,000
27,100 TXU Corp. .............................................. 799,450
------------
4,803,231
------------
ENERGY RESERVES--3.9%
25,700 Chevron Corp. .......................................... 2,179,681
113,900 Exxon Mobil Corp. ...................................... 8,941,150
74,200 Royal Dutch Petroleum Co. (ADR)......................... 4,567,937
------------
15,688,768
------------
FINANCIAL SERVICES--7.8%
440,400 General Electric Co. ................................... 23,341,200
49,300 Federal Home Loan Mortgage Corp. ....................... 1,996,650
67,300 Federal National Mortgage Association................... 3,512,219
24,400 Marsh & McLennan Companies, Inc. ....................... 2,548,275
------------
31,398,344
------------
FOOD & BEVERAGES--3.6%
41,400 Hormel Foods Corp. ..................................... 696,038
184,500 McCormick & Company, Inc. .............................. 5,996,250
53,500 PepsiCo, Inc. .......................................... 2,377,406
65,500 Quaker Oats Co. ........................................ 4,920,687
38,200 Supervalu, Inc. ........................................ 728,187
------------
14,718,568
------------
</TABLE>
See accompanying notes to financial statements.
100
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH AND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
HEALTH CARE--PRODUCTS--3.2%
61,000 Abbott Laboratories..................................... $ 2,718,313
98,900 Johnson & Johnson....................................... 10,075,437
------------
12,793,750
------------
HEALTH CARE--PROVIDERS--1.6%
42,500 HCA Healthcare Co. ..................................... 1,290,938
14,000 Pacificare Health Systems(b)............................ 842,625
49,800 Unitedhealth Group, Inc. ............................... 4,270,350
------------
6,403,913
------------
HOUSEHOLD PRODUCTS--3.0%
158,200 Colgate Palmolive Co. .................................. 9,472,225
36,000 Ralston Purina Co. ..................................... 717,750
39,200 Whirlpool Corp. ........................................ 1,827,700
------------
12,017,675
------------
INDUSTRIAL PARTS & MACHINERY--0.8%
65,900 Caterpillar, Inc. ...................................... 2,232,363
34,500 Parker Hannifin Corp. .................................. 1,181,625
------------
3,413,988
------------
INDUSTRIAL SERVICES--0.1%
19,900 Hertz Corp. ............................................ 558,444
------------
INFORMATION SERVICES--0.5%
21,600 Automatic Data Processing, Inc. ........................ 1,156,950
9,100 Omnicom Group........................................... 810,468
------------
1,967,418
------------
INSURANCE--LIFE--1.0%
14,800 Cigna Corp. ............................................ 1,383,800
70,700 Lincoln National Corp., Inc. ........................... 2,554,038
------------
3,937,838
------------
INSURANCE--PROPERTY--2.0%
21,600 Ambac Financial Group, Inc. ............................ 1,183,950
60,100 Mgic Investment Corp. .................................. 2,734,550
39,700 PMI Group, Inc. ........................................ 1,885,750
40,800 Radian Group, Inc. ..................................... 2,111,400
------------
7,915,650
------------
INTERNET--1.3%
8,900 Ariba, Inc.(b).......................................... 872,617
15,000 Broadvision, Inc.(b).................................... 762,187
119,100 E*Trade Group, Inc.(b).................................. 1,965,150
8,800 Juniper Networks, Inc.(b)............................... 1,280,950
7,700 Phone.com, Inc.(b)...................................... 501,463
------------
5,382,367
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
MEDIA & ENTERTAINMENT--1.5%
48,000 Gannett, Inc. .......................................... $ 2,871,000
79,500 Walt Disney Co. ........................................ 3,085,594
------------
5,956,594
------------
METALS & MINING--0.8%
73,100 Alcan Aluminium, Ltd. .................................. 2,266,100
28,800 Alcoa, Inc. ............................................ 835,200
------------
3,101,300
------------
PAPER & FOREST PRODUCTS--0.6%
32,600 Georgia Pacific Corp. .................................. 855,750
15,200 Weyerhaeuser Co. ....................................... 653,600
28,400 Willamette Industries, Inc. ............................ 773,900
------------
2,283,250
------------
PUBLISHING--0.3%
21,900 Knight Ridder, Inc. .................................... 1,164,806
------------
RAILROADS & EQUIPMENT--0.7%
44,900 Burlington, Northern Santa Fe........................... 1,029,894
43,300 Union Pacific Corp. .................................... 1,610,219
------------
2,640,113
------------
RETAIL--DEPARTMENT STORE--1.7%
111,500 Federated Department Stores(b).......................... 3,763,125
56,200 Sears Roebuck & Co. .................................... 1,833,525
21,500 Target Corp. ........................................... 1,247,000
------------
6,843,650
------------
RETAIL--SPECIALTY--2.4%
34,200 BJ's Wholesale Club, Inc.(b)............................ 1,128,600
132,650 Home Depot, Inc. ....................................... 6,624,209
50,400 Limited, Inc. .......................................... 1,089,900
14,400 Radioshack Corp. ....................................... 682,200
------------
9,524,909
------------
SECURITIES & ASSET MANAGEMENT--4.3%
51,271 Bear Stearns Companies, Inc. ........................... 2,134,155
43,500 Lehman Brothers Holdings, Inc. ......................... 4,113,469
31,300 Merrill Lynch & Company, Inc. .......................... 3,599,500
67,800 Morgan Stanley Dean Witter & Co. ....................... 5,644,350
45,200 Paine Webber Group, Inc. ............................... 2,056,600
------------
17,548,074
------------
SEMICONDUCTORS--7.2%
10,800 Analog Devices, Inc.(b)................................. 820,800
40,800 Applied Materials, Inc.(b).............................. 3,697,500
122,300 Intel Corp. ............................................ 16,349,981
20,300 LSI Logic Corp.(b)...................................... 1,098,738
</TABLE>
See accompanying notes to financial statements.
101
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH AND INCOME SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
SEMICONDUCTORS--(CONTINUED)
11,745 Stmicroelectronics NV (ADR)............................. $ 753,882
80,800 Texas Instruments, Inc. ................................ 5,549,950
11,700 Xilinx, Inc.(b)......................................... 965,981
------------
29,236,832
------------
TELECOMMUNICATION--4.5%
97,500 AT & T Corp. ........................................... 3,083,437
80,600 Bell Atlantic Corp. .................................... 4,095,487
207,000 Bellsouth Corp. ........................................ 8,823,375
23,400 Broadwing, Inc.(b)...................................... 606,938
29,300 Centurytel, Inc. ....................................... 842,375
12,800 Dycom Industries, Inc.(b)............................... 588,800
------------
18,040,412
------------
THRIFTS--0.7%
61,900 Golden State Bancorp(b)................................. 1,114,200
47,000 Golden West Financial Corp. ............................ 1,918,188
------------
3,032,388
------------
Total Common Stocks
(Identified Cost $402,139,520)......................... 400,696,021
------------
</TABLE>
Short-Term Investment--0.8%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
$3,250,000 Repurchase Agreement with State Street Corp. dated
6/30/2000 at 5.250% to be repurchased at $3,251,422
on 7/3/2000, collateralized by $2,915,000 U.S.
Treasury Bonds, 7.125% due 2/15/2023 with a value
of $3,319,456...................................... $ 3,250,000
------------
Total Short-Term Investment
(Identified Cost $3,250,000)....................... 3,250,000
------------
Total Investments--100.0%
(Identified Cost $405,389,520)(a).................. 403,946,021
Other assets less liabilities....................... 181,885
------------
TOTAL NET ASSETS--100%.............................. $404,127,906
============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized depreciation on investments based on
cost of $405,389,520 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.............. $ 33,389,542
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (34,833,041)
------------
Net unrealized depreciation................................... $ (1,443,499)
============
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The value
of ADRs and GDRs are significantly influenced by trading on exchanges
not located in the United States or Canada.
See accompanying notes to financial statements.
102
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH AND INCOME SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $403,946,021
Cash................................................. 2,275
Receivable for:
Securities sold..................................... 4,399,713
Fund shares sold.................................... 695,107
Dividends and interest.............................. 296,503
Foreign taxes....................................... 35
------------
Total Assets....................................... 409,339,654
LIABILITIES
Payable for:
Fund shares redeemed................................ $ 649,746
Securities purchased................................ 4,282,245
Accrued expenses:
Management fees..................................... 226,283
Deferred trustees fees.............................. 15,605
Other expenses...................................... 37,869
----------
Total Liabilities.................................. 5,211,748
------------
NET ASSETS............................................ $404,127,906
============
Net assets consist of:
Capital paid in..................................... $386,274,663
Undistributed net investment income.................. 1,094,060
Accumulated net realized gains (losses).............. 18,202,682
Unrealized appreciation (depreciation) on
investments......................................... (1,443,499)
------------
NET ASSETS............................................ $404,127,906
============
Computation of offering price:
Net asset value and redemption price per share
($404,127,906 divided by 2,105,826 shares of
beneficial interest)................................ $ 191.91
------------
Identified cost of investments........................ $405,389,520
============
</TABLE>
Statement of Operations
Six Months Ended June 30, 2000 (Unaudited)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 2,404,701 (a)
Interest........................................ 119,275
------------
2,523,976
EXPENSES
Management fees................................. $1,361,025
Trustees' fees and expenses..................... 9,626
Custodian....................................... 40,353
Audit and tax services.......................... 5,671
Legal........................................... 4,744
Printing........................................ 36,724
Miscellaneous................................... 2,861
----------
Total expenses before reductions............... 1,461,004
Expense reductions............................. (24,131) 1,436,873
---------- ------------
NET INVESTMENT INCOME............................ 1,087,103
------------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................ 8,882,256
Unrealized appreciation (depreciation) on:
Investments--net................................ (24,004,428)
------------
Net gain (loss).................................. (15,122,172)
------------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS...................................... $(14,035,069)
============
</TABLE>
(a) Net of foreign taxes $12,601
See accompanying notes to financial statements.
103
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK GROWTH AND INCOME SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 1,087,103 $ 3,329,734
Net realized gain (loss).......................... 8,882,256 52,016,715
Unrealized appreciation (depreciation)............ (24,004,428) (24,538,317)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. (14,035,069) 30,808,132
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (3,333,829)
Net realized gain................................. 0 (50,277,567)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (53,611,396)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 71,836,502 186,369,857
Reinvestment of distributions..................... 0 53,611,396
Cost of shares redeemed........................... (71,213,328) (81,195,387)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... 623,174 158,785,866
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... (13,411,895) 135,982,602
NET ASSETS
Beginning of the period........................... 417,539,801 281,557,199
------------ ------------
End of the period................................. $404,127,906 $417,539,801
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 1,094,060 $ 6,957
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 375,264 860,143
Issued in reinvestment of distributions........... 0 267,460
Redeemed.......................................... (373,050) (375,398)
------------ ------------
Net Change........................................ 2,214 752,205
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE ----------------------------------------------
30, 2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 198.49 $ 208.34 $ 179.98 $ 151.77 $141.31 $109.03
-------- -------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.51 1.78 1.30 1.37 1.78 1.77
Net Realized and
Unrealized Gain (Loss)
on Investments........ (7.09) 17.51 42.44 48.76 23.69 37.91
-------- -------- -------- -------- ------- -------
Total From Investment
Operations............ (6.58) 19.29 43.74 50.13 25.47 39.68
-------- -------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (1.78) (1.31) (1.35) (1.82) (1.71)
Distributions From Net
Realized Capital
Gains................. 0.00 (27.36) (14.07) (20.57) (13.19) (5.69)
-------- -------- -------- -------- ------- -------
Total Distributions.... 0.00 (29.14) (15.38) (21.92) (15.01) (7.40)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 191.91 $ 198.49 $ 208.34 $ 179.98 $151.77 $141.31
======== ======== ======== ======== ======= =======
TOTAL RETURN (%)........ (3.3)(b) 9.4 24.4 33.5 18.1 36.5
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.72 (a) 0.74 0.78 0.82 0.85 0.85
Ratio of Operating
Expenses to Average Net
Assets after
expense reductions
(%) (c)................ 0.71 (a) -- -- -- -- --
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.53 (a) 0.94 0.80 0.91 1.40 1.63
Portfolio Turnover Rate
(%).................... 154 (a) 115 100 93 104 92
Net Assets, End of
Period (000)........... $404,128 $417,540 $281,557 $152,738 $82,330 $48,129
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- -- -- -- 0.91 1.06
</TABLE>
(a) Computed on an annualized basis.
(b) Periods less than one year are not computed on an annualized basis.
(c) The Series has entered into arrangements with certain brokers who paid a
portion of the Series expenses.
See accompanying notes to financial statements.
104
<PAGE>
WESTPEAK STOCK INDEX SERIES
PORTFOLIO MANAGER: GERALD H. SCRIVER
WESTPEAK INVESTMENT ADVISORS, L.P.
[PHOTO]
Q: HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A: The Westpeak Stock Index Series returned -0.4% over the six months ending
June 30, 2000. This compares to a return of -0.4% for the Standard & Poor's 500
Index/25/ and -0.6% for the Lipper Variable Products S&P 500 Index Fund Aver-
age/16/. The Series remained fully invested in stocks that make up the S&P 500
Index. It is our strategy to weight the allocation of the Series virtually in
the same proportion as the S&P 500 Index as a means to duplicate the perfor-
mance of the Index.
Q: BRIEFLY DISCUSS THE INVESTMENT AND MARKET ENVIRONMENT DURING THE PAST TWELVE
MONTHS.
A: The last twelve months exhibited a healthy market environment with the
Standard & Poor's 500 Index returning 7.4% and the Russell 2000 Index returning
14.3%. Although the overall market returns were strong, the returns were not
evenly distributed across all investment styles. Growth outperformed value over
the past twelve months as the S&P/BARRA Growth Index returned +18.5% and the
S&P/BARRA Value Index returned -5.1%. Although it appears that growth drove
performance over the past twelve months, our research reveals that a relatively
small group of stocks exhibiting high volatility and poor fundamental
valuations actually led the market. Coincidentally, these same highly volatile
stocks also embody growth attributes, explaining why growth indices
outperformed the market. Although growth stocks outperformed value stocks over
the past twelve months, the pendulum appears to have recently swung toward
value stocks. The S&P/BARRA Value Index outperformed the S&P/BARRA Growth Index
by over 8% in April and May of this year.
Q: WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A: Although the Fed did not raise interest rates at the June 28th meeting,
there is still some concern about whether enough has been done to ensure that
future growth will remain at acceptable levels. There is still evidence of ac-
celerating inflation in the tight labor market, in rising commodity prices, and
in the growing current-account deficit. The potential for accelerating infla-
tion, coupled with slower growth, could cause corporate profits to weaken in
the future. Stocks with below average P/E's, above-average growth, and the po-
tential for positive earnings surprises will likely be the leaders in this type
of market environment. We do not anticipate any significant changes in the man-
agement of the portfolio in the coming months.
105
<PAGE>
A $10,000 Investment compared to the S&P 500 index over the past 10 years
[GRAPH]
Westpeak
Stock Index S&P 500
6/30/90 $10,000 10,000
6/30/91 $10,714 10,739
6/30/92 $12,134 12,185
6/30/93 $13,742 13,840
6/30/94 $13,846 14,027
6/30/95 $17,429 17,682
6/30/96 $21,837 22,290
6/30/97 $29,243 29,995
6/30/98 $37,823 39,055
6/30/99 $46,205 47,938
6/30/00 $49,474 51,487
Average Annual Returns
Lipper Variable Products
Stock Index Series S&P 500 S&P 500 Fund Index Avg.
6 Months -0.4% -0.4% -0.6%
1 Year 7.1% 7.4% 6.9%
3 Years 19.2% 19.7% 19.3%
5 Years 23.2% 23.8% 23.4%
10 Years 17.3% 17.8% 17.4%
Since Inception 15.6% 16.1% n/a
[GRAPHIC] FUND FACTS
GOAL: Investment results that correspond to the composite price and yield
performance of the S&P 500 Index.*
START DATE: March 30, 1987
SIZE: $282 million as of June 30, 2000
MANAGER: Gerald H. Scriver. Mr. Scriver has managed the Series since 1993; he
has also managed Westpeak Growth and Income Series since August 1993, Nvest
Growth and Income Fund since May 1995 and Nvest Capital Growth Fund since
February 1998. Mr. Scriver joined Westpeak in July 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.
* "S&P 500(R)" and "500" are trademarks of the McGraw-Hill Companies, Inc. and
references thereto have been made with permission. The Series is not
sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of investing in
the Series.
106
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--99.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AEROSPACE & DEFENSE--0.9%
2,500 B.F. Goodrich Co......................................... $ 85,156
19,454 Boeing Co. .............................................. 813,420
4,500 General Dynamics Corp. .................................. 235,125
8,830 Lockheed Martin Corp..................................... 219,094
1,600 Northrop Grumman Corp.................................... 106,000
1,100 PerkinElmer, Inc......................................... 72,737
7,600 Raytheon Co., Class B.................................... 146,300
3,300 Textron, Inc............................................. 179,231
2,700 TRW, Inc. ............................................... 117,113
10,700 United Technologies Corp. ............................... 629,963
------------
2,604,139
------------
AIRLINES--0.2%
3,300 AMR Corp.(b)............................................. 87,244
2,900 Delta Air Lines, Inc..................................... 146,631
11,300 Southwest Airlines Co. .................................. 213,994
1,600 U.S. Airways Group, Inc.(b).............................. 62,400
------------
510,269
------------
APPAREL & TEXTILES--0.1%
1,300 Liz Claiborne, Inc....................................... 45,825
6,200 NIKE, Inc., Class B...................................... 246,837
1,300 Reebok International, Ltd.(b)............................ 20,719
700 Russell Corp. ........................................... 14,000
400 Springs Industries, Inc. ................................ 12,875
2,600 VF Corp.................................................. 61,912
------------
402,168
------------
AUTOMOTIVE--0.9%
1,700 Cooper Tire & Rubber Co.................................. 18,913
3,722 Dana Corp................................................ 78,860
12,625 Delphi Automotive Systems Corp. ......................... 183,852
27,100 Ford Motor Co............................................ 1,165,300
12,400 General Motors Corp...................................... 719,975
3,500 Goodyear Tire & Rubber Co. .............................. 70,000
2,000 ITT Industries, Inc...................................... 60,750
1,420 Navistar International Corp., Inc.(b).................... 44,109
1,790 PACCAR, Inc.............................................. 71,041
3,548 Visteon Corp.(b)......................................... 43,023
------------
2,455,823
------------
BANKS--5.1%
8,750 AmSouth Bancorporation................................... 137,813
38,324 Bank of America Corp..................................... 1,647,932
7,800 BB&T Corp................................................ 186,225
4,700 Charter One Financial, Inc............................... 108,100
27,810 Chase Manhattan Corp..................................... 1,280,998
75,579 Citigroup, Inc........................................... 4,553,635
3,500 Comerica, Inc. .......................................... 157,063
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
BANKS--(CONTINUED)
6,900 Fifth Third Bancorp...................................... $ 436,425
22,170 First Union Corp......................................... 550,093
20,485 Fleet Boston Financial Corp.............................. 696,490
5,174 Huntington Bancshares, Inc............................... 81,814
3,900 J.P. Morgan & Company, Inc. ............................. 429,488
10,000 KeyCorp.................................................. 176,250
11,400 Mellon Financial Corp.................................... 415,387
13,800 National City Corp....................................... 235,462
3,150 Old Kent Financial Corp.................................. 84,262
6,600 PNC Financial Services Group............................. 309,375
4,900 Regions Financial Corp. ................................. 97,387
3,800 SouthTrust Corp.......................................... 85,975
3,900 Summit Bancorp........................................... 96,038
7,200 SunTrust Banks, Inc...................................... 328,950
6,250 Synovus Financial Corp................................... 110,156
3,200 Union Planters Corp. .................................... 89,400
4,500 Wachovia Corp............................................ 244,125
12,913 Washington Mutual, Inc................................... 372,863
37,030 Wells Fargo & Co......................................... 1,434,912
------------
14,346,618
------------
BANKS & THRIFTS--1.0%
16,500 Bank of New York Co., Inc................................ 767,250
25,692 Bank One Corp............................................ 682,444
22,009 Firstar Corp............................................. 463,565
5,000 Northern Trust Corp...................................... 325,312
3,600 State Street Corp. ...................................... 381,825
16,908 U.S. Bancorp............................................. 325,479
------------
2,945,875
------------
BROADCASTING--0.6%
20,800 Comcast Corp.(b)......................................... 842,400
13,700 MediaOne Group, Inc.(b).................................. 905,912
------------
1,748,312
------------
BUSINESS SERVICES--1.3%
14,100 Automatic Data Processing, Inc. ......................... 755,231
3,200 Ceridian Corp.(b)........................................ 77,000
3,800 Computer Sciences Corp.(b)............................... 283,813
3,500 Convergys Corp.(b)....................................... 181,563
10,600 Electronic Data Systems Corp. ........................... 437,250
6,940 IMS Health, Inc.......................................... 124,920
6,300 Interpublic Group of Companies, Inc...................... 270,900
2,200 NCR Corp.(b)............................................. 85,662
6,800 Network Appliance, Inc.(b)............................... 547,400
4,000 Omnicom Group, Inc....................................... 356,250
8,350 Paychex, Inc............................................. 350,700
2,600 Quintiles Transnational Corp.(b)......................... 36,725
1,600 Young & Rubicam, Inc..................................... 91,500
------------
3,598,914
------------
</TABLE>
See accompanying notes to financial statements.
107
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
CHEMICALS--1.4%
1,600 Ashland, Inc............................................ $ 56,100
2,900 Ecolab, Inc............................................. 113,281
8,900 Minnesota Mining & Manufactoring Co..................... 734,250
8,200 Occidental Petroleum Corp............................... 172,712
3,900 PPG Industries, Inc..................................... 172,819
1,896 Sealed Air Corp.(b)..................................... 99,303
3,700 Sherwin-Williams Co..................................... 78,394
2,200 Vulcan Materials Co. ................................... 93,912
2,275 Westvaco Corp........................................... 56,448
5,100 Air Products & Chemicals, Inc. ......................... 157,144
2,500 Avery Dennison Corp..................................... 167,813
14,850 Dow Chemical Co......................................... 448,284
23,377 E.I. Du Pont de Nemours................................. 1,022,744
1,800 Eastman Chemical Co. ................................... 85,950
2,825 Engelhard Corp. ........................................ 48,202
1,200 Great Lakes Chemical Corp............................... 37,800
2,400 Hercules, Inc. ......................................... 33,750
3,600 Praxair, Inc. .......................................... 134,775
4,885 Rohm & Haas Co.......................................... 168,533
3,000 Union Carbide Corp. .................................... 148,500
1,600 W.R. Grace & Co.(b)..................................... 19,400
------------
4,050,114
------------
COMPUTER HARDWARE--1.3%
7,800 Analog Devices, Inc.(b)................................. 592,800
35,400 Sun Microsystems, Inc.(b)............................... 3,219,188
------------
3,811,988
------------
COMPUTER SOFTWARE & SERVICES--8.3%
2,700 Adobe Systems, Inc...................................... 351,000
51,200 America Online, Inc.(b)................................. 2,700,800
1,400 Autodesk, Inc........................................... 48,563
5,500 BMC Software, Inc.(b)................................... 200,664
15,848 Cendant Corp.(b)........................................ 221,872
13,200 Computer Associates International, Inc.................. 675,675
8,100 Compuware Corp.(b)...................................... 84,038
3,400 Comverse Technology, Inc.(b)............................ 316,200
9,400 First Data Corp......................................... 466,475
1,700 Mercury Interactive Corp.(b)............................ 164,475
116,700 Microsoft Corp.(b)...................................... 9,336,000
7,300 Novell, Inc.(b)......................................... 67,525
63,310 Oracle Corp.(b)......................................... 5,321,997
6,200 Parametric Technology Corp.(b).......................... 68,200
6,000 Peoplesoft, Inc.(b)..................................... 100,500
1,300 Sapient Corp.(b)........................................ 139,019
4,282 Siebel Systems, Inc.(b)................................. 700,375
7,000 Unisys Corp.(b)......................................... 101,938
8,705 VERITAS Software Corp.(b)............................... 983,801
11,840 Yahoo!, Inc.(b)......................................... 1,466,680
------------
23,515,797
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
COMPUTERS & BUSINESS EQUIPMENT--9.5%
7,700 3Com Corp.(b)........................................... $ 443,712
2,300 Adaptec, Inc.(b)........................................ 52,325
7,200 Apple Computer, Inc.(b)................................. 377,100
4,100 Cabletron Systems, Inc.(b).............................. 103,525
153,400 Cisco Systems, Inc.(b).................................. 9,750,488
4,000 Citrix Systems, Inc.(b)................................. 75,750
37,947 Compaq Computer Corp.................................... 970,020
57,500 Dell Computer Corp.(b).................................. 2,835,469
45,662 EMC Corp.(b)............................................ 3,513,120
7,100 Gateway, Inc.(b)........................................ 402,925
22,500 Hewlett-Packard Co...................................... 2,809,687
40,400 International Business Machines Corp.................... 4,426,325
2,900 Lexmark International Group, Inc.(b).................... 195,025
5,900 Pitney Bowes, Inc....................................... 236,000
5,100 Seagate Technology, Inc.(b)............................. 280,500
14,900 Xerox Corp.............................................. 309,175
------------
26,781,146
------------
CONSTRUCTION--0.1%
900 Armstrong Holdings, Inc................................. 13,781
1,300 Centex Corp............................................. 30,550
1,700 Fluor Corp.............................................. 53,763
1,100 Kaufman & Broad Home Corp............................... 21,794
10,000 Masco Corp.............................................. 180,625
1,200 Owens Corning........................................... 11,100
1,000 Pulte Corp.............................................. 21,625
------------
333,238
------------
CONSUMER GOODS & SERVICES--0.1%
1,900 Black & Decker Corp..................................... 74,694
1,900 Maytag Corp............................................. 70,062
6,323 McKesson HBOC, Inc...................................... 132,388
1,700 Whirlpool Corp.......................................... 79,263
------------
356,407
------------
DRUGS--8.4%
2,900 Allergan, Inc........................................... 216,050
2,300 ALZA Corp.(b)........................................... 135,988
29,300 American Home Products Corp............................. 1,721,375
22,900 Amgen, Inc.(b).......................................... 1,608,725
3,341 Biogen, Inc.(b)......................................... 215,495
44,460 Bristol-Myers Squibb Co................................. 2,589,795
6,300 Cardinal Health, Inc.................................... 466,200
24,500 Eli Lilly & Co. ........................................ 2,446,937
4,600 Medimmune Inc.(b)....................................... 340,400
52,400 Merck & Co., Inc........................................ 4,015,150
139,875 Pfizer, Inc. ........................................... 6,714,000
28,061 Pharmacia Corp.......................................... 1,450,403
32,900 Schering-Plough Corp.................................... 1,661,450
</TABLE>
See accompanying notes to financial statements.
108
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
DRUGS--(CONTINUED)
2,300 Sigma-Aldrich Corp....................................... $ 67,275
2,200 Watson Pharmaceuticals, Inc.(b).......................... 118,250
------------
23,767,493
------------
ELECTRIC UTILITIES--1.7%
9,700 AES Corp.(b)............................................. 442,563
3,100 Ameren Corp.............................................. 104,625
7,280 American Electric Power, Inc............................. 215,670
3,611 Cinergy Corp............................................. 91,855
2,600 CMS Energy Corp.......................................... 57,525
5,000 Consolidated Edison, Inc. ............................... 148,125
3,400 Constellation Energy Group............................... 110,713
3,600 CP&L Energy, Inc......................................... 114,975
5,350 Dominion Resources, Inc.................................. 229,381
3,300 DTE Energy Co............................................ 100,856
8,227 Duke Energy Co. ......................................... 463,797
7,800 Edison International..................................... 159,900
5,500 Entergy Corp............................................. 149,531
5,200 FirstEnergy Corp......................................... 121,550
2,200 Florida Progress Corp.................................... 103,125
4,000 FPL Group, Inc........................................... 198,000
2,800 GPU, Inc................................................. 75,775
2,600 New Century Energies, Inc................................ 78,000
4,000 Niagara Mohawk Holdings, Inc.(b)......................... 55,750
3,500 Northern States Power Co................................. 70,656
4,200 PECO Energy Co........................................... 169,312
8,600 PG&E Corp................................................ 211,775
1,900 Pinnacle West Capital Corp............................... 64,363
3,200 PPL Corp................................................. 70,200
4,900 Public Service Enterprise Group, Inc..................... 169,662
6,648 Reliant Energy, Inc. .................................... 196,531
15,100 Southern Co. ............................................ 352,019
6,225 TXU Corp................................................. 183,638
4,900 Unicom Corp.............................................. 189,569
------------
4,699,441
------------
ELECTRONICS--4.2%
10,181 Agilent Technologies, Inc.(b)............................ 750,849
4,300 American Power Conversion Corp........................... 175,494
1,830 Andrew Corp.(b).......................................... 61,419
2,100 Cooper Industries, Inc. ................................. 68,381
6,200 Corning, Inc. ........................................... 1,673,225
1,700 Eaton Corp............................................... 113,900
9,700 Emerson Electric Co...................................... 585,638
17,800 Honeywell International, Inc. ........................... 599,637
1,900 Johnson Controls, Inc.................................... 97,494
71,484 Lucent Technologies, Inc................................. 4,235,427
1,000 Millipore Corp........................................... 75,375
4,375 Molex, Inc............................................... 210,547
4,600 PE Corp.................................................. 303,025
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
ELECTRONICS--(CONTINUED)
4,300 Rockwell International Corp............................. $ 135,450
3,100 Sanmina Corp.(b)........................................ 265,050
3,500 Scientific-Atlanta, Inc. ............................... 260,750
13,300 Solectron Corp.(b)...................................... 556,938
1,050 Tektronix, Inc.(b)...................................... 77,700
9,000 Tellabs, Inc.(b)........................................ 615,937
3,800 Teradyne, Inc.(b)....................................... 279,300
3,500 Thermo Electron Corp.(b)................................ 73,719
1,300 Thomas & Betts Corp..................................... 24,862
2,100 W.W. Grainger, Inc...................................... 64,706
7,200 Xilinx, Inc.(b)......................................... 594,450
------------
11,899,273
------------
ENERGY RESERVES--4.6%
2,000 Amerada Hess Corp. ..................................... 123,500
2,900 Anadarko Petroleum Corp................................. 143,006
2,600 Apache Corp............................................. 152,913
4,862 Burlington Resources, Inc............................... 185,972
14,700 Chevron Corp............................................ 1,246,744
4,800 Coastal Corp............................................ 292,200
14,000 Conoco, Inc., Class B................................... 343,875
77,442 Exxon Mobil Corp........................................ 6,079,197
5,700 Phillips Petroleum Co................................... 288,919
48,081 Royal Dutch Petroleum Co. (ADR)......................... 2,959,986
12,400 Texaco, Inc. ........................................... 660,300
4,703 Transocean Sedco Forex, Inc............................. 251,317
5,664 Union Pacific Resources Group, Inc...................... 124,608
5,400 Unocal Corp. ........................................... 178,875
------------
13,031,412
------------
ENVIRONMENTAL SERVICES--0.1%
4,200 Allied Waste Industries, Inc.(b)........................ 42,000
13,900 Waste Management, Inc................................... 264,100
------------
306,100
------------
FINANCIAL SERVICES--6.4%
30,100 American Express Co..................................... 1,568,963
5,800 Aon Corp. .............................................. 180,163
16,302 Associates First Capital Corp........................... 363,738
4,400 Capital One Financial Corp.............................. 196,350
2,500 Countrywide Credit Industries, Inc...................... 75,781
3,620 Dun & Bradstreet Corp. ................................. 103,623
3,200 Equifax, Inc............................................ 84,000
15,600 Federal Home Loan Mortgage Corp. ....................... 631,800
23,000 Federal National Mortgage Association................... 1,200,313
220,700 General Electric Co..................................... 11,697,100
2,200 H & R Block, Inc........................................ 71,225
10,553 Household International, Inc............................ 438,609
6,000 Marsh & McLennan Companies, Inc......................... 626,625
17,970 MBNA Corp............................................... 487,436
</TABLE>
See accompanying notes to financial statements.
109
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
FINANCIAL SERVICES--(CONTINUED)
3,150 Providian Financial Corp................................. $ 283,500
3,600 SLM Holding Corp. ....................................... 134,775
------------
18,144,001
------------
FOOD & BEVERAGES--3.1%
13,565 Archer-Daniels-Midland Co................................ 133,107
6,300 Bestfoods................................................ 436,275
9,600 Campbell Soup Co......................................... 279,600
11,000 ConAgra, Inc............................................. 209,688
55,400 Coca-Cola Co............................................. 3,182,038
9,500 Coca-Cola Enterprises, Inc............................... 154,969
6,800 General Mills, Inc....................................... 260,100
8,000 H. J. Heinz Co........................................... 350,000
3,100 Hershey Foods Corp....................................... 150,350
9,100 Kellogg Co............................................... 270,725
7,300 Nabisco Group Holdings Corp. ............................ 189,344
3,000 Quaker Oats Co........................................... 225,375
20,400 Sara Lee Corp............................................ 393,975
3,100 Supervalu, Inc........................................... 59,094
7,400 Sysco Corp............................................... 311,725
12,828 Unilever N.V.(ADR)....................................... 551,604
2,600 William Wrigley Jr. Co................................... 208,487
32,600 PepsiCo, Inc. ........................................... 1,448,662
------------
8,815,118
------------
FREIGHT TRANSPORTATION--0.1%
6,460 FedEx Corp.(b)........................................... 245,480
------------
GAS & PIPELINE UTILITIES--0.2%
1,800 Columbia Energy Group.................................... 118,125
5,100 El Paso Energy Corp...................................... 259,781
1,100 Nicor, Inc............................................... 35,888
700 ONEOK, Inc............................................... 18,156
800 Peoples Energy Corp...................................... 25,900
4,555 Sempra Energy............................................ 77,435
------------
535,285
------------
HEALTH CARE--PRODUCTS--3.4%
34,500 Abbott Laboratories...................................... 1,537,406
1,200 Bausch & Lomb, Inc....................................... 92,850
6,500 Baxter International, Inc................................ 457,031
5,600 Becton, Dickinson & Co................................... 160,650
2,500 Biomet, Inc.............................................. 96,094
9,300 Boston Scientific Corp.(b)............................... 204,019
1,100 C.R. Bard, Inc........................................... 52,938
6,900 Guidant Corp.(b)......................................... 341,550
31,200 Johnson & Johnson........................................ 3,178,500
1,500 Mallinckrodt, Inc........................................ 65,156
26,800 Medtronic, Inc........................................... 1,334,975
1,900 St. Jude Medical, Inc.(b)................................ 87,162
37,956 Tyco International, Ltd.................................. 1,798,165
------------
9,406,496
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
HEALTH CARE--SERVICES--0.4%
12,586 HCA-The Healthcare Co. .................................. $ 382,300
8,700 HEALTHSOUTH Corp.(b)..................................... 62,531
3,800 Humana, Inc.(b).......................................... 18,525
2,300 Manor Care, Inc.(b)...................................... 16,100
7,000 Tenet Healthcare Corp.(b)................................ 189,000
3,800 UnitedHealth Group, Inc.................................. 325,850
1,400 WellPoint Health Networks, Inc.(b)....................... 101,412
------------
1,095,718
------------
HOTELS & RESTAURANTS--0.5%
2,900 Darden Restaurants, Inc.................................. 47,125
2,850 Harrah's Entertainment, Inc.(b).......................... 59,672
8,300 Hilton Hotels Corp....................................... 77,812
5,600 Marriott International, Inc.............................. 201,950
30,400 McDonald's Corp.......................................... 1,001,300
3,420 Tricon Global Restaurants, Inc.(b)....................... 96,615
2,700 Wendy's International, Inc. ............................. 48,094
------------
1,532,568
------------
HOUSEHOLD PRODUCTS--1.9%
1,300 Alberto-Culver Co., Class B.............................. 39,731
1,400 American Greetings Corp.................................. 26,600
5,400 Avon Products, Inc. ..................................... 240,300
1,500 Brown-Forman Corp., Class B.............................. 80,625
5,300 Clorox Co................................................ 237,506
13,100 Colgate-Palmolive Co..................................... 784,363
3,700 Fortune Brands, Inc...................................... 85,331
24,100 Gillette Co. ............................................ 841,994
2,400 International Flavours & Fragrances, Inc................. 72,450
12,412 Kimberly-Clark Corp. .................................... 712,139
4,400 Leggett & Platt, Inc. ................................... 72,600
6,307 Newell Rubbermaid, Inc................................... 162,405
29,520 Procter & Gamble Co. .................................... 1,690,020
6,800 Ralston Purina Co........................................ 135,575
1,300 Tupperware Corp.......................................... 28,600
------------
5,210,239
------------
INDUSTRIAL PARTS & MACHINERY--0.6%
500 Briggs & Stratton Corp................................... 17,125
8,000 Caterpillar, Inc......................................... 271,000
1,500 Crane Co................................................. 36,469
900 Cummins Engine, Inc...................................... 24,525
3,200 Danaher Corp............................................. 158,200
5,200 Deere & Co............................................... 192,400
4,600 Dover Corp............................................... 186,588
4,000 Genuine Parts Co......................................... 80,000
6,700 Illinois Tool Works, Inc................................. 381,900
3,700 Ingersoll-Rand Co........................................ 148,925
1,300 McDermott International, Inc............................. 11,456
900 National Service Industries, Inc. ....................... 17,550
</TABLE>
See accompanying notes to financial statements.
110
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
INDUSTRIAL PARTS & MACHINERY--(CONTINUED)
2,800 Pall Corp. .............................................. $ 51,800
2,550 Parker Hannifin Corp..................................... 87,337
1,350 Snap-On, Inc............................................. 35,944
2,000 Stanley Works............................................ 47,500
1,400 Timken Co................................................ 26,075
------------
1,774,794
------------
INDUSTRIAL SERVICES--0.0%
1,300 Ryder Systems, Inc. ..................................... 24,619
------------
LEISURE--0.4%
2,100 Brunswick Corp........................................... 34,781
13,800 Carnival Corp............................................ 269,100
7,050 Eastman Kodak Co......................................... 419,475
6,828 Harley-Davidson, Inc..................................... 262,878
3,975 Hasbro, Inc.............................................. 59,873
9,450 Mattel, Inc.............................................. 124,622
1,000 Polaroid Corp. .......................................... 18,062
------------
1,188,791
------------
LIFE INSURANCE--0.6%
3,183 Aetna, Inc............................................... 204,309
6,000 Aflac Inc. .............................................. 275,625
5,498 American General Corp.................................... 335,378
3,800 CIGNA Corp............................................... 355,300
7,307 Conseco, Inc............................................. 71,243
2,337 Jefferson-Pilot Corp..................................... 131,894
4,400 Lincoln National Corp., Inc.............................. 158,950
2,900 Torchmark Corp........................................... 71,594
------------
1,604,293
------------
LIQUOR--0.5%
800 Adolph Coors Co., Class B................................ 48,400
10,400 Anheuser-Busch Companies, Inc............................ 776,750
9,700 Seagram Company, Ltd..................................... 562,600
------------
1,387,750
------------
MEDIA & ENTERTAINMENT--2.6%
7,600 Clear Channel Communications(b).......................... 570,000
46,394 The Walt Disney Co....................................... 1,800,667
28,800 Time Warner, Inc......................................... 2,188,800
6,950 Tribune Co............................................... 243,250
34,175 Viacom, Inc. Class B(b).................................. 2,330,308
------------
7,133,025
------------
METALS & MINING--0.4%
4,900 Alcan Aluminium, Ltd..................................... 151,900
19,568 Alcoa, Inc. ............................................. 567,472
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
METALS & MINING--(CONTINUED)
1,866 Allegheny Technologies, Inc. ............................ $ 33,588
700 Ball Corp................................................ 22,531
2,900 Bethlehem Steel Corp.(b)................................. 10,331
2,900 Crown Cork & Seal Company, Inc........................... 43,500
4,300 Inco, Ltd.(b)............................................ 66,112
2,000 Nucor Corp............................................... 66,375
1,847 Phelps Dodge Corp........................................ 68,685
2,020 USX-U.S. Steel Group..................................... 37,496
2,000 Worthington Industries, Inc.............................. 21,000
------------
1,088,990
------------
MINING--COAL--0.0%
393 Arch Coal, Inc........................................... 3,021
------------
NATURAL GAS--0.0%
600 Eastern Enterprises...................................... 37,800
------------
OIL SERVICES--0.6%
7,400 Baker Hughes, Inc........................................ 236,800
700 FMC Corp.(b)............................................. 40,600
9,900 Halliburton Co........................................... 467,156
2,100 Rowan Companies, Inc.(b)................................. 63,788
12,300 Schlumberger, Ltd........................................ 917,887
------------
1,726,231
------------
OIL--FOREIGN--0.0%
2,138 Kerr-Mcgee Corp.......................................... 126,008
------------
OIL--REFINING & DISTRIBUTION--0.6%
16,000 Enron Corp............................................... 1,032,000
2,000 Sunoco, Inc.............................................. 58,875
3,200 Tosco Corp............................................... 90,600
7,000 USX-Marathon Group....................................... 175,437
9,700 Williams Companies, Inc.................................. 404,369
------------
1,761,281
------------
PACKAGING--0.0%
3,400 Owens-Illinois, Inc.(b).................................. 39,737
3,800 Pactiv Corp.(b).......................................... 29,925
------------
69,662
------------
PAPER & FOREST PRODUCTS--0.4%
1,200 Bemis Co................................................. 40,350
1,233 Boise Cascade Corp....................................... 31,904
4,900 Fort James Corp.......................................... 113,313
3,800 Georgia-Pacific Corp..................................... 99,750
10,845 International Paper Co................................... 323,318
2,400 Louisiana-Pacific Corp................................... 26,100
2,300 Mead Corp................................................ 58,075
600 Potlatch Corp............................................ 19,875
1,300 Temple-Inland, Inc....................................... 54,600
</TABLE>
See accompanying notes to financial statements.
111
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
PAPER & FOREST PRODUCTS--(CONTINUED)
5,300 Weyerhaeuser Co.......................................... $ 227,900
2,500 Willamette Industries, Inc............................... 68,125
------------
1,063,310
------------
PRECIOUS METAL--0.1%
8,800 Barrick Gold Corp. ...................................... 160,050
3,700 Freeport McMoran Copper & Gold, Class B(b)............... 34,225
5,800 Homestake Mining Co...................................... 39,875
3,741 Newmont Mining Corp. .................................... 80,899
7,300 Placer Dome, Inc. ....................................... 69,806
------------
384,855
------------
PROPERTY & CASUALTY INSURANCE--2.1%
18,072 Allstate Corp............................................ 402,102
34,682 American International Group, Inc. ...................... 4,075,135
3,900 Chubb Corp. ............................................. 239,850
3,700 Cincinnati Financial Corp................................ 116,319
5,000 Hartford Financial Services Group........................ 279,688
2,400 Loews Corp............................................... 144,000
2,200 MBIA, Inc................................................ 106,012
2,400 MGIC Investment Corp..................................... 109,200
1,600 Progressive Corp. ....................................... 118,400
2,900 Safeco Corp.............................................. 57,638
5,070 St. Paul Companies, Inc.................................. 173,014
5,371 UnumProvident Corp....................................... 107,756
------------
5,929,114
------------
PUBLISHING--0.5%
1,600 Deluxe Corp.............................................. 37,700
2,000 Dow Jones & Company, Inc. ............................... 146,500
6,300 Gannett Company, Inc..................................... 376,819
1,600 Harcourt General, Inc. .................................. 87,000
1,700 Knight-Ridder, Inc....................................... 90,419
4,400 McGraw Hill Companies, Inc. ............................. 237,600
1,200 Meredith Corp............................................ 40,500
3,800 New York Times Co. ...................................... 150,100
2,800 R.R. Donnelley & Sons Co................................. 63,175
------------
1,229,813
------------
RAILROADS & EQUIPMENT--0.3%
10,266 Burlington Northern Santa Fe............................. 235,476
4,900 CSX Corp................................................. 103,819
2,500 Kansas City Southern Industries, Inc.(b)................. 221,719
8,600 Norfolk Southern Corp.................................... 127,925
5,600 Union Pacific Corp....................................... 208,250
------------
897,189
------------
RETAIL--CLOTHING--0.4%
19,112 Gap, Inc................................................. 597,250
9,616 Limited, Inc............................................. 207,946
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
RETAIL--CLOTHING--(CONTINUED)
3,000 Nordstrom, Inc........................................... $ 72,375
7,000 TJX Companies, Inc....................................... 131,250
------------
1,008,821
------------
RETAIL--DEPARTMENT STORE--2.8%
9,978 Costco Wholesale Corp.(b)................................ 329,274
2,400 Dillard's, Inc. ......................................... 29,400
4,700 Federated Department Stores, Inc.(b)..................... 158,625
5,800 J.C. Penney Company, Inc................................. 106,937
10,900 Kmart Corp.(b)........................................... 74,256
7,300 Kohl's Corp.(b).......................................... 406,062
7,500 May Department Stores Co................................. 180,000
8,500 Sears, Roebuck & Co. .................................... 277,312
9,800 Target Corp.............................................. 568,400
99,900 Wal Mart Stores Inc. .................................... 5,756,737
------------
7,887,003
------------
RETAIL--FOOD & DRUG--0.5%
9,528 Albertson's, Inc......................................... 316,806
900 Great Atlantic & Pacific Tea Co.......................... 14,963
18,700 Kroger Co.(b)............................................ 412,569
11,400 Safeway, Inc.(b)......................................... 514,425
4,200 Starbucks Corp.(b)....................................... 160,388
3,300 Winn-Dixie Stores, Inc................................... 47,231
------------
1,466,382
------------
RETAIL--SPECIALTY--1.9%
3,100 Autozone, Inc.(b)........................................ 68,200
3,100 Bed Bath & Beyond, Inc.(b)............................... 112,375
4,600 Best Buy Company, Inc.(b)................................ 290,950
4,600 Circuit City Stores, Inc................................. 152,663
2,500 Consolidated Stores Corp.(b)............................. 30,000
8,800 CVS Corp................................................. 352,000
7,390 Dollar General Corp...................................... 144,105
51,619 Home Depot, Inc.......................................... 2,577,724
900 Longs Drug Stores Corp................................... 19,575
8,600 Lowe's Companies, Inc.................................... 353,138
1 Neiman Marcus Group, Inc. Class B(b)..................... 28
7,400 Office Depot, Inc.(b).................................... 46,250
4,300 RadioShack Corp.......................................... 203,712
5,800 Rite Aid Corp.(b)........................................ 38,062
10,550 Staples, Inc.(b)......................................... 162,206
1,600 Tiffany & Co............................................. 108,000
5,375 Toys "R" Us, Inc.(b)..................................... 78,273
22,600 Walgreen Co.............................................. 727,437
------------
5,464,698
------------
SECURITIES & ASSET MANAGEMENT--1.8%
2,530 Bear Stearns Companies, Inc.............................. 105,311
29,775 Charles Schwab Corp...................................... 1,001,184
</TABLE>
See accompanying notes to financial statements.
112
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
SECURITIES & ASSET MANAGEMENT--(CONTINUED)
5,600 Franklin Resources, Inc.................................. $ 170,100
2,700 Lehman Brothers Holdings, Inc............................ 255,319
8,300 Merrill Lynch & Co., Inc................................. 954,500
25,598 Morgan Stanley Dean Witter & Co. ........................ 2,131,033
3,200 Paine Webber Group, Inc.................................. 145,600
2,700 T. Rowe Price Associates, Inc............................ 114,750
------------
4,877,797
------------
SEMICONDUCTORS--7.2%
3,300 Advanced Micro Devices, Inc.(b).......................... 254,925
4,500 Altera Corp.(b).......................................... 458,719
17,200 Applied Materials, Inc.(b)............................... 1,558,750
4,800 Broadcom Corp.(b)........................................ 1,051,200
4,766 Conexant Systems, Inc.(b)................................ 231,747
74,900 Intel Corp............................................... 10,013,194
4,100 KLA-Tencor Corp.(b)...................................... 240,106
6,973 Linear Technology Corp................................... 445,836
6,700 LSI Logic Corp.(b)....................................... 362,637
6,200 Maxim Integrated Products, Inc.(b)....................... 421,212
12,100 Micron Technology, Inc.(b)............................... 1,065,556
47,655 Motorola, Inc............................................ 1,384,973
3,800 National Semiconductor Corp.(b).......................... 215,650
2,800 Novellus Systems, Inc.(b)................................ 158,375
36,500 Texas Instruments, Inc................................... 2,507,094
------------
20,369,974
------------
TELECOMMUNICATIONS--8.7%
6,700 ADC Telecommunications, Inc.(b).......................... 561,963
7,000 ALLTEL Corp.............................................. 433,563
71,653 AT & T Corp.............................................. 2,266,026
34,852 Bell Atlantic Corp....................................... 1,770,917
42,200 Bellsouth Corp........................................... 1,798,775
3,100 Centurytel, Inc.......................................... 89,125
17,485 Global Crossing, Ltd.(b)................................. 460,074
21,800 GTE Corp................................................. 1,357,050
16,400 Nextel Communications, Inc.(b)........................... 1,003,475
64,700 Nortel Networks Corp..................................... 4,415,775
16,500 QUALCOMM, Inc.(b)........................................ 990,000
76,473 SBC Communications, Inc.................................. 3,307,457
19,500 Sprint Corp. (FON Group)................................. 994,500
19,300 Sprint Corp. (PCS Group)(b).............................. 1,148,350
11,292 U S West, Inc. .......................................... 968,289
63,655 WorldCom, Inc.(b)........................................ 2,920,173
------------
24,485,512
------------
THRIFTS--0.1%
3,600 Golden West Financial Corp............................... 146,925
------------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
TOBACCO--0.5%
53,100 Philip Morris Companies, Inc....................... $ 1,410,469
3,800 UST, Inc........................................... 55,812
------------
1,466,281
------------
TRAVEL SERVICES--0.0%
2,883 Sabre Holdings Corp.(b)............................ 82,172
------------
Total Common Stocks (Identified Cost $159,337,649). 280,835,543
------------
SHORT-TERM INVESTMENT--0.9%
<CAPTION>
FACE
AMOUNT
<C> <S> <C>
$2,533,000 Repurchase Agreement with State Street Corp. dated
6/30/2000 at 5.250% to be repurchased at
$2,534,108 on 7/3/2000, collateralized by
$2,270,000 U.S. Treasury Bonds, 7.125% due
2/15/2023 with a value of $2,584,963.............. $ 2,533,000
------------
Total Short-Term Investment
(Identified Cost $2,533,000)...................... 2,533,000
------------
Total Investments--100.3% (Identified Cost
$161,870,649)(a).................................. 283,368,543
Other assets less liabilities...................... (897,346)
------------
TOTAL NET ASSETS--100%............................. $282,471,197
============
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $161,870,649 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.............. $131,664,434
Aggregate gross unrealized depreciation for all investments in
which there is an excess of tax cost over value.............. (10,166,540)
------------
Net unrealized appreciation................................... $121,497,894
============
</TABLE>
(b) Non-income producing security.
Key to Abbreviations:
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The
value of ADRs and GDRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
See accompanying notes to financial statements.
113
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................. $283,368,543
Cash................................................. 1,994
Receivable for:
Securities sold...................................... 185,942
Fund shares sold..................................... 872,360
Dividends and interest............................... 216,827
------------
Total Assets........................................ 284,645,666
LIABILITIES
Payable for:
Fund shares redeemed................................. $ 726,292
Securities purchased................................. 1,260,876
Accrued expenses:
Management fees...................................... 57,934
Deferred trustees fees............................... 89,942
Other expenses....................................... 39,425
----------
Total Liabilities................................... 2,174,469
------------
NET ASSETS............................................ $282,471,197
============
Net assets consist of:
Capital paid in...................................... $158,120,422
Undistributed net investment income.................. 1,158,878
Accumulated net realized gains (losses).............. 1,694,003
Unrealized appreciation (depreciation) on
investments......................................... 121,497,894
------------
NET ASSETS............................................ $282,471,197
============
Computation of offering price:
Net asset value and redemption price per share
($282,471,197 divided by 1,228,747 shares of
beneficial interest)................................. $ 229.89
============
Identified cost of investments........................ $161,870,649
============
</TABLE>
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends........................................... $ 1,539,737(a)
Interest............................................ 67,839
-----------
1,607,576
EXPENSES
Management fees..................................... $338,353
Trustees' fees and expenses......................... 8,065
Custodian........................................... 54,253
Audit and tax services.............................. 5,671
Legal............................................... 3,344
Printing............................................ 29,054
Miscellaneous....................................... 1,402
--------
Total expenses before reductions.................... 440,142
Expense reductions.................................. (1,330) 438,812
-------- -----------
NET INVESTMENT INCOME................................ 1,168,764
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net.................................... 1,633,591
Unrealized appreciation (depreciation) on:
Investments--net.................................... (3,842,931)
-----------
Net gain (loss)...................................... (2,209,340)
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS.......................................... $(1,040,576)
===========
</TABLE>
(a) Net of foreign taxes of $8,605.
See accompanying notes to financial statements.
114
<PAGE>
NEW ENGLAND ZENITH FUND
(WESTPEAK STOCK INDEX SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 1,168,764 $ 2,211,404
Net realized gain (loss).......................... 1,633,591 3,248,314
Unrealized appreciation (depreciation)............ (3,842,931) 37,018,278
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. (1,040,576) 42,477,996
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (2,211,406)
In excess of net investment income................ (16,846)
Net realized gain................................. 0 (3,918,766)
------------ ------------
TOTAL DISTRIBUTIONS............................... 0 (6,147,018)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 63,963,209 98,861,454
Reinvestment of distributions..................... 0 6,147,018
Cost of shares redeemed........................... (50,202,727) (57,866,390)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... 13,760,482 47,142,082
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 12,719,906 83,473,060
NET ASSETS
Beginning of the period........................... 269,751,291 186,278,231
------------ ------------
End of the period................................. $282,471,197 $269,751,291
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 1,158,878 $ (9,886)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 282,761 465,233
Issued in reinvestment of distributions........... 0 27,019
Redeemed.......................................... (222,554) (272,517)
------------ ------------
Net Change........................................ 60,207 219,735
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE ----------------------------------------------
30, 2000 1999 1998 1997 1996 1995
---------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 230.84 $ 196.33 $ 155.76 $ 119.62 $100.09 $ 75.35
-------- -------- -------- -------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.95 1.94 1.92 1.86 1.91 1.88
Net Realized and
Unrealized Gain (Loss)
on Investments........ (1.90) 38.00 41.60 36.95 20.58 25.89
-------- -------- -------- -------- ------- -------
Total From Investment
Operations............ (0.95) 39.94 43.52 38.81 22.49 27.77
-------- -------- -------- -------- ------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (1.94) (1.91) (1.86) (1.93) (1.85)
Distributions in Excess
of Net Investment
Income................ 0.00 (0.01) 0.00 0.00 0.00 0.00
Distributions From Net
Realized Capital
Gains................. 0.00 (3.48) (1.04) (0.67) (1.03) (1.18)
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 0.00 0.00 (0.14) 0.00 0.00
-------- -------- -------- -------- ------- -------
Total Distributions.... 0.00 (5.43) (2.95) (2.67) (2.96) (3.03)
-------- -------- -------- -------- ------- -------
Net Asset Value, End of
Period................. $ 229.89 $ 230.84 $ 196.33 $ 155.76 $119.62 $100.09
======== ======== ======== ======== ======= =======
TOTAL RETURN (%)........ (0.4)(b) 20.4 27.9 32.5 22.5 36.9
Ratio of Operating
Expenses to Average Net
Assets (%)............. 0.32 (a) 0.35 0.37 0.40 0.40 0.40
Ratio of Operating
Expenses to Average Net
Assets after expense
reductions (%) (c)..... 0.32 (a) -- -- -- -- --
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.86 (a) 0.99 1.16 1.41 1.84 2.20
Portfolio Turnover Rate
(%).................... 2 (a) 3 3 3 4 5
Net Assets, End of
Period (000)........... $282,471 $269,751 $186,278 $126,584 $80,764 $58,671
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- -- -- 0.43 0.50 0.54
</TABLE>
(a) Computed on an annualized basis.
(b) Periods less than one year are not computed on an annualized basis.
(c) The Series has entered into arrangements with certain brokers who paid a
portion of the Series expenses.
See accompanying notes to financial statements.
115
<PAGE>
MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES
PORTFOLIO MANAGER: FRANCINE J. BOVICH MORGAN STANLEY ASSET MANAGEMENT
[PHOTO]
Q. HOW DID THE SERIES PERFORM DURING THE PAST SIX MONTHS RELATIVE TO ITS INDEX
AND RELATIVE TO ITS PEERS?
A. For the six month period ended June 30, 2000, the Morgan Stanley Interna-
tional Magnum Equity Series returned -2.1% compared to the -4.1 return of the
MSCI EAFE Index/18/. The Lipper Variable Products International Fund Aver-
age/12/ returned -3.6% for the same period.
Q. BRIEFLY DISCUSS THE INVESTMENT AND MARKET CONDITIONS DURING THE PAST SIX
MONTHS.
A. The first half of the year proved to be a difficult environment for
international investors as market volatility and inflation concerns hampered
equity returns. The new millennium began with a continuation of the theme seen
at the end of 1999. First quarter returns were dominated by high-flying
technology and telecomm stocks, which soared to unprecedented levels and
valuations. The tide turned during the middle of March as investors took
profits on fears of an overheating U.S. economy and the consequent interest
rate hikes cooled investor enthusiasm for these technology and telecomm stocks
and sent these sectors into a nosedive. This theme continued throughout the
whole of the second quarter. The beneficiaries of this changing tide were the
recently overlooked defensive sectors. International markets reacted to the
volatility evident in the U.S. market, and the sharp NASDAQ declines in April
heightened investor skittishness regarding U.S. interest rates. However,
towards the end of June, most markets rebounded as economic numbers pointed to
a "soft landing" for the U.S. economy, allaying investor fears of sharply
tighter U.S. interest rates.
Europe was relatively the best performer of all EAFE regions in the first six
months of the year, falling only 3.1% in U.S. dollar terms, but managing to
rise 1.6% in local currency. The U.S. dollar return was negative due primarily
to the depreciation of the euro throughout most of the period. The euro
currency reached its high for the year in early January at $1.04 and proceeded
to depreciate almost 15%, hitting a low of $0.89 before managing to climb to
$0.95 by the end of June. The volatility of the European markets in the first
half of 2000 was influenced in part by turbulence in the U.S. technology
sector. The first two months of the year saw markets reaching unprecedented
levels driven by investor mania over telecom and technology stocks. A major
rotation in market leadership began by the end of the first quarter as the "new
economy" stocks started to suffer exhaustion from their inexorable rise. "Old
economy" sectors like industrial cyclicals, consumer staples and utilities
benefited from concerns about the potential twin impact of rising interest
rates and negative earnings revisions on parts of the "new economy". During the
second quarter, formerly beaten-up defensives consumer staples and health care
rebounded to post gains for the year-to-date of 2.6% and 9.4% respectively.
European merger activity continued during the first half, with 40% of all
global deals completed attributed to European firms. The combination of
relatively low interest rates, low cost of capital, and a growing acceptance of
takeover tactics that focus on core businesses as a way to build shareholder
value and deliver stronger earnings continue to gain acceptance in Europe.
European CEOs increasingly consider Europe to be a single economic market and
recognize the need to be bigger to effectively compete in this setting.
Particular deals to take note of include Unilever's purchase of U.S. food giant
Bestfoods and France Telecom's acquisition of Orange.
The combination of currency weakness and an uncertain economic environment made
for a difficult investment environment during the first half of the year in
Japan. The MSCI Japan index/20/ posted returns of -5.4% in U.S. dollars (-2.2%
local currency) for the six-month period. The first quarter saw investor
confidence wane somewhat in response to the release of fourth quarter 1999
contractionary GDP numbers, which put Japan back into a technical recession.
The contraction was blamed primarily on the fall in spending in reaction to Y2K
concerns as well as the dwindling impact of the government's stimulus package
from last year. The second quarter, however, saw encouraging evidence of a
meaningful economic recovery beginning to emerge. GDP growth for the January -
March period showed Japan's economy growing at a 10% annualized rate, and the
June Tankan survey of business confidence confirmed a strong positive trend for
the Large Manufacturing Diffusion Index, at the highest level during the last
three years. The CAPEX (capital expenditures) of these large manufacturers was
announced to increase by over 11.3% in 2000, centering on Information
Technology investments. This is a result of a 10 trillion yen free cash flow
generated by Japanese corporations that are now bearing the fruits of
restructuring. Signs of more robust consumption were also evident by June as
automobile sales jumped 8.5% year over year.
116
<PAGE>
Despite this infusion of positive news, the stock market was generally weak
during the second quarter, and at one point fell to levels last seen in June
1999. Fears of higher U.S. interest rates and the potential slowdown of exports
to the U.S., coupled with volatility and sharp declines of the NASDAQ caused
the virtual collapse of leading "New New" economy Japanese stocks such as
Softbank, NTT DoCoMo and Hikari Tsushin that were the bell-cows of 1999's
Japanese equity market. Foreign investors, particularly momentum players and
sector funds, became large net sellers. The ill-timed change in 30 constituents
of the Nikkei 225 at the peak of NASDAQ volatility further confused many
potential buyers, particularly Japanese individual investors.
The countries of non-Japan Asia were the laggards of international developed
markets, falling 9.3% in U.S. dollar terms (-5.1% in local currency) during the
first six months of 2000. Despite generally positive economic conditions, these
markets fell due to their sensitivity to interest rates as the U.S. Fed hiked
rates 100 basis points over the course of six months. The financial sector,
which represents nearly half of the Pacific ex-Japan index, fell 9.7% from the
start of the year and dominated Asian markets' returns. Indeed, the economies
of the region remained strong in the face of market volatility. Singapore
reported strong May export data thanks to an increase in regional trade, which
saw sales to Asia, including Japan, growing 32.6%. Overall export growth of
27.8% year-over-year outpaced import growth of 24.5%, resulting in a higher-
than-expected trade surplus. Manufacturing growth continued to increase, buoyed
by strong demand for semiconductors, while retail sales increased in both Hong
Kong and Singapore.
Q: GIVEN THIS INVESTMENT ENVIRONMENT, WHAT WAS YOUR INVESTMENT STRATEGY? WHAT
CHANGES DID YOU MAKE SINCE THE START OF THE YEAR?
A. The Morgan Stanley International Magnum Equity Series began the year over-
weight versus the index in Japan and Asia ex-Japan and underweight relative to
the index in Europe. During the first half of the year, we reduced exposure to
Asia ex-Japan in the face of a difficult period for those markets and com-
pletely eliminated exposure to Korea and Taiwan. We maintained our overweight
to Japan and underweight to Europe while decreasing the magnitude of both to
finish the period with allocations of 64.3% vs. 67.2% in Europe, 29.9% vs.
26.9% in Japan, and 5.0% vs. 5.9% in Asia ex-Japan. Reducing exposure to Asia
while simultaneously increasing our weighting in Europe added to performance on
the margin. On balance, our regional allocation strategies detracted from port-
folio performance as Europe outperformed all other EAFE regions.
Q. WHAT WERE THE PRINCIPAL FACTORS AFFECTING YOUR PERFORMANCE (ON BOTH AN
ABSOLUTE AND RELATIVE BASIS) DURING THE PAST SIX MONTHS? WHAT INVESTMENT
DECISIONS WERE MOST EFFECTIVE AND WHICH ONES WERE LEAST EFFECTIVE?
A. As defensive stocks saw a return to favor in Europe during the latter half
of the period, the Series was well positioned to reap the benefits of this
turnaround. Consumer Staples companies were the strongest performing sector in
the European market. The Series benefited both from its significant overweight
to and stock selection within consumer staples, with food, beverage, and house-
hold products giants such as Nestle (+12%), Reckitt Benckiser (+20%) and Danone
(+19%) being top contributors to performance. Our overweight in health care was
further enhanced by strong stock selection, as Aventis (+28%) recently sur-
passed Merck as the largest pharmaceutical company in the world. Fresenius
(+28%), the world's top dialysis products and services provider, was also a top
contributor.
Stock selection in the Energy sector was positive as companies benefited from
the surge in oil prices. After riding the wave of rising oil prices, we reduced
the Series' exposure to the energy sector in Europe, but continued to maintain
an overweight position in French oil major TotalFina (+18%) given the extensive
restructuring opportunities that remain and the stock's modest valuation
relative to the U.S. majors. We trimmed positions in Royal Dutch, BG Group and
BP Amoco. Finally, we switched the Series holding in Repsol into ENI. Although
our underweight to Telecoms and Technology hurt returns in the first quarter,
the portfolio benefited from this strategy as these sectors corrected during
the latter half of the period. However, this was not enough to outweigh the
results of the first quarter as the single largest detractor from portfolio
performance was the European underweight to information technology over the
six-month period.
In Japan stock selection in information technology was the single largest
contributor to performance. NEC (+32%) reached a new high due to the strong
DRAM business and its management strategy. Our sector allocation decision,
especially overweighting of Machinery and underweighting of Banks, was a
contributor to the Series' low return relative to the Index. We will maintain
current holdings in select world class technology companies, economically
sensitive stocks, and deep value cyclical stocks as we believe these will be
the main beneficiaries to improving business conditions in Japan. Our strategy
in Asia ex-Japan was not as successful as in other regions due to its extreme
sensitivity to U.S. interest rates; consequently, our overweight and stock
selection within the Banking sector was a drag on returns.
Q. WHAT IS YOUR OUTLOOK FOR THE MARKET AND YOUR PORTFOLIO FOR THE NEXT SIX
MONTHS? WHAT CHANGES, IF ANY, WILL YOU MAKE TO THE WAY YOU MANAGE YOUR
PORTFOLIO?
A. The global economy remains vigorous and growth has begun to shift from the
U.S. to international markets. Revised earnings
117
<PAGE>
estimates point to a positive operating environment in Europe and we expect to
selectively add exposure to this region. A slower U.S. economy implies a weaker
dollar relative to the euro, which should benefit the region in general and Eu-
ropean equities in particular. European fundamentals look quite solid, with the
main risk to European equities appearing to be the potential for a slowdown in
the U.S. economy. European Monetary Union (EMU) domestic demand has been re-
vised upwards to 0.9% for both the fourth quarter of 1999 and the first quarter
of 2000 (from 0.6% and 0.7% respectively). There are signs that the recent
laggards in core Europe may soon start catching up to their peers: Germany saw
stronger-than-expected retail sales growth in May with retail sales jumping an
impressive 10.3% compared to a year earlier. Broad retail sales, including car
sales, now stand 2.1% higher than their first quarter average. This bodes well
for a rebound in consumer spending in the second quarter of this year, after a
surprising 0.6% quarterly decline in the first quarter.
Since March, the sheer pace of earnings forecast upgrades has been a support
for equities in the face of rising European and U.S. short interest rates and
the bursting of the speculative "new economy" bubble. Although we are
optimistic about the general environment, we remain cautious, as there is the
possibility of a slowdown toward the end of the summer and into the fall. A
topping out of earnings upgrades remains a possibility after experiencing the
strength seen recently. In such an environment, software, technology hardware
and luxury goods would most likely be the most sensitive on the downside, while
food, beverages and other consumer staples would be defensive. The Series would
therefore be well positioned if such a scenario were to develop.
Japan seems to be on the verge of a self-sustaining economic recovery. The key
assumption to our outlook is that the U.S. will have a "soft landing" and that
Japan's economic recovery will become self-sustaining during the 2nd half of
2000. Japan's Government leaders are expected to use the July Summit in Okinawa
as a means of show-casing concrete plans for a self sustaining recovery and
will pledge to continue Mr. Obuchi's plan for a domestic led recovery. Many
Japanese companies are beginning to generate free cash flow and Information
Technology spending as a percent of capital expenditures is expected to grow
significantly during the next year. In response to this trend, the Japanese
Government has created a new "Minister of Information Technology" within the
ruling cabinet. Global demand for Japan's digital products is also expected to
contribute to corporate earnings where companies have become highly geared to
top line growth. We expect earnings surprises because of this gearing in
earnings. Finally, we believe a modest rise in interest rates will actually be
positive to spur consumption and accelerate restructuring, an event that the
BOJ has hinted at for several months. Our portfolio will maintain the current
holdings in select world class technology companies, economically sensitive
stocks, and deep value cyclicals.
Our outlook for Asia ex-Japan remains somewhat tentative due to the regions'
interest rate sensitivity. Assuming that the U.S. experiences a "soft-landing",
which appears increasingly likely, and rate increases abate, the region should
experience solid performance. Specifically, as we near the end of the
tightening phase, we could see markets trend higher as domestic fundamentals
come to the forefront. Hong Kong looks poised to benefit in the near-term from
the likely boost to banking and property stocks, with increasing Chinese
monetary reflation, (which correlates well with the Hang Seng Index) working as
an additional catalyst. Recent data show increases in retail sales and export
growth in Singapore and Hong Kong, and we expect this trend to continue. In
Australia, the demand for equities remains robust, while little supply is
coming through the pipeline, and that should work to push the market higher.
118
<PAGE>
[GRAPH]
A $10,000 Investment compared to the MSCI EAFE index
since the Series' Inception
Morgan Stanley International
Magnum Equity Series EAFE
10/31/94 $10,000 $10,000
6/30/95 $10,330 $ 9,829
6/30/96 $11,598 $11,135
6/30/97 $12,542 $12,565
6/30/98 $13,536 $13,329
6/30/99 $13,011 $14,341
6/30/00 $15,024 $16,805
Average Annual Returns
International Magnum MSCI Lipper Variable Products
Equity Series EAFE International Funds Avg.
6 Months (2.1)% (4.1)% (3.6)%
1 Year 15.5% 17.2% 27.8%
3 Years 6.2% 10.2% 13.7%
5 Years 7.8% 11.3% 15.6%
Since Inception 7.5% 9.6% n/a
[GRAPHIC] FUND FACTS
GOAL: long-term capital appreciation through investment primarily in
international equity securities.
START DATE: October 31, 1994
SIZE: $116 million as of June 30, 2000
MANAGER: Francine Bovich has managed the Morgan Stanley International Magnum
Equity Series since May 1997. Ms. Bovich is also a Managing Director of
Morgan Stanley Dean Witter Investment Management Inc.
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.
119
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--92.4% OF TOTAL NET ASSETS
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
AUSTRALIA--1.9%
5,650 AMP Limited............................................ $ 57,443
2,950 Brambles Industries, Ltd............................... 90,569
13,350 Broken Hill Proprietary Company, Ltd................... 157,683
12,250 Commonwealth Bank of Australia......................... 202,860
2,550 CSL, Ltd. ............................................. 50,379
50,700 Fosters Brewing Group, Ltd............................. 142,509
7,141 Lend Lease Corporation, Ltd. .......................... 91,000
57,500 Macquarie Corporate Telecommunications Holdings,
Ltd.(b)............................................... 70,495
15,400 National Australia Bank, Ltd........................... 256,940
26,750 News Corporation, Ltd.................................. 367,950
120,000 Normandy Mining, Ltd................................... 64,589
24,500 Qantas Airways, Ltd.................................... 49,525
9,900 Rio Tinto, Ltd......................................... 163,524
40,850 Solution 6 Holdings Ltd.(b)............................ 79,399
42,700 Telstra Corporation, Ltd............................... 173,139
25,050 Westpac Banking Corporation, Ltd....................... 180,523
------------
2,198,527
------------
BELGIUM--0.2%
6,460 Mobistar S.A.(b)....................................... 214,439
------------
DENMARK--0.1%
2,100 Tele Danmark A/S....................................... 141,331
------------
FINLAND--1.4%
26,610 Nokia OYJ.............................................. 1,357,875
5,990 Sampo Insurance Co., Ltd. ............................. 243,043
------------
1,600,918
------------
FRANCE--9.2%
20,490 Alcatel................................................ 1,343,896
30,066 Aventis S.A............................................ 2,194,400
6,377 Axa S.A. .............................................. 1,004,541
8,720 BNP Paribas............................................ 839,159
930 Castorama Dubois Investissement S.A.................... 229,959
18,591 CNP Assurances......................................... 633,633
4,580 Groupe Danone S.A...................................... 607,781
8,030 Michelin CGDE, 'B' shares.............................. 257,662
6,630 Pernod Ricard.......................................... 360,791
4,200 Sanofi-Synthelabo S.A.................................. 200,086
8,340 Schneider Electric S.A................................. 581,241
1,450 Societe Television Francaise 1......................... 101,055
3,150 Thomson Multimedia(b).................................. 203,895
13,330 Total Fina S.A......................................... 2,043,821
------------
10,601,920
------------
GERMANY--4.6%
4,260 Adidas-Salomon AG...................................... 235,643
5,975 BASF AG................................................ 240,153
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
GERMANY--(CONTINUED)
3,029 Bayer AG................................................. $ 115,322
8,526 Bayerische HypoVereinsbank............................... 550,737
7,710 Bayerische Motoren Werke AG.............................. 232,967
17,361 Deutsche Telekom AG...................................... 991,158
2,555 Fresenius Medical Care AG, Preferred..................... 590,301
9,891 Henkel KGaA, Preferred................................... 564,688
2,051 Hugo Boss AG............................................. 362,991
3,480 SAP AG................................................... 512,972
4,020 Schering AG.............................................. 222,598
3,280 Siemens AG............................................... 494,764
1,950 Software AG.............................................. 180,582
------------
5,294,876
------------
HONG KONG--1.8%
35,000 Asia Satellite Telecommunications Holdings, Ltd.......... 119,652
79,500 Cable & Wireless HKT..................................... 175,409
44,500 Cathay Pacific Airways, Ltd.............................. 82,201
13,300 Cheung Kong Holdings, Ltd................................ 146,299
41,400 China Mobile, Ltd.(b).................................... 365,114
82,700 HongKong and China Gas Company, Ltd. .................... 93,356
11,200 HSBC Holdings, Plc....................................... 128,228
38,720 Hutchison Whampoa, Ltd................................... 486,763
48,600 Li and Fung, Ltd......................................... 243,140
18,900 Smartone Telecommunications Holding, Ltd................. 41,822
19,100 Sun Hung Kai Properties, Ltd............................. 137,207
7,600 Swire Pacific, Ltd. ..................................... 44,554
11,100 Television Broadcasts, Ltd............................... 74,043
------------
2,137,788
------------
ITALY--2.4%
24,005 Banca Popolare di Bergamo Credito Varesino Scrl.......... 444,143
82,710 ENI Spa.................................................. 477,728
8,340 Marzotto & Figli Spa..................................... 68,077
15,000 Mediaset Spa............................................. 229,128
27,020 Telecom Italia Mobile Spa................................ 276,017
72,990 Telecom Italia Spa....................................... 1,003,444
69,960 Unicredito Italiano Spa.................................. 334,622
------------
2,833,159
------------
JAPAN--28.5%
11,900 Aiwa Co., Ltd. .......................................... 190,436
56,000 Amada Co., Ltd........................................... 475,001
9,000 Bank of Tokyo-Mitsubishi, Ltd. .......................... 108,657
22,000 Canon, Inc. ............................................. 1,094,765
46,000 Casio Computer Co., Ltd. ................................ 515,904
31,000 Dai Nippon Printing Co., Ltd............................. 546,053
90,000 Daicel Chemical Industries, Ltd.......................... 290,090
45,000 Daifuku Co., Ltd......................................... 498,751
37,000 Daikin Industries, Ltd................................... 859,573
</TABLE>
See accompanying notes to financial statements.
120
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
JAPAN--(CONTINUED)
11,200 FamilyMart Co., Ltd. .................................... $ 430,668
11,400 Fuji Machine Manufacturing Co., Ltd. .................... 598,445
22,000 Fuji Photo Film Co., Ltd................................. 899,863
22,000 Fujitec Co., Ltd. ....................................... 191,376
37,000 Fujitsu, Ltd. ........................................... 1,279,770
20,000 Furukawa Electric Co., Ltd. ............................. 417,511
28,000 Hitachi Credit Corp...................................... 757,363
76,000 Hitachi, Ltd. ........................................... 1,095,896
12,000 House Foods Corp......................................... 185,477
65,000 Kaneka Corp. ............................................ 716,130
21,000 Kurita Water Industries, Ltd. ........................... 462,137
5,700 Kyocera Corp. ........................................... 966,430
17,000 Kyudenko Corp. .......................................... 51,110
32,000 Lintec Corp. ............................................ 333,255
38,000 Matsushita Electric Industrial Co., Ltd. ................ 984,874
41,000 Minebea Co., Ltd. ....................................... 513,925
86,000 Mitsubishi Chemical Corp. ............................... 352,575
31,000 Mitsubishi Estate Co., Ltd. ............................. 364,620
99,000 Mitsubishi Heavy Industries, Ltd. ....................... 438,528
20,000 Mitsubishi Logistics Corp. .............................. 180,953
22,000 Mitsumi Electric Co., Ltd. .............................. 808,633
43,000 NEC Corp. ............................................... 1,349,512
30,000 Nifco Inc. .............................................. 382,828
6,400 Nintendo Co., Ltd. ...................................... 1,117,082
19,000 Nippon Meat Packers, Inc. ............................... 277,555
89,000 Nissan Motor Co., Ltd.(b) ............................... 524,245
10,000 Nissei Sangyo Co., Ltd. ................................. 146,082
15,000 Nissha Printing Co., Ltd. ............................... 103,624
78 NTT Corp. ............................................... 1,036,520
16,000 Ono Pharmaceutical Co., Ltd. ............................ 686,113
51,000 Ricoh Co., Ltd. ......................................... 1,079,073
12,600 Rinnai Corp. ............................................ 280,844
2,300 Rohm Co., Ltd. .......................................... 671,976
15,000 Ryosan Co., Ltd. ........................................ 339,287
6,000 Sangetsu Co., Ltd. ...................................... 98,959
28,000 Sankyo Co., Ltd. ........................................ 632,015
45,000 Sanwa Shutter Corp. ..................................... 145,893
69,000 Sekisui Chemical Co., Ltd. .............................. 265,322
50,000 Sekisui House, Ltd. ..................................... 462,278
42,000 Shin-Etsu Polymer Co., Ltd. ............................. 347,543
12,200 Sony Corp. .............................................. 1,138,306
37,000 Suzuki Motor Corp. ...................................... 477,037
8,000 TDK Corp. ............................................... 1,149,051
12,000 Tokyo Electric Power Co.................................. 292,352
107,000 Toshiba Corp. ........................................... 1,207,097
15,000 Toyota Motor Corp. ...................................... 682,814
67,000 Tsubakimoto Chain Co..................................... 340,983
30,000 Yamaha Corp. ............................................ 327,694
15,000 Yamanouchi Pharmaceutical Co., Ltd. ..................... 818,529
-----------
32,989,383
-----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
NETHERLANDS--4.8%
8,130 ABN AMRO Holding NV....................................... $ 199,166
12,740 Akzo Nobel NV............................................. 541,248
3,320 ASM Lithography Holding NV(b)............................. 142,696
8,940 Buhrmann NV............................................... 255,624
9,050 Fortis NV................................................. 263,435
13,100 Getronics NV.............................................. 201,981
3,290 Heineken NV............................................... 200,236
10,208 Ing Groep NV.............................................. 689,987
37,586 Koninklijke Philips Electronics NV........................ 1,772,638
8,010 KPN NV.................................................... 358,269
23,680 Laurus NV................................................. 283,722
7,280 Royal Dutch Petroleum Co.................................. 452,459
6,460 United Pan Europe Communications NV(b).................... 168,924
-----------
5,530,385
-----------
NEW ZEALAND--0.1%
21,100 Telecom Corporation of New Zealand, Ltd. ................. 73,740
-----------
PORTUGAL--0.4%
38,500 Banco Commercial Portugues S.A............................ 200,320
15,370 Telecel Comunicacoes Pessoais S.A......................... 233,313
-----------
433,633
-----------
SINGAPORE--1.3%
10,000 Chartered Semiconductor Manufacturing, Ltd.(b)............ 87,435
18,000 City Developments, Ltd.................................... 69,832
22,586 DBS Group Holdings........................................ 290,335
20,000 Keppel Corp. ............................................. 43,312
17,000 Natsteel Electronics, Ltd................................. 52,171
50,000 Neptune Orient Lines, Ltd.(b)............................. 46,323
12,850 Overseas Chinese Banking Corp., Ltd....................... 88,544
9,562 Overseas Union Bank, Ltd.................................. 37,096
17,000 Sembcorp Logistics, Ltd................................... 95,484
10,000 Singapore Airlines, Ltd................................... 99,016
10,000 Singapore Press Holdings, Ltd............................. 156,341
58,000 Singapore Telecommunications, Ltd......................... 84,968
31,000 ST Assembly Test Services(b).............................. 79,699
15,952 United Overseas Bank, Ltd. ............................... 104,376
16,000 Venture Manufacturing, Ltd................................ 163,057
-----------
1,497,989
-----------
SPAIN--2.2%
25,430 Amadeus Global Travel Distribution S.A.................... 290,122
29,830 Banco Bilbao Vizcaya Argentaria S.A....................... 445,692
7,800 Banco Popular Espanol S.A................................. 241,272
19,370 Endesa S.A. .............................................. 375,214
4,200 Telefonica Publicidad e Informacion, S.A.................. 39,656
54,994 Telefonica S.A............................................ 1,181,313
-----------
2,573,269
-----------
</TABLE>
See accompanying notes to financial statements.
121
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
COMMON STOCKS--(CONTINUED)
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
SWEDEN--4.7%
24,816 Assa Abloy AB(b)........................................ $ 498,008
13,640 AstraZeneca, Plc........................................ 634,059
14,600 Autoliv, Inc............................................ 357,551
20,110 ForeningsSparbanken AB.................................. 294,126
120,911 Nordic Baltic Holding AB................................ 911,631
18,410 Scandic Hotels AB....................................... 221,254
29,770 Securitas AB 'B' shares................................. 631,178
6,850 Skandia Forsakrings AB.................................. 180,958
16,330 Svedala Industries AB................................... 311,048
9,720 Svenska Cellulosa AB, 'B' shares........................ 184,592
27,060 Svenska Handelsbanken AB................................ 392,707
800 Tele1 Europe Holding AB(b).............................. 49,592
39,800 Telefonaktiebolaget LM Ericsson AB...................... 787,426
------------
5,454,130
------------
SWITZERLAND--6.1%
410 Adecco S.A.............................................. 348,348
528 Compagnie Financiere Richemont AG....................... 1,422,522
205 Givaudan AG............................................. 62,393
388 Holderbank Financiere Glarus AG......................... 475,694
1,040 Nestle S.A.............................................. 2,081,530
585 Novartis AG............................................. 926,647
45 Roche Holdings AG....................................... 438,056
185 Schindler Holding AG.................................... 283,516
6,633 UBS AG.................................................. 971,794
------------
7,010,500
------------
UNITED KINGDOM--22.7%
218,100 Allied Domecq, Plc. .................................... 1,155,025
24,200 Allied Zurich, Plc...................................... 286,162
13,615 Astrazeneca, Plc........................................ 635,536
34,400 BAA, Plc................................................ 275,868
50,100 BAE Systems, Plc. ...................................... 312,322
2 Bank of Ireland......................................... 10
24,778 Bank of Scotland........................................ 235,635
37,930 Barclays, Plc........................................... 942,948
38,300 BBA Group, Plc.......................................... 250,931
85,029 BG Group, Plc. ......................................... 549,367
52,200 Blue Circle Industries, Plc............................. 336,866
19,229 BOC Group, Plc.......................................... 276,406
74,300 BP Amoco, Plc. ......................................... 712,764
59,500 Brit American Tobacco, Plc.............................. 397,030
111,300 British Telecom, Plc. .................................. 1,438,204
90,300 Cadbury Schweppes, Plc.................................. 592,987
2,850 Capital Radio........................................... 66,626
59,840 Centrica, Plc........................................... 199,649
96,400 Diageo, Plc. ........................................... 864,966
</TABLE>
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1A)
<C> <S> <C>
UNITED KINGDOM--(CONTINUED)
60,600 Egg, Plc.(b)........................................... $ 157,713
11,600 EMAP, Plc.............................................. 186,577
16,700 GKN, Plc............................................... 213,016
4,300 GKN, Plc. 'B' shares................................... 455
44,800 Glaxo Wellcome, Plc. .................................. 1,306,253
106,100 Granada Group, Plc..................................... 1,059,563
65,960 Great Universal Stores, Plc............................ 424,167
74,500 Halma, Plc............................................. 112,726
71,700 Imperial Tobacco Group................................. 686,737
22,100 J Sainsbury, Plc....................................... 100,319
18,500 Kingfisher, Plc........................................ 168,374
24,900 Lloyds TSB Group, Plc.................................. 235,099
35,500 Marconi, Plc........................................... 461,949
90,819 Prudential Corp., Plc.................................. 1,330,208
121,488 Reckitt Benckiser, Plc................................. 1,360,294
36,800 Reed International, Plc................................ 320,172
104,400 Rentokil Initial, Plc. ................................ 236,951
13,600 RMC Group, Plc......................................... 176,972
115,600 Rolls-Royce, Plc. ..................................... 410,174
50,400 Scottish & Southern Energy, Plc........................ 462,137
131,845 Shell Transport & Trading Co. ......................... 1,100,213
28,144 Smith & Nephew, Plc. .................................. 103,907
43,200 Smithkline Beecham, Plc................................ 565,415
21,700 Smiths Industries, Plc................................. 282,375
53,680 SSL International, Plc................................. 580,746
78,854 Telewest Communications, Plc.(b)....................... 272,036
77,100 Tesco, Plc............................................. 239,736
714,084 Vodafone Airtouch, Plc. ............................... 2,884,882
41,000 Wolseley, Plc.......................................... 220,232
49,000 Woolwich, Plc.......................................... 207,412
63,400 WPP Group, Plc......................................... 925,730
------------
26,321,842
------------
UNITED STATES--0.0%
300 Chartered Semiconductor Manufacturing, Ltd. (ADR)(b)... 27,000
------------
Total Common Stocks (Identified Cost $92,121,757)...... 106,934,829
------------
RIGHTS--0.0% OF TOTAL NET ASSETS
6 AXA ................................................... $ 15
------------
Total Rights
(Identified Cost $0.00)............................... 15
------------
</TABLE>
See accompanying notes to financial statements.
122
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
SHORT-TERM INVESTMENT--6.7%
<TABLE>
<CAPTION>
FACE VALUE
AMOUNT (NOTE 1A)
<C> <S> <C>
$7,707,000 Repurchase Agreement with State Street Corp. dated
6/30/2000 at 5.250% to be repurchased at $7,710,372
on 7/3/2000, collateralized by $6,905,000 U.S.
Treasury Bonds, 7.125% due 2/15/2023 with a value
of $7,863,069...................................... $ 7,707,000
------------
Total Short-Term Investment
(Identified Cost $7,707,000)....................... 7,707,000
------------
Total Investments--99.1%
(Identified Cost $99,828,757)(a)................... 114,641,844
Other assets less liabilities....................... 1,075,783
------------
TOTAL NET ASSETS--100%.............................. $115,717,627
============
</TABLE>
FUTURES CONTRACTS-LONG(C)
<TABLE>
<CAPTION>
NUMBER OF EXPIRATION UNREALIZED APPRECIATION/
CONTRACTS CONTRACT DATE (DEPRECIATION)
<S> <C> <C> <C>
17 CAC-40 10 Euro Index Futures (EUR) September 29, 2000 $ (29,295)
10 DAX Index Futures (EUR) September 15, 2000 (54,537)
3 MIB 30 Index Futures (EUR) September 15, 2000 (3,222)
23 FTSE 100 Index Futures (GBP) September 15, 2000 (73,083)
10 Topix Index Futures (JPY) September 7, 2000 3,770
---------
Net unrealized depreciation of futures contracts............... $(156,367)
=========
</TABLE>
See accompanying notes to financial statements.
123
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
INVESTMENTS AS OF JUNE 30, 2000 (UNAUDITED)
FORWARD CONTRACTS OUTSTANDING AT JUNE 30, 2000
<TABLE>
<CAPTION>
LOCAL AGGREGATE UNREALIZED
CURRENCY DELIVERY CURRENCY FACE TOTAL APPRECIATION/
CONTRACT DATE AMOUNT VALUE VALUE (DEPRECIATION)
<S> <C> <C> <C> <C> <C>
Euro Currency
(Bought).......... 9/18/2000 3,144,263 $3,033,082 $3,016,514 $(16,568)
Pound Sterling
(Bought).......... 9/18/2000 1,564,200 2,353,731 2,370,271 16,540
Japanese Yen
(Bought).......... 9/18/2000 184,950,000 1,763,108 1,768,180 5,072
Hong Kong Dollar
(Sold)............ 9/18/2000 3,695,000 474,198 474,324 (126)
--------
Net unrealized appreciation of forward currency contracts...... $ 4,918
========
</TABLE>
TEN LARGEST INDUSTRY HOLDINGS AT JUNE 30, 2000
<TABLE>
<C> <S> <C>
1 Pharmaceuticals 8.7%
2 Banks 8.3%
Telecommunication
3 Services 6.5%
4 Household Durables 5.5%
5 Oil & Gas 4.6%
6 Machinery 4.4%
7 Computers & Peripherals 4.4%
8 Communications Equipment 3.7%
Electronic Equipment
9 Instruments 3.6%
10 Chemicals 3.5%
</TABLE>
(a) Federal Tax Information:
At June 30, 2000 the net unrealized appreciation on investments based on
cost of $99,828,757 for federal income tax purposes was as follows:
<TABLE>
<C> <S> <C>
Aggregate gross unrealized appreciation for all investments
in which there is an excess of value over tax cost........ $19,339,168
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value........ (4,526,081)
-----------
Net unrealized appreciation................................ $14,813,087
===========
</TABLE>
(b) Non-income producing security.
(c) The Series used international stock index futures in conjunction with
currency forwards to replicate the exposure one would achieve by investing
in equities. As of June 30, 2000, 6.2% of total net assets was invested in
stock index futures. See Note E in Notes to Financial Statements.
Key to Abbreviations:
ADR/GDR--An American Depositary Receipt (ADR) or Global Depositary Receipt
(GDR) is a certificate issued by a Custodian Bank representing the
right to receive securities of the foreign issuer described. The
value of ADRs and GDRs are significantly influenced by trading on
exchanges not located in the United States or Canada.
See accompanying notes to financial statements.
124
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
ASSETS
Investments at value................................... $114,641,844
Cash................................................... 1,350,855
Foreign cash at value (Identified cost $105,495)....... 105,644
Receivable for:
Securities sold........................................ 404,809
Fund shares sold....................................... 333,060
Open forward currencey contracts--net.................. 4,918
Dividends and interest................................. 89,932
Foreign taxes.......................................... 110,475
Futures variation margin............................... 605,744
------------
Total Assets.......................................... 117,647,281
LIABILITIES
Payable for:
Fund shares redeemed................................... $ 387,447
Securities purchased................................... 1,364,699
Withholding taxes...................................... 8,983
Accrued expenses:
Management fees........................................ 59,643
Deferred trustees fees................................. 6,568
Other expenses......................................... 102,314
----------
Total Liabilities..................................... 1,929,654
------------
NET ASSETS.............................................. $115,717,627
============
Net assets consist of:
Capital paid in........................................ $ 98,124,426
Undistributed net investment income.................... 341,731
Accumulated net realized gains (losses)................ 2,434,717
Unrealized appreciation (depreciation) on investments,
foreign currency and futures contracts................ 14,816,753
------------
NET ASSETS.............................................. $115,717,627
============
Computation of offering price:
Net asset value and redemption price per share
($115,717,627 divided by 8,349,521 shares of beneficial
interest).............................................. $ 13.86
============
Identified cost of investments.......................... $ 99,828,757
============
</TABLE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED)
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividends....................................... $ 838,046 (a)
Interest........................................ 363,420
-----------
1,201,466
EXPENSES
Management fees................................. $ 479,343
Deferred expense recovery....................... 3,273
Trustees' fees and expenses..................... 6,418
Custodian....................................... 175,602
Audit and tax services.......................... 11,971
Legal........................................... 1,376
Printing........................................ 12,941
Miscellaneous................................... 1,458
-----------
Total expenses.................................. 692,382
-----------
NET INVESTMENT INCOME............................ 509,084
-----------
REALIZED AND UNREALIZED GAIN (LOSS)
Realized gain (loss) on:
Investments--net................................ 1,748,233
Futures contracts--net.......................... (265,847)
Foreign currency transactions--net.............. (322,257) 1,160,129
-----------
Unrealized appreciation (depreciation) on:
Investments--net................................ (2,895,297)
Futures contracts--net.......................... (409,167)
Foreign currency transactions--net.............. 27,867 (3,276,597)
----------- -----------
Net gain (loss).................................. (2,116,468)
-----------
NET INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS...................................... $(1,607,384)
===========
</TABLE>
(a) Net of foreign tax withholding of $149,396
See accompanying notes to financial statements.
125
<PAGE>
NEW ENGLAND ZENITH FUND
(MORGAN STANLEY INTERNATIONAL MAGNUM EQUITY SERIES)
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
FROM OPERATIONS
Net investment income............................. $ 509,084 $ 645,391
Net realized gain (loss).......................... 1,160,129 1,309,713
Unrealized appreciation (depreciation)............ (3,276,597) 16,366,194
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS. (1,607,384) 18,321,298
------------ ------------
FROM DISTRIBUTIONS TO SHAREHOLDERS
Net investment income............................. 0 (321,404)
------------ ------------
Total distributions............................... 0 (321,404)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from sale of shares...................... 40,126,272 36,063,101
Reinvestment of distributions..................... 0 321,404
Cost of shares redeemed........................... (22,261,556) (23,092,748)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................... 17,864,716 13,291,757
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS........... 16,257,332 31,291,651
NET ASSETS
Beginning of the period........................... 99,460,295 68,168,644
------------ ------------
End of the period................................. $115,717,627 $ 99,460,295
============ ============
UNDISTRIBUTED (OVERDISTRIBUTED) NET INVESTMENT
INCOME
End of the period................................. $ 341,731 $ (167,353)
============ ============
NUMBER OF SHARES OF THE FUND:
Issued from the sale of shares.................... 2,961,666 2,934,750
Issued in reinvestment of distributions........... 0 25,290
Redeemed.......................................... (1,642,846) (1,907,495)
------------ ------------
Net Change........................................ 1,318,820 1,052,545
============ ============
</TABLE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED JUNE -------------------------------------------
30, 2000 1999 1998 1997 1996 1995
---------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 14.15 $ 11.40 $ 10.86 $ 11.29 $ 10.73 $ 10.23
-------- ------- ------- ------- ------- -------
Income From Investment
Operations
Net Investment Income.. 0.07 0.10 0.14 0.08 0.06 0.09
Net Realized and
Unrealized Gain (Loss)
on Investments........ (0.36) 2.70 0.66 (0.23) 0.68 0.53
-------- ------- ------- ------- ------- -------
Total From Investment
Operations............ (0.29) 2.80 0.80 (0.15) 0.74 0.62
-------- ------- ------- ------- ------- -------
Less Distributions
Distributions From Net
Investment Income..... 0.00 (0.05) (0.12) (0.09) (0.02) (0.09)
Distributions in Excess
of Net Investment
Income................ 0.00 0.00 (0.03) 0.00 0.00 (0.03)
Distributions From Net
Realized Capital
Gains................. 0.00 0.00 (0.11) (0.08) (0.16) 0.00
Distributions in Excess
of Net Realized
Capital Gains......... 0.00 0.00 0.00 (0.11) 0.00 0.00
-------- ------- ------- ------- ------- -------
Total Distributions.... 0.00 (0.05) (0.26) (0.28) (0.18) (0.12)
-------- ------- ------- ------- ------- -------
Net Asset Value, End of
Period................. $ 13.86 $ 14.15 $ 11.40 $ 10.86 $ 11.29 $ 10.73
======== ======= ======= ======= ======= =======
TOTAL RETURN (%)........ (2.1)(b) 24.6 7.3 (1.3) 6.9 6.0
Ratio of Operating
Expenses to Average Net
Assets (%)............. 1.30 (a) 1.30 1.30 1.30 1.30 1.30
Ratio of Net Investment
Income to Average Net
Assets (%)............. 0.95 (a) 0.84 1.07 0.96 0.67 1.29
Portfolio Turnover Rate
(%).................... 59 (a) 59 40 115 64 89
Net Assets, End of
Period (000)........... $115,718 $99,460 $68,169 $53,035 $39,392 $16,268
Ratio of operating
expenses to average net
assets without giving
effect to the voluntary
expense agreement would
have been (%).......... -- 1.30 1.40 1.59 1.66 3.12
</TABLE>
(a)Computed on an annualized basis.
(b)Periods less than one year are not computed on an annualized basis.
See accompanying notes to financial statements.
126
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (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 as amended. The
Fund is registered under the Investment Company Act of 1940, as amended ("the
1940 Act"), as an open-end management investment company.
Shares in the Fund are not offered directly to the general public and are
currently available only to separate accounts established by Metropolitan Life
Insurance Company ("MetLife"), New England Life Insurance Company ("NELICO"),
General American Life Insurance Company, Security First Group Life Insurance
Company and other affiliated insurance companies, 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 (each a "Series"), with shares of each Series representing interests in
a separate portfolio of assets. Each Series of the Fund other than Harris
Oakmark Mid Cap Value is diversified. Mid Cap Value is non-diversified.
The following is a summary of significant accounting policies followed by the
Fund in the preparation of the Financial Statements of each 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
As permitted under Rule 2a-7 of the 1940 Act, and subject to certain
conditions therein, the Back Bay Advisors Money Market Series employs the
amortized cost method of security valuation which, the Fund's Board of
Trustees (the "Board") has determined, approximates the fair market net
asset value per share of the Series. 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.
Debt securities (other than short term obligations with a remaining
maturity of sixty days or less) are valued on the basis of valuations
furnished by independent pricing services selected by the relevant adviser
or subadviser pursuant to authorization of the Board. Short term
obligations with a remaining maturity of sixty days or less are stated at
amortized cost value which approximates fair market value. Equity
securities traded on a national securities exchange or exchanges or the
NASDAQ National Market System are valued at their last sale price on the
principal trading market. Equity securities traded on a national securities
exchange or exchanges or on the NASDAQ National Market System for which
there is no reported sale during the day, are valued at the last reported
bid price. Equity securities traded over-the-counter are valued at the last
reported bid price or at the average of the last reported bid and asked
price, according to the subadviser's or adviser's valuation policies. Other
equity securities for which current market quotations are not readily
available (including restricted securities, if any) and all other assets
are valued at fair value as determined in good faith by the Series' adviser
or subadviser acting under the supervision of the Board of Trustees,
although the actual calculations may be made by a pricing service selected
by the Series' adviser or subadviser and approved by the Board.
Securities traded primarily on an exchange outside of the United States
which closes before the close of the New York Stock Exchange generally will
be valued at the last sales price on that non-U.S. exchange, except when an
occurrence after closing of that exchange is likely to have materially
changed such security's value as determined by a subadviser or adviser. The
adviser or subadviser may value the security in good faith, acting under
the supervision of the Board, although the actual calculations may be made
by a pricing service selected by the relevant adviser or subadviser and
approved by the Board.
127
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
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 that portion of the results of
operations reflecting 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.
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 by
each Series and the U.S. dollar equivalent of the amounts actually received
or paid by each Series. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities, other than
investment securities, resulting from changes in the exchange rate.
FORWARD FOREIGN CURRENCY CONTRACTS--Certain Series may use foreign currency
contracts to facilitate transactions in foreign securities and to manage
the Series' currency exposure. Contracts to buy generally are used to
acquire exposure to foreign currencies, while contracts to sell generally
are used to hedge the Series' 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 Series' Statements of Assets and Liabilities. The U.S.
dollar value of the currencies the Series 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 Series 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. 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. OPTIONS--Certain Series may use options to hedge against changes in values
of securities the Series owns or expects to purchase. Writing puts and
buying calls tends to increase the Series' exposure to the underlying
instrument and writing calls or buying puts tends to decrease the Series'
exposure to the underlying instrument, or hedge other Series investments.
For options purchased to hedge the Series' investments, the potential risk
to the Series is that the change in value of options contracts may not
correspond to the change in value of the hedged instruments. In addition,
losses may arise from changes in the value of the underlying instruments,
if there is an illiquid secondary market, or if the counterparty is unable
to perform. The maximum loss for purchased options is limited to the
premium initially paid for the option. For options written by the Series,
the maximum loss is not limited to the premium initially received for the
option.
Exchange traded options are valued at the last sale price, or if no sales
are reported, the last bid price for purchased options and the last ask
price for written options. Options traded over the counter are valued using
prices supplied by dealers.
128
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
E. FUTURES CONTRACTS--The Morgan Stanley International Magnum Equity Series
uses international stock index futures contracts with the objective of
maintaining full exposure to the stock market, enhancing returns,
maintaining liquidity, and minimizing transaction costs. The Series may
seek to enhance returns by using futures contracts instead of the
underlying securities when futures are believed to be priced more
attractively than the underlying securities. The primary risks associated
with the use of futures contracts are imperfect correlation between changes
in market values of stocks held by the series and the prices of futures
contracts, and the possibility of an illiquid market. Futures contracts are
valued at their quoted daily settlement prices. The aggregate principal
amounts of the contracts are not recorded in the financial statements.
Fluctuations in the value of the contracts are recorded in the Statement of
Assets and Liabilities as an asset (liability) and in the Statement of
Operations as unrealized appreciation (depreciation) until the contracts
are closed, when they are recorded as realized gains (losses) on futures
contracts.
F. REPURCHASE AGREEMENTS--Each Series, through the custodian or subcustodian,
receives delivery of the underlying securities collateralizing repurchase
agreements. It is the Fund's policy that the market value of the collateral
be at least equal to 100% of the repurchase price in the case of a
repurchase agreement of one day duration and 102% on all other repurchase
agreements. Each Series' adviser or subadviser is responsible for
determining that the value of the collateral is at all times at least equal
to the repurchase price. In connection with transactions in repurchase
agreements, if the seller defaults and the value of the collateral declines
or if the seller enters an insolvency proceeding, realization of the
collateral by the Series may be delayed or limited.
G. REVERSE REPURCHASE AGREEMENTS--The Salomon Brothers U.S. Government and
Salomon Brothers Strategic Bond Opportunities Series may enter into reverse
repurchase agreements with qualified, third party broker-dealers as
determined by and under the direction of the Board. At the time a Series
enters into a reverse repurchase agreement, it will establish and maintain
a segregated account at the custodian or a subcustodian, the value of which
at least equals the principal amount of the reverse repurchase transactions
including accrued interest. At June 30, 2000, there were no open reverse
repurchase agreements for the Salomon Brothers Strategic Bond Opportunities
Series or Salomon Brothers U.S. Government Series.
H. 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.
I. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS--Back Bay Advisors 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 between under/over distributed net investment income,
accumulated net realized gains/losses and paid in capital. These
differences primarily relate to tax equalization, investments in mortgage
backed securities and investments in foreign securities.
J. EXPENSE REDUCTIONS--Certain portfolio trades were directed to brokers who
paid a portion of the Series' expenses. Amounts paid for each Series are
shown as Expense Reductions in the Statement of Operations of the
respective Series.
2. At June 30, 2000, MetLife held 27,694,605 shares of the Fund in separate
accounts funding annuity contracts issued by MetLife. NELICO held the
remaining 89,585,566 shares of the Fund then outstanding in separate accounts
funding variable life insurance and variable annuity contracts issued by
NELICO.
As long as MetLife (directly or through NELICO) and NELICO each own more than
25% of the Fund's outstanding shares, it will be presumed to be in control (as
that term is defined in the 1940 Act) of the Fund.
129
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
3. For the six months ended June 30, 2000, purchases and sales of securities
(excluding short-term investments) for each of the Series were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------------------------ ------------------------------
SERIES U.S. GOVERNMENT OTHER U.S. GOVERNMENT OTHER
------ --------------- -------------- --------------- --------------
<S> <C> <C> <C> <C>
Back Bay Advisors Bond
Income Series.......... $84,467,904.13 $ 41,944,467 $57,250,209.35 $ 76,455,141
Salomon Brothers
Strategic Bond
Opportunities Series... 129,025,211 30,892,065 111,436,279 49,121,633
Salomon Brothers U.S.
Government Series...... 155,240,559 0 153,962,307 0
Back Bay Advisors
Managed Series......... 7,876,475 43,799,100 3,823,730 59,652,788
Balanced Series......... 23,946,721.36 138,461,233 14,099,962.24 165,703,069
Alger Equity Growth
Series................. 0 593,280,039 0 403,328,704
Capital Growth Series... 0 2,681,420,138 0 2,798,550,556
Davis Venture Value
Series................. 0 204,863,171 0 113,909,640
Harris Oakmark Mid Cap
Value Series........... 0 121,379,477 0 121,321,226
Loomis Sayles Small Cap
Series................. 0 422,405,107 0 316,372,698
MFS Investors Series.... 0 10,232,083 0 3,928,039
MFS Research Managers... 0 29,014,923 0 7,916,891
Westpeak Growth and
Income Series.......... 0 316,444,789 0 309,950,136
Westpeak Stock Index
Series................. 0 21,883,830 0 3,310,444
Morgan Stanley
International Magnum
Equity Series.......... 0 48,395,065 0 3,310,444
</TABLE>
4. New England Investment Management, Inc. ("NEIM") 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 management fees payable by the Series
as set forth below:
<TABLE>
<CAPTION>
MANAGEMENT
FEES EARNED
BY NEIM FOR ANNUAL
THE SIX MONTHS PERCENTAGE BASED ON
ENDED JUNE 30, RATES PAID TO SERIES AVERAGE DAILY NET ASSET VALUE
SERIES 2000 ADVISER LEVELS
------ -------------- ------------- ------------------------------------
<S> <C> <C> <C>
Back Bay Advisors Money
Market Series.......... $ 401,565 0.35% of the first $1 billion
0.30% of the next $1 billion
0.25% of amounts in excess of $2 billion
Back Bay Advisors Bond
Income Series.......... 543,115 0.40% of the first $1 billion
0.35% of the next $1 billion
0.30% of the next $1 billion
0.25% of amounts in excess of $3 billion
Salomon Brothers
Strategic Bond
Opportunities Series... 298,234 0.65% of all assets
Salomon Brothers U.S.
Government Series...... 135,158 0.55% of all assets
Back Bay Advisors
Managed Series......... 515,641 0.50% of all assets
Balanced Series......... 605,152 0.70% of all assets
Alger Equity Growth
Series (a)............. 3,653,928 0.75% of all assets
Davis Venture Value
Series (b)............. 2,758,798 0.75% of all assets
Harris Oakmark Mid Cap
Value Series........... 391,563 0.75% of all assets
Loomis Sayles Small Cap
Series................. 1,805,494 0.90% of the first $500 million
0.85% of amounts in excess of $500 million
MFS Investors Series.... 38,073 0.75% of all assets
MFS Research Managers
Series................. 68,284 0.75% of all assets
Westpeak Growth and
Income Series.......... 1,361,025 0.70% of the first $200 million
0.65% of the next $1.3 billion
0.60% of amounts in excess of $1.5 billion
Westpeak Stock Index
Series................. 338,353 0.25% of all assets
Morgan Stanley
International Magnum
Equity Series.......... 479,343 0.90% of all assets
</TABLE>
(a) Effective July 1, 2000, the management fee payable by the Alger Equity
Growth Series is at the annual rate of 0.75% on the first $1 billion of
average daily net assets; and 0.70% of such assets in excess of $1
billion.
(b) Effective July 1, 2000, the management fee payable by the Davis Venture
Value Series is at the annual rate of 0.75% on the first $1 billion of
average daily net assets; and 0.70% of such assets in excess of $1
billion.
130
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
The Capital Growth Series pays its adviser, CGM, an advisory fee at an
annual rate of 0.70% of the first $200 million of average daily net assets,
0.65% of the next $300 million of such assets, 0.60% of the next $1.5 billion
of such assets and 0.55% of such assets in excess of $2 billion. For advisory
services rendered during the six months ended June 30, 2000, CGM was paid at
an average annual rate of 0.62% of the Capital Growth Series' average net
assets, totaling $6,008,404.
SUB-ADVISORY FEES. NEIM has sub-contracted day-to-day portfolio management
responsibilities for the Series it advises to each of the following sub-
advisers: 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; Salomon Brothers Asset Management Inc for the Salomon Brothers
Strategic Bond Opportunities and Salomon Brothers U.S. Government Series;
Loomis, Sayles & Company, L.P. ("Loomis Sayles") for the Loomis Sayles Small
Cap and Loomis Sayles Balanced Series through April 30, 2000 and effective May
1, 2000, Wellington Management Company, LLP for the Balanced Series; Fred
Alger Management, Inc. ("Alger") for the Alger Equity Growth Series; Davis
Selected Advisers, L.P. ("Davis") for the Davis Venture Value Series; Goldman
Sachs Asset Management ("GSAM") for the Goldman Sachs Midcap Value Series
through April 30, 2000, and effective May 1, 2000, Harris Associates, L.P.
("Harris") for the Harris Oakmark Mid Cap Value Series; Massachusetts
Financial Services Company for MFS Investors Series and MFS Research Managers
Series; Westpeak Investment Advisors, L.P. ("Westpeak") for the Westpeak
Growth and Income and Westpeak Stock Index Series; and Morgan Stanley Asset
Management ("MSAM") for the Morgan Stanley International Magnum Equity Series.
NEIM, which acts as adviser to each Series except the Capital Growth Series,
is an indirect wholly owned subsidiary of NELICO, an indirect wholly owned
subsidiary of MetLife. Loomis Sayles, Harris, Westpeak and Back Bay Advisors
are each independently operated subsidiaries, and CGM is an independently
operated affiliate, of Nvest, L.P. and Nvest Companies, L.P. ("Nvest
Companies"). Nvest Companies owns the entire limited partnership interest in
each of Loomis Sayles, Westpeak, Harris, and Back Bay Advisors. The general
partners of each of Loomis Sayles, Westpeak, Harris, and Back Bay Advisors are
special purpose corporations which are indirect wholly-owned subsidiaries of
Nvest Companies. Nvest Companies' managing general partner and Nvest, L.P.'s
general partner, Nvest Corporation, is an indirect wholly-owned subsidiary of
MetLife New England Holdings, Inc. which in turn is a wholly owned subsidiary
of MetLife. MetLife is a wholly owned subsidiary of MetLife, Inc., a New York
Stock Exchange traded company. MetLife owns directly 46% (and in the
aggregate, directly and indirectly, 47%) of the limited partnership interests
in Nvest Companies. Nvest Companies' advising general partner, Nvest, L.P., is
a publicly traded company listed on the New York Stock Exchange. Nvest
Companies is the owner of a majority limited partnership interest in the
Capital Growth Series' investment adviser, CGM. Consequently, the subadvisers
(Loomis Sayles, Westpeak, Harris, and Back Bay Advisors) of seven Series of
the Fund are currently wholly-owned subsidiaries of Nvest Companies and an
additional Series is advised by a majority-owned subsidiary (CGM) of Nvest
Companies. Nvest recently announced that they have entered into an agreement
to be acquired by CDC Asset Management. Nvest expects to be renamed CDC Asset
Management--North America and it will continue to use the holding company
structure. Consumation of the transaction with CDC is subject to a number of
contingencies including regulatory approval and is expected to close in the
fourth quarter of 2000. The sub-advisers of the remaining six Series are not
affiliated with MetLife, Nvest, L.P. or Nvest Companies. NEIM paid each sub-
adviser as shown below for providing sub-advisory services to the Series:
<TABLE>
<CAPTION>
FEES EARNED BY SUB-ADVISERS FOR THE
SERIES SIX MONTHS ENDED JUNE 30, 2000
------ -----------------------------------
<S> <C>
Back Bay Advisors Money Market Series...... $ 139,597
Back Bay Advisors Bond Income Series....... 278,259
Salomon Brothers Strategic Bond
Opportunities Series...................... 150,077
Salomon Brothers U.S. Government Series.... 55,292
Back Bay Advisors Managed Series........... 218,689
Loomis Sayles Balanced Series (January 1,
2000--April 30, 2000)..................... 215,957
Balanced Series (May 1, 2000--June 30,
2000)..................................... 85,992
Alger Equity Growth Series................. 1,854,347
Davis Venture Value Series................. 1,436,619
Goldman Sachs Midcap Value Series (January
1, 2000--April 30, 2000).................. 152,831
Harris Oakmark Mid Cap Value Series (May 1,
2000--June 30, 2000)...................... 80,688
Loomis Sayles Small Cap Series............. 883,248
MFS Investors Series....................... 20,305
MFS Research Managers Series............... 36,419
Westpeak Growth and Income Series.......... 692,235
Westpeak Stock Index Series................ 135,341
Morgan Stanley International Magnum Equity
Series.................................... 312,413
</TABLE>
131
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
VOLUNTARY EXPENSE AGREEMENT. Pursuant to the voluntary expense agreement
relating to Loomis Sayles Small Cap, NEIM bears all the operating expenses
(does not include amortization of expenses, brokerage costs, interest, taxes
or extraordinary expenses) of the Series in excess of 1.00% of the Series'
average daily net assets. NEIM may terminate this expense agreement at any
time. The Loomis Sayles Small Cap Series expenses did not exceed the
limitation for the six months ended June 30, 2000.
EXPENSE DEFERRAL ARRANGEMENT. Pursuant to an Expense Deferral Arrangement,
relating to the Morgan Stanley International Equity, Harris Oakmark Mid Cap
Value, Salomon Brothers U.S. Government, MFS Investors and MFS Research
Managers Series, NEIM has agreed to pay expenses of each Series' operations
(exclusive of any brokerage costs, interest, taxes or extraordinary expenses)
in excess of the annual percentages of each Series' net assets set forth
below, subject to the obligation of each Series to repay NEIM such expenses in
future years, if any, when the Series' expenses fall below that percentage;
however, no Series is obligated to repay any expenses paid by NEIM more than
two years after the end of the fiscal year in which such expenses were
incurred (three years for the MFS Investors Series and MFS Research Managers
Series).
NEIM may terminate these expense arrangements at any time. If these expense
arrangements were terminated, some of the Series would have higher expense
ratios. For the six months ended June 30, 2000, the maximum expense ratio for
each Series after giving effect to the foregoing arrangements and the amounts
of expenses deferred for each Series, are as follows:
<TABLE>
<CAPTION>
EXPENSES DEFERRED IN EXPENSES DEFERRED IN
MAXIMUM EXPENSE RATIO 1998 (SUBJECT TO 1999 (SUBJECT TO
UNDER CURRENT VOLUNTARY REPAYMENT UNTIL REPAYMENT UNTIL
SERIES EXPENSE DEFERRAL AGREEMENT DECEMBER 31, 2000) DECEMBER 31, 2001)
------ -------------------------- -------------------- --------------------
<S> <C> <C> <C>
Harris Oakmark Mid Cap
Value Series........... 0.90% None None
Morgan Stanley
International Magnum
Equity Series.......... 1.30% $62,316 $ 901
MFS Investors Series.... 0.90% N/A 38,953(a)
MFS Research
Managers Series........ 0.90% N/A 39,708(a)
Salomon Brothers U.S.
Government Series...... 0.70% 21,784 7,595
</TABLE>
(a) Subject to repayment until December 31, 2002.
For the six months ended June 30, 2000 the amount of deferred expense
recovered by NEIM from each Series subject to the Expense Deferral Agreement
is set forth below:
<TABLE>
<CAPTION>
DEFERRED EXPENSES DEFERRED EXPENSES
RECOVERED BY NEIM RECOVERED BY NEIM
SERIES FROM 1999 FROM 1998
------ ----------------- -----------------
<S> <C> <C>
Harris Oakmark Mid Cap Value Series.. None None
MFS Investors Series................. None N/A
MFS Research Managers Series......... None N/A
Morgan Stanley International Magnum
Equity Series....................... None $3,273
Salomon Brothers U.S. Government
Series.............................. None None
</TABLE>
5. The Fund does not pay any compensation to its officers or to any trustees
who are directors, officers or employees of MetLife, NELICO, NEIM or their
affiliates, other than affiliated registered investment companies. Each other
trustee receives a retainer fee at the annual rate of $22,000 and meeting fees
of $3,500 for each meeting of the Board of Trustees attended. The chairmen of
the Contract Review Committee and the Audit Committee receive an additional
annual retainer fee of $6,000 and $4,000, respectively. These fees are
allocated to the various Series and the New England Variable Annuity Fund I
based upon a formula that takes into account among other factors, the relative
net assets of each Series. Each trustee is also a manager of New England
Variable Annuity Fund I. A deferred compensation plan is available to the
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 Series on the normal payment
date. Deferred amounts remain in the Series until distributed in accordance
with the plan.
132
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
6. At a Special Meeting of Shareholders held on April 13, 2000 such
shareholders voted for the following proposals:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN TOTAL
------- ------- ------- -------
<S> <C> <C> <C> <C>
1. That with respect to the Harris Oakmark
Mid Cap Value Series the new proposed
Subadvisory Agreement between NEIM and
Harris Associates, L.P. is hereby
approved. 801,189 36,702 47,156 885,047
2. That with respect to the Harris Oakmark
Mid Cap Value Series the change of
classification of the Series under the
1940 Act from diversified to non-
diversified is hereby approved. 785,212 47,561 52,274 885,047
</TABLE>
133
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
FOOTNOTES TO PORTFOLIO MANAGER COMMENTARY
(1) Lipper Variable Products Money Market 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.
(2) Lehman Brothers Aggregate Bond Index includes most obligations of the
U.S. Treasury, agencies and quasi-federal corporations, most publicly
issued investment grade corporate bonds, and most bonds backed by
mortgage pools of GNMA, FNMA and FHLMC. The index has not been adjusted
for ongoing management, distribution and operating expenses and sales
charges applicable to mutual fund investments.
(3) Lehman Brothers Government/Credit Index is an unmanaged index of the
market value of approximately 5,300 bonds with a face value currently in
excess of $1.3 trillion. To be included in the Lehman Brothers
Government/Corporate Bond Index, an issue must have amounts outstanding
in excess of $25 million, have at least one year to maturity and be rated
"Baa" or higher ("investment grade") by a nationally recognized rating
agency. The index has not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable to
mutual fund investments.
(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 sales charges
applicable to mutual fund investments.
(5) Lehman Brothers Intermediate Government/Credit 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 has
not been adjusted for ongoing management, distributions and operating
expenses and sales charges applicable to mutual fund investments.
(6) Lipper Variable Products 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, on independent mutual fund ranking service.
(7) Lipper Variable Products 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 Products 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 Products 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 Products 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 Products 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 Products International Fund Average is an average of the
total return performance (calculated on the basis of net asset value) of
funds with similar investment objectives as calculated by Lipper
Analytical Services, an independent mutual fund ranking service.
(13) Lipper Variable Products 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.
134
<PAGE>
NEW ENGLAND ZENITH FUND
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 2000 (UNAUDITED)--(CONTINUED)
(14) Lipper Variable Products Midcap 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 Products Small Cap Fund Average is an average of the
total return performance (calculated on the basis of net asset value) of
funds with similar investment objectives as calculated by Lipper
Analytical Services, an independent mutual fund ranking service.
(16) Lipper Variable Products S&P 500 Index Fund Average is an average of the
total return performance (calculated on the basis of net asset value) of
funds with similar investment objectives as calculated by Lipper
Analytical Services, an independent mutual fund ranking service.
(17) Lipper Variable Products U.S. Mortgage and GNMA Fund Average is an
average of the total return performance (calculated on the basis of net
asset value) of funds with similar investment objectives as calculated by
Lipper Analytical Services, an independent mutual fund ranking service.
(18) Morgan Stanley Capital International Europe, Australasia, Far East (EAFE)
index is an arithmetical average (weighted by market value) of the
performance (in U.S. dollars) of companies representing the stock markets
of Europe, Australia and the Far East. The index has not been adjusted
for ongoing management, distribution and operating expenses and sales
charges applicable to mutual funds.
(19) Morgan Stanley Capital International Europe Index is an arithmetical
average (weighted by market value) of the performance (in U.S. dollars)
of companies representing the stock markets of Austria, Belgium, Czech
Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland,
Italy, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden,
Switzerland, Turkey and United Kingdom. The Index performance has not
been adjusted for ongoing management, distribution and operating expenses
and sales charges applicable to mutual funds.
(20) Morgan Stanley Capital International Japan Index is an arithmetical
average (weighted by market value) of the performance (in U.S. Dollars)
of companies representing the stock markets of Japan. The Index
performance has not been adjusted for ongoing management, distribution
and operating expenses and sales charges applicable to mutual funds.
(21) Morgan Stanley Capital International Pacific Free ex-Japan Index is an
arithmetical average (weighted by market value) of their performance (in
U.S. dollars) of companies representing the stock markets of Australia,
China Free, Hong Kong, Indonesia, Korea, Malaysia, New Zealand,
Philippines, Singapore, Taiwan and Thailand. The Index performance has
not been adjusted for ongoing management, distribution and operating
expenses and sales charges applicable to mutual funds.
(22) Russell Midcap Index consists of 800 mid-capitalization stocks having an
average market capitalization of $3.7 billion as of December 31, 1998.
The index has not been adjusted for ongoing management, distribution and
operating expenses and sales charges applicable to mutual fund
investments.
(23) Russell 2000 Index consists of 2000 small market capitalization stocks
having an average market capitalization of $592 million as of December
31, 1998. The index performance has not been adjusted for ongoing
management, distribution and operating expenses and sales charges
applicable to mutual fund investments.
(24) Salomon Brothers High Yield Market Index measurers the performance of
cash pay and deferred interest bonds.
(25) Standard & Poor's 500 Index(R) (S&P 500(R)) 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.
(26) Russell Midcap Value Index measures the performance of those Russell
Midcap companies with lower price-to-book ratios and lower forecasted
growth values.
135
