<PAGE>
Sentinel Family of Funds
Annual Report
November 30, 1999
[PHOTO]
<PAGE>
[LOGO OF SENTINEL GROUP FUNDS]
Sentinel Group Funds, Inc. (SGF)
Sentinel Pennsylvania
Tax-Free Trust (PA)
National Life Drive,
Montpelier, Vermont 05604
(800) 282-FUND(3863)
- --------------------------------------------------------------------------------
Table of Contents
2 Message to Shareholders
4 Understanding your Sentinel Funds Financial Statements
5 Fund Performance
6 Sentinel Investment Team
7 Sentinel Small Company Fund
14 Sentinel Mid Cap Growth Fund
20 Sentinel World Fund
28 Sentinel Growth Index Fund
33 Sentinel Common Stock Fund
41 Sentinel Balanced Fund
50 Sentinel High Yield Bond Fund
59 Sentinel Bond Fund
66 Sentinel Tax-Free Income Fund
72 Sentinel New York Tax-Free Income Fund
77 Sentinel Government Securities Fund
83 Sentinel Short Maturity Government Fund
90 Sentinel U.S. Treasury Money Market Fund
96 Notes to Financial Statements (SGF)
103 Report of Independent Accountants (SGF)
104 Sentinel Pennsylvania Tax-Free Trust
109 Notes to Financial Statements (PA)
111 Report of Independent Accountants (PA)
112 Federal Tax Status of Dividends and Distributions
112 Privileges, Plans and Services for Shareholders
114 Directors/Trustees and Officers
116 A Brief History
Cover: Church Street, Burlington, Vermont. Burlington was voted the "Number One
City Having It All" by the Arts and Entertainment Network(R)(A&E) in
1999.
Original oil by Douglas Fryer
1
<PAGE>
Message to Shareholders
[PHOTO] [PHOTO]
Patrick E. Welch Joseph M. Rob
Chairman Director and President
Dear Shareholder:
We are pleased to submit our annual report for the twelve months ended November
30, 1999. This past fiscal year contained a number of significant events that
influenced the world economy and financial markets.
The Economy
During 1999, the financial markets benefited from a near-perfect combination of
strong U.S. and worldwide economic growth with low inflation. A key factor was
strong growth in U.S. productivity, allowing companies to increase profits
without raising prices. One notable change from 1998 was the lack of any major
financial crises, major bankruptcies or international panics. Although oil
prices did rise to a 9-year high of $27 per barrel, the increase did not have a
significant impact on inflation indices. Overall, inflation remained well under
control throughout the year at an annualized rate of 2.7% for the consumer price
index. The labor market remained tight in the U.S. with the unemployment rate at
4.1% in November, the lowest level since 1970. However, productivity growth kept
unit labor costs down during 1999. The outlook for the world economy continued
to improve, offering the potential for greater U.S. export activity. Many
European stock markets hit new highs in November, and there were early signs of
economic recovery in Japan.
The Financial Markets
Equity Markets
The near-perfect economic environment provided a very favorable backdrop for the
stock market, with profit growth improving during each quarter and low inflation
allowing price-earnings multiples to expand. The Federal Reserve Board did move
to reverse the three interest rate cuts implemented last year, but the financial
markets reacted well to those actions.
Stock market returns were strong once again during the fiscal year. For the 12
months ended November 30, 1999, the Standard & Poor's 500 Index achieved a total
return of 20.9%. The Russell 2000, a widely used measure of returns for smaller
capitalization stocks, had a total return of 15.8% during the period. The NASDAQ
stock market reached its all-time high in November, and closed near that high at
the end of the fiscal year. The technology sector, especially Internet-related
stocks, was by far the best-performing group for the year as investors sought
out companies with strong growth prospects.
Asian markets, which had been battered last year, saw some recovery, and most
stock markets were up significantly in 1999. Japan's recent steps to resolve its
economic problems were received positively by the financial markets and the
Japanese stock market appreciated sharply for the first time in years.
Looking forward, the consensus earnings per share estimates for the year 2000
are about $56 for the S&P 500. Based on these estimates, the current
price-earnings multiple for the Standard & Poor's 500 Index is about 25 times.
While we believe the strong stock market performance of recent months is
generally justified, there are
2
<PAGE>
clear signs of overexuberance, such as Internet initial public offerings
averaging first-day gains of over 100 %, as well as near-panic investor buying
activity in the areas of technology and telecommunications stocks. The U.S. is
also running large current account deficits, relying on foreign investors to
fund that deficit by investing in the U.S. With the outlook for corporate
profits slowing - the most optimistic growth estimate is in the 5-7% range - the
stock market's upward momentum will be dependent upon further declines in
interest rates or a reduction in the equity risk premium. After five years of
strong equity returns, the current price-earnings multiple has risen to an
historically high level, a level which can only be justified by lower interest
rates or above-consensus growth in earnings. If, however, earnings growth
expectations are reduced, these price-earnings levels may not be sustainable. In
summary, we remain optimistic about the longer-term outlook for stocks, but
expect that the year 2000 may include periods of increased volatility.
Fixed Income Markets
Interest rates rose steadily in 1999 from the very low levels of a year ago as
the world economy continued to recover. The yield on ten-year treasury notes
increased approximately one and a half percentage points over the twelve months.
For the fiscal year ended November 30, 1999, the Lehman Brothers Aggregate Bond
Index, a widely-used measure of overall bond market performance, achieved a
slight, positive total return of .04%. The Federal Reserve embarked on a series
of rate increases to withdraw some of the liquidity provided during the
financial crisis, which occurred in the fall of 1998. Fixed income investors
worried that stronger economic growth and tight labor markets would eventually
result in higher inflation, although so far this has failed to develop. The best
performing sectors in the fixed income market had shorter maturities or provided
substantial income. The high-yield market performed well as it often does when
stocks do well, and mortgage-backed securities also outperformed other sectors
of the bond market.
In today's higher-risk market environment, we believe that our disciplined
investment approach, with its long-term-oriented focus on investing in quality
companies, will serve our shareholders well. We also believe that investors are
well advised to hold a diversified portfolio of investments and to review their
portfolios regularly. As always, we appreciate your support and look forward to
continuing to help you achieve your investment goals.
Sincerely,
/s/ Patrick Welch /s/ Joseph M. Rob
Patrick Welch Joseph M. Rob
Chairman Director & President
December 15, 1999
3
<PAGE>
Understanding your Sentinel Funds Financial Statements
(1) Schedule of Investment in Securities
This schedule shows you which investments your fund owned on the last day of the
reporting period. The schedule includes:
. a list of each investment
. the number of shares/par amount of each stock, bond or short-term note
. the market value of each investment
. the percentage of investments in each industry
. the percent and dollar breakdown of each category
(2) Statement of Assets and Liabilities
This statement details what the fund owns (assets), what it owes (liabilities),
and its net assets as of the last day of the period. If you subtract what the
fund owes from what it owns, you get the fund's net assets. For each class of
shares, the net assets divided by the total number of shares outstanding gives
you the price of an individual share, or the net asset value per share.
NET ASSETS are also broken down by capital (money invested by shareholders); net
investment income not yet paid to shareholders or net investment losses, if any;
net gains earned on investments but not yet paid to shareholders or net losses
on investments (known as realized gains or losses); and finally gains or losses
on securities still owned by the fund (known as unrealized appreciation or
depreciation). This breakdown tells you the value of net assets that are
performance-related, such as investment gains or losses, and the value of net
assets that are not related to performance, such as shareholder investments and
redemptions.
(3) Statement of Operations
This statement breaks down how each fund's net assets changed during the period
as a result of the fund's operations. It tells you how much money the fund made
or lost after taking into account income, fees and expenses, and investment
gains or losses. It does not include shareholder transactions and distributions.
Fund OPERATIONS include:
. income earned from investments
. management fees and other expenses
. gains or losses from selling investments (known as realized gains or
losses)
. gains or losses on current fund holdings (known as unrealized
appreciation or depreciation)
(4) Statement of Changes in Net Assets
These statements show how each fund's net assets changed over the past two
reporting periods. It details how much a fund grew or shrank as a result of:
. operations - a summary of the Statement of Operations for the most
recent period
. distributions - income and gains distributed to shareholders
. capital share transactions - shareholders' purchases, reinvestments,
and redemptions
Net assets at the beginning of the period plus the sum of operations,
distributions to shareholders and capital share transactions result in net
assets at the end of the period.
(5) Financial Highlights
These statements itemize current period activity and statistics and provide
comparison data for the last five fiscal years (or less if the fund or class is
not five years old). On a per-share basis, it includes:
. share price at the beginning of the period
. investment income and capital gains or losses
. income and capital gains distributions paid to shareholders
. share price at the end of the period
It also includes some key statistics for the period:
. total return - the overall percentage return of the fund, assuming
reinvestment of all distributions
. expense ratio - operating expenses as a percentage of average net
assets
. net income ratio - net investment income as a percentage of average
net assets
. portfolio turnover - the percentage of the portfolio that was replaced
during the period.
4
<PAGE>
- --------------------------------------------------------------------------------
Fund Performance
Performance data for each Sentinel Fund is
provided in this table. Financial data is contained
in the following pages.
<TABLE>
<CAPTION>
For the period from
12/1/98 through 11/30/99
--------------------------------------------------
11/30/99
Net Asset Capital
Sentinel Value Per Income Gain Total
Fund Share Dividends Distributions Return*
<S> <C> <C> <C> <C> <C>
Small Company "A" Shares $ 5.74 $ - $0.61 13.3%
- -------------------------------------------------------------------------------------------------
"B" Shares 5.51 - 0.61 12.3
- -------------------------------------------------------------------------------------------------
Mid Cap Growth "A" Shares 17.80 - 1.08 30.5
- -------------------------------------------------------------------------------------------------
"B" Shares 17.43 - 1.08 29.0
- -------------------------------------------------------------------------------------------------
World "A" Shares 21.28 0.17 - 18.1
- -------------------------------------------------------------------------------------------------
"B" Shares 20.95 0.02 - 17.1
- -------------------------------------------------------------------------------------------------
"C" Shares 21.08 - - 16.8
- -------------------------------------------------------------------------------------------------
Growth Index "A" Shares ** 21.30 - - 6.5
- -------------------------------------------------------------------------------------------------
"B" Shares ** 21.28 - - 6.4
- -------------------------------------------------------------------------------------------------
Common Stock "A" Shares 42.91 0.38 3.81 6.0
- -------------------------------------------------------------------------------------------------
"B" Shares 42.82 0.05 3.81 5.1
- -------------------------------------------------------------------------------------------------
"C" Shares 42.90 0.01 3.81 5.0
- -------------------------------------------------------------------------------------------------
Balanced "A" Shares 19.38 0.54 1.48 2.6
- -------------------------------------------------------------------------------------------------
"B" Shares 19.41 0.39 1.48 1.8
- -------------------------------------------------------------------------------------------------
"C" Shares 19.39 0.32 1.48 1.4
- -------------------------------------------------------------------------------------------------
"D" Shares *** 19.32 0.31 - -0.2
- -------------------------------------------------------------------------------------------------
High Yield "A" Shares 9.19 0.84 - 3.0
- -------------------------------------------------------------------------------------------------
"B" Shares 9.18 0.79 - 2.5
- -------------------------------------------------------------------------------------------------
"C" Shares 9.19 0.72 - 1.7
- -------------------------------------------------------------------------------------------------
Bond "A" Shares 5.94 0.39 - -1.9
- -------------------------------------------------------------------------------------------------
"B" Shares 5.96 0.33 - -2.6
- -------------------------------------------------------------------------------------------------
Tax-Free Income 12.60 0.64 0.17 -2.8
- -------------------------------------------------------------------------------------------------
New York Tax-Free Income 11.20 0.60 0.00 -3.3
- -------------------------------------------------------------------------------------------------
Government Securities 9.56 0.64 - -2.5
- -------------------------------------------------------------------------------------------------
Short Maturity Government 9.58 0.60 - 3.2
- -------------------------------------------------------------------------------------------------
U.S. Treasury Money Market "A" Shares 1.00 0.04 - 4.1
- -------------------------------------------------------------------------------------------------
"B" Shares 1.00 0.04 - 3.8
- -------------------------------------------------------------------------------------------------
Pennsylvania Tax-Free Trust 12.15 0.62 0.29 -3.3
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Standard & Poor's 500 + - - - 20.9
- -------------------------------------------------------------------------------------------------
Lehman Aggregate Bond Index ++ - - - 0.0
- -------------------------------------------------------------------------------------------------
Lehman Municipal Bond Index +++ - - - -1.1
- -------------------------------------------------------------------------------------------------
</TABLE>
* Total return is computed assuming the reinvestment of dividends and capital
gain distributions using net asset values. Past performance is no guarantee
of future results.
** Commenced operations September 13, 1999.
*** 1/4/99 Inception.
+ An unmanaged index of stocks reflecting average prices in the stock market.
++ An unmanaged index of bonds reflecting average prices in the bond market.
+++ An unmanaged index of bonds reflecting average prices in the municipal bond
market.
5
<PAGE>
[PHOTO]
"The Sentinel Investment Team is highly experienced, averaging more than 16
years of investment experience apiece. Our investment approach is a disciplined
one focusing on in-depth research and skilled portfolio management. Teamwork and
utilization of the best technology play a key role in Sentinel's investment
management. But the most important factor is our commitment to the ongoing hard
work that seeks to produce consistent long-term growth of capital for
shareholders in up markets, and stubbornly strives to preserve shareholder gains
in times of turmoil. It is an approach which has withstood the test of time."
Rodney A. Buck
Standing, left to right: Charles C. Schwartz, Equity Analyst & Co-Manager -
Sentinel Growth Index Fund; Scott T. Brayman, CFA, Vice President & Lead
Manager - Sentinel Small Company Fund; Daniel J. Manion, CFA, Vice President
& Co-Manager - Sentinel Common Stock Fund; David M. Brownlee, CFA, Senior Vice
President & Lead Manager - Sentinel Government Securities Fund, Sentinel Short
Maturity Government Fund; Co-Manager - Sentinel Balanced Fund, Sentinel Bond
Fund; Daniel E. Gass, CFA, Vice President - Fixed Income Research; Kenneth J.
Hart, Vice President & Manager - Sentinel Tax-Free Income Fund, Sentinel New
York Tax-Free Income Fund, Sentinel Pennsylvania Tax-Free Trust; Van Harissis,
CFA, Senior Vice President & Lead Manager - Sentinel Common Stock Fund;
Co-Manager - Sentinel Balanced Fund; William C. Kane, CFA, Vice President &
Manager - Sentinel Bond Fund; Bruce R. Bottamini, CFA, Vice President - Fixed
Income Research; Stephen P. Flynn, Vice President - Fixed Income Research.
Seated, left to right: Robert L. Lee, CFA, Senior Vice President & Lead
Manager - Sentinel Mid Cap Growth Fund, Sentinel Growth Index Fund; Co-Manager -
Sentinel Small Company Fund; Rodney A. Buck, CFA, Chief Executive Officer -
Sentinel Advisors Company; Hilary T. Roper, CFA, Assistant Vice President &
Equity Analyst; Darlene A. Coppola, Money Market Trader & Manager - Sentinel
U.S. Treasury Money Market Fund;
Not pictured: Erik B. Granade, CFA, Manager - Sentinel World Fund; Prescott B.
Crocker, CFA, Manager - Sentinel High Yield Bond Fund; Thomas H. Brownell, CFA,
Vice President - Fixed Income Research .
6
<PAGE>
Sentinel Small Company Fund seeks maximum long-term growth of capital
through primary investments in a diversified portfolio of
common stocks issued by small and medium-sized companies.
Sentinel Small Company Fund
Looking forward to 2000, we will continue to search for attractively valued
small companies that are solving problems or creating competitive advantages for
their customers.
The Sentinel Small Company Fund achieved a return of 13.3% for the twelve-month
period ending November 30, 1999. This performance somewhat lagged the 15.8%
returned by the Russell 2000 index and placed us at the median for the
Morningstar Small-Cap Blend category and just above median for the Lipper
Small-Cap Core category for the same twelve month period. For the three-year
period ending November 30, 1999, the Sentinel Small Company Fund achieved an
annualized return of 12.7%. This compares favorably to the annualized average
return of 10.1% for the Russell 2000 index and placed the Fund in the 29th
percentile of Morningstar's Small-Cap Blend category and the 22nd percentile for
Lipper's Small-Cap Core category for the same three-year period.
For a year when many investors have apparently abandoned caution and discipline
in the pursuit of Internet-related riches, our disciplined small company
investment approach was at a clear disadvantage. Instead of rewarding our
discipline for buying highly profitable small companies at a reasonable price,
or at a discount to their private market values, the small-cap marketplace
favored companies losing money. Roughly 15% of the companies in the Russell 2000
were projected to lose money in 1999. Incredibly, those same companies returned
approximately 59% for the first 11 months of the 1999 calendar year, which
greatly exceeded the 7.6% return of the index for the same period.
Although the Sentinel Small Company Fund was not invested in any money-losing
Internet related companies, a good many of your fund's holdings are expected to
benefit greatly from this worldwide phenomenon. Several are worthy of mention
here. With its soon-to-be-formed WholePeople.com subsidiary, Whole Foods Market
intends to be the leading Internet site for people looking for advice, products
and services related to natural and organic foods and a healthy lifestyle.
Dallas Semiconductor makes a key component for E-Stamp's on-line postage
technology. Catalina Marketing's web site ValuePage.com is the dominant provider
of online grocery coupons. True North Communications is a leading provider of
advertising services to the fast growing number of newly formed Internet
companies. And finally, Ethan Allen will soon launch a Web site and e-commerce
initiative that should allow this company to strengthen further its dominant
position in fine furniture retailing.
Average Annual Total Return -Class A Shares
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year 7.7% 13.3%
- --------------------------------------------------------------------------------
3 Years 10.8% 12.7%
- --------------------------------------------------------------------------------
5 Years 13.2% 14.4%
- --------------------------------------------------------------------------------
Since Inception* 10.9% 11.7%
- --------------------------------------------------------------------------------
*3/1/93
+Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel Small Company Fund Performance - Class A Shares
3/1/93 inception through 11/30/99
[LINE GRAPH]
Sentinel Morningstar Russell
Small Small Cap 2000
Company Fund Blend Index*
------------ ----------- -------
10,000 10,000 10,000
10,056 11,192 11,384
10,259 11,848 11,257
11,505 14,419 14,465
14,036 18,085 16,854
17,257 22,402 20,758
17,718 20,608 19,443
20,080 24,065 22,522
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 5% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results. Performance will vary
for each class of shares due to differences in share class expenses.
Chart Ending Values & Legend
3/1/93 inception through 11/30/99
Sentinel Small Company Fund $20,080
Russell 2000 Index* $22,522
Morningstar Small Cap Blend $24,065
*An unmanaged stock index of small capitalization companies which includes the
reinvestment of all income.
7
<PAGE>
Your fund's investments in selected fast growing communications-related
companies (especially wireless component manufacturers Sawtek and CTS Corp.,
Dallas Semiconductor and Methode Electronics) were particularly rewarding.
Mergers and acquisitions also contributed favorably to this year's results. The
most significant include Kimberly Clark's acquisition of Ballard Medical, Texas
Instruments' acquisition of Unitrode, Kellogg's acquisition of Worthington
Foods, and the recently announced intention of Deutsche Post to buy Air Express
Int'l.
Looking forward to 2000, we will continue to search for attractively valued
small companies that are solving problems or creating competitive advantages for
their customers. Companies with products or services that provide real solutions
to customers' needs or problems should enjoy the increasingly rare ability to
increase unit volume and preserve pricing power. Of course, we also will
continue to seek exposure to those attractively valued small companies that are
poised to benefit from important long-term trends like the exploding demand for
mobile communications, telecommunications bandwidth and data storage.
In closing, we feel strongly that many small company stocks continue to present
compelling relative value and outstanding risk/reward ratios. We fully expect
that our disciplined investment approach will continue to yield highly
competitive long-term results relative to most other small company funds. We
appreciate your continued confidence in our efforts on your behalf.
/s/ Scott T. Brayman
Scott T. Brayman, CFA
/s/ Robert L. Lee
Robert L. Lee, CFA
8
<PAGE>
Sentinel Small Company Fund
Investment in Securities
at November 30, 1999
- -------------------------------------------------------------
Shares Value
(Note 1)
- -------------------------------------------------------------
Common Stocks 92.5%
Basic Materials 2.0%
Bemis Co. 50,000 $ 1,575,000
Goodrich (B.F.) 40,000 902,500
-----------
2,477,500
-----------
Capital Goods 12.1%
AAR Corp. 70,000 1,155,000
Applied Power - Class A 80,000 2,555,000
Aptargroup 90,000 2,441,250
* C-COR Electronics 10,000 510,625
CTS Corp. 25,000 2,004,688
Donaldson Co. 100,000 2,256,250
* Gardner Denver Inc. 30,000 491,250
* Plexus 40,000 1,575,000
Robbins and Myers Inc. 30,000 600,000
* TETRA Technologies 150,000 1,162,500
-----------
14,751,563
-----------
Consumer Cyclicals 13.4%
* Acxiom Corp. 100,000 1,778,125
* Administaff Inc. 30,000 502,500
Casey's General Stores 100,000 1,275,000
* Catalina Marketing Corp. 25,000 2,382,812
Ethan Allen Interiors 75,000 2,493,750
Harman Int'l. Industries 60,000 3,090,000
* IDG Books Worldwide Inc. 40,000 600,000
Meredith Corp. 50,000 1,890,625
True North Communications 50,000 1,990,625
* Wet Seal Inc. - Class A 30,000 408,750
-----------
16,412,187
-----------
Consumer Staples 16.2%
ABM Industries 25,000 537,500
Alberto-Culver Co Class A 100,000 2,250,000
Applebee's Int'l. 55,000 1,656,875
* Bush Boake Allen 90,000 2,261,250
* Jack in the Box 60,000 1,263,750
Kimberly Clark Corp. 31,960 2,041,445
* Mondavi (Robert) `A' 30,000 1,154,063
Ruby Tuesday Inc. 130,000 2,616,250
Smart & Final Inc. 55,000 378,125
Strayer Education Inc. 30,000 622,500
Unifirst Corporation 100,000 1,518,750
* Whole Foods Market Inc. 90,000 3,538,125
-----------
19,838,633
-----------
Energy 1.6%
* Cal Dive Int'l. 20,000 727,500
Carbo Ceramics Inc. 25,000 650,000
* Oceaneering Int'l. Inc. 40,000 520,000
-----------
1,897,500
-----------
Financials 10.3%
Chateau Communitites Inc. 100,000 2,600,000
Cullen Frost Bankers Inc. 15,000 427,500
Duff & Phelps Credit Rating 35,000 2,786,875
Enhance Financial
Service Group 70,000 1,198,750
HCC Insurance Holdings 150,000 1,593,750
Liberty Property Trust 30,000 684,375
Mercantile Bankshares 10,000 344,062
Waddell & Reed Financial -
Class A 70,000 1,736,875
Waddell & Reed Financial -
Class B 30,000 705,000
Wilmington Trust Corp. 10,000 503,750
-----------
12,580,937
-----------
Health Care 12.6%
* Barr Laboratories 35,000 1,102,500
Cambrex Corp. 135,000 4,252,500
* Covance Inc. 150,000 1,631,250
Diagnostic Products 15,000 377,813
* Healthcare Services Group 94,800 758,400
JONES PHARMA INC. 25,000 865,625
* Medicis Pharmaceutical Corp. 35,000 1,229,375
Mentor Corp. 87,100 2,035,962
Minntech Corp. 90,000 877,500
* Monarch Dental Corp. 60,000 121,875
* Orthodontic Center
of America 80,000 975,000
* Roberts Pharmaceutical 25,000 807,813
Corp.
* Staar Surgical Co. 40,000 395,000
-----------
15,430,613
-----------
Technology 18.9%
* Affiliated Computer 80,000 2,995,000
Services
Analysts Int'l. 100,000 1,193,750
* Burr Brown Corp. 25,000 1,107,812
* Cable Design Technologies 70,000 1,675,625
* CACI Int'l. 50,000 1,100,000
* C-Cube Microsystems 40,000 1,790,625
* Ciber Inc. 75,000 1,598,438
Dallas Semicondutor Corp. 49,700 2,867,069
* Dynatech Corp. 17,500 124,687
* FileNet Corp. 100,000 2,000,000
Methode Electronics `A' 125,000 3,375,000
* Photronics Inc. 25,000 603,125
* Sawtek Inc. 30,000 1,368,750
* Tekelec 75,000 1,331,250
-----------
23,131,131
-----------
Transportation 4.4%
Air Express Int'l. Corp. 60,000 1,935,000
C.H. Robinson Worldwide 50,000 1,743,750
* Eagle USA Airfreight 30,000 1,010,625
* Railtex Inc. 40,000 675,000
-----------
5,364,375
-----------
Utilities 1.0%
* MidAmerican Energy Holdings 35,000 1,170,312
-----------
Total Common Stocks
(Cost $95,882,506) 113,054,751
-----------
- -------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- -------------------------------------------------------------
Corporate Convertible Bonds 0.2%
Phoenix Investment Partners 6%, `15
(Cost $403,571) 250M $ 245,313
------------
U.S. Government Agency
Obligations 3.3%
Federal Home Loan Mortgage Corp.
Agency Discount Note:
5.41%, 12/02/99
(Cost $3,999,399) 4,000M 3,999,399
------------
Corporate Short-Term Notes 3.7%
Eastman Kodak 5.6%, 12/03/99
(Cost $4,498,600) 4,500M 4,498,600
------------
Total Investments
(Cost $104,784,076)** 121,798,063
Excess of Other Assets
Over Liabilities 0.3% 406,240
------------
Net Assets $122,204,303
============
- -------------------------------------------------------------
* Non-income producing.
** Cost for federal income tax purposes is substantially similar. At November
30, 1999 net unrealized appreciation for federal income tax purposes
aggregated $17,013,987 of which $28,808,447 related to appreciated
securities and $11,794,460 related to depreciated securities.
See Notes to Financial Statements.
9
<PAGE>
Sentinel Small Company Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $121,798,063
Receivable for securities sold 866,613
Receivable for fund shares sold 4,035
Receivable for dividends and interest 28,185
--------------
Total Assets 122,696,896
--------------
Liabilities
Payable for securities purchased 163,225
Payable for fund shares repurchased 46,251
Payable to custodian 72,788
Accrued expenses 45,543
Management fee payable 60,870
Distribution fee payable (Class A Shares) 65,533
Distribution fee payable (Class B Shares) 12,836
Fund service fee payable 25,547
--------------
Total Liabilities 492,593
--------------
Net Assets Applicable to Outstanding Shares $122,204,303
==============
Net Asset Value and Offering Price per Share
Class A Shares
$107,919,194 / 18,785,106 shares outstanding $ 5.74
Sales Charge-- 5.00% of offering price 0.30
--------------
Maximum Offering Price $ 6.04
==============
Class B Shares
$14,285,109 / 2,592,158 shares outstanding $ 5.51
==============
Net Assets Represent
Capital stock at par value $ 213,773
Paid-in capital 89,450,555
Accumulated undistributed net realized gain
on investments 15,525,988
Unrealized appreciation of investments 17,013,987
--------------
Net Assets $122,204,303
==============
Investments at Cost $104,784,076
==============
Investment Income
Income:
Dividends $ 905,178
Interest 482,978
--------------
Total Income 1,388,156
--------------
Expenses:
Management advisory fee 733,657
Transfer agent and custodian 406,403
Distribution expense (Class A Shares) 321,528
Distribution expense (Class B Shares) 130,949
Accounting services 34,325
Auditing fees 10,100
Legal fees 4,700
Reports and notices to shareholders 29,000
Registration and filing fees 19,517
Directors' fees and expenses 11,023
Other 6,468
--------------
Total Expenses 1,707,670
Expense Offset (20,948)
--------------
Net Expenses 1,686,722
--------------
Net Investment Loss (298,566)
--------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on sales of investments 15,708,954
Net change in unrealized appreciation
(depreciation) (461,717)
--------------
Net Realized and Unrealized Gain on Investments 15,247,237
--------------
Net Increase in Net Assets from Operations $14,948,671
==============
See Notes to Financial Statements.
10
<PAGE>
Sentinel Small Company Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
-------------- --------------
Increase (Decrease) in Net Assets from Operations
Net investment loss $ (298,566) $ (186,150)
Net realized gain on sales of investments 15,708,954 13,141,667
-------------- --------------
Net change in unrealized appreciation
(depreciation) (461,717) (9,868,808)
-------------- --------------
Net increase in net assets from operations 14,948,671 3,086,709
-------------- --------------
Distributions to Shareholders
From net investment income
Class A Shares -- (348,277)
Class B Shares -- --
From realized gain on investments
Class A Shares (11,668,708) (13,692,058)
Class B Shares (1,353,508) (952,430)
-------------- --------------
Total distributions to shareholders (13,022,216) (14,992,765)
-------------- --------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 28,602,876 10,479,815
Class B Shares 3,276,653 5,429,602
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 10,889,296 12,740,406
Class B Shares 1,352,352 950,322
-------------- --------------
44,121,177 29,600,145
Less: Payments for shares reacquired
Class A Shares (42,938,531) (18,180,818)
Class B Shares (2,605,732) (999,866)
-------------- --------------
Increase (decrease) in net assets from
capital share transactions (1,423,086) 10,419,461
-------------- --------------
Total Increase (Decrease) in Net Assets for period 503,369 (1,486,595)
Net Assets: Beginning of period 121,700,934 123,187,529
-------------- --------------
Net Assets: End of period $122,204,303 $121,700,934
============== ==============
Undistributed Net Investment Income
at End of Period $ -- $ 57,617
============== ==============
See Notes to Financial Statements.
11
<PAGE>
Sentinel Small Company Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 5.67 $ 6.30 $ 5.17 $ 5.20 $ 5.53
------------- ------------- ------------- ------------- -------------
Income from Investment Operations
Net investment income (loss) (0.01) -- 0.02 0.01 0.02
Net realized and unrealized gain on investments 0.69 0.14 1.16 0.95 0.56
------------- ------------- ------------- ------------- -------------
Total from investment operations 0.68 0.14 1.18 0.96 0.58
------------- ------------- ------------- ------------- -------------
Less Distributions
Dividends from net investment income -- 0.02 0.01 0.03 --
Distributions from realized gains on investments 0.61 0.75 0.04 0.96 0.91
------------- ------------- ------------- ------------- -------------
Total Distributions 0.61 0.77 0.05 0.99 0.91
------------- ------------- ------------- ------------- -------------
Net asset value at end of period $ 5.74 $ 5.67 $ 6.30 $ 5.17 $ 5.20
============= ============= ============= ============= =============
Total Return (%) * 13.3 2.7 23.0 22.0 12.2
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.30 1.31 1.34 1.47 1.56
Ratio of expenses to average net assets before
expense reductions (%) ** 1.31 1.33 1.36 1.51 1.60
Ratio of net investment income (loss)
to average net assets (%) (0.14) (0.07) 0.38 0.23 0.26
Portfolio turnover rate (%) 43 45 45 60 79
Net assets at end of period (000 omitted) $107,919 $109,598 $115,532 $99,393 $89,321
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
12
<PAGE>
Sentinel Small Company Fund
Financial Highlights (cont'd)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Eight
Year Ended Year Ended Year Ended Months Ended
Class B Shares 11/30/99 (B) 11/30/98 (B) 11/30/97 (B) 11/30/96 (A)(B)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 5.51 $ 6.18 $ 5.12 $ 4.82
--------------- --------------- --------------- ---------------
Income from Investment Operations
Net investment income (loss) (0.06) (0.03) (0.03) (0.03)
Net realized and unrealized gain on investments 0.67 0.11 1.13 0.33
--------------- --------------- --------------- ---------------
Total from investment operations 0.61 0.08 1.10 0.30
--------------- --------------- --------------- ---------------
Less Distributions
Dividends from net investment income -- -- -- --
Distributions from realized gains on investments 0.61 0.75 0.04 --
--------------- --------------- --------------- ---------------
Total Distributions 0.61 0.75 0.04 --
--------------- --------------- --------------- ---------------
Net asset value at end of period $ 5.51 $ 5.51 $ 6.18 $ 5.12
=============== =============== =============== ===============
Total Return (%) * 12.3 1.7 21.6 6.2 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 2.27 2.24 2.35 2.62 +
Ratio of expenses to average net assets before
expense reductions (%) ** 2.28 2.25 2.36 2.64 +
Ratio of net investment income (loss)
to average net assets (%) (1.11) (1.00) (0.62) (0.91)+
Portfolio turnover rate (%) 43 45 45 60
Net assets at end of period (000 omitted) $14,285 $12,103 $7,656 $1,943
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
13
<PAGE>
Sentinel Mid Cap Growth Fund seeks growth of capital by focusing on common
stocks of mid-sized growing companies with experienced and capable managements.
Sentinel Mid Cap Growth Fund
During the year, new positions were started in a number of exciting new growth
industries such as genomics, fixed wireless communications, and the Internet
industry.
The Sentinel Mid Cap Growth Fund earned a total return of 30.5% during the
fiscal year he Sentinel Mid Cap Growth Fund earned a ended November 30, 1999.
Over the same period, the S&P 500 produced a 20.9% return and the S&P 400 Mid
Cap Index produced a 21.4% return.
The portfolio outperformed these key indices during the first half of the year
because of strong stock selection in technology and communications stocks. In
the technology sector, the fund benefited from significant gains in
semiconductor equipment stocks, which recovered nicely in anticipation of
improving orders. In the communications area, explosive growth in the demand for
cellular phone handsets caused sharp gains in Sawtek, which provides key
components to cell phone manufacturers. Strong consumer confidence and consumer
spending led to significant gains for our holdings in restaurant and retail
stocks.
During the second half of the year, investors' attention shifted toward
companies offering rapid earnings growth. The standout performers during the
second half of the year included technology, telecommunications, Internet
stocks, and technology-related initial public offerings ("IPO's").
The portfolio benefited from significant overweights in technology and
communications stocks. Stocks, such as JDS Uniphase, a key supplier of the
optical communications infrastructure needed to operate the Internet, and CTS
Corporation, a supplier of electronic components to the communications industry,
were strong contributors to the portfolio's performance.
During the year, new positions were started in a number of exciting new growth
industries such as genomics, fixed wireless communications, and the Internet
industry. Companies in the field of genomics are rapidly identifying and
patenting applications based on the decoding of the estimated 100,000 genes in
the human genetic code. These companies, such as Human Genome Sciences and
Millennium Pharmaceuticals, expect to earn royalties from drugs that are later
developed based on their discoveries. Fixed wireless companies, such as Winstar
Communications, Nextlink, and Teligent are providing a "last mile solution" for
mid and small-sized companies that cannot otherwise afford to connect to
expensive optical fiber networks. Our holdings in the Internet area include
important market leaders such as
- --------------------------------------------------------------------------------
Average Annual
Total Return -
Class A Shares
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year 23.9% 30.5%
- --------------------------------------------------------------------------------
5 Years 21.2% 22.5%
- --------------------------------------------------------------------------------
10 Years 12.9% 13.4%
- --------------------------------------------------------------------------------
+ Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel Mid Cap Growth Fund Performance - Class A Shares
Ten Years Ended 11/30/99
[GRAPH]
Sentinel Morningstar Standard &
Mid Cap Mid Cap Poor's 500
Growth Fund Growth Stock Index*
----------- ----------- -----------
10,000 10,000 10,000
9,371 9,123 9,654
10,795 12,721 11,615
13,004 15,093 13,756
12,832 17,172 15,142
12,173 16,094 15,304
15,200 23,615 20,954
18,635 25,021 26,795
23,714 31,157 34,440
25,691 28,644 42,593
33,515 43,773 51,496
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 5% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results. Performance will vary
for each class of shares due to differences in share class expenses.
* An unmanaged index of stocks reflecting average prices in the stock market.
14
<PAGE>
America OnLine, Ariba, DoubleClick, Inktomi, Lycos and Red Hat.
As we enter the new millennium, our strategy for the portfolio continues to
emphasize market-dominant companies with defensible "franchises" in rapidly
growing industries. These companies usually possess proprietary technology,
dominant brands, superior products, and outstanding management.
We appreciate your continued support and look forward to helping you achieve
your goal of long-term capital appreciation.
/s/ Robert L. Lee
Robert L. Lee, CFA
15
<PAGE>
Sentinel Mid Cap Growth Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Shares Value
(Note 1)
- --------------------------------------------------------------------------------
Common Stocks 95.6%
Basic Materials 1.9%
Bemis Co. 55,000 $ 1,732,500
Goodrich (B.F.) 60,000 1,353,750
------------
3,086,250
------------
Capital Goods 6.0%
Applied Power - Class A 40,000 1,277,500
CTS Corp. 72,800 5,837,650
Donaldson Co. 100,000 2,256,250
------------
9,371,400
------------
Communications Services 4.2%
*NEXTLINK Communications -
Class A 50,000 2,500,000
*Teligent Inc. - Class A 30,000 1,696,875
*Winstar Communications 45,000 2,283,750
------------
6,480,625
------------
Consumer Cyclicals 10.9%
Ethan Allen Interiors 127,500 4,239,375
*Expedia Inc. 25,000 1,331,250
Lands' End Inc. 108,200 6,532,575
Sherwin Williams 50,000 1,071,875
True North Communications 96,800 3,853,850
------------
17,028,925
------------
Consumer Staples 13.0%
Applebee's Int'l. 132,000 3,976,500
*Charter Communications -
Class A 75,000 1,739,063
Fortune Brands 33,000 1,128,188
McCormick & Co. 120,000 3,847,500
*Outback Steakhouse 40,000 942,500
*Ruby Tuesday Inc. 170,000 3,421,250
UST Inc. 44,000 1,171,500
*Whole Foods Market Inc. 100,000 3,931,250
------------
20,157,751
------------
Energy 2.0%
*Cal Dive Int'l. 85,000 3,091,875
------------
Financials 0.8%
AFLAC Inc. 25,000 1,196,875
------------
Health Care 9.0%
*Biogen 29,000 2,118,813
Cambrex Corp. 45,000 1,417,500
*Chiron Corp. 40,000 1,312,500
*Genzyme Corp. 40,000 1,440,000
*Human Genome Sciences 35,000 3,920,000
JONES PHARMA INC. 40,000 1,385,000
*Millennium Pharmaceuticals 25,000 2,433,593
------------
14,027,406
------------
Technology 39.5%
* America Online Inc. 30,000 2,180,625
* Analog Devices 60,200 3,457,738
* Applied Materials 37,200 3,624,675
* Ariba Inc. 3,600 650,025
* Cable Design Technologies 56,300 1,347,681
* C-Cube Microsystems 100,000 4,476,563
* Cisco Systems 48,400 4,316,675
Computer Associates 50,000 3,250,000
Dallas Semiconductor Corp. 70,000 4,038,125
* Doubleclick Inc. 10,100 1,616,631
* General Instrument 58,000 3,799,000
* Inktomi Corp. 5,900 761,468
* JDS Uniphase 20,000 4,575,000
* KLA Tencor Corp. 20,000 1,691,250
* Lycos, Inc. 20,000 1,120,000
* Novell Inc. 100,000 1,956,250
* Novellus Systems 55,000 4,516,875
* Photronics, Inc. 35,000 844,375
* Red Hat Inc. 15,400 3,234,000
* Sawtek Inc. 130,000 5,931,250
Scientific Atlanta 69,000 4,023,563
------------
61,411,769
------------
Transportation 6.8%
Air Express Int'l. Corp. 100,000 3,225,000
C.H. Robinson Worldwide 99,600 3,473,550
* Eagle USA Airfreight 115,000 3,874,063
------------
10,572,613
------------
Utilities 1.5%
MidAmerican Energy
Holdings 69,500 2,323,906
------------
Total Common Stocks
(Cost $119,145,223) 148,749,395
------------
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
U.S. Government Agency
Obligations 1.3%
Federal Home Loan Mortgage Corporation
Agency Discount Note:
5.41%, 12/02/99
(Cost $1,999,699) 2,000M $ 1,999,699
------------
Corporate Short-Term Notes 3.9%
G.E. Capital Corp.
5.55%, 12/09/99 4,000M 3,995,066
Prudential Securities
5.48%, 12/06/99 2,000M 1,998,478
(Cost $5,993,544) ------------
5,993,544
------------
Total Investments
(Cost $127,138,466)** 156,742,638
Excess of Liabilities
Over Other Assets (0.8%) (1,219,257)
------------
Net Assets $155,523,381
============
- --------------------------------------------------------------------------------
* Non-income producing.
** Also cost for federal income tax purposes. At November 30, 1999 net
unrealized appreciation for federal income tax purposes aggregated
$29,604,172 of which $33.499,931 related to appreciated securities and
$3,895,759 related to depreciated securities.
16
<PAGE>
Sentinel Mid Cap Growth Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $156,742,638
Cash and cash equivalents 982,399
Receivable for fund shares sold 40,899
Receivable for dividends 26,650
--------------
Total Assets 157,792,586
--------------
Liabilities
Payable for securities purchased 912,500
Payable for fund shares repurchased 1,097,428
Accrued expenses 60,112
Management fee payable 76,783
Distribution fee payable (Class A Shares) 88,848
Distribution fee payable (Class B Shares) 11,712
Fund service fee payable 21,822
--------------
Total Liabilities 2,269,205
--------------
Net Assets Applicable to Outstanding Shares $155,523,381
==============
Class A Shares
$140,632,815 / 7,902,012 shares outstanding $ 17.80
Sales Charge -- 5.00% of offering price 0.94
--------------
Maximum Offering Price $ 18.74
==============
Class B Shares
$14,890,566 / 854,389 shares outstanding $ 17.43
==============
Net Assets Represent
Capital stock at par value $ 87,564
Paid-in capital 115,346,268
Accumulated distributions in excess of
net investment income (21,629)
Accumulated undistributed net realized gain
on investments 10,507,006
Unrealized appreciation of investments 29,604,172
--------------
Net Assets $155,523,381
==============
Investments at Cost $127,138,466
==============
Sentinel Mid Cap Growth Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Dividends $ 739,608
Interest 252,420
--------------
Total Income 992,028
--------------
Expenses:
Management advisory fee 775,529
Transfer agent and custodian 295,648
Distribution expense (Class A Shares) 357,120
Distribution expense (Class B Shares) 81,165
Accounting services 36,090
Auditing fees 10,975
Legal fees 5,300
Reports and notices to shareholders 20,300
Registration and filing fees 24,217
Directors' fees and expenses 11,518
Other 17,220
--------------
Total Expenses 1,635,082
Expense Offset (26,573)
--------------
Net Expenses 1,608,509
--------------
Net Investment Loss (616,481)
Realized and Unrealized Gain on Investments
Net realized gain on sales of investments 11,126,651
Net change in unrealized appreciation 21,994,916
--------------
Net Realized and Unrealized Gain on Investments 33,121,567
--------------
Net Increase in Net Assets from Operations $ 32,505,086
==============
See Notes to Financial Statements.
17
<PAGE>
Sentinel Mid Cap Growth Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
--------------- ---------------
<S> <C> <C>
Increase in Net Assets from Operations
Net investment loss $ (616,481) $ (237,254)
Net realized gain on sales of investments 11,126,651 7,709,262
Net change in unrealized appreciation (depreciation) 21,994,916 (175,673)
--------------- ---------------
Net increase in net assets from operations 32,505,086 7,296,335
--------------- ---------------
Distributions to Shareholders
From net investment income
Class A Shares -- --
Class B Shares -- --
From net realized gain on investments
Class A Shares (7,360,527) (24,253,869)
Class B Shares (288,532) --
--------------- ---------------
Total distributions to shareholders (7,649,059) (24,253,869)
--------------- ---------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 53,398,987 16,027,433
Class B Shares 10,177,807 4,100,488
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 6,662,042 22,564,015
Class B Shares 288,437 --
--------------- ---------------
70,527,273 42,691,936
Less: Payments for shares reacquired
Class A Shares (40,685,086) (11,900,854)
Class B Shares (910,887) (281,977)
--------------- ---------------
Increase in net assets from capital share transactions 28,931,300 30,509,105
--------------- ---------------
Total Increase in Net Assets for period 53,787,327 13,551,571
Net Assets: Beginning of period 101,736,054 88,184,483
--------------- ---------------
Net Assets: End of period $ 155,523,381 $ 101,736,054
=============== ===============
Distributions in Excess of Net Investment Income
at End of Period $ (21,629) $ (24,789)
=============== ===============
</TABLE>
See Notes to Financial Statements.
18
<PAGE>
Sentinel Mid Cap Growth Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 14.65 $ 18.73 $ 17.57 $ 16.93 $ 16.15
------------ ------------ ------------ ------------ ------------
Income (Loss) from Investment Operations
Net investment income (loss) (0.06) (0.03) (0.02) 0.03 0.07
Net realized and unrealized gain on investments 4.29 1.08 4.00 3.23 3.33
------------ ------------ ------------ ------------ ------------
Total from investment operations 4.23 1.05 3.98 3.26 3.40
------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends from net investment income -- -- 0.02 0.07 0.05
Distributions from realized gains on investments 1.08 5.13 2.80 2.55 2.57
------------ ------------ ------------ ------------ ------------
Total Distributions 1.08 5.13 2.82 2.62 2.62
------------ ------------ ------------ ------------ ------------
Net asset value at end of period $ 17.80 $ 14.65 $ 18.73 $ 17.57 $ 16.93
============ ============ ============ ============ ============
Total Return (%) * 30.5 8.3 27.3 22.6 24.9
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.20 1.26 1.29 1.40 1.50
Ratio of expenses to average net assets before
expense reductions (%) ** 1.22 1.29 1.32 1.43 1.54
Ratio of net investment income (loss)
to average net assets (%) (0.41) (0.23) (0.15) 0.16 0.42
Portfolio turnover rate (%) 118 97 161 98 84
Net assets at end of period (000 omitted) $ 140,633 $ 97,895 $ 88,184 $ 69,816 $ 60,446
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Period
Year Ended 1/12/98 through
Class B Shares 11/30/99 (B) 11/30/98 (A)(B)
------------ ---------------
<S> <C> <C>
Net asset value at beginning of period $ 14.52 $ 13.08
------------ ---------------
Income from Investment Operations
Net investment income (loss) (0.23) (0.17)
Net realized and unrealized gain on investments 4.22 1.61
------------ ---------------
Total from investment operations 3.99 1.44
------------ ---------------
Less Distributions
Dividends from net investment income -- --
Distributions from realized gains on investments 1.08 --
------------ ---------------
Total Distributions 1.08 --
------------ ---------------
Net asset value at end of period $ 17.43 $ 14.52
============ ===============
Total Return (%) * 29.0 11.0++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 2.27 2.27+
Ratio of expenses to average net assets before
expense reductions (%)** 2.29 2.29+
Ratio of net investment income (loss)
to average net assets (%) (1.53) (1.24)+
Portfolio turnover rate (%) 118 97
Net assets at end of period (000 omitted) $ 14,891 $ 3,841
</TABLE>
(A) Commenced operations January 12, 1998.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
19
<PAGE>
Sentinel World Fund seeks long-term growth of capital principally through
investments in a diversified portfolio of marketable equity securities of
established non-U.S. companies.
Sentinel World Fund
Looking toward the millennium, we expect to see a more even distribution of
global growth.
During the year ending November 30, 1999 the Sentinel World Fund produced a
return of 18.1%, which compares to a 21.1% gain for the MSCI Europe, Australia,
and Far East Index (EAFE). Reflecting the stabilization of economic activity in
the Pacific Basin, Japanese and emerging-market stocks sharply outperformed in
the period, rising by 58% and 47%, respectively. Growth-oriented stocks,
particularly in the technology and telecommunications segments, also
outperformed during 1999. The MSCI EAFE Value index posted a gain of 18.7% for
the last twelve months while the EAFE Growth index appreciated 23.2%, a
difference of 4.5%. The Fund trailed the average international equity fund in
the Morningstar universe, which gained 31.3%. In 1999, the Fund's value
orientation, which has proven to be very successful over the long run, curtailed
results relative to the peer group of international funds, as did its minimal
exposure to emerging markets.
For the twelve-month period ending November 30th, the Asia-Pacific region
dominated international market performance. Funds continued to flow into the
Japanese market in anticipation of a recovery. The MSCI Japan index posted a
dramatic 58% return. Of this gain, a full 20% can be attributed to the
appreciation in the yen. The recovery in Japan remains tenuous as indicated by
the contraction in third quarter GDP. Nevertheless, progress is being made as
the pace of corporate restructuring and structural reform increases. And the
government recently announced its ninth economic stimulus package worth (Yen)7
trillion. The Fund has an approximately 25% weight in Japan, a modest 3%
underweight posture. In addition, the Sentinel World Fund has almost 9% in Asia
outside of Japan. This translates into a neutral regional exposure with a
conservative posture with holdings in the larger markets of Hong Kong and
Australia. Many of the top performing stocks in the fund were domiciled in Japan
and focused in the technology, electronics, and telecommunications industries.
More specifically, Murata, Sony, NTT, and Kyocera outperformed the broader
market.
Turning to Europe, the markets were dominated by several trends. Share buybacks
reached record levels, and in the third quarter of 1999 European mergers and
acquisitions exceeded the pace of takeover activity in the US for the first
time. The stock markets of the UK, France, Spain, and the Netherlands posted
record highs in November. Yet, over the last year, the markets faced headwinds
in the form of rising interest rates and the steady depreciation in the Euro,
the new
- --------------------------------------------------------------------------------
Average Annual
Total Return -
Class A Shares
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year 12.2% 18.1%
- --------------------------------------------------------------------------------
3 Years 11.7% 13.6%
- --------------------------------------------------------------------------------
5 Years 12.1% 13.3%
- --------------------------------------------------------------------------------
Since
Inception* 13.7% 14.6%
- --------------------------------------------------------------------------------
*3/1/93
+ Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel World Fund Performance - Class A Shares
3/1/93 inception through 11/30/99
[GRAPH]
Morgan Stanley's
Morningstar Capital International
Sentinel Foreign Stock "EAFE" (Europe, Australia,
World Fund Average Far East) Index*
---------- ------------- --------------------------
10,000 10,000 10,000
11,786 12,109 12,002
12,746 13,597 13,784
14,050 13,982 14,827
16,226 16,333 16,570
18,258 16,911 16,504
20,145 18,492 19,219
23,789 24,425 23,275
Chart Ending Values & Legend
3/1/93 inception through 11/30/99
Sentinel $23,789
World Fund
Morgan Stanley's $23,275
Capital International
"EAFE" (Europe, Australia,
Far East) Index*
Morningstar $24,425
Foreign Stock
Average
*An unmanaged index of 967 companies representing the stock markets of Europe,
Australia, New Zealand and the Far East.
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 5% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results. Performance will vary
for each class of shares due to differences in share class expenses.
20
<PAGE>
European common currency. Across Europe, we continue to find quality companies
with attractive valuations relative to their global peers. The Fund maintains a
significant exposure to the region with 65% of assets invested in European
companies. Holdings in France performed extremely well as takeover activity
fueled price action. In addition, Johnson Matthey and Philips Electronics posted
strong gains. However, most of the positions that lagged were domiciled in
Europe. We believe Europe's large discount in equity valuations relative to the
US is likely to narrow.
Looking toward the millennium, we expect to see a more even distribution of
global growth. As a result, central bankers may continue to take a proactive
stance towards anticipated inflationary pressures given the rise in many
commodity prices. We will continue to emphasize large-capitalization stocks
offering compelling valuations and remain overweight the pharmaceuticals, oil
and gas, and consumer products sectors.
/s/ Erik B. Granade
Erik B. Granade, CFA
21
<PAGE>
Sentinel World Fund
Investment in Securities
November 30, 1999
- ----------------------------------------------------------------------
Shares Value
(Note 1)
- ----------------------------------------------------------------------
Common Stocks 102.1%
Australia 5.7%
National Australia 225,000 $ 3,250,668
News Corporation 350,000 3,031,730
Rio Tinto Limited 75,000 1,315,065
----------------
7,597,463
----------------
Denmark 3.4%
Den Danske Bank 25,000 2,844,372
Novo Nordisk (ADR) 27,000 1,775,250
----------------
4,619,622
----------------
France 8.4%
Alcatel Alsthom (ADR) 40,005 1,522,690
Credit Commercial 20,000 2,438,513
Group Danone 4,000 928,247
Michelin 45,000 1,804,701
Societe Generale 10,850 2,339,663
Total Fina 31,825 2,104,428
----------------
11,138,242
----------------
Germany 7.5%
BASF A.G. 45,000 2,069,965
Bayer A.G. Ord. 60,000 2,530,209
DaimlerChrysler (ADR) 24,000 1,635,000
Deutsche Bank 37,000 2,410,349
SAP A.G. (ADR) 40,000 1,342,500
----------------
9,988,023
----------------
Hong Kong 3.0%
HSBC Holdings 299,870 3,976,646
----------------
Italy 4.3%
Beni Stabili 125,400 44,099
Enel SpA 300,000 1,327,075
San Paolo IMI SpA (ADR) 62,700 1,583,175
Telecom Italia (ADR) 25,000 2,696,875
----------------
5,651,224
----------------
Japan 26.5%
Bank of Tokyo 130,000 1,884,132
Canon 100,000 2,945,797
Dai Nippon Printing Co. 70,000 1,220,051
Fuji Photo Film 75,000 3,056,265
Honda Motors 67,000 2,763,158
Kyocera Corp. 45,000 5,439,415
Mitsubishi Heavy Industry 500,000 1,625,098
Murata Manufacturing 19,000 3,156,716
Nintendo Co. 17,000 2,839,454
Nippon Telegraph
& Telephone 250 4,492,341
Sankyo Co LTD 65,000 1,602,023
Sony Corp. 15,000 2,783,779
Toyota Motor 40,000 1,358,995
----------------
35,167,224
----------------
Mexico 1.4%
Telefonos de Mexico (ADR) 20,000 1,851,250
----------------
Netherlands 8.8%
ABN Amro Bank 115,000 $ 2,800,813
ING Groep N.V. 60,000 3,376,635
Koninklijke Philips
Electronics N.V. (ADR) 23,000 2,748,500
Unilever N.V. (ADR) 50,178 2,731,565
----------------
11,657,513
----------------
Portugal 2.3%
Portugal Telecom (ADR) 65,000 3,120,000
----------------
Spain 6.5%
Banco Popular 30,000 1,940,734
Endesa (ADR) 125,000 2,476,563
E.N.I. SpA (ADR) 30,000 1,623,750
Repsol (ADR) 120,000 2,610,000
----------------
8,651,047
----------------
Sweden 2.7%
Astrazeneca 80,000 3,573,612
----------------
Switzerland 6.0%
Nestle A.G. Registered 1,575 2,834,287
Novartis A.G. Registered 1,600 2,493,964
Zurich Allied 4,500 2,577,653
----------------
7,905,904
----------------
United Kingdom 15.6%
British Airways plc (ADR) 25,000 1,479,688
British Telecom plc (ADR) 10,000 2,045,000
Carlton Communications 150,000 1,323,207
Corus Group plc (ADR) 75,000 1,532,812
Glaxo Hldg plc (ADR) 25,000 1,485,937
Johnson Matthey plc 100,000 1,065,600
National Westminster
Bank plc 111,342 2,568,736
Powergen plc 250,000 2,170,371
Scottish Power 250,000 2,216,337
Shell Transport &
Trading (ADR) 62,000 2,828,750
Smithkline Beecham
plc (ADR) 30,000 1,995,000
----------------
20,711,438
----------------
Total Investments
(Cost $101,092,595)* 135,609,208
Excess of Liabilities
Over Other Assets (2.1%) (2,840,106)
----------------
Net Assets $132,769,102
================
Summary of Foreign Securities
by Industry Classification
Percent of Value
Industry Net Assets (Note 1)
Airlines 1.1% $ 1,479,688
Automobiles, Auto Parts 5.7% 7,561,854
Banks 17.5% 23,188,939
Broadcasting 2.3% 3,031,730
Chemicals 1.9% 2,530,209
Computers 1.0% 1,342,500
Distributors, Food & Health 0.7% 928,247
Electrical Components 4.1% 5,439,415
Electrical Equipment 2.1% 2,748,500
Entertainment 3.1% 4,162,661
Financial 1.8% 2,410,349
Financial Services 4.4% 5,815,148
Foods, Grocery 2.1% 2,731,565
Gold, Precious Metals 1.8% 2,380,665
Healthcare - Diversified 1.2% 1,602,023
Healthcare - Drug/Pharmacy 8.5% 11,323,763
Household Furniture
& Appliance 2.1% 2,783,779
Insurance 1.9% 2,577,653
Machinery 1.2% 1,625,098
Manufacturing & Process 3.9% 5,226,681
Office Equipment & Supply 2.2% 2,945,797
Oil 6.9% 9,166,928
Photography 2.3% 3,056,265
Printing, Publishing 0.9% 1,220,051
Real Estate 0.1% 44,099
Retail - Drug & Food 2.1% 2,834,287
Steel 1.2% 1,532,812
Telecommunications 11.8% 15,728,156
Utilities - Electric 6.2% 8,190,346
------ ------------
102.1% $135,609,208
====== ============
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes. At November 30, 1999 net unrealized
appreciation for federal income tax purposes aggregated $34,516,613 of which
$40,088,926 related to appreciated securities and $5,572,313 related to
depreciated securities.
(ADR) - American Depository Receipt
See Notes to Financial Statements.
22
<PAGE>
Sentinel World
Fund Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $135,609,208
Cash and cash equivalents 94,093
Foreign currency (cost $83,453) 82,206
Receivable for securities sold 200,442
Receivable for fund shares sold 88,245
Receivable for dividends and interest 411,401
--------------
Total Assets 136,485,595
--------------
Liabilities
Payable for securities purchased 27,536
Payable for fund shares repurchased 3,458,413
Accrued expenses 72,791
Management fee payable 69,666
Distribution fee payable (Class A Shares) 57,157
Distribution fee payable (Class B Shares) 15,077
Distribution fee payable (Class C Shares) 1,553
Fund service fee payable 14,300
--------------
Total Liabilities 3,716,493
--------------
Net Assets Applicable to Outstanding Shares $132,769,102
==============
Net Asset Value and Offering Price per Share
Class A Shares
$107,413,034 / 5,047,081 shares outstanding $ 21.28
Sales Charge -- 5.00% of offering price 1.12
--------------
Maximum Offering Price $ 22.40
==============
Class B Shares
$23,535,986 / 1,123,664 shares outstanding $ 20.95
==============
Class C Shares
$1,820,082 / 86,354 shares outstanding $ 21.08
==============
Net Assets Represent
Capital stock at par value $ 62,571
Paid-in capital 85,751,872
Accumulated undistributed net investment income 1,554,029
Accumulated undistributed net realized gain
on investments and foreign exchange 10,888,725
Unrealized appreciation of investments
and foreign exchange 34,511,905
--------------
Net Assets $132,769,102
==============
Investments at Cost $101,092,595
==============
Sentinel World Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Dividends $3,478,234 *
Interest 78,342
--------------
Total Income 3,556,576
--------------
Expenses:
Management advisory fee 766,638
Transfer agent and custodian 365,206
Distribution expense (Class A Shares) 308,582
Distribution expense (Class B Shares) 204,038
Distribution expense (Class C Shares) 24,318
Accounting services 28,525
Auditing fees 11,050
Legal fees 5,150
Reports and notices to shareholders 15,800
Registration and filing fees 28,371
Directors' fees and expenses 11,410
Other 13,254
--------------
Total Expenses 1,782,342
Expense Offset (13,776)
--------------
Net Expenses 1,768,566
--------------
Net Investment Income 1,788,010
--------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) from:
Investments 12,172,657
Foreign currency transactions (260,793)
--------------
Net realized gain 11,911,864
--------------
Net change in unrealized appreciation (depreciation)
during the period:
Investments 7,982,762
Foreign currency transactions (3,134)
--------------
Net change in unrealized appreciation 7,979,628
--------------
Net Realized and Unrealized Gain on Investments 19,891,492
--------------
Net Increase in Net Assets from Operations $ 21,679,502
==============
* Net of Foreign Tax Withholding of $347,115
See Notes to Financial Statements.
23
<PAGE>
Sentinel World Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
------------- ------------
Increase in Net Assets from Operations
Net investment income $ 1,788,010 $ 1,224,860
Net realized gain (loss) on sales of investments 11,911,864 (1,484,464)
Net change in unrealized appreciation 7,979,628 9,925,548
------------- ------------
Net increase in net assets from operations 21,679,502 9,665,944
------------- ------------
Distributions to Shareholders
From net investment income
Class A Shares (949,988) (615,675)
Class B Shares (22,623) --
Class C Shares -- --
From realized gain on investments
Class A Shares -- (3,354,309)
Class B Shares -- (392,508)
Class C Shares -- --
------------- ------------
Total distributions to shareholders (972,611) (4,362,492)
------------- ------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 135,953,410 23,218,940
Class B Shares 4,677,480 8,692,576
Class C Shares 26,898,630 2,785,802
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 777,351 3,762,833
Class B Shares 19,186 388,693
Class C Shares -- --
------------- ------------
168,326,057 38,848,844
Less: Payments for shares reacquired
Class A Shares (146,869,052) (20,790,851)
Class B Shares (2,574,022) (1,504,451)
Class C Shares (26,785,793) (1,753,067)
------------- ------------
Increase (decrease) in net assets from
capital share transactions (7,902,810) 14,800,475
------------- ------------
Total Increase in Net Assets for period 12,804,081 20,103,927
Net Assets: Beginning of period 119,965,021 99,861,094
------------- ------------
Net Assets: End of period $ 132,769,102 $119,965,021
============= ============
Undistributed Net Investment Income
at End of Period $ 1,554,029 $ 999,423
============= ============
See Notes to Financial Statements.
24
<PAGE>
Sentinel World Fund (A)
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 18.19 $ 17.25 $ 15.69 $ 13.78 $ 12.74
------------ ------------ ------------ ------------ ------------
Income from Investment Operations
Net investment income 0.28 0.18 0.11 0.12 0.14
Net realized and unrealized gain on investments 2.98 1.52 1.80 1.99 1.14
------------ ------------ ------------ ------------ ------------
Total from investment operations 3.26 1.70 1.91 2.11 1.28
------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends from net investment income 0.17 0.12 0.11 0.13 0.09
Distributions from realized gains on investments - 0.64 0.24 0.07 0.15
------------ ------------ ------------ ------------ ------------
Total Distributions 0.17 0.76 0.35 0.20 0.24
------------ ------------ ------------ ------------ ------------
Net asset value at end of period $ 21.28 $ 18.19 $ 17.25 $ 15.69 $ 13.78
============ ============ ============ ============ ============
Total Return (%) * 18.1 10.3 12.5 15.5 10.2
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.24 1.24 1.29 1.43 1.56
Ratio of expenses to average net assets before
expense reductions (%) ** 1.25 1.26 1.32 1.48 1.63
Ratio of net investment income to average net
assets (%) 1.86 1.18 1.14 0.94 0.79
Portfolio turnover rate (%) 35 12 21 14 32
Net assets at end of period (000 omitted) $107,413 $100,790 $89,740 $71,458 $47,702
</TABLE>
(A) As of April 1, 1996 INVESCO Capital Management, Inc. became the sub-advisor
to the Fund.
(B) Commenced operations April 1, 1996.
(C) Commenced operations May 4, 1998.
(D) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
25
<PAGE>
Sentinel World Fund (A)
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Eight
Year Ended Year Ended Year Ended Months Ended
Class B Shares 11/30/99 (D) 11/30/98 (D) 11/30/97 (D) 11/30/96 (B)(D)
------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 17.92 $ 17.05 $ 15.58 $14.49
------------- ------------ ------------ ---------------
Income (Loss) from Investment Operations
Net investment income (loss) 0.10 0.04 0.01 (0.08)
Net realized and unrealized gain on investments 2.95 1.47 1.74 1.17
------------- ------------ ------------ ---------------
Total from investment operations 3.05 1.51 1.75 1.09
------------- ------------ ------------ ---------------
Less Distributions
Dividends from net investment income 0.02 -- 0.04 --
Distributions from realized gains on investments -- 0.64 0.24 --
------------- ------------ ------------ ---------------
Total Distributions 0.02 0.64 0.28 -
------------- ------------ ------------ ---------------
Net asset value at end of period $ 20.95 $ 17.92 $ 17.05 $15.58
============= ============ ============ ===============
Total Return (%) * 17.1 9.2 11.5 7.5 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 2.15 2.23 2.16 2.56 +
Ratio of expenses to average net assets before
expense reductions (%) ** 2.16 2.25 2.18 2.59 +
Ratio of net investment income (loss)
to average net assets (%) 0.98 0.19 0.23 (0.19)+
Portfolio turnover rate (%) 35 12 21 14
Net assets at end of period (000 omitted) $23,536 $18,163 $10,121 $3,188
</TABLE>
(A) As of April 1, 1996 INVESCO Capital Management, Inc. became the sub-advisor
to the Fund.
(B) Commenced operations April 1, 1996.
(C) Commenced operations May 4, 1998.
(D) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
26
<PAGE>
Sentinel World Fund (A)
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Period
Year Ended 5/4/98 through
Class C Shares 11/30/99(D) 11/30/98 (C)(D)
--------------- -----------------
<S> <C> <C>
Net asset value at beginning of period $18.05 $19.57
--------------- -----------------
Income (Loss) from Investment Operations
Net investment income (loss) 0.09 (0.02)
Net realized and unrealized gain (loss) on investments 2.94 (1.50)
--------------- -----------------
Total from investment operations 3.03 (1.52)
--------------- -----------------
Less Distributions
Dividends from net investment income -- --
Distributions from realized gains on investments -- --
--------------- -----------------
Total Distributions -- --
--------------- -----------------
Net asset value at end of period $21.08 $18.05
=============== =================
Total Return (%) * 16.8 (7.8)++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 2.28 2.20 +
Ratio of expenses to average net assets before
expense reductions (%) ** 2.29 2.21 +
Ratio of net investment income
to average net assets (%) 0.85 0.23 +
Portfolio turnover rate (%) 35 12
Net assets at end of period (000 omitted) $1,820 $1,013
</TABLE>
(A) As of April 1, 1996 INVESCO Capital Management, Inc. became the sub-advisor
to the Fund.
(B) Commenced operations April 1, 1996.
(C) Commenced operations May 4, 1998.
(D) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
27
<PAGE>
Sentinel Growth Index Fund seeks to match, as closely as possible before
expenses, the performance of the S&P 500/BARRA Growth Index.
Sentinel Growth Index Fund
Technology stocks continue to be well represented in the portfolio, with
Microsoft, Cisco, and Intel among the fund's largest holdings.
The Sentinel Growth Index Fund began operating on September 13, 1999.
The portfolio's return from inception through the end of the fiscal year was
6.5% and matched the 6.5% return for the S&P 500/BARRA Growth Index. We are
pleased to report that, as expected, the fund has been tracking the index
closely since inception.
Technology stocks continue to be well represented in the portfolio, with
Microsoft, Cisco, and Intel among the fund's largest holdings. Other top ten
holdings include such blue-chip companies as Wal-Mart, America On Line, and
General Electric.
The coming year will mark the Fund's first full year of operations. We look
forward to being able to offer access to the S&P 500/BARRA Growth Index, and the
dynamic segment of the American economy it represents.
/s/Robert L. Lee
Robert L. Lee, CFA
/s/Charles C. Schwartz
Charles C. Schwartz
"S&P 500/BARRA Growth" is a trademark of The McGraw-Hill Companies, Inc. and has
been licensed for use by Sentinel Advisors Company. Sentinel Growth Index Fund
is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of investing in
Sentinel Growth Index Fund.
28
<PAGE>
Sentinel Growth Index Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Shares Value
(Note 1)
- --------------------------------------------------------------------------------
Common Stocks 99.2%
Basic Materials 0.2%
Ecolab Inc. 680 $ 23,545
Freeport McMoran Cop. &
Gld. Cl. B 958 15,148
* Grace, W.R. & Co. 368 5,014
Hercules Inc. 549 13,039
------------
56,746
------------
Capital Goods 9.5%
AlliedSignal Inc. 3,097 185,239
Avery Dennison Corp. 696 41,325
Corning Inc. 1,486 139,220
General Electric Co. 19,075 2,479,750
Millipore Corp. 237 7,777
Pitney Bowes Inc. 1,607 77,036
* Sealed Air Corp. 441 20,727
* Solectron Corp. 1,627 134,024
Tyco International Ltd. 9,608 384,921
Waste Management Inc. 3,555 57,769
------------
3,527,788
------------
Communication Services 11.2%
AT&T Corp. 18,529 1,035,308
Bell Atlantic Corp. 8,972 568,040
BellSouth Corp. 10,921 504,414
* Global Crossings Ltd. 4,540 198,057
GTE Corp. 5,661 413,253
* Nextel Communications 2,110 209,154
SBC Communications 19,616 1,018,806
U S West Inc. 2,856 177,250
------------
4,124,282
------------
Consumer Cyclicals 8.5%
* Best Buy Company Inc. 1,173 73,312
Black & Decker Corp. 454 20,373
Dollar General 1,277 31,286
Dow Jones & Co. Inc. 577 34,981
Dun & Bradstreet Corp. 939 25,353
Gap Inc. 4,916 199,098
Hilton Hotels Corp. 1,438 14,470
Home Depot Inc. 8,612 680,886
IMS Health Inc. 1,838 43,308
Interpublic Group of Cos. 1,688 79,336
Jostens Inc. 169 3,105
* Kohls Corp. 958 69,156
Maytag Corp. 455 21,698
McGraw-Hill Inc. 1,137 64,454
Omnicom Group 1,041 91,738
Owens Corning 286 4,505
* Staples Inc. 2,643 62,111
Tandy Corp. 1,114 85,360
TJX Companies 1,772 46,404
Times Mirror Company -
Class A 311 20,079
Wal Mart Stores Inc. 25,831 1,488,511
------------
3,159,524
------------
Consumer Staples 13.9%
Anheuser-Busch Cos. Inc. 2,662 199,151
Avon Products 1,471 53,600
* Bed Bath & Beyond 730 22,812
Bestfoods Inc. 1,666 91,318
Campbell Soup Co. 2,489 111,072
Clorox Co. 1,339 59,669
Coca-Cola Co. 14,305 962,905
Colgate Palmolive Co. 3,374 185,148
Fort James Corp. 1,257 36,139
General Mills Inc. 1,808 68,139
Gillette Co. 6,307 253,462
Heinz, H.J. Co. 2,084 87,267
Hershey Foods Corp. 838 41,167
Kellogg Co. 2,332 78,996
Kimberly Clark Corp. 3,010 192,264
* Kroger Co. 4,858 103,536
Mckesson HBOC Inc. 1,574 36,792
Newell Rubbermaid Inc. 1,578 51,778
Pepsico Inc. 8,498 293,712
Procter & Gamble Co. 7,793 841,644
Quaker Oats Co. 804 52,461
Ralston Purina Co. 1,895 56,258
* Safeway Inc. 2,980 109,887
Sara Lee Corp. 5,254 127,410
Sysco Corp. 1,940 73,841
Time Warner Inc. 7,508 463,150
* Tricon Global Restaurants 910 37,765
Tupperware Corp. 299 5,326
Unilever NV 3,213 174,908
UST, Inc. 1,009 26,865
Walgreen 5,776 168,226
Wrigley, William Jr. Co. 718 59,729
------------
5,126,397
------------
Financials 0.9%
Capital One Financial Corp. 1,137 52,942
Providian Financial Corp. 850 67,256
Schwab, Charles Corp. 4,700 178,306
SLM Holding Corp. 948 46,985
------------
345,489
------------
Health Care 17.3%
Abbott Laboratories 8,805 334,590
Allergan Inc. 446 43,875
American Home Products 7,577 394,004
* Amgen Inc. 5,766 262,713
Baxter International Inc. 1,736 117,289
* Boston Scientific Corp. 2,374 50,151
Bristol Myers Squibb 11,458 837,150
* Guidant Corp. 1,795 89,750
Johnson & Johnson 7,777 806,864
Lilly, Eli & Co. 6,360 456,330
Medtronic Inc. 6,678 259,607
Merck & Co. 13,655 1,071,918
Pfizer Inc. 22,401 810,636
Schering Plough Corp. 8,534 436,301
Warner Lambert Co. 4,899 439,379
------------
6,410,557
------------
Technology 37.6%
Adobe Systems Inc. 744 51,103
* America Online Inc. 12,676 921,387
* Applied Materials Inc. 2,175 211,926
Automatic Data Processing 3,553 175,429
* BMC Software Inc. 1,459 106,233
* Ceridian Corp. 762 16,478
* Cisco Systems Inc. 18,820 1,678,509
Computer Associates Int'l. Inc. 3,033 197,145
* Compuware Corp. 2,081 70,364
* Comverse Technology 470 56,811
* Dell Computer Corp. 14,773 635,239
* EMC Corp. 5,836 487,671
Equifax Inc. 752 18,612
* Gateway Inc. 1,855 141,675
Int'l. Business Machines 10,524 1,084,630
Intel Corp. 19,214 1,473,474
* Lexmark Int'l. Group Inc.
Class A 779 64,657
Lucent Technologies Inc. 17,739 1,296,056
* Microsoft Corp. 29,573 2,692,529
* Network Appliance Inc. 491 57,784
* Oracle Corp. 8,377 568,065
* Parametric Technology Corp. 1,509 34,235
Paychex Inc. 1,398 55,833
PE Corp. 636 51,914
* Peoplesoft Inc. 1,373 25,830
* Qualcomm Inc. 847 306,879
* Sun Microsytems Inc. 4,474 591,686
* Tellabs Inc. 2,261 146,682
Texas Instruments Inc. 4,543 436,412
* Unisys Corp. 1,709 49,134
Xerox Corp. 3,789 102,540
* Xilinx Inc. 930 83,235
------------
13,890,157
------------
Transportation 0.1%
Kansas City Southern Industries 683 40,681
* US Airways Group Inc. 372 10,393
------------
51,074
------------
Total Common Stocks
(Cost $35,041,368) 36,692,014
------------
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
U.S. Government Agency
Obligations 6.0%
Federal National Mortgage Corporation
Agency Discount Note:
5.61%, 12/01/99
(Cost $2,200,000) 2,200M 2,200,000
------------
Total Investments
(Cost $37,241,368)** 38,892,014
Excess of Liabilities
Over Other Assets (5.2%) (1,910,008)
------------
Net Assets $36,982,006
============
- --------------------------------------------------------------------------------
* Non-income producing.
** Cost for federal income tax purposes is substantially similar. At November
30, 1999 net unrealized appreciation for federal income tax purposes
aggregated $1,650,646 of which $2,437,857 related to appreciated securities
and $787,211 related to depreciated securities.
See Notes to Financial Statements.
29
<PAGE>
Sentinel Growth Index Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $38,892,014
Cash and cash equivalents 2,227,515
Receivable for fund shares sold 771,877
Receivable for dividends 18,373
Receivable from fund administrator 18,037
-------------
Total Assets 41,927,816
-------------
Liabilities
Payable for securities purchased 4,909,820
Payable for fund shares repurchased 4,333
Accrued expenses 15,234
Management fee payable 6,990
Distribution fee payable (Class A Shares) 2,522
Distribution fee payable (Class B Shares) 5,285
Fund service fee payable 1,626
-------------
Total Liabilities 4,945,810
-------------
Net Assets Applicable to Outstanding Shares $36,982,006
=============
Class A Shares
$28,530,231 / 1,339,455 shares outstanding $ 21.30
Sales Charge -- 2.50% of offering price 0.55
-------------
Maximum Offering Price $ 21.85
=============
Class B Shares
$8,451,775 / 397,238 shares outstanding $ 21.28
=============
Net Assets Represent
Capital stock at par value $ 17,367
Paid-in capital 35,318,759
Accumulated undistributed net investment income 12,159
Accumulated undistributed net realized loss
on investments (16,925)
Unrealized appreciation of investments 1,650,646
-------------
Net Assets $36,982,006
=============
Investments at Cost $37,241,368
=============
See Notes to Financial Statements.
Sentinel Growth Index Fund
Statement of Operations
For the Period from Sept. 13, 1999 through Nov. 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Dividends $ 28,166
Interest 13,086
-------------
Total Income 41,252
-------------
Expenses:
Management advisory fee 11,459
Transfer agent and custodian 21,844
Distribution expense (Class A Shares) 3,114
Distribution expense (Class B Shares) 6,838
Accounting services 842
Auditing fees 1,150
Legal fees 575
Reports and notices to shareholders 225
Registration and filing fees 801
Directors' fees and expenses 177
Other 424
-------------
Total Expenses 47,449
Expense Reimbursement (18,037)
Expense Offset (319)
-------------
Net Expenses 29,093
-------------
Net Investment Income 12,159
-------------
Realized and Unrealized Gain (Loss) on Investments
Net realized loss on sales of investments (16,925)
Net change in unrealized appreciation 1,650,646
-------------
Net Realized and Unrealized Gain on Investments 1,633,721
-------------
Net Increase in Net Assets from Operations $1,645,880
=============
See Notes to Financial Statements.
30
<PAGE>
Sentinel Growth Index Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Period
9/13/99 through
11/30/99
---------------
Increase in Net Assets from Operations
Net investment income $ 12,159
Net realized loss on sales of investments (16,925)
Net change in unrealized appreciation 1,650,646
---------------
Net increase in net assets from operations 1,645,880
---------------
Distributions to Shareholders
From net investment income
Class A Shares --
Class B Shares --
From net realized gain on investments
Class A Shares --
Class B Shares --
---------------
Total distributions to shareholders --
---------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 27,495,569
Class B Shares 8,101,219
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares --
Class B Shares --
---------------
35,596,788
Less: Payments for shares reacquired
Class A Shares (149,693)
Class B Shares (110,969)
---------------
Increase in net assets from capital share transactions 35,336,126
---------------
Total Increase in Net Assets for period 36,982,006
Net Assets: Beginning of period --
---------------
Net Assets: End of period $ 36,982,006
===============
Undistributed Net Investment Income
at End of Period $ 12,159
===============
See Notes to Financial Statements.
31
<PAGE>
Sentinel Growth Index Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Period Period
9/13/99 through 9/13/99 through
Class A Shares 11/30/99 (A)(B) Class B Shares 11/30/99 (A)(B)
--------------- ---------------
<S> <C> <C>
Net asset value at beginning of period $ 20.00 $20.00
--------------- ---------------
Income (Loss) from Investment Operations
Net investment income (loss) 0.02 (0.01)
Net realized and unrealized gain on investments 1.28 1.29
--------------- ---------------
Total from investment operations 1.30 1.28
--------------- ---------------
Less Distributions
Dividends from net investment income -- --
Distributions from realized gains on investments -- --
--------------- ---------------
Total Distributions -- --
--------------- ---------------
Net asset value at end of period $ 21.30 $21.28
=============== ===============
Total Return (%) * 6.5 ++ 6.4 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.63 + 1.17 +
Ratio of expenses to average net assets before
expense reductions (%) ** 1.11 + 1.66 +
Ratio of net investment income (loss)
to average net assets (%) 0.46 + (0.14)+
Ratio of net investment income (loss) to average net assets
before voluntary expense reimbursements (%) (0.01)+ (0.62)+
Portfolio turnover rate (%) 2.5 ++ 2.5 ++
Net assets at end of period (000 omitted) $28,530 $8,452
</TABLE>
(A) Commenced operations September 13, 1999.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
32
<PAGE>
Sentinel Common Stock Fund seeks a combination of growth of capital, current
income, growth of income, and relatively low risk as compared with the stock
market as a whole, by investing mainly in a diverse group of common
stocks of well-established companies.
Sentinel Common Stock Fund
Over the past five years, annual returns for the Sentinel Common Stock Fund have
averaged nearly 20%, a level of performance which has ranked the Fund
consistently well against its peer funds.
The Sentinel Common Stock Fund Class A shares produced a total return of 6.0%
for the fiscal year ended November 30, 1999. This figure compares to a 7.4%
annual return for the average Morningstar Large Capitalization Value fund and
12.2% for the average Lipper Large-Cap Value fund. Total returns were
substantially below the 20.9% for the S&P 500 index.
The Stock Market
The past year in the stock market has been unlike any other in recent memory. It
will be remembered as one in which the most aggressive, even speculative,
investments outperformed the vast majority of common stocks. Although the
returns registered for the S&P 500 index were again very strong, those for the
technology and internet-laden NASDAQ Composite index were truly spectacular. As
but one indication of the degree of speculation evident in the markets, initial
public offerings - companies mainly in the communications, internet and
technology sector with little operating history, but tremendous perceived
futures - were bid to astronomical levels by investors.
The "average" stock, however, as measured by the advance/decline ratio for the
New York Stock Exchange, was down for the fiscal year. Continuing a trend in
force since the second quarter of 1998, the market's focus narrowed as an ever
smaller group of stocks influenced the overall returns of the popular indices.
Meanwhile, and in the background, a growing majority of stocks languished or
fell in price. In this environment, only investors heavily weighted in
technology, to the exclusion of other sectors, outperformed the indices.
Fund Analysis
Increasing evidence of an enduring recovery in international economies lead us
to increase our exposure to basic industries, energy and global consumer staples
companies during 1999. Although utilities have been poor relative performers in
1999, we continue to believe that certain well-positioned participants that
benefit from deregulation in this sector merit inclusion in the portfolio,
especially given their increasing growth rates coupled with depressed
valuations. We feel health care stocks should continue to be well represented in
the portfolio, given above-average long-term growth trends. We favor a broad mix
of pharmaceuticals, health care services and medical supplies companies.
- --------------------------------------------------------------------------------
Average Annual Total Return - Class A Shares
Through 11/30/99
w/sales w/o sales
Period charge+ charge
- --------------------------------------------------------------------------------
1 Year 0.7% 6.0%
- --------------------------------------------------------------------------------
5 Years 18.6% 19.9%
- --------------------------------------------------------------------------------
10 Years 13.2% 13.8%
- --------------------------------------------------------------------------------
+Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel Common Stock Fund Performance - Class A Shares
Ten Years Ended 11/30/99
[GRAPH]
Sentinal Standard &
Common Mornongstar Poor's 500
Stock Fund Large Value Stock Index
Nov-89 10,000 10,000 10,000
Nov-90 9,273 9,212 9,654
Nov-91 11,229 11,167 11,615
Nov-92 13,104 13,273 13,756
Nov-93 14,251 15,048 15,142
Nov-94 13,993 15,275 15,304
Nov-95 18,587 19,914 20,954
Nov-96 23,635 25,052 26,795
Nov-97 28,564 30,508 34,440
Nov-98 32,651 34,200 42,593
Nov-99 34,597 36,714 51,496
Chart Ending Values & Legend
Ten years ended 11/30/99
Sentinel Common Stock Fund $34,597
Standard & Poor's 500 Stock Index* $51,496
Morningstar Large Value $36,714
* An unmanaged index of stocks reflecting average prices in the stock market.
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 5% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results. Performance will vary
for each class of shares due to differences in share class expenses.
33
<PAGE>
Expecting a moderation in domestic consumer spending trends from above-average
levels, we reduced exposure to areas such as retailing that face difficult
earnings comparisons and may be negatively impacted by an increasingly leveraged
consumer. Financial holdings were also pared due to the more hostile interest
rate environment engineered by the Fed, as well as moderating growth trends. We
continue to hold a number of reasonably priced technology issues, and expect to
increase exposure to the sector when valuations inevitably contract.
Revisiting the Fund's Objectives
As a core large capitalization value-oriented fund, Sentinel Common Stock Fund
maintains a diversified portfolio spread across most, if not all, sectors of the
stock market. Our approach is to identify and purchase companies that we believe
have exceptional business franchises and to hold such stocks with a long-term
horizon in mind. Price is a major part of the evaluation process, and we are
generally able to buy excellent companies when temporary business dislocations
or investor concerns depress share prices.
In a year like 1999, with its narrow stock market and performance concentrated
in the technology sector, Sentinel Common Stock Fund's value-oriented investment
style is unlikely to match the Standard & Poors' 500 stock index returns.
However, our returns were quite competitive compared to our peer group of Large
Cap Value managers. Over the past five years, annual returns for the Sentinel
Common Stock Fund have averaged nearly 20%, a level of performance which has
ranked the Fund consistently well against its peer funds. And while recent
returns may appear modest relative to certain market benchmarks and funds with
higher risk profiles, we continue to believe firmly that a diversified portfolio
of reasonably valued, high quality stocks will produce attractive risk adjusted
returns over time, as has historically been the case.
A number of factors suggest to us that a value investing approach could be
particularly rewarding in the years ahead. The concentrated nature of the
market's recent advance in technology is probably not sustainable. We suspect
that a meaningful correction in this area is increasingly likely in the not too
distant future. Further, the superior performance of growth versus value
management has persisted for over five years, with the past year leading to a
historic divergence between the two approaches. While it is always difficult to
predict when conditions will change, history has shown that all phenomena in the
stock market are cyclical.
Finally, we are also struck by the compelling value that exists in many of the
solid companies in which the Sentinel Common Stock Fund invests. We continue to
believe that our value investment approach - buying strong companies at
relatively cheap prices - will be a winning strategy long-term and should
represent a meaningful weighting in a diversified equity portfolio. As always we
appreciate your continuing support.
/s/ Van Harissis
Van Harissis, CFA
/s/ Danial J. Manion
Danial J. Manion, CFA
34
<PAGE>
Sentinel Common Stock Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Shares Value
(Note 1)
- --------------------------------------------------------------------------------
Common Stocks 97.2%
Basic Materials 7.1%
Alcoa Inc. 358,800 $ 23,501,400
Dupont (EI) de Nemours 116,726 6,937,902
International Paper 415,000 21,657,813
Monsanto 1,225,000 51,679,687
Weyerhaeuser Co. 285,000 17,456,250
-------------
121,233,052
-------------
Capital Goods 5.3%
Emerson Electric 500,000 28,500,000
General Electric 215,000 27,950,000
Parker-Hannifin 612,000 28,802,250
Tyco International 100,000 4,006,250
-------------
89,258,500
-------------
Communications Services 5.7%
AT & T Corp. 450,000 25,143,750
GTE Corp. 625,000 45,625,000
Sprint Corp. 374,000 25,946,250
-------------
96,715,000
-------------
Consumer Cyclicals 11.0%
Ford Motor 688,300 34,759,150
Marriott Int'l. - Class A 885,000 28,817,812
May Department Stores 550,470 18,509,554
McGraw-Hill 600,000 34,012,500
Omnicom Group 604,400 53,262,750
Sherwin - Williams 800,000 17,150,000
-------------
186,511,766
-------------
Consumer Staples 15.6%
BestFoods 484,800 26,573,100
* Comcast Corp. - Special
Class A 225,000 10,167,187
Fortune Brands Inc. 564,900 19,312,519
Gillette Co. 240,000 9,645,000
Kimberly-Clark 1,060,000 67,707,500
* Kroger Inc. 1,205,000 25,681,563
McCormick & Co. 669,500 21,465,844
PepsiCo Inc. 1,485,600 51,346,050
Philip Morris 390,000 10,261,875
Sara Lee 900,000 21,825,000
-------------
263,985,638
-------------
Energy 10.8%
Burlington Resources 480,000 16,140,000
Chevron 240,000 21,255,000
Conoco Inc.- Class B 817,529 21,409,041
Exxon 200,000 15,862,500
Halliburton 570,000 22,051,875
Mobil 370,000 38,595,625
Royal Dutch Petroleum 325,000 18,850,000
Santa Fe Int'l 345,000 7,870,312
Schlumberger Ltd. 350,000 21,021,875
-------------
183,056,228
-------------
Financials 17.0%
Allstate Corp. 600,000 $ 15,712,500
American Express 279,000 42,216,188
American General 495,000 36,289,688
American Int'l. Group 328,187 33,885,308
Bank of America Corp. 367,770 21,514,545
Bank of New York 869,200 34,659,350
Chase Manhattan Corp. 325,000 25,106,250
Citigroup 600,000 32,325,000
Fannie Mae 306,900 20,447,212
Jefferson-Pilot 400,000 27,150,000
-------------
289,306,041
-------------
Health Care 9.6%
American Home Products 1,164,000 60,528,000
Bristol-Myers Squibb Co. 57,000 4,164,562
Johnson & Johnson 430,000 44,612,500
* Manor Care Inc. 450,000 9,028,125
Pharmacia & Upjohn 570,000 31,171,875
Schering-Plough Corp. 250,000 12,781,250
-------------
162,286,312
-------------
Technology 7.8%
Automatic Data Processing 620,000 30,612,500
* BMC Software 95,000 6,917,188
Computer Assoc. Int'l 100,000 6,500,000
Electronic Data Systems 400,000 25,725,000
* General Instrument Corp. 220,000 14,410,000
Hewlett Packard 94,000 8,918,250
Intel Corp. 125,000 9,585,937
International Business
Machines 289,000 29,785,062
-------------
132,453,937
-------------
Transportation 1.0%
Union Pacific Corp. 348,900 16,420,106
-------------
Utilities 6.3%
Duke Energy 640,000 32,440,000
Enron Corp. 1,150,000 43,771,875
Florida Progress Corp. 450,000 19,237,500
FPL Group Inc. 275,000 12,031,250
-------------
107,480,625
-------------
Total Common Stocks
(Cost $913,049,129) 1,648,707,205
-------------
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Corporate Short-Term Notes 3.3%
G.E. Capital Corp.
5.55%, 12/10/99 10,000M $ 9,986,124
IBM Credit Corp.
5.45%, 12/07/99 12,000M 11,989,100
Merrill Lynch
5.49%, 12/02/99 7,000M 6,998,933
National City Credit
6.02%, 01/25/00 15,000M 14,862,042
Norwest Financial
5.38%, 12/02/99 12,000M 11,998,207
---------------
Total Corporate Short-Term Notes
(Cost $55,834,406) 55,834,406
---------------
Total Investments
(Cost $968,883,535)** 1,704,541,611
Excess of Liabilities
Over Other Assets (0.5%) (8,962,385)
---------------
Net Assets $1,695,579,226
===============
- --------------------------------------------------------------------------------
* Non-income producing.
** Also cost for federal income tax purposes. At November 30, 1999, unrealized
appreciation for federal income tax purposes aggregated $735,658,076 of
which $746,935,071 related to appreciated securities and $11,276,995
related to depreciated securities.
See Notes to Financial Statements.
35
<PAGE>
Sentinel Common Stock Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $1,704,541,611
Receivable for fund shares sold 196,606
Receivable for dividends and interest 3,808,889
---------------
Total Assets 1,708,547,106
---------------
Liabilities
Payable for securities purchased 1,793,061
Payable for fund shares repurchased 2,294,919
Payable to custodian 6,207,880
Accrued expenses 343,553
Management fee payable 789,125
Distribution fee payable (Class A Shares) 1,273,545
Distribution fee payable (Class B Shares) 117,265
Distribution fee payable (Class C Shares) 4,098
Fund service fee payable 144,434
--------------
Total Liabilities 12,967,880
--------------
Net Assets Applicable to Outstanding shares $1,695,579,226
==============
Net Asset Value and Offering Price per Share
Class A Shares
$1,538,670,516 / 35,854,259 shares outstanding $ 42.91
Sales Charge -- 5.00% of offering price 2.26
--------------
Maximum Offering Price $ 45.17
==============
Class B Shares
$149,586,100 / 3,493,632 shares outstanding $ 42.82
==============
Class C Shares
$7,322,610 / 170,692 shares outstanding $ 42.90
==============
Net Assets Represent
Capital stock at par value $ 395,186
Paid-in capital 831,036,108
Accumulated undistributed net investment income 2,211,664
Accumulated undistributed net realized gain
on investments 126,278,192
Unrealized appreciation of investments 735,658,076
--------------
Net Assets $1,695,579,226
==============
Investments at Cost $ 968,883,535
==============
See Notes to Financial Statements.
Sentinel Common Stock Fund
Statement of Operations
For the Year Ended November 30, 1999
Investment Income
Income:
Dividends $ 28,993,677
Interest 3,890,638
--------------
Total Income 32,884,315
--------------
Expenses:
Management advisory fee 9,787,856
Transfer agent and custodian 1,910,540
Distribution expense (Class A Shares) 4,800,000
Distribution expense (Class B Shares) 1,473,963
Distribution expense (Class C Shares) 73,860
Accounting services 506,485
Auditing fees 95,600
Legal fees 51,600
Reports and notices to shareholders 113,500
Registration and filing fees 42,890
Directors' fees and expenses 161,493
Other 85,894
--------------
Total Expenses 19,103,681
Expense Offset (101,665)
--------------
Net Expenses 19,002,016
--------------
Net Investment Income 13,882,299
--------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on sales of investments 126,280,438
Net change in unrealized appreciation (depreciation) (37,607,465)
--------------
Net Realized and Unrealized Gain on Investments 88,672,973
--------------
Net Increase in Net Assets from Operations $102,555,272
==============
See Notes to Financial Statements.
36
<PAGE>
Sentinel Common Stock Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
---------------- ----------------
Increase (Decrease) in Net Assets from Operations
Net investment income $ 13,882,299 $ 15,663,251
Net realized gain on sales of investments 126,280,438 149,403,464
Net change in unrealized appreciation
(depreciation) (37,607,465) 55,634,791
---------------- ----------------
Net increase in net assets from operations 102,555,272 220,701,506
---------------- ----------------
Distributions to Shareholders
From net investment income
Class A Shares (14,106,752) (16,362,871)
Class B Shares (147,613) (275,957)
Class C Shares (1,207) (1,857)
From net realized gain on investments
Class A Shares (137,654,972) (160,459,928)
Class B Shares (11,316,488) (8,547,448)
Class C Shares (434,275) --
---------------- ----------------
Total distributions to shareholders (163,661,307) (185,648,061)
---------------- ----------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 143,448,642 99,401,414
Class B Shares 36,334,463 53,313,684
Class C Shares 36,129,387 5,462,096
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 126,055,269 146,514,487
Class B Shares 11,241,443 8,661,766
Class C Shares 432,773 1,668
---------------- ----------------
353,641,977 313,355,115
Less: Payments for shares reacquired
Class A Shares (285,334,612) (176,666,662)
Class B Shares (23,100,421) (12,751,018)
Class C Shares (34,476,507) (334,825)
---------------- ----------------
Increase in net assets from capital share
transactions 10,730,437 123,602,610
---------------- ----------------
Total Increase (Decrease) in Net Assets for
period (50,375,598) 158,656,055
Net Assets: Beginning of period 1,745,954,824 1,587,298,769
---------------- ----------------
Net Assets: End of period $ 1,695,579,226 $ 1,745,954,824
================ ================
Undistributed Net Investment Income
at End of Period $ 2,211,664 $ 2,583,147
================ ================
See Notes to Financial Statements.
37
<PAGE>
Sentinel Common Stock Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 44.56 $ 44.09 $ 40.60 $ 35.21 $ 28.25
------------- ------------- ------------- ------------- -------------
Income from Investment Operations
Net investment income 0.37 0.42 0.57 0.59 0.72
Net realized and unrealized gain on investments 2.17 5.19 7.03 8.18 8.09
------------- ------------- ------------- ------------- -------------
Total from investment operations 2.54 5.61 7.60 8.77 8.81
------------- ------------- ------------- ------------- -------------
Less Distributions
Dividends from net investment income 0.38 0.45 0.57 0.61 0.74
Distributions from realized gains on investments 3.81 4.69 3.54 2.77 1.11
------------- ------------- ------------- ------------- -------------
Total Distributions 4.19 5.14 4.11 3.38 1.85
------------- ------------- ------------- ------------- -------------
Net asset value at end of period $ 42.91 $ 44.56 $ 44.09 $ 40.60 $ 35.21
============= ============= ============= ============= =============
Total Return (%) * 6.0 14.3 20.9 27.2 32.8
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.00 1.01 1.04 1.06 1.09(%)
Ratio of expenses to average net assets before
expense reductions (%)** 1.00 1.02 1.05 1.07 1.10
Ratio of net investment income to average net
assets (%) 0.85 0.98 1.41 1.64 2.29
Portfolio turnover rate (%) 37 28 24 22 22
Net assets at end of period (000 omitted) $ 1,538,671 $ 1,610,630 $ 1,509,999 $ 1,306,592 $ 1,057,944
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Commenced operations May 4, 1998.
(C) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements and
include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
38
<PAGE>
Sentinel Common Stock Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Eight Months
Year Ended Year Ended Year Ended Ended
Class B Shares 11/30/99 (C) 11/30/98 (C) 11/30/97 (C) 11/30/96 (A)(C)
------------ ------------ ------------ ---------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 44.47 $44.03 $ 40.57 $ 35.43
-------- -------- -------- --------
Income from Investment Operations
Net investment income 0.03 0.07 0.27 0.22
Net realized and unrealized gain on
investments 2.18 5.19 6.99 5.05
-------- -------- -------- --------
Total from investment operations 2.21 5.26 7.26 5.27
-------- -------- -------- --------
Less Distributions
Dividends from net investment income 0.05 0.13 0.26 0.13
Distributions from realized gains on
investments 3.81 4.69 3.54 -
-------- -------- -------- --------
Total Distributions 3.86 4.82 3.80 0.13
-------- -------- -------- --------
Net asset value at end of period $ 42.82 $ 44.47 $ 44.03 $ 40.57
======== ======== ======== ========
Total Return (%) * 5.1 13.4 19.9 14.9 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.80 1.81 1.79 1.91 +
Ratio of expenses to average net assets
before expense reductions (%)** 1.81 1.81 1.80 1.92 +
Ratio of net investment income
to average net assets (%) 0.05 0.19 0.66 0.80 +
Portfolio turnover rate (%) 37 28 24 22
Net assets at end of period (000 omitted) $149,586 $129,966 $77,299 $27,257
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Commenced operations May 4, 1998.
(C) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements and
include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
39
<PAGE>
Sentinel Common Stock Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
Period
Year Ended 5/4/98 through
Class C Shares 11/30/99 (C) 11/30/98 (B)(C)
------------ ---------------
Net asset value at beginning of period $44.55 $45.23
------ ------
Income (Loss) from Investment Operations
Net investment income (loss) (0.03) 0.06
Net realized and unrealized gain (loss) on
investments 2.20 (0.71)
------ ------
Total from investment operations 2.17 (0.65)
------ ------
Less Distributions
Dividends from net investment income 0.01 0.03
Distributions from realized gains on
investments 3.81 -
------ ------
Total Distributions 3.82 0.03
------ ------
Net asset value at end of period $42.90 $44.55
====== ======
Total Return (%) * 5.0 (1.4)++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.90 1.92 +
Ratio of expenses to average net assets before
expense reductions (%)** 1.90 1.92 +
Ratio of net investment income (loss)
to average net assets (%) (0.04) 0.08 +
Portfolio turnover rate (%) 37 28
Net assets at end of period (000 omitted) $7,323 $5,358
(A) Commenced operations April 1, 1996.
(B) Commenced operations May 4, 1998.
(C) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements and
include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
40
<PAGE>
Sentinel Balanced Fund seeks a combination of growth of capital and current
income, with relatively low risk and relatively low fluctuations in value, by
investing in high quality common stocks and investment grade bonds.
Sentinel Balanced Fund
Looking ahead to the year 2000, we expect interest rates to at least hold steady
if not drift slightly lower as domestic inflation should remain well contained.
There still exists potential for a significant bond market rally should U.S.
economic growth slow significantly.
The Sentinel Balanced Fund Class A shares produced a total return of 2.6% for
the fiscal year ended November 30, 1999. This figure compares to an 8.5% annual
return for the average Morningstar Domestic Hybrid Fund. Returns were
substantially below the 20.9% total return for the S&P 500 index, but ahead of
the modestly negative return for the Lehman Aggregate Bond Index.
Returns for the major stock market indices continue to be dominated by the
technology, telecommunications, and internet-related areas. In essence, returns
for these stocks surpassed those for every other sector of the stock market. The
technology-heavy Nasdaq composite index had truly staggering returns over the
past twelve months. The relative standing of most balanced funds over the past
year can be directly tied to the portfolios' exposure to the technology sector.
While the Sentinel Balanced Fund holds a number of technology industry
participants in the equity portion, our weighting in this sector has not been
high enough for us to keep pace with returns for some of our peers and the
equity market benchmarks. Additionally, within the tech sector, the strongest
performance has come from those issues with the highest multiples, making it
difficult for a disciplined value investor to participate in this sector's
upside.
Interest rates rose steadily over the period as concerns grew over the prospect
of higher future inflation levels in the U.S. economy. "New Era" economic
thinking, of strong growth and low inflation, gave way to traditionalist views
of supply and demand imbalances, most notably in the U.S. labor markets, leading
to higher inflation. In addition, surging commodity prices and a weakening U.S.
dollar contributed to bond investor anxiety. Yields on the 30-year U.S. Treasury
Bond rose 121 basis points to 6.29%. Defensive sectors of the fixed-income
market, in particular mortgage-backed securities, vastly outperformed those of
comparable duration U.S. Treasuries by a wide margin, completely reversing the
late 1998 trend.
Within the equity portion of the Sentinel Balanced Fund, increasing evidence of
an enduring recovery in international economies lead us to increase our exposure
to basic industries, energy and global consumer staples companies during the
past year. We expect a moderation in the increases in domestic consumer
spending, and as a result we reduced exposure to areas such as retailing that
face
- --------------------------------------------------------------------------------
Average Annual Total Return - Class A Shares
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year -2.6% 2.6%
- --------------------------------------------------------------------------------
5 Years 12.9% 14.0%
- --------------------------------------------------------------------------------
10 Years 10.0% 10.6%
- --------------------------------------------------------------------------------
+ Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel Balanced Fund Performance - Class A Shares
Ten Years Ended 11/30/99
[GRAPH]
10,000 10,000 10,000 10,000
9,667 9,880 9,654 10,758
11,359 11,680 11,615 12,308
12,761 13,318 13,756 13,399
14,004 14,861 15,142 14,858
13,494 14,633 15,304 14,403
16,788 18,114 20,954 16,945
19,571 20,941 26,795 17,973
22,592 24,236 34,440 19,331
25,347 26,552 42,593 21,158
25,996 28,777 51,496 21,149
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Indices and Average shown above, you should note
that the Fund's performance reflects the maximum 5% sales charge and includes
all expenses and management fees, while that shown for the Indices and Average
does not. Past performance is not predictive of future results. Performance will
vary for each class of shares due to differences in share class expenses.
Chart Ending Values & Legend
Ten years ended 11/30/99
Sentinel Balanced Fund $25,996
Standard & Poor's 50 Stock Index* $51,496
Lehman Aggregate Bond Index+ $21,149
Morningstar Domestic Hybrid $28,777
* An unmanaged index of stocks reflecting average prices in the stock market.
+ An unmanaged index of bonds reflecting average prices in the bond market.
41
<PAGE>
difficult sales trends and an increasingly leveraged consumer. Financial
holdings were also pared due to a moderating earnings growth outlook and
interest rate concerns. We feel healthcare stocks should continue to be well
represented in the portfolio, given above-average growth trends, and favor a
broad mix of pharmaceutical, medical supply and health care service companies.
Utilities were the worst performing sector of the stock market over the past
twelve months, however we continue to believe that shares of some better
positioned participants in this sector offer attractive total return potential.
We would expect to increase exposure to the technology sector when valuations
inevitably contract.
The Sentinel Balanced Fund began the year with a mix of 60% stocks, 36% bonds
and 4% cash and cash equivalents. As the stock market advance accelerated
towards the end of the fiscal year and long-term interest rates moved towards
recent highs, we began to increase the fixed-income exposure of the portfolio,
believing the total return potential for bonds was relatively attractive versus
the risks that existed in the equity markets. As of November 30, 1999, the
Sentinel Balanced Fund's asset allocation was 56% stocks, 43% bonds and 1% cash
and cash equivalents.
Looking ahead to the year 2000, we expect interest rates to at least hold
steady, if not drift slightly lower, as domestic inflation should remain well
contained. There still exists potential for a significant bond market rally
should U.S. economic growth slow significantly. The fixed income segment of the
Sentinel Balanced Fund remains focused on quality investments in the government,
corporate and mortgage-backed sectors. Corporate bonds appear to offer good
relative value at current historically wide spread levels.
The divergence of returns for balanced portfolios that have invested their
equity component in the growth style versus those employing a value approach has
been unprecedented. The Sentinel Balanced Fund's returns are consistent with
those of other managers with a value approach. We continue to believe that a
diversified portfolio of reasonably valued, high quality stocks and an actively
managed bond component will produce attractive risk adjusted total returns.
After an unusually long period of superior growth stock performance, a number of
factors suggest to us that a value stock focus could be relatively rewarding for
shareholders in the Sentinel Balanced Fund in the coming year. We appreciate
your continuing support of our efforts.
/s/ Van Harissis
Van Harissis, CFA
/s/ David M. Brownlee
David M. Brownlee, CFA
42
<PAGE>
Sentinel Balanced Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
U.S. Government Obligations 24.5%
U.S. Treasury Obligations 12.4%
10-Year:
Note 5.5%, '09 15,000M $14,277,150
Note 6%, '09 1,500M 1,481,415
-------------
15,758,565
-------------
30-Year:
Bond 7.25%, '16 2,500M 2,661,500
Bond 8.875%, '19 5,000M 6,214,750
Bond 6.25%, '23 5,250M 5,079,427
Bond 6.125%, '29 14,500M 14,216,525
-------------
28,172,202
-------------
Total U.S. Treasury Obligations 43,930,767
=============
U.S. Government Agency Obligations 12.1%
Federal Home Loan Mortgage Corporation 3.1%
Mortgage-Backed Securities:
15-Year:
9%, '05 996M 1,030,006
9.5%, '05 2,242M 2,356,292
9.5%, '06 867M 914,463
7%, '10 593M 593,477
7.5%, '10 818M 830,883
7.5%, '10 744M 755,515
-------------
6,480,636
-------------
30-Year:
8%, '08 938M 970,752
9.25%, 11 3,292M 3,428,658
-------------
4,399,410
-------------
Total Federal Home
Loan Mortgage Corporation 10,880,046
-------------
Federal National Mortgage Association 8.4%
Mortgage-Backed Securities:
10-Year:
9%, '06 1,170M 1,220,540
-------------
15-Year:
7.5%, '07 738M 747,441
7.5%, '12 2,659M 2,693,476
10.5%, '12 225M 238,553
-------------
3,679,470
-------------
30-Year:
10.25%, '17 902M 979,748
8.5%, '24 1,193M 1,230,813
8.5%, '26 3,560M 3,672,462
8.5%, '26 2,318M 2,392,068
8%, '27 1,834M 1,861,788
6%, '28 1,766M 1,638,570
6%, '28 1,141M 1,058,416
7.5%, '28 1,704M 1,700,937
8%, '28 689M 699,337
8.5%, '28 1,831M 1,889,739
6%, '29 497M 461,335
6%, '29 1,441M 1,337,089
7%, '29 4,650M 4,552,223
9%, '29 1,408M 1,473,725
-------------
24,948,250
-------------
Total Federal National
Mortgage Association 29,848,260
-------------
Government National Mortgage Association 0.6%
Mortgage-Backed Securities:
15-Year:
7%, '13 1,947M $ 1,949,022
-------------
30-Year:
9%, '09 26M 27,142
-------------
Total Government
National Mortgage Association 1,976,164
-------------
Total U.S. Government
Agency Obligations 42,704,470
-------------
Total U.S. Government Obligations
(Cost $87,889,156) 86,635,237
-------------
Collateralized Mortgage
Obligations 1.5%
Rali 1996-QS1 6.7%, '26
(Cost $5,294,609) 5,500M 5,263,720
-------------
Bonds 17.5%
Aerospace 2.1%
Lockheed Martin Corp.
8.5%, '29 4,000M 3,955,000
Raytheon Co. 7%, '28 3,850M 3,320,625
-------------
7,275,625
-------------
Automobile & Auto Parts 1.4%
Ford Motor Company
6.375%, '29 3,000M 2,572,500
Lear Corporation
7.96%, '05 (a) 1,000M 972,500
TRW Inc. 7.125%, '09 (a) 1,500M 1,440,000
-------------
4,985,000
-------------
Building Materials/Construction 0.8%
Owens Corning 7.5%, '05 3,000M 2,910,000
-------------
Chemicals 0.6%
IMC Global Inc. 7.4%, '02 2,000M 1,985,000
-------------
Computer Products & Services 0.4%
Sun Microsystems Inc.
7%, '02 1,500M 1,501,875
-------------
Consumer Services 0.2%
Service Corp. 6%, '05 1,000M 795,000
-------------
Containers & Packaging 0.6%
Crown Cork & Seal
7.125%, '02 2,250M 2,227,500
-------------
Energy 0.7%
Kinder Morgan Inc.
6.45%, '03 1000M 970,000
Union Pacific Resources
7.3%, '09 1,500M 1,458,750
-------------
2,428,750
-------------
Financial Institutions 1.0%
Finova Capital Corp.
7.25%, '04 2,500M 2,478,125
Household Finance Corp.
7.2%, '06 1,000M 998,750
-------------
3,476,875
-------------
Foods 0.5%
Archer-Daniels-Midland
6.625%, '29 2,000M $ 1,757,500
-------------
Foreign Financial Institutions 1.1%
Banque National de Paris
7.738%, '49 (a) 2,500M 2,328,125
Societe Generale 7.64%, '49 1,750M 1,612,188
-------------
3,940,313
-------------
Foreign Industrial 0.7%
Laidlaw Inc. 7.65%, '06 2,625M 2,483,906
-------------
Foreign Utilities-Electric 0.5%
Korea Electric Power
7.75%, '13 1,000M 936,250
Korea Electric Power 7%, '27 1,000M 930,000
-------------
1,866,250
-------------
Foreign Utilities-Telephone 0.4%
A T & T Canada
7.65%, '06 (a) 1,500M 1,511,250
-------------
Industrial-Transportation 0.4%
ERAC USA Finance
6.625%, '06 (a) 1,500M 1,430,625
-------------
Lodging 0.5%
Marriott Int'l. Inc.
6.625%, '03 1,750M 1,697,500
-------------
Oil Field Equipment & Services 0.2%
Nabors Industries Inc.
6.8%, '04 750M 730,312
-------------
Real Estate Investment Trusts 0.3%
Simon Debartolo
6.625%, '03 1,000M 960,000
-------------
Retail 1.7%
J. C. Penney Inc. 7.25%, '02 4,500M 4,432,500
Safeway Stores 7%, '02 1,500M 1,496,250
-------------
5,928,750
-------------
Telecommunications 2.2%
Comsat 8.05%, '06 2,000M 2,124,980
MCI Worldcom Inc.
6.4%, '05 2,000M 1,942,500
Sprint Capital Corp.
6.875%, '28 2,000M 1,820,000
US West Capital Funding
6.25%, '05 2,000M 1,907,500
-------------
7,794,980
-------------
Tobacco 0.2%
Dimon Inc. 8.875%, '06 1,000M 906,250
Utilities-Electric 1.0%
Cleveland Electric
7.67%, '04 1,000M 996,250
CMS Energy Corp.
6.75%, '04 1,000M 936,250
Duke Capital 7.5%, '09 1,500M 1,509,375
-------------
3,441,875
-------------
Total Bonds
(Cost $63,701,750) 62,035,136
-------------
(continued)
43
<PAGE>
Sentinel Balanced Fund
Investment in Securities (cont'd.)
at November 30, 1999
- --------------------------------------------------------------------------------
Shares Value
(Note 1)
- --------------------------------------------------------------------------------
Common Stocks 56.2%
Basic Materials 4.2%
Alcoa Inc. 39,600 $ 2,593,800
Dupont (EI) de Nemours 17,507 1,040,572
International Paper 49,000 2,557,187
Monsanto 150,000 6,328,125
Weyerhaeuser Co. 40,000 2,450,000
-------------
14,969,684
-------------
Capital Goods 2.9%
Emerson Electric 31,200 1,778,400
General Electric 28,000 3,640,000
Parker-Hannifin 77,000 3,623,812
Tyco International 25,000 1,001,562
-------------
10,043,774
-------------
Communications Services 3.7%
AT & T Corp. 58,000 3,240,750
GTE Corp. 86,000 6,278,000
Sprint Corp. 50,000 3,468,750
-------------
12,987,500
-------------
Consumer Cyclicals 4.3%
Ford Motor 90,000 4,545,000
Marriott Int'l. - Class A 75,000 2,442,188
McGraw-Hill 52,200 2,959,087
Omnicom Group 58,500 5,155,312
-------------
15,101,587
-------------
Consumer Staples 9.2%
BestFoods 67,300 3,688,881
* Comcast Corp. - Special
Class A 54,000 2,440,125
Gillette Co. 42,000 1,687,875
Kimberly-Clark 125,000 7,984,375
* Kroger Inc. 140,000 2,983,750
McCormick & Co. 100,700 3,228,694
PepsiCo Inc. 185,500 6,411,344
Philip Morris 54,000 1,420,875
Sara Lee 110,000 2,667,500
-------------
32,513,419
-------------
Energy 6.8%
Burlington Resources 60,000 2,017,500
Chevron 32,500 2,878,281
Conoco Inc. - Class B 101,989 2,670,837
Exxon 26,000 2,062,125
Halliburton 91,000 3,520,563
Mobil 53,100 5,538,994
Royal Dutch Petroleum 40,000 2,320,000
Santa Fe Int'l. 45,000 1,026,563
Schlumberger Ltd. 35,000 2,102,187
-------------
24,137,050
-------------
Financials 10.5%
Allstate Corp. 80,000 2,095,000
American Express 35,500 5,371,594
American General 63,000 4,618,687
American Int'l. Group 42,187 4,355,808
Bank of America Corp. 50,922 2,978,937
Bank of New York 122,000 4,864,750
Chase Manhattan Corp. 40,000 3,090,000
Citigroup 90,000 4,848,750
Fannie Mae 16,000 1,066,000
Jefferson-Pilot 57,750 3,919,781
-------------
37,209,307
-------------
Health Care 5.9%
American Home Products 142,000 $ 7,384,000
Bristol-Myers Squibb Co. 13,000 949,812
Johnson & Johnson 56,000 5,810,000
* Manor Care Inc. 75,000 1,504,688
Pharmacia & Upjohn 65,000 3,554,688
Schering Plough Corp. 30,000 1,533,750
-------------
20,736,938
-------------
Technology 4.6%
Automatic Data Processing 67,000 3,308,125
* BMC Software 11,500 837,344
Computer Assoc. Int'l. 12,000 780,000
Electronic Data Systems 45,000 2,894,063
* General Instrument Corp. 28,000 1,834,000
Hewlett Packard 17,000 1,612,875
Intel Corp. 16,000 1,227,000
International Business
Machines 36,600 3,772,088
-------------
16,265,495
-------------
Transportation 0.6%
Union Pacific Corp. 47,000 2,211,938
-------------
Utilities 3.5%
Duke Energy 85,000 4,308,437
Enron Corp. 172,000 6,546,750
FPL Group Inc. 36,000 1,575,000
-------------
12,430,187
-------------
Total Common Stocks
(Cost $113,511,428) 198,606,879
-------------
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Corporate Short-Term Notes 9.7%
Eastman Kodak
5.6%, 12/03/99 4,800M $ 4,798,507
G.E. Capital Corp.
5.55%, 12/08/99 2,000M 1,997,841
Household Finance
5.83%, 02/10/00 18,000M 17,793,035
IBM Credit Corp
6.35%, 01/19/00 4,700M 4,670,984
Norwest Financial
5.43%, 12/15/99 4,900M 4,889,653
-------------
Total Corporate Short-Term Notes
(Cost $34,150,020) 34,150,020
-------------
Total Investments
(Cost $304,546,963)** 386,690,992
Excess of Liabilities
Over Other Assets (9.4%) (33,090,080)
-------------
Net Assets $353,600,912
=============
- --------------------------------------------------------------------------------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt
from registrations, normally to qualified institutional buyers. At November
30, 1999, the market value of rule 144A securities amounted to $7,682,500
or 2.2% of net assets.
* Non-income producing.
** Also cost for federal income tax purposes. At November 30, 1999 net
unrealized appreciation for federal income tax purposes aggregated
$82,144,029 of which $86,974,082 related to appreciated securities and
$4,830,053 related to depreciated securities.
See Notes to Financial Statements.
44
<PAGE>
Sentinel Balanced Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $386,690,992
Cash and cash equivalents 827,678
Receivable for securities sold 300,826
Receivable for fund shares sold 12,200
Receivable for dividends and interest 2,093,029
---------------
Total Assets 389,924,725
---------------
Liabilities
Payable for securities purchased 35,629,641
Payable for fund shares repurchased 161,272
Accrued expenses 92,095
Management fee payable 180,613
Distribution fee payable (Class A Shares) 177,725
Distribution fee payable (Class B Shares) 43,020
Distribution fee payable (Class C Shares) 647
Distribution fee payable (Class D Shares) 587
Fund service fee payable 38,213
---------------
Total Liabilities 36,323,813
---------------
Net Assets Applicable to Outstanding Shares $353,600,912
===============
Net Asset Value and Offering Price per Share
Class A Shares
$297,027,373 / 15,326,401 shares outstanding $ 19.38
Sales Charge -- 5.00% of offering price 1.02
---------------
Maximum Offering Price $ 20.40
===============
Class B Shares
$52,085,689 / 2,683,555 shares outstanding $ 19.41
===============
Class C Shares
$3,349,944 / 172,753 shares outstanding $ 19.39
===============
Class D Shares
$1,137,906 / 58,893 shares outstanding $ 19.32
Net Assets Represent
Capital stock at par value $ 182,416
Paid-in capital 252,658,781
Accumulated undistributed net investment income 1,511,913
Accumulated undistributed net realized gain
on investments 17,103,773
Unrealized appreciation of investments 82,144,029
---------------
Net Assets $353,600,912
===============
Investments at Cost $304,546,963
===============
Sentinel Balanced Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Dividends $ 3,837,868
Interest 10,724,037
---------------
Total Income 14,561,905
---------------
Expenses:
Management advisory fee 2,311,349
Transfer agent and custodian 537,652
Distribution expense (Class A Shares) 968,434
Distribution expense (Class B Shares) 527,377
Distribution expense (Class C Shares) 29,264
Distribution expense (Class D Shares) 3,779
Accounting services 108,842
Auditing fees 27,575
Legal fees 14,985
Reports and notices to shareholders 33,550
Registration and filing fees 45,983
Directors' fees and expenses 34,427
Other 26,971
---------------
Total Expenses 4,670,188
Expense Offset (48,792)
---------------
Net Expenses 4,621,396
---------------
Net Investment Income 9,940,509
---------------
Realized and Unrealized Gain (Loss) on Investments
Net realized gain on sales of investments 17,239,737
Net change in unrealized appreciation
(depreciation) (17,640,672)
---------------
Net Realized and Unrealized Loss on Investments (400,935)
---------------
Net Increase in Net Assets from Operations $ 9,539,574
===============
See Notes to Financial Statements.
45
<PAGE>
Sentinel Balanced Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year
Ended Ended
11/30/99 11/30/98
------------- ------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 9,940,509 $ 9,400,265
Net realized gain on sales of investments 17,239,737 26,819,535
Net change in unrealized appreciation (depreciation) (17,640,672) 4,726,009
------------- ------------
Net increase in net assets from operations 9,539,574 40,945,809
------------- ------------
Distributions to Shareholders
From net investment income
Class A Shares (8,652,112) (8,757,240)
Class B Shares (1,011,062) (681,123)
Class C Shares (44,400) (6,238)
Class D Shares (9,280) -
From net realized gain on investments
Class A Shares (23,432,737) (18,036,497)
Class B Shares (3,424,615) (1,576,559)
Class C Shares (137,453) -
Class D Shares - -
------------- ------------
Total distributions to shareholders (36,711,659) (29,057,657)
------------- ------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 25,591,257 35,425,569
Class B Shares 15,013,233 20,459,943
Class C Shares 2,098,921 1,476,109
Class D Shares 1,190,850
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 29,834,718 24,763,831
Class B Shares 4,271,817 2,110,105
Class C Shares 179,289 6,238
Class D Shares 9,280 -
------------- ------------
78,189,365 84,241,795
------------- ------------
Less: Payments for shares reacquired
Class A Shares (65,079,933) (55,473,366)
Class B Shares (10,550,244) (3,659,707)
Class C Shares (273,939) (2,229)
Class D Shares (47,378) -
------------- ------------
Increase in net assets from
capital share transactions 2,237,871 25,106,493
------------- ------------
Total Increase (Decrease) in Net Assets for period (24,934,214) 36,994,645
Net Assets: Beginning of period 378,535,126 341,540,481
------------- ------------
Net Assets: End of period $353,600,912 $378,535,126
============= ============
Undistributed Net Investment Income
at End of Period $ 1,511,913 $ 1,300,366
============= ============
</TABLE>
See Notes to Financial Statements.
46
<PAGE>
Sentinel Balanced Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 20.88 $ 20.29 $ 18.55 $ 16.84 $ 14.08
----------- ----------- ----------- ----------- -----------
Income (Loss) from Investment Operations
Net investment income 0.55 0.54 0.56 0.54 0.58
Net realized and unrealized gain (loss) on investments (0.03) 1.76 2.18 2.13 2.78
----------- ----------- ----------- ----------- -----------
Total from investment operations 0.52 2.30 2.74 2.67 3.36
----------- ----------- ----------- ----------- -----------
Less Distributions
Dividends from net investment income 0.54 0.55 0.55 0.54 0.59
Distributions from realized gains on investments 1.48 1.16 0.45 0.42 0.01
----------- ----------- ----------- ----------- -----------
Total Distributions 2.02 1.71 1.00 0.96 0.60
----------- ----------- ----------- ----------- -----------
Net asset value at end of period $ 19.38 $ 20.88 $ 20.29 $ 18.55 $ 16.84
=========== =========== =========== =========== ===========
Total Return (%) * 2.6 12.2 15.4 16.6 24.4
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.10 1.12 1.16 1.20 1.27
Ratio of expenses to average net assets before
expense reductions (%) ** 1.12 1.13 1.17 1.22 1.29
Ratio of net investment income to average net assets (%) 2.73 2.69 2.93 3.13 3.77
Portfolio turnover rate (%) 110 81 63 83 110
Net assets at end of period (000 omitted) $297,027 $330,067 $314,948 $297,288 $267,103
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Commenced operations May 4, 1998.
(C) Commenced operations January 4, 1999.
(D) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
47
<PAGE>
Sentinel Balanced Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Eight Months
Year Ended Year Ended Year Ended Ended
Class B Shares 11/30/99 (D) 11/30/98 (D) 11/30/97 (D) 11/30/96 (A)(D)
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 20.91 $ 20.32 $ 18.58 $ 17.09
---------------- ---------------- ---------------- ----------------
Income (Loss) from Investment Operations
Net investment income 0.39 0.38 0.42 0.26
Net realized and unrealized gain (loss) on investments (0.02) 1.77 2.18 1.37
---------------- ---------------- ---------------- ----------------
Total from investment operations 0.37 2.15 2.60 1.63
---------------- ---------------- ---------------- ----------------
Less Distributions
Dividends from net investment income 0.39 0.40 0.41 0.14
Distributions from realized gains on investments 1.48 1.16 0.45 -
Total Distributions 1.87 1.56 0.86 0.14
---------------- ---------------- ---------------- ----------------
Net asset value at end of period $ 19.41 $ 20.91 $ 20.32 $ 18.58
================ ================ ================ ================
Total Return (%) * 1.8 11.3 14.6 9.6 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.86 1.89 1.88 2.12 +
Ratio of expenses to average net assets before
expense reductions (%) ** 1.87 1.90 1.89 2.13 +
Ratio of net investment income to average net assets (%) 2.00 1.91 2.21 2.21 +
Portfolio turnover rate (%) 110 81 63 83
Net assets at end of period (000 omitted) $52,086 $46,946 $26,593 $10,948
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Commenced operations May 4, 1998.
(C) Commenced operations January 4, 1999.
(D) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
48
<PAGE>
Sentinel Balanced Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Year Ended 5/4/98 through
Class C Shares 11/30/99 (D) 11/30/98 (B)(D)
---------------- ----------------
<S> <C> <C>
Net asset value at beginning of period $20.90 $20.87
---------------- ----------------
Income (Loss) from Investment Operations
Net investment income 0.32 0.20
Net realized and unrealized gain (loss) on investments (0.03) (0.01)
---------------- ----------------
Total from investment operations 0.29 0.19
---------------- ----------------
Less Distributions
Dividends from net investment income 0.32 0.16
Distributions from realized gains on investments 1.48 -
---------------- ----------------
Total Distributions 1.80 0.16
---------------- ----------------
Net asset value at end of period $19.39 $20.90
================ ================
Total Return (%) * 1.4 0.9 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 2.24 2.17 + (%)
Ratio of expenses to average net assets before
expense reductions (%) ** 2.25 2.18 +
Ratio of net investment income to average net assets (%) 1.65 1.63 +
Portfolio turnover rate (%) 110 81
Net assets at end of period (000 omitted) $3,350 $1,523
</TABLE>
<TABLE>
<CAPTION>
Period
1/4/99 through
Class D Shares 11/30/99 (C)(D)
----------------
<S> <C>
Net asset value at beginning of period $19.68
----------------
Income (Loss) from Investment Operations
Net investment income 0.33
Net realized and unrealized gain (loss) on investments (0.38)
----------------
Total from investment operations (0.05)
----------------
Less Distributions
Dividends from net investment income 0.31
Distributions from realized gains on investments -
----------------
Total Distributions 0.31
----------------
Net asset value at end of period $19.32
================
Total Return (%) * (0.2)++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 2.07 +
Ratio of expenses to average net assets before
expense reductions (%) ** 2.08 +
Ratio of net investment income to average net assets (%) 1.93 +
Portfolio turnover rate (%) 110
Net assets at end of period (000 omitted) $1,138
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Commenced operations May 4, 1998.
(C) Commenced operations January 4, 1999.
(D) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
49
<PAGE>
Sentinel High Yield Bond Fund seeks high current income and total return
by investing mainly in lower rated corporate bonds that have
higher effective interest rates than investment grade bonds.
Sentinel High Yield Bond Fund
Our view for the new year is for investment returns in fixed income markets to
approximate their coupons, that is to achieve 7.0% in ten year Treasuries and
11% in high yield.
The Sentinel High Yield Bond Fund completed its third fiscal year of operations
on November 30, 1999. Investment return for the period came in at 3.0%, another
disappointing year which reflected a staggeringly difficult period for bonds,
(the Lehman Brothers Long Treasury index returned a negative 7.35%). In
addition, yields on high yield paper remained on average at levels of +600 basis
points spread to treasuries, well above historical averages. Nevertheless the
Fund's investment return compared favorably with that of the high yield market
when measured against the Chase Bank high yield domestic index, which returned
0.77% in the year. The Fund also performed slightly above the median return of
2.8% for all high yield bond funds as measured by Lipper. This performance
placed the Fund at the 42nd percentile of all funds in the period of its fiscal
year, and at the 22nd percentile of all high yield funds, with an annualized
return of 5.3% since its inception on June 23, 1997.
As in the prior year, the first half of 1999 started strong with a return of
2.9% on average for Lipper-measured high yield funds, as the market continued to
rebound from its low levels set in the prior October's emerging market financial
crisis. However, a continuing decline in the treasury market, as well as
increases in the overall high yield default rate, continued to pressure the
market into achieving flat returns in the second half. In the 11 months ended
November, the performance of ten year treasury bonds, off which standard high
yield bonds are priced, was a negative 7.3%, while the Chase Bank high yield
domestic index returned 1.1%.
Continuing strong economic growth in the US economy has prompted the Federal
Reserve Bank to raise its base inter-bank interest rate three times in an
attempt to soften the impact of this strong growth on nascent inflationary
pressures. In spite of these actions which increased the Fed Funds rate from 4%
to 5% in the year, the economy continued on it's rampant growth curve,
accelerating from 3.9% in the first quarter to an estimated 5.5% in the fourth
quarter. Inflation pressures however remained subdued, in spite of dramatic
increases in the price of oil and other commodities, as well as in certain wage
rates. Overall market prices were, however, held in check by strong competitive
business pressures in the broad economy. As measured in November, the broad
inflationary measure, the Consumer Price Index rose only at a 2.1% annual rate,
just above the 1.9% rate set in the prior August, a 33 year low.
- -----------------------------------------
Average Annual
Total Return -
Class A Shares
Through 11/30/99
w/sales w/o sales
Period charge charge
1 Year -1.2% 3.0%
- -----------------------------------------
Since
Inception* 3.6% 5.3%
- -----------------------------------------
*6/23/97
+Sales charge applicable to year of initial investment.
================================================================================
Sentinel High Yield Bond Fund Performance - Class A Shares
6/23/97 inception through 11/30/99
[GRAPH]
Sentinel Lipper Lehman
High Yield High Current High Yield
Bond Fund Yield Fund Average Bond Index*
10,000 10,000 10,000
9,610 10,000 10,000
10,472 10,688 10,656
10,998 11,186 11,136
10,582 10,663 10,855
10,731 11,017 11,094
10,893 10,968 10,991
Chart Ending Values & Legend
6/23/97 inception through 11/30/99
Sentinel High Yield Bond Fund $10,893
Lehman High Yield Bond Index* $10,991
Lipper High Current Yield Fund Average $10,968
*An unmanaged index of bonds reflecting average prices in the bond market.
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 4% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results. Performance will vary
for each class of shares due to differences in share class expenses.
50
<PAGE>
At the calendar year end, the financial markets are forecasting a minimum rate
hike of 25 basis points by the Federal Reserve Bank. Treasury bond markets
continue under pressure even as the major stock market indexes remain ebullient,
breaking new highs. This backdrop of solid equity markets and strong economic
growth is actually favorable to high yield markets, as it lessens credit risk.
Looking forward, we believe the Federal Reserve will raise rates again until the
yield curve flattens with long term interest rates equal to short term rates.
Such a resulting flat yield cure often presages an economic slowdown and stock
market correction. Should this outlook unfold, bond markets will likely rally
strongly. Our view then for the new year, is for investment returns in fixed
income markets to approximate their coupons, that is to achieve 7.0% in ten year
Treasuries and 11.0% in high yield.
Since its inception, the Sentinel High Yield Bond Fund has enjoyed a high degree
of investor support. Total assets have reached $91.7 million dollars held by
2700 investors. We are gratified by the continuing response to this fund, as
well as to its strong relative investment performance. We wish to express our
gratitude to you for your continuing interest and support.
/s/ Prescott Crocker
Prescott Crocker, CFA
51
<PAGE>
Sentinel High Yield Bond Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Shares Value
(Note 1)
- --------------------------------------------------------------------------------
Common Stocks 2.2%
Cable/Other Video Distribution 0.7%
* Rogers Cantel Mobile Communications 20,000 $ 637,500
-----------
Communications 0.3%
* Telecorp PCS Inc. 7,300 263,256
-----------
Entertainment 0.3%
* Premier Cruises LTD 74,059 259,206
-----------
Retail 0.6%
* Ames Department Stores 20,000 531,250
-----------
Waste Management 0.3%
* Waste Systems International 71,428 321,426
-----------
Total Common Stocks
(Cost $2,784,230) 2,012,638
-----------
Preferred Stocks 3.2%
Cable/Other Video Distribution 1.9%
Adelphia Communications 13% 6,500 721,500
CSC Holdings 11.125% 9,510 1,036,628
-----------
1,758,128
-----------
Telecommunications 1.3%
Rural Cellular Corp. 11.375% 1,181 1,148,179
-----------
Total Preferred Stocks
(Cost $2,846,057) 2,906,307
-----------
Warrants 0.1%
* American Mobile Warrants (a) 1,000 40,000
* Ono Finance plc Warrants (a) 1,000 70,000
* Waste System Warrants (a) 11,250 8,437
-----------
Total Warrants
(Cost $71,875) 118,437
-----------
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Bonds 90.3%
Automobiles & Auto Parts 2.8%
Eagle-Picher 9.375%, '08 750M $ 673,125
Hayes Lemmerz
9.125%, '07 1,000M 972,500
Oxford Automotive
10.125%, '07 1,000M 902,500
-----------
2,548,125
-----------
Broadcasting 1.8%
ACME Television
0%, '00
10.875%, '04 800M 714,000
SFX Entertainment
9.125%, '08 1,000M 945,000
-----------
1,659,000
-----------
Building Residential & Commercial 1.0%
Webb (Del E) 9.375%, '09 1,000M 940,000
-----------
Cable/Other Video Distribution 6.4%
Echostar Communications
9.375%, '09 1,000M 1,008,750
Frontiervision 11%, '06 1,000M 1,060,000
Ono Finance plc
13%, '09 (a) 1,000M 1,036,250
Pegasus Communications
9.625%, '05 1,500M 1,492,500
Star Choice 13.0%, '05 1,250M 1,259,375
-----------
5,856,875
-----------
Chemicals 5.3%
Huntsman ICI Chemicals
10.125%, '09 (a) 600M 615,000
Lyondell Chemical Co.
9.625%, '07 1,250M 1,290,625
Lyondell Chemical Co.
10.875%, '09 500M 521,250
Polymer Group 9%, '07 500M 483,750
Polymer Group 8.75%, '08 1,250M 1,190,625
Waste Systems 11.5%, '06 750M 744,375
-----------
4,845,625
-----------
Computer Products & Services 1.1%
Verio Inc. 10.625%, '09 (a) 1,000M 1,020,000
-----------
Consumer Products 1.4%
Outboard Marine 10.75%, '08 750M 562,500
Simmons Co. 10.25%, '09 800M 776,000
-----------
1,338,500
-----------
Diversified Media 2.2%
Ackerley Group Inc. 9%, '09 1,000M 975,000
Big Flower Press 8.625%, '08 1,000M 1,000,000
-----------
1,975,000
-----------
Energy, Oil & Gas 4.6%
Benton Oil & Gas 9.375%, '07 325M 195,000
Energy Corp. 9.5%, '07 500M 280,000
Giant Industries 9%, '07 940M 843,650
Nuevo Energy Co.
9.5%, '08 (a) 575M 575,000
Petsec Energy 9.5%, '07 1,500M 787,500
Trinton Energy 9.25%, '05 475M 480,938
Western Gas Resources
10%, '09 1,000M 1,037,500
-----------
4,199,588
-----------
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Entertainment/Gaming 9.8%
Ameristar Casinos 10.5%, '04 1,000M $1,007,500
Argosy Gaming 10.75%, '09 1,000M 1,050,000
Boyd Gaming 9.5%, '07 1,000M 982,500
Coast Hotels & Casino
9.5%, '09 1,000M 950,000
Hollywood Casinos
13%, '06 (a) 1,000M 1,062,500
Hollywood Park Inc.
9.25%, '07 1,000M 990,000
Isle of Capri Casinos
8.75%, '09 1,100M 1,023,000
Loews Cineplex 8.875%, '08 1,000M 932,500
Premier Parks
0%, '03
10%, '08 1,500M 1,023,750
-----------
9,021,750
-----------
Financial Services 0.8%
Contifinancial 8.375%, '03 1,000M 160,000
Crown Castle Int'l. Corp.
9%, '11 550M 541,750
-----------
701,750
-----------
Food/Restaurants 1.7%
Aurora Foods 9.875%, '07 1,000M 1,025,000
Sun World Int'l. 11.25%, '04 500M 518,750
-----------
1,543,750
-----------
Hospitals and Healthcare/Medical
Technology 3.3%
Lifepoint Hospital
10.75%, '09 (a) 1,000M 1,035,000
Prime Medical 8.75%, '08 1,000M 927,500
Unilab Finance
12.75%, '09 (a) 1,000M 1,027,500
-----------
2,990,000
-----------
Information Technology 0.6%
Unisys Corp. 11.75%, '04 500M 552,500
-----------
Manufacturing 3.1%
Holley Performance
12.25%, '07 (a) 1,000M 945,000
Packaging Corp.
9.625%, '09 1,000M 1,033,750
Transdigm Inc.
10.375%, '08 1,000M 890,000
-----------
2,868,750
-----------
Metals/Minerals 4.4%
**Acme Metals 0.00%, '07 1,000M 188,750
AK Steel Corp. 7.875%, '09 1,000M 950,000
Bulong Operations Pty.
12.5%, '08 1,000M 920,000
Kaiser Aluminum
12.75%, '03 1,000M 992,500
National Steel Corp.
9.875%, '09 1,000M 1,025,000
-----------
4,076,250
-----------
52 (continued)
<PAGE>
Sentinel High Yield Bond Fund
Investment in Securities (cont'd)
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Paper & Printing 6.4%
Domtar Inc. 9.5%, '16 1,000M $ 1,065,000
Merrill Corp. 12%, '09 (a) 1,000M 973,750
Repap New Brunswick
11.5%, '04 1,000M 1,022,500
Riverwood Int'l
10.25%, '06 1,000M 1,025,000
Riverwood Int'l
10.875%, '08 500M 500,000
Stone Containers
10.75%, '02 1,000M 1,031,250
Tembec Industries
8.625%, '09 250M 253,125
------------
5,870,625
------------
Retail 2.4%
Advance Stores 10.25%, '08 1,000M 870,000
Ames Department Stores
10%, '06 1,000M 985,000
MTS Inc. 9.375%, '05 500M 342,500
------------
2,197,500
------------
Service 3.6%
AFC Enterprises 10.25%, '07 500M 501,250
American Lawyer 9.75%, '07 1,000M 947,500
Budget Group Inc.
9.125%, '06 1,000M 900,000
United Rentals 9.25%, '09 1,000M 940,000
------------
3,288,750
------------
Shipping/Transportation 1.2%
Greyhound Lines 11.5%, '07 1,000M 1,127,500
------------
Telecommunications 19.3%
Adelphia Business
0%, '01
13%, '03 500M 442,500
Alestra SA 12.125%, '06 (a) 1,000M 990,000
American Communications
10.25%, '08 1,000M 945,000
AMSC Acquistion
12.25%, '08 1,000M 760,000
Global Cossing
9.125%, '06 (a) 1,000M 985,000
Hermes Europe Railtel
10.375%, '09 1,000M 985,000
Intermedia Communications
0%, '02
11.25%, '07 1,575M 1,134,000
Jordan Telecommunications
9.875%, '07 1,000M 970,000
Level 3 Communications
9.125%, '08 1,500M 1,421,250
McLeodUSA Inc.
0%, '02
10.5%, '07 450M 361,125
McLeodUSA Inc. 9.5%, '08 1,000M 1,007,500
Microcell Telecommunications
0%, '04
12%, '09 1,500M 930,000
RCN Corp.
0%, '02
11.125%, '07 1,800M 1,278,000
Rural Cellular Corp.
9.625%, '08 1,000M 1,050,000
Telewest Communications
0%, '00
11%, '07 1,500M 1,389,375
Twenty-First Century Telecom
0%, '03 1,100M 500,500
Williams Communications
10.875%, '09 1,500M 1,571,250
Winstar Communications
10%, '08 1,100M 1,003,750
------------
17,724,250
------------
Wireless Communications 7.1%
Nextel Communications
0%, '03
9.95%, '08 1,500M 1,065,000
NEXTLINK Communications
0%, '04
12.25%, '09 1,400M 843,500
Price Comm. Cellular
11.75%, '07 1,000M 1,105,000
Telecorp 0%, '04 (a) 1,000M 650,000
Tritel PCS Inc.
0%, '04
12.75%, '09 (a) 1,100M 704,000
Triton PCS Inc.
0%, '03
11%, '08 900M 635,625
Voicestream 10.375%, '09 1,500M 1,560,000
------------
6,563,125
------------
Total Bonds
(Cost $86,583,135) 82,909,213
------------
Corporate Convertible Bonds 0.6%
Industrial
Exide Corp. 2.9%, `05 (a)
(Cost $688,141) 1,000M 525,000
------------
U.S. Government Agency
Obligations 0.8%
Student Loan Marketing Association
Agency Discount Note:
5.57%, 12/01/99
(Cost $713,000) 713M 713,000
------------
Total Investments
(Cost $93,686,438)*** 89,184,595
Excess of Other Assets
Over Liabilities 2.8% 2,586,880
------------
Net Assets $91,771,475
============
- --------------------------------------------------------------------------------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registrations, normally to qualified institutional buyers. At November 30,
1999, the market value of rule 144A securities amounted to $12,262,437 or
13.4% of net assets.
* Non-income producing.
** Bond in default.
*** Also cost for federal income tax purposes. At November 30, 1999, unrealized
depreciation for federal income tax purposes aggregated $4,501,843 of which
$1,290,923 related to appreciated securities and $5,792,766 related to
depreciated securities.
See Notes to Financial Statements.
53
<PAGE>
Sentinel High Yield Bond Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $ 89,184,595
Cash and cash equivalents 47,235
Receivable for securities sold 844,889
Receivable for fund shares sold 70,310
Receivable for interest and dividends 1,880,779
--------------
Total Assets 92,027,808
--------------
Liabilities
Payable for fund shares repurchased 134,019
Accrued expenses 27,962
Management fee payable 56,379
Distribution fee payable (Class A Shares) 10,121
Distribution fee payable (Class B Shares) 19,019
Distribution fee payable (Class C Shares) 1,239
Fund service fee payable 7,594
--------------
Total Liabilities 256,333
--------------
Net Assets Applicable to Outstanding Shares $ 91,771,475
==============
Net Asset Value and Offering Price per Share
Class A Shares
$28,252,770 / 3,074,099 shares outstanding $ 9.19
Sales Charge -- 4.00% of offering price 0.38
--------------
Maximum Offering Price $ 9.57
==============
Class B Shares
$59,518,201 / 6,481,635 shares outstanding $ 9.18
==============
Class C Shares
$4,000,504 / 435,185 shares outstanding $ 9.19
==============
Net Assets Represent
Capital stock at par value $ 99,909
Paid-in capital 102,195,561
Accumulated undistributed net investment income 11,450
Accumulated undistributed net realized loss
on investments (6,033,602)
Unrealized depreciation of investments (4,501,843)
--------------
Net Assets $ 91,771,475
==============
Investments at Cost $ 93,686,438
==============
See Notes to Financial Statements.
Sentinel High Yield Bond Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Dividends $ 334,092
Interest 8,996,183
--------------
Total Income 9,330,275
--------------
Expenses:
Management advisory fee 696,470
Transfer agent and custodian 122,041
Distribution expense (Class A Shares) 61,534
Distribution expense (Class B Shares) 407,422
Distribution expense (Class C Shares) 25,611
Accounting services 26,465
Auditing fees 9,550
Legal fees 3,675
Reports and notices to shareholders 6,100
Registration and filing fees 25,479
Directors' fees and expenses 8,404
Other 30,712
--------------
Total Expenses 1,423,463
Expense Offset (7,521)
--------------
Net Expenses 1,415,942
--------------
Net Investment Income 7,914,333
--------------
Realized and Unrealized Loss on Investments
Net realized loss on sales of investments (4,543,183)
Net change in unrealized depreciation (1,021,632)
--------------
Net Realized and Unrealized Loss on Investments (5,564,815)
--------------
Net Increase in Net Assets from Operations $ 2,349,518
==============
See Notes to Financial Statements.
54
<PAGE>
Sentinel High Yield Bond Fund
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year
Ended Ended
11/30/99 11/30/98
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net investment income $ 7,914,333 $ 5,889,537
Net realized loss on sales of investments (4,543,183) (1,490,419)
Net change in unrealized depreciation (1,021,632) (4,106,785)
------------- -------------
Net increase in net assets from operations 2,349,518 292,333
------------- -------------
Distributions to Shareholders
From net investment income
Class A Shares (2,706,580) (2,030,629)
Class B Shares (4,996,164) (3,810,264)
Class C Shares (205,162) (47,427)
From net realized gain on investments
Class A Shares - (106,907)
Class B Shares - (291,716)
Class C Shares - -
------------- -------------
Total distributions to shareholders (7,907,906) (6,286,943)
------------- -------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 8,535,916 25,055,794
Class B Shares 13,454,832 28,434,192
Class C Shares 5,141,165 1,996,985
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 1,776,689 1,504,347
Class B Shares 2,066,854 1,375,149
Class C Shares 249,194 43,607
------------- -------------
31,224,650 58,410,074
Less: Payments for shares reacquired
Class A Shares (11,352,238) (4,351,448)
Class B Shares (8,351,256) (3,955,134)
Class C Shares (3,177,472) (14,589)
------------- -------------
Increase in net assets from capital share transactions 8,343,684 50,088,903
------------- -------------
Total Increase in Net Assets for period 2,785,296 44,094,293
Net Assets: Beginning of period 88,986,179 44,891,886
------------- -------------
Net Assets: End of period $ 91,771,475 $ 88,986,179
============= =============
Undistributed Net Investment
Income at End of Period $ 11,450 $ 4,996
============= =============
</TABLE>
See Notes to Financial Statements.
55
<PAGE>
Sentinel High Yield Bond Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Year Ended Year Ended Ended
Class A Shares 11/30/99 11/30/98 11/30/97 (A)
---------- ---------- ------------
<S> <C> <C> <C>
Net asset value at beginning of period $ 9.75 $ 10.41 $ 10.00
-------- -------- --------
Income (Loss) from Investment Operations
Net investment income 0.84 0.87 0.32
Net realized and unrealized gain (loss) on investments (0.56) (0.58) 0.41
-------- -------- --------
Total from investment operations 0.28 0.29 0.73
-------- -------- --------
Less Distributions
Dividends from net investment income 0.84 0.86 0.32
Distributions from realized gains on investments - 0.09 -
-------- -------- --------
Total Distributions 0.84 0.95 0.32
-------- -------- --------
Net asset value at end of period $ 9.19 $ 9.75 $ 10.41
======== ======== ========
Total Return (%) * 3.0 2.7 7.3++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.21 1.26 1.20+
Ratio of expenses to average net assets before
expense reductions (%) ** 1.22 1.28 1.26+
Ratio of net investment income to average net assets (%) 8.83 8.42 7.80+
Portfolio turnover rate (%) 144 139 133
Net assets at end of period (000 omitted) $28,253 $31,120 $11,084
</TABLE>
(A) Commenced operations June 23, 1997.
(B) Commenced operations May 4, 1998.
(C) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
56
<PAGE>
Sentinel High Yield Bond Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Period Ended
Class B Shares 11/30/99 (C) 11/30/98 (C) 11/30/97 (A)(C)
------------ ------------ ---------------
<S> <C> <C> <C>
Net asset value at beginning of period $ 9.74 $ 10.40 $ 10.00
-------- -------- --------
Income (Loss) from Investment Operations
Net investment income 0.79 0.84 0.32
Net realized and unrealized gain (loss) on investments (0.56) (0.57) 0.39
-------- -------- --------
Total from investment operations 0.23 0.27 0.71
-------- -------- --------
Less Distributions
Dividends from net investment income 0.79 0.84 0.31
Distributions from realized gains on investments - - 0.09 -
-------- -------- --------
Total Distributions 0.79 0.93 0.31
-------- -------- --------
Net asset value at end of period $ 9.18 $ 9.74 $ 10.40
======== ======== ========
Total Return (%) * 2.5 2.4 7.2++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.65 1.49 1.30+
Ratio of expenses to average net assets before
expense reductions (%) ** 1.66 1.52 1.34+
Ratio of net investment income to average net assets (%) 8.40 8.19 7.70+
Portfolio turnover rate (%) 144 139 133
Net assets at end of period (000 omitted) $59,518 $55,911 $33,808
</TABLE>
(A) Commenced operations June 23, 1997.
(B) Commenced operations May 4, 1998.
(C) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
57
<PAGE>
Sentinel High Yield Bond Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period
Year Ended 5/4/98 through
Class C Shares 11/30/99 (C) 11/30/98 (B)(C)
------------ ---------------
<S> <C> <C>
Net asset value at beginning of period $ 9.75 $10.70
------- -------
Income (Loss) from Investment Operations
Net investment income 0.72 0.41
Net realized and unrealized gain (loss) on investments (0.56) (0.91)
------- -------
Total from investment operations 0.16 (0.50)
------- -------
Less Distributions
Dividends from net investment income 0.72 0.45
Distributions from realized gains on investments - - -
------- -------
otal Distributions 0.72 0.45
------- -------
Net asset value at end of period $ 9.19 $ 9.75
======= =======
Total Return (%) * 1.7 (4.7)++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 2.41 2.05+
atio of expenses to average net assets before
expense reductions (%) ** 2.42 2.06+
Ratio of net investment income to average net assets (%) 7.69 7.63+
Portfolio turnover rate (%) 144 139
Net assets at end of period (000 omitted) $4,001 $1,956
</TABLE>
(A) Commenced operations June 23, 1997.
(B) Commenced operations May 4, 1998.
(C) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
58
<PAGE>
Sentinel Bond Fund seeks high current income while seeking to control risk by
investing exclusively in fixed-income securities and mainly in investment grade
bonds.
Sentinel Bond Fund
During the first three quarters of the year, we opportunistically reduced the
Fund's duration during some of the bond market's brief rally periods.
The Sentinel Bond Fund had a total return of -1.9% for the fiscal year ended
November 30, 1999, slightly below the -1.7% average return of the A-rated
Corporate Debt Funds tracked by Lipper Analytical Services. The Lehman Aggregate
Index, which is considered a good proxy for the overall bond market, returned
0.0% for the same period. The disparity between the performance of the Bond Fund
and the Lehman Aggregate Index was mostly attributable to the Bond Fund's higher
interest rate sensitivity relative to that of the index, which hurt the Fund's
performance as interest rates rose over the course of the year.
After the yield on the 30-year Treasury reached a record low of 4.69% in the
fall of 1998, interest rates climbed as investors began to unwind the flight-to-
quality trade that followed last year's Russian financial crisis and the
headline-grabbing collapse of a major hedge fund. On top of the natural market
forces pushing interest rates higher as this year progressed, the Federal
Reserve was clearly becoming increasingly concerned about the inflationary
pressures that seemed to be building in the economy, as Gross Domestic Product
(GDP) growth remained robust and commodity prices, particularly oil, began
trending upward. A 25-basis point increase in the Fed Funds target rate in June
was followed by two more 25-basis point Fed Funds hikes, one in August and
another in November. Together, these increases amounted to a full reversal of
the 75-basis point reduction in the Fed Funds rate implemented by the central
bank last year.
After tightening in the first quarter as last year's flight-to-quality trade was
unwound, corporate bond spreads widened significantly in this year's second and
third quarters as the market became flooded with new issues. This heavy new
issue supply in the middle part of the year was driven by historically low
interest rates as well as the accelerated financing activities of corporate
treasurers worried that Year 2000 concerns would limit accessibility to the
capital markets in the latter part of the year. With the acceleration of so much
new issuance into this period, supply towards the end of year all but
evaporated, leading to a sharp tightening of spreads in the fourth quarter.
- --------------------------------------------------------------------------------
Average Annual Total Return - Class A Shares
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year -5.9% -1.9%
- --------------------------------------------------------------------------------
5 Years 6.1% 7.0%
- --------------------------------------------------------------------------------
10 Years 6.9% 7.3%
- --------------------------------------------------------------------------------
+Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel Bond Fund Performance - Class A Shares
Ten Years Ended 11/30/99
[GRAPH]
Sentinel Lehman Lipper A-Rated
Bond Aggregate Corp. Bond
Fund Bond Index* Fund Average
-------- ----------- --------------
10,000 10,000 10,000
10,159 10,533 10,758
11,744 12,080 12,308
12,856 13,215 13,399
14,622 14,986 14,858
13,905 14,406 14,403
16,516 17,042 16,945
17,257 17,930 17,973
18,414 19,181 19,331
19,879 20,752 21,158
19,497 20,393 21,149
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 4% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results. Performance will vary
for each class of shares due to differences in share class expenses.
Chart Ending Values & Legend
Ten years ended 11/30/99
Sentinel Bond Fund $19,497
Lehman Aggregate Bond Index* $21,149
Lipper A-Rated Corp. Bond Fund Average $20,393
*An unmanaged index of bonds reflecting average prices in the bond market.
59
<PAGE>
During the first three quarters of the year, we opportunistically reduced the
Fund's duration during some of the bond market's brief rally periods. Thus, as
the general level of rates continued to rise, the price impact on the Bond
Fund's holdings was less detrimental to the Fund's performance. Beginning in mid
to late summer, we implemented some timely increases to the Fund's corporate
exposure, as we began to sense that new issue supply would slow, resulting in
improved technical conditions.
Looking forward, we intend to continue managing the Fund in a manner that will
allow us to attain its objective of high current income and capital
preservation.
/s/ William C. Kane
William C. Kane, CFA
/s/ David M. Brownlee
David M. Brownlee, CFA
60
<PAGE>
Sentinel Bond Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
U.S.Government Obligations 38.2%
U.S. Treasury Obligations 12.6%
10-Year:
Note 5.50%, '09 2,500M $ 2,379,525
-------------
30-Year:
Bond 7.25%, '16 4,500M 4,790,700
Bond 6%, '26 1,500M 1,406,010
Bond 6.125%, '29 4,500M 4,412,025
-------------
10,608,735
-------------
Total U.S. Treasury Obligations 12,988,260
-------------
U.S. Government Agency Obligations 25.6%
Federal Home Loan Mortgage Corporation 5.6%
Agency Discount Note:
5.5%, 12/02/99 1,000M 999,847
-------------
Collateralized Mortgage Obligations:
FHLMC 1754(DC),
8.5%, '03 3,000M 3,094,620
-------------
Mortgage-Backed Securities:
5-Year Balloon:
6.5%, '01 683M 674,236
-------------
30-Year:
8%, '08 938M 970,752
-------------
Total Federal Home Loan
Mortgage Corporation 5,739,455
-------------
Federal National Mortgage Association 16.3%
Mortgage-Backed Securities:
10-Year:
7.5%, '04 261M 263,539
-------------
15-Year:
8.5%, '10 576M 590,750
-------------
30-Year:
10%, '17 539M 581,115
10%, '17 680M 732,562
7.5%, '22 1,204M 1,217,135
8%, '22 1,682M 1,723,253
9.5%, '24 809M 857,788
8.5%, '26 1,859M 1,918,202
6%, '28 1,026M 954,625
7%, '28 1,226M 1,200,661
7%, '28 2,129M 2,082,707
8.5%, '28 1,878M 1,937,732
7%, '29 2,744M 2,686,974
-------------
15,892,754
-------------
Total Federal National
Mortgage Association 16,747,043
-------------
Government National Mortgage Association 3.7%
Mortgage-Backed Securities:
30-year:
13%, '11 7M 8,331
13%, '13 409 473
7.5%, '23 1,878M 1,889,387
7.5%, '29 1,955M 1,945,471
-------------
Total Government National
Mortgage Association 3,843,662
-------------
Total U.S. Government
Agency Obligations 26,330,160
-------------
Total U.S. Government Obligations
(Cost $40,252,139) 39,318,420
-------------
Bonds 59.8%
Aerospace 2.7%
Lockheed Martin Corp.
8.5%, '29 1,500M 1,483,125
Raytheon Co. 7%, '28 1,500M 1,293,750
-------------
2,776,875
-------------
Automobile & Auto Parts 3.0%
Ford Motor Company
6.375%, '29 2,500M 2,143,750
Lear Corporation
7.96%, '05 (a) 1,000M 972,500
-------------
3,116,250
-------------
Building Materials/Construction 2.1%
Owens Corning 7.5%, '05 2,200M 2,134,000
-------------
Chemicals 3.7%
IMC Global Inc. 7.4%, '02 2,000M 1,985,000
Rohm & Haas Co. 7.4%, '09 1,750M 1,767,500
-------------
3,752,500
-------------
Containers & Packaging 1.9%
Crown Cork & Seal
7.125%, '02 2,000M 1,980,000
-------------
Computer Products & Services 2.5%
Sun Microsystems Inc.
7%, '02 2,500M 2,503,125
-------------
Energy 2.8%
Kinder Morgan Inc.
6.45%, '03 1,500M 1,455,000
Union Pacific Resources
7.3%, '09 1,500M 1,458,750
-------------
2,913,750
-------------
Financial Institutions 6.0%
Aristar 6.3%, '02 2,000M 1,972,500
Finova Capital Corp.
7.25%, '04 2,000M 1,982,500
Household Finance Corp.
7.2%, '06 2,250M 2,247,188
-------------
6,202,188
-------------
Foreign Financial Institutions 3.7%
Banque National de Paris
7.738%, '49 (a) 1,500M 1,396,875
Sanwa Bank LTD.
8.35%, '09 1,000M 1,016,250
Societe Generale 7.64%, '49 1,500M 1,381,875
-------------
3,795,000
-------------
Foreign Industrial 4.9%
Ahold Finance 6.25%, '09 2,750M 2,550,625
Laidlaw Inc. 7.65%, '06 2,625M 2,483,906
-------------
5,034,531
-------------
Foreign Utilities-Electric 1.8%
Korea Electric Power
7.75%, '13 1,000M 936,250
Korea Electric Power
7%, '27 1,000M 930,000
-------------
1,866,250
-------------
Industrial-Transportation 1.6%
ERAC USA Finance
6.625%, '06 (a) 1,750M 1,669,062
-------------
Lodging 1.7%
Marriott Int'l. Inc.
6.625%, '03 1,750M 1,697,500
-------------
Manufacturing 1.9%
Tyco International Group
6.875%, '02 2,000M 1,977,500
-------------
Real Estate Investment Trusts 1.6%
Simon Debartolo
6.625%, '03 1,750M 1,680,000
-------------
Retail 2.7%
J.C. Penney Inc. 7.25%, '02 1,500M 1,477,500
Safeway Stores 7%, '02 1,250M 1,246,875
-------------
2,724,375
-------------
Telecommunications 8.8%
AT & T Corp. 6.5%, '29 1,100M 963,875
Comsat 8.05%, '06 2,000M 2,124,980
MCI Worldcom Inc.
6.4%, '05 2,000M 1,942,500
Sprint Capital Corp.
6.875%, '28 2,000M 1,820,000
US West Capital Funding
6.25%, '05 2,250M 2,145,938
-------------
8,997,293
-------------
Tobacco 0.9%
Dimon Inc. 8.875%, '06 1,060M 960,625
-------------
Utilities-Electric 5.5%
Calenergy Co. 7.52%, '08 2,250M 2,227,500
Cleveland Electric
7.67%, '04 1,000M 996,250
CMS Energy Corp.
6.75%, '04 1,000M 936,250
Duke Capital 7.5%, '09 1,500M 1,509,375
-------------
5,669,375
-------------
Total Bonds
(Cost $63,098,563) 61,450,199
-------------
Corporate Short-Term Notes 4.8%
Chevron Oil Finance
5.78%, 02/14/00
(Cost $4,939,792) 5,000M 4,939,792
-------------
Total Investments
(Cost $108,290,494)* 105,708,411
Excess of Liabilities
Over Other Assets (2.8%) (2,898,643)
-------------
Net Assets $102,809,768
=============
- --------------------------------------------------------------------------------
(a) Security exempt from registration under Rule 144A of the Securities Act of
1933, as amended. These securities may be resold in transactions exempt from
registrations, normally to qualified institutional buyers. At November 30,
1999, the market value of rule 144A securities amounted to $4,038,437 or
3.9% of net assets.
* Also cost for federal income tax purposes. At November 30, 1999, unrealized
depreciation for federal income tax purposes aggregated $2,582,083 of which
$396,400 related to appreciated securities and $2,978,483 related to
depreciated securities.
See Notes to Financial Statements.
61
<PAGE>
Sentinel Bond Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $105,708,411
Cash and cash equivalents 1,815,007
Receivable for securities sold 27,299
Receivable for fund shares sold 56,625
Receivable for interest 1,246,442
Receivable from fund administrator 75,057
---------------
Total Assets 108,928,841
---------------
Liabilities
Payable for securities purchased 5,927,155
Payable for fund shares repurchased 61,959
Accrued expenses 30,389
Management fee payable 44,670
Distribution fee payable (Class A Shares) 31,128
Distribution fee payable (Class B Shares) 13,658
Fund service fee payable 10,114
---------------
Total Liabilities 6,119,073
---------------
Net Assets Applicable to Outstanding Shares $102,809,768
===============
Net Asset Value and Offering Price per Share
Class A Shares
$82,106,965 / 13,816,817 shares outstanding $ 5.94
Sales Charge-- 4.00% of offering price 0.25
---------------
Maximum Offering Price $ 6.19
===============
Class B Shares
$20,702,803 / 3,475,577 shares outstanding $ 5.96
===============
Net Assets Represent
Capital stock at par value $ 172,924
Paid-in capital 112,134,563
Accumulated undistributed net investment income 4,938
Accumulated undistributed net realized loss
on investments (6,920,574)
Unrealized depreciation of investments (2,582,083)
---------------
Net Assets $102,809,768
===============
Investments at Cost $108,290,494
===============
Sentinel Bond Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest $ 7,379,660
---------------
Expenses:
Management advisory fee 554,979
Transfer agent and custodian 151,765
Distribution expense (Class A Shares) 171,814
Distribution expense (Class B Shares) 191,442
Accounting services 29,810
Auditing fees 8,000
Legal fees 3,500
Reports and notices to shareholders 9,300
Registration and filing fees 22,667
Directors' fees and expenses 9,511
Other 5,162
---------------
Total Expenses 1,157,950
Expense Reimbursement (193,141)
Expense Offset (23,450)
---------------
Net Expenses 941,359
---------------
Net Investment Income 6,438,301
---------------
Realized and Unrealized Loss on Investments
Net realized loss on sales of investments (3,126,993)
Net change in unrealized depreciation (5,479,635)
---------------
Net Realized and Unrealized Loss on Investments (8,606,628)
---------------
Net Decrease in Net Assets from Operations $ (2,168,327)
===============
See Notes to Financial Statements.
62
<PAGE>
Sentinel Bond Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
--------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations
Net Investment income $ 6,438,301 $ 6,202,098
Net realized gain (loss) on sales of investments (3,126,993) 528,645
Net change in unrealized appreciation (depreciation) (5,479,635) 759,337
--------------- ---------------
Net increase (decrease) in net assets from operations (2,168,327) 7,490,080
--------------- ---------------
Distributions to Shareholders
From net investment income
Class A Shares (5,373,942) (5,570,866)
Class B Shares (1,033,897) (610,309)
From net realized gain on investments
Class A Shares -- --
Class B Shares -- --
--------------- ---------------
Total distributions to shareholders (6,407,839) (6,181,175)
--------------- ---------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 28,365,253 15,581,402
Class B Shares 9,007,466 10,004,831
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 3,533,989 3,791,071
Class B Shares 757,141 396,798
--------------- ---------------
41,663,849 29,774,102
Less: Payments for shares reacquired
Class A Shares (34,076,541) (18,008,356)
Class B Shares (4,099,087) (2,048,004)
--------------- ---------------
Increase in net assets from capital share transactions 3,488,221 9,717,742
--------------- ---------------
Total Increase (Decrease) in Net Assets for period (5,087,945) 11,026,647
Net Assets: Beginning of period 107,897,713 96,871,066
--------------- ---------------
Net Assets: End of period $102,809,768 $107,897,713
=============== ===============
Undistributed (Distributions in Excess of)
Net Investment Income at End of Period $ 4,938 $ (11,851)
=============== ===============
</TABLE>
See Notes to Financial Statements.
63
<PAGE>
Sentinel Bond Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 6.45 $ 6.36 $ 6.35 $ 6.49 $ 5.85
------------- ------------- ------------- ------------- -------------
Income (Loss) from Investment Operations
Net investment income 0.39 0.40 0.40 0.41 0.42
Net realized and unrealized gain (loss) on investments (0.51) 0.09 0.01 (0.14) 0.64
------------- ------------- ------------- ------------- -------------
Total from investment operations (0.12) 0.49 0.41 0.27 1.06
------------- ------------- ------------- ------------- -------------
Less Distributions
Dividends from net investment income 0.39 0.40 0.40 0.41 0.42
Distributions from realized gains on investments -- -- -- -- --
------------- ------------- ------------- ------------- -------------
Total Distributions 0.39 0.40 0.40 0.41 0.42
------------- ------------- ------------- ------------- -------------
Net asset value at end of period $ 5.94 $ 6.45 $ 6.36 $ 6.35 $ 6.49
============= ============= ============= ============= =============
Total Return (%) * (1.9) 8.0 6.7 4.5 18.8
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.73 0.77 0.97 0.98 0.99
Ratio of expenses to average net assets before
expense reductions (%) ** 0.94 0.95 0.99 1.00 1.03
Ratio of net investment income to average net assets (%) 6.29 6.26 6.37 6.46 6.81
Ratio of net investment income to average net assets
before voluntary expense reimbursements (%) 6.10 6.11 6.37 6.46 6.81
Portfolio turnover rate (%) 207 147 130 176 237
Net assets at end of period (000 omitted) $82,107 $91,297 $88,756 $99,408 $108,755
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
64
<PAGE>
Sentinel Bond Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Eight
Year Ended Year Ended Year Ended Months Ended
Class B Shares 11/30/99 (B) 11/30/98 (B) 11/30/97 (B) 11/30/96 (A)(B)
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 6.46 $ 6.38 $ 6.36 $ 6.30
----------------- ----------------- ----------------- -----------------
Income (Loss) from Investment Operations
Net investment income 0.33 0.34 0.34 0.21
Net realized and unrealized gain (loss) on investments (0.50) 0.08 0.02 0.06
----------------- ----------------- ----------------- -----------------
Total from investment operations (0.17) 0.42 0.36 0.27
----------------- ----------------- ----------------- -----------------
Less Distributions
Dividends from net investment income 0.33 0.34 0.34 0.21
Distributions from realized gains on investments -- -- -- --
----------------- ----------------- ----------------- -----------------
Total Distributions 0.33 0.34 0.34 0.21
----------------- ----------------- ----------------- -----------------
Net asset value at end of period $ 5.96 $ 6.46 $ 6.38 $ 6.36
================= ================= ================= =================
Total Return (%) * (2.6) 6.8 5.9 4.5 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 1.63 1.64 1.87 2.16 +
Ratio of expenses to average net assets before
expense reductions (%) ** 1.81 1.84 1.90 2.18 +
Ratio of net investment income to average net assets (%) 5.41 5.40 5.46 5.28 +
Ratio of net investment income to average net assets
before voluntary expense reimbursements (%) 5.25 5.22 5.46 5.28 +
Portfolio turnover rate (%) 207 147 130 176
Net assets at end of period (000 omitted) $20,703 $16,601 $8,115 $4,714
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not Annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
65
<PAGE>
Sentinel Tax-Free Income Fund seeks high current income exempt from federal
income taxes while seeking to control risk by investing mainly in investment
grade municipal bonds which are exempt from federal income taxes.
Sentinel Tax-Free Income Fund
The taxable equivalent yield of the Sentinel Tax-Free Income Fund as of 11/30/99
was 8.4% for an investor in the 39.6% federal income tax bracket.
For the fiscal year ended November 30, 1999, the Sentinel Tax-Free Income Fund
produced a total return of -2.8%, outperforming the -3.5% average return for
the Lipper Analytical Services Inc. universe of general municipal debt funds.
The Lehman Municipal Bond Index returned -1.1% for the same period.
Municipal interest rates rose throughout 1999 as the Federal Reserve increased
the federal funds rate three times in the face of strong economic growth, even
though the rate of inflation has been relatively stable. It seems that the
robust capital spending by corporations, concentrated in high-technology
equipment, has expanded the productive capacity of the U.S. economy. This has
the effect of increasing the rate of economic growth that can be sustained
without a pickup in inflation.
The current level of interest rates, combined with low inflation, provides
investors a high real rate of interest, which in the case of municipals is
exempt from federal income tax. The taxable equivalent yield of the Sentinel
Tax-Free Income Fund as of 11/30/99 was 8.4% for an investor in the 39.6%
federal income tax bracket. This compares favorably to corporate, government and
mortgage backed securities. We recommend municipals to investors who are looking
to maximize the risk adjusted, after-tax cash flows in their fixed income
portfolios.
We believe that interest rates are near a peak for this cycle and therefore
bonds represent good value as we head into the year 2000. Credit quality of
state and local governments that issue municipal bonds is excellent. Robust tax
receipts, a result of strong economic growth, has allowed municipal issuers to
accumulate surplus funds while reducing their dependency on borrowing. In this
environment, we will continue to structure the portfolio to take advantage of
changing market conditions, while striving to provide our shareholders with a
relatively high level of current income exempt from federal taxation.
/s/ Kenneth J. Hart
Kenneth J. Hart
- --------------------------------------------------------------------------------
Average Annual Total Return
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year -6.7% -2.8%
- --------------------------------------------------------------------------------
5 Years 5.3% 6.2%
- --------------------------------------------------------------------------------
Since Inception* 6.1% 6.6%
- --------------------------------------------------------------------------------
*10/1/90
+ Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel Tax-Free Income Fund Performance
10/1/90 inception through 11/30/99
[GRAPH]
Lipper
Sentinel Lehman General
Tax-Free Municipal Municipal Debt
Income Fund Bond Index* Fund Average
----------- ----------- --------------
9,500 10,000 10,000
9,890 10,382 10,386
10,897 11,418 11,452
11,988 12,565 12,600
13,416 14,004 13,997
12,739 13,096 13,262
14,780 15,529 15,769
15,418 16,292 16,695
16,475 17,419 17,892
17,702 18,607 19,281
17,208 17,953 19,074
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 4% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results.
Chart Ending Values & Legend
10/1/90 inception through 11/30/99
Sentinel Tax-Free Income Fund $17,208
Lehman Municipal Bond Index* $19,074
Lipper General Municipal Debt Fund Average $17,953
*An unmanaged index of bonds reflecting average prices in the bond market.
66
<PAGE>
Sentinel Tax-Free Income Fund
Investment in Securities
at November 30, 1999
- -------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- -------------------------------------------------------------
Bonds 97.4%
California 10.5%
Foothill/Eastern CA Toll
6.500%, 01/01/32 3,500M $3,882,095
Foothill/Eastern CA Toll
5.750%, 01/15/40 2,000M 1,856,140
San Mateo Cnty. CA
Power Rev. (AMBAC)
6.500%, 07/01/15 3,000M 3,334,380
------------
9,072,615
------------
Colorado 3.2%
Arapahoe County
Capital Improvements
6.950%, 08/31/20 1,500M 1,700,865
Fairfax Water Authority Water
7.250%, 01/01/27 1,000M 1,022,410
------------
2,723,275
------------
Connecticut 2.7%
Bridgeport Ref. A
6.125%, 03/01/05 2,250M 2,361,825
------------
Delaware 0.6%
Delaware Health Facility
Auth. (MBIA)
7.625%, 11/01/10 500M 539,285
------------
Florida 3.1%
Orange Cnty. Healthcare A
(Prerefunded) (MBIA)
6.250%, 10/01/13 440M 477,862
Orange County
Healthcare A (MBIA)
6.250%, 10/01/13 1,060M 1,152,294
University Community
Hospital Income (FSA)
7.500%, 09/01/11 1,000M 1,045,580
------------
2,675,736
------------
Georgia 1.8%
State Housing &
Finance Authority
6.550%, 12/01/27 1,485M 1,521,739
------------
Hawaii 1.3%
Hawaii State Dept. of
Budget & Finance (FSA)
7.650%, 07/01/19 1,000M 1,069,860
Hawaii State Housing Finance
7.800%, 07/01/29 5M 5,074
------------
1,074,934
------------
Idaho 0.3%
Idaho Housing Agency
Series D-1
8.000%, 01/01/20 245M 260,756
------------
Illinois 12.2%
Berwyn Corp. (AMBAC)
4.250%, 12/01/15 1,695M 1,411,088
Illinois Chicago University
Aux. (MBIA)
5.500%, 12/01/23 1,000M 946,550
Illinois Educational
Facs. Authority
6.100%, 12/15/16 560M 574,263
Illinois Housing
Development Authority
7.000%, 07/01/10 990M 1,045,212
Illinois Metro
Peir-Mccormick (FGIC)
5.375%, 12/15/18 2,250M 2,123,302
Illinois State Sales Tax
6.000%, 06/15/12 2,180M 2,274,634
Illinois State Sales
Tax Revenue
6.500%, 06/15/13 1,000M 1,088,030
IL MC Henry County
School (FSA)
5.850%, 01/01/16 1,000M 1,054,520
------------
10,517,599
------------
Indiana 0.1%
Indianapolis IN Economic
Dev. Revenue
7.800%, 12/01/17 55M 56,527
------------
Kansas 0.1%
Kansas City Leavenworth
Cnty. & City of Lenexa
Series A - Mtg. Rev.
8.400%, 05/01/15 80M 81,723
------------
Louisiana 4.5%
Government Development
Authority Revenue (AMBAC)
5.250%, 12/01/18 1,000M 938,270
New Orleans Ref. (FGIC)
5.500%, 12/01/15 1,000M 994,740
New Orleans Ref. (FGIC)
5.500%, 12/01/16 1,000M 984,820
New Orleans Ref. (FGIC)
5.500%, 12/01/17 1,000M 979,870
------------
3,897,700
------------
Massachusetts 4.7%
Massachusetts State
G/O (FGIC)
6.000%, 08/01/09 1,000M 1,070,270
Massachusetts State G/O
6.875%, 07/01/10 1,000M 1,058,160
Mass. State Health &
Educational Facs.New England
Baptist Hospital Revenue
7.300%, 07/01/11 1,000M 1,064,580
Mass. Water Revenue (MBIA)
5.000%, 08/01/24 1,000M 870,880
------------
4,063,890
------------
Michigan 0.9%
Michigan State
Building Authority
6.250%, 10/01/20 170M 175,158
Redford MI Union School
(AMBAC)
5.000%, 05/01/22 750M 668,340
------------
843,498
------------
Missouri 1.3%
Central Missouri St.
University (MBIA)
7.000%, 07/01/14 1,000M 1,060,050
Missouri Housing
Development Comm.
9.375%, 04/01/16 15M 15,421
------------
1,075,471
------------
Nebraska 2.4%
Omaha Public
Power District
6.150%, 02/01/12 1,000M 1,075,400
Omaha Public
Power District
7.625%, 02/01/12 1,000M 1,004,430
------------
2,079,830
------------
New Mexico 3.0%
Sante Fe County NM
Revenue (FSA)
6.000%, 02/01/27 2,500M 2,540,200
------------
New York 17.9%
Monroe County NY G/O
6.000%, 03/01/14 1,000M 1,055,930
Monroe IDA
5.375%, 04/01/29 700M 610,470
New York City NY
(Prerefunded)
7.100%, 02/01/09 1,105M 1,180,626
New York City NY
7.100%, 02/01/09 95M 100,632
NYC Municipal Water
Fin. Authority
7.000%, 06/15/09 250M 262,593
NYC University
Certificates of Participation
5.750%, 08/15/05 2,000M 2,085,520
New York NY
Series G
5.750%, 02/01/20 1,600M 1,549,792
NY State Dorm.
Authority
6.375%, 07/01/08 1,275M 1,344,692
NY State Dorm.
Mental Health Services
6.000%, 08/15/16 2,800M 2,865,128
NY State Envir. Facs.
Corp. (Prerefunded)
7.250%, 06/15/10 40M 42,537
(continued)
67
<PAGE>
Sentinel Tax-Free Income Fund
Investment in Securities (cont'd.)
at November 30, 1999
- -------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- -------------------------------------------------------------
New York (cont'd.)
NY State Environmental
Facs. Corp.
7.250%, 06/15/10 10M $ 10,597
NY State Medical Care
Facs. (Prerefunded)
7.875%, 08/15/08 175M 183,160
NY State Medical
Care Facs.
7.875%, 08/15/08 75M 78,155
Triborough Bridge &
Tunnel Authority
6.000%, 01/01/12 3,250M 3,436,550
Urban Development Corp.
Revenue (AMBAC)
4.750%, 01/01/28 750M 617,295
------------
15,423,677
------------
Pennsylvania 5.4%
Lancaster Sewer
Revenue (MBIA)
4.500%, 04/01/18 1,650M 1,380,209
Montgomery Cnty. Higher
Edl. & Health
8.300%, 06/01/10 500M 520,250
Pennsylvania State G/O
6.250%, 07/01/11 2,000M 2,175,400
Southeast Delco School
District (MBIA)
0.000%, 02/01/10 1,005M 588,307
------------
4,664,166
------------
Puerto Rico 3.0%
Puerto Rico Hwy. &
Transportation
5.500%, 07/01/36 2,750M 2,554,695
------------
Tennessee 2.4%
Lawrenceburg TN Electrical
Revenue (MBIA)
6.625%, 07/01/18 1,910M 2,101,458
------------
Texas 1.2%
North Central TX Health
6.250%, 05/15/10 1,000M 1,059,790
------------
Utah 0.1%
Utah State Housing
Finance Authority
7.250%, 07/01/22 10M 10,306
------------
Vermont 4.8%
Vermont Education &
Health Norwich
6.000%, 09/01/13 1,070M 1,064,939
Vermont Education &
Health Norwich
5.500%, 07/01/18 2,295M 2,081,519
Vermont Education &
Health St. Michaels
7.050%, 10/01/16 900M 977,103
------------
4,123,561
------------
Virginia 3.0%
VA Pocahontas Parkway
5.500%, 08/15/28 3,000M 2,553,480
------------
Washington 6.9%
Snohomish County
Washington School Dist.
7.100%, 12/01/07 500M 520,350
Washington State G/O
6.200%, 03/01/11 1,220M 1,321,687
Washington State
Public Power
7.625%, 07/01/10 250M 263,673
Washington State
Public Power (MBIA)
7.125%, 07/01/16 3,295M 3,786,383
------------
5,892,093
------------
Total Investments
(Cost $82,720,010)* 83,769,829
Excess of Other Assets
Over Liabilities 2.6% 2,204,893
------------
Net Assets $85,974,722
============
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes. At November 30, 1999, net
unrealized appreciation for federal income tax purposes aggregated $1,049,819
of which $2,878,660 related to appreciated securities and $1,828,841 related
to depreciated securities.
The following abbreviations are used in portfolio descriptions:
(AMBAC) - Guaranteed by AMBAC Indemnity Corp.
(FGIC) - Guaranteed by Financial Guaranty Insurance Co.
(FSA) - Guaranteed by Financial Security Assurance Inc.
(MBIA) - Guaranteed by Municipal Bond Investors Assurance Corp.
G/O - General Obligation Bond
See Notes to Financial Statements.
68
<PAGE>
Sentinel Tax-Free Income Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $83,769,829
Cash and cash equivalents 565,996
Receivable for fund shares sold 7,098
Receivable for interest 1,805,638
Receivable from fund administrator 75,933
------------
Total Assets 86,224,494
------------
Liabilities
Payable for fund shares repurchased 161,361
Accrued expenses 14,351
Management fee payable 37,627
Distribution fee payable 30,225
Fund service fee payable 6,208
------------
Total Liabilities 249,772
------------
Net Assets Applicable to Outstanding Shares $85,974,722
============
Net Asset Value and Offering Price per Share
$85,974,722 / 6,822,312 shares outstanding $ 12.60
Sales Charge-- 4.00% of offering price 0.53
------------
Maximum Offering Price $ 13.13
============
Net Assets Represent
Capital stock at par value $ 68,223
Paid-in capital 85,518,421
Accumulated undistributed net investment income 6,690
Accumulated undistributed net realized loss
on investments (668,431)
Unrealized appreciation of investments 1,049,819
------------
Net Assets $85,974,722
============
Investments at Cost $82,720,010
============
Sentinel Tax-Free Income Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest $ 4,934,683
------------
Expenses:
Management advisory fee 468,095
Transfer agent and custodian 87,548
Distribution expense 177,146
Accounting services 25,100
Auditing fees 7,500
Legal fees 2,500
Reports and notices to shareholders 6,500
Registration and filing fees 13,241
Directors' fees and expenses 8,146
Other 12,522
------------
Total Expenses 808,298
Expense Reimbursement (159,034)
Expense Offset (5,298)
------------
Net Expenses 643,966
------------
Net Investment Income 4,290,717
------------
Realized and Unrealized Loss on Investments
Net realized loss on sales of investments (668,431)
Net change in unrealized appreciation (depreciation) (6,235,157)
------------
Net Realized and Unrealized Loss on Investments (6,903,588)
------------
Net Decrease in Net Assets from Operations $(2,612,871)
============
See Notes to Financial Statements.
69
<PAGE>
Sentinel Tax-Free Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
------------ -------------
Increase (Decrease) in Net Assets from Operations
<S> <C> <C>
Net investment income $ 4,290,717 $ 4,236,658
Net realized gain (loss) on sales of investments (668,431) 1,104,977
Net change in unrealized appreciation (depreciation) (6,235,157) 1,013,730
------------ -------------
Net increase (decrease) in net assets from operations (2,612,871) 6,355,365
------------ -------------
Distributions to Shareholders
From net investment income (4,286,751) (4,234,079)
From net realized gain on investments (1,104,934) (1,229,059)
------------ -------------
Total distributions to shareholders (5,391,685) (5,463,138)
------------ -------------
From Capital Share Transactions
Net proceeds from sales of shares 38,537,008 10,999,021
Net asset value of shares in reinvestment
of dividends and distributions 3,857,794 3,837,597
------------ -------------
42,394,802 14,836,618
Less: Payments for shares reacquired (37,098,950) (14,980,884)
------------ -------------
Increase (decrease) in net assets from
capital share transactions 5,295,852 (144,266)
------------ -------------
Total Increase (Decrease) in Net Assets for period (2,708,704) 747,961
Net Assets: Beginning of period 88,683,426 87,935,465
------------ -------------
Net Assets: End of period $85,974,722 $88,683,426
============ =============
Undistributed Net Investment Income
at End of Period $ 6,690 $ 2,645
============ =============
</TABLE>
See Notes to Financial Statements.
70
<PAGE>
Sentinel Tax-Free Income Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 13.78 $ 13.64 $ 13.53 $ 13.62 $ 12.35
---------- ---------- ---------- ---------- ----------
Income (Loss) from Investment Operations
Net investment income 0.64 0.65 0.65 0.65 0.67
Net realized and unrealized gain (loss) on investments (1.01) 0.33 0.24 (0.09) 1.27
---------- ---------- ---------- ---------- ----------
Total from investment operations (0.37) 0.98 0.89 0.56 1.94
---------- ---------- ---------- ---------- ----------
Less Distributions
Dividends from net investment income 0.64 0.65 0.65 0.65 0.67
Distributions from realized gains on investments 0.17 0.19 0.13 -- --
---------- ---------- ---------- ---------- ----------
Total Distributions 0.81 0.84 0.78 0.65 0.67
---------- ---------- ---------- ---------- ----------
Net asset value at end of period $ 12.60 $ 13.78 $ 13.64 $ 13.53 $ 13.62
========== ========== ========== ========== ==========
Total Return (%) * (2.8) 7.4 6.9 4.3 16.0
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.73 0.74 0.91 0.94 0.90
Ratio of expenses to average net assets before
expense reductions (%) ** 0.91 0.92 0.95 0.97 0.99
Ratio of net investment income to average net assets (%) 4.84 4.77 4.84 4.86 5.06
Ratio of net investment income to average net assets
before voluntary expense reimbursement (%) 4.66 4.59 4.84 4.86 5.00
Portfolio turnover rate (%) 34 37 47 112 112
Net assets at end of period (000 omitted) $85,975 $88,683 $87,935 $99,967 $110,506
</TABLE>
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all distributions
at the net asset value during the period, and a redemption on the last day of
the period. Initial sales charge is not reflected in the calculation of total
return.
** Expense reductions are comprised of the voluntary expense reimbursements and
include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
71
<PAGE>
Sentinel New York Tax-Free Income Fund seeks high current income exempt from
federal and New York State income taxes, while seeking to control risk by
investing in investment grade municipal bonds of New York issuers.
Sentinel New York Tax-Free Income Fund
The taxable equivalent yield of the Sentinel New York Tax-Free Fund as of
11/30/99 was 9.6% for a New York state resident in the 39.6% federal income tax
bracket.
For the fiscal year ended November 30, 1999, the Sentinel New York Tax-Free Fund
produced a total return of -3.3%, outperforming the -3.8% average return for the
Lipper Analytical Services Inc. universe of New York municipal debt funds. The
Lehman Municipal Bond Index returned -1.1% for the same period.
Municipal interest rates rose throughout 1999 as the Federal Reserve increased
the federal funds rate three times in the face of strong economic growth, even
though the rate of inflation has been relatively stable. It seems that the
robust capital spending by corporations, concentrated in high-technology
equipment, has expanded the productive capacity of the U.S. economy. This has
the effect of increasing the rate of economic growth that can be sustained
without a pickup in inflation.
The current level of interest rates, combined with low inflation, provides
investors a high real rate of interest, which in the case of New York municipals
is sheltered from federal and New York state income taxes. The taxable
equivalent yield of the Sentinel New York Tax-Free Fund as of 11/30/99 was 9.6%
for a New York state resident in the 39.6% federal income tax bracket. This
compares favorably to corporate, government and mortgage backed securities. We
recommend municipals for investors who are looking to maximize risk adjusted,
after-tax cash flows in their fixed income portfolios.
We believe that interest rates are near a peak for this cycle and therefore
bonds represent good value as we head into the year 2000. Credit quality of
state and local governments that issue municipal bonds is excellent. Robust tax
receipts, a result of strong economic growth, has allowed municipal issuers to
accumulate surplus funds while reducing their dependency on borrowing. In this
environment, we will continue to structure the portfolio to take advantage of
changing market conditions, while striving to provide our shareholders with a
relatively high level of current income exempt from federal taxation.
/s/ Kenneth J. Hart
Kenneth J. Hart
- --------------------------------------------------------------------------------
Average Annual
Total Return
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year -7.2% -3.3%
- --------------------------------------------------------------------------------
3 Years 2.7% 4.1%
- --------------------------------------------------------------------------------
Since
Inception* 4.4% 5.4%
- --------------------------------------------------------------------------------
*3/27/95
+Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel NY Tax-Free Income Fund Performance
3/27/95 inception through 11/30/99
[GRAPH]
Sentinel Lehman Lipper
NY Tax-Free Municipal NY Municipal
Income Fund Bond Index* Debt Fund Average
----------- ----------- -----------------
10,000 10,000 10,000
9,789 10,241 10,191
10,460 10,970 10,915
10,303 10,921 10,760
10,773 11,456 11,264
11,157 11,822 11,596
11,897 12,509 12,273
12,255 12,846 12,561
12,705 13,320 12,975
12,486 13,200 12,742
12,249 13,144 12,461
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 4% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results.
Chart Ending Values & Legend
3/27/95 inception through 11/30/99
Sentinel $12,249
NY Tax-Free
Income Fund
Lehman $13,144
Municipal
Bond Index*
Lipper $12,461
NY Municipal
Debt Fund Average
*An unmanaged index of bonds reflecting average prices in the bond market.
72
<PAGE>
Sentinel New York Tax-Free Income Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Bonds 95.2%
New York 84.6%
City University NY
Certificate of Participation
5.75%, 08/15/05 300M $312,828
Clifton Park NY Water
Authority Revenue
5.00%, 10/01/29 (FGIC) 650M 560,989
Dutchess County NY G/O
5.00%, 06/15/17 325M 297,619
Long Island NY Electric
Power Revenue
5.25%, 12/01/26 200M 177,634
Metro Transportation Authority
5.75%, 07/01/13 250M 255,670
5.875%, 07/01/27 (AMBAC) 200M 196,902
Monroe County G/O
6.00%, 03/01/14 250M 263,983
Monroe County Industrial
Dev. Agency
5.375%, 04/01/29 510M 444,771
Monroe Woodbury
Central School Dist.
5.625%, 05/15/22 (MBIA) 250M 242,100
New York City Municipal
Water Fin. Auth.
6.00%, 06/15/17 100M 101,900
5.75%, 06/15/20 (MBIA) 220M 216,867
5.875%, 06/15/25 (MBIA) 500M 497,045
5.125%, 06/15/30 (FGIC) 300M 263,817
New York NY G/O Series G
5.75%, 02/01/20 400M 387,448
New York NY Transitional
Fin. Auth.
5.0%, 05/01/29 500M 424,610
New York State Dorm.
Authority Revenue
City University System
5.625%, 07/01/16 250M 245,368
5.375%, 07/01/25 (AMBAC) 200M 185,718
Cornell Univ. - Ser A
7.375%, 07/01/30 50M 51,768
Department of Health
5.50%, 07/01/20 125M 117,382
Fordham University (FGIC)
5.75%, 07/01/15 215M 216,507
Nursing Home-Hebrew Home
5.625%, 02/01/17 220M 220,059
NY Medical College
4.75%, 07/01/27 (MBIA) 250M 205,210
Memorial Sloan Kettering
Cancer Center
5.50%, 07/01/23 (MBIA) 500M 481,450
Mental Health Services
5.70%, 08/15/09 250M 258,472
5.50%, 08/15/17 600M 573,798
4.50%, 08/15/28 (AMBAC) 500M 394,450
State Univ. Educ. Fac. - Ser A
7.20%, 05/15/06 200M 216,412
6.375%, 05/15/14 250M 269,273
State Univ. Educ.
Fac. - Ser B
4.75%, 05/15/28 250M 201,253
St. Johns Univ.
5.25%, 07/01/18 (MBIA) 205M 192,714
Wyckoff Heights Medical Ctr.
5.3%, 08/15/21 250M 216,643
New York State
Environmental Facilities
5.75%, 01/15/13 250M 255,342
5.75%, 03/15/13 300M 301,665
New York State Environmental
Water Revenue
7.25%, 06/15/10 5M 5,299
7.25%, 06/15/10 (Prerefunded) 55M 58,489
New York State Housing
Finance Agency
5.625%, 05/01/02 250M 253,780
New York State Local
Govt. Assistance Corp.
7.00%, 04/01/08 100M 107,585
5.375%, 04/01/16 (AMBAC) 300M 289,392
New York State Medical
Care Facilities
7.875%, 08/15/20 10M 10,368
7.875%, 08/15/20
(Prerefunded) 10M 10,466
7.30%, 02/15/21 10M 10,503
7.30%, 02/15/21
(Prerefunded) 15M 16,031
Hospitals &
Nursing Homes
6.45%, 02/15/09 95M 100,264
6.45%, 02/15/09
(Prerefunded) 125M 134,425
New York State Thwy. Auth.
Service Contract
6.25%, 04/01/14 200M 217,370
New York State Urban
Development Corp.
6.000%, 01/01/15 (AMBAC) 485M 497,135
5.70%, 04/01/20 250M 243,812
4.75%, 01/01/28 (AMBAC) 250M 205,765
North Hempstead NY G/O
6.000%, 07/15/15 (FGIC) 500M 517,750
Saint Lawrence University
Insured Revenue
5.625%, 07/01/13 (MBIA) 250M 256,258
Suffolk County NY Judicial
Svc. Agreement
5.75%, 10/15/13 (AMBAC) 500M 512,065
Suffolk County NY
Water Authority
5.625%, 06/01/16 (AMBAC) 170M 169,007
Triborough Bridge &
Tunnel Authority
6.00%, 01/01/12 250M 264,350
6.875%, 01/01/15 65M 67,807
5.125%, 01/01/22 250M 221,185
United Nations
Development Corp.
6.00%, 07/01/12 250M 266,690
-----------
13,683,463
===========
Puerto Rico 10.6%
Puerto Rico Commonwealth
5.375%, 07/01/21 (MBIA) 255M 244,162
5.40%, 07/01/25 300M 279,933
Puerto Rico Commonwealth
Aqueduct & Sewer
6.00%, 07/01/09 250M 265,895
Puerto Rico Electric
Power Authority
4.50%, 07/01/18 (MBIA) 300M 253,269
Puerto Rico Indl. Tourist Edl.
Med. & Envir. Ctl. Facs.
5.00%, 10/01/22 (MBIA) 300M 269,118
Puerto Rico Public
Building Authority
5.75%, 07/01/15 400M 402,820
-----------
1,715,197
===========
Total Bonds
(Cost $15,795,199) 15,398,660
-----------
Short-Term Investments 2.9%
Provident New York
Money Fund 3.48% (a)
(Cost $475,000) 475M 475,000
-----------
Total Investments
(Cost $16,270,199)* 15,873,660
Excess of Other Assets
Over Liabilities 1.9% 301,354
-----------
Net Assets $16,175,014
===========
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes. At November 30, 1999, net
unrealized depreciation for federal income tax purposes aggregated $396,539
of which, $263,817 related to appreciated securities and $660,356 related
to depreciated securities.
(a) Variable rate security that may be tendered back to issuer at par.
The following abbreviations are used in portfolio descriptions:
(AMBAC) - Guaranteed by American Municipal Bond Association Corp.
(FGIC) - Guaranteed by Financial Guaranty Insurance Co
(MBIA) - Guaranteed by Municipal Bond Investors Assurance Corp.
G/O - General Obligation Bond
See Notes to Financial Statements.
73
<PAGE>
Sentinel New York Tax-Free Income Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $15,873,660
Receivable for interest 263,292
Receivable from fund administrator 79,000
-----------
Total Assets 16,215,952
-----------
Liabilities
Payable to custodian 22,681
Accrued expenses 4,452
Management fee payable 7,057
Distribution fee payable 5,888
Fund service fee payable 860
-----------
Total Liabilities 40,938
-----------
Net Assets Applicable to Outstanding Shares $16,175,014
===========
Net Asset Value and Offering Price Per Share
$16,175,014 / 1,444,375 shares outstanding $ 11.20
Sales Charge-- 4.00% of Offering Price 0.47
-----------
Maximum Offering Price Per Share $ 11.67
===========
Net Assets Represent
Capital stock at par value $ 14,444
Paid-in capital 16,866,572
Accumulated undistributed net investment income 767
Accumulated undistributed net realized loss
on investments (310,230)
Unrealized depreciation of investments (396,539)
-----------
Net Assets $16,175,014
===========
Investments at Cost $16,270,199
===========
Sentinel New York Tax-Free Income Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest $ 825,053
-----------
Expenses:
Management advisory fee 84,945
Transfer agent and custodian 11,585
Distribution expense 32,161
Accounting services 4,600
Auditing fees 3,500
Legal fees 750
Reports and notices to shareholders 2,500
Registration and filing fees 2,517
Directors' fees and expenses 1,463
Other 9,799
-----------
Total Expenses 153,820
Expense Reimbursement (150,000)
Expense Offset (3,820)
-----------
Net Expenses --
-----------
Net Investment Income 825,053
-----------
Realized and Unrealized Loss on Investments
Net realized loss on sales of investments (310,229)
Net change in unrealized depreciation (1,124,860)
-----------
Net Realized and Unrealized Loss on Investments (1,435,089)
-----------
Net Decrease in Net Assets from Operations $ (610,036)
===========
See Notes to Financial Statements.
74
<PAGE>
Sentinel New York Tax-Free Income Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
------------- -------------
Increase (Decrease) in Net Assets from Operations
<S> <C> <C>
Net investment income $ 825,053 $ 476,358
Net realized gain (loss) on sales of investments (310,229) 1,777
Net change in unrealized appreciation (depreciation) (1,124,860) 255,201
------------- -------------
Net increase (decrease) in net assets from operations (610,036) 733,336
------------- -------------
Distributions to Shareholders
From net investment income (824,836) (476,229)
From realized gain on investments (1,773) (19,064)
------------- -------------
Total distributions to shareholders (826,609) (495,293)
------------- -------------
From Capital Share Transactions
Net proceeds from sales of shares 8,896,645 4,692,578
Net asset value of shares in reinvestment
of dividends and distributions 630,118 456,688
------------- -------------
9,526,763 5,149,266
Less: Payments for shares reacquired (3,892,736) (1,114,125)
------------- -------------
Increase in net assets from capital share transactions 5,634,027 4,035,141
------------- -------------
Total Increase in Net Assets for period 4,197,382 4,273,184
Net Assets: Beginning of period 11,977,632 7,704,448
------------- -------------
Net Assets: End of period $16,175,014 $11,977,632
============= =============
Undistributed Net Investment Income
at End of Period $ 767 $ 542
============= =============
</TABLE>
See Notes to Financial Statements.
75
<PAGE>
Sentinel New York Tax-Free Income Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Eight Months
Year Ended Year Ended Year Ended Year Ended Ended
11/30/99 11/30/98 11/30/97 11/30/96 11/30/95(A)
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 12.19 $ 11.88 $11.72 $11.72 $11.19
------------ ------------ ------------ ------------ ------------
Income (Loss) from Investment Operations
Net investment income 0.60 0.62 0.60 0.53 0.36
Net realized and unrealized gain (loss) on investments (0.99) 0.34 0.25 -- 0.53
------------ ------------ ------------ ------------ ------------
Total from investment operations (0.39) 0.96 0.85 0.53 0.89
------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends from net investment income 0.60 0.62 0.60 0.53 0.36
Distributions from realized gains on investments -- 0.03 0.09 -- --
------------ ------------ ------------ ------------ ------------
Total Distributions 0.60 0.65 0.69 0.53 0.36
------------ ------------ ------------ ------------ ------------
Net asset value at end of period $ 11.20 $ 12.19 $11.88 $11.72 $11.72
============ ============ ============ ============ ============
Total Return (%) * (3.3) 8.3 7.7 4.8 8.1 ++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) -- -- 0.30 1.04 1.22 +
Ratio of expenses to average net assets before
expense reductions (%) ** 0.96 1.01 1.09 1.10 1.29 +
Ratio of net investment income to average net assets (%) 5.13 5.17 5.31 4.65 4.60 +
Ratio of net investment income to average net assets
before voluntary expense reimbursements (%) 4.20 4.19 4.57 4.65 4.60 +
Portfolio turnover rate (%) 31 6 21 48 32
Net assets at end of period (000 omitted) $16,175 $11,978 $7,704 $5,749 $5,332
</TABLE>
(A) Commenced operations March 27, 1995.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Note (2) and (1) H
See Notes to Financial Statements.
76
<PAGE>
Sentinel Government Securities Fund seeks high current income while seeking to
control risk by investing mainly in U.S. government bonds including direct
obligations of the U.S. Treasury, the U.S. government, its agencies and
instrumentalities.
Sentinel Government Securities Fund
Exposure to the mortgage-backed securities sector increased from 48% of assets
to 65% over the period. The Fund actively engaged in U.S. Treasury dollar rolls,
an income-enhancing strategy, which added approximately 85 basis points to the
Fund's return.
For the Sentinel Government Securities Fund's or the fiscal year ended November
30, 1999, 12-month total return was -2.5%, slightly below the -2.1% return of
the Lipper U.S. Government Fund Average. The Lehman Government Bond Index and
the Lehman Mortgage-Backed Securities Index returned -1.4% and +2.5%,
respectively, over the same period.
The twelve-month period ended November 30, 1999 can be categorized as another
year of high volatility with respect to the direction of interest rates, the
shape of the U.S. Treasury yield curve, and the relative spreads of
mortgage-backed securities (MBS). Interest rates rose fairly steadily over the
period, approximately 150 basis points, as investors increased their inflation
expectations. "New Era" economic thinking of strong growth and low inflation,
gave way to more traditionalist views of supply and demand imbalances, most
notably in the labor markets, leading to higher inflation. In addition, rising
commodity prices, stronger global economic growth, a declining U.S. dollar, as
well as building wage/earnings pressures, contributed to investor anxiety. The
Federal Reserve tightened monetary policy three times over the period, fully
reversing their accommodative stance in the latter part of 1998. The target
level of Federal Funds rose to 5.50%, up from 4.75% a year earlier. The slope of
the U.S. Treasury yield curve flattened 27 basis points during the period as
measured by the 2-year Note to 30-year Bond spread. Mortgage-backed securities
outperformed comparable duration U.S. Treasuries by a wide margin as investors
flocked to defensive sectors of the fixed-income markets.
Over the fiscal year, the Fund gradually increased its portfolio duration from
6.0 years to 6.7 years. About half of this increase can be attributed to the
duration extension of its mortgage-backed securities holdings resulting from
slower prepayment projections, while the other half was an intentional increase
of the Fund's sensitivity to interest rates given the magnitude of this fiscal
year's interest rate rise. Exposure to the mortgage-backed securities sector
increased from 48% of
- --------------------------------------------------------------------------------
Average Annual Total Return
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year -6.4% -2.5%
- --------------------------------------------------------------------------------
5 Years 6.1% 7.0%
- --------------------------------------------------------------------------------
10 Years 6.6% 7.0%
- --------------------------------------------------------------------------------
+ Sales charge applicable to year of initial investment.
- --------------------------------------------------------------------------------
Sentinel Government Securities Fund Performance
Ten Years Ended 11/30/99
[GRAPH]
Sentinel Lipper Gen'l. Lehman Lehman
Government U.S. Government Government Mortgage
Securities Fund Fund Average Bond Index* Index*
--------------- --------------- ----------- --------
10,000 10,000 10,000 10,000
10,392 10,672 10,724 10,954
11,799 12,015 12,144 12,635
12,814 12,999 13,243 13,610
14,170 14,475 14,843 14,611
13,534 13,810 14,311 14,377
15,958 16,204 16,800 16,719
16,454 16,902 17,691 17,927
17,646 18,020 18,991 19,350
19,415 19,626 21,033 20,796
18,933 19,214 20,743 21,324
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Indices and Average shown above, you should note
that the Fund's performance reflects the maximum 4% sales charge and includes
all expenses and management fees, while that shown for the Indices and Average
does not. Past performance is not predictive of future results.
Chart Ending Values & Legend
Ten years ended 11/30/99
Sentinel $18,933
Government
Securities Fund
Lehman $20,743
Government
Bond Index*
Lehman $21,324
Mortgage
Index*
Lipper Gen'l. $19,214
U.S. Government
Fund Average
*An unmanaged index of bonds reflecting average prices in the bond market.
77
<PAGE>
assets to 65% over the period. The Fund actively engaged in U.S. Treasury dollar
rolls, an income-enhancing strategy, which added approximately 85 basis points
to the Fund's return. The Fund's fiscal year performance was hindered by its
somewhat longer duration, as well as its relative underweighting to the
mortgage-backed securities sector.
In summary, we are adamantly committed to achieving the Fund's goals of high
current income and capital preservation through all market conditions, and
appreciate your continued support.
/s/ David M. Brownlee
David M. Brownlee, CFA
78
<PAGE>
Sentinel Government Securities Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
U.S. Government Obligations 127.3%
U.S. Treasury Obligations 33.7%
10-Year:
Note 5.5%, '09 3,000M $ 2,855,430
Note 6%, '09 1,000M 987,610
------------
3,843,040
------------
30-Year:
Bond 6.125%, '29 18,500M 18,138,325
------------
Total U.S. Treasury Obligations 21,981,365
------------
U.S. Government Agency Obligations 93.6%
Federal Home Loan Mortgage Corporation 22.6%
Agency Discount Notes:
5.41%, 12/15/99 5,000M 4,989,480
4.51%, 02/15/00 3,800M 3,755,798
------------
8,745,278
------------
Mortgage-Backed Securities:
15-Year:
9.5%, '05 378M 395,657
9%, '06 53M 54,731
6.5%, '07 893M 890,202
7.5%, '08 2,089M 2,120,242
8%, '14 366M 375,299
------------
3,836,131
------------
30-Year:
8.25%, '05 40M 41,213
11%, '09 9M 10,145
11%, '15 26M 28,604
11%, '15 18M 19,508
11%, '15 24M 25,995
11%, '16 4M 4,887
11%, '17 7M 7,393
11%, '17 72M 79,480
7.5%, '24 1,877M 1,899,524
------------
2,116,749
------------
Total Federal Home Loan
Mortgage Corporation 14,698,158
------------
Federal National Mortgage Association 62.9%
Agency Discount Note:
5.51%, 02/10/00 9,315M 9,213,774
------------
Mortgage-Backed Securities:
15-Year:
8.25%, '02 44M 45,283
9.75%, '04 144M 151,389
7.75%, '05 1,178M 1,202,609
8%, '09 941M 965,620
------------
2,364,901
30-Year:
9.25%, '09 186M 196,603
8%, '16 339M 347,813
10.5%, '17 1,038M 1,134,468
10%, '18 657M 707,865
10%, '18 542M 583,987
10%, '19 460M 490,985
10.5%, '19 1,024M 1,120,168
7.5%, '22 2,384M 2,409,629
10%, '24 1,227M 1,323,336
9%, '25 955M 1,000,120
9%, '25 2,049M 2,145,415
9.5%, '25 1,202M 1,274,861
8%, '27 1,019M 1,034,520
8%, '27 1,628M 1,651,678
8%, '28 945M 958,906
6%, '29 2,162M 2,007,381
6%, '29 973M 902,593
6%, '29 2,046M 1,898,453
6%, '29 2,996M 2,780,196
6%, '29 2,431M 2,255,352
6%, '29 1,679M 1,558,206
6.5%, '29 1,665M 1,589,167
------------
29,371,702
------------
Total Federal National
Mortgage Association 40,950,377
------------
Government National Mortgage Association 8.1%
Mortgage-Backed Securities:
10-Year:
7%, '03 454M 456,784
7%, '03 640M 643,557
------------
1,100,341
------------
15-Year:
10%, '01 5M 5,616
8%, '14 1,591M 1,632,570
8%, '14 1,495M 1,534,222
------------
3,172,408
------------
30-Year:
8%, '29 1,009M 1,027,718
------------
Total Government National
Mortgage Association 5,300,467
------------
Total U.S. Government
Agency Obligations 60,949,002
------------
Total U.S. Government Obligations
(Cost $83,563,259) 82,930,367
------------
Corporate Short-Term Notes 14.5%
IBM Credit Corp.
6.35%, 01/19/00 3,200M 3,180,244
Texaco, Inc.
5.89%, 01/13/00 3,300M 3,276,784
Transamerica Financial Corp.
6%, 01/24/00 3,000M 2,973,000
------------
(Cost $9,430,028) 9,430,028
------------
Total Investments
(Cost $92,993,287)* 92,360,395
Excess of Liabilities
Over Other Assets (41.8%) (27,224,113)
------------
Net Assets $65,136,282
============
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes. At November 30, 1999 unrealized
depreciation for federal income tax purposes aggregated $632,892 of which
$151,820 related to appreciated securities and $784,712 related to depreciated
securities.
See Notes to Financial Statements.
79
<PAGE>
Sentinel Government Securities Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $92,360,395
Receivable for securities sold 2,446,281
Receivable for fund shares sold 14,458
Receivable for interest 170,256
Receivable fund administrator 42,399
-------------
Total Assets 95,033,789
-------------
Liabilities
Payable for securities purchased 28,001,827
Payable for fund shares repurchased 127,380
Payable to custodian 1,683,256
Accrued expenses 21,930
Management fee payable 28,911
Distribution fee payable 26,809
Fund service fee payable 7,394
-------------
Total Liabilities 29,897,507
-------------
Net Assets Applicable to Outstanding Shares $65,136,282
=============
Net Asset Value and Offering Price Per Share
$65,136,282 / 6,813,609 shares outstanding $ 9.56
Sales Charge-- 4.00% of Offering Price 0.40
-------------
Maximum Offering Price Per Share $ 9.96
=============
Net Assets Represents
Capital stock at par value $ 68,136
Paid-in capital 73,420,236
Accumulated distributions in excess of
net investment income (11,828)
Accumulated undistributed net realized loss
on investments (7,707,370)
Unrealized depreciation of investments (632,892)
-------------
Net Assets $65,136,282
=============
Investments at Cost $92,993,287
=============
Sentinel Government Securities Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest $ 5,190,098
-------------
Expenses:
Management advisory fee 375,526
Transfer agent and custodian 120,890
Distribution expense 142,162
Accounting services 20,150
Auditing fees 6,300
Legal fees 2,500
Reports and notices to shareholders 7,200
Registration and filing fees 13,278
Directors' fees and expenses 6,474
Other 5,085
-------------
Total Expenses 699,565
Expense Reimbursement (83,938)
Expense Offset (15,565)
-------------
Net Expenses 600,062
-------------
Net Investment Income 4,590,036
-------------
Realized and Unrealized Loss on Investments
Net realized loss on sales of investments (4,769,780)
Net change in unrealized depreciation (1,694,567)
-------------
Net Realized and Unrealized Loss on Investments (6,464,347)
-------------
Net Decrease in Net Assets from Operations $(1,874,311)
=============
See Notes to Financial Statements.
80
<PAGE>
Sentinel Government Securities Fund
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
Year Year
Ended Ended
11/30/99 11/30/98
------------- -------------
Increase (Decrease) in Net Assets from Operations
<S> <C> <C>
Net investment income $ 4,590,036 $ 4,482,787
Net realized gain (loss) on sales of investments (4,769,780) 2,896,784
Net change in unrealized depreciation (1,694,567) (277,519)
------------- -------------
Net increase (decrease) in net assets from operations (1,874,311) 7,102,052
------------- -------------
Distributions to Shareholders
From net investment income (4,572,531) (4,425,304)
From net realized gain on investments -- --
------------- -------------
Total distributions to shareholders (4,572,531) (4,425,304)
------------- -------------
From Capital Share Transactions
Net proceeds from sales of shares 14,232,925 12,434,900
Net asset value of shares in reinvestment
of dividends and distributions 3,543,956 3,445,346
------------- -------------
17,776,881 15,880,246
Less: Payments for shares reacquired (22,692,243) (17,868,058)
------------- -------------
Decrease in net assets from capital share transactions (4,915,362) (1,987,812)
------------- -------------
Total Increase (Decrease) in Net Assets for period (11,362,204) 688,936
Net Assets: Beginning of period 76,498,486 75,809,550
------------- -------------
Net Assets: End of period $65,136,282 $76,498,486
============= =============
Distributions in Excess of Net Investment Income
at End of Period $ (11,828) $ (12,441)
============= =============
</TABLE>
See Notes to Financial Statements.
81
<PAGE>
Sentinel Government Securities Fund Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended Year Ended
11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 10.46 $ 10.09 $ 10.00 $ 10.30 $ 9.31
------------ ------------ ------------ ------------ ------------
Income (loss) from Investment Operations
Net investment income 0.64 0.61 0.59 0.61 0.63
Net realized and unrealized gain (loss) on investments (0.90) 0.37 0.09 (0.30) 0.99
------------ ------------ ------------ ------------ ------------
Total from investment operations (0.26) 0.98 0.68 0.31 1.62
------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends from net investment income 0.64 0.61 0.59 0.61 0.63
Distributions from realized gains on investments -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Total Distributions 0.64 0.61 0.59 0.61 0.63
------------ ------------ ------------ ------------ ------------
Net asset value at end of period $ 9.56 $ 10.46 $ 10.09 $ 10.00 $ 10.30
============ ============ ============ ============ ============
Total Return (%) * (2.5) 10.0 7.2 3.2 17.9
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.84 0.91 0.98 1.00 1.03
Ratio of expenses to average net assets before
expense reductions (%) ** 0.98 0.99 0.99 1.01 1.04
Ratio of net investment income to average net assets (%) 6.46 6.02 6.15 6.18 6.50
Ratio of net investment income to average net assets
before voluntary expense reimbursements (%) 6.34 5.94 6.15 6.18 6.50
Portfolio turnover rate (%) 330 355 249 614 367
Net assets at end of period (000 omitted) $65,136 $76,498 $75,810 $92,299 $108,100
</TABLE>
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1)H.
See Notes to Financial Statements.
82
<PAGE>
Sentinel Short Maturity Government Fund seeks high current income and limited
fluctuations in principal value by investing at least 65% of its assets in U.S.
government securities with average maturities of from two to five years.
Sentinel Short Maturity Government Fund
The Fund's exposure to mortgage-backed securities and its relatively short
duration made the largest contributions to the Fund's performance during the
period.
For the fiscal year ended November 30, 1999, the Sentinel Short Maturity
Government Fund produced a total return of 3.2%. This compares favorably to an
average return of 2.8% as reported by Lipper Analytical Services Inc. for Short
U.S. Government Funds. The Lehman 1-3 Year Government Index returned 3.3% for
the same period.
The investment goal of the Fund is to provide a high level of current income,
consistent with safety of principal, by investing in U.S. government securities,
including its agencies and instrumentalities. The Fund attempts to earn a
competitive yield and rate of return between that of a money market fund and
that provided by a long-term government bond fund. At least 65% of the Fund's
assets are invested in U.S. government securities with average maturities of 2
to 5 years. Included in this group of securities are U.S. Treasury and agency
issues, as well as mortgage-backed securities (MBS) issued by the
instrumentalities of the U.S. government. The investment strategy of the Fund is
to be at least 95% invested in all market environments, with a primary focus on
yield, as the price appreciation/depreciation of short maturity securities is
fairly limited over a 12-month investment horizon. In addition, yield and total
return are highly, positively correlated for short duration instruments over
short investment horizons. The Fund's target duration is 2.0 years, managed
within a range of 1.5 to 2.5 years.
Interest rates rose fairly steadily over the twelve-month period ended November
30, 1999 as investor anxiety increased sharply with respect to future levels of
inflation. U.S. economic growth remained robust and the Federal Reserve
tightened monetary policy three times over the period. Yields on the 2-year U.S.
Treasury Note rose 149 basis points to 6.01%, while 30-year U.S. Treasury Bond
yields increased 122 basis points to 6.29%.
As of November 30, 1999, the Fund was positioned with 97% of assets in short
mortgage-backed securities and 3% in cash and cash equivalents. The Fund
utilizes mortgage-backed securities for their excess yield spreads available
over comparable duration U.S. Treasuries. The Fund carefully limits the type of
MBS product it buys to those which possess limited risk should interest rates
unexpectedly rise.
- --------------------------------------------
Average Annual
Total Return
Through 11/30/99
w/sales w/o sales
Period charge+ charge
- --------------------------------------------
1 Year 2.1% 3.2%
- --------------------------------------------
3 Year 4.9% 5.3%
- --------------------------------------------
Since
Inception* 5.7% 5.9%
- --------------------------------------------
*3/27/95
+ Sales charge applicable to year of initial investment.
================================================================================
Sentinel Short Maturity Government Fund Performance
3/27/95 inception through 11/30/99
[GRAPH]
Sentinel Lipper Lehman
Short-Maturity Short U.S. Gov't 1-3 Yr. Growth
Gov't Fund Fund Average Bond Index*
9,900 10,000 10,000
10,221 10,283 10,317
10,615 10,665 10,728
10,695 10,777 10,883
11,103 11,293 11,275
11,443 11,564 11,600
11,861 11,899 12,024
12,268 12,113 12,385
12,605 12,609 12,860
12,708 12,736 13,008
12,966 12,919 13,231
Chart Ending Values & Legend
3/27/95 inception
through 11/30/99
Sentinel $12,966
Short-Maturity
Gov't. Fund
Lehman $13,213
1-3 Yr. Gov't.
Bond Index.*
Lipper $12,919
Short U.S. Gov't.
Fund Average
*An unmanaged index of bonds reflecting average prices in the bond market.
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 1% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results.
83
<PAGE>
In summary, the Fund's exposure to mortgage-backed securities and its relatively
short duration made the largest contributions to the Fund's performance during
the period. We look forward to helping you achieve your investment goals in the
coming year.
/s/ David M. Brownlee, CFA
David M. Brownlee, CFA
84
<PAGE>
Sentinel Short Maturity Government Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
U.S. Government Agency
Obligations 97.2%
Federal Home Loan Mortgage Corporation 34.0%
Collateralized Mortgage Obligations:
FHLMC 1057 (D), 8%, '21 86M $ 86,528
FHLMC 1754 (DC),
'8.5%, '03 1,051M 1,083,861
FHLMC T-2A, 7%, '21 262M 251,616
-------------
1,422,005
-------------
Mortgage-Backed Securities:
15-Year:
8.5%, '01 158M 162,553
9%, '01 71M 73,290
9%, '01 75M 77,062
9.5%, '01 1M 699
9.5%, '01 1M 621
7.5%, '02 187M 190,117
8%, '02 209M 215,212
9%, '02 204M 210,560
9.5%, '03 3M 2,680
9.5%, '03 123M 129,394
6.5%, '04 452M 454,239
9.5%, '04 96M 100,429
9.5%, '05 483M 509,485
10%, '05 62M 64,919
9%, '06 305M 319,124
7.5%, '07 2,015M 2,046,665
8.5%, '07 25M 25,644
9%, '07 2,322M 2,425,465
9%, '07 213M 223,040
8%, '08 165M 168,548
5.5%, '09 544M 533,974
7.5%, '09 247M 250,432
7.5%, '11 1,275M 1,293,225
8%, '11 238M 244,135
8%, '11 783M 801,466
8%, '11 771M 789,160
-------------
11,312,138
-------------
30-Year:
8.5%, '03 274M 286,435
7%, '06 361M 362,756
6.5%, '07 357M 358,066
7%, '07 186M 187,248
8%, '07 623M 645,199
8.25%, '07 272M 284,496
7.5%, '08 581M 591,898
7.5%, '08 399M 407,336
8%, '08 195M 197,820
8%, '08 782M 810,312
8.75%, '08 216M 228,543
9.25%, '08 229M 238,641
9.25%, '08 67M 70,245
9.25%, '08 25M 26,275
7.5%, '09 384M 391,231
7.75%, '09 286M 293,442
8%, '09 111M 114,720
8%, '09 117M 121,242
8.25%, '09 477M 497,361
8.5%, '09 806M 847,892
10.25%, '09 12M 12,833
9.25%, '11 923M 961,632
9.25%, '16 102M 105,836
8.75%, '17 1,710M 1,808,190
9.25%, '17 36M 37,650
8%, '23 400M 410,219
-------------
10,297,518
-------------
Total Federal Home Loan
Mortgage Corporation 23,031,661
-------------
Federal National Mortgage Association 55.7%
Collateralized Mortgage Obligations:
FNMA 1989-96 (G),
8.75%, '19 338M 343,470
-------------
Mortgage-Backed Securities:
7-Year Balloon:
7%, '04 389M 390,583
-------------
10-Year
7%, '06 2,124M 2,140,367
6.5%, '08 2,017M 2,006,715
-------------
4,147,082
-------------
15-Year:
9%, '02 3M 3,097
9%, '02 254M 264,763
6%, '03 766M 759,085
7%, '03 150M 152,702
9.5%, '03 1,357M 1,425,610
6%, '04 419M 418,254
7%, '07 334M 334,991
7%, '07 473M 475,230
7%, '07 200M 201,174
7%, '07 154M 154,493
7%, '07 168M 168,530
7%, '07 254M 255,304
7.5%, '08 1,380M 1,398,222
7.25%, '09 598M 601,980
8%, '09 807M 827,674
8.5%, '10 184M 190,144
9.0%, '10 728M 759,249
8%, '11 898M 922,083
7%, '12 1,500M 1,518,896
8.5%, '12 1,574M 1,635,338
-------------
12,466,819
-------------
20-Year:
10.5%, '18 815M 891,495
-------------
30-Year:
10.5%, '03 9M 9,194
8%, '04 124M 126,407
8%, '04 80M 82,325
9%, '04 308M 321,214
7%, '05 300M 302,802
8%, '05 236M 240,176
9%, '05 412M 430,002
7.75%, '06 293M 296,591
8%, '06 551M 563,988
8%, '06 363M 369,587
7%, '07 382M 387,169
7.5%, '07 266M 271,934
7.5%, '07 121M 123,819
7.5%, '07 814M 831,768
7.5%, '08 382M 389,985
8%, '08 374M 383,040
8.25%, '09 154M 158,299
8.25%, '09 483M 498,852
8.75%, '09 105M 110,238
9%, '09 203M 214,064
8.5%,'11 920M 955,375
8.5%, '11 126M 130,794
8%, '12 4,059M 4,155,693
8%, '12 663M 679,465
8.75%, '13 32M 33,789
7.5%, '14 608M 615,878
11.5%, '15 282M 315,728
12.5%, '15 316M 361,060
10.5%, '16 706M 771,818
8.25%, '17 276M 284,561
9%, '17 313M 328,725
8%, '18 1,266M 1,297,404
10.5%, '18 310M 338,886
11%, '19 397M 438,387
8.25%, '22 85M 88,036
10%, '23 690M 743,902
9%, '25 221M 232,342
10%, '25 541M 582,849
8.5%, '26 929M 959,101
-------------
19,425,247
-------------
Total Federal National
Mortgage Association 37,664,696
-------------
(continued)
85
<PAGE>
Sentinel Short Maturity Government Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Government National Mortgage Association 7.5%
Collateralized Mortgage Obligations:
CMO Trust 27(A) 7.25%, '17 128M $ 126,382
MDC Asset Inv. Trust XII 3,
8.94%, '18 131M 130,783
--------------
257,165
--------------
Mortgage-Backed Securities:
15-Year:
11%, '00 1M 1,419
11.25%, '00 4M 3,726
9%, '01 7M 7,059
9.75%, '01 2M 1,930
9.75%, '01 410 434
8%, '02 11M 11,502
8%, '02 10M 10,368
8%, '02 29M 30,222
8%, '02 64M 66,033
9.5%, '04 2M 2,209
9.75%, '04 352M 372,205
9.75%, '05 511M 541,227
9%, '06 261M 273,063
7%, '07 390M 391,972
9%, '07 17M 17,572
7.5%, '08 250M 253,946
8%, '08 258M 265,011
10%, '10 55M 57,989
9%, '11 274M 286,378
8%, '14 1,292M 1,325,733
--------------
3,919,998
--------------
20-Year:
9.25%, '07 28M 29,247
9.75%, '10 40M 42,446
--------------
71,693
--------------
30-Year:
6.5%, '03 136M 135,943
8%, '03 167M 171,792
8%, '04 24M 24,635
7.75%, '05 207M 212,008
9%, '09 68M 71,104
10%, '09 9M 9,767
10%, '16 6M 6,887
9.25%, '26 180M 191,391
--------------
823,527
--------------
Total Government National
Mortgage Association 5,072,383
--------------
Total U.S. Government
Agency Obligations
(Cost $65,717,250) 65,768,740
--------------
Corporate Short-Term Notes 1.5%
G.E. Capital Corp.
5.45%, 12/01/99
(Cost $1,000,000) 1,000M $ 1,000,000
--------------
Total Investments
(Cost $66,717,250)* 66,768,740
Excess of Other Assets
Over Liabilities 1.3% 878,738
--------------
Net Assets $67,647,478
==============
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes. At November 30, 1999 unrealized
appreciation for federal income tax purposes aggregated $51,490 of which
$330,366 related to appreciated securities and $278,876 related to
depreciated securities.
See Notes to Financial Statements.
86
<PAGE>
Sentinel Short Maturity Government Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $ 66,768,740
Receivable for securities sold 295,067
Receivable for fund shares sold 173,314
Receivable for interest 491,918
Receivable from fund administrator 112,547
---------------
Total Assets 67,841,586
---------------
Liabilities
Payable for fund shares repurchased 58,295
Payable to custodian bank 39,402
Accrued expenses 11,262
Management fee payable 30,159
Distribution fee payable 49,023
Fund service fee payable 5,967
---------------
Total Liabilities 194,108
---------------
Net Assets Applicable to Outstanding Shares $ 67,647,478
===============
Net Asset Value and Offering Price Per Share
$67,647,478 / 7,061,732 shares outstanding $ 9.58
Sales Charge--1.00% of Offering Price 0.10
---------------
Maximum Offering Price Per Share $ 9.68
===============
Net Assets Represent
Capital stock at par value $ 70,617
Paid-in capital 70,371,415
Accumulated undistributed net investment income 10,350
Accumulated undistributed net realized loss
on investments (2,856,394)
Unrealized appreciation of investments 51,490
---------------
Net Assets $ 67,647,478
===============
Investments at Cost $ 66,717,250
===============
See Notes to Financial Statements.
Sentinel Short Maturity Government Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest $ 5,090,040
---------------
Expenses:
Management advisory fee 381,980
Transfer agent and custodian 92,791
Distribution expense 253,042
Accounting services 20,580
Auditing fees 7,500
Legal fees 2,500
Reports and notices to shareholders 4,000
Registration and filing fees 17,984
Directors' fees and expenses 6,568
Other 18,746
---------------
Total Expenses 805,691
Expense Reimbursement (242,912)
Expense Offset (10,691)
---------------
Net Expenses 552,088
---------------
Net Investment Income 4,537,952
---------------
Realized and Unrealized Loss on Investments
Net realized loss on sales of investments (1,641,388)
Net change in unrealized appreciation (depreciation) (662,462)
---------------
Net Realized and Unrealized Loss on Investments (2,303,850)
---------------
Net Increase in Net Assets from Operations $ 2,234,102
===============
See Notes to Financial Statements.
87
<PAGE>
Sentinel Short Maturity Government Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year
Ended Ended
11/30/99 11/30/98
-------------- --------------
<S> <C> <C>
Increase in Net Assets from Operations
Net investment income $ 4,537,952 $ 3,466,726
Net realized loss on sales of investments (1,641,388) (71,256)
Net change in unrealized appreciation (depreciation) (662,462) 223,112
-------------- --------------
Net increase in net assets from operations 2,234,102 3,618,582
-------------- --------------
Distributions to Shareholders
From net investment income (4,461,517) (3,343,865)
From realized gain on sale of investments - -
-------------- --------------
Total distributions to shareholders (4,461,517) (3,343,865)
-------------- --------------
From Capital Share Transactions
Net proceeds from sales of shares 40,165,752 59,684,286
Net asset value of shares in reinvestment
of dividends and distributions 3,837,267 2,666,871
-------------- --------------
44,003,019 62,351,157
Less: Payments for shares reacquired (42,474,063) (39,324,195)
-------------- --------------
Increase in net assets from capital share transactions 1,528,956 23,026,962
-------------- --------------
Total Increase (Decrease) in Net Assets for period (698,459) 23,301,679
Net Assets: Beginning of period 68,345,937 45,044,258
-------------- --------------
Net Assets: End of period $ 67,647,478 $ 68,345,937
============== ==============
Undistributed Net Investment Income
at End of Period $ 10,351 $ 8,518
============== ==============
</TABLE>
See Notes to Financial Statements.
88
<PAGE>
Sentinel Short Maturity Government Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Eight
Year Ended Year Ended Year Ended Year Ended Months Ended
11/30/99 11/30/98 11/30/97 11/30/96 11/30/95(A)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 9.88 $ 9.82 $ 9.81 $ 9.84 $ 9.64
------------- ------------- ------------- ------------- -------------
Income from Investment Operations
Net investment income 0.60 0.57 0.56 0.57 0.40
Net realized and unrealized gain (loss) on investments (0.30) 0.06 0.01 (0.03) 0.20
------------- ------------- ------------- ------------- -------------
Total from investment operations 0.30 0.63 0.57 0.54 0.60
------------- ------------- ------------- ------------- -------------
Less Distributions
Dividends from net investment income 0.60 0.57 0.56 0.57 0.40
Distributions from realized gains on investments - - - - -
------------- ------------- ------------- ------------- -------------
Total Distributions 0.60 0.57 0.56 0.57 0.40
------------- ------------- ------------- ------------- -------------
Net asset value at end of period $ 9.58 $ 9.88 $ 9.82 $ 9.81 $ 9.84
============= ============= ============= ============= =============
Total Return (%) * 3.2 6.6 6.0 5.6 6.3++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.76 0.82 1.00 1.00 1.00+
Ratio of expenses to average net assets before
expense reductions (%) ** 1.11 1.12 1.18 1.20 1.38+
Ratio of net investment income to average net assets (%) 6.28 6.04 6.20 6.09 6.07+
Ratio of net investment income to average net assets
before voluntary expense reimbursements (%) 5.94 5.76 6.14 5.93 5.76
Portfolio turnover rate (%) 203 229 61 120 58
Net assets at end of period (000 omitted) $67,647 $68,346 $45,044 $36,474 $28,417
</TABLE>
(A) Commenced operations March 27, 1995.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
89
<PAGE>
Sentinel U.S. Treasury Money Market Fund seeks as high a level of current income
as is consistent with stable principal values by investing solely in short-term
direct obligations of the U.S. Treasury with remaining maturities of 397 days or
less.
Sentinel U.S. Treasury Money Market Fund
The Sentinel U.S. Treasury Money Market Fund ended fiscal year 1999 with
net assets of $127.3 million, a 24.2% increase over the previous fiscal year.
The Fund's maturity was unchanged at 63 days. The 7-day yield rose 47 basis
points to 4.58%.
For the 12-month period ended November 30, 1999, short-term interest rates
increased considerably, as the Federal Reserve raised short-term interest rates
three times in 25 basis point increments, one in late June, another in late
August, and the third in mid November. By the end of the fiscal year, 90-day
Treasury bills surged 78 basis points to 5.30%. The prime rate moved 75 basis
points higher to 8.50%. On average, the 90-day certificates of deposit and
commercial paper ended the fiscal year at 5.97%, also an increase of 75 basis
points. Federal Funds rate gained 69 basis points to 5.69%. During the Federal
Reserve's intervention, the discount rate was raised by a total of 50 basis
points, bringing it to 5.00% at the end of November.
Economic utopia prevailed throughout the year as evidenced by robust growth,
tight labor markets, and global economic recovery, with the missing ingredient
of inflation. Investor anxiety increased with each move by the Federal Reserve,
keeping upward pressure on interest rates throughout the year. In effect these
monetary tightenings took back the three rate cuts the Federal Reserve "gave"
during the 1998 Russian debt crisis.
The Sentinel U. S. Treasury Money Market Fund ended fiscal year 1999 with net
assets of $127.3 million, a 24.2% increase over the previous fiscal year. The
Fund's maturity was unchanged at 63 days. The 7-day yield rose 47 basis points
to 4.58%. Looking ahead, we plan to lengthen the Fund's maturity
opportunistically should interest rates continue to climb or the Treasury curve
steepen.
/s/ Darlene A. Coppola
Darlene A. Coppola
90
<PAGE>
Sentinel U.S.Treasury Money Market Fund
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
U.S. Treasury Obligations 91.2%
U S Treasury Bill
4.52.%, 12/09/99 1,000M $ 998,995
U S Treasury Bill
4.85%, 12/09/99 2,500M 2,497,305
U S Treasury Bill
4.6%, 12/16/99 3,000M 2,994,250
U S Treasury Bill
4.655%, 12/23/99 1,500M 1,495,733
U S Treasury Bill
4.68%, 12/23/99 2,500M 2,492,850
U S Treasury Note
5.625%, 12/31/99 14,100M 14,105,675
U S Treasury Bill
4.6%, 01/06/00 4,000M 3,981,600
U S Treasury Bill
4.65%, 01/13/00 3,000M 2,983,337
U S Treasury Bill
4.86%, 01/13/00 5,000M 4,970,975
U S Treasury Bill
5.28%, 01/13/00 2,000M 1,987,387
U S Treasury Bill
4.62%, 01/20/00 1,500M 1,490,375
U S Treasury Bill
5.2%, 01/20/00 5,000M 4,963,889
U S Treasury Bill
5.235%, 01/20/00 3,020M 2,998,042
U S Treasury Bill
4.82%, 01/27/00 2,000M 1,984,737
U S Treasury Bill
4.935%, 01/27/00 2,500M 2,480,466
U S Treasury Bill
4.975%, 01/27/00 2,000M 1,984,246
U S Treasury Note
5.375%, 01/31/00 7,100M 7,102,376
U S Treasury Note
7.75%, 01/31/00 6,000M 6,025,388
U S Treasury Bill
4.7%, 02/10/00 5,000M 4,953,653
U S Treasury Note
5.875%, 02/15/00 5,500M 5,506,572
U S Treasury Bill
5.1%, 02/17/00 5,000M 4,944,750
U S Treasury Bill
4.71%, 02/24/00 4,000M 3,955,517
U S Treasury Bill
4.77%, 02/24/00 3,000M 2,966,212
U S Treasury Bill
5.10%, 02/24/00 2,500M 2,469,896
U S Treasury Note
5.5%, 02/29/00 5,000M 5,004,741
U S Treasury Note
7.125%, 02/29/00 10,100M 10,146,615
U S Treasury Note
6.875%, 03/31/00 8,500M 8,538,596
-------------
Total U.S. Treasury Obligations
(Amortized Cost $116,024,178)* 116,024,178
Excess of Other Assets
Over Liabilities 8.8% 11,237,643
-------------
Net Assets $127,261,821
=============
- --------------------------------------------------------------------------------
** Also cost for federal income tax purposes.
See Notes to Financial Statements.
91
<PAGE>
Sentinel U.S. Treasury Money Market Fund
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $116,024,178
Cash and cash equivalents 4,726,164
Receivable for fund shares sold 6,437,481
Receivable for interest 1,060,092
-------------
Total Assets 128,247,915
-------------
Liabilities
Payable for fund shares repurchased 463,699
Dividends Payable 443,153
Accrued expenses 29,358
Management fee payable 37,457
Fund service fee payable 12,427
-------------
Total Liabilities 986,094
-------------
Net Assets Applicable to Outstanding Shares $127,261,821
=============
Net Asset Value
Class A Shares
$121,884,133 / 121,884,133 shares outstanding $ 1.00
=============
Class B Shares
$5,377,688 / 5,377,688 shares outstanding $ 1.00
=============
Net Assets Represent
Capital stock at par value $ 1,272,618
Paid-in capital 125,989,203
-------------
Net Assets $127,261,821
=============
Investments at Cost $116,024,178
=============
Sentinel U.S. Treasury Money Market Fund
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest $ 4,988,862
-------------
Expenses
Management advisory fee 424,468
Transfer agent and custodian 232,460
Accounting services 30,310
Auditing fees 7,150
Legal fees 3,150
Reports and notices to shareholders 10,400
Registration and filing fees 26,049
Directors' fees and expenses 9,647
Other 6,747
-------------
Total Expenses 750,381
Expense Offset (3,005)
-------------
Net Expenses 747,376
-------------
Net Investment Income and Net Increase in
Net Assets from Operations $ 4,241,486
=============
See Notes to Financial Statements.
92
<PAGE>
Sentinel U.S. Treasury Money Market Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year
Ended Ended
11/30/99 11/30/98
-------------- --------------
<S> <C> <C>
Increase in Net Assets from Operations
Net investment income $ 4,241,486 $ 4,026,507
-------------- --------------
Distributions to Shareholders
From net investment income
Class A Shares (4,062,569) (3,847,499)
Class B Shares (178,917) (179,008)
-------------- --------------
Total Distributions to Shareholders (4,241,486) (4,026,507)
-------------- --------------
From Capital Share Transactions
Net proceeds from sales of shares
Class A Shares 480,251,041 195,386,431
Class B Shares 8,325,140 8,254,397
Net asset value of shares in reinvestment
of dividends and distributions
Class A Shares 2,922,603 3,219,677
Class B Shares 159,539 161,984
-------------- --------------
491,658,323 207,022,489
Less: Payments for shares reacquired
Class A Shares (459,404,553) (186,402,562)
Class B Shares (7,529,315) (7,427,663)
-------------- --------------
Increase in net assets from capital share transactions 24,724,455 13,192,264
-------------- --------------
Total Increase in Net Assets for period 24,724,455 13,192,264
Net Assets: Beginning of period 102,537,366 89,345,102
-------------- --------------
Net Assets: End of period $ 127,261,821 $ 102,537,366
============== ==============
</TABLE>
See Notes to Financial Statements.
93
<PAGE>
Sentinel U.S. Treasury Money Market Fund
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Class A Shares 11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------ ------------ ------------ ------------ ------------
Income from Investment Operations
Net investment income 0.04 0.04 0.04 0.04 0.05
Net realized and unrealized gain (loss) on investments - - - - -
------------ ------------ ------------ ------------ ------------
Total from investment operations 0.04 0.04 0.04 0.04 0.05
------------ ------------ ------------ ------------ ------------
Less Distributions
Dividends from net investment income 0.04 0.04 0.04 0.04 0.05
Distributions from realized gains on investments - - - - -
------------ ------------ ------------ ------------ ------------
Total Distributions 0.04 0.04 0.04 0.04 0.05
------------ ------------ ------------ ------------ ------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
============ ============ ============ ============ ============
Total Return (%) * 4.1 4.6 4.6 4.6 5.0
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.69 0.72 0.76 0.78 0.81
Ratio of expenses to average net assets before
expense reductions (%) ** 0.70 0.73 0.77 0.78 0.82
Ratio of net investment income to average net assets (%) 4.01 4.47 4.46 4.38 4.83
Net assets at end of period (000 omitted) $121,884 $98,115 $85,911 $80,804 $80,664
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
94
<PAGE>
Sentinel U.S. Treasury Money Market Fund
Financial Highlights (cont'd.)
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Months Ended
Class B Shares 11/30/99 (B) 11/30/98 (B) 11/30/97 (B) 11/30/96 (A)(B)
-------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Net asset value at beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------------- -------------- -------------- -----------------
Income from Investment Operations
Net investment income 0.04 0.04 0.05 0.03
Net realized and unrealized gain (loss) on investments - - - -
-------------- -------------- -------------- -----------------
Total from investment operations 0.04 0.04 0.05 0.03
-------------- -------------- -------------- -----------------
Less Distributions
Dividends from net investment income 0.04 0.04 0.05 0.03
Distributions from realized gains on investments - - - -
-------------- -------------- -------------- -----------------
Total Distributions 0.04 0.04 0.05 0.03
-------------- -------------- -------------- -----------------
Net asset value at end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
============== ============== ============== =================
Total Return (%) * 3.8 4.5 4.7 3.0++
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.92 0.77 0.73 .76+
Ratio of expenses to average net assets before
expense reductions (%) ** 0.93 0.78 0.73 .77+
Ratio of net investment income to average net assets (%) 3.79 4.42 4.50 4.40+
Net assets at end of period (000 omitted) $5,378 $4,422 $3,434 $3,160
</TABLE>
(A) Commenced operations April 1, 1996.
(B) Per share data calculated utilizing average daily shares outstanding.
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earning credits as described in Notes (2) and (1) H.
See Notes to Financial Statements.
95
<PAGE>
Notes to Financial Statements
(1) Significant Accounting Policies:
Sentinel Group Funds, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as a diversified open-end management investment
company incorporated in Maryland. The Company consists of thirteen separate
series - Sentinel Small Company Fund, Sentinel Mid Cap Growth Fund (formerly
Sentinel Growth Fund), Sentinel World Fund, Sentinel Growth Index Fund
(commenced operations on September 13, 1999), Sentinel Common Stock Fund,
Sentinel Balanced Fund, Sentinel High Yield Bond Fund, Sentinel Bond Fund,
Sentinel Tax-Free Income Fund, Sentinel New York Tax-Free Income Fund (a
non-diversified series), Sentinel Government Securities Fund, Sentinel Short
Maturity Government Fund and Sentinel U.S. Treasury Money Market Fund, each
individually referred to as a Fund. All Funds offer one class of shares now
referred to as Class A shares. In addition, Sentinel Small Company, Sentinel Mid
Cap Growth, Sentinel World, Sentinel Growth Index, Sentinel Common Stock,
Sentinel Balanced, Sentinel High Yield Bond, Sentinel Bond and Sentinel U.S.
Treasury Money Market Funds have a second class of shares called Class B shares.
Also in addition, a third class of shares called Class C shares are offered for
Sentinel World, Sentinel Common Stock, Sentinel Balanced and Sentinel High Yield
Bond. On August 21, 1998 the Board of Directors approved Class D shares on the
Sentinel Balanced Fund, which commenced operations on January 4, 1999. On
December 9, 1999 the Board of Directors approved a new fund called Sentinel Flex
Cap Opportunity Fund which is to commence operations in February or March 2000.
The following is a summary of significant accounting policies followed by the
Company.
A. Security Valuation: Equity securities which are traded on a national or
foreign securities exchange and over-the-counter securities listed in the NASDAQ
National Market System are valued at the last reported sales price on the
principal exchange on which they are traded on the date of determination.
Securities for which no sale was reported on that date are valued at the mean
between the last reported bid and asked prices. Over-the-counter securities not
listed on the NASDAQ National Market System are valued at the mean of the
current bid and asked prices. Fixed income securities are valued on the basis of
valuations provided by independent pricing services. Short-term securities
maturing in 60 days or less are stated at cost plus accrued interest earned
which approximates market value. Portfolio securities of the Sentinel U.S.
Treasury Money Market Fund are valued at amortized cost, which approximates
market value. The amortized cost method values a security at cost on the date of
purchase and thereafter assumes a constant amortization to maturity of any
discount or premium.
B. Securities Transactions and Related Investment Income: Securities
transactions are accounted for on the date the securities are purchased or sold
(trade date). Interest income is recorded on the accrual basis. Cost is
determined, and realized gains and losses are computed, using the identified
cost method. Market discount and original issue discount are accreted to income.
The Sentinel Tax-Free Income Fund, the Sentinel New York Tax-Free Income Fund
and the Sentinel Short Maturity Government Fund amortize premium. Sentinel New
York Tax-Free Income Fund invests in debt instruments of municipal issuers whose
ability to meet their obligations may be affected by economic developments in
the State of New York.
C. Dividends and Distributions: Dividend income and distributions to
shareholders are recorded on the ex-dividend date. Income distributions and
capital gain distributions are determined in accordance with federal income tax
regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for mortgage-backed
securities, foreign currency transactions, real estate investment trusts and the
reclassification of net investment losses to net short-term capital gains or
paid-in-capital. Reclassifications were made to reflect these differences as of
November 30, 1999 as follows:
Accumulated Accumulated undistributed
undistributed net realized gain (loss)
net investment on investments and foreign Paid-in
Fund income (loss) currency transactions capital
- --------------------- -------------- -------------------------- ----------
Small Company ....... $ 240,949 $(183,157) $ (57,792)
Mid Cap Growth ...... 619,641 (619,641) -
World ............... (260,793) 260,793 -
Balanced ............ (12,108) 12,108 -
Bond ................ (13,673) 11,871 1,802
Government Sec ...... (16,892) 14,912 1,980
Short Maturity Gov't (74,603) 74,603 -
D. Dollar Rolls: Sentinel Balanced, Sentinel Bond, Sentinel Government
Securities and Sentinel Short Maturity Government Funds enter into dollar rolls
in which the Funds sell securities for delivery in the current month, and
simultaneously contract to repurchase similar (same type, coupon and maturity)
securities on a specified future date.
96
<PAGE>
During the roll period the Funds forgo principal and interest paid on the
securities. The Funds are compensated by the interest earned on the cash
proceeds of the initial sale and by the lower repurchase price at the future
date. The difference between the sale proceeds and the lower repurchase price is
taken into income. The Funds maintain segregated accounts, the dollar value of
which is equal to its obligations, in respect of dollar rolls.
E. Federal Income Taxes: Each Fund intends to continue to meet the requirements
of the Internal Revenue Code applicable to regulated investment companies. The
Company intends to distribute all of each Fund's taxable income to its
shareholders, relieving each Fund of any federal excise tax or income tax
liability.
F. Foreign Currency Translations: The books and records of the Sentinel World
Fund are maintained in U.S. dollars. Foreign currency amounts are translated
into U.S. dollars at the mean between the buying and selling rates on the
following basis:
(1) market value of investment securities, assets and liabilities at the
closing daily rate of exchange; and
(2) purchases and sales of investment securities, income and expenses at the
rate of exchange prevailing on the respective dates of such transactions.
The Sentinel World Fund does not isolate that portion of gains and losses on
investments in securities which is due to changes in the foreign exchange rates
from that which is due to changes in market prices of such securities. However,
pursuant to United States federal income tax regulations, gains and losses from
certain foreign currency transactions are treated as ordinary income for federal
income tax purposes.
G. Repurchase Agreements: Each Fund may enter into repurchase agreements as a
means of making short-term investments, of seven days or less, and in aggregate
amounts of not more than 25% of the net assets of a Fund. Each Fund, through its
custodian, takes possession of the securities collateralizing repurchase
agreements. All repurchase agreements entered into by the Funds provide that the
market value of the collateral underlying the repurchase agreement at the time
of purchase, and each subsequent business day, will always be at least equal to
102% of the repurchase agreement amount including accrued interest. If the
seller defaults and the value of the collateral declines or if bankruptcy
proceedings are commenced with respect to the seller of the security,
realization of the collateral by the Fund may be delayed or limited.
H. Other: Direct expenses of a Fund are charged to that Fund while common
expenses of the Company are allocated proportionately based upon the Funds'
respective average net assets or number of shareholder accounts.
Allocation of expenses not allocated to a specific Class of each Fund are
allocated on the basis of daily net assets or number of shareholder accounts,
each on a pro rata basis, of each Class.
Investment income, gains and losses (realized and unrealized) are allocated pro
rata according to daily net assets of each Class of each Fund.
Earnings credits are received from the custodian and dividend paying agent on
cash balances and are reflected in the statement of operations as an expense
offset.
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.
(2) Management Advisory Fee and Other Transactions with Affiliates:
Pursuant to the Investment Advisory Agreement (the "Agreement"), Sentinel
Advisors, Co. ("SAC"), a Vermont general partnership whose general partners are
Sentinel Advisors, Inc., an indirect wholly-owned subsidiary of National Life
Insurance Company ("National Life"), Provident Mutual Management Co., Inc., an
affiliate of Provident Mutual Life Insurance Company of Philadelphia ("Provident
Mutual"), HTK of Delaware, Inc. ("HTK"), an affiliate of The Penn Mutual Life
Insurance Company ("Penn Mutual") and Sentinel Management Company ("SMC"), a
Vermont general partnership whose general partners are affiliates of National
Life, Provident Mutual and Penn Mutual, provides general supervision of the
Funds' investments as well as certain administrative and related services. As
compensation in full for services rendered under its Agreement, the Funds pay
SAC a monthly fee determined as follows: (1) With respect to Sentinel Small
Company, Sentinel Mid Cap Growth, Sentinel World and Sentinel Balanced Funds:
0.70% per annum on the first $200 million of aggregate average daily net assets
of such Funds; 0.65% per annum on the next $100 million of such assets; 0.60%
per annum on the next $100 million of such assets; and 0.55% per annum on such
assets in excess of $400 million. (2) With respect to Sentinel Growth Index
Fund: 0.30% per annum on the average daily net assets. (3) With respect to
Sentinel
97
<PAGE>
Common Stock Fund: 0.55% per annum on the average daily net assets of the Fund.
(4) With respect to Sentinel High Yield Bond Fund: 0.75% per annum on the first
$100 million of average daily net assets; 0.70% per annum on the next $100
million of such assets; 0.65% per annum on the next $100 million of such assets;
and 0.60% per annum on such assets in excess of $300 million. (5) With respect
to Sentinel Bond, Sentinel Tax-Free Income, Sentinel New York Tax-Free Income,
Sentinel Government Securities and Sentinel Short Maturity Government Funds:
0.55% per annum on the first $200 million of aggregate average daily net assets
of such Funds; 0.50% per annum on the next $200 million of such assets; and
0.45% per annum on such assets in excess of $400 million. (6) With respect to
Sentinel U.S. Treasury Money Market Fund: 0.40% per annum on the first $300
million of average daily net assets; and 0.35% per annum on such assets in
excess of $300 million.
With respect to Sentinel World Fund, SAC has entered into a sub-advisory
agreement with INVESCO Global Asset Management (N.A.), Inc. Pursuant to such
agreement, INVESCO provides SAC with a continuous investment program consistent
with Sentinel World Fund's investment objectives and policies. The sub-advisory
agreement provides for a fee to be paid by SAC to INVESCO of the greater of (a)
a monthly fee equal to 0.375% per annum of the average daily net assets of
Sentinel World Fund up to $500 million and 0.30% per annum of such average net
assets in excess of $500 million, or (b) $20,000 per annum.
With respect to Sentinel High Yield Bond Fund, SAC has entered into a
sub-advisory agreement with Keystone Investment Management Company ("Keystone").
Pursuant to such agreement, Keystone provides SAC with a continuous investment
program consistent with Sentinel High Yield Bond Fund's investment objectives
and policies. The sub-advisory agreement provides for a fee from SAC to Keystone
equal to one half of the fee paid by Sentinel High Yield Bond Fund to SAC,
provided that the fee paid by SAC to Keystone will always be at least 0.35% per
annum of the average daily net assets.
All Funds (except Sentinel U.S. Treasury Money Market Fund) have adopted a
distribution plan applicable to their Class A shares pursuant to Rule 12b-1
under the 1940 Act. These distribution plans are herein referred to as the "A
Plans." Each of the Funds Class B shares (except Sentinel U.S. Treasury Money
Market Fund) has also adopted a distribution plan applicable to its Class B
shares. These plans are herein referred to as the "B Plans." Each of the Funds
Class C shares has also adopted a Class C distribution plan applicable to its
Class C shares referred to as the "C Plans." The Sentinel Balanced Fund Class D
has adopted a distribution plan referred to as the "D Plan." None of the fees
paid by the other Funds pursuant to the Plans will be used to reimburse Sentinel
Financial Services Company ("SFSC"), a Vermont general partnership whose general
partners are National Life Investment Management Company, Inc., a wholly-owned
subsidiary of National Life, ProvidentMutual Financial Services, Inc., an
affiliate of Provident Mutual, HTK and SMC, the principal underwriter
("Distributor") of the Company's shares, for expenses incurred in connection
with the distribution of the Sentinel U.S. Treasury Money Market Fund shares.
Under the A Plans, each participating Fund pays to the Distributor a monthly fee
at the maximum annual rate of (a) 0.30% of average daily net assets relating to
A shares outstanding in the case of the Sentinel Small Company, Sentinel Mid Cap
Growth, Sentinel World, Sentinel Common Stock and Sentinel Balanced Funds, (b)
0.20% of average daily net assets relating to A shares outstanding in the case
of the Sentinel Growth Index, Sentinel High Yield Bond, Sentinel Bond, Sentinel
Tax-Free Income, Sentinel New York Tax-Free Income, and Sentinel Government
Securities Funds or (c) 0.35% of average daily net assets relating to A shares
outstanding in the case of the Sentinel Short Maturity Government Fund. Such
fees will be used to reimburse the Distributor for expenses incurred in
connection with distribution and promotion of the shares of each participating
Fund. The Growth Index Fund Class A and B shares are not assessed a distribution
fee in respect to the seed money shares owned by National Life Insurance Company
and Penn Mutual Insurance Company. This will result in an overall Rule 12b-1 fee
to these classes to be less than 0.20% and 0.75% respectively, while National
Life and Penn Mutual maintain their investments in these share classes.
Under the Plan applicable to the Class B shares, the Class B shares of each of
the Common Stock, Balanced, Mid Cap Growth, Small Company, World, High Yield and
Bond Funds will pay to the Distributor a monthly fee at an annual rate of up to
a total of 1.00% of average daily net assets, of which up to 0.25% shall be for
service fees to broker-dealers, and the remaining 0.75% shall be for the
recovery of the initial sales commissions paid by the Distributor at the time of
sales of Class B shares, together with the cost of financing such payments, and
for the other distribution, sales and marketing expenditures applicable to the
Class B shares. The Class B shares of the Sentinel Growth Index Fund will pay to
the Distributor a monthly fee at an annual rate of up to a total of 0.75% of
average daily net assets. The High Yield Fund Class B
98
<PAGE>
shares are not assessed a distribution fee in respect of the seed money shares
owned by National Life, which will result in an overall Rule 12b-1 fee to the
Class B shares of the High Yield Fund of less than 1.00% for so long as National
Life maintains its investment.
Under the Plan applicable to the Class C shares, the Class C shares of each of
the Common Stock, Balanced, World and High Yield Funds will pay to the
Distributor a monthly fee at an annual rate of up to a total of 1.00% of average
daily net assets. In the first year after the purchase this fee will be applied
to recover the initial sales commission of 1.00% paid by the Distributor to the
selling dealer. In subsequent years, the entire 1.00% will be paid to the
selling dealer as additional commission and/or service fees.
Under the Plan Applicable to Balanced Fund Class D shares, these shares pay to
the Distributor a monthly fee at an annual rate of up to a total of 0.75% of
average daily net assets.
The Distributor will not be reimbursed for any unreimbursed eligible expenses
from any other Fund, or in any future year from any of the Plans.
SFSC also receives a sales charge added to the net asset value received by the
Company on the sale of its Class A shares. This compensation is not an expense
of the Company and does not affect its operating results. SFSC has advised the
Company that it received sales charges aggregating $3,324,626 for the fiscal
year ended November 30, 1999. The Company is advised that the total distribution
charges retained by SFSC on the sale of shares amounted to $156,537 after
allowances of $1,704,186 to Equity Services, Inc., an affiliate of National
Life, $248,317 to 1717 Capital Management Company, an affiliate of Provident
Mutual, $457,157 to Hornor, Townsend & Kent, Inc. and $185,078 to Janney
Montgomery Scott, Inc. ("JMS"), affiliates of Penn Mutual, and $573,351 to other
investment dealers. During this same period, SFSC received $42,098 in contingent
deferred sales charges from certain redemptions of Class A shares and $728,213
in contingent deferred sales charges from redemptions of Class B shares, $14,981
in contingent deferred sales charges from redemptions of Class C shares and $13
in contingent deferred sales charges from redemptions of Class D shares.
During the period the Company transacted purchases and sales of portfolio
securities through, among others, JMS for which JMS received $54,684 in
brokerage commissions. In addition, JMS acted as dealer on certain purchases of
shares of the Company for which it received dealer's concessions.
Each director who is not an employee of the adviser or an affiliated company is
paid an annual fee of $16,000 plus $1,500 for each meeting of the Board of
Directors attended. Such directors are reimbursed for travel and other
out-of-pocket expenses incurred in attending such meetings.
Pursuant to the Fund Services Agreement with Sentinel Administrative Service
Company ("SASC"), a Vermont general partnership whose general partners are
Sentinel Administrative Service Corporation, an indirect wholly-owned subsidiary
of National Life, SIGMA American Corp., an affiliate of Provident Mutual, HTK
and SMC, the Company receives fund accounting and financial administrative
services, transfer agent services and investor services, all of which are
coordinated with other services for which the Company has contracted with
outside providers. Total fees for the fiscal year ended November 30,1999 were
$3,539,697.
SAC has voluntarily agreed to refund its fee to the extent necessary to prevent
the overall aggregate expense ratio of the Funds' Class A shares and Sentinel
Pennsylvania Tax-Free Trust (excluding the Sentinel World Fund) from exceeding
1.30% of average daily net assets in any fiscal year. The aggregate expense
ratio of the Funds' Class B shares (excluding the Sentinel World Fund) would
also be reduced proportionately. The Funds and Sentinel Pennsylvania Tax-Free
Trust make up the Sentinel Family of Funds. Although SAC has no present
intention to do so, this arrangement may be terminated at any time. Expenses for
the fiscal year ended November 30, 1999 did not exceed 1.30% of the average
daily net assets attributable to Class A shares of any fund.
For the period March 30, 1998 through March 30, 1999 SAC voluntarily agreed to
reimburse the following Funds for advisory fees or other expenses necessary to
limit these Fund's overall expense ratios.
Bond Fund Class A shares 0.68%
Government Securities Fund Class A shares 0.87%
Short Maturity Government Fund Class A shares 0.75%
Tax-Free Income Fund Class A shares 0.72%
Effective March 31, 1999 SAC has voluntarily agreed to reimburse the following
Funds for advisory fees or other expenses necessary to limit these Fund's
overall expense ratios, after expense offset, (i.e. net of certain credits
against Fund expenses) to the following:
Bond Fund Class A shares 0.76%
Government Securities Fund Class A shares 0.83%
Short Maturity Government Fund Class A shares 0.77%
Tax-Free Income Fund Class A shares 0.73%
99
<PAGE>
With respect to the Sentinel Growth Index Fund Class A, SAC voluntarily waives
advisory fees and other expenses to the extent necessary to limit the overall
expense ratio to 0.65%. SAC currently intends to continue this fee waiver
indefinitely: however, it may change or terminate the fee waiver at any time
after November 30, 2000.
In case of the Sentinel Bond Fund and Sentinel Growth Index Fund, the
reimbursement of advisory fees will also benefit the Class B shares of both the
Sentinel Bond Fund and Sentinel Growth Index Fund which will experience the same
reduced effective advisory fee rate as the Class A shares.
For the fiscal year ended November 30, 1999, the total amount reimbursable to
Sentinel Growth Index Class A was $13,640, Sentinel Growth Index Class B was
$4,397, Sentinel Bond Fund Class A was $162,572, Sentinel Bond Fund Class B
$30,569, Sentinel Tax-Free Income Fund Class A $159,034, Sentinel New York
Tax-Free Class A $150,000, Sentinel Government Securities Fund Class A $83,938,
and Sentinel Short Maturity Government Fund Class A $242,912.
(3) Investment Transactions:
Purchases and sales of investment securities (excluding short-term obligations)
for the fiscal year ended November 30, 1999 were as follows:
<TABLE>
<CAPTION>
Purchases of Sales of
other than Purchases of other than
U.S. U.S. U.S. Sales of U.S.
Government Government Government Government
direct and direct and direct and direct and
agency agency agency agency
Fund obligations obligations` obligations obligations
- ---------------------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Small Company .............. $ 47,831,679 - $ 64,187,212 -
Mid Cap Growth ............. 156,964,718 - 142,439,721 -
World ...................... 42,819,611 - 42,580,984 -
Growth Index ............... 35,583,583 - 525,291 -
Common Stock ............... 620,910,166 - 754,300,325 -
Balanced ................... 161,123,435 $243,691,972 202,339,322 $214,339,175
High Yield ................. 116,608,138 19,949,722 107,965,515 19,398,363
Bond ....................... 87,803,883 125,501,258 97,485,956 112,313,261
Tax-Free ................... 34,130,491 - 29,787,421 -
N.Y. Tax-Free .............. 10,425,616 - 4,662,874 -
Government ................. - 231,442,256 - 236,197,292
Short Maturity ............. - 143,019,880 - 143,162,094
</TABLE>
(The Sentinel U.S. Treasury Money Market Fund invests only in short-term
obligations.)
For Federal income tax purposes, the Company has capital loss carryforwards at
November 30, 1999 as follows:
$2,140,898, $538,825, $1,051,666 and $3,189,185 (expiring in 2001, 2002, 2004
and 2007, respectively) for a total of $6,920,574 for the Sentinel Bond Fund,
$2,952,501 and $4,754,868 (expiring in 2004 and 2007) for a total of $7,707,369
for the Sentinel Government Securities Fund,$1,490,419 and $4,543,183(expiring
in 2006 and 2007) for a total of $6,033,602 for the Sentinel High Yield Bond
Fund, $278,001, $619,379, $142,166, $83,225, $166,838 and $1,566,785 (expiring
in 2000, 2001, 2002, 2004, 2005 and 2007, respectively) for a total of
$2,856,394 for the Sentinel Short Maturity Government Fund, $310,229 (Expiring
in 2007) for the Sentinel New York Tax-Free Fund, and $668,431 (Expiring in
2007) for the Sentinel Tax-Free Income Fund. It is unlikely that a capital gains
distribution will be paid to shareholders of these Funds until net gains have
been realized in excess of such capital loss carryforwards or the carryforwards
expire. During the year ended November 30, 1999 the Sentinel World Fund utilized
$1,283,934 of capital loss carryforward.
100
<PAGE>
(4) Fund Shares:
At November 30, 1999, 2 billion shares of one cent par value were authorized.
There are 1.56 billion shares allocated to the various Funds as Class A shares,
280 million shares allocated to the various Funds as Class B shares, 40 million
shares allocated to the various Funds as Class C shares and 20 million shares
allocated to Sentinel Balanced Fund Class D shares. Proceeds from sales and
payments for redemptions on Fund shares as shown in the statement of changes in
net assets are represented by the following number of shares:
<TABLE>
<CAPTION>
Net
Shares issued in increase
reinvestment of (decrease)
dividends and Shares in shares
Fund Shares sold distributions reacquired outstanding
---- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C>
Year Ended 11/30/99
Small Company - A ........ 5,233,049 2,130,978 7,895,657 (531,630)
Small Company - B ........ 634,395 273,202 510,027 397,570
Mid Cap Growth - A ....... 3,246,286 455,992 2,483,704 1,218,574
Mid Cap Growth - B ....... 626,959 19,933 57,050 589,842
World - A ................ 6,774,413 42,682 7,310,275 (493,180)
World - B ................ 245,101 1,060 135,981 110,180
World - C ................ 1,418,187 -- 1,387,921 30,266
Growth Index - A * ....... 1,346,378 -- 6,923 1,339,455
Growth Index - B * ....... 402,622 -- 5,384 397,238
Common Stock - A ......... 3,309,128 3,002,721 6,604,080 (292,231)
Common Stock - B ......... 839,508 268,092 536,317 571,283
Common Stock - C ......... 842,171 10,295 802,051 50,415
Balanced - A ............. 1,284,804 1,526,284 3,293,259 (482,171)
Balanced - B ............. 752,994 217,958 533,029 437,923
Balanced - C ............. 104,717 9,150 13,979 99,888
Balanced - D** ........... 60,806 481 2,394 58,893
High Yield - A ........... 896,942 189,365 1,202,842 (116,535)
High Yield - B ........... 1,411,047 219,765 887,056 743,756
High Yield - C ........... 555,114 18,999 339,404 234,709
Bond - A ................. 4,688,292 575,751 5,604,592 (340,549)
Bond - B ................. 1,449,960 123,494 666,624 906,830
Tax-Free ................. 2,917,006 291,859 2,824,305 384,560
N.Y. Tax-Free ............ 740,608 53,801 332,482 461,927
Government ............... 1,419,479 358,250 2,277,378 (499,649)
Short Maturity ........... 4,120,784 396,025 4,372,336 144,473
U.S. Treasury - A ........ 480,251,041 2,922,603 459,404,553 23,769,091
U.S. Treasury - B ........ 8,325,140 159,539 7,529,315 955,364
Year Ended 11/30/98
Small Company - A ........ 1,816,196 2,341,987 3,171,812 986,371
Small Company - B ........ 959,051 178,297 181,707 955,641
Mid Cap Growth - A ....... 1,107,943 1,695,268 827,751 1,975,460
Mid Cap Growth - B ***.... 284,897 -- 20,350 264,547
World - A ................ 1,261,819 229,155 1,153,057 337,917
World - B ................ 481,379 23,804 85,449 419,734
World - C **** .......... 154,395 -- 98,307 56,088
Common Stock - A ......... 2,319,503 3,707,242 4,126,688 1,900,057
Common Stock - B ......... 1,247,141 220,053 300,254 1,166,940
Common Stock - C **** 128,386 40 8,149 120,277
Balanced - A ............. 1,761,700 1,281,894 2,754,031 289,563
Balanced - B ............. 1,008,603 109,017 180,545 937,075
Balanced - C **** ........ 72,665 312 111 72,866
High Yield - A ........... 2,403,640 147,508 425,396 2,125,752
High Yield - B ........... 2,737,683 135,496 385,851 2,487,328
High Yield - C **** ...... 197,536 4,462 1,523 200,475
Bond - A ................. 2,428,801 592,479 2,808,497 212,783
Bond - B ................. 1,553,747 61,897 319,531 1,296,113
Tax-Free ................. 805,481 281,459 1,096,968 (10,028)
N.Y. Tax-Free ............ 387,759 37,877 91,615 334,021
Government ............... 1,206,526 336,396 1,743,268 (200,346)
Short Maturity ........... 6,037,319 270,309 3,978,257 2,329,371
U.S. Treasury - A ........ 195,386,431 3,219,677 186,402,562 12,203,546
U.S. Treasury - B ........ 8,254,397 161,984 7,427,663 988,718
</TABLE>
* For the period September 13, 1999 to November 30, 1999.
** For the period January 4, 1999 to November 30, 1999.
*** For the period January 12, 1998 to November 30, 1998
**** For the period May 4, 1998 to November 30, 1998.
101
<PAGE>
(5) Post Retirement Benefits:
The Company provides certain health care and life insurance benefits to its
retirees. At November 30, 1999 the projected obligation for such benefits had
been accrued.
(6) Subsequent Event:
The Funds have obtained access to an unsecured line of credit of up to
$30,000,000 from the custodian bank for temporary borrowing purposes. Borrowings
under this arrangement bear interest at the current overnight Federal Funds rate
plus an additional 50 basis points. This arrangement commences on December 30,
1999.
102
<PAGE>
Report of Independent Accountants
To the Shareholders and Board of Directors
of Sentinel Group Funds, Inc.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Sentinel Small Company Fund,
Sentinel Mid Cap Growth Fund, Sentinel World Fund, Sentinel Growth Index Fund,
Sentinel Common Stock Fund, Sentinel Balanced Fund, Sentinel High Yield Bond
Fund, Sentinel Bond Fund, Sentinel Tax-Free Income Fund, Sentinel New York
Tax-Free Income Fund, Sentinel Government Securities Fund, Sentinel Short
Maturity Government Fund and Sentinel U.S. Treasury Money Market Fund
(constituting Sentinel Group Funds, Inc., hereafter referred to as the "Fund")
at November 30, 1999, and the results of each of their operations, the changes
of each of their net assets and the financial highlights for each of the periods
presented, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at November 30, 1999 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 30, 1999
103
<PAGE>
Sentinel Pennsylvania Tax-Free Trust seeks high current interest income exempt
from federal and Pennsylvania personal income taxes, while seeking to control
risk by investing in investment grade municipal bonds of Pennsylvania issuers.
Sentinel Pennsylvania Tax-Free Trust
The taxable equivalent yield of the Sentinel Pennsylvania Tax-Free Trust as of
11/30/99 was 8.7% for a Pennsylvania state resident in the 39.6% federal income
tax bracket.
For the fiscal year ended November 30, 1999, the Sentinel Pennsylvania Tax-Free
Trust produced a total return of -3.3%, outperforming the -3.5% average return
for the Lipper Analytical Services Inc. universe of Pennsylvania municipal debt
funds. The Lehman Municipal Bond Index returned -1.1% for the same period.
Municipal interest rates rose throughout 1999 as the Federal Reserve increased
the federal funds rate three times in the face of strong economic growth, even
though the rate of inflation has been relatively stable. It seems that the
robust capital spending by corporations, concentrated in high-technology
equipment, has expanded the productive capacity of the U.S. economy. This has
the effect of increasing the rate of economic growth that can be sustained
without a pickup in inflation.
The current level of interest rates, combined with low inflation, provides
investors a high real rate of interest, which in the case of Pennsylvania
municipals is sheltered from federal and Pennsylvania state income taxes. The
taxable equivalent yield of the Sentinel Pennsylvania Tax-Free Trust as of
11/30/99 was 8.7% for a Pennsylvania state resident in the 39.6% federal income
tax bracket. This compares favorably to corporate, government and mortgage
backed securities. We recommend municipals for investors who are looking to
maximize risk adjusted, after-tax cash flows in their fixed income portfolios.
We believe that interest rates are near a peak for this cycle and therefore
bonds represent good value as we head into the year 2000. Credit quality of
state and local governments that issue municipal bonds is excellent. Robust tax
receipts, a result of strong economic growth, has allowed municipal issuers to
accumulate surplus funds while reducing their dependency on borrowing. In this
environment, we will continue to structure the portfolio to take advantage of
changing market conditions, while striving to provide our shareholders with a
relatively high level of current income exempt from federal taxation.
/s/ Kenneth J. Hart
Kenneth J. Hart
- ----------------------------------------
Average Annual
Total Return
Through 11/30/99
w/sales w/o sales
Period charge+ charge
1 Year -7.1% -3.3%
- ----------------------------------------
5 Years 4.9% 5.7%
- ----------------------------------------
10 Years 5.3% 5.7%
- ----------------------------------------
+ Sales charge applicable to year of initial investment.
================================================================================
Sentinel Pennsylvania Tax-Free Trust Performance
Ten Years Ended 11/30/99
[GRAPH]
Lipper
Sentinel Pennsylvania Lehman
Pennsylvania Municipal Debt Municipal
Tax-Free Trust Fund Average Bond Index*
10,000 10,000 10,000
10,173 10,604 10,770
11,072 11,677 11,875
12,205 12,893 13,066
13,319 14,571 14,514
12,667 13,568 13,752
14,537 16,126 16,351
15,260 16,948 17,312
16,185 18,090 18,553
17,295 19,266 19,993
16,729 18,590 19,778
Ending values are based upon an initial investment of $10,000 and the subsequent
reinvestment of all dividends and distributions. When comparing the Fund's
performance with that of the Index and Average shown above, you should note that
the Fund's performance reflects the maximum 4% sales charge and includes all
expenses and management fees, while that shown for the Index and Average does
not. Past performance is not predictive of future results.
* An unmanaged index of bonds reflecting average prices in the bond market.
104
<PAGE>
Sentinel Pennsylvania Tax-Free Trust
Investment in Securities
at November 30, 1999
- --------------------------------------------------------------------------------
Principal Amount Value
(M=$1,000) (Note 1)
- --------------------------------------------------------------------------------
Bonds 94.5%
Pennsylvania 88.5%
Allegheny County G/O
5.15%, 10/01/11 (FGIC) 1,000M $ 987,730
Allegheny County Hospital
6.00%, 10/01/03 (FGIC) 1,000M 1,049,620
Allegheny County
Institution G/O
7.30%, 04/01/09 (MBIA) 1,000M 1,009,130
Armstrong County
Hospital Auth.
6.25%, 06/01/13
(AMBAC) 1,200M 1,258,296
Berks County G/O
7.25%, 11/15/20 (FGIC) 1,000M 1,049,810
Butler PA Area
School District
4.75%, 10/01/22 (FGIC) 1,000M 845,620
Delaware Valley PA Regional
Fin. Auth.
5.5%, 08/01/28 (AMBAC) 1,000M 948,890
Erie PA Higher Education
Building Auth.
5.75%, 03/15/20 (ACA) 500M 477,500
Grove City PA Hospital Auth.
5.25%, 07/01/12 (ACA) 1,500M 1,447,740
Hazelton PA Area
School District
0.00%, 03/01/25 (FGIC) 1,255M 273,326
Jim Thorpe PA Area
School District
5.30%, 03/15/16 (MBIA) 1,500M 1,449,090
Lehigh County Industrial
Dev. Auth.
6.15%, 08/01/29 (MBIA) 1,000M 1,009,620
Montgomery County Higher
Educ. & Health
8.30%, 06/01/10 500M 520,250
Northampton County G/O
5.125%, 08/15/17 1,000M 919,610
Parkland PA School District
5.375%, 09/01/15 (FGIC) 1,000M 983,750
PA State Turnpike Commn.
Oil Tax Rev.
4.75%, 12/01/27 (AMBAC) 500M 413,395
Pennsylvania Higher
Educ. Facs.
5.625%, 12/01/27 (MBIA) 1,000M 950,740
Pennsylvania Housing
Finance Agency
5.80%, 10/01/29 1,000M 953,640
Pennsylvania State G/O
6.25%, 07/01/11 1,500M 1,631,550
Pennsylvania State
Turnpike Commn.
7.20%, 12/01/17 (FGIC) 1,000M 1,074,030
Pennsylvania Trafford
School Dist.
5.90%, 05/01/11 (MBIA) 1,000M 1,050,510
Philadelphia Parking
Authority Rev.
5.25%, 09/01/29 (FSA) 1,000M 891,390
Philadelphia Regional
Port. Auth.
7.125%, 08/01/10 (MBIA) 250M 255,127
7.15%, 08/01/20 (MBIA) 250M 255,168
Philadelphia Water & Waste
6.25%, 08/01/11 (MBIA) 1,000M 1,082,670
6.25%, 08/01/12 (MBIA) 500M 540,480
Pittsburgh PA Water &
Sewer System Rev.
6.50%, 09/01/13 (FGIC) 1,000M 1,099,560
Scranton Lackawanna
Health & Welfare
6.20%, 07/01/17 1,000M 919,740
Southeast Delco
School District
0.00%, 02/01/10 (MBIA) 1,000M 585,380
Westmoreland County
Municipal Auth.
0.00%, 08/15/18 (FGIC) 500M 171,335
York County Solid Waste
5.50%, 12/01/14 (FGIC) 1,000M 1,001,010
-------------
27,105,707
-------------
Puerto Rico 6.0%
Puerto Rico Commonwealth
Hwy & Transport
5.50%, 07/01/36 1,000M 928,980
Puerto Rico G/O
5.375%, 07/01/25 1,000M 922,420
-------------
1,851,400
-------------
Total Bonds
(Cost $29,363,097) 28,957,107
-------------
Short-Term Investments 3.8%
Blackrock Pennsylvania
Municipal Money Market
Institutional Class (a)
(Cost $1,175,000) 1,175M $ 1,175,000
-------------
Total Investments
(Cost $30,538,097)* 30,132,107
Excess of Other Assets
Over Liabilities 1.7% 497,999
-------------
Net Assets $30,630,106
=============
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes. At November 30, 1999, net
unrealized depreciation for federal income tax purposes aggregated $405,990
of which $641,469 related to appreciated securities and $1,047,459 related
to depreciated securities.
(a) Variable rate security that may be tendered back to issuer at par.
The following abbreviations are used in portfolio descriptions:
(ACA) - ACA Financial Guaranty Corp.
(AMBAC) - Guaranteed by American Municipal Bond Association Corp.
(FGIC) - Guaranteed by Financial Guaranty Insurance Co.
(FSA) - Guaranteed by Financial Security Assurance, Inc.
(MBIA) - Guaranteed by Municipal Bond Investors Assurance Corp.
G/O - General Obligation Bond
See Notes to Financial Statements.
105
<PAGE>
Sentinel Pennsylvania Tax-Free Trust
Statement of Assets and Liabilities
at November 30, 1999
- --------------------------------------------------------------------------------
Assets
Investments at value $30,132,107
Cash and cash equivalents 3,823
Receivable for fund shares sold 1,104
Receivable for interest 525,006
Receivable from fund administrator 95,864
---------------
Total Assets 30,757,904
---------------
Liabilities
Payable for fund shares repurchased 83,460
Accrued expenses 8,298
Management fee payable 13,914
Distribution fee payable 12,043
Fund service fee payable 10,083
---------------
Total Liabilities 127,798
---------------
Net Assets Applicable to Outstanding Shares $30,630,106
===============
Net Asset Value and Offering Price Per Share
$30,630,106 / 2,521,307 shares outstanding $ 12.15
Sales Charge--4.00% of Offering Price 0.51
---------------
Maximum Offering Price Per Share $ 12.66
===============
Net Assets Represent
No par value shares of beneficial interest;
authorized - unlimited shares
Paid-in-capital $31,131,186
Accumulated undistributed net investment income 1,861
Accumulated undistributed net realized loss
on investments (96,951)
Unrealized depreciation of investments (405,990)
---------------
Net Assets $30,630,106
===============
Investments at Cost $30,538,097
===============
Sentinel Pennsylvania Tax-Free Trust
Statement of Operations
For the Year Ended November 30, 1999
- --------------------------------------------------------------------------------
Investment Income
Income:
Interest $ 1,806,232
---------------
Expenses:
Management advisory fee 180,302
Transfer agent and custodian 53,616
Distribution expense 65,572
Accounting services 84,000
Auditing fees 5,000
Legal fees 1,750
Reports and notices to shareholders 3,500
Registration and filing fees 4,650
Directors' fees and expenses 33,017
Other 708
---------------
Total Expenses 432,115
Expense Reimbursement (198,099)
Expense Offset (6,615)
---------------
Net Expenses 227,401
---------------
Net Investment Income 1,578,831
---------------
Realized and Unrealized Loss on Investments
Net realized loss on sales of investments (96,951)
Net change in unrealized depreciation (2,535,663)
---------------
Net Realized and Unrealized Loss on Investments (2,632,614)
---------------
Net Decrease in Net Assets from Operations $(1,053,783)
===============
See Notes to Financial Statements.
106
<PAGE>
Sentinel Pennsylvania Tax-Free Trust
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Year
Ended Ended
11/30/99 11/30/98
-------------- --------------
Increase (Decrease) in Net Assets from Operations
<S> <C> <C>
Net investment income $ 1,578,831 $ 1,614,164
Net realized gain (loss) on sales of investments (96,951) 757,062
Net change in unrealized appreciation (depreciation) (2,535,663) (88,964)
-------------- --------------
Net increase (decrease) in net assets from operations (1,053,783) 2,282,262
-------------- --------------
Distributions to Shareholders
From net investment income (1,577,675) (1,613,860)
From realized gain on sale of investments (757,025) (324,168)
-------------- --------------
Total distributions to shareholders (2,334,700) (1,938,028)
-------------- --------------
From Capital Share Transactions
Net proceeds from sales of shares 1,672,187 2,130,748
Net asset value of shares in reinvestment
of dividends and distributions 1,693,166 1,341,058
-------------- --------------
3,365,353 3,471,806
Less: Payments for shares reacquired (4,066,876) (3,939,578)
-------------- --------------
Decrease in net assets from capital share transactions (701,523) (467,772)
-------------- --------------
Total Decrease in Net Assets for period (4,090,006) (123,538)
Net Assets: Beginning of period 34,720,112 34,843,650
-------------- --------------
Net Assets: End of period $30,630,106 $34,720,112
============== ==============
Undistributed Net Investment Income
at End of Period $ 1,861 $ 648
============== ==============
</TABLE>
See Notes to Financial Statements.
107
<PAGE>
Sentinel Pennsylvania Tax-Free Trust
Financial Highlights
Selected per share data and ratios
Selected data for a share of capital stock outstanding throughout each fiscal
period.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
11/30/99 11/30/98 11/30/97 11/30/96 11/30/95
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net asset value at beginning of period $ 13.48 $ 13.34 $ 13.29 $ 13.40 $ 12.29
------------- ------------- ------------- ------------- -------------
Income (Loss) from Investment Operations
Net investment income 0.62 0.63 0.64 0.66 0.66
Net realized and unrealized gain (loss) on investments (1.04) 0.26 0.13 (0.03) 1.11
------------- ------------- ------------- ------------- -------------
Total from investment operations (0.42) 0.89 0.77 0.63 1.77
------------- ------------- ------------- ------------- -------------
Less Distributions
Dividends from net investment income 0.62 0.63 0.64 0.66 0.66
Distributions from realized gains on investments 0.29 0.12 0.08 0.08 --
------------- ------------- ------------- ------------- -------------
Total Distributions 0.91 0.75 0.72 0.74 0.66
------------- ------------- ------------- ------------- -------------
Net asset value at end of period $ 12.15 $ 13.48 $ 13.34 $ 13.29 $ 13.40
============= ============= ============= ============= =============
Total Return (%) * (3.3) 6.9 6.1 5.0 14.8
Ratios/Supplemental Data
Ratio of net expenses to average net assets (%) 0.69 0.77 0.85 0.75 0.97
Ratio of expenses to average net assets before
expense reductions (%) ** 1.32 1.31 1.34 1.37 1.36
Ratio of net investment income to average net assets (%) 4.82 4.65 4.86 5.07 5.14
Ratio of net investment income to average net assets
before voluntary expense reimbursements (%) 4.21 4.14 4.41 4.48 4.78
Portfolio turnover rate (%) 21 50 28 56 80
Net assets at end of period (000 omitted) $30,630 $34,720 $34,844 $35,545 $34,975
</TABLE>
+ Annualized
++ Not annualized
* Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of all
distributions at the net asset value during the period, and a redemption on
the last day of the period. Initial sales charge is not reflected in the
calculation of total return.
** Expense reductions are comprised of the voluntary expense reimbursements
and include the earnings credits as described in Notes (5) and (1) D.
See Notes to Financial Statements.
108
<PAGE>
Notes to Financial Statements
(1) Significant Accounting Policies:
Sentinel Pennsylvania Tax-Free Trust (the "Trust") is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The following is a summary of significant
accounting policies followed by the Trust.
A. Security Valuation: Investments in securities are valued on the basis of
valuations provided by an independent pricing organization. The independent
pricing organization values the investments, taking into consideration
characteristics of the securities, values of similar securities that trade on a
regular basis, and other relevant market data. Short-term tax-free notes are
stated at cost, which approximates market value.
B. Securities Transactions and Related Investment Income: Securities
transactions are accounted for on the date the securities are purchased or sold
(trade date). Interest income is recorded on the accrual basis and premiums are
amortized. Cost of investments sold is determined on the basis of identified
cost for both financial reporting and income tax purposes. The Trust invests in
debt instruments of municipal issuers whose ability to meet their obligations
may be affected by economic developments in the State of Pennsylvania.
C. Federal Income Taxes: It is the Trust's policy to continue to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies. The Trust intends to distribute all of its taxable income to its
shareholders; therefore, no federal excise tax or income tax provision is
required.
D. Other: Earnings credits are received from the custodian and dividend paying
agent on cash balances and are reflected in the statement of operations as an
expense offset.
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.
(2) Distributions:
Realized gains from securities transactions, if any, will be distributed to
shareholders prior to the end of each calendar year. At November 30, 1999 the
Trust has $96,951 of capital loss carryforwards for federal income tax purposes
which are due to expire in 2007.
Dividends from net investment income are declared and paid monthly and recorded
on the ex-dividend date. Income distributions and capital gain distributions are
determined in accordance with federal income tax regulations.
(3) Trust Shares:
Transactions in Trust shares were as follows:
Year Year
Ended Ended
11/30/99 11/30/98
---------- ----------
Shares sold .................................... 130,028 158,799
Shares issued to stockholders in reinvestment
of dividends and distributions ................. 131,757 100,222
---------- ----------
261,785 259,021
Shares redeemed ................................ (316,992) (293,605)
---------- ----------
Net decrease ................................... (55,207) (34,584)
========== ==========
(4) Investment Transactions:
Purchases and sales of securities other than short-term securities aggregated
$6,651,560 and $8,895,095, respectively, during the fiscal year ended November
30, 1999.
(5) Management Advisory Fee and Other Transactions with Affiliates:
Pursuant to the Investment Advisory Agreement (the "Agreement"), Sentinel
Advisors, Co. ("SAC"), a Vermont general partnership whose general partners are
Sentinel Advisors, Inc., an indirect wholly-owned subsidiary of National Life
Insurance Company ("National Life"), ProvidentMutual Management Co., Inc., an
affiliate of Provident Mutual Life Insurance Company of Philadelphia ("Provident
Mutual"), HTK of Delaware, Inc. ("HTK"), an affiliate of The Penn Mutual Life
Insurance Company ("Penn Mutual") and Sentinel Management Company ("SMC"), a
Vermont general partnership whose general partners are affiliates of National
Life, Provident Mutual and Penn Mutual, provides general supervision of the
Trust's investments as well as certain administrative and related services. As
compensation in full for services rendered under its Agreement, the Trust pays
SAC a monthly fee determined as follows: 0.55% per annum on the first $50
million of average daily net assets; 0.50% per annum on the next $50 million of
such assets; and 0.45% per annum on such assets in excess of $100 million.
Sentinel Financial Services Company ("SFSC"), a Vermont general partnership
whose general partners are National Life Investment Management Company, Inc., a
wholly-owned subsidiary of National Life, ProvidentMutual Financial Services,
Inc., an affiliate of Provident Mutual, HTK and SMC,
109
<PAGE>
is the principal underwriter ("Distributor") of the Trust's shares. SFSC
receives a sales charge added to the net asset value received by the Trust on
the sale of its shares. This compensation is not an expense of the Trust and
does not affect its operating results. SFSC has advised the Trust that it
received sales charges aggregating $57,915 for the fiscal year ended November
30, 1999. The Trust is advised that the total distribution charges retained by
SFSC on the sale of shares amounted to $738 after allowances of $4,937 to Equity
Services, Inc., an affiliate of National Life, $15,043 to 1717 Capital
Management Company, an affiliate of Provident Mutual, $9,884 to Hornor, Townsend
& Kent, Inc. and $5,611 to Janney Montgomery Scott, Inc., affiliates of Penn
Mutual, and $21,702 to other investment dealers.
Each trustee who is not an employee of the adviser or an affiliated company is
paid an annual fee of $2,500 plus $200 for each meeting of the Board of Trustees
attended. Such trustees are reimbursed for travel and other out-of-pocket
expenses incurred in attending such meetings.
Pursuant to the Fund Services Agreement with Sentinel Administrative Service
Company ("SASC"), a Vermont general partnership whose general partners are
Sentinel Administrative Service Corporation, an indirect wholly-owned subsidiary
of National Life, SIGMA American Corp., an affiliate of Provident Mutual, HTK
and SMC, the Trust receives trust accounting and financial administrative
services, transfer agent services and investor services, all of which are
coordinated with other services which the Trust has contracted for with outside
providers. Total fees for the fiscal year ended November 30, 1999 were $121,000.
SAC has voluntarily agreed to refund its fee to the extent necessary to prevent
the overall aggregate expense ratio of the Trust and the Class A shares of
Sentinel Group Funds, Inc. (excluding the Sentinel World Fund) from exceeding
1.30% of average daily net assets in any fiscal year. Sentinel Group Funds, Inc.
is a series fund with thirteen portfolios and together with the Trust make up
the Sentinel Family of Funds. Although SAC has no present intention to do so,
this arrangement may be terminated at any time. Expenses for the fiscal year
ended November 30, 1999 did not exceed 1.30% of its average daily net assets.
Effective March 30, 1998, SASC agreed to reimburse the Trust for expenses in
excess of an annual rate of 0.70% of the Trust's average daily net assets.
Effective March 31, 1999, SASC has agreed to reimburse the Trust for expenses in
excess of an annual rate of 0.69% of the Trust's average daily net assets. For
the fiscal year ended November 30, 1999 the total amount reimbursable was
$198,099. This arrangement may be terminated at any time after November 30,
1999.
(6) Distribution Expenses:
On March 1, 1993, the Trust adopted a new distribution plan ("Plan") pursuant to
Rule 12b-1 under the 1940 Act. Under the Plan the Trust pays to the Distributor
a monthly fee at the maximum annual rate of 0.20% of average daily net assets.
Such fees will be used to reimburse the Distributor for expenses incurred in
connection with distribution and promotion of the shares of the Trust. The
Distributor is not reimbursed for any unreimbursed prior years expenses.
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Report of Independent Accountants
To the Shareholders and Board of Trustees of
Sentinel Pennsylvania Tax-Free Trust
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Sentinel Pennsylvania Tax-Free
Trust (the "Trust") at November 30, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended, in conformity with accounting principles generally
accepted in the United States. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Trust's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at November
30, 1999 by correspondence with the custodian, provide a reasonable basis for
the opinion expressed above.
PricewaterhouseCoopers LLP
1177 Avenue of the Americas
New York, New York
December 30, 1999
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Federal Tax Status
(Unaudited)
For corporate shareholders, the percentage of the total dividends from net
investment income from the fiscal year 1999 qualifying for the 70% dividend
received deduction available to corporations are as follows:
Sentinel Common Stock Fund 100%
Sentinel Balanced Fund 39%
In January 2000 you will be sent 1999 Form 1099-DIV from the Sentinel Funds. The
form will indicate the Federal income tax status of the dividends and capital
gains distributions paid to you by check or credited to your account in
additional shares during the calendar year 1999. The Internal Revenue Service
requires us to file this information, and it must be reported by you on your
Federal Income Tax Return for 1999. All of the dividends paid by the Sentinel
Tax-Free Income Fund, the Sentinel New York Tax-Free Income Fund and the
Sentinel Pennsylvania Tax-Free Trust from its net investment income is
tax-exempt for Federal income tax purposes.
Privileges, Plans and Services for Shareholders
Open Account - Unless another distribution option is elected, when an account is
established, all income dividends and capital gains distributions are reinvested
in additional shares at net asset value and without charge.
Other Distribution Options - Upon written notice to Sentinel Administrative
Service Company, you may elect one of the following options:
1. Receive dividends in cash and reinvest any capital gains distributions in
additional shares of any of the Sentinel Funds, of the same class, at net
asset value.
2. Receive capital gains in cash and reinvest dividends.
3. Receive both dividends and capital gains in cash.
4. Reinvest both dividends and capital gains in another Sentinel Fund, of the
same class, at net asset value (excluding dividends earned on assets
initially invested in Sentinel U.S. Treasury Money Market Fund).
5. Reinvest a percentage of dividends and/or capital gains and receive the
remaining portion in cash.
Automatic Investment Plan - This service, provided without charge, enables you
to make regular investments of $50 ($100 for Growth Index Fund) or more by means
of an automatic checking account debiting service via the ACH (Automated
Clearing House) network. Information and the application necessary to establish
this plan are included in the prospectus. A separate folder and application are
also available from Sentinel Administrative Service Company, or from your
investment dealer.
Systematic Withdrawal Plan - This plan enables you to receive a check once per
month, during any months of the year you specify, for a dollar amount that you
specify. Note that this plan is available only to those who own, or are
purchasing, at least $5,000 worth of shares of one or more of the Sentinel
Funds, except Sentinel U.S. Treasury Money Market Fund, as determined by the
current offering price. Payments may be made to you, your bank, or other payee
as requested on the application. Under the Systematic Withdrawal Plan, all
dividends and distributions are automatically reinvested at net asset value and
payments are made from the proceeds of redeemed shares.
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High Yield Bond, Bond, Tax-Free Income, New York Tax-Free Income, Government
Securities, Short Maturity Government, U.S. Treasury Money Market and
Pennsylvania Tax-Free Trust Check Writing Service - This special feature of the
Class A shares of Sentinel High Yield Bond Fund, Sentinel Bond Fund, Sentinel
Tax-Free Income Fund, Sentinel New York Tax-Free Income Fund, Sentinel
Government Securities Fund, Sentinel Short Maturity Government Fund, Sentinel
U.S. Treasury Money Market Fund and Sentinel Pennsylvania Tax-Free Trust enables
you to draw checks (minimum amount $500 except for the U.S. Treasury Money
Market Fund which is $250) on your account through Investors Fiduciary Trust Co.
There is currently no fee for this service. Please note that this service is not
available to IRA, 403(b) or other fiduciary accounts. Information and
applications are available by contacting Sentinel Funds Investor Services at
(800) 282-FUND (3863).
Exchange Privilege - The Exchange Privilege is designed to add flexibility to
your investment program by enabling you to exchange all or part of your shares
in one Sentinel Fund for shares of the same class of another Fund in the family
without payment of any additional sales charge. The exception to no additional
sales charge is when shares are exchanged from the Sentinel U.S. Treasury Money
Market Fund to Class A shares of another Sentinel Fund, a sales charge will be
imposed unless the assets in the Sentinel U.S. Treasury Money Market Fund were
in another Sentinel Fund and were previously subject to a sales charge. Shares
being exchanged into another Fund must have a value of at least $1,000 or $5,000
for Growth Index Fund (the minimum investment required to open a new account)
unless you already have an account in that Fund. Shares being exchanged must
have been in the account a minimum of 15 calendar days (90 days in the case of
funds initially invested in the Sentinel Short Maturity Government Fund or
exchanged into such Fund from funds initially invested in the Sentinel U.S.
Treasury Money Market Fund). Account registrations must be identical. Exchanges
may be made by calling toll-free, (800) 282-FUND (3863), or by writing Sentinel
Funds, P. O. Box 1499, Montpelier, Vermont 05601-1499. Note that an exchange is
a taxable transaction for federal income tax purposes.
Reinstatement Privilege - A shareholder who redeems all or part of an account
may reinvest all or part of the redemption proceeds at the then current net
asset value if a written request to the Fund is received or postmarked within
one year after the date of the redemption. Sentinel Short Maturity Government
Fund shareholders who have held their shares for 90 days or less, however, may
only use this reinstatement privilege to reinvest in the Sentinel Short Maturity
Government Fund.
Telephone Redemption - Up to $1,000,000 in funds may be redeemed by telephone
upon completion of the appropriate section of the Application, or subsequent
submission of such, with proper signature guarantee. Under this service,
proceeds may either be sent to the address of record or a pre-designated bank. A
signature guarantee is required on any change in redemption instructions as well
as a 30 day waiting period for changes to become effective. To redeem shares by
telephone, you may call (800) 282-FUND (3863).
Tax-Deferred Retirement Plans - Shares of Sentinel Group Funds may be purchased
by all types of tax-deferred retirement plans, including self-employed
individuals and partnerships ("Keogh Plans"), Individual Retirement Accounts
("IRAs"), SIMPLE IRAs, Simplified Employee Pension Plans ("SEP-IRAs"), 403(b)
Plans (deferred compensation arrangements for employees of public school systems
and certain non-profit organizations), Section 457 Plans and other corporate
pension and profit-sharing plans. Consult your tax advisor for details.
Please refer to the prospectus for complete details regarding these privileges,
plans and services.
113
<PAGE>
Directors/Trustees and Officers
Sentinel Group Funds, Inc. and Sentinel
Pennsylvania Tax-Free Trust
<TABLE>
<S> <C> <C>
Patrick E. Welch Richard I. Johannesen, Jr. Susan M. Sterne
Chairman and Chief Executive Officer Director/Trustee Director/Trustee
Chairman and Chief Executive Officer, Former Vice President and Manager - President, Economic Analysis
National Life Insurance Company Bond Market Research Department, Associates, Inc.
Salomon Brothers Inc.
Joseph M. Rob Angela E. Vallot
Director/Trustee and President Robert B. Mathias Director/Trustee
Chief Executive Officer, Director/Trustee Counsel, Texaco Inc.
Sentinel Management Company Sports Consultant;
Former U.S. Congressman John M. Grab, Jr.
Richard J. Borda Vice President
Director/Trustee Keniston P. Merrill
Former Vice Chairman, Director/Trustee Thomas P. Malone
National Life Insurance Company Former Chairman and Vice President and Treasurer
Chief Executive Officer,
Dr. Kalman J. Cohen Sentinel Advisors Company Scott G. Wheeler
Director/Trustee Assistant Treasurer
Distinguished Bank Research Deborah G. Miller
Professor Emeritus, Director/Trustee D. Russell Morgan
The Fuqua School of Business, Vice President Secretary
Duke University Digital Equipment Corporation
John D. Feerick John Raisian
Director/Trustee Director/Trustee
Dean, Fordham University Director and Senior Fellow,
School of Law Hoover Institution,
Stanford University
Investment Adviser Custodian and Dividend Paying Agent
Sentinel Advisors Company Investors Fiduciary Trust Company
Principal Underwriter Transfer Agent, Shareholder Servicing
Sentinel Financial Services Company Agent and Administrator
Sentinel Administrative Service
Counsel Company
Brown & Wood
Independent Accountants
PricewaterhouseCoopers LLP
</TABLE>
114
<PAGE>
The Sentinel Funds Board of Directors
[PHOTO]
Standing, left to right: Joseph M. Rob, Keniston P. Merrill, John D. Feerick,
Robert B. Mathias, Richard J. Borda, John Raisian
Seated, left to right: Dr. Kalman J. Cohen, Susan M. Sterne, Patrick E. Welch,
Angela E. Vallot, Richard I. Johannesen, Jr.
Not pictured: Deborah G. Miller
115
<PAGE>
A Brief History
[GRAPHIC]
The Sentinel Family of Funds is one of America's oldest fund families. Its
largest member, Sentinel Group Funds, Inc., was originally incorporated as Group
Securities, Inc. in the state of Delaware on December 3, 1933. Designed as a
series type of investment company, its main objectives were to offer
shareholders the benefits of "group security investing" along with the ability
to invest in individual industries or industrial groups readily and
conveniently, each in the form of a single stock.
Shares of 17 individual classes of stock were first offered to the public at
$1.10 per share on January 12, 1934 - virtually at the bottom of the Great
Depression.
Following several additions and deletions, 21 classes of stock were maintained
for an extended period of time. Subsequent consolidations, mergers and name
changes combined the classes of stock into what are today the two remaining
original funds in Sentinel Group Funds, Inc., Sentinel Common Stock Fund and
Sentinel Balanced Fund. Sentinel Growth Fund and Sentinel Bond Fund were
organized by National Life Insurance Company in 1969 and merged into the
Sentinel Group in 1978. Four more additions, Sentinel Government Securities
Fund, Sentinel Tax-Free Income Fund, Sentinel High Yield Bond Fund (Class A and
Class B shares) and Sentinel Growth Index Fund were introduced on September 2,
1986, October 1, 1990, June 23, 1997 and September 13, 1999, respectively.
In May, 1981, Sentinel Cash Management Fund, Inc. was organized as a no-load
money market fund. The "Cash Fund" was also organized as a series fund, and was
designed to operate independently of Sentinel Group Funds, Inc., while at the
same time sharing the Group's management, distribution, transfer agent and other
servicing and administrative arrangements.
On March 1, 1993, National Life Insurance Company and Provident Mutual Life
Insurance Company of Philadelphia entered into a joint venture arrangement which
resulted in the merging of the nine ProvidentMutual Funds into the Sentinel
Family of Funds. With the merger, three new classes of stock were added to
Sentinel Group Funds, Inc., and a fourth new member of the broader Sentinel
Family of Funds was added. The three new members of Sentinel Group Funds, Inc.
are Sentinel Small Company Fund, Sentinel World Fund and Sentinel U.S. Treasury
Money Market Fund. The fourth new member of the Sentinel Family of Funds is
Sentinel Pennsylvania Tax-Free Trust (the "Trust"). The Trust operates as a
separate investment company with respect to Sentinel Group Funds, Inc., but
shares management, distribution, fund accounting, transfer agent and other
arrangements with the Sentinel Group.
Also on March 1, 1993, Sentinel Cash Management Fund, Inc. was merged into the
Sentinel U.S. Treasury Money Market Fund.
On March 27, 1995, Penn Mutual Life Insurance Company joined National Life
Insurance Company and Provident Mutual Life Insurance Company in their mutual
fund operation. This resulted in the merging of seven funds of The Independence
Capital Group of Funds into Sentinel Group Funds, Inc., and the creation of two
new classes of stock - Sentinel New York Tax-Free Income Fund and Sentinel Short
Maturity Government Fund.
Effective April 1, 1996, five Sentinel Funds offered two classes of shares:
Sentinel Small Company, Sentinel World, Sentinel Common Stock, Sentinel Balanced
and Sentinel Bond funds. The new class is called "Class B shares" while the
original class is called "Class A shares." Sentinel U.S. Treasury Money Market
Fund also has Class B shares which are primarily available through exchanges
from the other Class B shares. On January 12, 1998 Sentinel Mid Cap Growth
(formerly Growth Fund) also offered Class B shares. Effective May 4, 1998 a
third class of shares, Class C shares were offered on the following Funds,
Sentinel Common Stock, Sentinel Balanced, Sentinel World and Sentinel High Yield
Bond Funds. Also on January 4, 1999 a fourth class of shares, Class D shares
were offered on the Sentinel Balanced Fund.
The fourteen funds in the Sentinel Family of Funds, which includes the thirteen
funds in Sentinel Group Funds, Inc., and the Sentinel Pennsylvania Tax-Free
Trust, now represent net assets of $3.1 billion which are managed on behalf of
approximately 116,450 individual, corporate and institutional shareholders
located across the country and around the world. Shares are distributed by
registered representatives and independent broker/dealers through Sentinel
Financial Services Company, an affiliate of the partnership between National
Life, Provident Mutual and Penn Mutual. Sentinel Advisors Company and Sentinel
Administrative Service Company, which are also affiliates of the partnership,
provide respective investment management and shareholder services to the funds.
116
<PAGE>
[GRAPHIC] Sentinel Funds
Integrity Since 1934
Sentinel Common Stock Fund
Sentinel Balanced Fund
Sentinel Growth Fund
Sentinel Small Company Fund
Sentinel World Fund
Sentinel High Yield Bond Fund
Sentinel Bond Fund
Sentinel Government Securities Fund
Sentinel Short Maturity Government Fund
Sentinel U.S. Treasury Money Market Fund
Sentinel Tax-Free Income Fund
Sentinel New York Tax-Free Income Fund
Sentinel Pennsylvania Tax-Free Trust
Distributed by
Sentinel Financial Services Company
National Life Drive
Montpelier, Vermont 05604
(800) 233-4332
Member of
FORUM for INVESTOR ADVICE
Investment Professionals Helping Investors
This brochure is authorized for distribution to prospective investors only when
preceded or accompanied by an effective prospectus.
SF0104A(1199) Cat. No. 43603
<PAGE>
[GRAPHIC] Sentinel Funds
Integrity Since 1934
Sentinel Common Stock Fund
Sentinel Balanced Fund
Sentinel Growth Fund
Sentinel Small Company Fund
Sentinel World Fund
Sentinel High Yield Bond Fund
Sentinel Bond Fund
Sentinel Government Securities Fund
Sentinel Short Maturity Government Fund
Sentinel U.S. Treasury Money Market Fund
Sentinel Tax-Free Income Fund
Sentinel New York Tax-Free Income Fund
Sentinel Pennsylvania Tax-Free Trust
Member of
FORUM for INVESTOR ADVICE
Investment Professionals Helping Investors
This brochure is authorized for distribution to prospective investors only when
preceded or accompanied by an effective prospectus.
---------------
Distributed by Postage Rate
Sentinel Financial Services Company U.S. POSTAGE
National Life Drive PAID
Montpelier, Vermont 05604 Hudson, MA
(800) 233-4332 Permit No. 19
---------------
SF0104(1199) Cat. No. 43602
