UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-2031
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MFS SERIES TRUST V
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Stephen E. Cavan
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: September 30, 2003
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Date of reporting period: September 30, 2003
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) Mutual Funds
ANNUAL REPORT 9/30/03
MFS(R) Research Fund
A path for pursuing opportunity
[MFS Logo](R)
INVESTMENT MANAGEMENT
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MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
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Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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MFS(R) RESEARCH FUND
The fund seeks long-term growth of capital and future income.
TABLE OF CONTENTS
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MFS PRIVACY POLICY
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LETTER FROM THE CHAIRMAN 1
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MFS ORIGINAL RESEARCH(R) 4
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MANAGEMENT REVIEW 5
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PERFORMANCE SUMMARY 8
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PORTFOLIO OF INVESTMENTS 12
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FINANCIAL STATEMENTS 19
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NOTES TO FINANCIAL STATEMENTS 30
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INDEPENDENT AUDITORS' REPORT 38
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TRUSTEES AND OFFICERS 39
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MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 41
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FEDERAL TAX INFORMATION 42
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CONTACT INFORMATION 43
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LETTER FROM THE CHAIRMAN
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Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is
the best means of achieving superior long-term investment performance. When
you're managing billions of dollars for investors, we think you have an
obligation to have in-depth, firsthand knowledge of every company owned,
anywhere in the world.
We have structured our equity and fixed-income investment teams to capitalize
on the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
research analysts, 27 based in the United States and 18 based abroad, and 26
credit research analysts. Each analyst is assigned one or more specific
industries and then charged with identifying the most attractive investment
ideas within these industries. Our U.S. and non-U.S. equity research analysts
are unified into one team that emphasizes a collaborative process in analyzing
securities around the globe. Credit analysts also share their expertise in
each segment of the fixed-income market and work as part of the same team
ensuring that every member has access to information that may have a material
effect on their investment decisions. As MFS(R) continues to grow and as
markets become more complex, we believe our structure will enable us to
maintain a consistent investment process with the goal of providing strong,
long-term investment performance across market capitalizations, investment
disciplines, and country borders for our investors.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers around the globe. The analysts
know the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry
insights and a wider perspective on companies and industries. Our goal is to
make sure those two sets of perspectives coordinate and work well together. As
the world's markets become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of
the market. We do not believe that analysts and portfolio managers - no matter
how talented they may be - can succeed by working in a vacuum. Through the
latest technology available, our entire research team meets frequently via
video and telephone teleconferences, e-mail, and PDAs (personal digital
assistants). When we hire new analysts, we require them to spend an average of
one year in Boston to learn MFS' culture and to build relationships with their
peers. We believe the interaction among our analysts is the key to making our
collaborative process work toward delivering superior long-term investment
performance for our investors. Our analysts work out of four research offices
in Boston, London, Singapore, and Tokyo, and are assigned to specific regions
and industries. They meet regularly with their colleagues to discuss world
trends affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspectives they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry,
and its ability to grow its market share. Conversely, our fixed-income
analysts will look at stability of a company's cash flow, the value of its
assets, and its capital structure to gauge whether the company can generate
enough free cash flow to pay off its debt. As a result of their collaboration,
we believe we're able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however, we
have rigorous guidelines to assure that the level of risk is measured and
monitored and consistent with the investment philosophies of each of our
portfolios. All told, we believe our culture empowers the members of our
investment team to continue to do their best work and allows them to make
better investment decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
October 21, 2003
The opinions expressed in this letter are those of MFS and no forecasts can be
guaranteed.
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MFS ORIGINAL RESEARCH(R)
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THE HUMAN SIDE OF MONEY MANAGEMENT
For nearly 80 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands
of institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain first-hand
knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
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MANAGEMENT REVIEW
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MARKET ENVIRONMENT
The 12-month reporting period ended September 30, 2003 was marked by
volatility but, in the end, rewarded long-term investors with better results
than they had experienced in quite some time. Nearly all asset classes showed
positive performance for the period.
Modest economic improvements and slightly stronger corporate earnings sparked
a stock market rally in October and November 2002. The stock market cooled in
the winter months of 2003 because of mixed economic signals and an increase in
geopolitical tensions. However, the market began a rebound in mid-March that
continued through August before taking a pause in September. Technology and
utilities & communications stocks were among the market's leaders during the
rallies.
DETRACTORS TO PERFORMANCE
The fund's underweighting in the technology sector early in the period was the
primary reason fund performance lagged benchmark returns. Technology stock
prices experienced their most explosive appreciation in the October/November
rally, and the fund did not fully participate in that move. Although software
manufacturer Oracle, integrated circuit maker Analog Devices, and computer
software and storage provider VERITAS were among the strongest-performing
stocks for the fund, our positions in these stocks could not offset that early
underweighting in the sector. (The fund sold its holdings in Oracle Analog
Devices, and VERITAS when they reached our price targets.) Fund performance was
also held back by being underweighted in benchmark component stocks of
semiconductor chip maker Intel, information technology provider IBM, and
software provider Microsoft.
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TOP 5 STOCK HOLDINGS
AS OF 9/30/03
CITIGROUP, INC. 3.6%
Diversified financial services company
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MICROSOFT CORP. 3.6%
Computer software and systems company
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WYETH 2.2%
Pharmaceutical and health care
products company
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ALTRIA GROUP (formerly Philip Morris) 2.1%
Tobacco, food, and beverage
conglomerate
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PROCTER & GAMBLE 2.1%
Consumer products manufacturer
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The portfolio is actively managed, and current
holdings may be different.
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Sears Roebuck, in the retail sector, was one of our biggest disappointments
for the period. The stock declined in the fall of 2002 after the company
announced that the quality of its credit card portfolio was worse than the
firm had previously known or disclosed. The company's stock price rose in 2003
after Sears announced that it would sell its troubled credit card business to
focus more closely on restructuring its retail franchise. However, the stock's
rise in 2003 was overshadowed by its poor performance earlier in the period.
The fund did not own Sears stock at the end of the period.
Our holdings in financial services contributed strong absolute returns for the
period; however, our holdings in the sector detracted from relative returns
because we had very little exposure to some of the better-performing large
banks. Stock brokerage firm Merrill Lynch was among the fund's better
performers. Merrill's stock price rebounded with the 2003 market rally, but
its performance was not as strong as that of others in the sector.
Although fundamentals continue to be quite strong for defense companies in
general and Lockheed Martin in particular, the defense industry fell out of
favor with investors early in the year. Performance for the defense group
suffered when investors shifted their attention to companies whose earnings
were more sensitive to an improving economy.
CONTRIBUTORS TO PERFORMANCE
Biotechnology stocks in the health care sector turned in the strongest
performance for the period. In biotechnology, Genzyme and Genentech were the
fund's top two contributors during the period. Investors had overreacted to
near-term events at Genzyme, and its stock had fallen to excessively low
levels in 2002. This year, sales picked up for the firm, and its developmental
drugs showed surprising promise. The price of the stock rebounded, and we sold
it when it reached our price target. Genentech's stock price received a lift
from successful early trials of its colorectal cancer drug, Avastin.
Strong results from the fund's biotech stocks were diminished slightly by the
performance of major pharmaceutical companies. Investors became concerned
about decelerating growth industrywide, drug patent challenges, and pricing
pressure from generic drugs. Although we believe that some of these concerns
were valid, we think that investors may have overreacted in pushing down the
prices of some of the pharmaceutical stocks that we continued to hold in
the fund at the end of the period.
Leisure holdings AOL Time Warner and EchoStar Communications led that sector's
performance. Our analysts found EchoStar attractive because they reasoned that
it was less expensive to attach a dish to someone's home than it was to bring
in a specialized line. The company continued to add subscribers and was
recently able to raise prices with no apparent erosion in its subscriber base.
The company received a further boost when it abandoned negotiations to buy
Direct TV, which the fund did not own.
At the start of the period, AOL Time Warner's stock price fell amid investor
worries about the viability of its core Internet business as broadband usage
increased. We saw that in addition to its Internet holdings, the company had a
strong asset base built on its media properties and cable offerings. The
company's stock price began its ascent with the start of the March 2003 rally
and received a further lift from rising revenues and net income from its
cable subscriptions. AOL Time Warner was sold when it reached our
price target.
Respectfully,
/s/ David A. Antonelli
David A. Antonelli
Director of Global Equity Research
The committee of MFS Global Equity Research Analysts is responsible for the
day-to-day management of the fund under the general supervision of Mr.
Antonelli.
The opinions expressed in this report are those of the Director and are
current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
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PERFORMANCE SUMMARY THROUGH 9/30/03
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The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results
include the deduction of the maximum applicable sales charge and reflect the
percentage change in net asset value, including reinvestment of dividends and
capital gains distributions. Benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. (See Notes to Performance Summary.)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the ten-year period ending September 30, 2003.)
Standard
MFS Research & Poors 500
Fund - Class A Stock Index
9/93 $ 9,425 $10,000
9/95 12,640 13,448
9/97 20,588 22,722
9/99 25,321 31,667
9/01 20,513 26,328
9/03 19,496 26,042
TOTAL RETURNS
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Average annual
without sales charge
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Class
Share class inception date 1-yr 3-yr 5-yr 10-yr
A 10/13/1971 19.28% -16.54% -0.91% 7.54%
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B 9/7/1993 18.54% -17.09% -1.55% 6.81%
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C 1/3/1994 18.45% -17.10% -1.55% 6.84%
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I 1/2/1997 19.72% -16.25% -0.55% 7.80%
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R 12/31/2002 19.05% -16.59% -0.94% 7.52%
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529A 7/31/2002 18.99% -16.63% -0.97% 7.51%
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529B 7/31/2002 18.24% -16.85% -1.12% 7.42%
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529C 7/31/2002 18.23% -16.85% -1.13% 7.42%
Comparative Benchmarks
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Average annual
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Average large-cap core fund+ 20.86% -12.31% -0.01% 7.84%
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Standard & Poor's 500
Stock Index# 24.38% -10.13% 1.00% 10.04%
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Average annual
with sales charge
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Share class 1-yr 3-yr 5-yr 10-yr
A 12.42% -18.17% -2.07% 6.90%
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B 14.54% -17.82% -1.85% 6.81%
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C 17.45% -17.10% -1.55% 6.84%
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529A 12.15% -18.26% -2.14% 6.87%
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529B 14.24% -17.54% -1.42% 7.42%
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529C 17.23% -16.85% -1.13% 7.42%
I and R class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
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Cumulative without
sales charge
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A 19.28% -41.87% -4.46% 106.85%
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B 18.54% -43.00% -7.50% 93.21%
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C 18.45% -43.02% -7.53% 93.71%
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I 19.72% -41.26% -2.74% 111.85%
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R 19.05% -41.98% -4.64% 106.46%
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529A 18.99% -42.05% -4.76% 106.20%
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529B 18.24% -42.50% -5.50% 104.59%
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529C 18.23% -42.51% -5.50% 104.58%
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
STANDARD & POOR'S 500 STOCK INDEX - A commonly used measure of the broad U.S.
stock market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A and 529A results, including sales charge, reflects the deduction of
the maximum 5.75% sales charge. Class B and 529B results, including sales
charge, reflects the deduction of the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C and 529C
results, including sales charge, redeemed within one year from the end of the
calendar month of purchase reflects the deduction of the 1% CDSC. Class I
shares have no sales charges and are available only to certain investors.
Class R shares have no sales charges and are available only to certain
retirement plans. Class 529A, 529B, and 529C shares are only available in
conjunction with qualified tuition programs, such as the MFS 529 Savings Plan.
Performance for share classes offered after Class A shares includes the
performance of the fund's Class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences
in sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the initial share class, and lower
performance for share classes with lower operating expenses than the initial
share class.
All performance results reflect any applicable expense subsidies and waivers
in effect during the periods shown; without these, the results would have been
less favorable. See the prospectus and financial statements for details. All
results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT
THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
These risks may increase share price volatility. Please see the prospectus for
further information regarding these and other risk considerations.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
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PORTFOLIO OF INVESTMENTS - 9/30/03
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The Portfolio of Investments is a complete list of all securities owned by your fund at the end of
the period. It is categorized by broad-based asset classes.
Stocks - 98.8%
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ISSUER SHARES $ VALUE
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U.S. Stocks - 90.7%
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Aerospace - 1.4%
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Lockheed Martin Corp. 900,600 $41,562,690
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Apparel Manufacturers - 0.7%
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Reebok International Ltd. 645,900 $21,592,437
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Banks & Credit Companies - 11.8%
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Bank of America Corp. 649,800 $50,710,392
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Bank One Corp. 768,300 29,694,795
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Banknorth Group, Inc. 541,400 15,278,308
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Citigroup, Inc. 2,363,386 107,557,697
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Fannie Mae 648,400 45,517,680
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Freddie Mac 781,600 40,916,760
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Mellon Financial Corp. 790,800 23,834,712
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SouthTrust Corp. 4,800 141,072
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SunTrust Banks, Inc. 389,000 23,483,930
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TCF Financial Corp. 332,100 15,924,195
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$353,059,541
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Biotechnology - 2.2%
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Amgen, Inc.* 680,700 $43,952,799
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Genentech, Inc.* 190,700 15,282,698
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Millipore Corp.* 134,200 6,181,252
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$65,416,749
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Broadcast & Cable TV - 2.7%
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Clear Channel Communications, Inc. 703,400 $26,940,220
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Cumulus Media, Inc., "A"* 794,500 13,546,225
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EchoStar Communications Corp., "A"* 673,700 25,782,499
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Westwood One, Inc.* 460,200 13,893,438
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$80,162,382
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Brokerage & Asset Managers - 3.7%
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Franklin Resources, Inc. 559,700 $24,744,337
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Goldman Sachs Group, Inc. 299,600 25,136,440
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Lehman Brothers Holdings, Inc. 468,100 32,336,348
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Merrill Lynch & Co., Inc. 529,700 28,354,841
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$110,571,966
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Business Services - 0.5%
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SunGard Data Systems, Inc.* 546,600 $14,381,046
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Chemicals - 3.0%
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Air Products & Chemicals, Inc. 643,200 $29,008,320
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Dow Chemical Co. 1,470,000 47,833,800
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Lyondell Chemical Co. 1,049,100 13,407,498
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$90,249,618
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Computer Software - 7.0%
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Amdocs Ltd.* 2,186,400 $41,104,320
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Getty Images, Inc.* 647,500 22,766,100
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Microsoft Corp. 3,817,700 106,093,883
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Netscreen Technologies, Inc.* 1,357,400 30,175,002
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Networks Associates, Inc.* 753,400 10,366,784
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$210,506,089
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Computer Software - Systems - 2.3%
- -----------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 1,935,300 $37,467,408
- -----------------------------------------------------------------------------------------------------
International Business Machines Corp. 345,900 30,553,347
- -----------------------------------------------------------------------------------------------------
$68,020,755
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Consumer Goods & Services - 3.8%
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Kimberly-Clark Corp. 580,000 $29,765,600
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Newell Rubbermaid, Inc. 1,055,300 22,868,351
- -----------------------------------------------------------------------------------------------------
Procter & Gamble Co. 663,300 61,567,506
- -----------------------------------------------------------------------------------------------------
$114,201,457
- -----------------------------------------------------------------------------------------------------
Containers - 1.0%
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Smurfit-Stone Container Corp.* 1,950,200 $29,213,996
- -----------------------------------------------------------------------------------------------------
Electrical Equipment - 2.8%
- -----------------------------------------------------------------------------------------------------
American Standard Cos., Inc.* 187,900 $15,830,575
- -----------------------------------------------------------------------------------------------------
Black & Decker Corp. 371,800 15,076,490
- -----------------------------------------------------------------------------------------------------
Rockwell Automation, Inc. 277,600 7,287,000
- -----------------------------------------------------------------------------------------------------
Tyco International Ltd. 2,211,500 45,180,945
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$83,375,010
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Electronics - 3.2%
- -----------------------------------------------------------------------------------------------------
Agere Systems, Inc., "B"* 10,609,510 $30,661,484
- -----------------------------------------------------------------------------------------------------
Novellus Systems, Inc.* 824,400 27,823,500
- -----------------------------------------------------------------------------------------------------
PMC-Sierra, Inc.* 1,107,500 14,609,032
- -----------------------------------------------------------------------------------------------------
Xilinx, Inc.* 775,900 22,120,909
- -----------------------------------------------------------------------------------------------------
$95,214,925
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 0.4%
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Unocal Corp. 369,800 $11,656,096
- -----------------------------------------------------------------------------------------------------
Energy - Integrated - 2.3%
- -----------------------------------------------------------------------------------------------------
ConocoPhillips 114,900 $6,290,775
- -----------------------------------------------------------------------------------------------------
ExxonMobil Corp. 1,679,938 61,485,731
- -----------------------------------------------------------------------------------------------------
$67,776,506
- -----------------------------------------------------------------------------------------------------
Entertainment - 1.9%
- -----------------------------------------------------------------------------------------------------
InterActive Corp.* 425,100 $14,049,555
- -----------------------------------------------------------------------------------------------------
Viacom, Inc., "B" 1,143,686 43,803,174
- -----------------------------------------------------------------------------------------------------
$57,852,729
- -----------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.1%
- -----------------------------------------------------------------------------------------------------
Rite Aid Corp.* 750,300 $3,871,548
- -----------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 2.5%
- -----------------------------------------------------------------------------------------------------
Kellogg Co. 430,800 $14,367,180
- -----------------------------------------------------------------------------------------------------
PepsiCo, Inc. 1,292,000 59,212,360
- -----------------------------------------------------------------------------------------------------
$73,579,540
- -----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
- -----------------------------------------------------------------------------------------------------
Bowater, Inc. 200,700 $8,441,442
- -----------------------------------------------------------------------------------------------------
International Paper Co. 368,000 14,359,360
- -----------------------------------------------------------------------------------------------------
$22,800,802
- -----------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.8%
- -----------------------------------------------------------------------------------------------------
Hilton Hotels Corp. 783,700 $12,711,614
- -----------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Co. 304,700 10,603,560
- -----------------------------------------------------------------------------------------------------
$23,315,174
- -----------------------------------------------------------------------------------------------------
General Merchandise - 4.0%
- -----------------------------------------------------------------------------------------------------
Kohl's Corp.* 710,900 $38,033,150
- -----------------------------------------------------------------------------------------------------
Target Corp. 741,900 27,917,697
- -----------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 985,300 55,029,005
- -----------------------------------------------------------------------------------------------------
$120,979,852
- -----------------------------------------------------------------------------------------------------
Insurance - 3.2%
- -----------------------------------------------------------------------------------------------------
American International Group, Inc. 807,200 $46,575,440
- -----------------------------------------------------------------------------------------------------
Chubb Corp. 315,380 20,461,854
- -----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., "A" 921,742 14,637,263
- -----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., "B" 868,036 13,784,412
- -----------------------------------------------------------------------------------------------------
$95,458,969
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 2.1%
- -----------------------------------------------------------------------------------------------------
Caremark Rx, Inc.* 705,300 $15,939,780
- -----------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc.* 157,300 6,243,237
- -----------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.* 2,859,700 41,408,456
- -----------------------------------------------------------------------------------------------------
$63,591,473
- -----------------------------------------------------------------------------------------------------
Medical Equipment - 4.0%
- -----------------------------------------------------------------------------------------------------
AmerisourceBergen Corp. 403,500 $21,809,175
- -----------------------------------------------------------------------------------------------------
Applera Corp. - Applied Biosystems Group 636,800 14,207,008
- -----------------------------------------------------------------------------------------------------
Baxter International, Inc. 806,400 23,433,984
- -----------------------------------------------------------------------------------------------------
Guidant Corp. 1,066,900 49,984,265
- -----------------------------------------------------------------------------------------------------
Invitrogen Corp.* 107,000 6,204,930
- -----------------------------------------------------------------------------------------------------
Thermo Electron Corp.* 268,700 5,830,790
- -----------------------------------------------------------------------------------------------------
$121,470,152
- -----------------------------------------------------------------------------------------------------
Oil Services - 2.4%
- -----------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 908,368 $21,755,414
- -----------------------------------------------------------------------------------------------------
Halliburton Co. 755,000 18,308,750
- -----------------------------------------------------------------------------------------------------
Noble Corp.* 350,600 11,916,894
- -----------------------------------------------------------------------------------------------------
Schlumberger Ltd. 438,200 21,208,880
- -----------------------------------------------------------------------------------------------------
$73,189,938
- -----------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.5%
- -----------------------------------------------------------------------------------------------------
Flextronics International Ltd.* 1,083,700 $15,366,866
- -----------------------------------------------------------------------------------------------------
Pharmaceuticals - 5.7%
- -----------------------------------------------------------------------------------------------------
Johnson & Johnson Co. 1,080,600 $53,511,312
- -----------------------------------------------------------------------------------------------------
Schering Plough Corp. 3,473,300 52,933,092
- -----------------------------------------------------------------------------------------------------
Wyeth 1,410,200 65,010,220
- -----------------------------------------------------------------------------------------------------
$171,454,624
- -----------------------------------------------------------------------------------------------------
Printing & Publishing - 1.6%
- -----------------------------------------------------------------------------------------------------
Lamar Advertising Co., "A"* 466,700 $13,692,978
- -----------------------------------------------------------------------------------------------------
McClatchy Co., "A" 67,000 3,985,160
- -----------------------------------------------------------------------------------------------------
New York Times Co., "A" 667,400 29,005,204
- -----------------------------------------------------------------------------------------------------
$46,683,342
- -----------------------------------------------------------------------------------------------------
Railroad & Shipping - 1.2%
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp. 613,800 $35,704,746
- -----------------------------------------------------------------------------------------------------
Restaurants - 0.2%
- -----------------------------------------------------------------------------------------------------
Brinker International, Inc.* 192,600 $6,425,136
- -----------------------------------------------------------------------------------------------------
Specialty Stores - 1.6%
- -----------------------------------------------------------------------------------------------------
Home Depot, Inc. 703,700 $22,412,845
- -----------------------------------------------------------------------------------------------------
The TJX Cos., Inc. 1,398,700 27,162,754
- -----------------------------------------------------------------------------------------------------
$49,575,599
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.3%
- -----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc.* 1,115,500 $9,124,790
- -----------------------------------------------------------------------------------------------------
Sprint Corp. (PCS Group)* 4,968,800 28,471,224
- -----------------------------------------------------------------------------------------------------
$37,596,014
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.4%
- -----------------------------------------------------------------------------------------------------
Cisco Systems, Inc.* 2,200,400 $42,995,816
- -----------------------------------------------------------------------------------------------------
Telephone Services - 2.4%
- -----------------------------------------------------------------------------------------------------
CenturyTel, Inc. 50,370 $1,707,039
- -----------------------------------------------------------------------------------------------------
Cincinnati Bell, Inc.* 1,692,300 8,613,807
- -----------------------------------------------------------------------------------------------------
Verizon Communications, Inc. 1,873,400 60,773,096
- -----------------------------------------------------------------------------------------------------
$71,093,942
- -----------------------------------------------------------------------------------------------------
Tobacco - 2.1%
- -----------------------------------------------------------------------------------------------------
Altria Group, Inc. 1,424,100 $62,375,580
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.1%
- -----------------------------------------------------------------------------------------------------
Dominion Resources, Inc. 252,100 $15,604,990
- -----------------------------------------------------------------------------------------------------
FirstEnergy Corp. 537,580 17,148,802
- -----------------------------------------------------------------------------------------------------
PG&E Corp.* 658,800 15,745,320
- -----------------------------------------------------------------------------------------------------
TXU Corp. 680,700 16,037,292
- -----------------------------------------------------------------------------------------------------
$64,536,404
- -----------------------------------------------------------------------------------------------------
Total U.S. Stocks $2,716,879,509
- -----------------------------------------------------------------------------------------------------
Foreign Stocks - 8.1%
- -----------------------------------------------------------------------------------------------------
Bermuda - 1.9%
- -----------------------------------------------------------------------------------------------------
Ace Ltd. (Insurance) 952,400 $31,505,392
- -----------------------------------------------------------------------------------------------------
XL Capital Ltd. (Insurance) 315,600 24,440,064
- -----------------------------------------------------------------------------------------------------
$55,945,456
- -----------------------------------------------------------------------------------------------------
Canada - 1.8%
- -----------------------------------------------------------------------------------------------------
Magna International Inc., "A" (Automotive) 190,900 $13,773,435
- -----------------------------------------------------------------------------------------------------
Nortel Networks Corp. (Telecommunications - Wireline)* 6,182,300 25,347,430
- -----------------------------------------------------------------------------------------------------
Talisman Energy, Inc. (Energy - Independent) 353,700 16,787,982
- -----------------------------------------------------------------------------------------------------
$55,908,847
- -----------------------------------------------------------------------------------------------------
Finland - 0.2%
- -----------------------------------------------------------------------------------------------------
Nokia Corp., ADR (Telecommunications - Wireline) 392,300 $6,119,880
- -----------------------------------------------------------------------------------------------------
France - 0.7%
- -----------------------------------------------------------------------------------------------------
Total Fina Elf S.A., "B" (Energy - Independent) 136,200 $20,567,545
- -----------------------------------------------------------------------------------------------------
Netherlands - 1.0%
- -----------------------------------------------------------------------------------------------------
STMicroelectronics N.V. (Electronics) 1,212,290 $29,155,575
- -----------------------------------------------------------------------------------------------------
United Kingdom - 2.5%
- -----------------------------------------------------------------------------------------------------
BHP Billiton PLC (Metals & Mining) 4,687,800 $31,130,233
- -----------------------------------------------------------------------------------------------------
Diageo PLC (Alcoholic Beverages)* 1,398,800 15,101,889
- -----------------------------------------------------------------------------------------------------
Rio Tinto Group (Metals & Mining)* 1,352,900 28,852,859
- -----------------------------------------------------------------------------------------------------
$75,084,981
- -----------------------------------------------------------------------------------------------------
Total Foreign Stocks $242,782,284
- -----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $2,776,585,212) $2,959,661,793
- -----------------------------------------------------------------------------------------------------
Repurchase Agreement - 0.9%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
Merrill Lynch, dated 9/30/03, due 10/01/03, total to be
received $26,587,790 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account), at Cost $26,587 $26,587,000
- -----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 4.4%
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Amortized Cost 130,962,874 $130,962,874
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,934,135,086) $3,117,211,667
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (4.1)% (120,479,567)
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,996,732,100
- -----------------------------------------------------------------------------------------------------
* Non-income producing security.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities
composing the total value of your fund.
AT 9/30/03
ASSETS
Investments, at value, including $127,401,456 of
securities on loan (identified cost, $2,934,135,086) $3,117,211,667
- -----------------------------------------------------------------------------------------------------
Cash 17,630
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 72,017,607
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 18,913,983
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 3,870,974
- -----------------------------------------------------------------------------------------------------
Other assets 149,157
- -----------------------------------------------------------------------------------------------------
Total assets $3,212,181,018
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $75,805,753
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 7,548,321
- -----------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 130,962,874
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 32,480
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 10,541
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 46,650
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 1,042,299
- -----------------------------------------------------------------------------------------------------
Total liabilities $215,448,918
- -----------------------------------------------------------------------------------------------------
Net assets $2,996,732,100
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $4,409,410,538
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 183,089,549
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (1,609,179,486)
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 13,411,499
- -----------------------------------------------------------------------------------------------------
Total $2,996,732,100
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 193,566,925
- -----------------------------------------------------------------------------------------------------
Class A shares
Net assets $1,475,897,332
- -----------------------------------------------------------------------------------------------------
Shares outstanding 92,849,761
- -----------------------------------------------------------------------------------------------------
Net asset value per share $15.90
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$15.90) $16.87
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class B shares
Net assets $1,071,291,848
- -----------------------------------------------------------------------------------------------------
Shares outstanding 71,629,581
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.96
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $262,391,138
- -----------------------------------------------------------------------------------------------------
Shares outstanding 17,538,043
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.96
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $186,803,971
- -----------------------------------------------------------------------------------------------------
Shares outstanding 11,526,804
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $16.21
- -----------------------------------------------------------------------------------------------------
Class R shares
Net assets $40,096
- -----------------------------------------------------------------------------------------------------
Shares outstanding 2,526
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $15.87
- -----------------------------------------------------------------------------------------------------
Class 529A shares
Net assets $106,658
- -----------------------------------------------------------------------------------------------------
Shares outstanding 6,729
- -----------------------------------------------------------------------------------------------------
Net asset value per share $15.85
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$15.85) $16.82
- -----------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $111,312
- -----------------------------------------------------------------------------------------------------
Shares outstanding 7,467
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.91
- -----------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $89,745
- -----------------------------------------------------------------------------------------------------
Shares outstanding 6,014
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.92
- -----------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A and Class 529A shares are reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class
529B, and Class 529C shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and paid in expenses. It
also describes any gains and/or losses generated by fund operations.
FOR YEAR ENDED 9/30/03
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Dividends $52,750,836
- -----------------------------------------------------------------------------------------------------
Interest 1,450,703
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (392,424)
- -----------------------------------------------------------------------------------------------------
Total investment income $53,809,115
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $12,972,180
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 70,302
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 3,168,426
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 5,313,483
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 11,282,098
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 2,798,544
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 60
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 136
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 1,007
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 559
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 97
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 252
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 140
- -----------------------------------------------------------------------------------------------------
Administrative fee 264,536
- -----------------------------------------------------------------------------------------------------
Custodian fee 868,346
- -----------------------------------------------------------------------------------------------------
Printing 204,012
- -----------------------------------------------------------------------------------------------------
Postage 359,789
- -----------------------------------------------------------------------------------------------------
Auditing fees 35,200
- -----------------------------------------------------------------------------------------------------
Legal fees 22,405
- -----------------------------------------------------------------------------------------------------
Miscellaneous 3,574,127
- -----------------------------------------------------------------------------------------------------
Total expenses $40,935,699
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (737,462)
- -----------------------------------------------------------------------------------------------------
Net expenses $40,198,237
- -----------------------------------------------------------------------------------------------------
Net investment income $13,610,878
- -----------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $(190,836,121)
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions 25,897
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign
currency transactions $(190,810,224)
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $696,905,103
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies (25,121)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign
currency translation $696,879,982
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency $506,069,758
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $519,680,636
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENTS OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets
resulting from operations, any distributions, and any shareholder
transactions.
FOR YEARS ENDED 9/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $13,610,878 $(6,153,011)
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign
currency transactions (190,810,224) (760,726,378)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 696,879,982 (8,754,927)
- -------------------------------------------------------- -------------- ---------------
Increase (decrease) in net assets from operations $519,680,636 $(775,634,316)
- -------------------------------------------------------- -------------- ---------------
Net decrease in net assets from fund
share transactions $(505,095,325) $(877,389,732)
- -------------------------------------------------------- -------------- ---------------
Total increase (decrease) in net assets $14,585,311 $(1,653,024,048)
- -------------------------------------------------------- -------------- ---------------
NET ASSETS
At beginning of period $2,982,146,789 $4,635,170,837
- -----------------------------------------------------------------------------------------------------
At end of period (including undistributed net
investment income and accumulated net investment loss
of $13,411,499 and $225,276, respectively) $2,996,732,100 $2,982,146,789
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- --------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years.
Certain information reflects financial results for a single fund share. The total returns in the table represent the rate by
which an investor would have earned (or lost) on an investment in the fund (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the fund's independent auditors, whose report, together with the
fund's financial statements, are included in this report.
FOR YEARS ENDED 9/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning
of period $13.33 $16.73 $31.40 $25.58 $21.45
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment income (loss) $0.11 $0.03 $(0.00)+++ $(0.05) $(0.02)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.46 (3.43) (11.15) 8.01 5.10
- ---------------------------------- ------ ------ ------ ------ ------
Total from investment
operations $2.57 $(3.40) $(11.15) $7.96 $5.08
- ---------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net realized gain on
investments and foreign
currency transactions $-- $-- $(3.42) $(2.14) $(0.95)
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments and
foreign currency
transactions -- -- (0.10) -- --
- ---------------------------------- ------ ------ ------ ------ ------
Total distributions declared
to shareholders $-- $-- $(3.52) $(2.14) $(0.95)
- ---------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $15.90 $13.33 $16.73 $31.40 $25.58
- ---------------------------------- ------ ------ ------ ------ ------
Total return (%)(+) 19.28& (20.32) (38.83) 32.45 24.09
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.06 1.08 0.99 0.96 0.98
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.74 0.20 (0.01) (0.16) (0.06)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114 99 91 95 93
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $1,475,897 $1,492,299 $2,213,955 $3,795,327 $3,061,563
- ----------------------------------------------------------------------------------------------------------------------------
+++ Per share amount was less than $0.01
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
& The fund's total return calculation includes a payment received from a non-recurring litigation settlement recorded as a
realized gain in the Statement of Operations. Excluding the effect of this payment from the fund's ending net asset
value per share, total return for the year ended September 30, 2003 would have been 18.75%.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
CLASS B 2003 2002 2001 2000 1999
Net asset value, beginning
of period $12.62 $15.95 $30.09 $24.74 $20.90
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment income (loss) $0.01 $(0.08) $(0.15) $(0.23) $(0.18)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.33 (3.25) (10.65) 7.72 4.97
- ---------------------------------- ------ ------ ------ ------ ------
Total from investment operations $2.34 $(3.33) $(10.80) $7.49 $4.79
- ---------------------------------- ------ ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net realized gain on
investments and foreign
currency transactions $-- $-- $(3.25) $(2.14) $(0.95)
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments and
foreign currency
transactions -- -- (0.09) -- --
- ---------------------------------- ------ ------ ------ ------ ------
Total distributions declared
to shareholders $-- $-- $(3.34) $(2.14) $(0.95)
- ---------------------------------- ------ ------ ------ ------ ------
Net asset value, end of period $14.96 $12.62 $15.95 $30.09 $24.74
- ---------------------------------- ------ ------ ------ ------ ------
Total return (%) 18.54& (20.88) (39.23) 31.60 23.31
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.70 1.73 1.64 1.61 1.63
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.09 (0.45) (0.66) (0.81) (0.71)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114 99 91 95 93
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $1,071,292 $1,172,864 $1,896,352 $3,455,142 $2,753,935
- ----------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& The fund's total return calculation includes a payment received from a non-recurring litigation settlement recorded as a
realized gain in the Statement of Operations. Excluding the effect of this payment from the fund's ending net asset value
per share, total return for the year ended September 30, 2003 would have been 17.99%.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
CLASS C 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.63 $15.95 $30.11 $24.75 $20.92
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment income (loss) $0.01 $(0.08) $(0.15) $(0.23) $(0.18)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.32 (3.24) (10.66) 7.73 4.96
- ----------------------------------------- ------- ------ ------ ------ ------
Total from investment operations $2.33 $(3.32) $(10.81) $7.50 $4.78
- ----------------------------------------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
From net realized gain on
investments and foreign currency
transactions $-- $-- $(3.26) $(2.14) $(0.95)
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- (0.09) -- --
- ----------------------------------------- ------- ------ ------ ------ ------
Total distributions declared to
shareholders $-- $-- $(3.35) $(2.14) $(0.95)
- ----------------------------------------- ------- ------ ------ ------ ------
Net asset value, end of period $14.96 $12.63 $15.95 $30.11 $24.75
- ----------------------------------------- ------- ------ ------ ------ ------
Total return (%) 18.45& (20.82) (39.25) 31.58 23.35
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.70 1.73 1.64 1.61 1.63
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.09 (0.45) (0.66) (0.81) (0.71)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114 99 91 95 93
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $262,391 $297,647 $513,120 $910,205 $699,816
- ----------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& The fund's total return calculation includes a payment received from a non-recurring litigation settlement recorded as a
realized gain in the Statement of Operations. Excluding the effect of this payment from the fund's ending net asset value
per share, total return for the year ended September 30, 2003 would have been 17.89%.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
CLASS I 2003 2002 2001 2000 1999
Net asset value, beginning of period $13.54 $16.94 $31.76 $25.77 $21.52
- ----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment income $0.17 $0.10 $0.08 $0.06 $0.07
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 2.50 (3.50) (11.28) 8.07 5.13
- --------------------------------------------- ------- ------ ------ ------ ------
Total from investment operations $2.67 $(3.40) $(11.20) $8.13 $5.20
- --------------------------------------------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments
and foreign currency transactions $-- $-- $(3.52) $(2.14) $(0.95)
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- (0.10) -- --
- --------------------------------------------- ------- ------ ------ ------ ------
Total distributions declared to
shareholders $-- $-- $(3.62) $(2.14) $(0.95)
- --------------------------------------------- ------- ------ ------ ------ ------
Net asset value, end of period $16.21 $13.54 $16.94 $31.76 $25.77
- --------------------------------------------- ------- ------ ------ ------ ------
Total return (%) 19.72& (20.07) (38.61) 32.90 24.59
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 0.72 0.73 0.64 0.61 0.63
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.08 0.55 0.34 0.20 0.29
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114 99 91 95 93
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $186,804 $19,244 $11,744 $20,919 $19,488
- ----------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& The fund's total return calculation includes a payment received from a non-recurring litigation settlement recorded as a
realized gain in the Statement of Operations. Excluding the effect of this payment from the fund's ending net asset value
per share, total return for the year ended September 30, 2003 would have been 19.20%.
See notes to financial statements.
Financial Highlights - continued
FOR PERIOD ENDED 9/30
CLASS R 2003*
Net asset value, beginning of period $14.14
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.07
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 1.66
- ------------------------------------------------------------------ -------
Total from investment operations $1.73
- ------------------------------------------------------------------ -------
Net asset value, end of period $15.87
- ------------------------------------------------------------------ -------
Total return (%) 12.23++&
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.21+
- -----------------------------------------------------------------------------
Net investment income 0.56+
- -----------------------------------------------------------------------------
Portfolio turnover 114
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $40
- -----------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through September 30, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& The fund's total return calculation includes a payment received from a
non-recurring litigation settlement recorded as a realized gain in the
Statement of Operations. Excluding the effect of this payment from the fund's
ending net asset value per share, total return for the year ended September
30, 2003 would have been 11.74%.
See notes to financial statements.
Financial Highlights - continued
YEAR PERIOD YEAR PERIOD YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED
9/30/03 9/30/02* 9/30/03 9/30/02* 9/30/03 9/30/02*
- ---------------------------------------------------------------------------------------------------------------------------
CLASS 529A CLASS 529B CLASS 529C
Net asset value, beginning of
period $13.32 $14.64 $12.61 $13.88 $12.62 $13.89
- ---------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS#
Net investment income gain
(loss) $0.08 $0.01 $(0.02) $0.00 $(0.02) $0.00
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments
and foreign currency 2.45 (1.33) 2.32 (1.27) 2.32 (1.27)
- --------------------------- ------ ------ ------ ------ ------ ------
Total from investment
operations $2.53 $(1.32) $2.30 $(1.27) $2.30 $(1.27)
- --------------------------- ------ ------ ------ ------ ------ ------
Net asset value,
end of period $15.85 $13.32 $14.91 $12.61 $14.92 $12.62
- --------------------------- ------ ------ ------ ------ ------ ------
Total return (%) 18.99(+)& (9.02)++(+) 18.24& 9.15++ 18.23& (9.14)++
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET
ASSETS AND SUPPLEMENTAL DATA:
Expenses## 1.31 1.33+ 1.95 1.98+ 1.96 1.98+
- ---------------------------------------------------------------------------------------------------------------------------
Net investment
income gain (loss) 0.53 0.68+ (0.16) 0.03+ (0.11) 0.11+
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 114 99 114 99 114 99
- ---------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $107 $5 $111 $79 $90 $8
- ---------------------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529 shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
(+) Total returns for Class 529A shares do not include applicable sales charge. If the charge had been included, the results
would have been lower.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
& The fund's total return calculation includes payment received from a non-recurring litigation settlement recorded as a
realized gain in the Statement of Operations. Excluding the effect of this payment from the fund's ending net asset value
per share, total return for the year ended September 30, 2003 for Class 529A, Class 529B, and Class 529C would have been
18.47%, 17.68%, and 17.67%, respectively.
See notes to financial statements.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Research Fund (the fund) is a diversified series of MFS Series Trust V
(the trust). The trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The fund can invest in foreign securities.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
INVESTMENT VALUATIONS - Equity securities in the fund's portfolio for which
market quotations are available are valued at the last sale or official
closing price on the primary market or exchange on which they are primarily
traded or at the last quoted bid price for securities in which there were no
sales during the day. If no sales are reported, as is the case for most
securities traded over the counter, securities are valued on the basis of
quotations obtained from brokers and dealers or on the basis of valuations
furnished by a pricing service. Bonds and other fixed income securities (other
than short-term obligations) of U.S. issuers in the fund's portfolio are
valued at an evaluated bid price on the basis of quotes from brokers and
dealers or on the basis of valuations furnished by a pricing service. Prices
obtained from pricing services utilize both dealer-supplied valuations and
electronic data processing techniques which take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data without exclusive reliance upon quoted prices or
exchange or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of such securities. Short-term
obligations in the fund's portfolio are valued at amortized cost, which
constitutes fair value as determined by the Board of Trustees. Short-term
obligations with a remaining maturity in excess of 60 days will be valued upon
dealer-supplied valuations. Portfolio investments for which market quotations
are not readily available, or whose values have been materially affected by
events occurring after the close of their primary markets, are valued at fair
value as determined in good faith by or at the direction of the Board of
Trustees.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a joint
trading account for the purpose of entering into one or more repurchase
agreements.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
independent Trustees may elect to defer receipt of all or a portion of their
annual compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or other MFS funds selected by
the Trustee. Deferred amounts represent an unsecured obligation of the fund
until distributed in accordance with the Plan. Included in other assets, and
accrued expenses and other liabilities, is $71,464 of deferred Trustees'
Compensation.
SECURITY LOANS - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the fund to certain qualified
institutions (the "Borrowers") approved by the fund. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the fund and the lending agent. Income from
securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All discount
is accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the
ex-dividend date.
FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the fund. During the period, the fund's custodian fees were reduced by
$572,615 under this arrangement. The fund has entered into a directed
brokerage agreement, under which the broker will credit the fund a portion of
the commissions generated, to offset certain expenses of the fund. For the
year, the fund's other expenses were reduced by $164,847 under this agreement.
These amounts are shown as a reduction of total expenses on the Statement of
Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions paid to shareholders are recorded on the ex-dividend date. The
fund distinguishes between distributions on a tax basis and a financial
reporting basis and only distributions in excess of tax basis earnings and
profits are reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions and real estate investment trusts.
The fund paid no distributions for the years ended September 30, 2003 and
September 30, 2002.
During the year ended September 30, 2003, accumulated undistributed net
investment income increased by $25,897, accumulated net realized loss on
investments and foreign currency transactions increased by $1,337,193, and
paid-in capital increased by $1,311,296 due to differences between book and
tax accounting for currency transactions. This change had no effect on the net
assets or net asset value per share.
As of September 30, 2003, the components of distributable earnings
(accumulated losses) on a tax basis were as follows:
Undistributed ordinary income $13,643,093
------------------------------------------------------------------
Capital loss carryforward (1,481,722,271)
------------------------------------------------------------------
Post-October capital loss deferral (79,687,400)
------------------------------------------------------------------
Unrealized appreciation 135,319,734
------------------------------------------------------------------
Other temporary differences (231,594)
------------------------------------------------------------------
Post-October capital loss deferrals represent losses realized during the
current fiscal year, but recognized for tax purposes in the next fiscal year.
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on:
EXPIRATION DATE
September 30, 2009 $(34,337,362)
------------------------------------------------------------------
September 30, 2010 (694,231,122)
------------------------------------------------------------------
September 30, 2011 (753,153,787)
------------------------------------------------------------------
Total $(1,481,722,271)
------------------------------------------------------------------
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B and Class
529B shares will convert to Class A and Class 529A shares, respectively,
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.43%
of the funds average daily net assets.
The fund pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the fund, all of whom receive remuneration for their services to the fund from
MFS. Certain officers and Trustees of the fund are officers or directors of
MFS, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
The fund has an unfunded, defined benefit plan for inactive Trustees and an
unfunded retirement benefit deferral plan for active Trustees. Included in
Trustees' compensation is a net increase of $20,845 as a result of the change
in the fund's pension liability for active Trustees and a pension expense of
$16,974 for inactive trustees for the year ended September 30, 2003.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS an administrative fee
not to exceed the following annual percentages of the fund's average daily
net assets:
First $2 billion 0.0175%
------------------------------------------------------------------
Next $2.5 billion 0.0130%
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Next $2.5 billion 0.0005%
------------------------------------------------------------------
In excess of $7 billion 0.0000%
------------------------------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor,
received $101,392 and $173 for the year ended September 30, 2003, as its
portion of the sales charge on sales of Class A and Class 529A shares of the
fund, respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R, Class 529A, Class 529B and Class 529C shares pursuant to Rule 12b-1
of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD an annual
percentage of its average daily net assets attributable to certain share
classes in order that MFD may pay expenses on behalf of the fund related to
the distribution and servicing of its shares. These expenses include a service
fee paid to each securities dealer that enters into a sales agreement with MFD
based on the average daily net assets of accounts attributable to such
dealers. These fees are calculated based on each class' average daily net
assets. The maximum distribution and service fees for each class of shares are
as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.75% 0.75%
- --------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- --------------------------------------------------------------------------------------------------------------------------
Total Distribution
Plan 0.35% 1.00% 1.00% 0.50% 0.50% 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the year ended September 30,
2003, amounted to:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Service Fee
Retained by MFD $105,535 $9,358 $8,912 $-- $12 $2 $9
- --------------------------------------------------------------------------------------------------------------------------
Payment of the 0.15% per annum portion of the Class 529A distribution fee that is not currently being charged will be
implemented on such a date as the Trustees of the Trust may determine.
Fees incurred under the distribution plan during the year ended September 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Effective Annual
Percentage Rates 0.35% 1.00% 1.00% 0.50% 0.35% 1.00% 1.00%
- --------------------------------------------------------------------------------------------------------------------------
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within, for
class A shares, 12 months following the purchase, and, for Class C and 529C
shares, the first year from the end of the calendar month of purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B and Class 529B shares in the event of a shareholder redemption within six
years from the end of the calendar month of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended September 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred
Sales Charges Imposed $175,301 $1,680,270 $16,545 $-- $--
The fund has and may from time to time enter into contracts with program
managers and other parties which administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered
into an agreement with MFD pursuant to which MFD receives an annual fee of up
to 0.35% from the fund based solely upon the value of the fund's 529 share
classes attributable to tuition programs to which MFD or a third party which
contracts with MFD provides administrative services. The current fee has been
established at 0.25% annually of average net assets of the fund's 529 share
classes attributable to such programs. The fee may only be increased with the
approval of the board of trustees that oversees the fund. The services
provided by MFD or a third party with which MFD contracts include
recordkeeping and tax reporting and account services, as well as services
designed to maintain the program's compliance with the Internal Revenue Code
and other regulatory requirements.
SHAREHOLDER SERVICING AGENT - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the fund's average daily net assets at an annual rate of
0.11%. Prior to April 1, 2003, the fee was 0.10% of the fund's average daily
net assets.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$3,352,064,333 and $3,843,790,669, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $2,981,876,490
------------------------------------------------------------------
Gross unrealized appreciation $204,448,883
------------------------------------------------------------------
Gross unrealized depreciation (69,113,706)
------------------------------------------------------------------
Net unrealized appreciation $135,335,177
------------------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
Year ended 9/30/03 Year ended 9/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 499,502,708 $7,226,793,730 340,255,244 $5,592,060,005
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (518,612,584) (7,510,187,144) (360,623,812) (5,934,591,596)
- -------------------------------------------------------------------------------------------------------------
Net decrease (19,109,876) $(283,393,414) (20,368,568) $(342,531,591)
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 4,154,201 $57,512,030 6,348,423 $104,611,686
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (25,455,878) (351,153,416) (32,342,433) (514,563,740)
- -------------------------------------------------------------------------------------------------------------
Net decrease (21,301,677) $(293,641,386) (25,994,010) $(409,952,054)
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 2,211,114 $30,311,393 3,100,147 $50,206,619
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (8,248,730) (113,137,745) (11,689,790) (185,815,096)
- -------------------------------------------------------------------------------------------------------------
Net decrease (6,037,616) $(82,826,352) (8,589,643) $(135,608,477)
- -------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 12,083,445 $182,572,702 875,472 $13,074,661
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (1,977,717) (28,030,740) (147,835) (2,475,508)
- -------------------------------------------------------------------------------------------------------------
Net increase 10,105,728 $154,541,962 727,637 $10,599,153
- -------------------------------------------------------------------------------------------------------------
Period ended 9/30/03**
SHARES AMOUNT
CLASS R SHARES
Shares sold 2,917 $44,995
- --------------------------------------------------------------------
Shares reacquired (391) (6,279)
- --------------------------------------------------------------------
Net increase 2,526 $38,716
- --------------------------------------------------------------------
Year ended 9/30/03 Period ended 9/30/02*
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 6,385 $97,154 359 $5,200
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (15) (214) -- --
- -------------------------------------------------------------------------------------------------------------
Net increase 6,370 $96,940 359 $5,200
- -------------------------------------------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 4,325 $62,410 6,295 $89,038
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (3,153) (46,875) -- --
- -------------------------------------------------------------------------------------------------------------
Net increase 1,172 $15,535 6,295 $89,038
- -------------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 5,358 $72,884 671 $8,999
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (15) (210) -- --
- -------------------------------------------------------------------------------------------------------------
Net increase 5,343 $72,674 671 $8,999
- -------------------------------------------------------------------------------------------------------------
* Commencement of operations for Classes 529, July 31, 2002.
** Commencement of operations for Class R, December 31, 2002.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. A commitment fee of $19,283 which is based on the average daily
unused portion of the line of credit is included in miscellaneous expense. The
fund had no significant borrowings during the year.
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
To the Trustees of MFS Series Trust V and Shareholders of
MFS Research Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Research Fund (one of the series comprising MFS Series Trust V) (the "Trust"),
including the portfolio of investments, as of September 30, 2003, and the
related statement of operations for the year then ended, the statements of
changes in 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.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 2003,
by correspondence with the custodian and brokers; where replies were not
received from brokers, we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Research Fund as of September 30, 2003, the results of its operations, the
changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 7, 2003
- -------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- -------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust V, of
which the fund is a series, including their principal occupations, which, unless specific dates are shown, are
of more than five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
JOHN W. BALLEN(2) (born 09/12/59) Executive Officer
Trustee and President
Massachusetts Financial Services Company, Chief LAWRENCE T. PERERA (born 06/23/35)
Executive Officer and Director Trustee
Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Trustee
President, Chief Investment Officer and Director Private investor; Harvard University Graduate
School of Business Administration, Class of 1961
INDEPENDENT TRUSTEES Adjunct Professor in Entrepreneurship Emeritus;
CBL & Associates Properties, Inc. (real estate
LAWRENCE H. COHN, M.D. (born 03/11/37) investment trust), Director
Trustee
Brigham and Women's Hospital, Chief of Cardiac J. DALE SHERRATT (born 09/23/38)
Surgery; Harvard Medical School, Professor of Trustee
Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
WILLIAM R. GUTOW (born 09/27/41) (investor in health care companies), Managing
Trustee General Partner (since 1993); Cambridge
Private investor and real estate consultant; Nutraceuticals (professional nutritional
Capitol Entertainment Management Company (video products), Chief Executive Officer (until May
franchise), Vice Chairman 2001)
J. ATWOOD IVES (born 05/01/36) ELAINE R. SMITH (born 04/25/46)
Trustee Trustee
Private investor; KeySpan Corporation (energy Independent health care industry consultant
related services), Director; Eastern Enterprises
(diversified services company), Chairman, Trustee WARD SMITH (born 09/13/30)
and Chief Executive Officer (until November 2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
OFFICERS
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59) RICHARD M. HISEY (born 08/29/58)
Assistant Secretary and Assistant Clerk Treasurer
Massachusetts Financial Services Company, Senior Massachusetts Financial Services Company, Senior
Vice President and Associate General Counsel Vice President (since July 2002); The Bank of New
York, Senior Vice President (September 2000 to
July 2002); Lexington Global Asset Managers, Inc.,
STEPHEN E. CAVAN (born 11/06/53) Executive Vice President and Chief Financial
Secretary and Clerk Officer (prior to September 2000); Lexington
Massachusetts Financial Services Company, Senior Funds, Treasurer (prior to September 2000)
Vice President, General Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer
STEPHANIE A. DESISTO (born 10/01/53) Massachusetts Financial Services Company, Vice
Assistant Treasurer President
Massachusetts Financial Services Company, Vice
President (since April 2003); Brown Brothers JAMES O. YOST (born 06/12/60)
Harriman & Co., Senior Vice President (November Assistant Treasurer
2002 to April 2003); ING Groep N.V./Aeltus Massachusetts Financial Services Company, Senior
Investment Management, Senior Vice President Vice President
(prior to November 2002)
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. This means that each Trustee will be elected to hold office until his or her
successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Each
officer will hold office until his or her successor is chosen and qualified, or until he or she retires,
resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Messrs. Ballen and Gutow have each served as a Trustee of
the Trust since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were elected by
shareholders and have served as Trustees of the Trust since January 1, 2002. Mr. Parke has served as a Trustee
of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 110 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
- --------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
DISTRIBUTOR AUDITORS
MFS Fund Distributors, Inc. Deloitte & Touche LLP
500 Boylston Street, Boston, MA
02116-3741
DIRECTOR OF GLOBAL EQUITY RESEARCH
David A. Antonelli(1)
(1) MFS Investment Management
- -------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- -------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and
risks associated with investing. Read the prospectus carefully before
investing or sending money.
Variable annuities are offered through MFS/Sun Life Financial Distributors,
Inc.
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
The fund hereby designates the maximum amount allowable as qualified dividend
income eligible for a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. Complete information will be
reported in conjunction with your 2003 Form 1099-DIV.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONTACT INFORMATION
- -------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.
gov.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day,
or stock and bond outlooks touch-tone required 365 days a year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education,
account access, and product and performance insights.
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[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2003 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
MFR-ANN-11/03 327M
MFS(R) Mutual Funds
ANNUAL REPORT 9/30/03
MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
- ------------------------------------------
MFS(R) INTERNATIONAL STRATEGIC VALUE FUND
- ------------------------------------------
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
Seeks capital appreciation.
MFS(R) INTERNATIONAL STRATEGIC VALUE FUND
Seeks capital appreciation.
- -------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements. Access to your nonpublic personal information is limited to
appropriate personnel who provide products, services, or information to you. We
maintain physical, electronic, and procedural safeguards that comply with
applicable federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
MANAGEMENT REVIEW 1
- ----------------------------------------------------
PERFORMANCE SUMMARY 3
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 6
- ----------------------------------------------------
FINANCIAL STATEMENTS 12
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 22
- ----------------------------------------------------
INDEPENDENT AUDITORS' REPORT 26
- ----------------------------------------------------
FEDERAL TAX INFORMATION 27
- ----------------------------------------------------
TRUSTEES AND OFFICERS 28
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW INTERNATIONAL STRATEGIC GROWTH FUND
- -------------------------------------------------------------------------------
Dear Shareholders,
The fund's investment objective is capital appreciation through investing mainly
in stocks of companies whose principal activities are outside the United States.
We manage the portfolio from the bottom up, making buy and sell decisions on a
company-by-company basis. Therefore, the portfolio's relative country, regional,
and sector weightings versus the fund's benchmark, the MSCI EAFE Index, are
merely byproducts of where MFS Original Research(R) has found opportunities -
companies that we believe offer above-average earnings or cash flow growth and
are trading at attractive valuations. These companies may be of any size. The
fund may invest in emerging market companies.
Concentration in a relatively small number of stocks is an important element of
the fund's strategy; our intent is to have the fund's holdings represent a
concentrated group of the "best ideas" of the MFS Research team, which includes
analysts and portfolio managers. At the end of the period, the fund consisted of
42 holdings, and we expect it will remain at about that level.
DETRACTORS FROM PERFORMANCE
Basic materials, consumer staples, and utilities and communications were the
fund's weakest-performing areas over the period. Dutch pharmaceutical and
chemical firm Akzo Nobel and Swiss agricultural chemical manufacturer Syngenta
were the portfolio's chief detractors in the basic materials sector. We sold
both positions during the period.
A key factor in our relative underperformance in the consumer staples area was
our overweighting in the sector, which underperformed the broad market. In
addition, results were hurt by our positions in Japanese cosmetics company
Shiseido, which was sold out of the portfolio, and in U.K.-headquartered
beverage firm Diageo. In the utilities and communications area, although stock
selection was positive for performance, our underweighting in the sector hurt
relative performance as the sector rose strongly over the period. Similarly, an
underweighting in the financial services sector hurt performance as that sector
rallied over the period. The fund's stock selection within the sector, however,
was relatively strong. Relative performance was also held back by our position
in Dutch publisher Reed Elsevier.
CONTRIBUTORS TO PERFORMANCE
Over the period, the fund's strongest-performing sectors relative to its
benchmark included health care, leisure, and retailing. Within health care, the
fund's largest sector concentration as of period-end, the fund benefited from
strong stock selection. Holdings that helped performance included Swiss medical
device maker Synthes-Stratec, Japanese firm Chugai Pharmaceutical, and
U.K.-headquartered pharmaceutical company GlaxoSmithKline.
Stock selection in the leisure sector was also positive for performance.
Positions that contributed to results included British broadcasting firms
Granada and British Sky Broadcasting, as well as Australia-headquartered media
conglomerate News Corporation. We sold News Corp. out of the portfolio during
the period and took some profits. In the retailing sector, the fund benefited
from positions in British clothing retailer Next, which was also sold during the
period, U.K.-based do-it-yourself chain Kingfisher, and Hong Kong-headquartered
fashion retailer Esprit Holdings. Stocks in other sectors that helped
performance included Australia-based insurer QBE Insurance, The Royal Bank of
Scotland, French information technology consulting firm Cap Gemini Ernst &
Young, and French semiconductor firm ST Microelectronics. Our holdings in the
Royal Bank of Scotland and Cap Gemini Ernst & Young have since been sold out of
the portfolio.
Respectfully,
/s/ David R. Mannheim
David R. Mannheim
Portfolio Manager
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW INTERNATIONAL STRATEGIC VALUE FUND
- -------------------------------------------------------------------------------
Dear Shareholders,
The fund focuses on companies that its investment adviser, MFS, believes are
undervalued in the market relative to their long-term potential. The stocks of
these companies may be undervalued because investors have overlooked them or
because they are temporarily out of favor among investors due to a decline in
the market, poor economic conditions, or developments that affected the issuer
or the issuer's industry. Generally the fund invests in at least three different
countries and in stocks issued by companies with relatively large market
capitalizations. Although the fund has historically invested in some U.S.
stocks, it is expected that it will invest almost exclusively in non-U.S.
stocks.
Securities are selected based upon fundamental analysis that closely examines
factors that include a company's earnings, cash flow, and management strength.
This research is performed by the fund's portfolio manager and MFS' global
equity research analyst team.
DETRACTORS FROM PERFORMANCE
The consumer staples, basic materials, and health care sectors posted the
weakest returns for the fund during the period. Diageo in consumer staples was
one of the portfolio's chief detractors for the period, along with other stocks
in the sector that included Altria (formerly Philip Morris), Shiseido, and
Reckitt Benckiser. The fund's holdings in Akzo Nobel and Syngenta detracted from
performance in the basic materials group. In health care, Aventis, Schering AG,
and AstraZeneca were disappointments for the period. Other detractors from
performance included Reed Elsevier and Quebecor World in the leisure sector and
Sears Roebuck in retailing. By the end of the period, Altria, Quebecor World,
Shiseido, and Sears had been sold from the portfolio.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the transportation, energy, and retailing sectors added to
the fund returns for the period. The strongest performers in the transportation
sector were Deutsche Post and Canadian National. Energy sector returns were
helped by the fund's avoidance of BP Amoco, Royal Dutch Petroleum, and Shell.
The fund received solid performance contributions from a number of its retailing
stocks, such as Fast Retailing, Cortefiel, and Kingfisher. Their results helped
to offset the weak performance of Sears in the same sector. Financials services
stocks QBE Insurance Group, Aeon Credit Services, and Depfa Bank lifted fund
returns, as did TF1-TV and Eastman Kodak in the leisure sector as well as KDDI
in utilities and communications. ST Microelectronics contributed strong returns
in technology, and so did 3M Company in the basic materials sector.
TF1, ST Microelectronics, 3M, Eastman Kodak, and Deutsche Post reached our
performance targets and were sold during the period.
Respectfully,
/s/ Barnaby Wiener
Barnaby Wiener
Portfolio Manager
Note to Shareholders: Effective May 1, 2003 Barnaby Wiener became Portfolio
Manager of the fund replacing Frederick J. Simmons.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
The portfolios are actively managed, and current holdings may be different.
- --------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 9/30/03
- --------------------------------------------------------------------------------
Currently, the funds offer only Class A and Class I shares, which are available
for purchase at net asset value only by residents of the Commonwealth of
Massachusetts who are employees (or certain relatives of employees) of MFS and
its affiliates or members of the governing boards of the various funds sponsored
by MFS.
The following information illustrates the historical performance of the funds'
Class A shares in comparison to their benchmarks. Performance results reflect
the maximum applicable sales charge and the percentage change in net asset
value, including the reinvestment of any dividends and capital gains
distributions. Benchmark comparisons are unmanaged and do not reflect any fees
or expenses. The performance of other share classes will be greater or less than
the line shown. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. (See Notes
to Performance Summary.)
MFS INTERNATIONAL STRATEGIC GROWTH FUND(1)(2)(3)(4)(5)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
October 9, 1997, through September 30, 2003. Index information is from
October 1, 1997.)
MFS International
Strategic Growth MSCI
Fund - Class A EAFE Index
--------------------------------------------
10/97 $ 9,525 $10,000
9/98 9,220 9,192
9/99 13,257 12,070
9/00 15,727 12,484
9/01 12,316 8,954
9/02 11,623 7,587
9/03 13,990 9,601
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 1-yr 3-yr 5-yr Life*
- ------------------------------------------------------------------------------
A 10/9/97 +20.37% - 3.83% +8.70% +6.65%
- ------------------------------------------------------------------------------
I 10/9/97 +20.42% - 3.81% +8.72% +6.70%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative Benchmarks
- ------------------------------------------------------------------------------
Average international fund+ +22.94% -10.06% +1.21% -1.09%
- ------------------------------------------------------------------------------
MSCI EAFE Index# +26.54% - 8.38% +0.87% -0.68%
- ------------------------------------------------------------------------------
- --------------------
Average annual
with sales charge**
- --------------------
- ------------------------------------------------------------------------------
A +14.65% - 5.37% +7.64% +5.78%
- ------------------------------------------------------------------------------
I class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A +20.37% -11.04% +51.74% +46.88%
- ------------------------------------------------------------------------------
I +20.42% -11.01% +51.87% +47.32%
- ------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
October 9, 1997, through September 30, 2003. Index information is from
October 1, 1997.
** Takes into account the maximum sales charge of 4.75%.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
MFS INTERNATIONAL STRATEGIC VALUE FUND(1)(2)(3)(5)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
October 9, 1997, through September 30, 2003. Index information is from October
1, 1997.)
MFS International
Strategic Value MSCI
Fund - Class A EAFE Index
--------------------------------------------
10/97 $ 9,525 $10,000
9/98 9,973 9,192
9/99 12,966 12,070
9/00 14,810 12,484
9/01 11,537 8,954
9/02 10,575 7,587
9/03 12,606 9,601
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 1-yr 3-yr 5-yr Life*
- ------------------------------------------------------------------------------
A 10/9/97 +19.20% - 5.23% +4.80% +4.80%
- ------------------------------------------------------------------------------
I 10/9/97 +19.11% - 5.25% +4.72% +4.74%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative Benchmarks
- ------------------------------------------------------------------------------
Average international fund+ +22.94% -10.06% +1.21% -1.09%
- ------------------------------------------------------------------------------
MSCI EAFE Index# +26.54% - 8.38% +0.87% -0.68%
- ------------------------------------------------------------------------------
- --------------------
Average annual
with sales charge**
- --------------------
- ------------------------------------------------------------------------------
A +13.54% - 6.75% +3.78% +3.95%
- ------------------------------------------------------------------------------
I class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A +19.20% -14.88% +26.40% +32.34%
- ------------------------------------------------------------------------------
I +19.11% -14.94% +25.94% +31.85%
- ------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
October 9, 1997, through September 30, 2003. Index information is from
October 1, 1997.
** Takes into account the maximum sales charge of 4.75%.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALASIA, FAR EAST)
INDEX - A commonly used measure of the international stock market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results, including sales charge, reflect the deduction of the maximum
4.75% sales charge. Class I shares have no sales charges and are available only
to certain investors.
Performance results reflect any applicable subsidies and waivers in effect
during the periods shown; without these, the results would have been less
favorable. See the prospectus and financial statements for details. All results
are historical and include the reinvestment of dividends and capital gains
distributions.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN ABOVE DOES NOT REFLECT
THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN.
KEY RISK CONSIDERATIONS
(1) Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
(2) The portfolio may participate in the initial public offering (IPO) market,
and a significant portion of the portfolio's returns may be attributable to
investment in IPOs, which may have greater impact on performance of a
portfolio while its asset base is small. There is no guarantee the portfolio
will experience similar performance as its assets grow.
(3) The portfolio may invest a substantial amount of its assets in issuers
located in a limited number of countries and therefore is susceptible to
adverse economic, political or regulatory developments affecting those
countries.
(4) When concentrating on one issuer, the portfolio is sensitive to changes in
these securities.
(5) These risks may increase share price volatility. Please see the prospectus
for further information regarding these and other risk considerations.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
- -----------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - 9/30/03 MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
- -----------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 98.3%
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
Australia - 4.3%
- -----------------------------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Insurance)* 5,224 $35,394
- -----------------------------------------------------------------------------------------------------
Tab Ltd. (Gaming & Lodging) 10,740 24,256
- -----------------------------------------------------------------------------------------------------
$59,650
- -----------------------------------------------------------------------------------------------------
Austria - 3.5%
- -----------------------------------------------------------------------------------------------------
Erste Bank der Oesterreichischen Sparkassen AG (Banks &
Credit Cos.) 480 $48,575
- -----------------------------------------------------------------------------------------------------
Canada - 5.2%
- -----------------------------------------------------------------------------------------------------
BCE, Inc. (Telephone Services) 1,148 $24,779
- -----------------------------------------------------------------------------------------------------
Canadian National Railway Co. (Railroad & Shipping) 500 26,010
- -----------------------------------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil Services) 500 20,581
- -----------------------------------------------------------------------------------------------------
$71,370
- -----------------------------------------------------------------------------------------------------
France - 14.1%
- -----------------------------------------------------------------------------------------------------
Axa (Insurance) 1,500 $25,290
- -----------------------------------------------------------------------------------------------------
France Telecom S.A. (Telephone Services) 1,400 32,218
- -----------------------------------------------------------------------------------------------------
L'Air Liquide S.A. (Specialty Chemicals) 245 34,628
- -----------------------------------------------------------------------------------------------------
Loreal (Consumer Goods & Services) 300 20,502
- -----------------------------------------------------------------------------------------------------
Sanofi-Synthelabo S.A. (Pharmaceuticals) 760 46,226
- -----------------------------------------------------------------------------------------------------
Total Fina Elf S.A., "B" (Energy - Independent) 245 36,997
- -----------------------------------------------------------------------------------------------------
$195,861
- -----------------------------------------------------------------------------------------------------
Germany - 2.6%
- -----------------------------------------------------------------------------------------------------
Bayerische Motoren Werke AG (Automotive) 940 $35,542
- -----------------------------------------------------------------------------------------------------
Hong Kong - 2.8%
- -----------------------------------------------------------------------------------------------------
Esprit Holdings Ltd. (Specialty Stores) 13,000 $39,532
- -----------------------------------------------------------------------------------------------------
Hungary - 2.2%
- -----------------------------------------------------------------------------------------------------
OTP Bank Ltd., ADR (Banks & Credit Cos.)* 1,300 $30,940
- -----------------------------------------------------------------------------------------------------
Japan - 18.2%
- -----------------------------------------------------------------------------------------------------
Bridgestone Corp. (Automotive) 2,000 $26,837
- -----------------------------------------------------------------------------------------------------
Canon, Inc., ADR (PC & Peripheral) 600 29,232
- -----------------------------------------------------------------------------------------------------
Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals) 3,200 40,009
- -----------------------------------------------------------------------------------------------------
Japan Telecom Holdings Co., Ltd. (Telephone Services) 13 38,505
- -----------------------------------------------------------------------------------------------------
KDDI Corp. (Telephone Services) 9 45,721
- -----------------------------------------------------------------------------------------------------
Tokyo Broadcasting System, Inc. (Broadcast & Cable TV) 3,000 41,520
- -----------------------------------------------------------------------------------------------------
Yamaha Corp. (Leisure & Toys) 1,600 30,373
- -----------------------------------------------------------------------------------------------------
$252,197
- -----------------------------------------------------------------------------------------------------
Netherlands - 4.4%
- -----------------------------------------------------------------------------------------------------
Elsevier N.V. (Printing & Publishing) 2,980 $33,681
- -----------------------------------------------------------------------------------------------------
STMicroelectronics N.V. (Electronics) 1,120 27,079
- -----------------------------------------------------------------------------------------------------
$60,760
- -----------------------------------------------------------------------------------------------------
Singapore - 2.6%
- -----------------------------------------------------------------------------------------------------
Singapore Telecommunications Ltd. (Telephone Services) 38,000 $36,478
- -----------------------------------------------------------------------------------------------------
Spain - 2.4%
- -----------------------------------------------------------------------------------------------------
Telefonica S.A. (Telephone Services) 2,776 $32,799
- -----------------------------------------------------------------------------------------------------
Sweden - 3.2%
- -----------------------------------------------------------------------------------------------------
Hennes & Mauritz AB (Specialty Stores) 1,930 $43,715
- -----------------------------------------------------------------------------------------------------
Switzerland - 11.3%
- -----------------------------------------------------------------------------------------------------
Nestle S.A. (Food & Non-Alcoholic Beverages) 150 $34,608
- -----------------------------------------------------------------------------------------------------
Novartis AG (Pharmaceuticals) 1,210 46,849
- -----------------------------------------------------------------------------------------------------
Synthes-Stratec, Inc. (Medical Equipment) 37 32,800
- -----------------------------------------------------------------------------------------------------
UBS AG (Banks & Credit Cos.) 748 41,996
- -----------------------------------------------------------------------------------------------------
$156,253
- -----------------------------------------------------------------------------------------------------
United Kingdom - 21.5%
- -----------------------------------------------------------------------------------------------------
AstraZeneca Group PLC (Pharmaceuticals) 930 $39,297
- -----------------------------------------------------------------------------------------------------
BOC Group PLC (Specialty Chemicals) 1,955 26,843
- -----------------------------------------------------------------------------------------------------
British Sky Broadcasting Group PLC (Broadcast & Cable TV) 2,010 20,531
- -----------------------------------------------------------------------------------------------------
Capital Radio PLC (Broadcast & Cable TV) 2,500 19,864
- -----------------------------------------------------------------------------------------------------
Diageo PLC (Alcoholic Beverages) 3,337 36,027
- -----------------------------------------------------------------------------------------------------
GlaxoSmithKline PLC (Pharmaceuticals) 1,370 28,443
- -----------------------------------------------------------------------------------------------------
Granada PLC (Broadcast & Cable TV) 20,300 31,550
- -----------------------------------------------------------------------------------------------------
Kingfisher PLC (Specialty Stores) 8,209 35,615
- -----------------------------------------------------------------------------------------------------
Reckitt Benckiser PLC (Consumer Goods & Services) 2,950 59,334
- -----------------------------------------------------------------------------------------------------
$297,504
- -----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,182,309) $1,361,176
- -----------------------------------------------------------------------------------------------------
Rights
- -----------------------------------------------------------------------------------------------------
Axa S.A. (Insurance)* (Identified Cost, $385) 1,500 $70
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.2%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
Abbey National LLC, due 10/01/03, at Amortized Cost $16 $16,000
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,198,694) $1,377,246
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.5% 6,776
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,384,022
- -----------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
- -----------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - 9/30/03 MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
- -----------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 98.0%
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
Australia - 1.9%
- -----------------------------------------------------------------------------------------------------
APN News & Media Ltd. (Printing & Publishing)* 1,700 $4,117
- -----------------------------------------------------------------------------------------------------
Australia & New Zealand Banking Group Ltd. (Banks & Credit Cos.)* 748 9,133
- -----------------------------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Insurance)* 300 2,033
- -----------------------------------------------------------------------------------------------------
$15,283
- -----------------------------------------------------------------------------------------------------
Austria - 1.0%
- -----------------------------------------------------------------------------------------------------
Bank Austria Credit (Banks & Credit Cos.)* 110 $3,963
- -----------------------------------------------------------------------------------------------------
Erste Bank der Oesterreichischen Sparkassen AG (Banks & Credit Cos.) 40 4,048
- -----------------------------------------------------------------------------------------------------
$8,011
- -----------------------------------------------------------------------------------------------------
Belgium - 1.1%
- -----------------------------------------------------------------------------------------------------
Fortis (Banks & Credit Cos.) 500 $8,500
- -----------------------------------------------------------------------------------------------------
Brazil - 0.7%
- -----------------------------------------------------------------------------------------------------
Brasil Telecom Participacoes ADR (Telephone Services) 50 $1,915
- -----------------------------------------------------------------------------------------------------
Companhia Siderurgica National ADR (Metals & Mining) 100 3,552
- -----------------------------------------------------------------------------------------------------
$5,467
- -----------------------------------------------------------------------------------------------------
Canada - 0.4%
- -----------------------------------------------------------------------------------------------------
Canadian National Railway Co. (Railroad & Shipping) 60 $3,121
- -----------------------------------------------------------------------------------------------------
China - 0.5%
- -----------------------------------------------------------------------------------------------------
Huaneng Power International, Inc. (Utilities - Electric Power) 3,000 $4,106
- -----------------------------------------------------------------------------------------------------
Denmark - 1.2%
- -----------------------------------------------------------------------------------------------------
Danske Bank (Banks & Credit Cos.) 500 $9,532
- -----------------------------------------------------------------------------------------------------
Finland - 1.6%
- -----------------------------------------------------------------------------------------------------
Fortum Oyj (Energy - Independent) 1,500 $12,986
- -----------------------------------------------------------------------------------------------------
France - 10.8%
- -----------------------------------------------------------------------------------------------------
April Group (Insurance) 360 $4,757
- -----------------------------------------------------------------------------------------------------
Aventis S.A. (Pharmaceuticals) 50 2,596
- -----------------------------------------------------------------------------------------------------
Companie Generale de Geophysique S.A. (Oil Services)* 180 4,079
- -----------------------------------------------------------------------------------------------------
Credit Agricole S.A. (Banks & Credit Cos.) 400 7,798
- -----------------------------------------------------------------------------------------------------
France Telecom S.A. (Telephone Services) 500 11,506
- -----------------------------------------------------------------------------------------------------
Renault Regie Nationale (Automobiles) 80 4,735
- -----------------------------------------------------------------------------------------------------
Sanofi-Synthelabo S.A. (Pharmaceuticals) 100 6,082
- -----------------------------------------------------------------------------------------------------
Suez S.A. (Utilities - Electric Power) 500 7,941
- -----------------------------------------------------------------------------------------------------
Total Fina S.A., ADR (Energy - Integrated) 500 37,900
- -----------------------------------------------------------------------------------------------------
$87,394
- -----------------------------------------------------------------------------------------------------
Germany - 5.1%
- -----------------------------------------------------------------------------------------------------
Aareal Bank AG (Banks & Credit Cos.) 250 $5,983
- -----------------------------------------------------------------------------------------------------
Bayerische Motoren Werke AG (Automotive) 300 11,343
- -----------------------------------------------------------------------------------------------------
Celanese AG (Specialty Chemicals) 80 2,634
- -----------------------------------------------------------------------------------------------------
Linde AG (Specialty Chemicals) 80 3,296
- -----------------------------------------------------------------------------------------------------
Porsche AG (Automotive) 24 10,107
- -----------------------------------------------------------------------------------------------------
Schering AG (Pharmaceuticals) 180 7,840
- -----------------------------------------------------------------------------------------------------
$41,203
- -----------------------------------------------------------------------------------------------------
Greece - 1.4%
- -----------------------------------------------------------------------------------------------------
Cosmote S.A. (Telephone Services) 400 $4,651
- -----------------------------------------------------------------------------------------------------
Greek Organization of Football Prognostics (Gaming & Lodging) 350 4,282
- -----------------------------------------------------------------------------------------------------
Public Power Corp. (Utilities - Electric Power) 100 1,958
- -----------------------------------------------------------------------------------------------------
$10,891
- -----------------------------------------------------------------------------------------------------
Hong Kong - 1.7%
- -----------------------------------------------------------------------------------------------------
CNOOC Ltd. (Energy - Independent) 3,500 $5,988
- -----------------------------------------------------------------------------------------------------
Hong Kong Electric Holdings Ltd. (Utilities - Electric Power) 2,000 7,709
- -----------------------------------------------------------------------------------------------------
$13,697
- -----------------------------------------------------------------------------------------------------
Hungary - 0.4%
- -----------------------------------------------------------------------------------------------------
OTP Bank Ltd., ADR (Banks & Credit Cos.)* 140 $3,332
- -----------------------------------------------------------------------------------------------------
Indonesia - 0.3%
- -----------------------------------------------------------------------------------------------------
PT Telekomunikasi Indonesia (Telephone Services) 4,000 $2,716
- -----------------------------------------------------------------------------------------------------
Ireland - 3.3%
- -----------------------------------------------------------------------------------------------------
Anglo Irish Bank Corp., PLC (Banks & Credit Cos.)* 500 $5,361
- -----------------------------------------------------------------------------------------------------
Bank of Ireland (Banks & Credit Cos.) 790 9,481
- -----------------------------------------------------------------------------------------------------
Depfa Bank PLC (Banks & Credit Cos.) 70 6,797
- -----------------------------------------------------------------------------------------------------
Irish Life & Permanent PLC (Banks & Credit Cos.) 400 5,252
- -----------------------------------------------------------------------------------------------------
$26,891
- -----------------------------------------------------------------------------------------------------
Italy - 5.7%
- -----------------------------------------------------------------------------------------------------
Cementir S.p.A. (Home Construction) 1,200 $3,565
- -----------------------------------------------------------------------------------------------------
Enel S.P.A. (Utilities - Electric Power) 700 4,356
- -----------------------------------------------------------------------------------------------------
Eni S.P.A. (Energy - Integrated) 2,000 30,575
- -----------------------------------------------------------------------------------------------------
Italcementi di Risp (Home Construction) 500 3,490
- -----------------------------------------------------------------------------------------------------
Merloni Elettrodom (Furniture & Appliances) 300 4,397
- -----------------------------------------------------------------------------------------------------
$46,383
- -----------------------------------------------------------------------------------------------------
Japan - 14.9%
- -----------------------------------------------------------------------------------------------------
Aeon Credit Service Co., Ltd. (Banks & Credit Cos.) 200 $8,634
- -----------------------------------------------------------------------------------------------------
Asahi Softdrinks (Food & Non-Alcoholic Beverages) 1,000 4,515
- -----------------------------------------------------------------------------------------------------
Brother Industries Ltd. (Electronics) 1,000 9,855
- -----------------------------------------------------------------------------------------------------
Chiba Bank (Banks & Credit Cos.) 1,000 3,904
- -----------------------------------------------------------------------------------------------------
Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals) 600 7,502
- -----------------------------------------------------------------------------------------------------
Credit Saison Co., Ltd. (Banks & Credit Cos.) 400 8,365
- -----------------------------------------------------------------------------------------------------
Fast Retailing Co. (Specialty Stores) 100 4,721
- -----------------------------------------------------------------------------------------------------
Heiwa Corp. (Leisure & Toys) 200 3,066
- -----------------------------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automotive) 300 12,036
- -----------------------------------------------------------------------------------------------------
Jaccs Co. (Banks & Credit Cos.) 1,000 3,770
- -----------------------------------------------------------------------------------------------------
Japan Telecom Holdings Co., Ltd. (Telephone Services) 3 8,886
- -----------------------------------------------------------------------------------------------------
KDDI Corp. (Telephone Services) 2 10,160
- -----------------------------------------------------------------------------------------------------
Nippondenso Co. (Automotive) 100 1,984
- -----------------------------------------------------------------------------------------------------
Takeda Chemical Industries Co. (Pharmaceuticals) 100 3,653
- -----------------------------------------------------------------------------------------------------
Tokyo Broadcasting System, Inc. (Broadcast & Cable TV) 500 6,920
- -----------------------------------------------------------------------------------------------------
Tokyo Gas Co., Ltd. (Natural Gas Distribution) 5,000 16,649
- -----------------------------------------------------------------------------------------------------
Toyota Motor Corp. (Automotive) 200 5,888
- -----------------------------------------------------------------------------------------------------
$120,508
- -----------------------------------------------------------------------------------------------------
Luxembourg - 0.5%
- -----------------------------------------------------------------------------------------------------
Tenaris S.A., ADR (Oil Services) 150 $3,948
- -----------------------------------------------------------------------------------------------------
Mexico - 0.8%
- -----------------------------------------------------------------------------------------------------
Apasco S.A. (Home Construction) 250 $1,921
- -----------------------------------------------------------------------------------------------------
Telefonos de Mexico S.A., ADR (Telephone Services) 140 4,277
- -----------------------------------------------------------------------------------------------------
$6,198
- -----------------------------------------------------------------------------------------------------
Netherlands - 3.6%
- -----------------------------------------------------------------------------------------------------
ABN AMRO Holding N.V. (Brokerage & Asset Managers)* 300 $5,541
- -----------------------------------------------------------------------------------------------------
Akzo Nobel N.V. (Specialty Chemicals) 120 3,743
- -----------------------------------------------------------------------------------------------------
Euronext N.V. (Banks & Credit Cos.) 100 2,436
- -----------------------------------------------------------------------------------------------------
Fugro N.V. (Oil Services)* 100 4,942
- -----------------------------------------------------------------------------------------------------
Koninklijke KPN N.V. (Telephone Services) 560 4,196
- -----------------------------------------------------------------------------------------------------
Koninklijke Philips Electronics N.V. (Electronics) 100 2,267
- -----------------------------------------------------------------------------------------------------
Unilever N.V. (Food & Non-Alcoholic Beverages) 100 5,884
- -----------------------------------------------------------------------------------------------------
$29,009
- -----------------------------------------------------------------------------------------------------
New Zealand - 0.8%
- -----------------------------------------------------------------------------------------------------
Telecom Corp. of New Zealand, Ltd. (Telephone Services)* 2,040 $6,270
- -----------------------------------------------------------------------------------------------------
Norway - 1.8%
- -----------------------------------------------------------------------------------------------------
DNB Holding ASA (Banks & Credit Cos.) 2,200 $10,540
- -----------------------------------------------------------------------------------------------------
Storebrand ASA (Insurance) 790 3,819
- -----------------------------------------------------------------------------------------------------
$14,359
- -----------------------------------------------------------------------------------------------------
Singapore - 1.6%
- -----------------------------------------------------------------------------------------------------
MobileOne Asia Ltd. (Wireless Communications) 5,000 $4,048
- -----------------------------------------------------------------------------------------------------
Singapore Post (Trucking) 10,000 4,077
- -----------------------------------------------------------------------------------------------------
Singapore Telecommunications Ltd. (Telephone Services) 5,000 4,800
- -----------------------------------------------------------------------------------------------------
$12,925
- -----------------------------------------------------------------------------------------------------
South Korea - 1.8%
- -----------------------------------------------------------------------------------------------------
Hyundai Motor Co., Ltd. (Automotive) 180 $5,180
- -----------------------------------------------------------------------------------------------------
KT&G Corp., GDR (Tobacco)* 700 6,269
- -----------------------------------------------------------------------------------------------------
LG Household & Healthcare Ltd. (Consumer Goods & Services) 150 3,313
- -----------------------------------------------------------------------------------------------------
$14,762
- -----------------------------------------------------------------------------------------------------
Spain - 3.3%
- -----------------------------------------------------------------------------------------------------
Altadis S.A. (Tobacco) 260 $6,408
- -----------------------------------------------------------------------------------------------------
Cortefiel S.A. (Apparel Manufacturers) 300 2,167
- -----------------------------------------------------------------------------------------------------
Enagas S.A. (Natural Gas - Pipeline) 225 1,969
- -----------------------------------------------------------------------------------------------------
Iberdrola S.A. (Utilities - Electric Power) 300 5,051
- -----------------------------------------------------------------------------------------------------
Telefonica S.A. (Telephone Services) 904 10,681
- -----------------------------------------------------------------------------------------------------
$26,276
- -----------------------------------------------------------------------------------------------------
Sweden - 2.5%
- -----------------------------------------------------------------------------------------------------
Alfa Laval (Machinery & Tools) 200 $2,349
- -----------------------------------------------------------------------------------------------------
Autoliv Inc. (Automotive) 150 4,501
- -----------------------------------------------------------------------------------------------------
Nordea (Banks & Credit Cos.) 600 3,415
- -----------------------------------------------------------------------------------------------------
Swedish Match AB (Tobacco)* 1,300 9,899
- -----------------------------------------------------------------------------------------------------
$20,164
- -----------------------------------------------------------------------------------------------------
Switzerland - 10.6%
- -----------------------------------------------------------------------------------------------------
Converium Holding AG (Insurance) 200 $9,168
- -----------------------------------------------------------------------------------------------------
Givaudan S.A. (Consumer Goods & Services) 20 8,471
- -----------------------------------------------------------------------------------------------------
Nestle S.A. (Food & Non-Alcoholic Beverages) 100 23,071
- -----------------------------------------------------------------------------------------------------
Novartis AG (Pharmaceuticals) 650 25,167
- -----------------------------------------------------------------------------------------------------
Syngenta AG (Chemicals) 370 20,073
- -----------------------------------------------------------------------------------------------------
$85,950
- -----------------------------------------------------------------------------------------------------
United Kingdom - 18.7%
- -----------------------------------------------------------------------------------------------------
Amlin (Insurance)* 1,100 $2,340
- -----------------------------------------------------------------------------------------------------
AstraZeneca Group PLC (Pharmaceuticals) 100 4,225
- -----------------------------------------------------------------------------------------------------
Aviva PLC (Insurance)* 800 6,210
- -----------------------------------------------------------------------------------------------------
Benfield (Insurance)* 880 3,957
- -----------------------------------------------------------------------------------------------------
BG Group PLC (Energy - Independent) 900 3,785
- -----------------------------------------------------------------------------------------------------
Bodycote International PLC (Electrical Equipment) 1,300 3,239
- -----------------------------------------------------------------------------------------------------
Burberry Group (Apparel Manufacturers) 700 3,787
- -----------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC (Food & Non-Alcoholic Beverages)* 600 3,690
- -----------------------------------------------------------------------------------------------------
Close Brothers Group PLC (Banks & Credit Cos.) 300 3,566
- -----------------------------------------------------------------------------------------------------
Diageo PLC (Alcoholic Beverages)* 1,000 10,796
- -----------------------------------------------------------------------------------------------------
Easy Jet PLC (Airlines) 1,600 5,845
- -----------------------------------------------------------------------------------------------------
Hiscox (Insurance) 2,000 5,145
- -----------------------------------------------------------------------------------------------------
Imperial Tobacco Group PLC (Tobacco)* 500 8,153
- -----------------------------------------------------------------------------------------------------
Johnston Press PLC (Printing & Publishing) 1,100 7,817
- -----------------------------------------------------------------------------------------------------
Kesa Electricals (Specialty Stores)* 800 2,962
- -----------------------------------------------------------------------------------------------------
Kingfisher PLC (Specialty Stores)* 1,050 4,555
- -----------------------------------------------------------------------------------------------------
NEXT PLC (General Merchandise) 200 3,737
- -----------------------------------------------------------------------------------------------------
Reckitt Benckiser PLC (Consumer Goods & Services)* 300 6,034
- -----------------------------------------------------------------------------------------------------
Reed Elsevier PLC (Printing & Publishing) 1,500 11,738
- -----------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC (Banks & Credit Cos.)* 400 10,173
- -----------------------------------------------------------------------------------------------------
Severn Trent (Utilities - Electric Power) 400 4,465
- -----------------------------------------------------------------------------------------------------
St. Jame's Place Capital PLC (Insurance) 2,000 4,089
- -----------------------------------------------------------------------------------------------------
United Utilities (Utilities - Electric Power)* 2,200 9,801
- -----------------------------------------------------------------------------------------------------
Vodafone Group PLC (Wireless Communications)* 3,770 7,520
- -----------------------------------------------------------------------------------------------------
Wellington Underwriter (Insurance) 3,000 3,940
- -----------------------------------------------------------------------------------------------------
William Hill Organization Ltd. (Gaming & Lodging) 800 4,122
- -----------------------------------------------------------------------------------------------------
Yell Group PLC (Broadcast & Cable TV)* 1,100 5,522
- -----------------------------------------------------------------------------------------------------
$151,213
- -----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $708,762) $791,095
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 2.0% 16,400
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $807,495
- -----------------------------------------------------------------------------------------------------
See portfolio footnotes and notes to financial statements.
PORTFOLIO FOOTNOTES:
*Non-income producing security.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities composing
the total value of your fund.
MFS INTERNATIONAL STRATEGIC GROWTH FUND
AT 9/30/03
ASSETS
Investments, at value (identified cost, $1,198,694) $1,377,246
- -----------------------------------------------------------------------------------------------------
Cash 87
- -----------------------------------------------------------------------------------------------------
Foreign currency, at value (identified cost, $482) 483
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 1,336
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 4,930
- -----------------------------------------------------------------------------------------------------
Other assets 7
- -----------------------------------------------------------------------------------------------------
Total assets $1,384,089
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable to affiliate for reimbursement fee $67
- -----------------------------------------------------------------------------------------------------
Total liabilities $67
- -----------------------------------------------------------------------------------------------------
Net assets $1,384,022
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $1,425,197
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies 178,763
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (221,944)
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 2,006
- -----------------------------------------------------------------------------------------------------
Total $1,384,022
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding
Class A 54,947
- -----------------------------------------------------------------------------------------------------
Class I 87,544
- -----------------------------------------------------------------------------------------------------
Total shares of beneficial interest outstanding 142,491
- -----------------------------------------------------------------------------------------------------
Class A shares
Net assets $532,477
- -----------------------------------------------------------------------------------------------------
Shares outstanding 54,947
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.69
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$9.69) $10.17
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $851,545
- -----------------------------------------------------------------------------------------------------
Shares outstanding 87,544
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $9.73
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the price of Class A shares is reduced. A contingent deferred sales charge
may be imposed on redemptions of Class A shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------
MFS INTERNATIONAL STRATEGIC VALUE FUND
AT 9/30/03
ASSETS
Investments, at value (identified cost, $708,762) $791,095
- -----------------------------------------------------------------------------------------------------
Cash 16,996
- -----------------------------------------------------------------------------------------------------
Foreign currency, at value (identified cost, $3,926) 3,965
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 7,473
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 1,831
- -----------------------------------------------------------------------------------------------------
Other assets 7
- -----------------------------------------------------------------------------------------------------
Total assets $821,367
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $13,835
- -----------------------------------------------------------------------------------------------------
Payable to affiliate for reimbursement fee 37
- -----------------------------------------------------------------------------------------------------
Total liabilities $13,872
- -----------------------------------------------------------------------------------------------------
Net assets $807,495
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $871,380
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies 82,408
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign currency
transactions (150,868)
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 4,575
- -----------------------------------------------------------------------------------------------------
Total $807,495
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding
Class A 19,005
- -----------------------------------------------------------------------------------------------------
Class I 79,642
- -----------------------------------------------------------------------------------------------------
Total shares of beneficial interest outstanding 98,647
- -----------------------------------------------------------------------------------------------------
Class A shares
Net assets $155,954
- -----------------------------------------------------------------------------------------------------
Shares outstanding 19,005
- -----------------------------------------------------------------------------------------------------
Net asset value per share $8.21
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$8.21) $8.62
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $651,541
- -----------------------------------------------------------------------------------------------------
Shares outstanding 79,642
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $8.18
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the price of Class A shares is reduced. A contingent deferred sales charge
may be imposed on redemptions of Class A shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and
paid in expenses. It also describes any gains and/or losses generated by fund
operations.
MFS INTERNATIONAL STRATEGIC GROWTH FUND
FOR YEAR ENDED 9/30/03
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Dividends $27,770
- -----------------------------------------------------------------------------------------------------
Interest 486
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (3,040)
- -----------------------------------------------------------------------------------------------------
Total investment income $25,216
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $12,229
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 1,319
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 2,390
- -----------------------------------------------------------------------------------------------------
Administrative fee 120
- -----------------------------------------------------------------------------------------------------
Custodian fee 8,661
- -----------------------------------------------------------------------------------------------------
Printing 6,370
- -----------------------------------------------------------------------------------------------------
Postage 137
- -----------------------------------------------------------------------------------------------------
Auditing fees 36,296
- -----------------------------------------------------------------------------------------------------
Professional services 5,636
- -----------------------------------------------------------------------------------------------------
Registration fees 2,623
- -----------------------------------------------------------------------------------------------------
Miscellaneous 850
- -----------------------------------------------------------------------------------------------------
Total expenses $76,631
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (43)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and distributor (54,643)
- -----------------------------------------------------------------------------------------------------
Net expenses $21,945
- -----------------------------------------------------------------------------------------------------
Net investment income $3,271
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized loss (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $(49,233)
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions (1,265)
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency transactions $(50,498)
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- -----------------------------------------------------------------------------------------------------
Investments $278,897
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 167
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency translation $279,064
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency $228,566
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $231,837
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------
MFS INTERNATIONAL STRATEGIC VALUE FUND
FOR YEAR ENDED 9/30/03
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Dividends $19,204
- -----------------------------------------------------------------------------------------------------
Interest 526
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (1,885)
- -----------------------------------------------------------------------------------------------------
Total investment income $17,845
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $7,040
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 760
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 700
- -----------------------------------------------------------------------------------------------------
Administrative fee 70
- -----------------------------------------------------------------------------------------------------
Custodian fee 9,918
- -----------------------------------------------------------------------------------------------------
Printing 349
- -----------------------------------------------------------------------------------------------------
Postage 19
- -----------------------------------------------------------------------------------------------------
Auditing fees 36,296
- -----------------------------------------------------------------------------------------------------
Legal fees 1,132
- -----------------------------------------------------------------------------------------------------
Professional services 6,486
- -----------------------------------------------------------------------------------------------------
Registration fees 2,614
- -----------------------------------------------------------------------------------------------------
Miscellaneous 2,135
- -----------------------------------------------------------------------------------------------------
Total expenses $67,519
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (40)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser and distributor (54,841)
- -----------------------------------------------------------------------------------------------------
Net expenses $12,638
- -----------------------------------------------------------------------------------------------------
Net investment income $5,207
- -----------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $9,489
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions (493)
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign currency transactions $8,996
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- -----------------------------------------------------------------------------------------------------
Investments $114,610
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 21
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency translation $114,631
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign currency $123,627
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $128,834
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting
from operations, any distributions, and any shareholder transactions.
MFS INTERNATIONAL STRATEGIC GROWTH FUND
FOR YEARS ENDED 9/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $3,271 $(1,456)
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign currency
transactions (50,498) (49,404)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign currency
translation 279,064 (32,059)
- ------------------------------------------------------------------- ----------- --------------
Increase (decrease) in net assets from operations $231,837 $(82,919)
- ------------------------------------------------------------------- ----------- --------------
Net increase (decrease) in net assets from fund share transactions $(22,602) $182,447
- ------------------------------------------------------------------- ----------- --------------
Total increase in net assets $209,235 $99,528
- ------------------------------------------------------------------- ----------- --------------
NET ASSETS
At beginning of period $1,174,787 $1,075,259
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed net
investment income $2,006 and accumulated net investment loss of
$0, respectively) $1,384,022 $1,174,787
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
MFS INTERNATIONAL STRATEGIC VALUE FUND
FOR YEARS ENDED 9/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $5,207 $2,478
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign currency
transactions 8,996 (106,084)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign currency translation 114,631 42,251
- -------------------------------------------------------------------- ----------- -------------
Increase (decrease) in net assets from operations $128,834 $(61,355)
- -------------------------------------------------------------------- ----------- -------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income (Class A) $(252) $--
- -----------------------------------------------------------------------------------------------------
From net investment income (Class I) (1,029) --
- -----------------------------------------------------------------------------------------------------
In excess of net realized gain on investments and foreign currency
transactions (Class A) -- (252)
- -----------------------------------------------------------------------------------------------------
In excess of net realized gain on investments and foreign currency
transactions (Class I) -- (1,032)
- -------------------------------------------------------------------- ----------- -------------
Total distributions declared to shareholders $(1,281) $(1,284)
- -------------------------------------------------------------------- ----------- -------------
Net increase (decrease) in net assets from fund share transactions $(1,227) $1,293
- -------------------------------------------------------------------- ----------- -------------
Total increase (decrease) in net assets $126,326 $(61,346)
- -------------------------------------------------------------------- ----------- -------------
NET ASSETS
At beginning of period $681,169 $742,515
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed net
investment income of $4,575 and $1,269, respectively) $807,495 $681,169
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 fiscal
years. Certain information reflects financial results for a single fund share. The total returns in the table represent the
rate by which an investor would have earned (or lost) on an investment in the series (assuming reinvestment of all
distributions). This information has been audited by the fund's independent auditors, whose report, together with the fund's
financial statements, are included in this report.
MFS INTERNATIONAL STRATEGIC GROWTH FUND
FOR YEARS ENDED 9/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning of period $8.05 $8.53 $13.30 $13.44 $9.68
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $0.02 $(0.01) $(0.03) $0.08 $0.05
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.62 (0.47) (2.47) 2.35 4.08
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations $1.64 $(0.48) $(2.50) $2.43 $4.13
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $-- $-- $(0.08) ($0.01) $(0.04)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- (1.94) (2.56) (0.33)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.00)+ -- --
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.25) -- --
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- (0.00)+ -- --
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $-- $-- $(2.27) $(2.57) $(0.37)
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $9.69 $8.05 $8.53 $13.30 $13.44
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total return (%) 20.37 (5.63) (21.69) 18.63 43.79
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 1.75 1.76 1.81 1.75 1.78
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.27 (0.08) (0.33) 0.55 0.44
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 86 82 103 137 175
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $532 $446 $367 $463 $253
- -----------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management and distribution and service fees. In
consideration, the fund pays the investment adviser a reimbursement fee not greater than 1.75% of average daily net
assets. In addition, the investment adviser and the distributor contractually waived their fees for the periods indicated.
To the extent actual expenses were over this limitation and the waivers had not been in place, the net investment loss per
share and the ratios would have been:
Net investment loss $(0.38) $(0.49) $(0.49) $(0.28) $(0.39)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 6.40 7.15 6.32 4.34 5.23
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (4.38) (5.47) (4.84) (2.04) (3.01)
- -----------------------------------------------------------------------------------------------------------------------------
+ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
MFS INTERNATIONAL STRATEGIC GROWTH FUND
FOR YEARS ENDED 9/30
CLASS I 2003 2002 2001 2000 1999
Net asset value, beginning of period $8.08 $8.56 $13.34 $13.48 $9.70
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $0.02 $(0.01) $(0.03) $0.07 $0.02
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.63 (0.47) (2.48) 2.36 4.13
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations $1.65 $(0.48) $(2.51) $2.43 $4.15
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $-- $-- $(0.08) ($0.01) $(0.04)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- (1.94) (2.56) (0.33)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.00)+ -- --
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.25) -- --
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- (0.00)+ -- --
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $-- $-- $(2.27) $(2.57) $(0.37)
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $9.73 $8.08 $8.56 $13.34 $13.48
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total return (%) 20.42 (5.61) (21.71) 18.59 43.91
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 1.75 1.76 1.81 1.75 1.78
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.25 (0.14) (0.32) 0.50 0.16
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 86 82 103 137 175
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $852 $728 $708 $859 $1,015
- -----------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management fee. In consideration, the fund pays the
investment adviser a reimbursement fee not greater than 1.75% of average daily net assets. In addition, the investment
adviser contractually waived its fee for the periods indicated. To the extent actual expenses were over this limitation
and the waivers had not been in place, the net investment loss per share and the ratios would have been:
Net investment loss $(0.34) $(0.45) $(0.44) $(0.22) $(0.36)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 5.90 6.65 5.82 3.84 4.73
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (3.90) (5.03) (4.33) (1.59) (2.79)
- -----------------------------------------------------------------------------------------------------------------------------
+ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
MFS INTERNATIONAL STRATEGIC VALUE FUND
FOR YEARS ENDED 9/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning of period $6.90 $7.54 $11.69 $13.24 $10.46
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $0.06 $0.03 $(0.04) $0.18 $0.00+
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.26 (0.66) (2.16) 1.57 3.10
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations $1.32 $(0.63) $(2.20) $1.75 $3.10
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.01) $-- $(0.13) $(0.07) $(0.10)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- (1.82) (3.23) (0.21)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- -- (0.01)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
and foreign currency transactions -- (0.01) -- -- --
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $(0.01) $(0.01) $(1.95) $(3.30) $(0.32)
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $8.21 $6.90 $7.54 $11.69 $13.24
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total return (%) 19.20 (8.34) (22.10) 14.22 30.01
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 1.74 1.76 1.89 1.79 1.77
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.75 0.32 (0.47) 1.51 --++
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 124 92 103 77 107
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $156 $134 $146 $953 $929
- -----------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management and distribution and service fees. In
consideration, the fund pays the investment adviser a reimbursement fee not greater than 1.75% of average daily net
assets. In addition, the investment adviser and the distributor contractually waived their fees for the periods indicated.
To the extent actual expenses were over this limitation and the waivers had not been in place, the net investment loss per
share and the ratios would have been:
Net investment loss $(0.57) $(0.51) $(0.52) $(0.23) $(0.28)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 9.70 8.64 7.00 5.09 4.07
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (7.21) (6.56) (5.58) (1.79) (2.30)
- -----------------------------------------------------------------------------------------------------------------------------
+ Per share amount was less than $0.01.
++ Ratio was less than 0.01%.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
MFS INTERNATIONAL STRATEGIC VALUE FUND
FOR YEARS ENDED 9/30
CLASS I 2003 2002 2001 2000 1999
Net asset value, beginning of period $6.88 $7.51 $11.67 $13.25 $10.47
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $0.05 $0.03 $0.05 $(0.02) $0.01
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.26 (0.65) (2.26) 1.74 3.09
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total from investment operations $1.31 $(0.62) $(2.21) $1.72 $3.10
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.01) $-- $(0.13) ($0.07) $(0.10)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- (1.82) (3.23) (0.21)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- -- -- (0.01)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments
and foreign currency transactions -- (0.01) -- -- --
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $(0.01) $(0.01) $(1.95) $(3.30) $(0.32)
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Net asset value, end of period $8.18 $6.88 $7.51 $11.67 $13.25
- ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Total return (%) 19.11 (8.24) (22.18) 13.80 30.11
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA(S):
Expenses## 1.75 1.76 1.89 1.74 1.77
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.71 0.32 0.59 (0.15) 0.08
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 124 92 103 77 107
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $652 $547 $596 $--+ $205
- -----------------------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually agreed under a temporary expense reimbursement
agreement to pay all of the fund's operating expenses, exclusive of management fee. In consideration, the fund pays the
investment adviser a reimbursement fee not greater than 1.75% of average daily net assets. In addition, the investment
adviser contractually waived its fee for the periods indicated. To the extent actual expenses were over this limitation
and the waivers had not been in place, the net investment loss per share and the ratios would have been:
Net investment loss $(0.50) $(0.47) $(0.36) $(0.38) $(0.21)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 9.20 8.14 6.50 4.54 3.58
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (6.75) (6.06) (4.02) (2.95) (1.73)
- -----------------------------------------------------------------------------------------------------------------------------
+ Class I net assets were less than $500.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS International Strategic Growth Fund and MFS International Strategic Value
Fund (the funds) are diversified series of MFS Series Trust V (the trust). The
trust is organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The funds can invest in foreign securities. Investments in foreign
securities are vulnerable to the effects of changes in the relative values of
the local currency and the U.S. dollar and to the effects of changes in each
country's legal, political, and economic environment.
INVESTMENT VALUATIONS - Equity securities in each fund's portfolio for which
market quotations are available are valued at the last sale or official closing
price on the primary market or exchange on which they are primarily traded or at
the last quoted bid price for securities in which there were no sales during the
day. If no sales are reported, as is the case for most securities traded over
the counter, securities are valued on the basis of quotations obtained from
brokers and dealers or on the basis of valuations furnished by a pricing
service. Short-term obligations in each fund's portfolio are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Short-term obligations with a remaining maturity in excess of 60 days will be
valued upon dealer-supplied valuations. Portfolio investments for which market
quotations are not readily available, or whose values have been materially
affected by events occurring after the close of their primary markets, are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized and accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States of
America. All discount is accreted for tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
FEES PAID INDIRECTLY - Each fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by each
fund. This amount is shown as a reduction of total expenses on the Statement of
Operations.
TAX MATTERS AND DISTRIBUTIONS - Each fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. Each fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions and wash sales.
The tax character of distributions declared for the years ended September 30, 2003 and September 30, 2002 was as
follows:
MFS INTERNATIONAL MFS INTERNATIONAL
STRATEGIC GROWTH FUND STRATEGIC VALUE FUND
------------------------------ ------------------------------
9/30/03 9/30/02 9/30/03 9/30/02
Distributions declared from
ordinary income $-- $-- $1,281 $--
Long-term capital gain -- -- -- 1,284
----- ----- ----- -----
Total distributions declared $-- $-- $1,281 $1,284
- ----------------------------------------------------------------------------------------------------------------
During the year ended September 30, 2003, the following amounts were reclassified between accumulated
undistributed net investment income, accumulated net realized loss on investments and foreign currency
transactions and paid-in capital, due to differences between book and tax accounting for currency transactions.
These changes had no effect on the net assets or net asset values per share.
MFS INTERNATIONAL MFS INTERNATIONAL
STRATEGIC GROWTH FUND STRATEGIC VALUE FUND
------------------------------- ------------------------------
Increase/decrease:
Paid in capital $-- $127
Accumulated net realized loss on investments
and foreign currency transactions 1,265 493
Accumulated undistributed net investment
income (1,265) (620)
- ----------------------------------------------------------------------------------------------------------------
As of September 30, 2003, the components of distributable earnings (accumulated losses) on a tax basis were as
follows:
MFS INTERNATIONAL MFS INTERNATIONAL
STRATEGIC GROWTH FUND STRATEGIC VALUE FUND
------------------------------- ------------------------------
Undistributed ordinary income $2,343 $4,689
Capital loss carryforward (177,727) (145,295)
Post-October capital loss deferral (40,338) --
Unrealized appreciation 174,884 76,835
Other temporary differences (337) (114)
- ----------------------------------------------------------------------------------------------------------------
Post-October capital loss deferrals represent loss realized during the current fiscal year, but recognized for
tax purposes in the next fiscal year.
For federal income tax purposes, the capital loss carryforward may be applied against any net taxable realized
gains of each succeeding year until the earlier of its utilization or expiration.
MFS INTERNATIONAL MFS INTERNATIONAL
STRATEGIC GROWTH FUND STRATEGIC VALUE FUND
------------------------------- ------------------------------
September 30, 2010 $(104,885) $(62,835)
September 30, 2011 $(72,842) $(82,460)
------ ------
Total $(177,727) $(145,295)
- ----------------------------------------------------------------------------------------------------------------
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - Each fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of each fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates are
generally due to differences in separate class expenses.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - Each fund has a separate investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee, for each fund, is computed daily and paid monthly at the
following annual rates:
First $500 million of average net assets 0.975%
-------------------------------------------------------
Average net assets in excess of $500 million 0.925%
-------------------------------------------------------
The investment adviser has voluntarily agreed to waive its fee, which is shown
as a reduction of total expenses in the Statement of Operations.
Each fund has a temporary expense reimbursement agreement whereby MFS has
voluntarily agreed to pay all of each fund's operating expenses, exclusive of
management, distribution, and service fees. Each fund in turn will pay MFS an
expense reimbursement fee not greater than 1.75% of average daily net assets. To
the extent that the expense reimbursement fee exceeds each fund's actual
expenses, the excess will be applied to amounts paid by MFS in prior years. At
September 30, 2003, aggregate unreimbursed expenses amounted to $172,602 and
$156,363 for the MFS International Strategic Growth Fund and the MFS
International Strategic Value Fund, respectively.
Each fund pays compensation to the Independent Trustees ("Trustees") in the form
of both a retainer and attendance fees, and pays no compensation directly to its
Trustees who are officers of the investment adviser, or to officers of the fund,
all of whom receive remuneration for their services to the fund from MFS.
Certain officers and Trustees of the fund are officers or directors of MFS, MFS
Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Trustees
are currently not receiving any payments for their services to each fund.
ADMINISTRATOR - Each fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each fund pays MFS an administrative fee
not to exceed the following annual percentage rates of the fund's average daily
net assets:
First $2 billion 0.0175%
----------------------------------------------
Next $2.5 billion 0.0130%
----------------------------------------------
Next $2.5 billion 0.0005%
----------------------------------------------
In excess of $7 billion 0.0000%
----------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, did not
receive any sales charges on sales of Class A shares of each fund for the year
ended September 30, 2003.
The Trustees have adopted a distribution plan for Class A shares pursuant to
Rule 12b-1 of the Investment Company Act of 1940 as follows:
Each fund's distribution plan provides that the fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to class A share classes
in order that MFD may pay expenses on behalf of the fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of up
to 0.25% per annum of the fund's average daily net assets attributable to Class
A shares. Distribution and service fees under the Class A distribution plan are
currently being waived for each fund.
Certain Class A shares are subject to a contingent deferred sales charge in the
event of a shareholder redemption within 12 months following the purchase. MFD
receives all contingent deferred sales charges. There were no contingent
deferred sales charges imposed during the year ended September 30, 2003.
SHAREHOLDER SERVICING AGENT - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of each fund's average daily net assets at an annual rate of 0.11%.
Prior to April 1, 2003, the fee was 0.10% of the fund's average daily net
assets.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions and short-term obligations, were as follows:
MFS INTERNATIONAL MFS INTERNATIONAL
STRATEGIC GROWTH FUND STRATEGIC VALUE FUND
------------------------------------ ------------------------------------
PURCHASES
Investments (non-U.S. government securities) $1,055,853 $902,472
SALES
Investments (non-U.S. government securities) $1,040,572 $848,030
- ----------------------------------------------------------------------------------------------------------------------------------
The cost and unrealized appreciation and depreciation in the value of the investments owned by each fund, as computed on a federal
income tax basis, are as follows:
MFS INTERNATIONAL MFS INTERNATIONAL
STRATEGIC GROWTH FUND STRATEGIC VALUE FUND
------------------------------------ ------------------------------------
Aggregate cost $1,202,573 $714,335
------------------------------------ ------------------------------------
Gross unrealized appreciation $202,360 $91,409
Gross unrealized depreciation (27,687) (14,649)
------------------------------------ ------------------------------------
Net unrealized appreciation $174,673 $76,760
- ----------------------------------------------------------------------------------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
MFS INTERNATIONAL STRATEGIC GROWTH FUND
-----------------------------------------
YEAR ENDED 9/30/03 YEAR ENDED 9/30/02
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 110 $1,020 14,131 $129,900
- --------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
- --------------------------------------------------------------------------------
Shares reacquired (624) (4,788) (1,667) (14,412)
- --------------------------------------------------------------------------------
Net increase (decrease) (514) $(3,768) 12,464 $115,488
- --------------------------------------------------------------------------------
CLASS I SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 16,440 $138,280 23,161 $211,544
- --------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
- --------------------------------------------------------------------------------
Shares reacquired (19,079) (157,114) (15,723) (144,585)
- --------------------------------------------------------------------------------
Net increase (decrease) (2,639) $(18,834) 7,438 $66,959
- --------------------------------------------------------------------------------
MFS INTERNATIONAL STRATEGIC VALUE FUND
-----------------------------------------
YEAR ENDED 9/30/03 YEAR ENDED 9/30/02
CLASS A SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 2 $20 26 $216
- --------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 35 252 32 253
- --------------------------------------------------------------------------------
Shares reacquired (490) (2,485) (26) (207)
- --------------------------------------------------------------------------------
Net increase (decrease) (453) $(2,213) 32 $262
- --------------------------------------------------------------------------------
CLASS I SHARES SHARES AMOUNT SHARES AMOUNT
Shares sold 2 $20 $-- $--
- --------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 143 1,029 131 1,031
- --------------------------------------------------------------------------------
Shares reacquired (14) (63) -- --
- --------------------------------------------------------------------------------
Net increase 131 $986 131 $1,031
- --------------------------------------------------------------------------------
(6) LINE OF CREDIT
Each fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at the
end of each quarter. Commitment fees of $8 and $2 were allocated to MFS
International Strategic Growth Fund and the MFS International Strategic Value
Fund, respectively. Each fund had no borrowings during the year ended September
30, 2003.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees of MFS Series Trust V and Shareholders of MFS International
Strategic Growth Fund and MFS International Strategic Value Fund:
We have audited the accompanying statements of assets and liabilities of MFS
International Strategic Growth Fund and MFS International Strategic Value Fund
(the Funds) (two of the portfolios constituting MFS Series Trust V), including
the portfolios of investments, as of September 30, 2003, and the related
statements of operations for the year then ended, the statements of changes in
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. These financial
statements and financial highlights are the responsibility of the Funds'
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and financial highlights. Our procedures included
confirmation of securities owned at September 30, 2003, by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
International Strategic Growth Fund and MFS International Strategic Value Fund
at September 30, 2003, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and their financial highlights for each of the five years in the period
then ended, in conformity with accounting principles generally accepted in the
United States.
ERNST & YOUNG LLP
Boston, Massachusetts
November 7, 2003
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (Unaudited)
- --------------------------------------------------------------------------------
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
For the year ended September 30, 2003, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 100% for
the MFS International Strategic Value Fund.
For the year ended September 30, 2003, income from foreign sources was $27,770
for the MFS International Strategic Growth Fund, and the fund designated a
foreign tax credit of $2,703.
For the year ended September 30, 2003, income from foreign sources was $17,039
for the MFS International Strategic Value Fund, and the fund designated a
foreign tax credit of $1,910.
The fund hereby designates the maximum amount allowable as qualified dividend
income eligible for a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. Complete information will be
reported in conjunction with your 2003 Form 1099-DIV.
Each fund has the option to use equalization, which is a tax basis dividends
paid deduction from earnings and profits distributed to shareholders upon
redemption of shares.
- -------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- -------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust V, of
which each fund is a series, including their principal occupations, which, unless specific dates are shown,
are of more than five years' duration, although the titles may not have been the same throughout.
Name, Age, Position with the Trust, Principal Occupation, and Other Directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) Chairman ABBY M. O'NEILL (born 04/27/28) Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
JOHN W. BALLEN(2) (born 09/12/59) Trustee and Executive Officer
President
Massachusetts Financial Services Company, Chief LAWRENCE T. PERERA (born 06/23/35) Trustee
Executive Officer and Director Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59) Trustee WILLIAM J. POORVU (born 04/10/35) Trustee
Massachusetts Financial Services Company, Private investor; Harvard University Graduate
President, Chief Investment Officer and Director School of Business Administration, Class of 1961
Adjunct Professor in Entrepreneurship Emeritus;
INDEPENDENT TRUSTEES CBL & Associates Properties, Inc. (real estate
LAWRENCE H. COHN, M.D. (born 03/11/37) Trustee investment trust), Director
Brigham and Women's Hospital, Chief of Cardiac
Surgery; Harvard Medical School, Professor of J. DALE SHERRATT (born 09/23/38) Trustee
Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
WILLIAM R. GUTOW (born 09/27/41) Trustee (investor in health care companies), Managing
Private investor and real estate consultant; General Partner (since 1993); Cambridge
Capitol Entertainment Management Company (video Nutraceuticals (professional nutritional
franchise), Vice Chairman products), Chief Executive Officer (until May
2001)
J. ATWOOD IVES (born 05/01/36) Trustee
Private investor; KeySpan Corporation (energy ELAINE R. SMITH (born 04/25/46) Trustee
related services), Director; Eastern Enterprises Independent health care industry consultant
(diversified services company), Chairman, Trustee
and Chief Executive Officer (until November 2000) WARD SMITH (born 09/13/30) Trustee
Private investor
OFFICERS
JOHN W. BALLEN (born 09/12/59) Trustee and ROBERT R. FLAHERTY (born 09/18/63) Assistant
President Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59) Assistant
Secretary and Assistant Clerk RICHARD M. HISEY (born 08/29/58) Treasurer
Massachusetts Financial Services Company, Senior Massachusetts Financial Services Company, Senior
Vice President and Associate General Counsel Vice President (since July 2002); The Bank of New
York, Senior Vice President (September 2000 to
STEPHEN E. CAVAN (born 11/06/53) Secretary and Clerk July 2002); Lexington Global Asset Managers, Inc.,
Massachusetts Financial Services Company, Senior Executive Vice President and Chief Financial
Vice President, General Counsel and Secretary Officer (prior to September 2000); Lexington
Funds, Treasurer (prior to September 2000)
STEPHANIE A. DESISTO (born 10/01/53) Assistant
Treasurer ELLEN MOYNIHAN (born 11/13/57) Assistant Treasurer
Massachusetts Financial Services Company, Vice Massachusetts Financial Services Company, Vice
President (since April 2003); Brown Brothers President
Harriman & Co., Senior Vice President (November
2002 to April 2003); ING Groep N.V./Aeltus JAMES O. YOST (born 06/12/60) Assistant Treasurer
Investment Management, Senior Vice President Massachusetts Financial Services Company, Senior
(prior to November 2002) Vice President
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. This means that each Trustee will be elected to hold office until his or her
successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Each
officer will hold office until his or her successor is chosen and qualified, or until he or she retires,
resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Messrs. Ballen and Gutow have each served as a Trustee of
the Trust since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and and Ms. O'Neill, were elected by
shareholders and have served as Trustees of the Trust since January 1, 2002. Mr. Parke has served as a Trustee
of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 110 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGERS
David R. Mannheim(1)
Barnaby Wiener(1)
CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
(1) MFS Investment Management
MFS(R) INTERNATIONAL STRATEGIC GROWTH FUND
MFS(R) INTERNATIONAL STRATEGIC VALUE FUND
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C)2003 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
INCV-ANN 11/03 300
MFS(R) Mutual Funds
ANNUAL REPORT 9/30/03
[graphic omitted]
MFS(R) INTERNATIONAL NEW
DISCOVERY FUND
A path for pursuing opportunity
[logo] M F S(R)
INVESTMENT MANAGEMENT
MFS(R) INTERNATIONAL NEW DISCOVERY FUND
Seeks capital appreciation.
- -------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- -------------------------------------------------------------------------------
MFS(R) INTERNATIONAL NEW DISCOVERY FUND
The fund seeks capital appreciation
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ----------------------------------------------------
MANAGEMENT REVIEW 5
- ----------------------------------------------------
PERFORMANCE SUMMARY 8
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 12
- ----------------------------------------------------
FINANCIAL STATEMENTS 21
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 35
- ----------------------------------------------------
INDEPENDENT AUDITORS' REPORT 45
- ----------------------------------------------------
TRUSTEES AND OFFICERS 46
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS 48
- ----------------------------------------------------
FEDERAL TAX INFORMATION 49
- ----------------------------------------------------
CONTACT INFORMATION 50
- ----------------------------------------------------
ASSET ALLOCATION 51
- -------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is
the best means of achieving superior long-term investment performance. When
you're managing billions of dollars for investors, we think you have an
obligation to have in-depth, firsthand knowledge of every company owned,
anywhere in the world.
We have structured our equity and fixed-income investment teams to capitalize
on the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
research analysts, 27 based in the United States and 18 based abroad, and 26
credit research analysts. Each analyst is assigned one or more specific
industries and then charged with identifying the most attractive investment
ideas within these industries. Our U.S. and non-U.S. equity research analysts
are unified into one team that emphasizes a collaborative process in analyzing
securities around the globe. Credit analysts also share their expertise in
each segment of the fixed-income market and work as part of the same team
ensuring that every member has access to information that may have a material
effect on their investment decisions. As MFS(R) continues to grow and as
markets become more complex, we believe our structure will enable us to
maintain a consistent investment process with the goal of providing strong,
long-term investment performance across market capitalizations, investment
disciplines, and country borders for our investors.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers around the globe. The analysts
know the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry
insights and a wider perspective on companies and industries. Our goal is to
make sure those two sets of perspectives coordinate and work well together. As
the world's markets become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of
the market. We do not believe that analysts and portfolio managers - no matter
how talented they may be - can succeed by working in a vacuum. Through the
latest technology available, our entire research team meets frequently via
video and telephone teleconferences, e-mail, and PDAs (personal digital
assistants). When we hire new analysts, we require them to spend an average of
one year in Boston to learn MFS' culture and to build relationships with their
peers. We believe the interaction among our analysts is the key to making our
collaborative process work toward delivering superior long-term investment
performance for our investors. Our analysts work out of four research offices
in Boston, London, Singapore, and Tokyo, and are assigned to specific regions
and industries. They meet regularly with their colleagues to discuss world
trends affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspectives they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry,
and its ability to grow its market share. Conversely, our fixed-income
analysts will look at stability of a company's cash flow, the value of its
assets, and its capital structure to gauge whether the company can generate
enough free cash flow to pay off its debt. As a result of their collaboration,
we believe we're able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however, we
have rigorous guidelines to assure that the level of risk is measured and
monitored and consistent with the investment philosophies of each of our
portfolios. All told, we believe our culture empowers the members of our
investment team to continue to do their best work and allows them to make
better investment decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
October 21, 2003
The opinions expressed in this letter are those of MFS and no forecasts can be
guaranteed.
- --------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- --------------------------------------------------------------------------------
THE HUMAN SIDE OF MONEY MANAGEMENT
For nearly 80 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands
of institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain first-hand
knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- --------------------------------------------------------------------------------
MANAGEMENT REVIEW
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
The 12-month reporting period that ended September 30, 2003, was marked by
volatility, but, in the end, rewarded investors with better results than they
had experienced in quite some time. The stocks of smaller companies, as
measured by market capitalization, generally outperformed mid-sized and
larger-sized companies for the period. Because this fund invests primarily in
small- and mid-cap stocks, the fund outperformed its benchmark, the Morgan
Stanley Capital International (MSCI) EAFE (Europe, Australasia, Far East)
Index, during the period.
In late 2002, concerns about slow global economic growth and geopolitical
tensions held back stock returns worldwide. Then, starting in March 2003,
increased signs of an economic upturn appeared in the United States and
overseas. Geopolitical tensions eased, and global stock markets rallied. Low
interest rates and accommodative monetary policies worldwide added further
impetus to stock prices.
Fund performance also benefited from a decline in the value of the U.S. dollar
and increased values of overseas currencies. U.S. investors benefited because
the performance of the fund's overseas holdings was enhanced by
currency appreciation.
FUND POSITIONING
As signs of an improving economic environment began to appear, we started to
move away from the more defensive sectors such as consumer staples and health
care. Our analysts found better growth opportunities in more economically
sensitive areas such as retailing, basic materials, technology, and autos and
housing. Our country allocations also changed. We reduced our Canadian holdings,
primarily the less economically sensitive energy stocks, in favor of companies
located in Europe and emerging markets - Mexico and Latin America, as well as
Thailand, Taiwan, and South Korea.
- -------------------------------------------------
TOP 5 STOCK HOLDINGS
AS OF 9/30/03
ANGLO IRISH BANK 2.0%
Irish financial services company,
specializing in business and consumer
banking
- -------------------------------------------------
STANLEY ELECTRIC 1.4%
Japanese automotive parts manufacturer
- -------------------------------------------------
GLOBAL SANTA FE 1.3%
U.S. provider of contract oil-drilling
services
- -------------------------------------------------
CANADIAN NATURAL RESOURCES 1.2%
Canadian oil and natural gas
exploration company
- -------------------------------------------------
AUTOLIV INC. 1.2%
Swedish manufacturer of automotive
safety devices
- -------------------------------------------------
The portfolio is actively managed, and current
holdings may be different.
- -------------------------------------------------
CONTRIBUTORS TO PERFORMANCE
Contributors to fund performance came from a wide variety of industries. In
health care, German company Fresenius Medical and the Swiss firm Synthes-
Stratec both generated strong returns for the fund. Fresenius, a world leader
in kidney dialysis treatment, continued its strong rebound from last year's
disappointing results. Synthes-Stratec makes implantable medical devices such
as artificial hips and knees. The company enjoyed success with its new
artificial discs used in spinal surgery. We sold our Fresenius holdings when
they reached our price target.
Anglo Irish Bank, headquartered in Ireland, benefited from the housing boom in
Ireland and the United Kingdom. The bank continued to experience strong
lending fee growth (especially mortgages) and kept surprising investors with
better-than expected revenues.
German industrial chemical company Celanese has been restructuring and selling
its unprofitable businesses. As a result, the company experienced good
earnings growth and its stock price rose as economic signs began to improve.
Stanley Electric, a Japanese company that has specialized in the manufacturing
of light emitting diodes (LEDs), continued to benefit from increased usage of
their lighting products in cell phones, computers and automobiles.
Other contributors to fund performance included Chinese power producer Huaneng
Power and Swedish manufacturing company Alfa Laval. Huaneng's stock price
climbed as Chinese demand for power continued to expand. In 2002, stock prices
of capital equipment manufacturers such as Alfa Laval were depressed because
of the weak economic environment. In addition, Alfa Laval had asbestos-related
lawsuits that pushed its stock price to even lower levels. However, with signs
of an improving economic environment, the company's stock price rebounded
sharply.
DETRACTORS FROM PERFORMANCE
Financial services company St. James Capital has a good franchise in the
British affluent market, but suffered in the first quarter of 2003 from
investors' aversion to equity markets. Stronger returns later in the period
could not overcome its earlier weakness. Japanese credit card company Credit
Saison saw its stock price sink when the company began to experience a higher-
than-expected default rate.
Norwegian teleconferencing company Tandberg had enjoyed high, double-digit
growth for many reporting periods. However, when the company announced that it
would not meet investors' growth expectations, its stock price fell. At the
end of the period, the fund no longer owned this stock.
The stocks of cosmetics manufacturer Shiseido and videogame software maker
Sega were also sold from the portfolio because of disappointing results.
Although Shiseido had improved profitability by consolidating its product
lines, the company's sales weakened as a result of the global economic
slowdown. In 2002, Sega had high hopes for the launch of new video games
during the second half of the year. The expected sales for the games did not
materialize. Investors further pushed down Sega's stock price when it
announced that it was purchasing one of its competitors.
Jomed, a heart-care surgical products company, was a significant detractor
from performance. The company's financial position was grossly overstated and
when the company disclosed that it had booked revenues for products it hadn't
sold, the stock plummeted. At the end of the period, the fund no longer owned
this stock.
Respectfully,
/s/ David A. Antonelli
David A. Antonelli
Director of Global Equity Research
The opinions expressed in this report are those of the Director of Global
Equity Research and are current only through the end of the period of the
report as stated on the cover. These views are subject to change at any time
based on market and other conditions, and no forecasts can be guaranteed.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 9/30/03
- -------------------------------------------------------------------------------
The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results
include the deduction of the maximum applicable sales charge and reflect the
percentage change in net asset value, including reinvestment of dividends and
capital gains distributions. Benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. (See Notes to Performance Summary.)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
October 9, 1997, through September 30, 2003. Index information is from October
1, 1997.)
MFS International
New Discovery Fund MSCI EAFE
- Class A Index
-----------------------------------------
10/97 $ 9,425 $10,000
9/98 8,878 9,192
9/99 12,440 12,070
9/00 19,100 12,484
9/01 14,799 8,954
9/02 14,964 7,587
9/03 19,614 9,601
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 1-yr 3-yr 5-yr Life*
- ------------------------------------------------------------------------------
A 10/9/1997 31.08% 0.89% 17.18% 13.05%
- ------------------------------------------------------------------------------
B 10/2/2000 30.17% 0.29% 16.76% 12.71%
- ------------------------------------------------------------------------------
C 10/2/2000 30.20% 0.26% 16.74% 12.70%
- ------------------------------------------------------------------------------
I 10/9/1997 31.40% 1.25% 17.44% 13.26%
- ------------------------------------------------------------------------------
R 12/31/2002 30.99% 0.87% 17.16% 13.04%
- ------------------------------------------------------------------------------
529A 7/31/2002 30.76% 0.78% 17.10% 12.99%
- ------------------------------------------------------------------------------
529B 7/31/2002 29.83% 0.52% 16.92% 12.84%
- ------------------------------------------------------------------------------
529C 7/31/2002 29.88% 0.53% 16.93% 12.85%
- --------------------
Average annual
- --------------------
Comparative Benchmarks
- ------------------------------------------------------------------------------
Average international fund+ 22.94% -10.06% 1.21% -1.09%
- ------------------------------------------------------------------------------
MSCI EAFE Index# 26.54% -8.38% 0.87% -0.68%
- ------------------------------------------------------------------------------
- --------------------
Average annual
with sales charge
- --------------------
- ------------------------------------------------------------------------------
A 23.54% -1.08% 15.80% 11.93%
- ------------------------------------------------------------------------------
B 26.17% -0.71% 16.54% 12.62%
- ------------------------------------------------------------------------------
C 29.20% 0.26% 16.74% 12.70%
- ------------------------------------------------------------------------------
529A 23.24% -1.19% 15.72% 11.87%
- ------------------------------------------------------------------------------
529B 25.83% -0.48% 16.70% 12.75%
- ------------------------------------------------------------------------------
529C 28.88% 0.53% 16.93% 12.85%
- ------------------------------------------------------------------------------
I and R class shares do not have a sales charge. Please see Notes to Performance
Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A 31.08% 2.69% 120.92% 108.10%
- ------------------------------------------------------------------------------
B 30.17% 0.87% 117.01% 104.42%
- ------------------------------------------------------------------------------
C 30.20% 0.80% 116.84% 104.27%
- ------------------------------------------------------------------------------
I 31.40% 3.79% 123.39% 110.43%
- ------------------------------------------------------------------------------
R 30.99% 2.62% 120.77% 107.97%
- ------------------------------------------------------------------------------
529A 30.76% 2.36% 120.20% 107.43%
- ------------------------------------------------------------------------------
529B 29.83% 1.56% 118.49% 105.82%
- ------------------------------------------------------------------------------
529C 29.88% 1.59% 118.55% 105.87%
- ------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations,
October 9, 1997,
through September 30, 2003. Index information is from October 1, 1997.
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALASIA, FAR
EAST) INDEX - A commonly used measure of the international stock market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A and 529A results, including sales charge, reflects the deduction of
the maximum 5.75% sales charge. Class B and 529B results, including sales
charge, reflects the deduction of the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C and 529C
results, including sales charge, redeemed within one year from the end of the
calendar month of purchase reflects the deduction of the 1% CDSC. Class I
shares have no sales charges and are available only to certain investors.
Class R shares have no sales charges and are available only to certain
retirement plans. Class 529A, 529B, and 529C shares are only available in
conjunction with qualified tuition programs, such as the MFS 529 Savings Plan.
Performance for share classes offered after Class A shares includes the
performance of the fund's Class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences
in sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the initial share class, and lower
performance for share classes with lower operating expenses than the initial
share class.
All performance results reflect any applicable expense subsidies and waivers
in effect during the periods shown; without these, the results would have been
less favorable. See the prospectus and financial statements for details. All
results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT
THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
The portfolio may invest a substantial amount of its assets in issuers located
in a limited number of countries and therefore is susceptible to adverse
economic, political or regulatory developments affecting those countries.
Investing in small and/or emerging growth companies is riskier than investing
in more-established companies.
These risks may increase share price volatility. Please see the prospectus for
further information regarding these and other risk considerations.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
- ------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - 9/30/03
- -----------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 97.9%
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
Foreign Stocks - 94.5%
- -----------------------------------------------------------------------------------------------------
Australia - 1.3%
- -----------------------------------------------------------------------------------------------------
APN News & Media Ltd. (Printing & Publishing) 976,617 $2,365,063
- -----------------------------------------------------------------------------------------------------
John Fairfax Holdings Ltd. (Printing & Publishing) 2,038,940 4,452,234
- -----------------------------------------------------------------------------------------------------
Oil Search Ltd. (Energy - Independent) 1,600,800 1,219,617
- -----------------------------------------------------------------------------------------------------
$8,036,914
- -----------------------------------------------------------------------------------------------------
Austria - 0.7%
- -----------------------------------------------------------------------------------------------------
Erste Bank der Oesterreichischen Sparkassen AG (Banks &
Credit Cos.) 40,600 $4,108,622
- -----------------------------------------------------------------------------------------------------
Brazil - 0.7%
- -----------------------------------------------------------------------------------------------------
Aracruz Celulose S.A. (Forest & Paper Products) 101,500 $2,770,950
- -----------------------------------------------------------------------------------------------------
Companhia Siderurgica Nacional S.A., ADR (Metals & Mining) 36,000 1,278,720
- -----------------------------------------------------------------------------------------------------
$4,049,670
- -----------------------------------------------------------------------------------------------------
Canada - 6.8%
- -----------------------------------------------------------------------------------------------------
Aber Diamond Corp. (Metals & Mining)* 56,200 $1,554,291
- -----------------------------------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil Services) 176,949 7,283,669
- -----------------------------------------------------------------------------------------------------
Cognos, Inc. (Computer Software)* 86,600 2,697,713
- -----------------------------------------------------------------------------------------------------
Dofasco, Inc. (Metals & Mining) 50,000 1,079,230
- -----------------------------------------------------------------------------------------------------
Encana Corp. (Natural Gas - Pipeline) 165,488 5,992,124
- -----------------------------------------------------------------------------------------------------
Goldcorp, Inc. (Metals & Mining) 103,200 1,440,444
- -----------------------------------------------------------------------------------------------------
IntraWest Partners (Gaming & Lodging) 129,800 1,815,902
- -----------------------------------------------------------------------------------------------------
Manitoba Telecom Services, Inc. (Telephone Services) 70,000 2,106,997
- -----------------------------------------------------------------------------------------------------
Molson, Inc. (Alcoholic Beverages) 85,490 2,107,973
- -----------------------------------------------------------------------------------------------------
Precision Drilling Corp. (Oil Services)* 80,500 3,042,370
- -----------------------------------------------------------------------------------------------------
Rona, Inc (Specialty Stores)* 183,960 2,860,541
- -----------------------------------------------------------------------------------------------------
Talisman Energy, Inc. (Energy - Independent) 124,660 5,916,850
- -----------------------------------------------------------------------------------------------------
TSX Group, Inc. (Financial Services)## 111,255 2,678,935
- -----------------------------------------------------------------------------------------------------
$40,577,039
- -----------------------------------------------------------------------------------------------------
Chile - 0.3%
- -----------------------------------------------------------------------------------------------------
Empresa Nacional de Electricidad, ADR (Utilities -
Electric Power)* 160,000 $1,728,000
- -----------------------------------------------------------------------------------------------------
China - 1.1%
- -----------------------------------------------------------------------------------------------------
Beijing Datang Power Generation Co., Ltd. (Utilities -
Electric Power) 6,276,000 $3,403,646
- -----------------------------------------------------------------------------------------------------
Huaneng Power International, Inc. (Utilities - Electric Power) 2,280,000 3,120,707
- -----------------------------------------------------------------------------------------------------
$6,524,353
- -----------------------------------------------------------------------------------------------------
Finland - 1.5%
- -----------------------------------------------------------------------------------------------------
Fortum Oyj (Energy - Independent) 496,600 $4,299,281
- -----------------------------------------------------------------------------------------------------
KCI Konecranes Oyj (Machinery & Tools) 60,000 1,768,074
- -----------------------------------------------------------------------------------------------------
Tieto-X Oyj (Computer Software)* 50,000 1,010,811
- -----------------------------------------------------------------------------------------------------
Vacon Oyj (Electronics) 159,800 1,860,127
- -----------------------------------------------------------------------------------------------------
$8,938,293
- -----------------------------------------------------------------------------------------------------
France - 3.6%
- -----------------------------------------------------------------------------------------------------
Business Objects S.A. (Internet)* 141,100 $3,577,555
- -----------------------------------------------------------------------------------------------------
Cap Gemini S.A. (Computer Software - Systems) 86,100 3,571,524
- -----------------------------------------------------------------------------------------------------
Dassault Systemes S.A. (Computer Software) 46,100 1,616,843
- -----------------------------------------------------------------------------------------------------
Essilor International S.A. (Medical Equipment) 30,130 1,303,891
- -----------------------------------------------------------------------------------------------------
JC Decaux S.A. (Broadcast & Cable TV) 170,000 2,390,873
- -----------------------------------------------------------------------------------------------------
Sagem S.A. (Telecom - Wireline) 29,496 2,764,964
- -----------------------------------------------------------------------------------------------------
Societe Television Francaise 1 S.A. (Broadcast & Cable TV) 218,276 6,467,742
- -----------------------------------------------------------------------------------------------------
$21,693,392
- -----------------------------------------------------------------------------------------------------
Germany - 5.9%
- -----------------------------------------------------------------------------------------------------
Aareal Bank AG (Banks & Credit Cos.) 144,100 $3,448,774
- -----------------------------------------------------------------------------------------------------
Celanese AG (Specialty Chemicals) 176,192 5,799,693
- -----------------------------------------------------------------------------------------------------
Continental AG (Automotive) 85,000 2,476,049
- -----------------------------------------------------------------------------------------------------
Deutsche Boerse AG (Banks & Credit Cos.) 50,100 2,556,891
- -----------------------------------------------------------------------------------------------------
Epcos AG (Electronics) 216,800 3,635,134
- -----------------------------------------------------------------------------------------------------
Linde AG (Specialty Chemicals) 53,030 2,184,914
- -----------------------------------------------------------------------------------------------------
Porsche AG (Automotive) 9,394 3,956,062
- -----------------------------------------------------------------------------------------------------
Schering AG (Pharmaceuticals) 50,000 2,177,758
- -----------------------------------------------------------------------------------------------------
Stada Arzneimittel AG (Pharmaceuticals) 117,798 6,313,877
- -----------------------------------------------------------------------------------------------------
W.E.T Automotive Systems AG (Automotive) 36,600 2,520,397
- -----------------------------------------------------------------------------------------------------
$35,069,549
- -----------------------------------------------------------------------------------------------------
Greece - 0.2%
- -----------------------------------------------------------------------------------------------------
Cosmote Mobile Communications S.A. (Telephone Services) 125,000 $1,453,587
- -----------------------------------------------------------------------------------------------------
Hong Kong - 1.9%
- -----------------------------------------------------------------------------------------------------
Cathay Pacific Airways Ltd. (Airlines) 850,000 $1,437,813
- -----------------------------------------------------------------------------------------------------
CNOOC Ltd. (Energy - Independent) 721,000 1,233,569
- -----------------------------------------------------------------------------------------------------
Denway Motors Ltd. (Automotive) 3,774,000 2,290,403
- -----------------------------------------------------------------------------------------------------
Esprit Asia Holdings Ltd. (Specialty Stores) 940,500 2,859,973
- -----------------------------------------------------------------------------------------------------
Hong Kong Electric Holdings Ltd. (Utilities - Electric
Power) 303,500 1,169,810
- -----------------------------------------------------------------------------------------------------
Li & Fung Ltd. (Business Services) 1,323,000 2,101,247
- -----------------------------------------------------------------------------------------------------
$11,092,815
- -----------------------------------------------------------------------------------------------------
Hungary - 0.7%
- -----------------------------------------------------------------------------------------------------
OTP Bank Ltd., ADR (Banks & Credit Cos.)* 173,600 $4,131,680
- -----------------------------------------------------------------------------------------------------
India - 0.9%
- -----------------------------------------------------------------------------------------------------
Bharti Tele-Venture (Telephone Services) 2,286,800 $3,997,079
- -----------------------------------------------------------------------------------------------------
Infosys Technologies Ltd. (Computer Software - Systems) 15,400 1,526,069
- -----------------------------------------------------------------------------------------------------
$5,523,148
- -----------------------------------------------------------------------------------------------------
Indonesia - 0.1%
- -----------------------------------------------------------------------------------------------------
PT Bank Mandiri (Banks & Credit Cos.)* 7,322,000 $741,358
- -----------------------------------------------------------------------------------------------------
Ireland - 3.3%
- -----------------------------------------------------------------------------------------------------
Anglo Irish Bank Corp., PLC (Banks & Credit Cos.) 1,087,073 $11,655,071
- -----------------------------------------------------------------------------------------------------
Depfa Bank PLC (Banks & Credit Cos.) 26,600 2,582,756
- -----------------------------------------------------------------------------------------------------
IAWS Group PLC, "A" (Specialty Chemicals) 300,000 3,006,215
- -----------------------------------------------------------------------------------------------------
Irish Life & Permanent PLC (Banks & Credit Cos.) 207,600 2,726,162
- -----------------------------------------------------------------------------------------------------
$19,970,204
- -----------------------------------------------------------------------------------------------------
Israel - 0.2%
- -----------------------------------------------------------------------------------------------------
Taro Pharmaceutical Industries Ltd. (Pharmaceuticals)* 25,100 $1,414,636
- -----------------------------------------------------------------------------------------------------
Italy - 2.5%
- -----------------------------------------------------------------------------------------------------
Cementir S.p.A. (Home Construction) 342,700 $1,018,251
- -----------------------------------------------------------------------------------------------------
Italcementi Group S.p.A. (Home Construction) 140,500 1,615,823
- -----------------------------------------------------------------------------------------------------
Italcementi Group S.p.A. - RNC (Home Construction) 208,700 1,456,631
- -----------------------------------------------------------------------------------------------------
Mediaset S.p.A. (Broadcast & Cable TV) 249,400 2,284,122
- -----------------------------------------------------------------------------------------------------
Merloni Elettrodomestici S.p.A. (Furniture & Appliances) 150,000 2,198,732
- -----------------------------------------------------------------------------------------------------
Saipem S.p.A. (Oil Services) 675,300 5,090,980
- -----------------------------------------------------------------------------------------------------
Tods S.p.A. (Apparel Manufacturers) 27,548 1,040,005
- -----------------------------------------------------------------------------------------------------
$14,704,544
- -----------------------------------------------------------------------------------------------------
Japan - 23.9%
- -----------------------------------------------------------------------------------------------------
Aeon Credit Service Co., Ltd. (Banks & Credit Cos.) 73,400 $3,168,819
- -----------------------------------------------------------------------------------------------------
Alps Electric Co., Ltd. (Electronics) 233,000 3,789,400
- -----------------------------------------------------------------------------------------------------
Brother Industries Ltd. (Electronics) 609,000 6,001,723
- -----------------------------------------------------------------------------------------------------
Chugai Pharmaceutical Co., Ltd. (Pharmaceuticals) 322,900 4,037,156
- -----------------------------------------------------------------------------------------------------
Citizen Electronic Co., Ltd. (Electronics) 65,400 4,930,754
- -----------------------------------------------------------------------------------------------------
Credit Saison Co., Ltd. (Banks & Credit Cos.) 253,800 5,307,670
- -----------------------------------------------------------------------------------------------------
Eisai Co., Ltd. (Pharmaceuticals) 80,000 1,874,074
- -----------------------------------------------------------------------------------------------------
Fast Retailing Co. (Specialty Stores) 122,000 5,759,727
- -----------------------------------------------------------------------------------------------------
Fuji Television Network, Inc. (Broadcast & Cable TV) 440 2,152,313
- -----------------------------------------------------------------------------------------------------
Fujikura Kasei Co. (Special Products & Services) 352,000 2,423,228
- -----------------------------------------------------------------------------------------------------
Fujikura Ltd. (Electrical Equipment) 1,115,000 4,883,723
- -----------------------------------------------------------------------------------------------------
Fujimi, Inc. (Special Products & Services) 46,800 1,415,572
- -----------------------------------------------------------------------------------------------------
Fujisawa Pharmaceuticals Co. (Pharmaceuticals) 108,000 2,462,146
- -----------------------------------------------------------------------------------------------------
Ibiden Co., Ltd. (Electronics) 225,100 3,396,249
- -----------------------------------------------------------------------------------------------------
JACCS Co., Ltd. (Banks & Credit Cos.) 470,000 1,771,754
- -----------------------------------------------------------------------------------------------------
Japan Telecom Holdings Co., Ltd. (Telephone Services) 1,125 3,332,137
- -----------------------------------------------------------------------------------------------------
JFE Holdings, Inc. (Metals & Mining) 102,400 2,242,571
- -----------------------------------------------------------------------------------------------------
JSR Corp. (Specialty Chemicals) 206,000 3,324,400
- -----------------------------------------------------------------------------------------------------
KDDI Corp. (Telephone Services) 923 4,688,938
- -----------------------------------------------------------------------------------------------------
Konica Minolta Holdings, Inc. (Electronics) 192,000 2,547,018
- -----------------------------------------------------------------------------------------------------
Meiwa Estate Co., Ltd. (Real Estate) 51,900 422,504
- -----------------------------------------------------------------------------------------------------
Mitsui Mining & Smelting Co., Ltd. (Machinery & Tools) 1,005,000 3,572,050
- -----------------------------------------------------------------------------------------------------
Mitsui Sumitomo Insurance Co., Ltd. (Insurance) 444,000 3,235,902
- -----------------------------------------------------------------------------------------------------
Nec Fielding Ltd. (Computer Software - Systems) 16,700 1,046,233
- -----------------------------------------------------------------------------------------------------
Nikko Securities Co., Ltd. (Brokerage & Asset Managers) 883,000 4,707,643
- -----------------------------------------------------------------------------------------------------
Nippon Electric Glass Co., Ltd. (Electronics) 347,000 5,341,336
- -----------------------------------------------------------------------------------------------------
Nippon Oil Corp. (Energy - Independent) 628,000 2,773,199
- -----------------------------------------------------------------------------------------------------
Nishimatsuya Chain Co., Ltd. (Specialty Stores) 84,500 2,123,592
- -----------------------------------------------------------------------------------------------------
Nissin Kogyo Co., Ltd. (Automotive) 84,800 2,055,020
- -----------------------------------------------------------------------------------------------------
Round One Corp. (Entertainment) 951 2,330,234
- -----------------------------------------------------------------------------------------------------
Round One Corp. (Entertainment)(S) 951 2,330,234
- -----------------------------------------------------------------------------------------------------
Shionogi & Co., Ltd. (Pharmaceuticals) 100,000 1,741,238
- -----------------------------------------------------------------------------------------------------
Stanley Electric Co., Ltd. (Automotive) 462,000 8,293,318
- -----------------------------------------------------------------------------------------------------
Sumitomo Bakelite Co., Ltd. (Specialty Chemicals) 935,000 $4,699,547
- -----------------------------------------------------------------------------------------------------
Sumitomo Real Estate Sales Co., Ltd. (Real Estate) 78,900 2,492,734
- -----------------------------------------------------------------------------------------------------
Tamron Co., Ltd. (Specialty Products & Services) 31,000 1,271,552
- -----------------------------------------------------------------------------------------------------
The Chiba Bank Ltd. (Banks & Credit Cos.) 1,161,000 4,532,918
- -----------------------------------------------------------------------------------------------------
Tokyo Broadcasting System, Inc. (Broadcast & Cable TV) 290,000 4,013,643
- -----------------------------------------------------------------------------------------------------
Tokyo Gas Co., Ltd. (Natural Gas Distribution) 854,000 2,843,728
- -----------------------------------------------------------------------------------------------------
Uni-Charm Corp. (Consumer Goods & Services) 120,700 5,720,020
- -----------------------------------------------------------------------------------------------------
Uniden Corp. (Telecom - Wireline) 111,000 1,568,137
- -----------------------------------------------------------------------------------------------------
YAMAHA Corp. (Leisure & Toys) 306,300 5,814,518
- -----------------------------------------------------------------------------------------------------
$142,438,672
- -----------------------------------------------------------------------------------------------------
Luxembourg - 0.6%
- -----------------------------------------------------------------------------------------------------
Tenaris S.A., ADR (Oil Services) 140,100 $3,687,432
- -----------------------------------------------------------------------------------------------------
Mexico - 3.3%
- -----------------------------------------------------------------------------------------------------
Alfa S.A., "A" (Conglomerates) 1,300,000 $3,143,883
- -----------------------------------------------------------------------------------------------------
Apasco S.A. (Home Construction) 433,800 3,333,888
- -----------------------------------------------------------------------------------------------------
Controladora Comercial Mexicana S.A. de C.V.
(General Merchandise) 3,153,600 2,165,501
- -----------------------------------------------------------------------------------------------------
Corporacion GEO, S.A. de C.V., "B" (Home Construction)* 726,800 3,272,087
- -----------------------------------------------------------------------------------------------------
Grupo Elektra S.A. de C.V. (Specialty Stores) 743,000 2,574,652
- -----------------------------------------------------------------------------------------------------
Grupo Financiero Inbursa, S.A. de C.V. (Banks & Credit Cos.) 367,700 401,310
- -----------------------------------------------------------------------------------------------------
TV Azteca S.A. de C.V., ADR (Broadcast & Cable TV) 600,300 4,502,250
- -----------------------------------------------------------------------------------------------------
$19,393,571
- -----------------------------------------------------------------------------------------------------
Netherlands - 3.0%
- -----------------------------------------------------------------------------------------------------
ASM International N.V. (Electronics)* 110,000 $1,622,500
- -----------------------------------------------------------------------------------------------------
ASM Lithography Holding N.V. (Electronics)* 71,100 933,543
- -----------------------------------------------------------------------------------------------------
Euronext N.V. (Banks & Credit Cos.) 140,900 3,432,933
- -----------------------------------------------------------------------------------------------------
Fugro N.V. (Oil Services) 86,576 4,278,250
- -----------------------------------------------------------------------------------------------------
Ordina N.V. (Computer Software - Systems) 95,459 823,093
- -----------------------------------------------------------------------------------------------------
PinkRoccade N.V. (Computer Software - Systems)* 75,600 810,420
- -----------------------------------------------------------------------------------------------------
VNU N.V. (Printing & Publishing) 203,103 5,956,620
- -----------------------------------------------------------------------------------------------------
$17,857,359
- -----------------------------------------------------------------------------------------------------
Norway - 0.3%
- -----------------------------------------------------------------------------------------------------
Gjensidige NOR ASA (Banks & Credit Cos.) 45,800 $1,590,503
- -----------------------------------------------------------------------------------------------------
Portugal - 0.2%
- -----------------------------------------------------------------------------------------------------
Portugal Telecom S.A., ADR (Telephone Services) 166,810 $1,312,795
- -----------------------------------------------------------------------------------------------------
Singapore - 2.2%
- -----------------------------------------------------------------------------------------------------
DBS Group Holdings Ltd. (Banks & Credit Cos.) 597,000 $4,453,549
- -----------------------------------------------------------------------------------------------------
MobileOne Asia Ltd. (Wireless Communications) 4,500,000 3,643,198
- -----------------------------------------------------------------------------------------------------
Neptune Orient Lines Ltd. (Railroad & Shipping) 947,000 1,067,891
- -----------------------------------------------------------------------------------------------------
Singapore Telecommunications Ltd. (Telephone Services) 3,830,000 3,676,623
- -----------------------------------------------------------------------------------------------------
$12,841,261
- -----------------------------------------------------------------------------------------------------
South Africa - 1.0%
- -----------------------------------------------------------------------------------------------------
Gold Fields Ltd. (Precious Metals) 300,100 $4,252,417
- -----------------------------------------------------------------------------------------------------
Impala Platinum Holdings Ltd. (Precious Metals) 24,000 2,005,235
- -----------------------------------------------------------------------------------------------------
$6,257,652
- -----------------------------------------------------------------------------------------------------
South Korea - 0.8%
- -----------------------------------------------------------------------------------------------------
Hyundai Motor Co., Ltd. (Automotive) 158,540 $4,562,600
- -----------------------------------------------------------------------------------------------------
Spain - 1.4%
- -----------------------------------------------------------------------------------------------------
Acciona S.A. (Engineering - Construction) 50,700 $2,622,958
- -----------------------------------------------------------------------------------------------------
Cortefiel S.A. (Apparel Manufacturers) 215,800 1,558,990
- -----------------------------------------------------------------------------------------------------
Enagas S.A. (Natural Gas - Pipeline) 475,412 4,160,164
- -----------------------------------------------------------------------------------------------------
$8,342,112
- -----------------------------------------------------------------------------------------------------
Sweden - 3.9%
- -----------------------------------------------------------------------------------------------------
Alfa Laval (Machinery & Tools) 461,110 $5,415,582
- -----------------------------------------------------------------------------------------------------
Atlas Copco AB, "A" (Machinery & Tools) 53,600 1,570,326
- -----------------------------------------------------------------------------------------------------
Autoliv, Inc. (Automotive) 228,500 6,856,593
- -----------------------------------------------------------------------------------------------------
Biacore International AB (Medical Equipment) 125,000 3,008,763
- -----------------------------------------------------------------------------------------------------
D. Carnegie & Co., AB (Brokerage & Asset Managers) 215,900 2,187,366
- -----------------------------------------------------------------------------------------------------
Svenska Handelsbanken Series AB, "A" (Banks & Credit Cos.) 152,090 2,581,223
- -----------------------------------------------------------------------------------------------------
Swedish Match AB (Tobacco) 212,400 1,617,356
- -----------------------------------------------------------------------------------------------------
$23,237,209
- -----------------------------------------------------------------------------------------------------
Switzerland - 4.1%
- -----------------------------------------------------------------------------------------------------
Actelion Ltd. (Pharmaceuticals) 42,800 $3,672,602
- -----------------------------------------------------------------------------------------------------
Bank Sarasin & Compagnie AG (Banks & Credit Cos.) 1,400 1,887,104
- -----------------------------------------------------------------------------------------------------
Julius Baer Holdings Ltd. (Brokerage & Asset Managers) 14,278 4,110,956
- -----------------------------------------------------------------------------------------------------
Nobel Biocare AG (Medical Equipment) 40,900 3,563,798
- -----------------------------------------------------------------------------------------------------
Straumann Holdings AG (Medical Equipment) 32,782 3,427,728
- -----------------------------------------------------------------------------------------------------
Synthes-Stratec, Inc. (Medical Equipment) 5,500 4,875,739
- -----------------------------------------------------------------------------------------------------
Vontobel Holdings AG (Brokerage & Asset Managers) 169,000 2,874,716
- -----------------------------------------------------------------------------------------------------
$24,412,643
- -----------------------------------------------------------------------------------------------------
Taiwan - 0.7%
- -----------------------------------------------------------------------------------------------------
Ambit Microsystems Corp. (Telecom - Wireline) 140,000 $412,985
- -----------------------------------------------------------------------------------------------------
Hon Hai Precision Industry Co., Ltd. (PC & Peripheral) 860,400 3,724,234
- -----------------------------------------------------------------------------------------------------
$4,137,219
- -----------------------------------------------------------------------------------------------------
Thailand - 1.8%
- -----------------------------------------------------------------------------------------------------
Aeon Thana Sinsa (Banks & Credit Cos.) 331,800 $1,740,645
- -----------------------------------------------------------------------------------------------------
Bangkok Bank (Banks & Credit Cos.) 1,373,800 2,951,456
- -----------------------------------------------------------------------------------------------------
BEC World Public Co., Ltd., PLC (Broadcast & Cable TV) 222,200 1,309,998
- -----------------------------------------------------------------------------------------------------
Hana Microelectronics Ltd. (Electronics) 409,400 961,369
- -----------------------------------------------------------------------------------------------------
PTT Exploration & Production Public Co., Ltd.
(Energy - Independent) 264,700 1,091,069
- -----------------------------------------------------------------------------------------------------
Siam Cement Public Co., Ltd. (Home Construction) 568,000 2,866,250
- -----------------------------------------------------------------------------------------------------
$10,920,787
- -----------------------------------------------------------------------------------------------------
United Kingdom - 15.6%
- -----------------------------------------------------------------------------------------------------
Amdocs Ltd. (Computer Software)* 111,100 $2,088,680
- -----------------------------------------------------------------------------------------------------
Bloomsbury Publishing PLC (Printing & Publishing) 812,800 3,431,736
- -----------------------------------------------------------------------------------------------------
BOC Group PLC (Specialty Chemicals) 225,000 3,089,293
- -----------------------------------------------------------------------------------------------------
Bodycote International PLC (Electrical Equipment) 2,099,320 5,230,904
- -----------------------------------------------------------------------------------------------------
Burberry Group PLC (Apparel Manufacturers) 310,000 1,677,294
- -----------------------------------------------------------------------------------------------------
Capital Radio PLC (Broadcast & Cable TV) 235,133 1,868,263
- -----------------------------------------------------------------------------------------------------
Close Brothers Group PLC (Banks & Credit Cos.) 300,200 3,567,905
- -----------------------------------------------------------------------------------------------------
Collins Stewart Tullett PLC (Brokerage & Asset Managers) 239,900 1,492,651
- -----------------------------------------------------------------------------------------------------
Cookson Group PLC (Electronics) 7,187,100 3,733,363
- -----------------------------------------------------------------------------------------------------
Easy Jet PLC (Airlines)* 608,800 2,223,822
- -----------------------------------------------------------------------------------------------------
Granada PLC (Broadcast & Cable TV) 1,600,000 2,486,727
- -----------------------------------------------------------------------------------------------------
ICAP PLC (Brokerage & Asset Managers) 41,000 $850,799
- -----------------------------------------------------------------------------------------------------
Intertek Group PLC (Special Products & Services) 202,510 1,726,873
- -----------------------------------------------------------------------------------------------------
Invensys PLC (Electrical Equipment) 6,948,290 3,291,693
- -----------------------------------------------------------------------------------------------------
Invesco MIM PLC (Brokerage & Asset Managers) 374,600 2,836,303
- -----------------------------------------------------------------------------------------------------
Johnson Service Group PLC (Consumer Services) 340,600 1,783,412
- -----------------------------------------------------------------------------------------------------
Johnston Press PLC (Printing & Publishing) 838,834 5,960,856
- -----------------------------------------------------------------------------------------------------
Kesa Electricals PLC (Specialty Stores) 482,172 1,785,321
- -----------------------------------------------------------------------------------------------------
Kingfisher PLC (Specialty Stores) 578,252 2,508,731
- -----------------------------------------------------------------------------------------------------
Marconi Corp., PLC (Telecom - Wireline) 246,320 1,842,505
- -----------------------------------------------------------------------------------------------------
MFI Furniture Group PLC (Specialty Stores) 900,000 2,767,647
- -----------------------------------------------------------------------------------------------------
Next PLC (General Merchandise) 257,220 4,805,821
- -----------------------------------------------------------------------------------------------------
Old Mutual PLC (Banks & Credit Cos.) 2,100,450 3,238,342
- -----------------------------------------------------------------------------------------------------
PHS Group PLC (Business Services) 1,613,300 2,292,861
- -----------------------------------------------------------------------------------------------------
Reckitt Benckiser PLC (Consumer Goods & Services) 323,248 6,501,562
- -----------------------------------------------------------------------------------------------------
Schroders PLC (Brokerage & Asset Managers) 230,000 2,565,351
- -----------------------------------------------------------------------------------------------------
Signet Group PLC (Specialty Stores) 1,205,500 2,114,054
- -----------------------------------------------------------------------------------------------------
St. James' Place Capital PLC (Insurance) 717,300 1,466,569
- -----------------------------------------------------------------------------------------------------
Taylor & Francis Group PLC (Printing & Publishing) 340,000 3,009,505
- -----------------------------------------------------------------------------------------------------
Taylor Nelson Sofres PLC (Broadcast & Cable TV) 633,700 2,022,467
- -----------------------------------------------------------------------------------------------------
United Utilities PLC (Utilities - Electric Power) 382,000 1,701,746
- -----------------------------------------------------------------------------------------------------
William Hill PLC (Gaming & Lodging) 441,810 2,276,637
- -----------------------------------------------------------------------------------------------------
WPP Group PLC (Broadcast & Cable TV) 164,900 1,391,084
- -----------------------------------------------------------------------------------------------------
Yell Group PLC (Broadcast & Cable TV)* 638,140 3,203,461
- -----------------------------------------------------------------------------------------------------
$92,834,238
- -----------------------------------------------------------------------------------------------------
Total Foreign Stocks $563,583,857
- -----------------------------------------------------------------------------------------------------
U.S. Stocks - 3.4%
- -----------------------------------------------------------------------------------------------------
Business Services - 1.1%
- -----------------------------------------------------------------------------------------------------
Cognizant Technology Solutions Corp.* 36,500 $1,331,155
- -----------------------------------------------------------------------------------------------------
Manpower, Inc. 132,310 4,908,701
- -----------------------------------------------------------------------------------------------------
$6,239,856
- -----------------------------------------------------------------------------------------------------
Containers - 0.3%
- -----------------------------------------------------------------------------------------------------
Smurfit-Stone Container Corp.* 118,025 $1,768,014
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 0.3%
- -----------------------------------------------------------------------------------------------------
Massey Energy Co. 133,100 $1,770,230
- -----------------------------------------------------------------------------------------------------
Oil Services - 1.3%
- -----------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 318,100 $7,618,495
- -----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.4%
- -----------------------------------------------------------------------------------------------------
Bowne & Co., Inc. 172,600 $2,580,370
- -----------------------------------------------------------------------------------------------------
Total U.S. Stocks $19,976,965
- -----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $496,040,777) $583,560,822
- -----------------------------------------------------------------------------------------------------
Rights
- -----------------------------------------------------------------------------------------------------
Stada Arzneimittel* (Identified Cost, $246,314) 117,798 $263,536
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 2.2%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
UBS Finance, Inc., due 10/01/03, at Amortized Cost $13,254 $13,254,000
- -----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 0.7%
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Identified Cost 3,875,896 $3,875,896
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $513,416,987) $600,954,254
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (0.8)% (4,765,583)
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $596,188,671
- -----------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
(S) When-issued security. At September 30, 2003, the fund had sufficient cash and/or securities at
least equal to the value of the when-issued security.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities composing
the total value of your fund.
AT 9/30/03
ASSETS
Investments, at value, including $3,761,278 of securities
on loan (identified cost, $513,416,987) $600,954,254
- -----------------------------------------------------------------------------------------------------
Cash 692,817
- -----------------------------------------------------------------------------------------------------
Foreign currency, at value (identified cost $2,568,772) 2,614,943
- -----------------------------------------------------------------------------------------------------
Receivable for forward foreign currency exchange contracts 1,143,136
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 6,908,327
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 6,917,261
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 927,667
- -----------------------------------------------------------------------------------------------------
Other assets 7
- -----------------------------------------------------------------------------------------------------
Total assets $620,158,412
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for dividends on securities sold short $20,161
- -----------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange contracts 659,936
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 18,168,181
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 1,216,637
- -----------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 3,875,896
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 15,543
- -----------------------------------------------------------------------------------------------------
Reimbursement fee 5,701
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 7,684
- -----------------------------------------------------------------------------------------------------
Program manager fee 2
- -----------------------------------------------------------------------------------------------------
Total liabilities $23,969,741
- -----------------------------------------------------------------------------------------------------
Net assets $596,188,671
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $514,785,449
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 88,041,658
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and foreign
currency transactions (6,213,970)
- -----------------------------------------------------------------------------------------------------
Accumulated net investment loss (424,466)
- -----------------------------------------------------------------------------------------------------
Total $596,188,671
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 38,630,001
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
Net assets $371,041,096
- -----------------------------------------------------------------------------------------------------
Shares outstanding 23,969,178
- -----------------------------------------------------------------------------------------------------
Net asset value per share $15.48
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$15.48) $16.42
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $84,766,982
- -----------------------------------------------------------------------------------------------------
Shares outstanding 5,564,188
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.23
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $69,101,003
- -----------------------------------------------------------------------------------------------------
Shares outstanding 4,541,459
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.22
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $69,214,190
- -----------------------------------------------------------------------------------------------------
Shares outstanding 4,421,401
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $15.65
- -----------------------------------------------------------------------------------------------------
Class R shares
Net assets $1,596,178
- -----------------------------------------------------------------------------------------------------
Shares outstanding 103,186
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $15.47
- -----------------------------------------------------------------------------------------------------
Class 529A shares
Net assets $297,458
- -----------------------------------------------------------------------------------------------------
Shares outstanding 19,275
- -----------------------------------------------------------------------------------------------------
Net asset value and redemption price per share $15.43
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$15.43) $16.37
- -----------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $69,705
- -----------------------------------------------------------------------------------------------------
Shares outstanding 4,588
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.19
- -----------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $102,059
- -----------------------------------------------------------------------------------------------------
Shares outstanding 6,726
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.17
- -----------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A and Class 529A shares are reduced. A contingent
deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class 529B, and Class 529C
shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and paid in expenses. It also
describes any gains and/or losses generated by fund operations.
FOR YEAR ENDED 9/30/03
NET INVESTMENT INCOME (LOSS)
Income
- -----------------------------------------------------------------------------------------------------
Dividends $7,889,411
- -----------------------------------------------------------------------------------------------------
Interest 166,013
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (821,027)
- -----------------------------------------------------------------------------------------------------
Total investment income $7,234,397
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $3,302,708
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 9,994
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 360,075
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 719,411
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 564,029
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 413,506
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 2,134
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 542
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 260
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 504
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 387
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 65
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 126
- -----------------------------------------------------------------------------------------------------
Administrative fee 31,796
- -----------------------------------------------------------------------------------------------------
Custodian fee 655,343
- -----------------------------------------------------------------------------------------------------
Printing 67,453
- -----------------------------------------------------------------------------------------------------
Postage 35,243
- -----------------------------------------------------------------------------------------------------
Auditing fees 36,000
- -----------------------------------------------------------------------------------------------------
Legal fees 3,469
- -----------------------------------------------------------------------------------------------------
Miscellaneous 502,500
- -----------------------------------------------------------------------------------------------------
Total expenses $6,705,545
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (4,486)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (666,129)
- -----------------------------------------------------------------------------------------------------
Net expenses $6,034,930
- -----------------------------------------------------------------------------------------------------
Net investment income $1,199,467
- -----------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $7,005,272
- -----------------------------------------------------------------------------------------------------
Securities sold short (684,370)
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions (1,341,724)
- -----------------------------------------------------------------------------------------------------
Net realized gain on investments and foreign
currency transactions $4,979,178
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $105,948,806
- -----------------------------------------------------------------------------------------------------
Securities sold short (972,109)
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 487,647
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign
currency translation $105,464,344
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency $110,443,522
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $111,642,989
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
FOR YEARS ENDED 9/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income (loss) $1,199,467 $(96,169)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 4,979,178 (10,578,944)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 105,464,344 (13,742,624)
- --------------------------------------------------------- ------------------ ----------------
Increase (decrease) in net assets from operations $111,642,989 $(24,417,737)
- --------------------------------------------------------- ------------------ ----------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and foreign currency
transactions (Class A) $-- $(146)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency
transactions (Class B) -- (57)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency
transactions (Class C) -- (35)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency
transactions (Class I) -- (40)
- --------------------------------------------------------- ------------------ ----------------
Total distributions declared to shareholders $-- $(278)
- --------------------------------------------------------- ------------------ ----------------
Net increase in net assets from fund share transactions $275,272,994 $197,796,735
- --------------------------------------------------------- ------------------ ----------------
Total increase in net assets $386,915,983 $173,378,720
- --------------------------------------------------------- ------------------ ----------------
NET ASSETS
At beginning of period $209,272,688 $35,893,968
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated net investment loss
of $424,466 and $498,634, respectively) $596,188,671 $209,272,688
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- ----------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years (or,
if shorter, the period of the fund's operation). Certain information reflects financial results for a single fund share. The
total returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund
(assuming reinvestment of all distributions). This information has been audited by the fund's independent auditors, whose
report, together with the fund's financial statements, are included in this report.
FOR YEARS ENDED 9/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning of year $11.82 $11.68 $15.24 $13.15 $9.42
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $0.07 $0.02 $0.05 $(0.10) $(0.01)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 3.59 0.12 (3.45) 6.62 3.78
- ------------------------------------------------ -------- ----------- ---------- ---------- ----------
Total from investment operations $3.66 $0.14 $(3.40) $6.52 $3.77
- ------------------------------------------------ -------- ----------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $-- $-- $-- $-- $(0.04)
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- (0.00)+++ (0.08) (4.43) (0.00)+++
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- (0.08) -- --
- ------------------------------------------------ -------- ----------- ---------- ---------- ----------
Total distributions declared to shareholders $-- $(0.00)+++ $(0.16) $(4.43) $(0.04)
- ------------------------------------------------ -------- ----------- ---------- ---------- ----------
Net asset value, end of year $15.48 $11.82 $11.68 $15.24 $13.15
- ------------------------------------------------ -------- ----------- ---------- ---------- ----------
Total return (%)(+) 31.08 1.11 (22.52) 53.54 40.11
- ----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
CLASS A (CONTINUED) 2003 2002 2001 2000 1999
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.62 1.64 1.66 1.77 1.78
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.51 0.13 0.37 (0.62) (0.13)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 88 130 136 152 162
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year (000 Omitted) $371,042 $121,779 $20,858 $202 $122
- ----------------------------------------------------------------------------------------------------------------------------
(S) Prior to October 1, 2000, subject to reimbursement by the fund, the investment adviser contractually agreed under a
temporary expense reimbursement agreement to pay all of the fund's operating expenses, exclusive of management and
distribution and service fees. In consideration, the fund paid the investment adviser a fee not greater than 1.75% of
average daily net assets. In addition, the investment adviser and the distributor voluntarily waived their fees for the
periods indicated. Effective October 1, 2000, the fund began paying the investment adviser a fee not greater than 0.30%
of average daily net assets. In addition the investment adviser and the distributor no longer waive their fees. To the
extent actual expenses were over these limitations, the net investment income (loss) per share and the ratios would have
been:
Net investment income (loss) $0.04 $(0.02) $(0.11) $(0.43) $(0.32)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.81 1.89 2.86 3.92 4.54
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.32 (0.12) (0.84) (2.77) (2.89)
- ----------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
+++ Per share amount was less than $(0.01). The per share amount is not in accordance with the net realized and unrealized
loss for the period because of the timing of sales of fund shares and the amount of per share realized and unrealized
gains and losses at such time.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the
results would have been lower.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
PERIOD ENDED
CLASS B 2003 2002 9/30/2001*
Net asset value, beginning of period $11.70 $11.65 $15.23
- -----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.02) $(0.07) $(0.02)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 3.55 0.12 (3.42)
- --------------------------------------------------------- ----------- ----------- ----------------
Total from investment operations $3.53 $0.05 $(3.44)
- --------------------------------------------------------- ----------- ----------- ----------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and foreign
currency transactions $-- $(0.00)+++ $(0.07)
- -----------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments and
foreign currency transactions -- -- (0.07)
- --------------------------------------------------------- ----------- ----------- ----------------
Total distributions declared to shareholders $-- $(0.00)+++ $(0.14)
- --------------------------------------------------------- ----------- ----------- ----------------
Net asset value, end of period $15.23 $11.70 $11.65
- --------------------------------------------------------- ----------- ----------- ----------------
Total return (%) 30.17 0.43 (22.84)++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.27 2.29 2.31+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (0.17) (0.55) (0.18)+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 88 130 136
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $84,767 $45,299 $7,735
- -----------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser has contractually agreed under a temporary expense
reimbursement agreement to pay all of the fund's operating expenses, exclusive of management and distribution and
service fees. In consideration, the fund pays the investment adviser a fee not greater than 0.30% of average daily net
assets. To the extent actual expenses were over this limitation, the net investment loss per share and the ratios would
have been:
Net investment loss $(0.05) $(0.10) $(0.18)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.46 2.54 3.51+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (0.36) (0.80) (1.39)+
- -----------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class B shares, October 2, 2000, through September 30, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly. The per share amount is not in accordance with the net
realized and unrealized loss for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
PERIOD ENDED
CLASS C 2003 2002 9/30/2001*
Net asset value, beginning of period $11.69 $11.63 $15.23
- -----------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.02) $(0.07) $(0.03)
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments
and foreign currency 3.55 0.13 (3.43)
- --------------------------------------------------------- ----------- ----------- ----------------
Total from investment operations $3.53 $0.06 $(3.46)
- --------------------------------------------------------- ----------- ----------- ----------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and foreign
currency transactions $-- $(0.00)+++ $(0.07)
- -----------------------------------------------------------------------------------------------------------------
In excess of net realized gain on investments and
foreign currency transactions -- -- (0.07)
- --------------------------------------------------------- ----------- ----------- ----------------
Total distributions declared to shareholders $-- $(0.00)+++ $(0.14)
- --------------------------------------------------------- ----------- ----------- ----------------
Net asset value, end of period $15.22 $11.69 $11.63
- --------------------------------------------------------- ----------- ----------- ----------------
Total return (%) 30.20 0.52 (22.98)++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.27 2.29 2.31+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (0.17) (0.55) (0.24)+
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover 88 130 136
- -----------------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $69,101 $28,694 $4,910
- -----------------------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually agreed under a temporary expense
reimbursement agreement to pay all of the fund's operating expenses, exclusive of management, distribution and service
fees. In consideration, the fund pays the investment adviser a reimbursement fee not greater than 0.30% of average daily
net assets. To the extent actual expenses were over this limitation, the net investment loss per share and the ratios
would have been:
Net investment loss $(0.04) $(0.10) $(0.19)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.46 2.54 3.51+
- -----------------------------------------------------------------------------------------------------------------
Net investment loss (0.36) (0.80) (1.45)+
- -----------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class C shares, October 2, 2000, through September 30, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly. The per share amount is not in accordance with the net
realized and unrealized loss for the period because of the timing of sales of fund shares and the amount of per share
realized and unrealized gains and losses at such time.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
CLASS I 2003 2002 2001 2000 1999
Net asset value, beginning of year $11.91 $11.73 $15.25 $13.16 $9.42
- ----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $0.12 $0.06 $0.07 $(0.10) $(0.03)
- ----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 3.62 0.12* (3.43) 6.62 3.81
- ------------------------------------------------ -------- ---------- ---------- ---------- ----------
Total from investment operations $3.74 $0.18 $(3.36) $6.52 $3.78
- ------------------------------------------------ -------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $-- $-- $-- $-- $(0.04)
- ----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- (0.00)+++ (0.08) (4.43) (0.00)+++
- ----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- (0.08) -- --
- ------------------------------------------------ -------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $-- $(0.00) $(0.16) $(4.43) $(0.04)
- ------------------------------------------------ -------- ---------- ---------- ---------- ----------
Net asset value, end of year $15.65 $11.91 $11.73 $15.25 $13.16
- ------------------------------------------------ -------- ---------- ---------- ---------- ----------
Total return (%) 31.40 1.53 (22.21) 53.50 40.22
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.27 1.29 1.31 1.77 1.78
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.89 0.46 0.53 (0.59) (0.23)
- ----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 88 130 136 152 162
- ----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year (000 Omitted) $69,214 $13,456 $2,391 $2,709 $985
- ----------------------------------------------------------------------------------------------------------------------------
(S) Prior to October 1, 2000, subject to reimbursement by the fund, the investment adviser contractually agreed under a
temporary expense reimbursement agreement to pay all of the fund's operating expenses, exclusive of management fee. In
consideration, the fund paid the investment adviser a fee not greater than 1.75% of average daily net assets. In
addition, the investment adviser voluntarily waived its fee for the periods indicated. Effective October 1, 2000, the
fund began paying the investment adviser a fee not greater than 0.30% of average daily net assets. In addition the
investment adviser no longer waives its fee. To the extent actual expenses were over these limitations, the net
investment income (loss) per share and the ratios would have been:
Net investment income (loss) $0.09 $0.03 $(0.09) $(0.36) $(0.29)
- ----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 1.46 1.54 2.51 3.42 4.04
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.70 0.21 (0.68) (2.27) (2.49)
- ----------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
+++ Per share amount was less than $(0.01).
* The per share amount is not in accordance with the net realized and unrealized loss for the period because of the timing
of sales of fund shares and the amount of per share realized and unrealized gains and losses at such time.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
CLASS R 9/30/2003*
Net asset value, beginning of period $12.26
- ------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.04
- ------------------------------------------------------------------------------
Net realized and unrealized gain on investments and foreign
currency 3.17
- ------------------------------------------------------------------------------
Total from investment operations $3.21
- ------------------------------------------------------------------------------
Net asset value, end of period $15.47
- ------------------------------------------------------------------------------
Total return (%) 26.18++
- ------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.77+
- ------------------------------------------------------------------------------
Net investment income 0.44+
- ------------------------------------------------------------------------------
Portfolio turnover 88
- ------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $1,596
- ------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser has
contractually agreed under a temporary expense reimbursement agreement to
pay all of the fund's operating expenses, exclusive of management and
distribution and service fees. In consideration, the fund pays the
investment adviser a fee not greater than 0.30% of average daily net
assets. To the extent actual expenses were over this limitation, the net
investment income per share and the ratios would have been:
Net investment income $0.03
- ------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
Expenses## 1.96+
- ------------------------------------------------------------------------------
Net investment income 0.25+
- ------------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through September 30, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS 529A 9/30/03 9/30/02*
Net asset value, beginning of period $11.81 $12.74
- --------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.07 $0.00+++
- --------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 3.55 (0.93)
- --------------------------------------------------------------- ------------ -----------
Total from investment operations $3.62 $(0.93)
- --------------------------------------------------------------- ------------ -----------
Net asset value, end of period $15.43 $11.81
- --------------------------------------------------------------- ------------ -----------
Total return (%)(+) 30.76 (7.38)++
- --------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 1.87 1.89+
- --------------------------------------------------------------------------------------------------
Net investment income 0.50 0.09+
- --------------------------------------------------------------------------------------------------
Portfolio turnover 88 130
- --------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $297 $32
- --------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser contractually agreed under a
temporary expense reimbursement agreement to pay all of the fund's operating expenses, exclusive
of management and distribution and service fees. In consideration, the fund pays the investment
adviser a fee not greater than 0.55% of average daily net assets. To the extent actual expenses
were over this limitation, the net investment income (loss) per share and the ratios would have
been:
Net investment income (loss) $0.04 $(0.00)+++
- --------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.06 2.14+
- --------------------------------------------------------------------------------------------------
Net investment income (loss) 0.31 (0.16)+
- --------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529A shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(+) Total returns for Class 529A shares do not include the applicable sales charge. If the charge
had been included, the results would have been lower.
See notes to financial statements.
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS 529B 9/30/03 9/30/02*
Net asset value, beginning of period $11.70 $12.63
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.05) $(0.02)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 3.54 (0.91)
- --------------------------------------------------------------- ------------- -----------
Total from investment operations $3.49 $(0.93)
- --------------------------------------------------------------- ------------- -----------
Net asset value, end of period $15.19 $11.70
- --------------------------------------------------------------- ------------- -----------
Total return (%) 29.83 (7.44)++
- ---------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 2.52 2.54+
- ---------------------------------------------------------------------------------------------------
Net investment loss (0.39) (0.98)+
- ---------------------------------------------------------------------------------------------------
Portfolio turnover 88 130
- ---------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $70 $6
- ---------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser has contractually agreed under a
temporary expense reimbursement agreement to pay all of the fund's operating expenses, exclusive
of management and distribution and service fees. In consideration, the fund pays the investment
adviser a fee not greater than 0.55% of average daily net assets. To the extent actual expenses
were over this limitation, the net investment loss per share and the ratios would have been:
Net investment loss $(0.07) $(0.02)
- ---------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.71 2.79+
- ---------------------------------------------------------------------------------------------------
Net investment loss (0.58) (1.23)+
- ---------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529B shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS 529C 9/30/03 9/30/02*
Net asset value, beginning of period $11.69 $12.62
- ---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.01) $(0.02)
- ---------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 3.49 (0.91)
- --------------------------------------------------------------- ------------- -----------
Total from investment operations $3.48 $(0.93)
- --------------------------------------------------------------- ------------- -----------
Net asset value, end of period $15.17 $11.69
- --------------------------------------------------------------- ------------- -----------
Total return (%) 29.88 (7.45)++
- ---------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA(S):
Expenses## 2.52 2.54+
- ---------------------------------------------------------------------------------------------------
Net investment loss (0.09) (0.92)+
- ---------------------------------------------------------------------------------------------------
Portfolio turnover 88 130
- ---------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $102 $7
- ---------------------------------------------------------------------------------------------------
(S) Subject to reimbursement by the fund, the investment adviser has contractually agreed under a
temporary expense reimbursement agreement to pay all of the fund's operating expenses, exclusive
of management and distribution and service fees. In consideration, the fund pays the investment
adviser a fee not greater than 0.55% of average daily net assets. To the extent actual expenses
were over this limitation, the net investment loss per share and the ratios would have been:
Net investment loss $(0.04) $(0.02)
- ---------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
Expenses## 2.71 2.79+
- ---------------------------------------------------------------------------------------------------
Net investment loss (0.28) (1.17)+
- ---------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529C shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS International New Discovery Fund (the fund) is a diversified series of MFS
Series Trust V (the trust). The trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended,
as an open-end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The fund can invest in foreign securities.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
INVESTMENT VALUATIONS - Equity securities in the fund's portfolio for which
market quotations are available are valued at the last sale or official
closing price on the primary market or exchange on which they are primarily
traded or at the last quoted bid price for securities in which there were no
sales during the day. If no sales are reported, as is the case for most
securities traded over the counter, securities are valued on the basis of
quotations obtained from brokers and dealers or on the basis of valuations
furnished by a pricing service. Short-term obligations in the fund's portfolio
are valued at amortized cost, which constitutes fair value as determined by
the Board of Trustees. Short-term obligations with a remaining maturity in
excess of 60 days will be valued upon dealer-supplied valuations. Portfolio
investments for which market quotations are not readily available, or whose
values have been materially affected by events occurring after the close of
their primary markets, are valued at fair value as determined in good faith by
or at the direction of the Board of Trustees.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that is
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a
joint trading account for the purpose of entering into one or more
repurchase agreements.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
SECURITY LOANS - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of the fund to certain qualified
institutions (the "Borrowers") approved by the fund. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the fund and the lending agent. Income from
securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The fund may enter
into forward foreign currency exchange contracts for hedging purposes as well
as for non-hedging purposes. For hedging purposes, the fund may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. The fund may also use contracts
in a manner intended to protect foreign currency-denominated securities from
declines in value due to unfavorable exchange rate movements. For non-hedging
purposes, the fund may enter into contracts with the intent of changing the
relative exposure of the fund's portfolio of securities to different
currencies to take advantage of anticipated changes. The forward foreign
currency exchange contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded as unrealized until
the contract settlement date. On contract settlement date, the gains or losses
are recorded as realized gains or losses on foreign currency transactions.
SHORT SALES - The fund may enter into short sales. A short sale transaction
involves selling a security, which the fund does not own, with the intent of
purchasing it later at a lower price. The fund will realize a gain if the
security price decreases and a loss if the security price increases between
the date of the short sale and the date on which the fund must replace the
borrowed security. Losses from short sales can exceed the proceeds of the
security sold; and they can also exceed the potential loss from an ordinary
buy and sell transaction. The amount of any gain will be decreased, and the
amount of any loss increased, by the amount of the premium, dividends, or
interest the fund may be required to pay in connection with a short sale.
Whenever the fund engages in short sales, its custodian segregates cash or
marketable securities in an amount that, when combined with the amount of
proceeds from the short sale deposited with the broker, at least equals the
current market value of the security sold short.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States
of America. All discount is accreted for tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Some securities may be purchased on a "when-issued" or
"forward delivery" basis, which means that the securities will be delivered to
the fund at a future date, usually beyond customary
settlement time.
FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the fund. During the period, the fund's custodian fees were reduced by $3,266
under this arrangement. The fund has entered into a directed brokerage
agreement, under which the broker will credit the fund a portion of the
commissions generated, to offset certain expenses of the fund. For the period,
the fund's other expenses were reduced by $1,220 under this agreement. These
amounts are shown as a reduction of total expenses on the Statement
of Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The fund
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, passive foreign investment companies,
and wash sales.
The tax character of distributions declared for the years ended September 30,
2003 and September 30, 2002 was as follows:
9/30/03 9/30/02
Distributions declared from:
- -----------------------------------------------------------------------------
Ordinary income $-- $--
Long-term capital gain -- 278
- -----------------------------------------------------------------------------
Total distributions declared $-- $278
- -----------------------------------------------------------------------------
During the year ended September 30, 2003, accumulated undistributed net
investment income decreased by $1,125,299, and accumulated net realized loss
on investments and foreign currency transactions decreased by $1,125,299 due
to differences between book and tax accounting for currency transactions and
passive foreign investment companies. This change had no effect on the net
assets or net asset value per share.
As of September 30, 2003, the components of distributable earnings
(accumulated losses) on a tax basis were as follows:
Undistributed ordinary income $549,553
------------------------------------------------------------------
Capital loss carryforward (5,027,801)
------------------------------------------------------------------
Unrealized appreciation 85,987,121
------------------------------------------------------------------
Other temporary differences (105,651)
------------------------------------------------------------------
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration.
EXPIRATION DATE
September 30, 2010 $(1,008,491)
------------------------------------------------------------------
September 30, 2011 (4,019,310)
------------------------------------------------------------------
Total $(5,027,801)
------------------------------------------------------------------
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B and Class
529B shares will convert to Class A and Class 529A shares, respectively,
approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities.
The management fee is computed daily and paid monthly at the following annual
rates:
First $500 million of average net assets 0.975%
------------------------------------------------------------------
Average net assets in excess of $500 million 0.925%
------------------------------------------------------------------
The fund has a temporary expense reimbursement agreement whereby MFS has
contractually agreed to pay all of the fund's operating expenses, exclusive of
management, distribution, and service fees. The fund in turn will pay MFS an
expense reimbursement fee not greater than 0.30% of average daily net assets
for Class A, Class B, Class C, Class I and Class R and not greater than 0.55%
of average daily net assets for Class 529A, Class 529B and Class 529C. To the
extent that the expense reimbursement fee exceeds the fund's actual expenses,
the excess will be applied to amounts paid by MFS in prior years. At September
30, 2003, aggregate unreimbursed expenses amounted
to $1,202,188.
The fund pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the fund, all of whom receive remuneration for their services to the fund from
MFS. Certain officers and Trustees of the fund are officers or directors of
MFS, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
The fund has an unfunded defined benefit plan for inactive Trustees and an
unfunded retirement benefit deferral plan for active Trustees. Included in
Trustees' compensation is a net increase of $6,071 as a result of the change
in the fund's pension liability for active Trustees and a pension expense of
$4,699 for inactive trustees for the year ended September 30, 2003.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS an administrative fee
at the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
------------------------------------------------------------------
Next $2.5 billion 0.0130%
------------------------------------------------------------------
Next $2.5 billion 0.0005%
------------------------------------------------------------------
In excess of $7 billion 0.0000%
------------------------------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$176,792 and $734 for the year ended September 30, 2003, as its portion of the
sales charge on sales of Class A and Class 529A shares of the fund,
respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R, Class 529A, Class 529B and Class 529C shares pursuant to Rule 12b-1
of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD an annual
percentage of its average daily net assets attributable to certain share
classes in order that MFD may pay expenses on behalf of the fund related to
the distribution and servicing of its shares. These expenses include a service
fee paid to each securities dealer that enters into a sales agreement with MFD
based on the average daily net assets of accounts attributable to such
dealers. These fees are calculated based on each class' average daily net
assets. The maximum distribution and service fees for each class of shares are
as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.75% 0.75%
- ----------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- ----------------------------------------------------------------------------------------------------------------------------
Total Distribution
Plan 0.35% 1.00% 1.00% 0.50% 0.50% 1.00% 1.00%
- ----------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the year ended September 30, 2003,
amounted to:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Service Fee
Retained
by MFD $43,027 $180 $8,558 $-- $184 $2 $9
- ----------------------------------------------------------------------------------------------------------------------------
Fees incurred under the distribution plan during the year ended September 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Effective Annual
Percentage Rates 0.35% 1.00% 1.00% 0.50% 0.35% 1.00% 1.00%
- ----------------------------------------------------------------------------------------------------------------------------
Payment of the 0.15% per annum portion of the Class 529A distribution fee that
is not currently being charged will be implemented on such a date as the
Trustees of the Trust may determine.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within, for
class A shares, 12 months following the purchase, and, for Class C and 529C
shares, the first year from the end of the calendar month of purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B and Class 529B shares in the event of a shareholder redemption within
six years from the end of the calendar month of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended September 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred Sales
Charges Imposed $3,507 $105,722 $14,563 $-- $--
- --------------------------------------------------------------------------------
The fund has and may from time to time enter into contracts with program
managers and other parties which administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered
into an agreement with MFD pursuant to which MFD receives an annual fee of up
to 0.35% from the fund based solely upon the value of the fund's 529 share
classes attributable to tuition programs to which MFD or a third party which
contracts with MFD provides administrative services. The current fee has been
established at 0.25% annually of average net assets of the fund's 529 share
classes attributable to such programs. The fee may only be increased with the
approval of the board of trustees that oversees the fund. The services
provided by MFD or a third party with which MFD contracts include
recordkeeping and tax reporting and account services, as well as services
designed to maintain the program's compliance with the Internal Revenue Code
and other regulatory requirements.
SHAREHOLDER SERVICING AGENT - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the fund's average daily net assets at an annual rate of
0.11%. Prior to April 1, 2003, the fee was 0.10% of the fund's average daily
net assets.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$567,260,804 and $292,369,231, respectively.
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $514,988,324
------------------------------------------------------------------
Gross unrealized appreciation $91,082,871
------------------------------------------------------------------
Gross unrealized depreciation (5,116,941)
------------------------------------------------------------------
Net unrealized appreciation $85,965,930
------------------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
Year ended 9/30/03 Year ended 9/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 24,801,144 $324,122,680 12,253,102 $164,132,962
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions -- -- 10 153
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (11,139,048) (143,532,807) (3,731,414) (48,908,349)
- -------------------------------------------------------------------------------------------------------------
Net increase 13,662,096 $180,589,873 8,521,698 $115,224,766
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 2,972,798 $38,297,386 3,842,289 $51,214,791
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions -- -- 4 44
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (1,278,827) (15,665,137) (636,103) (8,181,858)
- -------------------------------------------------------------------------------------------------------------
Net increase 1,693,971 $22,632,249 3,206,190 $43,032,977
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 2,987,580 $38,477,655 2,447,228 $32,826,389
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions -- -- 32 221
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (900,810) (11,055,587) (414,739) (5,459,459)
- -------------------------------------------------------------------------------------------------------------
Net increase 2,086,770 $27,422,068 2,032,521 $27,367,151
- -------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 3,960,032 $51,879,811 1,169,964 $15,326,210
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions -- -- 1 13
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (668,692) (8,950,350) (243,706) (3,201,935)
- -------------------------------------------------------------------------------------------------------------
Net increase 3,291,340 $42,929,461 926,259 $12,124,288
- -------------------------------------------------------------------------------------------------------------
Period ended 9/30/03*
SHARES AMOUNT
CLASS R SHARES
Shares sold 143,674 $1,881,170
- -------------------------------------------------------------------------
Shares reacquired (40,488) (512,829)
- -------------------------------------------------------------------------
Net increase 103,186 $1,368,341
- -------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through September 30, 2003.
Year ended 9/30/03 Period ended 9/30/02**
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 17,338 $211,554 2,688 $33,305
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (751) (9,652) -- --
- -------------------------------------------------------------------------------------------------------------
Net increase 16,587 $201,902 2,688 $33,305
- -------------------------------------------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 4,191 $56,053 533 $6,650
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (136) (1,569) -- --
- -------------------------------------------------------------------------------------------------------------
Net increase 4,055 $54,484 533 $6,650
- -------------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 6,192 $75,757 614 $7,598
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (80) (1,141) -- --
- -------------------------------------------------------------------------------------------------------------
Net increase 6,112 $74,616 614 $7,598
- -------------------------------------------------------------------------------------------------------------
** For the period from the inception of Classes 529A, 529B and 529C shares, July 31, 2002, through September 30, 2002.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. A commitment fee of $2,620 which is based on the average daily
unused portion of the line of credit is included in miscellaneous expense. The
fund had no significant borrowings during the year.
(7) FINANCIAL INSTRUMENTS
The fund trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the fund has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when all
related and offsetting transactions are considered.
Forward Foreign Currency Exchange Contracts
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
SALES
11/03/03 CAD 43,767,264 $31,806,680 $32,356,645 $(549,965)
10/06/03 EUR 9,500,000 10,971,835 11,067,468 (95,633)
10/06/03 GBP 6,800,000 11,284,158 11,298,496 (14,338)
----------- ----------- ---------
$54,062,673 $54,722,609 $(659,936)
=========== =========== =========
PURCHASES
10/06/03 EUR 9,500,000 $10,891,750 $11,067,469 $175,719
10/06/03 GBP 6,800,000 11,016,000 11,298,496 282,496
10/16/03 JPY 5,541,336,150 49,162,228 49,847,149 684,921
----------- ----------- ---------
$71,069,978 $72,213,114 $1,143,136
=========== =========== =========
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. Dollar. A list of abbreviations is shown
below.
CAD = Canadian Dollars
EUR = Euro
GBP = British Pounds
JPY = Japanese Yen
At September 30, 2003, the fund had sufficient cash and/or securities to cover
any commitments under these contracts.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Trustees of MFS Series Trust V and Shareholders of MFS International
New Discovery Fund:
We have audited the accompanying statement of assets and liabilities of MFS
International New Discovery Fund (the Fund) (one of the portfolios
constituting MFS Series Trust V), including the portfolio of investments, as
of September 30, 2003, and the related statement of operations for the year
then ended, the statement of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the periods
indicated therein. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned at September 30, 2003, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
International New Discovery Fund at September 30, 2003, 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 its financial highlights for each
of the periods indicated therein, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
November 7, 2003
- --------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- --------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust V, of
which the fund is a series, including their principal occupations, which, unless specific dates are shown, are
of more than five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
JOHN W. BALLEN(2) (born 09/12/59) Executive Officer
Trustee and President
Massachusetts Financial Services Company, Chief LAWRENCE T. PERERA (born 06/23/35)
Executive Officer and Director Trustee
Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Trustee
President, Chief Investment Officer and Director Private investor; Harvard University Graduate
School of Business Administration, Class of 1961
INDEPENDENT TRUSTEES Adjunct Professor in Entrepreneurship Emeritus;
CBL & Associates Properties, Inc. (real estate
LAWRENCE H. COHN, M.D. (born 03/11/37) investment trust), Director
Trustee
Brigham and Women's Hospital, Chief of Cardiac J. DALE SHERRATT (born 09/23/38)
Surgery; Harvard Medical School, Professor of Trustee
Surgery Insight Resources, Inc. (acquisition planning
specialists), President; Wellfleet Investments
WILLIAM R. GUTOW (born 09/27/41) (investor in health care companies), Managing
Trustee General Partner (since 1993); Cambridge
Private investor and real estate consultant; Nutraceuticals (professional nutritional
Capitol Entertainment Management Company (video products), Chief Executive Officer (until May
franchise), Vice Chairman 2001)
J. ATWOOD IVES (born 05/01/36) ELAINE R. SMITH (born 04/25/46)
Trustee Trustee
Private investor; KeySpan Corporation (energy Independent health care industry consultant
related services), Director; Eastern Enterprises
(diversified services company), Chairman, Trustee WARD SMITH (born 09/13/30)
and Chief Executive Officer (until November 2000) Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
OFFICERS
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59) RICHARD M. HISEY (born 08/29/58)
Assistant Secretary and Assistant Clerk Treasurer
Massachusetts Financial Services Company, Senior Massachusetts Financial Services Company, Senior
Vice President and Associate General Counsel Vice President (since July 2002); The Bank of New
York, Senior Vice President (September 2000 to
July 2002); Lexington Global Asset Managers, Inc.,
STEPHEN E. CAVAN (born 11/06/53) Executive Vice President and Chief Financial
Secretary and Clerk Officer (prior to September 2000); Lexington
Massachusetts Financial Services Company, Senior Funds, Treasurer (prior to September 2000)
Vice President, General Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer
STEPHANIE A. DESISTO (born 10/01/53) Massachusetts Financial Services Company, Vice
Assistant Treasurer President
Massachusetts Financial Services Company, Vice
President (since April 2003); Brown Brothers JAMES O. YOST (born 06/12/60)
Harriman & Co., Senior Vice President (November Assistant Treasurer
2002 to April 2003); ING Groep N.V./Aeltus Massachusetts Financial Services Company, Senior
Investment Management, Senior Vice President Vice President
(prior to November 2002)
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. This means that each Trustee will be elected to hold office until his or her
successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Each
officer will hold office until his or her successor is chosen and qualified, or until he or she retires,
resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Messrs. Ballen and Gutow have each served as a Trustee of
the Trust since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were elected by
shareholders and have served as Trustees of the Trust since January 1, 2002. Mr. Parke has served as a Trustee
of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 110 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
- -------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
DISTRIBUTOR AUDITORS
MFS Fund Distributors, Inc. Ernst & Young LLP
500 Boylston Street, Boston, MA
02116-3741
DIRECTOR OF GLOBAL EQUITY RESEARCH
David A. Antonelli(1)
(1) MFS Investment Management
- --------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- --------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and
risks associated with investing. Read the prospectus carefully before
investing or sending money.
Variable annuities are offered through MFS/Sun Life Financial Distributors,
Inc.
- ------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
For the year ended September 30, 2003, income from foreign sources was
$7,858,818, and the fund designated a foreign tax credit of $742,706.
The fund hereby designates the maximum amount allowable as qualified dividend
income eligible for a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. Complete information will be
reported in conjunction with your 2003 Form 1099-DIV.
The fund has the option to use equalization, which is a tax basis dividends
paid deduction from earnings and profits distributed to shareholders upon
redemption of shares.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTACT INFORMATION
- --------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.
gov.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day,
or stock and bond outlooks touch-tone required 365 days a year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education,
account access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send
you prospectuses, reports, and proxies electronically. You get timely
information without mailbox clutter (and help your fund save printing and
postage costs).
SIGN-UP instructions: If your account is registered with us, go to
www.mfs.com, log in to your account via MFS Access, and select the eDelivery
sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available
to you.
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2003 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
MIO-ANN-11/03 50M
MFS(R) Mutual Funds
ANNUAL REPORT 9/30/03
MFS(R) Total Return Fund
A path for pursuing opportunity
[MFS Logo](R)
INVESTMENT MANAGEMENT
- -------------------------------------------------------------------------------
MFS(R) PRIVACY POLICY: A COMMITMENT TO YOU
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about every MFS investment product and service that we
offer and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal information;
we maintain information and records about you, your investments, and the
services you use. Examples of the nonpublic personal information we maintain
include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone except as permitted by law. We may share information
with companies or financial institutions that perform marketing services on our
behalf or to other financial institutions with which we have joint marketing
arrangements.
Access to your nonpublic personal information is limited to appropriate
personnel who provide products, services, or information to you. We maintain
physical, electronic, and procedural safeguards that comply with applicable
federal regulations.
If you have any questions about MFS' privacy policy, please call 1-800-225-2606
any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
- -------------------------------------------------------------------------------
MFS(R) TOTAL RETURN FUND
The fund seeks above-average income (compared to a portfolio entirely invested
in equity securities) consistent with the prudent employment of capital. The
fund also seeks to provide reasonable opportunity for growth of capital
and income.
TABLE OF CONTENTS
- ----------------------------------------------------
MFS PRIVACY POLICY
- ----------------------------------------------------
LETTER FROM THE CHAIRMAN 1
- ----------------------------------------------------
MFS ORIGINAL RESEARCH(R) 4
- ----------------------------------------------------
MANAGEMENT REVIEW 5
- ----------------------------------------------------
PERFORMANCE SUMMARY 8
- ----------------------------------------------------
PORTFOLIO OF INVESTMENTS 11
- ----------------------------------------------------
FINANCIAL STATEMENTS 38
- ----------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 51
- ----------------------------------------------------
INDEPENDENT AUDITORS' REPORT 61
- ----------------------------------------------------
TRUSTEES AND OFFICERS 62
- ----------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES
OF INVESTORS 64
- ----------------------------------------------------
FEDERAL TAX INFORMATION 65
- ----------------------------------------------------
CONTACT INFORMATION 66
- ----------------------------------------------------
ASSET ALLOCATION 67
- -------------------------------------------------------------------------------
LETTER FROM THE CHAIRMAN
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Jeffrey L. Shames]
Our firm was built on the philosophy that bottom-up fundamental research is
the best means of achieving superior long-term investment performance. When
you're managing billions of dollars for investors, we think you have an
obligation to have in-depth, firsthand knowledge of every company owned,
anywhere in the world.
We have structured our equity and fixed-income investment teams to capitalize
on the strength of our investment process and the global reach of our analysts
based around the world. Our global research team is composed of 45 equity
research analysts, 27 based in the United States and 18 based abroad, and 26
credit research analysts. Each analyst is assigned one or more specific
industries and then charged with identifying the most attractive investment
ideas within these industries. Our U.S. and non-U.S. equity research analysts
are unified into one team that emphasizes a collaborative process in analyzing
securities around the globe. Credit analysts also share their expertise in
each segment of the fixed-income market and work as part of the same team
ensuring that every member has access to information that may have a material
effect on their investment decisions. As MFS(R) continues to grow and as
markets become more complex, we believe our structure will enable us to
maintain a consistent investment process with the goal of providing strong,
long-term investment performance across market capitalizations, investment
disciplines, and country borders for our investors.
THINKING GLOBALLY
More companies than ever compete globally and, therefore, we must make
investment decisions knowing what is occurring outside of a company's local
market. This trend plays to the strength of our environment of collaboration
between our analysts and portfolio managers around the globe. The analysts
know the most details about individual companies in specific industries and
geographic regions. The portfolio managers have broader, cross-industry
insights and a wider perspective on companies and industries. Our goal is to
make sure those two sets of perspectives coordinate and work well together. As
the world's markets become more interdependent, we believe our collaborative
environment allows us to produce solid investment ideas for our portfolios.
BUILDING A NETWORK
Simply put, we believe our structure assures that our analysts maintain their
peripheral vision rather than becoming too immersed in a specific segment of
the market. We do not believe that analysts and portfolio managers - no matter
how talented they may be - can succeed by working in a vacuum. Through the
latest technology available, our entire research team meets frequently via
video and telephone teleconferences, e-mail, and PDAs (personal digital
assistants). When we hire new analysts, we require them to spend an average of
one year in Boston to learn MFS' culture and to build relationships with their
peers. We believe the interaction among our analysts is the key to making our
collaborative process work toward delivering superior long-term investment
performance for our investors. Our analysts work out of four research offices
in Boston, London, Singapore, and Tokyo, and are assigned to specific regions
and industries. They meet regularly with their colleagues to discuss world
trends affecting the companies they cover.
In addition, our equity and fixed-income analysts often visit company
managements as a team. This collaboration is vital because of the different
perspectives they bring to their analysis. Because a company's stock price has
tended to follow its earnings over time, our equity research analysts tend to
focus on gauging earnings potential, a company's position within its industry,
and its ability to grow its market share. Conversely, our fixed-income
analysts will look at stability of a company's cash flow, the value of its
assets, and its capital structure to gauge whether the company can generate
enough free cash flow to pay off its debt. As a result of their collaboration,
we believe we're able to see a more complete view of a company.
WORKING TOGETHER
Our portfolio managers also work closely with the analysts to select the most
appropriate securities for their portfolios from the various recommendations
made by the analysts. Opinions are exchanged and ideas are challenged so that
each member of our team is involved in our investment process. In fact, our
portfolio managers will be the first ones to tell you that many of their best
ideas start with the research analysts. We believe our collaborative approach
also provides us with an effective way to assess risk. Our portfolio managers
are not discouraged from taking on an appropriate level of risk; however, we
have rigorous guidelines to assure that the level of risk is measured and
monitored and consistent with the investment philosophies of each of our
portfolios. All told, we believe our culture empowers the members of our
investment team to continue to do their best work and allows them to make
better investment decisions.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman
MFS Investment Management(R)
October 21, 2003
The opinions expressed in this letter are those of MFS and no forecasts can be
guaranteed.
- -------------------------------------------------------------------------------
MFS ORIGINAL RESEARCH(R)
- -------------------------------------------------------------------------------
THE HUMAN SIDE OF MONEY MANAGEMENT
For nearly 80 years MFS has been offering investors clear paths to pursuing
specific investment objectives. Today, millions of individuals and thousands
of institutions all over the world look to MFS to manage their assets with
insight and care.
Our success, we believe, has to do with the fact that we see investors as
people with plans, not just dollars to invest.
When you invest with MFS, you invest with a company dedicated to helping you
realize your long-term financial goals.
INVESTORS CHOOSE MFS FOR OUR
o global asset management expertise across all asset classes
o time-tested money management process for pursuing consistent results
o full spectrum of investment products backed by MFS Original Research(R)
o resources and services that match real-life needs
TURNING INFORMATION INTO OPPORTUNITY
Sound investments begin with sound information. MFS has been doing its own
research and analyzing findings in-house for decades. The process we use to
uncover opportunity is called MFS Original Research(R).
MFS ORIGINAL RESEARCH INVOLVES:
o meeting with the management of 3,000 companies each year to assess their
business plans and the managers' ability to execute those plans
o making onsite visits to more than 2,000 companies annually to gain first-hand
knowledge of their operations and products
o analyzing financial statements and balance sheets
o talking extensively with companies' customers and competitors
o developing our own proprietary estimates of companies' earnings
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
MARKET ENVIRONMENT
For the 12-month reporting period that ended September 30, 2003, the stronger-
performing stocks were typically higher-risk stocks in terms of balance sheet
characteristics and/or earnings. Many of these stocks rebounded from very
depressed, or in some cases, distressed levels in 2002. The rebound over the
past year has been driven by improved access to capital as the U.S.
Federal Reserve Board added liquidity to the banking system and eased
financial pressures.
This fund normally invests between 55% to 60% of its assets in higher-quality,
lower-risk stocks and the balance in high-quality bonds, and ended the period
with a 55.3% allocation to stocks.
Absolute performance was strong by historical standards over the period,
driven primarily by the recovery in the equity market from the trough a year
ago. Compared to the equity benchmark S&P 500 Index, however, performance has
lagged. In part, the underperformance is due to the balanced nature of the
fund and the conservative, higher-yield orientation of our stock selection
process. The fixed-income assets help to provide a stable source of return
over time as well as a consistent source of income. While this approach has
provided a strong historical long-term track record, results over the past
year lagged as higher-risk and lower-quality segments of the equity market led
the rebound. We continue to focus on inexpensive, higher-quality stocks with a
preference for yield, and believe that this approach will be rewarded
over time.
- -----------------------------------------------
TOP 5 STOCK HOLDINGS
AS OF 9/30/03
CITIGROUP, INC. 3.1%
Diversified financial services company
- -----------------------------------------------
MELLON FINANCIAL CORP. 2.1%
Financial services company
- -----------------------------------------------
EXXONMOBIL CORP. 2.0%
Diversified oil, gas, and
petrochemical firm
- -----------------------------------------------
VERIZON COMMUNICATIONS, INC. 1.9%
Wireline and wireless telecom services
provider
- -----------------------------------------------
VIACOM, INC. 1.8%
Diversified media and entertainment
company
- -----------------------------------------------
The portfolio is actively managed, and current
holdings may be different.
- -----------------------------------------------
DETRACTORS FROM PERFORMANCE
The technology, energy, and leisure sectors were the primary reasons the fund
underperformed its stock benchmark. We maintained an underweighting in
technology primarily because we felt that many stocks in the sector were
expensive, even after the declines experienced in 2000 and 2001. However, the
sector rose through much of the period, buoyed by signs of economic growth,
potential increases in capital spending, and possible pent-up demand for
personal computers, servers, and software. In absolute terms, the group was one
of the best-performing portfolio sectors; our underweighting caused the fund's
relative performance to suffer.
We were overweighted in the energy sector because we expected that higher oil
and gas prices would support improved earnings. While our holdings in the
sector rose, as a group they lagged the performance of the overall market,
dampening relative performance. As of the end of the period, we continue to be
overweighted in the sector, as we anticipate that higher energy prices should
continue to support earnings, and because a number of our holdings are
undertaking aggressive restructuring programs to improve returns.
The performance of the fund's leisure holdings was disappointing. Publisher
Reed Elsevier saw declines in its educational publishing arm as states cut
budgets in the face of revenue shortfalls. Entertainment giant Viacom, best
known for its ownership of CBS, MTV, and TNN, was also a detractor to the
sector's return. Its stock price suffered from investor concerns about weakness
in its radio advertising revenues.
Other detractors to performance included retailer Sears and health care
provider CIGNA. Sears' stock declined after the company announced that the
quality of its credit card portfolio was worse than the firm had previously
known or disclosed. We reestablished a position in the stock this year after
the company announced that it would sell the credit card business to focus
more closely on restructuring its retail franchise. Stock prices for insurance
giant CIGNA fell sharply in the fourth quarter of 2002 after it announced that
it would have to take a $1.1 billion pre-tax charge to increase its insurance
reserves. In the fourth quarter, the company cut its 2003 earnings estimates
and we have since sold our position in the company.
CONTRIBUTORS TO PERFORMANCE
Holdings in the financial services sector provided the strongest relative
returns for the period. Banks benefited from falling interest rates, an
improving outlook for corporate credit, and strength in mortgage lending
activity. In addition, as the stock market rallied throughout the period, our
holdings with exposure to capital market activities - investment management,
trust services, equity underwriting for example - performed strongly.
The fund's best-performing holding was AT&T Wireless in the utilities and
communications sector. The company's stock benefited from generally improving
fundamentals in the wireless markets; from better-than-expected increases in
its average revenue per unit; and from a "churn rate" - the rate at which a
company loses customers to competitors - that slowed more than many analysts
had expected.
Also in utilities, energy producer and merchant Calpine contributed solid
returns to fund performance. The company had suffered from weak power demand
and concern that it wouldn't meet its debt obligations. The power market
improved somewhat, natural gas prices rose, and the company was able to access
the financing it needed.
Our underweight position in pharmaceutical stocks benefited performance. Many
of the companies are under pressure from slower revenue growth as generic
drugs continued to capture market share, new drug introductions lagged
historical trends, and concerns persisted about legislative proposals to
reduce drug prices.
In the fixed-income market, corporate bonds in general outperformed U.S.
Treasuries over the period. In that environment, our relative overweighting in
corporate debt and underweighting in Treasuries helped the fixed-income
portion of the fund outperform the overall U.S. bond market, as measured by
the Lehman Brothers Aggregate Bond Index. (The principal value and interest of
U.S. Treasury securities, however, are guaranteed by the U.S. government if
held to maturity.)
Respectfully,
/s/ David M. Calabro
David M. Calabro
(on behalf of the Total Return team)
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 9/30/03
- -------------------------------------------------------------------------------
The following information illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results
include the deduction of the maximum applicable sales charge and reflect the
percentage change in net asset value, including reinvestment of dividends and
capital gains distributions. Benchmark comparisons are unmanaged and do not
reflect any fees or expenses. The performance of other share classes will be
greater than or less than the line shown. PAST PERFORMANCE IS NO GUARANTEE OF
FUTURE RESULTS. (See Notes to Performance Summary.)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended September 30, 2003.)
MFS Total Standard & Lehman Brothers
Return Fund - Poor's 500 Aggregate
Class A Stock Index Bond Index
9/93 $ 9,525 $10,000 $10,000
9/95 11,151 13,448 11,038
9/97 15,854 22,722 12,704
9/99 18,158 31,667 14,114
9/01 20,872 26,328 17,057
9/03 22,602 26,042 19,526
TOTAL RETURNS
- ---------------------
Average annual
without sales charge
- ---------------------
Class
Share class inception date 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 10/6/1970 13.70% 2.66% 5.91% 9.03%
- ------------------------------------------------------------------------------
B 8/23/1993 12.90% 2.00% 5.23% 8.26%
- ------------------------------------------------------------------------------
C 8/1/1994 13.03% 2.01% 5.24% 8.38%
- ------------------------------------------------------------------------------
I 1/2/1997 14.10% 2.99% 6.27% 9.28%
- ------------------------------------------------------------------------------
R 12/31/2002 13.58% 2.62% 5.89% 9.01%
- ------------------------------------------------------------------------------
529A 7/31/2002 13.19% 2.49% 5.81% 8.97%
- ------------------------------------------------------------------------------
529B 7/31/2002 12.63% 2.29% 5.68% 8.91%
- ------------------------------------------------------------------------------
529C 7/31/2002 12.67% 2.30% 5.69% 8.91%
- ------------------------------------------------------------------------------
- ---------------------
Average annual
- ---------------------
Comparative Benchmarks
- ------------------------------------------------------------------------------
Average balanced fund+ 15.87% -2.68% 3.02% 7.46%
- ------------------------------------------------------------------------------
Standard & Poor's 500
Stock Index# 24.38% -10.13% 1.00% 10.04%
- ------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond
Index# 5.41% 8.94% 6.63% 6.92%
- ------------------------------------------------------------------------------
- ---------------------
Average annual
with sales charge
- ---------------------
Share class 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 8.30% 1.01% 4.89% 8.50%
- ------------------------------------------------------------------------------
B 8.90% 1.10% 4.94% 8.26%
- ------------------------------------------------------------------------------
C 12.03% 2.01% 5.24% 8.38%
- ------------------------------------------------------------------------------
529A 7.81% 0.84% 4.78% 8.44%
- ------------------------------------------------------------------------------
529B 8.63% 1.39% 5.40% 8.91%
- ------------------------------------------------------------------------------
529C 11.67% 2.30% 5.69% 8.91%
- ------------------------------------------------------------------------------
- ---------------------
Cumulative without
sales charge
- ---------------------
I and R class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- ------------------------------------------------------------------------------
A 13.70% 8.18% 33.26% 137.29%
- ------------------------------------------------------------------------------
B 12.90% 6.11% 29.03% 121.10%
- ------------------------------------------------------------------------------
C 13.03% 6.16% 29.09% 123.59%
- ------------------------------------------------------------------------------
I 14.10% 9.24% 35.50% 142.84%
- ------------------------------------------------------------------------------
R 13.58% 8.07% 33.12% 137.03%
- ------------------------------------------------------------------------------
529A 13.19% 7.67% 32.62% 136.15%
- ------------------------------------------------------------------------------
529B 12.63% 7.03% 31.84% 134.75%
- ------------------------------------------------------------------------------
529C 12.67% 7.07% 31.89% 134.85%
- ------------------------------------------------------------------------------
+ Source: Lipper Inc., an independent firm that tracks mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
STANDARD & POOR'S 500 STOCK INDEX - a commonly used measure of the broad U.S.
stock market.
LEHMAN BROTHERS AGGREGATE BOND INDEX - a measure of the U.S. bond market.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A and 529A results, including sales charge, reflects the deduction of
the maximum 4.75% sales charge. Class B and 529B results, including sales
charge, reflects the deduction of the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C and 529C
results, including sales charge, redeemed within one year from the end of the
calendar month of purchase reflects the deduction of the 1% CDSC. Class I
shares have no sales charges and are available only to certain investors.
Class R shares have no sales charges and are available only to certain
retirement plans. Class 529A, 529B, and 529C shares are only available in
conjunction with qualified tuition programs, such as the MFS 529 Savings Plan.
Performance for share classes offered after class A shares includes the
performance of the fund's class A shares for periods prior to their offering.
Blended class performance has been adjusted to take into account differences
in sales loads, if any, applicable to these share classes, but has not been
adjusted to take into account differences in class specific operating expenses
(such as Rule 12b-1 fees). Compared to performance these share classes would
have experienced had they been offered for the entire period, the use of
blended performance generally results in higher performance for share classes
with higher operating expenses than the initial share class, and lower
performance for share classes with lower operating expenses than the initial
share class.
All performance results reflect any applicable expense subsidies and waivers
in effect during the periods shown; without these, the results would have been
less favorable. See the prospectus and financial statements for details. All
results are historical and assume the reinvestment of dividends and capital
gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS, AND THE PERFORMANCE SHOWN DOES NOT REFLECT
THE DEDUCTION OF TAXES, IF ANY, THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES.
MARKET VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND MORE
RECENT RETURNS MAY BE DIFFERENT FROM THOSE SHOWN. VISIT WWW.MFS.COM FOR MORE
CURRENT PERFORMANCE RESULTS.
KEY RISK CONSIDERATIONS
Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and political
conditions.
Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
These risks may increase share price volatility. Please see the prospectus for
further information regarding these and other risk considerations.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
- -----------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - 9/30/03
- -----------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 55.3%
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
U.S. Stocks - 51.9%
- -----------------------------------------------------------------------------------------------------
Aerospace - 0.2%
- -----------------------------------------------------------------------------------------------------
Alliant Techsystems, Inc.* 90,000 $4,324,500
- -----------------------------------------------------------------------------------------------------
EDO Corp. 75,000 1,518,750
- -----------------------------------------------------------------------------------------------------
Northrop Grumman Corp. 175,400 15,122,988
- -----------------------------------------------------------------------------------------------------
United Defense Industries, Inc.* 115,000 3,264,850
- -----------------------------------------------------------------------------------------------------
$24,231,088
- -----------------------------------------------------------------------------------------------------
Alcoholic Beverages
- -----------------------------------------------------------------------------------------------------
Constellation Brands, Inc.* 63,000 $1,920,870
- -----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 0.1%
- -----------------------------------------------------------------------------------------------------
Kellwood Co. 80,000 $2,676,000
- -----------------------------------------------------------------------------------------------------
Liz Claiborne, Inc. 100,000 3,405,000
- -----------------------------------------------------------------------------------------------------
Reebok International Ltd. 150,000 5,014,500
- -----------------------------------------------------------------------------------------------------
$11,095,500
- -----------------------------------------------------------------------------------------------------
Automotive - 0.1%
- -----------------------------------------------------------------------------------------------------
Autoliv, Inc. 60,000 $1,810,200
- -----------------------------------------------------------------------------------------------------
Johnson Controls, Inc. 25,000 2,365,000
- -----------------------------------------------------------------------------------------------------
Lear Corp.* 50,000 2,632,000
- -----------------------------------------------------------------------------------------------------
$6,807,200
- -----------------------------------------------------------------------------------------------------
Banks & Credit Companies - 8.4%
- -----------------------------------------------------------------------------------------------------
American Express Co. 461,600 $20,799,696
- -----------------------------------------------------------------------------------------------------
Astoria Financial Corp. 120,000 3,708,000
- -----------------------------------------------------------------------------------------------------
Bank of America Corp. 1,186,800 92,617,872
- -----------------------------------------------------------------------------------------------------
Bank One Corp. 918,800 35,511,620
- -----------------------------------------------------------------------------------------------------
Banknorth Group, Inc. 145,000 4,091,900
- -----------------------------------------------------------------------------------------------------
Charter One Financial, Inc. 115,000 3,519,000
- -----------------------------------------------------------------------------------------------------
Citigroup, Inc. 3,892,033 177,126,422
- -----------------------------------------------------------------------------------------------------
Countrywide Credit Industries, Inc. 39,500 3,092,060
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 688,100 36,022,035
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn. 1,068,100 74,980,620
- -----------------------------------------------------------------------------------------------------
First Tennessee National Corp. 100,000 4,246,000
- -----------------------------------------------------------------------------------------------------
FleetBoston Financial Corp. 3,307,800 99,730,170
- -----------------------------------------------------------------------------------------------------
Greenpoint Financial Corp. 90,000 2,687,400
- -----------------------------------------------------------------------------------------------------
JPMorgan Chase & Co. 646,640 22,199,151
- -----------------------------------------------------------------------------------------------------
Mellon Financial Corp. 4,029,440 $121,447,321
- -----------------------------------------------------------------------------------------------------
Mercantile Bankshares Corp. 90,000 3,600,000
- -----------------------------------------------------------------------------------------------------
National Commerce Financial Corp. 150,000 3,732,000
- -----------------------------------------------------------------------------------------------------
New York Community Bancorp, Inc. 10,700 337,157
- -----------------------------------------------------------------------------------------------------
Provident Finacial Services, Inc. 100,000 1,916,000
- -----------------------------------------------------------------------------------------------------
Roslyn Bancorp, Inc. 20,000 469,600
- -----------------------------------------------------------------------------------------------------
SouthTrust Corp. 745,900 21,922,001
- -----------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 1,111,640 67,109,707
- -----------------------------------------------------------------------------------------------------
TCF Financial Corp. 100,000 4,795,000
- -----------------------------------------------------------------------------------------------------
U.S. Bancorp 264,234 6,338,974
- -----------------------------------------------------------------------------------------------------
Wachovia Corp. 509,100 20,969,829
- -----------------------------------------------------------------------------------------------------
Wintrust Financial Corp. 30,000 1,130,100
- -----------------------------------------------------------------------------------------------------
$834,099,635
- -----------------------------------------------------------------------------------------------------
Biotechnology - 0.1%
- -----------------------------------------------------------------------------------------------------
Millipore Corp.* 65,000 $2,993,900
- -----------------------------------------------------------------------------------------------------
Neurocrine Biosciences, Inc.* 70,000 3,466,400
- -----------------------------------------------------------------------------------------------------
$6,460,300
- -----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 1.4%
- -----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc.* 1,476,600 $22,311,426
- -----------------------------------------------------------------------------------------------------
Cablevision Systems Corp., "A"* 120,000 2,172,000
- -----------------------------------------------------------------------------------------------------
Comcast Corp., "A"* 1 31
- -----------------------------------------------------------------------------------------------------
Comcast Corp., "Special A"* 2,645,135 78,137,288
- -----------------------------------------------------------------------------------------------------
Cox Communications, Inc., "A"* 975,600 30,848,472
- -----------------------------------------------------------------------------------------------------
Hearst-Argyle Television, Inc.* 110,000 2,662,000
- -----------------------------------------------------------------------------------------------------
$136,131,217
- -----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.9%
- -----------------------------------------------------------------------------------------------------
E*TRADE Group, Inc.* 200,000 $1,852,000
- -----------------------------------------------------------------------------------------------------
Eaton Vance Corp. 75,000 2,511,000
- -----------------------------------------------------------------------------------------------------
Federated Investors, Inc., "B" 100,000 2,770,000
- -----------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 576,400 25,482,644
- -----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. 455,300 38,199,670
- -----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 1,715,929 91,853,679
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 339,000 17,105,940
- -----------------------------------------------------------------------------------------------------
T. Rowe Price Group, Inc. 157,800 6,510,828
- -----------------------------------------------------------------------------------------------------
$186,285,761
- -----------------------------------------------------------------------------------------------------
Business Services
- -----------------------------------------------------------------------------------------------------
DST Systems, Inc.* 70,000 $2,632,000
- -----------------------------------------------------------------------------------------------------
Chemicals - 1.5%
- -----------------------------------------------------------------------------------------------------
3M Co. 49,000 $3,384,430
- -----------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 935,900 42,209,090
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co. 1,248,700 40,632,698
- -----------------------------------------------------------------------------------------------------
Lyondell Chemical Co. 1,181,700 15,102,126
- -----------------------------------------------------------------------------------------------------
PPG Industries, Inc. 892,400 46,601,128
- -----------------------------------------------------------------------------------------------------
$147,929,472
- -----------------------------------------------------------------------------------------------------
Computer Services - 0.6%
- -----------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 920,500 $17,820,880
- -----------------------------------------------------------------------------------------------------
International Business Machines Corp. 454,300 40,128,319
- -----------------------------------------------------------------------------------------------------
$57,949,199
- -----------------------------------------------------------------------------------------------------
Computer Software - 0.9%
- -----------------------------------------------------------------------------------------------------
Cadence Design Systems, Inc.* 150,000 $2,010,000
- -----------------------------------------------------------------------------------------------------
Microsoft Corp. 2,633,500 73,184,965
- -----------------------------------------------------------------------------------------------------
Networks Associates, Inc.* 1,261,130 17,353,149
- -----------------------------------------------------------------------------------------------------
$92,548,114
- -----------------------------------------------------------------------------------------------------
Computer Software - Systems
- -----------------------------------------------------------------------------------------------------
Acxiom Corp.* 70,000 $1,103,200
- -----------------------------------------------------------------------------------------------------
BearingPoint, Inc.* 300,000 2,394,000
- -----------------------------------------------------------------------------------------------------
$3,497,200
- -----------------------------------------------------------------------------------------------------
Conglomerates
- -----------------------------------------------------------------------------------------------------
Honeywell International, Inc. 101,600 $2,677,160
- -----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 2.4%
- -----------------------------------------------------------------------------------------------------
Altria Group, Inc. 1,550,100 $67,894,380
- -----------------------------------------------------------------------------------------------------
Gillette Co. 521,800 16,687,164
- -----------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 1,880,500 96,507,260
- -----------------------------------------------------------------------------------------------------
Newell Rubbermaid, Inc. 1,460,200 31,642,534
- -----------------------------------------------------------------------------------------------------
Procter & Gamble Co. 263,500 24,458,070
- -----------------------------------------------------------------------------------------------------
$237,189,408
- -----------------------------------------------------------------------------------------------------
Containers - 0.7%
- -----------------------------------------------------------------------------------------------------
Anchor Glass Container Corp.* 126,000 $2,053,800
- -----------------------------------------------------------------------------------------------------
Owens Illinois, Inc.* 2,939,100 33,564,522
- -----------------------------------------------------------------------------------------------------
Smurfit-Stone Container Corp.* 2,173,400 32,557,532
- -----------------------------------------------------------------------------------------------------
Sonoco Products Co. 110,000 2,414,500
- -----------------------------------------------------------------------------------------------------
$70,590,354
- -----------------------------------------------------------------------------------------------------
Electrical Equipment - 1.2%
- -----------------------------------------------------------------------------------------------------
American Standard Cos., Inc.* 50,000 $4,212,500
- -----------------------------------------------------------------------------------------------------
Black & Decker Corp. 50,000 2,027,500
- -----------------------------------------------------------------------------------------------------
Emerson Electric Co. 686,900 36,165,285
- -----------------------------------------------------------------------------------------------------
General Electric Co. 1,470,600 43,838,586
- -----------------------------------------------------------------------------------------------------
Rockwell Automation, Inc. 30,900 811,125
- -----------------------------------------------------------------------------------------------------
Tyco International Ltd. 1,670,500 34,128,315
- -----------------------------------------------------------------------------------------------------
$121,183,311
- -----------------------------------------------------------------------------------------------------
Electronics - 0.7%
- -----------------------------------------------------------------------------------------------------
Agere Systems, Inc., "B"* 700,000 $2,023,000
- -----------------------------------------------------------------------------------------------------
Amis Holdings, Inc.* 35,000 646,100
- -----------------------------------------------------------------------------------------------------
Amphenol Corp.* 35,400 1,842,570
- -----------------------------------------------------------------------------------------------------
Fairchild Semiconductor International Co.* 100,000 1,658,000
- -----------------------------------------------------------------------------------------------------
Intel Corp. 114,000 3,136,140
- -----------------------------------------------------------------------------------------------------
Novellus Systems, Inc.* 399,200 13,473,000
- -----------------------------------------------------------------------------------------------------
Tektronix, Inc.* 70,000 1,732,500
- -----------------------------------------------------------------------------------------------------
Texas Instruments, Inc. 1,733,600 39,526,080
- -----------------------------------------------------------------------------------------------------
$64,037,390
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 1.0%
- -----------------------------------------------------------------------------------------------------
Devon Energy Corp. 1,383,850 $66,687,732
- -----------------------------------------------------------------------------------------------------
EOG Resources, Inc. 75,000 3,130,500
- -----------------------------------------------------------------------------------------------------
Newfield Exploration Co.* 75,000 2,892,750
- -----------------------------------------------------------------------------------------------------
Tom Brown, Inc.* 120,000 3,084,000
- -----------------------------------------------------------------------------------------------------
Unocal Corp. 772,500 24,349,200
- -----------------------------------------------------------------------------------------------------
XTO Energy, Inc. 130,000 2,728,700
- -----------------------------------------------------------------------------------------------------
$102,872,882
- -----------------------------------------------------------------------------------------------------
Energy - Integrated - 2.4%
- -----------------------------------------------------------------------------------------------------
ChevronTexaco Corp. 222,000 $15,861,900
- -----------------------------------------------------------------------------------------------------
ConocoPhillips Co. 1,099,400 60,192,150
- -----------------------------------------------------------------------------------------------------
ExxonMobil Corp. 3,137,848 114,845,237
- -----------------------------------------------------------------------------------------------------
Occidental Petroleum Corp. 1,385,450 48,809,403
- -----------------------------------------------------------------------------------------------------
$239,708,690
- -----------------------------------------------------------------------------------------------------
Entertainment - 1.2%
- -----------------------------------------------------------------------------------------------------
Viacom, Inc., "B" 2,674,035 $102,415,541
- -----------------------------------------------------------------------------------------------------
Walt Disney Co. 824,320 16,626,534
- -----------------------------------------------------------------------------------------------------
$119,042,075
- -----------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.6%
- -----------------------------------------------------------------------------------------------------
Kroger Co.* 3,315,910 $59,255,312
- -----------------------------------------------------------------------------------------------------
Rite Aid Corp.* 73,100 377,196
- -----------------------------------------------------------------------------------------------------
Safeway, Inc.* 147,800 3,390,532
- -----------------------------------------------------------------------------------------------------
$63,023,040
- -----------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 1.6%
- -----------------------------------------------------------------------------------------------------
Archer-Daniels-Midland Co. 3,469,785 $45,488,881
- -----------------------------------------------------------------------------------------------------
Dean Foods Co.* 65,000 2,016,950
- -----------------------------------------------------------------------------------------------------
Del Monte Foods Co.* 200,000 1,742,000
- -----------------------------------------------------------------------------------------------------
Heinz (H.J.) Co. 483,600 16,577,808
- -----------------------------------------------------------------------------------------------------
Hormel Foods Corp. 168,400 3,869,832
- -----------------------------------------------------------------------------------------------------
Kellogg Co. 1,927,500 64,282,125
- -----------------------------------------------------------------------------------------------------
PepsiCo, Inc. 498,790 22,859,546
- -----------------------------------------------------------------------------------------------------
Tyson Foods, Inc., "A" 412,300 5,825,799
- -----------------------------------------------------------------------------------------------------
$162,662,941
- -----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.8%
- -----------------------------------------------------------------------------------------------------
Bowater, Inc. 835,500 $35,141,130
- -----------------------------------------------------------------------------------------------------
International Paper Co. 1,125,600 43,920,912
- -----------------------------------------------------------------------------------------------------
$79,062,042
- -----------------------------------------------------------------------------------------------------
Furniture & Appliances
- -----------------------------------------------------------------------------------------------------
Stanley Works 100,000 $2,952,000
- -----------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.5%
- -----------------------------------------------------------------------------------------------------
Hilton Hotels Corp. 1,523,880 $24,717,334
- -----------------------------------------------------------------------------------------------------
MGM Mirage, Inc.* 80,000 2,924,000
- -----------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts Co. 532,200 18,520,560
- -----------------------------------------------------------------------------------------------------
$46,161,894
- -----------------------------------------------------------------------------------------------------
General Merchandise - 1.0%
- -----------------------------------------------------------------------------------------------------
May Department Stores Co. 368,500 $9,076,155
- -----------------------------------------------------------------------------------------------------
Sears, Roebuck & Co. 2,112,475 92,378,532
- -----------------------------------------------------------------------------------------------------
$101,454,687
- -----------------------------------------------------------------------------------------------------
Health/Hospitals - 0.3%
- -----------------------------------------------------------------------------------------------------
Tenet Healthcare Corp.* 1,684,000 $24,384,320
- -----------------------------------------------------------------------------------------------------
Insurance - 3.3%
- -----------------------------------------------------------------------------------------------------
Allstate Corp. 2,419,400 $88,380,682
- -----------------------------------------------------------------------------------------------------
Chubb Corp. 617,000 40,030,960
- -----------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 1,411,285 74,275,930
- -----------------------------------------------------------------------------------------------------
MetLife, Inc. 1,549,750 43,470,487
- -----------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc., "A" 319,300 10,006,862
- -----------------------------------------------------------------------------------------------------
Safeco Corp. 70,000 2,468,200
- -----------------------------------------------------------------------------------------------------
The St. Paul Cos., Inc. 177,600 6,576,528
- -----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., "A" 3,703,123 58,805,593
- -----------------------------------------------------------------------------------------------------
UnumProvident Corp. 130,000 1,920,100
- -----------------------------------------------------------------------------------------------------
$325,935,342
- -----------------------------------------------------------------------------------------------------
Leisure & Toys - 0.1%
- -----------------------------------------------------------------------------------------------------
Hasbro, Inc. 325,200 $6,074,736
- -----------------------------------------------------------------------------------------------------
Machinery & Tools - 0.6%
- -----------------------------------------------------------------------------------------------------
AGCO Corp.* 160,000 $2,742,400
- -----------------------------------------------------------------------------------------------------
Caterpillar, Inc. 111,941 7,706,018
- -----------------------------------------------------------------------------------------------------
Deere & Co. 875,400 46,667,574
- -----------------------------------------------------------------------------------------------------
$57,115,992
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.1%
- -----------------------------------------------------------------------------------------------------
Apria Healthcare Group, Inc.* 70,000 $1,916,600
- -----------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc.* 75,000 2,976,750
- -----------------------------------------------------------------------------------------------------
$4,893,350
- -----------------------------------------------------------------------------------------------------
Medical Equipment - 0.6%
- -----------------------------------------------------------------------------------------------------
AmerisourceBergen Corp. 90,000 $4,864,500
- -----------------------------------------------------------------------------------------------------
Apogent Technologies, Inc.* 53,700 1,120,182
- -----------------------------------------------------------------------------------------------------
Applera Corp. - Applied Biosystems Group 130,000 2,900,300
- -----------------------------------------------------------------------------------------------------
Baxter International, Inc. 1,245,700 36,200,042
- -----------------------------------------------------------------------------------------------------
C.R. Bard, Inc. 70,000 4,970,000
- -----------------------------------------------------------------------------------------------------
DENTSPLY International, Inc. 40,000 1,793,600
- -----------------------------------------------------------------------------------------------------
Guidant Corp. 138,800 6,502,780
- -----------------------------------------------------------------------------------------------------
Thermo Electron Corp.* 125,000 2,712,500
- -----------------------------------------------------------------------------------------------------
$61,063,904
- -----------------------------------------------------------------------------------------------------
Metals & Mining - 0.6%
- -----------------------------------------------------------------------------------------------------
Alcoa, Inc. 1,845,700 $48,283,512
- -----------------------------------------------------------------------------------------------------
Phelps Dodge Corp.* 129,300 6,051,240
- -----------------------------------------------------------------------------------------------------
$54,334,752
- -----------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.3%
- -----------------------------------------------------------------------------------------------------
AGL Resources, Inc. 95,900 $2,701,503
- -----------------------------------------------------------------------------------------------------
KeySpan Corp. 250,400 8,784,032
- -----------------------------------------------------------------------------------------------------
National Fuel Gas Co. 937,600 21,424,160
- -----------------------------------------------------------------------------------------------------
$32,909,695
- -----------------------------------------------------------------------------------------------------
Oil Services - 2.9%
- -----------------------------------------------------------------------------------------------------
Baker Hughes, Inc. 325,700 $9,637,463
- -----------------------------------------------------------------------------------------------------
BJ Services Co.* 543,300 18,564,561
- -----------------------------------------------------------------------------------------------------
Cooper Cameron Corp.* 459,150 21,217,321
- -----------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 2,421,800 58,002,110
- -----------------------------------------------------------------------------------------------------
Noble Corp.* 2,765,600 94,002,744
- -----------------------------------------------------------------------------------------------------
Schlumberger Ltd. 1,779,435 86,124,654
- -----------------------------------------------------------------------------------------------------
Smith International, Inc.* 100,000 3,598,000
- -----------------------------------------------------------------------------------------------------
$291,146,853
- -----------------------------------------------------------------------------------------------------
Personal Computers & Peripherals - 0.1%
- -----------------------------------------------------------------------------------------------------
Ingram Micro, Inc.* 225,000 $2,936,250
- -----------------------------------------------------------------------------------------------------
Solectron Corp.* 300,000 1,755,000
- -----------------------------------------------------------------------------------------------------
$4,691,250
- -----------------------------------------------------------------------------------------------------
Pharmaceuticals - 3.7%
- -----------------------------------------------------------------------------------------------------
Abbott Laboratories, Inc. 222,700 $9,475,885
- -----------------------------------------------------------------------------------------------------
Bristol-Myers Squibb Co. 62,500 1,603,750
- -----------------------------------------------------------------------------------------------------
Eli Lilly & Co. 779,700 46,314,180
- -----------------------------------------------------------------------------------------------------
Johnson & Johnson Co. 1,191,800 59,017,936
- -----------------------------------------------------------------------------------------------------
Merck & Co., Inc. 883,700 44,732,894
- -----------------------------------------------------------------------------------------------------
Pfizer, Inc. 3,330,100 101,168,438
- -----------------------------------------------------------------------------------------------------
Schering Plough Corp. 5,644,900 86,028,276
- -----------------------------------------------------------------------------------------------------
Wyeth 418,700 19,302,070
- -----------------------------------------------------------------------------------------------------
$367,643,429
- -----------------------------------------------------------------------------------------------------
Printing & Publishing - 1.0%
- -----------------------------------------------------------------------------------------------------
Bowne & Co., Inc. 140,000 $2,093,000
- -----------------------------------------------------------------------------------------------------
Dun & Bradstreet Corp.* 60,000 2,492,400
- -----------------------------------------------------------------------------------------------------
Knight-Ridder, Inc. 134,900 8,997,830
- -----------------------------------------------------------------------------------------------------
Lamar Advertising Co., "A"* 125,000 3,667,500
- -----------------------------------------------------------------------------------------------------
Meredith Corp. 50,000 2,308,500
- -----------------------------------------------------------------------------------------------------
New York Times Co., "A" 589,400 25,615,324
- -----------------------------------------------------------------------------------------------------
Tribune Co. 1,102,400 50,600,160
- -----------------------------------------------------------------------------------------------------
$95,774,714
- -----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.6%
- -----------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Railway Co. 879,300 $25,385,391
- -----------------------------------------------------------------------------------------------------
CSX Corp. 100,000 2,925,000
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp. 583,700 33,953,829
- -----------------------------------------------------------------------------------------------------
$62,264,220
- -----------------------------------------------------------------------------------------------------
Real Estate - 0.4%
- -----------------------------------------------------------------------------------------------------
American Financial Realty Trust 130,000 $1,833,000
- -----------------------------------------------------------------------------------------------------
Boston Properties, Inc. 45,000 1,956,150
- -----------------------------------------------------------------------------------------------------
Entertainment Properties Trust 80,000 2,400,000
- -----------------------------------------------------------------------------------------------------
Equity Residential Properties Trust 809,400 23,699,232
- -----------------------------------------------------------------------------------------------------
Healthcare Realty Trust 39,200 1,253,616
- -----------------------------------------------------------------------------------------------------
Hospitality Properties Trust 79,000 2,771,320
- -----------------------------------------------------------------------------------------------------
iStar Financial, Inc. 85,000 3,310,750
- -----------------------------------------------------------------------------------------------------
Maguire Properties, Inc. 95,000 1,947,500
- -----------------------------------------------------------------------------------------------------
$39,171,568
- -----------------------------------------------------------------------------------------------------
Restaurants - 0.3%
- -----------------------------------------------------------------------------------------------------
ARAMARK Corp.* 65,000 $1,626,950
- -----------------------------------------------------------------------------------------------------
Brinker International, Inc.* 75,000 2,502,000
- -----------------------------------------------------------------------------------------------------
Darden Restaurants, Inc. 148,000 2,812,000
- -----------------------------------------------------------------------------------------------------
McDonald's Corp. 1,000,600 23,554,124
- -----------------------------------------------------------------------------------------------------
Wendy's International, Inc. 100,000 3,230,000
- -----------------------------------------------------------------------------------------------------
$33,725,074
- -----------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.3%
- -----------------------------------------------------------------------------------------------------
Georgia Gulf Corp. 125,000 $2,918,750
- -----------------------------------------------------------------------------------------------------
Praxair, Inc. 394,240 24,423,168
- -----------------------------------------------------------------------------------------------------
$27,341,918
- -----------------------------------------------------------------------------------------------------
Specialty Stores - 0.5%
- -----------------------------------------------------------------------------------------------------
Foot Locker, Inc. 125,000 $2,025,000
- -----------------------------------------------------------------------------------------------------
Home Depot, Inc. 733,010 23,346,369
- -----------------------------------------------------------------------------------------------------
Office Depot, Inc.* 210,000 2,950,500
- -----------------------------------------------------------------------------------------------------
Pier 1 Imports, Inc. 174,000 3,347,760
- -----------------------------------------------------------------------------------------------------
The Limited, Inc. 909,000 13,707,720
- -----------------------------------------------------------------------------------------------------
$45,377,349
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.2%
- -----------------------------------------------------------------------------------------------------
Motorola, Inc. 1,809,900 $21,664,503
- -----------------------------------------------------------------------------------------------------
Scientific-Atlanta, Inc. 62,900 1,959,335
- -----------------------------------------------------------------------------------------------------
$23,623,838
- -----------------------------------------------------------------------------------------------------
Telephone Services - 2.7%
- -----------------------------------------------------------------------------------------------------
AT&T Corp. 2,462,600 $53,069,030
- -----------------------------------------------------------------------------------------------------
BellSouth Corp. 2,049,200 48,525,056
- -----------------------------------------------------------------------------------------------------
CenturyTel, Inc. 15,870 537,834
- -----------------------------------------------------------------------------------------------------
Cincinnati Bell, Inc.* 600,000 3,054,000
- -----------------------------------------------------------------------------------------------------
Citizens Communications Co.* 180,000 2,017,800
- -----------------------------------------------------------------------------------------------------
Commonwealth Telephone Enterprises, Inc.* 70,000 2,809,100
- -----------------------------------------------------------------------------------------------------
SBC Communications, Inc. 2,147,348 47,778,493
- -----------------------------------------------------------------------------------------------------
Verizon Communications, Inc. 3,291,994 106,792,286
- -----------------------------------------------------------------------------------------------------
$264,583,599
- -----------------------------------------------------------------------------------------------------
Trucking
- -----------------------------------------------------------------------------------------------------
Swift Transportation, Inc.* 100,000 $2,269,000
- -----------------------------------------------------------------------------------------------------
Werner Enterprises, Inc. 90,000 2,061,900
- -----------------------------------------------------------------------------------------------------
$4,330,900
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.7%
- -----------------------------------------------------------------------------------------------------
Calpine Corp.* 6,429,365 $31,439,595
- -----------------------------------------------------------------------------------------------------
Duke Energy Corp. 747,600 13,314,756
- -----------------------------------------------------------------------------------------------------
Energy East Corp. 481,900 10,809,017
- -----------------------------------------------------------------------------------------------------
Entergy Corp. 184,400 9,985,260
- -----------------------------------------------------------------------------------------------------
Exelon Corp. 255,000 16,192,500
- -----------------------------------------------------------------------------------------------------
FirstEnergy Corp. 586,350 18,704,565
- -----------------------------------------------------------------------------------------------------
FPL Group, Inc. 218,800 13,828,160
- -----------------------------------------------------------------------------------------------------
NiSource, Inc. 1,615,130 32,270,297
- -----------------------------------------------------------------------------------------------------
NSTAR Co. 343,700 16,325,750
- -----------------------------------------------------------------------------------------------------
PG&E Corp.* 107,000 2,557,300
- -----------------------------------------------------------------------------------------------------
Pinnacle West Capital Corp. 40,200 1,427,100
- -----------------------------------------------------------------------------------------------------
PPL Corp. 569,660 23,327,577
- -----------------------------------------------------------------------------------------------------
Reliant Resources, Inc.* 190,000 972,800
- -----------------------------------------------------------------------------------------------------
TXU Corp. 3,167,600 74,628,656
- -----------------------------------------------------------------------------------------------------
$265,783,333
- -----------------------------------------------------------------------------------------------------
Utilities - Gas - 0.1%
- -----------------------------------------------------------------------------------------------------
WGL Holdings, Inc. 333,400 $9,195,172
- -----------------------------------------------------------------------------------------------------
Wireless Communications - 1.2%
- -----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc.* 8,392,900 $68,653,922
- -----------------------------------------------------------------------------------------------------
Sprint Corp. (PCS Group)* 436,200 2,499,426
- -----------------------------------------------------------------------------------------------------
Telephone & Data Systems, Inc. 862,145 48,745,678
- -----------------------------------------------------------------------------------------------------
$119,899,026
- -----------------------------------------------------------------------------------------------------
Total U.S. Stocks $5,145,469,764
- -----------------------------------------------------------------------------------------------------
Foreign Stocks - 3.4%
- -----------------------------------------------------------------------------------------------------
Australia - 0.1%
- -----------------------------------------------------------------------------------------------------
BHP Billiton Ltd. (Metals & Mining) 1,481,900 $10,645,138
- -----------------------------------------------------------------------------------------------------
Bermuda - 0.1%
- -----------------------------------------------------------------------------------------------------
Ace Ltd. (Insurance) 90,000 $2,977,200
- -----------------------------------------------------------------------------------------------------
PartnerRe Ltd. (Insurance) 40,000 2,070,000
- -----------------------------------------------------------------------------------------------------
$5,047,200
- -----------------------------------------------------------------------------------------------------
Canada - 0.2%
- -----------------------------------------------------------------------------------------------------
Abitibi-Consolidated, Inc. (Forest & Paper Products) 370,000 $2,590,000
- -----------------------------------------------------------------------------------------------------
Magna International, Inc (Automotive) 40,000 2,886,000
- -----------------------------------------------------------------------------------------------------
Nortel Networks Corp. (Telecommunications - Wireline)* 1,982,800 8,129,480
- -----------------------------------------------------------------------------------------------------
Talisman Energy, Inc. (Energy - Independent) 55,000 2,609,200
- -----------------------------------------------------------------------------------------------------
$16,214,680
- -----------------------------------------------------------------------------------------------------
France - 0.2%
- -----------------------------------------------------------------------------------------------------
Total Fina S.A., ADR (Energy - Integrated) 199,300 $15,106,940
- -----------------------------------------------------------------------------------------------------
Netherlands
- -----------------------------------------------------------------------------------------------------
Akzo Nobel N.V. (Specialty Chemicals) 157,300 $4,906,564
- -----------------------------------------------------------------------------------------------------
Switzerland - 0.8%
- -----------------------------------------------------------------------------------------------------
Novartis AG (Pharmaceuticals) 1,078,900 $41,772,837
- -----------------------------------------------------------------------------------------------------
Roche Holding AG (Pharmaceuticals) 226,600 18,800,348
- -----------------------------------------------------------------------------------------------------
Syngenta AG (Chemicals) 345,600 18,749,023
- -----------------------------------------------------------------------------------------------------
$79,322,208
- -----------------------------------------------------------------------------------------------------
United Kingdom - 2.0%
- -----------------------------------------------------------------------------------------------------
BHP Billiton PLC (Metals & Mining) 938,900 $6,234,945
- -----------------------------------------------------------------------------------------------------
BP PLC, ADR (Energy - Integrated) 2,309,871 97,245,569
- -----------------------------------------------------------------------------------------------------
Diageo PLC (Alcoholic Beverages)* 1,482,400 16,004,461
- -----------------------------------------------------------------------------------------------------
Reed Elsevier PLC (Printing & Publishing) 6,658,700 52,104,626
- -----------------------------------------------------------------------------------------------------
Rio Tinto Group (Metals & Mining)* 629,300 13,420,877
- -----------------------------------------------------------------------------------------------------
Vodafone Group PLC, ADR (Telecommunications -
Wireless) 863,257 17,480,954
- -----------------------------------------------------------------------------------------------------
$202,491,432
- -----------------------------------------------------------------------------------------------------
Total Foreign Stocks $333,734,162
- -----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $5,008,325,933) $5,479,203,926
- -----------------------------------------------------------------------------------------------------
Bonds - 39.2%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
U.S. Bonds - 37.5%
- -----------------------------------------------------------------------------------------------------
Aerospace - 0.5%
- -----------------------------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 6.4s, 2011## $9,873 $10,834,364
- -----------------------------------------------------------------------------------------------------
Boeing Capital Corp., 6.5s, 2012 22,280 24,423,893
- -----------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.75s, 2031 12,400 15,227,646
- -----------------------------------------------------------------------------------------------------
$50,485,903
- -----------------------------------------------------------------------------------------------------
Airlines - 0.1%
- -----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 6.648s, 2017 $7,563 $7,213,937
- -----------------------------------------------------------------------------------------------------
Continental Airlines Pass-Through Trust, Inc., 7.256s, 2020 5,202 5,121,267
- -----------------------------------------------------------------------------------------------------
Jet Equipment Trust, 11.44s, 2014## 4,700 23,500
- -----------------------------------------------------------------------------------------------------
$12,358,704
- -----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.1%
- -----------------------------------------------------------------------------------------------------
Miller Brewing Co., 5.5s, 2013## $5,604 $5,855,272
- -----------------------------------------------------------------------------------------------------
Automotive - 0.6%
- -----------------------------------------------------------------------------------------------------
Daimlerchrysler North America, 4.05s, 2008 $10,000 $9,898,980
- -----------------------------------------------------------------------------------------------------
Ford Motor Co., 7.45s, 2031 17,804 16,419,490
- -----------------------------------------------------------------------------------------------------
Ford Motor Credit Co., 7.875s, 2010 4,200 4,553,825
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 5.36s, 2004 15,046 15,428,108
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 6.875s, 2011 8,701 9,031,664
- -----------------------------------------------------------------------------------------------------
General Motors Acceptance Corp., 8s, 2031 5,883 6,042,900
- -----------------------------------------------------------------------------------------------------
General Motors Corp., 7.2s, 2011 2,252 2,373,016
- -----------------------------------------------------------------------------------------------------
$63,747,983
- -----------------------------------------------------------------------------------------------------
Banks & Credit Companies - 2.1%
- -----------------------------------------------------------------------------------------------------
Abbey National Capital, 8.963s, 2049 $9,960 $13,633,895
- -----------------------------------------------------------------------------------------------------
Bank of America Corp., 7.4s, 2011 25,548 30,347,958
- -----------------------------------------------------------------------------------------------------
Citigroup, Inc., 7.25s, 2010 18,039 21,366,817
- -----------------------------------------------------------------------------------------------------
Credit Suisse First Boston USA, Inc., 4.625s, 2008 28,860 30,371,976
- -----------------------------------------------------------------------------------------------------
Credit Suisse First Boston USA, Inc., 6.125s, 2011 5,083 5,568,096
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.25s, 2006 50,025 50,302,539
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Bank, 2.875s, 2006 19,285 19,647,886
- -----------------------------------------------------------------------------------------------------
Natexis AMBS Co. LLC, 8.44s, 2049## 5,000 5,944,505
- -----------------------------------------------------------------------------------------------------
Popular North America, Inc., 4.25s, 2008 9,579 9,834,376
- -----------------------------------------------------------------------------------------------------
Wells Fargo Co., 6.45s, 2011 20,780 23,687,745
- -----------------------------------------------------------------------------------------------------
$210,705,793
- -----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 0.4%
- -----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.75s, 2010 $11,539 $13,782,055
- -----------------------------------------------------------------------------------------------------
Cox Communications, Inc., 7.125s, 2012 1,460 1,685,974
- -----------------------------------------------------------------------------------------------------
TCI Communications Financing III, 9.65s, 2027 23,129 27,321,131
- -----------------------------------------------------------------------------------------------------
$42,789,160
- -----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 0.5%
- -----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc., 5.7s, 2012 $12,635 $13,515,786
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 7.75s, 2005 6,149 6,670,791
- -----------------------------------------------------------------------------------------------------
Lehman Brothers Holdings, Inc., 8.25s, 2007 8,368 9,895,068
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co., 6.1s, 2006 14,941 16,319,666
- -----------------------------------------------------------------------------------------------------
$46,401,311
- -----------------------------------------------------------------------------------------------------
Building - 0.1%
- -----------------------------------------------------------------------------------------------------
CRH America, Inc., 6.95s, 2012 $8,021 $9,153,260
- -----------------------------------------------------------------------------------------------------
Chemicals - 0.1%
- -----------------------------------------------------------------------------------------------------
Dow Chemical Co., 5.75s, 2008 $7,310 $7,895,224
- -----------------------------------------------------------------------------------------------------
Conglomerates - 0.2%
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 7.5s, 2005 $12,300 $13,492,018
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.75s, 2007 3,073 3,702,827
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 8.85s, 2007 3,572 4,261,867
- -----------------------------------------------------------------------------------------------------
General Electric Capital Corp., 6.75s, 2032 2,976 3,355,172
- -----------------------------------------------------------------------------------------------------
$24,811,884
- -----------------------------------------------------------------------------------------------------
Consumer Cyclical - 0.2%
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.875s, 2006 $11,036 $12,231,927
- -----------------------------------------------------------------------------------------------------
Cendant Corp., 6.25s, 2008 3,215 3,531,170
- -----------------------------------------------------------------------------------------------------
$15,763,097
- -----------------------------------------------------------------------------------------------------
Corporate Asset-Backed - 2.1%
- -----------------------------------------------------------------------------------------------------
Banamex Credit Card Merchant Voucher, 6.25s, 2003## $326 $327,484
- -----------------------------------------------------------------------------------------------------
BCF LLC, 7.75s, 2026## 2,698 2,151,645
- -----------------------------------------------------------------------------------------------------
Bear Stearns Commercial Mortgage Securities, Inc.,
6.8s, 2008 9,064 9,791,439
- -----------------------------------------------------------------------------------------------------
Capital One Auto Finance Trust, 4.79s, 2009 17,762 18,674,146
- -----------------------------------------------------------------------------------------------------
Certificates Funding Corp., 6.716s, 2004## 22,015 22,712,684
- -----------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 6.39s, 2030 10,029 11,297,853
- -----------------------------------------------------------------------------------------------------
Chase Commercial Mortgage Securities Corp., 7.543s, 2032 2,895 3,249,522
- -----------------------------------------------------------------------------------------------------
Citibank Credit Card Issuance Trust, 6.65s, 2008 17,900 19,504,986
- -----------------------------------------------------------------------------------------------------
CPS Auto Receivables Trust, 2.89s, 2009 1,837 1,847,460
- -----------------------------------------------------------------------------------------------------
Criimi Mae Commercial Mortgage Trust, 7s, 2033## 5,500 6,015,401
- -----------------------------------------------------------------------------------------------------
Criimi Mae Corp., 6.701s, 2030## 4,350 4,759,619
- -----------------------------------------------------------------------------------------------------
Deutsche Mortgage & Asset Receiving Corp., 6.538s, 2031 11,916 13,222,958
- -----------------------------------------------------------------------------------------------------
First Union Lehman Brothers Bank, 6.56s, 2035 15,000 16,996,062
- -----------------------------------------------------------------------------------------------------
First Union-Lehman Brothers Commercial Mortgage,
7.38s, 2029 10,000 11,380,877
- -----------------------------------------------------------------------------------------------------
GS Mortgage Securities Corp. II, 6.06s, 2030 8,635 9,102,058
- -----------------------------------------------------------------------------------------------------
JP Morgan Commercial Mortgage Finance Corp., 6.613s, 2030 4,018 4,515,101
- -----------------------------------------------------------------------------------------------------
LB Commercial Conduit Mortgage Trust, 6.78s, 2031 20,000 22,925,182
- -----------------------------------------------------------------------------------------------------
Merrill Lynch Mortgage Investors, Inc., 6.39s, 2030 10,000 11,078,902
- -----------------------------------------------------------------------------------------------------
Mortgage Capital Funding, Inc., 6.337s, 2031 15,076 16,882,345
- -----------------------------------------------------------------------------------------------------
Residential Funding Mortgage Securities, Inc., 6s, 2016 2,688 2,755,367
- -----------------------------------------------------------------------------------------------------
Summit Acceptance Auto Investment LLC, 7.51s, 2007## 3,858 3,884,708
- -----------------------------------------------------------------------------------------------------
$213,075,799
- -----------------------------------------------------------------------------------------------------
Defense Electronics - 0.2%
- -----------------------------------------------------------------------------------------------------
Raytheon Co., 6.15s, 2008 $14,808 $16,433,770
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 0.2%
- -----------------------------------------------------------------------------------------------------
Devon Financing Corp., ULC, 6.875s, 2011 $14,722 $16,898,206
- -----------------------------------------------------------------------------------------------------
Energy - Integrated - 0.1%
- -----------------------------------------------------------------------------------------------------
Phillips Petroleum Co., 8.5s, 2005 $6,703 $7,441,691
- -----------------------------------------------------------------------------------------------------
Entertainment - 0.4%
- -----------------------------------------------------------------------------------------------------
AOL Time Warner, Inc., 6.15s, 2007 $3,306 $3,632,891
- -----------------------------------------------------------------------------------------------------
Hearst Argyle Television, Inc., 7.5s, 2027 3,800 4,314,881
- -----------------------------------------------------------------------------------------------------
News America, Inc., 6.703s, 2004 12,847 13,192,404
- -----------------------------------------------------------------------------------------------------
News America, Inc., 6.55s, 2033## 1,675 1,752,551
- -----------------------------------------------------------------------------------------------------
The Walt Disney Co., 6.75s, 2006 3,127 3,442,192
- -----------------------------------------------------------------------------------------------------
Time Warner, Inc., 10.15s, 2012 3,471 4,682,102
- -----------------------------------------------------------------------------------------------------
Time Warner, Inc., 6.875s, 2018 3,863 4,285,809
- -----------------------------------------------------------------------------------------------------
Turner Broadcasting Systems, Inc., 8.375s, 2013 825 1,005,462
- -----------------------------------------------------------------------------------------------------
$36,308,292
- -----------------------------------------------------------------------------------------------------
Financial Institutions - 0.2%
- -----------------------------------------------------------------------------------------------------
AIG SunAmerica Institutional Funding, 5.75s, 2009 $9,589 $10,571,125
- -----------------------------------------------------------------------------------------------------
SLM Financial Corp., 5.375s, 2013 8,652 9,073,352
- -----------------------------------------------------------------------------------------------------
$19,644,477
- -----------------------------------------------------------------------------------------------------
Financial Services - 0.2%
- -----------------------------------------------------------------------------------------------------
Countrywide Home Loans, Inc., 6.85s, 2004 $9,733 $10,098,114
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Capital I, 0.842s, 2030 (Interest only)## 368,369 10,965,263
- -----------------------------------------------------------------------------------------------------
$21,063,377
- -----------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages - 0.2%
- -----------------------------------------------------------------------------------------------------
Kellogg Co., 6s, 2006 $7,855 $8,609,528
- -----------------------------------------------------------------------------------------------------
Kraft Foods, Inc., 6.25s, 2012 6,335 6,946,277
- -----------------------------------------------------------------------------------------------------
$15,555,805
- -----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.1%
- -----------------------------------------------------------------------------------------------------
MeadWestvaco Corp., 6.8s, 2032 $4,765 $5,001,777
- -----------------------------------------------------------------------------------------------------
Weyerhaeuser Co., 6.75s, 2012 9,061 10,080,245
- -----------------------------------------------------------------------------------------------------
$15,082,022
- -----------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.1%
- -----------------------------------------------------------------------------------------------------
Harrah's Entertainment, Inc., 7.125s, 2007 $5,634 $6,392,010
- -----------------------------------------------------------------------------------------------------
MGM Mirage, Inc., 8.5s, 2010 7,654 8,610,750
- -----------------------------------------------------------------------------------------------------
$15,002,760
- -----------------------------------------------------------------------------------------------------
Home Construction
- -----------------------------------------------------------------------------------------------------
Pulte Homes, Inc., 6.375s, 2033 $3,660 $3,511,902
- -----------------------------------------------------------------------------------------------------
Insurance - 0.4%
- -----------------------------------------------------------------------------------------------------
AIG SunAmerica Global Finance II, 7.6s, 2005## $10,863 $11,959,946
- -----------------------------------------------------------------------------------------------------
Metlife, Inc., 6.5s, 2032 8,745 9,385,711
- -----------------------------------------------------------------------------------------------------
Prudential Financial, Inc., 4.5s, 2013 10,563 10,294,985
- -----------------------------------------------------------------------------------------------------
Prudential Funding LLC, 6.6s, 2008## 7,538 8,550,775
- -----------------------------------------------------------------------------------------------------
$40,191,417
- -----------------------------------------------------------------------------------------------------
Insurance - Property & Casualty - 0.1%
- -----------------------------------------------------------------------------------------------------
Safeco Corp., 4.875s, 2010 $1,490 $1,560,899
- -----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 6.375s, 2033 3,800 4,039,506
- -----------------------------------------------------------------------------------------------------
$5,600,405
- -----------------------------------------------------------------------------------------------------
Machinery & Tools - 0.1%
- -----------------------------------------------------------------------------------------------------
Kennametal, Inc., 7.2s, 2012 $7,519 $8,127,964
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.2%
- -----------------------------------------------------------------------------------------------------
HCA, Inc., 6.95s, 2012 $10,107 $10,721,991
- -----------------------------------------------------------------------------------------------------
HCA, Inc., 6.25s, 2013 2,414 2,447,921
- -----------------------------------------------------------------------------------------------------
The Healthcare Co., 8.75s, 2010 2,760 3,211,492
- -----------------------------------------------------------------------------------------------------
$16,381,404
- -----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.2%
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 6.75s, 2011 $12,006 $13,781,808
- -----------------------------------------------------------------------------------------------------
Kinder Morgan Energy Partners, 7.75s, 2032 4,181 5,067,890
- -----------------------------------------------------------------------------------------------------
$18,849,698
- -----------------------------------------------------------------------------------------------------
Oils
- -----------------------------------------------------------------------------------------------------
Oryx Energy Co., 8s, 2003 $2,000 $2,004,370
- -----------------------------------------------------------------------------------------------------
Pollution Control - 0.2%
- -----------------------------------------------------------------------------------------------------
Waste Management, Inc., 7s, 2004 $5,323 $5,577,312
- -----------------------------------------------------------------------------------------------------
Waste Management, Inc., 7.375s, 2010 13,178 15,404,607
- -----------------------------------------------------------------------------------------------------
$20,981,919
- -----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.1%
- -----------------------------------------------------------------------------------------------------
Belo Corp., 7.75s, 2027 $5,143 $6,024,911
- -----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.1%
- -----------------------------------------------------------------------------------------------------
Union Pacific Corp., 6.34s, 2003 $7,211 $7,256,963
- -----------------------------------------------------------------------------------------------------
Real Estate - 0.5%
- -----------------------------------------------------------------------------------------------------
Boston Properties Limited Partnership, 5s, 2015 $2,006 $1,933,108
- -----------------------------------------------------------------------------------------------------
EOP Operating Limited Partnership, 6.8s, 2009 9,325 10,602,889
- -----------------------------------------------------------------------------------------------------
Kimco Realty Corp., 6s, 2012 1,750 1,897,480
- -----------------------------------------------------------------------------------------------------
Simon Property Group, Inc., 6.75s, 2004 19,846 20,208,904
- -----------------------------------------------------------------------------------------------------
Vornado Realty Trust, 5.625s, 2007 15,542 16,584,417
- -----------------------------------------------------------------------------------------------------
$51,226,798
- -----------------------------------------------------------------------------------------------------
Residential Mortgage-Backed - 0.3%
- -----------------------------------------------------------------------------------------------------
Chase Mortgage Finance Trust, 6s, 2017 $3,056 $3,098,412
- -----------------------------------------------------------------------------------------------------
CWMBS, Inc. Pass-Through Trust, 8s, 2030 16,299 16,587,719
- -----------------------------------------------------------------------------------------------------
Residential Accredit Loans, Inc., 7s, 2028 3,654 3,727,790
- -----------------------------------------------------------------------------------------------------
Wells Fargo Mortgage Backed Trust, 6s, 2017 7,541 7,876,237
- -----------------------------------------------------------------------------------------------------
$31,290,158
- -----------------------------------------------------------------------------------------------------
Stores - 0.3%
- -----------------------------------------------------------------------------------------------------
Wal Mart Stores, Inc., 6.875s, 2009 $28,540 $33,549,170
- -----------------------------------------------------------------------------------------------------
Supermarkets - 0.1%
- -----------------------------------------------------------------------------------------------------
Kroger Co., 6.75s, 2012 $7,000 $7,909,790
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.6%
- -----------------------------------------------------------------------------------------------------
Citizens Communications Co., 8.5s, 2006 $3,990 $4,578,753
- -----------------------------------------------------------------------------------------------------
Citizens Communications Co., 7.625s, 2008 14,278 16,702,176
- -----------------------------------------------------------------------------------------------------
Sprint Capital Corp., 6.875s, 2028 7,570 7,382,120
- -----------------------------------------------------------------------------------------------------
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 5,862 6,392,335
- -----------------------------------------------------------------------------------------------------
Verizon New York, Inc., 6.875s, 2012 20,657 23,587,381
- -----------------------------------------------------------------------------------------------------
$58,642,765
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.1%
- -----------------------------------------------------------------------------------------------------
ALLTEL Corp., 7.875s, 2032 $5,114 $6,402,605
- -----------------------------------------------------------------------------------------------------
U.S. Government Agencies - 17.8%
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 2.375s, 2006 $9,598 $9,686,542
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 4.5s, 2013 100,011 101,176,528
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5s, 2017 - 2033 66,854 67,550,625
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 5.5s, 2006 - 2033 95,668 100,944,415
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6s, 2011 8,500 9,613,109
- -----------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp., 6.5s, 2015 194 203,871
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.08s, 2031 13,932 14,076,246
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 4.5s, 2018 102,729 103,663,594
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5s, 2018 35,943 36,837,417
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.25s, 2007 128,370 140,266,305
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.5s, 2016 - 2033 305,468 313,275,982
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 5.722s, 2009 16,001 17,434,467
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6s, 2016 - 2033 278,270 288,298,005
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.5s, 2028 - 2032 212,207 221,234,900
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.625s, 2009 - 2010 56,085 65,448,925
- -----------------------------------------------------------------------------------------------------
Federal National Mortgage Assn., 7.5s, 2030 - 2032 21,493 22,940,025
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 5.5s, 2032 - 2033 106,290 109,046,248
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6s, 2031 - 2032 76,297 79,073,417
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 6.5s, 2028 - 2033 34,632 36,390,083
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7s, 2032 13,781 14,653,220
- -----------------------------------------------------------------------------------------------------
Government National Mortgage Assn., 7.5s, 2023 - 2028 1,430 1,533,573
- -----------------------------------------------------------------------------------------------------
Small Business Administration, 4.35s, 2023 2,692 2,632,567
- -----------------------------------------------------------------------------------------------------
Small Business Administration, 8.8s, 2011 103 111,822
- -----------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., 5s, 2004 13,045 13,435,254
- -----------------------------------------------------------------------------------------------------
$1,769,527,140
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 6.0%
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 5.375s, 2031 $32,389 $34,757,445
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.25s, 2023 119,115 139,248,175
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8s, 2021 23,286 32,298,404
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 11.875s, 2003 21,703 21,987,852
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3s, 2012 50,357 55,156,740
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 3.875s, 2013 13,186 13,179,816
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25s, 2010 31,896 37,438,186
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.375s, 2007 40,553 43,534,294
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.5s, 2005 117,900 128,232,236
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.75s, 2005 75,000 81,585,900
- -----------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 6.875s, 2006 9,757 11,028,454
- -----------------------------------------------------------------------------------------------------
$598,447,502
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 1.6%
- -----------------------------------------------------------------------------------------------------
Centerpoint Energy Resources Corp., 7.875s, 2013## $3,000 $3,370,296
- -----------------------------------------------------------------------------------------------------
Cleveland Electric Illuminating Co., 9s, 2023 8,396 8,809,696
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 7.05s, 2011 6,952 7,835,071
- -----------------------------------------------------------------------------------------------------
Entergy Corp., 6.2s, 2004 5,533 5,667,933
- -----------------------------------------------------------------------------------------------------
Exelon Generation Co. LLC, 6.95s, 2011 8,725 9,889,857
- -----------------------------------------------------------------------------------------------------
Firstenergy Corp., 6.45s, 2011 6,229 6,499,962
- -----------------------------------------------------------------------------------------------------
GGIB Funding Corp., 7.43s, 2011 3,256 3,383,557
- -----------------------------------------------------------------------------------------------------
Gulf States Utilities Co., 8.25s, 2004 2,781 2,870,554
- -----------------------------------------------------------------------------------------------------
Midamerican Energy Holdings Co., 3.5s, 2008 5,589 5,544,992
- -----------------------------------------------------------------------------------------------------
Midamerican Energy Holdings Co., 5.875s, 2012## 2,667 2,820,457
- -----------------------------------------------------------------------------------------------------
Midamerican Funding LLC, 6.927s, 2029 12,485 13,654,732
- -----------------------------------------------------------------------------------------------------
Niagara Mohawk Power Corp., 7.75s, 2006 14,960 17,008,727
- -----------------------------------------------------------------------------------------------------
Northeast Utilities LLC, 8.58s, 2006 4,896 5,558,166
- -----------------------------------------------------------------------------------------------------
Oncor Electric Delivery Co., 7s, 2032 13,303 14,815,085
- -----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7.1s, 2011 3,352 3,783,285
- -----------------------------------------------------------------------------------------------------
Progress Energy, Inc., 6.85s, 2012 9,458 10,536,061
- -----------------------------------------------------------------------------------------------------
PSEG Power LLC, 6.95s, 2012 4,742 5,353,154
- -----------------------------------------------------------------------------------------------------
PSEG Power LLC, 8.625s, 2031 9,549 12,079,685
- -----------------------------------------------------------------------------------------------------
Toledo Edison Co., 7.875s, 2004 5,783 6,066,483
- -----------------------------------------------------------------------------------------------------
TXU Corp., 7s, 2013## 3,390 3,676,658
- -----------------------------------------------------------------------------------------------------
Waterford 3 Funding Entergy Corp., 8.09s, 2017 7,834 8,916,914
- -----------------------------------------------------------------------------------------------------
$158,141,325
- -----------------------------------------------------------------------------------------------------
Wireless Communications - 0.1%
- -----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 7.35s, 2006 $3,877 $4,304,668
- -----------------------------------------------------------------------------------------------------
AT&T Wireless Services, Inc., 8.75s, 2031 5,983 7,400,007
- -----------------------------------------------------------------------------------------------------
Verizon Wireless Capital LLC, 5.375s, 2006 625 675,719
- -----------------------------------------------------------------------------------------------------
$12,380,394
- -----------------------------------------------------------------------------------------------------
Total U.S. Bonds $3,722,922,390
- -----------------------------------------------------------------------------------------------------
Foreign Bonds - 1.7%
- -----------------------------------------------------------------------------------------------------
Canada - 0.2%
- -----------------------------------------------------------------------------------------------------
Hydro Quebec, 6.3s, 2011 (Energy) $16,520 $18,931,391
- -----------------------------------------------------------------------------------------------------
Telus Corp., 8s, 2011 (Telecommunications - Wireline) 5,000 5,837,035
- -----------------------------------------------------------------------------------------------------
$24,768,426
- -----------------------------------------------------------------------------------------------------
France - 0.3%
- -----------------------------------------------------------------------------------------------------
France Telecom S.A., 9.75s, 2031 (Telecommunications -
Wireline) $7,914 $10,566,274
- -----------------------------------------------------------------------------------------------------
Socgen Real Estate Co., 7.64s, 2049 (Banks & Credit Cos.)## 16,307 18,623,997
- -----------------------------------------------------------------------------------------------------
$29,190,271
- -----------------------------------------------------------------------------------------------------
Hong Kong - 0.1%
- -----------------------------------------------------------------------------------------------------
PCCW-HKT Ltd., 6s, 2013 (Telecommunications - Wireline)## $7,734 $7,788,215
- -----------------------------------------------------------------------------------------------------
Israel - 0.1%
- -----------------------------------------------------------------------------------------------------
State of Israel, 4.625s, 2013 $6,850 $6,613,134
- -----------------------------------------------------------------------------------------------------
Italy - 0.3%
- -----------------------------------------------------------------------------------------------------
Republic of Italy, 4.625s, 2005 $14,395 $15,128,569
- -----------------------------------------------------------------------------------------------------
Unicredito Italiano Capital Trust, 9.2s, 2049 (Banks &
Credit Cos.)## 11,444 14,534,819
- -----------------------------------------------------------------------------------------------------
$29,663,388
- -----------------------------------------------------------------------------------------------------
Mexico - 0.2%
- -----------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 9.125s, 2010
(Quasi - Government) $10,769 $12,868,955
- -----------------------------------------------------------------------------------------------------
United Mexican States, 8.125s, 2019 3,155 3,565,150
- -----------------------------------------------------------------------------------------------------
United Mexican States, 8s, 2022 3,954 4,359,285
- -----------------------------------------------------------------------------------------------------
United Mexican States, 11.5s, 2026 3,000 4,401,000
- -----------------------------------------------------------------------------------------------------
$25,194,390
- -----------------------------------------------------------------------------------------------------
Netherlands - 0.3%
- -----------------------------------------------------------------------------------------------------
Deutsche Telekom, 8.75s, 2030 (Telecommunications -
Wireline) $3,708 $4,703,609
- -----------------------------------------------------------------------------------------------------
KfW International Finance, Inc., 4.25s, 2005 (Quasi -
Government) 19,905 20,755,620
- -----------------------------------------------------------------------------------------------------
$25,459,229
- -----------------------------------------------------------------------------------------------------
Singapore - 0.1%
- -----------------------------------------------------------------------------------------------------
DBS Capital Funding Corp., 7.657s, 2049 (Banks &
Credit Companies)## $7,327 $8,408,648
- -----------------------------------------------------------------------------------------------------
United Kingdom - 0.1%
- -----------------------------------------------------------------------------------------------------
Barclays Bank PLC, 6.86s, 2049 (Banks & Credit Cos.)## $4,948 $5,471,212
- -----------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC, 5.125s, 2013 (Food & Non
Alcoholic Beverages)## 3,825 3,880,248
- -----------------------------------------------------------------------------------------------------
$9,351,460
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $166,437,161
- -----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $3,763,374,497) $3,889,359,551
- -----------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.2%
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
U.S. Stocks - 1.2%
- -----------------------------------------------------------------------------------------------------
Aerospace - 0.1%
- -----------------------------------------------------------------------------------------------------
Northrop Grumman Corp., 7.25s 48,700 $4,762,860
- -----------------------------------------------------------------------------------------------------
Automotive
- -----------------------------------------------------------------------------------------------------
Ford Motor Co. Capital Trust, 6.5s 60,000 $2,598,600
- -----------------------------------------------------------------------------------------------------
Banks & Credit Companies - 0.1%
- -----------------------------------------------------------------------------------------------------
Capital One Financial Corp., 6.25s 31,000 $1,408,020
- -----------------------------------------------------------------------------------------------------
New York Community Capital Trust V, 6s 25,000 1,600,000
- -----------------------------------------------------------------------------------------------------
State Street Corp., 6.75s 5,900 1,320,420
- -----------------------------------------------------------------------------------------------------
Washington Mutual Capital Trust, 5.375s## 40,000 2,142,800
- -----------------------------------------------------------------------------------------------------
$6,471,240
- -----------------------------------------------------------------------------------------------------
Computer Software - Systems
- -----------------------------------------------------------------------------------------------------
Electro Data Systems, 7.625s 60,000 $1,227,600
- -----------------------------------------------------------------------------------------------------
Containers - 0.1%
- -----------------------------------------------------------------------------------------------------
Owens-Illinois, Inc., 4.75s 117,600 $3,363,360
- -----------------------------------------------------------------------------------------------------
Electronics
- -----------------------------------------------------------------------------------------------------
Xerox Capital Trust II, 7.5s## 40,000 $2,585,000
- -----------------------------------------------------------------------------------------------------
Energy - Independent
- -----------------------------------------------------------------------------------------------------
Kerr-McGee Corp., 5.5s 59,800 $2,586,350
- -----------------------------------------------------------------------------------------------------
Insurance - 0.3%
- -----------------------------------------------------------------------------------------------------
Chubb Corp., 7s 361,000 $9,989,942
- -----------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc., 6s 221,000 11,958,310
- -----------------------------------------------------------------------------------------------------
Travelers Property Casualty Corp., 4.5s 255,160 5,853,370
- -----------------------------------------------------------------------------------------------------
Unumprovident Corp., 8.25s 60,000 1,930,800
- -----------------------------------------------------------------------------------------------------
$29,732,422
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services
- -----------------------------------------------------------------------------------------------------
Express Scripts Automatic Exchange Trust, 7s 12,500 $1,290,645
- -----------------------------------------------------------------------------------------------------
Medical Equipment - 0.1%
- -----------------------------------------------------------------------------------------------------
Baxter International, Inc., 7s 202,600 $10,666,890
- -----------------------------------------------------------------------------------------------------
Natural Gas - Distribution
- -----------------------------------------------------------------------------------------------------
KeySpan Corp., 8.75s 19,430 $1,016,189
- -----------------------------------------------------------------------------------------------------
Sempra Energy, 8.5s 50,800 1,402,080
- -----------------------------------------------------------------------------------------------------
$2,418,269
- -----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline
- -----------------------------------------------------------------------------------------------------
El Paso Corp., 9s 25,200 $730,548
- -----------------------------------------------------------------------------------------------------
El Paso Energy Capital Trust I, 4.75s 40,000 1,205,200
- -----------------------------------------------------------------------------------------------------
$1,935,748
- -----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.1%
- -----------------------------------------------------------------------------------------------------
Tribune Co., 2s 50,000 $3,968,750
- -----------------------------------------------------------------------------------------------------
Railroad & Shipping
- -----------------------------------------------------------------------------------------------------
Teekay Shipping Corp., 7.25s 60,000 $1,680,600
- -----------------------------------------------------------------------------------------------------
Specialty Stores
- -----------------------------------------------------------------------------------------------------
Toys R Us, Inc., 6.25s 48,900 $1,921,770
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.2%
- -----------------------------------------------------------------------------------------------------
Motorola, Inc., 7s 417,600 $15,835,392
- -----------------------------------------------------------------------------------------------------
Telephone Services
- -----------------------------------------------------------------------------------------------------
ALLTEL Corp., 7.75s 30,000 $1,466,700
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 0.2%
- -----------------------------------------------------------------------------------------------------
Calpine Capital Trust, 5.75s* 15,000 $682,500
- -----------------------------------------------------------------------------------------------------
Dominion Resources, Inc., 9.5s 43,300 2,454,677
- -----------------------------------------------------------------------------------------------------
DTE Energy Co., 8.75s 70,000 1,771,000
- -----------------------------------------------------------------------------------------------------
Duke Energy Co., 8s 120,000 1,720,800
- -----------------------------------------------------------------------------------------------------
Duke Energy Co., 8.25s 50,000 653,000
- -----------------------------------------------------------------------------------------------------
TXU Corp., 8.125s 336,000 11,938,080
- -----------------------------------------------------------------------------------------------------
TXU Corp., 8.75s 6,660 228,771
- -----------------------------------------------------------------------------------------------------
$19,448,828
- -----------------------------------------------------------------------------------------------------
Total U.S. Stocks $113,961,024
- -----------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(Identified Cost, $116,921,394) $113,961,024
- -----------------------------------------------------------------------------------------------------
Convertible Bonds - 1.4%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
U.S. Bonds - 1.4%
- -----------------------------------------------------------------------------------------------------
Automotive
- -----------------------------------------------------------------------------------------------------
SPX Corp., 0s, 2021## $710 $449,075
- -----------------------------------------------------------------------------------------------------
Banks & Credit Companies
- -----------------------------------------------------------------------------------------------------
GATX Corp., 7.5s, 2007 $1,000 $1,043,750
- -----------------------------------------------------------------------------------------------------
Navistar Financial Corp., 4.75s, 2009 1,500 1,477,500
- -----------------------------------------------------------------------------------------------------
$2,521,250
- -----------------------------------------------------------------------------------------------------
Biotechnology
- -----------------------------------------------------------------------------------------------------
Protein Design Labs, Inc., 2.75s, 2023## $1,000 $976,250
- -----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 0.1%
- -----------------------------------------------------------------------------------------------------
Comcast Corp., 2s, 2029 $28 $9,141
- -----------------------------------------------------------------------------------------------------
Echostar Communications Corp., 4.875s, 2007 1,990 2,027,312
- -----------------------------------------------------------------------------------------------------
Echostar Communications Corp., 5.75s, 2008 1,500 1,633,125
- -----------------------------------------------------------------------------------------------------
Interpublic Group Cos., Inc., 4.5s, 2023## 2,970 4,191,412
- -----------------------------------------------------------------------------------------------------
LIN TV Corp., 2.5s, 2033## 1,410 1,295,438
- -----------------------------------------------------------------------------------------------------
$9,156,428
- -----------------------------------------------------------------------------------------------------
Computer Software - 0.1%
- -----------------------------------------------------------------------------------------------------
Computer Associates International, Inc., 5s, 2007## $2,000 $2,572,500
- -----------------------------------------------------------------------------------------------------
Veritas Software Corp., 0.25s, 2013## 1,320 1,318,350
- -----------------------------------------------------------------------------------------------------
$3,890,850
- -----------------------------------------------------------------------------------------------------
Conglomerates
- -----------------------------------------------------------------------------------------------------
Tyco International Ltd., 0s, 2020## $2,000 $1,535,000
- -----------------------------------------------------------------------------------------------------
Containers
- -----------------------------------------------------------------------------------------------------
Sealed Air Corp., 3s, 2033## $3,500 $3,486,875
- -----------------------------------------------------------------------------------------------------
Electrical Equipment
- -----------------------------------------------------------------------------------------------------
Tyco International Group S.A., 3.125s, 2023## $2,960 $3,322,600
- -----------------------------------------------------------------------------------------------------
Electronics - 0.3%
- -----------------------------------------------------------------------------------------------------
Agere Systems, Inc., 6.5s, 2009 $1,290 $1,665,712
- -----------------------------------------------------------------------------------------------------
Agilent Technologies, Inc., 3s, 2021 8,200 8,271,750
- -----------------------------------------------------------------------------------------------------
Atmel Corp., 0s, 2021 7,000 2,747,500
- -----------------------------------------------------------------------------------------------------
Fairchild Semiconductor Corp, 5s, 2008 730 714,488
- -----------------------------------------------------------------------------------------------------
LSI Logic Corp., 4s, 2006## 2,896 2,942,550
- -----------------------------------------------------------------------------------------------------
Photronics, Inc., 4.75s, 2006 1,000 980,000
- -----------------------------------------------------------------------------------------------------
Sandisk Corp., 4.5s, 2006## 2,000 6,992,500
- -----------------------------------------------------------------------------------------------------
SCI Systems, Inc., 3s, 2007 1,500 1,359,375
- -----------------------------------------------------------------------------------------------------
$25,673,875
- -----------------------------------------------------------------------------------------------------
Energy - Independent - 0.1%
- -----------------------------------------------------------------------------------------------------
Devon Energy Corp., 0s, 2020## $3,300 $1,782,000
- -----------------------------------------------------------------------------------------------------
Kerr McGee Corp., 5.25s, 2010 1,280 1,334,400
- -----------------------------------------------------------------------------------------------------
Massey Energy Co., 4.75s, 2023## 1,400 1,407,000
- -----------------------------------------------------------------------------------------------------
$4,523,400
- -----------------------------------------------------------------------------------------------------
Engineering - Construction
- -----------------------------------------------------------------------------------------------------
Shaw Group, Inc., 0s, 2021 $1,650 $1,068,375
- -----------------------------------------------------------------------------------------------------
Food & Non Alcoholic Beverages
- -----------------------------------------------------------------------------------------------------
Bunge Limited Finance Corp., 3.75s, 2022## $1,820 $1,958,775
- -----------------------------------------------------------------------------------------------------
Gaming & Lodging - 0.3%
- -----------------------------------------------------------------------------------------------------
Carnival Corp, 2s, 2021 $1,500 $1,646,250
- -----------------------------------------------------------------------------------------------------
Hilton Hotels Corp., 3.375s, 2023## 16,500 17,366,250
- -----------------------------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd., 0s, 2021 5,000 2,518,750
- -----------------------------------------------------------------------------------------------------
Starwood Hotels & Resorts, 3.5s, 2023## 2,830 2,897,212
- -----------------------------------------------------------------------------------------------------
$24,428,462
- -----------------------------------------------------------------------------------------------------
Health Maintenance Organizations
- -----------------------------------------------------------------------------------------------------
Pacificare Health Systems, Inc., 3s, 2032 $2,000 $2,710,000
- -----------------------------------------------------------------------------------------------------
Insurance
- -----------------------------------------------------------------------------------------------------
Ohio Casualty Corp., 5s, 2022 $2,000 $1,910,260
- -----------------------------------------------------------------------------------------------------
PMI Group, Inc., 2.5s, 2021## 1,000 1,057,500
- -----------------------------------------------------------------------------------------------------
$2,967,760
- -----------------------------------------------------------------------------------------------------
Machinery & Tools
- -----------------------------------------------------------------------------------------------------
Navistar International Corp., 2.5s, 2007 $2,000 $2,582,500
- -----------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 0.1%
- -----------------------------------------------------------------------------------------------------
Community Health Systems, Inc., 4.25s, 2008 $1,000 $993,750
- -----------------------------------------------------------------------------------------------------
Sunrise Assisted Living, Inc., 5.25s, 2009 1,900 1,881,000
- -----------------------------------------------------------------------------------------------------
WebMD Corp., 3.25s, 2007 900 1,031,625
- -----------------------------------------------------------------------------------------------------
$3,906,375
- -----------------------------------------------------------------------------------------------------
Oil Services - 0.1%
- -----------------------------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc., 0s, 2020 $3,000 $1,698,750
- -----------------------------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc., 1.5s, 2031 1,430 1,304,875
- -----------------------------------------------------------------------------------------------------
Global Marine, Inc., 0s, 2020 2,000 1,140,000
- -----------------------------------------------------------------------------------------------------
Halliburton Co., 3.125s, 2023## 1,900 1,900,000
- -----------------------------------------------------------------------------------------------------
Pride International, Inc., 3.25s, 2033## 2,000 2,040,000
- -----------------------------------------------------------------------------------------------------
Transocean Sedco Forex, Inc., 1.5s, 2021 2,000 1,925,000
- -----------------------------------------------------------------------------------------------------
$10,008,625
- -----------------------------------------------------------------------------------------------------
Personal Computers & Peripherals
- -----------------------------------------------------------------------------------------------------
Solectron Corp., 0s, 2020 $5,700 $3,220,500
- -----------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1%
- -----------------------------------------------------------------------------------------------------
Medics Pharmaceutical Corp., 2.5s, 2032 $1,310 $1,527,788
- -----------------------------------------------------------------------------------------------------
Watson Pharmaceuticals, Inc., 1.75s, 2023## 2,940 3,564,750
- -----------------------------------------------------------------------------------------------------
$5,092,538
- -----------------------------------------------------------------------------------------------------
Precious Metals & Minerals
- -----------------------------------------------------------------------------------------------------
Freeport McMoRan Copper & Gold, Inc., 8.25s, 2006## $1,000 $2,356,250
- -----------------------------------------------------------------------------------------------------
Printing & Publishing
- -----------------------------------------------------------------------------------------------------
School Specialty, Inc., 3.75s, 2023## $1,960 $1,935,500
- -----------------------------------------------------------------------------------------------------
Restaurants
- -----------------------------------------------------------------------------------------------------
Brinker International, Inc., 0s, 2021## $1,800 $1,219,500
- -----------------------------------------------------------------------------------------------------
Specialty Stores - 0.1%
- -----------------------------------------------------------------------------------------------------
Anntaylor Stores Corp., 0.55s, 2019## $3,000 $2,058,750
- -----------------------------------------------------------------------------------------------------
Charming Shoppes, Inc., 4.75s, 2012## 2,000 1,832,500
- -----------------------------------------------------------------------------------------------------
$3,891,250
- -----------------------------------------------------------------------------------------------------
Telecommunications - Wireless
- -----------------------------------------------------------------------------------------------------
Mcdata Corp., 2.25s, 2010## $1,000 $1,370,000
- -----------------------------------------------------------------------------------------------------
Telephone Services - 0.1%
- -----------------------------------------------------------------------------------------------------
Centurytel, Inc., 4.75s, 2032 $895 $1,034,557
- -----------------------------------------------------------------------------------------------------
Level 3 Communications, Inc., 2.875s, 2010 1,610 1,583,838
- -----------------------------------------------------------------------------------------------------
Verizon Global Funding Corp., 0s, 2021 4,000 2,390,000
- -----------------------------------------------------------------------------------------------------
$5,008,395
- -----------------------------------------------------------------------------------------------------
Utilities - Electric Power
- -----------------------------------------------------------------------------------------------------
Calpine Corp., 4s, 2006 $1,000 $916,250
- -----------------------------------------------------------------------------------------------------
Reliant Resources, Inc., 5s, 2010## 2,690 2,289,863
- -----------------------------------------------------------------------------------------------------
$3,206,113
- -----------------------------------------------------------------------------------------------------
Wireless Communications
- -----------------------------------------------------------------------------------------------------
American Tower Corp., 6.25s, 2009## $1,590 $1,514,475
- -----------------------------------------------------------------------------------------------------
Nextel Partners, Inc., 1.5s, 2008## 1,750 2,161,250
- -----------------------------------------------------------------------------------------------------
$3,675,725
- -----------------------------------------------------------------------------------------------------
Total U.S. Bonds $136,142,246
- -----------------------------------------------------------------------------------------------------
Foreign Bonds
- -----------------------------------------------------------------------------------------------------
Canada
- -----------------------------------------------------------------------------------------------------
Four Seasons Hotels, Inc., 0s, 2029 (Restaurants & Lodging) $4,982 $1,644,060
- -----------------------------------------------------------------------------------------------------
Netherlands
- -----------------------------------------------------------------------------------------------------
ASM International N.V., 5s, 2005 (Electronics)## $2,000 $2,235,000
- -----------------------------------------------------------------------------------------------------
United Kingdom
- -----------------------------------------------------------------------------------------------------
Amdocs Ltd., 2s, 2008 (Computer Software) $2,000 $1,972,500
- -----------------------------------------------------------------------------------------------------
Total Foreign Bonds $5,851,560
- -----------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $129,080,153) $141,993,806
- -----------------------------------------------------------------------------------------------------
Preferred Stock
- -----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -----------------------------------------------------------------------------------------------------
U.S. Stock
- -----------------------------------------------------------------------------------------------------
Consumer Goods & Services
- -----------------------------------------------------------------------------------------------------
Newell Financial Trust I, 5.25s, (Identified Cost, $4,021,050) 80,400 $3,376,800
- -----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 2.7%
- -----------------------------------------------------------------------------------------------------
Goldman Sachs & Co. 3,897,250 $3,897,250
- -----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 258,472,647 258,472,647
- -----------------------------------------------------------------------------------------------------
Total Collateral for Securities Loaned, at Amortized Cost $262,369,897
- -----------------------------------------------------------------------------------------------------
Short-Term Obligations - 0.8%
- -----------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 Omitted) $ VALUE
- -----------------------------------------------------------------------------------------------------
Corporate Asset Fund, due 10/22/03 $16,500 $16,489,701
- -----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc., due 10/01/03 43,546 43,546,000
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter, due 11/03/03 20,000 19,980,384
- -----------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $80,016,085
- -----------------------------------------------------------------------------------------------------
Repurchase Agreement - 1.0%
- -----------------------------------------------------------------------------------------------------
Merrill Lynch, dated 9/30/03, due 10/01/03, total to
be received $103,121,065 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost $103,118 $103,118,000
- -----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $9,467,227,009) $10,073,399,089
- -----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.6)% (162,250,356)
- -----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $9,911,148,733
- -----------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
^4(2) paper.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF ASSETS AND LIABILITIES
- -----------------------------------------------------------------------------------------------------
This statement represents your fund's balance sheet, which details the assets and liabilities
composing the total value of your fund.
AT 9/30/03
ASSETS
Investments, at value, including $256,291,759 of
securities on loan (identified cost, $9,467,227,009) $10,073,399,089
- -----------------------------------------------------------------------------------------------------
Cash 745
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 82,467,882
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 48,669,038
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 54,680,885
- -----------------------------------------------------------------------------------------------------
Other assets 165,120
- -----------------------------------------------------------------------------------------------------
Total assets $10,259,382,759
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable to custodian $5,935
- -----------------------------------------------------------------------------------------------------
Distribution payable 12,928,207
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 12,677,688
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 58,107,320
- -----------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 262,369,897
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 279,482
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 29,147
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 158,642
- -----------------------------------------------------------------------------------------------------
Program manager fee 29
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 1,677,679
- -----------------------------------------------------------------------------------------------------
Total liabilities $348,234,026
- -----------------------------------------------------------------------------------------------------
Net assets $9,911,148,733
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $9,758,261,962
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 606,198,925
- -----------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments and
foreign currency transactions (440,064,732)
- -----------------------------------------------------------------------------------------------------
Accumulated distributions in excess of net investment
income (13,247,422)
- -----------------------------------------------------------------------------------------------------
Total $9,911,148,733
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 701,352,969
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
Net assets $5,702,669,493
- -----------------------------------------------------------------------------------------------------
Shares outstanding 403,677,102
- -----------------------------------------------------------------------------------------------------
Net asset value per share $14.13
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$14.13) $14.83
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $2,658,781,282
- -----------------------------------------------------------------------------------------------------
Shares outstanding 188,251,325
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.12
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $1,150,875,248
- -----------------------------------------------------------------------------------------------------
Shares outstanding 81,186,861
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.18
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $378,001,458
- -----------------------------------------------------------------------------------------------------
Shares outstanding 26,763,946
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $14.12
- -----------------------------------------------------------------------------------------------------
Class R shares
Net assets $16,090,133
- -----------------------------------------------------------------------------------------------------
Shares outstanding 1,138,826
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $14.13
- -----------------------------------------------------------------------------------------------------
Class 529A shares
Net assets $2,601,273
- -----------------------------------------------------------------------------------------------------
Shares outstanding 184,428
- -----------------------------------------------------------------------------------------------------
Net asset value per share $14.10
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$14.10) $14.80
- -----------------------------------------------------------------------------------------------------
Class 529B shares
Net assets $1,063,850
- -----------------------------------------------------------------------------------------------------
Shares outstanding 75,322
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.12
- -----------------------------------------------------------------------------------------------------
Class 529C shares
Net assets $1,065,996
- -----------------------------------------------------------------------------------------------------
Shares outstanding 75,159
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.18
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price of Class A and Class 529A shares are reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class B, Class C, Class
529B, and Class 529C shares.
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------------------------
This statement describes how much your fund received in investment income and paid in expenses. It
also describes any gains and/or losses generated by fund operations.
FOR YEAR ENDED 9/30/03
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Interest $180,365,655
- -----------------------------------------------------------------------------------------------------
Dividends 120,348,916
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (829,827)
- -----------------------------------------------------------------------------------------------------
Total investment income $299,884,744
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $30,943,825
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 124,305
- -----------------------------------------------------------------------------------------------------
Shareholder servicing agent fee 9,389,705
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 17,771,922
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 24,860,357
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 10,134,120
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R) 23,846
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529A) 4,701
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529B) 4,315
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class 529C) 5,909
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529A) 3,358
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529B) 1,079
- -----------------------------------------------------------------------------------------------------
Program manager fee (Class 529C) 1,477
- -----------------------------------------------------------------------------------------------------
Administrative fee 382,153
- -----------------------------------------------------------------------------------------------------
Custodian fee 1,827,428
- -----------------------------------------------------------------------------------------------------
Printing 398,134
- -----------------------------------------------------------------------------------------------------
Postage 636,551
- -----------------------------------------------------------------------------------------------------
Auditing fees 45,600
- -----------------------------------------------------------------------------------------------------
Legal fees 63,383
- -----------------------------------------------------------------------------------------------------
Miscellaneous 5,455,270
- -----------------------------------------------------------------------------------------------------
Total expenses $102,077,438
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (204,139)
- -----------------------------------------------------------------------------------------------------
Net expenses $101,873,299
- -----------------------------------------------------------------------------------------------------
Net investment income $198,011,445
- -----------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $(137,817,178)
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions 138,385
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign
currency transactions $(137,678,793)
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation
- -----------------------------------------------------------------------------------------------------
Investments $1,059,185,292
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign
currencies 8,786
- -----------------------------------------------------------------------------------------------------
Net unrealized gain on investments and foreign
currency translation $1,059,194,078
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency $921,515,285
- -----------------------------------------------------------------------------------------------------
Increase in net assets from operations $1,119,526,730
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -----------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
This statement describes the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
FOR YEARS ENDED 9/30 2003 2002
INCREASE (DECREASE) IN NET ASSETS
OPERATIONS
Net investment income $198,011,445 $212,428,174
- -----------------------------------------------------------------------------------------------------
Net realized loss on investments and foreign
currency transactions (137,678,793) (209,992,635)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 1,059,194,078 (486,431,327)
- -------------------------------------------------------- --------------- ---------------
Increase (decrease) in net assets from operations $1,119,526,730 $(483,995,788)
- -------------------------------------------------------- --------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -----------------------------------------------------------------------------------------------------
Class A $(142,189,741) $(141,581,736)
- -----------------------------------------------------------------------------------------------------
Class B (53,932,749) (57,662,363)
- -----------------------------------------------------------------------------------------------------
Class C (21,827,600) (20,010,428)
- -----------------------------------------------------------------------------------------------------
Class I (10,451,387) (9,198,270)
- -----------------------------------------------------------------------------------------------------
Class R (107,286) --
- -----------------------------------------------------------------------------------------------------
Class 529A (32,207) (90)
- -----------------------------------------------------------------------------------------------------
Class 529B (7,647) (105)
- -----------------------------------------------------------------------------------------------------
Class 529C (10,540) (122)
- -----------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions
- -----------------------------------------------------------------------------------------------------
Class A -- (106,115,382)
- -----------------------------------------------------------------------------------------------------
Class B -- (56,021,579)
- -----------------------------------------------------------------------------------------------------
Class C -- (18,324,346)
- -----------------------------------------------------------------------------------------------------
Class I -- (5,210,957)
- -------------------------------------------------------- --------------- ---------------
Total distributions declared to shareholders $(228,559,157) $(414,125,378)
- -------------------------------------------------------- --------------- ---------------
Net increase in net assets from fund share transactions $1,002,815,528 $1,659,842,906
- -------------------------------------------------------- --------------- ---------------
Total increase in net assets $1,893,783,101 $761,721,740
- -------------------------------------------------------- --------------- ---------------
NET ASSETS
At beginning of period $8,017,365,632 $7,255,643,892
- -----------------------------------------------------------------------------------------------------
At end of period (including accumulated distributions in
excess of net investment income of $13,247,422 and
$13,190,833, respectively) $9,911,148,733 $8,017,365,632
- -----------------------------------------------------------------------------------------------------
See notes to financial statements.
- -------------------------------------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's financial performance for the past 5 years (or, if
shorter, the period of the fund's operation). Certain information reflects financial results for a single fund share. The total
returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the fund (assuming
reinvestment of all distributions) held for the entire period. This information has been audited by the fund's independent
auditors, whose report, together with the fund's financial statements, are included in this report.
FOR YEARS ENDED 9/30
CLASS A 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.78 $14.17 $15.19 $14.57 $16.06
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.33 $0.40 $0.46 $0.48 $0.53
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.40 (1.01) (0.45) 1.55 0.56
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations $1.73 $(0.61) $0.01 $2.03 $1.09
- ------------------------------------------------------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.38) $(0.43) $(0.47) $(0.47) $(0.51)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions -- (0.35) (0.55) (0.94) (2.07)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.01) -- --
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions declared to shareholders $(0.38) $(0.78) $(1.03) $(1.41) $(2.58)
- ------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $14.13 $12.78 $14.17 $15.19 $14.57
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total return (%)(+) 13.70 (4.76) (0.10) 15.06 7.06
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 0.90 0.92 0.88 0.90 0.89
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S) 2.45 2.84 3.09 3.36 3.45
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 71 86 97 112 151
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000,000 Omitted) $5,703 $4,540 $4,121 $3,570 $3,699
- -------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(S) As required, effective October 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended
September 30, 2002, was to decrease net investment income per share by $0.01, decrease net realized and unrealized losses
per share by $0.01, and decrease the ratio of net investment income to average net assets by 0.10%. Per share, ratios and
supplemental data for periods prior to October 1, 2001, have not been restated to reflect this change in presentation.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
CLASS B 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.78 $14.17 $15.18 $14.57 $16.05
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.24 $0.31 $0.37 $0.39 $0.43
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.39 (1.01) (0.45) 1.54 0.58
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations $1.63 $(0.70) $(0.08) $1.93 $1.01
- ------------------------------------------------------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.29) $(0.34) $(0.37) $(0.38) $(0.42)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions -- (0.35) (0.55) (0.94) (2.07)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.01) -- --
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions declared to shareholders $(0.29) $(0.69) $(0.93) $(1.32) $(2.49)
- ------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $14.12 $12.78 $14.17 $15.18 $14.57
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total return (%) 12.90 (5.38) (0.67) 14.24 6.43
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.54 1.57 1.53 1.54 1.54
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S) 1.81 2.18 2.46 2.71 2.80
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 71 86 97 112 151
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000,000 Omitted) $2,659 $2,321 $2,226 $2,014 $2,217
- -------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(S) As required, effective October 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended
September 30, 2002, was to decrease net investment income per share by $0.01, decrease net realized and unrealized losses
per share by $0.01, and decrease the ratio of net investment income to average net assets by 0.10%. Per share, ratios and
supplemental data for periods prior to October 1, 2001, have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
CLASS C 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.82 $14.22 $15.23 $14.61 $16.10
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.24 $0.31 $0.37 $0.39 $0.43
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.41 (1.02) (0.45) 1.55 0.57
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations $1.65 $(0.71) $(0.08) $1.94 $1.00
- ------------------------------------------------------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.29) $(0.34) $(0.37) $(0.38) $(0.42)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions -- (0.35) (0.55) (0.94) (2.07)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.01) -- --
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions declared to shareholders $(0.29) $(0.69) $(0.93) $(1.32) $(2.49)
- ------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $14.18 $12.82 $14.22 $15.23 $14.61
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total return (%) 13.03 (5.43) (0.68) 14.27 6.41
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.54 1.57 1.53 1.54 1.54
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S) 1.79 2.19 2.45 2.70 2.80
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 71 86 97 112 151
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000,000 Omitted) $1,151 $887 $702 $497 $508
- -------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(S) As required, effective October 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended
September 30, 2002, was to decrease net investment income per share by $0.01, decrease net realized and unrealized losses
per share by $0.01, and decrease the ratio of net investment income to average net assets by 0.10%. Per share, ratios and
supplemental data for periods prior to October 1, 2001, have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
FOR YEARS ENDED 9/30
CLASS I 2003 2002 2001 2000 1999
Net asset value, beginning of period $12.77 $14.17 $15.19 $14.57 $16.06
- -------------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.37 $0.46 $0.53 $0.53 $0.58
- -------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 1.40 (1.03) (0.47) 1.55 0.57
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total from investment operations $1.77 $(0.57) $0.06 $2.08 $1.15
- ------------------------------------------------------ ------- ------- ------- ------- -------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.42) $(0.48) $(0.51) $(0.52) $(0.57)
- -------------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions -- (0.35) (0.55) (0.94) (2.07)
- -------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income -- -- (0.02) -- --
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total distributions declared to shareholders $(0.42) $(0.83) $(1.08) $(1.46) $(2.64)
- ------------------------------------------------------ ------- ------- ------- ------- -------
Net asset value, end of period $14.12 $12.77 $14.17 $15.19 $14.57
- ------------------------------------------------------ ------- ------- ------- ------- -------
Total return (%) 14.10 (4.50) 0.25 15.46 7.43
- -------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 0.55 0.57 0.53 0.55 0.54
- -------------------------------------------------------------------------------------------------------------------------------
Net investment income(S) 2.79 3.20 3.43 3.71 3.84
- -------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 71 86 97 112 151
- -------------------------------------------------------------------------------------------------------------------------------
Net assets at end of period (000,000 Omitted) $378 $270 $207 $51 $48
- -------------------------------------------------------------------------------------------------------------------------------
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(S) As required, effective October 1, 2001, the fund has adopted the provisions of the AICPA Audit and Accounting Guide for
Investment Companies and began amortizing premium on debt securities. The effect of this change for the year ended
September 30, 2002, was to decrease net investment income per share by $0.01, decrease net realized and unrealized losses
per share by $0.01, and decrease the ratio of net investment income to average net assets by 0.10%. Per share, ratios and
supplemental data for periods prior to October 1, 2001, have not been restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
PERIOD ENDED
CLASS R 9/30/03*
Net asset value, beginning of period $13.27
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.19
- -----------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 0.93
- ----------------------------------------------------------------- -------
Total from investment operations $1.12
- ----------------------------------------------------------------- -------
Less distributions declared to shareholders from net
investment income $(0.26)
- ----------------------------------------------------------------- -------
Net asset value, end of period $14.13
- ----------------------------------------------------------------- -------
Total return (%) 8.57++
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA:
Expenses## 1.07+
- -----------------------------------------------------------------------------
Net investment income 1.81+
- -----------------------------------------------------------------------------
Portfolio turnover 71
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $16,090
- -----------------------------------------------------------------------------
* For the period from the inception of Class R shares, December 31, 2002,
through September 30, 2003.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
See notes to financial statements.
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS 529A 9/30/03 9/30/02*
Net asset value, beginning of period $12.78 $13.30
- ----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.27 $0.04
- ----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 1.39 (0.49)
- -------------------------------------------------------------------- ------- -------
Total from investment operations $1.66 $(0.45)
- -------------------------------------------------------------------- ------- -------
Less distributions declared to shareholders from net
investment income $(0.34) $(0.07)
- -------------------------------------------------------------------- ------- -------
Net asset value, end of period $14.10 $12.78
- -------------------------------------------------------------------- ------- -------
Total return (%)(+) 13.19 (3.43)++
- ----------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.16 1.17+
- ----------------------------------------------------------------------------------------------------------
Net investment income(S) 1.97 2.45+
- ----------------------------------------------------------------------------------------------------------
Portfolio turnover 71 86
- ----------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $2,601 $50
- ----------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529A shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(S) As required, effective October 1, 2001, the fund has adopted the provisions of the AICPA Audit and
Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect
of this change for the year ended September 30, 2002, was to decrease net investment income per share
and decrease net realized and unrealized losses per share. The impact of this change calculates to less
than $0.01 per share. In addition, the ratio of net investment income to average net assets decreased
by 0.11%. Per share, ratios and supplemental data for periods prior to October 1, 2001, have not been
restated to reflect this change in presentation.
(+) Total returns for Class 529A shares do not include the applicable sales charge. If the charge had been
included, the results would have been lower.
See notes to financial statements.
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS 529B 9/30/03 9/30/02*
Net asset value, beginning of period $12.78 $13.30
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.17 $0.03
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 1.43 (0.50)
- -------------------------------------------------------------------- ------- -------
Total from investment operations $1.60 $(0.47)
- -------------------------------------------------------------------- ------- -------
Less distributions declared to shareholders from net
investment income $(0.26) $(0.05)
- -------------------------------------------------------------------- ------- -------
Net asset value, end of period $14.12 $12.78
- -------------------------------------------------------------------- ------- -------
Total return (%) 12.63 (3.53)++
- -----------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.80 1.82+
- -----------------------------------------------------------------------------------------------------------
Net investment income(S) 1.33 1.75+
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover 71 86
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $1,064 $75
- -----------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529B shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(S) As required, effective October 1, 2001, the fund has adopted the provisions of the AICPA Audit and
Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect
of this change for the year ended September 30, 2002, was to decrease net investment income per share
and decrease net realized and unrealized losses per share. The impact of this change calculates to less
than $0.01 per share. In addition, the ratio of net investment income to average net assets decreased
by 0.11%. Per share, ratios and supplemental data for periods prior to October 1, 2001, have not been
restated to reflect this change in presentation.
See notes to financial statements.
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS 529C 9/30/03 9/30/02*
Net asset value, beginning of period $12.83 $13.35
- -----------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)
Net investment income $0.19 $0.03
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 1.42 (0.50)
- -------------------------------------------------------------------- ------- -------
Total from investment operations $1.61 $(0.47)
- -------------------------------------------------------------------- ------- -------
Less distributions declared to shareholders from net
investment income $(0.26) $(0.05)
- -------------------------------------------------------------------- ------- -------
Net asset value, end of period $14.18 $12.83
- -------------------------------------------------------------------- ------- -------
Total return (%) 12.67 (3.52)++
- -----------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS AND
SUPPLEMENTAL DATA:
Expenses## 1.80 1.82+
- -----------------------------------------------------------------------------------------------------------
Net investment income(S) 1.36 1.75+
- -----------------------------------------------------------------------------------------------------------
Portfolio turnover 71 86
- -----------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $1,066 $65
- -----------------------------------------------------------------------------------------------------------
* For the period from the inception of Class 529C shares, July 31, 2002, through September 30, 2002.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
(S) As required, effective October 1, 2001, the fund has adopted the provisions of the AICPA Audit and
Accounting Guide for Investment Companies and began amortizing premium on debt securities. The effect
of this change for the year ended September 30, 2002, was to decrease net investment income per share
and decrease net realized and unrealized losses per share. The impact of this change calculates to less
than $0.01 per share. In addition, the ratio of net investment income to average net assets decreased
by 0.11%. Per share, ratios and supplemental data for periods prior to October 1, 2001, have not been
restated to reflect this change in presentation.
See notes to financial statements.
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Total Return Fund (the fund) is a diversified series of MFS Series Trust V
(the trust). The trust is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-
end management investment company.
(2) SIGNIFICANT ACCOUNTING POLICIES
GENERAL - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates. The fund can invest in foreign securities.
Investments in foreign securities are vulnerable to the effects of changes in
the relative values of the local currency and the U.S. dollar and to the
effects of changes in each country's legal, political, and economic
environment.
INVESTMENT VALUATIONS - Equity securities in the fund's portfolio for which
market quotations are available are valued at the last sale or official
closing price on the primary market or exchange on which they are primarily
traded or at the last quoted bid price for securities in which there were no
sales during the day. If no sales are reported, as is the case for most
securities traded over the counter, securities are valued on the basis of
quotations obtained from brokers and dealers or on the basis of valuations
furnished by a pricing service. Bonds and other fixed income securities (other
than short-term obligations) in the fund's portfolio are valued at an
evaluated bid price on the basis of quotes from brokers and dealers or on the
basis of valuations furnished by a pricing service. Prices obtained from
pricing services utilize both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Short-term obligations in the fund's
portfolio are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees. Short-term obligations with a remaining
maturity in excess of 60 days will be valued upon dealer-supplied valuations.
Portfolio investments for which market quotations are not readily available,
or whose values have been materially affected by events occurring after the
close of their primary markets, are valued at fair value as determined in good
faith by or at the direction of the Board of Trustees.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the fund to obtain those
securities in the event of a default under the repurchase agreement. The fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the fund
under each such repurchase agreement. The fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a
joint trading account for the purpose of entering into one or more
repurchase agreements.
FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction
gains and losses. That portion of both realized and unrealized gains and
losses on investments that results from fluctuations in foreign currency
exchange rates is not separately disclosed.
DEFERRED TRUSTEE COMPENSATION - Under a Deferred Compensation Plan (the Plan)
independent Trustees may elect to defer receipt of all or a portion of their
annual compensation. Deferred amounts are treated as though equivalent dollar
amounts had been invested in shares of the fund or other MFS funds selected by
the Trustee. Deferred amounts represent an unsecured obligation of the fund
until distributed in accordance with the Plan. Included in other assets, and
accrued expenses and other liabilities, is $71,464 of Deferred Trustees'
Compensation.
SECURITY LOANS - State Street Bank and Trust Company ("State Street") and J.P.
Morgan Chase and Co. ("Chase"), as lending agents, may loan the securities of
the fund to certain qualified institutions (the "Borrowers") approved by the
fund. The loans are collateralized at all times by cash and/or U.S. Treasury
securities in an amount at least equal to the market value of the securities
loaned. State Street and Chase provides the fund with indemnification against
Borrower default. The fund bears the risk of loss with respect to the
investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the fund and the lending agents. Income
from securities lending is included in interest income on the Statement of
Operations. The dividend and interest income earned on the securities loaned
is accounted for in the same manner as other dividend and interest income.
INVESTMENT TRANSACTIONS AND INCOME - Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States
of America. All discount is accreted for tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
The fund may enter in "TBA" (to be announced) purchase commitments to purchase
securities for a fixed unit price at a future date. Although the unit price
has been established, the principal value has not been finalized. However, the
principal amount of the commitments will not fluctuate more than 1.0%. The
fund holds, and maintains until settlement date, cash or high-grade debt
obligations in an amount sufficient to meet the purchase price, or the fund
may enter into offsetting contracts for the forward sale of other securities
it owns. Income on the securities will not be earned until settlement date.
TBA purchase commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased declines
prior to settlement date, which is in addition to the risk of decline in the
value of the fund's other assets. Unsettled TBA purchase commitments are
valued at the current market value of the underlying securities, according to
the procedures described under "Investment Valuations" above.
FEES PAID INDIRECTLY - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
the fund. During the period, the fund's custodian fees were reduced by $86,782
under this arrangement. The fund has entered into a directed brokerage
agreement, under which the broker will credit the fund a portion of the
commissions generated, to offset certain expenses of the fund. For the period,
the fund's other expenses were reduced by $117,357 under this agreement. These
amounts are shown as a reduction of total expenses on the Statement of
Operations.
TAX MATTERS AND DISTRIBUTIONS - The fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. Distributions to
shareholders are recorded on the ex-dividend date. The fund distinguishes
between distributions on a tax basis and a financial reporting basis and only
distributions in excess of tax basis earnings and profits are reported in the
financial statements as distributions from paid-in capital. Differences in the
recognition or classification of income between the financial statements and
tax earnings and profits, which result in temporary over-distributions for
financial statement purposes, are classified as distributions in excess of net
investment income or net realized gains. Common types of book and tax
differences that could occur include differences in accounting for currency
transactions, mortgage-backed securities, real estate investment trusts,
defaulted bonds, and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended
September 30, 2003 and September 30, 2002 was as follows:
9/30/03 9/30/02
Distributions declared from:
- ------------------------------------------------------------------------------
Ordinary income $228,559,157 $304,677,802
- ------------------------------------------------------------------------------
Long-term capital gain -- 109,447,576
- ------------------------------------------------------------------------------
Total distributions declared $228,559,157 $414,125,378
- ------------------------------------------------------------------------------
During the year ended September 30, 2003, accumulated distributions in excess
of net investment income decreased by $30,491,123, accumulated undistributed
net realized loss on investments and foreign currency transactions increased
by $29,765,449, and paid-in capital decreased by $725,674 due to differences
between book and tax accounting for mortgage-backed securities, currency
transactions, and amortization and accretion on debt securities. This change
had no effect on the net assets or net asset value per share.
As of September 30, 2003, the components of distributable earnings
(accumulated losses) on a tax basis were as follows:
Capital loss carryforward (230,957,582)
-------------------------------------------------------------
Post-October capital loss deferral (41,531,280)
-------------------------------------------------------------
Unrealized appreciation 438,644,519
-------------------------------------------------------------
Other temporary differences (13,268,884)
-------------------------------------------------------------
Post-October capital loss deferrals represent losses realized during the
current fiscal year, but recognized for tax purposes in the next fiscal year.
For federal income tax purposes, the capital loss carryforward may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on September 30, 2010, $(15,563,754)
and September 30, 2011, $(215,393,828).
MULTIPLE CLASSES OF SHARES OF BENEFICIAL INTEREST - The fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the fund based on the value
of settled shares outstanding of each class, without distinction between share
classes. Dividends are declared separately for each class. Differences in per
share dividend rates are generally due to differences in separate class
expenses. Class B and Class 529B shares will convert to Class A and Class 529A
shares, respectively approximately eight years after purchase.
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The fund has an investment advisory agreement with MFS to
provide overall investment advisory and administrative services, and general
office facilities.
The management fee is computed daily and paid monthly at the following annual
rates:
First $6.3 billion of average net assets 0.35%
-------------------------------------------------------------
Average net assets in excess of $6.3 billion 0.34%
-------------------------------------------------------------
Management fees incurred for the year ended September 30, 2003 were 0.35% of
average daily net assets on an annualized basis.
The fund pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the fund, all of whom receive remuneration for their services to the fund from
MFS. Certain officers and Trustees of the fund are officers or directors of
MFS, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
The fund has an unfunded, defined benefit plan for inactive Trustees and an
unfunded retirement benefit deferral plan for active Trustees. Included in
Trustees' compensation is a net increase of $6,510 as a result of the change
in the fund's pension liability for active Trustees and a pension expense of
$19,084 for inactive trustees for the year ended September 30, 2003.
ADMINISTRATOR - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund pays MFS an administrative fee
not to exceed the following annual percentage rates of the fund's average
daily net assets:
First $2 billion 0.0175%
-----------------------------------------------------------
Next $2.5 billion 0.0130%
-----------------------------------------------------------
Next $2.5 billion 0.0005%
-----------------------------------------------------------
In excess of $7 billion 0.0000%
-----------------------------------------------------------
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$1,369,886 and $6,439 for the year ended September 30, 2003, as its portion of
the sales charge on sales of Class A and Class 529A shares of the fund,
respectively.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R, Class 529A, Class 529B and Class 529C shares pursuant to Rule 12b-1
of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD an annual
percentage of its average daily net assets attributable to certain share
classes in order that MFD may pay expenses on behalf of the fund related to
the distribution and servicing of its shares. These expenses include a service
fee paid to each securities dealer that enters into a sales agreement with MFD
based on the average daily net assets of accounts attributable to such
dealers. These fees are calculated based on each class' average daily net
assets. The maximum distribution and service fees for each class of shares are
as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25% 0.75% 0.75%
- -----------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- -----------------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50% 1.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the year ended September 30, 2003,
amounted to:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Service Fee Retained by MFD $403,454 $17,355 $11,762 $-- $81 $2 $9
- -------------------------------------------------------------------------------------------------------------------------------
Fees incurred under the distribution plan during the year ended September 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS R CLASS 529A CLASS 529B CLASS 529C
Effective Annual Percentage
Rates 0.35% 1.00% 1.00% 0.50% 0.35% 1.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------------------
Payment of the 0.15% per annum portion of the Class 529A distribution fee that
is not currently being charged will be implemented on such a date as the
Trustees of the Trust may determine.
Assets attributable to Class A shares sold prior to October 1, 1989 are
subject to a service fee of 0.15% per annum attributable to Class A shares.
Certain Class A, Class C and Class 529C shares are subject to a contingent
deferred sales charge in the event of a shareholder redemption within, for
Class A shares, 12 months following the purchase, and, for Class C and 529C
shares, the first year from the end of the calendar month of purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of
Class B and Class 529B shares in the event of a shareholder redemption within
six years from the end of the calendar month of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended September 30, 2003, were as follows:
CLASS A CLASS B CLASS C CLASS 529B CLASS 529C
Contingent Deferred
Sales Charges
Imposed $83,654 $4,557,426 $152,366 $-- $--
- --------------------------------------------------------------------------------
The fund has and may from time to time enter into contracts with program
managers and other parties which administer the tuition programs through which
an investment in the fund's 529 share classes is made. The fund has entered
into an agreement with MFD pursuant to which MFD receives an annual fee of up
to 0.35% from the fund based solely upon the value of the fund's 529 share
classes attributable to tuition programs to which MFD or a third party which
contracts with MFD provides administrative services. The current fee has been
established at 0.25% annually of average net assets of the fund's 529 share
classes attributable to such programs. The fee may only be increased with the
approval of the board of trustees that oversees the fund. The services
provided by MFD or a third party with which MFD contracts include
recordkeeping and tax reporting and account services, as well as services
designed to maintain the program's compliance with the Internal Revenue Code
and other regulatory requirements.
SHAREHOLDER SERVICING AGENT - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as
a percentage of the fund's average daily net assets at an annual rate of
0.11%. Prior to April 1, 2003, the fee was 0.10% of the fund's average daily
net assets.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
U.S. government securities $2,871,942,602 $2,353,898,617
- -------------------------------------------------------------------------------
Investments (non-U.S. government securities) $4,466,145,936 $3,724,177,656
- -------------------------------------------------------------------------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $9,631,669,051
- ------------------------------------------------------------------------------
Gross unrealized appreciation $591,223,515
- ------------------------------------------------------------------------------
Gross unrealized depreciation (149,493,477)
- ------------------------------------------------------------------------------
Net unrealized appreciation $441,730,038
- ------------------------------------------------------------------------------
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
Year ended 9/30/03 Year ended 9/30/02
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 186,997,610 $2,514,683,644 252,701,938 $3,593,282,017
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 9,466,653 126,616,112 14,520,193 207,472,950
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (148,111,649) (1,988,480,929) (202,729,029) (2,870,744,253)
- -----------------------------------------------------------------------------------------------------------
Net increase 48,352,614 $652,818,827 64,493,102 $930,010,714
- -----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 48,030,752 $644,973,593 68,888,367 $973,559,760
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 3,734,010 49,854,918 6,933,146 99,132,209
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (45,154,271) (604,557,426) (51,314,748) (719,436,539)
- -----------------------------------------------------------------------------------------------------------
Net increase 6,610,491 $90,271,085 24,506,765 $353,255,430
- -----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 24,417,745 $330,042,465 28,528,097 $404,598,343
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 1,402,274 18,806,673 2,243,627 32,175,910
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (13,771,246) (185,172,943) (11,026,051) (154,163,614)
- -----------------------------------------------------------------------------------------------------------
Net increase 12,048,773 $163,676,195 19,745,673 $282,610,639
- -----------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 9,872,406 $132,568,218 14,126,161 $202,432,574
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 786,000 10,516,143 948,262 13,536,985
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (4,993,826) (66,903,670) (8,568,437) (122,199,912)
- -----------------------------------------------------------------------------------------------------------
Net increase 5,664,580 $76,180,691 6,505,986 $93,769,647
- -----------------------------------------------------------------------------------------------------------
Period ended 9/30/03*
SHARES AMOUNT
CLASS R SHARES
Shares sold 2,118,727 $28,866,223
- -------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 6,057 84,130
- -------------------------------------------------------------------
Shares reacquired (985,958) (13,407,843)
- -------------------------------------------------------------------
Net increase 1,138,826 $15,542,510
- -------------------------------------------------------------------
Year ended 9/30/03 Period ended 9/30/02**
SHARES AMOUNT SHARES AMOUNT
CLASS 529A SHARES
Shares sold 178,408 $2,405,118 6,820 $88,529
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 2,153 29,192 2 21
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (21) (2,382) (2,934) (37,500)
- -----------------------------------------------------------------------------------------------------------
Net increase 180,540 $2,431,928 3,888 $51,050
- -----------------------------------------------------------------------------------------------------------
CLASS 529B SHARES
Shares sold 70,425 $960,020 5,886 $78,046
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 517 6,999 6 76
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (1,512) (20,887) -- --
- -----------------------------------------------------------------------------------------------------------
Net increase 69,430 $946,132 5,892 $78,122
- -----------------------------------------------------------------------------------------------------------
CLASS 529C SHARES
Shares sold 69,570 $941,303 5,082 $67,269
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 712 9,694 3 35
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (208) (2,837) -- --
- -----------------------------------------------------------------------------------------------------------
Net increase 70,074 $948,160 5,085 $67,304
- -----------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R shares December 31, 2002, through September 30, 2003.
** For the period from the inception of Class 529A, 529B and 529C shares, July 31, 2002 through
September 30, 2002.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each fund, based on its borrowings, at a rate equal to the bank's
base rate. A commitment fee of $61,383 which is based on the average daily
unused portion of the line of credit is included in miscellaneous expense. The
fund had no significant borrowings during the year.
- -------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- -------------------------------------------------------------------------------
To the Trustees of MFS Series Trust V and Shareholders of
MFS Total Return Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of MFS Total Return Fund (one of the
series comprising MFS Series Trust V) (the "Trust") as of September 30, 2003,
and the related statement of operations for the year then ended, the statement
of changes in 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. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of September 30, 2003,
by correspondence with the custodian and brokers where replies were not
received from brokers we performed other auditing procedures. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of MFS Total Return
Fund as of September 30, 2003, 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 its financial highlights for each of the five years in the
period then ended, in conformity with accounting principles generally accepted
in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 6, 2003
- -------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS
- -------------------------------------------------------------------------------------------------------------
The following tables present certain information regarding the Trustees and officers of MFS Series Trust V, of
which the fund is a series, including their principal occupations, which, unless specific dates are shown, are
of more than five years' duration, although the titles may not have been the same throughout.
Name, age, position with the Trust, principal occupation, and other directorships(1)
INTERESTED TRUSTEES
JEFFREY L. SHAMES(2) (born 06/02/55) ABBY M. O'NEILL (born 04/27/28)
Chairman Trustee
Massachusetts Financial Services Company, Chairman Private investor; Rockefeller Financial Services,
Inc. (investment advisers), Chairman and Chief
JOHN W. BALLEN(2) (born 09/12/59) Executive Officer
Trustee and President
Massachusetts Financial Services Company, Chief LAWRENCE T. PERERA (born 06/23/35)
Executive Officer and Director Trustee
Hemenway & Barnes (attorneys), Partner
KEVIN R. PARKE(2) (born 12/14/59)
Trustee WILLIAM J. POORVU (born 04/10/35)
Massachusetts Financial Services Company, Trustee
President, Chief Investment Officer and Director Private investor; Harvard University
Graduate School of Business
INDEPENDENT TRUSTEES Administration, Class of 1961
Adjunct Professor in
LAWRENCE H. COHN, M.D. (born 03/11/37) Entrepreneurship Emeritus;
Trustee CBL & Associates Properties, Inc.
Brigham and Women's Hospital, Chief of Cardiac (real estate investment trust),
Surgery; Harvard Medical School, Professor of Director
Surgery
J. DALE SHERRATT (born 09/23/38)
WILLIAM R. GUTOW (born 09/27/41) Trustee
Trustee Insight Resources, Inc. (acquisition planning
Private investor and real estate consultant; specialists), President; Wellfleet Investments
Capitol Entertainment Management Company (video (investor in health care companies), Managing
franchise), Vice Chairman General Partner (since 1993); Cambridge
Nutraceuticals (professional nutritional
J. ATWOOD IVES (born 05/01/36) products), Chief Executive Officer (until May
Trustee 2001)
Private investor; KeySpan Corporation (energy
related services), Director; Eastern Enterprises ELAINE R. SMITH (born 04/25/46)
(diversified services company), Chairman, Trustee Trustee
and Chief Executive Officer (until November 2000) Independent health care industry consultant
WARD SMITH (born 09/13/30)
Trustee
Private investor
(1) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(2) "Interested person" of MFS within the meaning of the Investment Company Act of 1940 (referred to as the
1940 Act) which is the principal federal law governing investment companies like the Trust. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
Trustees and Officers - continued
OFFICERS
JOHN W. BALLEN (born 09/12/59) ROBERT R. FLAHERTY (born 09/18/63)
Trustee and President Assistant Treasurer
Massachusetts Financial Services Company, Chief Massachusetts Financial Services Company, Vice
Executive Officer and Director President (since August 2000); UAM Fund Services,
Senior Vice President (prior to August 2000)
JAMES R. BORDEWICK, JR. (born 03/06/59) RICHARD M. HISEY (born 08/29/58)
Assistant Secretary and Assistant Clerk Treasurer
Massachusetts Financial Services Company, Senior Massachusetts Financial Services Company, Senior
Vice President and Associate General Counsel Vice President (since July 2002); The Bank of New
York, Senior Vice President (September 2000 to
July 2002); Lexington Global Asset Managers, Inc.,
STEPHEN E. CAVAN (born 11/06/53) Executive Vice President and Chief Financial
Secretary and Clerk Officer (prior to September 2000); Lexington
Massachusetts Financial Services Company, Senior Funds, Treasurer (prior to September 2000)
Vice President, General Counsel and Secretary
ELLEN MOYNIHAN (born 11/13/57)
Assistant Treasurer
STEPHANIE A. DESISTO (born 10/01/53) Massachusetts Financial Services Company, Vice
Assistant Treasurer President
Massachusetts Financial Services Company, Vice
President (since April 2003); Brown Brothers JAMES O. YOST (born 06/12/60)
Harriman & Co., Senior Vice President (November Assistant Treasurer
2002 to April 2003); ING Groep N.V./Aeltus Massachusetts Financial Services Company, Senior
Investment Management, Senior Vice President Vice President
(prior to November 2002)
The Trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. This means that each Trustee will be elected to hold office until his or her
successor is chosen and qualified or until his or her earlier death, resignation, retirement or removal. Each
officer will hold office until his or her successor is chosen and qualified, or until he or she retires,
resigns or is removed from office.
Messrs. Shames, Ives, Perera and Poorvu, and Ms. Smith, have served in their capacity as Trustee of the Trust
continuously since originally elected or appointed. Messrs. Ballen and Gutow have each served as a Trustee of
the Trust since August 1, 2001. Messrs. Cohn, Sherratt and Smith, and Ms. O'Neill, were elected by
shareholders and have served as Trustees of the Trust since January 1, 2002. Mr. Parke has served as a Trustee
of the Trust since January 1, 2002.
Each of the Trust's Trustees and officers holds comparable positions with certain other funds of which MFS or
a subsidiary is the investment adviser or distributor and, in the case of the officers, with certain
affiliates of MFS. Each Trustee serves as a board member of 110 funds within the MFS Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request, by calling 1-800-225-2606.
- --------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA
02116-3741 02110
DISTRIBUTOR JP Morgan Chase Bank
MFS Fund Distributors, Inc. One Chase Manhattan Plaza
500 Boylston Street, Boston, MA New York, NY 10081
02116-3741
AUDITORS
PORTFOLIO MANAGER Deloitte & Touche LLP
David M. Calabro(1) 200 Berkeley St., Boston, MA 02116
(1) MFS Investment Management
- -------------------------------------------------------------------------------
MONEY MANAGEMENT FOR ALL TYPES OF INVESTORS
- -------------------------------------------------------------------------------
YOUR GOALS ARE IMPORTANT
MFS offers a complete range of investments and investment services to address
specific financial needs over time. When your investing goals change, you can
easily stay with MFS for the products you need, when you need them. Whether
you're investing for college or retirement expenses or for tax management or
estate planning, MFS will be there.
Ask your investment professional how MFS can help you move toward the goals
you've set.
MFS FAMILY OF FUNDS(R)
More than 50 portfolios offer domestic and international
equity and fixed-income investment across the full risk
spectrum
VARIABLE ANNUITIES
A selection of annuity products with advantages for
building and preserving wealth
MFS 401(k) AND IRA SUITES
Retirement plans for businesses and individuals
MFS COLLEGE SAVINGS PLANS
Investment products to help meet education expenses
MFS PRIVATE PORTFOLIO SERVICES
Investment advisory services that provide custom products
for high-net-worth individuals
You can obtain a prospectus for any MFS product from your investment
professional. The prospectus contains complete information on the fees and
risks associated with investing. Read the prospectus carefully before
investing or sending money.
Variable annuities are offered through MFS/Sun Life Financial Distributors,
Inc.
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2004, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2003.
For the year ended September 30, 2003, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 37.36%.
The fund hereby designates the maximum amount allowable as qualified dividend
income eligible for a maximum tax rate of 15%, as provided for by the Jobs and
Growth Tax Relief Reconciliation Act of 2003. Complete information will be
reported in conjunction with your 2003 Form 1099-DIV.
The fund has the option to use equalization, which is a tax basis dividends
paid deduction from earnings and profits distributed to shareholders upon
redemption of shares.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CONTACT INFORMATION
- -------------------------------------------------------------------------------
INVESTOR INFORMATION
For information on MFS mutual funds, call your investment professional or, for
an information kit, call toll free: 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the About
MFS section of mfs.com or by visiting the SEC's website at http://www.sec.
gov.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
Type of Information Phone number Hours, Eastern Time
- --------------------------------------------------------------------------------
General information 1-800-225-2606 8 a.m. to 8 p.m., any
business day
- --------------------------------------------------------------------------------
Speech- or hearing-impaired 1-800-637-6576 9 a.m. to 5 p.m., any
business day
- --------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day,
or stock and bond outlooks touch-tone required 365 days a year
- --------------------------------------------------------------------------------
WORLD WIDE WEB
Go to WWW.MFS.COM for a clear view of market events, investor education,
account access, and product and performance insights.
Go paperless with EDELIVERY: Join your fellow shareholders who are already
taking advantage of this great new benefit from MFS. With eDelivery, we send
you prospectuses, reports, and proxies electronically. You get timely
information without mailbox clutter (and help your fund save printing and
postage costs).
SIGN-UP instructions: If your account is registered with us, go to
www.mfs.com, log in to your account via MFS Access, and select the eDelivery
sign up options.
If you own your MFS fund shares through a financial institution or through a
retirement plan, MFS Talk, MFS Access, and eDelivery may not be available
to you.
[logo] M F S(R)
INVESTMENT MANAGEMENT
500 Boylston Street
Boston, MA 02116-3741
(C) 2003 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.
500 Boylston Street, Boston, MA 02116
MTR-ANN-11/03 496M
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a Code of Ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in the instructions to Form N-CSR that applies
to the Registrant's principal executive officer and principal financial and
accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Messrs. J. Atwood Ives and Ward Smith, members of the Audit Committee, have been
determined by the Board of Trustees in their reasonable business judgment to
meet the definition of "audit committee financial expert" as such term is
defined in the instructions to Form N-CSR. In addition, Messrs. Ives and Smith
are both "independent" members of the Audit Committee as defined in the
instructions to Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time. Applicable for annual reports filed for the first
fiscal year ending after December 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
If applicable, not applicable at this time. Applicable for annual reports
covering periods ending on or after the compliance date for the listing
standards applicable to the particular issuer. Listed issuers must be in
compliance with the new listing rules by the earlier of the registrant's first
annual shareholders meeting after January 15, 2004 or October 31, 2004.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Applicable for annual reports filed on or after July 1, 2003.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal financial officer and principal executive
officer have concluded that those disclosure controls and procedures provide
reasonable assurance that the material information required to be disclosed
by the registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the registrant's last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 10. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends
to satisfy the Item 2 requirements through filing of an exhibit: Code of
Ethics attached hereto.
(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2): Attached hereto.
(b) If the report is filed under Section 13(a) or 15(d) of the Exchange Act,
provide the certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)), Rule 13a-14(b) or Rule 15d-14 under the Exchange Act (17 CFR
240.13a-14(b) or 240.15d-14(b)) and Section 1350 of Chapter 63 of Title 18
of the United States Code (18 U.S.C. 1350) as an exhibit. A certification
furnished pursuant to this paragraph will not be deemed "filed" for the
purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise
subject to the liability of that section. Such certification will not be
deemed to be incorporated by reference into any filing under the Securities
Act of 1933 or the Exchange Act, except to the extent that the registrant
specifically incorporates it by reference: Attached hereto
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) MFS SERIES TRUST V
-------------------------------------------------------------------
By (Signature and Title)* /s/ JOHN W. BALLEN
-----------------------------------------------------
John W. Ballen, President
Date: November 21, 2003
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ JOHN W. BALLEN
------------------------------------------------------
John W. Ballen, President
(Principal Executive Officer)
Date: November 21, 2003
------------------
By (Signature and Title)* /s/ RICHARD M. HISEY
------------------------------------------------------
Richard M. Hisey, Treasurer
(Principal Financial Officer and Accounting Officer)
Date: November 21, 2003
------------------
* Print name and title of each signing officer under his or her signature.