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 811-6102
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MFS SERIES TRUST VI
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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)
James R. Bordewick, Jr.
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: October 31
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Date of reporting period: October 31, 2004
ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) GLOBAL TOTAL RETURN FUND 10/31/04
ANNUAL REPORT
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[logo] M F S(R)
INVESTMENT MANAGEMENT
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. IT
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
ANNUAL REPORT
LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 5
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MANAGEMENT REVIEW 6
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PERFORMANCE SUMMARY 9
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EXPENSE TABLE 13
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PORTFOLIO OF INVESTMENTS 15
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FINANCIAL STATEMENTS 25
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NOTES TO FINANCIAL STATEMENTS 40
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 55
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TRUSTEES AND OFFICERS 56
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PROXY VOTING POLICIES AND
INFORMATION 60
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QUARTERLY PORTFOLIO DISCLOSURE 60
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FEDERAL TAX INFORMATION 61
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CONTACT INFORMATION BACK COVER
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LETTER FROM THE CEO
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Dear Shareholders,
[Photo of Robert J. Manning]
For most investors, the main factor in determining long-term success is asset
allocation - how they spread their money among stocks, bonds, and cash. In
fact, the total returns of investors may be more influenced by their asset
allocation strategy than by their security selection within each asset class.
The principle behind asset allocation is simple: by diversifying across a
variety of types of securities, investors reduce the overall risk of their
portfolio because gains in one area are likely to offset losses in another.
One of the dangers of not having an asset allocation plan is the temptation to
simply chase performance, by moving money into whichever asset class appears
to be outperforming at the moment. The problem with this approach is that by
the time a particular area of the market comes into favor, investors may have
already missed some of the best performance. We would suggest that one way to
benefit from swings in the market is to acquire a diversified portfolio so
that investors hold a range of asset classes before the market swings in their
direction.
UNDERSTAND YOUR EMOTIONS
It usually takes a bear market for people to appreciate the benefits of
diversification. At MFS, we believe proper asset allocation is important in
all market environments. But we understand that there are emotional components
of investment decisions that sometimes keep investors from achieving their
long term goals. The three common behaviors that negatively impact investment
decisions are overconfidence, looking backwards, and loss aversion.
o Overconfidence. After experiencing gains in the market, particularly
during a bull market, investors have a natural tendency to overestimate
their own abilities. During the global bull market of the late 1990s, for
example, a large number of investors traded their own stocks and made
significant profits. However, most of these same investors later handed
back those profits - and then some - because they focused more on
short-term blips in the market and less on the fundamental factors that
affect a company's long-term prospects.
o Looking backwards. Although security prices are determined by
expectations about the future, many investors make choices based on the
recent past. Investors who have achieved momentary success in the market
tend to take on too much risk, believing that better- than-average
returns can be easily duplicated. On the other hand, those who have had
negative experiences tend to become overly cautious and take on too
little risk. Recent historical experience tends to dictate an investor's
frame of reference and may lead to irrational decisions.
o Loss aversion. Simply put, investors would rather avoid the immediate
pain of losses than enjoy the future pleasure of gains. As a result, some
investors tend to overreact to short-term downturns in the market by
seeking to mitigate their losses, rather than remaining invested to
benefit from the long-term growth potential of the stock and bond
markets.
THINK LIKE A PROFESSIONAL INVESTOR
Asset allocation helps reduce the emotional factors that tend to affect the
long-term returns of investors. Professional investors - those who manage
assets for money management firms, pension funds, and endowments - have tended
to outperform the average retirement investor because they focus on asset
allocation. For example, the investment performance of the average 401(k)
participant has lagged these professional investors by more than two
percentage points a year, on average, over the past 10 years.(1)
We think asset allocation is one of the most important decisions for
investors. A study of the performance of 91 large U.S. corporate pension plans
with assets of more than $100 million over a 10-year period beginning in 1974
concluded that asset allocation policies accounted for 93.6% of their returns,
while individual security selection and the timing of their investments
accounted for only 6.4% for their overall performance.(2)
Professional investors target a realistic level of return based on the amount
of risk they are willing to take, then set allocations to meet their goals. On
average, U.S. professional investors allocate 35% to 40% of their assets to
domestic equity stocks; 20% to 30% to fixed income issues; 10% to
international stocks; and between 10% and 20% to other investment classes such
as real estate.(3) And within those categories, they hold a broad range of
styles and asset classes.
In contrast, 401(k) participants who held company stock in their retirement
plans at the end of 2002 had roughly 42% of their retirement assets in company
stock while the rest was allocated to either growth or value stock funds.(4)
These participants virtually ignored the broad range of equity, fixed-income,
and international offerings provided by their retirement plans.
ALLOCATE, DIVERSIFY, REBALANCE
We recommend working with a professional adviser to find an optimal mix of
investments based on your individual goals. In our view, a disciplined asset
allocation strategy is composed of three simple steps: allocate, diversify
and rebalance.
o Allocate. Investors should work with their financial adviser to specify
their long-term goals and tolerance for risk. Then investors should
allocate their assets across the major asset classes - stocks, bonds, and
cash - to help them pursue an investment return that is consistent with
their risk tolerance level.
o Diversify. By diversifying their assets, investors trade some performance
in the top performing categories for a more predictable and stable
portfolio. At the same time, investors should include different
investment styles and market capitalizations of stocks and a range of
fixed-income investments, as well as U.S. and non-U.S. securities.
Because security subclasses tend to move in and out of favor during
various market and economic environments, a broad portfolio increases the
benefits of diversification.
o Rebalance. We suggest that investors consult with their professional
advisers periodically to rebalance their portfolios to maintain the
percentages that they have dedicated to each asset class. Allocations can
shift as markets rise and fall, making for a riskier or more conservative
portfolio than an investor originally intended. For example, a portfolio
of 50% stocks and 50% bonds at the start of 2000 would have shifted to
32% stocks and 68% bonds at the end of 2002 because of the weak stock
market.(5)
In short, these three simple concepts - allocate, diversify and rebalance -
help take emotion out of the investment process and help prevent investors
from trying to outguess the market. An asset allocation strategy cannot turn a
down market cycle into a good one, but it is an invaluable tool to manage risk
and keep investors on track toward reaching their long-term investment goals.
A DISCIPLINED INVESTMENT PROCESS IS PARAMOUNT
Disciplined diversification has helped investors pursue long-term, above-
average results through the years. Since 1924, when we invented the mutual
fund, MFS(R) has strived to give investors the products and tools they need to
maintain well-diversified portfolios. MFS provides a variety of products in
each asset class as well as a family of asset allocation funds. These asset
allocation portfolios cover a range from conservative to moderate, growth, and
aggressive growth allocations, each with a strategy based on a distinct level
of risk. We recommend developing a comprehensive financial plan with an
investment advisor who is familiar with your risk tolerance, your individual
goals, and your financial situation.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
November 15, 2004
Asset allocation and diversification can not guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
(1) Source: Watson Wyatt
(2) "Determinants of Portfolio Performance," in Financial Analysts Journal,
January/February 1995, by
Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower
(3) Source: Greenwich Associates
(4) Source: Hewitt Associates
(5) Source: Lipper Inc.
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PORTFOLIO COMPOSITION
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PORTFOLIO STRUCTURE*
Stocks 59.3%
Bonds 36.8%
Cash & Other Net Assets 3.9%
TOP TEN HOLDINGS
Government of New Zealand
6.5%, 2013 1.6%
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Republic of Ireland 4.25%, 2007 1.5%
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Federal Republic of Germany
5.25%, 2010 1.5%
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Federal Republic of Germany
6.25%, 2030 1.5%
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Republic of France 4.75%, 2007 1.5%
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U.S. Treasury Notes 2.0%, 2014 1.5%
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Republic of Finland 3%, 2008 1.4%
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United Kingdom Treasury 5%, 2012 1.4%
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Republic of France 4.75%, 2012 1.4%
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Inter-American Development Bank
1.9%, 2009 1.4%
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TOP FIVE BOND MARKET SECTORS*
International Sovereigns 29.6%
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Cash & Other Net Assets 3.9%
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U.S. Treasuries 3.0%
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Emerging Market Debt 1.2%
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Commercial Mortgage Backed 1.1%
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TOP EQUITY SECTOR WEIGHTINGS
Financial Services 14.5%
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Utilities & Communications 10.1%
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Energy 6.8%
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Consumer Staples 5.6%
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Health Care 4.6%
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Basic Materials 3.8%
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Autos & Housing 3.4%
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Leisure 2.8%
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Industrial Goods & Services 2.7%
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Retailing 1.9%
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Transportation 1.9%
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Technology 0.9%
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Miscellaneous 0.3%
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COUNTRY WEIGHTINGS
United States 34.1%
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United Kingdom 11.8%
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France 7.5%
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Japan 6.0%
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Germany 5.7%
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Finland 3.3%
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Netherlands 2.6%
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Italy 2.5%
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Switzerland 2.5%
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Other 24.0%
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* For purposes of this graphical presentation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
Percentages are based on net assets as of 10/31/04.
The portfolio is actively managed, and current holdings may be different.
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MANAGEMENT REVIEW
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SUMMARY OF RESULTS
For the year ended October 31, 2004, Class A shares of the MFS Global Total
Return Fund provided a total return not including sales charges of 16.94%, as
compared to a return of 12.21% for the fund's hybrid benchmark comprised of
60% of the MSCI World Index, and 40% of the J.P. Morgan Global Government Bond
Index, and a 9.41% return for the fund's other benchmark, the Standard &
Poor's 500 Stock Index.
MARKET ENVIRONMENT
In 2004, many measures of global economic growth, including employment,
corporate spending, and earnings growth continued to improve, though we feel
that near-record-high oil prices, concerns about rising interest rates, and an
unsettled geopolitical environment adversely affected global markets. The U.S.
Federal Reserve Board raised interest rates three times during the period, and
this appears to have set expectations for an ongoing series of modest
rate hikes.
FIXED INCOME MARKET ENVIRONMENT
During the early months of the period, the bond market was characterized by a
continuation of falling interest rates and solid returns for bond investors.
However, in our view, improved labor market conditions and rising inflation in
the spring of 2004 raised the expectation of Fed tightening. In this
environment, global bonds sold off markedly. In addition, we saw central banks
in the United Kingdom, Australia, and New Zealand, as well in the United
States, raise interest rates, which drove bond prices lower. By mid-summer,
global growth expectations and inflationary pressures waned, resulting in
falling yields and rising bond prices for the remainder of the period.
EQUITY CONTRIBUTORS TO PERFORMANCE
Our decision to underweight the weak-performing technology sector and, to a
lesser extent stock selection, contributed to the fund's relative returns for
the period. Our avoidance of underperformers Intel, Cisco Systems, and Nokia
helped relative results.
Stock selection in the consumer staples sector also aided relative
performance. The strongest performers in the sector, though not among the
fund's top 10 contributors, included Kellogg, Archer Daniels Midland, and
Altadis. At period-end, Altadis was not held in the portfolio.
Strong stock selection and our overweighting in the utilities and
communications sector boosted relative results. Utilities companies Fortum,
TXU, and United Utilities were among the fund's top 10 contributors for the
period. At period-end, United Utilities was not held in the portfolio.
Individual stocks in other sectors that helped relative returns included
energy companies Total, ConocoPhillips, and Tenaris as well as basic materials
company Syngenta.
FIXED INCOME CONTRIBUTORS TO PERFORMANCE
Our overweight-position in Euro-area government bonds contributed to relative
performance. In addition, our U.S. yield curve positioning and our exposure to
certain higher yielding securities, including investment grade emerging market
government bonds also aided performance.
EQUITY DETRACTORS FROM PERFORMANCE
Our underweighted position in the industrial goods and services sector hurt
relative performance. Our underweight in General Electric and our avoidance of
strong-performers, such as Tyco International and Boeing, held back relative
results for the period. At period-end, General Electric and Boeing were not
held in the portfolio.
Stock selection in the transportation sector also dampened relative
performance, though no individual stocks within the sector were among the
fund's top 10 detractors. Our positions in airline company easyJet and rail
companies Union Pacific and Norfolk Southern held back relative returns. At
period-end, Norfolk Southern was not held in the portfolio.
Stocks in other sectors that held back relative performance included financial
services companies Converium, Fannie Mae, and Merrill Lynch, energy stocks
Exxon Mobil and ChevronTexaco, leisure company Tribune and utilities and
communications companies KDDI and France Telecom. At period-end, Converium,
ChevronTexaco, and France Telecom were not held in the portfolio.
The fund's cash position, which averaged 2.8% over the period, also held back
relative returns. As with nearly all mutual funds, this fund holds some cash
to buy new holdings and to provide liquidity. In a period when global equity
markets - as measured by the MSCI World Index - rose sharply, holding any cash
hurt relative performance. The index does not have a cash position.
FIXED INCOME DETRACTORS TO PERFORMANCE
Our underweighted exposure to Japanese yen was a detractor to relative
performance.
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS fund. References to specific securities are
not recommendations of such securities and may not be representative of any MFS
fund's current or future investments.
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PERFORMANCE SUMMARY THROUGH 10/31/04
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The following chart 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. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ANY
HIGH SHORT-TERM RETURNS MAY BE AND LIKELY WERE ATTRIBUTABLE TO RECENT
FAVORABLE MARKET CONDITIONS, WHICH MAY NOT BE REPEATED. 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
60% MSCI World Index/
MFS Global Total Standard & 40% J.P. Morgan
Return Fund -- Poor's 500 Global Government
Class A Stock Index Bond Index
10/94 $ 9,525 $10,000 $10,000
10/96 12,230 15,685 12,552
10/98 16,173 25,276 16,092
10/00 18,293 33,697 18,019
10/02 16,950 21,489 14,894
10/04 23,011 28,399 20,074
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
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A 9/4/90 16.94% 10.35% 6.27% 9.22%
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B 9/7/93 16.14% 9.65% 5.58% 8.49%
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C 1/3/94 16.12% 9.63% 5.58% 8.51%
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I 1/2/97 17.31% 10.73% 6.65% 9.53%
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R1 12/31/02 16.89% 10.28% 6.24% 9.20%
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R2 10/31/03 16.52% 9.77% 5.65% 8.53%
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Average annual
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Comparative benchmarks
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Average global flexible portfolio
funds+ 11.27% 8.19% 3.50% 8.67%
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Standard & Poor's 500
Stock Index# 9.41% 3.91% -2.21% 11.00%
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60% MSCI World Index/
40% J.P. Morgan Global Government
Bond Index# 12.21% 8.47% 1.97% 7.22%
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Average annual
with sales charge
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Share class
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A 11.38% 8.57% 5.24% 8.69%
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B 12.14% 8.81% 5.26% 8.49%
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C 15.12% 9.63% 5.58% 8.51%
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I, R1, and R2 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 16.94% 34.37% 35.56% 141.59%
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B 16.14% 31.82% 31.19% 125.93%
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C 16.12% 31.76% 31.21% 126.28%
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I 17.31% 35.77% 37.97% 148.54%
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R1 16.89% 34.13% 35.32% 141.17%
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R2 16.52% 32.25% 31.62% 126.67%
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+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
60% MSCI World Index/40% J.P. Morgan Global Government Bond Index - MSCI World
Index measures the performance of stock markets of developed countries, and
J.P. Morgan Global Government Bond Index measures the performance of the
government bond markets around the world.
Standard & Poor's 500 Stock Index - measures the broad U.S. 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 B results including sales charge reflect the
deduction of the applicable contingent deferred sales charge (CDSC), which
declines over six years from 4% to 0%. Class C results including sales charge
(assuming redemption within one year from the end of the calendar month of
purchase), reflect the deduction of the 1% CDSC. Class I shares have no sales
charges and are available only to certain investors. Class R1 and R2 shares
have no sales charges and are available only to certain retirement plans.
Performance for R1 and I shares includes the performance of the fund's Class A
shares for periods prior to their offering. Performance for R2 shares includes
the performance of the fund's Class B shares for periods prior to their
offering. This 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
to which it is blended, and lower performance for share classes with lower
operating expenses than the initial share class to which it is blended.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Without such subsidies and waivers the fund's
performance results would be less favorable. Please see the prospectus and
financial statements for complete details.
KEY RISK CONSIDERATIONS
The portfolio may invest in foreign and/or emerging markets securities, which
are more susceptible to risks relating to interest rates, currency exchange
rates, economic, and political conditions.
The portfolio may invest in high yield or lower-rated securities, which may
provide greater returns but are subject to greater-than-average risk.
The portfolio may invest in mortgage-backed securities, which during times of
fluctuating interest rates, may increase or decrease more than other
fixed-income securities.
The portfolio may invest in derivative securities, which may include futures
and options. These types of instruments can increase price fluctuation.
The portfolio will allocate its investments among fixed income markets based
upon judgments made by MFS. The portfolio could miss attractive investment
opportunities by underweighting markets where there are significant returns, and
could lose value by overweighting markets where there are significant declines.
The portfolio's value will vary daily since its investments will fluctuate in
response to issuer, market, regulatory, economic, or political developments.
Because stocks tend to be more volatile than some other investments, such as
bonds, the more assets a fund dedicates to stocks, generally the more volatile
the portfolio's value will be. Bond prices will decline when interest rates
rise and will increase when interest rates fall. Many bonds also carry credit
risk, which is the risk that issuers may fail to make timely principal or
interest payments. In addition, bonds with longer maturity dates will be
subject to greater price fluctuations than those with shorter maturity
periods. However, stocks historically have outperformed bonds over time.
Please see the prospectus for further information regarding these and other
risk considerations.
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EXPENSE TABLE
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FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD FROM
MAY 1, 2004, THROUGH OCTOBER 31, 2004.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and
(2) ongoing costs, including management fees; distribution and service
(12b-1) fees; and other fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period, May 1, 2004 through
October 31, 2004.
ACTUAL EXPENSES
The first line for each share class in the table on the following page
provides information about actual account values and actual expenses. You may
use the information in this line, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During Period" to estimate the expenses
you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table on the following page provides
information about hypothetical account values and hypothetical expenses based on
the fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the fund and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
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Share Class
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Expenses
Annualized Beginning Ending Paid During
Expense Account Value Account Value* Period**
Ratio 5/01/04 10/31/04 5/01/04-10/31/04
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Actual 1.53% $1,000 $1,077 $8.01
A ---------------------------------------------------------------------------
Hypothetical 1.53% $1,000 $1,017 $7.78
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Actual 2.18% $1,000 $1,074 $11.40
B ---------------------------------------------------------------------------
Hypothetical 2.18% $1,000 $1,014 $11.07
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Actual 2.18% $1,000 $1,074 $11.40
C ---------------------------------------------------------------------------
Hypothetical 2.18% $1,000 $1,014 $11.07
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Actual 1.18% $1,000 $1,079 $6.18
I ---------------------------------------------------------------------------
Hypothetical 1.18% $1,000 $1,019 $6.01
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Actual 1.68% $1,000 $1,077 $8.80
R1 ---------------------------------------------------------------------------
Hypothetical 1.68% $1,000 $1,017 $8.54
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Actual 1.93% $1,000 $1,075 $10.09
R2 ---------------------------------------------------------------------------
Hypothetical 1.93% $1,000 $1,015 $9.80
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* Ending account value reflects each class' ending account value assuming the
actual class return per year before expenses (Actual) and a hypothetical 5%
class return per year before expenses (Hypothetical).
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year. Expenses paid do not include any
applicable sales charges (loads) or redemption fees. If these transaction
costs had been included, your costs would have been higher.
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PORTFOLIO OF INVESTMENTS - 10/31/04
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The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 59.3%
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ISSUER SHARES $ VALUE
- -------------------------------------------------------------------------------------------------
Aerospace - 1.0%
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Honeywell International, Inc. 12,800 $431,104
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Lockheed Martin Corp. 59,160 3,259,124
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Northrop Grumman Corp. 26,200 1,355,850
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$5,046,078
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Airlines - 0.9%
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easyJet Airline Co. Ltd.* 525,400 $1,520,126
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TPG N.V. 122,500 2,968,052
- -------------------------------------------------------------------------------------------------
$4,488,178
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Alcoholic Beverages - 0.4%
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Diageo PLC 156,300 $2,091,691
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Apparel Manufacturers - 0.3%
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Sanyo Shokai Ltd. 277,000 $1,617,022
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Automotive - 2.0%
- -------------------------------------------------------------------------------------------------
Autoliv, Inc. 32,000 $1,361,991
- -------------------------------------------------------------------------------------------------
Bayerische Motoren Werke AG 50,700 2,150,042
- -------------------------------------------------------------------------------------------------
Compagnie Generale des Etablissements Michelin 24,700 1,347,632
- -------------------------------------------------------------------------------------------------
Nissan Motor Co. Ltd. 142,900 1,613,050
- -------------------------------------------------------------------------------------------------
PSA Peugeot Citroen S.A. 23,700 1,460,429
- -------------------------------------------------------------------------------------------------
Renault S.A. 23,000 1,930,132
- -------------------------------------------------------------------------------------------------
$9,863,276
- -------------------------------------------------------------------------------------------------
Banks & Credit Companies - 9.2%
- -------------------------------------------------------------------------------------------------
Acom Co. Ltd. 15,140 $951,032
- -------------------------------------------------------------------------------------------------
American Express Co. 40,400 2,144,028
- -------------------------------------------------------------------------------------------------
Bank of America Corp. 142,286 6,372,990
- -------------------------------------------------------------------------------------------------
Bank of Ireland 115,070 1,582,436
- -------------------------------------------------------------------------------------------------
Citigroup, Inc. 119,046 5,282,071
- -------------------------------------------------------------------------------------------------
Credit Agricole S.A.^ 100,000 2,938,437
- -------------------------------------------------------------------------------------------------
DnB Holding A.S.A. 108,200 916,848
- -------------------------------------------------------------------------------------------------
Fannie Mae 61,360 4,304,404
- -------------------------------------------------------------------------------------------------
Grupo Financiero Inbursa S.A. de C.V. 678,000 1,131,985
- -------------------------------------------------------------------------------------------------
Irish Life & Permanent PLC 110,460 1,865,239
- -------------------------------------------------------------------------------------------------
J.P. Morgan Chase & Co. 47,120 1,818,832
- -------------------------------------------------------------------------------------------------
MBNA Corp. 29,000 743,270
- -------------------------------------------------------------------------------------------------
Nordea Bank AB 332,900 2,883,219
- -------------------------------------------------------------------------------------------------
PNC Financial Services Group, Inc. 39,900 2,086,770
- -------------------------------------------------------------------------------------------------
Promise Co. Ltd. 14,650 932,707
- -------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC 149,505 4,407,981
- -------------------------------------------------------------------------------------------------
SunTrust Banks, Inc. 52,100 3,666,798
- -------------------------------------------------------------------------------------------------
Takefuji Corp. 13,390 847,428
- -------------------------------------------------------------------------------------------------
$44,876,475
- -------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 1.1%
- -------------------------------------------------------------------------------------------------
Comcast Corp., "Special A"* 84,000 $2,439,360
- -------------------------------------------------------------------------------------------------
Viacom, Inc., "B" 78,846 2,877,091
- -------------------------------------------------------------------------------------------------
$5,316,451
- -------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.2%
- -------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 14,500 $878,990
- -------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. 40,590 3,993,244
- -------------------------------------------------------------------------------------------------
Mellon Financial Corp. 89,700 2,592,330
- -------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 57,460 3,099,392
- -------------------------------------------------------------------------------------------------
$10,563,956
- -------------------------------------------------------------------------------------------------
Business Services - 0.3%
- -------------------------------------------------------------------------------------------------
Accenture Ltd., "A"* 61,070 $1,478,505
- -------------------------------------------------------------------------------------------------
Chemicals - 2.5%
- -------------------------------------------------------------------------------------------------
Dow Chemical Co. 35,780 $1,607,953
- -------------------------------------------------------------------------------------------------
E.I. du Pont de Nemours & Co. 54,800 2,349,276
- -------------------------------------------------------------------------------------------------
Monsanto Co. 34,200 1,462,050
- -------------------------------------------------------------------------------------------------
PPG Industries, Inc. 38,100 2,428,875
- -------------------------------------------------------------------------------------------------
Syngenta AG 43,800 4,187,142
- -------------------------------------------------------------------------------------------------
$12,035,296
- -------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.1%
- -------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 35,400 $660,564
- -------------------------------------------------------------------------------------------------
Construction - 1.4%
- -------------------------------------------------------------------------------------------------
Italcementi S.p.A. 235,000 $2,441,065
- -------------------------------------------------------------------------------------------------
Italcementi S.p.A. - Ordinary^ 79,100 1,218,312
- -------------------------------------------------------------------------------------------------
Masco Corp. 48,600 1,665,036
- -------------------------------------------------------------------------------------------------
Sekisui Chemical Co. Ltd. 228,000 1,451,585
- -------------------------------------------------------------------------------------------------
$6,775,998
- -------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.7%
- -------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 34,300 $2,046,681
- -------------------------------------------------------------------------------------------------
Reckitt Benckiser PLC 52,398 1,438,051
- -------------------------------------------------------------------------------------------------
$3,484,732
- -------------------------------------------------------------------------------------------------
Electrical Equipment - 0.7%
- -------------------------------------------------------------------------------------------------
Cooper Industries Ltd., "A" 15,700 $1,003,230
- -------------------------------------------------------------------------------------------------
Emerson Electric Co. 36,000 2,305,800
- -------------------------------------------------------------------------------------------------
$3,309,030
- -------------------------------------------------------------------------------------------------
Electronics - 0.7%
- -------------------------------------------------------------------------------------------------
CANON, Inc. 33,000 $1,630,284
- -------------------------------------------------------------------------------------------------
Samsung Electronics Co. Ltd. 4,890 1,919,745
- -------------------------------------------------------------------------------------------------
$3,550,029
- -------------------------------------------------------------------------------------------------
Energy - Independent - 1.4%
- -------------------------------------------------------------------------------------------------
CNOOC Ltd. 3,333,500 $1,724,073
- -------------------------------------------------------------------------------------------------
EnCana Corp. 43,200 2,143,410
- -------------------------------------------------------------------------------------------------
EOG Resources, Inc. 12,800 851,968
- -------------------------------------------------------------------------------------------------
Unocal Corp. 47,500 1,983,125
- -------------------------------------------------------------------------------------------------
$6,702,576
- -------------------------------------------------------------------------------------------------
Energy - Integrated - 4.8%
- -------------------------------------------------------------------------------------------------
BP PLC, ADR 100,296 $5,842,242
- -------------------------------------------------------------------------------------------------
China Petroleum & Chemical Corp. 2,932,000 1,111,412
- -------------------------------------------------------------------------------------------------
ConocoPhillips 39,200 3,304,952
- -------------------------------------------------------------------------------------------------
Eni S.p.A. 136,500 3,108,194
- -------------------------------------------------------------------------------------------------
Exxon Mobil Corp. 29,970 1,475,123
- -------------------------------------------------------------------------------------------------
Repsol YPF S.A. 73,000 1,586,615
- -------------------------------------------------------------------------------------------------
Statoil A.S.A 102,400 1,482,323
- -------------------------------------------------------------------------------------------------
TOTAL S.A., ADR 53,000 5,526,840
- -------------------------------------------------------------------------------------------------
$23,437,701
- -------------------------------------------------------------------------------------------------
Food & Drug Stores - 0.6%
- -------------------------------------------------------------------------------------------------
Lawson, Inc.^ 38,600 $1,290,738
- -------------------------------------------------------------------------------------------------
Wm Morrison Supermarkets PLC 368,200 1,532,008
- -------------------------------------------------------------------------------------------------
$2,822,746
- -------------------------------------------------------------------------------------------------
Food & Non-Alcoholic Beverages - 2.8%
- -------------------------------------------------------------------------------------------------
Archer Daniels Midland Co. 124,100 $2,403,817
- -------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC 161,090 1,339,048
- -------------------------------------------------------------------------------------------------
H.J. Heinz Co. 29,600 1,075,960
- -------------------------------------------------------------------------------------------------
Kellogg Co. 67,030 2,882,290
- -------------------------------------------------------------------------------------------------
Nestle S.A. 15,288 3,624,917
- -------------------------------------------------------------------------------------------------
PepsiCo, Inc. 12,000 594,960
- -------------------------------------------------------------------------------------------------
Sara Lee Corp. 64,430 1,499,930
- -------------------------------------------------------------------------------------------------
$13,420,922
- -------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.5%
- -------------------------------------------------------------------------------------------------
International Paper Co. 60,230 $2,319,457
- -------------------------------------------------------------------------------------------------
Insurance - 2.9%
- -------------------------------------------------------------------------------------------------
AFLAC, Inc. 28,200 $1,011,816
- -------------------------------------------------------------------------------------------------
Allstate Corp. 58,540 2,815,189
- -------------------------------------------------------------------------------------------------
Aviva PLC 154,100 1,542,795
- -------------------------------------------------------------------------------------------------
Chubb Corp. 10,400 750,152
- -------------------------------------------------------------------------------------------------
Hartford Financial Services Group, Inc. 27,500 1,608,200
- -------------------------------------------------------------------------------------------------
Jardine Lloyd Thompson Group PLC 143,800 1,212,497
- -------------------------------------------------------------------------------------------------
MetLife, Inc. 88,850 3,407,398
- -------------------------------------------------------------------------------------------------
Riunione Adriatica di Sicurta S.p.A. 87,000 1,843,041
- -------------------------------------------------------------------------------------------------
$14,191,088
- -------------------------------------------------------------------------------------------------
Leisure & Toys - 0.2%
- -------------------------------------------------------------------------------------------------
Heiwa Corp. 70,500 $1,060,180
- -------------------------------------------------------------------------------------------------
Machinery & Tools - 0.8%
- -------------------------------------------------------------------------------------------------
ASSA ABLOY AB 87,500 $1,184,690
- -------------------------------------------------------------------------------------------------
Deere & Co. 26,400 1,578,192
- -------------------------------------------------------------------------------------------------
Hyundai Mobis 25,000 1,281,822
- -------------------------------------------------------------------------------------------------
$4,044,704
- -------------------------------------------------------------------------------------------------
Medical Equipment - 0.1%
- -------------------------------------------------------------------------------------------------
Baxter International, Inc. 22,700 $698,252
- -------------------------------------------------------------------------------------------------
Metals & Mining - 0.4%
- -------------------------------------------------------------------------------------------------
Anglo American PLC 82,500 $1,809,536
- -------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.7%
- -------------------------------------------------------------------------------------------------
Tokyo Gas Co. Ltd.^ 950,000 $3,544,609
- -------------------------------------------------------------------------------------------------
Oil Services - 0.6%
- -------------------------------------------------------------------------------------------------
Noble Corp.* 46,600 $2,128,688
- -------------------------------------------------------------------------------------------------
Tenaris S.A., ADR^ 19,000 850,630
- -------------------------------------------------------------------------------------------------
$2,979,318
- -------------------------------------------------------------------------------------------------
Pharmaceuticals - 4.5%
- -------------------------------------------------------------------------------------------------
Abbott Laboratories 48,300 $2,059,029
- -------------------------------------------------------------------------------------------------
AstraZeneca PLC 56,300 2,308,403
- -------------------------------------------------------------------------------------------------
Chugai Pharmaceutical Co. Ltd. 135,900 2,130,959
- -------------------------------------------------------------------------------------------------
Johnson & Johnson 58,460 3,412,895
- -------------------------------------------------------------------------------------------------
Merck & Co., Inc. 52,300 1,637,513
- -------------------------------------------------------------------------------------------------
Novartis AG 47,300 2,260,866
- -------------------------------------------------------------------------------------------------
Pfizer, Inc. 40,207 1,163,993
- -------------------------------------------------------------------------------------------------
Roche Holding AG 20,200 2,069,714
- -------------------------------------------------------------------------------------------------
Sanofi-Aventis 27,900 2,045,099
- -------------------------------------------------------------------------------------------------
Tanabe Seiyaku Co. Ltd. 160,000 1,455,439
- -------------------------------------------------------------------------------------------------
Wyeth 31,890 1,264,439
- -------------------------------------------------------------------------------------------------
$21,808,349
- -------------------------------------------------------------------------------------------------
Printing & Publishing - 1.3%
- -------------------------------------------------------------------------------------------------
Reed Elsevier PLC 147,500 $1,318,208
- -------------------------------------------------------------------------------------------------
Tribune Co. 47,800 2,064,960
- -------------------------------------------------------------------------------------------------
Yell Group PLC 446,700 3,003,351
- -------------------------------------------------------------------------------------------------
$6,386,519
- -------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.8%
- -------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 20,700 $865,467
- -------------------------------------------------------------------------------------------------
Canadian National Railway Co. 33,165 1,792,568
- -------------------------------------------------------------------------------------------------
Union Pacific Corp. 16,700 1,051,599
- -------------------------------------------------------------------------------------------------
$3,709,634
- -------------------------------------------------------------------------------------------------
Real Estate - 0.3%
- -------------------------------------------------------------------------------------------------
Leopalace21 Corp. 79,800 $1,459,338
- -------------------------------------------------------------------------------------------------
Restaurants - 0.2%
- -------------------------------------------------------------------------------------------------
McDonald's Corp. 36,720 $1,070,388
- -------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.5%
- -------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 45,000 $2,393,100
- -------------------------------------------------------------------------------------------------
Specialty Stores - 1.1%
- -------------------------------------------------------------------------------------------------
Gap, Inc. 77,100 $1,540,458
- -------------------------------------------------------------------------------------------------
Matalan PLC 520,800 2,195,648
- -------------------------------------------------------------------------------------------------
TJX Cos., Inc. 57,600 1,381,248
- -------------------------------------------------------------------------------------------------
$5,117,354
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.7%
- -------------------------------------------------------------------------------------------------
KDDI Corp.^ 605 $2,914,561
- -------------------------------------------------------------------------------------------------
mm02 PLC* 689,600 1,333,301
- -------------------------------------------------------------------------------------------------
Vodafone Group PLC 1,658,243 4,249,437
- -------------------------------------------------------------------------------------------------
$8,497,299
- -------------------------------------------------------------------------------------------------
Telephone Services - 4.1%
- -------------------------------------------------------------------------------------------------
Brasil Telecom Participacoes S.A., ADR^ 33,600 $1,030,176
- -------------------------------------------------------------------------------------------------
Deutsche Telekom AG 185,400 3,562,338
- -------------------------------------------------------------------------------------------------
KT Freetel Co. Ltd. 61,400 1,116,114
- -------------------------------------------------------------------------------------------------
Royal KPN N.V. 395,300 3,170,661
- -------------------------------------------------------------------------------------------------
Sprint Corp. 168,400 3,527,980
- -------------------------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd. 360,300 1,424,172
- -------------------------------------------------------------------------------------------------
Telefonica S.A. 186,000 3,078,950
- -------------------------------------------------------------------------------------------------
Verizon Communications, Inc. 80,900 3,163,190
- -------------------------------------------------------------------------------------------------
$20,073,581
- -------------------------------------------------------------------------------------------------
Tobacco - 1.8%
- -------------------------------------------------------------------------------------------------
Altria Group, Inc. 77,040 $3,733,358
- -------------------------------------------------------------------------------------------------
British American Tobacco PLC 135,700 2,044,103
- -------------------------------------------------------------------------------------------------
Imperial Tobacco Group PLC 67,100 1,567,901
- -------------------------------------------------------------------------------------------------
Swedish Match AB 134,300 1,485,998
- -------------------------------------------------------------------------------------------------
$8,831,360
- -------------------------------------------------------------------------------------------------
Trucking - 0.2%
- -------------------------------------------------------------------------------------------------
Singapore Post Ltd. 2,485,300 $1,203,010
- -------------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.5%
- -------------------------------------------------------------------------------------------------
Dominion Resources, Inc.^ 40,000 $2,572,800
- -------------------------------------------------------------------------------------------------
Fortum Corp. 206,100 3,163,841
- -------------------------------------------------------------------------------------------------
Iberdrola S.A. 87,350 1,917,501
- -------------------------------------------------------------------------------------------------
Kelda Group PLC 125,300 1,287,835
- -------------------------------------------------------------------------------------------------
Severn Trent PLC 77,400 1,301,692
- -------------------------------------------------------------------------------------------------
Suez S.A. 124,500 2,917,765
- -------------------------------------------------------------------------------------------------
Tohoku Electric Power Co., Inc. 140,500 2,400,836
- -------------------------------------------------------------------------------------------------
TXU Corp. 23,010 1,408,672
- -------------------------------------------------------------------------------------------------
$16,970,942
- -------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $229,551,407) $289,709,244
- -------------------------------------------------------------------------------------------------
Bonds - 35.5%
- -------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- -------------------------------------------------------------------------------------------------
Advertising & Broadcasting - 0.2%
- -------------------------------------------------------------------------------------------------
News America Holdings, 7.75%, 2024 $622,000 $738,804
- -------------------------------------------------------------------------------------------------
Aerospace - 0.1%
- -------------------------------------------------------------------------------------------------
BAE Systems Holdings, Inc., 6.4%, 2011## $622,000 $697,396
- -------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 1.1%
- -------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust, 0.8763%, 2032##^^ $20,203,305 $1,032,126
- -------------------------------------------------------------------------------------------------
Deutsche Mortgage & Asset Receiving Corp., 6.538%, 2031 895,336 965,018
- -------------------------------------------------------------------------------------------------
First Union National Bank Commercial Mortgage Trust,
7.39%, 2031 917,891 1,054,768
- -------------------------------------------------------------------------------------------------
First Union National Bank Commercial Mortgage Trust,
0.9673%, 2043##^^ 27,899,099 1,374,628
- -------------------------------------------------------------------------------------------------
Lehman Brothers-UBS Commercial Mortgage Trust,
7.95%, 2010 688,418 810,870
- -------------------------------------------------------------------------------------------------
$5,237,410
- -------------------------------------------------------------------------------------------------
Banks & Credit Companies - 0.3%
- -------------------------------------------------------------------------------------------------
Pfandbriefstelle der osterreichischen Landes-
Hypothekenbanken, 1.6%, 2011 JPY 76,000,000 $745,639
- -------------------------------------------------------------------------------------------------
Woori Bank, 5.75%, 2014## $521,000 547,050
- -------------------------------------------------------------------------------------------------
$1,292,689
- -------------------------------------------------------------------------------------------------
Emerging Market Agencies - 0.5%
- -------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 7.375%, 2014^ $305,000 $337,940
- -------------------------------------------------------------------------------------------------
Pemex Project Funding Master Trust, 8.625%, 2022 1,299,000 1,500,345
- -------------------------------------------------------------------------------------------------
Petroleos Mexicanos, 9.5%, 2027 354,000 436,305
- -------------------------------------------------------------------------------------------------
Petronas Capital Ltd., 7.875%, 2022## 244,000 299,808
- -------------------------------------------------------------------------------------------------
$2,574,398
- -------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.5%
- -------------------------------------------------------------------------------------------------
Russian Federation, 11%, 2018 $694,000 $942,105
- -------------------------------------------------------------------------------------------------
State of Qatar, 9.75%, 2030 974,000 1,403,778
- -------------------------------------------------------------------------------------------------
United Mexican States, 8%, 2022 79,000 90,653
- -------------------------------------------------------------------------------------------------
$2,436,536
- -------------------------------------------------------------------------------------------------
International Market Agencies - 1.6%
- -------------------------------------------------------------------------------------------------
Japan Development Bank, 1.6%, 2014^ JPY 410,000,000 $3,890,033
- -------------------------------------------------------------------------------------------------
Kreditanstalt fur Wiederaufbau, 3.25%, 2008 EUR 3,043,000 3,942,157
- -------------------------------------------------------------------------------------------------
$7,832,190
- -------------------------------------------------------------------------------------------------
International Market Sovereign - 25.4%
- -------------------------------------------------------------------------------------------------
Federal Republic of Germany, 3.5%, 2008 EUR 2,769,000 $3,615,292
- -------------------------------------------------------------------------------------------------
Federal Republic of Germany, 5.25%, 2010 5,238,000 7,344,597
- -------------------------------------------------------------------------------------------------
Federal Republic of Germany, 6.25%, 2030 4,529,000 7,239,008
- -------------------------------------------------------------------------------------------------
Government of Australia, 8.75%, 2008 AUD 2,329,000 1,947,451
- -------------------------------------------------------------------------------------------------
Government of Australia, 6.25%, 2015 4,120,000 3,290,122
- -------------------------------------------------------------------------------------------------
Government of Canada, 5.5%, 2009 CAD 978,000 857,830
- -------------------------------------------------------------------------------------------------
Government of Canada, 5.25%, 2012 990,000 861,841
- -------------------------------------------------------------------------------------------------
Government of New Zealand, 7%, 2009 NZD 2,268,000 1,615,166
- -------------------------------------------------------------------------------------------------
Government of New Zealand, 6.5%, 2013^ 10,894,000 7,685,034
- -------------------------------------------------------------------------------------------------
Kingdom of Belgium, 3.75%, 2009 EUR 2,240,000 2,943,628
- -------------------------------------------------------------------------------------------------
Kingdom of Belgium, 5%, 2012 1,861,000 2,584,473
- -------------------------------------------------------------------------------------------------
Kingdom of Denmark, 7%, 2007 DKK 6,923,000 1,335,430
- -------------------------------------------------------------------------------------------------
Kingdom of Denmark, 6%, 2009 15,441,000 2,986,618
- -------------------------------------------------------------------------------------------------
Kingdom of Denmark, 5%, 2013 10,672,000 1,983,064
- -------------------------------------------------------------------------------------------------
Kingdom of Netherlands, 5.75%, 2007 EUR 3,552,000 4,862,537
- -------------------------------------------------------------------------------------------------
Kingdom of Netherlands, 5%, 2012 1,215,855 1,692,777
- -------------------------------------------------------------------------------------------------
Kingdom of Spain, 6%, 2008 1,401,000 1,967,201
- -------------------------------------------------------------------------------------------------
Kingdom of Spain, 5.35%, 2011 1,922,000 2,728,455
- -------------------------------------------------------------------------------------------------
Quebec Province, 1.6%, 2013^ JPY 136,000,000 1,304,996
- -------------------------------------------------------------------------------------------------
Republic of Austria, 5.5%, 2007 EUR 3,047,000 4,201,769
- -------------------------------------------------------------------------------------------------
Republic of Austria, 5%, 2012 461,000 641,828
- -------------------------------------------------------------------------------------------------
Republic of Austria, 4.65%, 2018 597,000 798,282
- -------------------------------------------------------------------------------------------------
Republic of Finland, 2.75%, 2006 4,574,000 5,886,474
- -------------------------------------------------------------------------------------------------
Republic of Finland, 3%, 2008 5,449,000 6,996,299
- -------------------------------------------------------------------------------------------------
Republic of France, 4.75%, 2007 - 2012 10,237,000 13,925,744
- -------------------------------------------------------------------------------------------------
Republic of France, 6%, 2025 2,877,000 4,459,253
- -------------------------------------------------------------------------------------------------
Republic of Ireland, 4.25%, 2007 5,576,000 7,442,660
- -------------------------------------------------------------------------------------------------
Republic of Ireland, 4.6%, 2016 633,000 852,170
- -------------------------------------------------------------------------------------------------
Republic of Italy, 5.25%, 2017 2,480,000 3,504,140
- -------------------------------------------------------------------------------------------------
Republic of Portugal, 5.45%, 2013 1,361,000 1,947,779
- -------------------------------------------------------------------------------------------------
United Kingdom Treasury, 7.25%, 2007 GBP 1,889,000 3,731,390
- -------------------------------------------------------------------------------------------------
United Kingdom Treasury, 5.75%, 2009 2,035,000 3,920,722
- -------------------------------------------------------------------------------------------------
United Kingdom Treasury, 5%, 2012 3,639,000 6,798,483
- -------------------------------------------------------------------------------------------------
$123,952,513
- -------------------------------------------------------------------------------------------------
Mortgage Backed - 0.5%
- -------------------------------------------------------------------------------------------------
Fannie Mae, 6%, 2017 - 2018 $2,222,491 $2,333,625
- -------------------------------------------------------------------------------------------------
Supranational - 1.4%
- -------------------------------------------------------------------------------------------------
Inter-American Development Bank, 1.9%, 2009 JPY 676,000,000 $6,764,949
- -------------------------------------------------------------------------------------------------
U.S. Government Agencies - 0.9%
- -------------------------------------------------------------------------------------------------
Fannie Mae, 1.75%, 2008 JPY 470,000,000 $4,643,976
- -------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 2.9%
- -------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8%, 2021### $838,000 $1,162,888
- -------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.25%, 2030 4,754,000 5,716,685
- -------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 4.25%, 2013 245,000 249,976
- -------------------------------------------------------------------------------------------------
U.S. Treasury Notes, 2%, 2014 6,870,984 7,122,476
- -------------------------------------------------------------------------------------------------
$14,252,025
- -------------------------------------------------------------------------------------------------
Utilities - Electric Power - 0.1%
- -------------------------------------------------------------------------------------------------
Progress Energy, Inc., 7.1%, 2011 $622,000 $705,421
- -------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $156,889,398) $173,461,932
- -------------------------------------------------------------------------------------------------
Short-Term Obligation - 4.0%
- -------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- -------------------------------------------------------------------------------------------------
General Electric Capital Corp., 1.84%, due 11/01/04,
at Amortized Cost $19,481,000 $19,481,000
- -------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 3.9%
- -------------------------------------------------------------------------------------------------
Merrill Lynch repurchase agreement, 1.895%, dated
10/29/04, due 11/01/04, total to be received $14,550,814
(secured by various U.S. Treasury and Federal Agency
obligations in an individually traded account), at Cost $14,548,517 $14,548,517
- -------------------------------------------------------------------------------------------------
SHARES $ VALUE
- -------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 4,513,150 4,513,150
- -------------------------------------------------------------------------------------------------
Total Collateral for Securities Loaned $19,061,667
- -------------------------------------------------------------------------------------------------
Repurchase Agreement - 0.6%
- -------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- -------------------------------------------------------------------------------------------------
Morgan Stanley, 1.85%, dated 10/29/04, due 11/01/04, total
to be received $3,180,490 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost $3,180,000 $3,180,000
- -------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $428,163,472) $504,893,843
- -------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (3.3)% (16,345,853)
- -------------------------------------------------------------------------------------------------
Net Assets - 100.0% $488,547,990
- -------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
### Security segregated as collateral for open futures contracts.
^ All or a portion of this security is on loan.
^^ Interest only security.
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.
AUD = Australian Dollar JPY = Japanese Yen
CAD = Canadian Dollar NOK = Norwegian Krone
CZK = Czech Koruna NZD = New Zealand Dollar
DKK = Danish Krone PLN = Polish Zloty
EUR = Euro SEK = Swedish Krona
GBP = British Pound
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 10/31/04
ASSETS
Investments, at value, including $18,415,721 of securities
on loan (identified cost, $428,163,472) $504,893,843
- -----------------------------------------------------------------------------------------------------
Cash 403
- -----------------------------------------------------------------------------------------------------
Receivable for forward foreign currency exchange contracts 3,623,326
- -----------------------------------------------------------------------------------------------------
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 46,724
- -----------------------------------------------------------------------------------------------------
Receivable for daily variation margin on open futures
contracts 550
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 4,210,798
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 770,241
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 3,043,787
- -----------------------------------------------------------------------------------------------------
Receivable from administrative proceeding settlement 6,868
- -----------------------------------------------------------------------------------------------------
Other assets 1,835
- -----------------------------------------------------------------------------------------------------
Total assets $516,598,375
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for forward foreign currency exchange contracts $1,813,490
- -----------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange contracts
subject to master netting agreements 38,234
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 5,857,418
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 834,386
- -----------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 19,061,667
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 33,577
- -----------------------------------------------------------------------------------------------------
Shareholder servicing costs 64,313
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 23,829
- -----------------------------------------------------------------------------------------------------
Administrative fee 233
- -----------------------------------------------------------------------------------------------------
Administrative service fee 2
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 323,236
- -----------------------------------------------------------------------------------------------------
Total liabilities $28,050,385
- -----------------------------------------------------------------------------------------------------
Net assets $488,547,990
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $390,634,600
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 78,705,145
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain on investments
and foreign currency transactions 16,663,209
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 2,545,036
- -----------------------------------------------------------------------------------------------------
Net assets $488,547,990
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 33,108,606
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
Net assets $298,826,277
- -----------------------------------------------------------------------------------------------------
Shares outstanding 20,290,925
- -----------------------------------------------------------------------------------------------------
Net asset value per share $14.73
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$14.73) $15.46
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $129,141,107
- -----------------------------------------------------------------------------------------------------
Shares outstanding 8,713,390
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.82
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $57,118,840
- -----------------------------------------------------------------------------------------------------
Shares outstanding 3,868,734
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.76
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $2,285,532
- -----------------------------------------------------------------------------------------------------
Shares outstanding 155,568
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $14.69
- -----------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $1,043,101
- -----------------------------------------------------------------------------------------------------
Shares outstanding 70,914
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $14.71
- -----------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $133,133
- -----------------------------------------------------------------------------------------------------
Shares outstanding 9,075
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $14.67
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price of Class A shares is reduced. A contingent deferred
sales charge may be imposed on redemptions of Class A, Class B and Class C 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 10/31/04
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Dividends $7,437,769
- -----------------------------------------------------------------------------------------------------
Interest 7,424,068
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (472,279)
- -----------------------------------------------------------------------------------------------------
Total investment income $14,389,558
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $4,185,972
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 31,181
- -----------------------------------------------------------------------------------------------------
Shareholder servicing costs 849,525
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 984,998
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 1,327,733
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 566,614
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 1,926
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R2) 306
- -----------------------------------------------------------------------------------------------------
Administrative service fee (Class R2) 153
- -----------------------------------------------------------------------------------------------------
Administrative fee 46,130
- -----------------------------------------------------------------------------------------------------
Custodian fee 375,482
- -----------------------------------------------------------------------------------------------------
Printing 79,850
- -----------------------------------------------------------------------------------------------------
Postage 47,987
- -----------------------------------------------------------------------------------------------------
Auditing fees 40,105
- -----------------------------------------------------------------------------------------------------
Legal fees 18,161
- -----------------------------------------------------------------------------------------------------
Miscellaneous 226,941
- -----------------------------------------------------------------------------------------------------
Total expenses $8,783,064
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (4,082)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (186)
- -----------------------------------------------------------------------------------------------------
Net expenses $8,778,796
- -----------------------------------------------------------------------------------------------------
Net investment income $5,610,762
- -----------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $53,807,297
- -----------------------------------------------------------------------------------------------------
Written options transactions 58,253
- -----------------------------------------------------------------------------------------------------
Futures contracts 32,484
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions (4,271,917)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $49,626,117
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $21,473,593
- -----------------------------------------------------------------------------------------------------
Futures contracts 48,296
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 1,850,507
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $23,372,396
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $72,998,513
- -----------------------------------------------------------------------------------------------------
Change in net assets from operations $78,609,275
- -----------------------------------------------------------------------------------------------------
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 10/31 2004 2003
CHANGE IN NET ASSETS
OPERATIONS
Net investment income $5,610,762 $5,064,740
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 49,626,117 15,646,581
- -------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 23,372,396 37,882,251
- ------------------------------------------------------------ --------------- ------------
Change in net assets from operations $78,609,275 $58,593,572
- ------------------------------------------------------------ --------------- ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -------------------------------------------------------------------------------------------------------
Class A $(8,272,745) $(3,629,327)
- -------------------------------------------------------------------------------------------------------
Class B (2,863,732) (951,921)
- -------------------------------------------------------------------------------------------------------
Class C (1,225,929) (446,022)
- -------------------------------------------------------------------------------------------------------
Class I (1,273,876) (1,287,997)
- -------------------------------------------------------------------------------------------------------
Class R1 (6,626) (49)
- -------------------------------------------------------------------------------------------------------
Class R2 (733) --
- ------------------------------------------------------------ --------------- ------------
Total distributions declared to shareholders $(13,643,641) $(6,315,316)
- ------------------------------------------------------------ --------------- ------------
Change in net assets from fund share transactions $(77,306,229) $112,694,909
- ------------------------------------------------------------ --------------- ------------
Redemption fees $3,976 $--
- ------------------------------------------------------------ --------------- ------------
Total change in net assets $(12,336,619) $164,973,165
- ------------------------------------------------------------ --------------- ------------
NET ASSETS
At beginning of period $500,884,609 $335,911,444
- -------------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed net
investment income of $2,545,036 and $4,417,733,
respectively) $488,547,990 $500,884,609
- -------------------------------------------------------------------------------------------------------
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 registered public accounting firm, whose report, together with the fund's financial statements, are included in
this report.
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS A 2004 2003 2002 2001 2000
Net asset value, beginning of year $12.98 $11.41 $11.64 $13.76 $13.98
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.19 $0.18 $0.21 $0.22 $0.36
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 1.97 1.63 (0.33) (1.02) 0.70
- ----------------------------------------------- -------- ------ ------ ------ ------
Total from investment operations $2.16 $1.81 $(0.12) $(0.80) $1.06
- ----------------------------------------------- -------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.41) $(0.24) $(0.11) $(0.48) $(0.23)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- (0.82) (1.05)
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.02) --
- ----------------------------------------------- -------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.41) $(0.24) $(0.11) $(1.32) $(1.28)
- ----------------------------------------------- -------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00### $-- $-- $-- $--
- ----------------------------------------------- -------- ------ ------ ------ ------
Net asset value, end of year $14.73 $12.98 $11.41 $11.64 $13.76
- ----------------------------------------------- -------- ------ ------ ------ ------
Total return (%)(+) 16.94 16.09 (1.02) (6.38) 7.76
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS A (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.54 1.54 1.53 1.47 1.51
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 1.37 1.53 1.79 1.80 2.62
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 76 105 72 69 91
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year
(000 Omitted) $298,826 $261,042 $213,983 $197,374 $178,773
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment advisor has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income $0.19^ $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.54^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.37^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective November 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
October 31, 2002, was to decrease net investment income per share and increase net realized gains and 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 0.03%. Per share, ratios, and supplemental data for the periods prior to November 1, 2001,
have not been restated to reflect this change in presentation.
# 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.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have been
lower.
^ The reimbursement impact per share amount and the ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS B 2004 2003 2002 2001 2000
Net asset value, beginning of year $13.03 $11.43 $11.65 $13.72 $13.95
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.10 $0.11 $0.13 $0.14 $0.27
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 1.99 1.62 (0.31) (1.03) 0.69
- --------------------------------------------- ---------- ------ ------ ------ ------
Total from investment operations $2.09 $1.73 $(0.18) $(0.89) $0.96
- --------------------------------------------- ---------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.30) $(0.13) $(0.04) $(0.34) $(0.14)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- (0.82) (1.05)
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.02) --
- --------------------------------------------- ---------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.30) $(0.13) $(0.04) $(1.18) $(1.19)
- --------------------------------------------- ---------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00### $-- $-- $-- $--
- --------------------------------------------- ---------- ------ ------ ------ ------
Net asset value, end of year $14.82 $13.03 $11.43 $11.65 $13.72
- --------------------------------------------- ---------- ------ ------ ------ ------
Total return (%) 16.14 15.33 (1.58) (7.05) 7.07
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS B (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.20 2.20 2.18 2.12 2.16
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 0.72 0.88 1.12 1.14 1.98
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 76 105 72 69 91
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year
(000 Omitted) $129,141 $129,378 $84,729 $104,442 $118,676
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment advisor has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income $0.10^ $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.20^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.72^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective November 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
October 31, 2002, was to decrease net investment income per share and increase net realized gains and 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 0.03%. Per share, ratios, and supplemental data for the periods prior to November 1, 2001,
have not been restated to reflect this change in presentation.
# 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 reimbursement impact per share amount and the ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS C 2004 2003 2002 2001 2000
Net asset value, beginning of year $12.99 $11.40 $11.62 $13.68 $13.94
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.10 $0.11 $0.13 $0.14 $0.27
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 1.97 1.62 (0.31) (1.02) 0.69
- --------------------------------------------- ---------- ------ ------ ------ ------
Total from investment operations $2.07 $1.73 $(0.18) $(0.88) $0.96
- --------------------------------------------- ---------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.30) $(0.14) $(0.04) $(0.34) $(0.17)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- (0.82) (1.05)
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.02) --
- --------------------------------------------- ---------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.30) $(0.14) $(0.04) $(1.18) $(1.22)
- --------------------------------------------- ---------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00### $-- $-- $-- $--
- --------------------------------------------- ---------- ------ ------ ------ ------
Net asset value, end of year $14.76 $12.99 $11.40 $11.62 $13.68
- --------------------------------------------- ---------- ------ ------ ------ ------
Total return (%) 16.12 15.27 (1.56) (7.03) 7.11
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS C (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.20 2.20 2.18 2.12 2.16
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 0.72 0.89 1.13 1.14 1.97
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 76 105 72 69 91
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year
(000 Omitted) $57,119 $54,438 $35,660 $38,230 $44,468
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment advisor has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income $0.10^ $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.20^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.72^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective November 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
October 31, 2002, was to decrease net investment income per share and increase net realized gains and 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 0.03%. Per share, ratios, and supplemental data for the periods prior to November 1, 2001,
have not been restated to reflect this change in presentation.
# 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 reimbursement impact per share amount and the ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS I 2004 2003 2002 2001 2000
Net asset value, beginning of year $12.96 $11.42 $11.65 $13.80 $14.02
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#(S)(S)
Net investment income(S) $0.24 $0.25 $0.25 $0.27 $0.41
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 1.96 1.60 (0.32) (1.03) 0.69
- --------------------------------------------- ---------- ------ ------ ------ ------
Total from investment operations $2.20 $1.85 $(0.07) $(0.76) $1.10
- --------------------------------------------- ---------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.47) $(0.31) $(0.16) $(0.55) $(0.27)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions -- -- -- (0.82) (1.05)
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.02) --
- --------------------------------------------- ---------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.47) $(0.31) $(0.16) $(1.39) $(1.32)
- --------------------------------------------- ---------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00### $-- $-- $-- $--
- --------------------------------------------- ---------- ------ ------ ------ ------
Net asset value, end of year $14.69 $12.96 $11.42 $11.65 $13.80
- --------------------------------------------- ---------- ------ ------ ------ ------
Total return (%) 17.31 16.49 (0.65) (6.06) 8.19
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------
CLASS I (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.16 1.20 1.18 1.12 1.16
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 1.59 1.93 2.14 2.14 2.98
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 76 105 72 69 91
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of year
(000 Omitted) $2,286 $56,010 $1,540 $1,307 $1,621
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment advisor has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income $0.24^ $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.16^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.59^ -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
(S)(S) As required, effective November 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
October 31, 2002, was to decrease net investment income per share and increase net realized gains and 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 0.03%. Per share, ratios, and supplemental data for the periods prior to November 1, 2001,
have not been restated to reflect this change in presentation.
# 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 reimbursement impact per share amount and the ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS R1 10/31/04 10/31/03*
Net asset value, beginning of year $12.97 $11.54**
- -------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.21 $0.14
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency transactions 1.94 1.40+++**
- --------------------------------------------------------------------- --------- ------
Total from investment operations $2.15 $1.54
- --------------------------------------------------------------------- --------- ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.41) $(0.11)
- --------------------------------------------------------------------- --------- ------
Redemption fees added to paid-in capital# $0.00### $--
- --------------------------------------------------------------------- --------- ------
Net asset value, end of year $14.71 $12.97
- --------------------------------------------------------------------- --------- ------
Total return (%) 16.89 13.41++**
- -------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.71 1.68+
- -------------------------------------------------------------------------------------------------------
Net investment income 1.24 1.34+
- -------------------------------------------------------------------------------------------------------
Portfolio turnover 76 105
- -------------------------------------------------------------------------------------------------------
Net assets at end of year (000 Omitted) $1,043 $12
- -------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment advisor has voluntarily agreed to reimburse the fund for its
proportional share of Independent Chief Compliance Officer services paid to Tarantino LLC. If this
fee had been incurred by the fund, the net investment income per share and the ratios would have
been:
Net investment income $0.21^ $--
- -------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.71^ --
- -------------------------------------------------------------------------------------------------------
Net investment income 1.24^ --
- -------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through October 31, 2003.
** The net asset value and total return previously reported as $11.56 and 13.21%, respectively, have
been revised to reflect the net asset value from the day prior to the class' inception date. The net
asset value and total return previously reported were from inception date, the date the share class
was first available to public shareholders.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with net realized and unrealized gain/loss for
the period because of the timing of sales of the fund shares and the amount of per share
realized and unrealized gains and losses at such time.
# 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 reimbursement impact per share amount and the ratios were less than $0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEAR ENDED
CLASS R2 10/31/04
Net asset value, beginning of year $12.97
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.12
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and foreign
currency transactions 1.99
- -----------------------------------------------------------------------------
Total from investment operations $2.11
- -----------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.41)
- -----------------------------------------------------------------------------
Redemption fees added to paid-in capital# $0.00###
- -----------------------------------------------------------------------------
Net asset value, end of year $14.67
- -----------------------------------------------------------------------------
Total return (%) 16.52
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.95
- -----------------------------------------------------------------------------
Net investment income 0.91
- -----------------------------------------------------------------------------
Portfolio turnover 76
- -----------------------------------------------------------------------------
Net assets at end of year (000 Omitted) $133
- -----------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment advisor has voluntarily agreed to
reimburse the fund for its proportional share of Independent Chief
Compliance Officer services paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment income per share and the ratios
would have been:
Net investment income $0.1
- -----------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.95^
- -----------------------------------------------------------------------------
Net investment income 0.91^
- -----------------------------------------------------------------------------
# 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 reimbursement impact per share amount and the ratios were less than
$0.01 and 0.01%, respectively.
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Global Total Return Fund (the fund) is a diversified series of MFS Series
Trust VI (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 U.S.
generally accepted accounting principles 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 as reported by an independent pricing service 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. Equity securities traded
over the counter are valued at the last sales price traded each day as reported
by an independent pricing service, or to the extent there are no sales reported,
such securities are valued on the basis of quotations obtained from brokers and
dealers. Bonds and other fixed income securities (other than short-term
obligations) in the fund's portfolio are valued at an evaluated bid price as
reported by an independent pricing service, or to the extent a valuation is not
reported by a pricing service, such securities are valued on the basis of quotes
from brokers and dealers. 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. Listed
options are valued at the closing price as reported by an independent pricing
service on the principal exchange on which they are traded. Unlisted options are
valued by an independent pricing service or on the basis of quotations obtained
from brokers and dealers. Futures contracts are valued at the settlement price
as reported by an independent pricing service on the primary exchange on which
they are traded. Forward foreign currency contracts are valued using spot rates
and forward points as reported by an independent pricing source. Short-term
obligations with a remaining maturity in excess of 60 days will be valued upon
dealer-supplied valuations. All other short-term obligations in the fund's
portfolio are valued at amortized cost, which constitutes market value as
determined by the Board of Trustees. Money market mutual funds are valued at net
asset value. 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. When pricing service information or
market quotations are not readily available, securities are priced at fair value
as determined under the direction of the Board of Trustees. For example,
significant events (such as movement in the U.S. securities market, or other
regional and local developments) may occur between the time that foreign markets
close (where the security is principally traded) and the time that the fund
calculates its net asset value (generally, the close of the NYSE) that may
impact the value of securities traded in these foreign markets. In these cases,
the fund may utilize information from an external vendor or other sources to
adjust closing market quotations of foreign equity securities to reflect what it
believes to be the fair value of the securities as of the fund's valuation time.
Because the frequency of significant events is not predictable, fair valuation
of foreign equity securities may occur on a frequent basis.
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 - 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.
WRITTEN OPTIONS - The fund may write call or put options in exchange for a
premium. The premium is initially recorded as a liability, which is subsequently
adjusted to the current value of the option contract. When a written option
expires, the fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the fund. The fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of the
fund management on the direction of interest rates.
FUTURES CONTRACTS - The fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the fund is required
to deposit with the broker, either in cash or securities, an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the fund each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the fund. The fund's investment in futures contracts is
designed to hedge against anticipated future changes in interest or exchange
rates or securities prices. Investments in interest rate futures for purposes
other than hedging may be made to modify the duration of the portfolio without
incurring the additional transaction costs involved in buying and selling the
underlying securities. Investments in currency futures for purposes other than
hedging may be made to change the fund's relative position in one or more
currencies without buying and selling portfolio assets. Should interest or
exchange rates move unexpectedly, the fund may not achieve the anticipated
benefits of the futures contracts and may realize a loss.
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 provide the fund with indemnification against
Borrower default. The fund bears the risk of loss with respect to the investment
of cash collateral. On loans collateralized by cash, the cash collateral is
invested in a money market fund or 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.
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 TERM FEES - For purchases made prior to July 1, 2004, the fund charges a
2% redemption fee (which is retained by the fund) on proceeds from Class A,
Class B, Class C, and Class I shares redeemed or exchanged within 30 calendar
days following their acquisition (either by purchase or exchange). For purchases
made on or after July 1, 2004, the fund will charge a 2% redemption fee on
proceeds from Class A, Class B, Class C, and Class I shares redeemed or
exchanged within 5 business days following their acquisition. Due to systems
limitations associated with the transition from applying a 30 calendar day
redemption fee to a 5 business day redemption fee, the fund will not impose
redemption fees with respect to purchases made in June 2004 followed by
redemptions made in July 2004. The fund may determine to reinstitute the 30
calendar day redemption fee period, or otherwise change the redemption fee
period in the future, including changes in connection with pending Securities
and Exchange Commission rules. See the fund's prospectus for details. These fees
are accounted for as an addition to paid-in capital.
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 U.S. generally accepted accounting principles. 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 - The fund's custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
fund. This amount, for the year ended October 31, 2004, is 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 foreign currency transactions and amortization and accretion
on debt securities.
The tax character of distributions declared for the years ended October 31, 2004
and October 31, 2003 was as follows:
10/31/04 10/31/03
Distributions declared from:
- ----------------------------------------------------------------------------
Ordinary income $13,643,641 $6,315,316
- ----------------------------------------------------------------------------
Long-term capital gain -- --
- ----------------------------------------------------------------------------
Total distributions declared $13,643,641 $6,315,316
- ----------------------------------------------------------------------------
During the year ended October 31, 2004, accumulated distributions in excess of
net investment income decreased by $6,160,182, accumulated undistributed net
realized gain on investments and foreign currency transactions decreased by
$7,710,137, and paid-in capital increased by $1,549,955 due to differences
between book and tax accounting for foreign currency transactions,
amortization and accretion on debt securities, and treating a portion of the
proceeds from redemptions as a distribution from realized gains for tax
purposes. This change had no effect on the net assets or net asset value per
share.
As of October 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $21,841,895
----------------------------------------------------------
Undistributed long-term capital gain 23,709,554
----------------------------------------------------------
Capital loss carryforward (16,693,176)
----------------------------------------------------------
Unrealized appreciation (depreciation) 75,106,140
----------------------------------------------------------
Other temporary differences (6,051,023)
----------------------------------------------------------
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 October 31, 2009, ($5,654,406) and
October 31, 2010, ($11,038,770). The availability of a portion of these
respective capital loss carryforwards, which were acquired on August 25, 2003,
in connection with the MFS Global Asset Allocation Fund acquisition, may be
limited in a given year.
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 shares
will convert to Class A shares 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 0.84%
----------------------------------------------------------
Average net assets in excess of $500 million 0.75%
----------------------------------------------------------
Management fees incurred for the year ended October 31, 2004 were an effective
rate of 0.84% of average daily net assets on an annualized basis.
The fund pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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 retired Independent Trustees and an unfunded
retirement benefit deferral plan for current Independent Trustees. Included in
Trustees' compensation is $10,939 as a result of the change in the fund's
unfunded retirement benefit deferral plan for certain current Independent
Trustees and a pension expense of $2,445 for retired Independent Trustees for
the year ended October 31, 2004.
This fund and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
The fund's investment adviser, MFS, has been the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in
connection with fund sales, as described in the Legal Proceedings Footnote.
Pursuant to the SEC Order, on July 28, 2004, MFS transferred $1.00 in
disgorgement and $50 million in penalty to the SEC (the "Payments"). A plan
for distribution of these Payments has been submitted to the SEC.
Contemporaneous with the transfer, the fund accrued an estimate of the amount
to be received upon final approval of the plan of distribution. The non-
recurring accrual in the amount of $6,868 did not have a material impact on
the net asset value per share based on the shares outstanding on the day the
proceeds were recorded.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment advisor. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior
to April 1, 2004, the fund paid MFS an administrative fee up to 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%
----------------------------------------------------------
Effective April 1, 2004, the fund paid MFS an administrative fee up to the
following annual percentage rates of the fund's average daily net assets:
First $2 billion 0.01120%
----------------------------------------------------------
Next $2.5 billion 0.00832%
----------------------------------------------------------
Next $2.5 billion 0.00032%
----------------------------------------------------------
In excess of $7 billion 0.00000%
----------------------------------------------------------
For the year ended October 31, 2004, the fund paid MFS $46,130, equivalent to
0.0093% of average daily net assets, to partially reimburse MFS for the costs
of providing administrative services.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to Class R2 shares. These services include various
administrative, recordkeeping, and communication/educational services with
respect to the retirement plans which invest in Class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of Class R2 shares to MFS
for the provision of these services.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$50,878 for the year ended October 31, 2004, as its portion of the sales
charge on sales of Class A shares of the fund.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R1, and Class R2 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. The 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 R1 CLASS R2
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25%
- ----------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25%
- ----------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the year ended
October 31, 2004 amounted to:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Service Fee Retained by MFD $17,422 $1,275 $1,000 $12 $21
- ----------------------------------------------------------------------------------------------------------------
Fees incurred under the distribution plan during the year ended October 31, 2004 were as follows:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Effective Annual Percentage Rates 0.35% 1.00% 1.00% 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------------------
Certain Class A and Class C 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 shares, the first year of
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption
within six years of purchase. MFD receives all contingent deferred sales
charges. Contingent deferred sales charges imposed during the year ended
October 31, 2004 were as follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges Imposed $6,628 $152,434 $4,730
- -----------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as shareholder
servicing agent. The fee, which is calculated as a percentage of the fund's
average daily net assets is set periodically under the supervision of the fund's
Trustees. Prior to April 1, 2004, the fee was set at 0.11% of the fund's average
daily net assets. For the period April 1, 2004 through June 30, 2004, the fee
was set at 0.10% of the fund's average daily net assets. Effective July 1, 2004,
the fund is charged up to 0.0861% of its average daily net assets. For the year
ended October 31, 2004, the fund paid MFSC a fee of $494,801 for shareholder
services which equated to 0.0996% of the fund's average daily net assets. Also
included in shareholder servicing costs are out-of-pocket expenses, paid to
MFSC, which amounted to $110,884 for the year ended October 31, 2004, as well as
other expenses paid to unaffiliated vendors.
(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 $56,780,799 $72,895,904
- --------------------------------------------------------------------------------
Investments (non-U.S. government
securities) $305,118,353 $385,904,404
- --------------------------------------------------------------------------------
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 $429,837,382
----------------------------------------------------------
Gross unrealized appreciation $76,537,345
----------------------------------------------------------
Gross unrealized depreciation (1,480,884)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $75,056,461
----------------------------------------------------------
(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 10/31/04 Year ended 10/31/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 4,486,722 $62,266,509 4,350,284 $52,691,315
- -------------------------------------------------------------------------------------------------------------
Shares issued in connection with
acquisition of MFS Global Asset
Allocation Fund -- -- 5,091,434 $62,573,719
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 553,931 7,552,297 275,345 3,296,785
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (4,866,563) (67,657,176) (8,351,035) (98,763,718)
- -------------------------------------------------------------------------------------------------------------
Net change 174,090 $2,161,630 1,366,028 $19,798,101
- -------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,661,204 $23,142,229 1,523,133 $18,454,080
- -------------------------------------------------------------------------------------------------------------
Shares issued in connection with
acquisition of MFS Global Asset
Allocation Fund -- -- 3,047,312 $37,664,774
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 172,989 2,374,894 63,497 772,051
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (3,046,676) (42,655,147) (2,122,289) (25,708,497)
- -------------------------------------------------------------------------------------------------------------
Net change (1,212,483) $(17,138,024) 2,511,653 $31,182,408
- -------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 658,631 $9,151,147 742,058 $8,931,498
- -------------------------------------------------------------------------------------------------------------
Shares issued in connection with
acquisition of MFS Global Asset
Allocation Fund -- -- 931,609 $11,468,110
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 63,977 875,732 24,475 296,623
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (1,045,963) (14,571,507) (635,530) (7,670,003)
- -------------------------------------------------------------------------------------------------------------
Net change (323,355) $(4,544,628) 1,062,612 $13,026,228
- -------------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 491,916 $6,845,053 4,768,389 $55,550,844
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 95,131 1,247,429 108,457 1,287,996
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (4,754,074) (66,989,201) (689,058) (8,166,963)
- -------------------------------------------------------------------------------------------------------------
Net change (4,167,027) $(58,896,719) 4,187,788 $48,671,877
- -------------------------------------------------------------------------------------------------------------
Year ended 10/31/04 Period ended 10/31/03*
SHARES AMOUNT SHARES AMOUNT
CLASS R1 SHARES
Shares sold 99,677 $1,408,570 996 $12,067
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 475 6,625 4 49
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (30,170) (423,984) (68) (841)
- -------------------------------------------------------------------------------------------------------------
Net change 69,982 $991,211 932 $11,275
- -------------------------------------------------------------------------------------------------------------
Year ended 10/31/04 Period ended 10/31/03**
SHARES AMOUNT SHARES AMOUNT
CLASS R2 SHARES
Shares sold 8,766 $121,404 386 $5,020
- -------------------------------------------------------------------------------------------------------------
Shares issued to shareholders in
reinvestment of distributions 53 733 -- --
- -------------------------------------------------------------------------------------------------------------
Shares reacquired (130) (1,836) -- --
- -------------------------------------------------------------------------------------------------------------
Net change 8,689 $120,301 386 $5,020
- -------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through October 31, 2003.
** Class R2 shares, which commenced operations on October 31, 2003, had no operating activity.
(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 Federal
Reserve funds rate plus 0.50%. 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 calendar quarter. The commitment fee
allocated to the fund for the year ended October 31, 2004 was $4,756, and is
included in miscellaneous expense. The fund had no significant borrowings
during the year ended October 31, 2004.
(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 written options, forward foreign currency
exchange contracts and futures 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.
Written Options Transactions
NUMBER OF PREMIUM
CONTRACTS RECEIVED
Outstanding, beginning of period -- $--
- --------------------------------------------------------------------------------
Options written 2 58,253
- --------------------------------------------------------------------------------
Options expired (2) (58,253)
- --------------------------------------------------------------------------------
Outstanding, end of period -- $--
- --------------------------------------------------------------------------------
At October 31, 2004 the fund had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
SALES
NET UNREALIZED
CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
SETTLEMENT DATE
12/13/04 AUD 6,852,324 $4,953,956 $5,104,842 $(150,886)
11/15/04 CAD 782,619 600,000 642,709 (42,709)
11/16/04 DKK 25,041,656 4,113,416 4,309,612 (196,196)
11/15/04 - 11/22/04 EUR 31,345,955 38,989,355 40,096,558 (1,107,203)
11/16/04 GBP 4,214,691 7,570,831 7,732,148 (161,317)
12/13/04 NZD 13,678,593 9,211,636 9,316,745 (105,109)
11/16/04 SEK 7,005,261 940,464 990,534 (50,070)
----------- ----------- -----------
$66,379,658 $68,193,148 $(1,813,490)
=========== =========== ===========
PURCHASES
12/13/04 AUD 2,587,781 $1,923,180 $1,927,845 $4,665
11/15/04 CAD 1,698,319 1,369,149 1,394,708 25,559
11/29/04 CZK 24,226,344 944,386 984,571 40,185
11/16/04 DKK 736,923 125,000 126,823 1,823
11/15/04 - 11/22/04 EUR 17,981,402 22,144,257 23,001,372 857,115
11/16/04 GBP 285,240 514,903 523,293 8,390
11/09/04 JPY 5,242,558,256 47,242,716 49,550,381 2,307,665
11/15/04 NOK 6,363,619 931,366 998,627 67,261
11/29/04 PLN 3,368,741 943,836 991,258 47,422
11/16/04 SEK 34,085,584 4,556,415 4,819,656 263,241
----------- ----------- -----------
$80,695,208 $84,318,534 $3,623,326
=========== =========== ===========
At October 31, 2004, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $46,724 with
Goldman Sachs & Co. and a net payable of $38,234 with Merrill Lynch
International.
At October 31, 2004, the fund had sufficient cash and/or securities to cover
any commitments under these contracts.
Futures Contracts
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
Japan Government Bonds 10 Year December 2004 3 Long $48,296
- --------------------------------------------------------------------------------------------------------------
At October 31, 2004, the fund had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under the
terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50 million
in penalty to certain MFS funds, pursuant to a plan developed by an independent
distribution consultant. The brokerage allocation practices which were the
subject of this proceeding were discontinued by MFS in November 2003. The
agreement with the SEC is reflected in an order of the SEC. Pursuant to the SEC
order, on July 28, 2004, MFS transferred these settlement amounts to the SEC,
and those MFS funds entitled to these settlement amounts accrued an estimate of
their pro rata portion of these amounts. Once the final distribution plan is
approved by the SEC, these amounts will be distributed by the SEC to the
affected MFS funds. The SEC settlement order states that MFS failed to
adequately disclose to the Boards of Trustees and to shareholders of the MFS
funds the specifics of its preferred arrangements with certain brokerage firms
selling MFS fund shares. The SEC settlement order states that MFS had in place
policies designed to obtain best execution of all MFS fund trades. As part of
the settlement, MFS retained an independent compliance consultant to review the
completeness of its current policies and practices regarding disclosure to MFS
fund trustees and to MFS fund shareholders of strategic alliances between MFS or
its affiliates and broker-dealers and other financial advisers who support the
sale of MFS fund shares.
In addition, in February, 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain MFS
retail funds was false and misleading because, although the prospectuses for
those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer,
John W. Ballen, and former President, Kevin R. Parke, also reached agreement
with the SEC in which they agreed to, among other terms, monetary fines and
temporary suspensions from association with any investment adviser or registered
investment company. Messrs. Ballen and Parke have resigned their positions with,
and will not be returning to, MFS and the MFS funds. Under the terms of the
February Settlements, MFS and the executives neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to increase
certain management fees during this period. MFS has also paid an administrative
fine to NH in the amount of $1 million, which will be used for investor
education purposes (NH retained $250,000 and $750,000 was contributed to the
North American Securities Administrators Association's Investor Protection
Trust). In addition, under the terms of the February Settlements, MFS is in the
process of adopting certain governance changes and reviewing its policies and
procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center, Inc.,
MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS
funds, certain current and/or former Trustees of these MFS funds, and certain
officers of MFS have been named as defendants in multiple lawsuits filed in
federal and state courts. The lawsuits variously have been commenced as class
actions or individual actions on behalf of investors who purchased, held or
redeemed shares of the MFS funds during specified periods, as class actions on
behalf of participants in certain retirement plan accounts, or as derivative
actions on behalf of the MFS funds. The lawsuits relating to market timing and
related matters have been transferred to, and consolidated before, the United
States District Court for the District of Maryland, as part of a multi-district
litigation of market timing and related claims involving several other fund
complexes (In re Mutual Funds Investment Litigation (Alger, Columbia, Janus,
MFS, One Group, Putnam, Allianz Dresdner), No. 1:04-md-15863 (transfer began
March 19, 2004)). The plaintiffs in these consolidated lawsuits generally seek
injunctive relief including removal of the named Trustees, adviser and
distributor, rescission of contracts and 12b-1 Plans, disgorgement of fees and
profits, monetary damages, punitive damages, attorney's fees and costs and other
equitable and declaratory relief. Four lawsuits alleging improper brokerage
allocation practices and excessive compensation are pending in the United States
District Court for the District of Massachusetts (Forsythe v. Sun Life Financial
Inc., et al., No. 04cv10584 (GAO) (March 25, 2004); Eddings v. Sun Life
Financial Inc., et al., No. 04cv10764 (GAO) (April 15, 2004); Marcus Dumond, et
al. v. Massachusetts Financial Servs. Co., et al., No. 04cv11458 (GAO) (May 4,
2004); and Koslow v. Sun Life Financial Inc., et al., No. 04cv11019 (GAO) (May
20, 2004)). The plaintiffs in these lawsuits generally seek compensatory
damages, punitive damages, recovery of fees, rescission of contracts, an
accounting, restitution, declaratory relief, equitable and/or injunctive relief
and attorney's fees and costs. The various lawsuits generally allege that some
or all of the defendants (i) permitted or acquiesced in market timing and/or
late trading in some of the MFS funds, inadequately disclosed MFS' internal
policies concerning market timing and such matters, and received excessive
compensation as fiduciaries to the MFS funds, or (ii) permitted or acquiesced in
the improper use of fund assets by MFS to support the distribution of MFS fund
shares and inadequately disclosed MFS' use of fund assets in this manner. The
actions assert that some or all of the defendants violated the federal
securities laws, including the Securities Act of 1933 and the Securities
Exchange Act of 1934, the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, the Employee Retirement Income Security Act of 1974, as
well as fiduciary duties and other violations of common law. Insofar as any of
the actions is appropriately brought derivatively on behalf of any of the MFS
funds, any recovery will inure to the benefit of the MFS funds. The defendants
are reviewing the allegations of the multiple complaints and will respond
appropriately. Additional lawsuits based on similar allegations may be filed in
the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the MFS
retail funds, and transferred $50 million for distribution to affected MFS funds
to compensate those funds based upon the amount of brokerage commissions
allocated in recognition of MFS fund sales. It is not clear whether these
amounts will be sufficient to compensate shareholders for all of the damage they
allegedly sustained, whether certain shareholders or putative class members may
have additional claims to compensation, or whether the damages that may be
awarded in any of the actions will exceed these amounts. In the event the MFS
funds incur any losses, costs or expenses in connection with such lawsuits, the
Boards of Trustees of the affected MFS funds may pursue claims on behalf of such
funds against any party that may have liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments,
will not result in increased fund redemptions, reduced sales of fund shares,
or other adverse consequences to the MFS funds.
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- -------------------------------------------------------------------------------
To the Trustees of MFS Series Trust VI and Shareholders of
MFS Global Total Return Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Global Total Return Fund (the Fund) (one of the portfolios comprising MFS Series
Trust VI), including the portfolio of investments, as of October 31, 2004, 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 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 the standards of the Public Company
Accounting Oversight Board (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 October 31, 2004, 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
Global Total Return Fund at October 31, 2004, 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 period
indicated therein, in conformity with U.S. generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 10, 2004
- -------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
- -------------------------------------------------------------------------------------------------------------
The Trustees and officers of the trust, as of December 10, 2004, are listed below, together with their
principal occupations during the past five years. (Their titles may have varied during that period.) The
address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS & OTHER
POSITION(s) HELD TRUSTEE/OFFICER DIRECTORSHIPS(2) DURING
NAME, DATE OF BIRTH WITH FUND SINCE(1) THE PAST FIVE YEARS
- ------------------- ---------------- --------------- ------------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee and February 2004 Massachusetts Financial
(born 10/20/63) President Services Company, Chief
Executive Officer, President,
Chief Investment Officer and
Director
Robert C. Pozen(3) Trustee February 2004 Massachusetts Financial
(born 08/08/46) Services Company, Chairman
(since February 2004);
Harvard Law School
(education), John Olin
Visiting Professor (since
July 2002); Secretary of
Economic Affairs, The
Commonwealth of Massachusetts
(January 2002 to December
2002); Fidelity Investments,
Vice Chairman (June 2000 to
December 2001); Fidelity
Management & Research Company
(investment adviser),
President (March 1997 to July
2001); The Bank of New York
(financial services),
Director; Bell Canada Enterprises
(telecommunications),
Director; Medtronic, Inc.
(medical technology),
Director; Telesat (satellite
communications), Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair of February 1992 Private investor; Eastern
(born 05/01/36) Trustees Enterprises (diversified
services company), Chairman,
Trustee and Chief Executive
Officer (until November 2000)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 03/11/37) Chief of Cardiac Surgery;
Harvard Medical School,
Professor of Surgery
David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining
(born 05/30/42) products and service
provider), Vice Chairman/
Director (since April 2001);
Encinitos Ventures (private
investment company),
Principal (1997 to April
2001); Lincoln Electric
Holdings, Inc. (welding
equipment manufacturer),
Director; Southwest Gas
Corporation (natural gas
distribution company),
Director
William R. Gutow Trustee December 1993 Private investor and real
(born 09/27/41) estate consultant; Capitol
Entertainment Management
Company (video franchise),
Vice Chairman
Amy B. Lane Trustee January 2004 Retired; Merrill Lynch & Co.,
(born 02/08/53) Inc., Managing Director,
Investment Banking Group
(1997 to February 2001);
Borders Group, Inc. (book and
music retailer), Director;
Federal Realty Investment
Trust (real estate investment
trust), Trustee
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes
(born 06/23/35) (attorneys), Partner
William J. Poorvu Trustee August 1982 Private investor; Harvard
(born 04/10/35) University Graduate School of
Business Administration,
Class of 1961 Adjunct
Professor in Entrepreneurship
Emeritus
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 09/23/38) (acquisition planning
specialists), President;
Wellfleet Investments
(investor in health care
companies), Managing General
Partner (since 1993);
Cambridge Nutraceuticals
(professional nutritional
products), Chief Executive
Officer (until May 2001)
Elaine R. Smith Trustee February 1992 Independent health care
(born 04/25/46) industry consultant
OFFICERS
Robert J. Manning(3) President and February 2004 Massachusetts Financial
(born 10/20/63) Trustee Services Company, Chief
Executive Officer, President,
Chief Investment Officer and
Director
James R. Bordewick, Jr.(3) Assistant Secretary September 1990 Massachusetts Financial
(born 03/06/59) and Assistant Clerk Services Company, Senior Vice
President and Associate
General Counsel
Jeffrey N. Carp(3) Secretary and Clerk September 2004 Massachusetts Financial
(born 12/01/56) Services Company, Senior Vice
President, General Counsel
and Secretary (since April
2004); Hale and Door LLP (law
firm) (prior to April 2004)
Stephanie A. DeSisto(3) Assistant Treasurer May 2003 Massachusetts Financial
(born 10/01/53) Services Company, Vice
President (since April 2003);
Brown Brothers Harriman &
Co., Senior Vice President
(November 2002 to April
2003); ING Groep N.V./Aeltus
Investment Management, Senior
Vice President (prior to
November 2002)
James F. DesMarais(3) Assistant Secretary September 2004 Massachusetts Financial
(born 03/09/61) and Assistant Clerk Services Company, Assistant
General Counsel
Robert R. Flaherty(3) Assistant Treasurer August 2000 Massachusetts Financial
(born 09/18/63) Services Company, Vice
President (since August
2000); UAM Fund Services,
Senior Vice President (prior
to August 2000)
Richard M. Hisey(3) Treasurer August 2002 Massachusetts Financial
(born 08/29/58) Services Company, Senior Vice
President (since July 2002);
The Bank of New York, Senior
Vice President (September
2000 to July 2002); Lexington
Global Asset Managers, Inc.,
Executive Vice President and
Chief Financial Officer
(prior to September 2000);
Lexington Funds, Chief
Financial Officer (prior to
September 2000)
Brian T. Hourihan(3) Assistant Secretary September 2004 Massachusetts Financial
(born 11/11/64) and Assistant Clerk Services Company, Vice
President, Senior Counsel and
Assistant Secretary (since
June 2004); Affiliated
Managers Group, Inc., Chief
Legal Officer/Centralized
Compliance Program (January
to April 2004); Fidelity
Research & Management
Company, Assistant General
Counsel (prior to January
2004)
Ellen Moynihan(3) Assistant Treasurer April 1997 Massachusetts Financial
(born 11/13/57) Services Company, Vice
President
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance Officer compliance services),
Principal (since June 2004);
CRA Business Strategies Group
(consulting services),
Executive Vice President
(April 2003 to June 2004);
David L. Babson & Co.
(investment adviser),
Managing Director, Chief
Administrative Officer and
Director (February 1997 to
March 2003)
James O. Yost(3) Assistant Treasurer September 1990 Massachusetts Financial
(born 06/12/60) Services Company, Senior Vice
President
- ----------------
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(3) "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 fund. The address of
MFS is 500 Boylston Street, Boston, Massachusetts 02116.
The trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. The trust will hold a shareholders' meeting in 2005 and at least once every five
years hereafter to elect Trustees. Each Trustee and officer holds office until his or her successor is chosen
and qualified or until his or her earlier death, resignation, retirement or removal. Messrs. Ives, Poorvu and
Sherratt and Ms. Lane are members of the trust's Audit Committee.
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 99 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 02116-3741 225 Franklin Street, Boston, MA 02110
JP Morgan Chase Manhattan Bank
DISTRIBUTOR One Chase Manhattan Plaza
MFS Fund Distributors, Inc. New York, NY 10081
500 Boylston Street, Boston, MA
02116-3741 INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PORTFOLIO MANAGERS Ernst & Young LLP
Steven R. Gorham 200 Clarendon Street, Boston, MA 02116
Matthew W. Ryan
Barnaby Weiner
Erik Weisman
- -------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
A general description of the MFS funds' proxy voting policies and procedures 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 Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
- -------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the Securities
and Exchange Commission (the Commission) for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed and copied at
the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
- ------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2005, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2004.
The fund has designated $1,549,955 as a capital gain dividend for the year
ended October 31, 2004.
For the year ended October 31, 2004, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 10.86%.
For the year ended October 31, 2004, income from foreign sources was
$2,936,939, and the fund designated a foreign tax credit of $473,723.
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 2004 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.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- --------------------------------------------------------------------------------
Share prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone required 24 hours a day, 365 days a
bond outlooks year
- --------------------------------------------------------------------------------
[logo] M F S(R)
INVESTMENT MANAGEMENT
(C) 2004 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MWT-ANN-12/04 39M
MFS(R) UTILITIES FUND 10/31/04
ANNUAL REPORT
- -------------------------------------------------------------------------------
[logo] M F S(R)
INVESTMENT MANAGEMENT
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. IT
IS AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
ANNUAL REPORT
LETTER FROM THE CEO 1
------------------------------------------------------
PORTFOLIO COMPOSITION 5
------------------------------------------------------
MANAGEMENT REVIEW 6
------------------------------------------------------
PERFORMANCE SUMMARY 8
------------------------------------------------------
EXPENSE TABLE 12
------------------------------------------------------
PORTFOLIO OF INVESTMENTS 14
------------------------------------------------------
FINANCIAL STATEMENTS 20
------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 35
------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 49
------------------------------------------------------
TRUSTEES AND OFFICERS 50
------------------------------------------------------
PROXY VOTING POLICIES AND
INFORMATION 54
------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 54
------------------------------------------------------
FEDERAL TAX INFORMATION 55
------------------------------------------------------
CONTACT INFORMATION BACK COVER
------------------------------------------------------
- -------------------------------------------------------------------------------
LETTER FROM THE CEO
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Robert J. Manning]
For most investors, the main factor in determining long-term success is asset
allocation - how they spread their money among stocks, bonds, and cash. In
fact, the total returns of investors may be more influenced by their asset
allocation strategy than by their security selection within each asset class.
The principle behind asset allocation is simple: by diversifying across a
variety of types of securities, investors reduce the overall risk of their
portfolio because gains in one area are likely to offset losses in another.
One of the dangers of not having an asset allocation plan is the temptation to
simply chase performance, by moving money into whichever asset class appears
to be outperforming at the moment. The problem with this approach is that by
the time a particular area of the market comes into favor, investors may have
already missed some of the best performance. We would suggest that one way to
benefit from swings in the market is to acquire a diversified portfolio so
that investors hold a range of asset classes before the market swings in their
direction.
UNDERSTAND YOUR EMOTIONS
It usually takes a bear market for people to appreciate the benefits of
diversification. At MFS, we believe proper asset allocation is important in
all market environments. But we understand that there are emotional components
of investment decisions that sometimes keep investors from achieving their
long term goals. The three common behaviors that negatively impact investment
decisions are overconfidence, looking backwards, and loss aversion.
o Overconfidence. After experiencing gains in the market, particularly
during a bull market, investors have a natural tendency to overestimate
their own abilities. During the global bull market of the late 1990s, for
example, a large number of investors traded their own stocks and made
significant profits. However, most of these same investors later handed
back those profits - and then some - because they focused more on
short-term blips in the market and less on the fundamental factors that
affect a company's long-term prospects.
o Looking backwards. Although security prices are determined by
expectations about the future, many investors make choices based on the
recent past. Investors who have achieved momentary success in the market
tend to take on too much risk, believing that better- than-average
returns can be easily duplicated. On the other hand, those who have had
negative experiences tend to become overly cautious and take on too
little risk. Recent historical experience tends to dictate an investor's
frame of reference and may lead to irrational decisions.
o Loss aversion. Simply put, investors would rather avoid the immediate
pain of losses than enjoy the future pleasure of gains. As a result, some
investors tend to overreact to short-term downturns in the market by
seeking to mitigate their losses, rather than remaining invested to
benefit from the long-term growth potential of the stock and bond
markets.
THINK LIKE A PROFESSIONAL INVESTOR
Asset allocation helps reduce the emotional factors that tend to affect the
long-term returns of investors. Professional investors - those who manage
assets for money management firms, pension funds, and endowments - have tended
to outperform the average retirement investor because they focus on asset
allocation. For example, the investment performance of the average 401(k)
participant has lagged these professional investors by more than two
percentage points a year, on average, over the past 10 years.(1)
We think asset allocation is one of the most important decisions for
investors. A study of the performance of 91 large U.S. corporate pension plans
with assets of more than $100 million over a 10-year period beginning in 1974
concluded that asset allocation policies accounted for 93.6% of their returns,
while individual security selection and the timing of their investments
accounted for only 6.4% for their overall performance.(2)
Professional investors target a realistic level of return based on the amount
of risk they are willing to take, then set allocations to meet their goals. On
average, U.S. professional investors allocate 35% to 40% of their assets to
domestic equity stocks; 20% to 30% to fixed income issues; 10% to
international stocks; and between 10% and 20% to other investment classes such
as real estate.(3) And within those categories, they hold a broad range of
styles and asset classes.
In contrast, 401(k) participants who held company stock in their retirement
plans at the end of 2002 had roughly 42% of their retirement assets in company
stock while the rest was allocated to either growth or value stock funds.(4)
These participants virtually ignored the broad range of equity, fixed-income,
and international offerings provided by their retirement plans.
ALLOCATE, DIVERSIFY, REBALANCE
We recommend working with a professional adviser to find an optimal mix of
investments based on your individual goals. In our view, a disciplined asset
allocation strategy is composed of three simple steps: allocate, diversify
and rebalance.
o Allocate. Investors should work with their financial adviser to specify
their long-term goals and tolerance for risk. Then investors should
allocate their assets across the major asset classes - stocks, bonds, and
cash - to help them pursue an investment return that is consistent with
their risk tolerance level.
o Diversify. By diversifying their assets, investors trade some performance
in the top performing categories for a more predictable and stable
portfolio. At the same time, investors should include different
investment styles and market capitalizations of stocks and a range of
fixed-income investments, as well as U.S. and non-U.S. securities.
Because security subclasses tend to move in and out of favor during
various market and economic environments, a broad portfolio increases the
benefits of diversification.
o Rebalance. We suggest that investors consult with their professional
advisers periodically to rebalance their portfolios to maintain the
percentages that they have dedicated to each asset class. Allocations can
shift as markets rise and fall, making for a riskier or more conservative
portfolio than an investor originally intended. For example, a portfolio
of 50% stocks and 50% bonds at the start of 2000 would have shifted to
32% stocks and 68% bonds at the end of 2002 because of the weak stock
market.(5)
In short, these three simple concepts - allocate, diversify and rebalance -
help take emotion out of the investment process and help prevent investors
from trying to outguess the market. An asset allocation strategy cannot turn a
down market cycle into a good one, but it is an invaluable tool to manage risk
and keep investors on track toward reaching their long-term investment goals.
A DISCIPLINED INVESTMENT PROCESS IS PARAMOUNT
Disciplined diversification has helped investors pursue long-term, above-
average results through the years. Since 1924, when we invented the mutual
fund, MFS(R) has strived to give investors the products and tools they need to
maintain well-diversified portfolios. MFS provides a variety of products in
each asset class as well as a family of asset allocation funds. These asset
allocation portfolios cover a range from conservative to moderate, growth, and
aggressive growth allocations, each with a strategy based on a distinct level
of risk. We recommend developing a comprehensive financial plan with an
investment advisor who is familiar with your risk tolerance, your individual
goals, and your financial situation.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
November 15, 2004
Asset allocation and diversification can not guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can
be guaranteed.
(1) Source: Watson Wyatt
(2) "Determinants of Portfolio Performance," in Financial Analysts Journal,
January/February 1995, by
Gary P. Brinson, L. Randolph Hood, and Gilbert L. Beebower
(3) Source: Greenwich Associates
(4) Source: Hewitt Associates
(5) Source: Lipper Inc.
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- -------------------------------------------------------------------------------
PORTFOLIO STRUCTURE*
Stocks 87.5%
Bonds 9.5%
Cash & Other Net Assets 1.8%
Convertible Preferred Stocks 1.2%
TOP TEN HOLDINGS
Entergy Corp. 3.5%
- ------------------------------------------------------------------------------
Exelon Corp. 3.0%
- ------------------------------------------------------------------------------
Vodafone Group PLC 2.7%
- ------------------------------------------------------------------------------
PPL Corp. 2.6%
- ------------------------------------------------------------------------------
America Movil S.A. de C.V. 2.5%
- ------------------------------------------------------------------------------
Comcast Corp. "Special A" 2.4%
- ------------------------------------------------------------------------------
AES Corp. 2.3%
- ------------------------------------------------------------------------------
PG&E Corp. 2.2%
- ------------------------------------------------------------------------------
Sempra Energy 2.1%
- ------------------------------------------------------------------------------
Deutsche Telekom AG 2.0%
- ------------------------------------------------------------------------------
TOP FIVE EQUITY INDUSTRIES
Electric power 40.6%
- ------------------------------------------------------------------------------
Broadcast & cable TV 15.1%
- ------------------------------------------------------------------------------
Telephone services 14.6%
- ------------------------------------------------------------------------------
Wireless communications 8.5%
- ------------------------------------------------------------------------------
Natural gas distribution 8.2%
- ------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
United States 64.7%
- ------------------------------------------------------------------------------
Spain 5.1%
- ------------------------------------------------------------------------------
Mexico 4.9%
- ------------------------------------------------------------------------------
Great Britain 4.8%
- ------------------------------------------------------------------------------
Germany 3.9%
- ------------------------------------------------------------------------------
South Korea 2.3%
- ------------------------------------------------------------------------------
Chile 2.3%
- ------------------------------------------------------------------------------
France 2.2%
- ------------------------------------------------------------------------------
Brazil 1.6%
- ------------------------------------------------------------------------------
Other 8.2%
- ------------------------------------------------------------------------------
Percentages are based on net assets as of 10/31/04.
The portfolio is actively managed, and current holdings may be different.
*For purposes of this graphical representation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
- -------------------------------------------------------------------------------
MANAGEMENT REVIEW
- -------------------------------------------------------------------------------
SUMMARY OF RESULTS
For the year ended October 31, 2004, Class A shares of the MFS Utilities Fund
provided a total return not including sales charges of 28.41%, outperforming
the 24.11% return for the fund's benchmark, S&P 500 Utilities Index.
MARKET ENVIRONMENT
In 2004, many measures of economic growth, including employment, corporate
spending, and earnings growth continued to improve, though some negative
factors put a drag on the U.S. stock market. Near-record-high oil prices,
concerns about rising interest rates, and an unsettled geopolitical
environment were among the issues that, in our view, dampened U.S. markets.
The U.S. Federal Reserve Board raised interest rates three times during the
period, and this appears to have set expectations for an ongoing series of
modest rate hikes.
CONTRIBUTORS TO PERFORMANCE
Strong stock selection in the electric power industry contributed to the
fund's relative returns for the period. The fund's top performers in the
industry included Reliant Energy and E.ON. Our virtual avoidance of Southern
Co., Progress Energy, and FPL Group, as well as our underweighting in Dominion
Resources, helped relative results. We sold out of our positions in Southern
Co., Progress Energy, and FPL Group during the period.
Our positioning in the wireless communications industry also contributed to
relative results. Sprint PCS, America Movil, and AT&T Wireless were among the
top contributors to relative results. We sold all of our AT&T Wireless stock
by period end. We sold most of our Sprint PCS stock during its rally. Our
remaining Sprint PCS holdings became Sprint FON holdings in early 2004, as
Sprint's wireless and wireline stocks, which had been separated years earlier,
were recombined under the Sprint FON name.
Stock selection in the natural gas distribution industry boosted relative
performance. Equitable Resources was one of the fund's top 10 performers for
the period.
DETRACTORS FROM PERFORMANCE
Our positions in the broadcast & cable TV industry hurt relative performance.
Among the fund's top detractors were Comcast, and EchoStar. Our holdings in
the telephone services industry, which was not represented in the benchmark,
also hurt relative results. Poor performers for the period included Hanaro
Telecom, Brasil Telecom, and Cincinnati Bell. We sold our position in
Cincinnati Bell by the end of the period.
A few electric power companies were among the top detractors for the period,
although the group as a whole was the fund's best performing industry. Our
underweighted positions in TXU and Edison International hurt results as we
failed to fully participate in the run up of both stocks. Our avoidance of
strong-performing Duke Energy, also hurt relative results.
The fund's cash position also held back relative returns. As with nearly all
mutual funds, this fund holds some cash to buy new holdings and to provide
liquidity. In a period when equity markets rose sharply, holding any cash hurt
relative performance. The index does not have a cash position.
The views expressed in this report are those of the portfolio manager only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS fund. References to specific securities are
not recommendations of such securities and may not be representative of any MFS
fund's current or future investments.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 10/31/04
- -------------------------------------------------------------------------------
The following chart 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. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ANY
HIGH SHORT-TERM RETURNS MAY BE AND LIKELY WERE ATTRIBUTABLE TO RECENT
FAVORABLE MARKET CONDITIONS, WHICH MAY NOT BE REPEATED. 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Standard &
MFS Utilities Poor's 500
Fund -- Class A Utilities Index
10/94 $ 9,525 $10,000
10/96 13,814 13,965
10/98 21,698 19,373
10/00 33,610 26,742
10/02 17,545 13,186
10/04 29,669 20,663
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 2/14/92 28.41% 6.89% 2.13% 12.03%
- ------------------------------------------------------------------------------
B 9/7/93 27.50% 6.10% 1.38% 11.19%
- ------------------------------------------------------------------------------
C 1/3/94 27.63% 6.10% 1.37% 11.18%
- ------------------------------------------------------------------------------
I 1/2/97 28.84% 7.19% 2.39% 12.27%
- ------------------------------------------------------------------------------
R1 12/31/02 28.11% 6.69% 2.02% 11.97%
- ------------------------------------------------------------------------------
R2 10/31/03 27.77% 6.18% 1.43% 11.21%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative benchmarks
- ------------------------------------------------------------------------------
Average utility fund+ 22.78% 2.68% -0.00% 8.85%
- ------------------------------------------------------------------------------
Standard & Poor's 500
Utilities Index# 24.11% -0.09% 0.98% 7.53%
- ------------------------------------------------------------------------------
- --------------------
Average annual
with sales charge
- --------------------
Share class
- ------------------------------------------------------------------------------
A 22.31% 5.17% 1.14% 11.49%
- ------------------------------------------------------------------------------
B 23.50% 5.21% 1.07% 11.19%
- ------------------------------------------------------------------------------
C 26.63% 6.10% 1.37% 11.18%
- ------------------------------------------------------------------------------
I, R1, and R2 Class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A 28.41% 22.13% 11.12% 211.48%
- ------------------------------------------------------------------------------
B 27.50% 19.44% 7.12% 188.77%
- ------------------------------------------------------------------------------
C 27.63% 19.42% 7.02% 188.50%
- ------------------------------------------------------------------------------
I 28.84% 23.16% 12.51% 218.05%
- ------------------------------------------------------------------------------
R1 28.11% 21.44% 10.49% 209.72%
- ------------------------------------------------------------------------------
R2 27.77% 19.70% 7.34% 189.38%
- ------------------------------------------------------------------------------
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
S&P 500 Utilities Index - measures the performance of the utilities sector.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Class A results including sales charge reflects the deduction of the maximum
4.75% sales charge. Class B 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 results including sales charge
(assuming redemption 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 R1 and R2 shares
have no sales charges and are available only to certain retirement plans.
Performance for R1 and I shares includes the performance of the fund's Class A
shares for periods prior to their offering. Performance for R2 shares includes
the performance of the fund's Class B shares for periods prior to
their offering. This 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 to which it is blended, and lower performance for share
classes with lower operating expenses than the initial share class to which
it is blended.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Without such subsidies and waivers the fund's
performance results would be less favorable. Please see the prospectus and
financial statements for complete details.
The performance shown reflects a non-recurring accrual made to the fund on July
28, 2004, relating to MFS' revenue sharing settlement with the Securities and
Exchange Commission, without which the performance would have been lower.
KEY RISK CONSIDERATIONS
The portfolio may invest in foreign and/or emerging markets securities, which
are more susceptible to risks relating to interest rates, currency exchange
rates, economic, and political conditions.
The portfolio may invest in high yield or lower-rated securities, which may
provide greater returns but are subject to greater-than-average risk.
The portfolio may invest a relatively high percentage of its assets in a small
number of issuers or even in a single issuer. This makes the fund's value more
sensitive to developments associated with the issuer and the overall market.
The portfolio focuses on companies in a limited number of sectors or
industries making it more susceptible to adverse economic, political, or
regulatory developments affecting those sectors or industries than a portfolio
that invests more broadly.
The portfolio may invest in mortgage-backed securities, which during times of
fluctuating interest rates, may increase or decrease more than other fixed-
income securities.
The portfolio's value will vary daily since its investments will fluctuate in
response to issuer, market, regulatory, economic, or political developments.
Because stocks tend to be more volatile than some other investments, such as
bonds, the more assets a fund dedicates to stocks, generally the more volatile
the portfolio's value will be. Bond prices will decline when interest rates
rise and will increase when interest rates fall. Many bonds also carry credit
risk, which is the risk that issuers may fail to make timely principal or
interest payments. In addition, bonds with larger maturity dates will be
subject to greater price fluctuations than those with shorter maturity
periods. However, stocks historically have outperformed bonds over time.
Please see the prospectus for further information regarding these and other
risk considerations.
- -------------------------------------------------------------------------------
EXPENSE TABLE
- -------------------------------------------------------------------------------
FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD FROM
MAY 1, 2004, THROUGH OCTOBER 31, 2004.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and
(2) ongoing costs, including management fees; distribution and service
(12b-1) fees; and other fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in the fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning
of the period and held for the entire period, May 1, 2004 through
October 31, 2004.
ACTUAL EXPENSES
The first line for each share class in the table on the following page
provides information about actual account values and actual expenses. You may
use the information in this line, together with the amount you invested, to
estimate the expenses that you paid over the period. Simply divide your
account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the first line under
the heading entitled "Expenses Paid During Period" to estimate the expenses
you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table on the following page
provides information about hypothetical account values and hypothetical
expenses based on the fund's actual expense ratio and an assumed rate of
return of 5% per year before expenses, which is not the fund's actual return.
The hypothetical account values and expenses may not be used to estimate the
actual ending account balance or expenses you paid for the period. You may use
this information to compare the ongoing costs of investing in the fund and
other funds. To do so, compare this 5% hypothetical example with the
5% hypothetical examples that appear in the shareholder reports of the
other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not
help you determine the relative total costs of owning different funds. In
addition, if these transactional costs were included, your costs would have
been higher.
- ------------------------------------------------------------------------------
Share Class
- ------------------------------------------------------------------------------
Expenses
Annualized Beginning Ending Paid During
Expense Account Value Account Value* Period**
Ratio 5/01/04 10/31/04 5/01/04-10/31/04
- ------------------------------------------------------------------------------
Actual 1.14% $1,000 $1,142 $6.16
A ---------------------------------------------------------------------------
Hypothetical 1.14% $1,000 $1,019 $5.80
- ------------------------------------------------------------------------------
Actual 1.89% $1,000 $1,137 $10.18
B ---------------------------------------------------------------------------
Hypothetical 1.89% $1,000 $1,015 $9.60
- ------------------------------------------------------------------------------
Actual 1.89% $1,000 $1,138 $10.19
C ---------------------------------------------------------------------------
Hypothetical 1.89% $1,000 $1,015 $9.60
- ------------------------------------------------------------------------------
Actual 0.89% $1,000 $1,143 $4.81
I ---------------------------------------------------------------------------
Hypothetical 0.89% $1,000 $1,021 $4.53
- ------------------------------------------------------------------------------
Actual 1.39% $1,000 $1,141 $7.50
R1 ---------------------------------------------------------------------------
Hypothetical 1.39% $1,000 $1,018 $7.07
- ------------------------------------------------------------------------------
Actual 1.64% $1,000 $1,138 $8.84
R2 ---------------------------------------------------------------------------
Hypothetical 1.64% $1,000 $1,017 $8.34
- ------------------------------------------------------------------------------
* Ending account value reflects each class' ending account value assuming the
actual class return per year before expenses (Actual) and a hypothetical 5%
class return per year before expenses (Hypothetical).
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year. Expenses paid do not include any
applicable sales charges (loads) or redemption fees. If these transaction
costs had been included, your costs would have been higher.
- -------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - 10/31/04
- -------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 87.5%
- -------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 14.8%
- -------------------------------------------------------------------------------------------------
Cablevision Systems Corp., "A"^* 714,400 $14,702,351
- -------------------------------------------------------------------------------------------------
Citadel Broadcasting Corp.^* 750,840 10,924,722
- -------------------------------------------------------------------------------------------------
Comcast Corp., "A"* 52,300 1,542,850
- -------------------------------------------------------------------------------------------------
Comcast Corp., "Special A"^* 1,098,400 31,897,536
- -------------------------------------------------------------------------------------------------
Cox Radio, Inc., "A"* 641,900 10,206,210
- -------------------------------------------------------------------------------------------------
Dex Media, Inc.^* 378,320 8,020,384
- -------------------------------------------------------------------------------------------------
EchoStar Communications Corp., "A"* 346,690 10,962,338
- -------------------------------------------------------------------------------------------------
Grupo Televisa S.A., ADR^ 319,800 17,589,000
- -------------------------------------------------------------------------------------------------
News Corp. Ltd., ADR 639,400 20,102,736
- -------------------------------------------------------------------------------------------------
NTL, Inc.^* 112,800 7,502,328
- -------------------------------------------------------------------------------------------------
R.H. Donnelley Corp.^* 98,100 5,321,925
- -------------------------------------------------------------------------------------------------
Radio One, Inc^* 165,000 2,423,850
- -------------------------------------------------------------------------------------------------
Radio One, Inc., "A"* 213,900 3,133,635
- -------------------------------------------------------------------------------------------------
Time Warner, Inc.* 663,500 11,040,640
- -------------------------------------------------------------------------------------------------
TV Azteca S.A. de C.V., ADR^ 1,454,200 14,571,084
- -------------------------------------------------------------------------------------------------
Viacom, Inc., "B" 613,200 22,375,668
- -------------------------------------------------------------------------------------------------
Walt Disney Co. 282,200 7,117,084
- -------------------------------------------------------------------------------------------------
$199,434,341
- -------------------------------------------------------------------------------------------------
Conglomerates - 1.8%
- -------------------------------------------------------------------------------------------------
E.ON AG* 303,700 $24,779,056
- -------------------------------------------------------------------------------------------------
Energy - Independent - 1.3%
- -------------------------------------------------------------------------------------------------
Devon Energy Corp. 8,500 $628,745
- -------------------------------------------------------------------------------------------------
EnCana Corp.* 103,600 5,140,214
- -------------------------------------------------------------------------------------------------
NRG Energy, Inc.* 402,300 11,159,802
- -------------------------------------------------------------------------------------------------
$16,928,761
- -------------------------------------------------------------------------------------------------
Entertainment - 0.7%
- -------------------------------------------------------------------------------------------------
Fox Entertainment Group, Inc., "A"* 318,200 $9,437,812
- -------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 7.9%
- -------------------------------------------------------------------------------------------------
AGL Resources, Inc. 677,215 $21,129,108
- -------------------------------------------------------------------------------------------------
Equitable Resources, Inc.^ 254,200 14,057,260
- -------------------------------------------------------------------------------------------------
MDU Resources Group, Inc.^ 589,650 15,124,523
- -------------------------------------------------------------------------------------------------
NiSource, Inc.^ 378,100 8,110,245
- -------------------------------------------------------------------------------------------------
ONEOK, Inc.^ 437,600 11,736,432
- -------------------------------------------------------------------------------------------------
Questar Corp.^ 150,700 7,233,600
- -------------------------------------------------------------------------------------------------
Sempra Energy 840,400 28,187,016
- -------------------------------------------------------------------------------------------------
Southern Union Co.^ 56,400 1,239,108
- -------------------------------------------------------------------------------------------------
$106,817,292
- -------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 4.2%
- -------------------------------------------------------------------------------------------------
El Paso Corp.^ 1,045,500 $9,346,770
- -------------------------------------------------------------------------------------------------
Enagas S.A.^ 2,132,155 27,002,838
- -------------------------------------------------------------------------------------------------
Kinder Morgan, Inc.^ 313,616 20,187,462
- -------------------------------------------------------------------------------------------------
$56,537,070
- -------------------------------------------------------------------------------------------------
Oil Services - 3.5%
- -------------------------------------------------------------------------------------------------
GlobalSantaFe Corp. 164,600 $4,855,700
- -------------------------------------------------------------------------------------------------
Halliburton Co. 657,800 24,364,912
- -------------------------------------------------------------------------------------------------
Noble Corp.* 164,100 7,496,088
- -------------------------------------------------------------------------------------------------
Pride International, Inc.^* 579,000 10,699,920
- -------------------------------------------------------------------------------------------------
$47,416,620
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 7.1%
- -------------------------------------------------------------------------------------------------
Alamosa Holdings, Inc.* 708,140 $7,106,185
- -------------------------------------------------------------------------------------------------
America Movil S.A. de C.V., ADR^* 764,200 33,624,800
- -------------------------------------------------------------------------------------------------
Rogers Wireless Communications, Inc.* 81,300 2,951,871
- -------------------------------------------------------------------------------------------------
SK Telecom Co. Ltd. 30,990 4,858,191
- -------------------------------------------------------------------------------------------------
SK Telecom Co. Ltd., ADR^ 535,000 10,555,550
- -------------------------------------------------------------------------------------------------
Vodafone Group PLC 14,427,246 36,971,464
- -------------------------------------------------------------------------------------------------
$96,068,061
- -------------------------------------------------------------------------------------------------
Telephone Services - 14.6%
- -------------------------------------------------------------------------------------------------
Bharti Tele-Ventures Ltd.* 189,100 $655,836
- -------------------------------------------------------------------------------------------------
Brasil Telecom Participacoes S.A., ADR^ 391,000 11,988,060
- -------------------------------------------------------------------------------------------------
CenturyTel, Inc. 335,200 10,756,568
- -------------------------------------------------------------------------------------------------
Citizens Communications Co., "B"^ 1,503,000 20,140,200
- -------------------------------------------------------------------------------------------------
Compania de Telecomunicaciones de Chile S.A., ADR^ 315,200 3,256,016
- -------------------------------------------------------------------------------------------------
Completel Europe N.V.* 19,648 647,219
- -------------------------------------------------------------------------------------------------
Deutsche Telekom AG* 1,408,557 27,064,487
- -------------------------------------------------------------------------------------------------
Hanaro Telecom, Inc.* 2,142,900 6,134,877
- -------------------------------------------------------------------------------------------------
KT Freetel Co. Ltd.* 507,500 9,225,212
- -------------------------------------------------------------------------------------------------
Royal KPN N.V.* 1,756,400 14,087,905
- -------------------------------------------------------------------------------------------------
SBC Communications, Inc. 438,100 11,066,406
- -------------------------------------------------------------------------------------------------
SpectraSite, Inc.^* 162,900 8,356,770
- -------------------------------------------------------------------------------------------------
Sprint Corp. 1,240,300 25,984,285
- -------------------------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd.^* 3,482,327 13,764,732
- -------------------------------------------------------------------------------------------------
Telefonica S.A.* 1,292,500 21,395,393
- -------------------------------------------------------------------------------------------------
Telewest Global, Inc.* 99,300 1,221,390
- -------------------------------------------------------------------------------------------------
Verizon Communications, Inc. 262,712 10,272,039
- -------------------------------------------------------------------------------------------------
$196,017,395
- -------------------------------------------------------------------------------------------------
Utilities - Electric Power - 31.6%
- -------------------------------------------------------------------------------------------------
AES Corp.* 2,892,300 $31,526,070
- -------------------------------------------------------------------------------------------------
AWG PLC 621,200 8,307,528
- -------------------------------------------------------------------------------------------------
Cinergy Corp.^ 590,700 23,344,464
- -------------------------------------------------------------------------------------------------
CMS Energy Corp.^* 654,900 6,129,864
- -------------------------------------------------------------------------------------------------
Constellation Energy Group, Inc. 543,300 22,068,846
- -------------------------------------------------------------------------------------------------
CPFL Energia S.A., ADR^* 517,960 9,012,504
- -------------------------------------------------------------------------------------------------
Dominion Resources, Inc.^ 351,000 22,576,320
- -------------------------------------------------------------------------------------------------
Edison International 220,900 6,737,450
- -------------------------------------------------------------------------------------------------
Endesa S.A.^ 683,300 13,907,115
- -------------------------------------------------------------------------------------------------
Enel S.p.A.^ 2,216,300 20,101,581
- -------------------------------------------------------------------------------------------------
Enersis S.A., ADR^* 1,732,100 13,094,676
- -------------------------------------------------------------------------------------------------
Entergy Corp. 713,000 46,601,680
- -------------------------------------------------------------------------------------------------
Exelon Corp.^ 1,014,200 40,182,604
- -------------------------------------------------------------------------------------------------
PG&E Corp.* 912,700 29,242,908
- -------------------------------------------------------------------------------------------------
PPL Corp. 681,300 35,427,600
- -------------------------------------------------------------------------------------------------
Red Electrica de Espana S.A.^ 371,120 6,945,670
- -------------------------------------------------------------------------------------------------
Reliant Energy, Inc.^* 776,600 7,983,448
- -------------------------------------------------------------------------------------------------
RWE AG 11,900 631,758
- -------------------------------------------------------------------------------------------------
SCANA Corp.^ 162,600 6,032,460
- -------------------------------------------------------------------------------------------------
Severn Trent PLC 541,200 9,101,755
- -------------------------------------------------------------------------------------------------
Suez S.A. 533,800 12,510,063
- -------------------------------------------------------------------------------------------------
TXU Corp. 440,600 26,973,532
- -------------------------------------------------------------------------------------------------
United Utilities PLC 359,354 3,789,164
- -------------------------------------------------------------------------------------------------
United Utilities PLC, "A" 704,907 5,037,214
- -------------------------------------------------------------------------------------------------
Veolia Environnement 565,411 17,178,424
- -------------------------------------------------------------------------------------------------
$424,444,698
- -------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,018,596,311) $1,177,881,106
- -------------------------------------------------------------------------------------------------
Bonds - 9.3%
- -------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- -------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 0.1%
- -------------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, 3.0625%, 2023## $4,557,985 $600,593
- -------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 0.3%
- -------------------------------------------------------------------------------------------------
Continental Cablevision, Inc., 9.5%, 2013 $412,000 $451,332
- -------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 5.5%, 2014 3,047,000 2,848,945
- -------------------------------------------------------------------------------------------------
$3,300,277
- -------------------------------------------------------------------------------------------------
Energy - Independent - 0.1%
- -------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 7.5%, 2014 $1,135,000 $1,262,688
- -------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.9%
- -------------------------------------------------------------------------------------------------
ANR Pipeline Co., 9.625%, 2021 $5,431,000 $6,680,130
- -------------------------------------------------------------------------------------------------
Enterprise Products Partners LP, 6.375%, 2013 4,946,000 5,348,367
- -------------------------------------------------------------------------------------------------
$12,028,497
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 1.2%
- -------------------------------------------------------------------------------------------------
Alamosa Holdings, Inc., 8.5%, 2012 $6,050,000 $6,413,000
- -------------------------------------------------------------------------------------------------
American Tower, Inc., 7.25%, 2011 5,880,000 6,247,500
- -------------------------------------------------------------------------------------------------
Rogers Wireless, Inc., 6.375%, 2014 4,245,000 4,053,975
- -------------------------------------------------------------------------------------------------
$16,714,475
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 0.4%
- -------------------------------------------------------------------------------------------------
Citizens Communications Co., 9.25%, 2011 $4,745,000 $5,456,750
- -------------------------------------------------------------------------------------------------
Citizens Communications Co., 9%, 2031 365,000 389,638
- -------------------------------------------------------------------------------------------------
$5,846,388
- -------------------------------------------------------------------------------------------------
Utilities - Electric Power - 6.3%
- -------------------------------------------------------------------------------------------------
AES Corp., 8.875%, 2011 $4,263,000 $4,907,779
- -------------------------------------------------------------------------------------------------
AES Corp., 9%, 2015## 2,500,000 2,912,500
- -------------------------------------------------------------------------------------------------
Allegheny Energy Supply Co. LLC, 8.25%, 2012## 3,070,000 3,461,425
- -------------------------------------------------------------------------------------------------
Beaver Valley Funding Corp., 9%, 2017 3,147,000 3,706,505
- -------------------------------------------------------------------------------------------------
Calpine Corp., 8.75%, 2013## 5,640,000 4,089,000
- -------------------------------------------------------------------------------------------------
DPL, Inc., 6.875%, 2011 6,304,000 6,871,360
- -------------------------------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A., 8.35%, 2013 7,593,000 8,528,898
- -------------------------------------------------------------------------------------------------
Enersis S.A., 7.375%, 2014 5,351,000 5,603,161
- -------------------------------------------------------------------------------------------------
NRG Energy, Inc., 8%, 2013## 9,145,000 10,070,931
- -------------------------------------------------------------------------------------------------
NorthWestern Corp., 7.875%, 2007 3,709,000 3,263,920
- -------------------------------------------------------------------------------------------------
NorthWestern Corp., 8.75%, 2012* 13,035,000 11,470,800
- -------------------------------------------------------------------------------------------------
NorthWestern Corp., 6.95%, 2028* 5,567,000 4,898,960
- -------------------------------------------------------------------------------------------------
PSEG Energy Holdings LLC, 7.75%, 2007 1,540,000 1,647,800
- -------------------------------------------------------------------------------------------------
PSEG Energy Holdings LLC, 8.625%, 2008 4,541,000 5,017,805
- -------------------------------------------------------------------------------------------------
Reliant Resources, Inc., 9.25%, 2010 1,580,000 1,753,800
- -------------------------------------------------------------------------------------------------
Reliant Resources, Inc., 9.5%, 2013 5,985,000 6,733,125
- -------------------------------------------------------------------------------------------------
TXU Eastern Funding Co., 6.75%, 2009* $793,000 107,055
- -------------------------------------------------------------------------------------------------
$85,044,824
- -------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $122,288,184) $124,797,742
- -------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.2%
- -------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.3%
- -------------------------------------------------------------------------------------------------
Sempra Energy, 8.5%^ 124,800 $3,560,544
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.1%
- -------------------------------------------------------------------------------------------------
Crown Castle International Corp., 6.25%* 31,800 $1,494,600
- -------------------------------------------------------------------------------------------------
Utilities - Electric Power - 0.8%
- -------------------------------------------------------------------------------------------------
AES Trust III, 6.75%^ 120,700 $5,371,150
- -------------------------------------------------------------------------------------------------
Public Service Enterprise Group, Inc., 10.25% 104,800 6,109,840
- -------------------------------------------------------------------------------------------------
$11,480,990
- -------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $16,995,506) $16,536,134
- -------------------------------------------------------------------------------------------------
Short-Term Obligation - 2.9%
- -------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- -------------------------------------------------------------------------------------------------
General Electric Capital Corp., 1.84%, due 11/01/04,
at Amortized Cost $38,389,000 $38,389,000
- -------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 15.2%
- -------------------------------------------------------------------------------------------------
SHARES/
ISSUER PAR AMOUNT $ VALUE
- -------------------------------------------------------------------------------------------------
Merrill Lynch Repurchase Agreement, 1.895%, dated 10/29/04,
due 11/01/04, total to be received $41,474,785 (secured by
various U.S. Treasury and Federal Agency obligations in an
individually traded account) 41,472,602 $41,472,602
- -------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 163,342,798 163,342,798
- -------------------------------------------------------------------------------------------------
Total Collateral for Securities Loaned, at Amortized Cost $204,815,400
- -------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,401,084,401) $1,562,419,382
- -------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (16.1)% (217,057,924)
- -------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,345,361,458
- -------------------------------------------------------------------------------------------------
* Non-income producing security.
^ All or a portion of this security is on loan.
## SEC Rule 144A restriction.
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 10/31/04
ASSETS
Investments, at value, including $199,251,770 of
securities on loan (identified cost, $1,401,084,401) $1,562,419,382
- -----------------------------------------------------------------------------------------------------
Cash 88
- -----------------------------------------------------------------------------------------------------
Receivable for investments sold 10,868,188
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 2,280,186
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 3,667,897
- -----------------------------------------------------------------------------------------------------
Receivable from administrative proceeding settlement 347,851
- -----------------------------------------------------------------------------------------------------
Other assets 1,711
- -----------------------------------------------------------------------------------------------------
Total assets $1,579,585,303
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Distributions payable $220,435
- -----------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange contracts 4,389,757
- -----------------------------------------------------------------------------------------------------
Payable for investments purchased 19,628,993
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 4,116,288
- -----------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 204,815,400
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 64,667
- -----------------------------------------------------------------------------------------------------
Shareholder servicing costs 269,290
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 73,573
- -----------------------------------------------------------------------------------------------------
Administrative fee 604
- -----------------------------------------------------------------------------------------------------
Administrative service fee 2
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 644,836
- -----------------------------------------------------------------------------------------------------
Total liabilities $234,223,845
- -----------------------------------------------------------------------------------------------------
Net assets $1,345,361,458
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $2,014,647,682
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign
currencies 156,956,290
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments and
foreign currency transactions (829,154,359)
- -----------------------------------------------------------------------------------------------------
Accumulated undistributed net investment income 2,911,845
- -----------------------------------------------------------------------------------------------------
Net assets $1,345,361,458
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 134,969,017
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
Net assets $586,729,763
- -----------------------------------------------------------------------------------------------------
Shares outstanding 58,766,016
- -----------------------------------------------------------------------------------------------------
Net asset value per share $9.98
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$9.98) $10.48
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $575,641,735
- -----------------------------------------------------------------------------------------------------
Shares outstanding 57,836,597
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.95
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $177,875,159
- -----------------------------------------------------------------------------------------------------
Shares outstanding 17,854,242
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $9.96
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $2,823,220
- -----------------------------------------------------------------------------------------------------
Shares outstanding 282,358
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $10.00
- -----------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $2,169,694
- -----------------------------------------------------------------------------------------------------
Shares outstanding 217,583
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price and redemption price
per share $9.97
- -----------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $121,887
- -----------------------------------------------------------------------------------------------------
Shares outstanding 12,221
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $9.97
- -----------------------------------------------------------------------------------------------------
On sales of $100,000 or more, the offering price of Class A shares is reduced.
A contingent deferred sales charge may be imposed on redemptions of Class A,
Class B, Class C, Class 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 10/31/04
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Dividends $30,331,662
- -----------------------------------------------------------------------------------------------------
Interest 7,781,800
- -----------------------------------------------------------------------------------------------------
Other# 347,851
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (1,255,051)
- -----------------------------------------------------------------------------------------------------
Total investment income $37,206,262
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $7,505,237
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 43,930
- -----------------------------------------------------------------------------------------------------
Shareholder servicing costs 2,383,546
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 1,299,041
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 5,569,544
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 1,712,256
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 5,928
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R2) 268
- -----------------------------------------------------------------------------------------------------
Administrative service fee (Class R2) 134
- -----------------------------------------------------------------------------------------------------
Administrative fee 115,203
- -----------------------------------------------------------------------------------------------------
Custodian fee 512,419
- -----------------------------------------------------------------------------------------------------
Printing 148,049
- -----------------------------------------------------------------------------------------------------
Postage 134,395
- -----------------------------------------------------------------------------------------------------
Auditing fees 36,563
- -----------------------------------------------------------------------------------------------------
Legal fees 21,266
- -----------------------------------------------------------------------------------------------------
Miscellaneous 290,698
- -----------------------------------------------------------------------------------------------------
Total expenses $19,778,477
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (62,026)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (3,112)
- -----------------------------------------------------------------------------------------------------
Net expenses $19,713,339
- -----------------------------------------------------------------------------------------------------
Net investment income $17,492,923
- -----------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $140,933,544
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions (3,466,573)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $137,466,971
- -----------------------------------------------------------------------------------------------------
Net increase from gains realized on the disposal of
investments in violation of restrictions $106,590
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $155,761,529
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies (4,378,646)
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $151,382,883
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $288,956,444
- -----------------------------------------------------------------------------------------------------
Change in net assets from operations $306,449,367
- -----------------------------------------------------------------------------------------------------
# A non-recurring accrual recorded as a result of an administrative proceeding regarding
disclosure of brokerage allocation practices in connection with fund sales, as described in the
Legal Proceedings and Transactions with Affiliates footnotes.
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 10/31 2004 2003
CHANGE IN NET ASSETS
OPERATIONS
Net investment income $17,492,923 $17,926,040
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 137,466,971 58,216,170
- -------------------------------------------------------------------------------------------------------
Net increase from gains realized on the disposal of
investments in violation of restrictions 106,590 --
- -------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 151,382,883 209,643,026
- ------------------------------------------------------------ ------------- ------------
Change in net assets from operations $306,449,367 $285,785,236
- ------------------------------------------------------------ ------------- ------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income
- -------------------------------------------------------------------------------------------------------
(Class A) $(8,504,149) $(8,984,210)
- -------------------------------------------------------------------------------------------------------
(Class B) (4,726,808) (7,157,688)
- -------------------------------------------------------------------------------------------------------
(Class C) (1,444,683) (2,150,766)
- -------------------------------------------------------------------------------------------------------
(Class I) (39,162) (35,688)
- -------------------------------------------------------------------------------------------------------
(Class R1) (15,016) (1,573)
- -------------------------------------------------------------------------------------------------------
(Class R2) (520) --
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(14,730,338) $(18,329,925)
- ------------------------------------------------------------ ------------- ------------
Change in net assets from fund share transactions $(103,250,580) $(120,804,015)
- ------------------------------------------------------------ ------------- ------------
Redemption fees $2,101 $--
- ------------------------------------------------------------ ------------- ------------
Total change in net assets $188,470,550 $146,651,296
- ------------------------------------------------------------ ------------- ------------
NET ASSETS
At beginning of period $1,156,890,908 $1,010,239,612
- -------------------------------------------------------------------------------------------------------
At end of period (including accumulated undistributed
net investment income of $2,911,845 and $2,026,855,
respectively) $1,345,361,458 $1,156,890,908
- -------------------------------------------------------------------------------------------------------
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 registered public accounting firm, whose report, together with the fund's financial statements, are included in
this report.
YEARS ENDED 10/31
------------------------------------------------------------------------------------
CLASS A 2004 2003 2002 2001 2000
Net asset value, beginning of period $7.89 $6.13 $8.68 $13.66 $12.23
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)#
Net investment income(S) $0.16 $0.15 $0.16 $0.21 $0.55
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.08 1.76 (2.55) (3.70) 2.40
- -------------------------------------------- ------- ------ ------ ------ ------
Total from investment operations $2.24 $1.91 $(2.39) $(3.49) $2.95
- -------------------------------------------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.15) $(0.15) $(0.16) $(0.27) $(0.42)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions -- -- -- (1.19) (1.10)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.03) --
- -------------------------------------------- ------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.15) $(0.15) $(0.16) $(1.49) $(1.52)
- -------------------------------------------- ------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $-- $-- $-- $--
- -------------------------------------------- ------- ------ ------ ------ ------
Net asset value, end of period $9.98 $7.89 $6.13 $8.68 $13.66
- -------------------------------------------- ------- ------ ------ ------ ------
Total return (%)(+) 28.41*^^ 31.69 (27.78) (27.72) 25.88
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------------
CLASS A (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.15 1.19 1.11 1.03 0.98
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 1.83 2.11 2.10 1.95 4.11
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 97 144 80 110 113
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $586,730 $464,832 $382,712 $733,848 $899,682
- -----------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been incurred by the fund,
the net investment income per share and the ratios would have been:
Net investment income $0.16 $-- $0.15 $0.21 $0.53
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.15 -- 1.15 1.06 1.16
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.83 -- 2.06 1.92 3.93
- -----------------------------------------------------------------------------------------------------------------------------
+++ 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.
(S)(S) As required, effective November 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
October 31, 2002 was to decrease net investment income per share and increase net realized and unrealized gains and
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 0.04%. Per share, ratios, and supplemental data for periods prior
to November 1, 2001 have not been restated to reflect this change in presentation.
(+) Total returns 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 net increase from gains realized on the disposal of investments in
violation of restrictions. The gains resulted in an increase in net asset value of $0.0007 per share based on shares
outstanding on the day the gains were realized. Excluding the offset of these gains from the fund's ending net asset
value per share, the total return for the year ended October 31, 2004 would have been approximately 28.40%.
^^ The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------------
CLASS B 2004 2003 2002 2001 2000
Net asset value, beginning of period $7.87 $6.11 $8.65 $13.62 $12.19
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)#
Net investment income(S) $0.10 $0.10 $0.10 $0.13 $0.45
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.05 1.76 (2.53) (3.69) 2.40
- -------------------------------------------- ------- ------ ------ ------ ------
Total from investment operations $2.15 $1.86 $(2.43) $(3.56) $2.85
- -------------------------------------------- ------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.07) $(0.10) $(0.11) $(0.19) $(0.32)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions -- -- -- (1.19) (1.10)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.03) --
- -------------------------------------------- ------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.07) $(0.10) $(0.11) $(1.41) $(1.42)
- -------------------------------------------- ------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $-- $-- $-- $--
- -------------------------------------------- ------- ------ ------ ------ ------
Net asset value, end of period $9.95 $7.87 $6.11 $8.65 $13.62
- -------------------------------------------- ------- ------ ------ ------ ------
Total return (%) 27.50*^^ 30.66 (28.30) (28.28) 25.04
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------------
CLASS B (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.91 1.94 1.86 1.78 1.73
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 1.10 1.38 1.35 1.20 3.40
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 97 144 80 110 113
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $575,642 $531,008 $481,361 $984,740 $1,279,547
- -----------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been incurred by the fund,
the net investment income per share and the ratios would have been:
Net investment income $0.10 $-- $0.10 $0.13 $0.43
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.91 -- 1.90 1.81 1.91
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.10 -- 1.31 1.17 3.22
- -----------------------------------------------------------------------------------------------------------------------------
+++ 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.
(S)(S) As required, effective November 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
October 31, 2002 was to decrease net investment income per share and increase net realized and unrealized gains and
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 0.04%. Per share, ratios, and supplemental data for periods prior
to November 1, 2001 have not been restated to reflect this change in presentation.
* The fund's total return calculation includes a net increase from gains realized on the disposal of investments in
violation of restrictions. The gains resulted in an increase in net asset value of $0.0007 per share based on shares
outstanding on the day the gains were realized. Excluding the offset of these gains from the fund's ending net asset
value per share, the total return for the year ended October 31, 2004 would have been approximately 27.49%.
^^ The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
----------------------------------------------------------------------------------
CLASS C 2004 2003 2002 2001 2000
Net asset value, beginning of period $7.87 $6.11 $8.66 $13.63 $12.21
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)#
Net investment income(S) $0.10 $0.10 $0.10 $0.13 $0.44
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.06 1.76 (2.54) (3.69) 2.40
- -------------------------------------------- --------- ------ ------ ------ ------
Total from investment operations $2.16 $1.86 $(2.44) $(3.56) $2.84
- -------------------------------------------- --------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.07) $(0.10) $(0.11) $(0.19) $(0.32)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions -- -- -- (1.19) (1.10)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.03) --
- -------------------------------------------- --------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.07) $(0.10) $(0.11) $(1.41) $(1.42)
- -------------------------------------------- --------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $-- $-- $-- $--
- -------------------------------------------- --------- ------ ------ ------ ------
Net asset value, end of period $9.96 $7.87 $6.11 $8.66 $13.63
- -------------------------------------------- --------- ------ ------ ------ ------
Total return (%) 27.63*^^ 30.66 (28.38) (28.26) 24.91
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
----------------------------------------------------------------------------------
CLASS C (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.90 1.94 1.86 1.78 1.73
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 1.10 1.38 1.35 1.20 3.35
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 97 144 80 110 113
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $177,875 $159,113 $144,861 $327,715 $433,998
- -----------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been incurred by the fund,
the net investment income per share and the ratios would have been:
Net investment income $0.10 $-- $0.10 $0.13 $0.42
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.90 -- 1.90 1.81 1.91
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 1.10 -- 1.31 1.17 3.17
- -----------------------------------------------------------------------------------------------------------------------------
+++ 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.
(S)(S) As required, effective November 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
October 31, 2002 was to decrease net investment income per share and increase net realized and unrealized gains and
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 0.04%. Per share, ratios, and supplemental data for periods prior
to November 1, 2001 have not been restated to reflect this change in presentation.
* The fund's total return calculation includes a net increase from gains realized on the disposal of investments in
violation of restrictions. The gains resulted in an increase in net asset value of $0.0007 per share based on shares
outstanding on the day the gains were realized. Excluding the offset of these gains from the fund's ending net asset
value per share, the total return for the year ended October 31, 2004 would have been approximately 27.62%.
^^ The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
----------------------------------------------------------------------------------
CLASS I 2004 2003 2002 2001 2000
Net asset value, beginning of period $7.91 $6.14 $8.69 $13.68 $12.25
- -----------------------------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS(S)(S)
Net investment income(S) $0.18 $0.17 $0.18 $0.24 $0.57
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.08 1.77 (2.55) (3.71) 2.41
- -------------------------------------------- --------- ------ ------ ------ ------
Total from investment operations $2.26 $1.94 $(2.37) $(3.47) $2.98
- -------------------------------------------- --------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.17) $(0.17) $(0.18) $(0.30) $(0.45)
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions -- -- -- (1.19) (1.10)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.03) --
- -------------------------------------------- --------- ------ ------ ------ ------
Total distributions declared to
shareholders $(0.17) $(0.17) $(0.18) $(1.52) $(1.55)
- -------------------------------------------- --------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $-- $-- $-- $--
- -------------------------------------------- --------- ------ ------ ------ ------
Net asset value, end of period $10.00 $7.91 $6.14 $8.69 $13.68
- -------------------------------------------- --------- ------ ------ ------ ------
Total return (%) 28.84*^^ 31.96 (27.56) (27.58) 26.14
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
----------------------------------------------------------------------------------
CLASS I (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses 0.90 0.94 0.86 0.78 0.73
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income(S)(S) 2.07 2.36 2.33 2.19 4.38
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 97 144 80 110 113
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $2,823 $1,744 $1,306 $2,604 $4,155
- -----------------------------------------------------------------------------------------------------------------------------
(S) The investment adviser contractually waived a portion of its fee for certain of the periods indicated. In addition,
effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share
of Independent Chief Compliance Officer service fees paid to Tarantino LLC. If this fee had been incurred by the fund,
the net investment income per share and the ratios would have been:
Net investment income $0.18 $-- $0.17 $0.24 $0.55
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses 0.90 -- 0.90 0.81 0.91
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 2.07 -- 2.29 2.17 4.20
- -----------------------------------------------------------------------------------------------------------------------------
+++ 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.
(S)(S) As required, effective November 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
October 31, 2002 was to decrease net investment income per share and increase net realized and unrealized gains and
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 0.04%. Per share, ratios, and supplemental data for periods prior
to November 1, 2001 have not been restated to reflect this change in presentation.
* The fund's total return calculation includes a net increase from gains realized on the disposal of investments in
violation of restrictions. The gains resulted in an increase in net asset value of $0.0007 per share based on shares
outstanding on the day the gains were realized. Excluding the offset of these gains from the fund's ending net asset
value per share, the total return for the year ended October 31, 2004 would have been approximately 28.83%.
^^ The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS R1 10/31/04 10/31/03*
Net asset value, beginning of period $7.89 $6.40^
- -------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.15 $0.11
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments and
foreign currency 2.05 1.47^
- ----------------------------------------------------------------------- ------- ------
Total from investment operations $2.20 $1.58^
- ----------------------------------------------------------------------- ------- ------
Less distributions declared to shareholders from net investment
income $(0.12) $(0.09)
- ----------------------------------------------------------------------- ------- ------
Redemption fees added to paid-in capital# $0.00+++ $--
- ----------------------------------------------------------------------- ------- ------
Net asset value, end of period $9.97 $7.89
- ----------------------------------------------------------------------- ------- ------
Total return (%) 28.11*^^ 24.78++^
- -------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.40 1.42+
- -------------------------------------------------------------------------------------------------------
Net investment income 1.64 1.47+
- -------------------------------------------------------------------------------------------------------
Portfolio turnover 97 144
- -------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $2,169 $189
- -------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund
for its proportional share of Independent Chief Compliance Officer services paid to Tarantino
LLC. If this fee had been incurred by the fund, the net investment income per share and the
ratios would have been:
Net investment income $0.15 $--
- -------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses 1.40 --
- -------------------------------------------------------------------------------------------------------
Net investment income 1.64 --
- -------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through October 31, 2003.
+ 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 fund's total return calculation includes a net increase from gains realized on the
disposal of investments in violation of restrictions. The gains resulted in an increase in
net asset value of $0.0007 per share based on shares outstanding on the day the gains were
realized. Excluding the offset of these gains from the fund's ending net asset value per
share, the total return for the year ended October 31, 2004 would have been approximately
28.10%.
^ The net asset value and total return previously reported as $6.43 and 24.19%, respectively,
have been revised to reflect the net asset value from the day prior to the class' inception
date. The net asset value and total return previously reported were from inception date, the
date the share class was first available to public shareholders.
^^ The fund's net asset value and total return calculation include a non-recurring accrual
recorded as a result of an administrative proceeding regarding disclosure of brokerage
allocation practices in connection with fund sales, as described in the Legal Proceedings and
Transactions with Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the shares outstanding on the day the
proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEAR ENDED
CLASS R2 10/31/04
Net asset value, beginning of period $7.89
- -----------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS#
Net investment income $0.14
- -----------------------------------------------------------------------------
Net realized and unrealized loss on investments and
foreign currency 2.04
- ------------------------------------------------------------------- --------
Total from investment operations $2.18
- ------------------------------------------------------------------- --------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net investment income $(0.10)
- ------------------------------------------------------------------- --------
Redemption fees added to paid-in capital# $0.00+++
- ------------------------------------------------------------------- --------
Net asset value, end of period $9.97
- ------------------------------------------------------------------- --------
Total return (%) 27.77*^^
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA+:
Expenses## 1.65
- -----------------------------------------------------------------------------
Net investment income 1.42
- -----------------------------------------------------------------------------
Portfolio turnover 97
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $122
- -----------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of Independent Chief
Compliance Officer services paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment income per share and the ratios
would have been:
Net investment income $0.14
- -----------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses 1.65
- -----------------------------------------------------------------------------
Net investment income 1.42
- -----------------------------------------------------------------------------
+++ 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 fund's total return calculation includes a net increase from gains
realized on the disposal of investments in violation of restrictions. The
gains resulted in an increase in net asset value of $0.0007 per share based
on shares outstanding on the day the gains were realized. Excluding the
offset of these gains from the fund's ending net asset value per share, the
total return for the year ended October 31, 2004 would have been
approximately 27.76%.
^^ The fund's net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the shares outstanding on
the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Utilities Fund (the fund) is a non-diversified series of MFS Series Trust
VI (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 U.S.
generally accepted accounting principles 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 as reported by an independent pricing service 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. Equity
securities traded over the counter are valued at the last sales price traded
each day as reported by an independent pricing service, or to the extent there
are no sales reported, such securities are valued on the basis of quotations
obtained from brokers and dealers. Bonds and other fixed income securities
(other than short-term obligations) in the fund's portfolio are valued at an
evaluated bid price as reported by an independent pricing service, or to the
extent a valuation is not reported by a pricing service, such securities are
valued on the basis of quotes from brokers and dealers. 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. Forward foreign currency contracts are
valued using spot rates and forward points as reported by an independent
pricing source. Short-term obligations with a remaining maturity in excess of
60 days will be valued upon dealer-supplied valuations. All other short-term
obligations in the fund's portfolio are valued at amortized cost, which
constitutes market value as determined by the Board of Trustees. 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. When pricing service information or market quotations
are not readily available, securities are priced at fair value as determined
under the direction of the Board of Trustees. For example, significant events
(such as movement in the U.S. securities market, or other regional and local
developments) may occur between the time that foreign markets close (where the
security is principally traded) and the time that the fund calculates its net
asset value (generally, the close of the NYSE) that may impact the value of
securities traded in these foreign markets. In these cases, the fund may
utilize information from an external vendor or other sources to adjust closing
market quotations of foreign equity securities to reflect what it believes to
be the fair value of the securities as of the fund's valuation time. Because
the frequency of significant events is not predictable, fair valuation of
foreign equity securities may occur on a frequent basis.
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 - 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") 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 provide the fund with indemnification against
Borrower default. The fund bears the risk of loss with respect to the
investment of cash collateral. On loans collateralized by cash, the cash
collateral is invested in a money market fund or 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.
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 TERM FEES - For purchases made on or after July 1, 2004, the fund will
charge a 2% redemption fee (which is retained by the fund) on proceeds from
Class A, Class B, Class C, and Class I shares redeemed or exchanged within 5
business days following their acquisition (either by purchase or exchange).
The fund may change the redemption fee period in the future, including changes
in connection with pending Securities and Exchange Commission rules. See the
fund's prospectus for details. These fees are accounted for as an addition to
paid-in capital.
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 U.S. generally accepted accounting principles. 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 year ended October 31, 2004, the fund's custodian fees were
reduced by $10,269 under this arrangement. The fund has entered into a
commission recapture agreement, under which certain brokers will credit the fund
a portion of the commissions generated, to offset certain expenses of the fund.
For the year ended October 31, 2004, the fund's miscellaneous expenses were
reduced by $51,757 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 foreign currency transactions, derivatives, defaulted bonds, and
amortization and accretion on debt securities.
The tax character of distributions declared for the years ended October 31, 2004
and October 31, 2003 was as follows:
10/31/04 10/31/03
Distributions declared from:
- ------------------------------------------------------------------------------
Ordinary income $14,730,338* $18,329,925
- ------------------------------------------------------------------------------
* Included in the fund's distributions from ordinary income $496,972 in excess
of investment company taxable income, which in accordance with applicable U.S.
tax law, is taxable to shareholders as ordinary income distributions.
During the year ended October 31, 2004, accumulated undistributed net
investment income decreased by $1,877,595, accumulated undistributed net
realized loss on investments and foreign currency transactions decreased by
$2,370,578, and paid-in capital decreased by $492,983 due to differences
between book and tax accounting for 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 October 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Capital loss carryforward $(827,616,457)
----------------------------------------------------------
Unrealized appreciation (depreciation) 159,808,145
----------------------------------------------------------
Other temporary differences (1,477,912)
----------------------------------------------------------
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 as follows:
EXPIRATION DATE
October 31, 2009 $(154,194,477)
----------------------------------------------------------
October 31, 2010 (673,421,980)
----------------------------------------------------------
Total $(827,616,457)
----------------------------------------------------------
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 shares
will convert to Class A shares 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 0.60%
of the fund's average daily net assets. Effective September 1, 2004, MFS has
agreed to a voluntary reduction in its management fee for the fund from an
annual rate of 0.60% to 0.55% on net assets in excess of $3.0 billion.
The fund pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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 retired Independent Trustees and an unfunded
retirement benefit deferral plan for current Independent Trustees. Included in
Trustees' compensation is $11,605 as a result of the change in the fund's
unfunded retirement benefit deferral plan for certain current Independent
Trustees and a pension expense of $2,732 for retired Independent Trustees for
the year ended October 31, 2004.
This fund and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an
Independent Chief Compliance Officer (ICCO) for the funds. The ICCO is an
officer of the funds and the sole member of Tarantino LLC. MFS has agreed to
reimburse each of the funds for a proportional share of substantially all of
the payments made by the funds to Tarantino LLC and also to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
The fund's investment adviser, MFS, has been the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in
connection with fund sales, as described in the Legal Proceedings Footnote.
Pursuant to the SEC Order, on July 28, 2004, MFS transferred $1.00 in
disgorgement and $50 million in penalty to the SEC (the "Payments"). A plan
for distribution of these Payments has been submitted to the SEC.
Contemporaneous with the transfer, the fund accrued an estimate of the amount
to be received upon final approval of the plan of distribution. The non-
recurring accrual in the amount of $347,851 did not have a material impact on
the net asset value per share based on the shares outstanding on the day the
proceeds were recorded.
During the year ended October 31, 2004, the fund realized a gain on
disposition of a security purchased in violation of the fund's investment
restrictions. The amount of the gain was $106,590. This amount is separately
disclosed in the Statement of Operations and the Statement of Changes in Net
Assets. The effect of this gain on the fund's total return is disclosed in the
Financial Highlights.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment advisor. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement
of the costs MFS incurs to provide these services, subject to review and
approval by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior
to April 1, 2004, the fund paid MFS an administrative fee up to 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%
----------------------------------------------------------
Effective April 1, 2004, the fund paid MFS an administrative fee up to the
following annual percentage rates of the fund's average daily net assets:
First $2 billion 0.01120%
----------------------------------------------------------
Next $2.5 billion 0.00832%
----------------------------------------------------------
Next $2.5 billion 0.00032%
----------------------------------------------------------
In excess of $7 billion 0.00000%
----------------------------------------------------------
For the year ended October 31, 2004, the fund paid MFS $115,203, equivalent to
0.0093% of average daily net assets, to partially reimburse MFS for the costs
of providing administrative services.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to Class R2 shares. These services include various
administrative, recordkeeping, and communication/educational services with
respect to the retirement plans which invest in Class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of Class R2 shares to MFS
for the provision of these services.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$116,447 for the year ended October 31, 2004, as its portion of the sales
charge on sales of Class A shares of the fund.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class R1 and Class R2 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. The 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 R1 CLASS R2
Distribution Fee 0.10% 0.75% 0.75% 0.25% 0.25%
- ---------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25%
- ---------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will not be implemented until such date as the Trustees
of the trust may determine.
MFD retains the service fee for accounts not attributable to a securities dealer, which for the year ended
October 31, 2004 amounted to:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Service Fee Retained by MFD $45,202 $5,279 $15,587 $0 $0
- ---------------------------------------------------------------------------------------------------------------
Fees incurred under the distribution plan during the year ended
October 31, 2004 were as follows:
CLASS A CLASS B CLASS C CLASS R1 CLASS R2
Effective Annual Percentage Rates 0.25% 1.00% 1.00% 0.50% 0.50%
- ---------------------------------------------------------------------------------------------------------------
Certain Class A and Class C 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 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 shares in the event of a
shareholder redemption within six years of purchase. MFD receives all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended October 31, 2004 were as follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales Charges
Imposed $16,167 $1,245,959 $12,249
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as shareholder
servicing agent. The fee, which is calculated as a percentage of the fund's
average daily net assets is set periodically under the supervision of the fund's
Trustees. Prior to April 1, 2004, the fee was set at 0.11% of the fund's average
daily net assets. For the period April 1, 2004 through June 30, 2004, the fee
was set at 0.10% of the fund's average daily net assets. Effective July 1, 2004,
the fund is charged up to 0.0861% of its average daily net assets. For the year
ended October 31, 2004, the fund paid MFSC a fee of $1,233,916 for shareholder
services which equated to 0.0992% of the fund's average daily net assets. Also
included in shareholder servicing costs are out-of-pocket expenses, paid to
MFSC, which amounted to $461,439 for the year ended October 31, 2004, as well as
other expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations were as follows:
PURCHASES SALES
U.S. government securities $3,236,888 $3,209,729
- ------------------------------------------------------------------------------
Investments (non-U.S. government
securities) $1,178,925,779 $1,291,108,770
- ------------------------------------------------------------------------------
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 $1,402,622,302
----------------------------------------------------------
Gross unrealized appreciation $182,001,352
----------------------------------------------------------
Gross unrealized depreciation (22,204,272)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $159,797,080
----------------------------------------------------------
(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 10/31/04 Year ended 10/31/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 15,462,054 $139,582,665 29,411,981 $204,065,280
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 862,015 7,637,377 1,177,872 7,933,393
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (16,437,879) (146,218,602) (34,151,195) (233,821,571)
- -----------------------------------------------------------------------------------------------------------
Net change (113,810) $1,001,440 (3,561,342) $(21,822,898)
- -----------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 4,717,125 $41,981,304 6,183,701 $44,054,947
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 469,766 4,126,295 990,470 6,542,842
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (14,858,658) (131,761,901) (18,481,270) (126,226,720)
- -----------------------------------------------------------------------------------------------------------
Net change (9,671,767) $(85,654,302) (11,307,099) $(75,628,931)
- -----------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 3,122,564 $27,738,519 2,694,297 $18,899,016
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 124,212 1,093,048 259,106 1,713,421
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (5,601,015) (49,826,824) (6,440,055) (44,194,896)
- -----------------------------------------------------------------------------------------------------------
Net change (2,354,239) $(20,995,257) (3,486,652) $(23,582,459)
- -----------------------------------------------------------------------------------------------------------
CLASS I SHARES
Shares sold 84,848 $788,118 90,555 $644,051
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 4,398 39,162 5,066 34,403
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (27,496) (248,138) (87,741) (620,683)
- -----------------------------------------------------------------------------------------------------------
Net change 61,750 $579,142 7,880 $57,771
- -----------------------------------------------------------------------------------------------------------
Year ended 10/31/04 Period ended 10/31/03*
SHARES AMOUNT SHARES AMOUNT
CLASS R1 SHARES
Shares sold 344,789 $2,982,387 106,011 $788,750
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 1,546 14,038 165 1,240
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (152,682) (1,282,754) (82,246) (622,511)
- -----------------------------------------------------------------------------------------------------------
Net change 193,653 $1,713,671 23,930 $167,479
- -----------------------------------------------------------------------------------------------------------
Year ended 10/31/04 Period ended 10/31/03**
SHARES AMOUNT SHARES AMOUNT
CLASS R2 SHARES
Shares sold 11,551 $104,413 636 $5,023
- -----------------------------------------------------------------------------------------------------------
Shares issued to shareholders
in reinvestment of distributions 45 520
- -----------------------------------------------------------------------------------------------------------
Shares reacquired (11) (207)
- -----------------------------------------------------------------------------------------------------------
Net change 11,585 $104,726 636 $5,023
- -----------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1, December 31, 2002, through October 31, 2003.
** Class R2 shares, which commenced operations on October 31, 2003, had no operating activity.
(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 Federal
Reserve funds rate plus 0.50%. 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 calendar quarter. The commitment fee
allocated to the fund for the year ended October 31, 2004 was $6,307, and is
included in miscellaneous expense. The fund had no significant borrowings
during the year ended October 31, 2004.
(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.
SALES
CONTRACTS TO NET UNREALIZED
SETTLEMENT DELIVER/ IN EXCHANGE CONTRACTS APPRECIATION
DATE RECEIVE FOR AT VALUE (DEPRECIATION)
11/15/04 EUR 85,042,087 $104,775,006 $108,782,668 $(4,007,663)
11/16/04 GBP 13,858,769 25,042,796 25,424,889 (382,094)
------------ ------------ -----------
$129,817,802 $134,207,557 $(4,389,757)
============ ============ ===========
(8) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under the
terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50 million
in penalty to certain MFS funds, pursuant to a plan developed by an independent
distribution consultant. The brokerage allocation practices which were the
subject of this proceeding were discontinued by MFS in November 2003. The
agreement with the SEC is reflected in an order of the SEC. Pursuant to the SEC
order, on July 28, 2004, MFS transferred these settlement amounts to the SEC,
and those MFS funds entitled to these settlement amounts accrued an estimate of
their pro rata portion of these amounts. Once the final distribution plan is
approved by the SEC, these amounts will be distributed by the SEC to the
affected MFS funds. The SEC settlement order states that MFS failed to
adequately disclose to the Boards of Trustees and to shareholders of the MFS
funds the specifics of its preferred arrangements with certain brokerage firms
selling MFS fund shares. The SEC settlement order states that MFS had in place
policies designed to obtain best execution of all MFS fund trades. As part of
the settlement, MFS retained an independent compliance consultant to review the
completeness of its current policies and practices regarding disclosure to MFS
fund trustees and to MFS fund shareholders of strategic alliances between MFS or
its affiliates and broker-dealers and other financial advisers who support the
sale of MFS fund shares.
In addition, in February, 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain MFS
retail funds was false and misleading because, although the prospectuses for
those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer,
John W. Ballen, and former President, Kevin R. Parke, also reached agreement
with the SEC in which they agreed to, among other terms, monetary fines and
temporary suspensions from association with any investment adviser or registered
investment company. Messrs. Ballen and Parke have resigned their positions with,
and will not be returning to, MFS and the MFS funds. Under the terms of the
February Settlements, MFS and the executives neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to increase
certain management fees during this period. MFS has also paid an administrative
fine to NH in the amount of $1 million, which will be used for investor
education purposes (NH retained $250,000 and $750,000 was contributed to the
North American Securities Administrators Association's Investor Protection
Trust). In addition, under the terms of the February Settlements, MFS is in the
process of adopting certain governance changes and reviewing its policies and
procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center, Inc.,
MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS
funds, certain current and/or former Trustees of these MFS funds, and certain
officers of MFS have been named as defendants in multiple lawsuits filed in
federal and state courts. The lawsuits variously have been commenced as class
actions or individual actions on behalf of investors who purchased, held or
redeemed shares of the MFS funds during specified periods, as class actions on
behalf of participants in certain retirement plan accounts, or as derivative
actions on behalf of the MFS funds. The lawsuits relating to market timing and
related matters have been transferred to, and consolidated before, the United
States District Court for the District of Maryland, as part of a multi-district
litigation of market timing and related claims involving several other fund
complexes (In re Mutual Funds Investment Litigation (Alger, Columbia, Janus,
MFS, One Group, Putnam, Allianz Dresdner), No. 1:04-md-15863 (transfer began
March 19, 2004)). The plaintiffs in these consolidated lawsuits generally seek
injunctive relief including removal of the named Trustees, adviser and
distributor, rescission of contracts and 12b-1 Plans, disgorgement of fees and
profits, monetary damages, punitive damages, attorney's fees and costs and other
equitable and declaratory relief. Four lawsuits alleging improper brokerage
allocation practices and excessive compensation are pending in the United States
District Court for the District of Massachusetts (Forsythe v. Sun Life Financial
Inc., et al., No. 04cv10584 (GAO) (March 25, 2004); Eddings v. Sun Life
Financial Inc., et al., No. 04cv10764 (GAO) (April 15, 2004); Marcus Dumond, et
al. v. Massachusetts Financial Servs. Co., et al., No. 04cv11458 (GAO) (May 4,
2004); and Koslow v. Sun Life Financial Inc., et al., No. 04cv11019 (GAO) (May
20, 2004)). The plaintiffs in these lawsuits generally seek compensatory
damages, punitive damages, recovery of fees, rescission of contracts, an
accounting, restitution, declaratory relief, equitable and/or injunctive relief
and attorney's fees and costs. The various lawsuits generally allege that some
or all of the defendants (i) permitted or acquiesced in market timing and/or
late trading in some of the MFS funds, inadequately disclosed MFS' internal
policies concerning market timing and such matters, and received excessive
compensation as fiduciaries to the MFS funds, or (ii) permitted or acquiesced in
the improper use of fund assets by MFS to support the distribution of MFS fund
shares and inadequately disclosed MFS' use of fund assets in this manner. The
actions assert that some or all of the defendants violated the federal
securities laws, including the Securities Act of 1933 and the Securities
Exchange Act of 1934, the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, the Employee Retirement Income Security Act of 1974, as
well as fiduciary duties and other violations of common law. Insofar as any of
the actions is appropriately brought derivatively on behalf of any of the MFS
funds, any recovery will inure to the benefit of the MFS funds. The defendants
are reviewing the allegations of the multiple complaints and will respond
appropriately. Additional lawsuits based on similar allegations may be filed in
the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the MFS
retail funds, and transferred $50 million for distribution to affected MFS funds
to compensate those funds based upon the amount of brokerage commissions
allocated in recognition of MFS fund sales. It is not clear whether these
amounts will be sufficient to compensate shareholders for all of the damage they
allegedly sustained, whether certain shareholders or putative class members may
have additional claims to compensation, or whether the damages that may be
awarded in any of the actions will exceed these amounts. In the event the MFS
funds incur any losses, costs or expenses in connection with such lawsuits, the
Boards of Trustees of the affected MFS funds may pursue claims on behalf of such
funds against any party that may have liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments,
will not result in increased fund redemptions, reduced sales of fund shares,
or other adverse consequences to the MFS funds.
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- -------------------------------------------------------------------------------
To the Trustees of MFS Series Trust VI and Shareholders of MFS Utilities Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Utilities Fund (the Fund) (one of the portfolios comprising MFS Series Trust
VI), including the portfolio of investments, as of October 31, 2004, 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 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 the standards of the Public Company
Accounting Oversight Board (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 October 31, 2004, 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
Utilities Fund at October 31, 2004, 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 U.S. generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 10, 2004
- -------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
- -------------------------------------------------------------------------------------------------------------
The Trustees and officers of the trust, as of December 10, 2004, are listed below, together with their
principal occupations during the past five years. (Their titles may have varied during that period.) The
address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS & OTHER
POSITION(s) HELD TRUSTEE/OFFICER DIRECTORSHIPS(2) DURING
NAME, DATE OF BIRTH WITH FUND SINCE(1) THE PAST FIVE YEARS
- ------------------- ---------------- --------------- ------------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee and February 2004 Massachusetts Financial
(born 10/20/63) President Services Company, Chief
Executive Officer, President,
Chief Investment Officer and
Director
Robert C. Pozen(3) Trustee February 2004 Massachusetts Financial
(born 08/08/46) Services Company, Chairman
(since February 2004);
Harvard Law School
(education), John Olin
Visiting Professor (since
July 2002); Secretary of
Economic Affairs, The
Commonwealth of Massachusetts
(January 2002 to December
2002); Fidelity Investments,
Vice Chairman (June 2000 to
December 2001); Fidelity
Management & Research Company
(investment adviser),
President (March 1997 to July
2001); The Bank of New York
(financial services),
Director; Bell Canada Enterprises
(telecommunications),
Director; Medtronic, Inc.
(medical technology),
Director; Telesat (satellite
communications), Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair of February 1992 Private investor; Eastern
(born 05/01/36) Trustees Enterprises (diversified
services company), Chairman,
Trustee and Chief Executive
Officer (until November 2000)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 03/11/37) Chief of Cardiac Surgery;
Harvard Medical School,
Professor of Surgery
David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining
(born 05/30/42) products and service
provider), Vice Chairman/
Director (since April 2001);
Encinitos Ventures (private
investment company),
Principal (1997 to April
2001); Lincoln Electric
Holdings, Inc. (welding
equipment manufacturer),
Director; Southwest Gas
Corporation (natural gas
distribution company),
Director
William R. Gutow Trustee December 1993 Private investor and real
(born 09/27/41) estate consultant; Capitol
Entertainment Management
Company (video franchise),
Vice Chairman
Amy B. Lane Trustee January 2004 Retired; Merrill Lynch & Co.,
(born 02/08/53) Inc., Managing Director,
Investment Banking Group
(1997 to February 2001);
Borders Group, Inc. (book and
music retailer), Director;
Federal Realty Investment
Trust (real estate investment
trust), Trustee
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes
(born 06/23/35) (attorneys), Partner
William J. Poorvu Trustee August 1982 Private investor; Harvard
(born 04/10/35) University Graduate School of
Business Administration,
Class of 1961 Adjunct
Professor in Entrepreneurship
Emeritus
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 09/23/38) (acquisition planning
specialists), President;
Wellfleet Investments
(investor in health care
companies), Managing General
Partner (since 1993);
Cambridge Nutraceuticals
(professional nutritional
products), Chief Executive
Officer (until May 2001)
Elaine R. Smith Trustee February 1992 Independent health care
(born 04/25/46) industry consultant
OFFICERS
Robert J. Manning(3) President and February 2004 Massachusetts Financial
(born 10/20/63) Trustee Services Company, Chief
Executive Officer, President,
Chief Investment Officer and
Director
James R. Bordewick, Jr.(3) Assistant Secretary September 1990 Massachusetts Financial
(born 03/06/59) and Assistant Clerk Services Company, Senior Vice
President and Associate
General Counsel
Jeffrey N. Carp(3) Secretary and Clerk September 2004 Massachusetts Financial
(born 12/01/56) Services Company, Senior Vice
President, General Counsel
and Secretary (since April
2004); Hale and Door LLP (law
firm) (prior to April 2004)
Stephanie A. DeSisto(3) Assistant Treasurer May 2003 Massachusetts Financial
(born 10/01/53) Services Company, Vice
President (since April 2003);
Brown Brothers Harriman &
Co., Senior Vice President
(November 2002 to April
2003); ING Groep N.V./Aeltus
Investment Management, Senior
Vice President (prior to
November 2002)
James F. DesMarais(3) Assistant Secretary September 2004 Massachusetts Financial
(born 03/09/61) and Assistant Clerk Services Company, Assistant
General Counsel
Robert R. Flaherty(3) Assistant Treasurer August 2000 Massachusetts Financial
(born 09/18/63) Services Company, Vice
President (since August
2000); UAM Fund Services,
Senior Vice President (prior
to August 2000)
Richard M. Hisey(3) Treasurer August 2002 Massachusetts Financial
(born 08/29/58) Services Company, Senior Vice
President (since July 2002);
The Bank of New York, Senior
Vice President (September
2000 to July 2002); Lexington
Global Asset Managers, Inc.,
Executive Vice President and
Chief Financial Officer
(prior to September 2000);
Lexington Funds, Chief
Financial Officer (prior to
September 2000)
Brian T. Hourihan(3) Assistant Secretary September 2004 Massachusetts Financial
(born 11/11/64) and Assistant Clerk Services Company, Vice
President, Senior Counsel and
Assistant Secretary (since
June 2004); Affiliated
Managers Group, Inc., Chief
Legal Officer/Centralized
Compliance Program (January
to April 2004); Fidelity
Research & Management
Company, Assistant General
Counsel (prior to January
2004)
Ellen Moynihan(3) Assistant Treasurer April 1997 Massachusetts Financial
(born 11/13/57) Services Company, Vice
President
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance Officer compliance services),
Principal (since June 2004);
CRA Business Strategies Group
(consulting services),
Executive Vice President
(April 2003 to June 2004);
David L. Babson & Co.
(investment adviser),
Managing Director, Chief
Administrative Officer and
Director (February 1997 to
March 2003)
James O. Yost(3) Assistant Treasurer September 1990 Massachusetts Financial
(born 06/12/60) Services Company, Senior Vice
President
- ----------------
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(3) "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 fund. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
The trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. The trust will hold a shareholders' meeting in 2005 and at least once every five
years hereafter to elect Trustees. Each Trustee and officer holds office until his or her successor is chosen
and qualified or until his or her earlier death, resignation, retirement or removal. Messrs. Ives, Poorvu and
Sherratt and Ms. Lane are members of the trust's Audit Committee.
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 99 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 02116-3741 225 Franklin Street, Boston, MA 02110
INDEPENDENT REGISTERED PUBLIC
DISTRIBUTOR ACCOUNTING FIRM
MFS Fund Distributors, Inc. Ernst & Young LLP
500 Boylston Street, Boston, MA 02116-3741 200 Clarendon Street, Boston, MA 02116
PORTFOLIO MANAGER
Maura A. Shaughnessy
- -------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
A general description of the MFS funds' proxy voting policies and procedures 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 Web site at
http://www.sec.gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
- ------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the Securities
and Exchange Commission (the Commission) for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed and copied at
the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
- ------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2005, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2004.
For the year ended October 31, 2004, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 100%.
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 2004 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.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- --------------------------------------------------------------------------------
Share prices, account 1-800-MFS-TALK
balances (1-800-637-8255)
exchanges or stock and touch-tone required 24 hours a day, 365 days a
bond outlooks year
- --------------------------------------------------------------------------------
[logo] M F S(R)
INVESTMENT MANAGEMENT
(C) 2004 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MMU-ANN-12/04 119M
MFS(R) GLOBAL EQUITY FUND 10/31/04
ANNUAL REPORT
- -------------------------------------------------------------------------------
[logo] M F S(R)
INVESTMENT MANAGEMENT
THIS REPORT HAS BEEN PREPARED FOR THE GENERAL INFORMATION OF SHAREHOLDERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
ANNUAL REPORT
LETTER FROM THE CEO 1
------------------------------------------------------
PORTFOLIO COMPOSITION 5
------------------------------------------------------
MANAGEMENT REVIEW 6
------------------------------------------------------
PERFORMANCE SUMMARY 8
------------------------------------------------------
EXPENSE TABLE 12
------------------------------------------------------
PORTFOLIO OF INVESTMENTS 14
------------------------------------------------------
FINANCIAL STATEMENTS 20
------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 37
------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 49
------------------------------------------------------
TRUSTEES AND OFFICERS 50
------------------------------------------------------
PROXY VOTING POLICIES AND
INFORMATION 54
------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 54
------------------------------------------------------
FEDERAL TAX INFORMATION 55
------------------------------------------------------
CONTACT INFORMATION BACK COVER
------------------------------------------------------
- -------------------------------------------------------------------------------
LETTER FROM THE CEO
- -------------------------------------------------------------------------------
Dear Shareholders,
[Photo of Robert J. Manning]
For most investors, the main factor in determining long-term success is asset
allocation - how they spread their money among stocks, bonds, and cash. In fact,
the total returns of investors may be more influenced by their asset allocation
strategy than by their security selection within each asset class. The principle
behind asset allocation is simple: by diversifying across a variety of types of
securities, investors reduce the overall risk of their portfolio because gains
in one area are likely to offset losses in another.
One of the dangers of not having an asset allocation plan is the temptation to
simply chase performance, by moving money into whichever asset class appears to
be outperforming at the moment. The problem with this approach is that by the
time a particular area of the market comes into favor, investors may have
already missed some of the best performance. We would suggest that one way to
benefit from swings in the market is to acquire a diversified portfolio so that
investors hold a range of asset classes before the market swings in their
direction.
UNDERSTAND YOUR EMOTIONS
It usually takes a bear market for people to appreciate the benefits of
diversification. At MFS, we believe proper asset allocation is important in all
market environments. But we understand that there are emotional components of
investment decisions that sometimes keep investors from achieving their long
term goals. The three common behaviors that negatively impact investment
decisions are overconfidence, looking backwards, and loss aversion.
o Overconfidence. After experiencing gains in the market, particularly
during a bull market, investors have a natural tendency to overestimate
their own abilities. During the global bull market of the late 1990s, for
example, a large number of investors traded their own stocks and made
significant profits. However, most of these same investors later handed
back those profits - and then some - because they focused more on
short-term blips in the market and less on the fundamental factors that
affect a company's long-term prospects.
o Looking backwards. Although security prices are determined by
expectations about the future, many investors make choices based on the
recent past. Investors who have achieved momentary success in the market
tend to take on too much risk, believing that better- than-average
returns can be easily duplicated. On the other hand, those who have had
negative experiences tend to become overly cautious and take on too
little risk. Recent historical experience tends to dictate an investor's
frame of reference and may lead to irrational decisions.
o Loss aversion. Simply put, investors would rather avoid the immediate
pain of losses than enjoy the future pleasure of gains. As a result, some
investors tend to overreact to short-term downturns in the market by
seeking to mitigate their losses, rather than remaining invested to
benefit from the long-term growth potential of the stock and bond
markets.
THINK LIKE A PROFESSIONAL INVESTOR
Asset allocation helps reduce the emotional factors that tend to affect the
long-term returns of investors. Professional investors - those who manage assets
for money management firms, pension funds, and endowments - have tended to
outperform the average retirement investor because they focus on asset
allocation. For example, the investment performance of the average 401(k)
participant has lagged these professional investors by more than two percentage
points a year, on average, over the past 10 years.(1)
We think asset allocation is one of the most important decisions for investors.
A study of the performance of 91 large U.S. corporate pension plans with assets
of more than $100 million over a 10-year period beginning in 1974 concluded that
asset allocation policies accounted for 93.6% of their returns, while individual
security selection and the timing of their investments accounted for only 6.4%
for their overall performance.(2)
Professional investors target a realistic level of return based on the amount of
risk they are willing to take, then set allocations to meet their goals. On
average, U.S. professional investors allocate 35% to 40% of their assets to
domestic equity stocks; 20% to 30% to fixed income issues; 10% to international
stocks; and between 10% and 20% to other investment classes such as real
estate.(3) And within those categories, they hold a broad range of styles and
asset classes.
In contrast, 401(k) participants who held company stock in their retirement
plans at the end of 2002 had roughly 42% of their retirement assets in company
stock while the rest was allocated to either growth or value stock funds.(4)
These participants virtually ignored the broad range of equity, fixed-income,
and international offerings provided by their retirement plans.
ALLOCATE, DIVERSIFY, REBALANCE
We recommend working with a professional adviser to find an optimal mix of
investments based on your individual goals. In our view, a disciplined asset
allocation strategy is composed of three simple steps: allocate, diversify and
rebalance.
o Allocate. Investors should work with their financial adviser to specify
their long-term goals and tolerance for risk. Then investors should
allocate their assets across the major asset classes - stocks, bonds, and
cash - to help them pursue an investment return that is consistent with
their risk tolerance level.
o Diversify. By diversifying their assets, investors trade some performance
in the top performing categories for a more predictable and stable
portfolio. At the same time, investors should include different
investment styles and market capitalizations of stocks and a range of
fixed-income investments, as well as U.S. and non-U.S. securities.
Because security subclasses tend to move in and out of favor during
various market and economic environments, a broad portfolio increases the
benefits of diversification.
o Rebalance. We suggest that investors consult with their professional
advisers periodically to rebalance their portfolios to maintain the
percentages that they have dedicated to each asset class. Allocations can
shift as markets rise and fall, making for a riskier or more conservative
portfolio than an investor originally intended. For example, a portfolio
of 50% stocks and 50% bonds at the start of 2000 would have shifted to
32% stocks and 68% bonds at the end of 2002 because of the weak stock
market.(5)
In short, these three simple concepts - allocate, diversify and rebalance - help
take emotion out of the investment process and help prevent investors from
trying to outguess the market. An asset allocation strategy cannot turn a down
market cycle into a good one, but it is an invaluable tool to manage risk and
keep investors on track toward reaching their long-term investment goals.
A DISCIPLINED INVESTMENT PROCESS IS PARAMOUNT
Disciplined diversification has helped investors pursue long-term, above-
average results through the years. Since 1924, when we invented the mutual fund,
MFS(R) has strived to give investors the products and tools they need to
maintain well-diversified portfolios. MFS provides a variety of products in each
asset class as well as a family of asset allocation funds. These asset
allocation portfolios cover a range from conservative to moderate, growth, and
aggressive growth allocations, each with a strategy based on a distinct level of
risk. We recommend developing a comprehensive financial plan with an investment
advisor who is familiar with your risk tolerance, your individual goals, and
your financial situation.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
November 15, 2004
Asset allocation and diversification can not guarantee a profit or protect
against a loss.
The opinions expressed in this letter are those of MFS, and no forecasts can be
guaranteed.
(1) Source: Watson Wyatt
(2) "Determinants of Portfolio Performance," in Financial Analysts Journal,
January/February 1995, by Gary P. Brinson, L. Randolph Hood, and Gilbert L.
Beebower
(3) Source: Greenwich Associates
(4) Source: Hewitt Associates
(5) Source: Lipper Inc.
- -------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- -------------------------------------------------------------------------------
PORTFOLIO STRUCTURE
Stocks 99.8%
Cash & Other Net Assets 0.2%
TOP TEN HOLDINGS
Reckitt Benckiser PLC 3.6%
- ------------------------------------------------------------------------------
L'Air Liquide S.A. 2.5%
- ------------------------------------------------------------------------------
American Express Co. 2.2%
- ------------------------------------------------------------------------------
Johnson & Johnson 2.1%
- ------------------------------------------------------------------------------
Roche Holding AG 2.0%
- ------------------------------------------------------------------------------
Sandvik AB 1.9%
- ------------------------------------------------------------------------------
Sanofi-Aventis 1.9%
- ------------------------------------------------------------------------------
Diageo PLC 1.8%
- ------------------------------------------------------------------------------
Accenture Ltd. 1.8%
- ------------------------------------------------------------------------------
TJX Cos., Inc. 1.7%
- ------------------------------------------------------------------------------
SECTOR WEIGHTINGS
Financial Services 17.6%
- ------------------------------------------------------------------------------
Health Care 17.5%
- ------------------------------------------------------------------------------
Technology 8.9%
- ------------------------------------------------------------------------------
Utilities & Communications 7.8%
- ------------------------------------------------------------------------------
Leisure 7.8%
- ------------------------------------------------------------------------------
Consumer Staples 7.6%
- ------------------------------------------------------------------------------
Retailing 7.3%
- ------------------------------------------------------------------------------
Industrial Goods & Services 5.8%
- ------------------------------------------------------------------------------
Basic Materials 5.7%
- ------------------------------------------------------------------------------
Energy 5.1%
- ------------------------------------------------------------------------------
Special Products & Services 3.5%
- ------------------------------------------------------------------------------
Autos & Housing 3.4%
- ------------------------------------------------------------------------------
Transportation 1.8%
- ------------------------------------------------------------------------------
COUNTRY WEIGHTINGS
United States 32.4%
- ------------------------------------------------------------------------------
Great Britain 15.8%
- ------------------------------------------------------------------------------
Japan 9.4%
- ------------------------------------------------------------------------------
France 9.2%
- ------------------------------------------------------------------------------
Switzerland 7.4%
- ------------------------------------------------------------------------------
Sweden 5.3%
- ------------------------------------------------------------------------------
Spain 3.9%
- ------------------------------------------------------------------------------
Canada 2.5%
- ------------------------------------------------------------------------------
Singapore 2.3%
- ------------------------------------------------------------------------------
All Others 11.6%
- ------------------------------------------------------------------------------
Percentages are based on net assets as of 10/31/04.
The portfolio is actively managed, and current holdings may be different.
- ------------------------------------------------------------------------------
MANAGEMENT REVIEW
- ------------------------------------------------------------------------------
SUMMARY OF RESULTS
For the year ended October 31, 2004, the Class A shares of MFS Global Equity
Fund provided an average annual return not including sales charge of 17.12%,
outpacing the 13.76% return for the MSCI World Index.
MARKET ENVIRONMENT
In 2004, many measures of global economic growth, including employment,
corporate spending, and earnings growth continued to improve, though we feel
that near-record-high oil prices, concerns about rising interest rates, and an
unsettled geopolitical environment adversely affected global markets. The U.S.
Federal Reserve Board raised interest rates three times during the period, and
this appears to have set expectations for an ongoing series of modest rate
hikes.
CONTRIBUTORS TO PERFORMANCE
The principal source of the fund's relative outperformance vs. its benchmark,
the MSCI World Index, was strong stock selection in the technology, health care,
retailing, and financial services sectors. Several of the fund's top
contributors on a relative basis came from the retail sector, including Hennes &
Mauritz, Esprit, and NEXT.
Individual stocks in other sectors that contributed to relative results included
strong-performing household products company Reckitt Benckiser and leisure
company William Hill. Our overweighted positions in financial services companies
OTP Bank and Erste Bank also boosted relative results.
DETRACTORS FROM PERFORMANCE
Stock selection in the utilities and communications sector held back relative
performance for the period. Our positions in wireless telecom companies KDDI and
Vodafone KK (formerly Japan Telecom) hurt relative results. Stock selection and
an overweighted position in the leisure sector also detracted from relative
returns, with Yamaha* and News Corp. among the fund's top 10 detractors for the
period.
Our underweighted position in the energy sector also hurt relative performance,
particularly not holding strong-performing Exxon Mobil. Stocks in other sectors
that held back relative results included financial services company Amvescap and
pharmaceutical firm AstraZeneca.
The fund's cash position also detracted from relative performance. As with
nearly all mutual funds, this fund holds some cash to buy new holdings and to
provide liquidity. In a period when equity markets - as measured by the MSCI
World Index - rose sharply, holding any cash hurt relative performance. The
index does not have a cash position.
The views expressed are those of the portfolio manager only through the end of
the period as stated on the cover and do not necessarily reflect the views of
MFS or any other person in the MFS organization. These views are subject to
change at any time based on market and other conditions, and MFS disclaims any
responsibility to update such views. These views may not be relied upon as
investment advice or as an indication of trading intent on behalf of any MFS
fund. References to specific securities are not recommendations of such
securities and may not be representative of any MFS fund's current or future
investments.
*Stock was not held in the portfolio at the end of the period.
- -------------------------------------------------------------------------------
PERFORMANCE SUMMARY THROUGH 10/31/04
- -------------------------------------------------------------------------------
The following chart illustrates the historical performance of the fund's
original share class in comparison to its benchmark. Performance results include
any applicable contingent deferred 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. (See Notes to Performance Summary.)
VISIT MFS.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. ANY
HIGH SHORT-TERM RETURNS MAY BE AND LIKELY WERE ATTRIBUTABLE TO RECENT FAVORABLE
MARKET CONDITIONS, WHICH MAY NOT BE REPEATED. 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.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
MFS Global Equity
Fund -- Class B MSCI World Index
10/94 $10,000 $10,000
10/96 12,625 12,855
10/98 16,138 17,437
10/00 20,322 22,158
10/02 15,523 14,163
10/04 21,164 20,032
TOTAL RETURNS
- --------------------
Average annual
without sales charge
- --------------------
Class
Share class inception date 1-yr 3-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 9/7/93 17.12% 9.24% 3.45% 8.64%
- ------------------------------------------------------------------------------
B 12/29/86 16.29% 8.42% 2.68% 7.79%
- ------------------------------------------------------------------------------
C 1/3/94 16.26% 8.41% 2.67% 7.80%
- ------------------------------------------------------------------------------
I 1/2/97 17.44% 9.51% 3.70% 8.85%
- ------------------------------------------------------------------------------
J 7/9/99 16.33% 8.47% 2.70% 7.83%
- ------------------------------------------------------------------------------
R1 12/31/02 16.86% 9.05% 3.34% 8.58%
- ------------------------------------------------------------------------------
R2 10/31/03 16.66% 8.53% 2.74% 7.82%
- ------------------------------------------------------------------------------
- --------------------
Average annual
- --------------------
Comparative benchmarks
- ------------------------------------------------------------------------------
Average global multi-cap
core fund+ 11.76% 8.12% 2.35% 7.11%
- ------------------------------------------------------------------------------
MSCI World Index# 13.76% 6.54% -1.73% 7.19%
- ------------------------------------------------------------------------------
- --------------------
Average annual
with sales charge
- --------------------
Share class
- ------------------------------------------------------------------------------
A 10.38% 7.11% 2.23% 8.00%
- ------------------------------------------------------------------------------
B 12.29% 7.56% 2.32% 7.79%
- ------------------------------------------------------------------------------
C 15.26% 8.41% 2.67% 7.80%
- ------------------------------------------------------------------------------
J 12.84% 7.38% 2.08% 7.50%
- ------------------------------------------------------------------------------
I, R1, and R2 Class shares do not have a sales charge. Please see Notes to
Performance Summary for more details.
- --------------------
Cumulative
without sales charge
- --------------------
- ------------------------------------------------------------------------------
A 17.12% 30.38% 18.49% 129.06%
- ------------------------------------------------------------------------------
B 16.29% 27.44% 14.13% 111.64%
- ------------------------------------------------------------------------------
C 16.26% 27.41% 14.10% 111.92%
- ------------------------------------------------------------------------------
I 17.44% 31.32% 19.90% 133.46%
- ------------------------------------------------------------------------------
J 16.33% 27.63% 14.25% 112.53%
- ------------------------------------------------------------------------------
R1 16.86% 29.69% 17.87% 127.86%
- ------------------------------------------------------------------------------
R2 16.66% 27.85% 14.50% 112.31%
- ------------------------------------------------------------------------------
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
MSCI World Index - measures the performance of stock markets in the developed
world.
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
5.75% sales charge. Class B results including sales charge reflect the deduction
of the applicable contingent deferred sales charge (CDSC) which declines over
six years from 4% to 0%. Class C results including sales charge (assuming
redemption within one year from the end of the calendar month of purchase)
reflect the deduction of the 1% CDSC. Class I shares have no sales charges and
are available only to certain investors. Class J results including sales charge
reflect the deduction of the maximum 3% sales charge and are available only to
residents of Japan. Class R1 and R2 shares have no sales charges and are
available only to certain retirement plans.
Performance for J and R2 includes the performance of the fund's Class B shares
prior to their offering. Performance for I and R1 shares includes the
performance of the fund's Class A shares prior to their offering. For reporting
periods ending prior to March 31, 2004, when quoting performance for the fund's
Class I and R1 shares, the performance of these share classes included the
performance of the fund's Class B shares, rather than Class A shares.
The blending methodology changed for reporting periods ending on or after March
31, 2004, because Class A shares now has a 10 year performance history, and
share class performance is being blended to Class A shares based upon the
similarity of share class operating expenses. This change in blending
methodology results in better performance for Class I and R1 shares than it had
under the prior blending methodology. For a transitional period lasting until
December 31, 2007, performance for Classes I and R1 shares under the prior
methodology is available at mfs.com. These results represent the percent change
in net asset value.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Without such subsidies and waivers the fund's
performance results would be less favorable. Please see the prospectus and
financial statements for complete details.
The performance shown reflects a non-recurring accrual made to the fund on July
28, 2004, relating to MFS' revenue sharing settlement with the Securities and
Exchange Commission, without which the performance would have been lower.
KEY RISK CONSIDERATIONS
The portfolio may invest in foreign and/or emerging markets securities, which
are more susceptible to risks relating to interest rates, currency exchange
rates, economic, and political conditions.
The portfolio's value will vary daily since its investments will fluctuate in
response to issuer, market, regulatory, economic, or political developments.
Because stocks tend to be more volatile than some other investments, such as
bonds, the more assets a fund dedicates to stocks, generally the more volatile
the portfolio's value will be. Historically, stocks have outperformed bonds over
time. Please see the prospectus for further information regarding these and
other risk considerations.
- -------------------------------------------------------------------------------
EXPENSE TABLE
- -------------------------------------------------------------------------------
FUND EXPENSES BORNE BY SHAREHOLDERS DURING THE PERIOD FROM MAY 1, 2004, THROUGH
OCTOBER 31, 2004.
As a shareholder of the fund, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on certain purchase or redemption
payments and redemption fees on certain exchanges and redemptions, and (2)
ongoing costs, including management fees; distribution and service (12b-1) fees;
and other fund expenses. This example is intended to help you understand your
ongoing costs (in dollars) of investing in the fund and to compare these costs
with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period, May 1, 2004 through October 31, 2004.
ACTUAL EXPENSES
The first line for each share class in the table on the following page provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line under the heading entitled
"Expenses Paid During Period" to estimate the expenses you paid on your account
during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table on the following page provides
information about hypothetical account values and hypothetical expenses based on
the fund's actual expense ratio and an assumed rate of return of 5% per year
before expenses, which is not the fund's actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the fund and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each share
class in the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs were included, your costs would have been higher.
- ------------------------------------------------------------------------------
Share Class
- ------------------------------------------------------------------------------
Expenses
Annualized Beginning Ending Paid During
Expense Account Value Account Value* Period**
Ratio 5/01/04 10/31/04 5/01/04-10/31/04
- ------------------------------------------------------------------------------
Actual 1.49% $1,000 $1,047 $7.69
A ---------------------------------------------------------------------------
Hypothetical 1.49% $1,000 $1,017 $7.58
- ------------------------------------------------------------------------------
Actual 2.24% $1,000 $1,043 $11.53
B ---------------------------------------------------------------------------
Hypothetical 2.24% $1,000 $1,014 $11.37
- ------------------------------------------------------------------------------
Actual 2.24% $1,000 $1,042 $11.53
C ---------------------------------------------------------------------------
Hypothetical 2.24% $1,000 $1,014 $11.37
- ------------------------------------------------------------------------------
Actual 1.24% $1,000 $1,048 $6.40
I ---------------------------------------------------------------------------
Hypothetical 1.24% $1,000 $1,019 $6.31
- ------------------------------------------------------------------------------
Actual 2.19% $1,000 $1,043 $11.28
J ---------------------------------------------------------------------------
Hypothetical 2.19% $1,000 $1,014 $11.12
- ------------------------------------------------------------------------------
Actual 1.75% $1,000 $1,045 $9.02
R1 ---------------------------------------------------------------------------
Hypothetical 1.75% $1,000 $1,016 $8.89
- ------------------------------------------------------------------------------
Actual 2.00% $1,000 $1,045 $10.31
R2
---------------------------------------------------------------------------
Hypothetical 2.00% $1,000 $1,015 $10.16
- ------------------------------------------------------------------------------
* Ending account value reflects each class' ending account value assuming the
actual class return per year before expenses (Actual) and a hypothetical 5%
class return per year before expenses (Hypothetical).
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year. Expenses paid do not include any
applicable sales charges (loads) or redemption fees. If these transaction
costs had been included, your costs would have been higher.
- -------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS - 10/31/04
- -------------------------------------------------------------------------------------------------
The Portfolio of Investments is a complete list of all securities owned by your fund. It is
categorized by broad-based asset classes.
Stocks - 99.8%
- -------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -------------------------------------------------------------------------------------------------
Alcoholic Beverages - 1.8%
- -------------------------------------------------------------------------------------------------
Diageo PLC 875,667 $11,718,649
- -------------------------------------------------------------------------------------------------
Apparel Manufacturers - 0.5%
- -------------------------------------------------------------------------------------------------
Toray Industries, Inc. 678,000 $3,170,170
- -------------------------------------------------------------------------------------------------
Automotive - 2.9%
- -------------------------------------------------------------------------------------------------
Bayerische Motoren Werke AG 155,110 $6,577,771
- -------------------------------------------------------------------------------------------------
Bridgestone Corp. 324,000 5,876,163
- -------------------------------------------------------------------------------------------------
Toyota Motor Corp. 163,400 6,374,552
- -------------------------------------------------------------------------------------------------
$18,828,486
- -------------------------------------------------------------------------------------------------
Banks & Credit Companies - 13.1%
- -------------------------------------------------------------------------------------------------
American Express Co. 265,300 $14,079,471
- -------------------------------------------------------------------------------------------------
Banco Bilbao Vizcaya Argentaria S.A.^ 479,500 7,544,825
- -------------------------------------------------------------------------------------------------
Citigroup, Inc. 220,600 9,788,022
- -------------------------------------------------------------------------------------------------
Credit Suisse Group 180,900 6,201,118
- -------------------------------------------------------------------------------------------------
DBS Group Holdings Ltd. 629,000 5,900,244
- -------------------------------------------------------------------------------------------------
Erste Bank der oesterreichischen Sparkassen AG 140,600 6,275,405
- -------------------------------------------------------------------------------------------------
Irish Life & Permanent PLC 198,530 3,352,398
- -------------------------------------------------------------------------------------------------
MBNA Corp. 261,400 6,699,682
- -------------------------------------------------------------------------------------------------
OTP Bank Ltd., GDR 101,200 5,098,456
- -------------------------------------------------------------------------------------------------
Royal Bank of Scotland Group PLC 149,290 4,401,642
- -------------------------------------------------------------------------------------------------
UBS AG 141,245 10,203,787
- -------------------------------------------------------------------------------------------------
United Overseas Bank Ltd. 504,000 4,091,278
- -------------------------------------------------------------------------------------------------
$83,636,328
- -------------------------------------------------------------------------------------------------
Biotechnology - 1.2%
- -------------------------------------------------------------------------------------------------
Genzyme Corp.^* 149,400 $7,839,018
- -------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 5.0%
- -------------------------------------------------------------------------------------------------
British Sky Broadcasting Group PLC 333,850 $3,118,540
- -------------------------------------------------------------------------------------------------
News Corp. Ltd. 867,134 6,986,064
- -------------------------------------------------------------------------------------------------
Time Warner, Inc.* 383,400 6,379,776
- -------------------------------------------------------------------------------------------------
Tokyo Broadcasting System, Inc. 199,300 3,196,632
- -------------------------------------------------------------------------------------------------
Viacom, Inc., "B"^ 235,170 8,581,353
- -------------------------------------------------------------------------------------------------
Walt Disney Co. 158,700 4,002,414
- -------------------------------------------------------------------------------------------------
$32,264,779
- -------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.4%
- -------------------------------------------------------------------------------------------------
AMVESCAP PLC 1,093,900 $5,928,006
- -------------------------------------------------------------------------------------------------
Janus Capital Group, Inc.^ 185,100 2,822,775
- -------------------------------------------------------------------------------------------------
$8,750,781
- -------------------------------------------------------------------------------------------------
Business Services - 3.0%
- -------------------------------------------------------------------------------------------------
Accenture Ltd., "A"^* 467,950 $11,329,070
- -------------------------------------------------------------------------------------------------
DST Systems, Inc.^* 178,500 8,005,725
- -------------------------------------------------------------------------------------------------
$19,334,795
- -------------------------------------------------------------------------------------------------
Chemicals - 0.5%
- -------------------------------------------------------------------------------------------------
Syngenta AG 32,991 $3,153,836
- -------------------------------------------------------------------------------------------------
Computer Software - 2.9%
- -------------------------------------------------------------------------------------------------
Business Objects S.A.^* 128,100 $3,277,439
- -------------------------------------------------------------------------------------------------
Microsoft Corp. 168,100 4,705,119
- -------------------------------------------------------------------------------------------------
Oracle Corp.* 562,400 7,119,984
- -------------------------------------------------------------------------------------------------
Symantec Corp.^* 56,800 3,234,192
- -------------------------------------------------------------------------------------------------
$18,336,734
- -------------------------------------------------------------------------------------------------
Computer Software - Systems - 1.6%
- -------------------------------------------------------------------------------------------------
Dell, Inc.* 284,000 $9,957,040
- -------------------------------------------------------------------------------------------------
Construction - 0.5%
- -------------------------------------------------------------------------------------------------
Sekisui Chemical Co. Ltd. 456,000 $2,903,169
- -------------------------------------------------------------------------------------------------
Consumer Goods & Services - 4.1%
- -------------------------------------------------------------------------------------------------
Colgate-Palmolive Co.^ 73,400 $3,275,108
- -------------------------------------------------------------------------------------------------
Reckitt Benckiser PLC 829,640 22,769,279
- -------------------------------------------------------------------------------------------------
$26,044,387
- -------------------------------------------------------------------------------------------------
Electrical Equipment - 2.6%
- -------------------------------------------------------------------------------------------------
Nitto Denko Corp. 147,600 $7,012,969
- -------------------------------------------------------------------------------------------------
Samsung SDI Co. Ltd. 53,610 4,836,632
- -------------------------------------------------------------------------------------------------
Schneider Electric S.A. 74,349 4,936,259
- -------------------------------------------------------------------------------------------------
$16,785,860
- -------------------------------------------------------------------------------------------------
Electronics - 3.0%
- -------------------------------------------------------------------------------------------------
CANON, Inc. 212,000 $10,473,339
- -------------------------------------------------------------------------------------------------
Samsung Electronics Co. Ltd. 22,300 8,754,667
- -------------------------------------------------------------------------------------------------
$19,228,006
- -------------------------------------------------------------------------------------------------
Energy - Independent - 1.6%
- -------------------------------------------------------------------------------------------------
EnCana Corp. 140,400 $6,966,082
- -------------------------------------------------------------------------------------------------
EOG Resources, Inc.^ 49,300 3,281,408
- -------------------------------------------------------------------------------------------------
$10,247,490
- -------------------------------------------------------------------------------------------------
Energy - Integrated - 2.5%
- -------------------------------------------------------------------------------------------------
BP PLC 643,700 $6,237,564
- -------------------------------------------------------------------------------------------------
Total S.A. 45,580 9,504,239
- -------------------------------------------------------------------------------------------------
$15,741,803
- -------------------------------------------------------------------------------------------------
Food & Non-Alcoholic Beverages - 1.7%
- -------------------------------------------------------------------------------------------------
Nestle S.A. 27,686 $6,564,590
- -------------------------------------------------------------------------------------------------
PepsiCo, Inc.^ 89,100 4,417,578
- -------------------------------------------------------------------------------------------------
$10,982,168
- -------------------------------------------------------------------------------------------------
Gaming & Lodging - 1.0%
- -------------------------------------------------------------------------------------------------
William Hill Ltd. 746,090 $6,702,072
- -------------------------------------------------------------------------------------------------
Insurance - 3.2%
- -------------------------------------------------------------------------------------------------
AXA 389,400 $8,403,621
- -------------------------------------------------------------------------------------------------
QBE Insurance Group Ltd.^ 506,995 5,207,207
- -------------------------------------------------------------------------------------------------
Riunione Adriatica di Sicurta S.p.A. 316,200 6,698,501
- -------------------------------------------------------------------------------------------------
$20,309,329
- -------------------------------------------------------------------------------------------------
Leisure & Toys - 0.7%
- -------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 41,000 $4,631,937
- -------------------------------------------------------------------------------------------------
Machinery & Tools - 3.2%
- -------------------------------------------------------------------------------------------------
Atlas Copco AB, "A" 200,400 $8,316,940
- -------------------------------------------------------------------------------------------------
Sandvik AB^ 321,900 12,084,905
- -------------------------------------------------------------------------------------------------
$20,401,845
- -------------------------------------------------------------------------------------------------
Medical & Health Technology & Services - 1.5%
- -------------------------------------------------------------------------------------------------
Caremark Rx, Inc.^* 196,459 $5,887,876
- -------------------------------------------------------------------------------------------------
Lincare Holdings, Inc.^* 104,560 3,843,626
- -------------------------------------------------------------------------------------------------
$9,731,502
- -------------------------------------------------------------------------------------------------
Medical Equipment - 5.0%
- -------------------------------------------------------------------------------------------------
DENTSPLY International, Inc.^ 93,800 $4,878,538
- -------------------------------------------------------------------------------------------------
Fisher Scientific International, Inc.^* 155,400 8,913,744
- -------------------------------------------------------------------------------------------------
Medtronic, Inc.^ 102,700 5,248,997
- -------------------------------------------------------------------------------------------------
Synthes, Inc.* 16,110 1,720,773
- -------------------------------------------------------------------------------------------------
Thermo Electron Corp.* 243,500 7,061,500
- -------------------------------------------------------------------------------------------------
Waters Corp.^* 93,500 3,860,615
- -------------------------------------------------------------------------------------------------
$31,684,167
- -------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.5%
- -------------------------------------------------------------------------------------------------
Tokyo Gas Co. Ltd.^ 889,000 $3,317,008
- -------------------------------------------------------------------------------------------------
Oil Services - 1.0%
- -------------------------------------------------------------------------------------------------
Noble Corp.^* 139,200 $6,358,656
- -------------------------------------------------------------------------------------------------
Pharmaceuticals - 9.8%
- -------------------------------------------------------------------------------------------------
AstraZeneca PLC 172,900 $7,089,216
- -------------------------------------------------------------------------------------------------
Chugai Pharmaceutical Co. Ltd. 274,500 4,304,255
- -------------------------------------------------------------------------------------------------
Johnson & Johnson 229,000 13,369,020
- -------------------------------------------------------------------------------------------------
Novartis AG 143,200 6,844,735
- -------------------------------------------------------------------------------------------------
Roche Holding AG 124,900 12,797,388
- -------------------------------------------------------------------------------------------------
Sanofi-Aventis 162,560 11,915,815
- -------------------------------------------------------------------------------------------------
Schering AG 97,800 6,304,326
- -------------------------------------------------------------------------------------------------
$62,624,755
- -------------------------------------------------------------------------------------------------
Printing & Publishing - 1.0%
- -------------------------------------------------------------------------------------------------
Reed Elsevier N.V. 473,090 $6,233,564
- -------------------------------------------------------------------------------------------------
Railroad & Shipping - 1.8%
- -------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp.^ 142,300 $5,949,563
- -------------------------------------------------------------------------------------------------
Canadian National Railway Co. 102,903 5,561,907
- -------------------------------------------------------------------------------------------------
$11,511,470
- -------------------------------------------------------------------------------------------------
Special Products & Services - 0.5%
- -------------------------------------------------------------------------------------------------
Nok Corp,^ 110,000 $3,345,771
- -------------------------------------------------------------------------------------------------
Specialty Chemicals - 5.2%
- -------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc.^ 90,160 $4,794,709
- -------------------------------------------------------------------------------------------------
BOC Group PLC 483,140 7,783,619
- -------------------------------------------------------------------------------------------------
L'Air Liquide S.A. 97,560 15,800,140
- -------------------------------------------------------------------------------------------------
Praxair, Inc.^ 113,140 4,774,508
- -------------------------------------------------------------------------------------------------
$33,152,976
- -------------------------------------------------------------------------------------------------
Specialty Stores - 6.8%
- -------------------------------------------------------------------------------------------------
Esprit Holdings Ltd. 679,000 $3,629,546
- -------------------------------------------------------------------------------------------------
Hennes & Mauritz AB, "B" 235,100 6,864,840
- -------------------------------------------------------------------------------------------------
Home Depot, Inc.^ 134,600 5,529,368
- -------------------------------------------------------------------------------------------------
Kingfisher PLC 1,867,690 10,370,032
- -------------------------------------------------------------------------------------------------
NEXT PLC 197,430 6,056,736
- -------------------------------------------------------------------------------------------------
TJX Cos., Inc.^ 462,800 11,097,944
- -------------------------------------------------------------------------------------------------
$43,548,466
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 2.7%
- -------------------------------------------------------------------------------------------------
Hutchison Telecommunications International Ltd.* 4,113,000 $2,827,494
- -------------------------------------------------------------------------------------------------
KDDI Corp. 1,187 5,718,321
- -------------------------------------------------------------------------------------------------
Vodafone Group PLC 3,365,145 8,623,568
- -------------------------------------------------------------------------------------------------
$17,169,383
- -------------------------------------------------------------------------------------------------
Telecommunications - Wireline - 1.0%
- -------------------------------------------------------------------------------------------------
Ericsson, Inc., "B"^* 2,251,300 $6,557,803
- -------------------------------------------------------------------------------------------------
Telephone Services - 3.2%
- -------------------------------------------------------------------------------------------------
BCE, Inc. 137,592 $3,197,501
- -------------------------------------------------------------------------------------------------
Brasil Telecom Participacoes S.A., ADR^ 69,100 2,118,606
- -------------------------------------------------------------------------------------------------
Singapore Telecommunications Ltd. 3,334,500 4,852,223
- -------------------------------------------------------------------------------------------------
Telefonica S.A. 620,104 10,264,889
- -------------------------------------------------------------------------------------------------
$20,433,219
- -------------------------------------------------------------------------------------------------
Utilities - Electric Power - 1.8%
- -------------------------------------------------------------------------------------------------
Iberdrola S.A.^ 318,530 $6,992,349
- -------------------------------------------------------------------------------------------------
Veolia Environnement 158,500 4,815,577
- -------------------------------------------------------------------------------------------------
$11,807,926
- -------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $493,376,412) $638,445,348
- -------------------------------------------------------------------------------------------------
Short-Term Obligation - 0.6%
- -------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- -------------------------------------------------------------------------------------------------
General Electric Capital Corp., 1.84%, due 11/01/04,
at Amortized Cost $3,780,000 $3,780,000
- -------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 12.0%
- -------------------------------------------------------------------------------------------------
Merrill Lynch Repurchase Agreement, 1.895%, dated 10/29/04,
due 11/01/04, total to be received $29,702,979 (secured by
various U.S. Treasury and Federal Agency obligations in an
individually traded account) $29,701,415 $29,701,415
- -------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- -------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 47,152,608 47,152,608
- -------------------------------------------------------------------------------------------------
Total Collateral for Securities Loaned, at Cost and
Net Asset Value $76,854,023
- -------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $574,010,435) $719,079,371
- -------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (12.4)% (79,504,663)
- -------------------------------------------------------------------------------------------------
Net Assets - 100.0% $639,574,708
- -------------------------------------------------------------------------------------------------
* Non-income producing security.
^ All or a portion of this security is on loan.
ADR = American Depository Receipt
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 10/31/04
ASSETS
Investments, at value, including $74,148,167 of securities
on loan (identified cost, $574,010,435) $719,079,371
- -----------------------------------------------------------------------------------------------------
Cash 266
- -----------------------------------------------------------------------------------------------------
Receivable for fund shares sold 470,193
- -----------------------------------------------------------------------------------------------------
Interest and dividends receivable 764,636
- -----------------------------------------------------------------------------------------------------
Receivable from administrative proceeding settlement 50,585
- -----------------------------------------------------------------------------------------------------
Other assets 3,297
- -----------------------------------------------------------------------------------------------------
Total assets $720,368,348
- -----------------------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $1,548,630
- -----------------------------------------------------------------------------------------------------
Payable for fund shares reacquired 1,951,825
- -----------------------------------------------------------------------------------------------------
Collateral for securities loaned, at value 76,854,023
- -----------------------------------------------------------------------------------------------------
Payable to affiliates
- -----------------------------------------------------------------------------------------------------
Management fee 46,349
- -----------------------------------------------------------------------------------------------------
Shareholder servicing costs 60,547
- -----------------------------------------------------------------------------------------------------
Distribution and service fee 26,818
- -----------------------------------------------------------------------------------------------------
Administrative fee 305
- -----------------------------------------------------------------------------------------------------
Administrative service fee 11
- -----------------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 305,132
- -----------------------------------------------------------------------------------------------------
Total liabilities $80,793,640
- -----------------------------------------------------------------------------------------------------
Net assets $639,574,708
- -----------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
Paid-in capital $542,253,270
- -----------------------------------------------------------------------------------------------------
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 145,103,454
- -----------------------------------------------------------------------------------------------------
Accumulated net realized gain (loss) on investments and
foreign currency transactions (47,775,512)
- -----------------------------------------------------------------------------------------------------
Accumulated net investment loss (6,504)
- -----------------------------------------------------------------------------------------------------
Net assets $639,574,708
- -----------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 28,308,356
- -----------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
Net assets $368,514,440
- -----------------------------------------------------------------------------------------------------
Shares outstanding 16,076,715
- -----------------------------------------------------------------------------------------------------
Net asset value per share $22.92
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$22.92) $24.32
- -----------------------------------------------------------------------------------------------------
Class B shares
Net assets $170,782,583
- -----------------------------------------------------------------------------------------------------
Shares outstanding 7,742,122
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $22.06
- -----------------------------------------------------------------------------------------------------
Class C shares
Net assets $32,784,542
- -----------------------------------------------------------------------------------------------------
Shares outstanding 1,513,458
- -----------------------------------------------------------------------------------------------------
Net asset value and offering price per share $21.66
- -----------------------------------------------------------------------------------------------------
Class I shares
Net assets $37,780,843
- -----------------------------------------------------------------------------------------------------
Shares outstanding 1,626,383
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $23.23
- -----------------------------------------------------------------------------------------------------
Class J shares
Net assets $23,187,812
- -----------------------------------------------------------------------------------------------------
Shares outstanding 1,063,524
- -----------------------------------------------------------------------------------------------------
Net asset value and redemption price per share $21.80
- -----------------------------------------------------------------------------------------------------
Offering price per share (100/97.00X$21.80) $22.47
- -----------------------------------------------------------------------------------------------------
Class R1 shares
Net assets $5,994,155
- -----------------------------------------------------------------------------------------------------
Shares outstanding 262,848
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $22.80
- -----------------------------------------------------------------------------------------------------
Class R2 shares
Net assets $530,333
- -----------------------------------------------------------------------------------------------------
Shares outstanding 23,306
- -----------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price
per share $22.76
- -----------------------------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A shares is reduced. A contingent deferred
sales charge may be imposed on redemptions of Class A, Class B, and Class C 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 10/31/04
NET INVESTMENT INCOME
Income
- -----------------------------------------------------------------------------------------------------
Dividends $12,522,444
- -----------------------------------------------------------------------------------------------------
Interest 370,635
- -----------------------------------------------------------------------------------------------------
Other# 50,585
- -----------------------------------------------------------------------------------------------------
Foreign taxes withheld (1,252,226)
- -----------------------------------------------------------------------------------------------------
Total investment income $11,691,438
- -----------------------------------------------------------------------------------------------------
Expenses
- -----------------------------------------------------------------------------------------------------
Management fee $5,945,640
- -----------------------------------------------------------------------------------------------------
Trustees' compensation 29,444
- -----------------------------------------------------------------------------------------------------
Shareholder servicing costs 1,151,027
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class A) 928,679
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class B) 1,814,809
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class C) 347,881
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class J) 250,315
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R1) 14,426
- -----------------------------------------------------------------------------------------------------
Distribution and service fee (Class R2) 1,036
- -----------------------------------------------------------------------------------------------------
Administrative service fee (Class R2) 518
- -----------------------------------------------------------------------------------------------------
Administrative fee 59,984
- -----------------------------------------------------------------------------------------------------
Custodian fee 507,896
- -----------------------------------------------------------------------------------------------------
Printing 133,581
- -----------------------------------------------------------------------------------------------------
Postage 62,822
- -----------------------------------------------------------------------------------------------------
Auditing fees 40,609
- -----------------------------------------------------------------------------------------------------
Legal fees 20,529
- -----------------------------------------------------------------------------------------------------
Miscellaneous 216,728
- -----------------------------------------------------------------------------------------------------
Total expenses $11,525,924
- -----------------------------------------------------------------------------------------------------
Fees paid indirectly (39,199)
- -----------------------------------------------------------------------------------------------------
Reduction of expenses by investment adviser (1,834)
- -----------------------------------------------------------------------------------------------------
Net expenses $11,484,891
- -----------------------------------------------------------------------------------------------------
Net investment income $206,547
- -----------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain (loss) (identified cost basis)
- -----------------------------------------------------------------------------------------------------
Investment transactions $54,076,179
- -----------------------------------------------------------------------------------------------------
Foreign currency transactions (120,882)
- -----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $53,955,297
- -----------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
- -----------------------------------------------------------------------------------------------------
Investments $44,856,509
- -----------------------------------------------------------------------------------------------------
Translation of assets and liabilities in foreign currencies 28,292
- -----------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $44,884,801
- -----------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $98,840,098
- -----------------------------------------------------------------------------------------------------
Change in net assets from operations $99,046,645
- -----------------------------------------------------------------------------------------------------
# A non-recurring accrual recorded as a result of an administrative proceeding regarding disclosure
of brokerage allocation practices in connection with fund sales, as described in the Legal Proceedings
and Transactions with Affiliates footnotes.
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 10/31 2004 2003
CHANGE IN NET ASSETS
OPERATIONS
Net investment income (loss) $206,547 $(498,849)
- -------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions 53,955,297 (17,445,241)
- -------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation 44,884,801 109,688,739
- ------------------------------------------------------------ --------------- ------------
Change in net assets from operations $99,046,645 $91,744,649
- ------------------------------------------------------------ --------------- ------------
Change in net assets from fund share transactions $(64,662,933) $(31,791,040)
- ------------------------------------------------------------ --------------- ------------
Redemption fees $2,932 $--
- ------------------------------------------------------------ --------------- ------------
Total change in net assets $34,386,644 $59,953,609
- ------------------------------------------------------------ --------------- ------------
NET ASSETS
At beginning of period $605,188,064 $545,234,455
- -------------------------------------------------------------------------------------------------------
At end of period (including accumulated net investment loss
of $6,504 and $92,169, respectively) $639,574,708 $605,188,064
- -------------------------------------------------------------------------------------------------------
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 registered public accounting firm, whose report, together with the fund's financial statements, are included in
this report.
YEARS ENDED 10/31
------------------------------------------------------------------------------------
CLASS A 2004 2003 2002 2001 2000
Net asset value, beginning of period $19.57 $16.55 $17.58 $22.88 $22.50
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment income (loss)(S) $0.07 $0.03 $(0.00)+++ $(0.01) $0.07
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.28 2.99 (1.03) (3.81) 2.24
- ----------------------------------------- ---------- ------ ------ ------ ------
Total from investment operations $3.35 $3.02 $(1.03) $(3.82) $2.31
- ----------------------------------------- ---------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net realized gain on
investments and foreign currency
transactions $-- $-- $-- $(1.44) $(1.93)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.04) --
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.00)+++ --
- ----------------------------------------- ---------- ------ ------ ------ ------
Total distributions declared to
shareholders $-- $-- $-- $(1.48) $(1.93)
- ----------------------------------------- ---------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $-- $-- $-- $--
- ----------------------------------------- ---------- ------ ------ ------ ------
Net asset value, end of period $22.92 $19.57 $16.55 $17.58 $22.88
- ----------------------------------------- ---------- ------ ------ ------ ------
Total return (%)(+) 17.12^ 18.25 (5.86) (17.67) 10.39
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
------------------------------------------------------------------------------------
CLASS A (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.52 1.65 1.62 1.59 1.55
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.30 0.19 (0.02) (0.06) 0.28
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 41 52 52 72 84
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $368,514 $345,783 $322,006 $348,129 $450,481
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income $0.07* $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.52* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.30* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
* The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# 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.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have been
lower.
^ The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
----------------------------------------------------------------------------------
CLASS B 2004 2003 2002 2001 2000
Net asset value, beginning of period $18.97 $16.18 $17.31 $22.52 $22.17
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS#
Net investment loss(S) $(0.10) $(0.09) $(0.14) $(0.16) $(0.11)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency 3.19 2.88 (0.99) (3.75) 2.21
- ------------------------------------------- ---------- ------ ------ ------ ------
Total from investment operations $3.09 $2.79 $(1.13) $(3.91) $2.10
- ------------------------------------------- ---------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO
SHAREHOLDERS
From net realized gain on investments
and foreign currency transactions $-- $-- $-- $(1.26) $(1.75)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.04) --
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.00)+++ --
- ------------------------------------------- ---------- ------ ------ ------ ------
Total distributions declared to
shareholders $-- $-- $-- $(1.30) $(1.75)
- ------------------------------------------- ---------- ------ ------ ------ ------
Redemption fees added to paid-in
capital# $0.00+++ $-- $-- $-- $--
- ------------------------------------------- ---------- ------ ------ ------ ------
Net asset value, end of period $22.06 $18.97 $16.18 $17.31 $22.52
- ------------------------------------------- ---------- ------ ------ ------ ------
Total return (%) 16.29^ 17.24 (6.53) (18.28) 9.60
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
----------------------------------------------------------------------------------
CLASS B (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.27 2.40 2.37 2.34 2.30
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.45) (0.56) (0.79) (0.81) (0.46)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 41 52 52 72 84
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $170,783 $177,713 $172,094 $220,855 $301,816
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment loss per share and the ratios would have been:
Net investment loss $(0.10)* $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.27* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.45)* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
* The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# 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 fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
-----------------------------------------------------------------------------
CLASS C 2004 2003 2002 2001 2000
Net asset value, beginning of period $18.63 $15.89 $17.00 $22.16 $21.89
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.09) $(0.09) $(0.14) $(0.16) $(0.11)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 3.12 2.83 (0.97) (3.68) 2.18
- ------------------------------------------------ -------- ------ ------ ------ ------
Total from investment operations $3.03 $2.74 $(1.11) $(3.84) $2.07
- ------------------------------------------------ -------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $-- $-- $-- $(1.28) $(1.80)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.04) --
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.00)+++ --
- ------------------------------------------------ -------- ------ ------ ------ ------
Total distributions declared to shareholders $-- $-- $-- $(1.32) $(1.80)
- ------------------------------------------------ -------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $-- $-- $-- $--
- ------------------------------------------------ -------- ------ ------ ------ ------
Net asset value, end of period $21.66 $18.63 $15.89 $17.00 $22.16
- ------------------------------------------------ -------- ------ ------ ------ ------
Total return (%) 16.26^ 17.24 (6.53) (18.30) 9.62
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
-----------------------------------------------------------------------------
CLASS C (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.27 2.40 2.37 2.34 2.30
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.45) (0.56) (0.78) (0.82) (0.47)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 41 52 52 72 84
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $32,785 $33,253 $31,594 $40,789 $56,755
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment loss per share and the ratios would have been:
Net investment loss $(0.09)* $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.27* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.45)* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
* The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# 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 fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
---------------------------------------------------------------------------
CLASS I 2004 2003 2002 2001 2000
Net asset value, beginning of period $19.78 $16.70 $17.69 $23.04 $22.63
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment income(S) $0.12 $0.09 $0.04 $0.02 $0.10
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 3.33 2.99 (1.03) (3.83) 2.28
- -------------------------------------------------- -------- ------ ------ ------ ------
Total from investment operations $3.45 $3.08 $(0.99) $(3.81) $2.38
- -------------------------------------------------- -------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $-- $-- $-- $(1.50) $(1.97)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.04) --
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.00)+++ --
- -------------------------------------------------- -------- ------ ------ ------ ------
Total distributions declared to shareholders $-- $-- $-- $(1.54) $(1.97)
- -------------------------------------------------- -------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $-- $-- $-- $--
- -------------------------------------------------- -------- ------ ------ ------ ------
Net asset value, end of period $23.23 $19.78 $16.70 $17.69 $23.04
- -------------------------------------------------- -------- ------ ------ ------ ------
Total return (%) 17.44^ 18.44 (5.60) (17.54) 10.73
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
---------------------------------------------------------------------------
CLASS I (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.26 1.40 1.37 1.34 1.30
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.53 0.54 0.23 0.10 0.41
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 41 52 52 72 84
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $37,781 $22,467 $2,325 $2,274 $2,312
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment income per share and the ratios would have been:
Net investment income $0.12* $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.26* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.53* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
* The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# 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 fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEAR ENDED PERIOD ENDED
CLASS R1 10/31/04 10/31/03**
Net asset value, beginning of period $19.51 $16.57***
- -------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment income (loss)(S) $0.01 $(0.05)
- -------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 3.28 2.99***
- -------------------------------------------------------------------- ---------- ------
Total from investment operations $3.29 $2.94
- -------------------------------------------------------------------- ---------- ------
Redemption fees added to paid-in capital# $0.00+++ $--
- -------------------------------------------------------------------- ---------- ------
Net asset value, end of period $22.80 $19.51
- -------------------------------------------------------------------- ---------- ------
Total return (%) 16.86^ 17.74***++
- -------------------------------------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 1.76 1.83+
- -------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.06 (0.29)+
- -------------------------------------------------------------------------------------------------------
Portfolio turnover 41 52
- -------------------------------------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $5,994 $1,265
- -------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its
proportional share of Independent Chief Compliance Officer services paid to Tarantino LLC. If this
fee had been incurred by the fund, the net investment income per share and the ratios would have been:
Net investment income $0.01* $--
- -------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 1.76* --
- -------------------------------------------------------------------------------------------------------
Net investment income 0.06* --
- -------------------------------------------------------------------------------------------------------
* The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
** For the period from the inception of Class R1 shares, December 31, 2002, through October 31, 2003.
*** The net asset value and total return previously reported as $16.67 and 17.04%, respectively, has been
revised to reflect the net asset value from the day prior to the class' inception date. The net asset
value and total return previously reported was from inception date, the date the share class was
first available to public shareholders.
+ 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 fund's net asset value and total return calculation include a non-recurring accrual recorded as a
result of an administrative proceeding regarding disclosure of brokerage allocation practices in
connection with fund sales, as described in the Legal Proceedings and Transactions with Affiliates
footnotes. The non-recurring accrual did not have a material impact on the net asset value per share
based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEAR ENDED
CLASS R2 10/31/04
Net asset value, beginning of period $19.51
- -----------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.03)
- -----------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency 3.28
- -------------------------------------------------------------------- -------
Total from investment operations $3.25
- -------------------------------------------------------------------- -------
Redemption fees added to paid-in capital# $0.00+++
- -------------------------------------------------------------------- -------
Net asset value, end of period $22.76
- -------------------------------------------------------------------- -------
Total return (%) 16.66^
- -----------------------------------------------------------------------------
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.00
- -----------------------------------------------------------------------------
Net investment loss (0.15)
- -----------------------------------------------------------------------------
Portfolio turnover 41
- -----------------------------------------------------------------------------
Net assets at end of period (000 Omitted) $530
- -----------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to
reimburse the fund for its proportional share of Independent Chief
Compliance Officer services paid to Tarantino LLC. If this fee had been
incurred by the fund, the net investment loss per share and the ratios would
have been:
Net investment loss $(0.03)*
- -----------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.00*
- -----------------------------------------------------------------------------
Net investment loss (0.15)*
- -----------------------------------------------------------------------------
* The reimbursement impact per share amount and ratios were less than $0.01
and 0.01%, respectively.
# 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 fund's net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the shares outstanding on
the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
YEARS ENDED 10/31
---------------------------------------------------------------------------
CLASS J 2004 2003 2002 2001 2000
Net asset value, beginning of period $18.74 $15.97 $17.08 $22.36 $22.21
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS#
Net investment loss(S) $(0.08) $(0.09) $(0.13) $(0.15) $(0.06)
- -----------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments and foreign currency 3.14 2.86 (0.98) (3.71) 2.19
- -------------------------------------------------- -------- ------ ------ ------ ------
Total from investment operations $3.06 $2.77 $(1.11) $(3.86) $2.13
- -------------------------------------------------- -------- ------ ------ ------ ------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
From net realized gain on investments and
foreign currency transactions $-- $-- $-- $(1.38) $(1.98)
- -----------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- (0.04) --
- -----------------------------------------------------------------------------------------------------------------------------
From paid-in capital -- -- -- (0.00)+++ --
- -------------------------------------------------- -------- ------ ------ ------ ------
Total distributions declared to shareholders $-- $-- $-- $(1.42) $(1.98)
- -------------------------------------------------- -------- ------ ------ ------ ------
Redemption fees added to paid-in capital# $0.00+++ $-- $-- $-- $--
- -------------------------------------------------- -------- ------ ------ ------ ------
Net asset value, end of period $21.80 $18.74 $15.97 $17.08 $22.36
- -------------------------------------------------- -------- ------ ------ ------ ------
Total return (%)(+) 16.33^ 17.35 (6.50) (18.29) 9.55
- -----------------------------------------------------------------------------------------------------------------------------
Financial Highlights - continued
YEARS ENDED 10/31
---------------------------------------------------------------------------
CLASS J (CONTINUED) 2004 2003 2002 2001 2000
RATIOS (%) TO AVERAGE NET ASSETS
AND SUPPLEMENTAL DATA(S):
Expenses## 2.22 2.34 2.32 2.29 2.25
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.39) (0.53) (0.73) (0.78) (0.27)
- -----------------------------------------------------------------------------------------------------------------------------
Portfolio turnover 41 52 52 72 84
- -----------------------------------------------------------------------------------------------------------------------------
Net assets at end of period
(000 Omitted) $23,188 $24,701 $17,215 $15,446 $20,540
- -----------------------------------------------------------------------------------------------------------------------------
(S) Effective June 7, 2004, the investment adviser has voluntarily agreed to reimburse the fund for its proportional share of
Independent Chief Compliance Officer services paid to Tarantino LLC. If this fee had been incurred by the fund, the net
investment loss per share and the ratios would have been:
Net investment loss $(0.08)* $-- $-- $-- $--
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS):
Expenses## 2.22* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.39)* -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
* The reimbursement impact per share amount and ratios were less than $0.01 and 0.01%, respectively.
# 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.
(+) Total returns do not include the applicable sales charge. If the charge had been included, the results would have been
lower.
^ The fund's net asset value and total return calculation include a non-recurring accrual recorded as a result of an
administrative proceeding regarding disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings and Transactions with Affiliates footnotes. The non-recurring accrual did not have a
material impact on the net asset value per share based on the shares outstanding on the day the proceeds were recorded.
SEE NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) BUSINESS AND ORGANIZATION
MFS Global Equity Fund (the fund) is a diversified series of MFS Series Trust VI
(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 U.S.
generally accepted accounting principles 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 as reported by an independent pricing service 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. Equity securities traded
over the counter are valued at the last sales price traded each day as reported
by an independent pricing service, or to the extent there are no sales reported,
such securities are valued on the basis of quotations obtained from brokers and
dealers. Short-term obligations with a remaining maturity in excess of 60 days
will be valued upon dealer-supplied valuations. All other short-term obligations
in the fund's portfolio are valued at amortized cost, which constitutes market
value as determined by the Board of Trustees. Money market mutual funds are
valued at net asset value. 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. When pricing service information
or market quotations are not readily available, securities are priced at fair
value as determined under the direction of the Board of Trustees. For example,
significant events (such as movement in the U.S. securities market, or other
regional and local developments) may occur between the time that foreign markets
close (where the security is principally traded) and the time that the fund
calculates its net asset value (generally, the close of the NYSE) that may
impact the value of securities traded in these foreign markets. In these cases,
the fund may utilize information from an external vendor or other sources to
adjust closing market quotations of foreign equity securities to reflect what it
believes to be the fair value of the securities as of the fund's valuation time.
Because the frequency of significant events is not predictable, fair valuation
of foreign equity securities may occur on a frequent basis.
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 - 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") 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 provide the fund with indemnification against
Borrower default. The fund bears the risk of loss with respect to the investment
of cash collateral. On loans collateralized by cash, the cash collateral is
invested in a money market fund or 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.
SHORT TERM FEES - For purchases made prior to July 1, 2004, the fund charges a
2% redemption fee (which is retained by the fund) on proceeds from Class A,
Class B, Class C, and Class I shares redeemed or exchanged within 30 calendar
days following their acquisition (either by purchase or exchange). For purchases
made on or after July 1, 2004, the fund will charge a 2% redemption fee on
proceeds from Class A, Class B, Class C, and Class I shares redeemed or
exchanged within 5 business days following their acquisition. Due to systems
limitations associated with the transition from applying a 30 calendar day
redemption fee to a 5 business day redemption fee, the fund will not impose
redemption fees with respect to purchases made in June 2004 followed by
redemptions made in July 2004. The fund may determine to reinstitute the 30
calendar day redemption fee period, or otherwise change the redemption fee
period in the future, including changes in connection with pending Securities
and Exchange Commission rules. See the fund's prospectus for details. These fees
are accounted for as an addition to paid-in capital.
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 U.S. generally accepted accounting principles. 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 year ended October 31, 2004, the fund's custodian fees were
reduced by $31,990 under this arrangement. The fund has entered into a
commission recapture agreement, under which certain brokers will credit the fund
a portion of the commissions generated, to offset certain expenses of the fund.
For the year ended October 31, 2004, the fund's miscellaneous expenses were
reduced by $7,209 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 foreign currency transactions and wash sales.
The fund paid no distributions for the years ended October 31, 2004 and October
31, 2003.
During the year ended October 31, 2004, accumulated undistributed net investment
income decreased by $120,882 and accumulated net realized loss on investments
and foreign currency transactions decreased by $120,882 due to differences
between book and tax accounting for foreign currency transactions. This change
had no effect on the net assets or net asset value per share.
As of October 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $84,104
----------------------------------------------------------
Capital loss carryforward (47,774,729)
----------------------------------------------------------
Unrealized appreciation (depreciation) 145,102,671
----------------------------------------------------------
Other temporary differences (90,608)
----------------------------------------------------------
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, ($29,468,686) and
September 30, 2011, ($18,306,043).
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 shares will
convert to Class A shares 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. Effective
January 1, 2004, the management fee is computed daily and paid monthly at the
following annual rates:
First $1 billion of average net assets 0.90%
----------------------------------------------------------
Next $1 billion of average net assets 0.75%
----------------------------------------------------------
Average net assets in excess of $2 billion 0.65%
----------------------------------------------------------
Prior to January 1, 2004, the management fee was computed daily and paid monthly
at the following rates:
First $800 million of average net assets 1.00%
----------------------------------------------------------
Next $200 million of average net assets 0.90%
----------------------------------------------------------
Next $1.5 billion of average net assets 0.85%
----------------------------------------------------------
Average net assets in excess of $2.5 billion 0.75%
----------------------------------------------------------
Management fees incurred for the year ended October 31, 2004 were an effective
rate of 0.92% of average daily net assets on an annualized basis.
The fund pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to Board and Committee
chairpersons, 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 retired Independent Trustees and an unfunded retirement
benefit deferral plan for current Independent Trustees. Included in Trustees'
compensation is $5,574 as a result of the change in the fund's unfunded
retirement benefit deferral plan for certain current Independent Trustees and a
pension expense of $4,486 for retired Independent Trustees for the year ended
October 31, 2004.
This fund and certain other MFS funds (the "funds") have entered into a services
agreement (the "Agreement") which provides for payment of fees by the funds to
Tarantino LLC in return for the provision of services of an Independent Chief
Compliance Officer (ICCO) for the funds. The ICCO is an officer of the funds and
the sole member of Tarantino LLC. MFS has agreed to reimburse each of the funds
for a proportional share of substantially all of the payments made by the funds
to Tarantino LLC and also to provide office space and other administrative
support and supplies to the ICCO. The funds can terminate the Agreement with
Tarantino LLC at any time under the terms of the Agreement.
The fund's investment adviser, MFS, has been the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in connection
with fund sales, as described in the Legal Proceedings Footnote. Pursuant to the
SEC Order, on July 28, 2004, MFS transferred $1.00 in disgorgement and $50
million in penalty to the SEC (the "Payments"). A plan for distribution of these
Payments has been submitted to the SEC. Contemporaneous with the transfer, the
fund accrued an estimate of the amount to be received upon final approval of the
plan of distribution. The non- recurring accrual in the amount of $50,585 did
not have a material impact on the net asset value per share based on the shares
outstanding on the day the proceeds were recorded.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment advisor. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement of
the costs MFS incurs to provide these services, subject to review and approval
by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior to
April 1, 2004, the fund paid MFS an administrative fee up to 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%
----------------------------------------------------------
Effective April 1, 2004, the fund paid MFS an administrative fee up to the
following annual percentage rates of the fund's average daily net assets:
First $2 billion 0.01120%
----------------------------------------------------------
Next $2.5 billion 0.00832%
----------------------------------------------------------
Next $2.5 billion 0.00032%
----------------------------------------------------------
In excess of $7 billion 0.00000%
----------------------------------------------------------
For the year ended October 31, 2004, the fund paid MFS $59,984 equivalent to
0.0093% of average daily net assets, to partially reimburse MFS for the costs of
providing administrative services.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain administrative
services with respect to Class R2 shares. These services include various
administrative, recordkeeping, and communication/educational services with
respect to the retirement plans which invest in Class R2 shares, and may be
provided directly by MFS or by a third party. The fund pays an annual 0.25%
administrative service fee solely from the assets of Class R2 shares to MFS for
the provision of these services.
DISTRIBUTOR - MFD, a wholly owned subsidiary of MFS, as distributor, received
$34,087 for the year ended October 31, 2004, as its portion of the sales charge
on sales of Class A shares of the fund.
The Trustees have adopted a distribution plan for Class A, Class B, Class C,
Class J, Class R1, and Class R2 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. The
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 J CLASS R1 CLASS R2
Distribution Fee 0.10% 0.75% 0.75% 0.70% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------
Service Fee 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------------------------
Total Distribution Plan 0.35% 1.00% 1.00% 0.95% 0.50% 0.50%
- ------------------------------------------------------------------------------------------------------------------------
MFD retains the service fee for accounts not attributable to a securities dealer, which for the year ended October 31, 2004
amounted to:
CLASS A CLASS B CLASS C CLASS J CLASS R1 CLASS R2
Service Fee Retained by
MFD $25,512 $2,060 $532 $-- $12 $21
- ----------------------------------------------------------------------------------------------------------------------
Payment of the 0.10% per annum Class A distribution fee will be implemented on such date as the Trustees of the Trust may
determine.
Fees incurred under the distribution plan during the year ended October 31, 2004 were as follows:
CLASS A CLASS B CLASS C CLASS J CLASS R1 CLASS R2
Effective Annual
Percentage Rates 0.25% 1.00% 1.00% 0.95% 0.50% 0.50%
- ----------------------------------------------------------------------------------------------------------------------
Class J shares are available for distribution through The Mizuho Bank Ltd.
("Mizuho Bank") and Citicorp Securities (Japan) Ltd. ("Citicorp") and their
network of financial intermediaries. Mizuho Bank also serves as the fund's agent
securities company in Japan, and in that capacity represents the fund before
Japanese regulatory authorities. MFD will pay to Mizuho Bank and Citicorp
service fees and distribution fees attributable to Class J shares. Out of the
distribution fee, MFD will pay Mizuho Bank and Citicorp 0.55% per annum of
average daily net assets attributable to Class J shares. A portion of the
distribution fee equal to 0.05% per annum of the fund's average daily net assets
attributable to Class J shares is paid to the Mizuho Bank to cover its services
as the fund's agent securities company. MFD retains the remaining 0.10%.
Certain Class A and Class C 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 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 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 October 31, 2004 were as
follows:
CLASS A CLASS B CLASS C
Contingent Deferred Sales
Charges Imposed $26,908 $213,994 $3,307
- -----------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT - Included in shareholder servicing costs is a fee
paid to MFSC, a wholly owned subsidiary of MFS, for its services as shareholder
servicing agent. The fee, which is calculated as a percentage of the fund's
average daily net assets is set periodically under the supervision of the fund's
Trustees. Prior to April 1, 2004, the fee was set at 0.11% of the fund's average
daily net assets. For the period April 1, 2004 through June 30, 2004, the fee
was set at 0.10% of the fund's average daily net assets. Effective July 1, 2004,
the fund is charged up to 0.0861% of its average daily net assets. For the year
ended October 31, 2004, the fund paid MFSC a fee of $641,546 for shareholder
services which equated to 0.0994% of the fund's average daily net assets. Also
included in shareholder servicing costs are out-of-pocket expenses, paid to
MFSC, which amounted to $122,329 for the year ended October 31, 2004, as well as
other expenses paid to unaffiliated vendors.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$260,565,410 and $312,986,318, 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 $574,011,218
----------------------------------------------------------
Gross unrealized appreciation $152,920,571
----------------------------------------------------------
Gross unrealized depreciation (7,852,418)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $145,068,153
----------------------------------------------------------
(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 10/31/04 Year ended 10/31/03
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 4,139,449 $89,657,979 7,680,199 $131,756,696
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (5,736,004) (124,915,880) (9,458,103) (162,136,413)
- --------------------------------------------------------------------------------------------------------------
Net change (1,596,555) $(35,257,901) (1,777,904) $(30,379,717)
- --------------------------------------------------------------------------------------------------------------
CLASS B SHARES
Shares sold 1,341,767 $28,143,014 1,539,414 $25,984,580
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (2,967,214) (62,160,971) (2,809,652) (46,834,296)
- --------------------------------------------------------------------------------------------------------------
Net change (1,625,447) $(34,017,957) (1,270,238) $(20,849,716)
- --------------------------------------------------------------------------------------------------------------
CLASS C SHARES
Shares sold 301,622 $6,199,357 329,696 $5,482,420
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (573,068) (11,862,760) (533,723) (8,716,592)
- --------------------------------------------------------------------------------------------------------------
Net change (271,446) $(5,663,403) (204,027) $(3,234,172)
- --------------------------------------------------------------------------------------------------------------
Year ended 10/31/04 Year ended 10/31/03
SHARES AMOUNT SHARES AMOUNT
CLASS I SHARES
Shares sold 1,092,942 $24,118,678 1,461,752 $24,857,744
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (602,499) (13,246,375) (465,064) (8,115,692)
- --------------------------------------------------------------------------------------------------------------
Net change 490,443 $10,872,303 996,688 $16,742,052
- --------------------------------------------------------------------------------------------------------------
CLASS J SHARES
Shares sold 760,073 $15,303,178 490,824 $8,875,375
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (1,014,626) (20,746,006) (250,572) (4,115,255)
- --------------------------------------------------------------------------------------------------------------
Net change (254,553) $(5,442,828) 240,252 $4,760,120
- --------------------------------------------------------------------------------------------------------------
Year ended 10/31/04 Period ended 10/31/03*
SHARES AMOUNT SHARES AMOUNT
CLASS R1 SHARES
Shares sold 262,806 $5,760,985 129,331 $2,338,964
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (64,810) (1,420,895) (64,479) (1,173,590)
- --------------------------------------------------------------------------------------------------------------
Net change 197,996 $4,340,090 64,852 $1,165,374
- --------------------------------------------------------------------------------------------------------------
Year ended 10/31/04 Period ended 10/31/03**
SHARES AMOUNT SHARES AMOUNT
CLASS R2 SHARES
Shares sold 25,850 $569,113 255 $5,019
- --------------------------------------------------------------------------------------------------------------
Shares reacquired (2,799) (62,350) -- --
- --------------------------------------------------------------------------------------------------------------
Net change 23,051 $506,763 255 $5,019
- --------------------------------------------------------------------------------------------------------------
* For the period from the inception of Class R1 shares, December 31, 2002, through October 31, 2003.
** Class R2 shares, which commenced operations on October 31, 2003, had no operating activity.
(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 Federal
Reserve funds rate plus 0.50%. 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 calendar quarter. The commitment fee
allocated to the fund for the year ended October 31, 2004 was $5,229, and is
included in miscellaneous expense. The fund had no significant borrowings during
the year ended October 31, 2004.
(7) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under the
terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50 million
in penalty to certain MFS funds, pursuant to a plan developed by an independent
distribution consultant. The brokerage allocation practices which were the
subject of this proceeding were discontinued by MFS in November 2003. The
agreement with the SEC is reflected in an order of the SEC. Pursuant to the SEC
order, on July 28, 2004, MFS transferred these settlement amounts to the SEC,
and those MFS funds entitled to these settlement amounts accrued an estimate of
their pro rata portion of these amounts. Once the final distribution plan is
approved by the SEC, these amounts will be distributed by the SEC to the
affected MFS funds. The SEC settlement order states that MFS failed to
adequately disclose to the Boards of Trustees and to shareholders of the MFS
funds the specifics of its preferred arrangements with certain brokerage firms
selling MFS fund shares. The SEC settlement order states that MFS had in place
policies designed to obtain best execution of all MFS fund trades. As part of
the settlement, MFS retained an independent compliance consultant to review the
completeness of its current policies and practices regarding disclosure to MFS
fund trustees and to MFS fund shareholders of strategic alliances between MFS or
its affiliates and broker-dealers and other financial advisers who support the
sale of MFS fund shares.
In addition, in February, 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain MFS
retail funds was false and misleading because, although the prospectuses for
those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer,
John W. Ballen, and former President, Kevin R. Parke, also reached agreement
with the SEC in which they agreed to, among other terms, monetary fines and
temporary suspensions from association with any investment adviser or registered
investment company. Messrs. Ballen and Parke have resigned their positions with,
and will not be returning to, MFS and the MFS funds. Under the terms of the
February Settlements, MFS and the executives neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to increase
certain management fees during this period. MFS has also paid an administrative
fine to NH in the amount of $1 million, which will be used for investor
education purposes (NH retained $250,000 and $750,000 was contributed to the
North American Securities Administrators Association's Investor Protection
Trust). In addition, under the terms of the February Settlements, MFS is in the
process of adopting certain governance changes and reviewing its policies and
procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center, Inc.,
MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS
funds, certain current and/or former Trustees of these MFS funds, and certain
officers of MFS have been named as defendants in multiple lawsuits filed in
federal and state courts. The lawsuits variously have been commenced as class
actions or individual actions on behalf of investors who purchased, held or
redeemed shares of the MFS funds during specified periods, as class actions on
behalf of participants in certain retirement plan accounts, or as derivative
actions on behalf of the MFS funds. The lawsuits relating to market timing and
related matters have been transferred to, and consolidated before, the United
States District Court for the District of Maryland, as part of a multi-district
litigation of market timing and related claims involving several other fund
complexes (In re Mutual Funds Investment Litigation (Alger, Columbia, Janus,
MFS, One Group, Putnam, Allianz Dresdner), No. 1:04-md-15863 (transfer began
March 19, 2004)). The plaintiffs in these consolidated lawsuits generally seek
injunctive relief including removal of the named Trustees, adviser and
distributor, rescission of contracts and 12b-1 Plans, disgorgement of fees and
profits, monetary damages, punitive damages, attorney's fees and costs and other
equitable and declaratory relief. Four lawsuits alleging improper brokerage
allocation practices and excessive compensation are pending in the United States
District Court for the District of Massachusetts (Forsythe v. Sun Life Financial
Inc., et al., No. 04cv10584 (GAO) (March 25, 2004); Eddings v. Sun Life
Financial Inc., et al., No. 04cv10764 (GAO) (April 15, 2004); Marcus Dumond, et
al. v. Massachusetts Financial Servs. Co., et al., No. 04cv11458 (GAO) (May 4,
2004); and Koslow v. Sun Life Financial Inc., et al., No. 04cv11019 (GAO) (May
20, 2004)). The plaintiffs in these lawsuits generally seek compensatory
damages, punitive damages, recovery of fees, rescission of contracts, an
accounting, restitution, declaratory relief, equitable and/or injunctive relief
and attorney's fees and costs. The various lawsuits generally allege that some
or all of the defendants (i) permitted or acquiesced in market timing and/or
late trading in some of the MFS funds, inadequately disclosed MFS' internal
policies concerning market timing and such matters, and received excessive
compensation as fiduciaries to the MFS funds, or (ii) permitted or acquiesced in
the improper use of fund assets by MFS to support the distribution of MFS fund
shares and inadequately disclosed MFS' use of fund assets in this manner. The
actions assert that some or all of the defendants violated the federal
securities laws, including the Securities Act of 1933 and the Securities
Exchange Act of 1934, the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, the Employee Retirement Income Security Act of 1974, as
well as fiduciary duties and other violations of common law. Insofar as any of
the actions is appropriately brought derivatively on behalf of any of the MFS
funds, any recovery will inure to the benefit of the MFS funds. The defendants
are reviewing the allegations of the multiple complaints and will respond
appropriately. Additional lawsuits based on similar allegations may be filed in
the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the MFS
retail funds, and transferred $50 million for distribution to affected MFS funds
to compensate those funds based upon the amount of brokerage commissions
allocated in recognition of MFS fund sales. It is not clear whether these
amounts will be sufficient to compensate shareholders for all of the damage they
allegedly sustained, whether certain shareholders or putative class members may
have additional claims to compensation, or whether the damages that may be
awarded in any of the actions will exceed these amounts. In the event the MFS
funds incur any losses, costs or expenses in connection with such lawsuits, the
Boards of Trustees of the affected MFS funds may pursue claims on behalf of such
funds against any party that may have liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or other
adverse consequences to the MFS funds.
- -------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- -------------------------------------------------------------------------------
To the Trustees of MFS Series Trust VI and Shareholders of MFS Global Equity
Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Global Equity Fund (the Fund) (one of the portfolios comprising MFS Series Trust
VI), including the portfolio of investments, as of October 31, 2004, 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 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 the standards of the Public Company
Accounting Oversight Board (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 October 31, 2004, 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
Global Equity Fund at October 31, 2004, 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 U.S. generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 10, 2004
- -------------------------------------------------------------------------------------------------------------
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
- -------------------------------------------------------------------------------------------------------------
The Trustees and officers of the trust, as of December 10, 2004, are listed below, together with their
principal occupations during the past five years. (Their titles may have varied during that period.) The
address of each Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
PRINCIPAL OCCUPATIONS & OTHER
POSITION(s) HELD TRUSTEE/OFFICER DIRECTORSHIPS(2) DURING
NAME, DATE OF BIRTH WITH FUND SINCE(1) THE PAST FIVE YEARS
- ------------------- ---------------- --------------- ------------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee and February 2004 Massachusetts Financial
(born 10/20/63) President Services Company, Chief
Executive Officer, President,
Chief Investment Officer and
Director
Robert C. Pozen(3) Trustee February 2004 Massachusetts Financial Services
(born 08/08/46) Company, Chairman (since
February 2004); Harvard Law
School (education), John Olin
Visiting Professor (since July
2002); Secretary of Economic
Affairs, The Commonwealth of
Massachusetts (January 2002 to
December 2002); Fidelity
Investments, Vice Chairman
(June 2000 to December 2001);
Fidelity Management & Research
Company (investment adviser),
President (March 1997 to July
2001); The Bank of New York
(financial services), Director;
Bell Canada Enterprises
(telecommunications), Director;
Medtronic, Inc. (medical
technology), Director; Telesat
(satellite communications),
Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair of February 1992 Private investor; Eastern
(born 05/01/36) Trustees Enterprises (diversified
services company), Chairman,
Trustee and Chief Executive
Officer (until November 2000)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 03/11/37) Chief of Cardiac Surgery;
Harvard Medical School,
Professor of Surgery
David H. Gunning Trustee January 2004 Cleveland-Cliffs Inc. (mining
(born 05/30/42) products and service provider),
Vice Chairman/ Director (since
April 2001); Encinitos Ventures
(private investment company),
Principal (1997 to April 2001);
Lincoln Electric Holdings, Inc.
(welding equipment manufacturer),
Director; Southwest Gas Corporation
(natural gas distribution company),
Director
William R. Gutow Trustee December 1993 Private investor and real
(born 09/27/41) estate consultant; Capitol
Entertainment Management
Company (video franchise),
Vice Chairman
Amy B. Lane Trustee January 2004 Retired; Merrill Lynch & Co.,
(born 02/08/53) Inc., Managing Director,
Investment Banking Group
(1997 to February 2001);
Borders Group, Inc. (book and
music retailer), Director;
Federal Realty Investment
Trust (real estate investment
trust), Trustee
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes
(born 06/23/35) (attorneys), Partner
William J. Poorvu Trustee August 1982 Private investor; Harvard
(born 04/10/35) University Graduate School of
Business Administration,
Class of 1961 Adjunct
Professor in Entrepreneurship
Emeritus
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 09/23/38) (acquisition planning
specialists), President; Wellfleet
Investments (investor in health
care companies), Managing General
Partner (since 1993); Cambridge
Nutraceuticals (professional
nutritional products), Chief
Executive Officer (until May 2001)
Elaine R. Smith Trustee February 1992 Independent health care
(born 04/25/46) industry consultant
OFFICERS
Robert J. Manning(3) President and February 2004 Massachusetts Financial
(born 10/20/63) Trustee Services Company, Chief
Executive Officer, President,
Chief Investment Officer and
Director
James R. Bordewick, Jr.(3) Assistant Secretary September 1990 Massachusetts Financial
(born 03/06/59) and Assistant Clerk Services Company, Senior Vice
President and Associate
General Counsel
Jeffrey N. Carp(3) Secretary and Clerk September 2004 Massachusetts Financial
(born 12/01/56) Services Company, Senior Vice
President, General Counsel and
Secretary (since April 2004); Hale
and Door LLP (law firm) (prior to
April 2004)
Stephanie A. DeSisto(3) Assistant Treasurer May 2003 Massachusetts Financial
(born 10/01/53) Services Company, Vice
President (since April 2003);
Brown Brothers Harriman &
Co., Senior Vice President
(November 2002 to April
2003); ING Groep N.V./Aeltus
Investment Management, Senior
Vice President (prior to
November 2002)
James F. DesMarais(3) Assistant Secretary September 2004 Massachusetts Financial
(born 03/09/61) and Assistant Clerk Services Company, Assistant
General Counsel
Robert R. Flaherty(3) Assistant Treasurer August 2000 Massachusetts Financial
(born 09/18/63) Services Company, Vice
President (since August
2000); UAM Fund Services,
Senior Vice President (prior
to August 2000)
Richard M. Hisey(3) Treasurer August 2002 Massachusetts Financial
(born 08/29/58) Services Company, Senior Vice
President (since July 2002); The
Bank of New York, Senior Vice
President (September 2000 to July
2002); Lexington Global Asset
Managers, Inc., Executive Vice
President and Chief Financial
Officer (prior to September 2000);
Lexington Funds, Chief Financial
Officer (prior to September 2000)
Brian T. Hourihan(3) Assistant Secretary September 2004 Massachusetts Financial
(born 11/11/64) and Assistant Clerk Services Company, Vice
President, Senior Counsel and
Assistant Secretary (since
June 2004); Affiliated
Managers Group, Inc., Chief
Legal Officer/Centralized
Compliance Program (January
to April 2004); Fidelity
Research & Management
Company, Assistant General
Counsel (prior to January
2004)
Ellen Moynihan(3) Assistant Treasurer April 1997 Massachusetts Financial
(born 11/13/57) Services Company, Vice
President
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance Officer compliance services),
Principal (since June 2004);
CRA Business Strategies Group
(consulting services),
Executive Vice President
(April 2003 to June 2004);
David L. Babson & Co.
(investment adviser),
Managing Director, Chief
Administrative Officer and
Director (February 1997 to
March 2003)
James O. Yost(3) Assistant Treasurer September 1990 Massachusetts Financial
(born 06/12/60) Services Company, Senior Vice
President
- ----------------
(1) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(3) "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 fund. The address of MFS
is 500 Boylston Street, Boston, Massachusetts 02116.
The trust does not hold annual shareholder meetings for the purpose of electing Trustees, and Trustees are not
elected for fixed terms. The trust will hold a shareholders' meeting in 2005 and at least once every five
years hereafter to elect Trustees. Each Trustee and officer holds office until his or her successor is chosen
and qualified or until his or her earlier death, resignation, retirement or removal. Messrs. Ives, Poorvu and
Sherratt and Ms. Lane are members of the trust's Audit Committee.
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 99 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 02116-3741 225 Franklin Street, Boston, MA 02110
JP Morgan Chase Bank
DISTRIBUTOR One Chase Manhattan Place
MFS Fund Distributors, Inc. New York, NY 10081
500 Boylston Street, Boston, MA 02116-3741
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
PORTFOLIO MANAGER Ernst & Young LLP
David R. Mannheim 200 Clarendon Street, Boston, MA 02116
- -------------------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION
- -------------------------------------------------------------------------------
A general description of the MFS funds' proxy voting policies and procedures 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 Web site at
http://www.sec. gov.
Information regarding how the fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's Web site at http://www.sec.gov.
- -------------------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE
- -------------------------------------------------------------------------------
The fund will file a complete schedule of portfolio holdings with the Securities
and Exchange Commission (the Commission) for the first and third quarters of
each fiscal year on Form N-Q. The fund's Form N-Q may be reviewed and copied at
the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. The fund's Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfo@sec.gov
or by writing the Public Reference Section at the above address.
A shareholder can also obtain the quarterly portfolio holdings report at
mfs.com.
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION (UNAUDITED)
In January 2005, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2004.
For the year ended October 31, 2004, income from foreign sources was
$10,457,399, and the fund designated a foreign tax credit of $1,222,016.
- --------------------------------------------------------------------------------
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.
INVESTOR SERVICE
Write to us at: MFS Service Center, Inc.
P.O. Box 55824
Boston, MA 02205-5824
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
- --------------------------------------------------------------------------------
Share prices, account 1-800-MFS-TALK
balances exchanges or (1-800-637-8255)
stock and bond outlooks touch-tone required 24 hours a day, 365 days a
year
- --------------------------------------------------------------------------------
[logo] M F S(R)
INVESTMENT MANAGEMENT
(C) 2004 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc., 500
Boylston Street, Boston, MA 02116.
LGE-ANN-12/04 49M
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 Form N-CSR that applies to the Registrant's
principal executive officer and principal financial and accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Mr. J. Atwood Ives and Ms. Amy B. Lane, 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 Form N-CSR. In addition, Mr. Ives and Ms. Lane are "independent"
members of the Audit Committee as defined in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(A) THROUGH 4(D) AND 4(G):
The Board of Trustees has appointed Ernst & Young LLP ("E&Y") to serve as
independent accountants to the series of the Registrant ("Funds"). The tables
below set forth the audit fees billed to the Funds as well as fees for non-audit
services provided to the Funds and/or to the Funds' investment adviser,
Massachusetts Financial Services Company ("MFS") and to various entities either
controlling, controlled by, or under common control with MFS that provide
ongoing services to the Funds ("MFS Related Entities").
For the fiscal years ended October 31, 2004 and 2003, audit fees billed to the
Funds by E&Y were as follows:
Audit Fees
FEES BILLED BY E&Y: 2004 2003
------- ------
MFS Global Equity Fund 33,550 31,660
MFS Global Total Return Fund 38,400 36,330
MFS Utilities Fund 30,600 28,850
------- ------
TOTAL 102,550 96,840
For the fiscal years ended October 31, 2004 and 2003, fees billed by E&Y for
audit-related, tax and other services provided to the Funds and for
audit-related, tax and other services provided to MFS and MFS Related Entities
were as follows:
Audit-Related Fees(1) Tax Fees(2) All Other Fees(3)
FEES BILLED BY E&Y: 2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
To MFS Global Equity 0 0 10,890 6,235 0 0
Fund
To MFS Global Total 0 0 11,790 7,065 0 0
Return Fund
To MFS Utilities Fund 0 0 10,390 5,745 0 0
------ -----
TOTAL FEES BILLED 0 0 33,070 19,045 0 0
BY E&Y TO
ABOVE FUNDS
To MFS and MFS Related 0 0 0 0 40,000 14,607
Entities relating directly to
the operations and financial
reporting of the above
Funds*
To Funds, MFS and MFS 0 0 40,070 19,045 40,000 24,607
Related Entities#
* This amount reflects the fees billed to MFS and MFS Related Entities for
non-audit services relating directly to the operations and financial
reporting of the Funds (which services also related to the operations and
financial reporting of other funds within the MFS Funds complex).
# This amount reflects the aggregate fees billed by E&Y for non-audit services
rendered to the Funds and for non-audit services rendered to MFS and the MFS
Related Entities.
(1) The fees included under "Audit-Related Fees" are fees related to assurance
and related services that are reasonably related to the performance of the
audit or review of financial statements, but not reported under "Audit
Fees," including accounting consultations, agreed-upon procedure reports,
attestation reports and comfort letters.
(2) The fees included under "Tax Fees" are fees associated with tax compliance,
tax advice and tax planning, including services relating to the filing or
amendment of federal, state or local income tax returns, regulated
investment company qualification reviews and tax distribution and analysis.
(3) The fees included under "All Other Fees" are fees for products and services
provided by E&Y other than those reported under "Audit Fees," "Audit-Related
Fees" and "Tax Fees."
For periods prior to May 6, 2003, the amounts shown above under "Audit-Related
Fees," "Tax Fees" and "All Other Fees" relate to permitted non-audit services
that would have been subject to pre-approval if the Securities and Exchange
Commission's rules relating to pre-approval of non-audit services had been in
effect.
ITEM 4(E)(1):
Set forth below are the policies and procedures established by the Audit
Committee of the Board of Trustees relating to the pre-approval of audit and
non-audit related services: To the extent required by applicable law,
pre-approval by the Audit Committee of the Board is needed for all audit and
permissible non-audit services rendered to the Funds and all permissible
non-audit services rendered to MFS or MFS Related Entities if the services
relate directly to the operations and financial reporting of the Registrant.
Pre-approval is currently on an engagement-by-engagement basis. In the event
pre-approval of such services is necessary between regular meetings of the Audit
Committee and it is not practical to wait to seek pre-approval at the next
regular meeting of the Audit Committee, pre-approval of such services may be
referred to the Chair of the Audit Committee for approval; provided that the
Chair may not pre-approve any individual engagement for such services exceeding
$50,000 or multiple engagements for such services in the aggregate exceeding
$100,000 between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
ITEM 4(E)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Funds and MFS and MFS Related Entities relating
directly to the operations and financial reporting of the Registrant disclosed
above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X (which permits audit committee approval after the
start of the engagement with respect to services other than audit review or
attest services, if certain conditions are satisfied).
ITEM 4(F): Not applicable.
ITEM 4(H): The Registrant's Audit Committee has considered whether the provision
by a Registrant's independent registered public accounting firm of non-audit
services to MFS and MFS Related Entities that were not pre-approved by the
Committee (because such services were provided prior to the effectiveness of SEC
rules requiring pre-approval or because such services did not relate directly to
the operations and financial reporting of the Registrant) was compatible with
maintaining the independence of the independent registered public accounting
firm as the Registrant's principal auditors.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Board of Trustees of the Registrant has adopted procedures by which
shareholders may send communications, including recommendations to the Board for
nominees to the Registrant's Board. Shareholders may mail written
recommendations to the Board to the attention of the Board of Trustees, MFS
Series Trust VI, Massachusetts Financial Services Company, 500 Boylston Street,
Boston, MA 02116, c/o , Jeffrey N. Carp, Secretary of the Fund. Shareholder
communications must be in writing and be signed by the shareholder and identify
the series of the Registrant to which they relate. Such recommendations must be
accompanied by the candidate's biographical and occupational data (including
whether the candidate would be an "interested person" of the Registrant), a
written consent of the candidate to be named as a nominee and to serve as
Trustee if elected, record and ownership information for the recommending
shareholder with respect to the series of the Registrant to which the
recommendation relates and a description of any arrangements or understandings
regarding recommendation of the candidate for consideration.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act) 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 second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. 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(b) 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 VI
By (Signature and Title)* ROBERT J. MANNING
------------------------------------------------------
Robert J. Manning, President
Date: December 21, 2004
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)* ROBERT J. MANNING
------------------------------------------------------
Robert J. Manning, President
(Principal Executive Officer)
Date: December 21, 2004
By (Signature and Title)* RICHARD M. HISEY
-----------------------------------------------------
Richard M. Hisey, Treasurer
(Principal Financial Officer and Accounting Officer)
Date: December 21, 2004
* Print name and title of each signing officer under his or her signature.