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)
Susan S. Newton
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, 2005
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ITEM 1. REPORTS TO STOCKHOLDERS.
MFS(R) UTILITIES FUND 10/31/05
ANNUAL REPORT
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LETTER FROM THE CEO 1
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PORTFOLIO COMPOSITION 2
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MANAGEMENT REVIEW 3
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PERFORMANCE SUMMARY 5
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EXPENSE TABLE 8
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PORTFOLIO OF INVESTMENTS 10
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FINANCIAL STATEMENTS 15
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NOTES TO FINANCIAL STATEMENTS 26
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REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 36
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TRUSTEES AND OFFICERS 37
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 42
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PROXY VOTING POLICIES AND INFORMATION 46
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QUARTERLY PORTFOLIO DISCLOSURE 46
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FEDERAL TAX INFORMATION 46
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CONTACT INFORMATION BACK COVER
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THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF
SHAREHOLDERS. IT IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
Most investors are familiar with the basic principles of investing - focus on
the long term and keep your assets diversified across different investment
categories. Still, it is surprising how often we forget these basic lessons.
Certainly, the dot-com euphoria that overtook Wall Street in the late 1990s had
many people hoping they could become millionaires overnight. But the market
decline that started in the spring of 2000 taught everyone how misguided those
hopes had been.
Now, less than five years after the market taught a harsh lesson in the follies
of speculative investing, we are seeing a number of trends that suggest many
investors, including professionals, are hoping for overnight miracles again. We
see a steady stream of market "gurus" on television news shows, promising to
teach amateur investors the strategies that will allow them to get rich quick.
Hedge funds - which by their nature move in and out of investments rapidly -
have soared in popularity over the past five years. We are reminded every day
that we live in a "what have you done for me lately?" world, but this mindset
should not influence how we invest and manage our money. In fact, investors
often fall short of their goals because they trade in and out of investments too
frequently and at inopportune times.
Throughout our entire 80-year history, MFS' money management process has focused
on long-term investment opportunities. We firmly believe that one of the best
ways to realize long-term financial goals - be it a college education, a
comfortable retirement, or a secure family legacy - is to follow a three-pronged
approach that focuses on longer time horizons. Allocate holdings across the
major asset classes - including stocks, bonds, and cash. Diversify within each
class to take advantage of different market segments and investing styles. And
rebalance assets regularly to maintain a desired asset allocation.*
This long-term approach requires diligence and patience, two traits that in our
experience are essential to capitalizing on the many opportunities the financial
markets can offer.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
December 15, 2005
* Asset allocation, diversification, and rebalancing does 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.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE*
Stocks 90.9%
Bonds 3.0%
Convertible Preferred Stocks 2.9%
Cash & Other Net Assets 2.3%
Preferred Stocks 0.7%
TOP TEN HOLDINGS*
TXU Corp. 4.4%
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NRG Energy, Inc. 4.3%
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AES Corp. 4.1%
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Exelon Corp. 2.8%
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PPL Corp. 2.7%
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Sprint Nextel Corp. 2.6%
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Edison International 2.1%
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Constellation Energy Group, Inc. 2.1%
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FirstEnergy Corp. 2.0%
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Williams Cos., Inc. 2.0%
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TOP FIVE STOCK INDUSTRIES
Utilities - Electric Power 46.2%
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Telephone Services 11.3%
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Natural Gas Distribution 8.2%
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Broadcast & Cable TV 7.8%
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Natural Gas Pipeline 4.9%
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COUNTRY WEIGHTINGS*
United States 69.7%
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Great Britain 5.1%
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Mexico 3.9%
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France 3.7%
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Spain 3.4%
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Germany 3.3%
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Brazil 2.9%
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Italy 2.2%
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Norway 1.7%
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Other Countries 4.1%
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* For the purposes of this graphical presentation, the bond component includes
both accrued interest amounts and the equivalent exposure from any derivative
holdings, if applicable.
Percentages are based on net assets as of 10/31/05.
The portfolio is actively managed, and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the twelve months ended October 31, 2005, Class A shares of the MFS
Utilities Fund had a total return of 25.33%, at net asset value. In comparison,
the fund's benchmark, the Standard & Poor's 500 Utilities Index, returned
23.86%.
CONTRIBUTORS TO PERFORMANCE
Strong stock selection in the electric power industry contributed to the fund's
relative returns for the period. Within this industry, our positions in
wholesale power generator NRG Energy and Brazilian electricity provider CPFL
Energia, neither of which are benchmark constituents, were among the fund's top
contributors. Additionally, not owning electric power companies Southern Company
and Consolidated Edison, and underweighting Duke Energy* (all benchmark
constituents which lagged overall benchmark returns) aided relative performance.
Stock selection in the natural gas distribution industry also boosted relative
results. Our position in Questar, which is not a benchmark constituent, helped
performance as the stock appreciated significantly over the period. Not owing
weak-performing benchmark constituent KeySpan also helped.
Elsewhere, our holdings in Mexican wireless communications company America
Movil, oilfield services firm Halliburton, and cable services provider
Cablevision Systems*, none of which are represented in the benchmark, positively
impacted relative performance.
DETRACTORS FROM PERFORMANCE
Our positions in the broadcast and cable television industry, which is not
represented in the benchmark, hindered relative performance. Among the fund's
top detractors were Viacom and News Corp., both of which underperformed the
benchmark over the period.
Holdings in the telephone services industry also hurt relative results. Several
stocks within this industry, which is not represented in the index, were among
the fund's greatest individual detractors. These included Citizens
Communications, Sprint Nextel, and Deutsche Telekom*.
Although overall stock selection in the electric power industry contributed to
relative performance, our underweighted positions in several strong-performing
benchmark constituents detracted from results. These included Public Service
Enterprise Group*, TXU, and Exelon. Our holdings in wireless communications
provider Vodafone, which is not a benchmark constituent and performed well below
the index, also held back relative returns.
The fund's cash position was also a detractor from relative performance. As with
nearly all mutual funds, this portfolio holds cash to buy new holdings and to
provide liquidity. In a period when equity markets rose as measured by the
fund's benchmark, holding cash hurt performance versus the benchmark, which has
no cash position.
Respectfully,
Maura Shaughnessy Robert D. Persons
Portfolio Manager Portfolio Manager
Note to Shareholders: Effective May, 1, 2005, Robert D. Persons became a
portfolio manager of the fund.
* Security was not held in portfolio at period-end.
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 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 10/31/05
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. (FOR THE MOST
RECENT MONTH-END PERFORMANCE FOR CLASS I SHARES CALL 1-888-808-6374.) 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. HIGH
SHORT-TERM RETURNS FOR ANY PERIOD MAY BE AND LIKELY WERE ATTRIBUTABLE TO
FAVORABLE MARKET CONDITIONS DURING THAT PERIOD, WHICH MAY NOT BE REPEATABLE. 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 Utilities Fund Standard & Poor's
-- Class A 500 Utilities Index
10/95 $ 9,525 $10,000
10/96 11,278 11,158
10/97 14,506 12,187
10/98 17,715 15,478
10/99 21,799 15,725
10/00 27,441 21,366
10/01 19,834 16,555
10/02 14,325 10,535
10/03 18,864 13,301
10/04 24,223 16,509
10/05 30,359 20,447
TOTAL RETURNS THROUGH 10/31/05
AVERAGE ANNUAL WITHOUT SALES CHARGE
Share class Class inception date 1-yr 5-yr 10-yr
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A 2/14/92 25.33% 2.04% 12.29%
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B 9/07/93 24.39% 1.28% 11.46%
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C 1/03/94 24.37% 1.28% 11.46%
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I 1/02/97 25.59% 2.30% 12.55%
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R 12/31/02 25.05% 1.88% 12.20%
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R1 4/01/05 24.26% 1.26% 11.44%
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R2 4/01/05 24.48% 1.29% 11.46%
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R3 10/31/03 24.66% 1.36% 11.50%
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R4 4/01/05 25.22% 2.02% 12.28%
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R5 4/01/05 25.44% 2.06% 12.30%
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AVERAGE ANNUAL
Comparative benchmarks
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Average utility fund+ 20.93% 0.46% 9.21%
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Standard & Poor's 500 Utilities Index# 23.86% -0.88% 7.41%
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AVERAGE ANNUAL WITH SALES CHARGE
Share class
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A 19.38% 1.05% 11.75%
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B 20.39% 0.93% 11.46%
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C 23.37% 1.28% 11.46%
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Class I, R, R1, R2, R3, R4, and R5 shares do not have a sales charge. Please see
Notes to Performance Summary for more details.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
The Standard & Poor's 500 Utilities Index - is a capitalization weighted index
designed to measure the utilities sector, including those companies considered
electric, gas or water utilities, or companies that operate as independent
producers and/or distributors of power.
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 prior month of purchase) reflect
the deduction of the 1% CDSC. Class R shares have no initial sales charge or
CDSC and are available only to existing Class R shareholders. Class I, R1, R2,
R3, R4, and R5 shares have no initial sales charge or CDSC. Class I shares are
only available to certain eligible investors, and Class R1, R2, R3, R4, and R5
shares are only available to certain retirement plans.
Performance for Classes I, R, R4, and R5 shares includes the performance of the
fund's Class A shares for periods prior to their offering. Performance for
Classes R1, R2, and R3 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 share class to which it is blended, and lower performance for
share classes with lower operating expenses than the 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.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD, MAY 1, 2005 THROUGH
OCTOBER 31, 2005.
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, 2005 through October 31, 2005.
ACTUAL EXPENSES
The first line for each share class in the table below 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 below 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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Expenses
Paid During
Annualized Beginning Ending Period**
Share Expense Account Value Account Value 5/01/05-
Class Ratio 5/01/05 10/31/05 10/31/05
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Actual 1.13% $1,000.00 $1,129.30 $6.06
A ------------------------------------------------------------------------
Hypothetical* 1.13% $1,000.00 $1,019.51 $5.75
- -------------------------------------------------------------------------------
Actual 1.89% $1,000.00 $1,125.70 $10.13
B ------------------------------------------------------------------------
Hypothetical* 1.89% $1,000.00 $1,015.68 $9.60
- -------------------------------------------------------------------------------
Actual 1.88% $1,000.00 $1,125.60 $10.07
C ------------------------------------------------------------------------
Hypothetical* 1.88% $1,000.00 $1,015.73 $9.55
- -------------------------------------------------------------------------------
Actual 0.88% $1,000.00 $1,130.40 $4.73
I ------------------------------------------------------------------------
Hypothetical* 0.88% $1,000.00 $1,020.77 $4.48
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Actual 1.38% $1,000.00 $1,128.10 $7.40
R ------------------------------------------------------------------------
Hypothetical* 1.38% $1,000.00 $1,018.25 $7.02
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Actual 2.05% $1,000.00 $1,124.70 $10.98
R1 ------------------------------------------------------------------------
Hypothetical* 2.05% $1,000.00 $1,014.87 $10.41
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Actual 1.71% $1,000.00 $1,126.40 $9.17
R2 ------------------------------------------------------------------------
Hypothetical* 1.71% $1,000.00 $1,016.59 $8.69
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Actual 1.60% $1,000.00 $1,125.90 $8.57
R3 ------------------------------------------------------------------------
Hypothetical* 1.60% $1,000.00 $1,017.14 $8.13
- -------------------------------------------------------------------------------
Actual 1.28% $1,000.00 $1,128.50 $6.87
R4 ------------------------------------------------------------------------
Hypothetical* 1.28% $1,000.00 $1,018.75 $6.51
- -------------------------------------------------------------------------------
Actual 0.98% $1,000.00 $1,130.10 $5.26
R5 ------------------------------------------------------------------------
Hypothetical* 0.98% $1,000.00 $1,020.27 $4.99
- -------------------------------------------------------------------------------
* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio, 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.
Effective October 1, 2005 the fund's Class R1, Class R2, and Class R3 retirement
plan administration and service fee was reduced (as described in Note 3 of the
Notes to the Financial Statements). Had this fee reduction been in effect
throughout the entire six month period, the annualized expense ratio would have
been 1.97, 1.59%, and 1.51% for Class R1, Class R2, and Class R3, respectively,
and the actual expenses paid during the period would have been $10.55, $8.53,
and $8.09 for Class R1, Class R2, and Class R3, respectively.
PORTFOLIO OF INVESTMENTS - 10/31/05
The Portfolio of Investments is a complete list of all securities owned by your
fund. It is categorized by broad-based asset classes.
Stocks - 90.9%
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ISSUER SHARES $ VALUE
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Broadcast & Cable TV - 7.8%
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Citadel Broadcasting Corp.^ 724,740 $ 9,986,918
Comcast Corp., "Special A"* 1,049,600 28,769,536
Grupo Televisa S.A., ADR^ 359,400 26,272,140
News Corp., "A" 894,000 12,739,500
NTL, Inc.^* 187,800 11,515,896
Time Warner, Inc. 856,800 15,276,744
TV Azteca S.A. de C.V 22,380,100 13,076,489
Viacom, Inc., "B" 727,600 22,533,772
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$ 140,170,995
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Construction - 0.2%
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Cyrela Brazil Realty S.A. Empreendimentos e Participacoes 424,738 $ 3,341,272
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Energy - Independent - 0.7%
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Southwestern Energy Co.* 181,280 $ 13,150,051
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Energy - Integrated - 3.3%
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Amerada Hess Corp. 130,700 $ 16,350,570
Chevron Corp. 176,500 10,072,855
Petroleo Brasileiro S.A., ADR^ 300,700 19,214,730
Total S.A 55,900 14,030,748
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$ 59,668,903
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Natural Gas - Distribution - 8.2%
- ------------------------------------------------------------------------------------------------------
AGL Resources, Inc. 930,425 $ 32,741,656
MDU Resources Group, Inc.^ 744,150 24,534,626
Northwestern Corp.^ 71,920 2,139,620
Questar Corp. 305,700 24,073,875
Rosetta Resources, Inc.##* 895,410 16,565,085
Sempra Energy 701,100 31,058,730
Southern Union Co.* 629,600 14,808,192
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$ 145,921,784
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Natural Gas - Pipeline - 4.9%
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El Paso Corp.^ 1,779,600 $ 21,106,056
Enagas S.A.^ 1,742,755 30,812,057
Williams Cos., Inc. 1,587,400 35,399,020
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$ 87,317,133
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Network & Telecom - 0.1%
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AFK Sistema, GDR## 105,317 $ 2,359,101
- ------------------------------------------------------------------------------------------------------
Oil Services - 4.2%
- ------------------------------------------------------------------------------------------------------
ENSCO International, Inc. 329,900 $ 15,040,141
GlobalSantaFe Corp. 607,800 27,077,490
Halliburton Co. 202,500 11,967,750
National Oilwell Varco, Inc.* 114,100 7,127,827
Noble Corp. 133,600 8,601,168
Pride International, Inc.* 204,800 5,748,736
---------------
$ 75,563,112
- ------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 4.0%
- ------------------------------------------------------------------------------------------------------
Alamosa Holdings, Inc.* 183,370 $ 2,713,876
America Movil S.A. de C.V., ADR, "L"^ 1,168,000 30,660,000
Hutchison Telecommunications International Ltd.* 723,000 904,683
MTN Group Ltd. 103,100 767,387
PT Indosat Tbk 3,011,000 1,450,099
Vodafone Group PLC 13,110,851 34,380,852
---------------
$ 70,876,897
- ------------------------------------------------------------------------------------------------------
Telephone Services - 11.3%
- ------------------------------------------------------------------------------------------------------
Alltel Corp.^ 168,900 $ 10,448,154
Citizens Communications Co.^ 2,149,700 26,312,328
FastWeb S.p.A.*^ 371,029 16,886,544
France Telecom S.A.^ 839,010 21,803,125
KT Freetel Co. Ltd. 440,330 9,447,693
Philippine Long Distance Telephone Co. 29,700 902,407
Sprint Nextel Corp. 2,021,800 47,128,158
Telecom Corp. of New Zealand Ltd.^ 2,566,427 10,468,352
Telefonica S.A 801,244 12,783,070
Telenor A.S.A.^ 3,076,100 30,039,577
Telus Corp. (Non Voting) 392,840 14,735,865
---------------
$ 200,955,273
- ------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 46.2%
- ------------------------------------------------------------------------------------------------------
AES Corp.* 4,628,200 $ 73,542,098
AWG PLC 842,000 14,320,310
British Energy Group PLC 114,200 896,892
Constellation Energy Group, Inc. 676,600 37,077,680
CPFL Energia S.A., ADR^ 555,560 17,316,805
Dominion Resources, Inc. 342,800 26,080,224
DTE Energy Co. 600,100 25,924,320
E.ON AG 334,907 30,348,578
Edison International 868,800 38,018,688
Endesa S.A.^ 653,701 16,258,841
Enel S.p.A.^ 2,803,640 22,616,721
Enersis S.A., ADR^ 387,300 4,233,189
Entergy Corp. 460,300 32,552,416
Exelon Corp. 956,000 49,740,680
FirstEnergy Corp. 759,900 36,095,250
Fortum Corp. 694,160 12,289,449
FPL Group, Inc. 501,500 21,594,590
International Power PLC 6,945,201 28,501,247
National Grid PLC 469,800 4,292,145
NRG Energy, Inc.^* 1,787,700 76,888,977
OGE Energy Corp.^ 223,700 5,762,512
PNM Resources, Inc.^ 216,000 5,475,600
PPL Corp. 1,554,800 48,727,432
Reliant Energy, Inc.* 1,496,200 19,001,740
RWE AG^ 432,900 27,646,753
SCANA Corp. 388,100 15,395,927
Scottish Power PLC 910,300 8,904,319
Suez S.A.^ 924,722 25,050,244
TXU Corp. 783,200 78,907,400
Veolia Environnement 122,550 5,101,647
Xcel Energy, Inc.^ 923,000 16,918,590
---------------
$ 825,481,264
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,434,532,381) $ 1,624,805,785
- ------------------------------------------------------------------------------------------------------
Bonds - 2.9%
- ------------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ------------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 0%
- ------------------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, FRN, 3.3861%, 2023##^^ $ 4,150,223 $ 495,165
- ------------------------------------------------------------------------------------------------------
Network & Telecom - 0.2%
- ------------------------------------------------------------------------------------------------------
Citizens Communications Co., 9%, 2031 $ 3,422,000 $ 3,379,225
- ------------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.3%
- ------------------------------------------------------------------------------------------------------
Rogers Wireless, Inc., 8%, 2012 $ 4,765,000 $ 5,038,988
- ------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.4%
- ------------------------------------------------------------------------------------------------------
Beaver Valley Funding Corp., 9%, 2017 $ 3,147,000 $ 3,633,621
CMS Energy Corp., 8.5%, 2011 6,080,000 6,642,400
Empresa Nacional de Electricidad S.A., 8.35%, 2013 3,010,000 3,371,573
Enersis S.A., 7.375%, 2014 6,840,000 7,206,419
PSEG Energy Holdings LLC, 8.625%, 2008 7,271,000 7,543,663
TXU Corp., 5.55%, 2014 7,271,000 6,683,649
TXU Corp., 6.5%, 2024 9,102,000 8,208,147
TXU Eastern Funding Co., 6.75%, 2009** 793,000 142,740
---------------
$ 43,432,212
- ------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $54,140,810) $ 52,345,590
- ------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 2.9%
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ------------------------------------------------------------------------------------------------------
Energy - Independent - 0.2%
- ------------------------------------------------------------------------------------------------------
Chesapeake Energy Corp., 4.5% 26,550 $ 2,708,100
---------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.2%
- ------------------------------------------------------------------------------------------------------
Southern Union Co., 5% 82,180 $ 4,063,801
---------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 1.5%
- ------------------------------------------------------------------------------------------------------
El Paso Corp., 4.99%## 18,000 $ 19,545,750
Williams Cos., Inc., 5.5% 75,250 7,901,250
---------------
$ 27,447,000
- ------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 1.0%
- ------------------------------------------------------------------------------------------------------
PNM Resources, Inc., 6.75% 349,300 $ 16,801,330
- ------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $49,665,939) $ 51,020,231
- ------------------------------------------------------------------------------------------------------
Preferred Stocks - 0.7%
- ------------------------------------------------------------------------------------------------------
Utilities - Electric Power - 0.7%
- ------------------------------------------------------------------------------------------------------
AES Tiete S.A 578,838,500 $ 12,734,447
- ------------------------------------------------------------------------------------------------------
Total Preferred Stocks (Identified Cost, $9,502,818) $ 12,734,447
- ------------------------------------------------------------------------------------------------------
Short-Term Obligation - 3.1%
- ------------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ------------------------------------------------------------------------------------------------------
General Electric Co., 4.03%, due 11/01/05, at Amortized Cost< $ 54,711,000 $ 54,711,000
- ------------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 7.5%
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 65,410,675 $ 65,410,675
- ------------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- -----------------------------------------------------------------------------------------------------
Morgan Stanley Repurchase Agreement, 4.03%, due 11/01/05,
total to be received $68,957,124 (secured by various U.S.
Treasury and Federal Agency obligations in an individually
traded account), at Cost $ 68,949,405 $ 68,949,405
- ------------------------------------------------------------------------------------------------------
Total Collateral for Securities Loaned, at Amortized Cost $ 134,360,080
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,736,913,028) (+) $ 1,929,977,133
- ------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (8.0)% (143,167,938)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $ 1,786,809,195
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
^ All or a portion of this security is on loan.
## SEC Rule 144A restriction.
< The rate shown represents an annualized yield at time of purchase.
(+) As of October 31, 2005 the fund had two securities representing $3,261,508 and 0.2% of net assets that
were fair valued in accordance with the policies adopted by the Board of Trustees.
^^ Interest only security for which the fund receives interest on notional principal (Par amount). Par amount
shown is the notional principal and does not reflect the cost of the security.
**Non-income producing security - in default.
Portfolio of Investments - continued
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are netted by currency.
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------
SALES
- -------------------------------------------------------------------------------------------------------------
EUR 98,703,162 11/22/05 - 12/05/05 $119,545,068 $118,257,814 $1,287,254
GBP 51,457,679 11/02/05 - 1/31/06 92,149,310 90,991,745 1,157,565
- -------------------------------------------------------------------------------------------------------------
$211,694,378 $209,249,559 $2,444,819
- -------------------------------------------------------------------------------------------------------------
PURCHASES
- -------------------------------------------------------------------------------------------------------------
EUR 3,538,148 11/22/05 $4,270,779 $4,240,253 $(30,526)
GBP 26,680,966 11/02/05 47,574,232 47,193,554 (380,678)
- -------------------------------------------------------------------------------------------------------------
$51,845,011 $51,433,807 $(411,204)
- -------------------------------------------------------------------------------------------------------------
At October 31, 2005, forward foreign currency purchases and sales under master netting agreements excluded above
amounted to a net receivable of $3,063 with Goldman Sachs & Co.
At October 31, 2005, the fund had sufficient cash and/or securities to cover any commitments under all derivative contracts.
The following abbreviations are used in the Portfolio of Investments and are defined:
ADR American Depository Receipt
EUR Euro
FRN Floating Rate Note. This interest rate is the rate in effect as of period end.
GBP British Pound
GDR Global Depository Note
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 the fund.
AT 10/31/05
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value, including $130,310,298 of securities
on loan (identified cost, $1,736,913,028) $1,929,977,133
Cash 591,901
Foreign currency, at value (identified cost, $1,258,874) 1,249,498
Receivable for forward foreign currency exchange contracts 2,487,442
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 3,063
Receivable for investments sold 13,110,220
Receivable for fund shares sold 3,278,493
Interest and dividends receivable 1,671,445
Other assets 1,711
- -------------------------------------------------------------------------------------------------------
Total assets $1,952,370,906
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Distributions payable $306,616
Payable for forward foreign currency exchange contracts 453,827
Payable for investments purchased 25,935,234
Payable for fund shares reacquired 3,671,787
Collateral for securities loaned, at value 134,360,080
Payable to affiliates
Management fee 84,960
Shareholder servicing costs 272,116
Distribution and service fees 86,474
Administrative services fee 8,016
Retirement plan administration and services fees 61
Accrued expenses and other liabilities 382,540
- -------------------------------------------------------------------------------------------------------
Total liabilities $165,561,711
- -------------------------------------------------------------------------------------------------------
Net assets $1,786,809,195
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid-in capital $2,135,673,187
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 195,111,832
Accumulated net realized gain (loss) on investments and
foreign currency transactions (542,659,475)
Accumulated distributions in excess of net investment income (1,316,349)
- -------------------------------------------------------------------------------------------------------
Net assets $1,786,809,195
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 145,136,567
- -------------------------------------------------------------------------------------------------------
Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $933,534,770
Shares outstanding 75,721,571
- -------------------------------------------------------------------------------------------------------
Net asset value per share $12.33
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$12.33) $12.94
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $617,687,242
Shares outstanding 50,265,253
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.29
- -------------------------------------------------------------------------------------------------------
Class C shares
- -------------------------------------------------------------------------------------------------------
Net assets $218,334,923
Shares outstanding 17,750,073
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $12.30
- -------------------------------------------------------------------------------------------------------
Class I shares
- -------------------------------------------------------------------------------------------------------
Net assets $6,630,025
Shares outstanding 536,941
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $12.35
- -------------------------------------------------------------------------------------------------------
Class R shares
- -------------------------------------------------------------------------------------------------------
Net assets $6,822,974
Shares outstanding 554,017
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $12.32
- -------------------------------------------------------------------------------------------------------
Class R1 shares
- -------------------------------------------------------------------------------------------------------
Net assets $879,080
Shares outstanding 71,518
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $12.29
- -------------------------------------------------------------------------------------------------------
Class R2 shares
- -------------------------------------------------------------------------------------------------------
Net assets $376,525
Shares outstanding 30,646
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $12.29
- -------------------------------------------------------------------------------------------------------
Class R3 shares
- -------------------------------------------------------------------------------------------------------
Net assets $2,425,889
Shares outstanding 196,996
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $12.31
- -------------------------------------------------------------------------------------------------------
Class R4 shares
- -------------------------------------------------------------------------------------------------------
Net assets $61,561
Shares outstanding 4,993
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $12.33
- -------------------------------------------------------------------------------------------------------
Class R5 shares
- -------------------------------------------------------------------------------------------------------
Net assets $56,206
Shares outstanding 4,559
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $12.33
- -------------------------------------------------------------------------------------------------------
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.
YEAR ENDED 10/31/05
NET INVESTMENT INCOME
- -------------------------------------------------------------------------------------------------------
Income
Dividends $35,570,027
Interest 9,439,882
Foreign taxes withheld (1,472,376)
- -------------------------------------------------------------------------------------------------------
Total investment income $43,537,533
- -------------------------------------------------------------------------------------------------------
Expenses
Management fee $9,532,864
Distribution and service fees 10,094,940
Shareholder servicing costs 3,044,039
Administrative services fee 183,998
Retirement plan administration and services fees 3,488
Independent trustees' compensation 37,291
Custodian fee 659,614
Printing 120,178
Postage 100,346
Auditing fees 52,350
Legal fees 46,657
Shareholder solicitation expenses 127,180
Miscellaneous 168,271
- ------------------------------------------------------------------------------------------------------
Total expenses $24,171,216
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (152,563)
Reduction of expenses by investment adviser (6,614)
- ------------------------------------------------------------------------------------------------------
Net expenses $24,012,039
- ------------------------------------------------------------------------------------------------------
Net investment income $19,525,494
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions (net of $115,157 country tax) $277,005,745
Foreign currency transactions 2,968,899
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $279,974,644
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $31,729,124
Translation of assets and liabilities in foreign currencies 6,426,418
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $38,155,542
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $318,130,186
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $337,655,680
- ------------------------------------------------------------------------------------------------------
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 2005 2004
CHANGE IN NET ASSETS
- -------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income $19,525,494 $17,492,923
Net realized gain (loss) on investments and foreign
currency transactions 279,974,644 137,466,971
Net unrealized gain (loss) on investments and foreign
currency translation 38,155,542 151,382,883
Net increase from gains realized on the disposal of
investments in violation of restrictions -- 106,590
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $337,655,680 $306,449,367
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A $(11,228,838) $(8,504,149)
Class B (4,389,574) (4,726,808)
Class C (1,462,469) (1,444,683)
Class I (77,745) (39,162)
Class R (58,110) (15,016)
Class R1 (1,404) --
Class R2 (691) --
Class R3 (10,336) (520)
Class R4 (471) --
Class R5 (554) --
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(17,230,192) $(14,730,338)
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $121,017,931 $(103,250,580)
- -------------------------------------------------------------------------------------------------------
Redemption fees $4,318 $2,101
- -------------------------------------------------------------------------------------------------------
Total change in net assets $441,447,737 $188,470,550
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period $1,345,361,458 $1,156,890,908
At end of period (including accumulated distributions in
excess of net investment income of $1,316,349 and
undistributed net investment income of $2,911,845) $1,786,809,195 $1,345,361,458
- -------------------------------------------------------------------------------------------------------
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
life of a particular share class, if shorter). 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
share class (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.
CLASS A
YEARS ENDED 10/31
-------------------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $9.98 $7.89 $6.13 $8.68 $13.66
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.18 $0.16 $0.15 $0.16 $0.21
Net realized and unrealized gain
(loss) on investments and foreign
currency 2.34 2.08 1.76 (2.55) (3.70)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.52 $2.24 $1.91 $(2.39) $(3.49)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.17) $(0.15) $(0.15) $(0.16) $(0.27)
From net realized gain on
investments and foreign currency
transactions -- -- -- -- (1.22)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.17) $(0.15) $(0.15) $(0.16) $(1.49)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.33 $9.98 $7.89 $6.13 $8.68
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 25.33 28.41[+](S)(S) 31.69 (27.78) (27.72)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.13 1.15 1.19 1.15 1.06
Expenses after expense reductions## 1.13 1.15 1.19 1.11 1.03
Net investment income(S) 1.60 1.83 2.11 2.10 1.95
Portfolio turnover 101 97 144 80 110
Net assets at end of period
(000 Omitted) $933,535 $586,730 $464,832 $382,712 $733,848
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B
YEARS ENDED 10/31
----------------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $9.95 $7.87 $6.11 $8.65 $13.62
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.10 $0.10 $0.10 $0.10 $0.13
Net realized and unrealized gain (loss)
on investments and foreign currency 2.32 2.05 1.76 (2.53) (3.69)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.42 $2.15 $1.86 $(2.43) $(3.56)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.08) $(0.07) $(0.10) $(0.11) $(0.19)
From net realized gain on investments
and foreign currency transactions -- -- -- -- (1.22)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.08) $(0.07) $(0.10) $(0.11) $(1.41)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.29 $9.95 $7.87 $6.11 $8.65
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 24.39 27.50[+](S)(S) 30.66 (28.30) (28.28)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.89 1.91 1.94 1.90 1.81
Expenses after expense reductions## 1.89 1.91 1.94 1.86 1.78
Net investment income(S) 0.88 1.10 1.38 1.35 1.20
Portfolio turnover 101 97 144 80 110
Net assets at end of period
(000 Omitted) $617,687 $575,642 $531,008 $481,361 $984,740
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C
YEARS ENDED 10/31
----------------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $9.96 $7.87 $6.11 $8.66 $13.63
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.10 $0.10 $0.10 $0.10 $0.13
Net realized and unrealized gain (loss)
on investments and foreign currency 2.32 2.06 1.76 (2.54) (3.69)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.42 $2.16 $1.86 $(2.44) $(3.56)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.08) $(0.07) $(0.10) $(0.11) $(0.19)
From net realized gain on investments
and foreign currency transactions -- -- -- -- (1.22)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.08) $(0.07) $(0.10) $(0.11) $(1.41)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.30 $9.96 $7.87 $6.11 $8.66
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 24.37 27.63[+](S)(S) 30.66 (28.38) (28.26)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.88 1.90 1.94 1.90 1.81
Expenses after expense reductions## 1.88 1.90 1.94 1.86 1.78
Net investment income(S) 0.87 1.10 1.38 1.35 1.20
Portfolio turnover 101 97 144 80 110
Net assets at end of period
(000 Omitted) $218,335 $177,875 $159,113 $144,861 $327,715
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS I
YEARS ENDED 10/31
----------------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $10.00 $7.91 $6.14 $8.69 $13.68
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.21 $0.18 $0.17 $0.18 $0.24
Net realized and unrealized gain (loss)
on investments and foreign currency 2.34 2.08 1.77 (2.55) (3.71)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.55 $2.26 $1.94 $(2.37) $(3.47)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.20) $(0.17) $(0.17) $(0.18) $(0.30)
From net realized gain on investments
and foreign currency transactions -- -- -- -- (1.22)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(0.20) $(0.17) $(0.17) $(0.18) $(1.52)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.35 $10.00 $7.91 $6.14 $8.69
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)&*** 25.59 28.84[+](S)(S) 31.96 (27.56) (27.58)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 0.88 0.90 0.94 0.90 0.81
Expenses after expense reductions## 0.88 0.90 0.94 0.86 0.78
Net investment income(S) 1.81 2.07 2.36 2.33 2.19
Portfolio turnover 101 97 144 80 110
Net assets at end of period
(000 Omitted) $6,630 $2,823 $1,744 $1,306 $2,604
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R
YEARS ENDED 10/31
---------------------------------------------------
2005 2004 2003**
Net asset value, beginning of period $9.97 $7.89 $6.40
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment income# $0.15 $0.15 $0.11
Net realized and unrealized gain (loss) on investments and
foreign currency 2.34 2.05 1.47
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.49 $2.20 $1.58
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------
From net investment income $(0.14) $(0.12) $(0.09)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.32 $9.97 $7.89
- --------------------------------------------------------------------------------------------------------------------
Total return (%)&*** 25.05 28.11[+](S)(S) 24.78++
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.38 1.40 1.42+
Expenses after expense reductions## 1.38 1.40 1.42+
Net investment income 1.33 1.64 1.47+
Portfolio turnover 101 97 144
Net assets at end of period (000 Omitted) $6,823 $2,169 $189
- --------------------------------------------------------------------------------------------------------------------
CLASS R1 CLASS R2
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $11.04 $11.04
- --------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------
Net investment income# $0.01 $0.03
Net realized and unrealized gain (loss) on investments
and foreign currency 1.29 1.29
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.30 $1.32
- --------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------
From net investment income $(0.05) $(0.07)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.29 $12.29
- --------------------------------------------------------------------------------------------------------------------
Total return (%)&*** 11.77++ 11.96++
- --------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.08+ 1.77+
Expenses after expense reductions## 2.05+ 1.71+
Net investment income 0.12+ 0.37+
Portfolio turnover 101 101
Net assets at end of period (000 Omitted) $879 $377
- --------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R3
YEARS ENDED 10/31
-----------------------------------------------------
2005 2004
Net asset value, beginning of period $9.97 $7.89
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income# $0.11 $0.14
Net realized and unrealized gain (loss) on investments
and foreign currency 2.34 2.04
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $2.45 $2.18
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
From net investment income $(0.11) $(0.10)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.31 $9.97
- -----------------------------------------------------------------------------------------------------------------
Total return (%)&*** 24.66 27.77[+](S)(S)
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.62 1.65
Expenses after expense reductions## 1.60 1.65
Net investment income 0.97 1.42
Portfolio turnover 101 97
Net assets at end of period (000 Omitted) $2,426 $122
- -----------------------------------------------------------------------------------------------------------------
CLASS R4 CLASS R5
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $11.08 $11.08
- -----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------
Net investment income# $0.10 $0.13
Net realized and unrealized gain (loss) on investments
and foreign currency 1.25 1.24
- -----------------------------------------------------------------------------------------------------------------
Total from investment operations $1.35 $1.37
- -----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------
From net investment income $(0.10) $(0.12)
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.33 $12.33
- -----------------------------------------------------------------------------------------------------------------
Total return (%)&*** 12.22++ 12.41++
- -----------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.26+ 0.96+
Expenses after expense reductions## 1.26+ 0.96+
Net investment income 1.50+ 1.83+
Portfolio turnover 101 101
Net assets at end of period (000 Omitted) $62 $56
- -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years resulted in a per share impact of less than $0.01.
** For the period from the class' inception, December 31, 2002 (Class R), and April 1, 2005 (Classes R1, R2, R4, and R5)
through the stated period end.
*** Certain expenses have been reduced without which performance would have been lower. + Annualized.
++ Not annualized.
# 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. 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.
(+) Total returns do not include any applicable sales charges.
(S) Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting Guide for Investment
Companies and began amortizing and accreting all premiums and discounts on debt securities. Per share data and ratios for
periods prior to November 1, 2001 have not been restated to reflect this change.
(S)(S) 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%, 27.49%, 27.62%,
28.83%, 28.10% and 27.76% for Class A, Class B, Class C, Class I, Class R and Class R3, respectively.
& From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
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, including restricted 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, including restricted 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
approximates 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.
DERIVATIVE RISK - The fund may invest in derivatives for hedging or non- hedging
purposes. While hedging can reduce or eliminate losses, it can also reduce or
eliminate gains. When the fund uses derivatives as an investment to gain market
exposure, or for hedging purposes, gains and losses from derivative instruments
may be substantially greater than the derivative's original cost. Derivative
instruments include forward foreign currency exchange contracts.
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 the contract. 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.
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 on or after July 1, 2004 and before April
1, 2005, the fund charged a 2% redemption fee (which was 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). Effective April 1, 2005, the fund no longer charges a redemption
fee. See the fund's prospectus for details. Any redemption fees charged 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.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss in
the Statement of Operations, or in unrealized gain/loss if the security is still
held by the fund.
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, 2005, the fund's custodian fees were
reduced by $74,676 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, 2005, the fund's miscellaneous expenses were
reduced by $77,887 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, defaulted bonds, amortization and
accretion on debt securities, wash sales and foreign taxes.
The tax character of distributions declared for the years ended October 31, 2005
and October 31, 2004 was as follows:
10/31/05 10/31/04
Distributions declared from:
Ordinary income $17,230,192 $14,730,338*
*Included in the fund's distributions from ordinary income is $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, 2005, accumulated distributions in excess of
net investment income increased by $6,523,496, accumulated net realized loss on
investments and foreign currency transactions decreased by $6,520,240, and
paid-in capital increased by $3,256 due to differences between book and tax
accounting for foreign currency transactions, amortization and accretion on debt
securities and foreign taxes. This change had no effect on the net assets or net
asset value per share.
As of October 31, 2005, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $912,423
Capital loss carryforward (540,181,622)
Unrealized appreciation1 92,622,930
Other temporary differences (2,217,723)
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, 2010.
Realized gain is reported net of any foreign capital gains tax in the Statement
of Operations.
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. The investment adviser has contractually
agreed to reduce its management fee to 0.55% of average daily net assets in
excess of $3.0 billion. The management fee incurred for the year ended October
31, 2005 was equivalent to an annual effective rate of 0.60% of the fund's
average daily net assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $233,061 for the year ended October 31, 2005, as
its portion of the initial sales charge on sales of Class A shares of the fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the distribution
and servicing of certain share classes. One component of the plan is a
distribution fee paid to MFD. Another component of the plan is a service fee
paid to MFD which subsequently pays a portion of this fee to financial
intermediaries that enter into sales or service agreements with MFD, or its
affiliates, based on the average daily net assets of accounts attributable to
such intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL SERVICE FEE DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE RETAINED AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) BY MFD(3) FEE
Class A 0.10% 0.25% 0.35% 0.25% $36,480 $1,906,403
Class B 0.75% 0.25% 1.00% 1.00% 6,236 6,135,168
Class C 0.75% 0.25% 1.00% 1.00% 14,542 2,023,614
Class R 0.25% 0.25% 0.50% 0.50% 14 23,278
Class R1 0.50% 0.25% 0.75% 0.75% 199 1,425
Class R2 0.25% 0.25% 0.50% 0.50% 133 328
Class R3 0.25% 0.25% 0.50% 0.50% 23 4,644
Class R4 -- 0.25% 0.25% 0.25% 66 80
- -------------------------------------------------------------------------------
Total Distribution and Service Fees $10,094,940
(1) In accordance with the distribution plan for certain classes, the fund pays
distribution and/or service fees up to these annual percentage rates of each
class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the
distribution plan for the year ended October 31, 2005 based on each class'
average daily net assets. Payment of the 0.10% annual Class A distribution
fee is not yet implemented and will commence on such date as the fund's
Board of Trustees may determine.
(3) For the year ended October 31, 2005, MFD retained these service fees.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months of purchase.
Class B shares are subject to a contingent deferred sales charge in the event of
a shareholder redemption within six years of purchase. MFD retained all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended October 31, 2005, were as follows:
AMOUNT
Class A $13,848
Class B $893,264
Class C $12,124
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS. MFSC
receives a fee from the fund, for its services as shareholder servicing agent,
set periodically under the supervision of the fund's Board of Trustees. For the
year ended October 31, 2005, the fee was $1,691,507, which equated to 0.1064%
annually of the fund's average daily net assets. MFSC also receives payment from
the fund for out-of-pocket and sub-accounting expenses paid by MFSC on behalf of
the fund. For the year ended October 31, 2005, these costs amounted to $961,381.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. Effective July 1, 2005, the fund's annual fixed amount is $10,000. The
administrative services fee incurred for the year ended October 31, 2005 was
equivalent to an annual effective rate of 0.0116% of the fund's average daily
net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain Class R shares. These
services include various administrative, recordkeeping, and communication/
educational services with respect to the retirement plans which invest in these
shares, and may be provided directly by MFS or by a third party. For the year
ended October 31, 2005, the fund paid an annual retirement plan administration
and services fee up to the following annual percentage rates of each class'
average daily net assets:
AMOUNT
FEE EFFECTIVE TOTAL RETAINED
RATE RATE(1) AMOUNT BY MFS
Class R1 0.45% 0.42% $848 $693
Class R2 0.40% 0.33% 257 240
Class R3 0.25% 0.23% 2,303 2,028
Class R4 0.15% 0.15% 48 48
Class R5 0.10% 0.10% 32 31
- ------------------------------------------------------------------------
Total Retirement Plan
Administration and
Services Fees $3,488 $3,040
(1) Effective October 1, 2005, MFS has contractually agreed to waive a portion
of the retirement plan administration and service fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
For the year ended October 31, 2005, this waiver amounted to $277 and is
reflected as a reduction of total expenses in the Statement of Operations.
This agreement will continue until September 30, 2007.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to Independent
Trustees in the form of a retainer, attendance fees, and additional compensation
to Board and Committee chairpersons. The fund does not pay compensation directly
to 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, MFD,
and MFSC. The fund has an unfunded, defined benefit plan for retired Independent
Trustees which resulted in a pension expense of $2,928. The fund also has an
unfunded retirement benefit deferral plan for certain current Independent
Trustees which resulted in an expense of $7,914. Both amounts are included in
Independent trustees' compensation for the year ended October 31, 2005.
OTHER - 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 the fund
for a portion of the payments made by the funds to Tarantino LLC in the amount
of $6,337, which is shown as a reduction of total expenses in the Statement of
Operations. Additionally, MFS has agreed to bear all expenses associated with
office space, other administrative support, and supplies provided 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, was the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in connection
with fund sales. As a result, proceeds in the amount of $347,851 were paid to
the fund on February 16, 2005.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,667,693,844 and $1,551,637,810, 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 $1,737,354,203
------------------------------------------------------------
Gross unrealized appreciation $225,423,644
Gross unrealized depreciation (32,800,714)
------------------------------------------------------------
Net unrealized appreciation $192,622,930
(5) SHARES OF BENEFICIAL INTEREST
The fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
fund shares were as follows:
Year ended 10/31/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 33,012,111 $380,967,466 15,462,054 $139,582,665
Shares issued to shareholders in
reinvestment of distributions 820,461 9,602,010 862,015 7,637,377
Shares reacquired (16,877,017) (193,480,346) (16,437,879) (146,218,602)
- -----------------------------------------------------------------------------------------------------------
Net change 16,955,555 $197,089,130 (113,810) $1,001,440
CLASS B SHARES
Shares sold 6,155,311 $70,346,774 4,717,125 $41,981,304
Shares issued to shareholders in
reinvestment of distributions 306,385 3,572,910 469,766 4,126,295
Shares reacquired (14,033,040) (159,448,969) (14,858,658) (131,761,901)
- -----------------------------------------------------------------------------------------------------------
Net change (7,571,344) $(85,529,285) (9,671,767) $(85,654,302)
CLASS C SHARES
Shares sold 3,474,179 $39,724,548 3,122,564 $27,738,519
Shares issued to shareholders in
reinvestment of distributions 86,295 1,009,289 124,212 1,093,048
Shares reacquired (3,664,643) (41,656,935) (5,601,015) (49,826,824)
- -----------------------------------------------------------------------------------------------------------
Net change (104,169) $(923,098) (2,354,239) $(20,995,257)
Year ended 10/31/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS I SHARES
Shares sold 320,468 $3,769,390 84,848 $788,118
Shares issued to shareholders in
reinvestment of distributions 6,391 75,359 4,398 39,162
Shares reacquired (72,276) (840,827) (27,496) (248,138)
- -----------------------------------------------------------------------------------------------------------
Net change 254,583 $3,003,922 61,750 $579,142
CLASS R SHARES
Shares sold 442,895 $5,029,875 344,789 $2,982,387
Shares issued to shareholders in
reinvestment of distributions 4,585 54,099 1,546 14,038
Shares reacquired (111,046) (1,265,328) (152,682) (1,282,754)
- -----------------------------------------------------------------------------------------------------------
Net change 336,434 $3,818,646 193,653 $1,713,671
Period ended 10/31/05*
SHARES AMOUNT
CLASS R1 SHARES
Shares sold 75,150 $902,415
Shares issued to shareholders in
reinvestment of distributions 113 1,397
Shares reacquired (3,745) (46,778)
- -------------------------------------------------------------------------
Net change 71,518 $857,034
CLASS R2 SHARES
Shares sold 34,360 $435,607
Shares issued to shareholders in
reinvestment of distributions 55 673
Shares reacquired (3,769) (45,979)
- -------------------------------------------------------------------------
Net change 30,646 $390,301
Year ended 10/31/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS R3 SHARES
Shares sold 229,235 $2,753,147 11,551 $104,413
Shares issued to shareholders in
reinvestment of distributions 843 10,212 45 520
Shares reacquired (45,303) (558,754) (11) (207)
- -----------------------------------------------------------------------------------------------------------
Net change 184,775 $2,204,605 11,585 $104,726
Period ended 10/31/05*
SHARES AMOUNT
CLASS R4 SHARES
Shares sold 4,954 $55,651
Shares issued to shareholders in
reinvestment of distributions 39 471
- -------------------------------------------------------------------------
Net change 4,993 $56,122
Period ended 10/31/05*
SHARES AMOUNT
CLASS R5 SHARES
Shares sold 4,513 $50,000
Shares issued to shareholders in
reinvestment of distributions 46 554
- -------------------------------------------------------------------------
Net change 4,559 $50,554
* For the period from the inception of Class R1, R2, R4, R5, April 1, 2005,
through October 31, 2005.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 0.35%. 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, 2005 was $10,226, and is included in
miscellaneous expense. The fund had no significant borrowings during the year
ended October 31, 2005.
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, 2005, 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. We were
not engaged to perform an audit of the Fund's internal control over financial
reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Fund's internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall
financial statement presentation. Our procedures included confirmation of
securities owned as of October 31, 2005, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. 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, 2005, 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 13, 2005
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 2, 2005, 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 DURING
POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS &
NAME, DATE OF BIRTH WITH FUND SINCE(1) OTHER DIRECTORSHIPS(2)
- ------------------- ---------------- --------------- ----------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) 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); Bell Canada
Enterprises (telecommunications),
Director; Medtronic, Inc. (medical
technology), Director; Telesat
(satellite communications), Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair February 1992 Private investor; Eastern
(born 05/01/36) of 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) Senior Cardiac Surgeon, Chief of
Cardiac Surgery (until 2005);
Harvard Medical School, Professor
of Surgery; Brigham and Women's
Hospital Physicians' Organization,
Chair (2000 to 2004)
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
William R. Gutow Trustee December 1993 Private investor and real estate
(born 09/27/41) consultant; Capitol Entertainment
Management Company (video
franchise), Vice Chairman
Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial
(born 12/21/44) services and insurance), Vice
Chairman and Chief Operating
Officer (until May 2001); The
Equitable Life Assurance Society
(insurance), President and Chief
Operating Officer (until May 2001)
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 (attorneys),
(born 06/23/35) Partner
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc. (acquisition
(born 09/23/38) 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)
Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture
(born 08/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
OFFICERS
Maria F. Dwyer(3) President November 2005 Massachusetts Financial Services
(born 12/01/58) Company, Executive Vice President
and Chief Regulatory Officer
(since March 2004); Fidelity
Management & Research Company,
Vice President (prior to March
2004); Fidelity Group of Funds,
President and Treasurer (prior to
March 2004)
Tracy Atkinson(3) Treasurer September 2005 Massachusetts Financial Services
(born 12/30/64) Company, Senior Vice President
(since September 2004);
PricewaterhouseCoopers LLP,
Partner (prior to September 2004)
Christopher R. Bohane(3) Assistant July 2005 Massachusetts Financial Services
(born 1/18/74) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003); Nvest Services Company,
Assistant Vice President and
Associate Counsel (prior to
January 2001)
Jeffrey N. Carp(3) Secretary and September 2004 Massachusetts Financial Services
(born 12/19/56) Clerk Company, Executive Vice President,
General Counsel and Secretary (since
April 2004); Hale and Dorr LLP (law
firm), Partner (prior to April 2004)
Ethan D. Corey(3) Assistant July 2005 Massachusetts Financial Services
(born 11/21/63) Secretary and Company, Special Counsel (since
Assistant Clerk December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(3) Assistant July 2005 Massachusetts Financial Services
(born 8/10/68) Treasurer Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (January
2001 to June 2005); State Street
Bank, Vice President and Corporate
Audit Manager (prior to January
2001)
Timothy M. Fagan(3) Assistant September 2005 Massachusetts Financial Services
(born 7/10/68) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since September 2005);
John Hancock Advisers, LLC, Vice
President and Chief Compliance
Officer (September 2004 to August
2005), Senior Attorney (prior to
September 2004); John Hancock
Group of Funds, Vice President and
Chief Compliance Officer
(September 2004 to December 2004)
Mark D. Fischer(3) Assistant July 2005 Massachusetts Financial Services
(born 10/27/70) Treasurer Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian T. Hourihan(3) Assistant September 2004 Massachusetts Financial Services
(born 11/11/64) Secretary and Company, Vice President, Senior
Assistant Clerk 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 April 1997 Massachusetts Financial Services
(born 11/13/57) Treasurer Company, Vice President
Susan S. Newton(3) Assistant May 2005 Massachusetts Financial Services
(born 03/07/50) Secretary and Company, Senior Vice President and
Assistant Clerk Associate General Counsel (since
April 2005); John Hancock
Advisers, LLC, Senior Vice
President, Secretary and Chief
Legal Officer (prior to April
2005); John Hancock Group of
Funds, Senior Vice President,
Secretary and Chief Legal Officer
(prior to April 2005)
Susan A. Pereira(3) Assistant July 2005 Massachusetts Financial Services
(born 11/05/70) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (January 2001 to June
2004); Preti, Flaherty, Beliveau,
Pachios & Haley, LLC, Associate
(prior to January 2001)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance compliance services), Principal
Officer (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 September 1990 Massachusetts Financial Services
(born 06/12/60) Treasurer 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 the Trust 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, as a
result of position with MFS. The address of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
Each Trustee has been elected by shareholders and 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 and Sherratt and Mses. Lane and Thomsen 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. As of December 31, 2004, each Trustee served as a board member of 99 funds within the MFS
Family of Funds.
The Trust held a shareholders' meeting in 2005, and will hold a shareholders' meeting at least once every five
years thereafter, to elect Trustees.
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 Plaza
MFS Fund Distributors, Inc. New York, New York 10081
500 Boylston Street, Boston, MA 02116-3741
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PORTFOLIO MANAGERS Ernst & Young LLP
Maura A. Shaughnessy 200 Clarendon Street, Boston, MA 02116
Robert D. Persons
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of Trustees
and a majority of the non-interested ("independent") Trustees, voting
separately, annually approve the continuation of the Fund's investment advisory
agreement with MFS. The Trustees consider matters bearing on the Fund and its
advisory arrangements at their meetings throughout the year, including a review
of performance data at each regular meeting. In addition, the independent
Trustees met several times over the course of three months beginning in May and
ending in July, 2005 ("contract review meetings") for the specific purpose of
considering whether to approve the continuation of the investment advisory
agreement for the Fund and the other investment companies that the Board
oversees (the "MFS Funds"). The independent Trustees were assisted in their
evaluation of the Fund's investment advisory agreement by independent legal
counsel, from whom they received separate legal advice and with whom they met
separately from MFS during various contract review meetings. The independent
Trustees were also assisted in this process by the MFS Funds' Independent Chief
Compliance Officer, a full-time senior officer appointed by and reporting to the
independent Trustees.
In connection with their deliberations regarding the continuation of the
investment advisory agreement, the Trustees, including the independent Trustees,
considered such information and factors as they believed, in light of the legal
advice furnished to them and their own business judgment, to be relevant. The
investment advisory agreement for the Fund was considered separately, although
the Trustees also took into account the common interests of all MFS Funds in
their review. As described below, the Trustees considered the nature, quality,
and extent of the various investment advisory, administrative, and shareholder
services performed by MFS under the existing investment advisory agreement and
other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and
relied upon materials which included, among other items: (i) information
provided by Lipper Inc. on the investment performance of the Fund for various
time periods ended December 31, 2004 and the investment performance of a group
of funds with substantially similar investment classifications/objectives (the
"Lipper performance universe"), as well as the investment performance of a group
of funds identified by objective criteria suggested by MFS ("peer funds"), (ii)
information provided by Lipper Inc. on the Fund's advisory fees and other
expenses and the advisory fees and other expenses of comparable funds identified
by Lipper (the "Lipper expense group"), as well as the advisory fees and other
expenses of peer funds identified by objective criteria suggested by MFS, (iii)
information provided by MFS on the advisory fees of comparable portfolios of
other clients of MFS, including institutional separate account and other
clients, (iv) information as to whether and to what extent applicable expense
waivers, reimbursements or fee "breakpoints" are observed for the Fund, (v)
information regarding MFS' financial results and financial condition, including
MFS' and certain of its affiliates' estimated profitability from services
performed for the Fund and the MFS Funds as a whole, (vi) MFS' views regarding
the outlook for the mutual fund industry and the strategic business plans of
MFS, (vii) descriptions of various functions performed by MFS for the Funds,
such as compliance monitoring and portfolio trading practices, and (viii)
information regarding the overall organization of MFS, including information
about MFS' senior management and other personnel providing investment advisory,
administrative and other services to the Fund and the other MFS Funds. The
comparative performance, fee and expense information prepared and provided by
Lipper Inc. was not independently verified and the independent Trustees did not
independently verify any information provided to them by MFS.
The Trustees' conclusion as to the continuation of the investment advisory
agreement was based on a comprehensive consideration of all information provided
to the Trustees and not the result of any single factor. Some of the factors
that figured particularly in the Trustees' deliberations are described below,
although individual Trustees may have evaluated the information presented
differently from one another, giving different weights to various factors. It is
also important to recognize that the fee arrangements for the Fund and other MFS
Funds are the result of years of review and discussion between the independent
Trustees and MFS, that certain aspects of such arrangements may receive greater
scrutiny in some years than others, and that the Trustees' conclusions may be
based, in part, on their consideration of these same arrangements during the
course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed the
Fund's total return investment performance as well as the performance of peer
groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of the Fund's Class A shares in
comparison to the performance of funds in its Lipper performance universe over
the three-year period ended December 31, 2004, which the Trustees believed was a
long enough period to reflect differing market conditions. The Fund's
performance was in the 7th percentile relative to the other funds in the
universe for this three-year period (the 1st percentile being the best
performers and the 100th percentile being the worst performers). The total
return performance of the Fund's Class A shares was in the 11th percentile
for the one-year period and the 32nd percentile for the five-year period
ended December 31, 2004 relative to the Lipper performance universe. Because of
the passage of time, these performance results are likely to differ from the
performance results for more recent periods, including those shown elsewhere in
this report.
In the course of their deliberations, the Trustees took into account information
provided by MFS in connection with the contract review meetings, as well as
during investment review meetings conducted with portfolio management personnel
during the course of the year regarding the Fund's performance. After reviewing
these and related factors, the Trustees concluded, within the context of their
overall conclusions regarding the investment advisory agreement, that they were
satisfied with MFS' responses and efforts relating to investment performance.
In assessing the reasonableness of the Fund's advisory fee, the Trustees
considered, among other information, the Fund's advisory fee and the total
expense ratio of the Fund's Class A shares as a percentage of average net assets
and the advisory fee and total expense ratios of peer groups of funds based on
information provided by Lipper Inc. and MFS. The Trustees considered whether the
Fund was subject to any fee waivers or reductions or expense limitations. The
Trustees also considered that, according to the Lipper data, the Fund's
effective advisory fee rate and total expense ratio were each approximately at
the Lipper expense group median.
The Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered information provided
by MFS as to the generally broader scope of services provided by MFS to the Fund
in comparison to institutional accounts, the higher demands placed on MFS'
investment personnel and trading infrastructure as a result of the daily cash
in-flows and out-flows of the Fund, and the impact on MFS and expenses
associated with the more extensive regulatory regime to which the Fund is
subject in comparison to institutional accounts.
The Trustees also considered whether the Fund is likely to benefit from any
economies of scale in the management of the Fund in the event of growth in
assets of the Fund. They noted that the Fund's advisory fee rate schedule is
currently subject to a breakpoint that reduces the Fund's advisory fee rate on
net assets over $3 billion. Taking into account fee waivers or reductions or
expense limitations, if any, the Trustees concluded that the existing breakpoint
was sufficient to allow the Fund to benefit from economies of scale as its
assets grow.
The Trustees also considered information prepared by MFS relating to MFS' costs
and profits with respect to the Fund, the MFS Funds considered as a group, and
other investment companies and accounts advised by MFS, as well as MFS'
methodologies used to determine and allocate its costs to the MFS Funds, the
Fund and other accounts and products for purposes of estimating profitability.
After reviewing these and other factors described herein, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that the advisory fees charged to the Fund
represent reasonable compensation in light of the nature and quality of the
services being provided by MFS to the Fund.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Fund.
The Trustees also considered current and developing conditions in the financial
services industry, including the entry into the industry of large and
well-capitalized companies which are spending, and appear to be prepared to
continue to spend, substantial sums to engage personnel and to provide services
to competing investment companies. In this regard, the Trustees also considered
the financial resources of MFS and its ultimate parent, Sun Life Financial Inc.
The Trustees also considered the advantages and possible disadvantages to the
Fund of having an adviser which also serves other investment companies as well
as other accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the Fund
by MFS and its affiliates under agreements and plans other than the investment
advisory agreement, including any 12b-1 fees the Fund pays to MFS Fund
Distributors, Inc., an affiliate of MFS. The Trustees also considered the
nature, extent and quality of certain other services MFS performs or arranges
for on the Fund's behalf, including securities lending programs, directed
expense payment programs, class action recovery programs, and MFS' interaction
with third-party service providers, principally custodians and sub-custodians.
The Trustees concluded that the various non-advisory services provided by MFS
and its affiliates on behalf of the Funds were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund's
portfolio brokerage commissions to pay for research and other similar services
(including MFS' general policy to pay directly for third-party research), and
various other factors. Additionally, the Trustees considered so-called "fall-
out benefits" to MFS such as reputational value derived from serving as
investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material, including
those factors described above, the Board of Trustees, including a majority of
the independent Trustees, concluded that the Fund's investment advisory
agreement with MFS should be continued for an additional one-year period,
commencing August 1, 2005.
A discussion regarding the Board's most recent review and renewal of the Fund's
investment advisory agreement will be available on or before December 1, 2005 by
clicking on the fund's name under "Select a fund" on the MFS Web site (mfs.com).
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 Proxy Voting 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 Web site 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 2006, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2005.
For the year ended October 31, 2005, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations is 77.96%.
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 2005 Form 1099-DIV.
CONTACT INFORMATION
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
- -------------------------------------------------------------------------------
Shares prices, account 1-800-MFS-TALK
balances exchanges (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- -------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MMU-ANN-12/05 64M
MFS(R) GLOBAL TOTAL RETURN FUND 10/31/05
ANNUAL REPORT
- -------------------------------------------------------------------------------
LETTER FROM THE CEO 1
- ---------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------
MANAGEMENT REVIEW 3
- ---------------------------------------------------
PERFORMANCE SUMMARY 5
- ---------------------------------------------------
EXPENSE TABLE 8
- ---------------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ---------------------------------------------------
FINANCIAL STATEMENTS 20
- ---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 31
- ---------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 43
- ---------------------------------------------------
TRUSTEES AND OFFICERS 44
- ---------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 49
- ---------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 53
- ---------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 53
- ---------------------------------------------------
FEDERAL TAX INFORMATION 53
- ---------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF
SHAREHOLDERS. IT IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
Most investors are familiar with the basic principles of investing - focus on
the long term and keep your assets diversified across different investment
categories. Still, it is surprising how often we forget these basic lessons.
Certainly, the dot-com euphoria that overtook Wall Street in the late 1990s
had many people hoping they could become millionaires overnight. But the
market decline that started in the spring of 2000 taught everyone how
misguided those hopes had been.
Now, less than five years after the market taught a harsh lesson in the
follies of speculative investing, we are seeing a number of trends that
suggest many investors, including professionals, are hoping for overnight
miracles again. We see a steady stream of market "gurus" on television news
shows, promising to teach amateur investors the strategies that will allow
them to get rich quick. Hedge funds - which by their nature move in and out of
investments rapidly - have soared in popularity over the past five years. We
are reminded every day that we live in a "what have you done for me lately?"
world, but this mindset should not influence how we invest and manage our
money. In fact, investors often fall short of their goals because they trade
in and out of investments too frequently and at inopportune times.
Throughout our entire 80-year history, MFS" money management process has
focused on long-term investment opportunities. We firmly believe that one of
the best ways to realize long-term financial goals - be it a college
education, a comfortable retirement, or a secure family legacy - is to follow
a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. And rebalance assets regularly to maintain a desired asset
allocation.*
This long-term approach requires diligence and patience, two traits that in
our experience are essential to capitalizing on the many opportunities the
financial markets can offer.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
December 15, 2005
* Asset allocation, diversification, and rebalancing does 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.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE*
Stocks 59.1%
Bonds 34.5%
Cash & Other Net Assets 6.1%
Preferred Stocks 0.3%
TOP TEN EQUITY SECURITIES AS A
PERCENT OF EQUITY HOLDINGS
TOTAL S.A., ADR 2.5%
-----------------------------------------------
Nestle S.A. 2.3%
-----------------------------------------------
Bank of America Corp. 2.1%
-----------------------------------------------
Vodafone Group PLC 2.1%
-----------------------------------------------
Goldman Sachs Group, Inc. 1.9%
-----------------------------------------------
Altria Group, Inc. 1.7%
-----------------------------------------------
BP PLC, ADR 1.6%
-----------------------------------------------
MetLife, Inc. 1.6%
-----------------------------------------------
Citigroup, Inc. 1.6%
-----------------------------------------------
Conocophillips 1.6%
-----------------------------------------------
TOP TEN FIXED INCOME SECURITIES AS A
PERCENT OF FIXED INCOME HOLDINGS*
United Kingdom Treasury,
5.75%, 2009 6.7%
-----------------------------------------------
Federal Republic of Germany,
6.25%, 2030 3.9%
-----------------------------------------------
United Kingdom Treasury,
8.0%, 2015 3.4%
-----------------------------------------------
Development Bank of Japan,
1.6%, 2014 3.3%
-----------------------------------------------
Republic of Finland, 3.0%, 2008 3.3%
-----------------------------------------------
Government of New Zealand,
6.5%, 2013 3.2%
-----------------------------------------------
Kingdom of Spain, 6.0%, 2008 3.1%
-----------------------------------------------
Federal Republic of Germany,
6.25%, 2024 2.9%
-----------------------------------------------
Republic of Ireland, 4.25%, 2007 2.9%
-----------------------------------------------
Republic of France, 4.75%, 2007 2.8%
-----------------------------------------------
TOP 5 EQUITY SECTORS
Financial Services 14.7%
-----------------------------------------------
Utilities & Communications 8.7%
-----------------------------------------------
Energy 6.5%
-----------------------------------------------
Consumer Staples 6.3%
-----------------------------------------------
Health Care 4.1%
-----------------------------------------------
TOP 5 FIXED INCOME MARKET SECTORS
AS A PERCENT OF FIXED INCOME HOLDINGS*
Non U.S. Government Bonds 68.6%
-----------------------------------------------
Cash & Other Net Assets 13.8%
-----------------------------------------------
U.S. Treasury Securities 6.2%
-----------------------------------------------
Commercial Mortgage-Backed
Securities 3.7%
-----------------------------------------------
U.S. Government Agencies 3.3%
-----------------------------------------------
COUNTRY WEIGHTINGS*
United States 39.0%
-----------------------------------------------
Great Britain 12.0%
-----------------------------------------------
Japan 9.7%
-----------------------------------------------
France 8.9%
-----------------------------------------------
Germany 6.1%
-----------------------------------------------
Spain 3.4%
-----------------------------------------------
Switzerland 2.7%
-----------------------------------------------
Canada 2.3%
-----------------------------------------------
Norway 2.0%
-----------------------------------------------
Other 13.9%
-----------------------------------------------
* For purposes of this graphical presentation, the bond component includes both
accrued interest amounts and the equivalent exposure from any derivative
holdings, if applicable.
Percentages are based on net assets as of 10/31/05.
The portfolio is actively managed, and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the twelve months ended October 31, 2005, Class A shares of the MFS Global
Total Return Fund provided a total return of 8.26%, at net asset value. In
comparison, the fund's benchmark, the Standard & Poor's 500 Stock Index (the
S&P 500) returned 8.71%. The fund's other benchmark, a blended benchmark
comprised of 60% of the Morgan Stanley Capital International (MSCI) World
Index and 40% of the J.P. Morgan Global Government Bond Index, provided a
total return of 7.19%.
DETRACTORS FROM PERFORMANCE
In the equity portion of the fund, financial services, retailing, and basic
materials sectors detracted from performance relative to the MSCI World Index
during the period. In financial services, stock selection was the key driver
for underperformance. Home mortgage lender Fannie Mae was the fund's largest
individual detractor over the period.
Although our underweighted position in the retailing sector aided performance,
weak stock selection within this group held back the sector's overall results.
UK-based supermarkets chain William Morrison (not an index constituent) and
clothing retailer Gap were among the top detractors within the sector. Stock
selection in the basic materials sector also dampened relative results. Global
forest products company International Paper was among the fund's top
detractors.
Stocks in other sectors that hampered relative results included newspaper
publisher Tribune, home improvement manufacturer Masco, media giant Viacom,
and telecom services provider Verizon.
During the reporting period, our equity currency exposure was a significant
detractor from the portfolio's relative performance. The cash position in the
equity portion of the fund was also a detractor from relative performance. As
with nearly all mutual funds, this portfolio holds cash to buy new holdings
and to provide liquidity. In a period when equity markets rose as measured by
the fund's benchmark, holding cash hurt performance versus the benchmark,
which has no cash position.
For the fixed income portion of the portfolio, the fund's underweighted
position in Japanese bonds dampened investment results relative to the J.P.
Morgan Global Government Bond Index.
CONTRIBUTORS TO PERFORMANCE
The energy, utilities and communications, and technology sectors contributed
to the fund's relative results over the period. Stock selection and, to a
lesser extent, our overweighted position in the energy sector boosted results.
Oil and gas company ConocoPhillips (not an index constituent), Norway's oil
and gas market giant Statoil*, Canadian energy company Encana, and global
seamless steel pipe manufacturer Tenaris* (not an index constituent) were
among the fund's top contributors over the period.
In utilities and communications, stock selection bolstered the fund's relative
performance. Fortum Oyj*, a Finnish electric utility company, was the largest
individual contributor to relative results. UK-based mobile phone operator O2
(not an index constituent) also boosted returns during the period.
Our underweighted position in the technology sector proved advantageous as the
sector underperformed the overall benchmark. Stock selection also helped,
although no individual stocks in this sector were among the top contributors.
Stocks in other sectors that aided relative results included Japan's leading
commercial broadcaster Tokyo Broadcasting Systems* and tobacco company Altria
Group. Our underweighted position in pharmaceutical giant Pfizer, which
significantly underperformed the benchmark, also helped relative performance.
In the fixed income portion of the portfolio, the fund's yield curve
positioning in North America (United States in particular), Europe, and Asia
Pacific was the major driver of strong results relative to the J.P. Morgan
Global Government Bond Index. Among U.S. bonds, the fund benefited from
positive sector selection, particularly from our holdings of TIPS (Treasury
Inflation Protected Securities). The cash position in the fixed income portion
of the fund, which was a result of the bond portion's duration underweight
relative to the benchmark, also boosted relative performance. Currency
exposure to Australia, the Czech Republic, Japan, and Poland further enhanced
results.
* Security was not held in the portfolio at period-end.
Respectfully,
Steven Gorham Erik Weisman
Portfolio Manager Portfolio Manager
Matthew W. Ryan Barnaby Wiener
Portfolio Manager Portfolio Manager
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 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 10/31/05
The following chart illustrates the historical performance of the fund's
original share class in comparison to its benchmark and the fund's
supplemental 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. (FOR THE MOST
RECENT MONTH-END PERFORMANCE FOR CLASS I SHARES CALL 1-888-808-6374.) 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. 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
40% J.P.
Morgan
MFS Global Global
Total Return Standard & Poor's Government
Fund -- Class A 500 Stock Index Bond Index
10/95 $ 9,525 $10,000 $10,000
10/96 11,055 12,408 11,220
10/97 12,791 16,391 12,516
10/98 14,619 19,995 14,384
10/99 15,344 25,127 16,276
10/00 16,535 26,657 16,106
10/01 15,479 20,022 14,059
10/02 15,321 17,000 13,314
10/03 17,787 20,534 15,992
10/04 20,799 22,466 17,944
10/05 22,517 24,424 19,233
TOTAL RETURNS THROUGH 10/31/05
AVERAGE ANNUAL WITHOUT SALES CHARGE
Share class Class inception date 1-yr 5-yr 10-yr
- ------------------------------------------------------------------------------
A 9/04/90 8.26% 6.37% 8.98%
- ------------------------------------------------------------------------------
B 9/07/93 7.56% 5.68% 8.27%
- ------------------------------------------------------------------------------
C 1/03/94 7.59% 5.68% 8.28%
- ------------------------------------------------------------------------------
I 1/02/97 8.65% 6.74% 9.33%
- ------------------------------------------------------------------------------
R 12/31/02 8.08% 6.30% 8.95%
- ------------------------------------------------------------------------------
R1 4/01/05 7.46% 5.66% 8.26%
- ------------------------------------------------------------------------------
R2 4/01/05 7.69% 5.70% 8.29%
- ------------------------------------------------------------------------------
R3 10/31/03 7.87% 5.79% 8.33%
- ------------------------------------------------------------------------------
R4 4/01/05 8.24% 6.37% 8.98%
- ------------------------------------------------------------------------------
R5 4/01/05 8.39% 6.40% 9.00%
- ------------------------------------------------------------------------------
AVERAGE ANNUAL
Comparative benchmarks
- ------------------------------------------------------------------------------
Average global flexible portfolio funds+ 11.20% 4.74% 8.61%
- ------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index# 8.71% -1.73% 9.34%
- ------------------------------------------------------------------------------
60% MSCI World Index/40% J.P. Morgan Global
Government Bond Index# 7.19% 3.61% 6.76%
- ------------------------------------------------------------------------------
AVERAGE ANNUAL WITH SALES CHARGE
Share class
- ------------------------------------------------------------------------------
A 3.12% 5.34% 8.46%
- ------------------------------------------------------------------------------
B 3.65% 5.35% 8.27%
- ------------------------------------------------------------------------------
C 6.61% 5.68% 8.28%
- ------------------------------------------------------------------------------
Class I, R, R1, R2, R3, R4, and R5 shares do not have a sales charge. Please
see Notes to Performance Summary for more details.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITIONS
S&P 500 Stock Index - is a capitalization-weighted index of 500 widely held
equity securities, designed to measure broad U.S. equity performance.
60% - The MSCI World Index is a market capitalization index that is designed to
measure global developed market equity performance, and 40% - the JP Morgan
Global Government Bond Index measures developed government bond markets around
the 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
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 prior month of
purchase) reflect the deduction of the 1% CDSC. Class R shares have no initial
sales charge or CDSC and are available only to existing Class R shareholders.
Class I, R1, R2, R3, R4, and R5 shares have no initial sales charge or CDSC.
Class I shares are only available to certain eligible investors, and Class R1,
R2, R3, R4, and R5 shares are only available to certain retirement plans.
Performance for Classes I, R, R4, and R5 shares includes the performance of
the fund's Class A shares for periods prior to their offering. Performance for
Classes R1, R2, and R3 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 share class to which it is blended, and lower
performance for share classes with lower operating expenses than the 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.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
MAY 1, 2005 THROUGH OCTOBER 31, 2005.
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, 2005 through October 31, 2005.
ACTUAL EXPENSES
The first line for each share class in the table below 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 below 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.
- --------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period**
Expense Account Value Account Value 5/01/05-
Share Class Ratio 5/01/05 10/31/05 10/31/05
- --------------------------------------------------------------------------------
Actual 1.42% $1,000.00 $1,019.30 $7.23
A ---------------------------------------------------------------------
Hypothetical* 1.42% $1,000.00 $1,018.05 $7.22
- --------------------------------------------------------------------------------
Actual 2.08% $1,000.00 $1,015.80 $10.57
B ----------------------------------------------------------------------
Hypothetical* 2.08% $1,000.00 $1,014.72 $10.56
- --------------------------------------------------------------------------------
Actual 2.07% $1,000.00 $1,016.10 $10.52
C ---------------------------------------------------------------------
Hypothetical* 2.07% $1,000.00 $1,014.77 $10.51
- --------------------------------------------------------------------------------
Actual 1.07% $1,000.00 $1,020.80 $5.45
I ---------------------------------------------------------------------
Hypothetical* 1.07% $1,000.00 $1,019.81 $5.45
- --------------------------------------------------------------------------------
Actual 1.56% $1,000.00 $1,018.40 $7.94
R ---------------------------------------------------------------------
Hypothetical* 1.56% $1,000.00 $1,017.34 $7.93
- --------------------------------------------------------------------------------
Actual 2.25% $1,000.00 $1,014.90 $11.43
R1 ---------------------------------------------------------------------
Hypothetical* 2.25% $1,000.00 $1,013.86 $11.42
- --------------------------------------------------------------------------------
Actual 1.94% $1,000.00 $1,017.00 $9.86
R2 ---------------------------------------------------------------------
Hypothetical* 1.94% $1,000.00 $1,015.43 $9.86
- --------------------------------------------------------------------------------
Actual 1.80% $1,000.00 $1,017.80 $9.15
R3 ---------------------------------------------------------------------
Hypothetical* 1.80% $1,000.00 $1,016.13 $9.15
- --------------------------------------------------------------------------------
Actual 1.47% $1,000.00 $1,019.10 $7.48
R4 ---------------------------------------------------------------------
Hypothetical* 1.47% $1,000.00 $1,017.80 $7.48
- --------------------------------------------------------------------------------
Actual 1.17% $1,000.00 $1,020.50 $5.96
R5 ---------------------------------------------------------------------
Hypothetical* 1.17% $1,000.00 $1,019.31 $5.96
- --------------------------------------------------------------------------------
* 5% class return per year before expenses.
** Expenses paid is equal to each class" annualized expense ratio, 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.
Effective October 1, 2005 the fund's Class R1, Class R2, and Class R3
retirement plan administration and service fee was reduced (as described in
Note 3 of the Notes to the Financial Statements). Had this fee reduction been
in effect throughout the entire six month period, the annualized expense ratio
would have been 2.17%, 1.82%, and 1.72% for Class R1, Class R2, and Class R3,
respectively, and the actual expenses paid during the period would have been
approximately $11.03, $9.26, and $8.75 for Class R1, Class R2, and Class R3,
respectively.
PORTFOLIO OF INVESTMENTS - 10/31/05
The Portfolio of Investments is a complete list of all securities owned by your fund.
It is categorized by broad-based asset classes.
Stocks - 59.1%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
Aerospace - 1.9%
- ----------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 67,960 $ 4,115,658
Northrop Grumman Corp. 79,750 4,278,588
United Technologies Corp. 39,600 2,030,688
------------
$ 10,424,934
- ----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.5%
- ----------------------------------------------------------------------------------------------------
Diageo PLC 208,250 $ 3,075,831
- ----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 0.3%
- ----------------------------------------------------------------------------------------------------
Sanyo Shokai Ltd.^ 234,000 $ 1,552,292
- ----------------------------------------------------------------------------------------------------
Automotive - 2.2%
- ----------------------------------------------------------------------------------------------------
Autoliv, Inc.^ 32,670 $ 1,405,957
Bayerische Motoren Werke AG 52,060 2,258,942
Compagnie Generale des Etablissements Michelin 20,190 1,090,001
Hyundai Mobis 15,500 1,232,280
PSA Peugeot Citroen S.A.^ 25,910 1,574,591
Renault S.A.^ 17,180 1,487,830
Toyota Motor Corp. 66,600 3,038,849
------------
$ 12,088,450
- ----------------------------------------------------------------------------------------------------
Banks & Credit Companies - 9.0%
- ----------------------------------------------------------------------------------------------------
Aiful Corp. 26,050 $ 1,940,739
American Express Co. 33,820 1,683,221
Bank of America Corp. 163,026 7,130,757
BNP Paribas 34,260 2,597,408
Citigroup, Inc. 116,346 5,326,320
Credit Agricole S.A.^ 114,780 3,363,856
Fannie Mae 62,540 2,971,901
Freddie Mac 15,340 941,109
ING Groep N.V. 46,800 1,349,128
Irish Life & Permanent PLC 68,030 1,198,699
MBNA Corp. 39,350 1,006,180
Nordea Bank AB 233,840 2,295,145
PNC Financial Services Group, Inc. 39,050 2,370,726
Royal Bank of Scotland Group PLC 107,305 2,968,573
Shinhan Financial Group Co., Ltd. 42,190 1,406,333
Shinsei Bank Ltd. 339,000 1,963,360
SunTrust Banks, Inc. 50,960 3,693,581
Takefuji Corp. 66,050 4,602,926
Wells Fargo & Co. 25,580 1,539,916
------------
$ 50,349,878
- ----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 0.9%
- ----------------------------------------------------------------------------------------------------
PagesJaunes S.A. 79,990 $ 2,061,420
Premiere AG^* 24,310 699,632
Viacom, Inc., "B" 66,146 2,048,542
------------
$ 4,809,594
- ----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.2%
- ----------------------------------------------------------------------------------------------------
Ameriprise Financial, Inc. 6,764 $ 251,756
Franklin Resources, Inc. 14,140 1,249,552
Goldman Sachs Group, Inc. 51,150 6,463,826
Lehman Brothers Holdings, Inc. 10,910 1,305,600
Mellon Financial Corp. 56,890 1,802,844
Merrill Lynch & Co., Inc. 20,220 1,309,043
------------
$ 12,382,621
- ----------------------------------------------------------------------------------------------------
Business Services - 0.5%
- ----------------------------------------------------------------------------------------------------
Accenture Ltd., "A" 108,460 $ 2,853,583
- ----------------------------------------------------------------------------------------------------
Chemicals - 1.8%
- ----------------------------------------------------------------------------------------------------
Dow Chemical Co. 34,920 $ 1,601,431
E.I. du Pont de Nemours & Co. 37,880 1,579,217
Nalco Holding Co.* 43,840 745,280
PPG Industries, Inc. 37,230 2,232,683
Syngenta AG 36,240 3,880,501
------------
$ 10,039,112
- ----------------------------------------------------------------------------------------------------
Computer Software - 0.2%
- ----------------------------------------------------------------------------------------------------
Oracle Corp.* 100,800 $ 1,278,144
- ----------------------------------------------------------------------------------------------------
Construction - 1.6%
- ----------------------------------------------------------------------------------------------------
Geberit AG 2,540 $ 1,757,425
Italcementi S.p.A. 185,890 2,072,198
Masco Corp. 117,280 3,342,480
Sekisui Chemical Co. Ltd. 281,000 1,769,908
------------
$ 8,942,011
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 0.9%
- ----------------------------------------------------------------------------------------------------
Kimberly-Clark Corp. 24,720 $ 1,405,085
Unicharm Corp.^ 76,000 3,428,571
------------
$ 4,833,656
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 0.4%
- ----------------------------------------------------------------------------------------------------
Cooper Industries Ltd., "A" 19,510 $ 1,383,064
W.W. Grainger, Inc. 14,500 971,210
------------
$ 2,354,274
- ----------------------------------------------------------------------------------------------------
Electronics - 1.6%
- ----------------------------------------------------------------------------------------------------
CANON, Inc. 40,000 $ 2,086,359
OMRON Corp. 58,800 1,381,895
Ricoh Co. Ltd. 111,000 1,754,062
Royal Philips Electronics N.V. 32,330 844,801
Samsung Electronics Co. Ltd. 5,380 2,844,598
------------
$ 8,911,715
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 1.8%
- ----------------------------------------------------------------------------------------------------
Cairn Energy PLC* 35,980 $ 1,099,119
CNOOC Ltd. 2,316,500 1,494,131
Devon Energy Corp. 25,550 1,542,709
EnCana Corp. 55,400 2,532,571
EOG Resources, Inc. 18,570 1,258,675
Norsk Hydro A.S.A. 23,600 2,362,722
------------
$ 10,289,927
- ----------------------------------------------------------------------------------------------------
Energy - Integrated - 4.4%
- ----------------------------------------------------------------------------------------------------
Amerada Hess Corp. 16,600 $ 2,076,660
BP PLC, ADR 82,826 5,499,646
Chevron Corp. 25,131 1,434,226
ConocoPhillips 80,850 5,285,973
Repsol YPF S.A.^ 71,460 2,127,683
TOTAL S.A., ADR^ 66,770 8,414,355
------------
$ 24,838,543
- ----------------------------------------------------------------------------------------------------
Food & Drug Stores - 1.2%
- ----------------------------------------------------------------------------------------------------
Carrefour S.A. 74,980 $ 3,334,354
Lawson, Inc.^ 37,500 1,433,942
William Morrison Supermarkets PLC 685,920 1,983,729
------------
$ 6,752,025
- ----------------------------------------------------------------------------------------------------
Food & Non-Alcoholic Beverages - 2.9%
- ----------------------------------------------------------------------------------------------------
Archer Daniels Midland Co. 57,420 $ 1,399,325
H.J. Heinz Co. 29,040 1,030,920
Kellogg Co. 42,860 1,893,126
Kirin Beverage Corp.^ 56,300 1,178,006
Nestle S.A. 25,518 7,592,230
Sara Lee Corp. 61,320 1,094,562
Unilever PLC 185,000 1,875,070
------------
$ 16,063,239
- ----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.3%
- ----------------------------------------------------------------------------------------------------
International Paper Co. 58,880 $ 1,718,118
- ----------------------------------------------------------------------------------------------------
Insurance - 3.5%
- ----------------------------------------------------------------------------------------------------
AFLAC, Inc. 14,510 $ 693,288
Allstate Corp. 85,460 4,511,433
Aviva PLC 222,510 2,625,224
Benfield Group PLC 233,670 1,322,647
Chubb Corp. 10,160 944,575
Hartford Financial Services Group, Inc. 25,690 2,048,778
Jardine Lloyd Thompson Group PLC 235,170 1,984,227
MetLife, Inc. 108,460 5,359,009
------------
$ 19,489,181
- ----------------------------------------------------------------------------------------------------
Leisure & Toys - 0.5%
- ----------------------------------------------------------------------------------------------------
Heiwa Corp.^ 68,700 $ 1,112,187
Nintendo Co. Ltd. 15,200 1,692,735
------------
$ 2,804,922
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 1.3%
- ----------------------------------------------------------------------------------------------------
ASSA ABLOY AB, "B" 113,220 $ 1,624,145
Deere & Co. 56,140 3,406,575
Fanuc Ltd. 8,900 695,940
Illinois Tool Works, Inc. 19,420 1,646,039
------------
$ 7,372,699
- ----------------------------------------------------------------------------------------------------
Metals & Mining - 0.6%
- ----------------------------------------------------------------------------------------------------
Anglo American PLC 117,800 $ 3,479,788
- ----------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.7%
- ----------------------------------------------------------------------------------------------------
Tokyo Gas Co. Ltd.^ 976,000 $ 3,824,327
- ----------------------------------------------------------------------------------------------------
Network & Telecom - 0.3%
- ----------------------------------------------------------------------------------------------------
Cisco Systems, Inc.* 68,300 $ 1,191,835
ZTE Corp. 139,400 411,798
------------
$ 1,603,633
- ----------------------------------------------------------------------------------------------------
Oil Services - 0.3%
- ----------------------------------------------------------------------------------------------------
Noble Corp. 12,990 $ 836,296
Vallourec S.A. 2,500 1,123,734
------------
$ 1,960,030
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals - 4.1%
- ----------------------------------------------------------------------------------------------------
Abbott Laboratories 42,490 $ 1,829,195
Astellas Pharma, Inc. 52,800 1,882,879
AstraZeneca PLC 46,750 2,094,633
Johnson & Johnson 74,650 4,674,583
Merck & Co., Inc. 97,720 2,757,658
Pfizer, Inc. 19,577 425,604
Roche Holdings AG 12,930 1,929,507
Sanofi-Aventis^ 27,300 2,185,906
Schering AG 20,630 1,272,758
Tanabe Seiyaku Co. Ltd. 193,000 1,854,127
Wyeth 48,860 2,177,202
------------
$ 23,084,052
- ----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.4%
- ----------------------------------------------------------------------------------------------------
Tribune Co. 29,930 $ 943,094
Yell Group PLC 142,610 1,116,232
------------
$ 2,059,326
- ----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.6%
- ----------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 15,860 $ 984,272
Canadian National Railway Co. 32,485 2,354,513
------------
$ 3,338,785
- ----------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.8%
- ----------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 30,610 $ 1,752,116
L'Air Liquide S.A., Bearer Shares^ 15,970 2,903,908
------------
$ 4,656,024
- ----------------------------------------------------------------------------------------------------
Specialty Stores - 0.7%
- ----------------------------------------------------------------------------------------------------
Gap, Inc. 92,350 $ 1,595,808
NEXT PLC 53,200 1,255,332
TJX Cos., Inc. 56,340 1,213,000
------------
$ 4,064,140
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 2.0%
- ----------------------------------------------------------------------------------------------------
KDDI Corp. 310 $ 1,768,765
O2 PLC 674,950 2,456,419
Vodafone Group PLC 2,686,783 7,045,606
------------
$ 11,270,790
- ----------------------------------------------------------------------------------------------------
Telephone Services - 3.1%
- ----------------------------------------------------------------------------------------------------
Deutsche Telekom AG^ 130,900 $ 2,314,323
France Telecom S.A. 70,800 1,839,860
KT Freetel Co. Ltd. 58,080 1,246,161
Sprint Nextel Corp. 194,750 4,539,623
Telecom Corp. of New Zealand Ltd. 352,530 1,437,956
Telefonica S.A. 80,476 1,283,916
Telenor A.S.A. 157,200 1,535,133
Verizon Communications, Inc. 92,570 2,916,881
------------
$ 17,113,853
- ----------------------------------------------------------------------------------------------------
Tobacco - 2.0%
- ----------------------------------------------------------------------------------------------------
Altria Group, Inc. 77,730 $ 5,833,637
British American Tobacco PLC 165,370 3,635,958
Swedish Match AB 131,200 1,494,098
------------
$ 10,963,693
- ----------------------------------------------------------------------------------------------------
Trucking - 0.7%
- ----------------------------------------------------------------------------------------------------
Singapore Post Ltd. 1,086,300 $ 730,587
TNT N.V. 133,000 3,138,988
------------
$ 3,869,575
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.9%
- ----------------------------------------------------------------------------------------------------
Dominion Resources, Inc. 58,930 $ 4,483,394
E.ON AG 30,400 2,754,785
Endesa S.A. 54,500 1,355,523
Iberdrola S.A. 58,510 1,566,771
Severn Trent PLC 75,720 1,281,780
Suez S.A.^ 102,911 2,787,806
TXU Corp. 18,080 1,821,560
------------
$ 16,051,619
- ----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $271,897,226) $330,564,384
- ----------------------------------------------------------------------------------------------------
Bonds - 32.7%
- ----------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ----------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 1.5%
- ----------------------------------------------------------------------------------------------------
Commercial Mortgage Asset Trust, FRN, 0.8866%, 2032##^^ $ 18,001,947 $ 832,237
Commercial Mortgage Pass-Through Certificate, FRN,
4.16%, 2017## 1,400,000 1,399,733
Deutsche Mortgage & Asset Receiving Corp., FRN, 6.538%, 2031 341,705 351,044
First Union National Bank Commercial Mortgage Trust, FRN,
1.2003%, 2043##^^ 26,343,498 1,089,770
J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN,
5.383%, 2041 1,870,062 1,868,387
J.P. Morgan Chase Commercial Mortgage Securities Corp., FRN,
4.17%, 2046 912,088 912,649
Wachovia Bank Commercial Mortgage Trust, FRN, 4.26%, 2015## 382,221 382,392
Wachovia Bank Commerical Mortgage Trust, FRN, 4.21%, 2015## 1,444,035 1,445,689
------------
$ 8,281,901
- ----------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 0.4%
- ----------------------------------------------------------------------------------------------------
Gaz Capital S.A., 8.625%, 2034 $ 450,000 $ 566,550
Pemex Project Funding Master Trust, 8.625%, 2022 438,000 523,410
Petronas Capital Ltd., 7.875%, 2022 1,086,000 1,313,769
------------
$ 2,403,729
- ----------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.3%
- ----------------------------------------------------------------------------------------------------
State of Qatar, 9.75%, 2030 $ 576,000 $ 855,360
United Mexican States, 6.625%, 2015^ 320,000 341,760
United Mexican States, 8.125%, 2019^ 700,000 837,200
------------
$ 2,034,320
- ----------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 1.5%
- ----------------------------------------------------------------------------------------------------
Development Bank of Japan, 1.4%, 2012 JPY96,000,000 $ 838,140
Development Bank of Japan, 1.6%, 2014^ JPY850,000,000 7,427,243
------------
$ 8,265,383
- ----------------------------------------------------------------------------------------------------
International Market Sovereign - 23.8%
- ----------------------------------------------------------------------------------------------------
Canada Housing Trust, 4.65%, 2009 CAD 3,180,000 $ 2,765,180
Federal Republic of Germany, 3.5%, 2008 EUR 1,902,000 2,325,850
Federal Republic of Germany, 5.25%, 2010 EUR 1,744,000 2,296,135
Federal Republic of Germany, 3.75%, 2015 EUR 2,598,000 3,209,682
Federal Republic of Germany, 6.25%, 2024 EUR 3,951,000 6,333,510
Federal Republic of Germany, 6.25%, 2030 EUR 4,994,000 8,334,525
Government of Australia, 6.25%, 2015 AUD 2,324,000 1,833,795
Government of Canada, 4.5%, 2015 CAD 622,000 540,620
Government of New Zealand, 6.5%, 2013^ NZD 10,055,000 7,247,951
Government of New Zealand, 6%, 2015^ NZD 3,061,000 2,145,379
Kingdom of Belgium, 3.75%, 2009 EUR 3,105,000 3,833,633
Kingdom of Belgium, 5%, 2012 EUR 2,221,000 2,959,157
Kingdom of Netherlands, 5.75%, 2007 EUR 1,711,000 2,133,600
Kingdom of Netherlands, 5%, 2012 EUR 1,389,855 1,846,670
Kingdom of Norway, 6.5%, 2013 NOK 32,207,000 5,837,097
Kingdom of Norway, 5%, 2015 NOK 6,424,000 1,076,728
Kingdom of Spain, 6%, 2008 EUR 5,197,000 6,672,025
Kingdom of Spain, 5.35%, 2011 EUR 4,400,000 5,913,982
Kingdom of Sweden, 4%, 2020 SEK 12,909,349 2,157,011
Quebec Province, 1.6%, 2013^ JPY 527,000,000 4,606,929
Republic of Austria, 5%, 2012 EUR 4,666,000 6,204,210
Republic of Finland, 3%, 2008 EUR 6,074,000 7,332,721
Republic of Finland, 5.375%, 2013 EUR 1,121,000 1,536,688
Republic of France, 4.75%, 2007 EUR 5,031,000 6,237,781
Republic of France, 3%, 2012 EUR 1,751,197 2,373,211
Republic of France, 4.75%, 2012 EUR 1,927,000 2,533,719
Republic of France, 6%, 2025 EUR 2,220,000 3,510,275
Republic of Ireland, 4.25%, 2007 EUR 5,293,000 6,537,262
Republic of Ireland, 4.6%, 2016 EUR 575,000 760,648
United Kingdom Treasury, 5.75%, 2009 GBP 7,843,000 14,605,591
United Kingdom Treasury, 8%, 2015 GBP 3,218,000 7,402,256
------------
$133,103,821
- ----------------------------------------------------------------------------------------------------
Mortgage Backed - 0.2%
- ----------------------------------------------------------------------------------------------------
Freddie Mac, 5%, 2024 $ 1,111,057 $ 1,109,204
- --------------------------------------------------------------------------------------------------
Municipals - 0.8%
- ----------------------------------------------------------------------------------------------------
Honolulu, HI, City & County Rev., "A", 5%, 2015 $ 1,625,000 $ 1,750,028
Massachusetts State Water Resources Authority, "A", MBIA,
5.25%, 2015 675,000 741,353
New York, NY, City Municipal Water Finance Authority, Water &
Sewer Systems Rev., "D", 5%, 2037 1,775,000 1,822,641
------------
$ 4,314,022
- ----------------------------------------------------------------------------------------------------
Supranational - 0.5%
- ----------------------------------------------------------------------------------------------------
Inter-American Development Bank, 1.9%, 2009 JPY 290,000,000 $ 2,616,382
- --------------------------------------------------------------------------------------------------
U.S. Government Agencies - 1.3%
- ----------------------------------------------------------------------------------------------------
Aid-Egypt, 4.45%, 2015 $ 265,000 $ 256,348
Fannie Mae, 4.25%, 2007 2,910,000 2,878,991
Freddie Mac, 4.2%, 2007 2,523,000 2,494,038
Small Business Administration, 5.09%, 2025 236,000 234,997
Small Business Administration, 4.76%, 2035 1,461,000 1,425,945
------------
$ 7,290,319
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 2.4%
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 6.25%, 2030 $ 1,625,000 $ 1,963,457
U.S. Treasury Bonds, TIPS, 2.375%, 2025 760,485 791,350
U.S. Treasury Notes, 3.125%, 2008 2,314,000 2,231,293
U.S. Treasury Notes, 4.25%, 2013 1,118,000 1,094,898
U.S. Treasury Notes, 4%, 2015 4,068,000 3,889,866
U.S. Treasury Notes, TIPS, 3%, 2012 1,041,911 1,114,072
U.S. Treasury Notes, TIPS, 2%, 2014### 2,595,211 2,602,408
------------
$ 13,687,344
- ----------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $186,073,339) $183,106,425
- ----------------------------------------------------------------------------------------------------
Preferred Stock - 0.3%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
Chemicals - 0.3%
- ----------------------------------------------------------------------------------------------------
Henkel KGaA (Identified Cost, $1,642,222) 18,800 $ 1,620,239
- ----------------------------------------------------------------------------------------------------
Call Options Purchased - 0%
- ----------------------------------------------------------------------------------------------------
NUMBER OF
ISSUE/STRIKE PRICE/EXPIRATION CONTRACTS $ VALUE
- ----------------------------------------------------------------------------------------------------
JPY - November 2005 @ $114.40 (Premiums Paid, $44,911) 529,672,000 $ 7,415
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 8.7%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and Net
Asset Value 8,596,638 $ 8,596,638
- ----------------------------------------------------------------------------------------------------
ISSUER PAR VALUE $ VALUE
- ----------------------------------------------------------------------------------------------------
Morgan Stanley, 4.03%, dated 10/31/05, due 11/01/05, total to be
received $39,734,500 (secured by various U.S. Treasury and
Federal Agency obligations in a jointly traded account), at Cost $ 39,730,052 $ 39,730,052
- ----------------------------------------------------------------------------------------------------
Total Collateral for Securities Loaned $ 48,326,690
- ----------------------------------------------------------------------------------------------------
Short-Term Obligations - 7.3%
- ----------------------------------------------------------------------------------------------------
General Electric Co., 4.03%, due 11/01/05< $ 18,507,000 $ 18,507,000
New Center Asset Trust, 4.02%, due 11/01/05< 22,328,000 22,328,000
- ----------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 40,835,000
- ----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $548,819,388) $604,460,153
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (8.1)% (45,153,332)
- ----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $559,306,821
- ----------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
### All or a portion of the security has been segregated as collateral for an open futures contract.
^ All or a portion of this security is on loan.
^^ Interest only security for which the fund receives interest on notional principal (Par amount).
Par amount shown is the notional principal and does not reflect the cost of the security.
< The rate shown represents an annualized yield at time of purchase.
The following abbreviations are used in the Portfolio of Investments and are defined:
ADR American Depository Receipt
FRN Floating Rate Note. The interest rate is the rate in effect as of period end.
MBIA MBIA Insurance Corp.
TIPS Treasury Inflation Protected Security
Abbreviations have been used throughout this report to indicate amounts shown in currencies other
than the U.S. dollar. All amounts are stated in U.S. dollars unless otherwise indicated. A list of
abbreviations is shown below:
AUD Australian Dollar
CAD Canadian Dollar
DKK Danish Krone
EUR Euro
GBP British Pound
JPY Japanese Yen
NOK Norwegian Krone
NZD New Zealand Dollar
SEK Swedish Krona
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are netted by currency.
NET UNREALIZED
CONTRACTS TO SETTLEMENT CONTRACTS APPRECIATION
DELIVER/RECEIVE DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------
SALES
- --------------------------------------------------------------------------------------------------------
AUD 7,700,213 12/05/05 - 12/07/05 $5,843,477 $5,745,033 $ 98,444
DKK 734,385 11/15/05 120,000 118,044 1,956
EUR 27,679,653 11/22/05 - 12/05/05 33,582,372 33,220,122 362,250
GBP 12,206,673 11/02/05 - 1/31/06 21,864,036 21,585,782 278,254
JPY 591,385,053 11/22/05 5,204,920 5,094,338 110,582
NOK 22,439,276 11/03/05 - 6/08/06 3,503,303 3,456,632 46,671
NZD 17,536,307 12/07/05 12,083,294 12,228,677 (145,383)
SEK 17,169,828 12/14/05 2,212,607 2,167,298 45,309
- --------------------------------------------------------------------------------------------------------
$84,414,009 $83,615,926 $ 798,083
- --------------------------------------------------------------------------------------------------------
PURCHASES
- --------------------------------------------------------------------------------------------------------
AUD 6,634,700 12/07/05 $5,045,889 $4,950,020 $ (95,869)
DKK 13,002,288 11/15/05 2,145,510 2,089,989 (55,521)
EUR 21,033,465 11/22/05 - 12/14/05 25,448,368 25,242,920 (205,448)
GBP 7,134,569 11/02/05 12,753,912 12,619,697 (134,215)
JPY 4,945,151,311 11/22/05 43,958,026 42,598,764 (1,359,262)
NOK 7,445,420 11/22/05 1,143,163 1,146,224 3,061
SEK 40,114,745 12/06/05 - 12/14/05 5,113,180 5,062,297 (50,883)
- --------------------------------------------------------------------------------------------------------
$95,608,048 $93,709,911 $(1,898,137)
- --------------------------------------------------------------------------------------------------------
At October 31, 2005, forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $165,361 with Merrill Lynch International.
FUTURES CONTRACTS OUTSTANDING AT OCTOBER 31, 2005:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------
Japan Government Bonds 10 Year (Long) 6 $7,068,528 Dec-05 $(151,910)
At October 31, 2005, the fund had sufficient cash and/or securities to cover any commitments under
all derivative contracts.
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 the fund.
AT 10/31/05
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value, including $46,536,137 of securities on
loan (identified cost, $548,819,388) $604,460,153
Cash 349,596
Receivable for forward foreign currency exchange contracts 973,886
Receivable for investments sold 7,297,076
Receivable for fund shares sold 823,730
Interest and dividends receivable 3,375,074
Receivable from investment adviser 237,439
Other assets 1,835
- ------------------------------------------------------------------------------------------------------
Total assets $617,518,789
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange contracts $2,073,940
Payable for forward foreign currency exchange contracts subject
to master netting agreements 165,361
Payable for daily variation margin on open futures contracts 16,231
Payable for investments purchased 5,700,349
Payable for fund shares reacquired 1,459,632
Collateral for securities loaned, at value 48,326,690
Payable to affiliates
Management fee 34,176
Shareholder servicing costs 80,962
Distribution and service fees 26,463
Administrative services fee 464
Retirement plan administration and services fees 5
Accrued expenses and other liabilities 327,695
- ------------------------------------------------------------------------------------------------------
Total liabilities $58,211,968
- ------------------------------------------------------------------------------------------------------
Net assets $559,306,821
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid-in capital $475,347,803
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 54,151,227
Accumulated net realized gain (loss) on investments and foreign
currency transactions 28,906,543
Undistributed net investment income 901,248
- ------------------------------------------------------------------------------------------------------
Net assets $559,306,821
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 38,981,875
- ------------------------------------------------------------------------------------------------------
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $353,744,622
Shares outstanding 24,741,334
- ------------------------------------------------------------------------------------------------------
Net asset value per share $14.30
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/95.25X$14.30 of net asset value
per share) $15.01
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $124,012,988
Shares outstanding 8,569,617
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.47
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $75,973,991
Shares outstanding 5,279,343
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $14.39
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $3,169,596
Shares outstanding 222,740
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $14.23
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $2,042,778
Shares outstanding 143,465
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $14.24
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $52,017
Shares outstanding 3,612
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $14.40
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $50,592
Shares outstanding 3,509
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $14.42
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $158,678
Shares outstanding 11,146
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $14.24
- ------------------------------------------------------------------------------------------------------
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $50,735
Shares outstanding 3,553
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $14.28
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $50,824
Shares outstanding 3,556
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $14.29
- ------------------------------------------------------------------------------------------------------
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.
YEAR ENDED 10/31/05
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $9,374,305
Interest 8,124,028
Foreign taxes withheld (617,062)
- ------------------------------------------------------------------------------------------------------
Total investment income $16,881,271
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $4,396,331
Distribution and service fees 3,191,160
Shareholder servicing costs 1,033,482
Administrative services fee 62,365
Retirement plan administration and services fees 687
Independent trustees' compensation 18,939
Custodian fee 446,012
Printing 72,070
Postage 30,482
Auditing fees 60,494
Legal fees 18,166
Shareholder solicitation expenses 36,764
Miscellaneous 187,851
Total expenses $9,554,803
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (24,735)
Reduction of expenses by investment adviser (239,641)
- ------------------------------------------------------------------------------------------------------
Net expenses $9,290,427
- ------------------------------------------------------------------------------------------------------
Net investment income $7,590,844
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $59,948,884
Futures contracts 192,184
Foreign currency transactions (3,607,238)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $56,533,830
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(21,089,606)
Futures contracts (200,206)
Translation of assets and liabilities in foreign currencies (3,264,106)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $(24,553,918)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $31,979,912
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $39,570,756
- ------------------------------------------------------------------------------------------------------
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 2005 2004
CHANGE IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income $7,590,844 $5,610,762
Net realized gain (loss) on investments and foreign
currency transactions 56,533,830 49,626,117
Net unrealized gain (loss) on investments and foreign
currency translation (24,553,918) 23,372,396
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $39,570,756 $78,609,275
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net investment income
Class A $(11,999,109) $(8,272,745)
Class B (3,414,168) (2,863,732)
Class C (1,726,657) (1,225,929)
Class I (108,523) (1,273,876)
Class R (60,209) (6,626)
Class R1 (556) --
Class R2 (591) --
Class R3 (4,662) (733)
Class R4 (656) --
Class R5 (690) --
From net realized gain on investments and
foreign currency transactions
Class A (21,507,585) --
Class B (9,135,951) --
Class C (4,107,200) --
Class I (174,939) --
Class R (95,337) --
Class R3 (9,689) --
- ------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(52,346,522) $(13,643,641)
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $83,530,915 $(77,306,229)
- ------------------------------------------------------------------------------------------------------
Redemption fees $3,682 $3,976
- ------------------------------------------------------------------------------------------------------
Total change in net assets $70,758,831 $(12,336,619)
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period $488,547,990 $500,884,609
At end of period (including accumulated undistributed net
investment income of $901,248 and $2,545,036, respectively) $559,306,821 $488,547,990
- ------------------------------------------------------------------------------------------------------
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 life of a particular share class, if shorter). 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 share class (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.
CLASS A
YEARS ENDED 10/31
----------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $14.73 $12.98 $11.41 $11.64 $13.76
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.24 $0.19 $0.18 $0.21 $0.22
Net realized and unrealized gain (loss)
on investments and foreign currency 0.94 1.97 1.63 (0.33) (1.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.18 $2.16 $1.81 $(0.12) $(0.80)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.56) $(0.41) $(0.24) $(0.11) $(0.48)
From net realized gain on investments and
foreign currency transactions (1.05) -- -- -- (0.82)
From paid-in capital -- -- -- -- (0.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.61) $(0.41) $(0.24) $(0.11) $(1.32)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.30 $14.73 $12.98 $11.41 $11.64
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 8.26 16.94 16.09 (1.02) (6.38)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.52 1.54 1.54 1.53 1.47
Expenses after expense reductions## 1.48 1.54 1.54 1.53 1.47
Net investment income(S) 1.64 1.37 1.53 1.79 1.80
Portfolio turnover 82 76 105 72 69
Net assets at end of period
(000 Omitted) $353,745 $298,826 $261,042 $213,983 $197,374
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B
YEARS ENDED 10/31
----------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $14.82 $13.03 $11.43 $11.65 $13.72
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.14 $0.10 $0.11 $0.13 $0.14
Net realized and unrealized gain (loss)
on investments and foreign currency 0.95 1.99 1.62 (0.31) (1.03)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.09 $2.09 $1.73 $(0.18) $(0.89)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.39) $(0.30) $(0.13) $(0.04) $(0.34)
From net realized gain on investments and
foreign currency transactions (1.05) -- -- -- (0.82)
From paid-in capital -- -- -- -- (0.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.44) $(0.30) $(0.13) $(0.04) $(1.18)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.47 $14.82 $13.03 $11.43 $11.65
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 7.56 16.14 15.33 (1.58) (7.05)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.17 2.20 2.20 2.18 2.12
Expenses after expense reductions## 2.13 2.20 2.20 2.18 2.12
Net investment income(S) 0.98 0.72 0.88 1.12 1.14
Portfolio turnover 82 76 105 72 69
Net assets at end of period
(000 Omitted) $124,013 $129,141 $129,378 $84,729 $104,442
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C
YEARS ENDED 10/31
----------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $14.76 $12.99 $11.40 $11.62 $13.68
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.15 $0.10 $0.11 $0.13 $0.14
Net realized and unrealized gain (loss)
on investments and foreign currency 0.94 1.97 1.62 (0.31) (1.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.09 $2.07 $1.73 $(0.18) $(0.88)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.41) $(0.30) $(0.14) $(0.04) $(0.34)
From net realized gain on investments and
foreign currency transactions (1.05) -- -- -- (0.82)
From paid-in capital -- -- -- -- (0.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.46) $(0.30) $(0.14) $(0.04) $(1.18)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.39 $14.76 $12.99 $11.40 $11.62
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 7.59 16.12 15.27 (1.56) (7.03)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.16 2.20 2.20 2.18 2.12
Expenses after expense reductions## 2.12 2.20 2.20 2.18 2.12
Net investment income(S) 1.00 0.72 0.89 1.13 1.14
Portfolio turnover 82 76 105 72 69
Net assets at end of period
(000 Omitted) $75,974 $57,119 $54,438 $35,660 $38,230
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS I
YEARS ENDED 10/31
----------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $14.69 $12.96 $11.42 $11.65 $13.80
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS(S)
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.29 $0.24 $0.25 $0.25 $0.27
Net realized and unrealized gain (loss)
on investments and foreign currency 0.93 1.96 1.60 (0.32) (1.03)
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.22 $2.20 $1.85 $(0.07) $(0.76)
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.63) $(0.47) $(0.31) $(0.16) $(0.55)
From net realized gain on investments and
foreign currency transactions (1.05) -- -- -- (0.82)
From paid-in capital -- -- -- -- (0.02)
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.68) $(0.47) $(0.31) $(0.16) $(1.39)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.23 $14.69 $12.96 $11.42 $11.65
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 8.65 17.31 16.49 (0.65) (6.06)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.16 1.16 1.20 1.18 1.12
Expenses after expense reductions## 1.12 1.16 1.20 1.18 1.12
Net investment income(S) 1.99 1.59 1.93 2.14 2.14
Portfolio turnover 82 76 105 72 69
Net assets at end of period
(000 Omitted) $3,170 $2,286 $56,010 $1,540 $1,307
- -----------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R
YEARS ENDED 10/31
----------------------------------------------
2005 2004 2003**
Net asset value, beginning of period $14.71 $12.97 $11.54
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income# $0.22 $0.21 $0.14
Net realized and unrealized gain (loss) on investments and
foreign currency 0.93 1.94 1.40^
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $1.15 $2.15 $1.54
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.57) $(0.41) $(0.11)
From net realized gain on investments and foreign
currency transactions (1.05) -- --
- -------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.62) $(0.41) $(0.11)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.24 $14.71 $12.97
- -------------------------------------------------------------------------------------------------------------------
Total return (%)&*** 8.08 16.89 13.41++
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.65 1.71 1.68+
Expenses after expense reductions## 1.61 1.71 1.68+
Net investment income 1.52 1.24 1.34+
Portfolio turnover 82 76 105
Net assets at end of period (000 Omitted) $2,043 $1,043 $12
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R1 CLASS R2
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $14.42 $14.42
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------
Net investment income# $0.08 $0.10
Net realized and unrealized gain (loss) on investments
and foreign currency 0.06^ 0.07^
- --------------------------------------------------------------------------------------------------------
Total from investment operations $0.14 $0.17
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.17)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.40 $14.42
- --------------------------------------------------------------------------------------------------------
Total return (%)&*** 0.99++ 1.20++
- --------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.34+ 2.03+
Expenses after expense reductions## 2.28+ 1.97+
Net investment income 0.91+ 1.23+
Portfolio turnover 82 82
Net assets at end of period (000 Omitted) $52 $51
- --------------------------------------------------------------------------------------------------------
CLASS R3
YEARS ENDED 10/31
---------------------------------------
2005 2004
Net asset value, beginning of period $14.67 $12.97
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------
Net investment income# $0.18 $0.12
Net realized and unrealized gain (loss) on investments
and foreign currency 0.94 1.99
- --------------------------------------------------------------------------------------------------------
Total from investment operations $1.12 $2.11
- --------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------
From net investment income $(0.50) $(0.41)
From net realized gain on investments and foreign currency
transactions (1.05) --
- --------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.55) $(0.41)
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.24 $14.67
- --------------------------------------------------------------------------------------------------------
Total return (%)&*** 7.87 16.52
- --------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.92 1.95
Expenses after expense reductions## 1.87 1.95
Net investment income 1.24 0.91
Portfolio turnover 82 76
Net assets at end of period (000 Omitted) $159 $133
- --------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R4 CLASS R5
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $14.26 $14.26
- ---------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------
Net investment income# $0.14 $0.17
Net realized and unrealized gain (loss) on investments
and foreign currency 0.07^ 0.06^
- ---------------------------------------------------------------------------------------------------------
Total from investment operations $0.21 $0.23
- ---------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------
From net investment income $(0.19) $(0.20)
- ---------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.28 $14.29
- ---------------------------------------------------------------------------------------------------------
Total return (%)&*** 1.48++ 1.62++
- ---------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.54+ 1.24+
Expenses after expense reductions## 1.50+ 1.20+
Net investment income 1.70+ 2.00+
Portfolio turnover 82 82
Net assets at end of period (000 Omitted) $51 $51
- ---------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
** For the period from the class' inception, December 31, 2002 (Class R), and April 1, 2005 (Classes
R1, R2, R4, and R5) through the stated period end.
*** Certain expenses have been reduced without which performance would have been lower.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^ The per share amount is not in accordance with the net realized and unrealized gain/loss for the
period because of the timing of sales of fund shares and the amount of per share realized and
unrealized gains and losses at such time.
(+) Total returns do not include any applicable sales charges.
(S) Effective November 1, 2001, the fund adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began amortizing and accreting all premiums and discounts on
debt securities. Per share data and ratios for periods prior to November 1, 2001 have not been
restated to reflect this change.
& From time to time the fund may receive proceeds from litigation settlements, without which
performance would be lower.
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, including restricted 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, including restricted 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 approximates 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.
INFLATION-ADJUSTED DEBT SECURITIES - The fund invests in inflation-adjusted
debt securities issued by the U.S. Treasury. The fund may also invest in
inflation-adjusted debt securities issued by U.S. Government agencies and
instrumentalities other than the U.S. Treasury and by other entities such as
U.S. and foreign corporations and foreign governments. The principal value of
these debt securities is adjusted by references to changes in the Consumer
Price Index or another general price or wage index. These debt securities
typically pay a fixed rate of interest, but this fixed rate is applied to the
inflation-adjusted principal amount. The principal paid at maturity of the debt
security is typically equal to the inflation-adjusted principal amount, or the
security's original par value, whichever is greater. Other types of
inflation-adjusted securities may use other methods to adjust for other
measures of inflation.
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.
DERIVATIVE RISK - The fund may invest in derivatives for hedging or non-
hedging purposes. While hedging can reduce or eliminate losses, it can also
reduce or eliminate gains. When the fund uses derivatives as an investment to
gain market exposure, or for hedging purposes, gains and losses from derivative
instruments may be substantially greater than the derivative's original cost.
Derivative instruments include purchased options, forward foreign currency
exchange contracts, and futures contracts.
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. The difference between the premium and the amount paid on
effecting a closing transaction is considered a realized gain or loss. When a
written call option is exercised, 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.
PURCHASED OPTIONS - The fund may purchase call or put options for a premium.
Purchasing call options may be a hedge against an anticipated increase in the
dollar cost of securities to be acquired or to increase the fund's exposure to
the underlying instrument. Purchasing put options may hedge against a decline
in the value of portfolio securities. The premium paid is included as an
investment in the Statement of Assets and Liabilities and is subsequently
adjusted to the current value of the option. Premiums paid for purchased
options which have expired are treated as realized losses on investments in the
Statement of Operations. Premiums paid for purchased options which are
exercised or closed are added to the amount paid or offset against the proceeds
on the underlying security or financial instrument to determine the realized
gain or loss. The risk of loss associated with purchased options is limited to
the premium paid.
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. Upon entering into such contracts, the
fund bears the risk of interest or exchange rates or securities prices moving
unexpectedly, in which case, the fund may not achieve the anticipated benefits
of the futures contracts and may realize a loss.
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 the contract. 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.
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 charged a
2% redemption fee (which was 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 and before April 1, 2005, the fund
charged 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 did not impose redemption fees with respect to purchases made in June
2004 followed by redemptions made in July 2004. Effective April 1, 2005, the
fund will no longer charge a redemption fee. See the fund's prospectus for
details. Any redemption fees charged 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.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss
in the Statement of Operations, or in unrealized gain/loss if the security is
still held by the fund.
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, 2005, the fund's custodian fees
were reduced by $22,256 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, 2005, the fund's miscellaneous expenses
were reduced by $2,479 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, amortization and
accretion on debt securities, treating a portion of the proceeds from
redemptions as a distribution from realized gains for tax purposes, straddle
loss deferrals, and wash sales.
The tax character of distributions declared for the years ended October 31,
2005 and October 31, 2004 was as follows:
10/31/05 10/31/04
Distributions declared from:
Ordinary income $28,636,769 $13,643,641
Long-term capital gain 23,709,753 --
-----------------------------------------------------------
Total distributions declared $52,346,522 $13,643,641
During the year ended October 31, 2005, undistributed net investment income
increased by $8,081,189, accumulated net realized gain on investments and
foreign currency transactions decreased by $9,259,795, and paid-in capital
increased by $1,178,606 due to differences between book and tax accounting for
foreign currency transactions, amortization and accretion on debt securities,
derivatives, 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, 2005, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed ordinary income $8,978,891
Undistributed long-term capital gain 34,398,678
Capital loss carryforward (11,833,939)
Unrealized appreciation (depreciation) 53,867,217
Other temporary differences (1,451,829)
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, ($795,169) 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 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:
EFFECTIVE
BEGINNING OF EFFECTIVE
PERIOD 8/01/05
First $500 million of average daily net assets 0.84% 0.84%
Next $500 million of average daily net assets 0.75% 0.75%
Average daily net assets in excess of $1 billion -- 0.70%
The management fee incurred for the year ended October 31, 2005 was equivalent
to an annual effective rate of 0.81% of the fund's average daily
net assets.
Effective August 1, 2005, the investment adviser has contractually agreed to
bear the fund's expenses, exclusive of taxes, brokerage and transaction costs,
currency conversion costs, extraordinary expenses and expenses associated with
the fund's investment activities, such that total annual fund operating
expenses do not exceed the following rates annually, of the fund's average
daily net assets:
CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS CLASS
A B C I R R1 R2 R3 R4 R5
1.30% 1.95% 1.95% 0.95% 1.45% 2.05% 1.70% 1.60% 1.35% 1.05%
For the year ended October 31, 2005, this reduction amounted to $237,439 and
is reflected as a reduction of total expenses in the Statement of Operations.
This contractual fee arrangement will continue until March 1, 2006.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $130,865 for the year ended October 31, 2005, as
its portion of the initial sales charge on sales of Class A shares of the
fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD. Another component of the plan is a service
fee paid to MFD which subsequently pays a portion of this fee to financial
intermediaries that enter into sales or service agreements with MFD, or its
affiliates, based on the average daily net assets of accounts attributable to
such intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL SERVICE FEE DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE RETAINED AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) BY MFD(3) FEE
Class A 0.10% 0.25% 0.35% 0.35% $22,030 $1,176,337
Class B 0.75% 0.25% 1.00% 1.00% 1,124 1,324,282
Class C 0.75% 0.25% 1.00% 1.00% 1,209 680,755
Class R 0.25% 0.25% 0.50% 0.50% 11 8,614
Class R1 0.50% 0.25% 0.75% 0.75% 188 222
Class R2 0.25% 0.25% 0.50% 0.50% 125 148
Class R3 0.25% 0.25% 0.50% 0.50% 21 728
Class R4 -- 0.25% 0.25% 0.25% 63 74
- -------------------------------------------------------------------------------
Total Distribution and Service Fees $3,191,160
(1) In accordance with the distribution plan for certain classes, the fund
pays distribution and/or service fees up to these annual percentage rates
of each class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the
distribution plan for the year ended October 31, 2005 based on each class'
average daily net assets.
(3) For the year ended October 31, 2005, MFD retained these service fees.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. MFD retained all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended October 31, 2005, were as follows:
AMOUNT
Class A $9,681
Class B 108,851
Class C 7,225
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS.
MFSC receives a fee from the fund, for its services as shareholder servicing
agent, set periodically under the supervision of the fund's Board of Trustees.
For the year ended October 31, 2005, the fee was $575,776, which equated to
0.1063% annually of the fund's average daily net assets. MFSC also receives
payment from the fund for out-of-pocket and sub-accounting expenses paid by
MFSC on behalf of the fund. For the year ended October 31, 2005, these costs
amounted to $287,027.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. Effective July 1, 2005, the fund's annual fixed amount is $10,000.
The administrative services fee incurred for the year ended October 31, 2005
was equivalent to an annual effective rate of 0.0115% of the fund's average
daily net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain Class R shares. These
services include various administrative, recordkeeping, and communication/
educational services with respect to the retirement plans which invest in
these shares, and may be provided directly by MFS or by a third party. For the
year ended October 31, 2005, the fund paid an annual retirement plan
administration and services fee up to the following annual percentage rates of
each class' average daily net assets:
AMOUNT
FEE EFFECTIVE TOTAL RETAINED
RATE RATE(1) AMOUNT BY MFS
Class R1 0.45% 0.44% $133 $132
Class R2 0.40% 0.38% 117 117
Class R3 0.25% 0.24% 363 226
Class R4 0.15% 0.15% 44 44
Class R5 0.10% 0.10% 30 29
- -------------------------------------------------------------------------------
Total Retirement Plan Administration
and Services Fees $687 $548
(1) Effective October 1, 2005, MFS has contractually agreed to waive a portion
of the retirement plan administration and service fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
For the year ended October 31, 2005, this waiver amounted to $22 and is
reflected as a reduction of total expenses in the Statement of Operations.
This agreement will continue until September 30, 2007.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
Independent Trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to 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, MFD, and MFSC. The fund has an unfunded,
defined benefit plan for retired Independent Trustees which resulted in a
pension expense of $2,515. The fund also has an unfunded retirement benefit
deferral plan for certain current Independent Trustees which resulted in a net
decrease of $91. Both amounts are included in Independent trustees'
compensation for the year ended October 31, 2005.
OTHER - 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 the fund for a portion of the payments made by the funds to
Tarantino LLC in the amount of $2,180, which is shown as a reduction of total
expenses in the Statement of Operations. Additionally, MFS has agreed to bear
all expenses associated with office space, other administrative support, and
supplies provided 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, was the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in
connection with fund sales. As a result, proceeds in the amount of $6,868 were
paid to the fund on February 16, 2005.
(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 $85,244,648 $84,822,458
- -------------------------------------------------------------------------------
Investments (non-U.S. government securities) $348,530,509 $334,020,917
- -------------------------------------------------------------------------------
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 $550,592,936
----------------------------------------------------------
Gross unrealized appreciation $66,735,169
Gross unrealized depreciation (12,867,952)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $53,867,217
(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 10/31/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 7,599,432 $109,093,900 4,486,722 $62,266,509
Shares issued to shareholders in
reinvestment of distributions 2,162,149 30,502,929 553,931 7,552,297
Shares reacquired (5,311,172) (76,336,187) (4,866,563) (67,657,176)
- -----------------------------------------------------------------------------------------------------------
Net change 4,450,409 $63,260,642 174,090 $2,161,630
CLASS B SHARES
Shares sold 2,454,459 $35,678,534 1,661,204 $23,142,229
Shares issued to shareholders in
reinvestment of distributions 721,314 10,310,591 172,989 2,374,894
Shares reacquired (3,319,546) (48,215,675) (3,046,676) (42,655,147)
- -----------------------------------------------------------------------------------------------------------
Net change (143,773) $(2,226,550) (1,212,483) $(17,138,024)
CLASS C SHARES
Shares sold 1,931,145 $27,862,218 658,631 $9,151,147
Shares issued to shareholders in
reinvestment of distributions 300,328 4,273,731 63,977 875,732
Shares reacquired (820,864) (11,876,702) (1,045,963) (14,571,507)
- -----------------------------------------------------------------------------------------------------------
Net change 1,410,609 $20,259,247 (323,355) $(4,544,628)
CLASS I SHARES
Shares sold 74,348 $1,063,076 491,916 $6,845,053
Shares issued to shareholders in
reinvestment of distributions 20,206 283,423 95,131 1,247,429
Shares reacquired (27,382) (392,542) (4,754,074) (66,989,201)
- -----------------------------------------------------------------------------------------------------------
Net change 67,172 $953,957 (4,167,027) $(58,896,719)
CLASS R SHARES
Shares sold 108,426 $1,565,792 99,677 $1,408,570
Shares issued to shareholders in
reinvestment of distributions 9,289 130,623 475 6,625
Shares reacquired (45,164) (646,669) (30,170) (423,984)
- -----------------------------------------------------------------------------------------------------------
Net change 72,551 $1,049,746 69,982 $991,211
Period ended 10/31/05*
SHARES AMOUNT
CLASS R1 SHARES
Shares sold 3,573 $51,532
Shares issued to shareholders in
reinvestment of distributions 39 556
- ---------------------------------------------------------------------------
Net change 3,612 $52,088
CLASS R2 SHARES
Shares sold 3,467 $50,000
Shares issued to shareholders in
reinvestment of distributions 42 591
- ---------------------------------------------------------------------------
Net change 3,509 $50,591
Year ended 10/31/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS R3 SHARES
Shares sold 2,703 $38,967 8,766 $121,404
Shares issued to shareholders in
reinvestment of distributions 1,021 14,350 53 733
Shares reacquired (1,653) (23,469) (130) (1,836)
- --------------------------------------------------------------------------------------------------------------
Net change 2,071 $29,848 8,689 $120,301
Period ended 10/31/05*
SHARES AMOUNT
CLASS R4 SHARES
Shares sold 3,506 $50,000
Shares issued to shareholders in
reinvestment of distributions 47 656
- ---------------------------------------------------------------------------
Net change 3,553 $50,656
CLASS R5 SHARES
Shares sold 3,507 $50,000
Shares issued to shareholders in
reinvestment of distributions 49 690
- ---------------------------------------------------------------------------
Net change 3,556 $50,690
* For the period from the inception of Class R1, Class R2, Class R4, and Class
R5 shares, April 1, 2005, through October 31, 2005.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 0.35%. 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, 2005 was $2,680, and is
included in miscellaneous expense. The fund had no significant borrowings
during the year ended October 31, 2005.
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,
2005, 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. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Ours audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Fund's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of October 31, 2005, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. 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, 2005, 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
periods indicated therein, in conformity with U.S. generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 13, 2005
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 2, 2005, 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 DURING
POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS &
NAME, DATE OF BIRTH WITH FUND SINCE(1) OTHER DIRECTORSHIPS(2)
- ------------------- ---------------- --------------- ----------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) 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); Bell Canada
Enterprises (telecommunications),
Director; Medtronic, Inc. (medical
technology), Director; Telesat
(satellite communications),
Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair February 1992 Private investor; Eastern
(born 05/01/36) of 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) Senior Cardiac Surgeon, Chief of
Cardiac Surgery (until 2005);
Harvard Medical School, Professor
of Surgery; Brigham and Women's
Hospital Physicians' Organization,
Chair (2000 to 2004)
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
William R. Gutow Trustee December 1993 Private investor and real estate
(born 09/27/41) consultant; Capitol Entertainment
Management Company (video
franchise), Vice Chairman
Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial
(born 12/21/44) services and insurance), Vice
Chairman and Chief Operating
Officer (until May 2001); The
Equitable Life Assurance Society
(insurance), President and Chief
Operating Officer (until May 2001)
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 (attorneys),
(born 06/23/35) Partner
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)
Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture
(born 08/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
OFFICERS
Maria F. Dwyer(3) President November 2005 Massachusetts Financial Services
(born 12/01/58) Company, Executive Vice President
and Chief Regulatory Officer
(since March 2004); Fidelity
Management & Research Company,
Vice President (prior to March
2004); Fidelity Group of Funds,
President and Treasurer (prior to
March 2004)
Tracy Atkinson(3) Treasurer September 2005 Massachusetts Financial Services
(born 12/30/64) Company, Senior Vice President
(since September 2004);
PricewaterhouseCoopers LLP,
Partner (prior to September 2004)
Christopher R. Bohane(3) Assistant July 2005 Massachusetts Financial Services
(born 1/18/74) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003); Nvest Services Company,
Assistant Vice President and
Associate Counsel (prior to
January 2001)
Jeffrey N. Carp(3) Secretary and September 2004 Massachusetts Financial Services
(born 12/19/56) Clerk Company, Executive Vice President,
General Counsel and Secretary
(since April 2004); Hale and Dorr
LLP (law firm), Partner (prior to
April 2004)
Ethan D. Corey(3) Assistant July 2005 Massachusetts Financial Services
(born 11/21/63) Secretary and Company, Special Counsel (since
Assistant Clerk December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(3) Assistant July 2005 Massachusetts Financial Services
(born 8/10/68) Treasurer Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (January
2001 to June 2005); State Street
Bank, Vice President and Corporate
Audit Manager (prior to January
2001)
Timothy M. Fagan(3) Assistant September 2005 Massachusetts Financial Services
(born 7/10/68) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since September 2005);
John Hancock Advisers, LLC, Vice
President and Chief Compliance
Officer (September 2004 to August
2005), Senior Attorney (prior to
September 2004); John Hancock
Group of Funds, Vice President and
Chief Compliance Officer
(September 2004 to December 2004)
Mark D. Fischer(3) Assistant July 2005 Massachusetts Financial Services
(born 10/27/70) Treasurer Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian T. Hourihan(3) Assistant September 2004 Massachusetts Financial Services
(born 11/11/64) Secretary and Company, Vice President, Senior
Assistant Clerk 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 April 1997 Massachusetts Financial Services
(born 11/13/57) Treasurer Company, Vice President
Susan S. Newton(3) Assistant May 2005 Massachusetts Financial Services
(born 03/07/50) Secretary and Company, Senior Vice President and
Assistant Clerk Associate General Counsel (since
April 2005); John Hancock
Advisers, LLC, Senior Vice
President, Secretary and Chief
Legal Officer (prior to April
2005); John Hancock Group of
Funds, Senior Vice President,
Secretary and Chief Legal Officer
(prior to April 2005)
Susan A. Pereira(3) Assistant July 2005 Massachusetts Financial Services
(born 11/05/70) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (January 2001 to June
2004); Preti, Flaherty, Beliveau,
Pachios & Haley, LLC, Associate
(prior to January 2001)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance compliance services), Principal
Officer (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 September 1990 Massachusetts Financial Services
(born 06/12/60) Treasurer 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 the Trust 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, as a result of position with MFS. The address of MFS is 500 Boylston Street,
Boston, Massachusetts 02116.
Each Trustee has been elected by shareholders and 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 and Sherratt and Mses. Lane and Thomsen 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. As of December 31, 2004, each Trustee served as a board member of 99 funds
within the MFS Family of Funds.
The Trust held a shareholders' meeting in 2005, and will hold a shareholders' meeting at least once
every five years thereafter, to elect Trustees.
The Statement of Additional Information contains further information about the Trustees and is
available without charge upon request by calling 1-800-225-2606.
- -----------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA 02110
02116-3741
JP Morgan Chase 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
Erik Weisman
Barnaby Wiener
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of
Trustees and a majority of the non-interested ("independent") Trustees, voting
separately, annually approve the continuation of the Fund's investment
advisory agreement with MFS. The Trustees consider matters bearing on the Fund
and its advisory arrangements at their meetings throughout the year, including
a review of performance data at each regular meeting. In addition, the
independent Trustees met several times over the course of three months
beginning in May and ending in July, 2005 ("contract review meetings") for the
specific purpose of considering whether to approve the continuation of the
investment advisory agreement for the Fund and the other investment companies
that the Board oversees (the "MFS Funds"). The independent Trustees were
assisted in their evaluation of the Fund's investment advisory agreement by
independent legal counsel, from whom they received separate legal advice and
with whom they met separately from MFS during various contract review
meetings. The independent Trustees were also assisted in this process by the
MFS Funds' Independent Chief Compliance Officer, a full-time senior officer
appointed by and reporting to the independent Trustees.
In connection with their deliberations regarding the continuation of the
investment advisory agreement, the Trustees, including the independent
Trustees, considered such information and factors as they believed, in light
of the legal advice furnished to them and their own business judgment, to be
relevant. The investment advisory agreement for the Fund was considered
separately, although the Trustees also took into account the common interests
of all MFS Funds in their review. As described below, the Trustees considered
the nature, quality, and extent of the various investment advisory,
administrative, and shareholder services performed by MFS under the existing
investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and
relied upon materials which included, among other items: (i) information
provided by Lipper Inc. on the investment performance of the Fund for various
time periods ended December 31, 2004 and the investment performance of a group
of funds with substantially similar investment classifications/objectives (the
"Lipper performance universe"), as well as the investment performance of a
group of funds identified by objective criteria suggested by MFS ("peer
funds"), (ii) information provided by Lipper Inc. on the Fund's advisory fees
and other expenses and the advisory fees and other expenses of comparable
funds identified by Lipper (the "Lipper expense group"), as well as the
advisory fees and other expenses of peer funds identified by objective
criteria suggested by MFS, (iii) information provided by MFS on the advisory
fees of comparable portfolios of other clients of MFS, including institutional
separate account and other clients, (iv) information as to whether and to what
extent applicable expense waivers, reimbursements or fee "breakpoints" are
observed for the Fund, (v) information regarding MFS' financial results and
financial condition, including MFS' and certain of its affiliates' estimated
profitability from services performed for the Fund and the MFS Funds as a
whole, (vi) MFS' views regarding the outlook for the mutual fund industry and
the strategic business plans of MFS, (vii) descriptions of various functions
performed by MFS for the Funds, such as compliance monitoring and portfolio
trading practices, and (viii) information regarding the overall organization
of MFS, including information about MFS' senior management and other personnel
providing investment advisory, administrative and other services to the Fund
and the other MFS Funds. The comparative performance, fee and expense
information prepared and provided by Lipper Inc. was not independently
verified and the independent Trustees did not independently verify any
information provided to them by MFS.
The Trustees' conclusion as to the continuation of the investment advisory
agreement was based on a comprehensive consideration of all information
provided to the Trustees and not the result of any single factor. Some of the
factors that figured particularly in the Trustees' deliberations are described
below, although individual Trustees may have evaluated the information
presented differently from one another, giving different weights to various
factors. It is also important to recognize that the fee arrangements for the
Fund and other MFS Funds are the result of years of review and discussion
between the independent Trustees and MFS, that certain aspects of such
arrangements may receive greater scrutiny in some years than others, and that
the Trustees' conclusions may be based, in part, on their consideration of
these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed
the Fund's total return investment performance as well as the performance of
peer groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of the Fund's Class A shares in
comparison to the performance of funds in its Lipper performance universe over
the three-year period ended December 31, 2004, which the Trustees believed was
a long enough period to reflect differing market conditions. The Fund's
performance was in the 23rd percentile relative to the other funds in the
universe for this three-year period (the 1st percentile being the best
performers and the 100th percentile being the worst performers). The total
return performance of the Fund's Class A shares was in the 26th percentile
for the one-year period and the 24th percentile for the five-year period
ended December 31, 2004 relative to the Lipper performance universe. Because
of the passage of time, these performance results are likely to differ from
the performance results for more recent periods, including those shown
elsewhere in this report.
In the course of their deliberations, the Trustees took into account
information provided by MFS in connection with the contract review meetings,
as well as during investment review meetings conducted with portfolio
management personnel during the course of the year regarding the Fund's
performance. After reviewing these and related factors, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that they were satisfied with MFS' responses
and efforts relating to investment performance.
In assessing the reasonableness of the Fund's advisory fee, the Trustees
considered, among other information, the Fund's advisory fee and the total
expense ratio of the Fund's Class A shares as a percentage of average net
assets and the advisory fee and total expense ratios of peer groups of funds
based on information provided by Lipper Inc. and MFS. The Trustees considered
whether the Fund was subject to any fee waivers or reductions or expense
limitations. The Trustees also considered that, according to the Lipper data,
the Fund's effective advisory fee rate and total expense ratio were each
approximately at the Lipper expense group median.
The Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered information
provided by MFS as to the generally broader scope of services provided by MFS
to the Fund in comparison to institutional accounts, the higher demands placed
on MFS' investment personnel and trading infrastructure as a result of the
daily cash in-flows and out-flows of the Fund, and the impact on MFS and
expenses associated with the more extensive regulatory regime to which the
Fund is subject in comparison to institutional accounts.
The Trustees also considered whether the Fund is likely to benefit from any
economies of scale in the management of the Fund in the event of growth in
assets of the Fund. They noted that the Fund's advisory fee rate schedule is
currently subject to a breakpoint that reduces the Fund's advisory fee rate on
net assets over $500 million, and that MFS proposed to implement an additional
advisory fee breakpoint to reduce the Fund's annual advisory fee rate by 0.05%
on net assets over $1 billion, effective August 1, 2005. Taking into account
fee waivers or reductions or expense limitations, if any, the Trustees
concluded that the breakpoints, as modified, are sufficient to allow the Fund
to benefit from economies of scale as its assets grow.
The Trustees also considered information prepared by MFS relating to MFS'
costs and profits with respect to the Fund, the MFS Funds considered as a
group, and other investment companies and accounts advised by MFS, as
well as MFS' methodologies used to determine and allocate its costs to the MFS
Funds, the Fund and other accounts and products for purposes of estimating
profitability.
After reviewing these and other factors described herein, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that the advisory fees charged to the Fund
represent reasonable compensation in light of the nature and quality of the
services being provided by MFS to the Fund.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Fund.
The Trustees also considered current and developing conditions in the
financial services industry, including the entry into the industry of large
and well-capitalized companies which are spending, and appear to be prepared
to continue to spend, substantial sums to engage personnel and to provide
services to competing investment companies. In this regard, the Trustees also
considered the financial resources of MFS and its ultimate parent, Sun Life
Financial Inc. The Trustees also considered the advantages and possible
disadvantages to the Fund of having an adviser which also serves other
investment companies as well as other accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the
Fund by MFS and its affiliates under agreements and plans other than the
investment advisory agreement, including any 12b-1 fees the Fund pays to MFS
Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the
nature, extent and quality of certain other services MFS performs or arranges
for on the Fund's behalf, including securities lending programs, directed
expense payment programs, class action recovery programs, and MFS' interaction
with third-party service providers, principally custodians and sub-custodians.
The Trustees concluded that the various non-advisory services provided by MFS
and its affiliates on behalf of the Funds were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund's
portfolio brokerage commissions to pay for research and other similar services
(including MFS'general policy to pay directly for third-party research), and
various other factors. Additionally, the Trustees considered so-called "fall-
out benefits" to MFS such as reputational value derived from serving as
investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material,
including those factors described above, the Board of Trustees, including a
majority of the independent Trustees, concluded that the Fund's investment
advisory agreement with MFS should be continued for an additional one-year
period, commencing August 1, 2005.
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement will be available on or before
December 1, 2005 by clicking on the fund's name under "Select a fund" on the
MFS Web site (mfs.com).
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 Proxy Voting 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 Web site 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 2006, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2005.
The fund has designated $24,888,361 as a capital gain dividend for the year
ended October 31, 2005.
For the year ended October 31, 2005, the amount of distributions from income
eligible for the 70% dividends received deductions for corporations is 12.45%.
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 2005 Form 1099-DIV.
CONTACT INFORMATION
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 (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MWT-ANN-12/05 47M
MFS(R) GLOBAL EQUITY FUND 10/31/05
ANNUAL REPORT
- -------------------------------------------------------------------------------
LETTER FROM THE CEO 1
- ---------------------------------------------------
PORTFOLIO COMPOSITION 2
- ---------------------------------------------------
MANAGEMENT REVIEW 3
- ---------------------------------------------------
PERFORMANCE SUMMARY 5
- ---------------------------------------------------
EXPENSE TABLE 8
- ---------------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- ---------------------------------------------------
FINANCIAL STATEMENTS 15
- ---------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 27
- ---------------------------------------------------
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 36
- ---------------------------------------------------
TRUSTEES AND OFFICERS 37
- ---------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 42
- ---------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 46
- ---------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 46
- ---------------------------------------------------
FEDERAL TAX INFORMATION 46
- ---------------------------------------------------
CONTACT INFORMATION BACK COVER
- ---------------------------------------------------
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF
SHAREHOLDERS. IT IS AUTHORIZED FOR DISTRIBUTION TO
PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
[logo] M F S(SM)
INVESTMENT MANAGEMENT(R)
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders,
Most investors are familiar with the basic principles of investing - focus on
the long term and keep your assets diversified across different investment
categories. Still, it is surprising how often we forget these basic lessons.
Certainly, the dot-com euphoria that overtook Wall Street in the late 1990s
had many people hoping they could become millionaires overnight. But the
market decline that started in the spring of 2000 taught everyone how
misguided those hopes had been.
Now, less than five years after the market taught a harsh lesson in the
follies of speculative investing, we are seeing a number of trends that
suggest many investors, including professionals, are hoping for overnight
miracles again. We see a steady stream of market "gurus" on television news
shows, promising to teach amateur investors the strategies that will allow
them to get rich quick. Hedge funds - which by their nature move in and out of
investments rapidly - have soared in popularity over the past five years. We
are reminded every day that we live in a "what have you done for me lately?"
world, but this mindset should not influence how we invest and manage our
money. In fact, investors often fall short of their goals because they trade
in and out of investments too frequently and at inopportune times.
Throughout our entire 80-year history, MFS' money management process has
focused on long-term investment opportunities. We firmly believe that one of
the best ways to realize long-term financial goals - be it a college
education, a comfortable retirement, or a secure family legacy - is to follow
a three-pronged approach that focuses on longer time horizons. Allocate
holdings across the major asset classes - including stocks, bonds, and cash.
Diversify within each class to take advantage of different market segments and
investing styles. And rebalance assets regularly to maintain a desired asset
allocation.*
This long-term approach requires diligence and patience, two traits that in
our experience are essential to capitalizing on the many opportunities the
financial markets can offer.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
December 15, 2005
* Asset allocation, diversification, and rebalancing does 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.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE*
Stocks 99.2%
Cash & Other Net Assets 0.8%
TOP TEN HOLDINGS
Reckitt Benckiser PLC 3.5%
------------------------------------------------
Nestle S.A. 2.9%
------------------------------------------------
L'Air Liquide S.A. 2.6%
------------------------------------------------
Roche Holdings AG 2.2%
------------------------------------------------
Johnson & Johnson 2.0%
------------------------------------------------
American Express Co. 1.9%
------------------------------------------------
Oracle Corp. 1.9%
------------------------------------------------
Sanofi-Aventis 1.9%
------------------------------------------------
Hilton Group PLC 1.9%
------------------------------------------------
Sandvik AB 1.9%
------------------------------------------------
SECTOR WEIGHTINGS
Health Care 16.4%
------------------------------------------------
Financial Services 15.2%
------------------------------------------------
Consumer Staples 12.2%
------------------------------------------------
Technology 10.6%
------------------------------------------------
Leisure 7.9%
------------------------------------------------
Retailing 6.9%
------------------------------------------------
Utilities & Communications 6.8%
------------------------------------------------
Basic Materials 6.4%
------------------------------------------------
Industrial Goods & Services 4.9%
------------------------------------------------
Energy 4.5%
------------------------------------------------
Autos & Housing 3.4%
------------------------------------------------
Special Products & Services 3.0%
------------------------------------------------
Transportation 1.0%
------------------------------------------------
COUNTRY WEIGHTINGS
United States 36.3%
------------------------------------------------
Great Britain 14.8%
------------------------------------------------
France 11.7%
------------------------------------------------
Japan 9.5%
------------------------------------------------
Switzerland 7.2%
------------------------------------------------
Spain 3.3%
------------------------------------------------
Sweden 3.2%
------------------------------------------------
Canada 2.0%
------------------------------------------------
Germany 1.9%
------------------------------------------------
All Others 10.1%
------------------------------------------------
Percentages are based on net assets as of 10/31/05.
The portfolio is actively managed, and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the twelve months ended October 31, 2005, Class A shares of the MFS Global
Equity Fund provided a total return of 12.52%, at net asset value. In
comparison, the fund's benchmark, the Morgan Stanley Capital International
(MSCI) World Index, returned 13.82%.
DETRACTORS FROM PERFORMANCE
Stock selection and an overweighted position in the retailing sector held back
relative performance for the period with home improvement store operator
Kingfisher*, off-price retailer TJX Companies*, and apparel retailer NEXT
among the fund's top detractors.
Our overweighted position in leisure hindered relative returns as the sector
underperformed the overall benchmark. Although stock selection in the sector
as a whole helped performance, our holdings in media giant Viacom held back
returns as the share price declined over the period.
Although technology was one of our top contributing sectors, a major detractor
from relative performance was our position in computer maker Dell. Elsewhere,
not holding strong-performing tobacco firm Altria Group (an index constituent
that significantly outperformed the benchmark) held back relative results. Our
holdings in credit card lender MBNA*, pharmaceutical company Eli Lilly,
scientific instrument maker Waters Corp, and Fisher Scientific, a wholesale
distributor of medical equipment, were also among the top detractors.
During the reporting period, our currency exposure was a significant detractor
from the portfolio's relative performance. All of MFS' investment decisions
are driven by the fundamentals of each individual opportunity, and as such, it
is common for our portfolio to have different currency exposure than
the benchmark.
CONTRIBUTORS TO PERFORMANCE
The industrial goods and services, technology, and transportation sectors were
the top contributors to performance relative to the benchmark. In industrial
goods and services, stock selection aided relative results. Machinery
manufacturer Sandvik and construction equipment maker Atlas Copco were strong
contributors in this sector.
A combination of stock selection and an underweighted position in the
technology sector also benefited relative performance. Our holdings in South
Korean electronics company Samsung, which is not a constituent of the index,
boosted relative results in this area.
Stock selection in the transportation sector contributed to relative
performance although no individual stocks in the sector were among the fund's
top contributors.
Individual stocks in other sectors also contributed to relative results.
Although our underweighted position in the energy sector hurt relative
performance, this was offset by strong stock selection. Canadian independent
oil producer EnCana was the top performing position in the fund. Other
contributors included pharmaceuticals and diagnostics company Roche Holding,
telecommunications provider Hutchison, and financial services firms AXA, OTP
Bank, and Goldman Sachs. Not owning pharmaceuticals firm Pfizer (an index
constituent that lagged the benchmark) also helped relative returns.
* Security was not held in the portfolio at period-end.
Respectfully,
David R. Mannheim Simon Todd
Portfolio Manager Portfolio Manager
Note to Shareholders: Effective April 1, 2005, Simon Todd became the co-
manager of the fund with Mr. Mannheim.
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 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 10/31/05
The following chart illustrates the historical performance of the fund's Class
A shares 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. (FOR THE MOST
RECENT MONTH-END PERFORMANCE FOR CLASS I SHARES CALL 1-888-808-6374. MOST
RECENT MONTH-END PERFORMANCE FOR J SHARES CAN BE OBTAINED BY CALLING EITHER
CITIBANK N.A. AT 0120-322522 OR MIZUHO BANK AT 0120-324286.) 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. 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 -- MSCI
Class A World Index
10/95 $ 9,425 $10,000
10/96 11,000 11,683
10/97 13,289 13,699
10/98 14,281 15,848
10/99 16,540 19,862
10/00 18,258 20,138
10/01 15,032 15,055
10/02 14,151 12,872
10/03 16,733 16,003
10/04 19,598 18,206
10/05 22,052 20,721
TOTAL RETURNS THROUGH 10/31/05
AVERAGE ANNUAL WITHOUT SALES CHARGE
Share class Class inception date 1-yr 5-yr 10-yr
- ----------------------------------------------------------------------------
A 9/07/93 12.52% 3.85% 8.87%
- ----------------------------------------------------------------------------
B 12/29/86 11.70% 3.07% 8.04%
- ----------------------------------------------------------------------------
C 1/03/94 11.68% 3.06% 8.04%
- ----------------------------------------------------------------------------
I 1/02/97 12.79% 4.08% 9.11%
- ----------------------------------------------------------------------------
J 7/09/99 11.74% 3.11% 8.09%
- ----------------------------------------------------------------------------
R 12/31/02 12.26% 3.69% 8.79%
- ----------------------------------------------------------------------------
R1 4/01/05 11.56% 3.04% 8.03%
- ----------------------------------------------------------------------------
R2 4/01/05 11.74% 3.08% 8.05%
- ----------------------------------------------------------------------------
R3 10/31/03 11.95% 3.18% 8.10%
- ----------------------------------------------------------------------------
R4 4/01/05 12.43% 3.83% 8.86%
- ----------------------------------------------------------------------------
R5 4/01/05 12.61% 3.86% 8.88%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL
Comparative benchmarks
- ----------------------------------------------------------------------------
Average global multi-cap core fund+ 13.33% 2.07% 8.15%
- ----------------------------------------------------------------------------
MSCI World Index# 13.82% 0.57% 7.56%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL WITH SALES CHARGE
Share class
- ----------------------------------------------------------------------------
A 6.05% 2.62% 8.23%
- ----------------------------------------------------------------------------
B 7.70% 2.71% 8.04%
- ----------------------------------------------------------------------------
C 10.68% 3.06% 8.04%
- ----------------------------------------------------------------------------
J 8.39% 2.48% 7.76%
- ----------------------------------------------------------------------------
Class I, R, R1, R2, R3, R4, and R5 shares do not have a sales charge. Please
see Notes to Performance Summary for more details.
+ Source: Lipper Inc., an independent firm that reports mutual fund performance.
# Source: Standard & Poor's Micropal, Inc.
INDEX DEFINITION
MSCI World Index - is a market capitalization index that is designed to
measure global developed market equity performance.
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 prior month of
purchase) reflect the deduction of the 1% CDSC. Class J results reflect the
deduction of the maximum 3% sales charge and are available only to residents
of Japan. Class R shares have no initial sales charge or CDSC and are
available only to existing Class R shareholders. Class I, R1, R2, R3, R4, and
R5 shares have no initial sales charge or CDSC. Class I shares are only
available to certain eligible investors, and Class R1, R2, R3, R4, and R5
shares are only available to certain retirement plans.
Performance for I, R, R4, and R5 shares includes the performance of the fund's
Class A shares prior to their offering. Performance for J, R1, R2, and R3
includes the performance of the fund's Class B shares prior to their offering.
For reporting periods ending prior to March 31, 2004, when quoting performance
for the fund's Class I and R 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 have 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 R shares than it had
under the prior blending methodology. For a transitional period lasting until
December 31, 2007, performance for Class I and R shares under the prior
methodology is available at mfs.com. 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 share class to which it is blended, and lower performance for share
classes with lower operating expenses than the 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.
From time to time the fund may receive proceeds from litigation settlements,
without which performance would be lower.
EXPENSE TABLE
FUND EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
MAY 1, 2005 THROUGH OCTOBER 31, 2005.
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, 2005 through October 31, 2005.
ACTUAL EXPENSES
The first line for each share class in the following table 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 following table 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.
- --------------------------------------------------------------------------------
Expenses
Paid During
Annualized Beginning Ending Period**
Expense Account Value Account Value 5/01/05-
Share Class Ratio 5/01/05 10/31/05 10/31/05
- --------------------------------------------------------------------------------
Actual 1.54% $1,000.00 $1,059.10 $7.99
A ---------------------------------------------------------------------
Hypothetical* 1.54% $1,000.00 $1,017.44 $7.83
- --------------------------------------------------------------------------------
Actual 2.29% $1,000.00 $1,055.70 $11.87
B ----------------------------------------------------------------------
Hypothetical* 2.29% $1,000.00 $1,013.66 $11.62
- --------------------------------------------------------------------------------
Actual 2.29% $1,000.00 $1,055.40 $11.86
C ---------------------------------------------------------------------
Hypothetical* 2.29% $1,000.00 $1,013.66 $11.62
- --------------------------------------------------------------------------------
Actual 1.29% $1,000.00 $1,060.40 $6.70
I ---------------------------------------------------------------------
Hypothetical* 1.29% $1,000.00 $1,018.70 $6.56
- --------------------------------------------------------------------------------
Actual 2.24% $1,000.00 $1,055.50 $11.61
J ---------------------------------------------------------------------
Hypothetical* 2.24% $1,000.00 $1,013.91 $11.37
- --------------------------------------------------------------------------------
Actual 1.78% $1,000.00 $1,057.90 $9.23
R ---------------------------------------------------------------------
Hypothetical* 1.78% $1,000.00 $1,016.23 $9.05
- --------------------------------------------------------------------------------
Actual 2.45% $1,000.00 $1,054.40 $12.69
R1 ---------------------------------------------------------------------
Hypothetical* 2.45% $1,000.00 $1,012.85 $12.43
- --------------------------------------------------------------------------------
Actual 2.13% $1,000.00 $1,055.70 $11.04
R2 ---------------------------------------------------------------------
Hypothetical* 2.13% $1,000.00 $1,014.47 $10.82
- --------------------------------------------------------------------------------
Actual 2.01% $1,000.00 $1,056.80 $10.42
R3 ---------------------------------------------------------------------
Hypothetical* 2.01% $1,000.00 $1,015.07 $10.21
- --------------------------------------------------------------------------------
Actual 1.68% $1,000.00 $1,058.80 $8.72
R4 ---------------------------------------------------------------------
Hypothetical* 1.68% $1,000.00 $1,016.74 $8.54
- --------------------------------------------------------------------------------
Actual 1.38% $1,000.00 $1,060.00 $7.17
R5 ---------------------------------------------------------------------
Hypothetical* 1.38% $1,000.00 $1,018.25 $7.02
- --------------------------------------------------------------------------------
* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio, 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.
Effective October 1, 2005 the fund's Class R1, Class R2, and Class R3
retirement plan administrative and services fees were reduced (as described in
Note 3 of the Notes to the Financial Statements). Had this fee reduction been
in effect throughout the entire six month period, the annualized expense ratio
would have been 2.37%, 2.01%, and 1.93% for Class R1, Class R2, and Class R3,
respectively, and the actual expenses paid during the period would have been
approximately $12.28, $10.42, and $10.01 for Class R1, Class R2, and Class R3,
respectively.
PORTFOLIO OF INVESTMENTS - 10/31/05
The Portfolio of Investments is a complete list of all securities owned by your fund.
It is categorized by broad-based asset classes.
Stocks - 99.2%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES $ VALUE
- ----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 1.6%
- ----------------------------------------------------------------------------------------------------
Diageo PLC 717,987 $ 10,604,595
- ----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 1.9%
- ----------------------------------------------------------------------------------------------------
LVMH Moet Hennessy Louis Vuitton S.A.^ 111,770 $ 9,049,882
Toray Industries, Inc. 647,000 3,580,391
------------
$ 12,630,273
- ----------------------------------------------------------------------------------------------------
Automotive - 3.4%
- ----------------------------------------------------------------------------------------------------
Bridgestone Corp.^ 310,000 $ 6,286,574
Harley-Davidson, Inc.^ 165,460 8,195,234
Toyota Motor Corp. 180,000 8,213,104
------------
$ 22,694,912
- ----------------------------------------------------------------------------------------------------
Banks & Credit Companies - 9.9%
- ----------------------------------------------------------------------------------------------------
American Express Co. 253,780 $ 12,630,631
Banco Bilbao Vizcaya Argentaria S.A. 406,160 7,161,470
Bangkok Bank Public Co. Ltd. 1,239,700 3,131,170
Citigroup, Inc. 139,200 6,372,576
Erste Bank der Oesterreichischen Sparkassen AG 127,620 6,638,971
OTP Bank Ltd., GDR 48,860 3,517,920
Powszechna Kasa Oszczednosci Bank Polski S.A. 171,410 1,441,161
PT Bank Central Asia Tbk. 7,210,500 2,297,245
Shinsei Bank Ltd. 847,000 4,905,504
UBS AG 130,801 11,097,284
UniCredito Italiano S.p.A.^ 1,183,920 6,609,484
------------
$ 65,803,416
- ----------------------------------------------------------------------------------------------------
Biotechnology - 1.1%
- ----------------------------------------------------------------------------------------------------
Gilead Sciences, Inc.* 153,250 $ 7,241,063
- ----------------------------------------------------------------------------------------------------
Broadcast & Cable TV - 3.3%
- ----------------------------------------------------------------------------------------------------
Viacom, Inc., "B" 316,810 $ 9,811,606
Walt Disney Co. 486,490 11,855,761
------------
$ 21,667,367
- ----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.3%
- ----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. 96,510 $ 12,195,969
Julius Baer Holding Ltd. 36,295 2,812,149
------------
$ 15,008,118
- ----------------------------------------------------------------------------------------------------
Business Services - 3.0%
- ----------------------------------------------------------------------------------------------------
Accenture Ltd., "A"^ 400,830 $ 10,545,837
DST Systems, Inc.* 172,200 9,663,864
------------
$ 20,209,701
- ----------------------------------------------------------------------------------------------------
Chemicals - 1.1%
- ----------------------------------------------------------------------------------------------------
3M Co. 96,070 $ 7,299,399
- ----------------------------------------------------------------------------------------------------
Computer Software - 3.1%
- ----------------------------------------------------------------------------------------------------
Oracle Corp.* 977,800 $ 12,398,504
Symantec Corp.* 347,910 8,297,654
------------
$ 20,696,158
- ----------------------------------------------------------------------------------------------------
Computer Software - Systems - 1.5%
- ----------------------------------------------------------------------------------------------------
Dell, Inc.* 321,480 $ 10,248,782
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 6.8%
- ----------------------------------------------------------------------------------------------------
Estee Lauder Cos., Inc., "A" 217,100 $ 7,201,207
L'Oreal S.A.^ 68,170 5,013,029
Procter & Gamble Co. 179,794 10,066,666
Reckitt Benckiser PLC 764,500 23,083,521
------------
$ 45,364,423
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 2.5%
- ----------------------------------------------------------------------------------------------------
Nitto Denko Corp. 77,400 $ 4,662,290
Schneider Electric S.A. 145,606 11,964,073
------------
$ 16,626,363
- ----------------------------------------------------------------------------------------------------
Electronics - 5.1%
- ----------------------------------------------------------------------------------------------------
CANON, Inc. 188,000 $ 9,805,886
Intel Corp. 277,500 6,521,250
OMRON Corp. 76,200 1,790,823
Ricoh Co. Ltd.^ 217,000 3,429,113
Samsung Electronics Co. Ltd. 22,790 12,049,885
------------
$ 33,596,957
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 1.0%
- ----------------------------------------------------------------------------------------------------
EnCana Corp. 147,780 $ 6,755,657
- ----------------------------------------------------------------------------------------------------
Energy - Integrated - 2.7%
- ----------------------------------------------------------------------------------------------------
BP PLC 615,380 $ 6,792,334
TOTAL S.A. 44,720 11,224,598
------------
$ 18,016,932
- ----------------------------------------------------------------------------------------------------
Food & Drug Stores - 1.2%
- ----------------------------------------------------------------------------------------------------
Tesco PLC 1,505,580 $ 8,009,410
- ----------------------------------------------------------------------------------------------------
Food & Non-Alcoholic Beverages - 3.8%
- ----------------------------------------------------------------------------------------------------
Nestle S.A. 64,892 $ 19,306,960
PepsiCo, Inc. 94,020 5,554,702
------------
$ 24,861,662
- ----------------------------------------------------------------------------------------------------
Gaming & Lodging - 3.0%
- ----------------------------------------------------------------------------------------------------
Hilton Group PLC 2,056,220 $ 12,339,015
William Hill Organization Ltd. 783,580 7,408,360
------------
$ 19,747,375
- ----------------------------------------------------------------------------------------------------
General Merchandise - 1.1%
- ----------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 151,220 $ 7,154,218
- ----------------------------------------------------------------------------------------------------
Insurance - 3.0%
- ----------------------------------------------------------------------------------------------------
AXA 372,700 $ 10,793,161
Lincoln National Corp. 82,400 4,170,264
QBE Insurance Group Ltd.^ 359,311 4,778,575
------------
$ 19,742,000
- ----------------------------------------------------------------------------------------------------
Leisure & Toys - 0.9%
- ----------------------------------------------------------------------------------------------------
Nintendo Co. Ltd. 51,900 $ 5,779,798
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 2.4%
- ----------------------------------------------------------------------------------------------------
Atlas Copco AB, "A"^ 182,560 $ 3,342,454
Sandvik AB^ 255,920 12,333,882
------------
$ 15,676,336
- ----------------------------------------------------------------------------------------------------
Medical Equipment - 4.7%
- ----------------------------------------------------------------------------------------------------
DENTSPLY International, Inc. 98,760 $ 5,445,626
Fisher Scientific International, Inc.* 155,380 8,778,970
Medtronic, Inc. 90,280 5,115,265
Smith & Nephew PLC 505,400 4,273,209
Waters Corp.* 212,450 7,690,690
------------
$ 31,303,760
- ----------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.5%
- ----------------------------------------------------------------------------------------------------
Tokyo Gas Co. Ltd.^ 850,000 $ 3,330,612
- ----------------------------------------------------------------------------------------------------
Network & Telecom - 0.9%
- ----------------------------------------------------------------------------------------------------
Cisco Systems, Inc.* 179,970 $ 3,140,476
Ericsson, Inc., "B" 804,030 2,630,525
------------
$ 5,771,001
- ----------------------------------------------------------------------------------------------------
Oil Services - 0.8%
- ----------------------------------------------------------------------------------------------------
Noble Corp. 82,680 $ 5,322,938
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals - 10.6%
- ----------------------------------------------------------------------------------------------------
AstraZeneca PLC 138,720 $ 6,215,346
Chugai Pharmaceutical Co. Ltd.^ 147,400 3,217,151
Eli Lilly & Co. 230,370 11,470,122
GlaxoSmithKline PLC 130,300 3,385,768
Johnson & Johnson 210,080 13,155,210
Roche Holding AG 97,500 14,549,646
Sanofi-Aventis 154,740 12,390,002
Schering AG 97,730 6,029,404
------------
$ 70,412,649
- ----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.7%
- ----------------------------------------------------------------------------------------------------
Reed Elsevier N.V. 361,240 $ 4,866,923
- ----------------------------------------------------------------------------------------------------
Railroad & Shipping - 1.0%
- ----------------------------------------------------------------------------------------------------
Canadian National Railway Co. 93,093 $ 6,747,381
- ----------------------------------------------------------------------------------------------------
Specialty Chemicals - 5.3%
- ----------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 37,600 $ 2,152,224
Asahi Glass Co. Ltd.^ 745,000 8,027,755
BOC Group PLC 83,990 1,653,536
L'Air Liquide S.A., Bearer Shares^ 95,210 17,312,528
Praxair, Inc. 122,020 6,029,008
------------
$ 35,175,051
- ----------------------------------------------------------------------------------------------------
Specialty Stores - 2.7%
- ----------------------------------------------------------------------------------------------------
Esprit Holdings Ltd. 510,000 $ 3,615,132
Hennes & Mauritz AB, "B" 90,280 2,936,628
Home Depot, Inc. 120,620 4,950,245
NEXT PLC 263,980 6,228,994
------------
$ 17,730,999
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 2.2%
- ----------------------------------------------------------------------------------------------------
Hutchison Telecommunications International Ltd.* 4,859,000 $ 6,080,018
Vodafone Group PLC 3,217,635 8,437,670
------------
$ 14,517,688
- ----------------------------------------------------------------------------------------------------
Telephone Services - 2.1%
- ----------------------------------------------------------------------------------------------------
Singapore Telecommunications Ltd. 3,992,500 $ 5,488,053
Telefonica S.A. 510,944 8,151,616
------------
$ 13,639,669
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.0%
- ----------------------------------------------------------------------------------------------------
E.ON AG 72,800 $ 6,596,985
Iberdrola S.A.^ 246,970 6,613,323
------------
$ 13,210,308
- ----------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $513,950,117) $657,463,894
- ----------------------------------------------------------------------------------------------------
Short-Term Obligation - 0.8%
- ----------------------------------------------------------------------------------------------------
ISSUER PAR AMOUNT $ VALUE
- ----------------------------------------------------------------------------------------------------
General Electric Co., 4.03%, due 11/01/05, at Amortized Cost< $ 5,436,000 $ 5,436,000
- --------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 5.5%
- ----------------------------------------------------------------------------------------------------
Morgan Stanley Repurchase Agreement, 4.03%, dated 10/31/05, due
11/01/05, total to be received $35,850,043 (secured by various
U.S. Treasury and Federal Agency obligations in an individually
traded account), at Cost $ 35,846,030 $ 35,846,030
- --------------------------------------------------------------------------------------------------
SHARES
- ----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 324,247 $ 324,247
- ----------------------------------------------------------------------------------------------------
Total Collateral for Securities Loaned $ 36,170,277
- ----------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $555,556,394) $699,070,171
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (5.5)% (36,160,370)
- ----------------------------------------------------------------------------------------------------
Net Assets - 100.0% $662,909,801
- ----------------------------------------------------------------------------------------------------
* Non-income producing security.
^ All or a portion of this security is on loan.
< The rate shown represents an annualized yield at time of purchase.
The following abbreviation is used in the Portfolio of Investments and is defined:
GDR Global 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 the fund.
AT 10/31/05
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value, including $34,678,046 of securities on
loan (identified cost, $555,556,394) $699,070,171
Cash 344
Receivable for investments sold 2,178,810
Receivable for fund shares sold 908,608
Interest and dividends receivable 703,819
Other assets 3,328
- ------------------------------------------------------------------------------------------------------
Total assets $702,865,080
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for investments purchased $1,949,970
Payable for fund shares reacquired 1,247,253
Collateral for securities loaned, at value 36,170,277
Payable to affiliates
Management fee 47,438
Shareholder servicing costs 106,373
Distribution and service fees 25,588
Administrative services fee 583
Retirement plan administration and services fees 62
Accrued expenses and other liabilities 407,735
- ------------------------------------------------------------------------------------------------------
Total liabilities $39,955,279
- ------------------------------------------------------------------------------------------------------
Net assets $662,909,801
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid-in capital $489,286,920
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 143,496,621
Accumulated net realized gain (loss) on investments and
foreign currency transactions 30,193,957
Accumulated distributions in excess of net investment income (67,697)
- ------------------------------------------------------------------------------------------------------
Net assets $662,909,801
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 26,087,429
- ------------------------------------------------------------------------------------------------------
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $402,985,021
Shares outstanding 15,624,265
- ------------------------------------------------------------------------------------------------------
Net asset value per share $25.79
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25X$25.79) $27.36
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $148,433,792
Shares outstanding 6,025,086
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $24.64
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $33,974,772
Shares outstanding 1,404,356
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $24.19
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $41,492,549
Shares outstanding 1,586,494
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $26.15
- ------------------------------------------------------------------------------------------------------
Class J shares
- ------------------------------------------------------------------------------------------------------
Net assets $19,136,106
Shares outstanding 785,510
- ------------------------------------------------------------------------------------------------------
Net asset value, and redemption price per share $24.36
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/97.00X$24.36) $25.11
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $12,862,115
Shares outstanding 502,612
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $25.59
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $672,214
Shares outstanding 27,312
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $24.61
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $185,297
Shares outstanding 7,516
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $24.65
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $3,031,658
Shares outstanding 118,993
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $25.48
- ------------------------------------------------------------------------------------------------------
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $84,447
Shares outstanding 3,277
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $25.77
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $51,830
Shares outstanding 2,008
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per
share $25.81
- ------------------------------------------------------------------------------------------------------
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.
YEAR ENDED 10/31/05
NET INVESTMENT LOSS
- ------------------------------------------------------------------------------------------------------
Income
Dividends $12,395,227
Interest 404,615
Foreign taxes withheld (912,548)
- ------------------------------------------------------------------------------------------------------
Total investment income $11,887,294
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $6,066,497
Distribution and service fees 3,275,424
Shareholder servicing costs 1,481,626
Administrative services fee 77,016
Retirement plan administration and services fees 5,461
Independent trustees' compensation 26,049
Custodian fee 561,717
Printing 179,773
Postage 29,734
Auditing fees 53,619
Legal fees 48,109
Shareholder solicitation expenses 46,116
Registration fees 128,351
Miscellaneous 56,011
- ------------------------------------------------------------------------------------------------------
Total expenses $12,035,503
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (39,336)
Reduction of expenses by investment adviser (3,481)
- ------------------------------------------------------------------------------------------------------
Net expenses $11,992,686
- ------------------------------------------------------------------------------------------------------
Net investment loss $(105,392)
- ------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions (net of $51,874 country tax) $79,162,432
Foreign currency transactions (107,896)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $79,054,536
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $(1,555,159)
Translation of assets and liabilities in foreign currencies (51,674)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $(1,606,833)
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $77,447,703
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $77,342,311
- ------------------------------------------------------------------------------------------------------
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 2005 2004
CHANGE IN NET ASSETS
- ------------------------------------------------------------------------------------------------------
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) $(105,392) $206,547
Net realized gain (loss) on investments and foreign
currency transactions 79,054,536 53,955,297
Net unrealized gain (loss) on investments and foreign
currency translation (1,606,833) 44,884,801
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $77,342,311 $99,046,645
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net investment income
Class I $(82,625) $--
Class R (1,632) --
- ------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(84,257) $--
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(53,926,243) $(64,662,933)
- ------------------------------------------------------------------------------------------------------
Redemption fees $3,282 $2,932
- ------------------------------------------------------------------------------------------------------
Total change in net assets $23,335,093 $34,386,644
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period $639,574,708 $605,188,064
At end of period (including accumulated distributions in
excess of net investment income of $67,697 and accumulated
net investment loss of $6,504, respectively) $662,909,801 $639,574,708
- ------------------------------------------------------------------------------------------------------
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 life of a particular share
class, if shorter). 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.
CLASS A
YEARS ENDED 10/31
-------------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $22.92 $19.57 $16.55 $17.58 $22.88
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss)# $0.06 $0.07 $0.03 $(0.00)+++ $(0.01)
Net realized and unrealized gain (loss)
on investments and foreign currency 2.81 3.28 2.99 (1.03) (3.81)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.87 $3.35 $3.02 $(1.03) $(3.82)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $-- $-- $-- $-- $(1.48)
From paid-in capital -- -- -- -- (0.00)+++
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $-- $-- $-- $-- $(1.48)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $25.79 $22.92 $19.57 $16.55 $17.58
- --------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 12.52 17.12[+] 18.25 (5.86) (17.67)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.55 1.52 1.65 1.62 1.59
Expenses after expense reductions## 1.55 1.52 1.65 1.62 1.59
Net investment income (loss) 0.22 0.30 0.19 (0.02) (0.06)
Portfolio turnover 39 41 52 52 72
Net assets at end of period (000 Omitted) $402,985 $368,514 $345,783 $322,006 $348,129
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B
YEARS ENDED 10/31
-----------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $22.06 $18.97 $16.18 $17.31 $22.52
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss# $(0.13) $(0.10) $(0.09) $(0.14) $(0.16)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.71 3.19 2.88 (0.99) (3.75)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.58 $3.09 $2.79 $(1.13) $(3.91)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $-- $-- $-- $-- $(1.30)
From paid-in capital -- -- -- -- (0.00)+++
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $-- $-- $-- $-- $(1.30)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.64 $22.06 $18.97 $16.18 $17.31
- --------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 11.70 16.29[+] 17.24 (6.53) (18.28)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.30 2.27 2.40 2.37 2.34
Expenses after expense reductions## 2.30 2.27 2.40 2.37 2.34
Net investment loss (0.53) (0.45) (0.56) (0.79) (0.81)
Portfolio turnover 39 41 52 52 72
Net assets at end of period (000 Omitted) $148,434 $170,783 $177,713 $172,094 $220,855
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C
YEARS ENDED 10/31
-----------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $21.66 $18.63 $15.89 $17.00 $22.16
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss# $(0.12) $(0.09) $(0.09) $(0.14) $(0.16)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.65 3.12 2.83 (0.97) (3.68)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.53 $3.03 $2.74 $(1.11) $(3.84)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $-- $-- $-- $-- $(1.32)
From paid-in capital -- -- -- -- (0.00)+++
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $-- $-- $-- $-- $(1.32)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.19 $21.66 $18.63 $15.89 $17.00
- --------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 11.68 16.26[+] 17.24 (6.53) (18.30)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.30 2.27 2.40 2.37 2.34
Expenses after expense reductions## 2.30 2.27 2.40 2.37 2.34
Net investment loss (0.53) (0.45) (0.56) (0.78) (0.82)
Portfolio turnover 39 41 52 52 72
Net assets at end of period (000 Omitted) $33,975 $32,785 $33,253 $31,594 $40,789
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS I
YEARS ENDED 10/31
-----------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $23.23 $19.78 $16.70 $17.69 $23.04
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income# $0.12 $0.12 $0.09 $0.04 $0.02
Net realized and unrealized gain (loss) on
investments and foreign currency 2.85 3.33 2.99 (1.03) (3.83)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.97 $3.45 $3.08 $(0.99) $(3.81)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.05) $-- $-- $-- $--
From net realized gain on investments and
foreign currency transactions -- -- -- -- (1.54)
From paid-in capital -- -- -- -- (0.00)+++
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(0.05) $-- $-- $-- $(1.54)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $26.15 $23.23 $19.78 $16.70 $17.69
- --------------------------------------------------------------------------------------------------------------------------
Total return (%)&*** 12.79 17.44[+] 18.44 (5.60) (17.54)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.30 1.26 1.40 1.37 1.34
Expenses after expense reductions## 1.30 1.26 1.40 1.37 1.34
Net investment income 0.47 0.53 0.54 0.23 0.10
Portfolio turnover 39 41 52 52 72
Net assets at end of period (000 Omitted) $41,493 $37,781 $22,467 $2,325 $2,274
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS J
YEARS ENDED 10/31
-----------------------------------------------------------------------
2005 2004 2003 2002 2001
Net asset value, beginning of period $21.80 $18.74 $15.97 $17.08 $22.36
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment loss# $(0.11) $(0.08) $(0.09) $(0.13) $(0.15)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.67 3.14 2.86 (0.98) (3.71)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.56 $3.06 $2.77 $(1.11) $(3.86)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $-- $-- $-- $-- $(1.42)
From paid-in capital -- -- -- -- (0.00)+++
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $-- $-- $-- $-- $(1.42)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.36 $21.80 $18.74 $15.97 $17.08
- --------------------------------------------------------------------------------------------------------------------------
Total return (%)(+)&*** 11.74 16.33[+] 17.35 (6.50) (18.29)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.25 2.22 2.34 2.32 2.29
Expenses after expense reductions## 2.25 2.22 2.34 2.32 2.29
Net investment loss (0.47) (0.39) (0.53) (0.73) (0.78)
Portfolio turnover 39 41 52 52 72
Net assets at end of period (000 Omitted) $19,136 $23,188 $24,701 $17,215 $15,446
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R
YEARS ENDED 10/31
----------------------------------------------
2005 2004 2003**
Net asset value, beginning of period $22.80 $19.51 $16.57
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss)# $(0.01) $0.01 $(0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency 2.81 3.28 2.99
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.80 $3.29 $2.94
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net investment income $(0.01) $-- $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $25.59 $22.80 $19.51
- ---------------------------------------------------------------------------------------------------------------------
Total return (%)&*** 12.26 16.86[+] 17.74++
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.81 1.76 1.83+
Expenses after expense reductions## 1.81 1.76 1.83+
Net investment income (loss) (0.03) 0.06 (0.29)+
Portfolio turnover 39 41 52
Net assets at end of period (000 Omitted) $12,862 $5,994 $1,265
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R1 CLASS R2
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $23.89 $23.89
- --------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------
Net investment loss# $(0.15) $(0.07)
Net realized and unrealized gain (loss) on investments
and foreign currency 0.87^ 0.83^
- --------------------------------------------------------------------------------------------------------
Total from investment operations $0.72 $0.76
- --------------------------------------------------------------------------------------------------------
Net asset value, end of period $24.61 $24.65
- --------------------------------------------------------------------------------------------------------
Total return (%)&*** 3.01++ 3.18++
- --------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.50+ 2.21+
Expenses after expense reductions## 2.47+ 2.17+
Net investment loss (1.06)+ (0.56)+
Portfolio turnover 39 39
Net assets at end of period (000 Omitted) $672 $185
- --------------------------------------------------------------------------------------------------------
CLASS R3
YEARS ENDED 10/31
---------------------------------
2005 2004
Net asset value, beginning of period $22.76 $19.51
- -------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment loss# $(0.06) $(0.03)
Net realized and unrealized gain (loss) on investments
and foreign currency 2.78 3.28
- -------------------------------------------------------------------------------------------------------
Total from investment operations $2.72 $3.25
- -------------------------------------------------------------------------------------------------------
Net asset value, end of period $25.48 $22.76
- -------------------------------------------------------------------------------------------------------
Total return (%)&*** 11.95 16.66[+]
- -------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 2.06 2.00
Expenses after expense reductions## 2.05 2.00
Net investment loss (0.25) (0.15)
Portfolio turnover 39 41
Net assets at end of period (000 Omitted) $3,032 $530
- -------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R4 CLASS R5
YEAR ENDED YEAR ENDED
10/31/05** 10/31/05**
Net asset value, beginning of period $24.90 $24.90
- ------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income# $0.02 $0.08
Net realized and unrealized gain (loss) on investments
and foreign currency 0.85^ 0.83^
- ------------------------------------------------------------------------------------------------------
Total from investment operations $0.87 $0.91
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $25.77 $25.81
- ------------------------------------------------------------------------------------------------------
Total return (%)&*** 3.49++ 3.65++
- ------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------
Expenses before expense reductions## 1.73+ 1.44+
Expenses after expense reductions## 1.73+ 1.44+
Net investment income 0.13+ 0.54+
Portfolio turnover 39 39
Net assets at end of period (000 Omitted) $84 $52
- ------------------------------------------------------------------------------------------------------
Any redemption fees charged by the fund during the 2004 and 2005 fiscal years
resulted in a per share impact of less than $0.01.
** For the period from the class' inception, December 31, 2002 (Class R) and April 1, 2005 (Classes
R1, R2, R4, and R5) through the stated period end.
*** Certain expenses have been reduced without which performance would have been lower.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^ The per share amount is not in accordance with the net realized and unrealized gain/loss for the
period because of the timing of sales of fund shares and the amount of per share realized and
unrealized gains and losses at such time.
[+] 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. 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.
(+) Total returns do not include any applicable sales charges.
& From time to time the fund may receive proceeds from litigation settlements, without which
performance would be lower.
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 including securities of emerging market
issuers. 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. The markets of emerging markets countries are generally more
volatile than the markets of developed countries with more mature economies.
All of the risks of investing in foreign securities previously described are
heightened when investing in emerging markets countries.
INVESTMENT VALUATIONS - Equity securities, including restricted 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
approximates 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 charged 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 and before April 1, 2005, the fund
charged 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 did not impose redemption fees with respect to purchases made in June
2004 followed by redemptions made in July 2004. Effective April 1, 2005, the
fund no longer charges a redemption fee. See the fund's prospectus for
details. Any redemption fees charged 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.
The fund may receive proceeds from litigation settlements involving its
portfolio holdings. Any proceeds received are reflected in realized gain/loss
in the Statement of Operations, or in unrealized gain/loss if the security is
still held by the fund.
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, 2005, the fund's custodian fees
were reduced by $30,695 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, 2005, the fund's miscellaneous expenses
were reduced by $8,641 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, net operating losses, treating a
portion of the proceeds from redemptions as a distribution from realized gains
for tax purposes, wash sales, and foreign taxes.
10/31/05
Distributions declared from:
Ordinary income $84,257
The fund paid no distributions for the year ended October 31, 2004.
During the year ended October 31, 2005, accumulated distributions in excess of
net investment income decreased by $128,456, accumulated net realized gain on
investments and foreign currency transactions decreased by $1,085,067 and
paid-in capital increased by $956,611 due to differences between book and tax
accounting for foreign currency transactions, net operating losses, treating a
portion of the proceeds from redemptions as a distribution from realized gains
for tax purposes, and foreign taxes. This change had no effect on the net
assets or net asset value per share.
As of October 31, 2005, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
Undistributed long-term capital gain $30,238,045
Unrealized appreciation (depreciation) 143,469,689
Other temporary differences (84,853)
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 $1 billion of average daily net assets 0.90%
Next $1 billion of average daily net assets 0.75%
Average daily net assets in excess of $2 billion 0.65%
The management fee incurred for the year ended October 31, 2005 was equivalent
to an annual effective rate of 0.90% of the fund's average daily
net assets.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly owned subsidiary of
MFS, as distributor, received $59,662 for the year ended October 31, 2005, as
its portion of the initial sales charge on sales of Class A shares of the
fund.
The Board of Trustees has adopted a distribution plan for certain class shares
pursuant to Rule 12b-1 of the Investment Company Act of 1940.
The fund's distribution plan provides that the fund will pay MFD for services
provided by MFD and financial intermediaries in connection with the
distribution and servicing of certain share classes. One component of the plan
is a distribution fee paid to MFD. Another component of the plan is a service
fee paid to MFD which subsequently pays a portion of this fee to financial
intermediaries that enter into sales or service agreements with MFD, or its
affiliates, based on the average daily net assets of accounts attributable to
such intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL SERVICE FEE DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE RETAINED AND SERVICE
FEE RATE FEE RATE PLAN(1) RATE(2) BY MFD(3) FEE
Class A 0.10% 0.25% 0.35% 0.25% $28,412 $995,839
Class B 0.75% 0.25% 1.00% 1.00% 1,696 1,661,020
Class C 0.75% 0.25% 1.00% 1.00% 878 349,669
Class J(4) 0.70% 0.25% 0.95% 0.95% -- 203,184
Class R 0.25% 0.25% 0.50% 0.50% 19 55,174
Class R1 0.50% 0.25% 0.75% 0.75% 189 1,081
Class R2 0.25% 0.25% 0.50% 0.50% 126 263
Class R3 0.25% 0.25% 0.50% 0.50% 21 9,111
Class R4 -- 0.25% 0.25% 0.25% 63 83
- -------------------------------------------------------------------------------
Total Distribution and Service Fees $3,275,424
(1) In accordance with the distribution plan for certain classes, the fund
pays distribution and/or service fees up to these annual percentage rates
of each class' average daily net assets.
(2) The annual effective rates represent actual fees incurred under the
distribution plan for the year ended October 31, 2005 based on each class'
average daily net assets. Payment of the 0.10% annual Class A distribution
fee is not yet implemented and will commence on such date as the fund's
Board of Trustees may determine.
(3) For the year ended October 31, 2005, MFD retained these service fees.
(4) Includes fees that MFD pays to financial intermediaries and for services
rendered as the fund's agent company in Japan. MFD retains 0.10% of the
distribution and service fee.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months of purchase.
Class B shares are subject to a contingent deferred sales charge in the event
of a shareholder redemption within six years of purchase. MFD retained all
contingent deferred sales charges. Contingent deferred sales charges imposed
during the year ended October 31, 2005, were as follows:
AMOUNT
Class A $26,964
Class B $141,581
Class C $3,088
SHAREHOLDER SERVICING AGENT - The fund pays a portion of shareholder servicing
costs to MFS Service Center, Inc. (MFSC), a wholly-owned subsidiary of MFS.
MFSC receives a fee from the fund, for its services as shareholder servicing
agent, set periodically under the supervision of the fund's Board of Trustees.
For the year ended October 31, 2005, the fee was $720,813, which equated to
0.1069% annually of the fund's average daily net assets. MFSC also receives
payment from the fund for out-of-pocket and sub-accounting expenses paid by
MFSC on behalf of the fund. For the year ended October 31, 2005, these costs
amounted to $421,156.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment adviser. Under an administrative services
agreement, the funds may partially reimburse MFS the costs incurred to provide
these services, subject to review and approval by the Board of Trustees. Each
fund is charged a fixed amount plus a fee based on calendar year average net
assets. Effective July 1, 2005, the fund's annual fixed amount is $10,000. The
administrative services fee incurred for the year ended October 31, 2005 was
equivalent to an annual effective rate of 0.0114% of the fund's average daily
net assets.
In addition to the administrative services provided by MFS to the fund as
described above, MFS is responsible for providing certain retirement plan
administration and services with respect to certain Class R shares. These
services include various administrative, recordkeeping, and communication/
educational services with respect to the retirement plans which invest in
these shares, and may be provided directly by MFS or by a third party. For the
year ended October 31, 2005, the fund paid an annual retirement plan
administration and services fee up to the following annual percentage rates of
each class' average daily net assets:
AMOUNT
FEE EFFECTIVE TOTAL RETAINED
RATE RATE(1) AMOUNT BY MFS
Class R1 0.45% 0.42% $643 $548
Class R2 0.40% 0.36% 208 206
Class R3 0.25% 0.24% 4,530 3,406
Class R4 0.15% 0.15% 50 49
Class R5 0.10% 0.10% 30 29
- -------------------------------------------------------------------------------
Total Retirement Plan Administration
and Services Fees $5,461 $4,238
(1) Effective October 1, 2005, MFS has contractually agreed to waive a portion
of the retirement plan administration and service fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
For the year ended October 31, 2005, this waiver amounted to $291 and is
reflected as a reduction of total expenses in the Statement of Operations.
This agreement will continue until September 30, 2007.
TRUSTEES' AND OFFICERS' COMPENSATION - The fund pays compensation to
Independent Trustees in the form of a retainer, attendance fees, and
additional compensation to Board and Committee chairpersons. The fund does not
pay compensation directly to 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, MFD, and MFSC. The fund has an unfunded,
defined benefit plan for retired Independent Trustees which resulted in a
pension expense of $5,794. The fund also has an unfunded retirement benefit
deferral plan for certain current Independent Trustees which resulted in an
expense of $3,246. Both amounts are included in Independent trustees'
compensation for the year ended October 31, 2005.
OTHER - 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 the fund for a portion of the payments made by the funds to
Tarantino LLC in the amount of $3,190, which is shown as a reduction of total
expenses in the Statement of Operations. Additionally, MFS has agreed to bear
all expenses associated with office space, other administrative support, and
supplies provided 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, was the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in
connection with fund sales. As a result, proceeds in the amount of $50,585
were paid to the fund on February 16, 2005.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$258,386,713 and $316,766,989, 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 $555,600,482
---------------------------------------------------------
Gross unrealized appreciation $155,950,743
Gross unrealized depreciation (12,481,054)
---------------------------------------------------------
Net unrealized appreciation (depreciation) $143,469,689
(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 10/31/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS A SHARES
Shares sold 4,169,984 $104,075,188 4,139,449 $89,657,979
Shares reacquired (4,622,434) (115,713,383) (5,736,004) (124,915,880)
- ----------------------------------------------------------------------------------------------------------
Net change (452,450) $(11,638,195) (1,596,555) $(35,257,901)
CLASS B SHARES
Shares sold 1,261,711 $30,176,056 1,341,767 $28,143,014
Shares reacquired (2,978,747) (71,428,594) (2,967,214) (62,160,971)
- ----------------------------------------------------------------------------------------------------------
Net change (1,717,036) $(41,252,538) (1,625,447) $(34,017,957)
CLASS C SHARES
Shares sold 291,873 $6,844,927 301,622 $6,199,357
Shares reacquired (400,975) (9,447,612) (573,068) (11,862,760)
- ----------------------------------------------------------------------------------------------------------
Net change (109,102) $(2,602,685) (271,446) $(5,663,403)
CLASS I SHARES
Shares sold 610,393 $15,444,916 1,092,942 $24,118,678
Shares issued to shareholders in
reinvestment of distributions 3,322 82,567 -- --
Shares reacquired (653,604) (16,583,343) (602,499) (13,246,375)
- ----------------------------------------------------------------------------------------------------------
Net change (39,889) $(1,055,860) 490,443 $10,872,303
CLASS J SHARES
Shares sold 214,359 $5,101,163 760,073 $15,303,178
Shares reacquired (492,373) (11,644,337) (1,014,626) (20,746,006)
- ----------------------------------------------------------------------------------------------------------
Net change (278,014) $(6,543,174) (254,553) $(5,442,828)
CLASS R SHARES
Shares sold 418,220 $10,252,746 262,806 $5,760,985
Shares issued to shareholders in
reinvestment of distributions 67 1,642 -- --
Shares reacquired (178,523) (4,464,506) (64,810) (1,420,895)
- ----------------------------------------------------------------------------------------------------------
Net change 239,764 $5,789,882 197,996 $4,340,090
Period ended 10/31/05*
SHARES AMOUNT
CLASS R1 SHARES
Shares sold 28,959 $704,849
Shares reacquired (1,647) (40,727)
- ------------------------------------------------------------------------
Net change 27,312 $664,122
CLASS R2 SHARES
Shares sold 8,005 $193,992
Shares reacquired (489) (12,251)
- ------------------------------------------------------------------------
Net change 7,516 $181,741
Year ended 10/31/05 Year ended 10/31/04
SHARES AMOUNT SHARES AMOUNT
CLASS R3 SHARES
Shares sold 126,604 $3,177,335 25,850 $569,113
Shares reacquired (30,917) (780,227) (2,799) (62,350)
- ----------------------------------------------------------------------------------------------------------
Net change 95,687 $2,397,108 23,051 $506,763
Period ended 10/31/05*
SHARES AMOUNT
CLASS R4 SHARES
Shares sold 3,277 $83,356
CLASS R5 SHARES
Shares sold 2,008 $50,000
* For the period from the inception of Class R1, Class R2, Class R4, and Class R5 shares, April 1, 2005,
through October 31, 2005.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured line
of credit provided by a syndication of banks under a 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 0.35%. 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, 2005 was $4,287, and is
included in miscellaneous expense. The fund had no significant borrowings
during the year ended October 31, 2005.
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, 2005, 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. We were not engaged to perform an audit of the Fund's internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Fund's internal control
over financial reporting. Accordingly, we express no such opinion. An audit
also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of October 31, 2005, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. 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, 2005, 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.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 13, 2005
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 2, 2005, 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 DURING
POSITION(s) HELD TRUSTEE/OFFICER THE PAST FIVE YEARS &
NAME, DATE OF BIRTH WITH FUND SINCE(1) OTHER DIRECTORSHIPS(2)
- ------------------- ---------------- --------------- ----------------------------
INTERESTED TRUSTEES
Robert J. Manning(3) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) 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); Bell Canada
Enterprises (telecommunications),
Director; Medtronic, Inc. (medical
technology), Director; Telesat
(satellite communications),
Director
INDEPENDENT TRUSTEES
J. Atwood Ives Trustee and Chair February 1992 Private investor; Eastern
(born 05/01/36) of 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) Senior Cardiac Surgeon, Chief of
Cardiac Surgery (until 2005);
Harvard Medical School, Professor
of Surgery; Brigham and Women's
Hospital Physicians' Organization,
Chair (2000 to 2004)
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
William R. Gutow Trustee December 1993 Private investor and real estate
(born 09/27/41) consultant; Capitol Entertainment
Management Company (video
franchise), Vice Chairman
Michael Hegarty Trustee December 2004 Retired; AXA Financial (financial
(born 12/21/44) services and insurance), Vice
Chairman and Chief Operating
Officer (until May 2001); The
Equitable Life Assurance Society
(insurance), President and Chief
Operating Officer (until May 2001)
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 (attorneys),
(born 06/23/35) Partner
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)
Laurie J. Thomsen Trustee March 2005 Private investor; Prism Venture
(born 08/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
OFFICERS
Maria F. Dwyer(3) President November 2005 Massachusetts Financial Services
(born 12/01/58) Company, Executive Vice President
and Chief Regulatory Officer
(since March 2004); Fidelity
Management & Research Company,
Vice President (prior to March
2004); Fidelity Group of Funds,
President and Treasurer (prior to
March 2004)
Tracy Atkinson(3) Treasurer September 2005 Massachusetts Financial Services
(born 12/30/64) Company, Senior Vice President
(since September 2004);
PricewaterhouseCoopers LLP,
Partner (prior to September 2004)
Christopher R. Bohane(3) Assistant July 2005 Massachusetts Financial Services
(born 1/18/74) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003); Nvest Services Company,
Assistant Vice President and
Associate Counsel (prior to
January 2001)
Jeffrey N. Carp(3) Secretary and September 2004 Massachusetts Financial Services
(born 12/19/56) Clerk Company, Executive Vice President,
General Counsel and Secretary
(since April 2004); Hale and Dorr
LLP (law firm), Partner (prior to
April 2004)
Ethan D. Corey(3) Assistant July 2005 Massachusetts Financial Services
(born 11/21/63) Secretary and Company, Special Counsel (since
Assistant Clerk December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(3) Assistant July 2005 Massachusetts Financial Services
(born 8/10/68) Treasurer Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (January
2001 to June 2005); State Street
Bank, Vice President and Corporate
Audit Manager (prior to January
2001)
Timothy M. Fagan(3) Assistant September 2005 Massachusetts Financial Services
(born 7/10/68) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since September 2005);
John Hancock Advisers, LLC, Vice
President and Chief Compliance
Officer (September 2004 to August
2005), Senior Attorney (prior to
September 2004); John Hancock
Group of Funds, Vice President and
Chief Compliance Officer
(September 2004 to December 2004)
Mark D. Fischer(3) Assistant July 2005 Massachusetts Financial Services
(born 10/27/70) Treasurer Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian T. Hourihan(3) Assistant September 2004 Massachusetts Financial Services
(born 11/11/64) Secretary and Company, Vice President, Senior
Assistant Clerk 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 April 1997 Massachusetts Financial Services
(born 11/13/57) Treasurer Company, Vice President
Susan S. Newton(3) Assistant May 2005 Massachusetts Financial Services
(born 03/07/50) Secretary and Company, Senior Vice President and
Assistant Clerk Associate General Counsel (since
April 2005); John Hancock
Advisers, LLC, Senior Vice
President, Secretary and Chief
Legal Officer (prior to April
2005); John Hancock Group of
Funds, Senior Vice President,
Secretary and Chief Legal Officer
(prior to April 2005)
Susan A. Pereira(3) Assistant July 2005 Massachusetts Financial Services
(born 11/05/70) Secretary and Company, Vice President and Senior
Assistant Clerk Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (January 2001 to June
2004); Preti, Flaherty, Beliveau,
Pachios & Haley, LLC, Associate
(prior to January 2001)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 03/07/44) Compliance compliance services), Principal
Officer (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 September 1990 Massachusetts Financial Services
(born 06/12/60) Treasurer 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 the Trust 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, as a result of position with MFS. The address of MFS is 500 Boylston Street,
Boston, Massachusetts 02116.
Each Trustee has been elected by shareholders and 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 and Sherratt and Mses. Lane and Thomsen 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. As of December 31, 2004, each Trustee served as a board
member of 99 funds within the MFS Family of Funds.
The Trust held a shareholders' meeting in 2005, and will hold a shareholders' meeting at least once
every five years thereafter, to elect Trustees.
The Statement of Additional Information contains further information about the Trustees and is
available without charge upon request by calling 1-800-225-2606.
- -----------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 225 Franklin Street, Boston, MA 02110
02116-3741
JP Morgan Chase 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
David A. Mannheim 200 Clarendon Street, Boston, MA 02116
Simon Todd
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT
The Investment Company Act of 1940 requires that both the full Board of
Trustees and a majority of the non-interested ("independent") Trustees, voting
separately, annually approve the continuation of the Fund's investment advisory
agreement with MFS. The Trustees consider matters bearing on the Fund and its
advisory arrangements at their meetings throughout the year, including a review
of performance data at each regular meeting. In addition, the independent
Trustees met several times over the course of three months beginning in May and
ending in July, 2005 ("contract review meetings") for the specific purpose of
considering whether to approve the continuation of the investment advisory
agreement for the Fund and the other investment companies that the Board
oversees (the "MFS Funds"). The independent Trustees were assisted in their
evaluation of the Fund's investment advisory agreement by independent legal
counsel, from whom they received separate legal advice and with whom they met
separately from MFS during various contract review meetings. The independent
Trustees were also assisted in this process by the MFS Funds' Independent Chief
Compliance Officer, a full-time senior officer appointed by and reporting to
the independent Trustees.
In connection with their deliberations regarding the continuation of the
investment advisory agreement, the Trustees, including the independent
Trustees, considered such information and factors as they believed, in light of
the legal advice furnished to them and their own business judgment, to be
relevant. The investment advisory agreement for the Fund was considered
separately, although the Trustees also took into account the common interests
of all MFS Funds in their review. As described below, the Trustees considered
the nature, quality, and extent of the various investment advisory,
administrative, and shareholder services performed by MFS under the existing
investment advisory agreement and other arrangements with the Fund.
In connection with their contract review meetings, the Trustees received and
relied upon materials which included, among other items: (i) information
provided by Lipper Inc. on the investment performance of the Fund for various
time periods ended December 31, 2004 and the investment performance of a group
of funds with substantially similar investment classifications/objectives (the
"Lipper performance universe"), as well as the investment performance of a
group of funds identified by objective criteria suggested by MFS ("peer
funds"), (ii) information provided by Lipper Inc. on the Fund's advisory fees
and other expenses and the advisory fees and other expenses of comparable funds
identified by Lipper (the "Lipper expense group"), as well as the advisory fees
and other expenses of peer funds identified by objective criteria suggested by
MFS, (iii) information provided by MFS on the advisory fees of comparable
portfolios of other clients of MFS, including institutional separate account
and other clients, (iv) information as to whether and to what extent applicable
expense waivers, reimbursements or fee "breakpoints" are observed for the Fund,
(v) information regarding MFS' financial results and financial condition,
including MFS' and certain of its affiliates' estimated profitability from
services performed for the Fund and the MFS Funds as a whole, (vi) MFS' views
regarding the outlook for the mutual fund industry and the strategic business
plans of MFS, (vii) descriptions of various functions performed by MFS for the
Funds, such as compliance monitoring and portfolio trading practices, and
(viii) information regarding the overall organization of MFS, including
information about MFS' senior management and other personnel providing
investment advisory, administrative and other services to the Fund and the
other MFS Funds. The comparative performance, fee and expense information
prepared and provided by Lipper Inc. was not independently verified and the
independent Trustees did not independently verify any information provided to
them by MFS.
The Trustees' conclusion as to the continuation of the investment advisory
agreement was based on a comprehensive consideration of all information
provided to the Trustees and not the result of any single factor. Some of the
factors that figured particularly in the Trustees' deliberations are described
below, although individual Trustees may have evaluated the information
presented differently from one another, giving different weights to various
factors. It is also important to recognize that the fee arrangements for the
Fund and other MFS Funds are the result of years of review and discussion
between the independent Trustees and MFS, that certain aspects of such
arrangements may receive greater scrutiny in some years than others, and that
the Trustees' conclusions may be based, in part, on their consideration of
these same arrangements during the course of the year and in prior years.
Based on information provided by Lipper Inc. and MFS, the Trustees reviewed the
Fund's total return investment performance as well as the performance of peer
groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of the Fund's Class A shares in
comparison to the performance of funds in its Lipper performance universe over
the three-year period ended December 31, 2004, which the Trustees believed was
a long enough period to reflect differing market conditions. The Fund's
performance was in the 26th percentile relative to the other funds in the
universe for this three-year period (the 1st percentile being the best
performers and the 100th percentile being the worst performers). The total
return performance of the Fund's Class A shares was in the 9th percentile
for the one-year period and the 29th percentile for the five-year period
ended December 31, 2004 relative to the Lipper performance universe. Because of
the passage of time, these performance results are likely to differ from the
performance results for more recent periods, including those shown elsewhere in
this report.
In the course of their deliberations, the Trustees took into account
information provided by MFS in connection with the contract review meetings,
as well as during investment review meetings conducted with portfolio
management personnel during the course of the year regarding the Fund's
performance. After reviewing these and related factors, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that they were satisfied with MFS' responses
and efforts relating to investment performance.
In assessing the reasonableness of the Fund's advisory fee, the Trustees
considered, among other information, the Fund's advisory fee and the total
expense ratio of the Fund's Class A shares as a percentage of average net
assets and the advisory fee and total expense ratios of peer groups of funds
based on information provided by Lipper Inc. and MFS. The Trustees considered
whether the Fund was subject to any fee waivers or reductions or expense
limitations. The Trustees also considered that, according to the Lipper data,
the Fund's effective advisory fee rate was higher than the Lipper expense
group median, and the Fund's total expense ratio was approximately at the
Lipper expense group median.
The Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered information
provided by MFS as to the generally broader scope of services provided by MFS
to the Fund in comparison to institutional accounts, the higher demands placed
on MFS' investment personnel and trading infrastructure as a result of the
daily cash in-flows and out-flows of the Fund, and the impact on MFS and
expenses associated with the more extensive regulatory regime to which the
Fund is subject in comparison to institutional accounts.
The Trustees also considered whether the Fund is likely to benefit from any
economies of scale in the management of the Fund in the event of growth in
assets of the Fund. They noted that the Fund's advisory fee rate schedule is
currently subject to breakpoints that reduce the Fund's advisory fee rate on
net assets over $1 billion and $2 billion. Taking into account fee waivers or
reductions or expense limitations, if any, the Trustees concluded that the
existing breakpoints were sufficient to allow the Fund to benefit from
economies of scale as its assets grow.
The Trustees also considered information prepared by MFS relating to MFS'
costs and profits with respect to the Fund, the MFS Funds considered as a
group, and other investment companies and accounts advised by MFS, as well as
MFS' methodologies used to determine and allocate its costs to the MFS Funds,
the Fund and other accounts and products for purposes of
estimating profitability.
After reviewing these and other factors described herein, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreement, that the advisory fees charged to the Fund
represent reasonable compensation in light of the nature and quality of the
services being provided by MFS to the Fund.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Fund.
The Trustees also considered current and developing conditions in the
financial services industry, including the entry into the industry of large
and well-capitalized companies which are spending, and appear to be prepared
to continue to spend, substantial sums to engage personnel and to provide
services to competing investment companies. In this regard, the Trustees also
considered the financial resources of MFS and its ultimate parent, Sun Life
Financial Inc. The Trustees also considered the advantages and possible
disadvantages to the Fund of having an adviser which also serves other
investment companies as well as other accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the
Fund by MFS and its affiliates under agreements and plans other than the
investment advisory agreement, including any 12b-1 fees the Fund pays to MFS
Fund Distributors, Inc., an affiliate of MFS. The Trustees also considered the
nature, extent and quality of certain other services MFS performs or arranges
for on the Fund's behalf, including securities lending programs, directed
expense payment programs, class action recovery programs, and MFS' interaction
with third-party service providers, principally custodians and sub-custodians.
The Trustees concluded that the various non-advisory services provided by MFS
and its affiliates on behalf of the Funds were satisfactory.
The Trustees also considered benefits to MFS from the use of the Fund's
portfolio brokerage commissions to pay for research and other similar services
(including MFS' general policy to pay directly for third-party research), and
various other factors. Additionally, the Trustees considered so-called "fall-
out benefits" to MFS such as reputational value derived from serving as
investment manager to the Fund.
Based on their evaluation of factors that they deemed to be material,
including those factors described above, the Board of Trustees, including a
majority of the independent Trustees, concluded that the Fund's investment
advisory agreement with MFS should be continued for an additional one-year
period, commencing August 1, 2005.
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement will be available on or before
December 1, 2005 by clicking on the fund's name under "Select a fund" on the
MFS Web site (mfs.com).
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 Proxy Voting 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 Web site 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 2006, shareholders will be mailed a Form 1099-DIV reporting the
federal tax status of all distributions paid during the calendar year 2005.
The fund has designated $1,244,837 as a capital gain dividend for the year
ended October 31, 2005.
For the year ended October 31, 2005, 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 2005 Form 1099-DIV.
For the year ended October 31, 2005, income from foreign sources was
$7,985,938, and the fund designated a foreign tax credit of $658,620.
CONTACT INFORMATION
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 (1-800-637-8255) 24 hours a day, 365 days a
or stock and bond outlooks touch-tone required year
- --------------------------------------------------------------------------------
M F S(SM)
INVESTMENT MANAGEMENT(R)
(C) 2005 MFS Investment Management(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
LGE-ANN-12/05 51M
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. The Registrant has amended its Code of Ethics to reflect that the
Registrant's Principal Financial Officer and Principal Executive Officer have
changed.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Mr. J. Atwood Ives and Mses. Amy B. Lane and Laurie J. Thomsen, 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 Mses. Lane and Thomsen 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 a series of the Registrant (the series referred to
collectively as the "Funds" and singularly as a "Fund"). 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, 2005 and 2004, audit fees billed to the
Funds by E&Y were as follows:
Audit Fees
FEES BILLED BY E&Y: 2005 2004
---- ----
MFS Global Equity Fund $36,825 $33,550
MFS Global Total Return Fund $42,160 $38,400
MFS Utilities Fund $33,580 $30,600
------- -------
TOTAL $112,565 $102,550
For the fiscal years ended October 31, 2005 and 2004, 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: 2005 2004 2005 2004 2005 2004
---- ---- ---- ---- ---- ----
To MFS Global Equity $0 $0 $9,630 $10,890 $237 $0
Fund
To MFS Global Total $0 $0 $10,620 $11,790 $176 $0
Return Fund
To MFS Utilities Fund $0 $0 $9,080 $10,200 $514 $0
TOTAL FEES BILLED BY E&Y
TO ABOVE FUND:
To MFS and MFS Related $0 $0 $0 $0 $685,399 $20,000
Entities of MFS
Global Equity Fund*
To MFS and MFS Related $0 $0 $0 $0 $685,399 $20,000
Entities of MFS
Global Total Return Fund*
To MFS and MFS Related $0 $0 $0 $0 $685,399 $20,000
Entities of MFS
Utilities Fund*
AGGREGATE FEES FOR NON-AUDIT
SERVICES:
2005 2004
---- ----
To MFS Global Equity Fund, $727,266 $37,890
MFS and MFS Related
Entities#
To MFS Global Total $728,195 $38,790
Return Fund, MFS and
MFS Related Entities#
To MFS Utilities, MFS $726,993 $37,200
and MFS 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 (portions of 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, comfort
letters and internal control reviews.
(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," including fees for services related to analysis
of fund administrative expenses, compliance program and records management projects.
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 Fund 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 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 the 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.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
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 Investment Company Act
of 1940 (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
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By (Signature and Title)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President
Date: December 22, 2005
-----------------
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)* MARIA F. DWYER
-----------------------------------------------------
Maria F. Dwyer, President (Principal Executive
Officer)
Date: December 22, 2005
-----------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: December 22, 2005
-----------------
* Print name and title of each signing officer under his or her signature.