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, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
ANNUAL REPORT
MFS(R) GLOBAL TOTAL RETURN FUND
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 6
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EXPENSE TABLE 9
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PORTFOLIO OF INVESTMENTS 11
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STATEMENT OF ASSETS AND LIABILITIES 23
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STATEMENT OF OPERATIONS 26
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STATEMENTS OF CHANGES IN NET ASSETS 28
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FINANCIAL HIGHLIGHTS 30
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NOTES TO FINANCIAL STATEMENTS 39
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 52
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TRUSTEES AND OFFICERS 53
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BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 59
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PROXY VOTING POLICIES AND INFORMATION 64
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QUARTERLY PORTFOLIO DISCLOSURE 64
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FEDERAL TAX INFORMATION 64
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MFS(R) PRIVACY NOTICE 65
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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.
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NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
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10/31/06
MWT-ANN
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
What a difference a year can make. By the end of 2005, the Dow Jones
Industrial Average had lost value over the course of the year, as stocks were
beaten back by a myriad of investor worries, including a spike in oil prices,
a rise in interest rates, and political uncertainty in the Middle East.
Fast forward to 2006, and we have seen a dramatically different picture.
While there were some fluctuations in the global markets in the first half of
the year, the second half of 2006 has, so far, been good to many investors.
Oil prices retreated, boosting consumer confidence, and interest rates have
held steady. U.S. stock markets responded favorably to this news, as the Dow
reached a record high in October, passing the 12,000 mark.
What does all of this mean for you? If you're focused on a long-term
investment strategy, the high points in the road -- and the bumps -- should
not necessarily dictate portfolio action on your part. Markets are inherently
cyclical, and we firmly believe that investors who remain committed to a long-
term investment strategy are more likely to achieve their goals than those who
consistently chase short-term performance.
At MFS(R), our unique teamwork approach to managing money and our global
research platform support an unwavering focus on helping you realize your
long-term financial goals. We believe in a three-pronged investment strategy
of allocating your holdings across major asset classes, diversifying within
each class, and rebalancing regularly. Of course, these strategies cannot
guarantee a profit or protect against a loss. Investing and planning for the
long term require diligence and patience -- two traits that 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, 2006
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Common Stocks 59.0%
Bonds 36.2%
Cash & Other Net Assets 4.8%
TOP TEN HOLDINGS (i)
Federal Republic of Germany, 6.25%, 2030 1.9%
---------------------------------------------------
Federal Republic of Germany, 6.25%, 2024 1.4%
---------------------------------------------------
Network Rail MTN Finance PLC,
FRN, 3.255%, 2007 1.4%
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Bank of America Corp. 1.4%
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Nestle S.A. 1.3%
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Lockheed Martin Corp. 1.3%
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Kingdom of Spain, 5.35%, 2011 1.2%
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Federal Republic of Germany, 3.75%, 2015 1.2%
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Allstate Corp. 1.2%
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Development Bank of Japan, 1.05%, 2023 1.2%
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EQUITY SECTORS
Financial Services 15.3%
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Utilities & Communications 7.0%
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Consumer Staples 6.4%
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Energy 5.2%
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Health Care 4.9%
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Industrial Goods & Services 4.3%
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Autos & Housing 3.2%
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Basic Materials 3.2%
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Technology 2.7%
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Retailing 2.4%
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Leisure 2.4%
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Transportation 1.6%
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Special Products & Services 0.4%
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FIXED INCOME SECTORS (i)
Non-U.S. Government Bonds 26.1%
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U.S. Treasury Securities 2.8%
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Commercial Mortgage-Backed
Securities 2.7%
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Emerging Market Bonds 1.7%
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U.S. Government Agencies 1.6%
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Mortgage-Backed Securities 0.9%
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High Grade Corporates 0.4%
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COUNTRY WEIGHTINGS (i)
United States 39.8%
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United Kingdom 12.2%
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Japan 11.5%
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Germany 9.5%
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France 6.8%
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Switzerland 3.4%
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Canada 2.7%
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Netherlands 2.1%
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Ireland 1.3%
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Other 10.7%
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(i) 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 10/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the twelve months ended October 31, 2006, Class A shares of the MFS Global
Total Return Fund provided a total return of 15.62%, at net asset value. This
compares with a return of 21.91% for the fund's benchmark, the MSCI World
Index. The MSCI World Index became the fund's benchmark effective December 13,
2005. For the period October 31, 2005 to December 12, 2005 the fund's
benchmark was the Standard and Poor's 500 Stock Index (S&P 500). The return of
the S&P 500 for the reporting period was 16.34%.
The fund changed its benchmark from the S&P 500 to the MSCI World Index,
because it is believed that it more closely corresponds to the investment
objectives of the fund. The fund's other benchmark, a hybrid benchmark
comprised of 60% of the MSCI World Index and 40% of the JPMorgan Global
Government Bond Index, had a total return of 14.99%.
DETRACTORS FROM PERFORMANCE
Within the equity portion of the fund, stock selection in the financial
services sector held back performance relative to the MSCI World Index. Some
of our holdings in Japanese financial services firms were among the fund's top
detractors during the reporting period. These included consumer financing
firms Aiful and Takefuji. Both companies struggled during the period in an
increasingly difficult regulatory and business environment for consumer
finance companies.
Security selection in the utilities and communications sector also hurt
relative results. Wireless services companies Sprint Nextel (U.S.) and
Vodafone Group (U.K.), and telecommunications company Deutsche Telekom(g)
(Germany) detracted from relative returns. Shares of Sprint Nextel struggled
after the company lowered its wireless subscriber guidance for 2006. Also, the
company's merger with Nextel appeared to have disappointed investors. Vodafone
lagged the benchmark as the company faced increased competition and
disappointing results from its core European markets.
In the leisure sector, stock selection held back relative performance.
Holdings of pay-television operator Premiere (Germany) and television
broadcasting company Nippon Television Network (Japan) were among the top
detractors.
Elsewhere, integrated energy company ConocoPhillips (U.S.) and home
improvements products maker Masco (U.S.) hurt relative performance.
The cash position in the equity portion of the fund was also a detractor from
relative performance. The fund 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.
Within the fixed income portion of the fund, our holdings in government agency
debt detracted from results relative to the JPMorgan Global Government Bond
Index. During the reporting period, the fund did not generate as much income
as the benchmark, which hindered relative returns.
CONTRIBUTORS TO PERFORMANCE
Security selection and, to a lesser extent, our underweighting in the health
care sector benefited relative performance. Our holdings in pharmaceutical
manufacturer Schering(g) (Germany) performed particularly well within
this sector as its share price soared following a takeover offer from rival
company Bayer.
Both stock selection and underweighted positions in the technology and
retailing sectors also boosted performance. No individual holdings within
either sector were among the fund's top contributors.
Several individual holdings significantly aided performance including
agrichemical products maker Syngenta (Switzerland), steel tube manufacturer
Vallourec(g) (France), and defense contractor Lockheed Martin (U.S.). Syngenta
benefited from increased sales volume, especially in North America, driven
largely by its newer product portfolio and strong distribution network. It is
our belief that Vallourec's strong performance was driven by price increases
of its seamless tubes. Lastly, Lockheed Martin gained on strong revenue
growth, improved margins, and key contract awards over the period.
Other stocks that helped relative results included postal systems operator TNT
(Netherlands), investment banker Goldman Sachs (U.S.), plumbing equipment
maker Geberit (Switzerland), and electric power distributor SUEZ (France).
During the reporting period, currency exposure in the equity portion of the
fund was a contributor to relative performance. All of MFS' investment
decisions are driven by the fundamentals of each individual opportunity and,
as such, it is common for our portfolios to have different currency exposure
than the benchmark.
Within the fixed income portion of the fund, our duration(d) stance boosted
results relative to the JPMorgan Global Government Bond Index, as the fund was
less sensitive to adverse interest rate changes than its benchmark. The fund's
exposure to the Euro, Japanese Yen, and Korean Won also helped relative
returns.
Respectfully,
Nevin P. Chitkara Steven R. Gorham Matthew W. Ryan
Portfolio Manager Portfolio Manager Portfolio Manager
Erik S. Weisman Barnaby Wiener
Portfolio Manager Portfolio Manager
Note To Shareholders: Effective May 2006, Nevin P. Chitkara became a member of
the management team.
(d) Duration is a measure of how much a bond's price is likely to fluctuate
with general changes in interest rates, e.g., if rates rise 1.00%, a bond
with a 5-year duration is likely to lose about 5.00% of its value.
(g) Security was not held in the 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 portfolio. References to \specific
securities are not recommendations of such securities, and may not be
representative of any MFS portfolio's current or future investments.
PERFORMANCE SUMMARY THROUGH 10/31/06
The following chart illustrates the historical performance of the fund's Class
A shares 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. The performance of other share classes will be greater
than or less than that of the class depicted below. Benchmark comparisons are
unmanaged; do not reflect sales charges, commissions or expenses; and cannot
be invested in directly. (See Notes to Performance Summary.)
PERFORMANCE DATA SHOWN REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE SO YOUR
SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. FOR MOST RECENT MONTH-END
PERFORMANCE, PLEASE VISIT MFS.COM. (FOR THE MOST RECENT MONTH-END PERFORMANCE
FOR CLASS I SHARES CALL 1-800-343-2829.) 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 Total MSCI Standard & Poor's 60% MSCI World Index/
Return Fund World 500 Stock 40% JPMorgan Global
- Class A Index Index Government Bond Index
10/96 $ 9,425 $10,000 $10,000 $10,000
10/97 10,905 11,725 13,211 11,182
10/98 12,464 13,564 16,117 12,880
10/99 13,082 17,000 20,254 14,604
10/00 14,097 17,237 21,487 14,477
10/01 13,197 12,886 16,136 12,664
10/02 13,062 11,017 13,698 12,022
10/03 15,165 13,697 16,548 14,484
10/04 17,733 15,582 18,107 16,296
10/05 19,198 17,736 19,686 17,518
10/06 22,197 21,622 22,903 20,143
TOTAL RETURNS THROUGH 10/31/06
AVERAGE ANNUAL WITHOUT SALES CHARGE
Share class Class inception date 1-yr 5-yr 10-yr
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A 9/04/90 15.62% 10.96% 8.94%
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B 9/07/93 14.84% 10.24% 8.23%
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C 1/03/94 14.87% 10.24% 8.23%
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I 1/02/97 16.00% 11.34% 9.33%
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R 12/31/02 15.39% 10.84% 8.88%
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R1 4/01/05 14.78% 10.21% 8.22%
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R2 4/01/05 15.16% 10.33% 8.27%
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R3 10/31/03 15.19% 10.43% 8.32%
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R4 4/01/05 15.53% 10.94% 8.93%
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R5 4/01/05 15.95% 11.05% 8.99%
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AVERAGE ANNUAL
Comparative benchmarks
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MSCI World Index (f) 21.91% 10.91% 8.02%
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Standard & Poor's 500 Stock Index (e)(f) 16.34% 7.26% 8.64%
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60% MSCI World Index/40% JPMorgan Global
Government Bond Index (f) 14.99% 9.73% 7.25%
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AVERAGE ANNUAL WITH SALES CHARGE
Share class
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A 8.97% 9.65% 8.30%
With Initial Sales Charge (5.75%)
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B 10.84% 9.97% 8.23%
With CDSC (Declining over six years
from 4% to 0%) (x)
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C 13.87% 10.24% 8.23%
With CDSC (1% for 12 months) (x)
- ---------------------------------------------------------------------------
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.
CDSC - Contingent Deferred Sales Charge.
(e) Effective December 13, 2005, we no longer use the Standard and Poor's 500
Stock Index as a benchmark because we believe the MSCI World Index better
reflects the fund's investment policies and objectives.
(f) Source: FactSet Research Systems Inc.
(x) Assuming redemption at the end of the applicable period.
INDEX DEFINITIONS
Morgan Stanley Capital International (MSCI) World Index - a market
capitalization index that is designed to measure global developed market
equity performance.
Standard & Poor's 500 Stock Index - a capitalization-weighted index of 500
widely held equity securities, designed to measure broad U.S. equity
performance.
JPMorgan 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 R shares are available only to existing Class R shareholders. 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, 2006 through October 31, 2006.
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, 2006 through October 31,
2006.
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.
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Expenses
Paid During
Annualized Beginning Ending Period(p)
Share Expense Account Value Account Value 5/01/06-
Class Ratio 5/01/06 10/31/06 10/31/06
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Actual 1.29% $1,000.00 $1,039.20 $6.63
A -----------------------------------------------------------------------
Hypothetical (h) 1.29% $1,000.00 $1,018.70 $6.56
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Actual 1.94% $1,000.00 $1,035.00 $9.95
B -----------------------------------------------------------------------
Hypothetical (h) 1.94% $1,000.00 $1,015.43 $9.86
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Actual 1.94% $1,000.00 $1,035.50 $9.95
C -----------------------------------------------------------------------
Hypothetical (h) 1.94% $1,000.00 $1,015.43 $9.86
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Actual 0.94% $1,000.00 $1,040.50 $4.83
I -----------------------------------------------------------------------
Hypothetical (h) 0.94% $1,000.00 $1,020.47 $4.79
- --------------------------------------------------------------------------------
Actual 1.44% $1,000.00 $1,037.80 $7.40
R -----------------------------------------------------------------------
Hypothetical (h) 1.44% $1,000.00 $1,017.95 $7.32
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Actual 2.05% $1,000.00 $1,035.80 $10.52
R1 -----------------------------------------------------------------------
Hypothetical (h) 2.05% $1,000.00 $1,014.87 $10.41
- --------------------------------------------------------------------------------
Actual 1.69% $1,000.00 $1,037.00 $8.68
R2 -----------------------------------------------------------------------
Hypothetical (h) 1.69% $1,000.00 $1,016.69 $8.59
- --------------------------------------------------------------------------------
Actual 1.60% $1,000.00 $1,037.40 $8.22
R3 -----------------------------------------------------------------------
Hypothetical (h) 1.60% $1,000.00 $1,017.14 $8.13
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Actual 1.35% $1,000.00 $1,038.50 $6.94
R4 -----------------------------------------------------------------------
Hypothetical (h) 1.35% $1,000.00 $1,018.40 $6.87
- --------------------------------------------------------------------------------
Actual 1.04% $1,000.00 $1,040.70 $5.35
R5 -----------------------------------------------------------------------
Hypothetical (h) 1.04% $1,000.00 $1,019.96 $5.30
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
10/31/06
The Portfolio of Investments is a complete list of all securities owned by
your fund. It is categorized by broad-based asset classes.
Common Stocks - 59.0%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Aerospace - 2.5%
- ----------------------------------------------------------------------------------------------------
Lockheed Martin Corp. 91,440 $ 7,948,879
Northrop Grumman Corp. 68,390 4,540,412
United Technologies Corp. 46,490 3,055,323
-------------
$ 15,544,614
- ----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 0.4%
- ----------------------------------------------------------------------------------------------------
Diageo PLC 138,000 $ 2,553,713
- ----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 0.4%
- ----------------------------------------------------------------------------------------------------
NIKE, Inc., "B" 31,020 $ 2,850,118
- ----------------------------------------------------------------------------------------------------
Automotive - 1.7%
- ----------------------------------------------------------------------------------------------------
Autoliv, Inc. 22,880 $ 1,297,372
Bayerische Motoren Werke AG 50,000 2,872,463
Continental AG 11,016 1,232,251
Johnson Controls, Inc. 12,630 1,029,850
Nissan Motor Co. Ltd. 115,600 1,385,005
PSA Peugeot Citroen S.A. (l) 52,660 3,025,950
-------------
$ 10,842,891
- ----------------------------------------------------------------------------------------------------
Broadcasting - 1.4%
- ----------------------------------------------------------------------------------------------------
Fuji Television Network, Inc. 648 $ 1,352,136
Nippon Television Network Corp. 11,880 1,530,019
Viacom, Inc., "B" (a) 51,493 2,004,108
Vivendi S.A. 51,550 1,952,622
WPP Group PLC 137,410 1,760,295
-------------
$ 8,599,180
- ----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 1.9%
- ----------------------------------------------------------------------------------------------------
Franklin Resources, Inc. 13,000 $ 1,481,480
Goldman Sachs Group, Inc. 29,800 5,655,742
Lehman Brothers Holdings, Inc. 20,480 1,594,163
Mellon Financial Corp. 37,710 1,463,148
Merrill Lynch & Co., Inc. 19,020 1,662,728
-------------
$ 11,857,261
- ----------------------------------------------------------------------------------------------------
Business Services - 0.4%
- ----------------------------------------------------------------------------------------------------
Accenture Ltd., "A" 71,950 $ 2,367,874
- ----------------------------------------------------------------------------------------------------
Cable TV - 0.1%
- ----------------------------------------------------------------------------------------------------
Premiere AG (a)(l) 33,780 $ 513,190
- ----------------------------------------------------------------------------------------------------
Chemicals - 1.8%
- ----------------------------------------------------------------------------------------------------
Dow Chemical Co. 33,130 $ 1,351,373
Nalco Holding Co. (a) 41,270 834,892
PPG Industries, Inc. 35,060 2,398,104
Syngenta AG 40,840 6,599,442
-------------
$ 11,183,811
- ----------------------------------------------------------------------------------------------------
Computer Software - 0.3%
- ----------------------------------------------------------------------------------------------------
Oracle Corp. (a) 107,350 $ 1,982,755
- ----------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.2%
- ----------------------------------------------------------------------------------------------------
Hewlett-Packard Co. 26,200 $ 1,014,988
- ----------------------------------------------------------------------------------------------------
Construction - 1.5%
- ----------------------------------------------------------------------------------------------------
CRH PLC 44,400 $ 1,569,560
Fletcher Building Ltd. 197,982 1,260,814
Geberit AG 1,040 1,355,994
Masco Corp. (l) 149,660 4,138,099
Sherwin-Williams Co. 22,880 1,355,182
-------------
$ 9,679,649
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 1.8%
- ----------------------------------------------------------------------------------------------------
Henkel KGaA, IPS 36,030 $ 4,827,459
Kao Corp. 122,000 3,202,976
Uni-Charm Corp. (l) 56,500 3,145,465
-------------
$ 11,175,900
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 0.7%
- ----------------------------------------------------------------------------------------------------
Cooper Industries Ltd., "A" 8,130 $ 727,228
Rockwell Automation, Inc. 16,000 992,000
Spectris PLC 86,000 1,082,838
W.W. Grainger, Inc. 19,840 1,443,955
-------------
$ 4,246,021
- ----------------------------------------------------------------------------------------------------
Electronics - 1.9%
- ----------------------------------------------------------------------------------------------------
Analog Devices, Inc. 20,200 $ 642,764
Canon, Inc. 28,500 1,528,157
Intel Corp. 94,360 2,013,642
Konica Minolta Holdings, Inc. 135,000 1,798,692
OMRON Corp. 55,300 1,428,195
Ricoh Co. Ltd. 74,000 1,461,838
Samsung Electronics Co. Ltd. 2,700 1,750,716
Taiwan Semiconductor Manufacturing Co. Ltd., ADR 128,758 1,248,953
-------------
$ 11,872,957
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 1.2%
- ----------------------------------------------------------------------------------------------------
Apache Corp. 28,570 $ 1,866,192
Devon Energy Corp. 30,900 2,065,356
EOG Resources, Inc. 25,240 1,679,217
Norsk Hydro A.S.A. 74,000 1,701,221
-------------
$ 7,311,986
- ----------------------------------------------------------------------------------------------------
Energy - Integrated - 4.0%
- ----------------------------------------------------------------------------------------------------
Chevron Corp. 19,531 $ 1,312,483
ConocoPhillips 53,550 3,225,852
Exxon Mobil Corp. 79,240 5,659,321
Hess Corp. (l) 53,480 2,267,552
Royal Dutch Shell PLC, "A" 174,300 6,045,225
TOTAL S.A., ADR 102,340 6,973,448
-------------
$ 25,483,881
- ----------------------------------------------------------------------------------------------------
Food & Beverages - 2.5%
- ----------------------------------------------------------------------------------------------------
Cadbury Schweppes PLC 315,200 $ 3,171,976
CSM N.V. 42,500 1,477,435
Kellogg Co. 35,700 1,796,067
Nestle S.A. 24,340 8,320,531
Nong Shim Co. Ltd. 3,895 1,058,177
-------------
$ 15,824,186
- ----------------------------------------------------------------------------------------------------
Food & Drug Stores - 1.4%
- ----------------------------------------------------------------------------------------------------
Carrefour S.A. 44,960 $ 2,740,189
Lawson, Inc. 35,400 1,201,847
Tesco PLC 419,800 3,151,435
William Morrison Supermarkets PLC 319,320 1,570,168
-------------
$ 8,663,639
- ----------------------------------------------------------------------------------------------------
Forest & Paper Products - 0.1%
- ----------------------------------------------------------------------------------------------------
International Paper Co. 19,760 $ 658,996
- ----------------------------------------------------------------------------------------------------
General Merchandise - 0.3%
- ----------------------------------------------------------------------------------------------------
Daiei, Inc. (a) 45,500 $ 854,086
Federated Department Stores, Inc. 25,900 1,137,269
-------------
$ 1,991,355
- ----------------------------------------------------------------------------------------------------
Health Maintenance Organizations - 0.4%
- ----------------------------------------------------------------------------------------------------
CIGNA Corp. 9,770 $ 1,142,895
WellPoint, Inc. (a) 16,500 1,259,280
-------------
$ 2,402,175
- ----------------------------------------------------------------------------------------------------
Insurance - 4.1%
- ----------------------------------------------------------------------------------------------------
AFLAC, Inc. 15,800 $ 709,736
Allstate Corp. 120,820 7,413,515
Benfield Group PLC 160,140 1,064,692
Chubb Corp. 18,800 999,220
Genworth Financial, Inc., "A" 50,270 1,681,029
Hartford Financial Services Group, Inc. 24,640 2,147,869
Jardine Lloyd Thompson Group PLC 228,840 1,827,042
Legal & General Group PLC 846,300 2,332,993
MetLife, Inc. 102,080 5,831,830
Swiss Reinsurance Co. 20,318 1,666,950
-------------
$ 25,674,876
- ----------------------------------------------------------------------------------------------------
Leisure & Toys - 0.3%
- ----------------------------------------------------------------------------------------------------
Heiwa Corp. 64,800 $ 853,397
NAMCO BANDAI Holdings, Inc. (l) 80,100 1,273,407
-------------
$ 2,126,804
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 1.1%
- ----------------------------------------------------------------------------------------------------
ASSA ABLOY AB, "B" (l) 82,200 $ 1,582,126
Deere & Co. 53,420 4,547,645
GEA Group AG 53,900 968,177
-------------
$ 7,097,948
- ----------------------------------------------------------------------------------------------------
Major Banks - 5.1%
- ----------------------------------------------------------------------------------------------------
Bank of America Corp. 161,596 $ 8,705,176
Bank of New York Co., Inc. 89,200 3,065,804
BNP Paribas 20,530 2,257,959
Credit Agricole S.A. 92,640 3,939,536
DBS Group Holdings Ltd. 173,000 2,264,776
Joyo Bank Ltd. (l) 117,000 683,380
PNC Financial Services Group, Inc. 36,790 2,576,404
Royal Bank of Scotland Group PLC 77,175 2,750,266
Shizuoka Bank Ltd. (l) 64,000 684,141
SunTrust Banks, Inc. 47,990 3,790,730
Svenska Handelsbanken AB, "A" (l) 56,700 1,468,180
-------------
$ 32,186,352
- ----------------------------------------------------------------------------------------------------
Metals & Mining - 0.5%
- ----------------------------------------------------------------------------------------------------
Anglo American PLC 68,610 $ 3,094,255
- ----------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 0.5%
- ----------------------------------------------------------------------------------------------------
Tokyo Gas Co. Ltd. 580,000 $ 2,961,132
- ----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.1%
- ----------------------------------------------------------------------------------------------------
Gazprom OAO, ADR 23,700 $ 1,003,932
- ----------------------------------------------------------------------------------------------------
Network & Telecom - 0.3%
- ----------------------------------------------------------------------------------------------------
Cisco Systems, Inc. (a) 56,040 $ 1,352,245
ZTE Corp. 131,600 487,320
-------------
$ 1,839,565
- ----------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 4.2%
- ----------------------------------------------------------------------------------------------------
Aiful Corp. 57,900 $ 2,000,393
American Express Co. 32,130 1,857,435
Citigroup, Inc. 109,036 5,469,246
DNB Holding A.S.A. 100,200 1,312,369
Fannie Mae 62,540 3,706,120
HSBC Holdings PLC 145,200 2,753,431
ING Groep N.V. 71,950 3,188,286
Nordea Bank AB 101,440 1,397,613
Sapporo Hokuyo Holdings, Inc. 85 850,472
Shinhan Financial Group Co. Ltd. 21,780 1,004,288
Shinsei Bank Ltd. 120,000 692,693
Takefuji Corp. (l) 55,170 2,000,434
-------------
$ 26,232,780
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals - 4.5%
- ----------------------------------------------------------------------------------------------------
Astellas Pharma, Inc. 74,000 $ 3,335,015
Eli Lilly & Co. 28,080 1,572,761
GlaxoSmithKline PLC 167,080 4,462,454
Johnson & Johnson 84,380 5,687,212
Merck & Co., Inc. 76,230 3,462,367
Novartis AG 61,200 3,716,549
Sanofi-Aventis 9,810 834,094
Takeda Pharmaceutical Co. Ltd. 28,500 1,830,376
Tanabe Seiyaku Co. Ltd. 86,000 1,059,050
Wyeth 47,310 2,414,229
-------------
$ 28,374,107
- ----------------------------------------------------------------------------------------------------
Printing & Publishing - 0.6%
- ----------------------------------------------------------------------------------------------------
PagesJaunes Groupe S.A. 56,450 $ 1,695,013
Reed Elsevier PLC 188,020 2,141,409
-------------
$ 3,836,422
- ----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.8%
- ----------------------------------------------------------------------------------------------------
Burlington Northern Santa Fe Corp. 14,560 $ 1,128,837
Canadian National Railway Co. 60,700 2,891,748
Norfolk Southern Corp. 17,400 914,718
-------------
$ 4,935,303
- ----------------------------------------------------------------------------------------------------
Specialty Chemicals - 0.8%
- ----------------------------------------------------------------------------------------------------
Air Products & Chemicals, Inc. 12,910 $ 899,440
L'Air Liquide S.A. 7,053 1,501,903
L'Air Liquide S.A., Bearer Shares 9,000 1,916,507
Praxair, Inc. 15,840 954,360
-------------
$ 5,272,210
- ----------------------------------------------------------------------------------------------------
Specialty Stores - 0.3%
- ----------------------------------------------------------------------------------------------------
NEXT PLC 28,170 $ 1,010,336
Praktiker Bau-und Heimwerkermaerkte Holding AG 34,100 1,084,861
-------------
$ 2,095,197
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.8%
- ----------------------------------------------------------------------------------------------------
KDDI Corp. 291 $ 1,814,162
Vodafone Group PLC 1,302,145 3,353,624
-------------
$ 5,167,786
- ----------------------------------------------------------------------------------------------------
Telephone Services - 2.7%
- ----------------------------------------------------------------------------------------------------
Embarq Corp. 11,381 $ 550,271
France Telecom S.A. 133,730 3,474,282
Royal KPN N.V. 73,100 977,093
Singapore Telecommunications Ltd. 1,430,000 2,431,817
Sprint Nextel Corp. 159,830 2,987,223
Telecom Corp. of New Zealand Ltd. (l) 331,550 1,037,929
Telekom Austria AG 88,500 2,203,179
Telenor A.S.A. 148,050 2,338,907
TELUS Corp. (non-voting shares) 13,900 797,932
-------------
$ 16,798,633
- ----------------------------------------------------------------------------------------------------
Tobacco - 1.7%
- ----------------------------------------------------------------------------------------------------
Altria Group, Inc. 87,980 $ 7,155,413
British American Tobacco PLC 79,990 2,180,666
Swedish Match AB 89,710 1,434,754
-------------
$ 10,770,833
- ----------------------------------------------------------------------------------------------------
Trucking - 0.8%
- ----------------------------------------------------------------------------------------------------
TNT N.V. 125,260 $ 4,822,982
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 2.9%
- ----------------------------------------------------------------------------------------------------
Dominion Resources, Inc. (l) 57,630 $ 4,667,454
E.ON AG 31,770 3,812,562
FPL Group, Inc. 59,430 3,030,930
Scottish Power PLC 70,809 882,786
SUEZ S.A. 36,031 1,612,724
TXU Corp. 33,280 2,100,966
United Utilities PLC 140,970 1,918,854
-------------
$ 18,026,276
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $295,313,765) $ 370,938,533
- ----------------------------------------------------------------------------------------------------
Bonds - 34.0%
- ----------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 2.7%
- ----------------------------------------------------------------------------------------------------
Bayview Commercial Asset Trust, FRN, 4.8329%, 2023 (n) CAD 560,000 $ 499,175
Citigroup/Deutsche Bank Commercial Mortgage Trust,
5.648%, 2048 $ 1,700,000 1,729,750
Commercial Mortgage Asset Trust, FRN, 0.884%, 2032 (i)(n) 17,597,322 701,848
Commercial Mortgage Pass-Through Certificates, FRN,
5.51%, 2017 (n) 1,400,000 1,400,118
Commercial Mortgage Pass-Through Certificates, FRN,
5.52%, 2017 (n) 2,100,000 2,100,529
Credit Suisse Commercial Mortgage Trust, 5.509%, 2039 478,292 482,760
Deutsche Mortgage & Asset Receiving Corp., 6.538%, 2031 221,361 223,412
First Union National Bank Commercial Mortgage Trust, FRN,
0.9471%, 2043 (i)(n) 25,759,754 864,454
IMPAC CMB Trust, FRN, 5.67%, 2036 2,050,116 2,059,086
JPMorgan Chase Commercial Mortgage Securities Corp.,
5.44%, 2045 (z) 398,186 400,864
JPMorgan Chase Commercial Mortgage Securities Corp., FRN,
5.2117%, 2041 1,870,062 1,869,977
Lehman Brothers Floating Rate Commercial Mortgage Trust, FRN,
5.48%, 2018 (n) 2,150,000 2,149,993
Wachovia Bank Commercial Mortgage Trust, FRN,
5.795%, 2045 670,000 691,961
Wachovia Bank Commercial Mortgage Trust, FRN,
5.651%, 2048 1,700,000 1,722,313
-------------
$ 16,896,240
- ----------------------------------------------------------------------------------------------------
Emerging Market Quasi-Sovereign - 0.6%
- ----------------------------------------------------------------------------------------------------
Gazprom International S.A., 7.201%, 2020 $ 1,505,000 $ 1,580,250
Pemex Project Funding Master Trust, 8.625%, 2022 498,000 607,560
Petronas Capital Ltd., 7.875%, 2022 1,296,000 1,591,745
-------------
$ 3,779,555
- ----------------------------------------------------------------------------------------------------
Emerging Market Sovereign - 0.8%
- ----------------------------------------------------------------------------------------------------
Republic of Argentina, FRN, 5.59%, 2012 $ 1,052,250 $ 985,516
Republic of Bulgaria, 8.25%, 2015 541,000 635,783
Republic of South Africa, 7.375%, 2012 523,000 566,148
United Mexican States, 5.625%, 2017 734,000 733,633
United Mexican States, 8.125%, 2019 1,118,000 1,358,370
United Mexican States, 10%, 2024 MXN 5,410,000 589,967
-------------
$ 4,869,417
- ----------------------------------------------------------------------------------------------------
International Market Quasi-Sovereign - 7.3%
- ----------------------------------------------------------------------------------------------------
Canada Housing Trust, 4.6%, 2011 CAD 2,724,000 $ 2,486,529
Development Bank of Japan, 1.4%, 2012 JPY 397,000,000 3,412,166
Development Bank of Japan, 1.6%, 2014 (l) JPY 810,000,000 6,966,416
Development Bank of Japan, 1.05%, 2023 (l) JPY 1,021,000,000 7,205,972
Japan Finance Corp. Ltd., 2%, 2016 JPY 630,000,000 5,527,304
KfW Bankengruppe, FRN, 3.164%, 2007 EUR 5,413,000 6,906,063
Landesbank Baden-Wurttemberg, FRN, 3.502%, 2007 EUR 1,939,000 2,475,118
Landesbank Baden-Wurttemberg, FRN, 3.333%, 2007 EUR 1,770,000 2,259,808
Network Rail MTN Finance PLC, FRN, 3.255%, 2007 EUR 6,885,000 8,788,268
-------------
$ 46,027,644
- ----------------------------------------------------------------------------------------------------
International Market Sovereign - 16.7%
- ----------------------------------------------------------------------------------------------------
Commonwealth of Australia, 6%, 2017 AUD 1,826,000 $ 1,450,698
Federal Republic of Germany, 3.5%, 2008 EUR 1,440,000 1,833,192
Federal Republic of Germany, 5.25%, 2010 EUR 1,915,000 2,574,896
Federal Republic of Germany, 3.75%, 2015 EUR 5,701,000 7,297,324
Federal Republic of Germany, 6.25%, 2024 EUR 5,233,000 8,680,246
Federal Republic of Germany, 6.25%, 2030 EUR 6,578,000 11,405,478
Government of Canada, 5.5%, 2009 CAD 4,829,000 4,466,475
Government of Canada, 4.5%, 2015 CAD 2,276,000 2,101,240
Government of Canada, 8%, 2023 CAD 2,082,000 2,714,794
Government of Canada, 5.75%, 2033 CAD 887,000 1,002,555
Kingdom of Belgium, 3.75%, 2009 EUR 1,015,000 1,297,992
Kingdom of Belgium, 5%, 2012 EUR 2,538,000 3,459,981
Kingdom of Denmark, 4%, 2015 DKK 13,354,000 2,331,578
Kingdom of Netherlands, 5%, 2012 EUR 2,175,855 2,960,474
Kingdom of Norway, 5%, 2015 NOK 3,862,000 624,044
Kingdom of Spain, 5.35%, 2011 EUR 5,669,000 7,771,155
Republic of Austria, 5%, 2012 EUR 2,543,000 3,459,168
Republic of Finland, 3%, 2008 EUR 2,846,000 3,596,104
Republic of Finland, 5.375%, 2013 EUR 1,981,000 2,775,499
Republic of France, 4.75%, 2012 EUR 2,134,000 2,875,329
Republic of France, 6%, 2025 EUR 1,428,000 2,345,708
Republic of France, 4.75%, 2035 EUR 3,866,000 5,664,211
Republic of Ireland, 4.25%, 2007 EUR 1,427,000 1,830,615
Republic of Ireland, 4.6%, 2016 EUR 1,732,000 2,359,018
United Kingdom Treasury, 5.75%, 2009 GBP 2,214,000 4,325,549
United Kingdom Treasury, 5%, 2012 GBP 2,929,000 5,658,203
United Kingdom Treasury, 8%, 2015 GBP 2,472,000 5,917,986
United Kingdom Treasury, 8%, 2021 GBP 699,000 1,839,041
United Kingdom Treasury, 4.25%, 2036 GBP 183,000 364,409
-------------
$ 104,982,962
- ----------------------------------------------------------------------------------------------------
Major Banks - 0.4%
- ----------------------------------------------------------------------------------------------------
Ulster Bank Finance PLC, FRN, 3.424%, 2008 EUR 1,968,000 $ 2,510,940
- ----------------------------------------------------------------------------------------------------
Mortgage Backed - 0.9%
- ----------------------------------------------------------------------------------------------------
Fannie Mae, 4.98%, 2015 $ 214,013 $ 211,846
Fannie Mae, 5.423%, 2016 349,855 357,696
Freddie Mac, 5%, 2022 - 2025 5,182,975 5,160,103
-------------
$ 5,729,645
- ----------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 0.3%
- ----------------------------------------------------------------------------------------------------
HSBK Europe B.V., 7.75%, 2013 (n) $ 930,000 $ 961,387
VTB Capital S.A., 7.5%, 2011 823,000 875,096
-------------
$ 1,836,483
- ----------------------------------------------------------------------------------------------------
U.S. Government Agencies - 1.6%
- ----------------------------------------------------------------------------------------------------
Aid-Egypt, 4.45%, 2015 $ 1,113,000 $ 1,077,273
Fannie Mae, 4.25%, 2007 2,020,000 2,002,295
Fannie Mae, 6%, 2011 2,121,000 2,216,623
Freddie Mac, 4.2%, 2007 1,563,000 1,548,025
Small Business Administration, 5.09%, 2025 225,981 224,123
Small Business Administration, 5.21%, 2026 2,715,444 2,711,515
-------------
$ 9,779,854
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 2.7%
- ----------------------------------------------------------------------------------------------------
U.S. Treasury Bonds, 8%, 2021 $ 2,933,000 $ 3,931,135
U.S. Treasury Bonds, 5.25%, 2028 1,162,000 1,234,534
U.S. Treasury Bonds, TIPS, 2.375%, 2025 1,127,079 1,140,904
U.S. Treasury Notes, 4%, 2010 1,394,000 1,368,134
U.S. Treasury Notes, 4.25%, 2013 4,787,000 4,691,820
U.S. Treasury Notes, 4%, 2015 (f) 4,992,000 4,787,443
-------------
$ 17,153,970
- ----------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $210,534,952) $ 213,566,710
- ----------------------------------------------------------------------------------------------------
Call Options Purchased - 0.0%
- ----------------------------------------------------------------------------------------------------
PAR AMOUNT
ISSUE/EXPIRATION DATE/STRIKE PRICE OF CONTRACTS VALUE ($)
- ----------------------------------------------------------------------------------------------------
JPY Currency - November 2006 @ EUR 0.99994 540,551,600 $ 33,514
JPY Currency - January 2007 @ $0.99335 419,265,400 47,796
- ----------------------------------------------------------------------------------------------------
TOTAL CALL OPTIONS PURCHASED (PREMIUMS PAID, $116,752) $ 81,310
- ----------------------------------------------------------------------------------------------------
Put Options Purchased - 0.0%
- ----------------------------------------------------------------------------------------------------
USD Currency - January 2007 @ EUR 0.99910
(Premiums Paid, $51,773) 3,729,375 $ 47,039
- ----------------------------------------------------------------------------------------------------
Short-term Obligations - 6.8% (y)
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
General Electric Co., 5.3%, due 11/01/06 $ 25,106,000 $ 25,106,000
New Center Asset Trust, 5.3%, due 11/01/06 17,449,000 17,449,000
- ----------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST AND VALUE $ 42,555,000
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 4.7%
- ----------------------------------------------------------------------------------------------------
Merrill Lynch Repurchase Agreement, 5.30%, dated 10/31/06,
due 11/01/06, total to be received $20,390,906 (secured by
various U.S. Treasury and Federal Agency obligations and
Mortgage Backed securities in a jointly traded account), at Cost 20,387,903 $ 20,387,903
Navigator Securities Lending Prime Portfolio, at Cost and Net
Asset Value 8,924,603 8,924,603
- ----------------------------------------------------------------------------------------------------
TOTAL COLLATERAL FOR SECURITIES LOANED $ 29,312,506
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $577,884,748) (k) $ 656,501,098
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (4.5)% (28,195,418)
- ----------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 628,305,680
- ----------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(k) As of October 31, 2006, the fund held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $211,344,112 and 32.19% of market value. An
independent pricing service provided an evaluated bid for 31.46% of market value.
(i) 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.
(l) All or a portion of this security is on loan.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be sold in the ordinary course of business in transactions exempt from
registration, normally to qualified institutional buyers. At period end, the aggregate value of
these securities was $8,677,504, representing 1.4% of net assets.
(y) The rate shown represents an annualized yield at time of purchase.
(z) Restricted securities are not registered under the Securities Act of 1933 and are subject to
legal restrictions on resale. These securities generally may be resold in transactions exempt
from registration or to the public if the securities are subsequently registered. Disposal of
these securities may involve time-consuming negotiations and prompt sale at an acceptable price
may be difficult. The fund holds the following restricted securities:
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
JPMorgan Chase Commercial Mortgage
Securities Corp., 5.44%, 2045 9/22/06 $400,173 $400,864 0.1%
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
IPS International Preference Stock
TIPS Treasury Inflation Protected Security
Abbreviations 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 JPY Japanese Yen
BRL Brazilian Real MXN Mexican Peso
CAD Canadian Dollar MYR Malaysian Ringgit
CHF Swiss Franc NOK Norwegian Krone
DKK Danish Krone NZD New Zealand Dollar
EUR Euro SEK Swedish Krona
GBP British Pound SGD Singapore Dollar
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are reported by currency.
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------
SALES
AUD 1,231,049 12/06/06 $ 945,104 $ 952,628 $ (7,524)
CAD 13,233,292 12/04/06 11,733,030 11,807,676 (74,646)
CHF 778,762 12/04/06 615,015 628,619 (13,604)
DKK 13,804,820 12/18/06 - 12/27/06 2,343,180 2,370,828 (27,648)
EUR 8,075,460 11/30/06 - 1/12/07 10,186,466 10,334,260 (147,794)
GBP 7,319,900 11/27/06 13,815,255 13,967,944 (152,689)
JPY 867,894,339 11/06/06 - 1/10/07 7,336,400 7,445,067 (108,667)
MXN 2,064,304 11/10/06 187,120 191,590 (4,470)
NOK 12,439,275 11/08/06 1,946,018 1,904,188 41,830
NZD 1,210,348 12/06/06 798,406 809,565 (11,159)
SGD 908,152 11/30/06 577,136 583,653 (6,517)
- ----------------------------------------------------------------------------------------------------
$50,483,130 $50,996,018 $(512,888)
- ----------------------------------------------------------------------------------------------------
PURCHASES
AUD 361,075 12/06/06 $ 272,182 $ 279,412 $ 7,230
BRL 1,316,887 11/27/06 - 11/30/06 612,332 610,706 (1,626)
CAD 211,779 12/07/06 186,429 188,982 2,553
EUR 7,587,207 11/30/06 - 5/17/07 9,596,770 9,709,128 112,358
GBP 4,695,373 11/27/06 - 11/30/06 8,851,436 8,959,855 108,419
JPY 5,715,515,941 11/20/06 48,986,970 49,020,866 33,896
MXN 1,086,046 11/10/06 100,000 100,797 797
MYR 1,648,536 11/24/06 450,051 451,904 1,853
NOK 997,955 11/08/06 148,040 152,766 4,726
SEK 28,908,458 12/06/06 3,943,855 4,013,408 69,553
SGD 908,152 11/30/06 573,810 583,653 9,843
- ----------------------------------------------------------------------------------------------------
$73,721,875 $74,071,477 $ 349,602
- ----------------------------------------------------------------------------------------------------
At October 31, 2006, forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $12,594 with Goldman Sachs & Co. and $3,254 with
Merrill Lynch International.
FUTURES CONTRACTS OUTSTANDING AT OCTOBER 31, 2006
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------
Japan Government Bonds 10 yr (Long) 9 $10,350,366 Dec-06 $23,662
At October 31, 2006, the fund had sufficient cash and/or securities to cover any commitments under these derivative contracts.
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/06
This statement represents your fund's balance sheet, which details the assets
and liabilities comprising the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value, including $28,406,071 of securities on
loan (identified cost, $577,884,748) $656,501,098
Cash 385,290
Receivable for forward foreign currency exchange contracts 420,850
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 15,848
Receivable for investments sold 3,113,575
Receivable for fund shares sold 1,227,899
Interest and dividends receivable 3,721,466
Receivable from investment adviser 69,901
- ------------------------------------------------------------------------------------------------------
Total assets $665,455,927
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for forward foreign currency exchange contracts $584,136
Payable for daily variation margin on open futures contracts 1,690
Payable for investments purchased 5,014,405
Payable for fund shares reacquired 1,665,860
Collateral for securities loaned, at value 29,312,506
Payable to affiliates
Management fee 28,236
Shareholder servicing costs 70,192
Distribution and service fees 19,584
Administrative services fee 649
Retirement plan administration and services fees 32
Payable for independent trustees' compensation 64,403
Accrued expenses and other liabilities 388,554
- ------------------------------------------------------------------------------------------------------
Total liabilities $37,150,247
- ------------------------------------------------------------------------------------------------------
Net assets $628,305,680
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- ------------------------------------------------------------------------------------------------------
Paid-in capital $514,245,045
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 78,522,785
Accumulated net realized gain (loss) on investments and foreign
currency transactions 35,423,900
Undistributed net investment income 113,950
- ------------------------------------------------------------------------------------------------------
Net assets $628,305,680
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 41,584,018
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $403,847,969
Shares outstanding 26,840,546
- ------------------------------------------------------------------------------------------------------
Net asset value per share $15.05
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $15.97
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $115,335,857
Shares outstanding 7,546,383
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.28
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $99,019,399
Shares outstanding 6,522,961
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.18
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $4,133,188
Shares outstanding 276,434
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $14.95
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $2,363,688
Shares outstanding 157,753
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $14.98
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $362,926
Shares outstanding 23,930
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.17
- ------------------------------------------------------------------------------------------------------
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $93,824
Shares outstanding 6,177
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.19
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,184,837
Shares outstanding 79,124
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $14.97
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,303,347
Shares outstanding 86,761
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.02
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $660,645
Shares outstanding 43,949
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.03
- ------------------------------------------------------------------------------------------------------
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
Year ended 10/31/06
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Interest $9,792,395
Dividends 9,340,162
Foreign taxes withheld (477,047)
- ------------------------------------------------------------------------------------------------------
Total investment income $18,655,510
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $4,849,042
Distribution and service fees 3,312,943
Shareholder servicing costs 971,211
Administrative services fee 92,881
Retirement plan administration and services fees 4,386
Independent trustees' compensation 22,541
Custodian fee 424,303
Shareholder communications 98,654
Auditing fees 53,873
Legal fees 13,726
Miscellaneous 241,291
- ------------------------------------------------------------------------------------------------------
Total expenses $10,084,851
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (72,272)
Reduction of expenses by investment adviser (1,287,891)
- ------------------------------------------------------------------------------------------------------
Net expenses $8,724,688
- ------------------------------------------------------------------------------------------------------
Net investment income $9,930,822
- ------------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $51,460,869
Futures contracts 47,988
Foreign currency transactions (2,871,215)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $48,637,642
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $22,975,585
Futures contracts 175,572
Translation of assets and liabilities in foreign currencies 1,220,401
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $24,371,558
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $73,009,200
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $82,940,022
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions,
and any shareholder transactions.
YEARS ENDED 10/31
----------------------------------
2006 2005
CHANGE IN NET ASSETS
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income $9,930,822 $7,590,844
Net realized gain (loss) on investments and foreign
currency transactions 48,637,642 56,533,830
Net unrealized gain (loss) on investments and foreign
currency translation 24,371,558 (24,553,918)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $82,940,022 $39,570,756
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net investment income
Class A $(5,593,645) $(11,999,109)
Class B (715,557) (3,414,168)
Class C (585,189) (1,726,657)
Class I (65,432) (108,523)
Class R (29,988) (60,209)
Class R1 (1,946) (556)
Class R2 (1,176) (591)
Class R3 (8,358) (4,662)
Class R4 (9,161) (656)
Class R5 (3,213) (690)
Statements of Changes in Net Assets - continued
YEARS ENDED 10/31
----------------------------------
2006 2005
DISTRIBUTIONS DECLARED TO SHAREHOLDERS - CONTINUED
- ------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions
Class A (27,058,316) (21,507,585)
Class B (9,148,385) (9,135,951)
Class C (5,867,929) (4,107,200)
Class I (248,822) (174,939)
Class R (161,515) (95,337)
Class R1 (6,293) --
Class R2 (9,823) --
Class R3 (12,793) (9,689)
Class R4 (4,033) --
Class R5 (3,950) --
- ------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(49,535,524) $(52,346,522)
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $35,594,361 $83,530,915
- ------------------------------------------------------------------------------------------------------
Redemption fees $-- $3,682
- ------------------------------------------------------------------------------------------------------
Total change in net assets $68,998,859 $70,758,831
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period 559,306,821 488,547,990
At end of period (including undistributed net investment
income of $113,950 and $901,248, respectively) $628,305,680 $559,306,821
- ------------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $14.30 $14.73 $12.98 $11.41 $11.64
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.28 $0.24 $0.19 $0.18 $0.21
- --------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments and foreign currency 1.80 0.94 1.97 1.63 (0.33)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.08 $1.18 $2.16 $1.81 $(0.12)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.22) $(0.56) $(0.41) $(0.24) $(0.11)
From net realized gain on investments and
foreign currency transactions (1.11) (1.05) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to
shareholders $(1.33) $(1.61) $(0.41) $(0.24) $(0.11)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.05 $14.30 $14.73 $12.98 $11.41
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 15.62 8.26 16.94 16.09 (1.02)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.52 1.52 1.54 1.54 1.53
Expenses after expense reductions (f) 1.30 1.48 1.54 N/A N/A
Net investment income 1.95 1.64 1.37 1.53 1.79
Portfolio turnover 82 82 76 105 72
Net assets at end of period (000 Omitted) $403,848 $353,745 $298,826 $261,042 $213,983
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B YEARS ENDED 10/31
----------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $14.47 $14.82 $13.03 $11.43 $11.65
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.19 $0.14 $0.10 $0.11 $0.13
Net realized and unrealized gain (loss) on
investments and foreign currency 1.82 0.95 1.99 1.62 (0.31)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.01 $1.09 $2.09 $1.73 $(0.18)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.09) $(0.39) $(0.30) $(0.13) $(0.04)
From net realized gain on investments and
foreign currency transactions (1.11) (1.05) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.20) $(1.44) $(0.30) $(0.13) $(0.04)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.28 $14.47 $14.82 $13.03 $11.43
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 14.84 7.56 16.14 15.33 (1.58)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.17 2.17 2.20 2.20 2.18
Expenses after expense reductions (f) 1.95 2.13 2.20 N/A N/A
Net investment income 1.29 0.98 0.72 0.88 1.12
Portfolio turnover 82 82 76 105 72
Net assets at end of period (000 Omitted) $115,336 $124,013 $129,141 $129,378 $84,729
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C YEARS ENDED 10/31
------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $14.39 $14.76 $12.99 $11.40 $11.62
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.19 $0.15 $0.10 $0.11 $0.13
Net realized and unrealized gain (loss) on
investments and foreign currency 1.81 0.94 1.97 1.62 (0.31)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.00 $1.09 $2.07 $1.73 $(0.18)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.10) $(0.41) $(0.30) $(0.14) $(0.04)
From net realized gain on investments and
foreign currency transactions (1.11) (1.05) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.21) $(1.46) $(0.30) $(0.14) $(0.04)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.18 $14.39 $14.76 $12.99 $11.40
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 14.87 7.59 16.12 15.27 (1.56)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.17 2.16 2.20 2.20 2.18
Expenses after expense reductions (f) 1.95 2.12 2.20 N/A N/A
Net investment income 1.29 1.00 0.72 0.89 1.13
Portfolio turnover 82 82 76 105 72
Net assets at end of period (000 Omitted) $99,019 $75,974 $57,119 $54,438 $35,660
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS I YEARS ENDED 10/31
------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $14.23 $14.69 $12.96 $11.42 $11.65
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.32 $0.29 $0.24 $0.25 $0.25
Net realized and unrealized gain (loss) on
investments and foreign currency 1.79 0.93 1.96 1.60 (0.32)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.11 $1.22 $2.20 $1.85 $(0.07)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.28) $(0.63) $(0.47) $(0.31) $(0.16)
From net realized gain on investments and
foreign currency transactions (1.11) (1.05) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.39) $(1.68) $(0.47) $(0.31) $(0.16)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.95 $14.23 $14.69 $12.96 $11.42
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 16.00 8.65 17.31 16.49 (0.65)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.12 1.16 1.16 1.20 1.18
Expenses after expense reductions (f) 0.95 1.12 1.16 N/A N/A
Net investment income 2.28 1.99 1.59 1.93 2.14
Portfolio turnover 82 82 76 105 72
Net assets at end of period (000 Omitted) $4,133 $3,170 $2,286 $56,010 $1,540
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R YEARS ENDED 10/31
-------------------------------------------------------------
2006 2005 2004 2003(i)
Net asset value, beginning of period $14.24 $14.71 $12.97 $11.54
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.26 $0.22 $0.21 $0.14
Net realized and unrealized gain (loss) on investments
and foreign currency 1.78 0.93 1.94 1.40(g)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.04 $1.15 $2.15 $1.54
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.19) $(0.57) $(0.41) $(0.11)
From net realized gain on investments and foreign
currency transactions (1.11) (1.05) -- --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.30) $(1.62) $(0.41) $(0.11)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.98 $14.24 $14.71 $12.97
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 15.39 8.08 16.89 13.41(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.68 1.65 1.71 1.68(a)
Expenses after expense reductions (f) 1.45 1.61 1.71 N/A
Net investment income 1.81 1.52 1.24 1.34(a)
Portfolio turnover 82 82 76 105
Net assets at end of period (000 Omitted) $2,364 $2,043 $1,043 $12
- -------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R1 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $14.40 $14.42
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.18 $0.08
Net realized and unrealized gain (loss) on investments and foreign
currency 1.81 0.06(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $1.99 $0.14
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.11) $(0.16)
From net realized gain on investments and foreign currency transactions (1.11) --
- -------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.22) $(0.16)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.17 $14.40
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 14.78 0.99(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.39 2.34(a)
Expenses after expense reductions (f) 2.05 2.28(a)
Net investment income 1.23 0.91(a)
Portfolio turnover 82 82
Net assets at end of period (000 Omitted) $363 $52
- -------------------------------------------------------------------------------------------------------------
CLASS R2 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $14.42 $14.42
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.23 $0.10
Net realized and unrealized gain (loss) on investments and foreign
currency 1.81 0.07(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $2.04 $0.17
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.16) $(0.17)
From net realized gain on investments and foreign currency transactions (1.11) --
- -------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.27) $(0.17)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.19 $14.42
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 15.16 1.20(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.07 2.03(a)
Expenses after expense reductions (f) 1.70 1.97(a)
Net investment income 1.54 1.23(a)
Portfolio turnover 82 82
Net assets at end of period (000 Omitted) $94 $51
- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R3 YEARS ENDED 10/31
-----------------------------------------------
2006 2005 2004
Net asset value, beginning of period $14.24 $14.67 $12.97
- ----------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.25 $0.18 $0.12
Net realized and unrealized gain (loss) on investments and
foreign currency 1.77 0.94 1.99
- ----------------------------------------------------------------------------------------------------------------------
Total from investment operations $2.02 $1.12 $2.11
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ----------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.50) $(0.41)
From net realized gain on investments and foreign
currency transactions (1.11) (1.05) --
- ----------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.29) $(1.55) $(0.41)
- ----------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $14.97 $14.24 $14.67
- ----------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 15.19 7.87 16.52
- ----------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- ----------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.94 1.92 1.95
Expenses after expense reductions (f) 1.60 1.87 1.95
Net investment income 1.76 1.24 0.91
Portfolio turnover 82 82 76
Net assets at end of period (000 Omitted) $1,185 $159 $133
- ----------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R4 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $14.28 $14.26
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.31 $0.14
Net realized and unrealized gain (loss) on investments and foreign
currency 1.75 0.07(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $2.06 $0.21
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.21) $(0.19)
From net realized gain on investments and foreign currency transactions (1.11) --
- -------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.32) $(0.19)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.02 $14.28
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 15.53 1.48(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.57 1.54(a)
Expenses after expense reductions (f) 1.35 1.50(a)
Net investment income 2.10 1.70(a)
Portfolio turnover 82 82
Net assets at end of period (000 Omitted) $1,303 $51
- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R5 YEARS ENDED 10/31
--------------------------------
2006 2005(i)
Net asset value, beginning of period $14.29 $14.26
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.25 $0.17
Net realized and unrealized gain (loss) on investments and foreign
currency 1.87 0.06(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $2.12 $0.23
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.27) $(0.20)
From net realized gain on investments and foreign currency transactions (1.11) --
- -------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.38) $(0.20)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.03 $14.29
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 15.95 1.62(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.30 1.24(a)
Expenses after expense reductions (f) 1.05 1.20(a)
Net investment income 1.77 2.00(a)
Portfolio turnover 82 82
Net assets at end of period (000 Omitted) $661 $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.
(a) Annualized.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) 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 per share amount of realized and unrealized gains and losses at such time.
(i) 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.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
MFS Global Total Return Fund (the fund) is a 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, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the
market or exchange on which they are primarily traded. Debt instruments (other
than short-term instruments), including restricted debt instruments, are
generally valued at an evaluated or composite bid as reported by an
independent pricing service. Values of debt instruments obtained from pricing
services can utilize both dealer-supplied valuations and electronic data
processing techniques, which take into account 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. Short-
term instruments with a maturity at issuance of 60 days or less may be valued
at amortized cost, which approximates market value. Exchange-traded options
are generally valued at the last sale or official closing price as reported by
an independent pricing service on the exchange on which they are primarily
traded. Exchange-traded options for which there were no sales reported that
day are generally valued at the last daily bid quotation as reported by an
independent pricing service on the exchange on which they are primarily
traded. Options not traded on an exchange are generally valued at broker-
dealer bid quotation. Foreign currency options are generally valued using an
external pricing model that uses market data from an independent source.
Futures contracts are generally valued at last posted settlement price as
reported by an independent pricing service on the market on which they are
primarily traded. Futures contracts for which there were no trades that day
for a particular position are generally valued at the closing bid quotation as
reported by an independent pricing service on the market on which they are
primarily traded. Forward foreign currency contracts are generally valued at
the mean of bid and asked prices for the time period interpolated from rates
reported by an independent pricing service for proximate time periods. Open-
end investment companies are generally valued at their net asset value per
share. Securities and other assets generally valued on the basis of
information from an independent pricing service may also be valued at a
broker-dealer bid quotation. The values of foreign securities and other assets
and liabilities expressed in foreign currencies are converted to U.S. dollars
using the mean of bid and asked prices for rates reported by an independent
pricing service. The Board of Trustees has delegated primary responsibility
for determining or causing to be determined the value of the fund's
investments (including any fair valuation) to the adviser pursuant to
valuation policies and procedures approved by the Board. If the adviser
determines that reliable market quotations are not readily available,
investments are valued at fair value as determined in good faith by the
adviser in accordance with such procedures under the oversight of the Board of
Trustees. Under the fund's valuation policies and procedures, market
quotations are not considered to be readily available for many types of debt
instruments. These investments are generally valued at fair value based on
information from independent pricing services. The adviser may rely on
independent pricing services or other information (such as the correlation
with price movements of similar securities in the same or other markets; the
type, cost and investment characteristics of the security; the business and
financial condition of the issuer; and trading and other market data) to
assist in determining whether to fair value and at what value to fair value an
investment. The value of an investment for purposes of calculating the fund's
net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published
prices for the same investments. In addition, investments may be valued at
fair value if the adviser determines that an investment's value has been
materially affected by events occurring after the close of the exchange or
market on which the investment is principally traded (such as foreign exchange
or market) and prior to the determination of the fund's net asset value, or
after the halting of trading of a specific security where trading does not
resume prior to the close of the exchange or market on which the security is
principally traded. Events that occur on a frequent basis after foreign
markets close (such as developments in foreign markets and significant
movements in the U.S. markets) and prior to the determination of the fund's
net asset value may be deemed to have a material affect on the value of
securities traded in foreign markets. Accordingly, the fund's foreign equity
securities may often be valued at fair value. In September 2006, FASB
Statement No. 157, Fair Value Measurements (the "Statement") was issued, and
is effective for fiscal years beginning after November 15, 2007 and for all
interim periods within those fiscal years. This Statement provides a single
definition of fair value, a hierarchy for measuring fair value and expanded
disclosures about fair value measurements. Management is evaluating the
application of the Statement to the fund, and believes the impact will be
limited to expanded disclosures resulting from the adoption of this Statement
in the fund's financial statements.
REPURCHASE AGREEMENTS - The fund may enter into repurchase agreements with
institutions that the fund 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, futures contracts, and
forward foreign currency exchange contracts.
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 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
JPMorgan 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.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
SHORT TERM FEES - 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. 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.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to 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, 2006, the fund's custodian fees were
reduced by $70,762 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, 2006, the fund's custodian expenses were
reduced by $1,510 under this agreement. These amounts are shown as a reduction
of total expenses on the Statement of Operations. Effective January 1, 2006,
the commission recapture agreement was terminated.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue Code,
and to distribute all of its taxable income, including realized capital gains.
Accordingly, no provision for federal income tax is required in the financial
statements. Foreign taxes, if any, have been accrued by the fund in the
accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to amortization and accretion of debt
securities, wash sale loss deferrals, straddle loss deferrals, foreign currency
transactions, derivative transactions, and treating a portion of the proceeds
from redemptions as a distribution for tax purposes.
The tax character of distributions declared to shareholders is as follows:
10/31/06 10/31/05
Ordinary income (including any short-term
capital gains) $15,135,577 $28,636,769
Long-term capital gain 34,399,947 23,709,753
- --------------------------------------------------------------------------------
Total distributions $49,535,524 $52,346,522
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 10/31/06
Cost of investments $579,224,216
----------------------------------------------------------
Gross appreciation $86,424,516
Gross depreciation (9,147,634)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $77,276,882
Undistributed ordinary income 4,280,090
Undistributed long-term capital gain 40,022,611
Capital loss carryforwards (6,974,702)
Other temporary differences (544,246)
As of October 31, 2006, the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
10/31/10 $(6,974,702)
The availability of a portion of the capital loss carryforwards, which were
acquired on August 25, 2003, in connection with the MFS Global Asset
Allocation Fund merger, may be limited in a given year.
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. This Interpretation prescribes a minimum threshold
for financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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 management and related administrative services and
facilities to the fund.
The management fee is computed daily and paid monthly at an annual rate of
0.84% of the fund's average daily net assets. The investment adviser has
agreed in writing to reduce its management fee to 0.75% in excess of $500
million of average daily net assets and 0.70% of average daily net assets in
excess of $1 billion. This written agreement may be rescinded only upon
consent of the fund's Board of Trustees. This management fee reduction
amounted to $69,540, which is shown as a reduction of total expenses in the
Statement of Operations.
The management fee incurred for the year ended October 31, 2006 was equivalent
to an annual effective rate of 0.83% of the fund's average daily net assets.
The investment adviser has agreed in writing to pay a portion of the fund's
operating expenses, exclusive of certain other fees and expenses, such that
total annual fund operating expenses do not exceed the following rates annually
of the fund's average daily net assets:
CLASS A CLASS B CLASS C CLASS I CLASS R CLASS R1 CLASS R2 CLASS R3 CLASS R4 CLASS R5
1.30% 1.95% 1.95% 0.95% 1.45% 2.05% 1.70% 1.60% 1.35% 1.05%
The written agreement may be rescinded only upon consent of the fund's Board
of Trustees. For the year ended October 31, 2006, this reduction amounted
$1,214,060 and is reflected as a reduction of total expenses in the Statement
of Operations.
DISTRIBUTOR - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, as distributor, received $94,287 for the year ended October 31, 2006, 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 and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.35% $1,294,602
Class B 0.75% 0.25% 1.00% 1.00% 1,167,368
Class C 0.75% 0.25% 1.00% 1.00% 832,124
Class R 0.25% 0.25% 0.50% 0.50% 11,364
Class R1 0.50% 0.25% 0.75% 0.75% 1,914
Class R2 0.25% 0.25% 0.50% 0.50% 513
Class R3 0.25% 0.25% 0.50% 0.50% 3,476
Class R4 -- 0.25% 0.25% 0.25% 1,582
- ---------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $3,312,943
(d) 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.
(e) The annual effective rates represent actual fees incurred under the distribution plan for the year ended October
31, 2006 based on each class' average daily net assets.
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. All contingent
deferred sales charges are paid to MFD and during the year ended October 31,
2006, were as follows:
AMOUNT
Class A $5,466
Class B 123,008
Class C 6,643
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average net
assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the year ended October 31, 2006, the fee was
$548,946, which equated to 0.0951% 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, 2006, these costs amounted to $180,507. The fund may also pay
shareholder servicing related costs to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. From July 1, 2005
through March 31, 2006, the fund's annual fixed amount was $10,000. Effective
April 1, 2006, the fund's annual fixed amount is $17,500.
The administrative services fee incurred for the year ended October 31, 2006
was equivalent to an annual effective rate of 0.0161% 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 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. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services fee
to affiliated or unaffiliated third parties. For the year ended October 31,
2006 the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily
net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $1,148
Class R2 0.40% 0.25% 410
Class R3 0.25% 0.15% 1,738
Class R4 0.15% 0.15% 949
Class R5 0.10% 0.10% 141
- -------------------------------------------------------------------------------
Total Retirement Plan Administration
and Services Fees $4,386
(g) Effective October 1, 2005, MFS has agreed in writing to waive a portion of
the retirement plan administration and services fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
This agreement will continue until at least September 30, 2008. For the
year ended October 31, 2006, this waiver amounted to $1,104 and is
reflected as a reduction of total expenses in the Statement of Operations.
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 or officers of the fund who are also
officers of the investment adviser, 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 certain retired independent
trustees which resulted in a pension expense of $1,720. The fund also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $1,181. Both amounts are included in
independent trustees' compensation for the year ended October 31, 2006. The
deferred liability for retirement benefits payable to certain independent
trustees under both plans amounted to $62,245 at October 31, 2006, and is
included in payable for independent trustees' compensation.
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. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the year ended October 31, 2006, the fee paid to Tarantino LLC
was $3,577. MFS has agreed to reimburse the fund for a portion of the payments
made by the funds to Tarantino LLC in the amount of $3,187, 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.
(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 $93,402,808 $84,694,519
- --------------------------------------------------------------------------------
Investments (non-U.S. government securities) $363,834,121 $353,785,131
- --------------------------------------------------------------------------------
(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 YEAR ENDED
10/31/06 10/31/05(i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 6,872,236 $98,398,262 7,599,432 $109,093,900
Class B 1,847,929 26,911,822 2,454,459 35,678,534
Class C 2,074,023 30,045,833 1,931,145 27,862,218
Class I 93,995 1,351,358 74,348 1,063,076
Class R 38,205 540,251 108,426 1,565,792
Class R1 32,080 460,229 3,573 51,532
Class R2 6,340 91,115 3,467 50,000
Class R3 119,751 1,681,818 2,703 38,967
Class R4 87,324 1,264,079 3,506 50,000
Class R5 40,840 598,993 3,507 50,000
- -----------------------------------------------------------------------------------------------------------
11,212,723 $161,343,760 12,184,566 $175,504,019
Shares issued to shareholders in
reinvestment of distributions
Class A 2,178,230 $29,679,452 2,162,149 $30,502,929
Class B 584,438 8,061,736 721,314 10,310,591
Class C 334,397 4,589,203 300,328 4,273,731
Class I 22,802 309,017 20,206 283,423
Class R 13,311 180,617 9,289 130,623
Class R1 596 8,239 39 556
Class R2 802 10,999 42 591
Class R3 1,539 21,151 1,021 14,350
Class R4 942 13,194 47 656
Class R5 363 4,958 49 690
- -----------------------------------------------------------------------------------------------------------
3,137,420 $42,878,566 3,214,484 $45,518,140
Shares reacquired
Class A (6,951,254) $(99,304,209) (5,311,172) $(76,336,187)
Class B (3,455,601) (50,075,224) (3,319,546) (48,215,675)
Class C (1,164,802) (16,756,790) (820,864) (11,876,702)
Class I (63,103) (886,437) (27,382) (392,542)
Class R (37,228) (530,589) (45,164) (646,669)
Class R1 (12,358) (182,604) -- --
Class R2 (4,474) (62,809) -- --
Class R3 (53,312) (745,149) (1,653) (23,469)
Class R4 (5,058) (72,237) -- --
Class R5 (810) (11,917) -- --
- -----------------------------------------------------------------------------------------------------------
(11,748,000) $(168,627,965) (9,525,781) $(137,491,244)
Net change
Class A 2,099,212 $28,773,505 4,450,409 $63,260,642
Class B (1,023,234) (15,101,666) (143,773) (2,226,550)
Class C 1,243,618 17,878,246 1,410,609 20,259,247
Class I 53,694 773,938 67,172 953,957
Class R 14,288 190,279 72,551 1,049,746
Class R1 20,318 285,864 3,612 52,088
Class R2 2,668 39,305 3,509 50,591
Class R3 67,978 957,820 2,071 29,848
Class R4 83,208 1,205,036 3,553 50,656
Class R5 40,393 592,034 3,556 50,690
- -----------------------------------------------------------------------------------------------------------
2,602,143 $35,594,361 5,873,269 $83,530,915
(i) For the period from the class inception, April 1, 2005 (Classes R1, R2, R4, and R5), through the stated period end.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other affiliated funds have established
uncommitted borrowing arrangements with certain banks. Borrowings may be made
for temporary financing needs. Interest is charged to each fund, based on its
borrowings, generally 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 committed line of credit, is allocated among the participating
funds at the end of each calendar quarter. For the year ended October 31, 2006,
the fund's commitment fee and interest expense were $3,729 and $0,
respectively, and are included in miscellaneous expense on the Statement of
Operations.
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,
2006, 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, 2006, by
correspondence with the Fund's 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, 2006, 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 21, 2006
TRUSTEES AND OFFICERS --
IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 1, 2006, 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(h) OTHER DIRECTORSHIPS(j)
- ------------------- ---------------- --------------- -----------------------------
INTERESTED TRUSTEES
Robert J. Manning(k) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment
Officer and Director
Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial Services
(born 8/08/46) Company, Chairman (since February
2004); 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 5/01/36) of Trustees Enterprises (diversified services
company), Chairman, Trustee and
Chief Executive Officer (until
November 2000)
Robert E. Butler(n) Trustee January 2006 Consultant - regulatory and
(born 11/29/41) compliance matters (since July
2002); PricewaterhouseCoopers LLP
(professional services firm),
Partner (November 2000 until June
2002)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 3/11/37) 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 5/30/42) 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 9/27/41) 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)
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys),
(born 6/23/35) Partner
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 9/23/38) (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 8/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
Robert W. Uek Trustee January 2006 Retired (since 1999);
(born 5/18/41) PricewaterhouseCoopers LLP
(professional services firm),
Partner (until 1999); Consultant
to investment company industry
(since 2000); TT International
Funds (mutual fund complex),
Trustee (2000 until 2005);
Hillview Investment Trust II Funds
(mutual fund complex), Trustee
(2000 until 2005)
OFFICERS
Maria F. Dwyer(k) 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(k) 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(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 1/18/74) and Assistant Clerk Company, Vice President and Senior
Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003)
Ethan D. Corey(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/21/63) and Assistant Clerk Company, Special Counsel (since
December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 8/10/68) Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (prior to
June 2005)
Timothy M. Fagan(k) Assistant Secretary September 2005 Massachusetts Financial Services
(born 7/10/68) and Assistant Clerk Company, Vice President and Senior
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(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 10/27/70) Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian E. Langenfeld(k) Assistant Secretary June 2006 Massachusetts Financial Services
(born 3/07/73) and Assistant Clerk Company, Assistant Vice President
and Counsel (since May 2006); John
Hancock Advisers, LLC, Assistant
Vice President and Counsel (May
2005 to April 2006); John Hancock
Advisers, LLC, Attorney and
Assistant Secretary (prior to May
2005)
Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial Services
(born 11/13/57) Company, Senior Vice President
Susan S. Newton(k) Assistant Secretary May 2005 Massachusetts Financial Services
(born 3/07/50) and Assistant Clerk Company, Senior Vice President and
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(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/05/70) and Assistant Clerk Company, Vice President and Senior
Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (prior to June 2004)
Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial Services
(born 5/01/52) Company, Executive Vice President,
General Counsel and Secretary
(since January 2006); Wilmer
Cutler Pickering Hale and Dorr LLP
(law firm), Partner (prior to
January 2006)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 3/07/44) Compliance Officer compliance services), Principal
(since June 2004); CRA Business
Strategies Group (consulting
services), Executive Vice
President (April 2003 to June
2004); David L. Babson & Co.
(investment adviser), Managing
Director, Chief Administrative
Officer and Director (prior to
March 2003)
James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial Services
(born 6/12/60) Company, Senior Vice President
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(h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(k) "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.
(n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant
retained by MFS pursuant to its settlement with the SEC concerning market timing and related matters. The
terms of that settlement required that compensation and expenses related to the independent compliance
consultant be borne exclusively by MFS and, therefore, MFS paid Mr. Butler for the services he rendered to
the independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of $351,119.29.
The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold a shareholders' meeting at
least once every five years thereafter, to elect Trustees.
Each Trustee (except Mr. Butler and Mr. Uek) 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. Butler, Sherratt and Uek and Ms. 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 January 1, 2006, the Trustees served as board members of 98 funds within the MFS
Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request by calling 1-800-225-2606.
- -------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
JPMorgan 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
Nevin P. Chitkara 200 Clarendon Street, Boston, MA 02116
Steven R. Gorham
Matthew W. Ryan
Erik S. 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, 2006 ("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, 2005 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 ("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 MFS peer funds, (iii) information provided
by MFS on the advisory fees of comparable portfolios of other clients of MFS,
including institutional separate accounts 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, 2005, which the Trustees believed was
a long enough period to reflect differing market conditions. The Fund's
performance was in the 4th quintile relative to the other funds in the
universe for this three-year period (the 1st quintile being the best
performers and the 5th quintile being the worst performers). The total return
performance of the Fund's Class A shares was in the 5th quintile for the one-
year period and the 2nd quintile for the five-year period ended December 31,
2005 relative to the Lipper performance universe. Because of the passage of
time, these performance results may differ from the performance results for
more recent periods, including those shown elsewhere in this report.
The Trustees expressed concern to MFS about the ongoing substandard investment
performance of the Fund. 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, as to MFS'
efforts to improve the Fund's performance, including the recent restructuring
of responsibilities among MFS' senior investment management executives and the
replacement of two portfolio managers in May 2005 with two new portfolio
managers, one of whom joined in May 2005 and the second of whom joined in May
2006. In addition, the Trustees requested that they receive a separate update
on the Fund's performance at each of their meetings. After reviewing these and
related factors, the Trustees concluded, within the context of their overall
conclusions regarding the investment advisory agreement, that MFS' responses
and efforts and plans to improve investment performance were sufficient to
support approval of the continuance of the investment advisory agreement for
an additional one-year period, but that they would continue to closely monitor
the performance of the Fund.
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 that MFS
has agreed in writing to waive a portion of its advisory fee on assets over $500
million and $1 billion, which may not be changed without the Trustees' approval,
and that MFS currently observes an expense limitation for the Fund. The Trustees
also considered that, according to the Lipper data, the Fund's effective
advisory fee rate (taking into account the expense limitation) was approximately
at the Lipper expense group median and the Fund's total expense ratio was higher
than 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 as a result of the advisory fee waiver
described above. 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 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, which may include 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, if applicable, to pay for investment research
(excluding third-party research, for which MFS pays directly) 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, 2006.
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available 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
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. 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)
The fund will notify shareholders of amounts for use in preparing 2006 income
tax forms in January 2007. The following information is provided pursuant to
provisions of the Internal Revenue Code.
The fund designates the maximum amount allowable as qualified dividend income
eligible for the 15% tax rate.
The fund designates $37,702,828 as capital gain dividends paid during the
fiscal year.
For corporate shareholders, 22.74% of the ordinary income dividends paid
during the fiscal year qualify for the corporate dividends received deduction.
MFS(R) PRIVACY NOTICE
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about the investment products and services that we
offer, and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal
information. We maintain information and records about you, your investments,
and the services you use. Examples of the nonpublic personal information we
maintain include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or
others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. We may share nonpublic
personal information with third parties or certain of our affiliates in
connection with servicing your account or processing your transactions. We may
share information with companies or financial institutions that perform
marketing services on our behalf or with other financial institutions with
which we have joint marketing arrangements, subject to any legal requirements.
Authorization to access your nonpublic personal information is limited to
appropriate personnel who provide products, services, or information to you.
We maintain physical, electronic, and procedural safeguards to help protect
the personal information we collect about you.
If you have any questions about the MFS privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA 02205-5824
1-800-637-8255
24 hours a day OVERNIGHT MAIL
MFS Service Center, Inc.
ACCOUNT SERVICE AND 500 Boylston Street
LITERATURE Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Annual report
MFS(R) Utiliies Fund
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
- -------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 16
- -------------------------------------------------------------------
STATEMENT OF OPERATIONS 19
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STATEMENTS OF CHANGES IN NET ASSETS 21
- -------------------------------------------------------------------
FINANCIAL HIGHLIGHTS 22
- -------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 30
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 41
- -------------------------------------------------------------------
TRUSTEES AND OFFICERS 42
- -------------------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 48
- -------------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 52
- -------------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 52
- -------------------------------------------------------------------
FEDERAL TAX INFORMATION 52
- -------------------------------------------------------------------
MFS(R) PRIVACY NOTICE 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.
- ---------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ---------------------------------------------------------------------------
10/31/06
MMU-ANN
LETTER FROM THE CEO
[Photo of Robert J. Manning]
Dear Shareholders:
What a difference a year can make. By the end of 2005, the Dow Jones
Industrial Average had lost value over the course of the year, as stocks were
beaten back by a myriad of investor worries, including a spike in oil prices,
a rise in interest rates, and political uncertainty in the Middle East.
Fast forward to 2006, and we have seen a dramatically different picture.
While there were some fluctuations in the global markets in the first half of
the year, the second half of 2006 has, so far, been good to many investors.
Oil prices retreated, boosting consumer confidence, and interest rates have
held steady. U.S. stock markets responded favorably to this news, as the Dow
reached a record high in October, passing the 12,000 mark.
What does all of this mean for you? If you're focused on a long-term
investment strategy, the high points in the road -- and the bumps -- should
not necessarily dictate portfolio action on your part. Markets are inherently
cyclical, and we firmly believe that investors who remain committed to a long-
term investment strategy are more likely to achieve their goals than those who
consistently chase short-term performance.
At MFS(R), our unique teamwork approach to managing money and our global
research platform support an unwavering focus on helping you realize your
long-term financial goals. We believe in a three-pronged investment strategy
of allocating your holdings across major asset classes, diversifying within
each class, and rebalancing regularly. Of course, these strategies cannot
guarantee a profit or protect against a loss. Investing and planning for the
long term require diligence and patience -- two traits that 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, 2006
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Common Stocks 89.6%
Convertible Preferred Stocks 4.5%
Bonds 1.4%
Convertible Bonds 0.5%
Cash & Other Net Assets 4.0%
TOP TEN HOLDINGS (i)
NRG Energy, Inc. 4.6%
------------------------------------------------------
FPL Group, Inc. 3.8%
------------------------------------------------------
Edison International 3.7%
------------------------------------------------------
Williams Cos., Inc. 3.5%
------------------------------------------------------
TELUS Corp. (non-voting shares) 3.2%
------------------------------------------------------
Equitable Resources, Inc. 2.9%
------------------------------------------------------
FirstEnergy Corp. 2.8%
------------------------------------------------------
Constellation Energy Group, Inc. 2.8%
------------------------------------------------------
Entergy Corp. 2.6%
------------------------------------------------------
TXU Corp. 2.6%
------------------------------------------------------
TOP FIVE INDUSTRIES (i)
Utilities - Electric Power 51.0%
------------------------------------------------------
Telephone Services 15.1%
------------------------------------------------------
Natural Gas - Pipeline 6.2%
------------------------------------------------------
Natural Gas - Distribution 6.2%
------------------------------------------------------
Telecommunications - Wireless 6.0%
------------------------------------------------------
COUNTRY WEIGHTINGS (i)
United States 69.3%
------------------------------------------------------
Canada 4.9%
------------------------------------------------------
Germany 4.0%
------------------------------------------------------
Brazil 3.5%
------------------------------------------------------
Spain 3.0%
------------------------------------------------------
Mexico 2.8%
------------------------------------------------------
France 2.6%
------------------------------------------------------
United Kingdom 1.9%
------------------------------------------------------
Norway 1.5%
------------------------------------------------------
Other 6.5%
------------------------------------------------------
(i) 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 10/31/06.
The portfolio is actively managed and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the twelve months ended October 31, 2006, Class A shares of the MFS
Utilities Fund had a total return of 26.48%, at net asset value. This compares
with a return of 17.90% for the fund's benchmark, the Standard & Poor's 500
Utilities Index.
CONTRIBUTORS TO PERFORMANCE
Strong stock selection in the electric power industry contributed to the
fund's relative performance for the period. Our positions in electric power
generators International Power(c) (U.K.), RWE(c) (Germany), and SUEZ(c)
(France) were among the fund's top contributors. All three companies benefited
from an increasingly higher pricing environment for power in Europe.
Additionally, not owning electric utility provider Southern Company (U.S.),
and underweighting Public Service Enterprise Group (U.S.) and Dominion
Resources(g) (U.S.), aided relative performance as the returns of all three
stocks lagged overall benchmark returns.
Elsewhere in the portfolio, wireless communications company America Movil(c)
(Mexico) was a strong performer. This company is the largest mobile service
provider in Latin America and benefited from solid revenue and subscriber
growth over the reporting period.
Several holdings within the telephone services industry, which is not
represented in the benchmark, boosted the fund's relative performance. These
included communications companies TELUS(c) (Canada), Telenor(c) (Norway), and
SBC Communications(c)(g) (U.S.).
During the reporting period, the portfolio's currency exposure was a contributor
to relative performance. All of MFS' investment decisions are driven by the
fundamentals of each individual opportunity and as such, it is common for our
portfolios to have different currency exposure than the benchmark.
DETRACTORS FROM PERFORMANCE
Our positions in wireless service providers Sprint Nextel(c)(g) (U.S.) and
Vodafone Group(c)(g) (U.K.) were among the top detractors from relative
results. Shares of Sprint Nextel struggled after the company lowered its
wireless subscriber guidance for 2006. Also, the company's merger with Nextel
seemed to have disappointed investors. Vodafone lagged the benchmark as the
company faced increased competition and disappointing results in its core
European markets.
Although overall stock selection in the electric power industry contributed to
relative returns, our underweighted positions in several strong-performing
benchmark constituents detracted from results. Among these were Allegheny
Energy(g) (U.S.), Duke Energy (U.S.), and Exelon (U.S.).
The fund's cash position was also a detractor from relative performance. The
fund 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 A. Shaughnessy Robert D. Persons
Portfolio Manager Portfolio Manager
(c) Security is not a benchmark constituent.
(g) Security was not held in the 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 portfolio. References to specific
securities are not recommendations of such securities, and may not be
representative of any MFS portfolio's current or future investments.
PERFORMANCE SUMMARY THROUGH 10/31/06
The following chart illustrates the historical performance of the fund's Class
A shares 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. The performance of other share classes will be greater
than or less than that of the class depicted below. Benchmark comparisons are
unmanaged; do not reflect sales charges, commissions or expenses; and cannot
be invested in directly. (See Notes to Performance Summary.)
PERFORMANCE DATA SHOWN REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE SO YOUR
SHARES, WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. FOR MOST RECENT MONTH-END
PERFORMANCE, PLEASE VISIT MFS.COM. (FOR THE MOST RECENT MONTH-END PERFORMANCE
FOR CLASS I SHARES CALL 1-800-343-2829.) 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 Standard & Poor's
Fund - Class A 500 Utilities Index
10/96 $ 9,425 $10,000
10/97 12,122 10,923
10/98 14,804 13,873
10/99 18,217 14,094
10/00 22,931 19,149
10/01 16,574 14,837
10/02 11,971 9,442
10/03 15,764 11,921
10/04 20,242 14,796
10/05 25,370 18,325
10/06 32,087 21,605
TOTAL RETURNS THROUGH 10/31/06
AVERAGE ANNUAL WITHOUT SALES CHARGE
Share class Class inception date 1-yr 5-yr 10-yr
- ----------------------------------------------------------------------------
A 2/14/92 26.48% 14.12% 13.03%
- ----------------------------------------------------------------------------
B 9/07/93 25.55% 13.28% 12.20%
- ----------------------------------------------------------------------------
C 1/03/94 25.61% 13.28% 12.20%
- ----------------------------------------------------------------------------
I 1/02/97 26.83% 14.43% 13.32%
- ----------------------------------------------------------------------------
R 12/31/02 26.19% 13.89% 12.92%
- ----------------------------------------------------------------------------
R1 4/01/05 25.42% 13.23% 12.17%
- ----------------------------------------------------------------------------
R2 4/01/05 25.86% 13.35% 12.23%
- ----------------------------------------------------------------------------
R3 10/31/03 26.02% 13.46% 12.29%
- ----------------------------------------------------------------------------
R4 4/01/05 26.21% 14.06% 13.00%
- ----------------------------------------------------------------------------
R5 4/01/05 26.75% 14.19% 13.07%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL
Comparative benchmark
- ----------------------------------------------------------------------------
Standard & Poor's 500 Utilities Index (f) 17.90% 7.81% 8.01%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL WITH SALES CHARGE
Share class
- ----------------------------------------------------------------------------
A 19.21% 12.78% 12.37%
With Initial Sales Charge (5.75%)
- ----------------------------------------------------------------------------
B 21.55% 13.04% 12.20%
With CDSC (Declining over six years
from 4% to 0%) (x)
- ----------------------------------------------------------------------------
C 24.61% 13.28% 12.20%
With CDSC (1% for 12 months) (x)
- ----------------------------------------------------------------------------
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.
CDSC - Contingent Deferred Sales Charge.
(f) Source: FactSet Research Systems Inc.
(x) Assuming redemption at the end of the applicable period.
INDEX DEFINITION
Standard & Poor's 500 Utilities Index - 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 R shares are available only to existing Class R shareholders. 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, 2006 through October 31, 2006.
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, 2006 through October 31,
2006.
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.
- ------------------------------------------------------------------------------
Beginning Ending Expenses
Annualized Account Account Paid During
Share Expense Value Value Period (p)
Class Ratio 5/01/06 10/31/06 5/01/06-10/31/06
- ------------------------------------------------------------------------------
Actual 1.10% $1,000.00 $1,154.70 $5.97
A ----------------------------------------------------------------------
Hypothetical (h) 1.10% $1,000.00 $1,019.66 $5.60
- ------------------------------------------------------------------------------
Actual 1.85% $1,000.00 $1,151.00 $10.03
B ----------------------------------------------------------------------
Hypothetical (h) 1.85% $1,000.00 $1,015.88 $9.40
- ------------------------------------------------------------------------------
Actual 1.85% $1,000.00 $1,150.80 $10.03
C ----------------------------------------------------------------------
Hypothetical (h) 1.85% $1,000.00 $1,015.88 $9.40
- ------------------------------------------------------------------------------
Actual 0.85% $1,000.00 $1,156.70 $4.62
I ----------------------------------------------------------------------
Hypothetical (h) 0.85% $1,000.00 $1,020.92 $4.33
- ------------------------------------------------------------------------------
Actual 1.35% $1,000.00 $1,154.30 $7.33
R ----------------------------------------------------------------------
Hypothetical (h) 1.35% $1,000.00 $1,018.40 $6.87
- ------------------------------------------------------------------------------
Actual 1.94% $1,000.00 $1,149.60 $10.51
R1 ----------------------------------------------------------------------
Hypothetical (h) 1.94% $1,000.00 $1,015.43 $9.86
- ------------------------------------------------------------------------------
Actual 1.59% $1,000.00 $1,152.40 $8.63
R2 ----------------------------------------------------------------------
Hypothetical (h) 1.59% $1,000.00 $1,017.19 $8.08
- ------------------------------------------------------------------------------
Actual 1.52% $1,000.00 $1,152.70 $8.25
R3 ----------------------------------------------------------------------
Hypothetical (h) 1.52% $1,000.00 $1,017.54 $7.73
- ------------------------------------------------------------------------------
Actual 1.28% $1,000.00 $1,153.10 $6.95
R4 ----------------------------------------------------------------------
Hypothetical (h) 1.28% $1,000.00 $1,018.75 $6.51
- ------------------------------------------------------------------------------
Actual 0.96% $1,000.00 $1,156.30 $5.22
R5 ----------------------------------------------------------------------
Hypothetical (h) 0.96% $1,000.00 $1,020.37 $4.89
- ------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
10/31/06
The Portfolio of Investments is a complete list of all securities owned by your fund. It is categorized
by broad-based asset classes.
Common Stocks - 89.6%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Broadcasting - 3.8%
- ----------------------------------------------------------------------------------------------------
Citadel Broadcasting Corp. (l) 1,011,240 $ 10,355,098
Grupo Televisa S.A., ADR 1,338,800 33,041,584
News Corp., "A" 1,195,000 24,915,750
Time Warner, Inc. 113,700 2,275,137
Viacom, Inc., "B" (a) 360,050 14,013,146
--------------
$ 84,600,715
- ----------------------------------------------------------------------------------------------------
Cable TV - 0.6%
- ----------------------------------------------------------------------------------------------------
Comcast Corp., "Special A" (a)(l) 273,500 $ 11,071,280
EchoStar Communications Corp., "A" (a) 32,300 1,147,296
--------------
$ 12,218,576
- ----------------------------------------------------------------------------------------------------
Energy - Independent - 1.8%
- ----------------------------------------------------------------------------------------------------
Apache Corp. 98,000 $ 6,401,360
CONSOL Energy, Inc. 371,500 13,147,385
Devon Energy Corp. 101,900 6,810,996
EOG Resources, Inc. 16,700 1,111,051
Southwestern Energy Co. (a) 110,500 3,931,590
Talisman Energy, Inc. 392,100 6,448,496
XTO Energy, Inc. 51,400 2,398,324
--------------
$ 40,249,202
- ----------------------------------------------------------------------------------------------------
Energy - Integrated - 0.5%
- ----------------------------------------------------------------------------------------------------
Hess Corp. 266,400 $ 11,295,360
- ----------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 6.2%
- ----------------------------------------------------------------------------------------------------
AGL Resources, Inc. 967,825 $ 36,293,437
Dynegy Holdings, Inc. (a) 1,804,000 10,968,320
Equitable Resources, Inc. 1,572,600 63,721,752
Gaz de France (l) 243,200 9,780,161
Questar Corp. 198,200 16,149,336
--------------
$ 136,913,006
- ----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 5.5%
- ----------------------------------------------------------------------------------------------------
El Paso Corp. 149,900 $ 2,053,630
Enagas S.A 1,705,855 41,377,818
Gazprom OAO, ADR 25,100 1,063,236
Williams Cos., Inc. 3,211,750 78,463,052
--------------
$ 122,957,736
- ----------------------------------------------------------------------------------------------------
Oil Services - 4.0%
- ----------------------------------------------------------------------------------------------------
ENSCO International, Inc. 202,900 $ 9,936,013
GlobalSantaFe Corp. 688,200 35,717,580
Noble Corp. 343,200 24,058,320
Schlumberger Ltd. 51,900 3,273,852
Terna Participacoes S.A., IEU (a) 144,400 1,520,780
Transocean, Inc. (a) 184,100 13,354,614
--------------
$ 87,861,159
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 6.0%
- ----------------------------------------------------------------------------------------------------
America Movil S.A. de C.V., "L", ADR 674,700 $ 28,924,389
Dobson Communications Corp. (a)(l) 3,429,070 26,609,583
Hutchison Telecommunications International Ltd. (a) 8,276,000 15,940,350
Rogers Communications, Inc., "B" 412,100 24,681,552
Tim Participacoes S.A., ADR 732,500 24,612,000
Vimpel-Communications, ADR (a)(l) 208,800 13,778,712
--------------
$ 134,546,586
- ----------------------------------------------------------------------------------------------------
Telephone Services - 15.1%
- ----------------------------------------------------------------------------------------------------
Alltel Corp. 147,800 $ 7,879,218
AT&T, Inc. 1,537,400 52,655,950
Embarq Corp. 223,700 10,815,895
FastWeb S.p.A. (l) 110,029 5,450,179
France Telecom S.A 770,810 20,025,512
Neuf Promesses (a) 240,710 7,267,703
Philippine Long Distance Telephone Co. 47,900 2,268,138
Royal KPN N.V 81,600 1,090,709
Singapore Telecommunications Ltd. 11,152,950 18,966,385
Telecom Argentina S.A., ADR (a)(l) 807,300 12,190,230
Telefonica S.A 1,184,200 22,828,316
Telekom Austria AG 209,800 5,222,903
Telenor A.S.A 2,141,300 33,828,451
TELUS Corp. (non-voting shares) 1,229,540 70,581,964
Verizon Communications, Inc. 507,400 18,773,800
Windstream Corp. 3,447,476 47,299,371
--------------
$ 337,144,724
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 46.1%
- ----------------------------------------------------------------------------------------------------
AES Corp. (a) 1,110,500 $ 24,419,895
AES Tiete S.A., IPS 579,757,500 14,694,040
Ameren Corp. (l) 312,400 16,900,840
American Electric Power Co., Inc. 652,900 27,049,647
Centerpoint Energy, Inc. (l) 940,600 14,560,488
CEZ AS 503,400 19,943,662
CMS Energy Corp. (a)(l) 2,808,300 41,815,587
Constellation Energy Group, Inc. 981,903 61,270,747
CPFL Energia S.A., ADR (l) 427,460 16,200,734
DPL, Inc. 303,100 8,705,032
Drax Group PLC 284,100 4,417,230
Duke Energy Corp. 1,628,800 51,535,232
E.ON AG 428,507 51,423,028
Edison International 1,876,200 83,378,328
Eletropaulo Metropolitana S.A., IPS (a) 351,700,000 15,255,644
Enel S.p.A 2,179,140 20,920,634
Energias do Brasil S.A 39,200 539,366
Enersis S.A., ADR 1,107,400 15,271,046
Entergy Corp. 76,400 6,557,412
Equatorial Energia S.A., IEU (a) 295,700 2,296,364
Exelon Corp. 350,900 21,748,782
FirstEnergy Corp. 1,056,000 62,145,600
Fortum Corp. 317,400 8,736,300
FPL Group, Inc. 1,654,000 84,354,000
International Power PLC 6,032,101 38,522,140
Mirant Corp. (a)(l) 1,362,200 40,280,254
NRG Energy, Inc. (a)(l) 2,146,000 103,329,900
Public Service Enterprise Group, Inc. 646,900 39,493,245
Red Electrica de Espana S.A 56,400 2,189,613
Reliant Energy, Inc. (a) 333,600 4,230,048
RWE AG 389,200 38,472,815
SUEZ S.A 188,022 8,415,743
Tractebel Energia S.A 245,360 1,945,485
TXU Corp. 902,600 56,981,138
Veolia Environment 184,350 11,289,761
Xcel Energy, Inc. (l) 354,900 7,832,643
--------------
$1,027,122,423
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $1,663,083,725) $1,994,909,487
- ----------------------------------------------------------------------------------------------------
Bonds - 1.4%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Asset Backed & Securitized - 0.0%
- ----------------------------------------------------------------------------------------------------
Falcon Franchise Loan LLC, FRN, 3.0286%, 2023 (i)(n) $ 3,836,225 $ 418,072
- ----------------------------------------------------------------------------------------------------
Cable TV - 0.4%
- ----------------------------------------------------------------------------------------------------
Rogers Cable, Inc., 5.5%, 2014 $ 8,580,000 $ 8,065,200
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 1.0%
- ----------------------------------------------------------------------------------------------------
Beaver Valley Funding Corp., 9%, 2017 $ 3,147,000 $ 3,554,820
Empresa Nacional de Electricidad S.A., 8.35%, 2013 3,010,000 3,408,232
Mirant North American LLC, 7.375%, 2013 7,700,000 7,786,625
TXU Eastern Funding Co., 6.75%, 2009 (d) 793,000 47,580
TXU Energy Co., 7%, 2013 8,015,000 8,442,704
--------------
$ 23,239,961
- ----------------------------------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $32,407,981) $ 31,723,233
- ----------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 4.5%
- ----------------------------------------------------------------------------------------------------
Natural Gas - Pipeline - 0.7%
- ----------------------------------------------------------------------------------------------------
El Paso Corp., 4.99% (n) 12,600 $ 15,482,250
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 3.8%
- ----------------------------------------------------------------------------------------------------
Entergy Corp., 7.625% 1,033,580 $ 58,397,270
NRG Energy, Inc., 5.75% (l) 108,700 26,952,165
--------------
$ 85,349,435
- ----------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST, $92,275,418) $ 100,831,685
- ----------------------------------------------------------------------------------------------------
Convertible Bonds - 0.5%
- ----------------------------------------------------------------------------------------------------
Cable TV - 0.3%
- ----------------------------------------------------------------------------------------------------
EchoStar Communications Corp., 5.75%, 2008 $ 6,540,000 $ 6,597,225
- ----------------------------------------------------------------------------------------------------
Oil Services - 0.2%
- ----------------------------------------------------------------------------------------------------
Transocean, Inc., 1.5%, 2021 $ 2,860,000 $ 3,078,075
- ----------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS (IDENTIFIED COST, $9,700,292) $ 9,675,300
- ----------------------------------------------------------------------------------------------------
Repurchase Agreements - 4.7%
- ----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., 5.31%, dated 10/31/06, due 11/01/06,
total to be received $105,225,518 (secured by various U.S.
Treasury and Federal Agency obligations and Mortgage Backed
securities in a jointly traded account), at Cost $105,210,000 $ 105,210,000
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 4.9%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Merrill Lynch & Co., Repurchase Agreement, 5.3025%,
dated 10/31/06, due 11/01/06, total to be received
$11,933,117 (secured by various U.S. Treasury and
Federal Agency obligations and Mortgage Backed
securities in an individually traded account), at Cost $ 11,931,360 $ 11,931,360
- ----------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio, at Cost
and Net Asset Value 96,386,622 96,386,622
- ----------------------------------------------------------------------------------------------------
TOTAL COLLATERAL FOR SECURITIES LOANED $ 108,317,982
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $2,010,995,398) (k) $2,350,667,687
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (5.6)% (123,904,927)
- ----------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $2,226,762,760
- ----------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(d) Non-income producing security - in default.
(i) 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.
(k) As of October 31, 2006, the fund had nine securities that were fair valued, aggregating
$56,462,711 and 2.40% of market value, in accordance with the policies adopted by the Board of
Trustees.
(l) All or a portion of this security is on loan.
(n) Securities exempt from registration under Rule 144A of the Securities Act of 1933. These
securities may be sold in the ordinary course of business in transactions exempt from
registration, normally to qualified institutional buyers. At period end, the aggregate value of
these securities was $15,900,322, representing 0.7% of net assets.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are reported by currency.
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
SALES
EUR 109,470,524 11/30/06 - 12/18/06 $137,880,411 $140,106,845 $(2,226,434)
GBP 20,942,082 11/27/06 - 11/30/06 39,532,135 39,962,041 (429,906)
- ---------------------------------------------------------------------------------------------------------
$177,412,546 $180,068,886 $(2,656,340)
- ---------------------------------------------------------------------------------------------------------
PURCHASES
EUR 5,325,642 11/30/06 - 12/18/06 $ 6,761,802 $ 6,815,635 $ 53,833
GBP 8,629,593 11/27/06 - 11/30/06 16,270,749 16,467,180 196,431
- ---------------------------------------------------------------------------------------------------------
$ 23,032,551 $ 23,282,815 $ 250,264
- ---------------------------------------------------------------------------------------------------------
At October 31, 2006, forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $5,501 with Goldman Sachs & Co.
At October 31, 2006, the fund had sufficient cash and/or securities to cover any commitments under
these derivative contracts.
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
IEU International Equity Unit
IPS International Preference Stock
Abbreviations 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.
EUR Euro
GBP British Pound
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/06
This statement represents your fund's balance sheet, which details the assets and liabilities
comprising the total value of the fund.
ASSETS
- -------------------------------------------------------------------------------------------------------
Investments, at value, including $105,360,315 of securities
on loan (identified cost, $2,010,995,398) $2,350,667,687
Cash 1,419,307
Receivable for forward foreign currency exchange contracts 250,264
Receivable for forward foreign currency exchange contracts
subject to master netting agreements 5,501
Receivable for investments sold 20,110,663
Receivable for fund shares sold 6,693,485
Interest and dividends receivable 3,065,233
- -------------------------------------------------------------------------------------------------------
Total assets $2,382,212,140
- -------------------------------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------------------------------
Payable to custodian $1,414,366
Distributions payable 676,215
Payable for forward foreign currency exchange contracts 2,656,340
Payable for investments purchased 36,607,916
Payable for fund shares reacquired 4,691,888
Collateral for securities loaned, at value 108,317,982
Payable to affiliates
Management fee 72,834
Shareholder servicing costs 183,755
Distribution and service fees 65,720
Administrative services fee 2,113
Retirement plan administration and services fees 263
Payable for independent trustees' compensation 69,590
Accrued expenses and other liabilities 690,398
- -------------------------------------------------------------------------------------------------------
Total liabilities $155,449,380
- -------------------------------------------------------------------------------------------------------
Net assets $2,226,762,760
- -------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF
- -------------------------------------------------------------------------------------------------------
Paid-in capital $2,150,723,934
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 337,281,241
Accumulated net realized gain (loss) on investments and
foreign currency transactions (268,613,593)
Undistributed net investment income 7,371,178
- -------------------------------------------------------------------------------------------------------
Net assets $2,226,762,760
- -------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 145,396,861
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,319,703,208
Shares outstanding 86,067,134
- -------------------------------------------------------------------------------------------------------
Net asset value per share $15.33
- -------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $16.27
- -------------------------------------------------------------------------------------------------------
Class B shares
- -------------------------------------------------------------------------------------------------------
Net assets $597,963,680
Shares outstanding 39,128,800
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.28
- -------------------------------------------------------------------------------------------------------
Class C shares
- -------------------------------------------------------------------------------------------------------
Net assets $260,119,666
Shares outstanding 17,004,830
- -------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $15.30
- -------------------------------------------------------------------------------------------------------
Class I shares
- -------------------------------------------------------------------------------------------------------
Net assets $9,830,416
Shares outstanding 640,066
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.36
- -------------------------------------------------------------------------------------------------------
Class R shares
- -------------------------------------------------------------------------------------------------------
Net assets $10,122,731
Shares outstanding 660,880
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.32
- -------------------------------------------------------------------------------------------------------
Class R1 shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,901,805
Shares outstanding 124,426
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.28
- -------------------------------------------------------------------------------------------------------
Class R2 shares
- -------------------------------------------------------------------------------------------------------
Net assets $1,285,206
Shares outstanding 84,121
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.28
- -------------------------------------------------------------------------------------------------------
Class R3 shares
- -------------------------------------------------------------------------------------------------------
Net assets $14,413,159
Shares outstanding 941,226
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.31
- -------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class R4 shares
- -------------------------------------------------------------------------------------------------------
Net assets $10,786,146
Shares outstanding 703,859
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.32
- -------------------------------------------------------------------------------------------------------
Class R5 shares
- -------------------------------------------------------------------------------------------------------
Net assets $636,743
Shares outstanding 41,519
- -------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $15.34
- -------------------------------------------------------------------------------------------------------
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
Year ended 10/31/06
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $58,947,366
Interest 6,802,666
Foreign taxes withheld (2,184,512)
- ------------------------------------------------------------------------------------------------------
Total investment income $63,565,520
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $11,367,809
Distribution and service fees 10,995,460
Shareholder servicing costs 3,207,190
Administrative services fee 275,990
Retirement plan administration and services fees 29,169
Independent trustees' compensation 47,691
Custodian fee 792,858
Shareholder communications 245,242
Auditing fees 45,164
Legal fees 78,367
Miscellaneous 279,394
- ------------------------------------------------------------------------------------------------------
Total expenses $27,364,334
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (178,325)
Reduction of expenses by investment adviser (18,882)
- ------------------------------------------------------------------------------------------------------
Net expenses $27,167,127
- ------------------------------------------------------------------------------------------------------
Net investment income $36,398,393
- ------------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $276,727,740
Foreign currency transactions (3,103,866)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $273,623,874
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $146,608,184
Translation of assets and liabilities in foreign currencies (4,438,775)
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $142,169,409
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $415,793,283
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $452,191,676
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations,
any distributions, and any shareholder transactions.
YEARS ENDED 10/31
---------------------------------------
2006 2005
CHANGE IN NET ASSETS
FROM OPERATIONS
- -------------------------------------------------------------------------------------------------------
Net investment income $36,398,393 $19,525,494
Net realized gain (loss) on investments and foreign
currency transactions 273,623,874 279,974,644
Net unrealized gain (loss) on investments and foreign
currency translation 142,169,409 38,155,542
- -------------------------------------------------------------------------------------------------------
Change in net assets from operations $452,191,676 $337,655,680
- -------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------
From net investment income
Class A $(18,685,709) $(11,228,838)
Class B (5,803,139) (4,389,574)
Class C (2,315,006) (1,462,469)
Class I (146,800) (77,745)
Class R (124,773) (58,110)
Class R1 (13,376) (1,404)
Class R2 (10,526) (691)
Class R3 (109,291) (10,336)
Class R4 (75,443) (471)
Class R5 (4,795) (554)
- -------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(27,288,858) $(17,230,192)
- -------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $15,050,747 $121,017,931
- -------------------------------------------------------------------------------------------------------
Redemption fees $-- $4,318
- -------------------------------------------------------------------------------------------------------
Total change in net assets $439,953,565 $441,447,737
- -------------------------------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------------------------------
At beginning of period 1,786,809,195 1,345,361,458
At end of period (including undistributed net
investment income of $7,371,178 and accumulated
distributions in excess of net investment income of
$1,316,349, respectively) $2,226,762,760 $1,786,809,195
- -------------------------------------------------------------------------------------------------------
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
---------------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $12.33 $9.98 $7.89 $6.13 $8.68
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.30 $0.18 $0.16 $0.15 $0.16
Net realized and unrealized gain (loss)
on investments and foreign currency 2.94 2.34 2.08 1.76 (2.55)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.24 $2.52 $2.24 $1.91 $(2.39)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.24) $(0.17) $(0.15) $(0.15) $(0.16)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.33 $12.33 $9.98 $7.89 $6.13
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 26.48 25.33 28.41(b)(z) 31.69 (27.78)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.11 1.13 1.15 1.19 1.15
Expenses after expense reductions (f) 1.11 1.13 1.15 N/A 1.11
Net investment income 2.24 1.60 1.83 2.11 2.10
Portfolio turnover 100 101 97 144 80
Net assets at end of period (000 omitted) $1,319,703 $933,535 $586,730 $464,832 $382,712
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B YEARS ENDED 10/31
-------------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $12.29 $9.95 $7.87 $6.11 $8.65
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.20 $0.10 $0.10 $0.10 $0.10
Net realized and unrealized gain (loss) on
investments and foreign currency 2.93 2.32 2.05 1.76 (2.53)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.13 $2.42 $2.15 $1.86 $(2.43)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.14) $(0.08) $(0.07) $(0.10) $(0.11)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.28 $12.29 $9.95 $7.87 $6.11
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 25.55 24.39 27.50(b)(z) 30.66 (28.30)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.86 1.89 1.91 1.94 1.90
Expenses after expense reductions (f) 1.86 1.89 1.91 N/A 1.86
Net investment income 1.51 0.88 1.10 1.38 1.35
Portfolio turnover 100 101 97 144 80
Net assets at end of period (000 omitted) $597,964 $617,687 $575,642 $531,008 $481,361
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C YEARS ENDED 10/31
-------------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $12.30 $9.96 $7.87 $6.11 $8.66
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.20 $0.10 $0.10 $0.10 $0.10
Net realized and unrealized gain (loss) on
investments and foreign currency 2.94 2.32 2.06 1.76 (2.54)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.14 $2.42 $2.16 $1.86 $(2.44)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.14) $(0.08) $(0.07) $(0.10) $(0.11)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.30 $12.30 $9.96 $7.87 $6.11
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 25.61 24.37 27.63(b)(z) 30.66 (28.38)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.86 1.88 1.90 1.94 1.90
Expenses after expense reductions (f) 1.86 1.88 1.90 N/A 1.86
Net investment income 1.51 0.87 1.10 1.38 1.35
Portfolio turnover 100 101 97 144 80
Net assets at end of period (000 omitted) $260,120 $218,335 $177,875 $159,113 $144,861
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS I YEARS ENDED 10/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $12.35 $10.00 $7.91 $6.14 $8.69
- ------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.33 $0.21 $0.18 $0.17 $0.18
Net realized and unrealized gain (loss) on
investments and foreign currency 2.95 2.34 2.08 1.77 (2.55)
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.28 $2.55 $2.26 $1.94 $(2.37)
- ------------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.27) $(0.20) $(0.17) $(0.17) $(0.18)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.36 $12.35 $10.00 $7.91 $6.14
- ------------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 26.83 25.59 28.84(b)(z) 31.96 (27.56)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- ------------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.86 0.88 0.90 0.94 0.90
Expenses after expense reductions (f) 0.86 0.88 0.90 N/A 0.86
Net investment income 2.45 1.81 2.07 2.36 2.33
Portfolio turnover 100 101 97 144 80
Net assets at end of period (000 omitted) $9,830 $6,630 $2,823 $1,744 $1,306
- ------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R YEARS ENDED 10/31
------------------------------------------------------------------
2006 2005 2004 2003(i)
Net asset value, beginning of period $12.32 $9.97 $7.89 $6.40
- -----------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.27 $0.15 $0.15 $0.11
Net realized and unrealized gain (loss) on investments
and foreign currency 2.93 2.34 2.05 1.47
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.20 $2.49 $2.20 $1.58
- -----------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -----------------------------------------------------------------------------------------------------------------------------
From net investment income $(0.20) $(0.14) $(0.12) $(0.09)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.32 $12.32 $9.97 $7.89
- -----------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 26.19 25.05 28.11(b)(z) 24.78(n)
- -----------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -----------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.36 1.38 1.40 1.42(a)
Expenses after expense reductions (f) 1.36 1.38 1.40 N/A
Net investment income 2.01 1.33 1.64 1.47(a)
Portfolio turnover 100 101 97 144
Net assets at end of period (000 omitted) $10,123 $6,823 $2,169 $189
- -----------------------------------------------------------------------------------------------------------------------------
CLASS R1 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $12.29 $11.04
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.19 $0.01
Net realized and unrealized gain (loss) on investments and foreign
currency 2.92 1.29
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $3.11 $1.30
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.12) $(0.05)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.28 $12.29
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 25.42 11.77(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.06 2.08(a)
Expenses after expense reductions (f) 1.96 2.05(a)
Net investment income 1.40 0.12(a)
Portfolio turnover 100 101
Net assets at end of period (000 omitted) $1,902 $879
- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R2 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $12.29 $11.04
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.23 $0.03
Net realized and unrealized gain (loss) on investments and foreign
currency 2.93 1.29
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $3.16 $1.32
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.17) $(0.07)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.28 $12.29
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 25.86 11.96(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.76 1.77(a)
Expenses after expense reductions (f) 1.61 1.71(a)
Net investment income 1.74 0.37(a)
Portfolio turnover 100 101
Net assets at end of period (000 omitted) $1,285 $377
- -------------------------------------------------------------------------------------------------------------
CLASS R3 YEARS ENDED 10/31
-----------------------------------------------
2006 2005 2004
Net asset value, beginning of period $12.31 $9.97 $7.89
- -------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.24 $0.11 $0.14
Net realized and unrealized gain (loss) on investments and
foreign currency 2.94 2.34 2.04
- -------------------------------------------------------------------------------------------------------------------
Total from investment operations $3.18 $2.45 $2.18
- -------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------
From net investment income $(0.18) $(0.11) $(0.10)
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.31 $12.31 $9.97
- -------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 26.02 24.66 27.77(b)(z)
- -------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.62 1.62 1.65
Expenses after expense reductions (f) 1.52 1.60 1.65
Net investment income 1.73 0.97 1.42
Portfolio turnover 100 101 97
Net assets at end of period (000 omitted) $14,413 $2,426 $122
- -------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R4 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $12.33 $11.08
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.26 $0.10
Net realized and unrealized gain (loss) on investments and foreign
currency 2.95 1.25
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $3.21 $1.35
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.22) $(0.10)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.32 $12.33
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 26.21 12.22(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.28 1.26(a)
Expenses after expense reductions (f) 1.28 1.26(a)
Net investment income 1.93 1.50(a)
Portfolio turnover 100 101
Net assets at end of period (000 omitted) $10,786 $62
- -------------------------------------------------------------------------------------------------------------
CLASS R5 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $12.33 $11.08
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.28 $0.13
Net realized and unrealized gain (loss) on investments and foreign
currency 2.99 1.24
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $3.27 $1.37
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net investment income $(0.26) $(0.12)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $15.34 $12.33
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 26.75 12.41(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 0.96 0.96(a)
Expenses after expense reductions (f) 0.96 0.96(a)
Net investment income 1.98 1.83(a)
Portfolio turnover 100 101
Net assets at end of period (000 omitted) $637 $56
- -------------------------------------------------------------------------------------------------------------
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.
(a) Annualized.
(b) 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.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(i) For the period from the class' inception, December 31, 2002 (Class R), April 1, 2005 (Classes R1, R2, R4, and R5) through
the stated period end.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance would be lower.
(t) Total returns do not include any applicable sales charges.
(z) The fund's total return calculation includes a net increase from gains realized on the disposal of investments in violation
of investment 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.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
MFS Utilities Fund (the fund) is a 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, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales
reported that day, equity securities are generally valued at the last quoted
daily bid quotation as reported by an independent pricing service on the
market or exchange on which they are primarily traded. Debt instruments (other
than short-term instruments), including restricted debt instruments, are
generally valued at an evaluated or composite bid as reported by an
independent pricing service. Values of debt instruments obtained from pricing
services can utilize both dealer-supplied valuations and electronic data
processing techniques, which take into account 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. Short-
term instruments with a maturity at issuance of 60 days or less may be valued
at amortized cost, which approximates market value. Forward foreign currency
contracts are generally valued at the mean of bid and asked prices for the
time period interpolated from rates reported by an independent pricing service
for proximate time periods. Open-end investment companies are generally valued
at their net asset value per share. Securities and other assets generally
valued on the basis of information from an independent pricing service may
also be valued at a broker-dealer bid quotation. The values of foreign
securities and other assets and liabilities expressed in foreign currencies
are converted to U.S. dollars using the mean of bid and asked prices for rates
reported by an independent pricing service. The Board of Trustees has
delegated primary responsibility for determining or causing to be determined
the value of the fund's investments (including any fair valuation) to the
adviser pursuant to valuation policies and procedures approved by the Board.
If the adviser determines that reliable market quotations are not readily
available, investments are valued at fair value as determined in good faith by
the adviser in accordance with such procedures under the oversight of the
Board of Trustees. Under the fund's valuation policies and procedures, market
quotations are not considered to be readily available for many types of debt
instruments. These investments are generally valued at fair value based on
information from independent pricing services. The adviser may rely on
independent pricing services or other information (such as the correlation
with price movements of similar securities in the same or other markets; the
type, cost and investment characteristics of the security; the business and
financial condition of the issuer; and trading and other market data) to
assist in determining whether to fair value and at what value to fair value an
investment. The value of an investment for purposes of calculating the fund's
net asset value can differ depending on the source and method used to
determine value. When fair valuation is used, the value of investments used to
determine the fund's net asset value may differ from quoted or published
prices for the same investments. In addition, investments may be valued at
fair value if the adviser determines that an investment's value has been
materially affected by events occurring after the close of the exchange or
market on which the investment is principally traded (such as foreign exchange
or market) and prior to the determination of the fund's net asset value, or
after the halting of trading of a specific security where trading does not
resume prior to the close of the exchange or market on which the security is
principally traded. Events that occur on a frequent basis after foreign
markets close (such as developments in foreign markets and significant
movements in the U.S. markets) and prior to the determination of the fund's
net asset value may be deemed to have a material affect on the value of
securities traded in foreign markets. Accordingly, the fund's foreign equity
securities may often be valued at fair value. In September 2006, FASB
Statement No. 157, Fair Value Measurements (the "Statement") was issued, and
is effective for fiscal years beginning after November 15, 2007 and for all
interim periods within those fiscal years. This Statement provides a single
definition of fair value, a hierarchy for measuring fair value and expanded
disclosures about fair value measurements. Management is evaluating the
application of the Statement to the fund, and believes the impact will be
limited to expanded disclosures resulting from the adoption of this Statement
in the fund's financial statements.
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
JPMorgan 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.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising
out of the performance of their duties to the fund. Additionally, in the
normal course of business, the fund enters into agreements with service
providers that may contain indemnification clauses. The fund's maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the fund that have not yet occurred.
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.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to 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, 2006, the fund's custodian fees
were reduced by $159,370 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, 2006, the fund's custodian expenses
were reduced by $18,955 under this agreement. These amounts are shown as
a reduction of total expenses on the Statement of Operations. Effective
January 1, 2006, the commission recapture agreement was terminated.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue
Code, and to distribute all of its taxable income, including realized capital
gains. Accordingly, no provision for federal income tax is required in the
financial statements. Foreign taxes, if any, have been accrued by the fund in
the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value per
share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess of
net investment income or net realized gains are temporary overdistributions for
financial statement purposes resulting from differences in the recognition or
classification of income or distributions for financial statement and tax
purposes.
Book/tax differences primarily relate to foreign currency transactions and
wash sale loss deferrals.
The tax character of distributions declared to shareholders is as follows:
10/31/06 10/31/05
Ordinary income (including any short-term
capital gains) $27,288,858 $17,230,192
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 10/31/06
Cost of investments $2,011,317,315
----------------------------------------------------------
Gross appreciation $351,978,451
Gross depreciation (12,628,079)
----------------------------------------------------------
Net unrealized appreciation (depreciation) $339,350,372
Undistributed ordinary income 11,941,328
Capital loss carryforwards (269,629,338)
Other temporary differences (5,623,536)
As of October 31, 2006, the fund had capital loss carryforwards available to
offset future realized gains. Such losses expire as follows:
10/31/10 $(269,629,338)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. This Interpretation prescribes a minimum threshold
for financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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
management and related administrative services and facilities to the fund. 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 agreed in
writing to reduce its management fee to 0.55% of average daily net assets in
excess of $3.0 billion. This written agreement may be rescinded only upon
consent of the fund's Board of Trustees. For the year ended October 31, 2006,
the fund's average daily net assets did not exceed $3.0 billion and therefore,
the management fee was not reduced. The management fee incurred for the year
ended October 31, 2006 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 $274,746 for the year ended October 31, 2006, 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 and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.25% $2,591,585
Class B 0.75% 0.25% 1.00% 1.00% 6,015,289
Class C 0.75% 0.25% 1.00% 1.00% 2,295,561
Class R 0.25% 0.25% 0.50% 0.50% 40,682
Class R1 0.50% 0.25% 0.75% 0.75% 9,558
Class R2 0.25% 0.25% 0.50% 0.50% 3,468
Class R3 0.25% 0.25% 0.50% 0.50% 31,172
Class R4 -- 0.25% 0.25% 0.25% 8,145
- -----------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $10,995,460
(d) 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.
(e) The annual effective rates represent actual fees incurred under the
distribution plan for the year ended October 31, 2006 based on each class'
average daily net assets. Payment of the 0.10% annual Class A distribution
fee is not yet in effect and will be implemented on such date as the
fund's Board of Trustees may determine.
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. All contingent deferred
sales charges are paid to MFD and during the year ended October 31, 2006, were
as follows:
AMOUNT
Class A $14,480
Class B 534,811
Class C 27,661
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average net
assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the year ended October 31, 2006, the fee was
$1,801,387, which equated to 0.0950% 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, 2006, these costs amounted to $616,650. The fund may also pay
shareholder servicing related costs to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund.
Under an administrative services agreement, the fund partially reimburses MFS
the costs incurred to provide these services. The fund is charged a fixed
amount plus a fee based on calendar year average net assets. From July 1, 2005
through March 31, 2006, the fund's annual fixed amount was $10,000. Effective
April 1, 2006, the fund's annual fixed amount is $17,500. The administrative
services fee incurred for the year ended October 31, 2006 was equivalent to an
annual effective rate of 0.0146% 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 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. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services fee
to affiliated or unaffiliated third parties. For the year ended October 31,
2006, the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily
net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $5,735
Class R2 0.40% 0.25% 2,774
Class R3 0.25% 0.15% 15,586
Class R4 0.15% 0.15% 4,887
Class R5 0.10% 0.10% 187
- -------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $29,169
(g) Effective October 1, 2005, MFS has agreed in writing to waive a portion of
the retirement plan administration and services fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
This agreement will continue until at least September 30, 2008. For the
year ended October 31, 2006, this waiver amounted to $8,549 and is
reflected as a reduction of total expenses in the Statement of Operations.
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 or officers of the fund who are also
officers of the investment adviser, 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 certain retired independent
trustees which resulted in a pension expense of $2,045. The fund also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $5,326. Both amounts are included in
independent trustees' compensation for the year ended October 31, 2006. The
deferred liability for retirement benefits payable to certain independent
trustees under both plans amounted to $64,914 at October 31, 2006, and is
included in payable for independent trustees' compensation.
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. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the year ended October 31, 2006, the fee paid to Tarantino LLC
was $11,537. MFS has agreed to reimburse the fund for a portion of the
payments made by the funds to Tarantino LLC in the amount of $10,333, 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.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$1,837,654,769 and $1,861,934,045, respectively.
(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 YEAR ENDED
10/31/06 10/31/05(i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 33,508,984 $458,480,658 33,012,111 $380,967,466
Class B 4,742,777 63,866,481 6,155,311 70,346,774
Class C 2,945,245 39,895,981 3,474,179 39,724,548
Class I 306,670 4,242,384 320,468 3,769,390
Class R 321,836 4,305,463 442,895 5,029,875
Class R1 86,994 1,169,275 75,150 902,415
Class R2 57,226 778,779 34,360 435,607
Class R3 945,010 13,009,585 229,235 2,753,147
Class R4 803,432 11,169,808 4,954 55,651
Class R5 40,477 573,603 4,513 50,000
- -----------------------------------------------------------------------------------------------------------
43,758,651 $597,492,017 43,753,176 $504,034,873
Shares issued to shareholders in
reinvestment of distributions
Class A 1,154,428 $16,017,930 820,461 $9,602,010
Class B 346,869 4,817,355 306,385 3,572,910
Class C 113,999 1,591,737 86,295 1,009,289
Class I 10,392 144,309 6,391 75,359
Class R 7,535 104,556 4,585 54,099
Class R1 947 13,364 113 1,397
Class R2 746 10,526 55 673
Class R3 7,548 107,740 843 10,212
Class R4 5,217 75,443 39 471
Class R5 89 1,246 46 554
- -----------------------------------------------------------------------------------------------------------
1,647,770 $22,884,206 1,225,213 $14,326,974
Shares reacquired
Class A (24,317,849) $(325,008,013) (16,877,017) $(193,480,346)
Class B (16,226,099) (218,698,121) (14,033,040) (159,448,969)
Class C (3,804,487) (50,809,784) (3,664,643) (41,656,935)
Class I (213,937) (2,834,328) (72,276) (840,827)
Class R (222,508) (2,972,060) (111,046) (1,265,328)
Class R1 (35,033) (477,175) (3,745) (46,778)
Class R2 (4,497) (60,223) (3,769) (45,979)
Class R3 (208,328) (2,858,235) (45,303) (558,754)
Class R4 (109,783) (1,555,899) -- --
Class R5 (3,606) (51,638) -- --
- -----------------------------------------------------------------------------------------------------------
(45,146,127) $(605,325,476) (34,810,839) $(397,343,916)
Net change
Class A 10,345,563 $149,490,575 16,955,555 $197,089,130
Class B (11,136,453) (150,014,285) (7,571,344) (85,529,285)
Class C (745,243) (9,322,066) (104,169) (923,098)
Class I 103,125 1,552,365 254,583 3,003,922
Class R 106,863 1,437,959 336,434 3,818,646
Class R1 52,908 705,464 71,518 857,034
Class R2 53,475 729,082 30,646 390,301
Class R3 744,230 10,259,090 184,775 2,204,605
Class R4 698,866 9,689,352 4,993 56,122
Class R5 36,960 523,211 4,559 50,554
- -----------------------------------------------------------------------------------------------------------
260,294 $15,050,747 10,167,550 $121,017,931
(i) For the period from the class' inception, April 1, 2005 (Classes R1, R2, R4, and R5), through the stated
period end.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other affiliated funds have established
uncommitted borrowing arrangements with certain banks. Borrowings may be made
for temporary financing needs. Interest is charged to each fund, based on its
borrowings, generally 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 committed line of credit, is allocated among the participating funds at
the end of each calendar quarter. For the year ended October 31, 2006, the
fund's commitment fee and interest expense were $11,966 and $646, respectively,
and are included in miscellaneous expense on the Statement of Operations.
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, 2006, 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, 2006, by
correspondence with the Fund's 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, 2006, 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 21, 2006
TRUSTEES AND OFFICERS --
IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 1, 2006, 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(h) OTHER DIRECTORSHIPS(j)
- ------------------- ---------------- --------------- -----------------------------
INTERESTED TRUSTEES
Robert J. Manning(k) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment
Officer and Director
Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial Services
(born 8/08/46) Company, Chairman (since February
2004); 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 5/01/36) of Trustees Enterprises (diversified services
company), Chairman, Trustee and
Chief Executive Officer (until
November 2000)
Robert E. Butler(n) Trustee January 2006 Consultant - regulatory and
(born 11/29/41) compliance matters (since July
2002); PricewaterhouseCoopers LLP
(professional services firm),
Partner (November 2000 until June
2002)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 3/11/37) 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 5/30/42) 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 9/27/41) 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)
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys),
(born 6/23/35) Partner
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 9/23/38) (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 8/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
Robert W. Uek Trustee January 2006 Retired (since 1999);
(born 5/18/41) PricewaterhouseCoopers LLP
(professional services firm),
Partner (until 1999); Consultant
to investment company industry
(since 2000); TT International
Funds (mutual fund complex),
Trustee (2000 until 2005);
Hillview Investment Trust II Funds
(mutual fund complex), Trustee
(2000 until 2005)
OFFICERS
Maria F. Dwyer(k) 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(k) 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(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 1/18/74) and Assistant Clerk Company, Vice President and Senior
Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003)
Ethan D. Corey(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/21/63) and Assistant Clerk Company, Special Counsel (since
December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 8/10/68) Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (prior to
June 2005)
Timothy M. Fagan(k) Assistant Secretary September 2005 Massachusetts Financial Services
(born 7/10/68) and Assistant Clerk Company, Vice President and Senior
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(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 10/27/70) Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian E. Langenfeld(k) Assistant Secretary June 2006 Massachusetts Financial Services
(born 3/07/73) and Assistant Clerk Company, Assistant Vice President
and Counsel (since May 2006); John
Hancock Advisers, LLC, Assistant
Vice President and Counsel (May
2005 to April 2006); John Hancock
Advisers, LLC, Attorney and
Assistant Secretary (prior to May
2005)
Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial Services
(born 11/13/57) Company, Senior Vice President
Susan S. Newton(k) Assistant Secretary May 2005 Massachusetts Financial Services
(born 3/07/50) and Assistant Clerk Company, Senior Vice President and
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(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/05/70) and Assistant Clerk Company, Vice President and Senior
Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (prior to June 2004)
Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial Services
(born 5/01/52) Company, Executive Vice President,
General Counsel and Secretary
(since January 2006); Wilmer
Cutler Pickering Hale and Dorr LLP
(law firm), Partner (prior to
January 2006)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 3/07/44) Compliance Officer compliance services), Principal
(since June 2004); CRA Business
Strategies Group (consulting
services), Executive Vice
President (April 2003 to June
2004); David L. Babson & Co.
(investment adviser), Managing
Director, Chief Administrative
Officer and Director (prior to
March 2003)
James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial Services
(born 6/12/60) Company, Senior Vice President
- ------------
(h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(k) "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.
(n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant
retained by MFS pursuant to its settlement with the SEC concerning market timing and related matters. The
terms of that settlement required that compensation and expenses related to the independent compliance
consultant be borne exclusively by MFS and, therefore, MFS paid Mr. Butler for the services he rendered to
the independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of $351,119.29.
The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold a shareholders' meeting at
least once every five years thereafter, to elect Trustees.
Each Trustee (except Mr. Butler and Mr. Uek) 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. Butler, Sherratt and Uek and Ms. 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 January 1, 2006, the Trustees served as board members of 98 funds within the MFS
Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request by calling 1-800-225-2606.
- -------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIANS
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
JPMorgan 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
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, 2006 ("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, 2005 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 ("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 MFS peer funds, (iii) information provided
by MFS on the advisory fees of comparable portfolios of other clients of MFS,
including institutional separate accounts 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, 2005, which the Trustees believed was
a long enough period to reflect differing market conditions. The Fund's
performance was in the 1st quintile relative to the other funds in the
universe for this three-year period (the 1st quintile being the best
performers and the 5th quintile being the worst performers). The total return
performance of the Fund's Class A shares was in the 1st quintile for the one-
year period and the 2nd quintile for the five-year period ended December 31,
2005 relative to the Lipper performance universe. Because of the passage of
time, these performance results may 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
that MFS has agreed in writing to waive a portion of its advisory fee on
assets over $3 billion, which may not be changed without the Trustees'
approval. The Trustees also considered that, according to the Lipper data, the
Fund's effective advisory fee rate was approximately at the Lipper expense
group median and the total expense ratio was lower than 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 the breakpoint described above. 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 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, which may include 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, if applicable, to pay for investment research
(excluding third-party research, for which MFS pays directly), 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, 2006.
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available 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
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. 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)
The fund will notify shareholders of amounts for use in preparing 2006 income
tax forms in January 2007. The following information is provided pursuant to
provisions of the Internal Revenue Code.
The fund designates the maximum amount allowable as qualified dividend income
eligible for the 15% tax rate.
For corporate shareholders, 63.31% of the ordinary income dividends paid
during the fiscal year qualify for the corporate dividends received deduction.
MFS(R) PRIVACY NOTICE
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about the investment products and services that we
offer, and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal
information. We maintain information and records about you, your investments,
and the services you use. Examples of the nonpublic personal information we
maintain include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or
others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. We may share nonpublic
personal information with third parties or certain of our affiliates in
connection with servicing your account or processing your transactions. We may
share information with companies or financial institutions that perform
marketing services on our behalf or with other financial institutions with
which we have joint marketing arrangements, subject to any legal requirements.
Authorization to access your nonpublic personal information is limited to
appropriate personnel who provide products, services, or information to you.
We maintain physical, electronic, and procedural safeguards to help protect
the personal information we collect about you.
If you have any questions about the MFS privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA 02205-5824
1-800-637-8255
24 hours a day OVERNIGHT MAIL
MFS Service Center, Inc.
ACCOUNT SERVICE AND 500 Boylston Street
LITERATURE Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
M F S(R)
INVESTMENT MANAGEMENT
[graphic omitted]
Annual report
MFS(R) Global Equity Fund
LETTER FROM THE CEO 1
- --------------------------------------------------------------
PORTFOLIO COMPOSITION 2
- --------------------------------------------------------------
MANAGEMENT REVIEW 3
- --------------------------------------------------------------
PERFORMANCE SUMMARY 5
- --------------------------------------------------------------
EXPENSE TABLE 8
- --------------------------------------------------------------
PORTFOLIO OF INVESTMENTS 10
- --------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES 15
- --------------------------------------------------------------
STATEMENT OF OPERATIONS 18
- --------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS 20
- --------------------------------------------------------------
FINANCIAL HIGHLIGHTS 21
- --------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS 30
- --------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 40
- --------------------------------------------------------------
TRUSTEES AND OFFICERS 41
- --------------------------------------------------------------
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENT 47
- --------------------------------------------------------------
PROXY VOTING POLICIES AND INFORMATION 51
- --------------------------------------------------------------
QUARTERLY PORTFOLIO DISCLOSURE 51
- --------------------------------------------------------------
FEDERAL TAX INFORMATION 51
- --------------------------------------------------------------
MFS(R) PRIVACY NOTICE 52
- --------------------------------------------------------------
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.
- ---------------------------------------------------------------------------
NOT FDIC INSURED o MAY LOSE VALUE o
NO BANK OR CREDIT UNION GUARANTEE o NOT A DEPOSIT o
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR
NCUA/NCUSIF
- ---------------------------------------------------------------------------
10/31/06
LGE-ANN
[Photo of Robert J. Manning]
LETTER FROM THE CEO
Dear Shareholders:
What a difference a year can make. By the end of 2005, the Dow Jones
Industrial Average had lost value over the course of the year, as stocks were
beaten back by a myriad of investor worries, including a spike in oil prices,
a rise in interest rates, and political uncertainty in the Middle East.
Fast forward to 2006, and we have seen a dramatically different picture.
While there were some fluctuations in the global markets in the first half of
the year, the second half of 2006 has, so far, been good to many investors.
Oil prices retreated, boosting consumer confidence, and interest rates have
held steady. U.S. stock markets responded favorably to this news, as the Dow
reached a record high in October, passing the 12,000 mark.
What does all of this mean for you? If you're focused on a long-term
investment strategy, the high points in the road -- and the bumps -- should
not necessarily dictate portfolio action on your part. Markets are inherently
cyclical, and we firmly believe that investors who remain committed to a long-
term investment strategy are more likely to achieve their goals than those who
consistently chase short-term performance.
At MFS(R), our unique teamwork approach to managing money and our global
research platform support an unwavering focus on helping you realize your
long-term financial goals. We believe in a three-pronged investment strategy
of allocating your holdings across major asset classes, diversifying within
each class, and rebalancing regularly. Of course, these strategies cannot
guarantee a profit or protect against a loss. Investing and planning for the
long term require diligence and patience -- two traits that 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, 2006
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
PORTFOLIO COMPOSITION
PORTFOLIO STRUCTURE (i)
Stocks 98.5%
Cash & Other Net Assets 1.5%
TOP TEN HOLDINGS
Reckitt Benckiser PLC 3.6%
------------------------------------------------------
Johnson & Johnson 3.3%
------------------------------------------------------
Nestle S.A. 3.3%
------------------------------------------------------
American Express Co. 2.3%
------------------------------------------------------
L'Air Liquide S.A., Bearer Shares 2.2%
------------------------------------------------------
Roche Holding AG 2.2%
------------------------------------------------------
UBS AG 1.9%
------------------------------------------------------
Bank of New York Co., Inc. 1.9%
------------------------------------------------------
Diageo PLC 1.8%
------------------------------------------------------
AXA 1.7%
------------------------------------------------------
EQUITY SECTORS
Financial Services 20.6%
------------------------------------------------------
Consumer Staples 15.9%
------------------------------------------------------
Health Care 15.6%
------------------------------------------------------
Technology 8.4%
------------------------------------------------------
Retailing 7.2%
------------------------------------------------------
Leisure 6.3%
------------------------------------------------------
Basic Materials 6.1%
------------------------------------------------------
Energy 4.9%
------------------------------------------------------
Autos & Housing 4.5%
------------------------------------------------------
Industrial Goods & Services 3.7%
------------------------------------------------------
Utilities & Communications 3.5%
------------------------------------------------------
Special Products & Services 1.3%
------------------------------------------------------
Transportation 0.5%
------------------------------------------------------
COUNTRY WEIGHTINGS
United States 38.8%
------------------------------------------------------
France ` 14.8%
------------------------------------------------------
United Kingdom 12.8%
------------------------------------------------------
Switzerland 10.0%
------------------------------------------------------
Japan 8.3%
------------------------------------------------------
Germany 4.0%
------------------------------------------------------
Italy 2.1%
------------------------------------------------------
South Korea 1.6%
------------------------------------------------------
Netherlands 1.0%
------------------------------------------------------
Other Countries 6.6%
------------------------------------------------------
Percentages are based on net assets as of 10/31/06.
The portfolio is actively managed and current holdings may be different.
MANAGEMENT REVIEW
SUMMARY OF RESULTS
For the twelve months ended October 31, 2006, Class A shares of the MFS Global
Equity Fund provided a total return of 24.73%, at net asset value. This compares
with a return of 21.91% for the fund's benchmark, the MSCI World Index.
CONTRIBUTORS TO PERFORMANCE
Strong stock selection in the health care sector was the primary factor
generating outperformance. German pharmaceutical company Schering(g) and
scientific products and services provider Fisher Scientific International were
among the fund's top contributors over the period. Shares of Schering soared
after receiving acquisition offers from Merck and Bayer early in 2006
(Schering is in the process of being acquired by Bayer).
In the consumer staples sector, stock selection also helped. UK-based
household products manufacturer Reckitt Benckiser contributed to relative
returns as the company delivered strong sales growth over the period.
Although stock selection in the retailing sector added to relative performance,
no stocks within this sector were among the fund's top contributors.
Stock selection in the financial services and the utilities and communications
sectors also strengthened relative results. In financial services, investment
banking firm Goldman Sachs, Swiss wealth management firm Julius Baer Holding(c),
Italian banking firm UniCredito Italiano, and Swiss investment management and
banking firm UBS contributed to positive results. In utilities and
communications, our positioning in Spanish electric utility company Iberdrola(g)
bolstered the fund's results. Iberdrola benefited from merger speculation taking
place in the European utilities industry.
Stocks in other sectors that helped relative performance included Japanese video
game console maker Nintendo and printers and computer peripherals maker Canon.
During the reporting period, our currency exposure was a contributor to the
fund'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 portfolios to have different currency exposure than the benchmark.
DETRACTORS FROM PERFORMANCE
Stock selection in the basic materials sector held back relative performance.
Our holding in diversified materials company 3M Co. was among the fund's top
detractors. Although 3M stock was up for the period, it lagged the market, due
largely to slow sales and lower profitability in its optical films business,
which was the result of weaker demand for LCD screen displays and start-up
issues at a new plant.
Elsewhere in the fund, network security software company Symantec(c)(g),
direct-sale computer vendor Dell, chip giant Intel, and medical device maker
Medtronic also detracted from relative performance.
The fund's cash position was a detractor from relative performance. The fund
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,
David R. Mannheim Simon Todd
Portfolio Manager Portfolio Manager
(c) Security is not a benchmark constituent.
(g) Security was not held in the 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 portfolio. References to specific securities
are not recommendations of such securities, and may not be representative of any
MFS portfolio's current or future investments.
PERFORMANCE SUMMARY THROUGH 10/31/06
The following chart illustrates the historical performance of the fund's Class
A shares 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. The performance of other share classes will be greater
than or less than that of the class depicted below. Benchmark comparisons are
unmanaged; do not reflect sales charges, commissions or expenses; and cannot
be invested in directly. (See Notes to Performance Summary.)
PERFORMANCE DATA SHOWN REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF FUTURE
RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE FLUCTUATE SO YOUR SHARES, WHEN
SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER THAN QUOTED. FOR MOST RECENT MONTH-END PERFORMANCE, PLEASE
VISIT MFS.COM. (FOR THE MOST RECENT MONTH-END PERFORMANCE FOR CLASS I SHARES
CALL 1-800-343-2829. MOST RECENT MONTH-END PERFORMANCE FOR J SHARES CAN BE
OBTAINED BY CALLING CITIBANK N.A. AT 0120-322522.) 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 MSCI
Fund - Class A World Index
10/96 $ 9,425 $10,000
10/97 11,386 11,725
10/98 12,236 13,564
10/99 14,171 17,000
10/00 15,644 17,237
10/01 12,879 12,886
10/02 12,124 11,017
10/03 14,337 13,697
10/04 16,791 15,582
10/05 18,893 17,736
10/06 23,565 21,622
TOTAL RETURNS THROUGH 10/31/06
AVERAGE ANNUAL WITHOUT SALES CHARGE
Share class Class inception date 1-yr 5-yr 10-yr
- ----------------------------------------------------------------------------
A 9/07/93 24.73% 12.84% 9.60%
- ----------------------------------------------------------------------------
B 12/29/86 23.77% 11.99% 8.77%
- ----------------------------------------------------------------------------
C 1/03/94 23.84% 12.00% 8.77%
- ----------------------------------------------------------------------------
I 1/02/97 25.09% 13.13% 9.86%
- ----------------------------------------------------------------------------
J 7/09/99 23.88% 12.06% 8.83%
- ----------------------------------------------------------------------------
R 12/31/02 24.44% 12.62% 9.49%
- ----------------------------------------------------------------------------
R1 4/01/05 23.68% 11.95% 8.75%
- ----------------------------------------------------------------------------
R2 4/01/05 24.14% 12.07% 8.80%
- ----------------------------------------------------------------------------
R3 10/31/03 24.22% 12.19% 8.86%
- ----------------------------------------------------------------------------
R4 4/01/05 24.54% 12.79% 9.57%
- ----------------------------------------------------------------------------
R5 4/01/05 24.95% 12.90% 9.63%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL
Comparative benchmark
- ----------------------------------------------------------------------------
MSCI World Index (f) 21.91% 10.91% 8.02%
- ----------------------------------------------------------------------------
AVERAGE ANNUAL WITH SALES CHARGE
Share class
- ----------------------------------------------------------------------------
A 17.55% 11.52% 8.95%
With Initial Sales Charge (5.75%)
- ----------------------------------------------------------------------------
B 19.77% 11.74% 8.77%
With CDSC (Declining over six years
from 4% to 0%) (x)
- ----------------------------------------------------------------------------
C 22.84% 12.00% 8.77%
With CDSC (1% for 12 months) (x)
- ----------------------------------------------------------------------------
J 20.17% 11.38% 8.50%
With Initial Sales Charge (3.00%)
- ----------------------------------------------------------------------------
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.
CDSC - Contingent Deferred Sales Charge.
(f) Source: FactSet Research Systems Inc.
(x) Assuming redemption at the end of the applicable period.
INDEX DEFINITION
Morgan Stanley Capital International (MSCI) World Index - 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 J shares are available only to residents of Japan. Class R shares are
available only to existing Class R shareholders. 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 Classes 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, 2006 through
October 31, 2006.
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, 2006 through October 31,
2006.
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(p)
Share Expense Account Value Account Value 5/01/06-
Class Ratio 5/01/06 10/31/06 10/31/06
- --------------------------------------------------------------------------------
Actual 1.44% $1,000.00 $1,074.70 $7.53
A -------------------------------------------------------------------------
Hypothetical (h) 1.44% $1,000.00 $1,017.95 $7.32
- --------------------------------------------------------------------------------
Actual 2.19% $1,000.00 $1,070.60 $11.43
B -------------------------------------------------------------------------
Hypothetical (h) 2.19% $1,000.00 $1,014.17 $11.12
- --------------------------------------------------------------------------------
Actual 2.19% $1,000.00 $1,070.80 $11.43
C -------------------------------------------------------------------------
Hypothetical (h) 2.19% $1,000.00 $1,014.17 $11.12
- --------------------------------------------------------------------------------
Actual 1.19% $1,000.00 $1,076.30 $6.23
I -------------------------------------------------------------------------
Hypothetical (h) 1.19% $1,000.00 $1,019.21 $6.06
- --------------------------------------------------------------------------------
Actual 2.14% $1,000.00 $1,071.00 $11.17
J -------------------------------------------------------------------------
Hypothetical (h) 2.14% $1,000.00 $1,014.42 $10.87
- --------------------------------------------------------------------------------
Actual 1.69% $1,000.00 $1,073.70 $8.83
R -------------------------------------------------------------------------
Hypothetical (h) 1.69% $1,000.00 $1,016.69 $8.59
- --------------------------------------------------------------------------------
Actual 2.29% $1,000.00 $1,070.30 $11.95
R1 -------------------------------------------------------------------------
Hypothetical (h) 2.29% $1,000.00 $1,013.66 $11.62
- --------------------------------------------------------------------------------
Actual 1.93% $1,000.00 $1,072.30 $10.08
R2 -------------------------------------------------------------------------
Hypothetical (h) 1.93% $1,000.00 $1,015.48 $9.80
- --------------------------------------------------------------------------------
Actual 1.83% $1,000.00 $1,072.60 $9.56
R3 -------------------------------------------------------------------------
Hypothetical (h) 1.83% $1,000.00 $1,015.98 $9.30
- --------------------------------------------------------------------------------
Actual 1.63% $1,000.00 $1,073.80 $8.52
R4 -------------------------------------------------------------------------
Hypothetical (h) 1.63% $1,000.00 $1,016.99 $8.29
- --------------------------------------------------------------------------------
Actual 1.28% $1,000.00 $1,075.60 $6.70
R5 -------------------------------------------------------------------------
Hypothetical (h) 1.28% $1,000.00 $1,018.75 $6.51
- --------------------------------------------------------------------------------
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year. Expenses paid do not include any applicable sales charges (loads) or
redemption fees. If these transaction costs had been included, your costs
would have been higher.
PORTFOLIO OF INVESTMENTS
10/31/06
The Portfolio of Investments is a complete list of all securities owned by your
fund. It is categorized by broad-based asset classes.
Common Stocks - 98.5%
- ----------------------------------------------------------------------------------------------------
ISSUER SHARES/PAR VALUE ($)
- ----------------------------------------------------------------------------------------------------
Alcoholic Beverages - 2.7%
- ----------------------------------------------------------------------------------------------------
Diageo PLC 740,757 $ 13,707,830
Pernod Ricard S.A. (l) 33,810 6,772,359
--------------
$ 20,480,189
- ----------------------------------------------------------------------------------------------------
Apparel Manufacturers - 3.2%
- ----------------------------------------------------------------------------------------------------
LVMH Moet Hennessy Louis Vuitton S.A 116,830 $ 12,178,181
NIKE, Inc., "B" 134,570 12,364,292
--------------
$ 24,542,473
- ----------------------------------------------------------------------------------------------------
Automotive - 4.5%
- ----------------------------------------------------------------------------------------------------
Bayerische Motoren Werke AG 135,200 $ 7,767,139
Bridgestone Corp. (l) 275,500 5,748,664
Harley-Davidson, Inc. (l) 155,640 10,681,573
Toyota Motor Corp. 167,100 9,902,963
--------------
$ 34,100,339
- ----------------------------------------------------------------------------------------------------
Biotechnology - 1.7%
- ----------------------------------------------------------------------------------------------------
Actelion Ltd. (a)(l) 18,300 $ 3,083,732
Amgen, Inc. (a) 128,760 9,774,172
--------------
$ 12,857,904
- ----------------------------------------------------------------------------------------------------
Broadcasting - 4.0%
- ----------------------------------------------------------------------------------------------------
Viacom, Inc., "B" (a) 186,125 $ 7,243,985
Vivendi S.A 146,200 5,537,794
Walt Disney Co. 242,770 7,637,544
WPP Group PLC 758,800 9,720,633
--------------
$ 30,139,956
- ----------------------------------------------------------------------------------------------------
Brokerage & Asset Managers - 2.5%
- ----------------------------------------------------------------------------------------------------
Goldman Sachs Group, Inc. 60,800 $ 11,539,232
Julius Baer Holding Ltd. 72,714 7,685,196
--------------
$ 19,224,428
- ----------------------------------------------------------------------------------------------------
Business Services - 1.3%
- ----------------------------------------------------------------------------------------------------
Accenture Ltd., "A" 176,610 $ 5,812,235
DST Systems, Inc. (a) 63,970 3,952,706
--------------
$ 9,764,941
- ----------------------------------------------------------------------------------------------------
Chemicals - 2.4%
- ----------------------------------------------------------------------------------------------------
3M Co. 157,860 $ 12,445,682
Bayer AG 112,160 5,648,809
--------------
$ 18,094,491
- ----------------------------------------------------------------------------------------------------
Computer Software - 1.2%
- ----------------------------------------------------------------------------------------------------
Oracle Corp. (a) 512,150 $ 9,459,411
- ----------------------------------------------------------------------------------------------------
Computer Software - Systems - 0.7%
- ----------------------------------------------------------------------------------------------------
Dell, Inc. (a) 231,800 $ 5,639,694
- ----------------------------------------------------------------------------------------------------
Consumer Goods & Services - 8.7%
- ----------------------------------------------------------------------------------------------------
Alberto-Culver Co. 166,250 $ 8,447,163
Estee Lauder Cos., Inc., "A" 131,170 5,297,956
Henkel KGaA, IPS 42,200 5,654,143
Kao Corp. 279,000 7,324,839
L'Oreal S.A 57,740 5,616,990
Procter & Gamble Co. 104,264 6,609,295
Reckitt Benckiser PLC 629,920 27,411,443
--------------
$ 66,361,829
- ----------------------------------------------------------------------------------------------------
Electrical Equipment - 3.1%
- ----------------------------------------------------------------------------------------------------
Legrand S.A 119,470 $ 3,385,975
Nitto Denko Corp. (l) 66,600 3,798,880
Rockwell Automation, Inc. 84,300 5,226,600
Schneider Electric S.A 110,836 11,518,001
--------------
$ 23,929,456
- ----------------------------------------------------------------------------------------------------
Electronics - 5.9%
- ----------------------------------------------------------------------------------------------------
Canon, Inc. 177,300 $ 9,506,743
Intel Corp. 551,020 11,758,767
Nintendo Co. Ltd. 8,700 1,779,655
OMRON Corp. 141,200 3,646,676
Ricoh Co. Ltd. 296,000 5,847,351
Samsung Electronics Co. Ltd. 19,050 12,352,276
--------------
$ 44,891,468
- ----------------------------------------------------------------------------------------------------
Energy - Integrated - 4.9%
- ----------------------------------------------------------------------------------------------------
BP PLC 133,160 $ 1,481,029
Chevron Corp. 90,330 6,070,176
Exxon Mobil Corp. 133,470 9,532,427
Royal Dutch Shell PLC 214,300 7,427,863
TOTAL S.A 184,180 12,473,827
--------------
$ 36,985,322
- ----------------------------------------------------------------------------------------------------
Food & Beverages - 4.5%
- ----------------------------------------------------------------------------------------------------
General Mills, Inc. 67,940 $ 3,860,351
Nestle S.A 72,710 24,855,620
PepsiCo, Inc. 88,810 5,634,106
--------------
$ 34,350,077
- ----------------------------------------------------------------------------------------------------
Food & Drug Stores - 1.6%
- ----------------------------------------------------------------------------------------------------
Tesco PLC 1,596,616 $ 11,985,783
- ----------------------------------------------------------------------------------------------------
Gaming & Lodging - 2.3%
- ----------------------------------------------------------------------------------------------------
Harrah's Entertainment, Inc. 29,900 $ 2,222,467
Ladbrokes PLC 747,810 5,827,799
William Hill PLC 739,110 9,179,336
--------------
$ 17,229,602
- ----------------------------------------------------------------------------------------------------
General Merchandise - 1.2%
- ----------------------------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 190,040 $ 9,365,171
- ----------------------------------------------------------------------------------------------------
Insurance - 6.5%
- ----------------------------------------------------------------------------------------------------
AFLAC, Inc. 99,100 $ 4,451,572
Assicurazioni Generali S.p.A 218,210 8,660,984
AXA 336,770 12,833,633
Genworth Financial, Inc., "A" 238,670 7,981,125
Lincoln National Corp. 47,300 2,994,563
QBE Insurance Group Ltd. 181,050 3,463,738
Swiss Reinsurance Co. 115,368 9,465,141
--------------
$ 49,850,756
- ----------------------------------------------------------------------------------------------------
Machinery & Tools - 0.6%
- ----------------------------------------------------------------------------------------------------
Fanuc Ltd. 52,600 $ 4,565,699
- ----------------------------------------------------------------------------------------------------
Major Banks - 5.3%
- ----------------------------------------------------------------------------------------------------
Banca Intesa S.p.A. (l) 571,400 $ 3,907,083
Bank of New York Co., Inc. 414,290 14,239,147
Credit Agricole S.A 216,730 9,216,490
Erste Bank der oesterreichischen Sparkassen AG (l) 59,440 4,048,416
State Street Corp. 74,800 4,804,404
UniCredito Italiano S.p.A 457,880 3,797,253
--------------
$ 40,012,793
- ----------------------------------------------------------------------------------------------------
Medical Equipment - 4.2%
- ----------------------------------------------------------------------------------------------------
DENTSPLY International, Inc. 155,960 $ 4,878,429
Fisher Scientific International, Inc. (a) 120,190 10,290,668
Medtronic, Inc. 192,760 9,383,557
Waters Corp. (a) 156,800 7,808,640
--------------
$ 32,361,294
- ----------------------------------------------------------------------------------------------------
Natural Gas - Distribution - 1.0%
- ----------------------------------------------------------------------------------------------------
Gaz de France (l) 92,700 $ 3,727,882
Tokyo Gas Co. Ltd. 700,000 3,573,780
--------------
$ 7,301,662
- ----------------------------------------------------------------------------------------------------
Network & Telecom - 0.6%
- ----------------------------------------------------------------------------------------------------
Ericsson, Inc., "B" 1,128,280 $ 4,280,771
- ----------------------------------------------------------------------------------------------------
Other Banks & Diversified Financials - 6.3%
- ----------------------------------------------------------------------------------------------------
American Express Co. 303,280 $ 17,532,617
Banco Bilbao Vizcaya Argentaria S.A 173,880 4,199,936
Bangkok Bank Public Co. Ltd. 1,169,600 3,825,608
PT Bank Central Asia Tbk 5,630,000 2,878,766
Shinsei Bank Ltd. 800,000 4,617,950
UBS AG 245,657 14,681,130
--------------
$ 47,736,007
- ----------------------------------------------------------------------------------------------------
Pharmaceuticals - 9.7%
- ----------------------------------------------------------------------------------------------------
Eli Lilly & Co. 131,040 $ 7,339,550
GlaxoSmithKline PLC 469,780 12,547,112
Johnson & Johnson 373,510 25,174,574
Roche Holding AG 95,830 16,780,367
Sanofi-Aventis (l) 146,260 12,435,741
--------------
$ 74,277,344
- ----------------------------------------------------------------------------------------------------
Railroad & Shipping - 0.5%
- ----------------------------------------------------------------------------------------------------
Canadian National Railway Co. 87,656 $ 4,175,932
- ----------------------------------------------------------------------------------------------------
Specialty Chemicals - 3.7%
- ----------------------------------------------------------------------------------------------------
Asahi Glass Co. Ltd. (l) 276,000 $ 3,179,305
L'Air Liquide S.A., Bearer Shares 79,221 16,869,734
Praxair, Inc. 131,080 7,897,570
--------------
$ 27,946,609
- ----------------------------------------------------------------------------------------------------
Specialty Stores - 1.2%
- ----------------------------------------------------------------------------------------------------
Esprit Holdings Ltd. 381,500 $ 3,693,644
NEXT PLC 160,270 5,748,192
--------------
$ 9,441,836
- ----------------------------------------------------------------------------------------------------
Telecommunications - Wireless - 0.4%
- ----------------------------------------------------------------------------------------------------
Hutchison Telecommunications International Ltd. (a) 1,441,000 $ 2,775,501
- ----------------------------------------------------------------------------------------------------
Telephone Services - 0.6%
- ----------------------------------------------------------------------------------------------------
Singapore Telecommunications Ltd. 2,821,975 $ 4,798,969
- ----------------------------------------------------------------------------------------------------
Utilities - Electric Power - 1.5%
- ----------------------------------------------------------------------------------------------------
E.ON AG 95,040 $ 11,405,285
- ----------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (IDENTIFIED COST, $558,922,134) $ 750,332,992
- ----------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.4%
- ----------------------------------------------------------------------------------------------------
General Electric Co., 5.3%, due 11/01/06, at Amortized
Cost and Value (y) $ 10,946,000 $ 10,946,000
- ----------------------------------------------------------------------------------------------------
Collateral for Securities Loaned - 3.7%
- ----------------------------------------------------------------------------------------------------
Merrill Lynch Repurchase Agreement, 5.3025%,
dated 10/31/06, due 11/01/06, total to be
received $20,889,771 (secured by various U.S.
Treasury and Federal Agency obligations and
Mortgage Backed securities in an individually
traded account), at Cost $ 20,886,695 $ 20,886,695
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 7,613,133 7,613,133
- ----------------------------------------------------------------------------------------------------
TOTAL COLLATERAL FOR SECURITIES LOANED $ 28,499,828
- ----------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $598,367,962) $ 789,778,820
- ----------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (3.6)% (27,732,606)
- ----------------------------------------------------------------------------------------------------
NET ASSETS - 100.0% $ 762,046,214
- ----------------------------------------------------------------------------------------------------
(a) Non-income producing security.
(l) All or a portion of this security is on loan.
(y) The rate shown represents an annualized yield at time of purchase.
The following abbreviation is used in this report and is defined:
IPS International Preference Stock
Financial Statements
STATEMENT OF ASSETS AND LIABILITIES
At 10/31/06
This statement represents your fund's balance sheet, which details the assets and liabilities comprising
the total value of the fund.
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at value, including $27,324,896 of securities on
loan (identified cost, $598,367,962) $789,778,820
Cash 159,295
Foreign currency, at value (identified cost, $7,549) 7,755
Receivable for investments sold 9,887,444
Receivable for fund shares sold 1,487,070
Interest and dividends receivable 869,846
- ------------------------------------------------------------------------------------------------------
Total assets $802,190,230
- ------------------------------------------------------------------------------------------------------
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Payable for investments purchased $9,129,474
Payable for fund shares reacquired 1,846,426
Collateral for securities loaned, at value 28,499,828
Payable to affiliates
Management fee 37,367
Shareholder servicing costs 86,855
Distribution and service fees 18,022
Administrative services fee 775
Retirement plan administration and services fees 157
Payable for independent trustees' compensation 58,601
Accrued expenses and other liabilities 466,511
- ------------------------------------------------------------------------------------------------------
Total liabilities $40,144,016
- ------------------------------------------------------------------------------------------------------
Net assets $762,046,214
- ------------------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
- ------------------------------------------------------------------------------------------------------
Paid-in capital $477,313,511
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies 191,418,528
Accumulated net realized gain (loss) on investments and foreign
currency transactions 82,631,610
Undistributed net investment income 10,682,565
- ------------------------------------------------------------------------------------------------------
Net assets $762,046,214
- ------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding 25,140,727
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class A shares
- ------------------------------------------------------------------------------------------------------
Net assets $465,394,345
Shares outstanding 15,117,569
- ------------------------------------------------------------------------------------------------------
Net asset value per share $30.78
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/94.25Xnet asset value per share) $32.66
- ------------------------------------------------------------------------------------------------------
Class B shares
- ------------------------------------------------------------------------------------------------------
Net assets $139,655,669
Shares outstanding 4,795,326
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $29.12
- ------------------------------------------------------------------------------------------------------
Class C shares
- ------------------------------------------------------------------------------------------------------
Net assets $41,350,521
Shares outstanding 1,446,991
- ------------------------------------------------------------------------------------------------------
Net asset value and offering price per share $28.58
- ------------------------------------------------------------------------------------------------------
Class I shares
- ------------------------------------------------------------------------------------------------------
Net assets $63,713,699
Shares outstanding 2,034,548
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $31.32
- ------------------------------------------------------------------------------------------------------
Class J shares
- ------------------------------------------------------------------------------------------------------
Net assets $20,831,553
Shares outstanding 723,369
- ------------------------------------------------------------------------------------------------------
Net asset value and redemption price per share $28.80
- ------------------------------------------------------------------------------------------------------
Offering price per share (100/97.00Xnet asset value per share) $29.69
- ------------------------------------------------------------------------------------------------------
Class R shares
- ------------------------------------------------------------------------------------------------------
Net assets $13,909,218
Shares outstanding 456,676
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $30.46
- ------------------------------------------------------------------------------------------------------
Class R1 shares
- ------------------------------------------------------------------------------------------------------
Net assets $1,348,027
Shares outstanding 46,388
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $29.06
- ------------------------------------------------------------------------------------------------------
Statement of Assets and Liabilities - continued
Class R2 shares
- ------------------------------------------------------------------------------------------------------
Net assets $574,814
Shares outstanding 19,670
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $29.22
- ------------------------------------------------------------------------------------------------------
Class R3 shares
- ------------------------------------------------------------------------------------------------------
Net assets $6,500,859
Shares outstanding 214,742
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $30.27
- ------------------------------------------------------------------------------------------------------
Class R4 shares
- ------------------------------------------------------------------------------------------------------
Net assets $8,702,757
Shares outstanding 283,350
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $30.71
- ------------------------------------------------------------------------------------------------------
Class R5 shares
- ------------------------------------------------------------------------------------------------------
Net assets $64,752
Shares outstanding 2,098
- ------------------------------------------------------------------------------------------------------
Net asset value, offering price, and redemption price per share $30.86
- ------------------------------------------------------------------------------------------------------
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
Year ended 10/31/06
This statement describes how much your fund earned in investment income and accrued in expenses.
It also describes any gains and/or losses generated by fund operations.
NET INVESTMENT INCOME
- ------------------------------------------------------------------------------------------------------
Income
Dividends $22,785,407
Interest 676,852
Foreign taxes withheld (992,604)
- ------------------------------------------------------------------------------------------------------
Total investment income $22,469,655
- ------------------------------------------------------------------------------------------------------
Expenses
Management fee $6,395,172
Distribution and service fees 3,217,863
Shareholder servicing costs 1,123,201
Administrative services fee 112,311
Retirement plan administration and services fees 21,728
Independent trustees' compensation 27,556
Custodian fee 534,679
Shareholder communications 86,126
Auditing fees 50,085
Legal fees 25,508
Miscellaneous 168,975
- ------------------------------------------------------------------------------------------------------
Total expenses $11,763,204
- ------------------------------------------------------------------------------------------------------
Fees paid indirectly (64,261)
Reduction of expenses by investment adviser (10,180)
- ------------------------------------------------------------------------------------------------------
Net expenses $11,688,763
- ------------------------------------------------------------------------------------------------------
Net investment income $10,780,892
- ------------------------------------------------------------------------------------------------------
Statement of Operations - continued
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
- ------------------------------------------------------------------------------------------------------
Realized gain (loss) (identified cost basis)
Investment transactions $96,431,871
Foreign currency transactions (30,630)
- ------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments and foreign
currency transactions $96,401,241
- ------------------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)
Investments $47,897,081
Translation of assets and liabilities in foreign currencies 24,826
- ------------------------------------------------------------------------------------------------------
Net unrealized gain (loss) on investments and foreign
currency translation $47,921,907
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments and
foreign currency $144,323,148
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $155,104,040
- ------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Statements
STATEMENTS OF CHANGES IN NET ASSETS
These statements describe the increases and/or decreases in net assets resulting from operations, any
distributions, and any shareholder transactions.
YEARS ENDED 10/31
----------------------------------
2006 2005
CHANGE IN NET ASSETS
FROM OPERATIONS
- ------------------------------------------------------------------------------------------------------
Net investment income (loss) $10,780,892 $(105,392)
Net realized gain (loss) on investments and foreign
currency transactions 96,401,241 79,054,536
Net unrealized gain (loss) on investments and foreign
currency translation 47,921,907 (1,606,833)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations $155,104,040 $77,342,311
- ------------------------------------------------------------------------------------------------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ------------------------------------------------------------------------------------------------------
From net investment income
Class I $-- $(82,625)
Class R -- (1,632)
From net realized gain on investments and foreign
currency transactions
Class A (18,099,702) --
Class B (6,962,364) --
Class C (1,607,519) --
Class I (1,898,929) --
Class J (882,139) --
Class R (585,544) --
Class R1 (31,501) --
Class R2 (8,875) --
Class R3 (159,137) --
Class R4 (4,035) --
Class R5 (2,344) --
- ------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(30,242,089) $(84,257)
- ------------------------------------------------------------------------------------------------------
Change in net assets from fund share transactions $(25,725,538) $(53,926,243)
- ------------------------------------------------------------------------------------------------------
Redemption fees $-- $3,282
- ------------------------------------------------------------------------------------------------------
Total change in net assets $99,136,413 $23,335,093
- ------------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
At beginning of period 662,909,801 639,574,708
At end of period (including undistributed net investment
income of $10,682,565 and accumulated distributions in
excess of net investment income of $67,697) $762,046,214 $662,909,801
- ------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $25.79 $22.92 $19.57 $16.55 $17.58
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.48 $0.06 $0.07 $0.03 $(0.00)(w)
Net realized and unrealized gain
(loss) on investments and
foreign currency 5.68 2.81 3.28 2.99 (1.03)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $6.16 $2.87 $3.35 $3.02 $(1.03)
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
From net realized gain on
investments and foreign currency
transactions $(1.17) $-- $-- $-- $--
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $30.78 $25.79 $22.92 $19.57 $16.55
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 24.73 12.52 17.12(b) 18.25 (5.86)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions(f) 1.45 1.55 1.52 1.65 1.62
Expenses after expense reductions (f) 1.45 1.55 1.52 N/A N/A
Net investment income (loss) 1.72 0.22 0.30 0.19 (0.02)
Portfolio turnover 39 39 41 52 52
Net assets at end of period
(000 Omitted) $465,394 $402,985 $368,514 $345,783 $322,006
- -------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS B YEARS ENDED 10/31
------------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $24.64 $22.06 $18.97 $16.18 $17.31
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.27 $(0.13) $(0.10) $(0.09) $(0.14)
Net realized and unrealized gain (loss)
on investments and foreign currency 5.38 2.71 3.19 2.88 (0.99)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $5.65 $2.58 $3.09 $2.79 $(1.13)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments
and foreign currency transactions $(1.17) $-- $-- $-- $--
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $29.12 $24.64 $22.06 $18.97 $16.18
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 23.77 11.70 16.29(b) 17.24 (6.53)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.20 2.30 2.27 2.40 2.37
Expenses after expense reductions (f) 2.20 2.30 2.27 N/A N/A
Net investment income (loss) 1.02 (0.53) (0.45) (0.56) (0.79)
Portfolio turnover 39 39 41 52 52
Net assets at end of period (000 Omitted) $139,656 $148,434 $170,783 $177,713 $172,094
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS C YEARS ENDED 10/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $24.19 $21.66 $18.63 $15.89 $17.00
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.25 $(0.12) $(0.09) $(0.09) $(0.14)
Net realized and unrealized gain (loss) on
investments and foreign currency 5.31 2.65 3.12 2.83 (0.97)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $5.56 $2.53 $3.03 $2.74 $(1.11)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.17) $-- $-- $-- $--
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $28.58 $24.19 $21.66 $18.63 $15.89
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 23.84 11.68 16.26(b) 17.24 (6.53)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.20 2.30 2.27 2.40 2.37
Expenses after expense reductions (f) 2.20 2.30 2.27 N/A N/A
Net investment income (loss) 0.96 (0.53) (0.45) (0.56) (0.78)
Portfolio turnover 39 39 41 52 52
Net assets at end of period (000 Omitted) $41,351 $33,975 $32,785 $33,253 $31,594
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS I YEARS ENDED 10/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $26.15 $23.23 $19.78 $16.70 $17.69
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.56 $0.12 $0.12 $0.09 $0.04
Net realized and unrealized gain (loss) on
investments and foreign currency 5.78 2.85 3.33 2.99 (1.03)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $6.34 $2.97 $3.45 $3.08 $(0.99)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net investment income $-- $(0.05) $-- $-- $--
From net realized gain on investments and
foreign currency transactions (1.17) -- -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.17) $(0.05) $-- $-- $--
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $31.32 $26.15 $23.23 $19.78 $16.70
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 25.09 12.79 17.44(b) 18.44 (5.60)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.20 1.30 1.26 1.40 1.37
Expenses after expense reductions (f) 1.20 1.30 1.26 N/A N/A
Net investment income 1.95 0.47 0.53 0.54 0.23
Portfolio turnover 39 39 41 52 52
Net assets at end of period (000 Omitted) $63,714 $41,493 $37,781 $22,467 $2,325
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS J YEARS ENDED 10/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
Net asset value, beginning of period $24.36 $21.80 $18.74 $15.97 $17.08
- --------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS
- --------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.24 $(0.11) $(0.08) $(0.09) $(0.13)
Net realized and unrealized gain (loss) on
investments and foreign currency 5.37 2.67 3.14 2.86 (0.98)
- --------------------------------------------------------------------------------------------------------------------------
Total from investment operations $5.61 $2.56 $3.06 $2.77 $(1.11)
- --------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED
TO SHAREHOLDERS
- --------------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and
foreign currency transactions $(1.17) $-- $-- $-- $--
- --------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $28.80 $24.36 $21.80 $18.74 $15.97
- --------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s)(t) 23.88 11.74 16.33(b) 17.35 (6.50)
- --------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- --------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.15 2.25 2.22 2.34 2.32
Expenses after expense reductions (f) 2.15 2.25 2.22 N/A N/A
Net investment income (loss) 0.93 (0.47) (0.39) (0.53) (0.73)
Portfolio turnover 39 39 41 52 52
Net assets at end of period (000 Omitted) $20,832 $19,136 $23,188 $24,701 $17,215
- --------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R YEARS ENDED 10/31
-------------------------------------------------------------
2006 2005 2004 2003(i)
Net asset value, beginning of period $25.59 $22.80 $19.51 $16.57
- -------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.40 $(0.01) $0.01 $(0.05)
Net realized and unrealized gain (loss) on investments
and foreign currency 5.64 2.81 3.28 2.99
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations $6.04 $2.80 $3.29 $2.94
- -------------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------------------
From net investment income $-- $(0.01) $-- $--
From net realized gain on investments and foreign
currency transactions (1.17) -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Total distributions declared to shareholders $(1.17) $(0.01) $-- $--
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $30.46 $25.59 $22.80 $19.51
- -------------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 24.44 12.26 16.86(b) 17.74(n)
- -------------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS)
AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.70 1.81 1.76 1.83(a)
Expenses after expense reductions (f) 1.70 1.81 1.76 N/A
Net investment income (loss) 1.45 (0.03) 0.06 (0.29)(a)
Portfolio turnover 39 39 41 52
Net assets at end of period (000 Omitted) $13,909 $12,862 $5,994 $1,265
- -------------------------------------------------------------------------------------------------------------------------
CLASS R1 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $24.61 $23.89
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.21 $(0.15)
Net realized and unrealized gain (loss) on investments and foreign
currency 5.41 0.87(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $5.62 $0.72
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.17) $--
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $29.06 $24.61
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 23.68 3.01(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.40 2.50(a)
Expenses after expense reductions (f) 2.30 2.47(a)
Net investment income (loss) 0.78 (1.06)(a)
Portfolio turnover 39 39
Net assets at end of period (000 Omitted) $1,348 $672
- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R2 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $24.65 $23.89
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.33 $(0.07)
Net realized and unrealized gain (loss) on investments and foreign
currency 5.41 0.83(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $5.74 $0.76
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.17) $--
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $29.22 $24.65
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 24.14 3.18(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 2.09 2.21(a)
Expenses after expense reductions (f) 1.94 2.17(a)
Net investment income (loss) 1.20 (0.56)(a)
Portfolio turnover 39 39
Net assets at end of period (000 Omitted) $575 $185
- -------------------------------------------------------------------------------------------------------------
CLASS R3 YEARS ENDED 10/31
-----------------------------------------------
2006 2005 2004
Net asset value, beginning of period $25.48 $22.76 $19.51
- ---------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- ---------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (d) $0.39 $(0.06) $(0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency 5.57 2.78 3.28
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations $5.96 $2.72 $3.25
- ---------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign
currency transactions $(1.17) $-- $--
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $30.27 $25.48 $22.76
- ---------------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 24.22 11.95 16.66(b)
- ---------------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- ---------------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.94 2.06 2.00
Expenses after expense reductions (f) 1.84 2.05 2.00
Net investment income (loss) 1.42 (0.25) (0.15)
Portfolio turnover 39 39 41
Net assets at end of period (000 Omitted) $6,501 $3,032 $530
- ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
Financial Highlights - continued
CLASS R4 YEARS ENDED 10/31
-------------------------------
2006 2005(i)
Net asset value, beginning of period $25.77 $24.90
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.04 $0.02
Net realized and unrealized gain (loss) on investments and foreign
currency 6.07 0.85(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $6.11 $0.87
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.17) $--
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $30.71 $25.77
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 24.54 3.49(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.63 1.73(a)
Expenses after expense reductions (f) 1.63 1.73(a)
Net investment income 0.14 0.13(a)
Portfolio turnover 39 39
Net assets at end of period (000 Omitted) $8,703 $84
- -------------------------------------------------------------------------------------------------------------
CLASS R5 YEARS ENDED 10/31
--------------------------------
2006 2005(i)
Net asset value, beginning of period $25.81 $24.90
- -------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM INVESTMENT OPERATIONS
- -------------------------------------------------------------------------------------------------------------
Net investment income (d) $0.53 $0.08
Net realized and unrealized gain (loss) on investments and foreign
currency 5.69 0.83(g)
- -------------------------------------------------------------------------------------------------------------
Total from investment operations $6.22 $0.91
- -------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS DECLARED TO SHAREHOLDERS
- -------------------------------------------------------------------------------------------------------------
From net realized gain on investments and foreign currency transactions $(1.17) $--
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $30.86 $25.81
- -------------------------------------------------------------------------------------------------------------
Total return (%) (r)(s) 24.95 3.65(n)
- -------------------------------------------------------------------------------------------------------------
RATIOS (%) (TO AVERAGE NET ASSETS) AND SUPPLEMENTAL DATA:
- -------------------------------------------------------------------------------------------------------------
Expenses before expense reductions (f) 1.29 1.44(a)
Expenses after expense reductions (f) 1.29 1.44(a)
Net investment income 1.88 0.54(a)
Portfolio turnover 39 39
Net assets at end of period (000 Omitted) $65 $52
- -------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS
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.
(a) Annualized.
(b) 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.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(g) 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 per share amount of realized and unrealized gains
and losses at such time.
(i) 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.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the fund may receive proceeds from litigation settlements, without which performance
would be lower.
(t) Total returns do not include any applicable sales charges.
(w) Per share amount was less than $0.01.
SEE NOTES TO FINANCIAL STATEMENTS
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
MFS Global Equity Fund (the fund) is a 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, are generally valued at the last sale or official closing price as
reported by an independent pricing service on the market or exchange on which
they are primarily traded. For securities for which there were no sales reported
that day, equity securities are generally valued at the last quoted daily bid
quotation as reported by an independent pricing service on the market or
exchange on which they are primarily traded. Short-term instruments with a
maturity at issuance of 60 days or less may be valued at amortized cost, which
approximates market value. Open-end investment companies are generally valued at
their net asset value per share. Securities and other assets generally valued on
the basis of information from an independent pricing service may also be valued
at a broker-dealer bid quotation. The values of foreign securities and other
assets and liabilities expressed in foreign currencies are converted to U.S.
dollars using the mean of bid and asked prices for rates reported by an
independent pricing service. The Board of Trustees has delegated primary
responsibility for determining or causing to be determined the value of the
fund's investments (including any fair valuation) to the adviser pursuant to
valuation policies and procedures approved by the Board. If the adviser
determines that reliable market quotations are not readily available,
investments are valued at fair value as determined in good faith by the adviser
in accordance with such procedures under the oversight of the Board of Trustees.
Under the fund's valuation policies and procedures, market quotations are not
considered to be readily available for many types of debt instruments. These
investments are generally valued at fair value based on information from
independent pricing services. The adviser may rely on independent pricing
services or other information (such as the correlation with price movements of
similar securities in the same or other markets; the type, cost and investment
characteristics of the security; the business and financial condition of the
issuer; and trading and other market data) to assist in determining whether to
fair value and at what value to fair value an investment. The value of an
investment for purposes of calculating the fund's net asset value can differ
depending on the source and method used to determine value. When fair valuation
is used, the value of investments used to determine the fund's net asset value
may differ from quoted or published prices for the same investments. In
addition, investments may be valued at fair value if the adviser determines that
an investment's value has been materially affected by events occurring after the
close of the exchange or market on which the investment is principally traded
(such as foreign exchange or market) and prior to the determination of the
fund's net asset value, or after the halting of trading of a specific security
where trading does not resume prior to the close of the exchange or market on
which the security is principally traded. Events that occur on a frequent basis
after foreign markets close (such as developments in foreign markets and
significant movements in the U.S. markets) and prior to the determination of the
fund's net asset value may be deemed to have a material affect on the value of
securities traded in foreign markets. Accordingly, the fund's foreign equity
securities may often be valued at fair value. In September 2006, FASB Statement
No. 157, Fair Value Measurements (the "Statement") was issued, and is effective
for fiscal years beginning after November 15, 2007 and for all interim periods
within those fiscal years. This Statement provides a single definition of fair
value, a hierarchy for measuring fair value and expanded disclosures about fair
value measurements. Management is evaluating the application of the Statement to
the fund, and believes the impact will be limited to expanded disclosures
resulting from the adoption of this Statement in the fund's financial
statements.
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
JPMorgan 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.
INDEMNIFICATIONS - Under the fund's organizational documents, its officers and
trustees may be indemnified against certain liabilities and expenses arising out
of the performance of their duties to the fund. Additionally, in the normal
course of business, the fund enters into agreements with service providers that
may contain indemnification clauses. The fund's maximum exposure under these
agreements is unknown as this would involve future claims that may be made
against the fund that have not yet occurred.
SHORT TERM FEES - 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. 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.
Certain dividends from foreign securities will be recorded when the fund is
informed of the dividend if such information is obtained subsequent to 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, 2006, the fund's custodian fees
were reduced by $62,791 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, 2006, the fund's custodian expenses were
reduced by $1,470 under this agreement. These amounts are shown as a reduction
of total expenses on the Statement of Operations. Effective
January 1, 2006, the commission recapture agreement was terminated.
TAX MATTERS AND DISTRIBUTIONS - The fund intends to qualify as a regulated
investment company, as defined under Subchapter M of the Internal Revenue
Code, and to distribute all of its taxable income, including realized capital
gains. Accordingly, no provision for federal income tax is required in the
financial statements. Foreign taxes, if any, have been accrued by the fund in
the accompanying financial statements.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from U.S. generally accepted accounting
principles. Certain capital accounts in the financial statements are
periodically adjusted for permanent differences in order to reflect their tax
character. These adjustments have no impact on net assets or net asset value
per share. Temporary differences which arise from recognizing certain items of
income, expense, gain or loss in different periods for financial statement and
tax purposes will reverse at some time in the future. Distributions in excess
of net investment income or net realized gains are temporary overdistributions
for financial statement purposes resulting from differences in the recognition
or classification of income or distributions for financial statement and
tax purposes.
Book/tax differences primarily relate to wash sale loss deferrals and treating
a portion of the proceeds from redemptions as a distribution for tax purposes.
The tax character of distributions declared to shareholders is as follows:
10/31/06 10/31/05
Ordinary income (including any short-term
capital gains) $-- $84,257
Long-term capital gain $30,242,089 $--
The federal tax cost and the tax basis components of distributable earnings
were as follows:
AS OF 10/31/06
Cost of investments $598,629,642
---------------------------------------------------------
Gross appreciation $204,965,889
Gross depreciation (13,816,711)
---------------------------------------------------------
Net unrealized appreciation (depreciation) $191,149,178
Undistributed ordinary income 20,848,052
Undistributed long-term capital gai 72,803,437
Other temporary differences (67,964)
In June 2006, FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (the "Interpretation") was issued, and is effective for fiscal years
beginning after December 15, 2006 and is to be applied to all open tax years
as of the effective date. This Interpretation prescribes a minimum threshold
for financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management is evaluating the application of the Interpretation to
the fund, and has not at this time determined the impact, if any, resulting
from the adoption of this Interpretation on the fund's financial statements.
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
management and related administrative services and facilities to the fund.
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, 2006 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 $45,750 for the year ended October 31, 2006, 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 and another component of the plan is a
service fee paid to MFD. MFD may subsequently pay all, or a portion, of the
distribution and/or service fees to financial intermediaries.
Distribution Fee Plan Table:
TOTAL ANNUAL DISTRIBUTION
DISTRIBUTION SERVICE DISTRIBUTION EFFECTIVE AND SERVICE
FEE RATE FEE RATE PLAN(d) RATE(e) FEE
Class A 0.10% 0.25% 0.35% 0.25% $1,082,168
Class B 0.75% 0.25% 1.00% 1.00% 1,464,214
Class C 0.75% 0.25% 1.00% 1.00% 367,071
Class J (f) 0.70% 0.25% 0.95% 0.95% 197,864
Class R 0.25% 0.25% 0.50% 0.50% 67,197
Class R1 0.50% 0.25% 0.75% 0.75% 6,810
Class R2 0.25% 0.25% 0.50% 0.50% 2,101
Class R3 0.25% 0.25% 0.50% 0.50% 23,596
Class R4 -- 0.25% 0.25% 0.25% 6,842
- -----------------------------------------------------------------------------------------------------------------------
Total Distribution and Service Fees $3,217,863
(d) 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.
(e) The annual effective rates represent actual fees incurred under the
distribution plan for the year ended October 31, 2006 based on each class'
average daily net assets. Payment of the 0.10% annual Class A distribution
fee is not yet in effect and will be implemented on such date as the
fund's Board of Trustees may determine.
(f) Includes fees that MFD pays to financial intermediaries and for services
rendered as the fund's agent company in Japan.
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. All contingent
deferred sales charges are paid to MFD and during the year ended October 31,
2006, were as follows:
AMOUNT
Class A $29,210
Class B 109,822
Class C 1,754
SHAREHOLDER SERVICING AGENT - MFS Service Center, Inc. (MFSC), a wholly-owned
subsidiary of MFS, receives a fee from the fund for its services as
shareholder servicing agent calculated as a percentage of the average net
assets of the fund as determined periodically under the supervision of the
fund's Board of Trustees. For the year ended October 31, 2006, the fee was
$676,181, which equated to 0.0951% 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, 2006, these costs amounted to $209,799. The fund may also pay
shareholder servicing related costs to non-related parties.
ADMINISTRATOR - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to the fund. Under
an administrative services agreement, the fund partially reimburses MFS the
costs incurred to provide these services. The fund is charged a fixed amount
plus a fee based on calendar year average net assets. From July 1, 2005 through
March 31, 2006, the fund's annual fixed amount was $10,000. Effective April 1,
2006, the fund's annual fixed amount is $17,500. The administrative services fee
incurred for the year ended October 31, 2006 was equivalent to an annual
effective rate of 0.0158% 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 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. MFS may subsequently
pay all, or a portion, of the retirement plan administration and services fee
to affiliated or unaffiliated third parties. For the year ended October 31,
2006, the fund paid MFS an annual retirement plan administration and services
fee up to the following annual percentage rates of each class' average daily
net assets:
ANNUAL
EFFECTIVE TOTAL
FEE RATE RATE(g) AMOUNT
Class R1 0.45% 0.35% $4,086
Class R2 0.40% 0.25% 1,681
Class R3 0.25% 0.15% 11,798
Class R4 0.15% 0.15% 4,105
Class R5 0.10% 0.10% 58
- --------------------------------------------------------------------------------
Total Retirement Plan Administration and
Services Fees $21,728
(g) Effective October 1, 2005, MFS has agreed in writing to waive a portion of
the retirement plan administration and services fee equal to 0.10% for
Class R1 shares, 0.15% for Class R2 shares, and 0.10% for Class R3 shares.
This agreement will continue until at least September 30, 2008. For the
year ended October 31, 2006, this waiver amounted to $6,257 and is
reflected as a reduction of total expenses in the Statement of Operations.
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 or officers of the fund who are also
officers of the investment adviser, 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 certain retired independent
trustees which resulted in a pension expense of $4,074. The fund also has an
unfunded retirement benefit deferral plan for certain independent trustees
which resulted in an expense of $3,489. Both amounts are included in
independent trustees' compensation for the year ended October 31, 2006. The
deferred liability for retirement benefits payable to certain independent
trustees under both plans amounted to $56,359 at October 31, 2006, and is
included in payable for independent trustees' compensation.
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. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement. For the year ended October 31, 2006, the fee paid to Tarantino LLC
was $4,403. MFS has agreed to reimburse the fund for a portion of the payments
made by the funds to Tarantino LLC in the amount of $3,923, 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.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, aggregated
$275,637,190 and $328,119,657, respectively.
(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 YEAR ENDED
10/31/06 10/31/05(i)
SHARES AMOUNT SHARES AMOUNT
Shares sold
Class A 4,014,938 $112,614,919 4,169,984 $104,075,188
Class B 1,117,767 29,668,548 1,261,711 30,176,056
Class C 334,540 8,801,328 291,873 6,844,927
Class I 740,812 21,189,033 610,393 15,444,916
Class J 406,812 10,632,135 214,359 5,101,163
Class R 130,060 3,590,592 418,220 10,252,746
Class R1 24,270 651,059 28,959 704,849
Class R2 14,979 394,125 8,005 193,992
Class R3 194,822 5,377,457 126,604 3,177,335
Class R4 334,485 9,358,083 3,277 83,356
Class R5 3 75 2,008 50,000
- ----------------------------------------------------------------------------------------------------------
7,313,488 $202,277,354 7,135,393 $176,104,528
Shares issued to shareholders in
reinvestment of distributions
Class A 665,004 $17,230,263 -- $--
Class B 259,668 6,406,014 -- --
Class C 59,990 1,452,354 -- --
Class I 72,189 1,898,578 3,322 82,567
Class J 104 2,514 -- --
Class R 22,642 581,662 67 1,642
Class R1 1,278 31,501 -- --
Class R2 359 8,875 -- --
Class R3 6,224 159,128 -- --
Class R4 154 4,035 -- --
Class R5 90 2,344 -- --
- ----------------------------------------------------------------------------------------------------------
1,087,702 $27,777,268 3,389 $84,209
Shares reacquired
Class A (5,186,638) $(144,690,837) (4,622,434) $(115,713,383)
Class B (2,607,195) (69,055,673) (2,978,747) (71,428,594)
Class C (351,895) (9,109,603) (400,975) (9,447,612)
Class I (364,947) (10,359,697) (653,604) (16,583,343)
Class J (469,057) (12,408,367) (492,373) (11,644,337)
Class R (198,638) (5,485,858) (178,523) (4,464,506)
Class R1 (6,472) (168,490) (1,647) (40,727)
Class R2 (3,184) (88,631) (489) (12,251)
Class R3 (105,297) (2,850,074) (30,917) (780,227)
Class R4 (54,566) (1,562,853) -- --
Class R5 (3) (77) -- --
- ----------------------------------------------------------------------------------------------------------
(9,347,892) $(255,780,160) (9,359,709) $(230,114,980)
Net change
Class A (506,696) $(14,845,655) (452,450) $(11,638,195)
Class B (1,229,760) (32,981,111) (1,717,036) (41,252,538)
Class C 42,635 1,144,079 (109,102) (2,602,685)
Class I 448,054 12,727,914 (39,889) (1,055,860)
Class J (62,141) (1,773,718) (278,014) (6,543,174)
Class R (45,936) (1,313,604) 239,764 5,789,882
Class R1 19,076 514,070 27,312 664,122
Class R2 12,154 314,369 7,516 181,741
Class R3 95,749 2,686,511 95,687 2,397,108
Class R4 280,073 7,799,265 3,277 83,356
Class R5 90 2,342 2,008 50,000
- ----------------------------------------------------------------------------------------------------------
(946,702) $(25,725,538) (2,220,927) $(53,926,243)
(i) For the period from the class' inception, April 1, 2005 (Classes R1, R2, R4, and R5), through the stated
period end.
(6) LINE OF CREDIT
The fund and other affiliated funds participate in a $1 billion unsecured
committed line of credit provided by a syndication of banks under a credit
agreement. In addition, the fund and other affiliated funds have established
uncommitted borrowing arrangements with certain banks. Borrowings may be made
for temporary financing needs. Interest is charged to each fund, based on its
borrowings, generally 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 committed line of credit, is allocated among the participating funds at
the end of each calendar quarter. For the year ended October 31, 2006, the
fund's commitment fee and interest expense were $4,532 and $0, respectively, and
are included in miscellaneous expense on the Statement of Operations.
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, 2006, 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, 2006, by
correspondence with the Fund's 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, 2006, 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 21, 2006
TRUSTEES AND OFFICERS --
IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of December 1, 2006, 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(h) OTHER DIRECTORSHIPS(j)
- ------------------- ---------------- --------------- ----------------------------
INTERESTED TRUSTEES
Robert J. Manning(k) Trustee February 2004 Massachusetts Financial Services
(born 10/20/63) Company, Chief Executive Officer,
President, Chief Investment
Officer and Director
Robert C. Pozen(k) Trustee February 2004 Massachusetts Financial Services
(born 8/08/46) Company, Chairman (since February
2004); 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 5/01/36) of Trustees Enterprises (diversified services
company), Chairman, Trustee and
Chief Executive Officer (until
November 2000)
Robert E. Butler(n) Trustee January 2006 Consultant - regulatory and
(born 11/29/41) compliance matters (since July
2002); PricewaterhouseCoopers LLP
(professional services firm),
Partner (November 2000 until June
2002)
Lawrence H. Cohn, M.D. Trustee August 1993 Brigham and Women's Hospital,
(born 3/11/37) 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 5/30/42) 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 9/27/41) 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)
Lawrence T. Perera Trustee July 1981 Hemenway & Barnes (attorneys),
(born 6/23/35) Partner
J. Dale Sherratt Trustee August 1993 Insight Resources, Inc.
(born 9/23/38) (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 8/05/57) Partners (venture capital), Co-
founder and General Partner (until
June 2004); St. Paul Travelers
Companies (commercial property
liability insurance), Director
Robert W. Uek Trustee January 2006 Retired (since 1999);
(born 5/18/41) PricewaterhouseCoopers LLP
(professional services firm),
Partner (until 1999); Consultant
to investment company industry
(since 2000); TT International
Funds (mutual fund complex),
Trustee (2000 until 2005);
Hillview Investment Trust II Funds
(mutual fund complex), Trustee
(2000 until 2005)
OFFICERS
Maria F. Dwyer(k) 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(k) 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(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 1/18/74) and Assistant Clerk Company, Vice President and Senior
Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law
firm), Associate (prior to April
2003)
Ethan D. Corey(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/21/63) and Assistant Clerk Company, Special Counsel (since
December 2004); Dechert LLP (law
firm), Counsel (prior to December
2004)
David L. DiLorenzo(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 8/10/68) Company, Vice President (since
June 2005); JP Morgan Investor
Services, Vice President (prior to
June 2005)
Timothy M. Fagan(k) Assistant Secretary September 2005 Massachusetts Financial Services
(born 7/10/68) and Assistant Clerk Company, Vice President and Senior
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(k) Assistant Treasurer July 2005 Massachusetts Financial Services
(born 10/27/70) Company, Vice President (since May
2005); JP Morgan Investment
Management Company, Vice President
(prior to May 2005)
Brian E. Langenfeld(k) Assistant Secretary June 2006 Massachusetts Financial Services
(born 3/07/73) and Assistant Clerk Company, Assistant Vice President
and Counsel (since May 2006); John
Hancock Advisers, LLC, Assistant
Vice President and Counsel (May
2005 to April 2006); John Hancock
Advisers, LLC, Attorney and
Assistant Secretary (prior to May
2005)
Ellen Moynihan(k) Assistant Treasurer April 1997 Massachusetts Financial Services
(born 11/13/57) Company, Senior Vice President
Susan S. Newton(k) Assistant Secretary May 2005 Massachusetts Financial Services
(born 3/07/50) and Assistant Clerk Company, Senior Vice President and
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(k) Assistant Secretary July 2005 Massachusetts Financial Services
(born 11/05/70) and Assistant Clerk Company, Vice President and Senior
Counsel (since June 2004); Bingham
McCutchen LLP (law firm),
Associate (prior to June 2004)
Mark N. Polebaum(k) Secretary and Clerk January 2006 Massachusetts Financial Services
(born 5/01/52) Company, Executive Vice President,
General Counsel and Secretary
(since January 2006); Wilmer
Cutler Pickering Hale and Dorr LLP
(law firm), Partner (prior to
January 2006)
Frank L. Tarantino Independent Chief June 2004 Tarantino LLC (provider of
(born 3/07/44) Compliance Officer compliance services), Principal
(since June 2004); CRA Business
Strategies Group (consulting
services), Executive Vice
President (April 2003 to June
2004); David L. Babson & Co.
(investment adviser), Managing
Director, Chief Administrative
Officer and Director (prior to
March 2003)
James O. Yost(k) Assistant Treasurer September 1990 Massachusetts Financial Services
(born 6/12/60) Company, Senior Vice President
- ------------
(h) Date first appointed to serve as Trustee/officer of an MFS fund. Each Trustee has served continuously
since appointment unless indicated otherwise.
(j) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission
(i.e., "public companies").
(k) "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.
(n) In 2004 and 2005, Mr. Butler provided consulting services to the independent compliance consultant
retained by MFS pursuant to its settlement with the SEC concerning market timing and related matters. The
terms of that settlement required that compensation and expenses related to the independent compliance
consultant be borne exclusively by MFS and, therefore, MFS paid Mr. Butler for the services he rendered to
the independent compliance consultant. In 2004 and 2005, MFS paid Mr. Butler a total of $351,119.29.
The Trust held a shareholders' meeting in 2005 to elect Trustees, and will hold a shareholders' meeting at
least once every five years thereafter, to elect Trustees.
Each Trustee (except Mr. Butler and Mr. Uek) 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. Butler, Sherratt and Uek and Ms. 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 January 1, 2006, the Trustees served as board members of 98 funds within the MFS
Family of Funds.
The Statement of Additional Information contains further information about the Trustees and is available
without charge upon request by calling 1-800-225-2606.
- -------------------------------------------------------------------------------------------------------
INVESTMENT ADVISER CUSTODIAN
Massachusetts Financial Services Company State Street Bank and Trust Company
500 Boylston Street, Boston, MA 02116-3741 225 Franklin Street, Boston, MA 02110
JPMorgan 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 R. 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, 2006 ("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, 2005 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 ("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 MFS peer funds, (iii) information provided
by MFS on the advisory fees of comparable portfolios of other clients of MFS,
including institutional separate accounts 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, 2005, which the Trustees believed was
a long enough period to reflect differing market conditions. The Fund's
performance was in the 3rd quintile relative to the other funds in the
universe for this three-year period (the 1st quintile being the best
performers and the 5th quintile being the worst performers). The total return
performance of the Fund's Class A shares was in the 4th quintile for the one-
year period and the 2nd quintile for the five-year period ended December 31,
2005 relative to the Lipper performance universe. Because of the passage of
time, these performance results may 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 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. The Trustees 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 the Fund's advisory fee rate schedule described
above. 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 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, which may include 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, if applicable, to pay for investment research
(excluding third-party research, for which MFS pays directly) 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, 2006.
A discussion regarding the Board's most recent review and renewal of the
Fund's investment advisory agreement is available 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
100 F Street, NE, Room 1580
Washington, D.C. 20549
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-202-551-5850. 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)
The fund will notify shareholders of amounts for use in preparing 2006 income
tax forms in January 2007. The following information is provided pursuant to
provisions of the Internal Revenue Code.
The fund designates the maximum amount allowable as qualified dividend income
eligible for the 15% tax rate.
The fund designates $43,994,218 as capital gain dividends paid during the
fiscal year.
Income derived from foreign sources was $16,111,666. The fund intends to pass
through foreign tax credits of $548,145 for the fiscal year.
MFS(R) PRIVACY NOTICE
Privacy is a concern for every investor today. At MFS Investment Management(R)
and the MFS funds, we take this concern very seriously. We want you to
understand our policies about the investment products and services that we
offer, and how we protect the nonpublic personal information of investors who
have a direct relationship with us and our wholly owned subsidiaries.
Throughout our business relationship, you provide us with personal
information. We maintain information and records about you, your investments,
and the services you use. Examples of the nonpublic personal information we
maintain include
o data from investment applications and other forms
o share balances and transactional history with us, our affiliates, or
others
o facts from a consumer reporting agency
We do not disclose any nonpublic personal information about our customers or
former customers to anyone, except as permitted by law. We may share nonpublic
personal information with third parties or certain of our affiliates in
connection with servicing your account or processing your transactions. We may
share information with companies or financial institutions that perform
marketing services on our behalf or with other financial institutions with
which we have joint marketing arrangements, subject to any legal requirements.
Authorization to access your nonpublic personal information is limited to
appropriate personnel who provide products, services, or information to you.
We maintain physical, electronic, and procedural safeguards to help protect
the personal information we collect about you.
If you have any questions about the MFS privacy policy, please call
1-800-225-2606 any business day between 8 a.m. and 8 p.m. Eastern time.
Note: If you own MFS products or receive MFS services in the name of a third
party such as a bank or broker-dealer, their privacy policy may apply to you
instead of ours.
CONTACT US
WEB SITE MAILING ADDRESS
mfs.com MFS Service Center, Inc.
P.O. Box 55824
MFS TALK Boston, MA
1-800-637-8255 02205-5824
24 hours a day
OVERNIGHT MAIL
ACCOUNT SERVICE AND MFS Service Center, Inc.
LITERATURE 500 Boylston Street
Boston, MA 02116-3741
SHAREHOLDERS
1-800-225-2606
8 a.m. to 8 p.m. ET
INVESTMENT PROFESSIONALS
1-800-343-2829
8 a.m. to 8 p.m. ET
RETIREMENT PLAN SERVICES
1-800-637-1255
8 a.m. to 8 p.m. ET
- -------------------------------------------------------------------------------
Go paperless with eDELIVERY: Arrange to have MFS send prospectuses, reports,
and proxies directly to your e-mail inbox. You'll get timely information and
less clutter in your mailbox (not to mention help your fund save printing and
postage costs).
SIGN UP: If your account is registered with us, simply go to mfs.com, log in to
your account via MFS Access, and select the eDelivery sign up options.
If you own your MFS fund shares through a financial institution or a retirement
plan, MFS TALK, MFS Access, and eDelivery may not be available to you.
- -------------------------------------------------------------------------------
M F S(R)
INVESTMENT MANAGEMENT
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 not amended any provision in its Code of Ethics (the "Code") that
relates to an element of the Code's definitions enumerated in paragraph (b) of
Item 2 of this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Messrs. Robert E. Butler and Robert W. Uek and Ms. 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, Messrs.
Butler, and Uek and Ms. Thomsen are "independent" members of the Audit Committee
(as such term has been defined by the Securities and Exchange Commission in
regulations implementing Section 407 of the Sarbanes-Oxley Act of 2002). The
Securities and Exchange Commission has stated that the designation of a person
as an audit committee financial expert pursuant to this Item 3 on the Form N-CSR
does not impose on such a person any duties, obligations or liability that are
greater than the duties, obligations or liability imposed on such person as a
member of the Audit Committee and the Board of Trustees in the absence of such
designation or identification.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(a) THROUGH 4(d) AND 4(g):
The Board of Trustees has appointed Ernst & Young LLP ("E&Y") to serve as
independent accountants to the series of the Registrant (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, 2006 and 2005, audit fees billed to the
Funds by E&Y were as follows:
Audit Fees
FEES BILLED BY E&Y: 2006 2005
---- ----
MFS Global Equity Fund 38,825 36,825
MFS Global Total Return Fund 44,160 42,160
MFS Utilities Fund 35,580 33,580
------- -------
TOTAL 118,565 112,565
For the fiscal years ended October 31, 2006 and 2005, 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: 2006 2005 2006 2005 2006 2005
---- ---- ---- ---- ---- ----
To MFS Global Equity 0 0 8,642 9,630 144 1,605
Fund
To MFS Global Total 0 0 9,632 10,620 144 1,509
Return Fund
To MFS Utilities Fund 0 0 8,092 9,080 144 2,108
--- --- ------ ------ --- --------
TOTAL FEES BILLED BY E&Y 0 0 26,366 29,330 432 5,222
TO ABOVE FUNDS:
To MFS and MFS Related 0 0 15,500 0 0 685,399
Entities of MFS Global
Equity Fund*
To MFS and MFS Related 0 0 15,500 0 0 685,399
Entities of MFS Global
Total Return Fund*
To MFS and MFS Related 0 0 15,500 0 0 685,399
Entities of MFS Utilities
Fund*
AGGREGATE FEES FOR NON-AUDIT SERVICES:
2006 2005
---- ----
To MFS Global Equity Fund, 98,655 728,634
MFS and MFS Related
Entities#
To MFS Global Total 99,645 729,528
Return Fund, MFS and
MFS Related Entities#
To MFS Utilities Fund, 98,105 728,587
MFS 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 the subscription to tax treatise and for
services related to analysis of fund administrative expenses, compliance program and records management projects.
ITEM 4(e)(1):
Set forth below are the policies and procedures established by the Audit
Committee of the Board of Trustees relating to the pre-approval of audit and
non-audit related services: To the extent required by applicable law,
pre-approval by the Audit Committee of the Board is needed for all audit and
permissible non-audit services rendered to the Funds and all permissible
non-audit services rendered to MFS or MFS Related Entities if the services
relate directly to the operations and financial reporting of the Registrant.
Pre-approval is currently on an engagement-by-engagement basis. In the event
pre-approval of such services is necessary between regular meetings of the Audit
Committee and it is not practical to wait to seek pre-approval at the next
regular meeting of the Audit Committee, pre-approval of such services may be
referred to the Chair of the Audit Committee for approval; provided that the
Chair may not pre-approve any individual engagement for such services exceeding
$50,000 or multiple engagements for such services in the aggregate exceeding
$100,000 between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
ITEM 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Funds and MFS and MFS Related Entities relating
directly to the operations and financial reporting of the Registrant disclosed
above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X (which permits audit committee approval after the
start of the engagement with respect to services other than audit, review or
attest services, if certain conditions are satisfied).
ITEM 4(f): Not applicable.
ITEM 4(h): The Registrant's Audit Committee has considered whether the provision
by a Registrant's independent registered public accounting firm of non-audit
services to MFS and MFS Related Entities that were not pre-approved by the
Committee (because such services 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 effectiveness 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 of the period covered by the report that have
materially affected, or are 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.
NOTICE
A copy of the Amended and Restated Declaration of Trust of the Registrant is on
file with the Secretary of State of the Commonwealth of Massachusetts and notice
is hereby given that this instrument is executed on behalf of the Registrant by
an officer of the Registrant as an officer and not individually and the
obligations of or arising out of this instrument are not binding upon any of the
Trustees or shareholders individually, but are binding only upon the assets and
property of the respective constituent series of the Registrant.
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 21, 2006
-----------------
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 21, 2006
-----------------
By (Signature and Title)* TRACY ATKINSON
-----------------------------------------------------
Tracy Atkinson, Treasurer
(Principal Financial Officer
and Accounting Officer)
Date: December 21, 2006
-----------------
* Print name and title of each signing officer under his or her signature.