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 811-3732
_______________________________________________________________________________
MFS/SUN LIFE SERIES TRUST
_______________________________________________________________________________
(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
_______________________________________________________________________________
(Address of principal executive offices) (Zip code)
Susan S. Newton
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
_______________________________________________________________________________
(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
_______________________________________________________________________________
Date of fiscal year end: December 31
_______________________________________________________________________________
Date of reporting period: December 31, 2006
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ITEM 1. REPORTS TO STOCKHOLDERS.
M F S(R)/SUN LIFE SERIES TRUST
[Graphic Omitted]
ANNUAL REPORT o DECEMBER 31, 2006
Bond Series
Emerging Markets Equity Series
Global Governments Series
Global Total Return Series
Government Securities Series
High Yield Series
International Value Series
Money Market Series
Strategic Income Series
TABLE OF CONTENTS
Letter from the CEO of MFS ........................................ 1
Management Reviews ................................................ 1
Portfolio Composition ............................................. 5
Performance Summary ............................................... 14
Expense Tables .................................................... 20
Portfolio of Investments .......................................... 22
Financial Statements .............................................. 57
Notes to Financial Statements ..................................... 72
Report of Independent Registered Public Accounting Firm ........... 83
Trustees and Officers ............................................. 84
Board Review of Investment Advisory Agreements .................... 88
MFS(R) PRIVACY POLICY ............................................. 92
Proxy Voting Policies and Information ............................. Back Cover
Quarterly Portfolio Disclosure .................................... Back Cover
Federal Tax Information (Unaudited)................................ Back Cover
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THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF CONTRACT OWNERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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LETTER FROM THE CEO OF MFS
DEAR CONTRACT OWNERS:
The year 2006 proved to be a very good one for many of the world's financial
markets. The U.S. stock market, as one notable example, posted strong gains as
the Dow Jones Industrial Average hit record highs and the Standard & Poor's 500
Stock Index rose to levels not seen since 2000.
While investors were undoubtedly encouraged by these positive developments, we
think it is important to maintain the proper perspective on what appears to be
happening with the world's financial markets. Around the globe, economies seem
to have reached a state of equilibrium. Both stock and bond markets have simply
been less volatile than they were in years past. While there are many factors
behind the low levels of volatility, one of the key reasons is that the U.S.
Federal Reserve Board and other central banks around the world seem to have
found the right formula for simultaneously promoting economic growth and
keeping inflation under control.
This new, calmer state of affairs is no doubt welcomed by many investors, but
with less volatility, the possibilities for earning exceptional returns also
diminish. Investors may have to lower their expectations about what are
reasonable returns from the markets. Those still looking for the types of
returns they had been accustomed to in the past may have to work much harder to
seek out those opportunities and perhaps also accept more risk than they
customarily did. In any market climate, even in a relatively benign one, we
think investors are still best served by spreading their holdings across a
variety of investments that will give them exposure to a range of market
opportunities and varying levels of risk.
Respectfully,
/s/ Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
February 15, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
MANAGEMENT REVIEWS
The following management reviews, for the twelve months ended December 31,
2006, exclude the Money Market Series.
BOND SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 5.20%, while Service Class shares provided a
total return of 4.87%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 3.77% for the series' benchmark,
the Lehman Brothers U.S. Government/Credit Bond Index.
CONTRIBUTORS TO PERFORMANCE
Yield was a positive factor contributing to the portfolio's relative
performance. Overweighting "BB" and "B" rated(s) bonds also bolstered results
as spreads narrowed over the period. The portfolio's shorter duration(d) stance
helped performance as interest rates rose. Corporate bonds in the industrial
and finance sectors also aided performance as those sectors outperformed the
benchmark. In the finance sector, bonds of Ford Motor Credit and General Motors
Acceptance Corp. (GMAC) were among the top contributors.
DETRACTORS FROM PERFORMANCE
Security selection detracted from relative returns over the period. Individual
holdings that held back results included casino operator Harrah's, hospital
operator HCA, and pipeline company Kinder Morgan, all of which announced
leveraged buyouts (LBOs) during the period.
EMERGING MARKETS EQUITY SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 30.16%, while the Service Class shares
provided a total return of 29.90%. These returns do not reflect any applicable
surrender or contract charges and compare with a return of 32.59% for the
series' benchmark, the MSCI Emerging Markets Index.
DETRACTORS FROM PERFORMANCE
Stock selection in the financial services sector was the principal negative
factor in the portfolio's relative performance. Credit card administration
services provider CSU CardSystem(c)(g) (Brazil) and banking firm Kookmin Bank
(South Korea) were among the top detractors from relative returns. Not owning
China Life Insurance (Hong Kong) held back relative performance as this stock
performed significantly better than the benchmark.
Stock selection and, to a lesser extent, our overweighted position in the
technology sector also detracted from results. Overweighting electronics
manufacturer Samsung Electronics (South Korea) dampened relative performance as
Samsung underperformed the benchmark. Samsung's stock price suffered due to
disappointing earnings in the first half of the reporting period.
Elsewhere, generic drug manufacturer Teva Pharmaceuticals(g) (Israel), Latin
American provider of airline passenger and cargo services Copa Holdings(c)(g),
and mobile phone services provider Egypt Mobile Phone(g) held back results. Not
owning strong-performing Latin American wireless communications company America
Movil and our positioning in technology consulting firm Infosys Technologies(g)
(India) also hurt.
The portfolio's cash position was a detractor from relative performance. The
portfolio holds cash to buy new holdings and to provide liquidity. In a period
when equity markets rose, as measured by the portfolio's benchmark, holding
cash hurt performance versus the benchmark, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the autos and housing sector boosted relative performance.
Not owning weak-performing electronics manufacturer LG Electronics (South
Korea) was a factor in this result.
Stock selection in the utilities and communications sector also helped.
Wireless communications company China Mobile (Hong Kong) and mobile phone
services provider Vimpel Communications(g) (Russia) were among the portfolio's
top contributors. Our underweighted position in natural gas producer Gazprom
(Russia) benefited relative performance as this stock underperformed the
benchmark.
Stocks in other sectors that aided relative returns included four Brazilian
companies: iron ore miner Companhia Vale do Rio Doce, railroad-based logistics
operator All America Latina Logistica(g), oil and gas exploration and
production company Petroleo Brasileiro, and financial services firm Banco Nossa
Caixa. Our favorable positioning in banking firm Turkiye Is Bankasi(g)
(Turkey), and in gold producer Polyus Gold(g) (Russia) also helped.
During the reporting period, 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.
GLOBAL GOVERNMENTS SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 4.97%, while Service Class shares provided a
total return of 4.70%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 5.94% for the series' benchmark,
the JPMorgan Global Government Bond Index.
DETRACTORS FROM PERFORMANCE
Although yield was a factor that negatively affected the portfolio's relative
performance, this was more than offset by the benefit from the portfolio's
short bond position in Japan. The portfolio's positioning in bonds from the
United Kingdom and New Zealand also held back results.
CONTRIBUTORS TO PERFORMANCE
The portfolio's short duration(d) stance contributed to performance throughout
the period. Our underweighted position in U.S. dollars and our overweighted
position in the Euro also helped. Sector and security selection in U.S. and EMU
(European Monetary Unit) bonds contributed to results, as did our emerging
markets exposure.
GLOBAL TOTAL RETURN SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 17.20%, while Service Class shares provided a
total return of 16.91%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 20.65% for the series'
benchmark, the MSCI World Index. The series' other benchmark, a hybrid
benchmark comprised of 60% of the MSCI World Index and 40% of the JPMorgan
Global Government Bond Index, provided a total return of 14.64%.
DETRACTORS FROM PERFORMANCE
Within the equity portion of the portfolio, stock selection in the financial
services and leisure sectors held back performance relative to the MSCI World
Index. Within financial services, some of our holdings in Japanese financial
services firms were among the portfolio'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 company Sprint Nextel and communications
company Telecom Corp. of New Zealand(g) detracted from relative returns. Shares
of Sprint Nextel suffered after the company lowered its wireless subscriber
guidance for 2006. Also, the company's merger with Nextel appeared to have
disappointed investors. Not owning communications services providers AT&T and
BellSouth, both strong-performing benchmark constituents, also dampened
performance.
Elsewhere, convenience store operator Lawson (Japan), home improvements
products maker Masco, and electronics manufacturer Samsung Electronics(c)
(South Korea) hurt relative performance.
The cash position in the equity portion of the portfolio was also a detractor
from relative performance. As with nearly all mutual funds, this portfolio
holds cash to buy new holdings and to provide liquidity. In a period when
equity markets rose, as measured by the portfolio's benchmark, holding cash
hurt performance versus the benchmark, which has no cash position.
Within the fixed income portion of the portfolio, our holdings in government
agency debt detracted from relative results. Although yield was a factor that
negatively affected the portfolio's relative performance, this was more than
offset by the benefit from the portfolio's short bond position in Japan.
CONTRIBUTORS TO PERFORMANCE
Security selection and, to a lesser extent, our underweighting in both the
technology and health care sectors benefited relative performance. Our holdings
in pharmaceutical manufacturer Schering(g) (Germany) performed particularly
well within the health care sector as its share price soared following a
takeover offer from rival company Bayer. No individual holdings within the
technology sector were among the portfolio's top contributors.
Stock selection in the energy sector also contributed to relative results as
steel tube manufacturer Vallourec(g) (France) and oil and gas company Norsk
Hydro (Norway) gained substantially over the period.
Several individual holdings significantly aided performance including
agrichemical products maker Syngenta (Switzerland) and defense contractor
Lockheed Martin. Syngenta benefited from increased sales volume, especially in
North America, driven largely by its newer product portfolio and strong
distribution network. Lockheed Martin gained on strong revenue growth, improved
margins, and key contract awards over the period.
Other stocks that helped relative results included investment banking firm
Goldman Sachs, plumbing equipment maker Geberit (Switzerland), and electric
power distributor SUEZ (France).
During the reporting period, currency exposure in the equity portion of the
portfolio 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 portfolio, our duration(d) stance
boosted relative results. The portfolio's exposure to the Euro and the Swedish
Krona also helped.
GOVERNMENT SECURITIES SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 3.68%, while Service
Class shares provided a total return of 3.47%. These returns do not reflect any
applicable contract or surrender charges and compare with a return of 4.35% for
the series' benchmark, the Lehman Brothers U.S. Government/Mortgage Bond Index.
DETRACTORS FROM PERFORMANCE
Relative to the benchmark, our positioning in Israeli government debt held back
relative returns. Within the agency sector, a Tennessee Valley Authority (TVA)
bond, which underperformed the agency sector as a whole, was among the top
detractors.
CONTRIBUTORS TO PERFORMANCE
The portfolio's overweighted position in agency securities contributed to
relative performance as the sector outperformed the overall benchmark over the
reporting period. Holdings of mortgage-backed securities also helped.
HIGH YIELD SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 10.39%, while Service Class shares provided a
total return of 10.04%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 11.87% for the series'
benchmark, the Lehman Brothers U.S. High-Yield Corporate Bond Index.
DETRACTORS FROM PERFORMANCE
Yield was a negative factor in performance relative to the Lehman Brothers U.S.
High-Yield Corporate Bond Index, as was our relative exposure to "BB" rated(s)
bonds.
Holdings of hospital operator HCA and gaming company Station Casinos were among
the portfolio's largest detractors.
CONTRIBUTORS TO PERFORMANCE
Our positioning in "B" rated securities helped relative performance over the
reporting period.
Individual contributors that aided relative results included broadband
communications company CCH Holdings, financing company General Motors
Acceptance Corp. (GMAC), and packaging company Smurfit Kappa(g).
INTERNATIONAL VALUE SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 29.23%, while the Service Class shares
provided a total return of 28.95%. These returns do not reflect any applicable
surrender or contract charges and compare with a return of 31.05% for the
series' benchmark, the MSCI EAFE Value Index. The series' other benchmark, the
MSCI EAFE Index, provided a return of 26.86%.
DETRACTORS FROM PERFORMANCE
Stock selection in the financial services sector was a significant detractor
from performance relative to the MSCI EAFE Value Index. Two Japanese consumer
finance firms, Aiful and Takefuji, had particularly disappointing performance.
Both firms struggled during the period in an increasingly difficult regulatory,
business, and media environment for consumer finance firms.
Elsewhere, electronics manufacturer Samsung Electronics(c) (South Korea)
hindered results. Shares of Samsung suffered as a result of disappointing
earnings in the first half of the period. Other detractors included
pharmaceutical company GlaxoSmithKline(c) (United Kingdom), apparel products
and accessories retailer Impact 21(c) (Japan), convenience store chain Lawson
(Japan), pharmaceutical company Novartis(c) (Switzerland), and electronics
manufacturer Samsung SDI(c) (South Korea). Not owning steel producer Arcelor
Mittal (Luxembourg) also hurt as this company's stock outperformed the
benchmark.
During the reporting period, currency exposure was a detractor from 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.
The portfolio's cash position was also a detractor from relative performance.
The portfolio holds cash to buy new holdings and to provide liquidity. In a
period when equity markets rose, as measured by the portfolio's benchmark,
holding cash hurt performance versus the benchmark, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the energy sector contributed to performance relative to the
MSCI EAFE Value Index. Steel tube manufacturer Vallourec(c)(g) (France) was the
largest contributor to the portfolio's relative return. The company's strong
performance was driven by price increases of its seamless tubes and low levels
of exposure to price fluctuations of raw materials. Other stocks within this
sector that helped performance included energy company Royal Dutch Shell
(Netherlands) and seismographic services and equipment firm Compagnie Generale
de Geophysique(c)(g) (France).
Stock selection in the autos and housing sector also bolstered results. Within
this sector, plumbing equipment maker Geberit(c) (Switzerland) was among the
portfolio's top contributors.
Stocks in other sectors that contributed to relative performance included
pharmaceutical company Schering(c)(g) (Germany), agrochemical company
Syngenta(c) (Switzerland), home improvement retailer Praktiker Bau-und
Heimwerkermarkte(c) (Germany), telecommunications company Telenor(c) (Norway),
biopharmaceutical company Actelion(c) (Switzerland), and grocery store chain
Morrison Supermarkets(c)(g) (United Kingdom).
STRATEGIC INCOME SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 6.71%, while Service Class shares provided a
total return of 6.45%. These returns do not reflect any applicable contract or
surrender charges and compare with the following returns over the same period
for the series' benchmarks: 9.88% for the JPMorgan Emerging Markets Bond Index
Global, 11.87% for the Lehman Brothers U.S. High-Yield Corporate Bond Index,
3.10% for the Citigroup World Government Bond Non-Dollar Hedged Index, and
4.33% for the Lehman Brothers U.S. Aggregate Bond Index.
DETRACTORS FROM PERFORMANCE
The portfolio's underweighted position in "B" rated(s) securities held back
performance during the reporting period. Our positioning in New Zealand
government debt also hurt. Among individual holdings, hospital operator HCA was
a top detractor.
CONTRIBUTORS TO PERFORMANCE
Our short duration(d) stance contributed to the portfolio's performance as
interest rates rose over the reporting period. Corporate bonds in the bank and
finance sector and our positioning in Argentinian government debt also helped.
Bonds of General Motors Acceptance Corp. (GMAC) and Ford Motor Credit were
among the portfolio's top contributors.
(c) Security is not a benchmark constituent.
(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.
(s) Bonds rated "BBB", "Baa", or higher are considered investment grade; bonds
rated "BB", "Ba", or below are considered non-investment grade. The primary
source for bond quality ratings is Moody's Investors Service. If not
available, ratings by Standard & Poor's are used, else ratings by Fitch,
Inc. For securities which are not rated by any of the three agencies, the
security is considered Not Rated.
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.
PORTFOLIO COMPOSITION -- BOND SERIES
PORTFOLIO STRUCTURE (i)
Bonds 96.7%
Cash & Other Net Assets 3.3%
FIXED INCOME SECTORS (i)
High Grade Corporates 52.2%
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High Yield Corporates 13.1%
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Mortgage-Backed Securities 9.7%
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Commercial Mortgage-Backed Securities 9.3%
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Emerging Markets Bonds 5.3%
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U.S. Government Agencies 3.7%
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Asset-Backed Securities 1.4%
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U.S. Treasury Securities 1.1%
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Collateralized Debt Obligations 0.6%
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Non-U.S. Government Bonds 0.3%
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CREDIT QUALITY OF BONDS (r)
AAA 23.4%
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AA 6.3%
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A 15.2%
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BBB 39.4%
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BB 11.0%
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B 3.9%
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CCC 0.5%
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Not Rated 0.3%
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PORTFOLIO FACTS
Average Duration (d) 4.9
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Average Life (m) 7.7 yrs.
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Average Maturity (m) 15.6 yrs.
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Average Credit Quality of Rated Securities (long-term) (a) A-
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Average Credit Quality of Rated Securities (short-term) (a) A-1
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(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.
(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.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre-refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 12/31/06.
Percentages are based on net assets as of 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- EMERGING MARKETS EQUITY SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.1%
Cash & Other Net Assets 0.9%
TOP TEN HOLDINGS
Samsung Electronics Co. Ltd. 5.4%
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Petroleo Brasileiro S.A., ADR 5.1%
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LUKOIL, ADR 3.5%
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Companhia Vale do Rio Doce, ADR 3.3%
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China Mobile Ltd. 3.2%
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Hon Hai Precision Industry Co. Ltd. 2.3%
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Kookmin Bank 2.2%
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PetroChina Co. Ltd. 2.2%
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POSCO, ADR 2.0%
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Sasol Ltd. 1.9%
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COMMON STOCK SECTORS
Energy 18.0%
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Utilities & Communications 16.6%
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Financial Services 16.4%
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Technology 15.7%
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Basic Materials 14.8%
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Consumer Staples 5.3%
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Retailing 4.4%
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Leisure 2.2%
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Autos & Housing 2.1%
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Special Products & Services 1.5%
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Health Care 1.1%
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Transportation 1.0%
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COUNTRY WEIGHTINGS
Brazil 15.2%
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South Korea 14.2%
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South Africa 13.3%
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Russia 8.4%
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Taiwan 8.1%
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Mexico 7.0%
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Hong Kong 4.8%
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China 4.6%
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Philippines 3.8%
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Other Countries 20.6%
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Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- GLOBAL GOVERNMENTS SERIES
PORTFOLIO STRUCTURE (i)
Bonds 94.3%
Cash & Other Net Assets 5.7%
FIXED INCOME SECTORS (i)
Non-U.S. Government Bonds 63.0%
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U.S. Treasury Securities 10.6%
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Commercial Mortgage-Backed Securities 9.7%
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U.S. Government Agencies 6.4%
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Emerging Market Bonds 4.3%
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Mortgage-Backed Securities 0.3%
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CREDIT QUALITY OF BONDS (r)
AAA 84.6%
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AA 8.7%
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A 1.7%
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BBB 5.0%
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PORTFOLIO FACTS
Average Duration (d) 6.0
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Average Life (m) 9.0 yrs.
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Average Maturity (m) 11.7 yrs.
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Average Credit Quality of Rated Securities (long-term) (a) AA+
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Average Credit Quality of Rated Securities (short-term) (a) A-1
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COUNTRY WEIGHTINGS (i)
United States 32.4%
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Germany 18.7%
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Japan 15.2%
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United Kingdom 8.7%
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Canada 7.0%
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France 3.3%
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Spain 1.8%
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Finland 1.8%
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Mexico 1.4%
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Other Countries 9.7%
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(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(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.
(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.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre-refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 12/31/06.
Percentages are based on net assets as of 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- GLOBAL TOTAL RETURN SERIES
PORTFOLIO STRUCTURE (i)
Common Stocks 58.7%
Bonds 36.5%
Preferred Stocks 0.8%
Cash & Other Net Assets 4.0%
TOP TEN HOLDINGS (i)
Federal Republic of Germany, 6.25%, 2030 1.9%
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Network Rail MTN Finance PLC, FRN, 3.618%, 2007 1.6%
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Federal Republic of Germany, 3.75%, 2015 1.6%
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Development Bank of Japan, 1.05%, 2023 1.5%
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TOTAL S.A., ADR 1.5%
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Federal Republic of Germany, 6.25%, 2024 1.5%
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Nestle S.A. 1.3%
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Lockheed Martin Corp. 1.3%
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U.S. Treasury Notes, 4%, 2010 1.3%
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KfW Bankengruppe FRN, 3.528%, 2007 1.3%
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COMMON STOCK SECTORS
Financial Services 15.1%
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Utilities & Communications 6.9%
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Consumer Staples 6.0%
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Energy 5.6%
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Health Care 4.8%
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Industrial Goods & Services 4.2%
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Autos & Housing 3.6%
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Basic Materials 3.4%
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Retailing 2.7%
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Leisure 2.4%
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Technology 2.3%
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Transportation 1.4%
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Special Products & Services 0.3%
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FIXED INCOME SECTORS (i)
Non U.S. Government Bonds 24.1%
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U.S. Treasury Securities 4.1%
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Commercial Mortgage-Backed Securities 3.1%
-----------------------------------------------------------------------
Emerging Market Bonds 2.0%
-----------------------------------------------------------------------
U.S. Government Agencies 1.8%
-----------------------------------------------------------------------
Mortgage-Backed Securities 0.9%
-----------------------------------------------------------------------
High Grade Corporates 0.5%
-----------------------------------------------------------------------
COUNTRY WEIGHTINGS (i)
United States 40.2%
-----------------------------------------------------------------------
Japan 13.2%
-----------------------------------------------------------------------
United Kingdom 10.7%
-----------------------------------------------------------------------
Germany 10.3%
-----------------------------------------------------------------------
France 6.6%
-----------------------------------------------------------------------
Switzerland 3.4%
-----------------------------------------------------------------------
Canada 2.5%
-----------------------------------------------------------------------
Netherlands 2.3%
-----------------------------------------------------------------------
Ireland 1.2%
-----------------------------------------------------------------------
Other Countries 9.6%
-----------------------------------------------------------------------
(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 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- GOVERNMENT SECURITIES SERIES
PORTFOLIO STRUCTURE (i)
Bonds 95.1%
Cash & Other Net Assets 4.9%
FIXED INCOME SECTORS (i)
Mortgage-Backed Securities 47.7%
-----------------------------------------------------------------------
U.S. Government Agencies 29.0%
-----------------------------------------------------------------------
U.S. Treasury Securities 18.4%
-----------------------------------------------------------------------
CREDIT QUALITY OF BONDS (r)
AAA 100.0%
-----------------------------------------------------------------------
PORTFOLIO FACTS
Average Duration (d) 4.1
-----------------------------------------------------------------------
Average Life (m) 7.0 yrs.
-----------------------------------------------------------------------
Average Maturity (m) 14.3 yrs.
-----------------------------------------------------------------------
Average Credit Quality of Rated Securities (long-term) (a) AAA
-----------------------------------------------------------------------
Average Credit Quality of Rated Securities (short-term) (a) A-1
-----------------------------------------------------------------------
(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(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.
(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.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre-refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 12/31/06.
Percentages are based on net assets as of 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- HIGH YIELD SERIES
PORTFOLIO STRUCTURE (i)
Bonds 88.7%
Floating Rate Loans 6.4%
Common Stocks 1.3%
Convertible Preferred Stocks 0.4%
Convertible Bonds 0.4%
Preferred Stocks 0.1%
Cash & Other Net Assets 2.7%
TOP FIVE INDUSTRIES (i)
Medical & Health Technology & Services 7.6%
-----------------------------------------------------------------------
Automotive 7.1%
-----------------------------------------------------------------------
Gaming & Lodging 7.1%
-----------------------------------------------------------------------
Printing & Publishing 5.4%
-----------------------------------------------------------------------
Broadcasting 4.8%
-----------------------------------------------------------------------
CREDIT QUALITY OF BONDS (r)
AAA 2.1%
-----------------------------------------------------------------------
A 0.3%
-----------------------------------------------------------------------
BBB 3.4%
-----------------------------------------------------------------------
BB 24.2%
-----------------------------------------------------------------------
B 52.8%
-----------------------------------------------------------------------
CCC 15.8%
-----------------------------------------------------------------------
Not Rated 1.4%
-----------------------------------------------------------------------
PORTFOLIO FACTS
Average Duration (d) 4.2
-----------------------------------------------------------------------
Average Life (m) 8.0 yrs.
-----------------------------------------------------------------------
Average Maturity (m) 8.4 yrs.
-----------------------------------------------------------------------
Average Credit Quality of Rated Securities (long-term) (a) B+
-----------------------------------------------------------------------
Average Credit Quality of Rated Securities (short-term) (a) A-1
-----------------------------------------------------------------------
(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(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.
(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.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre-refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 12/31/06.
Percentages are based on net assets as of 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- INTERNATIONAL VALUE SERIES
PORTFOLIO STRUCTURE
Common Stocks 96.2%
Preferred Stocks 2.0%
Cash & Other Net Assets 1.8%
TOP TEN HOLDINGS
Nestle S.A. 3.2%
-----------------------------------------------------------------------
TOTAL S.A., ADR 3.0%
-----------------------------------------------------------------------
Syngenta AG 2.8%
-----------------------------------------------------------------------
Royal Dutch Shell PLC, "A" 2.2%
-----------------------------------------------------------------------
Henkel KGaA, IPS 2.0%
-----------------------------------------------------------------------
GlaxoSmithKline PLC 2.0%
-----------------------------------------------------------------------
TNT N.V. 1.9%
-----------------------------------------------------------------------
Credit Agricole S.A. 1.8%
-----------------------------------------------------------------------
Novartis AG 1.8%
-----------------------------------------------------------------------
Astellas Pharma, Inc. 1.7%
-----------------------------------------------------------------------
COMMON STOCK SECTORS
Financial Services 20.5%
-----------------------------------------------------------------------
Utilities & Communications 13.7%
-----------------------------------------------------------------------
Consumer Staples 12.2%
-----------------------------------------------------------------------
Autos & Housing 8.0%
-----------------------------------------------------------------------
Health Care 7.5%
-----------------------------------------------------------------------
Energy 7.1%
-----------------------------------------------------------------------
Leisure 5.9%
-----------------------------------------------------------------------
Retailing 5.7%
-----------------------------------------------------------------------
Basic Materials 5.5%
-----------------------------------------------------------------------
Technology 5.0%
-----------------------------------------------------------------------
Transportation 2.7%
-----------------------------------------------------------------------
Industrial Goods & Services 2.4%
-----------------------------------------------------------------------
COUNTRY WEIGHTINGS
United Kingdom 20.6%
-----------------------------------------------------------------------
Japan 20.4%
-----------------------------------------------------------------------
France 13.7%
-----------------------------------------------------------------------
Switzerland 9.2%
-----------------------------------------------------------------------
Germany 8.8%
-----------------------------------------------------------------------
Netherlands 5.3%
-----------------------------------------------------------------------
Sweden 3.4%
-----------------------------------------------------------------------
South Korea 2.8%
-----------------------------------------------------------------------
Norway 2.6%
-----------------------------------------------------------------------
Other Countries 13.2%
-----------------------------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- MONEY MARKET SERIES
PORTFOLIO STRUCTURE (u)
Commercial Paper 85.8%
Certificate of Deposit 12.0%
Repurchase Agreements 1.8%
Other Assets Less Liabilities 0.4%
SHORT-TERM CREDIT QUALITY (q)
Average Credit Quality Short-Term Bonds (a) A-1
-----------------------------------------------------------------------
All holdings are rated A-1
MATURITY BREAKDOWN (u)
0 - 29 50.6%
-----------------------------------------------------------------------
30 - 59 18.2%
-----------------------------------------------------------------------
60 - 89 25.6%
-----------------------------------------------------------------------
90 - 366 5.2%
-----------------------------------------------------------------------
Other Assets Less Liabilities 0.4%
-----------------------------------------------------------------------
(a) The average credit quality is based upon a market weighted average of
portfolio holdings that are rated by public rating agencies.
(q) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. If not rated by any of the three
agencies, the security is considered Not Rated. U.S. Treasuries and U.S.
Agency securities are included in the "A-1"-rating category. Percentages
are based on the total market value of investments as of 12/31/06.
(u) For purposes of this graphical presentation, accrued interest, where
applicable, is included.
Percentages are based on net assets as of 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- STRATEGIC INCOME SERIES
PORTFOLIO STRUCTURE (i)
Bonds 94.9%
Convertible Bonds 0.2%
Convertible Preferred Stocks 0.1%
Cash & Other Net Assets 4.8%
FIXED INCOME SECTORS (i)
High Yield Corporates 34.6%
-----------------------------------------------------------------------
High Grade Corporates 20.0%
-----------------------------------------------------------------------
Non-U.S. Government Bonds 13.4%
-----------------------------------------------------------------------
Emerging Market Bonds 13.0%
-----------------------------------------------------------------------
Commercial Mortgage-Backed Securities 6.2%
-----------------------------------------------------------------------
Mortgage-Backed Securities 4.7%
-----------------------------------------------------------------------
U.S. Government Agencies 2.4%
-----------------------------------------------------------------------
Asset-Backed Securities 0.4%
-----------------------------------------------------------------------
Collateralized Debt Obligations 0.2%
-----------------------------------------------------------------------
CREDIT QUALITY OF BONDS (r)
AAA 22.1%
-----------------------------------------------------------------------
AA 2.3%
-----------------------------------------------------------------------
A 10.6%
-----------------------------------------------------------------------
BBB 21.4%
-----------------------------------------------------------------------
BB 15.8%
-----------------------------------------------------------------------
B 21.4%
-----------------------------------------------------------------------
CCC 5.9%
-----------------------------------------------------------------------
Not Rated 0.5%
-----------------------------------------------------------------------
PORTFOLIO FACTS
Average Duration (d) 4.7
-----------------------------------------------------------------------
Average Life (m) 8.4 yrs.
-----------------------------------------------------------------------
Average Maturity (m) 12.0 yrs.
-----------------------------------------------------------------------
Average Credit Quality of Rated Securities (long-term) (a) BBB
-----------------------------------------------------------------------
Average Credit Quality of Rated Securities (short-term) (a) A-1
-----------------------------------------------------------------------
COUNTRY WEIGHTINGS (i)
United States 65.1%
-----------------------------------------------------------------------
Japan 3.3%
-----------------------------------------------------------------------
Russia 3.2%
-----------------------------------------------------------------------
Germany 3.2%
-----------------------------------------------------------------------
Canada 2.7%
-----------------------------------------------------------------------
Mexico 2.1%
-----------------------------------------------------------------------
France 2.0%
-----------------------------------------------------------------------
United Kingdom 2.0%
-----------------------------------------------------------------------
Netherlands 1.9%
-----------------------------------------------------------------------
Other Countries 14.5%
-----------------------------------------------------------------------
(a) The average credit quality of rated securities is based upon a market
weighted average of portfolio holdings that are rated by public rating
agencies.
(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.
(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.
(m) The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which
have been pre-refunded or pre-paid to an earlier date or which have a
mandatory put date prior to the stated maturity. The average life shown
takes into account these earlier dates.
(r) Each security is assigned a rating from Moody's Investors Service. If not
rated by Moody's, the rating will be that assigned by Standard & Poor's.
Likewise, if not assigned a rating by Standard & Poor's, it will be based
on the rating assigned by Fitch, Inc. For those portfolios that hold a
security which is not rated by any of the three agencies, the security is
considered Not Rated. Holdings in U.S. Treasuries and government agency
mortgage-backed securities, if any, are included in the "AAA"-rating
category. Percentages are based on the total market value of investments as
of 12/31/06.
Percentages are based on net assets as of 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the historical
performance of each series in comparison to its benchmark(s). Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be more than or less than the line
shown. It is not possible to invest directly in an index. (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 UNITS,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. THE PERFORMANCE SHOWN DOES NOT
REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A CONTRACT HOLDER WOULD PAY ON
DISTRIBUTIONS OR REDEMPTION OF CONTRACT UNITS.
BOND SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2006.)
Lehman Brothers
Bond Series- U.S. Government/
Initial Class Credit Bond Index
5/98 $10,000 $10,000
12/98 10,690 10,731
12/99 10,509 10,501
12/00 11,579 11,745
12/01 12,488 12,744
12/02 13,678 14,150
12/03 15,007 14,811
12/04 15,945 15,432
12/05 16,225 15,797
12/06 17,068 16,394
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- --------------------------------------------------------------------------------
Average Annual Total Return 5/06/98 5.20% 6.45% 6.37%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 4.87% 6.19% 6.20%
COMPARATIVE BENCHMARK
- --------------------------------------------------------------------------------
Lehman Brothers U.S. Government/Credit Bond Index (f) 3.77% 5.16% 5.86%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 6, 1998, through the stated period end.
EMERGING MARKETS EQUITY SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Emerging Markets
Equity Series- MSCI Emerging
Initial Class Markets Index
12/96 $10,000 $10,000
12/97 11,046 8,841
12/98 7,735 6,601
12/99 11,794 10,985
12/00 9,110 7,622
12/01 9,017 7,442
12/02 8,847 6,995
12/03 13,501 10,932
12/04 17,171 13,769
12/05 23,483 18,525
12/06 30,567 24,561
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 6/05/96 30.16% 27.66% 11.82%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 29.90% 27.34% 11.67%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
MSCI Emerging Markets Index (f) 32.59% 26.97% 9.40%
(f) Source: FactSet Research Systems Inc.
PERFORMANCE SUMMARY -- continued
GLOBAL GOVERNMENTS SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Global JPMorgan
Government Series- Global Government
Initial Class Bond Index
12/96 $10,000 $10,000
12/97 9,924 10,140
12/98 11,458 11,693
12/99 10,865 11,099
12/00 10,997 11,359
12/01 10,765 11,269
12/02 12,986 13,451
12/03 15,012 15,403
12/04 16,522 16,959
12/05 15,332 15,852
12/06 16,093 16,793
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 5/16/88 4.97% 8.37% 4.87%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 4.70% 8.09% 4.73%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
JPMorgan Global Government Bond Index (f) 5.94% 8.31% 5.32%
(f) Source: FactSet Research Systems Inc.
GLOBAL TOTAL RETURN SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
60% MSCI
World/40%
Global Total JPMorgan MSCI
Return Series- Global Government World
Initial Class Bond Index Index
12/96 $10,000 $10,000 $10,000
12/97 11,361 11,033 11,623
12/98 13,448 13,416 14,505
12/99 14,582 15,082 18,180
12/00 14,914 14,037 15,832
12/01 13,993 12,618 13,216
12/02 14,074 11,980 10,633
12/03 17,307 15,094 14,223
12/04 20,270 17,088 16,392
12/05 21,045 17,637 18,035
12/06 24,666 20,219 21,760
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 11/07/94 17.20% 12.00% 9.45%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 16.91% 11.72% 9.30%
COMPARATIVE BENCHMARKS
- -------------------------------------------------------------------------------
60% MSCI World/40% JPMorgan Global
Government Bond Index (f) 14.64% 9.89% 7.29%
MSCI World Index (f) 20.65% 10.49% 8.08%
(f) Source: FactSet Research Systems Inc.
PERFORMANCE SUMMARY -- continued
GOVERNMENT SECURITIES SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Government Lehman Brothers
Securities Series- U.S. Government/
Initial Class Mortgage Bond Index
12/96 $10,000 $10,000
12/97 10,872 10,954
12/98 11,818 11,909
12/99 11,596 11,844
12/00 13,001 13,303
12/01 13,972 14,330
12/02 15,342 15,772
12/03 15,672 16,202
12/04 16,261 16,863
12/05 16,635 17,307
12/06 17,248 18,059
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 6/12/85 3.68% 4.30% 5.60%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 3.47% 4.05% 5.47%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Lehman Brothers U.S. Government/Mortgage
Bond Index (f) 4.35% 4.74% 6.09%
(f) Source: FactSet Research Systems Inc.
HIGH YIELD SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Lehman Brothers
High Yield U.S. High-Yield
Series- Corporate
Initial Class Bond Index
12/96 $10,000 $10,000
12/97 11,324 11,277
12/98 11,389 11,488
12/99 12,177 11,762
12/00 11,350 11,072
12/01 11,554 11,657
12/02 11,866 11,498
12/03 14,410 14,828
12/04 15,785 16,479
12/05 16,132 16,930
12/06 17,808 18,939
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 6/12/85 10.39% 9.04% 5.94%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 10.04% 8.77% 5.79%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Lehman Brothers U.S. High-Yield Corporate
Bond Index (f) 11.87% 10.19% 6.59%
(f) Source: Factset Research Systems Inc.
PERFORMANCE SUMMARY -- continued
INTERNATIONAL VALUE SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
International MSCI
Value Series- MSCI EAFE EAFE
Initial Class Value Index Index
12/96 $10,000 $10,000 $10,000
12/97 10,653 10,182 10,206
12/98 12,963 12,024 12,281
12/99 15,193 14,974 15,633
12/00 14,839 14,552 13,451
12/01 12,667 11,901 10,599
12/02 11,925 10,044 8,939
12/03 15,935 14,661 12,441
12/04 20,400 18,308 15,016
12/05 23,504 20,944 17,120
12/06 30,374 27,447 21,718
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 10/02/95 29.23% 19.11% 11.75%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 28.95% 18.85% 11.63%
COMPARATIVE BENCHMARKS
- -------------------------------------------------------------------------------
MSCI EAFE Value Index (f) 31.05% 18.19% 10.62%
MSCI EAFE Index (f) 26.86% 15.43% 8.06%
(f) Source: FactSet Research Systems Inc.
MONEY MARKET SERIES
TOTAL RETURNS THROUGH 12/31/06
Class
Inception 1-yr Current (y)
Initial Class Date Total Return 7-day Yield
- -------------------------------------------------------------------------------
7/19/85 4.59% 4.69%
Class
Inception 1-yr Current (y)
Service Class Date Total Return 7-day Yield
- -------------------------------------------------------------------------------
8/24/01 4.33% 4.44%
(y) Based on the latest seven days ended as of December 31, 2006, with
dividends annualized. The yield quotation more closely reflects the current
earnings of the series than the total return quotation.
PERFORMANCE SUMMARY -- continued
STRATEGIC INCOME SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2006.)
Citigroup
Lehman World
Brothers Government
JPMorgan Lehman U.S. High- Bond Non-
Strategic Emerging Brothers Yield Dollar
Income Series- Market Bond U.S. Aggregate Corporate Hedged
Initial Class Index Global Bond Index Bond Index Index
5/98 $10,000 $10,000 $10,000 $10,000 $10,000
12/98 8,398 9,817 10,645 10,040 10,524
12/99 10,428 10,051 10,557 10,503 10,828
12/00 11,931 9,462 11,785 10,805 11,901
12/01 12,092 9,962 12,780 11,162 12,658
12/02 13,678 9,826 14,090 12,001 13,515
12/03 17,188 12,671 14,669 13,548 13,775
12/04 19,205 14,083 15,305 14,637 14,489
12/05 21,266 14,468 15,677 14,914 15,315
12/06 23,366 16,185 16,356 15,914 15,791
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 5/06/98 6.71% 7.35% 5.52%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 6.45% 7.08% 5.35%
COMPARATIVE BENCHMARKS
- -------------------------------------------------------------------------------
Citigroup World Government Bond Non-Dollar
Hedged Index (f) 3.10% 4.52% 5.40%
JPMorgan Emerging Markets Bond Index Global (f) 9.88% 14.08% 10.27%
Lehman Brothers U.S. Aggregate Bond Index (f) 4.33% 5.06% 5.83%
Lehman Brothers U.S. High-Yield Corporate
Bond Index (f) 11.87% 10.19% 5.71%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 6, 1998 through the stated period end. Lehman Brothers U.S. High-Yield
Corporate Bond Index information is from May 1, 1998.
PERFORMANCE SUMMARY -- continued
INDEX DEFINITIONS
CITIGROUP WORLD GOVERNMENT BOND NON-DOLLAR HEDGED INDEX - a market
capitalization-weighted index that tracks the currency-hedged performance of
the major government bond markets, excluding the United States. Country
eligibility is determined based upon market capitalization and investability
criteria.
JPMORGAN EMERGING MARKETS BOND INDEX GLOBAL (EMBI GLOBAL) - tracks total
returns for U.S.-dollar-denominated debt instruments issued by emerging market
sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds.
JPMORGAN GLOBAL GOVERNMENT BOND INDEX - measures developed government bond
markets around the world.
LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX - measures the U.S. investment
grade, fixed rate bond market, with index components for government and
corporate securities, mortgage pass-through securities, and asset-backed
securities.
LEHMAN BROTHERS U.S. HIGH-YIELD CORPORATE BOND INDEX - measures the universe
of non-investment grade, fixed rate debt. Eurobonds, and debt issues from
countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela,
etc.) are excluded.
LEHMAN BROTHERS U.S. GOVERNMENT/CREDIT BOND INDEX - measures investment grade
debt obligations of the U.S. Treasury and U.S. government agencies, as well as
U.S. corporate and foreign debentures and secured notes that meet specified
maturity, liquidity, and quality requirements.
LEHMAN BROTHERS U.S. GOVERNMENT/MORTGAGE BOND INDEX - measures debt issued by
the U.S. Government as well as mortgage-backed pass-through securities of
Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALASIA, FAR
EAST) INDEX - a market capitalization index that is designed to measure
developed market equity performance, excluding the U.S. and Canada.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALASIA, FAR
EAST) VALUE INDEX - a market capitalization index that is designed to measure
developed market equity performance for value securities, excluding the U.S.
and Canada.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EMERGING MARKETS INDEX - a market
capitalization index that is designed to measure equity market performance in
the global emerging markets.
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
Initial Class shares have no sales charge. Service Class shares have no sales
charge and carry a 0.25% annual Rule 12b-1 fee.
Service Class share performance includes the performance of Initial Class
shares for periods prior to the inception of Service Class shares (blended
performance). These blended performance figures have not been adjusted to take
into account differences in the class-specific operating expenses (such as
Rule 12b-1 fees). Because operating expenses of Service Class shares are
generally higher than those of Initial Class shares, the blended Service Class
shares performance shown is higher than it would have been had Service Class
shares been offered for the entire period.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown. Without such subsidies and waivers the
series' performance results would be less favorable. Please see the prospectus
and financial statements for complete details. All results are historical and
assume the reinvestment of dividends and capital gains.
The returns for the series shown do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges imposed by insurance company
separate accounts. Such expenses would reduce the overall returns shown.
From time to time the series may receive proceeds from litigation settlements,
without which performance would be lower.
EXPENSE TABLES
SERIES EXPENSES BORNE BY THE CONTRACT HOLDERS DURING THE PERIOD,
JULY 1, 2006 THROUGH DECEMBER 31, 2006
As a contract holder of each series, you incur ongoing costs, including
management fees; distribution (12b-1) fees; and other series expenses. The
examples are intended to help you understand your ongoing costs (in dollars) of
investing in each series and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period, July 1, 2006 through December 31,
2006.
ACTUAL EXPENSES
The first line for each share class in the following tables 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 tables provides
information about hypothetical account values and hypothetical expenses based
on each series' actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not each series' 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 each series 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 tables are meant to highlight each
series' ongoing costs only and do not take into account the fees and expenses
imposed under the variable contracts through which your investment in each
series is made. Therefore, the second line for each share class in the tables
is useful in comparing ongoing costs associated with an investment in vehicles
(such as the series) which fund benefits under variable annuity and variable
life insurance contracts and to qualified pension and retirement plans only,
and will not help you determine the relative total costs of investing in each
series through variable annuity and variable life insurance contracts. If the
fees and expenses imposed under the variable contracts were included, your
costs would have been higher.
Beginning Ending
Annualized Account Account Expenses Paid
Expense Value Value During Period (p)
BOND SERIES Ratio 7/01/06 12/31/06 7/01/06-12/31/06
- --------------------------------------------------------------------------------
Initial Class
Actual 0.71% $1,000.00 $1,060.70 $3.69
Hypothetical (h) 0.71% $1,000.00 $1,021.63 $3.62
Service Class
Actual 0.95% $1,000.00 $1,058.10 $4.93
Hypothetical (h) 0.95% $1,000.00 $1,020.42 $4.84
EMERGING MARKETS
EQUITY SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 1.70% $1,000.00 $1,216.30 $9.50
Hypothetical (h) 1.70% $1,000.00 $1,016.64 $8.64
Service Class
Actual 1.91% $1,000.00 $1,215.30 $10.67
Hypothetical (h) 1.91% $1,000.00 $1,015.58 $9.70
GLOBAL
GOVERNMENTS SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 1.00% $1,000.00 $1,023.90 $5.10
Hypothetical (h) 1.00% $1,000.00 $1,020.16 $5.09
Service Class
Actual 1.25% $1,000.00 $1,022.20 $6.37
Hypothetical (h) 1.25% $1,000.00 $1,018.90 $6.36
GLOBAL TOTAL
RETURN SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.95% $1,000.00 $1,092.90 $5.01
Hypothetical (h) 0.95% $1,000.00 $1,020.42 $4.84
Service Class
Actual 1.20% $1,000.00 $1,091.00 $6.32
Hypothetical (h) 1.20% $1,000.00 $1,019.16 $6.11
GOVERNMENT
SECURITIES SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.62% $1,000.00 $1,044.60 $3.20
Hypothetical (h) 0.62% $1,000.00 $1,022.08 $3.16
Service Class
Actual 0.87% $1,000.00 $1,043.10 $4.48
Hypothetical (h) 0.87% $1,000.00 $1,020.82 $4.43
HIGH YIELD SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.81% $1,000.00 $1,079.40 $4.25
Hypothetical (h) 0.81% $1,000.00 $1,021.12 $4.13
Service Class
Actual 1.06% $1,000.00 $1,078.40 $5.55
Hypothetical (h) 1.06% $1,000.00 $1,019.86 $5.40
EXPENSE TABLES -- continued
SERIES EXPENSES BORNE BY THE CONTRACT HOLDERS DURING THE PERIOD,
JULY 1, 2006 THROUGH DECEMBER 31, 2006 -- continued
Beginning Ending
Annualized Account Account Expenses Paid
INTERNATIONAL Expense Value Value During Period (p)
VALUE SERIES Ratio 7/01/06 12/31/06 7/01/06-12/31/06
- --------------------------------------------------------------------------------
Initial Class
Actual 1.13% $1,000.00 $1,145.30 $6.11
Hypothetical (h) 1.13% $1,000.00 $1,019.51 $5.75
Service Class
Actual 1.38% $1,000.00 $1,143.50 $7.46
Hypothetical (h) 1.38% $1,000.00 $1,018.25 $7.02
MONEY MARKET SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.60% $1,000.00 $1,024.30 $3.06
Hypothetical (h) 0.60% $1,000.00 $1,022.18 $3.06
Service Class
Actual 0.85% $1,000.00 $1,023.00 $4.33
Hypothetical (h) 0.85% $1,000.00 $1,020.92 $4.33
STRATEGIC
INCOME SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.92% $1,000.00 $1,059.90 $4.78
Hypothetical (h) 0.92% $1,000.00 $1,020.57 $4.69
Service Class
Actual 1.17% $1,000.00 $1,058.21 $6.07
Hypothetical (h) 1.17% $1,000.00 $1,019.31 $5.96
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
BOND SERIES
BONDS -- 97.6%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 0.5%
Bombardier, Inc., 6.3%, 2014 (n) ............... $ 1,060,000 $ 996,400
------------
ASSET BACKED & SECURITIZED -- 11.3%
ARCap REIT, Inc., "G", 6.1%, 2045 (n) .......... $ 350,000 $ 316,463
Asset Securitization Corp., FRN,
7.8671%, 2029 ................................ 775,000 841,250
Banc of America Commercial Mortgage, Inc.,
FRN, 5.7755%, 2045 ........................... 680,000 703,646
Bayview Financial Revolving Mortgage Loan
Trust, FRN, 6.15%, 2040 (z) .................. 470,000 470,630
Brazilian Merchant Voucher Receivables
Ltd., 5.911%, 2011 (z) ....................... 641,221 628,204
Capital One Auto Finance Trust,
2.47%, 2010 .................................. 205,291 204,158
Commercial Mortgage Acceptance Corp.,
7.03%, 2031 .................................. 685,124 706,128
Commercial Mortgage Acceptance Corp., FRN,
1.0004%, 2030 (i) ............................ 7,730,300 194,389
Countrywide Asset-Backed Certificates,
FRN, 4.575%, 2035 ............................ 97,712 96,951
CPS Auto Receivables Trust,
3.52%, 2009 (z) .............................. 74,941 74,223
Credit Suisse Mortgage Capital
Certificate, 5.343%, 2039 .................... 1,030,000 1,024,026
CRIIMI MAE Commercial Mortgage Trust,
7%, 2033 (n) ................................. 521,329 515,751
Deutsche Mortgage & Asset Receiving Corp.,
6.538%, 2031 ................................. 378,890 381,395
DLJ Commercial Mortgage Corp., 6.04%, 2031 ..... 625,000 634,416
Drive Auto Receivables Trust,
2.5%, 2009 (n) ............................... 306,549 301,788
Falcon Franchise Loan LLC,
6.5%, 2014 (z) ............................... 440,000 384,261
Falcon Franchise Loan LLC, FRN,
3.8676%, 2025 (i)(z) ......................... 2,543,519 392,897
First Union-Lehman Brothers Commercial
Mortgage Trust, 7%, 2029 (n) ................. 607,000 655,374
GE Commercial Mortgage Corp., FRN,
5.3394%, 2044 ................................ 440,000 440,610
GMAC Commercial Mortgage Securities, Inc.,
6.02%, 2033 .................................. 800,000 814,952
GMAC Commercial Mortgage Securities, Inc.,
FRN, 7.6614%, 2034 (n) ....................... 825,000 895,155
Greenwich Capital Commercial Funding
Corp., 4.305%, 2042 .......................... 589,156 573,547
Greenwich Capital Commercial Funding
Corp., FRN, 5.9123%, 2016 .................... 350,000 365,702
Holmes Financing PLC, FRN,
6.0938%, 2040 ................................ 181,000 181,033
IKON Receivables Funding LLC,
3.27%, 2011 .................................. 332,311 330,641
JPMorgan Chase Commercial Mortgage
Securities Corp., 5.372%, 2047 ............... 820,000 819,106
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.3443%, 2042 (n) ............................ 765,072 748,873
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN, 5.3643%, 2043 ......... 1,168,381 1,170,277
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN, 5.855%, 2043 .......... 681,261 706,324
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN, 5.038%, 2046 .......... 880,000 862,806
Lehman Brothers Commercial Conduit
Mortgage Trust, FRN,
0.9592%, 2030 (i) ............................ 6,330,900 123,478
Morgan Stanley Capital I, Inc.,
5.72%, 2032 .................................. 330,344 332,965
Morgan Stanley Capital I, Inc., FRN,
0.5376%, 2030 (i)(n) ......................... 22,112,417 277,820
Mortgage Capital Funding, Inc., FRN,
0.7028%, 2031 (i) ............................ 6,266,107 43,630
Nomura Asset Acceptance Corp., FRN,
4.423%, 2034 ................................. 445,763 440,348
Prudential Securities Secured Financing
Corp., FRN, 7.379%, 2013 (z) ................. 567,000 600,894
Spirit Master Funding LLC,
5.05%, 2023 (z) .............................. 469,191 451,680
TIAA Real Estate CDO Ltd.,
7.17%, 2032 (n) .............................. 206,764 207,569
TPREF Funding III Ltd., CDO,
5.34% to 2008, FRN to 2033 (z) ............... 1,075,000 1,066,602
Wachovia Bank Commercial Mortgage Trust,
FRN, 4.847%, 2041 ............................ 551,473 534,151
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.1959%, 2044 ........................... 391,000 388,443
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.3161%, 2044 ........................... 600,000 599,526
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.962%, 2045 (n) ........................ 680,000 711,881
------------
$ 22,213,963
------------
AUTOMOTIVE -- 1.0%
Ford Motor Credit Co., 5.8%, 2009 .............. $ 926,000 $ 909,187
Johnson Controls, Inc., 5.5%, 2016 ............. 1,050,000 1,029,517
------------
$ 1,938,704
------------
BROADCASTING -- 1.3%
CBS Corp., 6.625%, 2011 ........................ $ 933,000 $ 963,667
Clear Channel Communications, Inc.,
7.65%, 2010 .................................. 671,000 702,507
News America Holdings, 8.5%, 2025 .............. 770,000 911,305
------------
$ 2,577,479
------------
BROKERAGE & ASSET MANAGERS -- 2.1%
AMVESCAP PLC, 4.5%, 2009 ....................... $ 684,000 $ 666,828
Lehman Brothers Holdings, Inc.,
5.5%, 2016 ................................... 551,000 550,925
Merrill Lynch & Co., Inc., 6.05%, 2016 ......... 1,102,000 1,140,615
Morgan Stanley Dean Witter, Inc.,
6.6%, 2012 ................................... 1,240,000 1,309,540
Morgan Stanley Group, Inc.,
5.75%, 2016 .................................. 510,000 517,484
------------
$ 4,185,392
------------
BUILDING -- 1.7%
American Standard Cos., Inc.,
7.375%, 2008 ................................. $ 1,150,000 $ 1,169,108
American Standard Cos., Inc.,
7.625%, 2010 ................................. 302,000 316,511
Hanson PLC, 6.125%, 2016 ....................... 1,030,000 1,048,400
Lafarge S.A., 6.5%, 2016 ....................... 877,000 915,693
------------
$ 3,449,712
------------
BUSINESS SERVICES -- 0.5%
Xerox Corp., 6.4%, 2016 ........................ $ 1,020,000 $ 1,041,675
------------
CABLE TV -- 2.7%
Cox Communications, Inc.,
4.625%, 2013 ................................. $ 994,000 $ 935,297
CSC Holdings, Inc., 7.875%, 2007 ............... 975,000 987,188
Rogers Cable, Inc., 5.5%, 2014 ................. 364,000 348,053
TCI Communications Financing III,
9.65%, 2027 .................................. 2,081,000 2,195,653
TCI Communications, Inc., 9.8%, 2012 ........... 439,000 517,667
Time Warner Entertainment Co. LP,
8.375%, 2033 ................................. 266,000 321,485
------------
$ 5,305,343
------------
CHEMICALS -- 0.3%
BCP Crystal Holdings Corp.,
9.625%, 2014 ................................. $ 468,000 $ 517,140
------------
COMPUTER SOFTWARE -- 0.3%
Seagate Technology HDD Holdings,
6.375%, 2011 ................................. $ 170,000 $ 170,000
Seagate Technology HDD Holdings,
6.8%, 2016 ................................... 440,000 442,200
------------
$ 612,200
------------
CONGLOMERATES -- 0.4%
Kennametal, Inc., 7.2%, 2012 ................... $ 816,000 $ 859,317
------------
CONSTRUCTION -- 0.5%
Beazer Homes USA, Inc., 6.875%, 2015 ........... $ 690,000 $ 676,200
D.R. Horton, Inc., 5.625%, 2014 ................ 269,000 259,823
------------
$ 936,023
------------
CONSUMER GOODS & SERVICES -- 0.6%
Fortune Brands, Inc., 5.125%, 2011 ............. $ 940,000 $ 922,412
Service Corp. International,
7.375%, 2014 ................................. 300,000 313,500
------------
$ 1,235,912
------------
DEFENSE ELECTRONICS -- 1.9%
L-3 Communications Corp.,
6.375%, 2015 ................................. $ 1,115,000 $ 1,103,850
Litton Industries, Inc., 8%, 2009 .............. 1,300,000 1,384,609
Raytheon Co., 8.3%, 2010 ....................... 1,228,000 1,333,210
------------
$ 3,821,669
------------
EMERGING MARKET QUASI-SOVEREIGN -- 0.6%
Export-Import Bank of Korea,
5.25%, 2014 (n) .............................. $ 596,000 $ 590,132
Pemex Finance Ltd., 9.69%, 2009 ................ 603,350 651,896
------------
$ 1,242,028
------------
EMERGING MARKET SOVEREIGN -- 0.5%
Republic of Argentina, FRN,
5.59%, 2012 .................................. $ 375,000 $ 353,782
Republic of Panama, 9.375%, 2029 ............... 331,000 441,885
Republic of Panama, 6.7%, 2036 ................. 66,000 68,640
United Mexican States, 8.3%, 2031 .............. 118,000 150,863
------------
$ 1,015,170
------------
ENERGY -- INDEPENDENT -- 1.7%
Anadarko Petroleum Corp., 6.45%, 2036 .......... $ 680,000 $ 687,137
Chesapeake Energy Corp.,
6.375%, 2015 ................................. 1,110,000 1,098,900
Ocean Energy, Inc., 7.25%, 2011 ................ 1,400,000 1,493,666
------------
$ 3,279,703
------------
ENERGY -- INTEGRATED -- 0.7%
TNK-BP Ltd., 6.875%, 2011 (z) .................. $ 1,360,000 $ 1,405,900
------------
ENTERTAINMENT -- 1.1%
Time Warner, Inc., 9.125%, 2013 ................ $ 1,216,000 $ 1,416,628
Time Warner, Inc., 6.5%, 2036 .................. 110,000 109,486
Walt Disney Co., 6.375%, 2012 .................. 660,000 691,703
------------
$ 2,217,817
------------
FINANCIAL INSTITUTIONS -- 3.3%
Allied Capital Corp., 6.625%, 2011 ............. $ 1,000,000 $ 1,016,882
Countrywide Financial Corp.,
6.25%, 2016 .................................. 1,462,000 1,490,117
General Electric Capital Corp.,
8.7%, 2007 ................................... 4,000 4,020
General Motors Acceptance Corp.,
5.85%, 2009 .................................. 696,000 693,363
General Motors Acceptance Corp.,
7.25%, 2011 .................................. 739,000 768,511
HSBC Finance Corp., 6.75%, 2011 ................ 550,000 582,087
HSBC Finance Corp., 5.5%, 2016 ................. 1,402,000 1,408,617
International Lease Finance Corp.,
5.625%, 2013 ................................. 524,000 527,828
------------
$ 6,491,425
------------
FOOD & BEVERAGES -- 1.5%
Dean Foods Co., 7%, 2016 ....................... $ 964,000 $ 973,640
Diageo Capital PLC, 5.5%, 2016 ................. 1,070,000 1,056,408
Miller Brewing Co., 5.5%, 2013 (n) ............. 978,000 967,144
------------
$ 2,997,192
------------
FOREST & PAPER PRODUCTS -- 1.0%
MeadWestvaco Corp., 6.8%, 2032 ................. $ 524,000 $ 498,323
Stone Container Corp., 7.375%, 2014 ............ 645,000 599,850
Stora Enso Oyj, 7.25%, 2036 (z) ................ 823,000 862,634
------------
$ 1,960,807
------------
GAMING & LODGING -- 2.0%
Harrah's Operating Co., Inc.,
5.375%, 2013 ................................. $ 413,000 $ 363,488
Host Marriott LP, 6.75%, 2016 .................. 1,110,000 1,111,380
Marriott International, Inc., 6.2%, 2016 ....... 497,000 501,217
Royal Caribbean Cruises Ltd.,
8%, 2010 ..................................... 705,000 748,276
Starwood Hotels & Resorts Worldwide, Inc.,
7.875%, 2012 ................................. 575,000 607,268
Wyndham Worldwide Corp.,
6%, 2016 (n) ................................. 670,000 658,214
------------
$ 3,989,843
------------
INSURANCE -- 2.0%
American International Group,
4.25%, 2013 .................................. $ 970,000 $ 909,538
ING Groep N.V., 5.775% to 2015,
FRN to 2049 .................................. 902,000 892,552
Prudential Insurance Co.,
7.65%, 2007 (n) .............................. 1,100,000 1,112,714
UnumProvident Corp., 6.85%, 2015 (n) ........... 950,000 987,712
------------
$ 3,902,516
------------
INSURANCE -- PROPERTY & CASUALTY -- 0.9%
AXIS Capital Holdings Ltd.,
5.75%, 2014 .................................. $ 860,000 $ 854,671
Fund American Cos., Inc.,
5.875%, 2013 ................................. 993,000 987,067
------------
$ 1,841,738
------------
MACHINERY & TOOLS -- 0.6%
Case New Holland, Inc., 7.125%, 2014 ........... $ 1,095,000 $ 1,111,425
------------
MAJOR BANKS -- 6.5%
Barclays Bank PLC, 8.55% to 2011,
FRN to 2049 (n) .............................. $ 1,682,000 $ 1,882,237
BNP Paribas, 5.186% to 2015,
FRN to 2049 (n) .............................. 1,147,000 1,101,211
HBOS Capital Funding LP,
6.071% to 2014, FRN to 2049 (n) .............. 1,205,000 1,221,817
MUFG Capital Finance 1 Ltd.,
6.346% to 2016, FRN to 2049 .................. 1,686,000 1,711,101
Natexis AMBS Co. LLC, 8.44% to 2008, FRN
to 2049 (n) .................................. 1,637,000 1,704,739
Royal Bank of Scotland Group PLC,
9.118%, 2049 ................................. 348,000 385,527
Socgen Real Estate LLC,
7.64% to 2007, FRN to 2049 (n) ............... 2,047,000 2,078,640
UniCredito Italiano Capital Trust II,
9.2% to 2010, FRN to 2049 (n) ................ 851,000 954,917
Wachovia Corp., 6.605%, 2025 ................... 1,270,000 1,355,615
Wells Fargo Capital X, 5.95%, 2036 ............. 490,000 480,243
------------
$ 12,876,047
------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.3%
Cardinal Health, Inc., 5.85%, 2017 ............. $ 551,000 $ 547,903
Fisher Scientific International, Inc.,
6.125%, 2015 ................................. 1,115,000 1,102,298
HCA, Inc., 8.75%, 2010 ......................... 838,000 873,615
------------
$ 2,523,816
------------
METALS & MINING -- 1.8%
Corporacion Nacional del Cobre de Chile,
6.375%, 2012 (n) ............................. $ 342,000 $ 356,993
International Steel Group, Inc.,
6.5%, 2014 ................................... 945,000 970,988
Peabody Energy Corp., 5.875%, 2016 ............. 1,525,000 1,486,875
Vale Overseas Ltd., 6.25%, 2017 ................ 663,000 666,014
------------
$ 3,480,870
------------
MORTGAGE BACKED -- 9.6%
Fannie Mae, 6%, 2017 - 2035 .................... $ 2,359,428 $ 2,380,832
Fannie Mae, 5.5%, 2017 - 2035 .................. 6,390,245 6,361,131
Fannie Mae, 4.5%, 2018 ......................... 1,797,268 1,738,048
Fannie Mae, 7.5%, 2030 - 2031 .................. 251,555 261,883
Fannie Mae, 6.5%, 2032 ......................... 947,459 969,176
Freddie Mac, 6%, 2021 - 2034 ................... 780,994 789,617
Freddie Mac, 5%, 2025 - 2035 ................... 4,701,667 4,555,751
Freddie Mac, 5.5%, 2035 ........................ 2,008,665 1,986,884
------------
$ 19,043,322
------------
NATURAL GAS -- PIPELINE -- 2.3%
CenterPoint Energy Resources Corp.,
7.875%, 2013 ................................. $ 1,383,000 $ 1,534,454
Kinder Morgan Energy Partners LP,
5.125%, 2014 ................................. 410,000 390,483
Kinder Morgan Energy Partners LP,
7.4%, 2031 ................................... 581,000 635,960
Kinder Morgan, Inc., 6.8%, 2008 ................ 600,000 607,728
Magellan Midstream Partners LP,
5.65%, 2016 .................................. 733,000 713,622
Williams Cos., Inc., 7.125%, 2011 .............. 689,000 716,560
------------
$ 4,598,807
------------
NETWORK & TELECOM -- 2.3%
AT&T, Inc., 5.1%, 2014 ......................... $ 1,361,000 $ 1,321,462
Deutsche Telekom International Finance
B.V., 8%, 2010 ............................... 548,000 593,392
Telecomunicaciones de Puerto Rico, Inc.,
6.8%, 2009 ................................... 375,000 382,789
Telefonica Emisiones S.A.U.,
7.045%, 2036 ................................. 550,000 584,192
Telefonica Europe B.V., 7.75%, 2010 ............ 981,000 1,053,636
Verizon New York, Inc., 6.875%, 2012 ........... 635,000 658,315
------------
$ 4,593,786
------------
OIL SERVICES -- 0.6%
Halliburton Co., 5.5%, 2010 .................... $ 1,225,000 $ 1,222,823
------------
OILS -- 0.9%
Premcor Refining Group, Inc.,
7.5%, 2015 ................................... $ 1,690,000 $ 1,767,360
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 6.9%
Alfa Diversified Payment Rights Finance
Co., FRN, 7.2531%, 2011 (z) .................. $ 663,000 $ 661,343
Banco Mercantil del Norte S.A.,
5.875% to 2009, FRN to 2014 (n) .............. 1,000,000 1,007,000
Chuo Mitsui Trust & Banking Co., 5.506% to 2015,
FRN to 2049 (n) .............................. 1,114,000 1,064,025
Citigroup, Inc., 5%, 2014 ...................... 938,000 915,860
Credit Suisse (USA), Inc.,
4.875%, 2010 ................................. 1,389,000 1,373,889
Fifth Third Bancorp, 5.45%, 2017 ............... 900,000 889,633
Kazkommerts International B.V.,
8.5%, 2013 ................................... 698,000 749,478
Mizuho Capital Investment 1 Ltd.,
6.686% to 2016, FRN to 2049 (n) .............. 1,550,000 1,563,826
Mizuho Financial Group, Inc.,
5.79%, 2014 (n) .............................. 929,000 934,448
Nordea Bank AB, 5.424% to 2015,
FRN to 2049 (n) .............................. 700,000 671,438
Resona Bank Ltd., 5.85% to 2016,
FRN to 2049 (n) .............................. 1,051,000 1,026,256
Russian Standard Finance S.A.,
8.625%, 2011 (n) ............................. 605,000 602,731
UBS Preferred Funding Trust V,
6.243% to 2016, FRN to 2049 .................. 1,030,000 1,066,552
UFJ Finance Aruba AEC, 6.75%, 2013 ............. 1,028,000 1,097,050
------------
$ 13,623,529
------------
PHARMACEUTICALS -- 0.4%
Wyeth, 5.5%, 2013 .............................. $ 864,000 $ 869,590
------------
PRINTING & PUBLISHING -- 0.8%
Dex Media West LLC, 9.875%, 2013 ............... $ 659,000 $ 718,310
Idearc, Inc., 8%, 2016 (n) ..................... 870,000 883,050
------------
$ 1,601,360
------------
RAILROAD & SHIPPING -- 1.0%
CSX Corp., 6.3%, 2012 .......................... $ 826,000 $ 855,973
TFM S.A. de C.V., 9.375%, 2012 ................. 968,000 1,033,340
------------
$ 1,889,313
------------
REAL ESTATE -- 3.6%
EOP Operating LP, 6.8%, 2009 ................... $ 1,137,000 $ 1,174,917
EOP Operating LP, 4.75%, 2014 .................. 1,119,000 1,108,515
HRPT Properties Trust, REIT,
6.25%, 2016 .................................. 1,027,000 1,058,582
Liberty Property Ltd. Partnership, REIT,
5.5%, 2016 ................................... 660,000 650,667
ProLogis Trust, REIT, 5.625%, 2016 ............. 160,000 158,805
ProLogis, REIT, 5.75%, 2016 .................... 1,113,000 1,119,795
Simon Property Group LP, REIT,
6.35%, 2012 .................................. 629,000 654,716
Simon Property Group LP, REIT,
5.75%, 2015 .................................. 1,200,000 1,217,461
------------
$ 7,143,458
------------
RESTAURANTS -- 0.3%
YUM! Brands, Inc., 8.875%, 2011 ................ $ 466,000 $ 522,745
------------
RETAILERS -- 1.7%
Couche-Tard, Inc., 7.5%, 2013 .................. $ 700,000 $ 715,750
Dollar General Corp., 8.625%, 2010 ............. 725,000 770,313
Federated Retail Holdings, Inc.,
5.9%, 2016 ................................... 520,000 519,191
Home Depot, Inc., 5.25%, 2013 .................. 940,000 933,009
Home Depot, Inc., 5.4%, 2016 ................... 463,000 452,835
------------
$ 3,391,098
------------
SUPRANATIONAL -- 0.3%
Corporacion Andina de Fomento,
6.875%, 2012 ................................. $ 481,000 $ 511,506
------------
TELECOMMUNICATIONS -- WIRELESS -- 1.4%
Mobile TeleSystems OJSC,
9.75%, 2008 (n) .............................. $ 559,000 $ 578,565
Nextel Communications, Inc.,
5.95%, 2014 .................................. 1,570,000 1,528,891
Rogers Wireless, Inc., 7.25%, 2012 ............. 535,000 567,100
------------
$ 2,674,556
------------
TOBACCO -- 0.5%
Reynolds American, Inc., 7.25%, 2012 ........... $ 881,000 $ 918,443
------------
TRANSPORTATION -- SERVICES -- 0.6%
FedEx Corp., 9.65%, 2012 ....................... $ 1,052,000 $ 1,252,826
------------
U.S. GOVERNMENT AGENCIES -- 3.7%
Small Business Administration,
4.34%, 2024 .................................. $ 1,128,219 $ 1,075,419
Small Business Administration,
4.93%, 2024 .................................. 1,584,536 1,563,533
Small Business Administration,
4.99%, 2024 .................................. 712,098 703,482
Small Business Administration,
4.625%, 2025 ................................. 1,087,245 1,049,974
Small Business Administration,
4.86%, 2025 .................................. 637,922 625,126
Small Business Administration,
5.11%, 2025 .................................. 2,245,161 2,229,181
------------
$ 7,246,715
------------
U.S. TREASURY OBLIGATIONS -- 2.7%
U.S. Treasury Bonds, 6.25%, 2023 ............... $ 963,000 $ 1,108,428
U.S. Treasury Bonds, 5.375%, 2031 (f) .......... 2,255,000 2,415,493
U.S. Treasury Bonds, 4.5%, 2036 ................ 585,000 556,299
U.S. Treasury Notes, TIPS, 2%, 2014 ............ 1,220,666 1,184,762
------------
$ 5,264,982
------------
UTILITIES -- ELECTRIC POWER -- 7.4%
Allegheny Energy Supply Co. LLC,
8.25%, 2012 (n) .............................. $ 1,110,000 $ 1,218,225
Beaver Valley Funding Corp., 9%, 2017 .......... 2,022,000 2,270,686
DPL, Inc., 6.875%, 2011 ........................ 614,000 644,762
Empresa Nacional de Electricidad S.A.,
8.35%, 2013 .................................. 520,000 589,814
Enersis S.A., 7.375%, 2014 ..................... 686,000 738,288
Exelon Generation Co. LLC,
6.95%, 2011 .................................. 976,000 1,028,185
FirstEnergy Corp., 6.45%, 2011 ................. 702,000 732,053
MidAmerican Energy Holdings Co.,
6.125%, 2036 ................................. 706,000 711,686
NiSource Finance Corp.,
7.875%, 2010 ................................. 755,000 814,541
NorthWestern Corp., 5.875%, 2014 ............... 680,000 668,126
NRG Energy, Inc., 7.375%, 2016 ................. 1,110,000 1,115,550
PSEG Power LLC, 5.5%, 2015 ..................... 284,000 277,967
Spectra Energy Capital LLC, 8%, 2019 ........... 942,000 1,095,127
System Energy Resources, Inc.,
5.129%, 2014 (n) ............................. 749,440 731,783
TXU Energy Co., 7%, 2013 ....................... 1,105,000 1,156,226
Waterford 3 Funding Corp.,
8.09%, 2017 .................................. 856,737 863,068
------------
$ 14,656,087
------------
Total Bonds
(Identified Cost, $192,741,299) .......... $192,819,532
------------
SHORT-TERM OBLIGATIONS -- 1.2%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized Cost
and Value (y) ................................ $ 2,312,000 $ 2,311,660
------------
Total Investments
(Identified Cost, $195,052,959) (k) ...... $195,131,192
------------
OTHER ASSETS,
LESS LIABILITIES -- 1.2% ..................... 2,331,408
------------
Net Assets -- 100.0% ....................... $197,462,600
============
FUTURES CONTRACTS OUTSTANDING AT 12/31/06:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Note 5 year (Short) ................................... 30 $3,151,875 Mar-07 $23,567
SWAP AGREEMENTS AT 12/31/06
UNREALIZED
NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION
EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS
3/20/11 USD 520,000 Citibank, N.A. (1) 0.65% (fixed rate) $(7,168)
3/20/11 USD 520,000 Merrill Lynch International (2) 0.43% (fixed rate) (1,189)
-------
$(8,357)
=======
(1) Series to receive notional amount upon a defined credit default event by Autozone, Inc., 5.875%, 10/15/12.
(2) Series to receive notional amount upon a defined credit default event by New York Times Co., 4.61%, 9/26/12.
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these derivative contracts.
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
EMERGING MARKETS EQUITY SERIES
COMMON STOCKS -- 99.1%
ISSUER SHARES/PAR VALUE ($)
ALCOHOLIC BEVERAGES -- 1.9%
Anadolu Efes Biracilik ve Malt
Sanayii A.S .................................. 19,141 $ 590,938
Companhia de Bebidas das Americas, ADR ......... 20,650 1,007,720
Grupo Modelo S.A. de C.V., "C" ................. 90,770 504,159
------------
$ 2,102,817
------------
AUTOMOTIVE -- 1.3%
Denway Motors Ltd. ............................. 1,038,000 $ 420,364
Hyundai Mobis (a) .............................. 5,371 496,096
PT Astra International Tbk ..................... 302,000 527,203
------------
$ 1,443,663
------------
BROADCASTING -- 1.1%
Grupo Televisa S.A., ADR ....................... 45,000 $ 1,215,450
------------
BUSINESS SERVICES -- 0.9%
CITIC Pacific Ltd. ............................. 144,000 $ 497,078
Sime Darby Berhad .............................. 239,900 489,592
------------
$ 986,670
------------
CABLE TV -- 0.6%
Naspers Ltd. ................................... 25,830 $ 611,361
------------
CHEMICALS -- 0.9%
Israel Chemicals Ltd. .......................... 147,910 $ 925,008
------------
COMPUTER SOFTWARE -- SYSTEMS -- 2.5%
Hcl Technologies ............................... 144,890 $ 2,100,021
High Tech Computer Corp. ....................... 29,400 581,955
------------
$ 2,681,976
------------
CONGLOMERATES -- 0.6%
Alfa S.A de C.V., "A" .......................... 89,980 $ 595,493
------------
CONSTRUCTION -- 0.8%
Consorcio ARA S.A. de C.V ...................... 55,330 $ 374,835
Corporacion Moctezuma S.A. de C.V .............. 201,300 505,265
------------
$ 880,100
------------
CONSUMER GOODS & SERVICES -- 1.0%
Kimberly-Clark de Mexico S.A. de
C.V., "A" .................................... 235,850 $ 1,084,835
------------
ELECTRONICS -- 9.9%
ASM Pacific Technology Ltd. .................... 209,500 $ 1,166,246
MediaTek, Inc. ................................. 44,938 464,757
Samsung Electronics Co. Ltd. ................... 8,895 5,863,048
Taiwan Semiconductor Manufacturing
Co. Ltd. ..................................... 576,341 1,193,893
Taiwan Semiconductor Manufacturing Co.
Ltd., ADR (l) ................................ 188,119 2,056,141
------------
$ 10,744,085
------------
ENERGY -- INDEPENDENT -- 3.2%
CNOOC Ltd. ..................................... 1,047,000 $ 994,739
First Uranium Corp. ............................ 29,810 207,792
First Uranium Corp. (a) ........................ 37,300 260,002
Oil & Natural Gas Corp. Ltd. ................... 21,614 425,492
Reliance Industries Ltd. ....................... 54,280 1,557,699
------------
$ 3,445,724
------------
ENERGY -- INTEGRATED -- 13.8%
LUKOIL, ADR .................................... 43,460 $ 3,798,404
MOL Hungarian Oil & Gas ........................ 4,680 530,598
OAO Gazprom, ADR (l) ........................... 28,010 648,432
PetroChina Co. Ltd. ............................ 1,660,000 2,351,840
Petroleo Brasileiro S.A., ADR .................. 54,170 5,578,968
Sasol Ltd. ..................................... 57,210 2,110,983
------------
$ 15,019,225
------------
FOOD & BEVERAGES -- 1.6%
Coca-Cola Hellenic Bottling Co. S.A ............ 14,400 $ 562,530
Embotelladoras Arca S.A. de C.V ................ 165,400 673,805
Grupo Continential S.A ......................... 250,660 533,776
------------
$ 1,770,111
------------
FOREST & PAPER PRODUCTS -- 1.8%
Aracruz Celulose S.A., ADR (l) ................. 15,430 $ 944,933
Votorantim Celulose e Papel S.A., ADR .......... 52,045 1,020,602
------------
$ 1,965,535
------------
GAMING & LODGING -- 0.5%
Resorts World Berhad ........................... 137,400 $ 568,605
------------
GENERAL MERCHANDISE -- 2.1%
Massmart Holdings Ltd. ......................... 61,040 $ 610,966
Shinsegae Co. Ltd. (a) ......................... 799 498,301
Wal-Mart de Mexico S.A. de C.V ................. 254,700 1,121,545
------------
$ 2,230,812
------------
INSURANCE -- 1.0%
Sanlam Ltd. .................................... 421,403 $ 1,099,547
------------
INTERNET -- 1.0%
NHN Corp. ...................................... 4,658 $ 571,482
Universo Online S.A., IPS (a) .................. 84,800 461,137
------------
$ 1,032,619
------------
MAJOR BANKS -- 4.8%
First Financial Holding Co. .................... 683,000 $ 518,774
Kookmin Bank (a) ............................... 29,771 2,397,686
Korea Exchange Bank (a) ........................ 17,860 246,775
Malayan Banking Berhad ......................... 192,800 644,853
Standard Bank Group Ltd. ....................... 102,620 1,382,703
------------
$ 5,190,791
------------
METALS & MINING -- 10.6%
Anglo American PLC ............................. 22,970 $ 1,120,677
China Steel Corp. .............................. 447,506 475,179
Companhia Siderurgica Nacional
S.A., ADR (l) ................................ 13,560 406,529
Companhia Vale do Rio Doce, ADR ................ 120,270 3,576,830
Grupo Mexico SAB ............................... 279,500 1,024,245
KGHM Polska Miedz S.A .......................... 13,240 405,639
Mining & Metallurgical Co. Norilsk
Nickel, ADR .................................. 5,830 921,140
POSCO, ADR ..................................... 26,240 2,169,261
Southern Copper Corp. .......................... 9,030 486,627
Ternium S.A., ADR (a) .......................... 17,220 509,195
Usinas Siderurgicas de Minas Gerais
S.A., IPS .................................... 10,700 403,443
------------
$ 11,498,765
------------
NATURAL GAS -- PIPELINE -- 1.4%
Gazprom OAO, ADR ............................... 22,900 $ 1,053,400
Transneft, IPS ................................. 190 436,050
------------
$ 1,489,450
------------
OIL SERVICES -- 1.0%
Addax Petroleum Corp. (a)(n) ................... 40,330 $ 1,133,491
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 10.6%
Absa Group Ltd. ................................ 63,484 $ 1,132,366
African Bank Investments Ltd. .................. 264,410 1,078,224
Ayala Corp. .................................... 39,960 464,651
Banco Nossa Caixa S.A .......................... 33,740 758,557
Banco Santander Chile, ADR ..................... 10,580 509,533
Cathay Financial Holding Co. Ltd. .............. 428,894 974,011
FirstRand Ltd. ................................. 396,070 1,253,690
Hana Financial Group, Inc. ..................... 10,420 547,890
MCB Bank Ltd. .................................. 132,000 533,594
OTP Bank Ltd., GDR ............................. 9,660 885,822
PT Bank Central Asia Tbk ....................... 824,500 476,722
Sberbank ....................................... 230 793,500
Shinhan Financial Group Co. Ltd. (a) ........... 13,210 674,704
Turkiye Garanti Bankasi ........................ 158,160 522,326
Unibanco -- Uniao de Bancos Brasileiros
S.A., ADR .................................... 9,740 905,430
------------
$ 11,511,020
------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.3%
Hon Hai Precision Industry Co. Ltd. ............ 356,484 $ 2,543,579
------------
PHARMACEUTICALS -- 1.1%
Gedeon Richter Rt .............................. 5,280 $ 1,203,898
------------
PRECIOUS METALS & MINERALS -- 1.0%
Impala Platinum Holdings Ltd. .................. 41,020 $ 1,076,165
------------
SPECIALTY CHEMICALS -- 0.5%
LG Chemical Ltd. (a) ........................... 11,160 $ 517,200
------------
SPECIALTY STORES -- 2.3%
Edgars Consolidated Stores Ltd. ................ 108,550 $ 603,769
Ellerine Holdings Ltd. ......................... 52,113 577,712
Foschini Ltd. .................................. 74,280 607,924
Truworths International Ltd. ................... 149,980 685,159
------------
$ 2,474,564
------------
TELECOMMUNICATIONS -- WIRELESS -- 6.2%
China Mobile Ltd. .............................. 405,000 $ 3,498,988
Egyptian Mobil Services (MobiNil) .............. 21,330 672,252
Globe Telecom, Inc. ............................ 44,530 1,121,880
Vimpel-Communications, ADR (a) ................. 18,350 1,448,733
------------
$ 6,741,853
------------
TELEPHONE SERVICES -- 4.9%
China Netcom Group Corp. Ltd. .................. 209,000 $ 560,235
China Telecom Corp. Ltd. ....................... 1,316,000 720,748
KT Corp., ADR .................................. 21,080 534,378
Orascom Telecom Holding (S.A.E) ................ 17,900 1,183,241
Philippine Long Distance Telephone Co. ......... 21,220 1,103,856
PT Telekomunikasi Indonesia Tbk ................ 717,500 805,776
Telecom Egypt .................................. 176,040 437,692
------------
$ 5,345,926
------------
TOBACCO -- 0.8%
KT&G Corp. (a) ................................. 14,821 $ 900,416
------------
TRUCKING -- 1.0%
Imperial Holdings .............................. 47,730 $ 1,116,025
------------
UTILITIES -- ELECTRIC POWER -- 4.1%
AES Tiete S.A., IPS ............................ 10,755,590 $ 313,852
Energias do Brasil S.A ......................... 34,440 532,328
Enersis S.A., ADR .............................. 69,460 1,111,360
Equatorial Energia S.A., IEU (a) ............... 63,540 560,997
First Philippine Holdings Corp. ................ 498,900 641,181
Inversiones Aguas Metropolitanas
S.A., ADR (n) ................................ 18,450 454,101
Manila Water Co., Inc. ......................... 4,413,000 846,230
------------
$ 4,460,049
------------
Total Common Stocks
(Identified Cost, $81,028,180) ........... $107,606,828
------------
COLLATERAL FOR SECURITIES LOANED -- 1.9%
Navigator Securities Lending
Prime Portfolio, at Cost and
Net Asset Value .............................. 2,067,068 $ 2,067,068
------------
Total Investments
(Identified Cost, $83,095,248) (k) ....... $109,673,896
------------
OTHER ASSETS,
LESS LIABILITIES -- (1.0)% ................... (1,078,732)
------------
Net Assets -- 100.0% ....................... $108,595,164
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
GLOBAL GOVERNMENTS SERIES
BONDS -- 85.4%
ISSUER SHARES/PAR VALUE ($)
FOREIGN BONDS -- 58.2%
AUSTRALIA -- 1.2%
Commonwealth of Australia,
6.5%, 2013 ................................... AUD 313,000 $ 253,968
Commonwealth of Australia,
6%, 2017 ..................................... AUD 321,000 255,705
------------
$ 509,673
------------
AUSTRIA -- 1.4%
Republic of Austria, 5%, 2012 .................. EUR 429,000 $ 595,065
------------
BELGIUM -- 0.8%
Kingdom of Belgium, 3.75%, 2009 ................ EUR 140,000 $ 184,131
Kingdom of Belgium, 5%, 2012 ................... EUR 106,000 147,287
------------
$ 331,418
------------
BULGARIA -- 0.3%
Republic of Bulgaria, 8.25%, 2015 .............. $ 100,000 $ 118,390
------------
CANADA -- 6.7%
Canada Housing Trust, 4.6%, 2011 ............... CAD 475,000 $ 416,274
Government of Canada, 5.5%, 2009 ............... CAD 926,000 822,438
Government of Canada, 4.5%, 2015 ............... CAD 388,000 342,875
Government of Canada, 8%, 2023 ................. CAD 346,000 431,278
Government of Canada, 5.75%, 2033 .............. CAD 242,000 261,133
Quebec Province, 1.6%, 2013 .................... JPY 75,000,000 634,493
------------
$ 2,908,491
------------
DENMARK -- 1.0%
Kingdom of Denmark, 4%, 2015 ................... DKK 2,451,000 $ 436,351
------------
FINLAND -- 1.7%
Republic of Finland, 3%, 2008 .................. EUR 494,000 $ 643,742
Republic of Finland, 5.375%, 2013 .............. EUR 77,000 109,786
------------
$ 753,528
------------
FRANCE -- 3.3%
Republic of France, 6%, 2025 ................... EUR 260,000 $ 427,910
Republic of France, 4.75%, 2035 ................ EUR 681,000 991,204
------------
$ 1,419,114
------------
GERMANY -- 18.0%
Federal Republic of Germany,
3.5%, 2008 ................................... EUR 302,000 $ 395,934
Federal Republic of Germany,
5.25%, 2010 .................................. EUR 335,000 460,862
Federal Republic of Germany,
3.75%, 2015 .................................. EUR 1,304,000 1,696,861
Federal Republic of Germany,
6.25%, 2024 .................................. EUR 927,000 1,546,756
Federal Republic of Germany,
6.25%, 2030 .................................. EUR 1,172,000 2,029,797
KfW Bankengruppe, FRN,
3.528%, 2007 ................................. EUR 1,295,000 1,708,361
------------
$ 7,838,571
------------
IRELAND -- 1.0%
Republic of Ireland, 4.6%, 2016 ................ EUR 313,000 $ 432,860
------------
JAPAN -- 7.4%
Development Bank of Japan,
1.4%, 2012 ................................... JPY 109,000,000 $ 921,011
Development Bank of Japan,
1.6%, 2014 ................................... JPY 10,000,000 84,678
Development Bank of Japan,
1.05%, 2023 .................................. JPY 248,000,000 1,789,775
Japan Finance Corp. for Municipal
Enterprises, 2%, 2016 ........................ JPY 50,000,000 433,394
------------
$ 3,228,858
------------
MALAYSIA -- 1.1%
Petronas Capital Ltd., 7.875%, 2022 ............ $ 393,000 $ 483,649
------------
MEXICO -- 1.1%
United Mexican States, 8.125%, 2019 ............ $ 288,000 $ 349,920
United Mexican States, 10%, 2024 ............... MXN 1,060,000 121,597
------------
$ 471,517
------------
NETHERLANDS -- 1.5%
Intergas Finance B.V., 6.875%, 2011 ............ $ 105,000 $ 108,150
Kingdom of Netherlands, 5%, 2012 ............... EUR 409,354 568,122
------------
$ 676,272
------------
RUSSIA -- 0.6%
Gazprom International S.A.,
7.201%, 2020 ................................. $ 266,000 $ 280,630
------------
SOUTH AFRICA -- 0.3%
Republic of South Africa,
7.375%, 2012 ................................. $ 104,000 $ 111,800
------------
SPAIN -- 1.8%
Kingdom of Spain, 5.35%, 2011 .................. EUR 562,000 $ 785,905
------------
TUNISIA -- 0.3%
Banque Centrale de Tunisie,
7.375%, 2012 ................................. $ 119,000 $ 128,877
------------
UNITED KINGDOM -- 8.7%
Network Rail MTN Finance PLC, FRN,
3.618%, 2007 ................................. EUR 1,284,000 $ 1,694,150
United Kingdom Treasury, 5.75%, 2009 ........... GBP 176,000 350,367
United Kingdom Treasury, 8%, 2015 .............. GBP 436,000 1,051,732
United Kingdom Treasury, 8%, 2021 .............. GBP 133,000 351,145
United Kingdom Treasury, 4.25%, 2036 ........... GBP 165,000 325,560
------------
$ 3,772,954
------------
Total Foreign Bonds ........................ $ 25,283,923
------------
U.S. BONDS -- 27.2%
ASSET BACKED & SECURITIZED -- 9.7%
Bayview Commercial Asset Trust,
4.83%, 2023 (n) .............................. CAD 150,000 $ 128,766
Citigroup/Deutsche Bank Commercial
Mortgage Trust, 5.648%, 2048 ................. $ 300,000 305,643
Commercial Mortgage Asset Trust, FRN,
0.8834%, 2032 (i)(n) ......................... 8,134,752 315,000
Commercial Mortgage Pass-Through
Certificates, FRN, 5.54%, 2017 (n) ........... 331,000 331,016
Commercial Mortgage Pass-Through
Certificates, FRN, 5.55%, 2017 (n) ........... 500,000 500,170
Credit Suisse Commercial Mortgage Trust,
5.509%, 2039 ................................. 122,389 123,353
Deutsche Mortgage & Asset Receiving Corp.,
6.538%, 2031 ................................. 162,923 164,000
First Union National Bank Commercial
Mortgage Trust, FRN,
0.9457%, 2043 (i)(n) ......................... 8,758,789 282,755
IMPAC CMB Trust, FRN, 5.7%, 2036 ............... 481,483 483,504
JPMorgan Chase Commercial Mortgage
Securities Corp., 5.44%, 2045 (z) ............ 101,869 102,202
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.2115%, 2041 ................................ 309,615 308,458
Lehman Brothers Floating Rate Commercial
Mortgage Trust, FRN, 5.51%, 2018 (n) ......... 500,000 500,008
Merrill Lynch/Countrywide Commercial
Mortgage Trust, FRN, 5.204%, 2049 ............ 175,000 172,252
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.795%, 2045 ............................ 170,000 174,923
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.603%, 2048 ............................ 300,000 304,172
------------
$ 4,196,222
------------
EMERGING MARKET QUASI-SOVEREIGN -- 0.3%
Pemex Project Funding Master Trust,
8.625%, 2022 ................................. $ 120,000 $ 148,320
------------
MORTGAGE BACKED -- 0.3%
Fannie Mae, 4.98%, 2015 ........................ $ 45,268 $ 44,632
Fannie Mae, 5.423%, 2016 ....................... 73,397 74,568
------------
$ 119,200
------------
U.S. GOVERNMENT AGENCIES -- 6.4%
Aid-Egypt, 4.45%, 2015 ......................... $ 252,000 $ 243,510
Fannie Mae, 4.25%, 2007 ........................ 885,000 877,892
Fannie Mae, 6%, 2011 ........................... 444,000 462,307
Freddie Mac, 4.2%, 2007 ........................ 549,000 544,020
Small Business Administration,
5.09%, 2025 .................................. 55,538 55,016
Small Business Administration,
5.21%, 2026 .................................. 586,067 584,544
------------
$ 2,767,289
------------
U.S. TREASURY OBLIGATIONS -- 10.5%
U.S. Treasury Bonds, 8%, 2021 .................. $ 237,000 $ 314,173
U.S. Treasury Bonds, 5.25%, 2028 ............... 591,000 619,765
U.S. Treasury Notes, 4%, 2010 .................. 1,486,000 1,454,075
U.S. Treasury Notes, 4.25%, 2013 ............... 1,267,000 1,233,544
U.S. Treasury Notes, 4%, 2015 (f) .............. 1,011,000 963,096
------------
$ 4,584,653
------------
Total U.S. Bonds ........................... $ 11,815,684
------------
Total Bonds
(Identified Cost, $36,319,386) ........... $ 37,099,607
------------
CALL OPTIONS PURCHASED -- 0.0%
NUMBER
ISSUER/EXPIRATION/STRIKE PRICE OF CONTRACTS VALUE ($)
JPY Currency - January 2007 @ $0.9759
(Premiums Paid, $9,619) ...................... JPY 78,394,500 $ 78
------------
PUT OPTIONS PURCHASED -- 0.1%
USD Currency - January 2007 @ EUR 0.96631
(Premiums Paid, $9,558) ...................... $ 688,500 $ 24,465
------------
SHORT-TERM OBLIGATIONS -- 11.3%
ISSUER SHARES/PAR VALUE ($)
Fannie Mae, 5.155%, due 1/17/07 (y) ............ $ 1,000,000 $ 997,709
Federal Home Loan Bank,
4.95%, due 1/02/07 (y) ....................... 3,928,000 3,927,460
------------
Total Short-Term Obligations,
at Amortized Cost and Value .............. $ 4,925,169
------------
REPURCHASE AGREEMENTS -- 4.5%
Merrill Lynch, 5.32%, dated 12/29/06, due
1/02/07, total to be received $1,946,150
(secured by various U.S. Treasury and
Federal Agency obligations and Mortgage
Backed securities in a jointly traded
account), at Cost ............................ $ 1,945,000 $ 1,945,000
------------
Total Investments
(Identified Cost, $43,208,732) (k) ....... $ 43,994,319
------------
OTHER ASSETS,
LESS LIABILITIES -- (1.3)% ................... (564,617)
------------
Net Assets -- 100.0% ....................... $ 43,429,702
============
FUTURES CONTRACTS OUTSTANDING AT 12/31/06:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
Japan Government Bond 10 yr (Long) ............................ 3 $3,378,134 Mar-07 $67
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 663,172 2/06/07 $ 521,464 $ 523,213 $ (1,749)
CAD 2,087,395 1/22/07 - 2/06/07 1,837,280 1,793,900 43,380
DKK 5,050,180 1/02/07 - 2/15/07 891,083 894,832 (3,749)
EUR 1,506,501 1/10/07 - 2/28/07 1,967,490 1,992,010 (24,520)
GBP 65,000 2/26/07 125,613 127,343 (1,730)
JPY 293,612,992 1/10/07 - 2/20/07 2,515,687 2,475,886 39,801
MXN 1,131,097 1/05/07 104,248 104,690 (442)
NZD 234,321 2/5/07 160,379 165,071 (4,692)
----------- ----------- ---------
$ 8,123,244 $ 8,076,945 $ 46,299
=========== =========== =========
PURCHASES
BRL 236,551 1/29/07 $ 109,591 $ 110,165 $ 574
DKK 2,525,090 1/02/07 444,740 446,989 2,249
EUR 2,012,684 1/29/07 - 5/17/07 2,663,031 2,660,443 (2,588)
GBP 94,686 2/26/07 - 2/28/07 180,516 185,501 4,985
JPY 1,589,086,311 1/18/07 - 2/20/07 13,558,180 13,384,691 (173,489)
MXN 717,263 1/05/07 65,709 66,387 678
MYR 343,365 1/26/07 97,105 97,463 358
NOK 764,929 1/08/07 118,265 122,778 4,513
NZD 234,321 2/05/07 163,681 165,071 1,390
PLN 249,134 1/08/07 86,688 85,794 (894)
RUB 1,723,286 1/22/07 65,499 65,441 (58)
SEK 3,882,925 2/06/07 576,084 568,540 (7,544)
----------- ----------- ---------
$18,129,089 $17,959,263 $(169,826)
=========== =========== =========
At December 31, 2006, forward foreign currency purchases and sales under master netting agreements excluded above
amounted to a net payable of $2,209 with Goldman Sachs & Co. and a net receivable of $48,363 with Merrill Lynch
International Bank.
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these derivative
contracts.
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
GLOBAL TOTAL RETURN SERIES
COMMON STOCKS -- 58.7%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 2.4%
Lockheed Martin Corp. .......................... 25,890 $ 2,383,692
Northrop Grumman Corp. ......................... 16,430 1,112,311
United Technologies Corp. ...................... 13,440 840,269
------------
$ 4,336,272
------------
ALCOHOLIC BEVERAGES -- 0.4%
Diageo PLC ..................................... 39,388 $ 773,382
------------
APPAREL MANUFACTURERS -- 0.5%
NIKE, Inc., "B" ................................ 8,600 $ 851,658
------------
AUTOMOTIVE -- 2.0%
Autoliv, Inc., SDR ............................. 6,440 $ 388,929
Bayerische Motoren Werke AG .................... 21,630 1,242,045
Continental AG ................................. 3,787 440,315
Johnson Controls, Inc. ......................... 3,570 306,734
Nissan Motor Co. Ltd. (l) ...................... 32,200 387,606
PSA Peugeot Citroen S.A ........................ 12,230 810,256
------------
$ 3,575,885
------------
BROADCASTING -- 1.5%
Fuji Television Network, Inc. .................. 264 $ 603,200
Nippon Television Network Corp. ................ 3,360 498,447
Viacom, Inc., "B" (a) .......................... 14,373 589,724
Vivendi S.A .................................... 14,340 560,376
WPP Group PLC .................................. 37,800 511,212
------------
$ 2,762,959
------------
BROKERAGE & ASSET MANAGERS -- 1.8%
Franklin Resources, Inc. ....................... 3,990 $ 439,578
Goldman Sachs Group, Inc. ...................... 7,600 1,515,060
Lehman Brothers Holdings, Inc. ................. 5,730 447,628
Mellon Financial Corp. ......................... 10,890 459,014
Merrill Lynch & Co., Inc. ...................... 4,830 449,673
------------
$ 3,310,953
------------
BUSINESS SERVICES -- 0.3%
Accenture Ltd., "A" ............................ 17,110 $ 631,872
------------
CABLE TV -- 0.1%
Premiere AG (a)(l) ............................. 9,280 $ 155,541
------------
CHEMICALS -- 1.9%
Dow Chemical Co. ............................... 9,240 $ 369,046
Nalco Holding Co. (a) .......................... 11,330 231,812
PPG Industries, Inc. ........................... 10,000 642,100
Syngenta AG .................................... 11,270 2,096,078
------------
$ 3,339,036
------------
COMPUTER SOFTWARE -- 0.3%
Oracle Corp. (a) ............................... 29,490 $ 505,459
------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.2%
Hewlett-Packard Co. ............................ 7,190 $ 296,156
------------
CONSTRUCTION -- 1.6%
CRH PLC ........................................ 12,460 $ 518,647
Fletcher Building Ltd. ......................... 55,218 430,833
Geberit AG ..................................... 280 431,405
Masco Corp. .................................... 41,650 1,244,086
Sherwin-Williams Co. ........................... 3,400 216,172
------------
$ 2,841,143
------------
CONSUMER GOODS & SERVICES -- 1.0%
Kao Corp. (l) .................................. 33,000 $ 889,832
Uni-Charm Corp. (l) ............................ 15,600 926,473
------------
$ 1,816,305
------------
ELECTRICAL EQUIPMENT -- 0.6%
Rockwell Automation, Inc. ...................... 4,960 $ 302,957
Spectris PLC ................................... 23,970 367,835
W.W. Grainger, Inc. ............................ 5,580 390,265
------------
$ 1,061,057
------------
ELECTRONICS -- 1.8%
Intel Corp. .................................... 26,880 $ 544,320
Konica Minolta Holdings, Inc. (l) .............. 38,000 536,268
OMRON Corp. .................................... 15,300 434,407
Ricoh Co. Ltd. ................................. 21,000 428,661
Samsung Electronics Co. Ltd. ................... 735 484,468
Sony Corp. ..................................... 11,000 471,250
Taiwan Semiconductor Manufacturing Co.
Ltd., ADR (l) ................................ 35,156 384,255
------------
$ 3,283,629
------------
ENERGY -- INDEPENDENT -- 1.2%
Apache Corp. ................................... 7,780 $ 517,448
Devon Energy Corp. ............................. 8,240 552,739
EOG Resources, Inc. ............................ 6,830 426,533
Norsk Hydro A.S.A .............................. 20,600 639,500
------------
$ 2,136,220
------------
ENERGY -- INTEGRATED -- 4.4%
ConocoPhillips ................................. 15,080 $ 1,085,006
Exxon Mobil Corp. .............................. 21,790 1,669,768
Hess Corp. ..................................... 14,590 723,226
Royal Dutch Shell PLC, "A" ..................... 48,420 1,692,811
TOTAL S.A., ADR ................................ 38,030 2,735,118
------------
$ 7,905,929
------------
FOOD & BEVERAGES -- 2.8%
Cadbury Schweppes PLC .......................... 87,620 $ 937,862
CSM N.V ........................................ 11,870 456,961
Kellogg Co. .................................... 10,110 506,107
Nestle S.A ..................................... 6,790 2,412,068
Nong Shim Co. Ltd. (a) ......................... 1,075 329,435
PepsiCo, Inc. .................................. 5,140 321,507
------------
$ 4,963,940
------------
FOOD & DRUG STORES -- 1.0%
Carrefour S.A. (l) ............................. 12,570 $ 762,111
CVS Corp. ...................................... 14,470 447,268
Lawson, Inc. (l) ............................... 18,800 672,754
------------
$ 1,882,133
------------
FOREST & PAPER PRODUCTS -- 0.1%
International Paper Co. ........................ 5,780 $ 197,098
------------
GENERAL MERCHANDISE -- 0.9%
Daiei, Inc. (a)(l) ............................. 12,750 $ 170,935
Federated Department Stores, Inc. .............. 16,980 647,447
METRO AG ....................................... 12,650 806,528
------------
$ 1,624,910
------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.3%
WellPoint, Inc. (a) ............................ 7,170 $ 564,207
------------
INSURANCE -- 3.9%
Aflac, Inc. .................................... 5,410 $ 248,860
Allstate Corp. ................................. 31,690 2,063,336
Benfield Group PLC ............................. 49,580 347,159
Chubb Corp. .................................... 5,420 286,772
Genworth Financial, Inc., "A" .................. 16,650 569,597
Hartford Financial Services
Group, Inc. .................................. 6,680 623,311
Jardine Lloyd Thompson Group PLC ............... 63,420 522,321
Legal & General Group PLC ...................... 232,910 718,479
MetLife, Inc. .................................. 28,010 1,652,870
------------
$ 7,032,705
------------
LEISURE & TOYS -- 0.3%
Heiwa Corp. (l) ................................ 14,600 $ 184,700
NAMCO BANDAI Holdings, Inc. .................... 22,200 325,415
------------
$ 510,115
------------
MACHINERY & TOOLS -- 1.2%
ASSA ABLOY AB, "B" ............................. 22,680 $ 493,558
Deere & Co. .................................... 13,530 1,286,297
GEA Group AG ................................... 15,080 339,724
------------
$ 2,119,579
------------
MAJOR BANKS -- 5.1%
Bank of America Corp. .......................... 39,944 $ 2,132,610
Bank of New York Co., Inc. ..................... 22,140 871,652
BNP Paribas (l) ................................ 6,021 656,755
Credit Agricole S.A ............................ 25,880 1,088,183
DBS Group Holdings Ltd. ........................ 46,000 677,794
Joyo Bank Ltd. ................................. 32,000 176,605
PNC Financial Services Group, Inc. ............. 10,090 747,064
Royal Bank of Scotland Group PLC ............... 21,101 823,675
Shizuoka Bank Ltd. ............................. 32,000 317,460
SunTrust Banks, Inc. ........................... 13,750 1,161,188
Svenska Handelsbanken AB, "A" .................. 19,600 592,564
------------
$ 9,245,550
------------
METALS & MINING -- 0.5%
Anglo American PLC ............................. 18,960 $ 925,034
------------
NATURAL GAS -- DISTRIBUTION -- 0.5%
Tokyo Gas Co. Ltd. (l) ......................... 163,000 $ 866,723
------------
NATURAL GAS -- PIPELINE -- 0.2%
Gazprom OAO, ADR ............................... 6,610 $ 304,060
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 4.3%
Aiful Corp. (l) ................................ 17,300 $ 486,833
American Express Co. ........................... 9,190 557,557
Banche Popolari Unite Scpa ..................... 12,800 351,708
Citigroup, Inc. ................................ 30,473 1,697,346
DNB Holding A.S.A .............................. 27,600 391,872
Fannie Mae ..................................... 17,460 1,036,949
Hachijuni Bank Ltd. ............................ 32,000 209,400
HSBC Holdings PLC .............................. 42,220 769,863
ING Groep N.V .................................. 20,560 911,433
Sapporo Hokuyo Holdings, Inc. .................. 33 318,787
Shinhan Financial Group Co. Ltd. (a) ........... 6,030 307,984
Takefuji Corp. (l) ............................. 15,370 608,112
------------
$ 7,647,844
------------
PHARMACEUTICALS -- 4.5%
Astellas Pharma, Inc. .......................... 20,700 $ 940,712
Eli Lilly & Co. ................................ 8,700 453,270
GlaxoSmithKline PLC ............................ 50,290 1,323,812
Johnson & Johnson .............................. 26,050 1,719,821
Merck & Co., Inc. .............................. 14,520 633,072
Novartis AG .................................... 20,540 1,183,801
Takeda Pharmaceutical Co. Ltd. ................. 7,900 542,173
Tanabe Seiyaku Co. Ltd. ........................ 24,000 313,495
Wyeth .......................................... 18,120 922,670
------------
$ 8,032,826
------------
PRINTING & PUBLISHING -- 0.5%
PagesJaunes Groupe S.A. (l) .................... 15,900 $ 316,229
Reed Elsevier PLC .............................. 52,510 576,452
------------
$ 892,681
------------
RAILROAD & SHIPPING -- 0.6%
Burlington Northern Santa Fe Corp. ............. 4,130 $ 304,835
Canadian National Railway Co. .................. 11,414 491,144
Norfolk Southern Corp. ......................... 4,870 244,912
------------
$ 1,040,891
------------
SPECIALTY CHEMICALS -- 0.9%
Air Products & Chemicals, Inc. ................. 3,660 $ 257,225
L'Air Liquide S.A .............................. 2,102 499,063
L'Air Liquide S.A., Bearer Shares (l) .......... 2,310 548,447
Praxair, Inc. .................................. 4,300 255,119
------------
$ 1,559,854
------------
SPECIALTY STORES -- 0.3%
NEXT PLC ....................................... 7,700 $ 271,462
Praktiker Bau-und Heimwerkermaerkte
Holding AG ................................... 9,460 337,965
------------
$ 609,427
------------
TELECOMMUNICATIONS -- WIRELESS -- 1.1%
KDDI Corp. ..................................... 146 $ 989,727
Vodafone Group PLC ............................. 363,540 1,007,521
------------
$ 1,997,248
------------
TELEPHONE SERVICES -- 2.4%
Embarq Corp. ................................... 3,234 $ 169,979
France Telecom S.A ............................. 37,570 1,038,764
Royal KPN N.V .................................. 20,390 289,818
Singapore Telecommunications Ltd. .............. 288,000 615,882
Sprint Nextel Corp. ............................ 44,060 832,293
Telekom Austria AG ............................. 29,540 791,404
Telenor A.S.A .................................. 26,080 490,583
TELUS Corp. (non-voting shares) ................ 3,760 167,940
------------
$ 4,396,663
------------
TOBACCO -- 1.8%
Altria Group, Inc. ............................. 24,176 $ 2,074,784
British American Tobacco PLC ................... 22,250 622,741
Swedish Match AB ............................... 25,360 474,098
------------
$ 3,171,623
------------
TRUCKING -- 0.8%
TNT N.V ........................................ 35,170 $ 1,512,221
------------
UTILITIES -- ELECTRIC POWER -- 2.7%
Dominion Resources, Inc. (l) ................... 14,110 $ 1,182,982
E.ON AG ........................................ 8,790 1,192,890
FPL Group, Inc. (l) ............................ 11,080 602,974
Scottish Power PLC ............................. 19,410 284,363
SUEZ S.A. (l) .................................. 10,112 523,537
TXU Corp. ...................................... 9,320 505,237
United Utilities PLC ........................... 39,340 601,000
------------
$ 4,892,983
------------
Total Common Stocks
(Identified Cost, $83,834,181) ........... $105,573,771
------------
PORTFOLIO OF INVESTMENTS -- continued
BONDS -- 33.5%
ISSUER SHARES/PAR VALUE ($)
ASSET BACKED & SECURITIZED -- 3.1%
Bayview Commercial Asset Trust,
4.83%, 2023 (n) .............................. CAD 170,000 $ 145,935
Citigroup/Deutsche Bank Commercial
Mortgage Trust, 5.648%, 2048 ................. $ 500,000 509,405
Commercial Mortgage Asset Trust, FRN,
0.8834%, 2032 (i)(n) ......................... 3,907,871 151,324
Commercial Mortgage Pass-Through
Certificates, FRN, 5.54%, 2017 (n) ........... 360,000 360,017
Commercial Mortgage Pass-Through
Certificates, FRN, 5.55%, 2017 (n) ........... 700,000 700,239
Credit Suisse Commercial Mortgage Trust,
5.509%, 2039 ................................. 151,393 152,586
Deutsche Mortgage & Asset Receiving
Corp., 6.538%, 2031 .......................... 135,927 136,825
First Union National Bank Commercial
Mortgage Trust, FRN,
0.9457%, 2043 (i)(n) ......................... 7,992,993 258,033
IMPAC CMB Trust, FRN, 5.7%, 2036 ............... 674,076 676,906
JPMorgan Chase Commercial Mortgage
Securities Corp., 5.44%, 2045 (z) ............ 126,019 126,432
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.2115%, 2041 ................................ 606,421 604,154
Lehman Brothers Floating Rate Commercial
Mortgage Trust, FRN, 5.51%, 2018 (n) ......... 700,000 700,011
Merrill Lynch/Countrywide Commercial
Mortgage Trust, FRN,
5.204%, 2049 ................................. 275,000 270,681
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.795%, 2045 ............................ 210,000 216,081
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.603%, 2048 ............................ 500,000 506,954
------------
$ 5,515,583
------------
EMERGING MARKET QUASI-SOVEREIGN -- 0.6%
Gazprom International S.A.,
7.201%, 2020 ................................. $ 422,000 $ 445,210
Pemex Project Funding Master Trust,
8.625%, 2022 ................................. 143,000 176,748
Petronas Capital Ltd., 7.875%, 2022 ............ 354,000 435,653
------------
$ 1,057,611
------------
EMERGING MARKET SOVEREIGN -- 1.0%
Banque Centrale de Tunisie,
7.375%, 2012 ................................. $ 192,000 $ 207,936
Republic of Argentina, FRN,
5.59%, 2012 .................................. 322,500 304,253
Republic of Bulgaria, 8.25%, 2015 .............. 171,000 202,447
Republic of South Africa,
7.375%, 2012 ................................. 157,000 168,775
United Mexican States,
5.625%, 2017 ................................. 342,000 342,342
United Mexican States,
8.125%, 2019 ................................. 319,000 387,585
United Mexican States, 10%, 2024 ............... MXN 1,610,000 184,690
------------
$ 1,798,028
------------
INTERNATIONAL MARKET QUASI-SOVEREIGN -- 7.0%
Canada Housing Trust, 4.6%, 2011 ............... CAD 781,000 $ 684,443
Development Bank of Japan,
1.4%, 2012 ................................... JPY 172,000,000 1,453,339
Development Bank of Japan,
1.6%, 2014 ................................... JPY 120,000,000 1,016,141
Development Bank of Japan,
1.05%, 2023 .................................. JPY 379,000,000 2,735,180
Japan Finance Corp. for Municipal
Enterprises, 2%, 2016 ........................ JPY 190,000,000 1,646,896
KfW Bankengruppe, FRN,
3.528%, 2007 ................................. EUR 1,720,000 2,269,020
Network Rail MTN Finance PLC, FRN,
3.618%, 2007 ................................. EUR 2,149,000 2,835,457
------------
$ 12,640,476
------------
INTERNATIONAL MARKET SOVEREIGN -- 14.2%
Commonwealth of Australia,
6.5%, 2013 ................................... AUD 504,000 $ 408,944
Commonwealth of Australia,
6%, 2017 ..................................... AUD 517,000 411,836
Federal Republic of Germany,
3.5%, 2008 ................................... EUR 444,000 582,102
Federal Republic of Germany,
5.25%, 2010 .................................. EUR 511,000 702,987
Federal Republic of Germany,
3.75%, 2015 .................................. EUR 2,098,000 2,730,073
Federal Republic of Germany,
6.25%, 2024 .................................. EUR 1,498,000 2,499,504
Federal Republic of Germany,
6.25%, 2030 .................................. EUR 1,908,000 3,304,481
Government of Canada, 5.5%, 2009 ............... CAD 1,417,000 1,258,526
Government of Canada, 4.5%, 2015 ............... CAD 649,000 573,520
Government of Canada, 8%, 2023 ................. CAD 598,000 745,388
Government of Canada, 5.75%, 2033 .............. CAD 391,000 421,913
Kingdom of Belgium, 3.75%, 2009 ................ EUR 295,000 387,991
Kingdom of Belgium, 5%, 2012 ................... EUR 218,000 302,911
Kingdom of Denmark, 4%, 2015 ................... DKK 3,980,000 708,559
Kingdom of Netherlands, 5%, 2012 ............... EUR 631,219 876,037
Kingdom of Spain, 5.35%, 2011 .................. EUR 843,000 1,178,858
Republic of Austria, 5%, 2012 .................. EUR 737,000 1,022,291
Republic of Finland, 3%, 2008 .................. EUR 788,000 1,026,860
Republic of Finland, 5.375%, 2013 .............. EUR 132,000 188,205
Republic of France, 6%, 2025 ................... EUR 393,000 646,803
Republic of France, 4.75%, 2035 ................ EUR 1,098,000 1,598,153
Republic of Ireland, 4.6%, 2016 ................ EUR 524,000 724,661
United Kingdom Treasury,
5.75%, 2009 .................................. GBP 282,000 561,383
United Kingdom Treasury, 8%, 2015 .............. GBP 693,000 1,671,674
United Kingdom Treasury, 8%, 2021 .............. GBP 204,000 538,599
United Kingdom Treasury,
4.25%, 2036 .................................. GBP 267,000 526,816
------------
$ 25,599,075
------------
MAJOR BANKS -- 0.5%
Ulster Bank Finance PLC, FRN,
3.764%, 2008 ................................. EUR 622,000 $ 820,617
------------
MORTGAGE BACKED -- 1.0%
Fannie Mae, 4.98%, 2015 ........................ $ 65,933 $ 65,007
Fannie Mae, 5.423%, 2016 ....................... 107,119 108,829
Freddie Mac, 5%, 2022 - 2025 ................... 1,552,339 1,544,651
------------
$ 1,718,487
------------
NATURAL GAS -- PIPELINE -- 0.1%
Intergas Finance B.V., 6.875%, 2011 ............ $ 171,000 $ 176,130
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 0.1%
HSBK Europe B.V., 7.75%, 2013 (n) .............. $ 216,000 $ 227,880
------------
TELECOMMUNICATIONS -- WIRELESS -- 0.1%
OJSC Vimpel Communications,
8.25%, 2016 .................................. $ 198,000 $ 207,900
------------
U.S. GOVERNMENT AGENCIES -- 1.7%
Aid-Egypt, 4.45%, 2015 ......................... $ 349,000 $ 337,242
Fannie Mae, 4.25%, 2007 ........................ 736,000 730,088
Fannie Mae, 6%, 2011 ........................... 655,000 682,008
Freddie Mac, 4.2%, 2007 ........................ 467,000 462,764
Small Business Administration,
5.09%, 2025 .................................. 71,816 71,142
Small Business Administration,
5.21%, 2026 .................................. 869,333 867,074
------------
$ 3,150,318
------------
U.S. TREASURY OBLIGATIONS -- 4.1%
U.S. Treasury Bonds, 8%, 2021 .................. $ 448,000 $ 593,880
U.S. Treasury Bonds, 5.25%, 2028 ............... 838,000 878,787
U.S. Treasury Notes, 4%, 2010 .................. 2,378,000 2,326,911
U.S. Treasury Notes, 4.25%, 2013 ............... 1,846,000 1,797,255
U.S. Treasury Notes, 4%, 2015 (f) .............. 1,833,000 1,746,147
------------
$ 7,342,980
------------
Total Bonds
(Identified Cost, $59,328,480) ........... $ 60,255,085
------------
PREFERRED STOCKS -- 0.8%
CONSUMER GOODS & SERVICES -- 0.8%
Henkel KGaA, IPS
(Identified Cost, $1,047,261) ................ 10,210 $ 1,502,154
------------
CALL OPTIONS PURCHASED -- 0.0%
NUMBER
ISSUER/EXPIRATION/STRIKE PRICE OF CONTRACTS VALUE ($)
JPY Currency - January 2007 @ $0.9759
(Premiums Paid, $14,820) ..................... $ 120,785,600 $ 121
------------
PUT OPTIONS PURCHASED -- 0.0%
ISSUER SHARES/PAR VALUE ($)
USD Currency - January 2007 @
EUR 0.96631 (Premiums Paid, $14,868) ......... $ 1,071,000 $ 38,057
------------
SHORT-TERM OBLIGATIONS (y) -- 6.8%
General Electric Capital Corp.,
5.29%, due 1/02/07 ........................... $ 4,958,000 $ 4,957,271
Old Line Funding LLC,
5.33%, due 1/02/07 (t) ....................... 7,182,000 7,180,937
------------
Total Short-Term Obligations,
at Amortized Cost and Value .............. $ 12,138,208
------------
COLLATERAL FOR SECURITIES LOANED -- 5.5%
Navigator Securities Lending
Prime Portfolio, at Cost and
Net Asset Value .............................. 9,828,765 $ 9,828,765
------------
Total Investments
(Identified Cost, $166,206,583) (k) ...... $189,336,161
------------
OTHER ASSETS,
LESS LIABILITIES -- (5.3)% ................... (9,490,854)
------------
Net Assets -- 100.0% ....................... $179,845,307
============
FUTURES CONTRACTS OUTSTANDING AT 12/31/06:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
Japan Government Bonds 10 yr (Long) ........................... 4 $4,504,179 Mar-07 $(6,329)
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 1,068,904 2/06/07 $ 840,496 $ 843,317 $ (2,821)
CAD 3,188,278 1/22/07 - 2/06/07 2,805,992 2,739,993 65,999
DKK 7,805,466 1/02/07 - 2/15/07 1,377,728 1,383,107 (5,379)
EUR 2,046,304 1/10/07 - 2/28/07 2,671,678 2,705,901 (34,223)
GBP 96,000 2/26/07 185,520 188,075 (2,555)
JPY 242,717,186 1/10/07 - 1/23/07 2,078,580 2,044,658 33,922
MXN 1,665,185 1/05/07 153,704 154,124 (420)
NZD 359,651 2/05/07 246,160 253,362 (7,202)
----------- ----------- ---------
$10,359,858 $10,312,537 $ 47,321
=========== =========== =========
PURCHASES
BRL 383,008 1/22/07 - 1/29/07 $ 177,383 $ 178,391 $ 1,008
CAD 60,456 2/06/07 53,095 51,957 (1,138)
DKK 3,695,273 1/02/07 650,842 654,134 3,292
EUR 2,505,643 1/29/07 - 5/17/07 3,311,740 3,312,469 729
GBP 212,187 2/26/07 402,862 415,699 12,837
JPY 1,577,688,631 1/18/07 - 2/20/07 13,457,486 13,288,611 (168,875)
MXN 1,167,544 1/05/07 106,960 108,064 1,104
MYR 506,816 1/26/07 143,330 143,858 528
NOK 1,175,390 1/08/07 181,725 188,661 6,936
NZD 359,651 2/05/07 251,227 253,362 2,135
PLN 403,875 1/08/07 140,531 139,083 (1,448)
RUB 2,774,664 1/22/07 105,460 105,366 (94)
SEK 6,215,879 2/06/07 922,209 910,132 (12,077)
----------- ----------- ---------
$19,904,850 $19,749,787 $(155,063)
=========== =========== =========
At December 31, 2006, forward foreign currency purchases and sales under master netting agreements excluded above amounted
to a net receivable of $425 with Goldman Sachs & Co. and $4,209 with Merrill Lynch International.
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these derivative
contracts.
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
GOVERNMENT SECURITIES SERIES
BONDS -- 98.2%
ISSUER SHARES/PAR VALUE ($)
AGENCY -- OTHER -- 6.3%
Financing Corp., 9.4%, 2018 .................... $ 5,475,000 $ 7,453,670
Financing Corp., 9.8%, 2018 .................... 7,760,000 10,843,180
Financing Corp., 10.35%, 2018 .................. 7,065,000 10,255,914
Financing Corp., STRIPS, 0%, 2017 .............. 8,940,000 5,145,757
Resolution Funding Corp.,
8.875%, 2020 ................................. 6,000,000 8,221,548
------------
$ 41,920,069
------------
MORTGAGE BACKED -- 47.7%
Fannie Mae, 4.73%, 2012 ........................ $ 933,929 $ 913,172
Fannie Mae, 4.79%, 2012 ........................ 6,259,642 6,076,033
Fannie Mae, 4.543%, 2013 ....................... 947,983 918,237
Fannie Mae, 4.8%, 2013 ......................... 721,014 707,079
Fannie Mae, 4.845%, 2013 ....................... 1,789,437 1,749,395
Fannie Mae, 5%, 2013 - 2027 .................... 19,726,264 19,477,745
Fannie Mae, 5.06%, 2013 ........................ 911,141 900,695
Fannie Mae, 5.37%, 2013 ........................ 1,103,911 1,108,200
Fannie Mae, 4.45%, 2014 ........................ 2,141,467 2,055,225
Fannie Mae, 4.519%, 2014 ....................... 2,051,198 1,975,898
Fannie Mae, 4.6%, 2014 ......................... 862,973 834,770
Fannie Mae, 4.666%, 2014 ....................... 5,143,503 4,996,421
Fannie Mae, 4.77%, 2014 ........................ 741,620 719,821
Fannie Mae, 4.82%, 2014 - 2015 ................. 3,115,999 3,035,386
Fannie Mae, 4.848%, 2014 ....................... 5,977,327 5,862,595
Fannie Mae, 4.871%, 2014 ....................... 3,219,892 3,166,939
Fannie Mae, 5.1%, 2014 ......................... 924,629 918,926
Fannie Mae, 4.56%, 2015 ........................ 1,114,600 1,071,740
Fannie Mae, 4.62%, 2015 ........................ 1,557,188 1,504,120
Fannie Mae, 4.665%, 2015 ....................... 752,526 728,275
Fannie Mae, 4.69%, 2015 ........................ 614,069 595,334
Fannie Mae, 4.7%, 2015 ......................... 1,114,006 1,080,417
Fannie Mae, 4.74%, 2015 ........................ 700,000 676,774
Fannie Mae, 4.815%, 2015 ....................... 824,000 799,943
Fannie Mae, 4.85%, 2015 ........................ 613,955 600,991
Fannie Mae, 4.87%, 2015 ........................ 647,308 634,146
Fannie Mae, 4.89%, 2015 ........................ 730,976 717,186
Fannie Mae, 4.925%, 2015 ....................... 2,406,097 2,368,037
Fannie Mae, 5.471%, 2015 ....................... 1,521,140 1,549,554
Fannie Mae, 5.423%, 2016 ....................... 1,433,218 1,456,086
Fannie Mae, 6.5%, 2016 - 2036 .................. 13,613,464 13,925,946
Fannie Mae, 4.996%, 2017 ....................... 2,300,171 2,274,781
Fannie Mae, 6%, 2017 - 2034 .................... 6,038,654 6,121,988
Fannie Mae, 7.5%, 2017 - 2031 .................. 1,518,938 1,585,030
Fannie Mae, 5.5%, 2018 - 2035 .................. 74,686,183 74,048,078
Fannie Mae, 4.5%, 2019 ......................... 25,943,685 25,058,038
Fannie Mae, 4.88%, 2020 ........................ 643,889 635,190
Freddie Mac, 4.5%, 2013 - 2015 ................. 3,857,497 3,822,947
Freddie Mac, 4.375%, 2015 ...................... 3,885,919 3,789,194
Freddie Mac, 5%, 2016 - 2025 ................... 21,609,284 21,466,663
Freddie Mac, 6%, 2021 - 2035 ................... 30,661,118 30,945,748
Freddie Mac, 5.5%, 2024 - 2035 ................. 47,902,781 47,456,516
Freddie Mac, 6.5%, 2032 ........................ 4,944,032 5,055,109
Ginnie Mae, 5.5%, 2033 - 2034 .................. 9,856,542 9,817,540
------------
$315,201,908
------------
U.S. GOVERNMENT AGENCIES -- 22.3%
Aid-Egypt, 4.45%, 2015 ......................... $ 3,299,000 $ 3,187,857
Aid-Israel, 0%, 2021 - 2024 .................... 13,832,000 5,821,356
Aid-Israel, 5.5%, 2023 ......................... 7,403,000 7,703,073
Aid-Lebanon, 7.62%, 2009 ....................... 3,331,045 3,428,745
Aid-Peru, 9.98%, 2008 .......................... 1,092,047 1,118,027
Empresa Energetica Cornito Ltd.,
6.07%, 2010 .................................. 5,076,000 5,145,389
Fannie Mae, 4.25%, 2009 ........................ 7,277,000 7,160,495
Fannie Mae, 4.625%, 2013 ....................... 627,000 614,271
Farmer Mac, 5.5%, 2011 (n) ..................... 5,370,000 5,468,577
Federal Home Loan Bank,
4.5%, 2007 ................................... 4,020,000 4,010,770
Federal Home Loan Bank,
4.625%, 2008 ................................. 15,250,000 15,157,738
Freddie Mac, 4.2%, 2007 ........................ 3,706,000 3,672,383
Freddie Mac, 7%, 2010 .......................... 8,626,000 9,146,243
Freddie Mac, 4.875%, 2013 ...................... 1,859,000 1,847,655
Overseas Private Investment Corp.,
0%, 2007 ..................................... 3,374,000 3,568,005
Small Business Administration,
8.4%, 2007 ................................... 1,656 1,661
Small Business Administration,
9.65%, 2007 .................................. 1,818 1,842
Small Business Administration,
8.7%, 2009 ................................... 64,352 66,509
Small Business Administration,
9.05%, 2009 .................................. 5,272 5,426
Small Business Administration,
10.05%, 2009 ................................. 3,829 3,947
Small Business Administration,
6.34%, 2021 .................................. 2,159,246 2,235,933
Small Business Administration,
6.35%, 2021 .................................. 2,369,967 2,453,846
Small Business Administration,
6.44%, 2021 .................................. 2,716,106 2,818,319
Small Business Administration,
6.625%, 2021 ................................. 3,161,637 3,302,918
Small Business Administration,
6.07%, 2022 .................................. 2,553,111 2,628,989
Small Business Administration,
4.89%, 2023 .................................. 4,070,885 4,005,708
Small Business Administration,
4.98%, 2023 .................................. 1,663,796 1,645,577
Small Business Administration,
4.34%, 2024 .................................. 2,361,912 2,251,375
Small Business Administration,
4.72%, 2024 .................................. 4,152,074 4,048,687
Small Business Administration,
4.77%, 2024 .................................. 3,070,673 2,999,678
Small Business Administration,
4.86%, 2024 .................................. 2,095,937 2,054,538
Small Business Administration,
4.87%, 2024 .................................. 2,451,338 2,402,335
Small Business Administration,
4.88%, 2024 .................................. 1,877,000 1,841,291
Small Business Administration,
4.99%, 2024 .................................. 2,768,279 2,734,785
Small Business Administration,
5.19%, 2024 .................................. 2,532,169 2,530,457
Small Business Administration,
5.52%, 2024 .................................. 2,326,778 2,357,411
Small Business Administration,
5.11%, 2025 .................................. 2,217,809 2,202,436
Small Business Administration,
4.76%, 2025 .................................. 3,774,141 3,665,159
Tennessee Valley Authority STRIPS,
0% to 2012, 8.25% to 2042 .................... 12,654,000 10,018,551
U.S. Department of Housing & Urban
Development, 6.36%, 2016 ..................... 6,000,000 6,192,971
U.S. Department of Housing & Urban
Development, 6.59%, 2016 ..................... 5,744,000 5,833,187
------------
$147,354,120
------------
U.S. TREASURY OBLIGATIONS -- 21.9%
U.S. Treasury Bonds, 6.5%, 2010 ................ $77,264,000 $ 81,166,450
U.S. Treasury Bonds, 9.25%, 2016 ............... 4,302,000 5,731,073
U.S. Treasury Bonds, 6.875%, 2025 .............. 504,000 623,936
U.S. Treasury Bonds, 6%, 2026 .................. 14,839,000 16,829,518
U.S. Treasury Bonds, 6.25%, 2030 ............... 579,000 689,734
U.S. Treasury Bonds, 4.5%, 2036 ................ 8,275,000 7,869,012
U.S. Treasury Bonds, TIPS,
3.875%, 2009 ................................. 4,755,425 4,886,199
U.S. Treasury Notes, 5.5%, 2008 ................ 9,172,000 9,222,877
U.S. Treasury Notes, 5.125%, 2011 .............. 17,321,000 17,613,292
------------
$144,632,091
------------
Total Bonds
(Identified Cost, $653,215,161) .......... $649,108,188
------------
REPURCHASE AGREEMENTS -- 0.8%
Merrill Lynch, 5.32%, dated 12/29/06, due
1/02/07, total to be received $5,360,167
(secured by various U.S. Treasury and
Federal Agency obligations and Mortgage
Backed securities in a jointly traded
account), at Cost ............................ $ 5,357,000 $ 5,357,000
------------
Total Investments
(Identified Cost, $658,572,161) (k) ...... $654,465,188
------------
OTHER ASSETS,
LESS LIABILITIES -- 1.0% ..................... 6,602,781
------------
Net Assets -- 100.0% ....................... $661,067,969
============
FUTURES CONTRACTS OUTSTANDING AT 12/31/06:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond (Short) .................................... 56 $ 6,240,500 Mar-07 $112,679
U.S. Treasury Note 10 year (Short) ............................ 185 19,881,719 Mar-07 249,328
--------
$362,007
========
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these derivative
contracts.
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
HIGH YIELD SERIES
BONDS -- 87.0%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 1.6%
Argo-Tech Corp., 9.25%, 2011 ................... $ 1,275,000 $ 1,377,000
Bombardier, Inc., 8%, 2014 (n) ................. 1,298,000 1,330,450
DRS Technologies, Inc., 7.625%, 2018 ........... 2,590,000 2,667,700
Vought Aircraft Industry, Inc., 8%, 2011 ....... 475,000 457,188
------------
$ 5,832,338
------------
AIRLINES -- 0.7%
Continental Airlines, Inc., 6.9%, 2017 ......... $ 357,382 $ 354,203
Continental Airlines, Inc.,
6.748%, 2017 ................................. 336,095 332,734
Continental Airlines, Inc.,
6.795%, 2018 ................................. 600,967 597,962
Continental Airlines, Inc.,
7.566%, 2020 ................................. 1,137,813 1,149,192
------------
$ 2,434,091
------------
APPAREL MANUFACTURERS -- 0.4%
Levi Strauss & Co., 12.25%, 2012 ............... $ 830,000 $ 923,375
Levi Strauss & Co., 9.75%, 2015 ................ 625,000 673,438
------------
$ 1,596,813
------------
ASSET BACKED & SECURITIZED -- 1.7%
Airlie LCDO Ltd., CDO, FRN,
7.287%, 2011 (z) ............................. $ 665,000 $ 665,000
Anthracite Ltd., CDO, 6%, 2037 (z) ............. 1,300,000 1,189,500
Arbor Realty Mortgage Securities, CDO,
FRN, 7.6738%, 2038 (z) ....................... 722,734 730,757
Babson CLO Ltd., "D", CLO, FRN,
6.8528%, 2018 (n) ............................ 670,000 671,340
CWCapital Cobalt Ltd., "F", CDO, FRN,
6.68%, 2050 (z) .............................. 500,000 500,800
CWCapital Cobalt Ltd., CDO,
6.23%, 2045 (n) .............................. 950,000 940,595
First Union National Bank Commercial
Mortgage Corp., 6.75%, 2032 .................. 855,000 866,773
Wachovia Credit, CDO, FRN,
6.7156%, 2026 (p)(z) ......................... 376,000 376,940
------------
$ 5,941,705
------------
AUTOMOTIVE -- 4.8%
Cooper-Standard Automotive, Inc.,
8.375%, 2014 ................................. $ 1,285,000 $ 1,011,938
Ford Motor Credit Co., 5.8%, 2009 .............. 2,665,000 2,616,612
Ford Motor Credit Co.,
9.75%, 2010 (n) .............................. 4,095,000 4,356,302
Ford Motor Credit Co., 8.625%, 2010 ............ 1,065,000 1,096,264
Ford Motor Credit Co., 7%, 2013 ................ 1,247,000 1,190,861
Ford Motor Credit Co., 8%, 2016 ................ 1,460,000 1,442,699
Ford Motor Credit Co., FRN,
8.11%, 2012 .................................. 930,000 921,555
General Motors Corp., 7.2%, 2011 ............... 554,000 537,380
General Motors Corp., 8.375%, 2033 ............. 2,147,000 1,985,975
Goodyear Tire & Rubber Co.,
9%, 2015 ..................................... 1,690,000 1,770,275
------------
$ 16,929,861
------------
BROADCASTING -- 4.6%
Allbritton Communications Co.,
7.75%, 2012 .................................. $ 2,078,000 $ 2,098,780
Barrington Broadcasting Group,
10.5%, 2014 (n) .............................. 1,025,000 1,040,375
Clear Channel Communications,
5.5%, 2014 ................................... 1,915,000 1,615,417
EchoStar DBS Corp., 6.375%, 2011 ............... 925,000 919,219
Hughes Network Systems LLC,
9.5%, 2014 ................................... 945,000 986,344
Intelsat Ltd., 9.25%, 2016 (n) ................. 1,015,000 1,091,125
Intelsat Ltd., 11.25%, 2016 (n) ................ 2,405,000 2,639,488
Intelsat Ltd., 0% to 2010,
9.25% to 2015 ................................ 1,590,000 1,208,400
Intelsat Subsidiary Holding Co. Ltd.,
8.625%, 2015 ................................. 900,000 936,000
ION Media Networks, Inc., FRN,
11.6238%, 2013 (n) ........................... 2,155,000 2,181,938
XM Satellite Radio, Inc., 9.75%, 2014 .......... 855,000 855,000
Young Broadcasting, Inc., 10%, 2011 ............ 805,000 764,750
------------
$ 16,336,836
------------
BUILDING -- 1.9%
Goodman Global Holdings, Inc.,
7.875%, 2012 ................................. $ 790,000 $ 776,175
Interface, Inc., 10.375%, 2010 ................. 943,000 1,042,015
Interface, Inc., 9.5%, 2014 .................... 170,000 178,500
Masonite Corp., 11%, 2015 (z) .................. 1,210,000 1,119,250
Nortek Holdings, Inc., 8.5%, 2014 .............. 1,145,000 1,122,100
Nortek Holdings, Inc., 0% to 2009,
10.75% to 2014 ............................... 3,597,000 2,517,900
------------
$ 6,755,940
------------
BUSINESS SERVICES -- 2.0%
Iron Mountain, Inc., 8.625%, 2013 .............. $ 680,000 $ 702,100
Iron Mountain, Inc., 7.75%, 2015 ............... 720,000 734,400
Nortel Networks Ltd.,
10.75%, 2016 (n) ............................. 820,000 896,875
Northern Telecom Corp.,
6.875%, 2023 ................................. 685,000 575,400
SunGard Data Systems, Inc.,
10.25%, 2015 ................................. 2,355,000 2,513,963
Xerox Corp., 7.625%, 2013 ...................... 1,605,000 1,685,250
------------
$ 7,107,988
------------
CABLE TV -- 3.5%
CCH I Holdings LLC, 11%, 2015 .................. $ 3,354,000 $ 3,442,043
CCH II Holdings LLC, 10.25%, 2010 .............. 2,450,000 2,563,313
CCO Holdings LLC, 8.75%, 2013 .................. 1,405,000 1,459,444
CSC Holdings, Inc., 6.75%, 2012 (n) ............ 1,905,000 1,857,375
Mediacom LLC, 9.5%, 2013 ....................... 1,600,000 1,648,000
NTL Cable PLC, 9.125%, 2016 .................... 1,286,000 1,358,338
------------
$ 12,328,513
------------
CHEMICALS -- 3.9%
BCP Crystal Holdings Corp.,
9.625%, 2014 ................................. $ 693,000 $ 765,765
Crystal U.S. Holdings LLC, "B",
0% to 2009, 10.5% to 2014 .................... 2,452,000 2,108,720
Equistar Chemicals LP, 10.125%, 2008 ........... 1,305,000 1,386,563
Equistar Chemicals LP, 10.625%, 2011 ........... 360,000 383,400
Innophos, Inc., 8.875%, 2014 ................... 1,160,000 1,177,400
KI Holdings, Inc., 0% to 2009,
9.875% to 2014 ............................... 1,960,000 1,568,000
Lyondell Chemical Co., 11.125%, 2012 ........... 750,000 806,250
Momentive Performance Materials, Inc.,
11.5%, 2016 (n) .............................. 2,175,000 2,131,500
Mosaic Co., 7.625%, 2016 (n) ................... 1,780,000 1,844,525
Nalco Co., 8.875%, 2013 ........................ 1,630,000 1,725,763
------------
$ 13,897,886
------------
CONGLOMERATES -- 0.1%
Esco Corp., 8.625%, 2013 (z) ................... $ 490,000 $ 503,475
------------
CONSUMER GOODS & SERVICES -- 2.5%
GEO Group, Inc., 8.25%, 2013 ................... $ 1,595,000 $ 1,642,850
Jarden Corp., 9.75%, 2012 ...................... 835,000 883,013
Playtex Products, Inc., 9.375%, 2011 ........... 1,025,000 1,068,563
Service Corp. International,
7.375%, 2014 ................................. 700,000 731,500
Service Corp. International, 7%, 2017 .......... 2,380,000 2,409,750
Spectrum Brands, Inc., 7.375%, 2015 ............ 525,000 454,125
Visant Holding Corp., 8.75%, 2013 .............. 1,645,000 1,694,350
------------
$ 8,884,151
------------
CONTAINERS -- 1.9%
Berry Plastics Holding Corp.,
8.875%, 2014 (n) ............................. $ 1,485,000 $ 1,507,275
Graham Packaging Co. LP,
9.875%, 2014 ................................. 1,765,000 1,782,650
Owens-Brockway Glass Container, Inc.,
8.25%, 2013 .................................. 3,380,000 3,494,075
------------
$ 6,784,000
------------
DEFENSE ELECTRONICS -- 0.8%
L-3 Communications Corp.,
5.875%, 2015 ................................. $ 1,435,000 $ 1,384,775
L-3 Communications Holdings, Inc.,
6.125%, 2014 ................................. 1,340,000 1,309,850
------------
$ 2,694,625
------------
ELECTRONICS -- 0.7%
NXP B.V./NXP Funding LLC,
7.875%, 2014 (n) ............................. $ 655,000 $ 677,106
Sensata Technologies B.V.,
8%, 2014 (n) ................................. 1,735,000 1,665,600
------------
$ 2,342,706
------------
EMERGING MARKET QUASI-SOVEREIGN -- 0.3%
Gazprom OAO, 9.625%, 2013 (n) .................. $ 610,000 $ 730,475
Gazprom OAO, 8.625%, 2034 (n) .................. 224,000 287,840
------------
$ 1,018,315
------------
EMERGING MARKET SOVEREIGN -- 0.2%
Federative Republic of Brazil,
8.875%, 2019 ................................. $ 296,000 $ 361,120
Russian Ministry of Finance,
12.75%, 2028 ................................. 243,000 438,863
------------
$ 799,983
------------
ENERGY -- INDEPENDENT -- 3.3%
Chesapeake Energy Corp., 7%, 2014 .............. $ 958,000 $ 973,568
Chesapeake Energy Corp.,
6.375%, 2015 ................................. 2,660,000 2,633,400
Chesapeake Energy Corp.,
6.875%, 2016 ................................. 1,685,000 1,699,744
Hilcorp Energy I, 9%, 2016 (n) ................. 1,320,000 1,395,900
Newfield Exploration Co.,
6.625%, 2014 ................................. 2,380,000 2,380,000
Quicksilver Resources, Inc.,
7.125%, 2016 ................................. 1,770,000 1,730,175
Whiting Petroleum Corp., 7%, 2014 .............. 1,120,000 1,117,200
------------
$ 11,929,987
------------
ENTERTAINMENT -- 1.0%
AMC Entertainment, Inc., 9.5%, 2011 ............ $ 886,000 $ 889,323
AMC Entertainment, Inc., 11%, 2016 ............. 850,000 954,125
Six Flags, Inc., 8.875%, 2010 .................. 1,030,000 996,525
Six Flags, Inc., 9.75%, 2013 ................... 745,000 699,369
------------
$ 3,539,342
------------
FINANCIAL INSTITUTIONS -- 2.4%
General Motors Acceptance Corp.,
6.875%, 2011 ................................. $ 3,138,000 $ 3,218,640
General Motors Acceptance Corp.,
6.75%, 2014 .................................. 5,272,000 5,415,045
------------
$ 8,633,685
------------
FOOD & BEVERAGES -- 0.9%
B&G Foods Holding Corp., 8%, 2011 .............. $ 990,000 $ 999,900
Dole Foods Co., Inc., 8.875%, 2011 ............. 930,000 916,050
Michael Foods, Inc., 8%, 2013 .................. 1,405,000 1,457,688
------------
$ 3,373,638
------------
FOREST & PAPER PRODUCTS -- 2.3%
Buckeye Technologies, Inc., 8%, 2010 ........... $ 365,000 $ 365,000
Buckeye Technologies, Inc.,
8.5%, 2013 ................................... 2,165,000 2,284,075
Jefferson Smurfit Corp., 8.25%, 2012 ........... 2,020,000 1,969,500
JSG Funding PLC, 7.75%, 2015 ................... 150,000 144,000
MDP Acquisitions PLC, 9.625%, 2012 ............. 1,145,000 1,213,700
Millar Western Forest Products Ltd.,
7.75%, 2013 .................................. 755,000 677,613
Verso Paper Holdings LLC,
9.125%, 2014 (n) ............................. 755,000 787,088
Verso Paper Holdings LLC,
11.375%, 2016 (n) ............................ 865,000 908,250
------------
$ 8,349,226
------------
GAMING & LODGING -- 6.4%
Greektown Holdings, 10.75%, 2013 (n) ........... $ 1,260,000 $ 1,316,700
Harrah's Entertainment, Inc.,
5.75%, 2017 .................................. 4,385,000 3,673,779
Majestic Star Casino LLC,
9.75%, 2011 .................................. 1,445,000 1,430,550
Mandalay Resort Group,
9.375%, 2010 ................................. 1,085,000 1,160,950
MGM Mirage, Inc., 8.5%, 2010 ................... 1,165,000 1,246,550
MGM Mirage, Inc., 8.375%, 2011 ................. 2,155,000 2,235,813
MGM Mirage, Inc., 6.75%, 2013 .................. 1,125,000 1,099,688
MGM Mirage, Inc., 5.875%, 2014 ................. 485,000 448,625
MGM Mirage, Inc., 6.875%, 2016 ................. 1,010,000 969,600
Pinnacle Entertainment, Inc.,
8.25%, 2012 .................................. 1,055,000 1,065,550
Pokagon Gaming Authority,
10.375%, 2014 (n) ............................ 755,000 826,725
Station Casinos, Inc., 6.5%, 2014 .............. 3,485,000 3,097,273
Trump Entertainment Resorts Holdings,
Inc., 8.5%, 2015 ............................. 1,065,000 1,059,675
Wimar Opco LLC, 9.625%, 2014 (z) ............... 985,000 975,150
Wynn Las Vegas LLC, 6.625%, 2014 ............... 2,255,000 2,240,906
------------
$ 22,847,534
------------
INDUSTRIAL -- 2.5%
Amsted Industries, Inc.,
10.25%, 2011 (z) ............................. $ 1,720,000 $ 1,840,400
Blount, Inc., 8.875%, 2012 ..................... 1,445,000 1,473,900
Education Management LLC,
8.75%, 2014 (n) .............................. 1,020,000 1,055,700
Education Management LLC,
10.25%, 2016 (n) ............................. 790,000 835,425
JohnsonDiversey Holdings, Inc., "B",
9.625%, 2012 ................................. 2,075,000 2,173,563
JohnsonDiversey Holdings, Inc.,
0% to 2007, 10.67% to 2013 ................... 291,000 280,815
Knowledge Learning Corp.,
7.75%, 2015 (z) .............................. 725,000 694,188
RBS Global & Rexnord Corp.,
9.5%, 2014 (n) ............................... 660,000 686,400
------------
$ 9,040,391
------------
MACHINERY & TOOLS -- 1.1%
Case Corp., 7.25%, 2016 ........................ $ 705,000 $ 713,813
Case New Holland, Inc., 9.25%, 2011 ............ 540,000 571,725
Case New Holland, Inc., 7.125%, 2014 ........... 2,680,000 2,720,200
------------
$ 4,005,738
------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 6.9%
CDRV Investors, Inc., 0% to 2010,
9.625% to 2015 ............................... $ 1,725,000 $ 1,336,875
DaVita, Inc., 6.625%, 2013 ..................... 740,000 741,850
DaVita, Inc., 7.25%, 2015 ...................... 2,595,000 2,646,900
HCA, Inc., 6.375%, 2015 ........................ 4,160,000 3,525,600
HCA, Inc., 9.25%, 2016 (n) ..................... 4,745,000 5,083,081
HealthSouth Corp., 10.75%, 2016 (n) ............ 1,610,000 1,732,763
Omnicare, Inc., 6.875%, 2015 ................... 1,830,000 1,807,125
Psychiatric Solutions, Inc.,
7.75%, 2015 .................................. 980,000 977,550
Select Medical Corp., 7.625%, 2015 ............. 1,505,000 1,249,150
Tenet Healthcare Corp., 9.25%, 2015 ............ 1,525,000 1,525,000
U.S. Oncology, Inc., 10.75%, 2014 .............. 2,125,000 2,348,125
Vanguard Health Holding II, 9%, 2014 ........... 1,715,000 1,736,438
------------
$ 24,710,457
------------
METALS & MINING -- 3.7%
Aleris International, Inc., 10%, 2016 (z) ...... $ 595,000 $ 600,950
Arch Western Finance LLC,
6.75%, 2013 .................................. 2,690,000 2,669,825
Chaparral Steel Co., 10%, 2013 ................. 1,270,000 1,417,638
FMG Finance Ltd., 10.625%, 2016 (n) ............ 2,020,000 2,166,450
Griffin Coal Mining Co., 9.5%, 2016 (z) ........ 825,000 849,750
Massey Energy Co., 6.875%, 2013 ................ 1,925,000 1,809,500
Peabody Energy Corp., 5.875%, 2016 ............. 1,565,000 1,525,875
Peabody Energy Corp., 7.375%, 2016 ............. 1,045,000 1,112,925
PNA Group, Inc., 10.75%, 2016 (n) .............. 880,000 909,700
------------
$ 13,062,613
------------
NATURAL GAS -- DISTRIBUTION -- 0.3%
AmeriGas Partners LP, 7.125%, 2016 ............. $ 990,000 $ 990,000
------------
NATURAL GAS -- PIPELINE -- 3.1%
ANR Pipeline Co., 9.625%, 2021 ................. $ 633,000 $ 840,007
Atlas Pipeline Partners, 8.125%, 2015 .......... 1,070,000 1,099,425
Colorado Interstate Gas Co.,
5.95%, 2015 .................................. 790,000 779,465
El Paso Energy Corp., 7%, 2011 ................. 1,905,000 1,976,438
El Paso Energy Corp., 7.75%, 2013 .............. 1,510,000 1,579,838
El Paso Performance-Linked Trust,
7.75%, 2011 (n) .............................. 2,210,000 2,337,075
Transcontinental Gas Pipe Line Corp.,
7%, 2011 ..................................... 750,000 770,625
Williams Cos., Inc., 7.125%, 2011 .............. 733,000 762,320
Williams Partners LP, 7.25%, 2017 (z) .......... 830,000 846,600
------------
$ 10,991,793
------------
NETWORK & TELECOM -- 3.9%
Cincinnati Bell, Inc., 8.375%, 2014 ............ $ 1,705,000 $ 1,751,888
Citizens Communications Co.,
9.25%, 2011 .................................. 1,286,000 1,422,638
Hawaiian Telecom Communications, Inc.,
9.75%, 2013 .................................. 1,045,000 1,047,613
Nordic Telephone Co. Holdings,
8.875%, 2016 (n) ............................. 1,445,000 1,546,150
Qwest Capital Funding, Inc.,
7.25%, 2011 .................................. 1,035,000 1,056,994
Qwest Corp., 7.875%, 2011 ...................... 1,095,000 1,166,175
Qwest Corp., 8.875%, 2012 ...................... 1,985,000 2,210,794
Time Warner Telecom Holdings, Inc.,
9.25%, 2014 .................................. 1,635,000 1,747,406
Windstream Corp., 8.625%, 2016 (n) ............. 1,695,000 1,856,025
------------
$ 13,805,683
------------
OIL SERVICES -- 1.2%
Basic Energy Services, Inc.,
7.125%, 2016 ................................. $ 1,890,000 $ 1,861,650
GulfMark Offshore, Inc., 7.75%, 2014 ........... 1,190,000 1,213,800
Hanover Compressor Co., 9%, 2014 ............... 1,055,000 1,139,400
------------
$ 4,214,850
------------
PHARMACEUTICALS -- 0.3%
Warner Chilcott Corp., 8.75%, 2015 ............. $ 1,108,000 $ 1,135,700
------------
PRINTING & PUBLISHING -- 3.9%
American Media Operations, Inc.,
10.25%, 2009 ................................. $ 650,000 $ 629,688
American Media Operations, Inc.,
8.875%, 2011 ................................. 380,000 346,750
Dex Media, Inc., 0% to 2008,
9% to 2013 ................................... 3,710,000 3,311,175
Dex Media, Inc., 0% to 2008,
9% to 2013 ................................... 1,710,000 1,526,175
Idearc, Inc., 8%, 2016 (n) ..................... 3,620,000 3,674,300
MediaNews Group, Inc., 6.875%, 2013 ............ 1,895,000 1,714,975
PRIMEDIA, Inc., 8%, 2013 ....................... 780,000 754,650
R.H. Donnelley Corp., 8.875%, 2016 ............. 1,785,000 1,874,250
------------
$ 13,831,963
------------
RAILROAD & SHIPPING -- 0.3%
TFM S.A. de C.V., 9.375%, 2012 ................. $ 931,000 $ 993,843
TFM S.A. de C.V., 12.5%, 2012 .................. 132,000 142,560
------------
$ 1,136,403
------------
RESTAURANTS -- 0.2%
Denny's Corp. Holdings, Inc.,
10%, 2012 .................................... $ 850,000 $ 896,750
------------
RETAILERS -- 1.4%
Buhrmann U.S., Inc., 7.875%, 2015 .............. $ 1,055,000 $ 1,028,625
Couche-Tard, Inc., 7.5%, 2013 .................. 1,045,000 1,068,513
Jean Coutu Group (PJC), Inc.,
7.625%, 2012 ................................. 915,000 963,038
Neiman Marcus Group, Inc., 9%, 2015 ............ 1,065,000 1,162,181
Neiman Marcus Group, Inc.,
10.375%, 2015 ................................ 650,000 723,125
------------
$ 4,945,482
------------
SPECIALTY STORES -- 1.3%
GSC Holdings Corp., 8%, 2012 ................... $ 1,420,000 $ 1,483,900
Michaels Stores, Inc.,
11.375%, 2016 (n) ............................ 1,720,000 1,793,100
Payless ShoeSource, Inc.,
8.25%, 2013 .................................. 1,165,000 1,211,600
------------
$ 4,488,600
------------
SUPERMARKETS -- 0.0%
Jitney Jungle Stores of America, Inc.,
10.375%, 2007 (d) ............................ $ 250,000 $ 0
------------
TELECOMMUNICATIONS -- WIRELESS -- 1.8%
Centennial Communications Corp.,
10%, 2013 .................................... $ 300,000 $ 319,125
Centennial Communications Corp.,
10.125%, 2013 ................................ 655,000 705,763
Rogers Wireless, Inc., 6.375%, 2014 ............ 1,380,000 1,397,250
Rogers Wireless, Inc., 7.5%, 2015 .............. 990,000 1,074,150
Rural Cellular Corp., 9.875%, 2010 ............. 1,200,000 1,276,500
Wind Acquisition Finance S.A.,
10.75%, 2015 (n) ............................. 1,580,000 1,797,250
------------
$ 6,570,038
------------
TOBACCO -- 0.6%
Reynolds American, Inc., 7.25%, 2012 ........... $ 1,040,000 $ 1,084,200
Reynolds American, Inc., 7.3%, 2015 ............ 865,000 897,822
------------
$ 1,982,022
------------
TRANSPORTATION -- SERVICES -- 1.0%
Hertz Corp., 8.875%, 2014 (n) .................. $ 2,095,000 $ 2,194,513
Stena AB, 7%, 2016 ............................. 1,311,000 1,245,450
------------
$ 3,439,963
------------
U.S. TREASURY OBLIGATIONS -- 1.9%
U.S. Treasury Bonds, 4.5%, 2036 ................ $ 7,303,000 $ 6,944,700
------------
UTILITIES -- ELECTRIC POWER -- 3.7%
Edison Mission Energy, 7.75%, 2016 ............. $ 775,000 $ 821,500
Midwest Generation LLC, 8.75%, 2034 ............ 2,340,000 2,538,900
Mirant North American LLC,
7.375%, 2013 ................................. 1,340,000 1,360,100
Mission Energy Holding Co.,
13.5%, 2008 .................................. 1,405,000 1,549,013
NRG Energy, Inc., 7.375%, 2016 ................. 4,705,000 4,728,525
NRG Energy, Inc., 7.375%, 2017 ................. 615,000 616,538
Reliant Energy, Inc., 6.75%, 2014 .............. 660,000 645,150
Reliant Resources, Inc., 9.25%, 2010 ........... 770,000 808,500
------------
$ 13,068,226
------------
Total Bonds
(Identified Cost, $303,315,970) .......... $310,124,010
------------
FLOATING RATE LOANS(g)(r) -- 6.3%
AUTOMOTIVE -- 1.9%
Ford Motor Co., Term Loan B,
8.36%, 2013 .................................. $ 3,276,961 $ 3,277,780
General Motors, Term Loan B,
7.745%, 2013 (o) ............................. 2,350,002 2,350,491
Mark IV Industries, Inc., Second Lien Term
Loan, 2011 (o) ............................... 994,489 995,318
------------
$ 6,623,589
------------
CONTAINERS -- 0.3%
Altivity Packaging LLC, Second Lien Term
Loan, 10.35%, 2013 ........................... $ 290,909 $ 293,697
Altivity Packaging LLC, Second Lien Term
Loan, 10.3494%, 2013 ......................... 909,091 917,045
------------
$ 1,210,742
------------
ENERGY -- INDEPENDENT -- 0.2%
MEG Energy Corp., Bridge Term Loan,
10.12%, 2013 ................................. $ 838,403 $ 834,211
------------
FOOD & BEVERAGES -- 0.2%
Dole Food Co., Inc., Letter of Credit,
5.2438%, 2013 (o) ............................ $ 80,526 $ 79,907
Dole Food Co., Inc., Term Loan,
7.5455%, 2013 (o) ............................ 179,824 178,443
Dole Food Co., Inc., Term Loan C,
7.4603%, 2013 (o) ............................ 599,413 594,811
------------
$ 853,161
------------
FOREST & PAPER PRODUCTS -- 0.5%
Georgia-Pacific Corp., Term Loan,
7.3561%, 2012 ................................ $ 1,700,870 $ 1,708,975
Georgia-Pacific Corp., Term Loan
B-2, 2013 (o) ................................ 112,872 113,389
------------
$ 1,822,364
------------
GAMING & LODGING -- 0.5%
Gulfside Casino, Term Loan B,
10.3703%, 2012 ............................... $ 1,842,346 $ 1,851,558
------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.5%
HCA, Inc., Term Loan B,
8.1138%, 2013 ................................ $ 1,699,488 $ 1,718,415
------------
POLLUTION CONTROL -- 0.2%
Allied Waste North America, Inc., Term
Loan, 7.1576%, 2012 .......................... $ 539,190 $ 539,752
Allied Waste North America, Inc., Term
Loan A, 7.0629%, 2012 ........................ 239,105 239,583
------------
$ 779,335
------------
PRINTING & PUBLISHING -- 1.5%
Idearc, Inc., Term Loan B,
7.35%, 2014 .................................. $ 3,846,408 $ 3,865,640
Nielsen Finance LLC, Term Loan B,
8.1254%, 2013 ................................ 1,435,073 1,444,811
------------
$ 5,310,451
------------
SPECIALTY STORES -- 0.5%
Michaels Stores, Inc., Term Loan,
8.375%, 2013 ................................. $ 1,675,220 $ 1,684,643
------------
Total Floating Rate Loans
(Identified Cost, $22,614,557) ........... $ 22,688,469
------------
CONVERTIBLE BONDS -- 0.4%
AUTOMOTIVE -- 0.4%
Ford Motor Co., 4.25%, 2036
(Identified Cost, $1,255,000) ................ $ 1,255,000 $ 1,341,281
------------
COMMON STOCKS -- 1.3%
CHEMICALS -- 0.3%
Huntsman Corp. (a) ............................. 51,600 $ 978,852
------------
CONTAINERS -- 0.3%
Crown Holdings, Inc. (a) ....................... 43,900 $ 918,388
------------
ENERGY -- INDEPENDENT -- 0.4%
Chesapeake Energy Corp. ........................ 12,400 $ 360,220
Foundation Coal Holdings, Inc. ................. 34,980 1,110,965
------------
$ 1,471,185
------------
MACHINERY & TOOLS -- 0.1%
Titan International, Inc. ...................... 19,700 $ 396,955
------------
METALS & MINING -- 0.0%
Oxford Automotive, Inc. (a) .................... 21 $ 0
------------
PRINTING & PUBLISHING -- 0.0%
Golden Books Family Entertainment,
Inc. (a) ..................................... 17,708 $ 0
------------
TELEPHONE SERVICES -- 0.2%
Windstream Corp. ............................... 58,000 $ 824,760
------------
Total Common Stocks
(Identified Cost, $4,479,621) ............ $ 4,590,140
------------
CONVERTIBLE PREFERRED STOCKS -- 0.4%
REAL ESTATE -- 0.4%
Mills Corp., "F", 6.75%
(Identified Cost, $1,177,875) ................ 1,500 $ 1,344,375
------------
PREFERRED STOCKS -- 0.1%
BROADCASTING -- 0.1%
ION Media Networks, Inc. (p) ................... 44 $ 325,600
------------
REAL ESTATE -- 0.0%
HRPT Properties Trust, REIT, "B" ............... 1,225 $ 31,495
------------
Total Preferred Stocks
(Identified Cost, $389,843) .............. $ 357,095
------------
WARRANTS -- 0.0%
STRIKE FIRST
ISSUER PRICE EXERCISE
BUSINESS SERVICES -- 0.0%
Loral Space &
Communications Ltd. (a) $0.14 1/28/97 1,000 $ 0
Loral Space &
Communications Ltd. (a) $0.14 1/28/97 1,100 0
------------
$ 0
------------
NETWORK & TELECOM -- 0.0%
Knology, Inc. (a)(z) ....... $0.10 11/22/97 525 $ 1,312
------------
Total Warrants
(Identified Cost, $29,924) ............... $ 1,312
------------
SHORT-TERM OBLIGATIONS -- 3.7%
ISSUER SHARES/PAR VALUE ($)
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized Cost
and Value (y) ................................ $13,120,000 $ 13,118,072
------------
Total Investments
(Identified Cost, $346,380,862) (k) ...... $353,564,754
------------
OTHER ASSETS,
LESS LIABILITIES -- 0.8% ..................... 2,686,710
------------
Net Assets -- 100.0% ....................... $356,251,464
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
INTERNATIONAL VALUE SERIES
COMMON STOCKS -- 96.2%
ISSUER SHARES/PAR VALUE ($)
AIRLINES -- 0.4%
Sydney Roads Group ............................. 523,100 $ 545,351
------------
ALCOHOLIC BEVERAGES -- 1.3%
Diageo PLC ..................................... 72,178 $ 1,417,212
Remy Cointreau S.A ............................. 8,200 530,276
------------
$ 1,947,488
------------
APPAREL MANUFACTURERS -- 0.4%
Impact 21 Co. Ltd. ............................. 22,000 $ 369,423
Sanyo Shokai Ltd. (l) .......................... 34,400 248,800
------------
$ 618,223
------------
AUTOMOTIVE -- 4.4%
Autoliv, Inc., SDR ............................. 14,880 $ 898,644
Bayerische Motoren Werke AG .................... 29,130 1,672,713
Continental AG ................................. 8,392 975,738
Kongsberg Automotive A.S.A ..................... 48,600 444,430
Nissan Motor Co. Ltd. (l) ...................... 72,800 876,327
PSA Peugeot Citroen S.A. (l) ................... 24,850 1,646,349
------------
$ 6,514,201
------------
BIOTECHNOLOGY -- 0.6%
Actelion Ltd. (a) .............................. 4,000 $ 879,481
------------
BROADCASTING -- 3.3%
Fuji Television Network, Inc. .................. 572 $ 1,306,934
Nippon Television Network Corp. ................ 7,240 1,074,034
Vivendi S.A. (l) ............................... 31,820 1,243,456
WPP Group PLC .................................. 90,750 1,227,314
------------
$ 4,851,738
------------
BROKERAGE & ASSET MANAGERS -- 0.2%
Van Lanschot N.V ............................... 3,420 $ 324,975
------------
CABLE TV -- 0.2%
Premiere AG (a)(l) ............................. 20,240 $ 339,239
------------
CHEMICALS -- 2.8%
Syngenta AG .................................... 22,787 $ 4,238,094
------------
CONSTRUCTION -- 3.3%
Buzzi Unicem S.p.A. (l) ........................ 21,180 $ 602,093
CRH PLC ........................................ 25,100 1,044,786
Fletcher Building Ltd. ......................... 141,588 1,104,727
Geberit AG ..................................... 750 1,155,550
Nexity International ........................... 6,770 490,516
Sekisui Chemical Co. Ltd. ...................... 68,000 542,081
------------
$ 4,939,753
------------
CONSUMER GOODS & SERVICES -- 2.6%
Kao Corp. ...................................... 65,000 $ 1,752,699
Lion Corp. (l) ................................. 64,000 324,180
Uni-Charm Corp. (l) ............................ 30,900 1,835,130
------------
$ 3,912,009
------------
ELECTRICAL EQUIPMENT -- 1.1%
Saft Groupe S.A ................................ 9,900 $ 333,171
Samsung SDI Co. Ltd. (a) ....................... 3,720 257,200
Spectris PLC ................................... 64,000 982,120
------------
$ 1,572,491
------------
ELECTRONICS -- 5.0%
Barco N.V ...................................... 4,150 $ 377,910
Brother Industries Ltd. ........................ 33,000 446,579
Konica Minolta Holdings, Inc. (l) .............. 85,000 1,199,546
OMRON Corp. .................................... 32,200 914,243
Ricoh Co. Ltd. ................................. 46,000 938,973
Samsung Electronics Co. Ltd. ................... 1,600 1,054,624
Sony Corp. ..................................... 26,000 1,113,864
Taiwan Semiconductor Manufacturing Co. .........
Ltd., ADR .................................... 86,519 945,653
Venture Corp. Ltd. ............................. 51,000 448,885
------------
$ 7,440,277
------------
ENERGY -- INDEPENDENT -- 1.6%
Apache Corp. ................................... 9,420 $ 626,524
Norsk Hydro A.S.A .............................. 44,750 1,389,205
PTT Public Co. ................................. 72,600 421,743
------------
$ 2,437,472
------------
ENERGY -- INTEGRATED -- 5.2%
Royal Dutch Shell PLC, "A" ..................... 94,650 $ 3,309,058
TOTAL S.A., ADR ................................ 62,400 4,487,808
------------
$ 7,796,866
------------
FOOD & BEVERAGES -- 6.5%
Binggrae Co. Ltd. (a) .......................... 6,650 $ 304,613
Cadbury Schweppes PLC .......................... 175,100 1,874,226
CoolBrands International, Inc. (a) ............. 50,980 56,455
CSM N.V ........................................ 32,110 1,236,143
Greencore Group PLC ............................ 87,762 542,056
Nestle S.A ..................................... 13,455 4,779,732
Nong Shim Co. Ltd. (a) ......................... 3,085 945,403
------------
$ 9,738,628
------------
FOOD & DRUG STORES -- 2.2%
Carrefour S.A. (l) ............................. 28,230 $ 1,711,566
Lawson, Inc. (l) ............................... 42,800 1,531,589
------------
$ 3,243,155
------------
FOREST & PAPER PRODUCTS -- 0.2%
Abitibi-Consolidated, Inc. ..................... 102,830 $ 263,938
------------
FURNITURE & APPLIANCES -- 0.3%
Indesit Co. S.p.A. (l) ......................... 30,440 $ 495,376
------------
GENERAL MERCHANDISE -- 1.5%
Daiei, Inc. (a)(l) ............................. 34,500 $ 462,531
METRO AG ....................................... 27,000 1,721,443
------------
$ 2,183,974
------------
INSURANCE -- 3.7%
Benfield Group PLC ............................. 134,100 $ 938,967
Catlin Group Ltd. .............................. 61,470 618,831
Hiscox Ltd. .................................... 151,418 831,129
Jardine Lloyd Thompson Group PLC ............... 162,000 1,334,217
Legal & General Group PLC ...................... 580,900 1,791,957
------------
$ 5,515,101
------------
LEISURE & TOYS -- 1.2%
Heiwa Corp. (l) ................................ 45,100 $ 570,546
NAMCO BANDAI Holdings, Inc. .................... 50,400 738,779
Tamron Co. Ltd. (l) ............................ 24,500 519,656
------------
$ 1,828,981
------------
MACHINERY & TOOLS -- 1.3%
ASSA ABLOY AB, "B" (l) ......................... 47,960 $ 1,043,697
GEA Group AG ................................... 40,800 919,148
------------
$ 1,962,845
------------
MAJOR BANKS -- 7.2%
BNP Paribas (l) ................................ 15,010 $ 1,637,251
Credit Agricole S.A. (l) ....................... 63,733 2,679,797
DBS Group Holdings Ltd. ........................ 104,000 1,532,403
Joyo Bank Ltd. ................................. 87,000 480,146
Royal Bank of Scotland Group PLC ............... 56,801 2,217,220
Shizuoka Bank Ltd. ............................. 73,000 724,205
Svenska Handelsbanken AB, "A" .................. 47,800 1,445,132
------------
$ 10,716,154
------------
METALS & MINING -- 1.2%
Anglo American PLC ............................. 37,030 $ 1,806,646
------------
NATURAL GAS -- DISTRIBUTION -- 1.2%
Tokyo Gas Co. Ltd. ............................. 349,000 $ 1,855,744
------------
NATURAL GAS -- PIPELINE -- 0.6%
Gazprom OAO, ADR ............................... 17,900 $ 823,400
------------
OIL SERVICES -- 0.3%
Fugro N.V ...................................... 7,872 $ 376,085
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 9.1%
Aiful Corp. (l) ................................ 45,000 $ 1,266,328
Banche Popolari Unite Scpa ..................... 29,700 816,073
Dah Sing Financial Holdings Ltd. ............... 46,400 420,259
DNB Holding A.S.A. (l) ......................... 71,960 1,021,708
Hachijuni Bank Ltd. ............................ 76,000 497,325
Hana Financial Group, Inc. ..................... 14,100 741,387
HSBC Holdings PLC .............................. 106,200 1,936,510
ING Groep N.V .................................. 52,050 2,307,398
Krungthai Card PLC ............................. 463,600 365,494
LIC Housing Finance Ltd. ....................... 57,690 209,918
Sapporo Hokuyo Holdings, Inc. .................. 75 724,516
Shinhan Financial Group Co. Ltd. (a) ........... 15,700 801,882
Siam City Bank Public Co. Ltd. ................. 733,600 357,161
SinoPac Holdings ............................... 1,063,000 569,260
Takefuji Corp. (l) ............................. 40,020 1,583,386
------------
$ 13,618,605
------------
PHARMACEUTICALS -- 6.9%
Astellas Pharma, Inc. .......................... 55,600 $ 2,526,742
GlaxoSmithKline PLC ............................ 112,870 2,971,142
Novartis AG .................................... 45,300 2,610,817
Takeda Pharmaceutical Co. Ltd. ................. 20,300 1,393,179
Tanabe Seiyaku Co. Ltd. (l) .................... 54,000 705,363
------------
$ 10,207,243
------------
PRINTING & PUBLISHING -- 1.2%
PagesJaunes Groupe S.A. (l) .................... 34,830 $ 692,721
Reed Elsevier PLC .............................. 92,800 1,018,754
------------
$ 1,711,475
------------
RAILROAD & SHIPPING -- 0.4%
SMRT Corp. Ltd. ................................ 780,820 $ 605,800
------------
REAL ESTATE -- 0.3%
Deutsche Wohnen AG ............................. 7,200 $ 460,667
------------
SPECIALTY CHEMICALS -- 1.3%
L'Air Liquide S.A .............................. 4,652 $ 1,104,492
L'Air Liquide S.A., Bearer Shares (l) .......... 3,300 783,496
------------
$ 1,887,988
------------
SPECIALTY STORES -- 1.6%
KappAhl Holding AB ............................. 56,900 $ 596,271
NEXT PLC ....................................... 19,560 689,584
Praktiker Bau-und Heimwerkermarkte
Holding AG ................................... 29,520 1,054,621
------------
$ 2,340,476
------------
TELECOMMUNICATIONS -- WIRELESS -- 3.3%
KDDI Corp. ..................................... 284 $ 1,925,222
Mobilcom AG (a)(l) ............................. 18,930 552,122
SmarTone Telecommunications
Holdings Ltd. ................................ 372,000 385,475
Vodafone Group PLC ............................. 731,010 2,025,934
------------
$ 4,888,753
------------
TELEPHONE SERVICES -- 4.5%
France Telecom S.A ............................. 70,630 $ 1,952,833
Royal KPN N.V .................................. 54,780 778,627
Singapore Telecommunications Ltd. .............. 599,000 1,280,949
Telekom Austria AG ............................. 60,400 1,618,172
Telenor A.S.A .................................. 57,750 1,086,319
------------
$ 6,716,900
------------
TOBACCO -- 1.8%
British American Tobacco PLC ................... 55,040 $ 1,540,480
Swedish Match AB ............................... 59,560 1,113,458
------------
$ 2,653,938
------------
TRUCKING -- 1.9%
TNT N.V ........................................ 66,710 $ 2,868,361
------------
UTILITIES -- ELECTRIC POWER -- 4.1%
E.ON AG ........................................ 18,430 $ 2,501,134
Hera S.p.A ..................................... 122,270 531,378
Scottish Power PLC ............................. 52,729 772,497
SUEZ S.A. (l) .................................. 20,225 1,047,125
United Utilities PLC ........................... 85,200 1,301,607
------------
$ 6,153,741
------------
Total Common Stocks
(Identified Cost, $113,940,007) .......... $143,281,632
------------
PREFERRED STOCKS -- 2.0%
CONSUMER GOODS & SERVICES -- 2.0%
Henkel KGaA, IPS (l)
(Identified Cost, $2,073,350) ................ 20,310 $ 2,988,125
------------
SHORT-TERM OBLIGATIONS -- 1.1%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ........................... $ 1,561,000 $ 1,560,771
------------
COLLATERAL FOR SECURITIES LOANED -- 14.4%
Navigator Securities Lending
Prime Portfolio, at Cost and
Net Asset Value .............................. 21,516,173 $ 21,516,173
------------
Total Investments
(Identified Cost, $139,090,301) (k) ...... $169,346,701
------------
OTHER ASSETS,
LESS LIABILITIES -- (13.7)% .................. (20,365,241)
------------
Net Assets -- 100.0% ....................... $148,981,460
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
MONEY MARKET SERIES
CERTIFICATES OF DEPOSIT -- 11.9%
ISSUER SHARES/PAR VALUE ($)
OTHER BANKS & DIVERSIFIED FINANCIALS -- 8.0%
Barclays Bank PLC, NY,
5.31%, due 03/13/2007 ........................ $15,800,000 $ 15,800,000
Barclays Bank PLC, NY,
5.31%, due 01/22/2007 ........................ 1,605,000 1,605,000
Credit Suisse, NY,
5.31%, due 02/28/2007 ........................ 17,814,000 17,814,000
UBS AG, Stamford CT Branch,
5.355%, due 03/06/2007 ....................... 18,016,000 18,016,000
Total Certificates of Deposit,
at Amortized Cost and Value .............. $ 53,235,000
------------
COMMERCIAL PAPER(y) -- 85.8%
ASSET BACKED & SECURITIZED -- 2.2%
Yorktown Capital LLC,
5.26%, due 1/04/07 (t) ....................... $ 4,822,000 $ 4,819,880
Yorktown Capital LLC,
5.29%, due 2/26/07 (t) ....................... 5,000,000 4,958,856
------------
$ 9,778,736
------------
BROKERAGE & ASSET MANAGERS -- 4.0%
Morgan Stanley, Inc.,
5.25%, due 2/21/07 ........................... $18,100,000 $ 17,965,381
------------
FINANCIAL INSTITUTIONS -- 64.2%
Barton Capital LLC,
5.27%, due 1/09/07 - 1/11/07 (t) ............. $ 8,351,000 $ 8,339,938
Barton Capital LLC,
5.26%, due 1/10/07 (t) ....................... 9,771,000 9,758,151
Bryant Park Funding LLC,
5.26%, due 1/05/07 (t) ....................... 2,000,000 1,998,831
Bryant Park Funding LLC,
5.27%, due 1/12/07 - 2/12/07 (t) ............. 8,402,000 8,363,262
Bryant Park Funding LLC,
5.25%, due 1/18/07 (t) ....................... 5,832,000 5,817,542
CAFCO LLC,
5.25%, due 2/02/07 - 2/06/07 (t) ............. 15,903,000 15,823,944
CRC Funding LLC,
5.27%, due 1/04/07 (t) ....................... 1,000,000 999,561
CRC Funding LLC,
5.25%, due 2/13/07 (t) ....................... 2,026,000 2,013,295
Cargill, Inc.,
5.28%, due 2/28/07 (t) ....................... 10,000,000 9,914,933
Ciesco LLC,
5.26%, due 1/04/07 - 2/09/07 (t) ............. 7,011,000 6,981,127
Ciesco LLC,
5.27%, due 1/11/07 (t) ....................... 3,882,000 3,876,317
Ciesco LLC,
5.27%, due 1/18/07 (t) ....................... 7,100,000 7,082,331
Citibank Credit Card Issuance Trust,
5.27%, due 1/12/07 (t) ....................... 18,092,000 18,062,867
Fairway Finance Corp.,
5.245%, due 1/11/07 (t) ...................... 257,000 256,626
Fairway Finance Corp.,
5.265%, due 1/12/07 (t) ...................... 7,629,000 7,616,727
Falcon Asset Securitization Co. LLC,
5.25%, due 2/14/07 (t) ....................... 12,990,000 12,906,648
Govco, Inc.,
5.25%, due 1/18/07 - 2/20/07 (t) ............. 13,737,000 13,679,844
Govco, Inc.,
5.24%, due 3/07/07 (t) ....................... 2,232,000 2,210,883
Jupiter Securitization Co. LLC,
5.25%, due 1/25/07 - 2/01/07 (t) ............. 18,031,000 17,963,233
Kitty Hawk Funding Corp.,
5.25%, due 3/30/07 (t) ....................... 17,920,000 17,690,027
Old Line Funding LLC,
5.33%, due 1/02/07 (t) ....................... 1,157,000 1,156,829
Old Line Funding LLC,
5.27%, due 1/03/07 (t) ....................... 3,194,000 3,193,065
Old Line Funding LLC,
5.26%, due 1/04/07 - 1/12/07 (t) ............. 13,394,000 13,380,077
Ranger Funding Co. LLC,
5.26%, due 1/04/07 (t) ....................... 10,564,000 10,559,369
Ranger Funding Co. LLC,
5.25%, due 3/12/07 (t) ....................... 7,480,000 7,403,642
Regency Markets, No. 1 LLC,
5.28%, due 1/08/07 (t) ....................... 8,711,000 8,702,057
Regency Markets, No. 1 LLC,
5.26%, due 3/20/07 (t) ....................... 9,206,000 9,101,082
Scaldis Capital LLC,
5.25%, due 1/16/07 (t) ....................... 12,935,000 12,906,705
Sheffield Receivables Corp.,
5.26%, due 1/24/07 (t) ....................... 5,000,000 4,983,197
Swedbank, 5.23%,
due 1/08/07 .................................. 18,065,000 18,046,629
Thunder Bay Funding LLC,
5.25%, due 1/10/07 - 1/16/07 (t) ............. 9,880,000 9,862,136
Thunder Bay Funding LLC,
5.27%, due 1/12/07 (t) ....................... 2,855,000 2,850,403
Windmill Funding Corp.,
5.26%, due 1/04/07 - 2/02/07 (t) ............. 12,991,000 12,961,560
------------
$286,462,838
------------
MAJOR BANKS -- 7.0%
HBOS Treasury Services PLC,
5.245%, due 1/16/07 - 3/14/07 ................ $10,748,000 $ 10,699,183
HBOS Treasury Services PLC,
5.27%, due 1/26/07 ........................... 1,920,000 1,912,973
HBOS Treasury Services PLC,
5.26%, due 1/30/07 ........................... 1,844,000 1,836,187
Societe Generale North America,
5.23%, due 3/29/07 ........................... 17,173,000 16,955,948
------------
$ 31,404,291
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 8.4%
Citigroup Funding, Inc.,
5.245%, due 1/16/07 .......................... $18,150,000 $ 18,110,335
Depfa Bank PLC,
5.3%, due 2/26/07 (t) ........................ 350,000 347,114
Depfa Bank PLC,
4.98%, due 12/21/07 (t) ...................... 6,000,000 5,706,180
ING America Insurance Holdings, Inc.,
5.26%, due 3/14/07 ........................... 590,000 583,793
Svenska Handelsbanken, Inc.,
5.23%, due 2/28/07 ........................... 13,000,000 12,890,461
------------
$ 37,637,883
------------
Total Commercial Paper,
at Amortized Cost and Value .............. $383,249,129
------------
REPURCHASE AGREEMENTS -- 1.8%
Merrill Lynch, 5.32%, dated 12/29/06, due
1/02/07, total to be received $7,957,701
(secured by various U.S. Treasury and
Federal Agency obligations and Mortgage
Backed securities in a jointly traded
account), at Cost ............................ $ 7,953,000 $ 7,953,000
------------
Total Investments,
at Amortized Cost and Value .............. $444,437,129
------------
OTHER ASSETS,
LESS LIABILITIES -- 0.5% ..................... 2,132,828
------------
Net Assets -- 100.0% ....................... $446,569,957
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
STRATEGIC INCOME SERIES
BONDS -- 95.1%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 0.3%
Bombardier, Inc., 8%, 2014 (n) ................. $ 75,000 $ 76,875
DRS Technologies, Inc., 7.625%, 2018 ........... 165,000 169,950
------------
$ 246,825
------------
AIRLINES -- 0.2%
Continental Airlines, Inc., 7.566%, 2020 ....... $ 168,565 $ 170,251
------------
APPAREL MANUFACTURERS -- 0.2%
Levi Strauss & Co., 12.25%, 2012 ............... $ 105,000 $ 116,813
------------
ASSET BACKED & SECURITIZED -- 6.7%
Anthracite Ltd., CDO, 6%, 2037 (z) ............. $ 200,000 $ 183,000
ARCap REIT, Inc., "H", 6.1%, 2045 (n) .......... 200,000 178,683
Asset Securitization Corp., FRN,
7.8671%, 2029 ................................ 215,000 233,379
Asset Securitization Corp., FRN,
8.3571%, 2029 (z) ............................ 185,000 200,093
Bayview Financial Revolving Mortgage Loan
Trust, FRN, 6.15%, 2040 (z) .................. 250,000 250,335
Chase Commercial Mortgage Securities Corp.,
6.6%, 2029 ................................... 360,000 368,392
Countrywide Asset-Backed Certificates, FRN,
4.575%, 2035 ................................. 31,202 30,959
Crest Ltd., 7%, 2040 (n) ....................... 270,000 269,568
Deutsche Mortgage & Asset Receiving Corp.,
7.5%, 2031 ................................... 250,000 276,941
DLJ Commercial Mortgage Corp.,
6.04%, 2031 .................................. 265,000 268,992
Falcon Franchise Loan LLC,
6.5%, 2014 (z) ............................... 250,000 218,330
Falcon Franchise Loan LLC, FRN,
2.7292%, 2023 (i)(n) ......................... 717,624 78,508
Falcon Franchise Loan LLC, FRN,
3.8676%, 2025 (i)(z) ......................... 759,486 117,318
First Union-Lehman Brothers Bank of America,
FRN, 0.5025%, 2035 (i) ....................... 7,812,833 124,305
First Union-Lehman Brothers Commercial
Mortgage Trust, 7%, 2029 (n) ................. 150,000 161,954
GMAC Commercial Mortgage Securities, Inc.,
6.02%, 2033 .................................. 350,000 356,541
Morgan Stanley Capital I, Inc.,
7.18%, 2030 .................................. 180,000 182,928
Morgan Stanley Capital I, Inc., FRN,
1.3439%, 2039 (i)(n) ......................... 2,662,489 159,600
Preferred Term Securities IV Ltd., CDO, FRN,
7.6106%, 2031 (z) ............................ 125,091 125,716
Prudential Securities Secured Financing
Corp., FRN, 7.379%, 2013 (z) ................. 411,000 435,568
Salomon Brothers Mortgage Securities, Inc.,
FRN, 7.0801%, 2032 (z) ....................... 530,129 579,758
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.3161%, 2044 ........................... 312,000 311,753
------------
$ 5,112,621
------------
AUTOMOTIVE -- 2.0%
Cooper-Standard Automotive, Inc.,
8.375%, 2014 ................................. $ 105,000 $ 82,688
Ford Motor Credit Co., 5.8%, 2009 .............. 556,000 545,905
Ford Motor Credit Co., 9.75%, 2010 (n) ......... 195,000 207,443
Ford Motor Credit Co., 7%, 2013 ................ 105,000 100,273
Ford Motor Credit Co., FRN,
8.11%, 2012 .................................. 100,000 99,092
General Motors Corp., 8.375%, 2033 ............. 315,000 291,375
Goodyear Tire & Rubber Co., 9%, 2015 ........... 150,000 157,125
Johnson Controls, Inc., 5.25%, 2011 ............ 60,000 59,527
------------
$ 1,543,428
------------
BROADCASTING -- 2.3%
Allbritton Communications Co.,
7.75%, 2012 .................................. $ 245,000 $ 247,450
Barrington Broadcasting Group,
10.5%, 2014 (n) .............................. 85,000 86,275
Clear Channel Communications,
5.5%, 2014 ................................... 150,000 126,534
EchoStar DBS Corp., 6.375%, 2011 ............... 75,000 74,531
Hughes Network Systems LLC,
9.5%, 2014 ................................... 75,000 78,281
Intelsat Ltd., 9.25%, 2016 (n) ................. 85,000 91,375
Intelsat Ltd., 11.25%, 2016 (n) ................ 195,000 214,013
Intelsat Subsidiary Holding Co. Ltd.,
8.625%, 2015 ................................. 230,000 239,200
ION Media Networks, Inc., FRN,
11.6238%, 2013 (n) ........................... 225,000 227,813
Liberty Media Corp., 5.7%, 2013 ................ 131,000 123,420
News America, Inc., 6.4%, 2035 ................. 220,000 218,555
------------
$ 1,727,447
------------
BUILDING -- 1.9%
American Standard Cos., Inc.,
7.625%, 2010 ................................. $ 225,000 $ 235,811
C10 Capital SPV Ltd., 0% to 2016,
6.722% to 2049 (z) ........................... 104,000 103,684
Goodman Global Holdings, Inc.,
7.875%, 2012 ................................. 90,000 88,425
Hanson PLC, 6.125%, 2016 ....................... 90,000 91,608
Lafarge S.A., 6.15%, 2011 ...................... 330,000 337,772
Masonite Corp., 11%, 2015 (z) .................. 95,000 87,875
Nortek Holdings, Inc., 8.5%, 2014 .............. 165,000 161,700
Nortek Holdings, Inc., 0% to 2009,
10.75% to 2014 ............................... 195,000 136,500
Owens Corning, Inc., 6.5%, 2016 (n) ............ 170,000 172,692
------------
$ 1,416,067
------------
BUSINESS SERVICES -- 1.1%
Iron Mountain, Inc., 8.625%, 2013 .............. $ 120,000 $ 123,900
Iron Mountain, Inc., 7.75%, 2015 ............... 95,000 96,900
Nortel Networks Ltd., 10.75%, 2016 (n) ......... 95,000 103,906
SunGard Data Systems, Inc.,
10.25%, 2015 ................................. 210,000 224,175
Xerox Corp., 7.625%, 2013 ...................... 275,000 288,750
------------
$ 837,631
------------
CABLE TV -- 2.1%
CCH I Holdings LLC, 11%, 2015 .................. $ 275,000 $ 282,219
CCH II Holdings LLC, 10.25%, 2010 .............. 155,000 162,169
CCO Holdings LLC, 8.75%, 2013 .................. 60,000 62,325
CSC Holdings, Inc., 8.125%, 2009 ............... 353,000 365,796
Grupo Televisa S.A., 8.5%, 2032 ................ 141,000 175,389
Mediacom LLC, 9.5%, 2013 ....................... 105,000 108,150
Rogers Cable, Inc., 5.5%, 2014 ................. 164,000 156,815
TCI Communications, Inc., 9.8%, 2012 ........... 245,000 288,903
------------
$ 1,601,766
------------
CHEMICALS -- 2.0%
BCP Crystal Holdings Corp.,
9.625%, 2014 ................................. $ 140,000 $ 154,700
Crystal U.S. Holdings LLC, "B",
0% to 2009, 10.5% to 2014 .................... 210,000 180,600
Equistar Chemicals LP, 10.625%, 2011 ........... 190,000 202,350
Innophos, Inc., 8.875%, 2014 ................... 95,000 96,425
Lyondell Chemical Co., 11.125%, 2012 ........... 140,000 150,500
Momentive Performance Materials, Inc.,
11.5%, 2016 (n) .............................. 175,000 171,500
Mosaic Co., 7.625%, 2016 (n) ................... 140,000 145,075
Nalco Co., 8.875%, 2013 ........................ 70,000 74,113
Nalco Finance Holdings, Inc, 0% to 2009, 9%
to 2014 ...................................... 115,000 93,150
Yara International A.S.A.,
5.25%, 2014 (n) .............................. 310,000 296,446
------------
$ 1,564,859
------------
CONGLOMERATES -- 0.1%
Esco Corp., 8.625%, 2013 (z) ................... $ 40,000 $ 41,100
------------
CONSTRUCTION -- 0.7%
Lennar Corp., 5.125%, 2010 ..................... $ 270,000 $ 263,892
Pulte Homes, Inc., 5.25%, 2014 ................. 283,000 270,756
------------
$ 534,648
------------
CONSUMER GOODS & SERVICES -- 1.5%
Fortune Brands, Inc., 5.125%, 2011 ............. $ 244,000 $ 239,435
Jarden Corp., 9.75%, 2012 ...................... 65,000 68,738
Service Corp. International, 7%, 2017 .......... 70,000 70,875
Service Corp. International, 7.625%, 2018 ...... 175,000 185,500
Spectrum Brands, Inc., 7.375%, 2015 ............ 40,000 34,600
Visant Holding Corp., 8.75%, 2013 .............. 130,000 133,900
Western Union Co., 5.4%, 2011 (n) .............. 440,000 433,873
------------
$ 1,166,921
------------
CONTAINERS -- 1.1%
Berry Plastics Holding Corp.,
8.875%, 2014 (n) ............................. $ 135,000 $ 137,025
Crown Americas LLC, 7.75%, 2015 ................ 145,000 150,438
Graham Packaging Co. LP,
9.875%, 2014 ................................. 120,000 121,200
Owens-Brockway Glass Container, Inc.,
8.875%, 2009 ................................. 97,000 99,183
Owens-Brockway Glass Container, Inc.,
8.25%, 2013 .................................. 360,000 372,150
------------
$ 879,996
------------
DEFENSE ELECTRONICS -- 0.9%
BAE Systems Holdings, Inc.,
5.2%, 2015 (n) ............................... $ 312,000 $ 297,192
L-3 Communications Holdings, Inc.,
6.125%, 2014 ................................. 385,000 376,338
------------
$ 673,530
------------
ELECTRONICS -- 0.3%
NXP B.V./NXP Funding LLC,
7.875%, 2014 (n) ............................. $ 55,000 $ 56,856
Sensata Technologies B.V.,
8.25%, 2014 (n) .............................. 195,000 187,200
------------
$ 244,056
------------
EMERGING MARKET QUASI-SOVEREIGN -- 2.3%
Gaz Capital S.A., 8.625%, 2034 ................. $ 344,000 $ 443,760
Gazprom OAO, 9.625%, 2013 ...................... 250,000 299,375
Gazprom OAO, 8.625%, 2034 (n) .................. 221,000 283,985
Pemex Project Funding Master Trust,
8.625%, 2022 ................................. 328,000 405,408
Petronas Capital Ltd., 7.875%, 2022 (n) ........ 236,000 290,435
------------
$ 1,722,963
------------
EMERGING MARKET SOVEREIGN -- 4.8%
Arab Republic of Egypt, 8.75%, 2011 ............ $ 79,000 $ 89,270
Federative Republic of Brazil, 8%, 2018 ........ 32,000 35,584
Federative Republic of Brazil,
7.125%, 2037 ................................. 241,000 258,955
Federative Republic of Brazil, 11%, 2040 ....... 177,000 234,525
Republic of Argentina,
FRN, 5.589%, 2012 ............................ 441,750 416,755
Republic of Bulgaria, 8.25%, 2015 .............. 204,000 241,516
Republic of Colombia, FRN,
7.175%, 2015 ................................. 161,000 166,635
Republic of El Salvador, 7.65%, 2035 ........... 114,000 129,390
Republic of Indonesia, 6.875%, 2017 (n) ........ 100,000 106,250
Republic of Korea, 5.625%, 2025 ................ 259,000 259,276
Republic of Panama, 9.375%, 2029 ............... 327,000 436,545
Republic of Philippines, 9.375%, 2017 .......... 66,000 81,345
Republic of South Africa, 9.125%, 2009 ......... 75,000 81,000
Republic of Venezuela, 7%, 2018 ................ 233,000 240,573
Republic of Venezuela, 7.65%, 2025 ............. 252,000 274,680
United Mexican States, 6.375%, 2013 ............ 124,000 130,386
United Mexican States, 8.125%, 2019 ............ 420,000 510,300
------------
$ 3,692,985
------------
ENERGY -- INDEPENDENT -- 1.8%
Anadarko Petroleum Corp., 5.95%, 2016 .......... $ 180,000 $ 180,377
Chesapeake Energy Corp., 6.375%, 2015 .......... 420,000 415,800
Hilcorp Energy I, 9%, 2016 (n) ................. 80,000 84,600
Newfield Exploration Co., 6.625%, 2014 ......... 220,000 220,000
Quicksilver Resources, Inc.,
7.125%, 2016 ................................. 130,000 127,075
Ras Laffan Liquefied Natural Gas Co. Ltd.,
5.832%, 2016 (n) ............................. 250,000 250,735
Whiting Petroleum Corp., 7%, 2014 .............. 90,000 89,775
------------
$ 1,368,362
------------
ENERGY -- INTEGRATED -- 0.3%
TNK-BP Finance S.A., 7.5%, 2016 (n) ............ $ 213,000 $ 226,579
------------
ENTERTAINMENT -- 0.9%
AMC Entertainment, Inc., 9.5%, 2011 ............ $ 223,000 $ 223,836
AMC Entertainment, Inc., 11%, 2016 ............. 80,000 89,800
Six Flags, Inc., 9.75%, 2013 ................... 136,000 127,670
Time Warner, Inc., 6.5%, 2036 .................. 20,000 19,907
Turner Broadcasting System, Inc.,
8.375%, 2013 ................................. 185,000 208,033
------------
$ 669,246
------------
FINANCIAL INSTITUTIONS -- 2.3%
Allied Capital Corp., 6.625%, 2011 ............. $ 330,000 $ 335,571
Countrywide Financial Corp.,
6.25%, 2016 .................................. 270,000 275,193
General Motors Acceptance Corp.,
5.85%, 2009 .................................. 295,000 293,882
General Motors Acceptance Corp.,
6.875%, 2011 ................................. 55,000 56,413
General Motors Acceptance Corp.,
6.75%, 2014 .................................. 413,000 424,206
ORIX Corp., 5.48%, 2011 ........................ 380,000 379,267
------------
$ 1,764,532
------------
FOOD & BEVERAGES -- 1.4%
Diageo Capital PLC, 5.5%, 2016 ................. $ 430,000 $ 424,538
Dole Foods Co., Inc., 8.875%, 2011 ............. 145,000 142,825
Michael Foods, Inc., 8%, 2013 .................. 195,000 202,313
Miller Brewing Co., 5.5%, 2013 (n) ............. 330,000 326,337
------------
$ 1,096,013
------------
FOREST & PAPER PRODUCTS -- 1.5%
Buckeye Technologies, Inc., 8%, 2010 ........... $ 30,000 $ 30,000
Buckeye Technologies, Inc., 8.5%, 2013 ......... 255,000 269,025
Jefferson Smurfit Corp., 8.25%, 2012 ........... 79,000 77,025
JSG Funding PLC, 7.75%, 2015 ................... EUR 130,000 173,283
MDP Acquisitions PLC, 9.625%, 2012 ............. 195,000 206,700
Millar Western Forest Products Ltd.,
7.75%, 2013 .................................. 110,000 98,725
Stora Enso Oyj, 6.404%, 2016 (n) ............... 160,000 164,095
Verso Paper Holdings LLC,
9.125%, 2014 (n) ............................. 65,000 67,763
Verso Paper Holdings LLC,
11.375%, 2016 (n) ............................ 80,000 84,000
------------
$ 1,170,616
------------
GAMING & LODGING -- 2.8%
Harrah's Entertainment, Inc.,
5.75%, 2017 .................................. $ 335,000 $ 280,665
Harrah's Operating Co., Inc.,
5.375%, 2013 ................................. 270,000 237,631
Majestic Star Casino LLC, 9.75%, 2011 .......... 80,000 79,200
MGM Mirage, Inc., 8.375%, 2011 ................. 435,000 451,313
MGM Mirage, Inc., 6.75%, 2013 .................. 90,000 87,975
MGM Mirage, Inc., 6.875%, 2016 ................. 85,000 81,600
Pokagon Gaming Authority,
10.375%, 2014 (n) ............................ 65,000 71,175
Scientific Games Corp., 6.25%, 2012 ............ 185,000 180,838
Station Casinos, Inc., 6.5%, 2014 .............. 320,000 284,400
Trump Entertainment Resorts Holdings, Inc.,
8.5%, 2015 ................................... 90,000 89,550
Wimar Opco LLC, 9.625%, 2014 (z) ............... 75,000 74,250
Wyndham Worldwide Corp., 6%, 2016 (n) .......... 90,000 88,417
Wynn Las Vegas LLC, 6.625%, 2014 ............... 110,000 109,313
------------
$ 2,116,327
------------
INDUSTRIAL -- 1.2%
Amsted Industries, Inc., 10.25%, 2011 (z) ...... $ 280,000 $ 299,600
Blount, Inc., 8.875%, 2012 ..................... 85,000 86,700
Education Management LLC,
8.75%, 2014 (n) .............................. 55,000 56,925
Education Management LLC,
10.25%, 2016 (n) ............................. 35,000 37,013
JohnsonDiversey Holdings, Inc., "B", 9.625%,
2012 ......................................... 150,000 157,123
JohnsonDiversey Holdings, Inc.,
0% to 2007, 10.67% to 2013 ................... 77,000 74,305
RBS Global & Rexnord Corp.,
9.5%, 2014 (n) ............................... 55,000 57,200
Steelcase, Inc., 6.5%, 2011 .................... 146,000 148,302
------------
$ 917,168
------------
INSURANCE -- 1.1%
Allianz AG, 5.5% to 2014, FRN to 2049 .......... EUR 248,000 $ 339,345
ING Groep N.V., 5.775% to 2015,
FRN to 2049 .................................. $ 520,000 514,552
------------
$ 853,897
------------
INSURANCE -- PROPERTY & CASUALTY -- 0.5%
AXIS Capital Holdings Ltd., 5.75%, 2014 ........ $ 375,000 $ 372,677
------------
INTERNATIONAL MARKET QUASI-SOVEREIGN -- 3.5%
Canada Housing Trust, 4.6%, 2011 ............... CAD 644,000 $ 564,380
Development Bank of Japan, 1.4%, 2012 .......... JPY 43,000,000 363,335
Development Bank of Japan,
1.05%, 2023 .................................. JPY 59,000,000 425,791
Japan Finance Corp. for Municipal
Enterprises, 1.55%, 2012 ..................... JPY 22,000,000 186,942
Japan Finance Corp. for Municipal
Enterprises, 2%, 2016 ........................ JPY 80,000,000 693,430
KfW Bankengruppe, FRN, 3.528%, 2007 ............ EUR 342,000 451,166
------------
$ 2,685,044
------------
INTERNATIONAL MARKET SOVEREIGN -- 9.6%
Commonwealth of Australia, 6.5%, 2013 .......... AUD 87,000 $ 70,591
Commonwealth of Australia, 6%, 2017 ............ AUD 86,000 68,507
Federal Republic of Germany,
5.25%, 2010 .................................. EUR 303,000 416,839
Federal Republic of Germany,
3.75%, 2015 .................................. EUR 224,000 291,485
Federal Republic of Germany,
6.25%, 2030 .................................. EUR 315,000 545,551
Government of Canada, 5.5%, 2009 ............... CAD 242,000 214,933
Government of Canada, 4.5%, 2015 ............... CAD 408,000 360,549
Government of Canada, 8%, 2023 ................. CAD 90,000 112,182
Government of Canada, 5.75%, 2033 .............. CAD 22,000 23,738
Kingdom of Denmark, 4%, 2015 ................... DKK 648,000 115,363
Kingdom of Netherlands, 3.75%, 2009 ............ EUR 619,000 813,954
Kingdom of Netherlands, 3.75%, 2014 ............ EUR 68,000 88,560
Kingdom of Spain, 5.35%, 2011 .................. EUR 454,000 634,877
Republic of Austria, 4.65%, 2018 ............... EUR 568,000 791,507
Republic of France, 4.75%, 2012 ................ EUR 98,000 134,587
Republic of France, 5%, 2016 ................... EUR 340,000 484,505
Republic of France, 6%, 2025 ................... EUR 83,000 136,602
Republic of France, 4.75%, 2035 ................ EUR 349,000 507,974
Republic of Ireland, 3.25%, 2009 ............... EUR 262,000 340,934
Republic of Ireland, 4.6%, 2016 ................ EUR 344,000 475,731
United Kingdom Treasury, 5.75%, 2009 ........... GBP 132,000 262,775
United Kingdom Treasury, 8%, 2015 .............. GBP 101,000 243,635
United Kingdom Treasury, 8%, 2021 .............. GBP 35,000 92,407
United Kingdom Treasury, 4.25%, 2036 ........... GBP 70,000 138,116
------------
$ 7,365,902
------------
MACHINERY & TOOLS -- 0.7%
Case New Holland, Inc., 9.25%, 2011 ............ $ 155,000 $ 164,106
Case New Holland, Inc., 7.125%, 2014 ........... 145,000 147,175
Manitowoc Co., Inc., 10.5%, 2012 ............... 120,000 128,850
Terex Corp., 7.375%, 2014 ...................... 105,000 106,575
------------
$ 546,706
------------
MAJOR BANKS -- 1.5%
BNP Paribas, 5.186% to 2015,
FRN to 2049 (n) .............................. $ 232,000 $ 222,738
Royal Bank of Scotland Group PLC, 9.118%,
2049 ......................................... 207,000 229,322
UniCredito Italiano Capital Trust II,
9.2% to 2010, FRN to 2049 (n) ................ 290,000 325,412
Wachovia Capital Trust III, 5.8% to 2011,
FRN to 2044 .................................. 360,000 362,972
------------
$ 1,140,444
------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 3.2%
Cardinal Health, Inc., 5.85%, 2017 ............. $ 289,000 $ 287,376
CDRV Investors, Inc., 0% to 2010,
9.625% to 2015 ............................... 185,000 143,375
DaVita, Inc., 6.625%, 2013 ..................... 65,000 65,163
DaVita, Inc., 7.25%, 2015 ...................... 205,000 209,100
HCA, Inc., 6.375%, 2015 ........................ 345,000 292,388
HCA, Inc., 9.25%, 2016 (n) ..................... 380,000 407,075
HealthSouth Corp., 10.75%, 2016 (n) ............ 180,000 193,725
Omnicare, Inc., 6.875%, 2015 ................... 195,000 192,563
Owens & Minor, Inc., 6.35%, 2016 ............... 170,000 170,688
Psychiatric Solutions, Inc., 7.75%, 2015 ....... 80,000 79,800
Tenet Healthcare Corp., 9.25%, 2015 ............ 90,000 90,000
U.S. Oncology, Inc., 10.75%, 2014 .............. 120,000 132,600
Vanguard Health Holding II, 9%, 2014 ........... 165,000 167,063
------------
$ 2,430,916
------------
METALS & MINING -- 1.8%
Aleris International, Inc., 10%, 2016 (z) ...... $ 45,000 $ 45,450
Arch Western Finance LLC, 6.75%, 2013 .......... 235,000 233,238
FMG Finance Ltd., 10.625%, 2016 (n) ............ 170,000 182,325
Griffin Coal Mining Co., 9.5%, 2016 (z) ........ 70,000 72,100
Massey Energy Co., 6.875%, 2013 ................ 145,000 136,300
Peabody Energy Corp., 7.375%, 2016 ............. 40,000 42,600
Peabody Energy Corp., "B",
6.875%, 2013 ................................. 210,000 215,250
PNA Group, Inc., 10.75%, 2016 (n) .............. 75,000 77,531
U.S. Steel Corp., 9.75%, 2010 .................. 130,000 138,288
Vale Overseas Ltd., 6.25%, 2017 ................ 210,000 210,955
------------
$ 1,354,037
------------
MORTGAGE BACKED -- 4.7%
Fannie Mae, 5.5%, 2019 - 2035 .................. $ 2,388,358 $ 2,372,062
Fannie Mae, 6.5%, 2032 ......................... 289,994 296,641
Fannie Mae, 6%, 2034 ........................... 919,180 926,930
------------
$ 3,595,633
------------
NATURAL GAS -- DISTRIBUTION -- 0.1%
AmeriGas Partners LP, 7.125%, 2016 ............. $ 90,000 $ 90,000
------------
NATURAL GAS -- PIPELINE -- 2.6%
Atlas Pipeline Partners, 8.125%, 2015 .......... $ 90,000 $ 92,475
CenterPoint Energy Resources Corp., 7.875%,
2013 ......................................... 448,000 497,061
El Paso Energy Corp., 7%, 2011 ................. 140,000 145,250
El Paso Energy Corp., 7.75%, 2013 .............. 200,000 209,250
El Paso Performance-Linked Trust,
7.75%, 2011 (n) .............................. 280,000 296,100
Kinder Morgan Finance, 5.35%, 2011 ............. 362,000 353,065
Williams Cos., Inc., 7.125%, 2011 .............. 280,000 291,200
Williams Partners LP, 7.25%, 2017 (z) .......... 65,000 66,300
------------
$ 1,950,701
------------
NETWORK & TELECOM -- 2.6%
Cincinnati Bell, Inc., 8.375%, 2014 ............ $ 120,000 $ 123,300
Citizens Communications Co.,
9.25%, 2011 .................................. 397,000 439,181
Citizens Communications Co., 9%, 2031 .......... 155,000 168,175
Deutsche Telekom International Finance B.V.,
8%, 2010 ..................................... 137,000 148,348
Hawaiian Telecom Communications, Inc.,
9.75%, 2013 .................................. 100,000 100,250
Nordic Telephone Co. Holdings,
8.875%, 2016 (n) ............................. 115,000 123,050
Qwest Corp., 8.875%, 2012 ...................... 105,000 116,944
Qwest Corp., 7.5%, 2014 ........................ 140,000 148,400
Telecom Italia Capital, 4.875%, 2010 ........... 60,000 58,439
Telefonica Europe B.V., 7.75%, 2010 ............ 260,000 279,251
Time Warner Telecom Holdings, Inc., 9.25%,
2014 ......................................... 130,000 138,938
Windstream Corp., 8.625%, 2016 (n) ............. 105,000 114,975
------------
$ 1,959,251
------------
OIL SERVICES -- 0.5%
Basic Energy Services, Inc.,
7.125%, 2016 ................................. $ 140,000 $ 137,900
Halliburton Co., 5.5%, 2010 .................... 280,000 279,502
------------
$ 417,402
------------
OILS -- 0.4%
Premcor Refining Group, Inc.,
7.5%, 2015 ................................... $ 310,000 $ 324,190
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 3.7%
Alfa Diversified Payment Rights Finance Co.,
FRN, 7.2531%, 2011 (z) ....................... $ 250,000 $ 249,375
Banco BMG S.A., 9.15%, 2016 (n) ................ 148,000 149,998
Banco do Estado de Sao Paulo S.A.,
8.7%, 2049 (n) ............................... 169,000 179,985
Banco Mercantil del Norte S.A.,
5.875% to 2009, FRN to 2014 (n) .............. 248,000 249,736
Bosphorus Financial Services Ltd., FRN,
7.1738%, 2012 (z) ............................ 200,000 202,755
Chuo Mitsui Trust & Banking Co.,
5.506% to 2015, FRN to 2049 (n) .............. 195,000 186,252
DFS Funding Corp., FRN,
7.36%, 2010 (z) .............................. 261,000 264,263
Glitnir Banki HF, 6.693% to 2011,
FRN to 2016 (n) .............................. 110,000 113,561
Kazkommerts International B.V.,
10.125%, 2007 ................................ 221,000 224,315
Kazkommerts International B.V.,
8%, 2015 ..................................... 165,000 171,600
Mizuho Capital Investment 1 Ltd.,
6.686% to 2016, FRN to 2049 (n) .............. 160,000 161,427
Resona Bank Ltd., 5.85% to 2016,
FRN to 2049 (n) .............................. 100,000 97,646
Russian Standard Finance S.A.,
8.625%, 2011 (n) ............................. 100,000 99,625
UBS Preferred Funding Trust V,
6.243% to 2016, FRN to 2049 .................. 270,000 279,581
UFJ Finance Aruba AEC, 6.75%, 2013 ............. 159,000 169,680
------------
$ 2,799,799
------------
PHARMACEUTICALS -- 0.1%
Teva Pharmaceutical Finance LLC,
5.55%, 2016 .................................. $ 87,000 $ 85,071
------------
PRECIOUS METALS & MINERALS -- 0.7%
Alrosa Finance S.A., 8.875%, 2014 .............. $ 432,000 $ 499,608
------------
PRINTING & PUBLISHING -- 2.1%
American Media Operations, Inc.,
10.25%, 2009 ................................. $ 50,000 $ 48,438
American Media Operations, Inc.,
8.875%, 2011 ................................. 60,000 54,750
Dex Media East LLC, 9.875%, 2009 ............... 245,000 256,638
Dex Media West LLC, 9.875%, 2013 ............... 283,000 308,470
Idearc, Inc., 8%, 2016 (n) ..................... 570,000 578,550
MediaNews Group, Inc., 6.875%, 2013 ............ 265,000 239,825
R.H. Donnelley Corp., 8.875%, 2016 ............. 140,000 147,000
------------
$ 1,633,671
------------
REAL ESTATE -- 0.9%
EOP Operating LP, 4.65%, 2010 .................. $ 260,000 $ 258,188
Simon Property Group LP, REIT,
6.1%, 2016 ................................... 430,000 445,729
------------
$ 703,917
------------
RETAILERS -- 0.8%
Couche-Tard, Inc., 7.5%, 2013 .................. $ 180,000 $ 184,050
Federated Retail Holdings, Inc.,
5.9%, 2016 ................................... 60,000 59,907
Jean Coutu Group (PJC), Inc.,
7.625%, 2012 ................................. 70,000 73,675
Limited Brands, Inc., 5.25%, 2014 .............. 276,000 262,233
------------
$ 579,865
------------
SPECIALTY STORES -- 0.4%
GSC Holdings Corp., 8%, 2012 ................... $ 160,000 $ 167,200
Michaels Stores, Inc., 11.375%, 2016 (n) ....... 145,000 151,163
Payless ShoeSource, Inc., 8.25%, 2013 .......... 20,000 20,800
------------
$ 339,163
------------
SUPERMARKETS -- 0.4%
Safeway, Inc., 4.95%, 2010 ..................... $ 112,000 $ 109,885
Safeway, Inc., 6.5%, 2011 ...................... 160,000 165,530
------------
$ 275,415
------------
SUPRANATIONAL -- 0.4%
Central American Bank, 4.875%, 2012 (n) ........ $ 305,000 $ 294,334
------------
TELECOMMUNICATIONS -- WIRELESS -- 1.9%
Alamosa Holdings, Inc., 11%, 2010 .............. $ 184,000 $ 198,828
Centennial Communications Corp.,
10%, 2013 .................................... 30,000 31,913
Centennial Communications Corp., 10.125%,
2013 ......................................... 105,000 113,138
Nextel Communications, Inc.,
5.95%, 2014 .................................. 380,000 370,050
OJSC Vimpel Communications,
8.25%, 2016 .................................. 298,000 312,900
Rogers Wireless, Inc., 7.5%, 2015 .............. 240,000 260,400
Rural Cellular Corp., 9.875%, 2010 ............. 160,000 170,200
------------
$ 1,457,429
------------
TOBACCO -- 0.4%
Reynolds American, Inc., 7.25%, 2012 ........... $ 266,000 $ 277,305
------------
TRANSPORTATION -- SERVICES -- 0.3%
Hertz Corp., 8.875%, 2014 (n) .................. $ 135,000 $ 141,413
Stena AB, 7%, 2016 ............................. 110,000 104,500
------------
$ 245,913
------------
U.S. GOVERNMENT AGENCIES -- 2.4%
Small Business Administration,
4.34%, 2024 .................................. $ 349,272 $ 332,927
Small Business Administration,
4.77%, 2024 .................................. 279,980 273,507
Small Business Administration,
5.18%, 2024 .................................. 517,441 516,731
Small Business Administration,
4.625%, 2025 ................................. 203,858 196,870
Small Business Administration,
4.86%, 2025 .................................. 364,527 357,215
Small Business Administration,
5.11%, 2025 .................................. 184,144 182,753
------------
$ 1,860,003
------------
U.S. TREASURY OBLIGATIONS -- 1.3%
U.S. Treasury Bonds, 5.375%, 2031 .............. $ 96,000 $ 102,833
U.S. Treasury Bonds, 4.5%, 2036 ................ 32,000 30,430
U.S. Treasury Notes, 4.125%, 2015 (f) .......... 121,000 116,184
U.S. Treasury Notes, 4.5%, 2015 ................ 90,000 88,615
U.S. Treasury Notes, TIPS, 0.875%, 2010 ........ 183,249 173,728
U.S. Treasury Notes, TIPS, 3%, 2012 ............ 220,022 226,425
U.S. Treasury Notes, TIPS, 1.625%, 2015 ........ 232,547 218,884
------------
$ 957,099
------------
UTILITIES -- ELECTRIC POWER -- 3.8%
Beaver Valley Funding Corp., 9%, 2017 .......... $ 424,000 $ 476,148
Edison Mission Energy, 7.75%, 2016 ............. 165,000 174,900
Empresa Nacional de Electricidad S.A.,
8.35%, 2013 .................................. 26,000 29,491
Enersis S.A., 7.375%, 2014 ..................... 363,000 390,668
FirstEnergy Corp., 6.45%, 2011 ................. 207,000 215,862
HQI Transelec Chile S.A., 7.875%, 2011 ......... 290,000 307,810
Mirant North American LLC,
7.375%, 2013 ................................. 145,000 147,175
NRG Energy, Inc., 7.375%, 2016 ................. 375,000 376,875
NRG Energy, Inc., 7.375%, 2017 ................. 50,000 50,125
Progress Energy, Inc., 5.625%, 2016 ............ 86,000 85,800
Reliant Resources, Inc., 9.25%, 2010 ........... 165,000 173,250
Spectra Energy Capital LLC, 8%, 2019 ........... 164,000 190,659
TXU Corp., 5.55%, 2014 ......................... 310,000 294,296
------------
$ 2,913,059
------------
Total Bonds
(Identified Cost, $71,100,664) ........... $ 72,631,201
------------
CONVERTIBLE PREFERRED STOCKS -- 0.1%
REAL ESTATE -- 0.1%
Mills Corp., 6.75%, "F" ........................ 100 $ 89,625
------------
Total Convertible Preferred Stocks
(Identified Cost, $77,375) ............... $ 89,625
------------
PREFERRED STOCKS -- 0.0%
REAL ESTATE -- 0.0%
HRPT Properties Trust, REIT, 8.75%, "B" ........ 625 $ 16,069
------------
Total Preferred Stocks
(Identified Cost, $17,094) ............... $ 16,069
------------
CONVERTIBLE BONDS -- 0.2%
AUTOMOTIVE -- 0.2%
Ford Motor Co., 4.25%, 2036 .................... $ 100,000 $ 106,875
------------
Total Convertible Bonds
(Identified Cost, $100,000) .............. $ 106,875
------------
SHORT-TERM OBLIGATIONS -- 2.6%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized Cost and
Value (y) .................................... $ 1,979,000 $ 1,978,709
------------
Total Investments
(Identified Cost, $73,273,842) (k) ...................... $ 74,822,479
------------
OTHER ASSETS, LESS LIABILITIES -- 2.0% ........................ 1,549,734
------------
Net Assets -- 100.0% .................................. $ 76,372,213
============
FUTURES CONTRACTS OUTSTANDING AT 12/31/06:
UNREALIZED
EXPIRATION APPRECIATION
DESCRIPTION CONTRACTS VALUE DATE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------------
U.S. Treasury Bond (Short) .................................... 4 $ 445,750 Mar-07 $ 8,048
U.S. Treasury Note 5 yr (Long) ................................ 1 105,063 Mar-07 (761)
U.S. Treasury Note 10 yr (Short) .............................. 25 2,686,719 Mar-07 28,444
-------
$35,731
=======
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these derivative
contracts.
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 178,902 2/06/07 $ 140,645 $ 141,145 $ (500)
CAD 935,789 2/06/07 819,876 804,233 15,643
DKK 3,449,042 1/02/07 - 2/15/07 610,780 611,245 (465)
EUR 3,228,898 1/29/07 4,270,815 4,267,888 2,927
GBP 538,719 2/26/07 1,024,937 1,055,413 (30,476)
JPY 10,272,288 1/23/07 88,250 86,579 1,671
MXN 819,166 1/05/07 76,000 75,819 181
NOK 5,177 1/08/07 800 830 (30)
---------- ---------- --------
$7,032,103 $7,043,152 $(11,049)
==========
PURCHASES
BRL 165,906 1/29/07 $ 76,862 $ 77,264 $ 402
DKK 2,715,786 1/02/07 - 2/15/07 480,395 481,197 802
EUR 367,258 2/28/07 484,087 486,046 1,959
GBP 157,549 2/28/07 309,807 308,658 (1,149)
JPY 5,500,845 1/18/07 46,960 46,333 (627)
MXN 2,062,436 1/05/07 188,104 190,892 2,788
PLN 323,444 1/08/07 113,094 111,384 (1,710)
ZAR 543,066 1/08/07 74,745 77,342 2,597
---------- ---------- --------
$1,774,054 $1,779,116 $ 5,062
========== ========== ========
At December 31, 2006, forward foreign currency purchases and sales under master netting agreements excluded above amounted
to a net payable of $4,155 with Merrill Lynch International.
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these derivative
contracts.
SWAP AGREEMENTS AT 12/31/06
UNREALIZED
NOTIONAL CASH FLOWS CASH FLOWS APPRECIATION
EXPIRATION AMOUNT COUNTERPARTY TO RECEIVE TO PAY (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------
CREDIT DEFAULT SWAPS
12/20/12 USD 310,000 Merrill Lynch Capital Services (1) 0.3% (fixed rate) $(1,143)
9/20/10 USD 270,000 Merrill Lynch International (2) 0.68% (fixed rate) (3,071)
-------
$(4,214)
=======
(1) Fund to receive notional amount upon a defined credit default event by Bear Stearns & Co., 7.625%, 12/7/09.
(2) Fund to receive notional amount upon a defined credit default event by Lennar Corp., 5.95%, 3/1/13.
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these derivative
contracts.
Portfolio Footnotes:
(a) Non-income producing security.
(d) Non-income producing security - in default.
(f) All or a portion of the security has been segregated as collateral for an open futures contract.
(g) The rate shown represents a weighted average coupon rate on settled positions at period end.
(i) Interest only security for which the series receives interest on notional principal (Par amount). Par amount shown is
the notion al principal and does not reflect the cost of the security.
(k) As of December 31, 2006, the following series held securities fair valued in accordance with the policies adopted by the
Board of Trustees:
MARKET % OF MARKET NUMBER OF
FUND VALUE VALUE SECURITIES
-----------------------------------------------------------------------------------------------------------------------
Emerging Markets Equity Series ........................................... $2,443,816 2.23% 4
International Value Series ............................................... 1,104,492 0.65% 1
(k) Certain series held securities fair valued in accordance with the policies adopted by the Board of Trustees. An
independent pric ing service provided an evaluated bid for certain series. As of December 31, 2006, the following series
held securities that were fair valued.
MARKET % OF MARKET % OF MARKET VALUE
SERIES VALUE VALUE USING EVALUATED BID
-----------------------------------------------------------------------------------------------------------------------
Bond Series ..................................................... $186,249,382 95.45% 95.06%
Global Governments Series ....................................... 36,798,589 83.64% 82.30%
Global Total Return Series ...................................... 60,033,279 31.71% 31.01%
Government Securities Series .................................... 642,111,442 98.11% 97.94%
High Yield Series ............................................... 306,869,273 86.78% 86.78%
Strategic Income Series ......................................... 69,832,488 93.33% 91.49%
(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 valu es and percentages of net assets of these securities were as follows for each series:
MARKET TOTAL % OF
VALUE NET ASSETS
-----------------------------------------------------------------------------------------------------------------------
Bond Series .............................................................................. $29,532,897 15.0%
Emerging Markets Equity Series ........................................................... 1,587,592 1.5%
Global Governments Series ................................................................ 2,057,715 4.7%
Global Total Return Series ............................................................... 2,543,439 1.4%
Government Securities Series ............................................................. 5,468,577 0.8%
High Yield Series ........................................................................ 58,752,779 16.5%
Strategic Income Series .................................................................. 10,296,002 13.5%
(o) All or a portion of this position has not settled. Upon settlement date, interest rates will be determined.
(p) Payment-in-kind security.
(r) Remaining maturities of floating rate loans may be less than stated maturities shown as a result of contractual or
optional prep ayments by the borrower. Such prepayments cannot be predicted with certainty. These loans may be subject
to restrictions on resale. Floating ra te loans generally have rates of interest which are determined periodically by
reference to a base lending rate plus a premium.
(t) Security exempt from registration with the U.S. Securities and Exchange Commission under Section 4(2) of the Securities
Act of 1 933.
(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. Each series ho lds the following restricted securities:
BOND SERIES
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Alfa Diversified Payment Rights Finance Co., FRN, 7.2531%, 2011 ........ 12/04/06 $ 663,000 $ 661,343
Bayview Financial Revolving Mortgage Loan Trust, FRN, 6.15%, 2040 ...... 3/01/06 470,000 470,630
Brazilian Merchant Voucher Receivables Ltd., 5.911%, 2011 .............. 7/02/03 641,221 628,204
CPS Auto Receivables Trust, 3.52%, 2009 ................................ 2/14/03 75,207 74,223
Falcon Franchise Loan LLC, 6.5%, 2014 .................................. 7/15/05 381,666 384,261
Falcon Franchise Loan LLC, FRN, 3.8676%, 2025 .......................... 1/29/03 483,175 392,897
Prudential Securities Secured Financing Corp., FRN, 7.379%, 2013 ....... 12/06/04 629,481 600,894
Spirit Master Funding LLC, 5.05%, 2023 ................................. 10/04/05 463,143 451,680
Stora Enso Oyj, 7.25%, 2036 ............................................ 5/30/06 816,523 862,634
TNK-BP Ltd., 6.875%, 2011 .............................................. 7/13/06 1,354,002 1,405,900
TPREF Funding III Ltd., CDO, 5.34% to 2008, FRN to 2033 ................ 4/18/06 1,060,928 1,066,602
- --------------------------------------------------------------------------------------------------------------------------------
Total Restricted Securities ............................................ $6,999,268 3.5%
========================
GLOBAL GOVERNMENTS SERIES
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 $102,377 $102,202 0.2%
GLOBAL TOTAL RETURN SERIES
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 $126,648 $126,432 0.1%
HIGH YIELD SERIES
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Airlie LCDO Ltd., CDO, FRN, 7.287%, 2011 ....................... 10/13/06 $ 665,000 $ 665,000
Aleris International, Inc., 10%, 2016 .......................... 12/13/06 595,000 600,950
Amsted Industries, Inc., 10.25%, 2011 .......................... 8/08/03 - 4/25/06 1,831,550 1,840,400
Anthracite Ltd., CDO, 6%, 2037 ................................. 5/14/02 839,044 1,189,500
Arbor Realty Mortgage Securities, CDO, FRN, 7.6738%, 2038 ...... 12/20/05 750,000 730,757
CWCapital Cobalt Ltd., "F", CDO, FRN, 6.68%, 2050 .............. 4/12/06 500,000 500,800
Esco Corp., 8.625%, 2013 ....................................... 12/12/06 490,000 503,475
Griffin Coal Mining Co., 9.5%, 2016 ............................ 11/10/06 825,000 849,750
Knology, Inc. .................................................. 11/27/02 -- 1,312
Knowledge Learning Corp., 7.75%, 2015 .......................... 1/28/05 725,000 694,188
Masonite Corp., 11%, 2015 ...................................... 11/07/06 - 12/05/06 1,113,319 1,119,250
Wachovia Credit, CDO, FRN, 6.7156%, 2026 ....................... 6/08/06 376,000 376,940
Williams Partners LP, 7.25%, 2017 .............................. 12/06/06 830,000 846,600
Wimar Opco LLC, 9.625%, 2014 ................................... 12/14/06 985,000 975,150
- --------------------------------------------------------------------------------------------------------------------------------
Total Restricted Securities .................................... $10,894,072 3.1%
========================
STRATEGIC INCOME SERIES
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
- --------------------------------------------------------------------------------------------------------------------------------
Aleris International, Inc., 10%, 2016 .......................... 12/13/06 $ 45,000 $ 45,450
Alfa Diversified Payment Rights Finance Co., FRN, 7.2531%, 2011 12/4/06 250,000 249,375
Amsted Industries, Inc., 10.25%, 2011 .......................... 8/8/03 280,000 299,600
Anthracite Ltd., CDO, 6%, 2037 ................................. 5/14/02 129,084 183,000
Asset Securitization Corp., FRN, 8.3571%, 2029 ................. 1/25/05 159,671 200,093
Bayview Financial Revolving Mortgage Loan Trust,
FRN, 6.15%, 2040 ............................................. 3/1/06 250,000 250,335
Bosphorus Financial Services Ltd., FRN, 7.1738%, 2012 .......... 3/8/05 200,000 202,755
C10 Capital SPV Ltd., 0% to 2016, 6.722% to 2049 ............... 12/11/06 104,000 103,684
DFS Funding Corp., FRN, 7.36%, 2010 ............................ 6/24/05 261,000 264,263
Esco Corp., 8.625%, 2013 ....................................... 12/12/06 40,000 41,100
Falcon Franchise Loan LLC, 6.5%, 2014 .......................... 7/15/05 216,855 218,330
Falcon Franchise Loan LLC, FRN, 3.8676%, 2025 .................. 1/29/03 150,553 117,318
Griffin Coal Mining Co., 9.5%, 2016 ............................ 11/10/06 70,000 72,100
Masonite Corp., 11%, 2015 ...................................... 11/07/06 - 12/05/06 87,438 87,875
Preferred Term Securities IV Ltd., CDO, FRN, 7.6106%, 2031 ..... 9/13/05 127,256 125,716
Prudential Securities Secured Financing Corp.,
FRN, 7.379%, 2013 ............................................ 12/6/04 456,290 435,568
Salomon Brothers Mortgage Securities, Inc., FRN, 7.0801%, 2032 . 1/7/05 609,048 579,758
Williams Partners LP, 7.25%, 2017 .............................. 12/6/06 65,000 66,300
Wimar Opco LLC, 9.625%, 2014 ................................... 12/14/06 75,000 74,250
- --------------------------------------------------------------------------------------------------------------------------------
Total Restricted Securities .................................... $3,616,870 4.7%
========================
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
CDO Collateralized Debt Obligation
CLO Collateralized Loan Obligation
FRN Floating Rate Note. Interest rate resets periodically and may not be the rate reported at period end.
GDR Global Depository Receipt
IEU International Equity Unit
IPS International Preference Stock
REIT Real Estate Investment Trust
SDR Swedish Depository Receipt
STRIPS Separate Trading of Registered Interest and Principal of Securities
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 MYR Malaysian Ringgit
BRL Brazilian Real NOK Norwegian Krone
CAD Canadian Dollar NZD New Zealand Dollar
DKK Danish Krone PLN Polish Zloty
EUR Euro RUB Russian Ruble
GBP British Pound SEK Swedish Krona
JPY Japanese Yen ZAR South African Rand
MXN Mexican Peso
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2006
These statements represent each series' balance sheet, which details the
assets and liabilities comprising the total value of each series.
Emerging Global Global Total Government
Bond Markets Governments Return Securities
Series Equity Series Series Series Series
------------ ------------- ----------- ------------ ------------
Assets:
Investments --
Unaffiliated issuers, at identified cost ........... $195,052,959 $ 83,095,248 $43,208,732 $166,206,583 $658,572,161
Unrealized appreciation (depreciation) ............. 78,233 26,578,648 785,587 23,129,578 (4,106,973)
------------ ------------ ----------- ------------ ------------
Total investments, at value (including securities
loaned of $--, $2,018,776, $--, $9,407,975,
and $--, respectively) ......................... $195,131,192 $109,673,896 $43,994,319 $189,336,161 $654,465,188
Cash ................................................. 3 1,083,238 3,273 706 --
Foreign currency, at value (identified cost, $--,
$367,759, $--, $11,495, and $--, respectively) ..... -- 368,378 -- 11,528 --
Receivable for forward foreign currency exchange
contracts .......................................... -- -- 98,730 132,607 --
Receivable for forward foreign currency exchange
contracts subject to master netting agreements ..... -- -- 48,363 4,634 --
Receivable for daily variation margin on open
futures contracts .................................. 1,875 -- -- -- 28,375
Receivable for investments sold ...................... -- 1,218,848 -- 1,061,622 --
Receivable for series shares sold .................... -- 39,402 -- 67,554 408,805
Interest and dividends receivable .................... 2,755,086 322,919 535,400 1,029,137 7,598,298
Receivable from investment adviser ................... -- -- 30,161 -- --
Other assets ......................................... 8,112 4,646 2,210 7,543 24,466
------------ ------------ ----------- ------------ ------------
Total assets ..................................... $197,896,268 $112,711,327 $44,712,456 $191,651,492 $662,525,132
============ ============ =========== ============ ============
Liabilities:
Notes payable ........................................ $ -- $ 651,000 $ -- $ -- $ --
Payable to custodian ................................. -- -- -- -- 11,655
Payable for forward foreign currency exchange
contracts .......................................... -- -- 222,257 240,349 --
Payable for forward foreign currency exchange
contracts subject to master netting agreements ..... -- -- 2,209 -- --
Payable for daily variation margin on open futures
contracts .......................................... -- -- 3,026 4,030 --
Payable for investments purchased .................... -- 1,162,431 942,154 1,617,367 1,179,457
Payable for series shares reacquired ................. 330,609 3,238 20,275 188 102,378
Unrealized depreciation on credit default swaps ...... 8,357 -- -- -- --
Collateral for securities loaned, at value ........... -- 2,067,068 -- 9,828,765 --
Payable to affiliates --
Management fee ..................................... 13,030 12,448 3,569 14,752 39,865
Distribution fees .................................. 2,098 526 104 511 8,457
Administrative services fee ........................ 619 338 136 561 1,985
Payable for independent trustees' compensation ....... 432 260 296 381 1,063
Accrued expenses and other liabilities ............... 78,523 218,854 88,728 99,281 112,303
------------ ------------ ----------- ------------ ------------
Total liabilities ................................ $ 433,668 $ 4,116,163 $ 1,282,754 $ 11,806,185 $ 1,457,163
------------ ------------ ----------- ------------ ------------
Net assets ............................................. $197,462,600 $108,595,164 $43,429,702 $179,845,307 $661,067,969
============ ============ =========== ============ ============
Net assets consist of:
Paid-in capital ...................................... $189,475,852 $ 58,172,938 $42,680,075 $144,100,872 $652,974,425
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign
currencies (net of $--, $50,154, $--, $--, and $--,
deferred country tax) .............................. 93,443 26,531,774 721,189 23,043,713 (3,744,966)
Accumulated net realized gain (loss) on investments
and foreign currency transactions .................. -- 21,891,469 (734,498) 8,972,375 (19,822,756)
Accumulated distributions in excess of net realized
gain on investments and foreign currency
transactions ....................................... (3,656,084) -- -- -- --
Undistributed net investment income .................. 11,549,389 1,998,983 762,936 3,728,347 31,661,266
------------ ------------ ----------- ------------ ------------
Total ............................................ $197,462,600 $108,595,164 $43,429,702 $179,845,307 $661,067,969
============ ============ =========== ============ ============
Net Assets:
Initial Class ........................................ $120,991,481 $ 89,418,853 $39,636,809 $161,208,549 $351,905,635
Service Class ........................................ 76,471,119 19,176,311 3,792,893 18,636,758 309,162,334
------------ ------------ ----------- ------------ ------------
Total ............................................ $197,462,600 $108,595,164 $43,429,702 $179,845,307 $661,067,969
============ ============ =========== ============ ============
Shares of beneficial interest outstanding:
Initial Class ........................................ 10,812,474 3,646,046 3,705,277 8,903,867 27,808,570
Service Class ........................................ 6,880,146 788,184 357,805 1,035,927 24,569,478
------------ ------------ ----------- ------------ ------------
Total ............................................ 17,692,620 4,434,230 4,063,082 9,939,794 52,378,048
============ ============ =========== ============ ============
Net asset value per share (net assets / shares of
beneficial interest outstanding):
Initial Class ........................................ $11.19 $24.52 $10.70 $18.11 $12.65
====== ====== ====== ====== ======
Service Class ........................................ $11.11 $24.33 $10.60 $17.99 $12.58
====== ====== ====== ====== ======
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2006 -- continued
High International Money Strategic
Yield Value Market Income
Series Series Series Series
------------ ------------- ------------ -----------
Assets:
Investments --
Unaffiliated issuers, at identified cost .......................... $346,380,862 $139,090,301 $444,437,129 $73,273,842
Unrealized appreciation (depreciation) ............................ 7,183,892 30,256,400 -- 1,548,637
------------ ------------ ------------ -----------
Total investments, at value (including securities loaned of
$--, $20,476,654, $--, and $--, respectively) ................. $353,564,754 $169,346,701 $444,437,129 $74,822,479
Cash ................................................................ 124,406 896 -- 14,613
Foreign currency, at value (identified cost, $--, $609,391, $--,
and $--, respectively) ............................................ -- 591,835 -- --
Receivable for forward foreign currency exchange contracts .......... -- -- -- 31,539
Receivable for daily variation margin on open futures contracts ..... -- -- -- 3,438
Receivable for investments sold ..................................... 165,830 586,418 -- 482,834
Receivable for series shares sold ................................... 130,005 212,346 1,818,199 9
Interest and dividends receivable ................................... 6,405,966 249,600 463,472 1,215,092
Receivable from investment adviser .................................. -- -- -- 3,466
Other assets ........................................................ 13,837 6,201 17,720 3,665
------------ ------------ ------------ -----------
Total assets .................................................... $360,404,798 $170,993,997 $446,736,520 $76,577,135
============ ============ ============ ===========
Liabilities:
Payable to custodian ................................................ $ -- $ -- $ 607 $ --
Payable for forward foreign currency exchange contracts ............. -- -- -- 37,526
Payable for forward foreign currency exchange contracts subject
to master netting agreements ...................................... -- -- -- 4,155
Payable for investments purchased ................................... 3,929,905 352,258 -- 75,725
Payable for series shares reacquired ................................ 83,479 6,497 49,368 5,948
Unrealized depreciation on credit default swaps ..................... -- -- -- 4,214
Collateral for securities loaned, at value .......................... -- 21,516,173 -- --
Payable to affiliates --
Investment adviser ................................................ -- -- 158 --
Management fee .................................................... 27,342 14,653 24,260 5,863
Distribution fees ................................................. 3,604 410 4,441 601
Administrative services fee ....................................... 1,102 464 1,362 239
Payable for independent trustees' compensation ...................... 668 265 658 320
Accrued expenses and other liabilities .............................. 107,234 121,817 85,709 70,331
------------ ------------ ------------ -----------
Total liabilities ............................................... $ 4,153,334 $ 22,012,537 $ 166,563 $ 204,922
------------ ------------ ------------ -----------
Net assets ............................................................ $356,251,464 $148,981,460 $446,569,957 $76,372,213
============ ============ ============ ===========
Net assets consist of:
Paid-in capital ..................................................... $434,000,898 $ 94,371,025 $446,569,485 $71,886,192
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign currencies ....... 7,183,892 30,234,244 -- 1,577,277
Accumulated net realized gain (loss) on investments and
foreign currency transactions ..................................... (110,298,729) 21,616,330 (766) (852,674)
Undistributed net investment income ................................. 25,365,403 2,759,861 1,238 3,761,418
------------ ------------ ------------ -----------
Total ........................................................... $356,251,464 $148,981,460 $446,569,957 $76,372,213
============ ============ ============ ===========
Net Assets:
Initial Class ....................................................... $224,412,452 $134,008,348 $283,055,132 $54,423,186
Service Class ....................................................... 131,839,012 14,973,112 163,514,825 21,949,027
------------ ------------ ------------ -----------
Total ........................................................... $356,251,464 $148,981,460 $446,569,957 $76,372,213
============ ============ ============ ===========
Shares of beneficial interest outstanding:
Initial Class ....................................................... 32,373,910 6,692,102 283,055,220 5,127,697
Service Class ....................................................... 19,155,030 751,574 163,514,931 2,081,548
------------ ------------ ------------ -----------
Total ........................................................... 51,528,940 7,443,676 446,570,151 7,209,245
============ ============ ============ ===========
Net asset value per share (net assets / shares of beneficial
interest outstanding):
Initial Class ...................................................... $6.93 $20.02 $1.00 $10.61
===== ====== ===== ======
Service Class ...................................................... $6.88 $19.92 $1.00 $10.54
===== ====== ===== ======
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2006
These statements describe how much each series earned in investment income and accrued in expenses. It also describes any gains
and/or losses generated by series' operations.
Emerging Global Global Total Government
Bond Markets Governments Return Securities
Series Equity Series Series Series Series
----------- ------------- ----------- ------------ -----------
Net investment income:
Income --
Interest ........................................... $12,423,214 $ 49,437 $1,978,896 $ 2,977,568 $33,446,712
Dividends .......................................... -- 3,935,421 -- 3,029,612 --
Income on securities loaned ........................ -- 12,451 -- 65,711 --
Foreign taxes withheld ............................. -- (293,556) -- (175,554) --
----------- ----------- ---------- ----------- -----------
Total investment income .......................... $12,423,214 $ 3,703,753 $1,978,896 $ 5,897,337 $33,446,712
----------- ----------- ---------- ----------- -----------
Expenses --
Management fee ..................................... $ 1,238,152 $ 1,080,819 $ 353,163 $ 1,327,096 $ 3,614,367
Distribution fees .................................. 190,579 37,766 10,422 43,124 678,104
Administrative services fee ........................ 50,913 25,161 11,374 43,858 159,234
Independent trustees' compensation ................. 20,181 8,948 5,214 16,563 60,885
Custodian fee ...................................... 72,036 337,075 98,534 162,533 171,800
Shareholder communications ......................... 6,094 38,314 3,507 24,644 12,289
Auditing fees ...................................... 47,784 48,330 47,784 46,138 40,828
Legal fees ......................................... 5,706 5,191 5,191 5,191 5,191
Miscellaneous ...................................... 20,864 29,955 6,965 24,470 47,171
----------- ----------- ---------- ----------- -----------
Total expenses ................................... $ 1,652,309 $ 1,611,559 $ 542,154 $ 1,693,617 $ 4,789,869
Fees paid indirectly ............................... (9,552) (15,202) (1,588) (12,385) (20,438)
Reduction of expenses by investment adviser ........ -- -- (61,974) -- --
----------- ----------- ---------- ----------- -----------
Net expenses ..................................... $ 1,642,757 $ 1,596,357 $ 478,592 $ 1,681,232 $ 4,769,431
----------- ----------- ---------- ----------- -----------
Net investment income ................................ $10,780,457 $ 2,107,396 $1,500,304 $ 4,216,105 $28,677,281
=========== =========== ========== =========== ===========
Realized and unrealized gain (loss) on investments and
foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions (net of $--, $82,472, $--,
$--, and $--, country tax) ......................... $ (122,638) $22,208,175 $ (540,824) $18,894,685 $(1,501,448)
Futures contracts .................................. (44,951) -- 33,615 56,772 (250,904)
Swap transactions .................................. (15,938) -- -- -- --
Foreign currency transactions ...................... -- (269,921) (116,331) (178,553) --
----------- ----------- ---------- ----------- -----------
Net realized gain (loss) on investments and
foreign currency transactions .................. $ (183,527) $21,938,254 $ (623,540) $18,772,904 $(1,752,352)
----------- ----------- ---------- ----------- -----------
Change in unrealized appreciation (depreciation) --
Investments (net of $--, $1,349, $--, $--, and $--
increase in deferred country tax) ................ $ (851,214) $ 2,078,051 $1,659,792 $ 5,475,091 $(4,322,429)
Futures contracts .................................. 23,567 -- (11,662) (18,058) 414,797
Swap transactions .................................. (8,357) -- -- -- --
Translation of assets and liabilities
in foreign currencies ............................ -- (35) (259,699) (345,396) --
----------- ----------- ---------- ----------- -----------
Net unrealized gain (loss) on investments and
foreign currency translation ................... $ (836,004) $ 2,078,016 $1,388,431 $ 5,111,637 $(3,907,632)
----------- ----------- ---------- ----------- -----------
Net realized and unrealized gain (loss) on
investments and foreign currency ............. $(1,019,531) $24,016,270 $ 764,891 $23,884,541 $(5,659,984)
----------- ----------- ---------- ----------- -----------
Change in net assets from operations ........... $ 9,760,926 $26,123,666 $2,265,195 $28,100,646 $23,017,297
=========== =========== ========== =========== ===========
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2006 -- continued
High International Money Strategic
Yield Value Market Income
Series Series Series Series
----------- ------------- ----------- ----------
Net investment income:
Income --
Interest .......................................................... $27,882,556 $ 108,271 $20,272,776 $4,946,392
Dividends ......................................................... 320,578 4,468,437 -- 16,917
Income on securities loaned ....................................... -- 139,564 -- --
Foreign taxes withheld ............................................ (5,865) (391,878) -- --
----------- ----------- ----------- ----------
Total investment income ......................................... $28,197,269 $ 4,324,394 $20,272,776 $4,963,309
----------- ----------- ----------- ----------
Expenses --
Management fee .................................................... $ 2,656,055 $ 1,217,523 $ 1,986,200 $ 583,323
Distribution fees ................................................. 296,653 33,350 351,471 54,151
Administrative services fee ....................................... 86,992 33,648 99,489 19,082
Independent trustees' compensation ................................ 33,597 11,395 31,749 7,716
Custodian fee ..................................................... 141,586 153,151 49,145 86,026
Shareholder communications ........................................ 3,368 13,559 99,554 4,462
Auditing fees ..................................................... 45,888 40,057 22,485 35,768
Legal fees ........................................................ 6,547 5,191 5,191 5,317
Miscellaneous ..................................................... 25,642 20,705 31,571 10,253
----------- ----------- ----------- ----------
Total expenses .................................................. $ 3,296,328 $ 1,528,579 $ 2,676,855 $ 806,098
Fees paid indirectly .............................................. (23,937) (2,239) (7,685) (4,408)
Reduction of expenses by investment adviser ....................... (58,752) -- -- (17,088)
----------- ----------- ----------- ----------
Net expenses .................................................... $ 3,213,639 $ 1,526,340 $ 2,669,170 $ 784,602
----------- ----------- ----------- ----------
Net investment income ............................................... $24,983,630 $ 2,798,054 $17,603,606 $4,178,707
=========== =========== =========== ==========
Realized and unrealized gain (loss) on investments
and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ........................................... $ (571,501) $22,026,023 $ (199) $ 391,878
Futures contracts ................................................. -- -- -- (46,669)
Swap transactions ................................................. -- -- -- (1,390)
Foreign currency transactions ..................................... (193,078) (9,377) -- (630,020)
----------- ----------- ----------- ----------
Net realized gain (loss) on investments and
foreign currency transactions ................................. $ (764,579) $22,016,646 $ (199) $ (286,201)
----------- ----------- ----------- ----------
Change in unrealized appreciation (depreciation) --
Investments (net of $--, $15,231, $--, and $-- decrease in
deferred country tax) ........................................... $10,239,764 $ 9,592,005 $ -- $1,107,029
Futures contracts ................................................. -- -- -- 35,731
Swap transactions ................................................. -- -- -- (4,162)
Translation of assets and liabilities in foreign currencies ....... 54,623 9,210 -- (47,151)
----------- ----------- ----------- ----------
Net unrealized gain (loss) on investments and
foreign currency translation .................................. $10,294,387 $ 9,601,215 $ -- $1,091,447
----------- ----------- ----------- ----------
Net realized and unrealized gain (loss) on investments
and foreign currency ........................................ $ 9,529,808 $31,617,861 $ (199) $ 805,246
----------- ----------- ----------- ----------
Change in net assets from operations .......................... $34,513,438 $34,415,915 $17,603,407 $4,983,953
=========== =========== =========== ==========
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2006
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any
shareholder transactions.
Emerging Global Global Total Government
Bond Markets Governments Return Securities
Series Equity Series Series Series Series
------------ ------------- ------------ ------------ ------------
Change in net assets:
From operations:
Net investment income .............................. $ 10,780,457 $ 2,107,396 $ 1,500,304 $ 4,216,105 $ 28,677,281
Net realized gain (loss) on investments and
foreign currency transactions .................... (183,527) 21,938,254 (623,540) 18,772,904 (1,752,352)
Net unrealized gain (loss) on investments and
foreign currency translation ..................... (836,004) 2,078,016 1,388,431 5,111,637 (3,907,632)
------------ ------------ ------------ ------------ ------------
Change in net assets from operations ................... $ 9,760,926 $ 26,123,666 $ 2,265,195 $ 28,100,646 $ 23,017,297
------------ ------------ ------------ ------------ ------------
Distributions declared to shareholders:
From net investment income (Initial Class) ......... $ (8,023,602) $(978,689) $ -- $ (1,461,088) $(19,538,803)
From net investment income (Service Class) ......... (4,507,857) (135,060) -- (114,800) (12,425,972)
From net realized gain on investments and
foreign currency transactions (Initial Class) .... (759,589) (13,285,025) (417,067) (10,553,650) --
From net realized gain on investments and
foreign currency transactions (Service Class) .... (444,627) (2,097,870) (41,595) (1,109,353) --
------------ ------------ ------------ ------------ ------------
Total distributions declared to shareholders ..... $(13,735,675) $(16,496,644) $ (458,662) $(13,238,891) $(31,964,775)
------------ ------------ ------------ ------------ ------------
Change in net assets from series share transactions .... $(18,018,509) $ 5,670,696 $(10,817,955) $(12,956,875) $ 3,147,375
------------ ------------ ------------ ------------ ------------
Total change in net assets ....................... $(21,993,258) $ 15,297,718 $ (9,011,422) $ 1,904,880 $ (5,800,103)
Net Assets:
At beginning of period ............................... 219,455,858 93,297,446 52,441,124 177,940,427 666,868,072
------------ ------------ ------------ ------------ ------------
At end of period ..................................... $197,462,600 $108,595,164 $ 43,429,702 $179,845,307 $661,067,969
============ ============ ============ ============ ============
Undistributed net investment income included in net
assets at end of period .............................. $ 11,549,389 $ 1,998,983 $ 762,936 $ 3,728,347 $ 31,661,266
High International Money Strategic
Yield Value Market Income
Series Series Series Series
------------ ------------- ------------ -----------
Change in net assets:
From operations:
Net investment income ............................................. $ 24,983,630 $ 2,798,054 $ 17,603,606 $ 4,178,707
Net realized gain (loss) on investments and
foreign currency transactions ................................... (764,579) 22,016,646 (199) (286,201)
Net unrealized gain (loss) on investments and
foreign currency translation .................................... 10,294,387 9,601,215 -- 1,091,447
------------ ------------ ------------ -----------
Change in net assets from operations ................................ $ 34,513,438 $ 34,415,915 $ 17,603,407 $ 4,983,953
------------ ------------ ------------ -----------
Distributions declared to shareholders:
From net investment income (Initial Class) ........................ $(19,601,820) $ (1,509,642) $(11,590,505) $(3,408,471)
From net investment income (Service Class) ........................ (9,556,650) (142,578) (6,013,101) (1,238,612)
From net realized gain on investments and
foreign currency transactions (Initial Class) ................... -- (12,870,222) -- (620,852)
From net realized gain on investments and
foreign currency transactions (Service Class) ................... -- (1,405,739) -- (236,204)
------------ ------------ ------------ -----------
Total distributions declared to shareholders ........................ $(29,158,470) $(15,928,181) $(17,603,606) $(5,504,139)
------------ ------------ ------------ -----------
Change in net assets from series share transactions ................. $(16,450,874) $ 11,081,685 $ 81,654,487 $(5,457,996)
------------ ------------ ------------ -----------
Total change in net assets .......................................... $(11,095,906) $ 29,569,419 $ 81,654,288 $(5,978,182)
Net Assets:
At beginning of period ............................................ 367,347,370 119,412,041 364,915,669 82,350,395
------------ ------------ ------------ -----------
At end of period .................................................. $356,251,464 $148,981,460 $446,569,957 $76,372,213
============ ============ ============ ===========
Undistributed net investment income included in net assets
at end of period .................................................. $ 25,365,403 $ 2,759,861 $ 1,238 $ 3,761,418
============ ============ ============ ===========
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2005
Emerging Global Global Total Government
Bond Markets Governments Return Securities
Series Equity Series Series Series Series
------------ ------------- ------------ ------------ ------------
Changes in net assets:
From operations:
Net investment income .............................. $ 11,364,653 $ 1,174,148 $ 1,590,121 $ 3,884,418 $ 29,280,242
Net realized gain (loss) on investments and
foreign currency transactions .................... 1,490,916 15,378,096 263,280 13,513,474 (2,494,206)
Net unrealized gain (loss) on investments and
foreign currency translation ..................... (8,953,486) 7,476,626 (6,507,776) (10,729,518) (11,858,283)
------------ ----------- ------------ ------------ ------------
Change in net assets from operations ................... $ 3,902,083 $24,028,870 $ (4,654,375) $ 6,668,374 $ 14,927,753
------------ ----------- ------------ ------------ ------------
Distributions declared to shareholders:
From net investment income (Initial Class) ......... $ (9,411,635) $ (448,328) $ (5,969,201) $ (6,966,176) $(21,947,118)
From net investment income (Service Class) ......... (4,408,284) (39,696) (477,244) (589,331) (9,752,762)
From net realized gain on investments and
foreign currency transactions (Initial Class) .... (2,642,743) (243,293) (328,895) (10,281,639) --
From net realized gain on investments and
foreign currency transactions (Service Class) .... (1,287,828) (29,086) (26,977) (916,598) --
------------ ----------- ------------ ------------ ------------
Total distributions declared to shareholders ..... $(17,750,490) $ (760,403) $ (6,802,317) $(18,753,744) $(31,699,880)
------------ ----------- ------------ ------------ ------------
Change in net assets from series share transactions .... $ (4,494,371) $ 5,833,884 $ (3,041,599) $ 9,531,704 $(14,464,265)
------------ ----------- ------------ ------------ ------------
Total change in net assets ....................... $(18,342,778) $29,102,351 (14,498,291) $ (2,553,666) $(31,236,392)
Net Assets:
At beginning of period ............................... 237,798,636 64,195,095 66,939,415 180,494,093 698,104,464
------------ ----------- ------------ ------------ ------------
At end of period ..................................... $219,455,858 $93,297,446 $ 52,441,124 $177,940,427 $666,868,072
============ =========== ============ ============ ============
Undistributed (distributions in excess of) net
investment income included in net assets
at end of period ..................................... $ 12,528,913 $ 1,045,289 $ (455,964) $ 1,104,888 $ 31,959,956
============ =========== ============ ============ ============
High International Money Strategic
Yield Value Market Income
Series Series Series Series
------------ ------------- ------------ -----------
Changes in net assets:
From operations:
Net investment income ........................................... $ 27,110,722 $ 1,760,096 $ 9,661,016 $ 4,544,849
Net realized gain (loss) on investments and
foreign currency transactions ................................. 1,714,312 14,307,849 (61) 1,551,265
Net unrealized gain (loss) on investments and
foreign currency translation .................................. (20,970,130) (571,375) -- (4,606,464)
------------ ------------ ------------ -----------
Change in net assets from operations ................................ $ 7,854,904 $ 15,496,570 $ 9,660,955 $ 1,489,650
------------ ------------ ------------ -----------
Distributions declared to shareholders:
From net investment income (Initial Class) ...................... $(23,882,264) $ (1,083,122) $ (6,992,613) $(4,482,176)
From net investment income (Service Class) ...................... (8,025,309) (78,002) (2,668,342) (1,550,120)
From net realized gain on investments and
foreign currency transactions (Initial Class) ................. -- (1,914,712) -- (584,605)
From net realized gain on investments and
foreign currency transactions (Service Class) ................. -- (162,463) -- (210,297)
------------ ------------ ------------ -----------
Total distributions declared to shareholders ........................ $(31,907,573) $ (3,238,299) $ (9,660,955) $(6,827,198)
------------ ------------ ------------ -----------
Change in net assets from series share transactions ................. $(38,167,173) $ 15,353,050 $ (5,463,894) $(2,744,135)
------------ ------------ ------------ -----------
Total change in net assets .......................................... $(62,219,842) $ 27,611,321 $ (5,463,894) $(8,081,683)
Net Assets:
At beginning of period ............................................ 429,567,212 91,800,720 370,379,563 90,432,078
------------ ------------ ------------ -----------
At end of period .................................................. $367,347,370 $119,412,041 $364,915,669 $82,350,395
============ ============ ============ ===========
Undistributed net investment income included in net assets
at end of period .................................................. $ 29,065,182 $ 1,647,100 $ 1,845 $ 4,410,661
============ ============ ============ ===========
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
Bond Series
--------------------------------------------------------
Years Ended 12/31
--------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period .................... $ 11.40 $ 12.15 $ 12.39 $ 11.85 $ 11.34
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.59 $ 0.59 $ 0.61 $ 0.62 $ 0.66
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ (0.04) (0.39) 0.09 0.51 0.37
-------- -------- -------- -------- --------
Total from investment operations .................. $ 0.55 $ 0.20 $ 0.70 $ 1.13 $ 1.03
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ............................ $ (0.69) $ (0.74) $ (0.76) $ (0.59) $ (0.45)
From net realized gain on investments and
foreign currency transactions ....................... (0.07) (0.21) (0.18) -- (0.07)
-------- -------- -------- -------- --------
Total distributions declared to shareholders ...... $ (0.76) $ (0.95) $ (0.94) $ (0.59) $ (0.52)
-------- -------- -------- -------- --------
Net asset value, end of period .......................... $ 11.19 $ 11.40 $ 12.15 $ 12.39 $ 11.85
======== ======== ======== ======== ========
Total return (%) (k)(s) ................................. 5.20 1.75 6.25 9.72 9.53
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 0.71 0.72 0.69 0.69 0.68
Net investment income ................................. 5.32 5.05 5.04 5.10 5.87
Portfolio turnover (%) .................................. 47 52 50 96 130
Net assets at end of period (000 Omitted) ............... $120,991 $143,680 $164,227 $199,735 $211,757
Bond Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period .................... $ 11.33 $ 12.07 $ 12.33 $ 11.81 $ 11.32
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.56 $ 0.56 $ 0.58 $ 0.57 $ 0.63
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ (0.05) (0.38) 0.08 0.53 0.38
------- ------- ------- ------- -------
Total from investment operations .................. $ 0.51 $ 0.18 $ 0.66 $ 1.10 $ 1.01
------- ------- ------- ------- -------
Less distributions declared to shareholders
From net investment income ............................ $ (0.66) $ (0.71) $ (0.74) $ (0.58) $ (0.45)
From net realized gain on investments and
foreign currency transactions ....................... (0.07) (0.21) (0.18) -- (0.07)
------- ------- ------- ------- -------
Total distributions declared to shareholders ...... $ (0.73) $ (0.92) $ (0.92) $ (0.58) $ (0.52)
------- ------- ------- ------- -------
Net asset value, end of period .......................... $ 11.11 $ 11.33 $ 12.07 $ 12.33 $ 11.81
======= ======= ======= ======= =======
Total return (%) (k)(s) ................................. 4.87 1.59 5.91 9.43 9.34
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 0.96 0.97 0.94 0.94 0.93
Net investment income ................................. 5.07 4.81 4.80 4.77 5.62
Portfolio turnover (%) .................................. 47 52 50 96 130
Net assets at end of period (000 Omitted) ............... $76,471 $75,776 $73,572 $66,091 $36,960
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be
lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
Emerging Markets Equity Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period .................... $ 21.84 $ 16.16 $ 12.85 $ 8.48 $ 8.73
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.47 $ 0.29 $ 0.18 $ 0.20 $ 0.09
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 5.92 5.59 3.27 4.23 (0.24)
------- ------- ------- ------- -------
Total from investment operations .................. $ 6.39 $ 5.88 $ 3.45 $ 4.43 $ (0.15)
------- ------- ------- ------- -------
Less distributions declared to shareholders
From net investment income ............................ $ (0.25) $ (0.13) $ (0.14) $ (0.06) $ (0.10)
From net realized gain on investments and
foreign currency transactions ....................... (3.46) (0.07) -- -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders ...... $ (3.71) $ (0.20) $ (0.14) $ (0.06) $ (0.10)
------- ------- ------- ------- -------
Net asset value, end of period .......................... $ 24.52 $ 21.84 $ 16.16 $ 12.85 $ 8.48
======= ======= ======= ======= =======
Total return (%) (k)(s) ................................. 30.16 36.76 27.18 52.60 (1.88)
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 1.53 1.31 1.35 1.65 1.49
Net investment income ................................. 2.08 1.62 1.33 1.99 1.01
Portfolio turnover (%) .................................. 110 95 109 125 246
Net assets at end of period (000 Omitted) ............... $89,419 $82,804 $57,799 $46,769 $30,393
Emerging Markets Equity Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------ ------ ------
Net asset value, beginning of period .................... $ 21.71 $ 16.08 $12.80 $ 8.45 $ 8.72
------- ------- ------ ------ ------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.41 $ 0.25 $ 0.15 $ 0.17 $ 0.06
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 5.89 5.54 3.25 4.22 (0.23)
------- ------- ------ ------ ------
Total from investment operations .................. $ 6.30 $ 5.79 $ 3.40 $ 4.39 $(0.17)
------- ------- ------ ------ ------
Less distributions declared to shareholders
From net investment income ............................ $ (0.22) $ (0.09) $(0.12) $(0.04) $(0.10)
From net realized gain on investments and
foreign currency transactions ....................... (3.46) (0.07) -- -- --
------- ------- ------ ------ ------
Total distributions declared to shareholders ...... $ (3.68) $ (0.16) $(0.12) $(0.04) $(0.10)
------- ------- ------ ------ ------
Net asset value, end of period .......................... $ 24.33 $ 21.71 $16.08 $12.80 $ 8.45
======= ======= ====== ====== ======
Total return (%) (k)(s) ................................. 29.90 36.36 26.96 52.12 (2.12)
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 1.78 1.56 1.60 1.89 1.74
Net investment income ................................. 1.84 1.38 1.08 1.71 0.70
Portfolio turnover (%) .................................. 110 95 109 125 246
Net assets at end of period (000 Omitted) ............... $19,176 $10,494 $6,397 $5,049 $2,066
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be
lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
Global Governments Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period .................... $ 10.29 $ 12.40 $ 12.92 $ 11.75 $ 9.74
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.34 $ 0.29 $ 0.30 $ 0.34 $ 0.35
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 0.17 (1.10) 0.76 1.45 1.66
------- ------- ------- ------- -------
Total from investment operations .................. $0.51 $ (0.81) $ 1.06 $ 1.79 $ 2.01
------- ------- ------- ------- -------
Less distributions declared to shareholders
From net investment income ............................ $-- $ (1.23) $ (1.58) $ (0.62) $ --
From net realized gain on investments and
foreign currency transactions ....................... (0.10) (0.07) -- -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders ...... $ (0.10) $ (1.30) $ (1.58) $ (0.62) $ --
------- ------- ------- ------- -------
Net asset value, end of period .......................... $ 10.70 $ 10.29 $ 12.40 $ 12.92 $ 11.75
======= ======= ======= ======= =======
Total return (%) (k)(r) ................................. 4.97 (7.20) 10.06 15.60 20.64
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) ................ 1.13 1.03 0.98 0.95 0.93
Expenses after expense reductions (f) ................. 1.00 1.00 N/A N/A N/A
Net investment income ................................. 3.21 2.64 2.48 2.75 3.36
Portfolio turnover (%) .................................. 122 137 124 143 120
Net assets at end of period (000 Omitted) ............... $39,637 $48,203 $62,107 $67,472 $70,613
Global Governments Series
------------------------------------------------------
Years Ended 12/31
------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
------ ------ ------ ------ ------
Net asset value, beginning of period .................... $10.22 $12.33 $12.85 $11.71 $ 9.73
------ ------ ------ ------ ------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.31 $ 0.27 $ 0.27 $ 0.30 $ 0.33
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 0.17 (1.11) 0.75 1.45 1.65
------ ------ ------ ------ ------
Total from investment operations .................. $ 0.48 $(0.84) $ 1.02 $ 1.75 $ 1.98
------ ------ ------ ------ ------
Less distributions declared to shareholders
From net investment income ............................ $ -- $(1.20) $(1.54) $(0.61) $ --
From net realized gain on investments and
foreign currency transactions ....................... (0.10) (0.07) -- -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders ...... $(0.10) $(1.27) $(1.54) $(0.61) $ --
------ ------ ------ ------ ------
Net asset value, end of period .......................... $10.60 $10.22 $12.33 $12.85 $11.71
====== ====== ====== ====== ======
Total return (%) (k)(r) ................................. 4.70 (7.49) 9.80 15.30 20.35
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) ................ 1.38 1.28 1.23 1.20 1.18
Expenses after expense reductions (f) ................. 1.25 1.25 N/A N/A N/A
Net investment income ................................. 2.96 2.39 2.23 2.50 3.03
Portfolio turnover (%) .................................. 122 137 124 143 120
Net assets at end of period (000 Omitted) ............... $3,793 $4,238 $4,832 $5,355 $3,969
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
(r) Certain expenses have been reduced without which performance would have been lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
Global Total Return Series
--------------------------------------------------------
Years Ended 12/31
--------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- -------
Net asset value, beginning of period .................... $ 16.66 $ 17.91 $ 15.70 $ 13.11 $ 13.28
-------- -------- -------- -------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.41 $ 0.37 $ 0.32 $ 0.29 $ 0.31
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 2.38 0.23 2.29 2.66 (0.23)
-------- -------- -------- -------- -------
Total from investment operations .................. $ 2.79 $ 0.60 $ 2.61 $ 2.95 $ 0.08
-------- -------- -------- -------- -------
Less distributions declared to shareholders
From net investment income ............................ $ (0.16) $ (0.75) $ (0.40) $ (0.36) $ (0.25)
From net realized gain on investments and
foreign currency transactions ....................... (1.18) (1.10) -- -- --
-------- -------- -------- -------- -------
Total distributions declared to shareholders ...... $ (1.34) $ (1.85) $ (0.40) $ (0.36) $ (0.25)
-------- -------- -------- -------- -------
Net asset value, end of period .......................... $ 18.11 $ 16.66 $ 17.91 $ 15.70 $ 13.11
======== ======== ======== ======== =======
Total return (%) (k)(s) ................................. 17.20 3.83 17.12 22.97 0.58
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 0.93 0.92 0.89 0.94 0.90
Net investment income ................................. 2.41 2.18 1.97 2.06 2.34
Portfolio turnover (%) .................................. 76 78 86 93 84
Net assets at end of period (000 Omitted) ............... $161,209 $161,143 $166,034 $156,675 $80,150
Global Total Return Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------- ------- ------
Net asset value, beginning of period .................... $ 16.56 $ 17.82 $ 15.63 $ 13.08 $13.28
------- ------- ------- ------- ------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.37 $ 0.32 $ 0.28 $ 0.26 $ 0.27
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 2.36 0.23 2.29 2.63 (0.22)
------- ------- ------- ------- ------
Total from investment operations .................. $ 2.73 $ 0.55 $ 2.57 $ 2.89 $ 0.05
------- ------- ------- ------- ------
Less distributions declared to shareholders
From net investment income ............................ $ (0.12) $ (0.71) $ (0.38) $ (0.34) $(0.25)
From net realized gain on investments and
foreign currency transactions ....................... (1.18) (1.10) -- -- --
------- ------- ------- ------- ------
Total distributions declared to shareholders ...... $ (1.30) $ (1.81) $ (0.38) $ (0.34) $(0.25)
------- ------- ------- ------- ------
Net asset value, end of period .......................... $ 17.99 $ 16.56 $ 17.82 $ 15.63 $13.08
======= ======= ======= ======= ======
Total return (%) (k)(s) ................................. 16.91 3.54 16.88 22.53 0.41
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 1.18 1.17 1.14 1.19 1.15
Net investment income ................................. 2.15 1.91 1.72 1.83 2.10
Portfolio turnover (%) .................................. 76 78 86 93 84
Net assets at end of period (000 Omitted) ............... $18,637 $16,797 $14,460 $11,545 $5,699
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be
lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
Government Securities Series
--------------------------------------------------------
Years Ended 12/31
--------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period .................... $ 12.84 $ 13.16 $ 13.44 $ 13.85 $ 13.28
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.56 $ 0.56 $ 0.54 $ 0.44 $ 0.58
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ (0.12) (0.26) (0.07) (0.14) 0.67
-------- -------- -------- -------- --------
Total from investment operations .................. $ 0.44 $ 0.30 $ 0.47 $ 0.30 $ 1.25
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ............................ $ (0.63) $ (0.62) $ (0.75) $ (0.59) $ (0.68)
From net realized gain on investments and
foreign currency transactions ....................... -- -- -- (0.12) --
-------- -------- -------- -------- --------
Total distributions declared to shareholders ...... $ (0.63) $ (0.62) $ (0.75) $ (0.71) $ (0.68)
-------- -------- -------- -------- --------
Net asset value, end of period .......................... $ 12.65 $ 12.84 $ 13.16 $ 13.44 $ 13.85
======== ======== ======== ======== ========
Total return (%) (k) .................................... 3.68 2.30 3.76 2.15 9.80
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 0.63 0.63 0.62 0.62 0.60
Net investment income ................................. 4.47 4.32 4.12 3.22 4.33
Portfolio turnover (%) .................................. 29 75 85 144 157
Net assets at end of period (000 Omitted) ............... $351,906 $425,740 $493,616 $629,265 $877,180
Government Securities Series
--------------------------------------------------------
Years Ended 12/31
--------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- -------
Net asset value, beginning of period .................... $ 12.77 $ 13.10 $ 13.38 $ 13.81 $ 13.27
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.53 $ 0.53 $ 0.51 $ 0.36 $ 0.51
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ (0.12) (0.27) (0.07) (0.10) 0.71
-------- -------- -------- -------- --------
Total from investment operations .................. $ 0.41 $ 0.26 $ 0.44 $ 0.26 $ 1.22
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ............................ $ (0.60) $ (0.59) $ (0.72) $ (0.57) $ (0.68)
From net realized gain on investments and
foreign currency transactions ....................... -- -- -- (0.12) --
-------- -------- -------- -------- --------
Total distributions declared to shareholders ...... $ (0.60) $ (0.59) $ (0.72) $ (0.69) $ (0.68)
-------- -------- -------- -------- --------
Net asset value, end of period .......................... $ 12.58 $ 12.77 $ 13.10 $ 13.38 $ 13.81
======== ======== ======== ======== ========
Total return (%) (k) .................................... 3.47 2.01 3.55 1.87 9.55
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 0.88 0.88 0.87 0.87 0.85
Net investment income ................................. 4.22 4.10 3.90 2.64 3.86
Portfolio turnover (%) .................................. 29 75 85 144 157
Net assets at end of period (000 Omitted) ............... $309,162 $241,128 $204,488 $172,578 $132,071
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
High Yield Series
--------------------------------------------------------
Years Ended 12/31
--------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period .................... $ 6.83 $ 7.32 $ 7.27 $ 6.56 $ 7.05
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.48 $ 0.49 $ 0.52 $ 0.54 $ 0.61
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 0.19 (0.36) 0.11 0.80 (0.42)
-------- -------- -------- -------- --------
Total from investment operations .................. $ 0.67 $ 0.13 $ 0.63 $ 1.34 $ 0.19
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ............................ $ (0.57) $ (0.62) $ (0.58) $ (0.63) $ (0.68)
-------- -------- -------- -------- --------
Net asset value, end of period .......................... $ 6.93 $ 6.83 $ 7.32 $ 7.27 $ 6.56
======== ======== ======== ======== ========
Total return (%) (k)(r)(s) .............................. 10.39 2.19 9.54 21.44 2.70
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) ................ 0.85 0.86 0.83 0.83 0.82
Expenses after expense reductions (f) ................. 0.83 N/A N/A N/A N/A
Net investment income ................................. 7.14 7.06 7.27 7.89 9.15
Portfolio turnover (%) .................................. 92 53 68 92 75
Net assets at end of period (000 Omitted) ............... $224,412 $255,999 $319,653 $360,207 $305,487
High Yield Series
--------------------------------------------------------
Years Ended 12/31
--------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- ------- -------
Net asset value, beginning of period .................... $ 6.79 $ 7.28 $ 7.23 $ 6.53 $ 7.04
-------- -------- -------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.46 $ 0.47 $ 0.49 $ 0.51 $ 0.58
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 0.19 (0.36) 0.12 0.81 (0.41)
-------- -------- -------- ------- -------
Total from investment operations .................. $ 0.65 $ 0.11 $ 0.61 $ 1.32 $ 0.17
-------- -------- -------- ------- -------
Less distributions declared to shareholders
From net investment income ............................ $ (0.56) $ (0.60) $ (0.56) $ (0.62) $ (0.68)
-------- -------- -------- ------- -------
Net asset value, end of period .......................... $ 6.88 $ 6.79 $ 7.28 $ 7.23 $ 6.53
======== ======== ======== ======= =======
Total return (%) (k)(r)(s) .............................. 10.04 1.93 9.37 21.21 2.37
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) ................ 1.10 1.11 1.08 1.08 1.07
Expenses after expense reductions (f) ................. 1.08 N/A N/A N/A N/A
Net investment income ................................. 6.89 6.81 6.99 7.59 8.99
Portfolio turnover (%) .................................. 92 53 68 92 75
Net assets at end of period (000 Omitted) ............... $131,839 $111,348 $109,914 $98,931 $44,533
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be
lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
International Value Series
--------------------------------------------------------
Years Ended 12/31
--------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- ------- ------- -------
Net asset value, beginning of period .................... $ 17.39 $ 15.58 $ 12.27 $ 9.28 $ 9.93
-------- -------- ------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.39 $ 0.27 $ 0.20 $ 0.11 $ 0.09
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 4.54 2.03 3.21 2.98 (0.66)
-------- -------- ------- ------- -------
Total from investment operations .................. $ 4.93 $ 2.30 $ 3.41 $ 3.09 $ (0.57)
-------- -------- ------- ------- -------
Less distributions declared to shareholders
From net investment income ............................ $ (0.24) $ (0.18) $ (0.10) $ (0.10) $ (0.08)
From net realized gain on investments and
foreign currency transactions ....................... (2.06) (0.31) -- -- --
-------- -------- ------- ------- -------
Total distributions declared to shareholders ...... $ (2.30) $ (0.49) $ (0.10) $ (0.10) $ (0.08)
-------- -------- ------- ------- -------
Net asset value, end of period .......................... $ 20.02 $ 17.39 $ 15.58 $ 12.27 $ 9.28
======== ======== ======= ======= =======
Total return (%) (k)(s) ................................. 29.23 15.22 28.02(v) 33.63 (5.86)
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 1.11 1.13 1.15 1.28 1.24
Net investment income ................................. 2.09 1.67 1.52 1.06 0.91
Portfolio turnover (%) .................................. 55 46 65 84 80
Net assets at end of period (000 Omitted) ............... $134,008 $108,418 $84,996 $61,108 $50,609
International Value Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------ ------ ------
Net asset value, beginning of period .................... $ 17.32 $ 15.54 $12.24 $ 9.27 $ 9.93
------- ------- ------ ------ ------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.34 $ 0.22 $ 0.18 $ 0.07 $ 0.04
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 4.53 2.02 3.20 2.98 (0.62)
------- ------- ------ ------ ------
Total from investment operations .................. $ 4.87 $ 2.24 $ 3.38 $ 3.05 $(0.58)
------- ------- ------ ------ ------
Less distributions declared to shareholders
From net investment income ............................ $ (0.21) $ (0.15) $(0.08) $(0.08) $(0.08)
From net realized gain on investments and
foreign currency transactions ....................... (2.06) (0.31) -- -- --
------- ------- ------ ------ ------
Total distributions declared to shareholders ...... $ (2.27) $ (0.46) $(0.08) $(0.08) $(0.08)
------- ------- ------ ------ ------
Net asset value, end of period .......................... $ 19.92 $ 17.32 $15.54 $12.24 $ 9.27
======= ======= ====== ====== ======
Total return (%) (k)(s) ................................. 28.95 14.86 27.82(v) 33.20 (5.97)
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) .......................................... 1.36 1.39 1.40 1.53 1.49
Net investment income ................................. 1.84 1.37 1.31 0.67 0.44
Portfolio turnover (%) .................................. 55 46 65 84 80
Net assets at end of period (000 Omitted) ............... $14,973 $10,994 $6,805 $4,646 $2,246
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be
lower.
(v) During the year ended December 31, 2004, the series received a payment from the investment adviser to reimburse
the series for losses on investments not meeting the investment guidelines of the series. If this loss had been
incurred, the total returns would have been approximately 28.01% and 27.81% for the Initial Class and Service
Class, respectively.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the series' independent registered public accounting firm, whose
report, together with the series' financial statements, are included in this report.
Money Market Series
------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ............................... $ 0.04 $ 0.03 $ 0.01 $ 0.01 $ 0.01
Net realized and unrealized gain (loss) on investments .. (0.00)(w) (0.00)(w) -- -- --
-------- -------- -------- -------- --------
Total from investment operations .................... $ 0.04 $ 0.03 $ 0.01 $ 0.01 $ 0.01
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income .............................. $ (0.04) $ (0.03) $ (0.01) $ (0.01) $ (0.01)
-------- -------- -------- -------- --------
Net asset value, end of period ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ======== ========
Total return (%) (k)(r) ................................... 4.59 2.72 0.83 0.63 1.27
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) .................. 0.59 0.60 0.58 0.57 0.57
Expenses after expense reductions (f) ................... N/A 0.60 N/A N/A N/A
Net investment income ................................... 4.52 2.65 0.79 0.64 1.27
Net assets at end of period (000 Omitted) ................. $283,055 $241,684 $282,595 $426,154 $690,127
Money Market Series
------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- ------- ------- -------
Net asset value, beginning of period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- ------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................... $ 0.04 $ 0.02 $ 0.01 $ 0.00(w) $ 0.01
Net realized and unrealized gain (loss) on investments .. (0.00)(w) (0.00)(w) -- -- --
-------- -------- ------- ------- -------
Total from investment operations .................... $ 0.04 $ 0.02 $ 0.01 $ 0.00(w) $ 0.01
-------- -------- ------- ------- -------
Less distributions declared to shareholders
From net investment income .............................. $ (0.04) $ (0.02) $ (0.01) $ (0.00)(w) $ (0.01)
-------- -------- ------- ------- -------
Net asset value, end of period ............................ $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======= ======= =======
Total return (%) (k)(r) ................................... 4.33 2.46 0.57 0.38 1.02
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) .................. 0.84 0.85 0.82 0.82 0.82
Expenses after expense reductions (f) ................... N/A 0.85 N/A N/A N/A
Net investment income ................................... 4.28 2.49 0.63 0.37 0.99
Net assets at end of period (000 Omitted) ................. $163,515 $123,232 $87,785 $49,380 $52,745
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(r) Certain expenses have been reduced without which performance would have been lower.
(w) Per share amount was less than $0.01.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5
years. Certain information reflects financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an investment in the series share class
(assuming reinvestment of all distributions) held for the entire period. This information has been audited by the
series' independent registered public accounting firm, whose report, together with the series' financial statements,
are included in this report.
Strategic Income Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period .................... $ 10.71 $ 11.42 $ 11.12 $ 10.31 $ 10.04
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.57 $ 0.58 $ 0.61 $ 0.59 $ 0.57
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 0.11 (0.39) 0.23 0.71 0.16
------- ------- ------- ------- -------
Total from investment operations .................. $ 0.68 $ 0.19 $ 0.84 $ 1.30 $ 0.73
------- ------- ------- ------- -------
Less distributions declared to shareholders
From net investment income ............................ $ (0.66) $ (0.80) $ (0.54) $ (0.49) $ (0.46)
From net realized gain on investments and
foreign currency transactions ....................... (0.12) (0.10) -- -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders ...... $ (0.78) $ (0.90) $ (0.54) $ (0.49) $ (0.46)
------- ------- ------- ------- -------
Net asset value, end of period .......................... $ 10.61 $ 10.71 $ 11.42 $ 11.12 $ 10.31
======= ======= ======= ======= =======
Total return (%) (k)(s) ................................. 6.71 1.89 8.04 12.89 7.52
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) ................ 0.97 0.97 0.91 0.90 0.86
Expenses after expense reductions (f) ................. 0.95 N/A N/A N/A N/A
Net investment income ................................. 5.44 5.33 5.55 5.58 5.74
Portfolio turnover (%) .................................. 64 66 74 127 137
Net assets at end of period (000 Omitted) ............... $54,423 $59,707 $66,248 $67,547 $56,980
Strategic Income Series
-------------------------------------------------------
Years Ended 12/31
-------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
------- ------- ------- ------- -------
Net asset value, beginning of period .................... $ 10.64 $ 11.35 $ 11.06 $ 10.28 $ 10.03
------- ------- ------- ------- -------
Income (loss) from investment operations
Net investment income (d) ............................. $ 0.54 $ 0.55 $ 0.59 $ 0.57 $ 0.53
Net realized and unrealized gain (loss) on investments
and foreign currency ................................ 0.11 (0.39) 0.22 0.68 0.18
------- ------- ------- ------- -------
Total from investment operations .................. $ 0.65 $ 0.16 $ 0.81 $ 1.25 $ 0.71
------- ------- ------- ------- -------
Less distributions declared to shareholders
From net investment income ............................ $ (0.63) $ (0.77) $ (0.52) $ (0.47) $ (0.46)
From net realized gain on investments and
foreign currency transactions ....................... (0.12) (0.10) -- -- --
------- ------- ------- ------- -------
Total distributions declared to shareholders ...... $ (0.75) $ (0.87) $ (0.52) $ (0.47) $ (0.46)
------- ------- ------- ------- -------
Net asset value, end of period .......................... $ 10.54 $ 10.64 $ 11.35 $ 11.06 $ 10.28
======= ======= ======= ======= =======
Total return (%) (k)(s) ................................. 6.45 1.61 7.83 12.48 7.31
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) ................ 1.22 1.22 1.16 1.15 1.11
Expenses after expense reductions (f) ................. 1.19 N/A N/A N/A N/A
Net investment income ................................. 5.19 5.08 5.31 5.36 5.41
Portfolio turnover (%) .................................. 64 66 74 127 137
Net assets at end of period (000 Omitted) ............... $21,949 $22,643 $24,184 $21,008 $12,979
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would
reduce the total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be
lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
The trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company consisting of twenty-eight separate
series (the series) of shares: Bond Series*, Capital Appreciation Series,
Capital Opportunities Series, Core Equity Series, Emerging Growth Series,
Emerging Markets Equity Series*, Global Governments Series*, Global Growth
Series, Global Total Return Series*, Government Securities Series*, High Yield
Series*, International Growth Series, International Value Series*,
Massachusetts Investors Growth Stock Series, Massachusetts Investors Trust
Series, Mid Cap Growth Series, Mid Cap Value Series, Money Market Series*, New
Discovery Series, Research Series, Research International Series, Strategic
Growth Series, Strategic Income Series*, Strategic Value Series, Technology
Series, Total Return Series, Utilities Series and Value Series. The shares of
each series are sold only to variable accounts established by insurance
companies to fund benefits under variable contracts issued by such companies.
The series denoted with an asterisk above are included within these financial
statements.
(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 High
Yield Series can invest up to 100% of its portfolio in high-yield securities
rated below investment grade. Investments in high-yield securities involve
greater degrees of credit and market risk than investments in higher- rated
securities and tend to be more sensitive to economic conditions. Each series
(except the Money Market Series and Government Securities Series) 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 - Money market instruments are valued at amortized cost,
which approximates market value. Amortized cost involves valuing an instrument
at its cost as adjusted for amortization of premium or accretion of discount
rather than its current market value. Each money market fund's use of amortized
cost is subject to the fund's compliance with Rule 2a-7 under the Investment
Company Act of 1940. The amortized cost value of an instrument can be different
from the market value of an instrument. 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 a 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. Swaps are generally valued at a
broker-dealer bid quotation. 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 series' 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 series' 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. 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 series' 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 series' net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
series' foreign equity securities may often be valued at fair value. 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
series' 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 series' net asset value may differ from quoted or published
prices for the same investments.
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 series, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in each series' financial statements.
Repurchase Agreements - Each series may enter into repurchase agreements with
institutions that the series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each series
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the series to
obtain those securities in the event of a default under the repurchase
agreement. Each series 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 series under each such repurchase agreement. Each series, 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 - Certain series invest in inflation-
adjusted debt securities issued by the U.S. Treasury. Certain series 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 - Certain series 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 each series 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, forward foreign currency exchange contracts, and swap agreements.
Purchased Options - Certain series 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 series'
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 - Certain series 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, each
series 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 each series 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 each series. Upon entering
into such contracts, each series bears the risk of interest or exchange rates
or securities prices moving unexpectedly, in which case, the series may not
achieve the anticipated benefits of the futures contracts and may realize a
loss.
Forward Foreign Currency Exchange Contracts - Certain series 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. Each series may enter into forward
foreign currency exchange contracts for hedging purposes as well as for non-
hedging purposes. For hedging purposes, each series may enter into contracts to
deliver or receive foreign currency it will receive from or require for its
normal investment activities. Each series 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,
each series may enter into contracts with the intent of changing the relative
exposure of the series' 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.
Swap Agreements - Certain series may enter into swap agreements. A swap is an
exchange of cash payments between the series and another party. Net cash
payments are exchanged at specified intervals and are recorded as a realized
gain or loss in the Statement of Operations. The value of the swap is adjusted
daily and the change in value, including accruals of periodic amounts of
interest to be paid or received, is recorded as unrealized appreciation or
depreciation in the Statement of Operations. A liquidation payment received or
made upon early termination is recorded as a realized gain or loss in the
Statement of Operations. Collateral, in the form of cash or securities, may be
required to be held in segregated accounts with each series' custodian in
connection with these agreements. Risk of loss may exceed amounts recognized on
the Statement of Assets and Liabilities. These risks include the possible lack
of a liquid market, failure of the counterparty to perform under the terms of
the agreements, and unfavorable market movement of the underlying instrument.
All swap agreements entered into by each series with the same counterparty are
generally governed by a single master agreement, which provides for the netting
of all amounts owed by the parties under the agreement upon the occurrence of
an event of default, thereby reducing the credit risk to which such party is
exposed.
Credit Default Swaps - In a credit default swap, one party makes a stream of
payments based on a fixed percentage applied to the notional amount to another
party in exchange for the right to receive a specified return in the event of a
default by a third party, such as a corporate issuer or foreign issuer, on its
obligation. Each series may enter into credit default swaps to limit or to
reduce its risk exposure to defaults of corporate and sovereign issuers or to
create direct or synthetic short or long exposure to corporate debt securities
or certain sovereign debt securities to which it is not otherwise exposed.
Security Loans - State Street Bank and Trust Company ("State Street"), as
lending agent, may loan the securities of certain series to certain qualified
institutions (the "Borrowers") approved by the series. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides certain series with indemnification against Borrower default.
Each series 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 series and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the series and the lending agent. The
dividend and interest income earned on the securities loaned is accounted for
in the same manner as other dividend and interest income.
Loans and Other Direct Debt Instruments - Certain series may invest in loans
and loan participations or other receivables. These investments may include
standby financing commitments, including revolving credit facilities, which
obligate the series to supply additional cash to the borrower on demand. Loan
participations involve a risk of insolvency of the lending bank or other
financial intermediary.
Indemnifications - Under each series' organizational documents, its officers
and trustees may be indemnified against certain liabilities and expenses
arising out of the performance of their duties to the series. Additionally, in
the normal course of business, each series enters into agreements with service
providers that may contain indemnification clauses. Each series' maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the series that have not yet occurred.
Investment Transactions and Income - Investment transactions are recorded on
the trade date. Some securities may be purchased on a "when-issued" or "forward
delivery" basis, which means that the securities will be delivered to the
series at a future date, usually beyond customary settlement time. Interest
income is recorded on the accrual basis. For Money Market Series, all premium
and discount is amortized and accreted for financial statement purposes and tax
reporting purposes in accordance with generally accepted accounting principles
and federal tax regulations, respectively. For all other series, all premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles; and all discount
is accreted for tax reporting purposes as required by federal income tax
regulations. Certain series earn certain fees in connection with their floating
rate loan purchasing activities. These fees are in addition to interest
payments earned and may include amendment fees, commitment fees, facility fees,
consent fees, and prepayment fees. These fees are recorded on an accrual basis
as income in the accompanying financial statements. Dividends received in cash
are recorded on the ex-dividend date. Certain dividends from foreign securities
will be recorded when the series 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.
Certain series 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 series.
Certain series may enter into "TBA" (to be announced) purchase commitments to
purchase securities for a fixed unit price at a future date. Although the unit
price has been established, the principal value has not been finalized.
However, the principal amount of the commitments will not fluctuate more than
0.01%. The series holds, and maintains until settlement date, cash or high-
grade debt obligations in an amount sufficient to meet the purchase price, or
the series may enter into offsetting contracts for the forward sale of other
securities it owns. Income on the securities will not be earned until
settlement date. TBA purchase commitments may be considered securities in
themselves, and involve a risk of loss if the value of the security to be
purchased declines prior to settlement date, which is in addition to the risk
of decline in the value of the series' other assets. Unsettled TBA purchase
commitments are valued at the current market value of the underlying
securities.
Certain series may enter into "TBA" (to be announced) sale commitments to hedge
its portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time a TBA sale
commitment is outstanding, equivalent deliverable securities, or an offsetting
TBA purchase commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction.
Fees Paid Indirectly - Each series' custody fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
series. This amount, for the year ended December 31, 2006, is shown as a
reduction of total expenses on the Statements of Operations.
Tax Matters and Distributions - Each series 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 series 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 expiration of capital loss
carryforwards, amortization and accretion of debt securities, defaulted bonds,
passive foreign investment companies, wash sale loss deferrals, straddle loss
deferrals, foreign currency transactions, derivative transactions, and foreign
taxes.
The tax character of distributions declared to shareholders is as follows:
Emerging Markets
Bond Series Equity Series Global Governments Series
-------------------------- ------------------------- -------------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
- -----------------------------------------------------------------------------------------------------------------------------------
Ordinary income (including any short-term
capital gains) ............................. $12,531,880 $14,157,639 $ 6,817,904 $ 488,024 $ 458,662 $ 6,705,443
Long-term capital gain ....................... 1,203,795 3,592,851 9,678,740 272,379 -- 96,874
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ........................ $13,735,675 $17,750,490 $16,496,644 $ 760,403 $ 458,662 $ 6,802,317
=========== =========== =========== =========== =========== ===========
Government
Global Total Return Series Securities Series High Yield Series
-------------------------- ------------------------- -------------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
- -----------------------------------------------------------------------------------------------------------------------------------
Ordinary income (including any short-term
capital gains) ............................. $ 2,629,612 $10,130,137 $31,964,775 $31,699,880 $29,158,470 $31,907,573
Long-term capital gain ....................... 10,609,279 8,623,607 -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ........................ $13,238,891 $18,753,744 $31,964,775 $31,699,880 $29,158,470 $31,907,573
=========== =========== =========== =========== =========== ===========
International Value Series Money Market Series Strategic Income Series
-------------------------- ------------------------- -------------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
- -----------------------------------------------------------------------------------------------------------------------------------
Ordinary income (including any short-term
capital gains) ............................. $ 6,463,756 $ 1,161,124 $17,603,606 $ 9,660,955 $ 4,885,515 $ 6,201,359
Long-term capital gain ....................... 9,464,425 2,077,175 -- -- 618,624 625,839
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ........................ $15,928,181 $ 3,238,299 $17,603,606 $ 9,660,955 $ 5,504,139 $ 6,827,198
=========== =========== =========== =========== =========== ===========
The federal tax cost and the tax basis components of distributable earnings
were as follows:
Emerging Global
Bond Markets Equity Governments
AS OF 12/31/06 Series Series Series
- ---------------------------------------------------------------------------------------------------
Cost of investments ............................. $196,572,458 $83,514,883 $43,443,352
------------ ----------- -----------
Gross appreciation .............................. 2,071,544 26,494,207 743,588
Gross depreciation .............................. (3,512,810) (335,194) (192,621)
------------ ----------- -----------
Net unrealized appreciation (depreciation) ...... $ (1,441,266) $26,159,013 $ 550,967
============ =========== ===========
Undistributed ordinary income ................... $ 11,541,219 $ 5,671,957 $ 827,707
Undistributed long-term capital gain ............ -- 18,659,597 --
Capital loss carryforwards ...................... (2,113,205) -- (535,220)
Other temporary differences ..................... -- (68,341) (93,827)
Global Government High
Total Return Securities Yield
AS OF 12/31/06 Series Series Series
- ----------------------------------------------------------------------------------------------------
Cost of investments ............................. $166,581,001 $664,078,656 $347,505,522
------------ ------------ ------------
Gross appreciation .............................. 25,250,862 5,846,943 8,660,367
Gross depreciation .............................. (2,495,702) (15,460,411) (2,601,135)
------------ ------------ ------------
Net unrealized appreciation (depreciation) ...... $ 22,755,160 $ (9,613,468) $ 6,059,232
============ ============ ============
Undistributed ordinary income ................... $ 4,461,737 $ 31,661,266 $ 25,367,348
Undistributed long-term capital gain ............ 15,054,983 -- --
Capital loss carryforwards ...................... (6,387,222) (13,802,724) (109,174,069)
Other temporary differences ..................... (140,223) (151,530) (1,945)
International Money Strategic
Value Market Income
AS OF 12/31/06 Series Series Series
- ---------------------------------------------------------------------------------------------------
Cost of investments ............................. $139,540,939 $444,437,129 $73,594,289
------------ ------------ -----------
Gross appreciation .............................. 33,917,304 -- 2,013,510
Gross depreciation .............................. (4,111,542) -- (785,320)
------------ ------------ -----------
Net unrealized appreciation (depreciation) ...... $ 29,805,762 $ -- $ 1,228,190
============ ============ ===========
Undistributed ordinary income ................... $ 7,185,471 $ 1,238 $ 3,958,435
Undistributed long-term capital gain ............ 17,654,953 -- --
Capital loss carryforwards ...................... -- (766) (500,150)
Other temporary differences ..................... (35,751) -- (200,454)
As of December 31, 2006, the following series had capital loss carryforwards available to offset future realized gains. Such
losses expire as follows:
Global Global Government High Money Strategic
Bond Government Total Return Securities Yield Market Income
EXPIRATION DATE Series Series Series(a) Series Series Series Series
- ---------------------------------------------------------------------------------------------------------------------------------
12/31/07 ....................... $ -- $ -- $ -- $ -- $ (6,145,967) $ -- $ --
12/31/08 ....................... -- -- (658,824) -- (6,617,797) --
12/31/09 ....................... -- -- (5,728,398) -- (37,568,488) (429) --
12/31/10 ....................... -- -- -- -- (46,740,625) -- --
12/31/11 ....................... -- -- -- (4,003,424) -- (271) --
12/31/12 ....................... -- -- -- (3,805,608) -- (66) --
12/31/13 ....................... -- -- -- (4,142,507) (5,089,839) -- --
12/31/14 ....................... (2,113,205) (535,220) -- (1,851,185) (7,011,353) -- (500,150)
----------- --------- ----------- ------------ ------------- ----- ---------
$(2,113,205) $(535,220) $(6,387,222) $(13,802,724) $(109,174,069) $(766) $(500,150)
=========== ========= =========== ============ ============= ===== =========
(a) The availability of a portion of the capital loss carryforwards, which were acquired on September 5, 2003, in connection with
the 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. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. 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 series, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on the series' financial statements.
Multiple Classes of Shares of Beneficial Interest - Each series offers multiple
classes of shares, which differ in their respective distribution fees. All
shareholders bear the common expenses of the series based on daily net assets
of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates are
generally due to differences in separate class expenses.
(3) TRANSACTIONS WITH AFFILIATES
Investment Adviser - Each series has an investment advisory agreement with MFS
to provide overall investment management and related administrative services
and facilities. The management fee is computed daily and paid monthly at an
annual rate based on a percentage of each series' average daily net assets as
follows:
Bond Series: The management fee is 0.60% of average daily net assets.
Emerging Markets Equity Series: The management fee is 1.05% of the first $500
million of average daily net assets and 1.00% of average daily net assets in
excess of $500 million.
Global Governments Series: The management fee is 0.75% of the first $300
million of average daily net assets and 0.675% of average daily net assets in
excess of $300 million.
Global Total Return Series: The management fee is 0.75% of the first $300
million of average daily net assets and 0.675% of average daily net assets in
excess of $300 million.
Government Securities Series: The management fee is 0.55% of the first $1
billion of average daily net assets and 0.50% of average daily net assets in
excess of $1 billion.
High Yield Series: The management fee is 0.75% of average daily net assets. At
the commencement of the period, and until August 31, 2006, the investment
adviser had agreed in writing to reduce its management fee to 0.70% of average
daily net assets in excess of $1 billion. Effective September 1, 2006, the
investment adviser has agreed in writing to reduce its management fee to 0.70%
of the first $1.0 billion of average daily net assets and 0.65% of average
daily net assets in excess of $1 billion. This written agreement will continue
through August 31, 2007 unless changed or rescinded by the series' Board of
Trustees. This management fee reduction amounts to $58,752, which is shown as a
reduction of total expense in the Statement of Operations.
International Value Series: The management fee is 0.90% of the first $1 billion
of average daily net assets, 0.80% of the next $1 billion of average daily net
assets and 0.70% of average daily net assets in excess of $2 billion.
Money Market Series: The management fee is 0.50% of average daily net assets.
The investment adviser has agreed in writing to reduce its management fee to
0.45% of average daily net assets in excess of $500 million. This written
agreement may be rescinded only upon consent of the series' Board of Trustees.
For the year ended December 31, 2006, the series' average daily net assets did
not exceed $500 million and therefore, the management fee was not reduced.
Strategic Income Series: The management fee is 0.75% of the first $1.0 billion
of average daily net assets and 0.65% of average daily net assets in excess of
$1 billion. At the commencement of the period, and until August 31, 2006, the
investment adviser had agreed in writing to reduce its management fee to 0.65%
of average daily net assets in excess of $500 million. Effective September 1,
2006, the investment adviser has agreed in writing to reduce its management fee
to 0.70% of the first $1.0 billion of average daily net assets. This written
agreement will continue through August 31, 2007 unless changed or rescinded by
the series' Board of Trustees. This management fee reduction amounts to
$12,810, which is shown as a reduction of total expense in the Statement of
Operations.
Effective September 1, 2006, the investment adviser has agreed in writing to
pay a portion of certain series' operating expenses, exclusive of certain other
fees and expenses, such that the total annual operating expenses of these
series do not exceed the expense limitations indicated below, based on the
average daily net assets of such series. The management fees incurred for the
year ended December 31, 2006 were equivalent to an annual effective rate of
each series' average daily net assets as follows. In addition, the expense
limitations incurred for the year ended December 31, 2006 were as follows:
Effective Initial Class Service Class
Management Expense Expense
Fees Limitation Limitation
- --------------------------------------------------------------------------------
Bond Series ....................... 0.60% N/A N/A
Emerging Markets Equity Series .... 1.05% N/A N/A
Global Governments Series ......... 0.75% 1.00%(a) 1.25%(a)
Global Total Return Series ........ 0.75% N/A N/A
Government Securities Series ...... 0.55% 1.00%(a) 1.25%(a)
High Yield Series ................. 0.73% 1.00%(a) 1.25%(a)
International Value Series ........ 0.90% N/A N/A
Money Market Series ............... 0.50% 0.60%(a) 0.85%(a)
Strategic Income Series ........... 0.73% 0.90%(b) 1.15%(b)
(a) MFS' agreement to limit the series' operating expenses, exclusive of
certain other fees and expenses, to 1.25% of the series' average daily net
assets is contained in the investment advisory agreement between MFS and
the series and may not be rescinded without shareholder approval. MFS'
agreement to limit the series' operating expenses, exclusive of certain
other fees and expenses, to 1.00% of the series' average daily net assets
attributable to Initial Class shares (0.60% for Money Market Series Initial
Class shares and 0.85% for Money Market Series Service Class shares) may be
changed or rescinded at any time by MFS.
(b) This written agreement became effective on September 1, 2006, and will
continue through August 31, 2007 unless changed or rescinded by the series'
Board of Trustees.
For the year ended December 31, 2006, these reductions amounted to the
following for each series and is reflected as a reduction of total expenses in
the Statements of Operations:
Expense
Reduction
- -------------------------------------------------------------------------------
Global Government Series ........................................ $61,974
Strategic Income Series ......................................... $ 4,278
For the year ended December 31, 2006, the actual operating expenses for
Government Securities Series, High Yield Series, and Money Market Series did
not exceed the limit and therefore, the investment adviser did not pay any
portion of these series' expenses.
Distributor - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, is the distributor of shares of the series. The Trustees have adopted a
distribution plan for the Service Class shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940.
The series' distribution plan provides that each series will pay MFD
distribution fees equal to 0.25% per annum of its average daily net assets
attributable to Service Class shares as partial consideration for services
performed and expenses incurred by MFD and financial intermediaries in
connection with the sale and distribution of the series' Service Class shares
and the sale and distribution of the variable annuity or variable life
insurance contracts investing indirectly in Service Class shares. MFD may
subsequently pay all, or a portion, of the distribution fees to financial
intermediaries.
Administrator - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to each series.
Under an administrative services agreement, each series partially reimburses
MFS the costs incurred to provide these services. Prior to June 1, 2006, each
series was allocated a portion of these administrative costs based on its size
and relative average net assets. Effective June 1, 2006, each series is charged
an annual fixed amount of $10,000 plus a fee based on calendar year average net
assets.
The administrative services fee incurred for the year ended December 31, 2006
was equivalent to an annual effective rate of each series' average daily net
assets as follows.
% of Average
Daily Net Assets
- -------------------------------------------------------------------------------
Bond Series ............................................... 0.0247%
Emerging Markets Equity Series ............................ 0.0244%
Global Governments Series ................................. 0.0242%
Global Total Return Series ................................ 0.0248%
Government Securities Series .............................. 0.0242%
High Yield Series ......................................... 0.0246%
International Value Series ................................ 0.0249%
Money Market Series ....................................... 0.0250%
Strategic Income Series ................................... 0.0245%
Trustees' and Officers' Compensation - Each series pays compensation to
independent trustees in the form of a retainer, attendance fees, and additional
compensation to the Board chairperson. Each series does not pay compensation
directly to trustees or officers of the series who are also officers of the
investment adviser, all of whom receive remuneration for their services to the
series from MFS. Certain officers and trustees of the series are officers or
directors of MFS, MFD, and MFSC.
Other - These series 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. MFS has agreed to bear all expenses associated with office space,
other administrative support, and supplies provided to the ICCO. For the year
ended December 31, 2006, payments made by the series to Tarantino LLC amounted
to the following and are included in the miscellaneous expense on the
Statements of Operations:
ICCO Fee
- -------------------------------------------------------------------------------
Bond Series ....................................................... $1,061
Emerging Markets Equity Series .................................... 524
Global Governments Series ......................................... 242
Global Total Return Series ........................................ 909
Government Securities Series ...................................... 3,382
High Yield Series ................................................. 1,814
International Value Series ........................................ 696
Money Market Series ............................................... 2,045
Strategic Income Series ........................................... 401
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
Emerging Global
Bond Markets Equity Governments Global Total
Series Series Series Return Series
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities ...................................... $ 6,733,178 $ -- $18,210,239 $ 31,050,608
Investments (non-U.S. government securities) .................... $ 89,034,409 $111,955,027 $26,805,538 $ 91,390,280
Sales
U.S. government securities ...................................... $ 14,779,065 $ -- $15,819,245 $ 26,737,741
Investments (non-U.S. government securities) .................... $ 99,959,169 $120,997,622 $36,303,651 $122,192,574
Government
Securities High Yield International Strategic
Series Series Value Series Income Series
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities ...................................... $186,019,868 $ 6,945,838 $ -- $ 547,566
Investments (non-U.S. government securities) .................... $ 60,366 $300,257,114 $72,870,125 $47,756,526
Sales
U.S. government securities ...................................... $186,137,372 $ -- $ -- $ 3,731,938
Investments (non-U.S. government securities) .................... $ 2,548,037 $321,765,611 $74,657,102 $53,010,575
Purchases and sales of investments for the Money Market Series, which consist solely of short-term obligations, amounted to
$6,070,800,047 and $5,978,435,257, respectively, excluding repurchase agreements.
(5) SHARES OF BENEFICIAL INTEREST
Each series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
Bond Series Emerging Markets Equity Series
-------------------------------------------------- --------------------------------------------------
Year ended 12/31/06 Year ended 12/31/05 Year ended 12/31/06 Year ended 12/31/05
------------------------ ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class .......... 511,623 $ 5,696,273 532,824 $ 6,159,640 461,878 $ 10,944,669 750,581 $ 13,792,728
Service Class .......... 757,341 8,481,493 709,728 8,260,306 373,697 8,407,231 162,593 3,056,316
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
1,268,964 $ 14,177,766 1,242,552 $ 14,419,946 835,575 $ 19,351,900 913,174 $ 16,849,044
========== ============ ========== ============ ========== ============ ========== ============
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class .......... 830,955 $ 8,783,191 1,078,209 $ 12,054,378 612,703 $ 14,263,714 41,967 $ 691,621
Service Class .......... 471,216 4,952,484 511,780 5,696,112 96,580 2,232,930 4,191 68,782
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
1,302,171 $ 13,735,675 1,589,989 $ 17,750,490 709,283 $ 16,496,644 46,158 $ 760,403
========== ============ ========== ============ ========== ============ ========== ============
Shares reacquired
Initial Class .......... (3,130,238) $(34,566,125) (2,532,487) $(29,446,090) (1,220,180) $(26,542,036) (576,657) $(10,304,020)
Service Class .......... (1,035,814) (11,365,825) (627,154) (7,218,717) (165,472) (3,635,812) (81,283) (1,471,543)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
(4,166,052) $(45,931,950) (3,159,641) (36,664,807) (1,385,652) (30,177,848) (657,940) (11,775,563)
========== ============ ========== ============ ========== ============ ========== ============
Net change
Initial Class .......... (1,787,660) (20,086,661) (921,454) (11,232,072) (145,599) $ (1,333,653) 215,891 $ 4,180,329
Service Class .......... 192,743 2,068,152 594,354 6,737,701 304,805 7,004,349 85,501 1,653,555
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
(1,594,917) $(18,018,509) (327,100) $ (4,494,371) 159,206 $ 5,670,696 301,392 $ 5,833,884
========== ============ ========== ============ ========== ============ ========== ============
Global Governments Series Global Total Return Series
-------------------------------------------------- --------------------------------------------------
Year ended 12/31/06 Year ended 12/31/05 Year ended 12/31/06 Year ended 12/31/05
------------------------ ------------------------ ------------------------ ------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class .......... 235,784 $ 2,493,032 338,069 $ 3,864,329 279,698 $ 4,847,132 617,589 $ 10,572,346
Service Class .......... 128,161 1,333,249 86,041 967,223 175,674 2,986,285 220,372 3,625,886
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
363,945 $ 3,826,281 424,110 $ 4,831,552 455,372 $ 7,833,417 837,961 $ 14,198,232
========== ============ ========== ============ ========== ============ ========== ============
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class .......... 39,420 $ 417,067 575,169 $ 6,298,096 702,206 $ 12,014,738 1,081,368 $ 17,247,815
Service Class .......... 3,961 41,595 46,301 504,221 71,882 1,224,153 94,772 1,505,929
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
43,381 $ 458,662 621,470 $ 6,802,317 774,088 $ 13,238,891 1,176,140 $ 18,753,744
========== ============ ========== ============ ========== ============ ========== ============
Shares reacquired
Initial Class .......... (1,256,568) $(13,131,770) (1,233,242) $(13,475,400) (1,752,724) $(30,164,017) (1,292,942) $(21,543,832)
Service Class .......... (189,097) (1,971,128) (109,455) (1,200,068) (225,954) (3,865,166) (112,149) (1,876,440)
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
(1,445,665) $(15,102,898) (1,342,697) $(14,675,468) (1,978,678) $(34,029,183) (1,405,091) $(23,420,272)
========== ============ ========== ============ ========== ============ ========== ============
Net change
Initial Class .......... (981,364) $(10,221,671) (320,004) $ (3,312,975) (770,820) $(13,302,147) 406,015 $ 6,276,329
Service Class .......... (56,975) (596,284) 22,887 271,376 21,602 345,272 202,995 3,255,375
---------- ------------ ---------- ------------ ---------- ------------ ---------- ------------
(1,038,339) $(10,817,955) (297,117) $ (3,041,599) (749,218) (12,956,875) 609,010 $ 9,531,704
========== ============ ========== ============ ========== ============ ========== ============
Government Securities Series High Yield Series
----------------------------------------------------- ------------------------------------------------------
Year ended 12/31/06 Year ended 12/31/05 Year ended 12/31/06 Year ended 12/31/05
-------------------------- ------------------------- ------------------------- --------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- ----------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class .... 1,901,707 $ 23,886,222 1,930,095 $ 25,145,323 1,957,194 $ 12,923,475 2,797,916 $ 18,918,498
Service Class .... 5,845,549 73,153,904 3,834,346 49,457,894 5,001,880 33,148,087 5,365,903 36,088,400
----------- ------------- ---------- ------------- ----------- ------------ ----------- -------------
7,747,256 $ 97,040,126 5,764,441 $ 74,603,217 6,959,074 $ 46,071,562 8,163,819 $ 55,006,898
=========== ============= ========== ============= =========== ============ =========== =============
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class .... 1,620,133 $ 19,538,803 1,730,845 $ 21,947,118 3,011,032 $ 19,601,820 3,668,551 $ 23,882,264
Service Class .... 1,034,635 12,425,972 771,579 9,752,762 1,474,792 9,556,650 1,238,473 8,025,309
----------- ------------- ---------- ------------- ----------- ------------ ----------- -------------
2,654,768 $ 31,964,775 2,502,424 $ 31,699,880 4,485,824 $ 29,158,470 4,907,024 $ 31,907,573
=========== ============= ========== ============= =========== ============ =========== =============
Shares reacquired
Initial Class .... (8,870,465) $(111,053,317) (8,002,617) $(103,478,662) (10,062,177) $(67,473,253) (12,661,076) $ (88,241,247)
Service Class .... (1,186,471) (14,804,209) (1,336,977) (17,288,700) (3,723,299) (24,207,653) (5,307,145) (36,840,397)
----------- ------------- ---------- ------------- ----------- ------------ ----------- -------------
(10,056,936) $(125,857,526) (9,339,594) $(120,767,362) (13,785,476) $(91,680,906) (17,968,221) $(125,081,644)
=========== ============= ========== ============= =========== ============ =========== =============
Net change
Initial Class .... (5,348,625) $ (67,628,292) (4,341,677) $ (56,386,221) (5,093,951) $(34,947,958) (6,194,609) $ (45,440,485)
Service Class .... 5,693,713 70,775,667 3,268,948 41,921,956 2,753,373 18,497,084 1,297,231 7,273,312
----------- ------------- ---------- ------------- ----------- ------------ ----------- -------------
345,088 $ 3,147,375 (1,072,729) $ (14,464,265) (2,340,578) $(16,450,874) (4,897,378) $ (38,167,173)
=========== ============= ========== ============= =========== ============ =========== =============
International Value Series Money Market Series
------------------------------------------------- --------------------------------------------------------
Year ended 12/31/06 Year ended 12/31/05 Year ended 12/31/06 Year ended 12/31/05
------------------------ ----------------------- --------------------------- ---------------------------
Shares Amount Shares Amount Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class ...... 665,273 $ 12,343,355 1,186,772 $ 18,986,115 131,247,795 $ 131,247,749 70,048,871 $ 70,048,871
Service Class ...... 230,239 4,243,515 244,374 3,868,563 84,823,109 84,823,094 77,065,752 77,065,752
---------- ------------ --------- ------------ ------------ ------------- ------------ -------------
895,512 $ 16,586,870 1,431,146 $ 22,854,678 216,070,904 $ 216,070,843 147,114,623 $ 147,114,623
========== ============ ========= ============ ============ ============= ============ =============
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class ...... 764,074 $ 14,379,864 197,356 $ 2,997,834 11,590,459 $ 11,590,505 6,992,613 $ 6,992,613
Service Class ...... 82,577 1,548,317 15,861 240,465 6,013,081 6,013,101 2,668,342 2,668,342
---------- ------------ --------- ------------ ------------ ------------- ------------ -------------
846,651 $ 15,928,181 213,217 $ 3,238,299 17,603,540 $ 17,603,606 9,660,955 $ 9,660,955
========== ============ ========= ============ ============ ============= ============ =============
Shares reacquired
Initial Class ...... (972,963) $(17,817,104) (602,285) $ (9,717,718) (101,466,658) $(101,466,658) (117,952,563) $(117,952,563)
Service Class ...... (195,932) (3,616,262) (63,452) (1,022,209) (50,553,304) (50,553,304) (44,286,909) (44,286,909)
---------- ------------ --------- ------------ ------------ ------------- ------------ -------------
(1,168,895) $(21,433,366) (665,737) $(10,739,927) (152,019,962) $(152,019,962) (162,239,472) $(162,239,472)
========== ============ ========= ============ ============ ============= ============ =============
Net change
Initial Class ...... 456,384 $8,906,115 781,843 $ 12,266,231 41,371,596 $ 41,371,596 (40,911,079) $ (40,911,079)
Service Class ...... 116,884 2,175,570 196,783 3,086,819 40,282,886 40,282,891 35,447,185 35,447,185
---------- ------------ --------- ------------ ------------ ------------- ------------ -------------
573,268 $11,081,685 978,626 $ 15,353,050 81,654,482 $ 81,654,487 (5,463,894) $ (5,463,894)
========== ============ ========= ============ ============ ============= ============ =============
Strategic Income Series
----------------------------------------------------
Year ended 12/31/06 Year ended 12/31/05
------------------------- ------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------
Shares sold
Initial Class ......... 429,421 $ 4,446,481 333,858 $3,671,323
Service Class ......... 299,504 3,094,181 216,627 2,349,211
---------- ------------ ---------- -----------
728,925 $ 7,540,662 550,485 $6,020,534
========== ============ ========== ===========
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class ......... 399,735 $ 4,029,323 486,255 $5,066,781
Service Class ......... 147,040 1,474,816 169,761 1,760,417
---------- ------------ ---------- -----------
546,775 $ 5,504,139 656,016 $6,827,198
========== ============ ========== ===========
Shares reacquired
Initial Class ......... (1,276,321) $(13,358,088) (1,044,745) (11,344,741)
Service Class ......... (492,786) (5,144,709) (389,034) (4,247,126)
---------- ------------ ---------- -----------
(1,769,107) $(18,502,797) (1,433,779) (15,591,867)
========== ============ ========== ===========
Net change
Initial Class ......... (447,165) $ (4,882,284) (224,632) $(2,606,637)
Service Class ......... (46,242) (575,712) (2,646) (137,498)
---------- ------------ ---------- -----------
(493,407) $ (5,457,996) (227,278) $(2,744,135)
========== ============ ========== ===========
(6) LINE OF CREDIT
Each series and other funds managed by MFS participate in a $1 billion
unsecured committed line of credit provided by a syndication of banks under a
credit agreement. In addition, each series and other funds managed by MFS 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, 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 December 31, 2006, each
series' commitment fee and interest expense were as follows and are included in
miscellaneous expense on the Statements of Operations:
Commitment Interest
Fee Expense
- -------------------------------------------------------------------------------
Bond Series ......................................... $1,757 $ --
Emerging Markets Equity Series ...................... 842 6,248
Global Governments Series ........................... 411 --
Global Total Return Series .......................... 1,500 --
Government Securities Series ........................ 5,568 1,801
High Yield Series ................................... 2,924 --
International Value Series .......................... 1,112 --
Money Market Series ................................. 4,596 3,562
Strategic Income Series ............................. 659 --
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and the Shareholders of MFS/Sun Life Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of MFS/Sun Life Series Trust (the
"Trust"), comprising Bond Series, Emerging Markets Equity Series, Global
Governments Series, Global Total Return Series, Government Securities Series,
High Yield Series, International Value Series, Money Market Series and
Strategic Income Series as of December 31, 2006, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights
for each of the five years in the period then ended. These financial statements
and financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with 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. The Trust is not required to have, nor were we engaged to
perform, an audit of its 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
Trust'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, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2006, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial positions of Bond Series,
Emerging Markets Equity Series, Global Governments Series, Global Total Return
Series, Government Securities Series, High Yield Series, International Value
Series, Money Market Series and Strategic Income Series as of December 31,
2006, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States
of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 20, 2007
MFS/SUN LIFE SERIES TRUST
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of February 1, 2007, 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.
- -----------------------------------------------------------------------------------------------------------------------------------
POSITION(s) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATIONS DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS & OTHER DIRECTORSHIPS(2)
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
David D. Horn(3) Trustee April 1986 Private investor; Retired; Sun Life Assurance Company
(born 06/07/41) of Canada, Former Senior Vice President and General
Manager for the United States (until 1997)
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
J. Kermit Birchfield Chairman May 1997 Consultant; Century Partners, Inc. (investments),
(born 01/08/40) Managing Director; Displaytech, Inc. (manufacturer of
liquid crystal display technology), Director; Dessin
Fournir LLC (furniture manufacturer), Director (October
2005 to present)
- -----------------------------------------------------------------------------------------------------------------------------------
Robert C. Bishop Trustee May 2001 AutoImmune Inc. (pharmaceutical product development),
(born 01/13/43) Chairman, President and Chief Executive Officer; Caliper
Life Sciences Corp. (laboratory analytical instruments),
Director; Millipore Corporation (purification/filtration
products), Director; Quintiles Transnational Corp.
(contract services to the medical industry), Director
- -----------------------------------------------------------------------------------------------------------------------------------
Frederick H. Dulles Trustee May 2001 Attorney; Ten State Street LLP (law firm), Partner (July
(born 03/12/42) 2003 to May 2005); McFadden, Pilkington & Ward LLP
(solicitors and registered foreign lawyers), Partner
(until June 2003); Jackson & Nash, LLP (law firm), Of
Counsel (January 2000 to November 2000)
- -----------------------------------------------------------------------------------------------------------------------------------
Marcia A. Kean Trustee April 2005 Feinstein Kean Healthcare (consulting), Chief Executive
(born 06/30/48) Officer (since December 2002), Managing Director
(prior to May 2001); Ardais Corporation (biotech
products), Senior Vice President - Commercialization
February 2002 until November 2002)
- -----------------------------------------------------------------------------------------------------------------------------------
Ronald G. Steinhart Trustee May 2001 Private investor; Bank One, Texas N.A., Vice Chairman
(born 06/15/40) and Director (January 2000 to January 2001); Bank
One Corporation, Officer (until January 2000); Carreker
Corporation (consultant and technology provider to
financial institutions), Director; Prentiss Properties
Trust (real estate investment trust), Director; United
Auto Group, Inc. (automotive retailer), Director
- -----------------------------------------------------------------------------------------------------------------------------------
Haviland Wright Trustee May 2001 Hawaii Small Business Development Center, Kaua'l
(born 07/21/48) Center, Center Director (since March 2002);
Displaytech, Inc. (manufacturer of liquid crystal display
technology), Chairman and Chief Executive Officer (until)
March 2002)
- -----------------------------------------------------------------------------------------------------------------------------------
TRUSTEE EMERITUS
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel Adams Trustee Emeritus Retired
(born 10/19/25)
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
- -----------------------------------------------------------------------------------------------------------------------------------
Maria F. Dwyer(4) President November 2005 Massachusetts Financial Services Company, Executive
(born 12/01/58) 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(4) Treasurer September 2005 Massachusetts Financial Services Company, Senior Vice
(born 12/30/64) President (since September 2004);
PricewaterhouseCoopers LLP, Partner (prior to
September 2004)
- -----------------------------------------------------------------------------------------------------------------------------------
Christopher R. Bohane(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice
(born 01/18/74) and Assistant Clerk President and Senior Counsel (since April 2003);
Kirkpatrick & Lockhart LLP (law firm), Associate (prior
to April 2003)
- -----------------------------------------------------------------------------------------------------------------------------------
Ethan D. Corey(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Special
(born 11/21/63) and Assistant Clerk Counsel (since December 2004); Dechert LLP (law
firm), Counsel (prior to December 2004)
- -----------------------------------------------------------------------------------------------------------------------------------
David L. DiLorenzo(4) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice
(born 08/10/68) President (since June 2005); JP Morgan Investor
Services, Vice President (January 2001 to June 2005)
- -----------------------------------------------------------------------------------------------------------------------------------
Timothy M. Fagan(4) Assistant Secretary September 2005 Massachusetts Financial Services Company, Vice
(born 07/10/68) and Assistant Clerk 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(4) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice
(born 10/27/70) President (since May 2005); JP Morgan Investment
Management Company, Vice President (prior to May
2005)
- -----------------------------------------------------------------------------------------------------------------------------------
Brian E. Langenfeld(4) Assistant Secretary May 2006 Massachusetts Financial Services Company, Assistant
(born 03/07/73) and Assistant Clerk 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(4) Assistant Treasurer May 1997 Massachusetts Financial Services Company, Vice
(born 11/13/57) President
- -----------------------------------------------------------------------------------------------------------------------------------
Susan S. Newton(4) Assistant Secretary May 2005 Massachusetts Financial Services Company, Senior Vice
(born 03/07/50) and Assistant Clerk President and Assistant 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(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice
(born 11/05/70) and Assistant Clerk President and Senior Counsel (since June 2004);
Bingham McCutchen LLP (law firm), Associate (January
2001 to June 2004)
- -----------------------------------------------------------------------------------------------------------------------------------
Mark N. Polebaum(4) Secretary and February 2006 Massachusetts Financial Services Company, Executive
(born 05/01/52) Assistant Clerk 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 September 2004 Tarantino LLC (provider of compliance services),
(born 03/07/44) Compliance Officer Principal (since June 2004); CRA Business Strategies
Group (consulting services), Executive Vice President
(April 2003 to June 2004); David L. Babson & Co.
(investment adviser), Managing Director, Chief
Administrative Officer and Director (February 1997 to
March 2003)
- -----------------------------------------------------------------------------------------------------------------------------------
James O. Yost (4) Assistant Treasurer April 1992 Massachusetts Financial Services Company, Senior Vice
(born 06/12/60) President
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product. Each Trustee has served continuously since
appointment.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., "public
companies").
(3) "Interested person" of the Sun Life of Canada (U.S.), 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 Series. The address of Sun Life of
Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street, Boston, Massachusetts
02116.
The Series do not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms. 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.
All Trustees currently serve as Trustees of the Series and have served in that capacity since originally elected or appointed. All
of the Trustees are also Managers of the Compass Variable Accounts. The executive officers of the MFS Sun Life Series Trust hold
similar offices for the Compass Variable Accounts and other funds in the MFS fund complex. Each Trustee serves as a Trustee or
Manager of 34 Accounts/Series.
The Statement of Additional Information contains further information about the Trustees and is available without charge upon request
by calling 1-800-752-7215.
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENTS.
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 Trust's investment
advisory agreements with Massachusetts Financial Services Company (MFS) on
behalf of the Series. The Trustees consider matters bearing on the Series and
their 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 agreements for the Series. The independent Trustees were
assisted in their evaluation of the investment advisory agreements by
independent legal counsel, from whom they received separate legal advice and
with whom they met separately from MFS management during various contract
review meetings. The independent Trustees were also assisted in this process by
the Series' Independent Chief Compliance Officer, a full-time senior officer of
the Series appointed by and reporting to the independent Trustees.
In connection with their deliberations, 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 agreements were considered separately for
each Series, although the Trustees also took into account the common interests
of all Series 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 agreements and other arrangements with the Trust.
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 each Series for
various time periods ended December 31, 2005, compared to the investment
performance of a group of funds with substantially similar investment
classifications/objectives (the "Lipper performance universe"), as well as the
investment performance of a group of funds identified by objective criteria
suggested by MFS ("peer funds"), (ii) information provided by Lipper Inc. on
each Series' advisory fees and other expenses compared to the advisory fees and
other expenses of comparable funds identified by Lipper (the "Lipper expense
group"), as well as the advisory fees and other expenses of peer funds
identified by objective criteria suggested by MFS, (iii) information provided
by MFS on the advisory fees of comparable portfolios of its other clients,
including institutional separate account and other clients, (iv) information as
to whether, and to what extent applicable, expense waivers, reimbursements or
fee "breakpoints" are observed for a Series, (v) information regarding MFS'
financial results and financial condition, including MFS' and certain of its
affiliates' estimated profitability from services performed for the Series,
(vi) MFS' views regarding the outlook for the mutual fund industry and its
strategic business plans, (vii) descriptions of various functions performed by
MFS for the Trust, 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 Series.
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' conclusions as to the continuation of the investment advisory
agreements were based on 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 for each Series, while individual Trustees may have given different
weight to various factors and evaluated the information presented as a whole
differently than another Trustee. The Trustees recognized that the fee
arrangements for the Series reflect 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 compared
each Series' total return investment performance to the performance of peer
groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of each Series' Initial Class shares
in comparison to the performance of funds in its Lipper performance universe
over the one-, three- and five-year periods. The Trustees did not rely on
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 during contract review meetings, as well as during
investment review meetings conducted with portfolio management personnel during
the course of the year. For Series whose performance lagged their peer groups,
they discussed the factors that contributed thereto and MFS' efforts to improve
such Series' performance. After reviewing this information, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreements, that they were satisfied with MFS' responses
and efforts relating to investment performance.
In assessing the reasonableness of each Series' advisory fee, the Trustees
considered, among other information, each Series' advisory fee and the total
expense ratio of the Series' Initial Class shares as a percentage of average
net assets, compared to the advisory fee and total expense ratios of other
comparable funds based on information provided by Lipper Inc. and MFS. The
Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered the generally
broader scope of services provided by MFS to the Trust than those provided to
institutional accounts. The Trustees also considered 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 Series, and the impact on MFS and
related expenses due to the more extensive regulatory regime to which the
Series are subject, compared to institutional accounts.
The Trustees also considered whether a Series is likely to benefit from any
economies of scale due to future asset growth. In this regard, the Trustees
reviewed the adequacy of breakpoints and discussed with MFS any adjustments
necessary for the shareholders' benefits.
The Trustees also considered information prepared by MFS relating to its costs
and profits with respect to the Series and other investment companies and
accounts advised by MFS, as well as MFS' methodologies used to determine and
allocate its costs to the Series and other accounts and products for purposes
of estimating profitability.
After reviewing these and other factors described below, the Trustees concluded
that the advisory fees charged to the Series represent reasonable compensation
in light of the nature and quality of the services being provided by MFS.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Series.
The Trustees also considered the financial resources of MFS and its parent, Sun
Life Financial Inc. The Trustees further considered any advantages and possible
disadvantages of having an adviser which also serves other investment companies
as well as institutional accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the
Series by MFS and its affiliates under agreements and plans other than the
investment advisory agreements, including the 12b-1 fees the Series pay 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
on the Series' behalf, including securities lending programs, directed expense
payment programs, class action recovery programs, and MFS' interaction with
third-party service providers, principally custodians and sub-custodians. The
Trustees concluded that the various non-advisory services provided by MFS and
its affiliates on behalf of the Series were satisfactory. The Trustees also
considered the benefits to MFS from the use of the Series' portfolio brokerage
commissions to pay for research and other similar services (including MFS'
policy not to use "soft dollars" generated by fund portfolio transactions to
pay for third-party research), and various other factors. Additionally, the
Trustees considered so-called "fall-out benefits" to MFS such as reputational
value derived from serving as investment manager to the Trust, and determined
that any such benefits derived by MFS were reasonable and fair.
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 investment advisory agreements
should be continued for an additional one-year period, commencing September 1,
2006.
BOND SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 1st quintile for the three-year period and the 1st quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was above the median and the total expense
ratio was approximately at the median of such fees and expenses of funds in the
Lipper expense group. They noted that the Series' advisory fee rate schedule is
not currently subject to any breakpoints. However, the Trustees concluded that
the fees were reasonable in light of the nature and quality of services
provided by MFS, and determined not to recommend any advisory fee breakpoints
for the Series at this time.
EMERGING MARKETS EQUITY SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 2nd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 1st quintile for the three-year period and the 2nd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was approximately at the median and total
expense ratio was below the median of such fees and expenses of funds in the
Lipper expense group. The Trustees further concluded that the existing
breakpoints were sufficient to allow the Series to benefit from economies of
scale as its assets grow. The Trustees concluded that the fees were reasonable
in light of the nature and quality of services provided.
GLOBAL GOVERNMENTS SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 4th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 4th quintile for the three-year period and the 4th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the existing breakpoints
were sufficient to allow the Series to benefit from economies of scale as its
assets grow. In addition, the Trustees considered that MFS observes a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
GLOBAL TOTAL RETURN SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 4th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 1st quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each below the
median of such fees and expenses of funds in the Lipper expense group. The
Trustees further concluded that the existing breakpoints were sufficient to
allow the Series to benefit from economies of scale as its assets grow. The
Trustees concluded that the fees were reasonable in light of the nature and
quality of services provided.
GOVERNMENT SECURITIES SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 3rd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 3rd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the existing breakpoints
were sufficient to allow the Series to benefit from economies of scale as its
assets grow. In addition, the Trustees considered that MFS observes a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
HIGH YIELD SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 4th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 4th quintile for the three-year period and the 3rd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each above the
median of such fees and expenses of funds in the Lipper expense group. The
Trustees further noted that MFS agreed to reduce its advisory fee to an annual
rate of 0.70% on the first $1 billion of assets. In addition, the Trustees
considered that MFS observes a total expense limitation for the Series. The
Trustees concluded that the fees were reasonable in light of the nature and
quality of services provided.
INTERNATIONAL VALUE SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 3rd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 1st quintile for the three-year period and the 1st quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each above the
median of such fees and expenses of funds in the Lipper expense group. The
Trustees further concluded that the existing breakpoints were sufficient to
allow the Series to benefit from economies of scale as its assets grow. The
Trustees concluded that the fees were reasonable in light of the nature and
quality of services provided.
MONEY MARKET SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 3rd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 3rd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was approximately at the median and the
total expense ratio was above the median of such fees and expenses of funds in
the Lipper expense group. The Trustees further concluded that the existing
breakpoint was sufficient to allow the Series to benefit from economies of
scale as its assets grow. In addition, the Trustees considered that MFS
observes a total expense limitation for the Series. The Trustees concluded that
the fees were reasonable in light of the nature and quality of services
provided.
STRATEGIC INCOME SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 4th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 2nd quintile for the three-year period and the 3rd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each above the
median of such fees and expenses of funds in the Lipper expense group. The
Trustees noted that MFS agreed to reduce its advisory fee to an annual rate of
0.70% on the first $1 billion of assets. In addition, the Trustees considered
that MFS observes a total expense limitation for the Series. The Trustees
concluded that the fees were reasonable in light of the nature and quality of
services provided.
A discussion regarding the Board's most recent review and renewal of the
series' Investment Advisory Agreement with MFS is available by clicking on "Sun
Life Annuities" in the "Products and Performance" section of the MFS Web site
(mfs.com).
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.
MFS/SUN LIFE SERIES TRUST
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
PROXY VOTING POLICIES AND INFORMATION
A general description of the series' 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 each series 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
Each series 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. Each series' Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 1-800-SEC-0330. Each series' 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:
publicinfor@sec.gov or by writing the Public Reference Section at the above
address.
FEDERAL TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
Each series below designates the following as capital gain dividends paid
during the fiscal year.
CAPITAL
GAIN
DIVIDENDS
-------------------------------------------------------------
Bond Series .................................. $ 1,203,795
Emerging Market Equity Series ................ 9,678,740
Global Total Return Series ................... 10,609,279
International Value Series ................... 9,464,425
Strategic Income Series ...................... 618,624
For corporate shareholders, the percentages of the ordinary income dividends
paid during the fiscal year that qualify for the corporate dividends received
deduction are as follows:
DIVIDENDS
RECEIVED
DEDUCTION
-------------------------------------------------------------
Global Total Return Series ................... 39.69%
Each series below intends to pass through foreign tax credits. Income derived
from foreign sources and foreign tax credits were as follows:
FOREIGN
SOURCE FOREIGN
INCOME TAX CREDIT
-------------------------------------------------------------
Emerging Market Equity Series ...... $3,458,731 $310,738
Global Total Return Series ......... 3,017,135 79,310
International Value Series ......... 2,956,781 199,656
Sun Life Financial Distributors Inc.
SUN-A-ANN-2/06
MFS(R)/SUN LIFE SERIES TRUST [GRAPHIC]
ANNUAL REPORT o DECEMBER 31, 2006
Capital Appreciation Series
Emerging Growth Series
Global Growth Series
Massachusetts Investors Trust Series
Mid Cap Growth Series
Research Series
Total Return Series
Utilities Series
TABLE OF CONTENTS
Letter from the CEO of MFS ............................................. 1
Management Reviews ..................................................... 1
Portfolio Composition .................................................. 6
Performance Summary .................................................... 14
Expense Tables ......................................................... 19
Portfolio of Investments ............................................... 21
Financial Statements ................................................... 42
Notes to Financial Statements .......................................... 56
Report of Independent Registered Public Accounting Firm ................ 65
Trustees and Officers .................................................. 66
Board Review of Investment Advisory Agreements ......................... 70
MFS(R) PRIVACY POLICY .................................................. 74
Proxy Voting Policies and Information ............................. Back Cover
Quarterly Portfolio Disclosure .................................... Back Cover
Federal Tax Information ........................................... Back Cover
- -------------------------------------------------------------------------------
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF CONTRACT OWNERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
- -------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE NOT A DEPOSIT
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
- --------------------------------------------------------------------------------------------------
LETTER FROM THE CEO OF MFS
DEAR CONTRACT OWNERS:
The year 2006 proved to be a very good one for many of the world's financial
markets. The U.S. stock market, as one notable example, posted strong gains as
the Dow Jones Industrial Average hit record highs and the Standard & Poor's 500
Stock Index rose to levels not seen since 2000.
While investors were undoubtedly encouraged by these positive developments, we
think it is important to maintain the proper perspective on what appears to be
happening with the world's financial markets. Around the globe, economies seem
to have reached a state of equilibrium. Both stock and bond markets have simply
been less volatile than they were in years past. While there are many factors
behind the low levels of volatility, one of the key reasons is that the U.S.
Federal Reserve Board and other central banks around the world seem to have
found the right formula for simultaneously promoting economic growth and
keeping inflation under control.
This new, calmer state of affairs is no doubt welcomed by many investors, but
with less volatility, the possibilities for earning exceptional returns also
diminish. Investors may have to lower their expectations about what are
reasonable returns from the markets. Those still looking for the types of
returns they had been accustomed to in the past may have to work much harder to
seek out those opportunities and perhaps also accept more risk than they
customarily did. In any market climate, even in a relatively benign one, we
think investors are still best served by spreading their holdings across a
variety of investments that will give them exposure to a range of market
opportunities and varying levels of risk.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
February 15, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
MANAGEMENT REVIEWS
CAPITAL APPRECIATION SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 6.37%, while Service Class shares provided a
total return of 6.05%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 9.07% for the series' benchmark,
the Russell 1000 Growth Index.
DETRACTORS FROM PERFORMANCE
Our overweighted position in the technology sector held back performance
relative to the benchmark. Technology stocks that detracted from results
included networking chip maker Marvell Technology Group(c), data storage
systems provider EMC, flash memory products maker SanDisk, and producer of
thin-film transistor liquid crystal displays (TFT-LCDs) LG Philips(c)(g). The
sources of underperformance at Marvell included a dilutive acquisition, a stock
options backdating investigation, and disappointing second and third quarter
results. EMC's stock suffered after the company lowered earnings guidance.
Stock selection in the financial services and retailing sectors dampened
relative results over the reporting period. In the financial services sector,
education loans lender SLM Corp. (Sallie Mae) hindered relative returns. Within
the retailing sector, specialty apparel retailer Chico's and home products
retailer Williams-Sonoma were among the portfolio's top detractors.
Disappointing earnings guidance and sales trends at Chico's hurt the stock's
performance.
An underweighted position in the industrial goods and services sector and stock
selection in the leisure sector also hurt results. No individual stocks within
either of these sectors were among the portfolio's top detractors.
Other individual securities that hurt relative performance included
biotechnology firm Genzyme, cardiovascular medical devices manufacturer St.
Jude Medical, and medical device maker Advanced Medical Optics. Shares of
Genzyme declined after the company missed their first quarter earnings target
and reported slightly lower sales for Fabrazyme and Synvisc. Higher operating
expenses also held back the stock's performance. Advanced Medical Optics
struggled after the company lowered its earnings guidance for 2007. Management
cited a slowdown in laser vision correction procedures and a slower-than-
expected uptake of its multifocal intraocular lenses, especially in Europe, as
reasons for its dampened outlook.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the basic materials sector aided relative returns, although
no individual stocks within this sector were among the portfolio's top
contributors.
Several names in leisure and retailing sectors helped overall relative
performance. These included casino resorts operator Las Vegas Sands, slot
machine maker International Game Technology, and discount department store
Kohl's(g). Shares of Kohl's gained from strong results for the second quarter,
with earnings well above guidance. In addition, the company's margins continued
to improve due to inventory management initiatives implemented in the last few
years.
Elsewhere, biotechnology firm Gilead Sciences(g), software giant Oracle,
billing software company Amdocs Ltd.(c), biotechnology company Celgene, and
network equipment company Cisco Systems were strong contributors over the
period. Cisco's shares rose as the company reported strong earnings. In the
latter half of the period, the company released better-than-expected fiscal
second quarter guidance and reiterated their confidence that the company's full
year earnings would be at the high end of their projected range. Our
positioning in wireless communications software company QUALCOMM and
underweighted position in industrial conglomerate General Electric stock also
helped.
EMERGING GROWTH SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 8.02%, while Service Class shares provided a
total return of 7.70%. These returns do not reflect any contract or surrender
charges and compare with a return of 9.46% for the series' benchmark, the
Russell 3000 Growth Index.
DETRACTORS FROM PERFORMANCE
Stock selection in the technology sector hurt performance relative to the
benchmark. Online information portal Yahoo!, network equipment manufacturer
Juniper Networks, network chip maker Marvell Technology Group(c), and flash
memory storage products maker SanDisk were among the portfolio's largest
detractors. The share price of Yahoo! declined as growth in their advertising
business and premium branded business slowed.
Stock selection in the health care sector also had a negative impact on
relative returns. Medical device maker Advanced Medical Optics and
cardiovascular medical devices maker St. Jude Medical were significant
detractors. Advanced Medical Optics struggled after the company lowered its
earnings guidance for 2007. Management cited a slowdown in laser vision
correction procedures and a slower-than-expected uptake of its multifocal
intraocular lenses as reasons for its dampened outlook.
Our underweighted position in the strong-performing industrial goods and
services sector held back relative performance. Our overweighted position in
industrial automation products maker Rockwell Automation detracted as this
stock underperformed the benchmark.
Stocks in other sectors that hindered results included online auctioneer eBay,
multimedia image provider Getty Images(g), and specialty apparel retailer
Chico's(g).
CONTRIBUTORS TO PERFORMANCE
Stock selection in the financial services sector was a strong contributor to
relative returns. Within this sector, two financial exchanges, Euronext(c)(g)
and Chicago Mercantile Exchange Holdings, were top contributors. Shares of
Euronext skyrocketed early in the year on strong fundamental performance and
speculation that it was a possible acquisition target. Later in the period,
Euronext announced that it had agreed to a merger proposal from the NYSE Group.
Stock selection and our overweighted position in the strong-performing
utilities and communications sector also had a positive effect on the
portfolio's relative returns. Broadcast and communication tower management firm
American Tower and Latin American wireless communications company America
Movil(c) bolstered results.
Elsewhere, casino resorts operator Las Vegas Sands, biotechnology firm Celgene,
billing software company Amdocs Ltd.(c), e-commerce company Submarino(c)
(Brazil), and Internet search provider Baidu.com(c) (China) aided relative
returns. Our underweighted position in poor-performing semiconductor company
Intel also helped as the stock underperformed the benchmark.
During the reporting period, 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.
GLOBAL GROWTH SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 17.37% while the Service Class shares
provided a total return of 17.09%. These returns do not reflect any applicable
surrender or contract charges and compare with a return of 16.74% for the
series' benchmark, the MSCI All Country World Growth Index. The series' other
benchmark, the MSCI World Growth Index, provided a return of 15.48%.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the retailing sector was a positive factor in performance
relative to the MSCI All Country World Growth Index. Consumer products exporter
Li & Fung (Hong Kong) was the portfolio's largest relative contributor. The
company's shares gained on strong revenue growth and improved margins during
the period. We feel that Li & Fung's acquisition of a private label buying
division, which will allow the company to expand its European business, also
had a positive impact on its stock. Supermarkets and convenience stores
operator Tesco (United Kingdom) also supported this sector's results.
Stock selection in the utilities and communications and energy sectors were
also positive factors in relative returns. In the utilities and communications
sector, telecommunications company Telenor (Norway), electric utility company
Iberdrola(g) (Spain), and wireless communications company China Mobile (Hong
Kong) were among the portfolio's top contributors. In the energy sector, global
seamless steel pipe manufacturer Tenaris(g) made a positive contribution.
Stock selection and an overweighted position in the strong-performing consumer
staples sector also helped, although no individual securities within this
sector were among the top contributors.
Stocks in other sectors that bolstered results included paper products
manufacturer Aracruz Celulose(c) (Brazil), financial services firm Bank of
Cyprus, wealth management firm Julius Baer Holdings(c) (Switzerland), and
investment banking firm Goldman Sachs.
During the reporting period, 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
Stock selection in the health care sector detracted from performance relative
to the benchmark. Medical device maker Cyberonics(c)(g) was among the largest
detractors in the portfolio. Cyberonics' stock price declined after the company
lowered revenue guidance for their first fiscal quarter of 2007 and delayed
expectations for profitability. An investigation into the company's stock
options practices led to uncertainty as to whether NASDAQ would delist its
stock.
Stock selection in the special products and services sector also negatively
affected relative returns. The weak performance of multimedia image provider
Getty Images(g) and online auctioneer eBay held back results. Getty Images'
stock fell due to a slowing image market that led to a depressed revenue trend.
Elsewhere, weakness in consumer finance firms AEON Credit Services (Japan) and
Aiful(c)(g) (Japan), network equipment manufacturer Juniper Networks(g),
industrial adhesive tape maker Nitto Denko (Japan), electronic products
manufacturer and seller Hirose Electric, networking chip maker Marvell
Technology Group, and children and infant clothing and accessories retailer
Nishimatsuya Chain(c)(g) (Japan) had negative impacts on relative returns.
MASSACHUSETTS INVESTORS TRUST SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 13.30%, while Service Class shares provided a
total return of 13.04%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 15.79% for the series'
benchmark, the Standard & Poor's 500 Stock Index (S&P 500 Index).
DETRACTORS FROM PERFORMANCE
A combination of stock selection and an underweighted position in the utilities
and communications sector held back relative performance. In particular, not
owning strong-performing telecommunications companies AT&T and Bellsouth
hindered results.
In the healthcare sector, a combination of stock selection and an overweighted
position in this sector had a negative impact on relative returns.
Biotechnology firm Amgen and generic drug manufacturer Teva Pharmaceutical(c)
were among the portfolio's top detractors. Shares of Amgen fell due to
potential competitive pressures on the company's highly profitable anemia
franchise.
Stock selection in the leisure sector also dampened relative results, though no
individual stocks in this sector were among the portfolio's top detractors.
A number of individual securities in other sectors held back relative
performance. Specialty apparel retailer Chico's(c) was the portfolio's top
detractor. Chico's shares came under pressure following tepid same store sales
results and weaker-than-expected financial performance. Other detractors
included data storage systems provider EMC Corp., energy exploration and
production company EOG Resources, flash memory storage products maker SanDisk,
and financial services firms SLM Corp. (Sallie Mae) and Legg Mason(g).
CONTRIBUTORS TO PERFORMANCE
The consumer staples, industrial goods and services, and special products and
services sectors were the top contributors to performance relative to the
benchmark during the reporting period. Stock selection played the major role in
each case.
In the consumer staples sector, household products manufacturer Reckitt
Benckiser(c) and alcoholic beverages producer Diageo(c) were among the
portfolio's top relative contributors. Reckitt Benckiser performed well as the
company realized both sales and cost synergies from the Boots Healthcare
acquisition earlier than expected and once again posted strong earnings.
Within the industrial goods and services sector, defense contractor Lockheed
Martin and industrial manufacturer Caterpillar(g) boosted relative returns.
Shares of Lockheed Martin reacted strongly to significantly better-than-
expected earnings results throughout the year coupled with some exciting new
contract announcements (the Orion space shuttle replacement program was a
highlight). Not owning stock in diversified industrial conglomerate General
Electric also benefited results. In the special products and services sector,
billing software company Amdocs Ltd.(c) contributed to relative returns.
Stocks in other sectors that helped relative results included investment
banking firm Goldman Sachs Group, discount department store Kohl's(g), network
equipment company Cisco Systems, and software giant Oracle.
During the reporting period, currency exposure was a contributor to the
portfolio's relative performance. All of MFS' investment decisions are driven
by the fundamentals of each individual opportunity and, as such, it is common
for our portfolios to have different currency exposure than the benchmark.
MID CAP GROWTH SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 2.34%, while Service Class shares provided a
total return of 2.20%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 10.66% for the series'
benchmark, the Russell Midcap Growth Index.
DETRACTORS FROM PERFORMANCE
The technology, retailing, and health care sectors were the largest detractors
from relative performance over the reporting period. In all three, stock
selection was the principal factor that held back relative returns.
Several individual securities in the technology sector hurt results including
network equipment manufacturer Juniper Networks(g), flash memory storage
products provider SanDisk, LED semiconductor maker Cree, Inc.(g), and
publishing software company Adobe Systems(c)(g). Juniper Network's stock was
under pressure due, in part, to an investigation into the company's stock
options practices and lowered earnings guidance in its outlook for the second
half of the 2006 year.
In retailing, an overweighted position in poor-performing apparel retailer
Chico's(g) was among the portfolio's top detractors. Disappointing earnings
guidance and sales trends hurt the stock's performance.
In the health care sector, cardiovascular medical devices maker St. Jude
Medical(g), health care provider Humana, and dermatological treatment company
Medicis Pharmaceutical(c) held back relative performance.
Elsewhere, the portfolio's holdings in industrial automation products company
Rockwell Automation and automatic card shuffling device maker Shuffle Master(c)
detracted from relative returns as both stocks underperformed the benchmark.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the energy and transportation sectors was a contributor to
relative performance over the reporting period. However, no individual
securities in either sector were among the portfolio's top contributors.
The portfolio's underweighted position in the autos and housing sector aided
relative results as the sector underperformed the benchmark over the reporting
period.
Elsewhere in the portfolio, billing software company Amdocs Ltd.(c), slot
machine manufacturer International Game Technology, broadcast and
communications firm American Tower, private student loans provider First
Marblehead Corp., and networking semiconductor company PMC-Sierra(g) all
contributed to relative performance. Amdocs' shares increased as the company
reported stronger-than-expected earnings during the fiscal year and offered a
positive outlook for 2007. In addition, the company secured a 5-year managed
services deal with Vodafone Netherlands. Our positioning in blood test analysis
systems maker Immucor(c), casino resorts operator MGM Grand(g), apparel
retailer Phillips-Van Heusen Corp.(c), private-label credit card services
company Alliance Data Systems, and semiconductor production equipment maker
Novellus Systems also helped.
RESEARCH SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 10.62%, while Service Class shares provided a
total return of 10.32%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 15.79% for the series'
benchmark, the Standard & Poor's 500 Stock Index (S&P 500 Index).
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure sector was the principal detractor from results
relative to the benchmark. Within this sector, satellite radio service company
XM Satellite Radio(c)(g) hurt results as weaker-than-expected subscriber growth
and a slower rollout of new products led to lower-than-expected earnings and
put pressure on its share price during the period.
Security selection in the technology sector also held back performance. Several
individual holdings within this sector were among the portfolio's top
detractors including network equipment company Juniper Networks(g), flash
memory storage products maker SanDisk, networking chip manufacturer Marvell
Technology Group(c), and semiconductor giant Intel. The sources of
underperformance at Marvell included a dilutive acquisition, a stock options
backdating investigation, and disappointing second and third quarter results.
The basic materials sector was also a negative factor in relative returns as
several individual securities weighed on performance. These included packaging
manufacturer Owens-Illinois(c) and newsprint company Abitibi-
Consolidated(c)(g), which were both affected by higher energy prices.
Additionally, Abitibi faced weaker demand for newsprint.
Stocks in other sectors that hindered results included specialty apparel
retailer Chico's(c), industrial equipment distributor W.W. Grainger, and home
products retailer Williams-Sonoma(c)(g).
CONTRIBUTORS TO PERFORMANCE
The consumer staples sector was the largest contributor to relative
performance. No individual holdings within this sector were among the
portfolio's top contributors.
Security selection in the special products and services and the industrial
goods and services sectors helped relative results. Within industrial goods and
services, defense contractor Lockheed Martin was a strong performer as shares
gained on strong revenue growth, improved margins and key contract awards over
the period. Not owning stock in industrial conglomerate General Electric also
helped as the stock's return lagged that of the benchmark.
Elsewhere, our positions in discount department store Kohl's(g), investment
banking firm Goldman Sachs, enterprise software company Oracle(g), cable and
wireless services provider Rogers Communications(c), and electric utility
company FPL Group boosted relative returns. Avoiding online information portal
Yahoo!, a poor-performing benchmark constituent, also benefited results.
During the reporting period, 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.
TOTAL RETURN SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 12.22%, while Service Class shares provided a
total return of 11.91%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 15.79% for the series'
benchmark, the Standard & Poor's 500 Stock Index (S&P 500 Index). The series'
other benchmark, the Lehman Brothers U.S. Aggregate Bond Index (Lehman Index),
had a total return of 4.33%.
DETRACTORS FROM PERFORMANCE
Within the equity portion of the portfolio, stock selection in the basic
materials and energy sectors detracted from performance relative to the S&P 500
Index. In basic materials, packaging manufacturer Owens-Illinois(c) and
newsprint maker Bowater(c) were among the portfolio's top detractors. The
profitability of both companies was negatively affected by higher energy
prices. Additionally, Bowater faced weaker demand for newsprint. In energy, our
underweighted position in integrated oil and gas company Exxon Mobil held back
relative returns.
Elsewhere, telecommunications equipment manufacturer Nortel Networks(c),
wireless service provider Sprint Nextel, insurance company Conseco(c), and home
improvement products maker Masco dampened results. We believe Nortel's delay in
filing the 2005 annual reports and restatement of certain prior period results,
along with weaker-than-expected fundamentals and management's inability to turn
around the business, contributed to the decline of the company's stock price.
Shares of Sprint Nextel struggled after the company lowered its wireless
subscriber guidance for 2006.
Not holding communications service provider BellSouth also detracted from
relative returns as this stock outperformed the S&P 500 Index.
The cash position in the equity portion of the portfolio was also a detractor
from relative performance. The portfolio holds cash to buy new holdings and to
provide liquidity. In a period when equity markets rose, as measured by the
portfolio's benchmark, holding cash hurt performance versus the benchmark,
which has no cash position.
Within the fixed income portion of the portfolio, several Treasury securities
and long-maturity corporate issues held back returns relative to the Lehman
Index.
CONTRIBUTORS TO PERFORMANCE
Within the equity portion of the portfolio, the health care, financial
services, and retailing sectors were the principal contributors to performance
relative to the S&P 500 Index.
Stock selection was the primary factor in the strong relative performance in
the health care sector. This was reinforced by underweighting this otherwise
weak-performing sector. Pharmaceutical company Merck was among the portfolio's
top contributors. Merck rebounded after struggling with the recall of its pain
medication Vioxx. Shares of Merck also benefited from the company's cost
cutting efforts and solid growth in several key products. Our underweighting of
benchmark constituent UnitedHealth Group also helped as this stock's
performance trailed that of the benchmark.
The strong showing in the financial services and retailing sectors also
resulted from security selection. PNC Financial Services Group and office
products retailer OfficeMax were among the largest contributors to relative
returns.
In other sectors, defense contractor Lockheed Martin was a top performer as
shares gained on strong revenue growth, improved margins and key contract
awards over the period. Other individual stocks that contributed to results
included electric utility company FPL Group, telecommunications services
provider Verizon Communications, and agricultural equipment manufacturer Deere
& Co. Underweighting or avoiding several poor-performing benchmark
constituents, such as semiconductor company Intel and online information portal
Yahoo!, further strengthened relative performance.
Within the fixed income portion of the portfolio, our overweighted positions in
"BBB" rated(s) securities and our small exposure to "BB" rated bonds added to
performance relative to the Lehman Index (the Lehman Index does not include
bonds rated lower than "BBB"). While we do not generally position the portfolio
for changes in interest rates, the portfolio's short duration(d) stance boosted
results as interest rates rose over the reporting period. The portfolio's yield
advantage and mortgage convexity positioning (exposure to interest rate
volatility) were also positive factors in relative returns.
UTILITIES SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 32.35%, while Service Class shares provided a
total return of 31.96%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 20.99% for the series'
benchmark, the Standard & Poor's 500 Utilities Index.
CONTRIBUTORS TO PERFORMANCE
Strong stock selection in the electric power industry contributed to the
portfolio's relative performance for the period. Our positions in electric
generators International Power(c) (U.K.) and RWE(c) (Germany) were among the
portfolio's top contributors. Both companies benefited from an increasingly
higher pricing environment for power in Europe. Additionally, not owning
electric utility provider Southern Company, and underweighting TXU. Public
Service Enterprise Group, and Dominion Resources, aided relative performance as
the returns of all four stocks lagged overall benchmark returns.
Several holdings within the telephone services industry, which is not
represented in the benchmark, boosted relative performance over the period.
These included communications companies Telenor(c) (Norway) and AT&T(c).
Elsewhere, Latin American wireless communications company America Movil(c) and
cable services provider Comcast(c) were notable strong-performing holdings.
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
During the reporting period, wireless service providers Sprint Nextel(c) was
the top detractor from relative results. Shares of Sprint Nextel struggled
after the company lowered its wireless subscriber guidance for 2006.
Although overall stock selection in the electric power industry contributed to
relative returns, not owning PG&E and underweighting strong-performing
benchmark constituents, Entergy and Allegheny Energy(g), detracted from
results.
The portfolio's cash position was also a detractor from relative performance.
The portfolio holds cash to buy new holdings and to provide liquidity. In a
period when equity markets rose, as measured by the portfolio's benchmark,
holding cash hurt performance versus the benchmark, which has no cash position.
(c) Security is not a benchmark constituent.
(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.
(s) Bonds rated "BBB", "Baa", or higher are considered investment grade; bonds
rated "BB", "Ba", or below are considered non-investment grade. The primary
source for bond quality ratings is Moody's Investors Service. If not
available, ratings by Standard & Poor's are used, else ratings by Fitch,
Inc. For securities which are not rated by any of the three agencies, the
security is considered Not Rated.
PORTFOLIO COMPOSITION -- CAPITAL APPRECIATION SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.3%
Cash & Other Net Assets 0.7%
TOP TEN HOLDINGS
Cisco Systems, Inc. 3.8%
------------------------------------------------
General Electric Co. 3.2%
------------------------------------------------
Intel Corp. 2.7%
------------------------------------------------
Johnson & Johnson 2.3%
------------------------------------------------
Adobe Systems, Inc. 2.2%
------------------------------------------------
Medtronic, Inc. 2.1%
------------------------------------------------
Microsoft Corp. 2.1%
------------------------------------------------
Procter & Gamble Co. 2.0%
------------------------------------------------
Google, Inc., "A" 2.0%
------------------------------------------------
Amdocs Ltd. 1.8%
------------------------------------------------
COMMON STOCK SECTORS
Technology 23.6%
------------------------------------------------
Health Care 20.0%
------------------------------------------------
Industrial Goods & Services 9.5%
------------------------------------------------
Retailing 9.2%
------------------------------------------------
Financial Services 9.1%
------------------------------------------------
Special Products & Services 6.8%
------------------------------------------------
Consumer Staples 6.0%
------------------------------------------------
Leisure 5.4%
------------------------------------------------
Energy 3.8%
------------------------------------------------
Transportation 2.7%
------------------------------------------------
Basic Materials 1.5%
------------------------------------------------
Utilities & Communications 1.0%
------------------------------------------------
Autos & Housing 0.7%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- EMERGING GROWTH SERIES
PORTFOLIO STRUCTURE
Common Stocks 97.5%
Cash & Other Net Assets 2.5%
TOP TEN HOLDINGS
Cisco Systems, Inc. 2.4%
------------------------------------------------
Adobe Systems, Inc. 2.3%
------------------------------------------------
News Corp., "A" 2.2%
------------------------------------------------
GlobalSantaFe Corp. 1.9%
------------------------------------------------
Google, Inc., "A" 1.9%
------------------------------------------------
Marvell Technology Group Ltd. 1.7%
------------------------------------------------
Rockwell Automation, Inc. 1.7%
------------------------------------------------
Monsanto Co. 1.7%
------------------------------------------------
Roche Holding AG 1.6%
------------------------------------------------
American Tower Corp., "A" 1.5%
------------------------------------------------
COMMON STOCK SECTORS
Technology 22.8%
------------------------------------------------
Health Care 16.0%
------------------------------------------------
Special Products & Services 10.2%
------------------------------------------------
Financial Services 9.5%
------------------------------------------------
Leisure 8.8%
------------------------------------------------
Retailing 7.8%
------------------------------------------------
Energy 6.4%
------------------------------------------------
Industrial Goods & Services 5.6%
------------------------------------------------
Utilities & Communications 3.7%
------------------------------------------------
Consumer Staples 3.2%
------------------------------------------------
Basic Materials 1.8%
------------------------------------------------
Autos & Housing 1.3%
------------------------------------------------
Transportation 0.4%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- GLOBAL GROWTH SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.7%
Cash & Other Net Assets 0.3%
TOP TEN HOLDINGS
TOTAL S.A. 2.2%
------------------------------------------------
LVMH Moet Hennessy Louis Vuitton S.A. 2.1%
------------------------------------------------
HSBC Holdings PLC 2.0%
------------------------------------------------
Roche Holding AG 2.0%
------------------------------------------------
Tesco PLC 1.8%
------------------------------------------------
UBS AG 1.7%
------------------------------------------------
BHP Billiton Ltd. 1.5%
------------------------------------------------
WPP Group PLC 1.5%
------------------------------------------------
Li & Fung Ltd. 1.5%
------------------------------------------------
Procter & Gamble Co. 1.5%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 19.1%
------------------------------------------------
Technology 13.6%
------------------------------------------------
Consumer Staples 11.3%
------------------------------------------------
Health Care 10.5%
------------------------------------------------
Retailing 9.6%
------------------------------------------------
Basic Materials 9.0%
------------------------------------------------
Energy 6.7%
------------------------------------------------
Leisure 6.2%
------------------------------------------------
Utilities & Communications 5.2%
------------------------------------------------
Industrial Goods & Services 3.4%
------------------------------------------------
Special Products & Services 2.4%
------------------------------------------------
Autos & Housing 2.1%
------------------------------------------------
Transportation 0.6%
------------------------------------------------
COUNTRY WEIGHTINGS
United States 34.1%
------------------------------------------------
United Kingdom 10.5%
------------------------------------------------
Japan 10.5%
------------------------------------------------
France 8.4%
------------------------------------------------
Switzerland 6.9%
------------------------------------------------
Germany 3.9%
------------------------------------------------
Hong Kong 3.1%
------------------------------------------------
Brazil 2.8%
------------------------------------------------
Mexico 2.1%
------------------------------------------------
Other Countries 17.7%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- MASSACHUSETTS INVESTORS TRUST SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.0%
Cash & Other Net Assets 1.0%
TOP TEN HOLDINGS
Johnson & Johnson 2.9%
------------------------------------------------
American International Group, Inc. 2.9%
------------------------------------------------
JPMorgan Chase & Co. 2.4%
------------------------------------------------
Cisco Systems, Inc. 2.3%
------------------------------------------------
Reckitt Benckiser PLC 2.3%
------------------------------------------------
Amgen, Inc. 2.0%
------------------------------------------------
Procter & Gamble Co. 2.0%
------------------------------------------------
EMC Corp. 2.0%
------------------------------------------------
Bank of America Corp. 2.0%
------------------------------------------------
TOTAL S.A., ADR 2.0%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 20.9%
------------------------------------------------
Health Care 15.8%
------------------------------------------------
Technology 13.2%
------------------------------------------------
Consumer Staples 11.7%
------------------------------------------------
Energy 10.2%
------------------------------------------------
Retailing 5.8%
------------------------------------------------
Industrial Goods & Services 5.3%
------------------------------------------------
Leisure 5.1%
------------------------------------------------
Basic Materials 4.0%
------------------------------------------------
Special Products & Services 3.4%
------------------------------------------------
Utilities & Communications 2.5%
------------------------------------------------
Transportation 0.6%
------------------------------------------------
Autos & Housing 0.5%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- MID CAP GROWTH SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.3%
Cash & Other Net Assets 0.7%
TOP TEN HOLDINGS
International Game Technology 2.6%
--------------------------------------------------
Williams Cos., Inc. 2.6%
--------------------------------------------------
Hess Corp. 2.3%
--------------------------------------------------
Rockwell Automation, Inc. 2.3%
--------------------------------------------------
Phillips-Van Heusen Corp. 2.3%
--------------------------------------------------
YUM! Brands, Inc. 2.2%
--------------------------------------------------
Amdocs Ltd. 2.0%
--------------------------------------------------
Cognizant Technology Solutions Corp., "A" 2.0%
--------------------------------------------------
Humana, Inc. 2.0%
--------------------------------------------------
Kroger Co. 1.9%
--------------------------------------------------
COMMON STOCK SECTORS
Health Care 17.6%
--------------------------------------------------
Technology 12.2%
--------------------------------------------------
Special Products & Services 11.5%
--------------------------------------------------
Retailing 9.8%
--------------------------------------------------
Financial Services 8.9%
--------------------------------------------------
Leisure 7.9%
--------------------------------------------------
Industrial Goods & Services 7.3%
--------------------------------------------------
Utilities & Communications 6.8%
--------------------------------------------------
Energy 5.4%
--------------------------------------------------
Autos & Housing 4.6%
--------------------------------------------------
Consumer Staples 3.4%
--------------------------------------------------
Transportation 2.1%
--------------------------------------------------
Basic Materials 1.8%
--------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- RESEARCH SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.5%
Cash & Other Net Assets 0.5%
TOP TEN HOLDINGS
Altria Group, Inc. 3.7%
------------------------------------------------
Applied Materials, Inc. 2.4%
------------------------------------------------
JPMorgan Chase & Co. 2.1%
------------------------------------------------
Amgen, Inc. 2.1%
------------------------------------------------
Bank of New York Co., Inc. 2.0%
------------------------------------------------
American Express Co. 2.0%
------------------------------------------------
Genworth Financial, Inc., "A" 1.9%
------------------------------------------------
United Technologies Corp. 1.9%
------------------------------------------------
Tyco International Ltd. 1.9%
------------------------------------------------
Hess Corp. 1.9%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 21.7%
------------------------------------------------
Technology 13.7%
------------------------------------------------
Health Care 11.9%
------------------------------------------------
Energy 10.1%
------------------------------------------------
Industrial Goods & Services 9.4%
------------------------------------------------
Consumer Staples 7.5%
------------------------------------------------
Utilities & Communications 7.0%
------------------------------------------------
Retailing 5.7%
------------------------------------------------
Leisure 5.0%
------------------------------------------------
Basic Materials 4.1%
------------------------------------------------
Special Products & Services 2.4%
------------------------------------------------
Transportation 1.0%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- TOTAL RETURN SERIES
PORTFOLIO STRUCTURE (i)
Common Stocks 58.7%
Bonds 37.8%
Cash & Other Net Assets 3.5%
TOP TEN HOLDINGS (i)
Fannie Mae 5.5%, 30 years 3.8%
------------------------------------------------
Bank of America Corp. 1.9%
------------------------------------------------
Altria Group, Inc. 1.7%
------------------------------------------------
JPMorgan Chase & Co. 1.5%
------------------------------------------------
Citigroup, Inc. 1.5%
------------------------------------------------
U.S. Treasury Notes, 4.75%, 2008 1.4%
------------------------------------------------
Bank of New York Co., Inc. 1.4%
------------------------------------------------
Exxon Mobil Corp. 1.3%
------------------------------------------------
Fannie Mae 6.0%, 30 years 1.3%
------------------------------------------------
U.S. Treasury Notes, 5.625%, 2008 1.2%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 17.5%
------------------------------------------------
Energy 6.7%
------------------------------------------------
Health Care 6.1%
------------------------------------------------
Utilities & Communications 5.8%
------------------------------------------------
Industrial Goods & Services 5.0%
------------------------------------------------
Consumer Staples 4.3%
------------------------------------------------
Technology 3.3%
------------------------------------------------
Basic Materials 3.2%
------------------------------------------------
Leisure 2.4%
------------------------------------------------
Retailing 1.8%
------------------------------------------------
Autos & Housing 1.8%
------------------------------------------------
Transportation 0.6%
------------------------------------------------
Special Products & Services 0.2%
------------------------------------------------
FIXED INCOME SECTORS (i)
Mortgage-Backed Securities 13.6%
------------------------------------------------
High Grade Corporates 8.9%
------------------------------------------------
U.S. Treasury Securities 8.3%
------------------------------------------------
Commercial Mortgage-Backed Securities 3.7%
------------------------------------------------
U.S. Government Agencies 2.0%
------------------------------------------------
Asset-Backed Securities 0.6%
------------------------------------------------
Emerging Market Bonds 0.4%
------------------------------------------------
Non-U.S. Government Bonds 0.2%
------------------------------------------------
High Yield Corporates 0.1%
------------------------------------------------
(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 12/31/06, unless otherwise noted.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- UTILITIES SERIES
PORTFOLIO STRUCTURE (i)
Common Stocks 93.5%
Convertible Preferred Stocks 2.0%
Bonds 1.4%
Convertible Bonds 0.4%
Cash & Other Net Assets 2.7%
TOP TEN HOLDINGS (i)
NRG Energy, Inc. 4.9%
------------------------------------------------
Williams Cos., Inc. 3.5%
------------------------------------------------
Edison International 3.1%
------------------------------------------------
FPL Group, Inc. 3.0%
------------------------------------------------
AT&T, Inc. 2.9%
------------------------------------------------
Equitable Resources, Inc. 2.9%
------------------------------------------------
Constellation Energy Group, Inc. 2.8%
------------------------------------------------
Entergy Corp. 2.7%
------------------------------------------------
E.ON AG 2.7%
------------------------------------------------
Public Service Enterprise Group, Inc. 2.6%
------------------------------------------------
TOP FIVE INDUSTRIES (i)
Utilities - Electric Power 50.7%
------------------------------------------------
Telephone Services 15.0%
------------------------------------------------
Telecommunications - Wireless 6.5%
------------------------------------------------
Natural Gas - Pipeline 6.0%
------------------------------------------------
Natural Gas - Distribution 5.9%
------------------------------------------------
COUNTRY WEIGHTINGS (i)
United States 67.2%
------------------------------------------------
Canada 4.4%
------------------------------------------------
Spain 4.4%
------------------------------------------------
Germany 4.1%
------------------------------------------------
France 3.3%
------------------------------------------------
Brazil 3.3%
------------------------------------------------
Mexico 2.2%
------------------------------------------------
United Kingdom 2.2%
------------------------------------------------
Norway 1.5%
------------------------------------------------
Other Countries 7.4%
------------------------------------------------
(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 12/31/06.
The portfolio is actively managed and current holdings may be different.
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the historical
performance of each series in comparison to its benchmark(s). Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be more than or less than the line
shown. It is not possible to invest directly in an index. (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 UNITS,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. THE PERFORMANCE SHOWN DOES NOT
REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A CONTRACT HOLDER WOULD PAY ON
DISTRIBUTIONS OR REDEMPTION OF CONTRACT UNITS.
CAPITAL APPRECIATION SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Capital Appreciation Russell 1000
Series -- Initial Class Growth Index
12/96 $10,000 $10,000
12/97 12,313 13,049
12/98 15,847 18,100
12/99 21,019 24,101
12/00 18,619 18,697
12/01 13,904 14,878
12/02 9,400 10,730
12/03 12,099 13,922
12/04 13,432 14,799
12/05 13,555 15,577
12/06 14,419 16,991
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 6/12/85 6.37% 0.73% 3.73%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 6.05% 0.46% 3.58%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Russell 1000 Growth Index (f) 9.07% 2.69% 5.44%
(f) Source: FactSet Research Systems Inc.
EMERGING GROWTH SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Emerging Growth Russell 3000
Series -- Initial Class Growth Index
12/96 $10,000 $10,000
12/97 12,193 12,874
12/98 16,324 17,382
12/99 28,699 23,262
12/00 23,216 18,047
12/01 15,189 14,505
12/02 10,003 10,439
12/03 13,153 13,672
12/04 14,894 14,619
12/05 16,255 15,375
12/06 17,559 16,829
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- --------------------------------------------------------------------------------
Average Annual Total Return 5/01/95 8.02% 2.94% 5.79%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 7.70% 2.68% 5.64%
COMPARATIVE BENCHMARK
- --------------------------------------------------------------------------------
Russell 3000 Growth Index (f) 9.46% 3.02% 5.34%
(f) Source: FactSet Research Systems Inc.
PERFORMANCE SUMMARY -- continued
GLOBAL GROWTH SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Global Growth MSCI All Country MSCI World
Series -- Initial Class World Growth Index Growth Index
12/96 $10,000 $10,000 $10,000
12/97 11,532 11,485 11,631
12/98 13,217 15,000 15,562
12/99 22,106 20,218 20,699
12/00 19,200 14,988 15,411
12/01 15,429 12,207 12,457
12/02 12,442 9,8790 10,015
12/03 16,852 12,779 12,871
12/04 19,483 14,272 14,314
12/05 21,438 15,865 15,707
12/06 25,162 18,521 18,138
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- --------------------------------------------------------------------------------
Average Annual Total Return 11/16/93 17.37% 10.28% 9.67%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 17.09% 9.99% 9.50%
COMPARATIVE BENCHMARK
- --------------------------------------------------------------------------------
MSCI All Country World Growth Index (f) 16.74% 8.69% 6.36%
- --------------------------------------------------------------------------------
MSCI World Growth Index (f) 15.48% 7.80% 6.14%
(f) Source: FactSet Research Systems Inc.
MASSACHUSETTS INVESTORS TRUST SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Massachusetts Investors Trust Standard & Poor's
Series -- Initial Class 500 Stock Index
12/96 $10,000 $10,000
12/97 13,194 13,336
12/98 16,341 17,148
12/99 17,514 20,756
12/00 17,530 18,866
12/01 14,775 16,624
12/02 11,640 12,950
12/03 14,297 16,664
12/04 16,011 18,478
12/05 17,245 19,385
12/06 19,539 22,447
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- --------------------------------------------------------------------------------
Average Annual Total Return 11/14/86 13.30% 5.75% 6.93%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 13.04% 5.48% 6.78%
COMPARATIVE BENCHMARK
- --------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index (f) 15.79% 6.19% 8.42%
(f) Source: FactSet Research Systems Inc.
PERFORMANCE SUMMARY -- continued
MID CAP GROWTH SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
August 31, 2000, through December 31, 2006.)
Mid Cap Growth Russell Midcap
Series -- Initial Class Growth Index
8/00 $10,000 $10,000
12/00 9,080 7,473
12/01 6,970 5,967
12/02 3,686 4,332
12/03 5,082 6,182
12/04 5,825 7,139
12/05 6,005 8,002
12/06 6,146 8,855
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 8/31/00 2.34% -2.48% -7.39%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 2.20% -2.71% -7.56%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Russell Midcap Growth Index (f) 10.66% 8.22% -1.90%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
August 31, 2000, through the stated period end.
RESEARCH SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Research Series -- Standard & Poor's
Initial Class 500 Stock Index
12/96 $10,000 $10,000
12/97 12,086 13,336
12/98 14,940 17,148
12/99 18,547 20,756
12/00 17,787 18,866
12/01 13,980 16,624
12/02 10,470 12,950
12/03 13,121 16,664
12/04 15,198 18,478
12/05 16,405 19,385
12/06 18,147 22,447
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- --------------------------------------------------------------------------------
Average Annual Total Return 11/07/94 10.62% 5.36% 6.14%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 10.32% 5.08% 5.99%
COMPARATIVE BENCHMARK
- --------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index (f) 15.79% 6.19% 8.42%
(f) Source: FactSet Research Systems Inc.
PERFORMANCE SUMMARY -- continued
TOTAL RETURN SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Lehman Brothers
Total Return Standard & Poor's U.S. Aggregate
Series -- Initial Class 500 Stock Index Bond Index
12/96 $10,000 $10,000 $10,000
12/97 12,198 10,968 13,336
12/98 13,626 11,920 17,148
12/99 14,013 11,821 20,756
12/00 16,363 13,196 18,866
12/01 16,446 14,307 16,624
12/02 15,513 15,776 12,950
12/03 18,173 16,425 16,664
12/04 20,258 17,137 18,478
12/05 20,870 17,554 19,385
12/06 23,420 18,314 22,447
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- --------------------------------------------------------------------------------
Average Annual Total Return 5/11/88 12.22% 7.32% 8.88%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 11.91% 7.05% 8.73%
COMPARATIVE BENCHMARKS
- --------------------------------------------------------------------------------
Lehman Brothers U.S. Aggregate Bond Index (f) 4.33% 5.06% 6.24%
- --------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index (f) 15.79% 6.19% 8.42%
(f) Source: FactSet Research Systems Inc.
UTILITIES SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006.)
Utilities Series -- Standard & Poor's
Initial Class 500 Utilities Index
12/96 $10,000 $10,000
12/97 13,271 12,465
12/98 15,600 14,315
12/99 20,482 13,001
12/00 21,916 20,435
12/01 16,582 14,215
12/02 12,625 9,9510
12/03 17,202 12,564
12/04 22,427 15,615
12/05 26,290 18,245
12/06 34,796 22,074
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- --------------------------------------------------------------------------------
Average Annual Total Return 11/16/93 32.35% 15.98% 13.28%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 31.96% 15.69% 13.12%
COMPARATIVE BENCHMARK
- --------------------------------------------------------------------------------
Standard & Poor's 500 Utilities Index (f) 20.99% 9.20% 8.24%
(f) Source: FactSet Research Systems Inc.
PERFORMANCE SUMMARY -- continued
INDEX DEFINITIONS
LEHMAN BROTHERS U.S. AGGREGATE BOND INDEX -- measures the U.S. investment
grade, fixed rate bond market, with index components for government and
corporate securities, mortgage pass-through securities, and asset-backed
securities.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) ALL COUNTRY WORLD GROWTH INDEX -- a
market capitalization index that is designed to measure equity market
performance for growth securities in the global developed and emerging markets.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD GROWTH INDEX -- a market
capitalization index that is designed to measure global developed market equity
performance for growth securities.
RUSSELL 1000 GROWTH INDEX -- constructed to provide a comprehensive barometer
for growth securities in the large-cap segment of the U.S. equity universe.
Companies in this index generally have higher price-to-book ratios and higher
forecasted growth values.
RUSSELL 3000 GROWTH INDEX -- constructed to provide a comprehensive barometer
for the growth securities in the small to large-cap segment of the U.S. equity
universe. Companies in this Index generally have higher price-to-book ratios
and higher forecasted growth values.
RUSSELL MIDCAP GROWTH INDEX -- constructed to provide a comprehensive barometer
for the growth securities in the mid-cap segment of the U.S. equity universe.
Companies in this index generally have higher price-to-book ratios and higher
forecasted growth values.
STANDARD & POOR'S 500 STOCK INDEX -- a capitalization-weighted index of 500
widely held equity securities, designed to measure broad U.S. equity
performance.
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
Initial Class shares have no sales charge. Service Class shares have no sales
charge and carry a 0.25% annual Rule 12b-1 fee.
Service Class share performance includes the performance of Initial Class
shares for periods prior to the inception of Service Class shares (blended
performance). These blended performance figures have not been adjusted to take
into account differences in the class-specific operating expenses (such as Rule
12b-1 fees). Because operating expenses of Service Class shares are generally
higher than those of Initial Class shares, the blended Service Class shares
performance shown is higher than it would have been had Service Class shares
been offered for the entire period.
Performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without such subsidies and waivers the series'
performance results would be less favorable. Please see the prospectus for
complete details. All results are historical and assume the reinvestment of
dividends and capital gains.
The returns for the series shown do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges imposed by insurance company
separate accounts. Such expenses would reduce the overall returns shown.
From time to time the series may receive proceeds from litigation settlements,
without which performance would be lower.
EXPENSE TABLES
SERIES EXPENSES BORNE BY THE CONTRACT HOLDERS DURING THE PERIOD,
JULY 1, 2006 THROUGH DECEMBER 31, 2006
As a contract holder of each series, you incur ongoing costs, including
management fees; distribution (12b-1) fees; and other series expenses. The
examples are intended to help you understand your ongoing costs (in dollars) of
investing in each series and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period, July 1, 2006 through December 31,
2006.
ACTUAL EXPENSES
The first line for each share class in the following tables 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 tables provides
information about hypothetical account values and hypothetical expenses based
on each series' actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not each series' 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 each series 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 tables are meant to highlight each
series' ongoing costs only and do not take into account the fees and expenses
imposed under the variable contracts through which your investment in each
series is made. Therefore, the second line for each share class in the tables
is useful in comparing ongoing costs associated with an investment in vehicles
(such as the series) which fund benefits under variable annuity and variable
life insurance contracts and to qualified pension and retirement plans only,
and will not help you determine the relative total costs of investing in each
series through variable annuity and variable life insurance contracts. If the
fees and expenses imposed under the variable contracts were included, your
costs would have been higher.
Beginning Ending
Annualized Account Account Expenses Paid
CAPITAL Expense Value Value During Period (p)
APPRECIATION SERIES Ratio 7/01/06 12/31/06 7/01/06-12/31/06
- --------------------------------------------------------------------------------
Initial Class
Actual 0.75% $1,000.00 $1,089.80 $3.95
Hypothetical (h) 0.75% $1,000.00 $1,021.42 $3.82
Service Class
Actual 1.00% $1,000.00 $1,087.80 $5.26
Hypothetical (h) 1.00% $1,000.00 $1,020.16 $5.09
EMERGING
GROWTH SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.83% $1,000.00 $1,091.10 $4.37
Hypothetical (h) 0.83% $1,000.00 $1,021.02 $4.23
Service Class
Actual 1.08% $1,000.00 $1,089.90 $5.69
Hypothetical (h) 1.08% $1,000.00 $1,019.76 $5.50
GLOBAL GROWTH SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 1.17% $1,000.00 $1,127.50 $6.27
Hypothetical (h) 1.17% $1,000.00 $1,019.31 $5.96
Service Class
Actual 1.42% $1,000.00 $1,125.30 $7.61
Hypothetical (h) 1.42% $1,000.00 $1,018.05 $7.22
MASSACHUSETTS
INVESTORS TRUST SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.60% $1,000.00 $1,124.00 $3.21
Hypothetical (h) 0.60% $1,000.00 $1,022.18 $3.06
Service Class
Actual 0.85% $1,000.00 $1,122.80 $4.55
Hypothetical (h) 0.85% $1,000.00 $1,020.92 $4.33
MID CAP GROWTH SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.94% $1,000.00 $1,046.20 $4.85
Hypothetical (h) 0.94% $1,000.00 $1,020.47 $4.79
Service Class
Actual 1.19% $1,000.00 $1,046.70 $6.14
Hypothetical (h) 1.19% $1,000.00 $1,019.21 $6.06
RESEARCH SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.81% $1,000.00 $1,110.30 $4.31
Hypothetical (h) 0.81% $1,000.00 $1,021.12 $4.13
Service Class
Actual 1.06% $1,000.00 $1,109.10 $5.64
Hypothetical (h) 1.06% $1,000.00 $1,019.86 $5.40
TOTAL RETURN SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.71% $1,000.00 $1,101.20 $3.76
Hypothetical (h) 0.71% $1,000.00 $1,021.63 $3.62
Service Class
Actual 0.96% $1,000.00 $1,099.70 $5.08
Hypothetical (h) 0.96% $1,000.00 $1,020.37 $4.89
UTILITIES SERIES
- --------------------------------------------------------------------------------
Initial Class
Actual 0.85% $1,000.00 $1,219.20 $4.75
Hypothetical (h) 0.85% $1,000.00 $1,020.92 $4.33
Service Class
Actual 1.11% $1,000.00 $1,217.80 $6.20
Hypothetical (h) 1.11% $1,000.00 $1,019.61 $5.65
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
CAPITAL APPRECIATION SERIES
COMMON STOCKS -- 99.3%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 3.2%
Boeing Co. ................................. 70,750 $ 6,285,430
Precision Castparts Corp. .................. 44,530 3,485,808
United Technologies Corp. .................. 133,540 8,348,921
------------
$ 18,120,159
------------
APPAREL MANUFACTURERS -- 2.0%
Coach, Inc. (a) ............................ 91,550 $ 3,932,988
NIKE, Inc., "B" ............................ 71,230 7,053,907
------------
$ 10,986,895
------------
AUTOMOTIVE -- 0.7%
Harman International Industries, Inc. ...... 40,470 $ 4,043,358
------------
BIOTECHNOLOGY -- 5.4%
Amgen, Inc. (a) ............................ 143,390 $ 9,794,971
Celgene Corp. (a) .......................... 139,550 8,028,311
Genzyme Corp. (a) .......................... 155,780 9,592,932
Millipore Corp. (a) ........................ 41,500 2,763,900
------------
$ 30,180,114
------------
BROADCASTING -- 1.6%
News Corp., "A" ............................ 280,690 $ 6,029,221
Viacom, Inc., "B" (a) ...................... 73,110 2,999,703
------------
$ 9,028,924
------------
BROKERAGE & ASSET MANAGERS -- 3.9%
Charles Schwab Corp. ....................... 330,260 $ 6,387,228
Chicago Mercantile Exchange Holdings,
Inc., "A" ................................ 10,470 5,337,083
Mellon Financial Corp. ..................... 101,030 4,258,415
Merrill Lynch & Co., Inc. .................. 60,050 5,590,655
------------
$ 21,573,381
------------
BUSINESS SERVICES -- 5.6%
Amdocs Ltd. (a) ............................ 258,550 $ 10,018,813
Automatic Data Processing, Inc. ............ 96,380 4,746,715
CheckFree Corp. (a) ........................ 69,290 2,782,686
First Data Corp. ........................... 378,660 9,663,403
Western Union Co. .......................... 182,800 4,098,376
------------
$ 31,309,993
------------
CHEMICALS -- 1.3%
Ecolab, Inc. ............................... 50,210 $ 2,269,492
Monsanto Co. ............................... 96,110 5,048,658
------------
$ 7,318,150
------------
COMPUTER SOFTWARE -- 5.8%
Adobe Systems, Inc. (a) .................... 294,230 $ 12,098,738
Microsoft Corp. ............................ 386,080 11,528,349
Oracle Corp. (a) ........................... 503,180 8,624,505
------------
$ 32,251,592
------------
COMPUTER SOFTWARE -- SYSTEMS -- 3.0%
Apple Computer, Inc. (a) ................... 78,790 $ 6,684,544
Dell, Inc. (a) ............................. 112,650 2,826,388
Hewlett-Packard Co. ........................ 171,780 7,075,618
------------
$ 16,586,550
------------
CONSUMER GOODS & SERVICES -- 4.0%
Colgate-Palmolive Co. ...................... 67,420 $ 4,398,481
eBay, Inc. (a) ............................. 144,100 4,333,087
Monster Worldwide, Inc. (a) ................ 46,560 2,171,558
Procter & Gamble Co. ....................... 177,430 11,403,426
------------
$ 22,306,552
------------
ELECTRICAL EQUIPMENT -- 5.1%
General Electric Co. ....................... 474,160 $ 17,643,494
Rockwell Automation, Inc. .................. 97,640 5,963,851
W.W. Grainger, Inc. ........................ 68,990 4,825,161
------------
$ 28,432,506
------------
ELECTRONICS -- 5.9%
Applied Materials, Inc. .................... 283,550 $ 5,231,497
Intel Corp. ................................ 743,880 15,063,570
Marvell Technology Group Ltd. (a) .......... 269,160 5,165,180
Samsung Electronics Co. Ltd., GDR .......... 11,935 3,926,615
SanDisk Corp. (a) .......................... 83,170 3,578,805
------------
$ 32,965,667
------------
FOOD & BEVERAGES -- 2.4%
Nestle S.A ................................. 17,967 $ 6,382,567
PepsiCo, Inc. .............................. 110,950 6,939,923
------------
$ 13,322,490
------------
FOOD & DRUG STORES -- 0.5%
CVS Corp. .................................. 89,550 $ 2,767,990
------------
GAMING & LODGING -- 2.3%
International Game Technology .............. 179,670 $ 8,300,754
Las Vegas Sands Corp. (a) .................. 18,620 1,666,118
Starwood Hotels & Resorts, Inc. ............ 47,910 2,994,375
------------
$ 12,961,247
------------
GENERAL MERCHANDISE -- 2.0%
Family Dollar Stores, Inc. ................. 98,320 $ 2,883,726
Target Corp. ............................... 144,780 8,259,699
------------
$ 11,143,425
------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.5%
UnitedHealth Group, Inc. ................... 54,820 $ 2,945,479
------------
INTERNET -- 2.7%
Google, Inc., "A" (a) ...................... 24,050 $ 11,074,544
Yahoo!, Inc. (a) ........................... 161,720 4,130,329
------------
$ 15,204,873
------------
LEISURE & TOYS -- 1.5%
Electronic Arts, Inc. (a) .................. 167,890 $ 8,454,940
------------
MACHINERY & TOOLS -- 1.2%
Deere & Co. ................................ 70,910 $ 6,741,414
------------
MAJOR BANKS -- 1.7%
JPMorgan Chase & Co. ....................... 92,160 $ 4,451,328
State Street Corp. ......................... 74,400 5,017,536
------------
$ 9,468,864
------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.4%
Caremark Rx, Inc. .......................... 135,680 $ 7,748,685
------------
MEDICAL EQUIPMENT -- 5.2%
Advanced Medical Optics, Inc. (a) .......... 151,750 $ 5,341,600
Baxter International, Inc. ................. 113,120 5,247,637
DENTSPLY International, Inc. ............... 94,370 2,816,945
Medtronic, Inc. ............................ 217,330 11,629,328
Respironics, Inc. (a) ...................... 38,300 1,445,825
St. Jude Medical, Inc. (a) ................. 76,040 2,780,022
------------
$ 29,261,357
------------
NETWORK & TELECOM -- 5.2%
Cisco Systems, Inc. (a) .................... 776,310 $ 21,216,552
Corning, Inc. (a) .......................... 140,280 2,624,639
Juniper Networks, Inc. (a) ................. 69,740 1,320,876
QUALCOMM, Inc. ............................. 111,090 4,198,091
------------
$ 29,360,158
------------
OIL SERVICES -- 3.8%
Noble Corp. ................................ 83,820 $ 6,382,893
Schlumberger Ltd. .......................... 92,710 5,855,564
Transocean, Inc. (a) ....................... 78,880 6,380,603
Weatherford International Ltd. (a) ......... 65,520 2,738,081
------------
$ 21,357,141
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 3.5%
American Express Co. ....................... 151,510 $ 9,192,112
SLM Corp. .................................. 152,240 7,424,745
UBS AG ..................................... 45,350 2,735,966
------------
$ 19,352,823
------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.0%
EMC Corp. (a) .............................. 409,610 $ 5,406,852
------------
PHARMACEUTICALS -- 7.5%
Allergan, Inc. ............................. 61,480 $ 7,361,615
Eli Lilly & Co. ............................ 151,800 7,908,780
Johnson & Johnson .......................... 195,170 12,885,123
Roche Holding AG ........................... 43,430 7,785,261
Wyeth ...................................... 121,540 6,188,817
------------
$ 42,129,596
------------
RAILROAD & SHIPPING -- 0.8%
Burlington Northern Santa Fe Corp. ......... 62,460 $ 4,610,173
------------
SPECIALTY CHEMICALS -- 0.2%
Praxair, Inc. .............................. 22,800 $ 1,352,724
------------
SPECIALTY STORES -- 4.7%
Aeropostale, Inc. (a) ...................... 72,320 $ 2,232,518
Best Buy Co., Inc. ......................... 47,600 2,341,444
Chico's FAS, Inc. (a) ...................... 120,280 2,488,593
Lowe's Cos., Inc. .......................... 136,860 4,263,189
Staples, Inc. .............................. 291,080 7,771,836
Urban Outfitters, Inc. (a) ................. 117,940 2,716,158
Williams-Sonoma, Inc. ...................... 133,380 4,193,467
------------
$ 26,007,205
------------
TELEPHONE SERVICES -- 1.0%
American Tower Corp., "A" (a) .............. 145,430 $ 5,421,630
------------
TOBACCO -- 0.8%
Altria Group, Inc. ......................... 51,600 $ 4,428,312
------------
TRUCKING -- 1.9%
FedEx Corp. ................................ 37,840 $ 4,110,181
United Parcel Service, Inc., "B" ........... 83,900 6,290,822
------------
$ 10,401,003
------------
Total Common Stocks
(Identified Cost, $516,604,202) ..................... $554,952,222
------------
SHORT-TERM OBLIGATIONS -- 0.4%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ......................... $ 2,482,000 $ 2,481,635
------------
Total Investments
(Identified Cost, $519,085,837) .................... $557,433,857
------------
OTHER ASSETS,
LESS LIABILITIES -- 0.3% ............................... 1,627,438
------------
Net Assets -- 100.0% ................................. $559,061,295
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
EMERGING GROWTH SERIES
COMMON STOCKS -- 97.5%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 3.0%
Lockheed Martin Corp. ...................... 45,500 $ 4,189,185
Precision Castparts Corp. .................. 31,900 2,497,132
United Technologies Corp. .................. 44,900 2,807,148
------------
$ 9,493,465
------------
APPAREL MANUFACTURERS -- 1.9%
Coach, Inc. (a) ............................ 57,600 $ 2,474,496
Li & Fung Ltd. ............................. 124,000 385,790
NIKE, Inc., "B" ............................ 23,000 2,277,690
Under Armour, Inc. (a) ..................... 16,800 847,562
------------
$ 5,985,538
------------
AUTOMOTIVE -- 1.3%
Harman International Industries, Inc. ...... 40,510 $ 4,047,354
------------
BIOTECHNOLOGY -- 5.6%
Actelion Ltd. (a) .......................... 7,900 $ 1,736,976
Amgen, Inc. (a) ............................ 45,300 3,094,443
Celgene Corp. (a) .......................... 40,600 2,335,718
Genentech, Inc. (a) ........................ 20,100 1,630,713
Genzyme Corp. (a) .......................... 57,380 3,533,460
Gilead Sciences, Inc. (a) .................. 18,900 1,227,177
Millipore Corp. (a) ........................ 60,460 4,026,636
------------
$ 17,585,123
------------
BROADCASTING -- 2.8%
Grupo Televisa S.A., ADR ................... 64,040 $ 1,729,720
News Corp., "A" ............................ 327,200 7,028,256
------------
$ 8,757,976
------------
BROKERAGE & ASSET MANAGERS -- 4.8%
Affiliated Managers Group, Inc. (a)(l) ..... 8,200 $ 862,066
Charles Schwab Corp. ....................... 175,400 3,392,236
Chicago Mercantile Exchange Holdings,
Inc., "A" ................................ 6,730 3,430,618
Deutsche Boerse AG ......................... 4,900 901,598
EFG International (a) ...................... 27,700 1,044,233
Evercore Partners, Inc. (a)(l) ............. 8,560 315,436
Goldman Sachs Group, Inc. .................. 10,900 2,172,915
Greenhill & Co., Inc. (l) .................. 11,600 856,080
IntercontinentalExchange, Inc. (a) ......... 6,000 647,400
Lazard Ltd. ................................ 30,830 1,459,492
------------
$ 15,082,074
------------
BUSINESS SERVICES -- 7.3%
Amdocs Ltd. (a) ............................ 106,200 $ 4,115,250
CheckFree Corp. (a) ........................ 58,900 2,365,424
Cognizant Technology Solutions
Corp., "A" (a) ........................... 37,100 2,862,636
Corporate Executive Board Co. .............. 27,100 2,376,670
Equinix, Inc. (a)(l) ....................... 25,000 1,890,500
First Data Corp. ........................... 155,400 3,965,808
Global Payments, Inc. ...................... 29,100 1,347,330
Western Union Co. .......................... 172,700 3,871,934
------------
$ 22,795,552
------------
CHEMICALS -- 1.7%
Monsanto Co. ............................... 100,000 $ 5,253,000
------------
COMPUTER SOFTWARE -- 4.1%
Adobe Systems, Inc. (a) .................... 178,000 $ 7,319,360
McAfee, Inc. (a) ........................... 73,700 2,091,606
Salesforce.com, Inc. (a) ................... 38,100 1,388,745
TIBCO Software, Inc. (a) ................... 207,500 1,958,800
------------
$ 12,758,511
------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.5%
Apple Computer, Inc. (a) ................... 43,100 $ 3,656,604
Hewlett-Packard Co. ........................ 25,900 1,066,821
------------
$ 4,723,425
------------
CONSUMER GOODS & SERVICES -- 2.9%
DeVry, Inc. ................................ 63,700 $ 1,783,600
eBay, Inc. (a) ............................. 64,400 1,936,508
ITT Educational Services, Inc. (a) ......... 37,400 2,482,238
Monster Worldwide, Inc. (a) ................ 22,600 1,054,064
New Oriental Educational & Technology
Group, ADR (a) ........................... 35,240 1,181,950
Strayer Education, Inc. .................... 6,870 728,564
------------
$ 9,166,924
------------
ELECTRICAL EQUIPMENT -- 1.7%
Rockwell Automation, Inc. .................. 87,100 $ 5,320,068
------------
ELECTRONICS -- 7.7%
Applied Materials, Inc. .................... 196,300 $ 3,621,735
ARM Holdings PLC ........................... 218,700 538,645
ASML Holding N.V. (a)(l) ................... 25,900 637,917
FormFactor, Inc. (a) ....................... 8,000 298,000
Intel Corp. ................................ 209,800 4,248,450
Intersil Corp., "A" ........................ 65,700 1,571,544
Marvell Technology Group Ltd. (a) .......... 279,100 5,355,929
Nintendo Co. Ltd. .......................... 4,800 1,245,915
Samsung Electronics Co. Ltd., GDR .......... 5,839 1,921,031
SanDisk Corp. (a) .......................... 84,900 3,653,247
Synopsys, Inc. (a) ......................... 35,300 943,569
------------
$ 24,035,982
------------
ENERGY -- INDEPENDENT -- 1.0%
CONSOL Energy, Inc. ........................ 46,300 $ 1,487,619
XTO Energy, Inc. ........................... 32,200 1,515,010
------------
$ 3,002,629
------------
ENERGY -- INTEGRATED -- 0.3%
Hess Corp. ................................. 22,400 $ 1,110,368
------------
FOOD & BEVERAGES -- 2.4%
Nestle S.A ................................. 10,624 $ 3,774,052
PepsiCo, Inc. .............................. 59,200 3,702,960
------------
$ 7,477,012
------------
GAMING & LODGING -- 3.1%
Carnival Corp. ............................. 16,000 $ 784,800
International Game Technology .............. 104,800 4,841,760
Las Vegas Sands Corp. (a) .................. 17,800 1,592,744
Penn National Gaming, Inc. (a) ............. 27,000 1,123,740
Station Casinos, Inc. ...................... 17,500 1,429,225
------------
$ 9,772,269
------------
GENERAL MERCHANDISE -- 1.2%
Costco Wholesale Corp. ..................... 31,600 $ 1,670,692
Family Dollar Stores, Inc. ................. 68,500 2,009,105
------------
$ 3,679,797
------------
INTERNET -- 3.6%
Baidu.com, Inc., ADR (a) ................... 19,100 $ 2,152,952
CNET Networks, Inc. (a) .................... 91,400 830,826
Google, Inc., "A" (a) ...................... 12,810 5,898,749
NetEase.com, Inc., ADR (a)(l) .............. 17,600 328,944
TENCENT Holdings, Ltd. ..................... 405,000 1,442,291
Yahoo!, Inc. (a) ........................... 29,730 759,304
------------
$ 11,413,066
------------
LEISURE & TOYS -- 2.1%
Activision, Inc. (a) ....................... 30,800 $ 530,992
Electronic Arts, Inc. (a) .................. 75,920 3,823,331
Scientific Games Corp. (a) ................. 10,400 314,392
THQ, Inc. (a)(l) ........................... 31,600 1,027,632
Ubisoft Entertain S.A. (a) ................. 24,600 830,152
------------
$ 6,526,499
------------
MACHINERY & TOOLS -- 0.9%
Deere & Co. ................................ 28,900 $ 2,747,523
------------
MAJOR BANKS -- 1.8%
Bank of New York Co., Inc. ................. 65,400 $ 2,574,798
State Street Corp. ......................... 46,700 3,149,448
------------
$ 5,724,246
------------
MEDICAL EQUIPMENT -- 5.7%
Advanced Medical Optics, Inc. (a)(l) ....... 117,200 $ 4,125,440
Cooper Cos., Inc. .......................... 9,700 431,650
Cytyc Corp. (a) ............................ 159,260 4,507,058
Medtronic, Inc. ............................ 44,800 2,397,248
ResMed, Inc. (a)(l) ........................ 33,100 1,629,182
St. Jude Medical, Inc. (a) ................. 107,600 3,933,856
Thoratec Corp. (a)(l) ...................... 48,500 852,630
------------
$ 17,877,064
------------
METALS & MINING -- 0.1%
Cameco Corp. ............................... 4,000 $ 161,800
------------
NETWORK & TELECOM -- 5.0%
Cisco Systems, Inc. (a) .................... 269,800 $ 7,373,634
Juniper Networks, Inc. (a) ................. 111,658 2,114,803
NICE Systems Ltd., ADR (a) ................. 107,860 3,319,931
QUALCOMM, Inc. ............................. 55,680 2,104,147
Research In Motion Ltd. (a) ................ 6,000 766,680
------------
$ 15,679,195
------------
OIL SERVICES -- 5.1%
Cameron International Corp. (a) ............ 17,300 $ 917,765
GlobalSantaFe Corp. ........................ 104,000 6,113,120
National-Oilwell Varco, Inc. (a) ........... 38,100 2,330,958
Noble Corp. ................................ 41,600 3,167,840
Schlumberger Ltd. .......................... 57,000 3,600,120
------------
$ 16,129,803
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 2.9%
American Express Co. ....................... 70,000 $ 4,246,900
Moody's Corp. .............................. 9,400 649,164
SLM Corp. .................................. 6,300 307,251
UBS AG ..................................... 62,700 3,782,691
------------
$ 8,986,006
------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.9%
EMC Corp. (a) .............................. 97,000 $ 1,280,400
Network Appliance, Inc. (a) ................ 41,000 1,610,480
------------
$ 2,890,880
------------
PHARMACEUTICALS -- 4.7%
Allergan, Inc. ............................. 33,290 $ 3,986,145
GlaxoSmithKline PLC ........................ 140,300 3,693,197
Johnson & Johnson .......................... 32,700 2,158,854
Roche Holding AG ........................... 27,950 5,010,317
------------
$ 14,848,513
------------
PRINTING & PUBLISHING -- 0.2%
Playboy Enterprises, Inc., "B" (a)(l) ...... 56,060 $ 642,448
------------
RESTAURANTS -- 0.6%
Chipotle Mexican Grill, Inc., "B" (a) ...... 19,700 $ 1,024,400
Texas Roadhouse, Inc., "A" (a)(l) .......... 54,000 716,040
------------
$ 1,740,440
------------
SPECIALTY STORES -- 4.7%
Best Buy Co., Inc. ......................... 35,100 $ 1,726,569
CarMax, Inc. (a) ........................... 14,500 777,635
Dick's Sporting Goods, Inc. (a) ............ 14,800 725,052
GameStop Corp., "A" (a) .................... 28,400 1,565,124
Lowe's Cos., Inc. .......................... 113,400 3,532,410
Staples, Inc. .............................. 93,500 2,496,450
Submarino S.A .............................. 41,980 1,376,197
Urban Outfitters, Inc. (a) ................. 44,000 1,013,320
Williams-Sonoma, Inc. (l) .................. 50,900 1,600,296
------------
$ 14,813,053
------------
TELECOMMUNICATIONS -- WIRELESS -- 1.6%
America Movil S.A. de C.V., "L", ADR ....... 87,020 $ 3,935,044
Rogers Communications, Inc., "B" ........... 37,600 1,120,027
------------
$ 5,055,071
------------
TELEPHONE SERVICES -- 2.1%
American Tower Corp., "A" (a) .............. 130,145 $ 4,851,806
Global Crossing Ltd. (a)(l) ................ 36,600 898,530
Level 3 Communications, Inc. (a)(l) ........ 144,600 809,760
------------
$ 6,560,096
------------
TOBACCO -- 0.8%
Altria Group, Inc. ......................... 28,400 $ 2,437,288
------------
TRUCKING -- 0.4%
UTi Worldwide, Inc. ........................ 45,100 $ 1,348,490
------------
Total Common Stocks
(Identified Cost, $272,223,647) ..................... $305,628,548
------------
SHORT-TERM OBLIGATIONS -- 2.5%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ....................... $ 7,842,000 $ 7,840,848
------------
COLLATERAL FOR SECURITIES LOANED -- 5.4%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value ... 16,917,979 $ 16,917,979
------------
Total Investments
(Identified Cost, $296,982,474) ..................... $330,387,375
------------
OTHER ASSETS,
LESS LIABILITIES -- (5.4)% .............................. (16,884,588)
------------
Net Assets -- 100.0% .................................. $313,502,787
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
GLOBAL GROWTH SERIES
COMMON STOCKS -- 99.7%
ISSUER SHARES/PAR VALUE ($)
ALCOHOLIC BEVERAGES -- 1.7%
Companhia de Bebidas das Americas, ADR ..... 31,390 $ 1,531,832
Pernod Ricard S.A. (l) ..................... 4,740 1,088,477
------------
$ 2,620,309
------------
APPAREL MANUFACTURERS -- 4.4%
Li & Fung Ltd. ............................. 737,800 $ 2,295,473
LVMH Moet Hennessy Louis Vuitton S.A. (l) .. 31,200 3,292,038
NIKE, Inc., "B" ............................ 13,130 1,300,264
------------
$ 6,887,775
------------
AUTOMOTIVE -- 2.1%
Continental AG ............................. 12,402 $ 1,441,981
Toyota Industries Corp. .................... 40,700 1,870,125
------------
$ 3,312,106
------------
BIOTECHNOLOGY -- 1.7%
Amgen, Inc. (a) ............................ 19,790 $ 1,351,855
Genzyme Corp. (a) .......................... 10,870 669,375
Millipore Corp. (a)(l) ..................... 9,370 624,042
------------
$ 2,645,272
------------
BROADCASTING -- 4.5%
Antena 3 de Television S.A. (l) ............ 35,779 $ 842,393
Fuji Television Network, Inc. .............. 370 845,395
Grupo Televisa S.A., ADR ................... 57,110 1,542,541
Walt Disney Co. ............................ 46,150 1,581,561
WPP Group PLC .............................. 170,790 2,309,786
------------
$ 7,121,676
------------
BROKERAGE & ASSET MANAGERS -- 5.5%
Daiwa Securities Group, Inc. ............... 92,000 $ 1,031,711
Franklin Resources, Inc. ................... 13,070 1,439,922
Goldman Sachs Group, Inc. .................. 7,660 1,527,021
Julius Baer Holdings Ltd. .................. 13,650 1,502,855
Mellon Financial Corp. ..................... 36,600 1,542,690
Morgan Stanley ............................. 20,470 1,666,872
------------
$ 8,711,071
------------
BUSINESS SERVICES -- 1.2%
Amdocs Ltd. (a) ............................ 26,310 $ 1,019,513
First Data Corp. ........................... 33,740 861,045
------------
$ 1,880,558
------------
CHEMICALS -- 2.8%
3M Co. ..................................... 18,660 $ 1,454,174
Bayer AG ................................... 14,710 789,354
Monsanto Co. ............................... 24,670 1,295,915
Wacker Chemie AG (a)(l) .................... 6,870 893,794
------------
$ 4,433,237
------------
COMPUTER SOFTWARE -- 2.0%
Adobe Systems, Inc. (a) .................... 19,210 $ 789,915
Oracle Corp. (a) ........................... 52,250 895,565
SAP AG ..................................... 26,960 1,432,470
------------
$ 3,117,950
------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.9%
Hewlett-Packard Co. ........................ 35,020 $ 1,442,474
------------
CONSUMER GOODS & SERVICES -- 8.6%
Alberto Culver Co. ......................... 54,110 $ 1,160,660
Avon Products, Inc. ........................ 30,460 1,006,398
eBay, Inc. (a) ............................. 40,380 1,214,227
Estee Lauder Cos., Inc., "A" ............... 25,600 1,044,992
Kao Corp. (l) .............................. 48,000 1,294,300
Kimberly-Clark de Mexico S.A. de C.V., "A" . 370,710 1,705,148
L'Oreal S.A. (l) ........................... 10,880 1,089,839
Monster Worldwide, Inc. (a) ................ 16,730 780,287
Procter & Gamble Co. ....................... 35,660 2,291,868
Reckitt Benckiser PLC ...................... 44,880 2,051,631
------------
$ 13,639,350
------------
ELECTRICAL EQUIPMENT -- 2.5%
Keyence Corp. .............................. 4,800 $ 1,189,063
Nitto Denko Corp. (l) ...................... 25,800 1,291,680
Schneider Electric S.A. (l) ................ 13,023 1,445,436
------------
$ 3,926,179
------------
ELECTRONICS -- 8.9%
Applied Materials, Inc. (l) ................ 56,370 $ 1,040,027
Canon, Inc. (l) ............................ 25,000 1,407,031
Hirose Electric Co. Ltd. ................... 16,700 1,895,224
Intel Corp. ................................ 82,700 1,674,675
Marvell Technology Group Ltd. (a) .......... 48,700 934,553
Nippon Electric Glass Co. Ltd. (l) ......... 38,000 798,018
OMRON Corp. ................................ 36,100 1,024,974
Royal Philips Electronics N.V .............. 60,330 2,274,759
Samsung Electronics Co. Ltd. ............... 2,194 1,446,153
Taiwan Semiconductor Manufacturing Co.
Ltd., ADR (l) ............................ 144,433 1,578,653
------------
$ 14,074,067
------------
ENERGY -- INDEPENDENT -- 2.0%
CNOOC Ltd. ................................. 1,680,000 $ 1,596,143
Norsk Hydro A.S.A .......................... 26,350 818,001
Talisman Energy, Inc. ...................... 46,570 791,558
------------
$ 3,205,702
------------
ENERGY -- INTEGRATED -- 3.2%
Petroleo Brasileiro S.A., ADR .............. 15,240 $ 1,569,568
TOTAL S.A. (l) ............................. 48,360 3,487,934
------------
$ 5,057,502
------------
FOOD & BEVERAGES -- 2.2%
Groupe Danone (l) .......................... 8,050 $ 1,219,634
Nestle S.A ................................. 6,209 2,205,675
------------
$ 3,425,309
------------
FOOD & DRUG STORES -- 1.8%
Tesco PLC .................................. 355,469 $ 2,816,215
------------
FOREST & PAPER PRODUCTS -- 0.8%
Aracruz Celulose S.A., ADR (l) ............. 22,160 $ 1,357,078
------------
GAMING & LODGING -- 1.7%
International Game Technology .............. 18,620 $ 860,244
Melco PB Entertainment, ADR (a) ............ 32,630 693,714
William Hill PLC ........................... 88,140 1,091,027
------------
$ 2,644,985
------------
INSURANCE -- 2.4%
Aflac, Inc. ................................ 31,370 $ 1,443,020
Assicurazioni Generali S.p.A ............... 33,450 1,468,726
Genworth Financial, Inc., "A" .............. 23,680 810,093
------------
$ 3,721,839
------------
MACHINERY & TOOLS -- 0.9%
Fanuc Ltd. ................................. 14,800 $ 1,457,062
------------
MAJOR BANKS -- 3.8%
Erste Bank der oesterreichischen Sparkassen
AG ....................................... 18,950 $ 1,453,039
Standard Chartered PLC ..................... 52,260 1,527,157
Sumitomo Mitsui Financial Group, Inc. ...... 121 1,240,035
UniCredito Italiano S.p.A .................. 194,720 1,706,359
------------
$ 5,926,590
------------
MEDICAL EQUIPMENT -- 3.5%
Advanced Medical Optics, Inc. (a)(l) ....... 16,130 $ 567,776
Boston Scientific Corp. (a) ................ 70,230 1,206,551
Medtronic, Inc. ............................ 28,110 1,504,166
ResMed, Inc. (a)(l) ........................ 18,220 896,788
Straumann Holding AG ....................... 2,630 636,517
Synthes, Inc. .............................. 6,060 722,387
------------
$ 5,534,185
------------
METALS & MINING -- 2.5%
Anglo American PLC ......................... 32,880 $ 1,604,173
BHP Billiton Ltd. (l) ...................... 118,150 2,360,867
------------
$ 3,965,040
------------
NETWORK & TELECOM -- 1.8%
Cisco Systems, Inc. (a) .................... 69,450 $ 1,898,069
NICE Systems Ltd., ADR (a) ................. 28,960 891,389
------------
$ 2,789,458
------------
OIL SERVICES -- 1.5%
Dresser-Rand Group, Inc. (a) ............... 36,540 $ 894,134
Schlumberger Ltd. .......................... 23,970 1,513,945
------------
$ 2,408,079
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 7.4%
Absa Group Ltd. ............................ 94,440 $ 1,684,529
AEON Credit Service Co. Ltd. ............... 62,700 1,187,690
American Express Co. ....................... 33,240 2,016,671
Bank of Cyprus Public Co. Ltd. ............. 62,280 851,530
HSBC Holdings PLC .......................... 173,920 3,171,354
UBS AG ..................................... 44,297 2,691,109
------------
$ 11,602,883
------------
PHARMACEUTICALS -- 5.3%
Eli Lilly & Co. ............................ 20,390 $ 1,062,319
GlaxoSmithKline PLC ........................ 74,660 1,965,318
Johnson & Johnson .......................... 33,080 2,183,942
Roche Holding AG ........................... 17,430 3,124,502
------------
$ 8,336,081
------------
SPECIALTY CHEMICALS -- 2.9%
L'Air Liquide S.A., Bearer Shares (l) ...... 6,487 $ 1,540,164
Linde AG (l) ............................... 15,500 1,600,897
Praxair, Inc. (l) .......................... 23,910 1,418,580
------------
$ 4,559,641
------------
SPECIALTY STORES -- 3.4%
Esprit Holdings Ltd. ....................... 98,000 $ 1,094,244
Industria de Diseno Textil S.A ............. 19,810 1,066,947
Lowe's Cos., Inc. .......................... 40,430 1,259,395
PetSmart, Inc. ............................. 26,150 754,689
Staples, Inc. .............................. 43,820 1,169,994
------------
$ 5,345,269
------------
TELECOMMUNICATIONS -- WIRELESS -- 0.9%
China Mobile Ltd. .......................... 169,000 $ 1,460,071
------------
TELEPHONE SERVICES -- 3.1%
Orascom Telecom Holding (S.A.E) ............ 25,900 $ 1,712,064
Telenor A.S.A .............................. 100,340 1,887,467
TELUS Corp. ................................ 28,010 1,286,887
------------
$ 4,886,418
------------
TRUCKING -- 0.6%
FedEx Corp. ................................ 8,560 $ 929,787
------------
UTILITIES -- ELECTRIC POWER -- 1.2%
CEZ AS ..................................... 39,910 $ 1,840,381
------------
Total Common Stocks
(Identified Cost, $131,384,800) ..................... $157,081,599
------------
SHORT-TERM OBLIGATIONS -- 0.3%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ....................... $ 475,000 $ 474,930
------------
COLLATERAL FOR SECURITIES LOANED -- 13.6%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value ... 21,306,037 $ 21,306,037
------------
Total Investments
(Identified Cost, $153,165,767) ..................... $178,862,566
------------
OTHER ASSETS,
LESS LIABILITIES -- (13.6)% ............................. (21,346,051)
------------
Net Assets -- 100.0% .................................. $157,516,515
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
MASSACHUSETTS INVESTORS TRUST SERIES
COMMON STOCKS -- 99.0%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 3.7%
Lockheed Martin Corp. ...................... 240,010 $ 22,097,721
United Technologies Corp. .................. 331,420 20,720,378
--------------
$ 42,818,099
--------------
ALCOHOLIC BEVERAGES -- 1.3%
Diageo PLC ................................. 765,420 $ 15,028,988
--------------
APPAREL MANUFACTURERS -- 1.3%
NIKE, Inc., "B" ............................ 145,170 $ 14,376,185
--------------
AUTOMOTIVE -- 0.5%
Bayerische Motoren Werke AG ................ 105,700 $ 6,069,542
--------------
BIOTECHNOLOGY -- 3.6%
Amgen, Inc. (a) ............................ 342,610 $ 23,403,689
Genzyme Corp. (a) .......................... 185,670 11,433,559
Gilead Sciences, Inc. (a) .................. 100,290 6,511,830
--------------
$ 41,349,078
--------------
BROADCASTING -- 2.5%
News Corp., "A" ............................ 357,340 $ 7,675,663
Viacom, Inc., "B" (a) ...................... 181,155 7,432,790
Walt Disney Co. ............................ 399,120 13,677,842
--------------
$ 28,786,295
--------------
BROKERAGE & ASSET MANAGERS -- 4.3%
Charles Schwab Corp. ....................... 463,710 $ 8,968,151
Franklin Resources, Inc. ................... 99,860 11,001,576
Goldman Sachs Group, Inc. .................. 84,300 16,805,205
Lehman Brothers Holdings, Inc. ............. 164,060 12,816,367
--------------
$ 49,591,299
--------------
BUSINESS SERVICES -- 3.4%
Accenture Ltd., "A" ........................ 165,640 $ 6,117,085
Amdocs Ltd. (a) ............................ 368,280 14,270,850
CheckFree Corp. (a) ........................ 137,600 5,526,016
First Data Corp. ........................... 486,430 12,413,694
--------------
$ 38,327,645
--------------
CHEMICALS -- 2.9%
3M Co. ..................................... 146,450 $ 11,412,849
Monsanto Co. ............................... 243,480 12,790,004
Rohm & Haas Co. ............................ 183,000 9,354,960
--------------
$ 33,557,813
--------------
COMPUTER SOFTWARE -- 2.5%
Adobe Systems, Inc. (a) .................... 308,690 $ 12,693,333
Oracle Corp. (a) ........................... 943,930 16,178,960
--------------
$ 28,872,293
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.5%
Apple Computer, Inc. (a) ................... 97,740 $ 8,292,262
Dell, Inc. (a)(l) .......................... 331,450 8,316,081
--------------
$ 16,608,343
--------------
CONSUMER GOODS & SERVICES -- 5.4%
Colgate-Palmolive Co. ...................... 201,250 $ 13,129,550
Procter & Gamble Co. ....................... 363,640 23,371,143
Reckitt Benckiser PLC ...................... 564,500 25,805,386
--------------
$ 62,306,079
--------------
ELECTRICAL EQUIPMENT -- 1.6%
Rockwell Automation, Inc. .................. 171,650 $ 10,484,382
Tyco International Ltd. .................... 270,250 8,215,600
--------------
$ 18,699,982
--------------
ELECTRONICS -- 4.6%
Applied Materials, Inc. (l) ................ 319,110 $ 5,887,580
Intel Corp. ................................ 858,370 17,381,993
Marvell Technology Group Ltd. (a) .......... 445,300 8,545,307
Samsung Electronics Co. Ltd., GDR .......... 41,613 13,690,677
SanDisk Corp. (a) .......................... 166,200 7,151,586
--------------
$ 52,657,143
--------------
ENERGY -- INDEPENDENT -- 1.1%
EOG Resources, Inc. ........................ 206,570 $ 12,900,297
--------------
ENERGY -- INTEGRATED -- 5.3%
Exxon Mobil Corp. .......................... 277,550 $ 21,268,657
Hess Corp. ................................. 343,740 17,039,192
TOTAL S.A., ADR ............................ 311,140 22,377,189
--------------
$ 60,685,038
--------------
FOOD & BEVERAGES -- 3.1%
Nestle S.A ................................. 52,035 $ 18,484,826
PepsiCo, Inc. .............................. 276,760 17,311,338
--------------
$ 35,796,164
--------------
GAMING & LODGING -- 2.1%
Carnival Corp. ............................. 228,880 $ 11,226,564
International Game Technology .............. 134,130 6,196,806
Ladbrokes PLC .............................. 768,252 6,293,398
--------------
$ 23,716,768
--------------
GENERAL MERCHANDISE -- 2.4%
Federated Department Stores, Inc. .......... 353,080 $ 13,462,940
Target Corp. ............................... 254,020 14,491,841
--------------
$ 27,954,781
--------------
INSURANCE -- 7.1%
Ace Ltd. ................................... 148,860 $ 9,016,450
American International Group, Inc. ......... 464,427 33,280,839
Genworth Financial, Inc., "A" .............. 375,060 12,830,803
MetLife, Inc. .............................. 279,850 16,513,949
St. Paul Travelers Cos., Inc. .............. 183,690 9,862,316
--------------
$ 81,504,357
--------------
INTERNET -- 0.3%
Yahoo!, Inc. (a) ........................... 140,600 $ 3,590,924
--------------
LEISURE & TOYS -- 0.5%
Electronic Arts, Inc. (a) .................. 119,100 $ 5,997,876
--------------
MAJOR BANKS -- 6.7%
Bank of America Corp. ...................... 421,990 $ 22,530,046
Bank of New York Co., Inc. ................. 413,640 16,285,007
JPMorgan Chase & Co. ....................... 564,690 27,274,527
Wells Fargo & Co. .......................... 292,010 10,383,876
--------------
$ 76,473,456
--------------
MEDICAL EQUIPMENT -- 3.4%
Boston Scientific Corp. (a) ................ 304,620 $ 5,233,372
Medtronic, Inc. ............................ 324,050 17,339,916
Zimmer Holdings, Inc. (a) .................. 209,700 16,436,286
--------------
$ 39,009,574
--------------
NETWORK & TELECOM -- 2.3%
Cisco Systems, Inc. (a) .................... 967,910 $ 26,452,980
--------------
OIL SERVICES -- 3.8%
GlobalSantaFe Corp. ........................ 240,040 $ 14,109,551
Noble Corp. ................................ 210,100 15,999,115
Transocean, Inc. (a) ....................... 163,250 13,205,293
--------------
$ 43,313,959
--------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 2.8%
American Express Co. ....................... 277,440 $ 16,832,285
SLM Corp. .................................. 322,500 15,728,325
--------------
$ 32,560,610
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.0%
EMC Corp. (a) .............................. 1,756,330 $ 23,183,556
--------------
PHARMACEUTICALS -- 8.8%
Abbott Laboratories ........................ 398,790 $ 19,425,061
Eli Lilly & Co. ............................ 241,830 12,599,343
Johnson & Johnson .......................... 511,980 33,800,920
Roche Holding AG ........................... 92,780 16,631,742
Teva Pharmaceutical Industries Ltd., ADR ... 144,560 4,492,925
Wyeth ...................................... 279,160 14,214,827
--------------
$ 101,164,818
--------------
SPECIALTY CHEMICALS -- 1.1%
Praxair, Inc. .............................. 209,190 $ 12,411,243
--------------
SPECIALTY STORES -- 2.1%
Chico's FAS, Inc. (a)(l) ................... 331,030 $ 6,849,011
Staples, Inc. .............................. 621,670 16,598,589
--------------
$ 23,447,600
--------------
TELEPHONE SERVICES -- 0.7%
TELUS Corp. ................................ 159,960 $ 7,349,180
--------------
TOBACCO -- 1.9%
Altria Group, Inc. ......................... 250,640 $ 21,509,925
--------------
TRUCKING -- 0.6%
FedEx Corp. ................................ 61,140 $ 6,641,027
--------------
UTILITIES -- ELECTRIC POWER -- 1.8%
Entergy Corp. .............................. 50,860 $ 4,695,395
Exelon Corp. ............................... 156,920 9,711,779
FPL Group, Inc. (l) ........................ 110,320 6,003,607
--------------
$ 20,410,781
--------------
Total Common Stocks
(Identified Cost, $961,797,566) .................... $1,135,123,698
--------------
SHORT-TERM OBLIGATIONS -- 1.5%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ....................... $17,268,000 $ 17,265,463
--------------
COLLATERAL FOR SECURITIES LOANED -- 1.3%
Navigator Securities Lending
Prime Portfolio, at Cost and
Net Asset Value .......................... 15,256,542 $ 15,256,542
--------------
Total Investments
(Identified Cost, $994,319,571) .................... $1,167,645,703
--------------
OTHER ASSETS,
LESS LIABILITIES -- (1.8)% ............................. (20,839,803)
--------------
Net Assets -- 100.0% ................................. $1,146,805,900
==============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
MID CAP GROWTH SERIES
COMMON STOCKS -- 99.3%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 1.1%
Precision Castparts Corp. .................. 12,190 $ 954,233
------------
AIRLINES -- 2.1%
AMR Corp. (a)(l) ........................... 40,050 $ 1,210,712
Continental Airlines, Inc. (a) ............. 7,060 291,225
UAL Corp. (a) .............................. 9,480 417,120
------------
$ 1,919,057
------------
APPAREL MANUFACTURERS -- 3.4%
Coach, Inc. (a) ............................ 24,200 $ 1,039,632
Phillips-Van Heusen Corp. .................. 40,430 2,028,373
------------
$ 3,068,005
------------
AUTOMOTIVE -- 0.6%
Goodyear Tire & Rubber Co. (a)(l) .......... 23,870 $ 501,031
------------
BIOTECHNOLOGY -- 1.5%
Genzyme Corp. (a) .......................... 4,820 $ 296,816
Millipore Corp. (a) ........................ 16,320 1,086,912
------------
$ 1,383,728
------------
BROKERAGE & ASSET MANAGERS -- 2.0%
Affiliated Managers Group, Inc. (a)(l) ..... 1,220 $ 128,259
Chicago Mercantile Exchange Holdings,
Inc., "A" ................................ 2,510 1,279,473
Investment Technology Group, Inc. (a) ...... 9,310 399,213
------------
$ 1,806,945
------------
BUSINESS SERVICES -- 6.9%
Alliance Data Systems Corp. (a) ............ 2,250 $ 140,558
Amdocs Ltd. (a) ............................ 46,440 1,799,550
CheckFree Corp. (a) ........................ 16,060 644,970
Cognizant Technology Solutions Corp.,
"A" (a) .................................. 23,250 1,793,970
Corporate Executive Board Co. .............. 14,460 1,268,142
TALX Corp. ................................. 21,850 599,783
------------
$ 6,246,973
------------
CABLE TV -- 0.4%
EchoStar Communications Corp., "A" (a) ..... 9,540 $ 362,806
------------
CHEMICALS -- 0.6%
Celanese Corp. ............................. 19,690 $ 509,577
------------
COMPUTER SOFTWARE -- 1.7%
McAfee, Inc. (a) ........................... 23,780 $ 674,876
TIBCO Software, Inc. (a) ................... 68,990 651,266
Transaction Systems Architects, Inc. (a) ... 5,070 165,130
------------
$ 1,491,272
------------
CONSTRUCTION -- 4.0%
Masco Corp. ................................ 9,220 $ 275,401
NVR, Inc. (a)(l) ........................... 2,420 1,560,900
Pulte Homes, Inc. .......................... 12,750 422,280
Sherwin-Williams Co. ....................... 20,750 1,319,285
------------
$ 3,577,866
------------
CONSUMER GOODS & SERVICES -- 7.3%
Alberto Culver Co. ......................... 3,280 $ 70,356
Avon Products, Inc. ........................ 27,680 914,547
Brink's Co. ................................ 8,700 556,104
Estee Lauder Cos., Inc., "A" ............... 36,520 1,490,746
ITT Educational Services, Inc. (a) ......... 21,910 1,454,167
Monster Worldwide, Inc. (a) ................ 30,080 1,402,931
NutriSystem, Inc. (a) ...................... 11,220 711,236
------------
$ 6,600,087
------------
ELECTRICAL EQUIPMENT -- 3.2%
Rockwell Automation, Inc. .................. 33,290 $ 2,033,353
W.W. Grainger, Inc. ........................ 12,720 889,637
------------
$ 2,922,990
------------
ELECTRONICS -- 5.7%
KLA-Tencor Corp. ........................... 12,620 $ 627,845
MEMC Electronic Materials, Inc. (a) ........ 11,300 442,282
Novellus Systems, Inc. (a) ................. 47,920 1,649,406
SanDisk Corp. (a) .......................... 28,900 1,243,567
Synopsys, Inc. (a) ......................... 4,730 126,433
Tessera Technologies, Inc. (a)(l) .......... 8,800 354,992
Varian Semiconductor Equipment Associates,
Inc. (a) ................................. 16,090 732,417
------------
$ 5,176,942
------------
ENERGY -- INTEGRATED -- 2.3%
Hess Corp. ................................. 41,070 $ 2,035,840
------------
ENGINEERING -- CONSTRUCTION -- 0.0%
Granite Construction, Inc. ................. 820 $ 41,262
------------
ENTERTAINMENT -- 0.1%
Warner Music Group Corp. ................... 3,090 $ 70,916
------------
FOOD & BEVERAGES -- 0.7%
Pepsi Bottling Group, Inc. ................. 19,900 $ 615,109
------------
FOOD & DRUG STORES -- 1.9%
Kroger Co. ................................. 75,540 $ 1,742,708
------------
GAMING & LODGING -- 4.8%
International Game Technology .............. 51,120 $ 2,361,744
Penn National Gaming, Inc. (a) ............. 38,460 1,600,705
Shuffle Master, Inc. (a)(l) ................ 15,590 408,458
------------
$ 4,370,907
------------
HEALTH MAINTENANCE ORGANIZATIONS -- 4.0%
AMERIGROUP Corp. (a) ....................... 29,100 $ 1,044,399
Humana, Inc. (a) ........................... 32,270 1,784,854
WellCare Health Plans, Inc. (a) ............ 10,990 757,211
------------
$ 3,586,464
------------
INSURANCE -- 3.3%
Ace Ltd. ................................... 17,200 $ 1,041,804
Genworth Financial, Inc., "A" .............. 39,990 1,368,058
MGIC Investment Corp. ...................... 5,480 342,719
XL Capital Ltd., "A" ....................... 2,530 182,211
------------
$ 2,934,792
------------
INTERNET -- 1.4%
RealNetworks, Inc. (a) ..................... 119,580 $ 1,308,205
------------
MACHINERY & TOOLS -- 3.0%
Cummins, Inc. .............................. 13,740 $ 1,623,793
Eaton Corp. ................................ 6,480 486,907
Parker Hannifin Corp. ...................... 3,750 288,300
Timken Co. ................................. 8,980 262,036
------------
$ 2,661,036
------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 2.3%
Emdeon Corp. (a)(l) ........................ 124,070 $ 1,537,227
McKesson Corp. ............................. 5,550 281,385
VCA Antech, Inc. (a) ....................... 8,940 287,779
------------
$ 2,106,391
------------
MEDICAL EQUIPMENT -- 7.2%
Advanced Medical Optics, Inc. (a) .......... 28,950 $ 1,019,040
Cooper Cos., Inc. (l) ...................... 19,550 869,975
Cytyc Corp. (a) ............................ 46,560 1,317,648
DENTSPLY International, Inc. ............... 28,000 835,800
Immucor, Inc. (a) .......................... 22,480 657,090
Mentor Corp. (l) ........................... 6,290 307,392
Waters Corp. (a) ........................... 31,200 1,527,864
------------
$ 6,534,809
------------
NATURAL GAS -- PIPELINE -- 2.6%
Williams Cos., Inc. ........................ 88,320 $ 2,306,918
------------
NETWORK & TELECOM -- 0.4%
InterDigital Communications Corp. (a)(l) ... 10,600 $ 355,630
------------
OIL SERVICES -- 3.1%
Cameron International Corp. (a) ............ 22,300 $ 1,183,015
GlobalSantaFe Corp. ........................ 12,510 735,338
Smith International, Inc. .................. 21,610 887,523
------------
$ 2,805,876
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 3.1%
First Marblehead Corp. ..................... 30,119 $ 1,646,003
IndyMac Bancorp, Inc. ...................... 13,190 595,660
Investors Financial Services Corp. (l) ..... 12,120 517,160
------------
$ 2,758,823
------------
PERSONAL COMPUTERS & PERIPHERALS -- 3.0%
Lexmark International, Inc., "A" (a) ....... 23,040 $ 1,686,528
Network Appliance, Inc. (a) ................ 17,200 675,616
Nuance Communications, Inc. (a)(l) ......... 31,210 357,667
------------
$ 2,719,811
------------
PHARMACEUTICALS -- 2.6%
Allergan, Inc. ............................. 4,310 $ 516,079
Endo Pharmaceuticals Holdings, Inc. (a) .... 53,090 1,464,222
Medicis Pharmaceutical Corp., "A" (l) ...... 6,690 235,020
Warner Chilcott Ltd., "A" (a) .............. 11,820 163,352
------------
$ 2,378,673
------------
REAL ESTATE -- 0.5%
CapitalSource, Inc., REIT .................. 8,690 $ 237,324
Corrections Corp. of America (a) ........... 3,850 174,136
------------
$ 411,460
------------
RESTAURANTS -- 2.6%
Brinker International, Inc. ................ 2,950 $ 88,972
Jack in the Box, Inc. (a) .................. 4,130 252,095
YUM! Brands, Inc. .......................... 33,350 1,960,980
------------
$ 2,302,047
------------
SPECIALTY CHEMICALS -- 1.2%
Praxair, Inc. .............................. 18,260 $ 1,083,366
------------
SPECIALTY STORES -- 4.5%
Aeropostale, Inc. (a) ...................... 36,570 $ 1,128,916
Group 1 Automotive, Inc. ................... 19,020 983,714
Limited Brands, Inc. ....................... 56,400 1,632,216
Williams-Sonoma, Inc. (l) .................. 8,850 278,244
------------
$ 4,023,090
------------
TELEPHONE SERVICES -- 2.2%
American Tower Corp., "A" (a) .............. 15,724 $ 586,191
Embarq Corp. ............................... 26,370 1,386,007
------------
$ 1,972,198
------------
UTILITIES -- ELECTRIC POWER -- 2.0%
Constellation Energy Group, Inc. ........... 16,300 $ 1,122,581
Mirant Corp. (a) ........................... 17,730 559,736
NRG Energy, Inc. (a) ....................... 2,860 160,189
------------
$ 1,842,506
------------
Total Common Stocks
(Identified Cost, $81,534,770) ...................... $ 89,490,349
------------
SHORT-TERM OBLIGATIONS -- 0.2%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ....................... $ 154,000 $ 153,977
------------
COLLATERAL FOR SECURITIES LOANED -- 8.8%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value ... 7,975,921 $ 7,975,921
------------
Total Investments
(Identified Cost, $89,664,668) ...................... $ 97,620,247
------------
OTHER ASSETS,
LESS LIABILITIES -- (8.3)% .............................. (7,471,548)
------------
Net Assets -- 100.0% .................................. $ 90,148,699
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
RESEARCH SERIES
COMMON STOCKS -- 99.5%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 4.0%
Lockheed Martin Corp. ...................... 54,680 $ 5,034,388
Precision Castparts Corp. .................. 26,650 2,086,155
United Technologies Corp. .................. 101,010 6,315,145
------------
$ 13,435,688
------------
ALCOHOLIC BEVERAGES -- 0.6%
Diageo PLC ................................. 111,280 $ 2,184,978
------------
APPAREL MANUFACTURERS -- 1.8%
Coach, Inc. (a) ............................ 54,820 $ 2,355,067
NIKE, Inc., "B" ............................ 37,770 3,740,363
------------
$ 6,095,430
------------
BIOTECHNOLOGY -- 4.6%
Amgen, Inc. (a) ............................ 102,370 $ 6,992,895
Genzyme Corp. (a) .......................... 66,100 4,070,438
Millipore Corp. (a)(l) ..................... 65,690 4,374,954
------------
$ 15,438,287
------------
BROADCASTING -- 2.8%
News Corp., "A" ............................ 195,040 $ 4,189,459
Walt Disney Co. ............................ 51,660 1,770,388
WPP Group PLC .............................. 257,980 3,488,954
------------
$ 9,448,801
------------
BROKERAGE & ASSET MANAGERS -- 4.5%
Affiliated Managers Group, Inc. (a)(l) ..... 21,030 $ 2,210,884
Franklin Resources, Inc. ................... 32,460 3,576,118
Goldman Sachs Group, Inc. .................. 24,860 4,955,841
Legg Mason, Inc. (l) ....................... 12,395 1,178,145
Mellon Financial Corp. ..................... 79,570 3,353,876
------------
$ 15,274,864
------------
BUSINESS SERVICES -- 1.3%
First Data Corp. ........................... 179,550 $ 4,582,116
------------
CABLE TV -- 0.4%
Comcast Corp., "Special A" (a) ............. 32,600 $ 1,365,288
------------
CHEMICALS -- 0.9%
Monsanto Co. ............................... 55,370 $ 2,908,586
------------
COMPUTER SOFTWARE -- 3.3%
Adobe Systems, Inc. (a) .................... 124,150 $ 5,105,048
McAfee, Inc. (a) ........................... 69,540 1,973,545
Symantec Corp. (a) ......................... 85,010 1,772,459
TIBCO Software, Inc. (a) ................... 239,910 2,264,750
------------
$ 11,115,802
------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.2%
Hewlett-Packard Co. ........................ 101,320 $ 4,173,371
------------
CONSUMER GOODS & SERVICES -- 2.1%
Alberto Culver Co. ......................... 43,620 $ 935,649
Avon Products, Inc. ........................ 76,580 2,530,203
ITT Educational Services, Inc. (a) ......... 25,760 1,709,691
Monster Worldwide, Inc. (a) ................ 38,790 1,809,166
------------
$ 6,984,709
------------
CONTAINERS -- 0.8%
Owens-Illinois, Inc. (a)(l) ................ 140,690 $ 2,595,731
------------
ELECTRICAL EQUIPMENT -- 4.2%
Rockwell Automation, Inc. .................. 55,880 $ 3,413,150
Tyco International Ltd. .................... 207,390 6,304,656
W.W. Grainger, Inc. ........................ 66,830 4,674,090
------------
$ 14,391,896
------------
ELECTRONICS -- 5.9%
Applied Materials, Inc. .................... 437,610 $ 8,073,905
Intel Corp. ................................ 275,900 5,586,975
Marvell Technology Group Ltd. (a) .......... 185,360 3,557,058
SanDisk Corp. (a)(l) ....................... 65,610 2,823,198
------------
$ 20,041,136
------------
ENERGY -- INDEPENDENT -- 2.8%
Apache Corp. ............................... 34,150 $ 2,271,317
CONSOL Energy, Inc. ........................ 20,810 668,625
Devon Energy Corp. ......................... 74,190 4,976,665
EOG Resources, Inc. ........................ 24,450 1,526,903
------------
$ 9,443,510
------------
ENERGY -- INTEGRATED -- 4.2%
Exxon Mobil Corp. .......................... 67,940 $ 5,206,242
Hess Corp. ................................. 126,940 6,292,416
TOTAL S.A., ADR ............................ 37,120 2,669,670
------------
$ 14,168,328
------------
FOOD & BEVERAGES -- 2.2%
Nestle S.A ................................. 6,854 $ 2,434,804
PepsiCo, Inc. .............................. 82,390 5,153,495
------------
$ 7,588,299
------------
FOOD & DRUG STORES -- 0.9%
CVS Corp. .................................. 98,690 $ 3,050,508
------------
GAMING & LODGING -- 1.2%
Hilton Hotels Corp. ........................ 40,220 $ 1,403,678
International Game Technology .............. 60,520 2,796,024
------------
$ 4,199,702
------------
GENERAL MERCHANDISE -- 1.5%
Family Dollar Stores, Inc. ................. 60,390 $ 1,771,239
Federated Department Stores, Inc. .......... 86,090 3,282,612
------------
$ 5,053,851
------------
INSURANCE -- 7.2%
Ace Ltd. ................................... 28,180 $ 1,706,863
Aflac, Inc. ................................ 67,370 3,099,020
Chubb Corp. ................................ 67,880 3,591,531
Endurance Specialty Holdings Ltd. .......... 38,180 1,396,624
Genworth Financial, Inc., "A" .............. 186,980 6,396,586
MetLife, Inc. .............................. 92,680 5,469,047
St. Paul Travelers Cos., Inc. .............. 52,530 2,820,336
------------
$ 24,480,007
------------
INTERNET -- 1.2%
Google, Inc., "A" (a) ...................... 8,590 $ 3,955,523
------------
LEISURE & TOYS -- 0.6%
Electronic Arts, Inc. (a) .................. 42,450 $ 2,137,782
------------
MACHINERY & TOOLS -- 1.2%
Deere & Co. ................................ 43,350 $ 4,121,285
------------
MAJOR BANKS -- 6.6%
Bank of America Corp. ...................... 90,630 $ 4,838,736
Bank of New York Co., Inc. ................. 173,660 6,836,994
JPMorgan Chase & Co. ....................... 145,580 7,031,514
PNC Financial Services Group, Inc. ......... 50,620 3,747,905
------------
$ 22,455,149
------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0 5%
DaVita, Inc. (a) ........................... 27,000 $ 1,535,760
------------
MEDICAL EQUIPMENT -- 1.8%
Boston Scientific Corp. (a) ................ 216,160 $ 3,713,629
St. Jude Medical, Inc. (a) ................. 68,530 2,505,457
------------
$ 6,219,086
------------
METALS & MINING -- 0.9%
BHP Billiton PLC ........................... 165,270 $ 3,024,955
------------
NATURAL GAS -- PIPELINE -- 1.7%
Williams Cos., Inc. ........................ 217,160 $ 5,672,219
------------
NETWORK & TELECOM -- 1.6%
Cisco Systems, Inc. (a) .................... 197,400 $ 5,394,942
------------
OIL SERVICES -- 3.1%
GlobalSantaFe Corp. ........................ 70,795 $ 4,161,330
Noble Corp. ................................ 42,550 3,240,183
Schlumberger Ltd. .......................... 51,530 3,254,635
------------
$ 10,656,148
------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 3.4%
American Express Co. ....................... 111,140 $ 6,742,864
SLM Corp. .................................. 101,480 4,949,180
------------
$ 11,692,044
------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.5%
EMC Corp. (a) .............................. 129,570 $ 1,710,324
------------
PHARMACEUTICALS -- 5.0%
Eli Lilly & Co. ............................ 72,680 $ 3,786,628
Endo Pharmaceuticals Holdings, Inc. (a) .... 120,360 3,319,529
Johnson & Johnson .......................... 65,330 4,313,087
Wyeth ...................................... 108,380 5,518,710
------------
$ 16,937,954
------------
RAILROAD & SHIPPING -- 0.5%
Burlington Northern Santa Fe Corp. ......... 25,300 $ 1,867,393
------------
SPECIALTY CHEMICALS -- 1.5%
Air Products & Chemicals, Inc. ............. 36,420 $ 2,559,598
Praxair, Inc. .............................. 41,010 2,433,123
------------
$ 4,992,721
------------
SPECIALTY STORES -- 1.5%
Chico's FAS, Inc. (a)(l) ................... 69,070 $ 1,429,058
Lowe's Cos., Inc. .......................... 55,400 1,725,710
Staples, Inc. .............................. 66,330 1,771,011
------------
$ 4,925,779
------------
TELECOMMUNICATIONS -- WIRELESS -- 0.5%
Dobson Communications Corp. (a) ............ 5,166 $ 44,996
Rogers Communications, Inc., "B" ........... 58,500 1,742,596
------------
$ 1,787,592
------------
TELEPHONE SERVICES -- 3.2%
American Tower Corp., "A" (a) .............. 48,100 $ 1,793,168
AT&T, Inc. ................................. 123,270 4,406,903
Qwest Communications International,
Inc. (a) ................................. 158,500 1,326,645
TELUS Corp. (non-voting shares) ............ 72,860 3,254,276
------------
$ 10,780,992
------------
TOBACCO -- 3.7%
Altria Group, Inc. ......................... 146,110 $ 12,539,160
------------
TRUCKING -- 0.5%
FedEx Corp. ................................ 16,380 $ 1,779,196
------------
UTILITIES -- ELECTRIC POWER -- 1.6%
FPL Group, Inc. ............................ 47,820 $ 2,602,364
NRG Energy, Inc. (a) ....................... 48,070 2,692,401
------------
$ 5,294,765
------------
Total Common Stocks
(Identified Cost, $310,491,674) ..................... $337,501,657
------------
SHORT-TERM OBLIGATIONS -- 0.5%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ....................... $ 1,746,000 $ 1,745,743
------------
COLLATERAL FOR SECURITIES LOANED -- 3.0%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value ... 10,110,323 $ 10,110,323
------------
Total Investments
(Identified Cost, $322,347,740) .................... $349,357,723
------------
OTHER ASSETS,
LESS LIABILITIES -- (3.0)% ............................. (10,285,047)
------------
Net Assets -- 100.0% ................................. $339,072,676
============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
TOTAL RETURN SERIES
COMMON STOCKS -- 58.7%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 2.0%
Lockheed Martin Corp. ...................... 242,570 $ 22,333,409
Northrop Grumman Corp. ..................... 122,850 8,316,945
United Technologies Corp. .................. 178,750 11,175,450
--------------
$ 41,825,804
--------------
ALCOHOLIC BEVERAGES -- 0.5%
Diageo PLC ................................. 392,772 $ 7,712,061
Molson Coors Brewing Co. (l) ............... 39,600 3,027,024
--------------
$ 10,739,085
--------------
APPAREL MANUFACTURERS -- 0.4%
Hanesbrands, Inc. (a) ...................... 13,456 $ 317,831
NIKE, Inc., "B" ............................ 86,160 8,532,425
--------------
$ 8,850,256
--------------
AUTOMOTIVE -- 0.3%
Johnson Controls, Inc. ..................... 73,270 $ 6,295,358
--------------
BIOTECHNOLOGY -- 1.0%
Amgen, Inc. (a) ............................ 251,260 $ 17,163,571
Millipore Corp. (a) ........................ 42,430 2,825,838
--------------
$ 19,989,409
--------------
BROADCASTING -- 1.3%
CBS Corp., "B" ............................. 292,784 $ 9,129,005
E.W. Scripps Co., "A" (l) .................. 87,450 4,367,253
Idearc, Inc. (a)(l) ........................ 28,596 819,275
Time Warner, Inc. .......................... 95,120 2,071,714
Viacom, Inc., "B" (a) ...................... 133,920 5,494,738
Walt Disney Co. ............................ 49,510 1,696,708
WPP Group PLC .............................. 279,530 3,780,399
--------------
$ 27,359,092
--------------
BROKERAGE & ASSET MANAGERS -- 2.5%
Franklin Resources, Inc. ................... 62,610 $ 6,897,744
Goldman Sachs Group, Inc. .................. 57,670 11,496,515
KKR Private Equity Investments LP, IEU ..... 75,810 1,732,259
Lehman Brothers Holdings, Inc. ............. 115,380 9,013,486
Mellon Financial Corp. ..................... 232,890 9,816,314
Merrill Lynch & Co., Inc. .................. 86,970 8,096,907
Morgan Stanley ............................. 73,670 5,998,948
--------------
$ 53,052,173
--------------
BUSINESS SERVICES -- 0.2%
Accenture Ltd., "A" ........................ 130,730 $ 4,827,859
--------------
CHEMICALS -- 1.1%
3M Co. ..................................... 40,210 $ 3,133,565
Dow Chemical Co. ........................... 73,510 2,935,989
Nalco Holding Co. (a) ...................... 141,890 2,903,069
PPG Industries, Inc. ....................... 127,610 8,193,838
Syngenta AG ................................ 28,440 5,289,481
--------------
$ 22,455,942
--------------
COMPUTER SOFTWARE -- 1.3%
Compuware Corp. (a) ........................ 1,697,550 $ 14,140,592
Oracle Corp. (a) ........................... 345,670 5,924,784
Symantec Corp. (a) ......................... 388,640 8,103,144
--------------
$ 28,168,520
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.3%
Hewlett-Packard Co. ........................ 168,740 $ 6,950,401
--------------
CONSTRUCTION -- 1.5%
D.R. Horton, Inc. .......................... 84,050 $ 2,226,485
Masco Corp. (l) ............................ 865,410 25,849,797
Sherwin-Williams Co. ....................... 32,840 2,087,967
Toll Brothers, Inc. (a) .................... 32,320 1,041,674
--------------
$ 31,205,923
--------------
CONSUMER GOODS & SERVICES -- 0.6%
Alberto Culver Co. ......................... 223,760 $ 4,799,652
Estee Lauder Cos., Inc., "A" ............... 198,470 8,101,545
--------------
$ 12,901,197
--------------
CONTAINERS -- 1.0%
Owens-Illinois, Inc. (a)(l) ................ 1,089,300 $ 20,097,585
Smurfit-Stone Container Corp. (a) .......... 69,400 732,864
--------------
$ 20,830,449
--------------
ELECTRICAL EQUIPMENT -- 2.3%
Cooper Industries Ltd., "A" ................ 8,910 $ 805,731
General Electric Co. ....................... 358,770 13,349,832
Rockwell Automation, Inc. .................. 87,760 5,360,381
Tyco International Ltd. .................... 786,780 23,918,112
W.W. Grainger, Inc. (l) .................... 76,820 5,372,791
--------------
$ 48,806,847
--------------
ELECTRONICS -- 0.4%
Analog Devices, Inc. ....................... 18,810 $ 618,285
Applied Materials, Inc. .................... 42,840 790,398
Intel Corp. ................................ 347,380 7,034,445
--------------
$ 8,443,128
--------------
ENERGY -- INDEPENDENT -- 2.1%
Apache Corp. ............................... 258,270 $ 17,177,538
Devon Energy Corp. ......................... 321,650 21,576,282
EOG Resources, Inc. ........................ 38,990 2,434,926
Sunoco, Inc. ............................... 40,800 2,544,288
--------------
$ 43,733,034
--------------
ENERGY -- INTEGRATED -- 3.7%
Chevron Corp. .............................. 102,807 $ 7,559,399
ConocoPhillips ............................. 118,350 8,515,283
Exxon Mobil Corp. .......................... 370,286 28,375,016
Hess Corp. (l) ............................. 328,630 16,290,189
Royal Dutch Shell PLC, ADR ................. 29,290 2,073,439
TOTAL S.A., ADR ............................ 220,600 15,865,552
--------------
$ 78,678,878
--------------
FOOD & BEVERAGES -- 1.5%
Coca-Cola Co. .............................. 80,630 $ 3,890,398
General Mills, Inc. ........................ 35,540 2,047,104
Kellogg Co. ................................ 159,930 8,006,096
Nestle S.A ................................. 19,540 6,941,357
PepsiCo, Inc. .............................. 88,490 5,535,050
Tyson Foods, Inc., "A" ..................... 255,960 4,210,542
--------------
$ 30,630,547
--------------
FOOD & DRUG STORES -- 0.4%
CVS Corp. .................................. 168,000 $ 5,192,880
Kroger Co. ................................. 80,610 1,859,673
Sally Beauty Holdings, Inc. (a) ............ 256,900 2,003,820
--------------
$ 9,056,373
--------------
FOREST & PAPER PRODUCTS -- 0.6%
Bowater, Inc. (l) .......................... 393,730 $ 8,858,925
International Paper Co. .................... 57,870 1,973,367
MeadWestvaco Corp. ......................... 91,830 2,760,410
--------------
$ 13,592,702
--------------
GENERAL MERCHANDISE -- 0.6%
Federated Department Stores, Inc. .......... 297,110 $ 11,328,804
Wal-Mart Stores, Inc. ...................... 40,800 1,884,144
--------------
$ 13,212,948
--------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.5%
UnitedHealth Group, Inc. ................... 21,950 $ 1,179,374
WellPoint, Inc. (a) ........................ 106,010 8,341,927
--------------
$ 9,521,301
--------------
INSURANCE -- 5.0%
Aflac, Inc. ................................ 122,130 $ 5,617,980
Allstate Corp. ............................. 384,580 25,040,004
Chubb Corp. ................................ 49,330 2,610,050
Conseco, Inc. (a)(l) ....................... 624,440 12,476,311
Genworth Financial, Inc., "A" .............. 738,780 25,273,664
Hartford Financial Services Group, Inc. .... 108,720 10,144,663
MetLife, Inc. .............................. 204,500 12,067,545
St. Paul Travelers Cos., Inc. .............. 242,300 13,009,087
--------------
$ 106,239,304
--------------
LEISURE & TOYS -- 0.3%
Hasbro, Inc. ............................... 45,770 $ 1,247,233
Mattel, Inc. ............................... 244,030 5,529,720
--------------
$ 6,776,953
--------------
MACHINERY & TOOLS -- 0.7%
Deere & Co. ................................ 153,020 $ 14,547,611
Finning International, Inc. (n) ............ 4,940 202,663
Illinois Tool Works, Inc. .................. 17,540 810,173
--------------
$ 15,560,447
--------------
MAJOR BANKS -- 6.2%
Bank of America Corp. ...................... 757,600 $ 40,448,264
Bank of New York Co., Inc. ................. 744,500 29,310,965
JPMorgan Chase & Co. ....................... 653,612 31,569,460
PNC Financial Services Group, Inc. ......... 196,510 14,549,600
SunTrust Banks, Inc. ....................... 171,180 14,456,151
--------------
$ 130,334,440
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0 4%
Caremark Rx, Inc. .......................... 63,500 $ 3,626,485
Tenet Healthcare Corp. (a)(l) .............. 723,160 5,040,425
--------------
$ 8,666,910
--------------
MEDICAL EQUIPMENT -- 1.0%
Boston Scientific Corp. (a) ................ 498,250 $ 8,559,935
Pall Corp. ................................. 347,470 12,005,089
--------------
$ 20,565,024
--------------
METALS & MINING -- 0.1%
BHP Billiton PLC ........................... 128,400 $ 2,350,119
--------------
NATURAL GAS -- DISTRIBUTION -- 0.1%
Questar Corp. .............................. 23,610 $ 1,960,811
--------------
NATURAL GAS -- PIPELINE -- 0.5%
Williams Cos., Inc. ........................ 432,260 $ 11,290,631
--------------
NETWORK & TELECOM -- 1.3%
Cisco Systems, Inc. (a) .................... 203,920 $ 5,573,134
Nortel Networks Corp. (a)(l) ............... 801,869 21,433,958
--------------
$ 27,007,092
--------------
OIL SERVICES -- 0.9%
GlobalSantaFe Corp. ........................ 151,050 $ 8,878,719
Noble Corp. ................................ 124,270 9,463,161
--------------
$ 18,341,880
--------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 3.8%
American Express Co. ....................... 121,440 $ 7,367,765
Capital One Financial Corp. ................ 30,640 2,353,765
Citigroup, Inc. ............................ 565,313 31,487,934
Countrywide Financial Corp. ................ 95,440 4,051,428
Fannie Mae ................................. 223,050 13,246,940
Freddie Mac ................................ 29,660 2,013,914
New York Community Bancorp, Inc. (l) ....... 452,600 7,286,860
SLM Corp. .................................. 55,400 2,701,858
UBS AG ..................................... 89,340 5,427,539
UBS AG ..................................... 73,440 4,430,635
--------------
$ 80,368,638
--------------
PHARMACEUTICALS -- 3.2%
Abbott Laboratories ........................ 48,310 $ 2,353,180
Eli Lilly & Co. ............................ 166,630 8,681,423
Johnson & Johnson .......................... 340,930 22,508,199
Merck & Co., Inc. .......................... 101,040 4,405,344
Warner Chilcott Ltd., "A" (a) .............. 256,680 3,547,318
Wyeth ...................................... 490,840 24,993,573
--------------
$ 66,489,037
--------------
PRINTING & PUBLISHING -- 0.8%
New York Times Co., "A" (l) ................ 733,070 $ 17,857,585
--------------
RAILROAD & SHIPPING -- 0.6%
Burlington Northern Santa Fe Corp. ......... 88,880 $ 6,560,233
Norfolk Southern Corp. ..................... 125,980 6,335,534
--------------
$ 12,895,767
--------------
SPECIALTY CHEMICALS -- 0.4%
Air Products & Chemicals, Inc. ............. 89,730 $ 6,306,224
Praxair, Inc. .............................. 42,980 2,550,003
--------------
$ 8,856,227
--------------
SPECIALTY STORES -- 0.4%
OfficeMax, Inc. (l) ........................ 175,700 $ 8,723,505
--------------
TELECOMMUNICATIONS -- WIRELESS -- 0.2%
Vodafone Group PLC, ADR .................... 151,097 $ 4,197,475
--------------
TELEPHONE SERVICES -- 2.2%
AT&T, Inc. ................................. 180,386 $ 6,448,800
Embarq Corp. ............................... 101,729 5,346,876
Qwest Communications International,
Inc. (a) ................................. 329,300 2,756,241
Sprint Nextel Corp. ........................ 310,650 5,868,179
TELUS Corp. ................................ 47,970 2,203,927
TELUS Corp. (non-voting shares) ............ 14,450 645,406
Verizon Communications, Inc. ............... 623,960 23,236,270
--------------
$ 46,505,699
--------------
TOBACCO -- 1.7%
Altria Group, Inc. ......................... 428,800 $ 36,799,616
--------------
TRUCKING -- 0.0%
Con-way, Inc. .............................. 6,300 $ 277,452
--------------
UTILITIES -- ELECTRIC POWER -- 2.8%
Dominion Resources, Inc. ................... 135,420 $ 11,353,613
Edison International ....................... 68,360 3,109,013
Entergy Corp. .............................. 29,700 2,741,904
FirstEnergy Corp. .......................... 52,250 3,150,675
FPL Group, Inc. ............................ 463,190 25,206,800
NRG Energy, Inc. (a)(l) .................... 69,060 3,868,051
PPL Corp. .................................. 29,030 1,040,435
Public Service Enterprise Group, Inc. ...... 77,210 5,125,200
TXU Corp. .................................. 52,140 2,826,509
--------------
$ 58,422,200
--------------
Total Common Stocks
(Identified Cost, $1,007,090,677) .................. $1,241,614,038
--------------
BONDS -- 37.5%
AEROSPACE -- 0.1%
Boeing Capital Corp., 6.5%, 2012 ........... $ 2,734,000 $ 2,882,672
--------------
AGENCY -- OTHER -- 0.0%
Financing Corp., 9.65%, 2018 ............... $ 490,000 $ 684,466
--------------
ASSET BACKED & SECURITIZED -- 4.3%
Banc of America Commercial Mortgage,
Inc., FRN, 4.857%, 2043 .................. $ 2,050,000 $ 1,985,795
Banc of America Commercial Mortgage,
Inc., FRN, "AM", 5.1814%, 2047 ........... 776,389 770,781
Banc of America Commercial Mortgage,
Inc., FRN, "A4", 5.1814%, 2047 ........... 1,000,000 993,664
Bayview Financial Revolving Mortgage Loan
Trust, FRN, 6.15%, 2040 (z) .............. 1,850,000 1,852,481
Bear Stearns Commercial Mortgage
Securities, Inc., FRN, 5.116%, 2041 ...... 1,220,816 1,204,542
Blackrock Capital Finance LP,
7.75%, 2026 (n) .......................... 207,071 205,000
Chase Commercial Mortgage Securities
Corp., 7.543%, 2032 ...................... 388,544 396,550
Citigroup Commercial Mortgage Trust,
5.462%, 2049 ............................. 2,429,505 2,439,216
Citigroup/Deutsche Bank Commercial
Mortgage Trust, 5.648%, 2048 ............. 2,400,000 2,445,144
Citigroup/Deutsche Bank Commercial
Mortgage Trust, FRN,
5.2255%, 2044 ............................ 570,000 568,965
Countrywide Asset-Backed Certificates,
FRN, 4.575%, 2035 ........................ 66,510 65,992
Countrywide Asset-Backed Certificates,
FRN, 4.823%, 2035 ........................ 1,152,730 1,144,550
Countrywide Asset-Backed Certificates,
FRN, 5.689%, 2046 ........................ 1,120,000 1,122,708
CPS Auto Receivables Trust,
2.89%, 2009 (z) .......................... 38,552 37,968
Credit Suisse Commercial Mortgage Trust,
5.509%, 2039 ............................. 1,449,204 1,460,624
Credit Suisse Mortgage Capital
Certificate, 5.343%, 2039 ................ 2,410,000 2,396,022
CRIIMI MAE CMBS Corp.,
6.701%, 2030 (n) ......................... 477,786 476,914
CRIIMI MAE Commercial Mortgage Trust,
7%, 2033 (n) ............................... 809,301 800,642
Deutsche Mortgage & Asset Receiving
Corp., 6.538%, 2031 ...................... 962,853 969,220
Falcon Franchise Loan LLC,
7.382%, 2010 (n) ......................... 398,738 408,828
GE Commercial Mortgage Corp., FRN,
5.3394%, 2044 ............................ 1,330,000 1,331,845
GMAC Mortgage Corp. Loan Trust, FRN,
5.805%, 2036 ............................. 1,316,000 1,316,669
Greenwich Capital Commercial Funding
Corp., 4.305%, 2042 ...................... 1,644,482 1,600,914
Greenwich Capital Commercial Funding
Corp., FRN, 5.9123%, 2016 ................ 1,225,000 1,279,956
Greenwich Capital Commercial Funding
Corp., FRN, 5.317%, 2036 ................. 625,465 624,842
Greenwich Capital Commercial Funding
Corp., FRN, 5.224%, 2037 ................. 1,532,847 1,521,889
JPMorgan Chase Commercial Mortgage
Securities Corp., 4.78%, 2042 ............ 1,620,000 1,555,372
JPMorgan Chase Commercial Mortgage
Securities Corp., 5.552%, 2045 ........... 2,420,000 2,454,755
JPMorgan Chase Commercial Mortgage
Securities Corp., 5.44%, 2045 (z) ........ 1,203,050 1,206,988
JPMorgan Chase Commercial Mortgage
Securities Corp., 5.372%, 2047 ........... 2,020,000 2,017,798
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.2115%, 2041 ............................ 1,985,000 1,977,580
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.2943%, 2043 ............................ 2,290,000 2,292,075
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.475%, 2043 ............................. 2,420,000 2,441,336
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.855%, 2043 ............................. 2,350,000 2,436,454
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.8755%, 2045 ............................ 2,420,000 2,528,225
JPMorgan Chase Commercial Mortgage
Securities Corp., FRN,
5.038%, 2046 ............................. 2,097,327 2,056,349
LB-UBS Commercial Mortgage Trust, FRN,
5.413%, 2039 ............................. 638,518 640,022
Merrill Lynch Mortgage Trust, FRN,
5.6601%, 2039 ............................ 2,245,000 2,304,394
Merrill Lynch Mortgage Trust, FRN,
5.2643%, 2044 ............................ 1,029,000 1,027,003
Merrill Lynch/Countrywide Commercial
Mortgage Trust, FRN,
5.4848%, 2039 ............................ 1,140,000 1,154,147
Merrill Lynch/Countrywide Commercial
Mortgage Trust, FRN, 5.204%, 2049 ........ 2,470,000 2,431,208
Morgan Stanley Capital I, Inc.,
5.168%, 2042 ............................. 859,244 849,411
Morgan Stanley Capital I, Inc., FRN,
0.5376%, 2030 (i)(n) ..................... 61,436,843 771,892
Multi-Family Capital Access One, Inc.,
6.65%, 2024 .............................. 393,085 399,085
Residential Asset Mortgage Products,
Inc., 4.109%, 2035 ....................... 978,423 965,255
Residential Asset Mortgage Products,
Inc., FRN, 4.9708%, 2034 ................. 931,000 909,980
Residential Funding Mortgage Securities,
Inc., FRN, 5.32%, 2035 ................... 1,405,000 1,394,980
Spirit Master Funding LLC,
5.05%, 2023 (z) .......................... 1,689,089 1,626,050
Structured Asset Securities Corp., FRN,
4.67%, 2035 .............................. 3,279,080 3,242,715
Wachovia Bank Commercial Mortgage Trust,
4.935%, 2042 ............................. 2,750,000 2,676,474
Wachovia Bank Commercial Mortgage Trust,
4.75%, 2044 .............................. 2,500,000 2,392,021
Wachovia Bank Commercial Mortgage Trust,
5.339%, 2048 ............................. 2,410,000 2,397,685
Wachovia Bank Commercial Mortgage Trust,
FRN, 4.847%, 2041 ........................ 2,000,000 1,937,178
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.083%, 2042 ........................ 2,033,724 1,997,179
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.1959%, 2044 ....................... 1,432,000 1,422,634
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.3161%, 2044 ....................... 1,744,000 1,742,622
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.466%, 2045 ........................ 2,205,000 2,216,271
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.962%, 2045 (n) .................... 1,660,000 1,737,827
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.795%, 2045 ........................ 1,710,000 1,759,516
Wachovia Bank Commercial Mortgage Trust,
FRN, 5.603%, 2048 ........................ 2,400,000 2,433,379
--------------
$ 90,817,581
--------------
AUTOMOTIVE -- 0.1%
Johnson Controls, Inc., 5.5%, 2016 ......... $ 1,608,000 $ 1,576,631
--------------
BROADCASTING -- 0.2%
CBS Corp., 6.625%, 2011 .................... $ 1,595,000 $ 1,647,426
News America Holdings, 8.5%, 2025 .......... 994,000 1,176,412
News America, Inc., 6.2%, 2034 ............. 476,000 459,442
--------------
$ 3,283,280
--------------
BROKERAGE & ASSET MANAGERS -- 0.5%
Goldman Sachs Group, Inc., 5.7%, 2012 ...... $ 1,568,000 $ 1,596,908
Lehman Brothers Holdings, Inc., 8.25%, 2007 1,405,000 1,423,153
Lehman Brothers Holdings, Inc., 5.5%, 2016 342,000 341,953
Merrill Lynch & Co., Inc., 5.45%, 2014 ..... 2,012,000 2,022,740
Merrill Lynch & Co., Inc., 6.05%, 2016 ..... 1,388,000 1,436,637
Morgan Stanley Group, Inc.,
5.75%, 2016 .............................. 100,000 101,467
Morgan Stanley Group, Inc.,
6.75%, 2011 .............................. 1,530,000 1,617,167
Morgan Stanley Group, Inc.,
4.75%, 2014 .............................. 1,168,000 1,116,756
--------------
$ 9,656,781
--------------
BUILDING -- 0.1%
CRH America, Inc., 6.95%, 2012 ............. $ 1,847,000 $ 1,952,288
Lafarge S.A., 6.5%, 2016 ................... 804,000 839,472
--------------
$ 2,791,760
--------------
BUSINESS SERVICES -- 0.1%
Cisco Systems, Inc., 5.5%, 2016 ............ $ 1,519,000 $ 1,519,969
--------------
CABLE TV -- 0.3%
Cox Communications, Inc.,
4.625%, 2013 ............................. $ 1,624,000 $ 1,528,091
TCI Communications Financing III,
9.65%, 2027 .............................. 4,805,000 5,069,731
--------------
$ 6,597,822
--------------
CONGLOMERATES -- 0.1%
Kennametal, Inc., 7.2%, 2012 ............... $ 1,780,000 $ 1,874,490
--------------
CONSUMER GOODS & SERVICES -- 0.2%
Fortune Brands, Inc., 5.125%, 2011 ......... $ 1,671,000 $ 1,639,734
Western Union Co., 5.4%, 2011 (n) .......... 2,300,000 2,267,975
--------------
$ 3,907,709
--------------
DEFENSE ELECTRONICS -- 0.1%
BAE Systems Holdings, Inc.,
5.2%, 2015 (n) ........................... $ 753,000 $ 717,263
Raytheon Co., 6.15%, 2008 .................. 1,077,000 1,090,785
--------------
$ 1,808,048
--------------
EMERGING MARKET QUASI-SOVEREIGN -- 0.0%
Pemex Project Funding Master Trust,
8.625%, 2022 ............................. $ 316,000 $ 390,576
--------------
EMERGING MARKET SOVEREIGN -- 0.2%
State of Israel, 4.625%, 2013 .............. $ 981,000 $ 933,487
United Mexican States, 6.375%, 2013 ........ 1,147,000 1,206,071
United Mexican States, 6.625%, 2015 ........ 97,000 104,130
United Mexican States, 5.625%, 2017 ........ 1,014,000 1,015,014
United Mexican States, 7.5%, 2033 .......... 885,000 1,044,300
--------------
$ 4,303,002
--------------
ENERGY -- INDEPENDENT -- 0.4%
Anadarko Petroleum Corp., 5.95%, 2016 ...... $ 910,000 $ 911,905
Nexen, Inc., 5.875%, 2035 .................. 1,200,000 1,123,295
Ocean Energy, Inc., 7.25%, 2011 ............ 2,246,000 2,396,266
Ras Laffan Liquefied Natural Gas Co.
Ltd., 5.832%, 2016 (n) ................... 1,130,000 1,133,322
XTO Energy, Inc., 5.65%, 2016 .............. 2,120,000 2,095,792
--------------
$ 7,660,580
--------------
ENTERTAINMENT -- 0.2%
Walt Disney Co., 6.375%, 2012 .............. $ 1,957,000 $ 2,051,004
Walt Disney Co., 5.625%, 2016 .............. 1,388,000 1,397,659
--------------
$ 3,448,663
--------------
FINANCIAL INSTITUTIONS -- 0.5%
American Express Co., 5.5%, 2016 ........... $ 2,360,000 $ 2,378,776
Capital One Financial Co., 6.15%, 2016 ..... 1,540,000 1,592,686
Countrywide Financial Corp.,
6.25%, 2016 .............................. 1,892,000 1,928,387
General Electric Capital Corp.,
8.75%, 2007 .............................. 904,000 915,423
General Electric Capital Corp.,
5.45%, 2013 .............................. 179,000 180,712
HSBC Finance Corp., 5.25%, 2011 ............ 1,510,000 1,510,041
ORIX Corp., 5.48%, 2011 .................... 2,290,000 2,285,585
--------------
$ 10,791,610
--------------
FOOD & BEVERAGES -- 0.2%
Diageo Finance B.V., 5.5%, 2013 ............ $ 2,100,000 $ 2,095,928
Miller Brewing Co., 5.5%, 2013 (n) ......... 2,985,000 2,951,867
--------------
$ 5,047,795
--------------
FOOD & DRUG STORES -- 0.1%
CVS Corp., 5.75%, 2011 ..................... $ 830,000 $ 839,982
CVS Corp., 6.125%, 2016 .................... 1,140,000 1,176,247
--------------
$ 2,016,229
--------------
FOREST & PAPER PRODUCTS -- 0.0%
MeadWestvaco Corp., 6.8%, 2032 ............. $ 724,000 $ 688,523
--------------
GAMING & LODGING -- 0.1%
Marriott International, Inc., 6.2%, 2016 ... $ 1,892,000 $ 1,908,054
Wyndham Worldwide Corp.,
6%, 2016 (n) ............................. 1,146,000 1,125,841
--------------
$ 3,033,895
--------------
INSURANCE -- 0.4%
AIG SunAmerica Institutional Funding II,
5.75%, 2009 .............................. $ 2,804,000 $ 2,832,015
American International Group,
4.25%, 2013 .............................. 853,000 799,831
American International Group,
5.05%, 2015 .............................. 1,650,000 1,604,419
ING Groep N.V., 5.775% to 2015,
FRN to 2049 .............................. 2,555,000 2,528,239
MetLife, Inc., 6.5%, 2032 .................. 578,000 626,273
--------------
$ 8,390,777
--------------
INSURANCE -- PROPERTY & CASUALTY -- 0.1%
Allstate Corp., 6.125%, 2032 ............... $ 1,617,000 $ 1,685,013
Fund American Cos., Inc., 5.875%, 2013 ..... 1,110,000 1,103,368
--------------
$ 2,788,381
--------------
INTERNATIONAL MARKET QUASI-SOVEREIGN -- 0.2%
Hydro-Quebec, 6.3%, 2011 ................... $ 2,256,000 $ 2,358,098
Province of Ontario, 5%, 2011 .............. 2,280,000 2,276,566
--------------
$ 4,634,664
--------------
MAJOR BANKS -- 1.1%
Bank of America Corp., 5.375%, 2014 ........ $ 2,830,000 $ 2,829,026
Bank of America Corp., 5.49%, 2019 (n) ..... 2,172,000 2,139,920
DBS Capital Funding Corp.,
7.657% to 2011, FRN to 2049 (n) .......... 1,476,000 1,587,352
HBOS Capital Funding LP,
6.071% to 2014, FRN to 2049 (n) .......... 977,000 990,635
MUFG Capital Finance 1 Ltd.,
6.346% to 2016, FRN to 2049 .............. 1,638,000 1,662,387
Natexis AMBS Co. LLC, 8.44% to 2008, FRN
to 2049 (n) .............................. 135,000 140,586
Socgen Real Estate LLC,
7.64% to 2007, FRN to 2049 (n) ........... 3,128,000 3,176,349
UniCredito Italiano Capital Trust II,
9.2% to 2010, FRN to 2049 (n) ............ 1,509,000 1,693,267
Wachovia Corp., 5.25%, 2014 ................ 3,339,000 3,298,328
Wells Fargo National Bank, 4.75%, 2015 ..... 3,338,000 3,195,818
Wells Fargo National Bank, 5.75%, 2016 ..... 2,550,000 2,611,626
--------------
$ 23,325,294
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0 2%
Baxter International, Inc., 5.9%, 2016 ..... $ 1,622,000 $ 1,666,251
Cardinal Health, Inc., 5.85%, 2017 ......... 2,022,000 2,010,634
HCA, Inc., 8.75%, 2010 ..................... 355,000 370,088
HCA, Inc., 6.95%, 2012 ..................... 1,390,000 1,317,025
--------------
$ 5,363,998
--------------
METALS & MINING -- 0.1%
Vale Overseas Ltd., 6.25%, 2017 ............ $ 1,650,000 $ 1,657,501
--------------
MORTGAGE BACKED -- 13.6%
Fannie Mae, 5.722%, 2009 ................... $ 4,455,000 $ 4,463,089
Fannie Mae, 4.01%, 2013 .................... 192,279 180,811
Fannie Mae, 4.519%, 2014 ................... 1,716,298 1,653,292
Fannie Mae, 4.63%, 2014 .................... 479,386 462,100
Fannie Mae, 4.848%, 2014 ................... 958,487 940,090
Fannie Mae, 4.76%, 2015 .................... 356,210 346,317
Fannie Mae, 4.925%, 2015 ................... 2,820,143 2,775,534
Fannie Mae, 5.5%, 2016 - 2036 .............. 92,296,687 91,464,782
Fannie Mae, 6%, 2017 - 2036 ................ 35,387,195 35,729,426
Fannie Mae, 4.5%, 2018 - 2035 .............. 10,568,246 10,115,386
Fannie Mae, 5%, 2018 - 2035 ................ 30,902,670 30,106,488
Fannie Mae, 7.5%, 2030 - 2031 .............. 360,572 375,469
Fannie Mae, 6.5%, 2031 - 2036 .............. 10,081,264 10,301,693
Freddie Mac, 6%, 2016 - 2036 ............... 14,868,346 15,020,341
Freddie Mac, 5%, 2017 - 2035 ............... 26,140,998 25,357,251
Freddie Mac, 4.5%, 2018 - 2035 ............. 10,888,162 10,469,211
Freddie Mac, 5.5%, 2019 - 2036 ............. 26,323,987 26,113,376
Freddie Mac, 6.5%, 2034 .................... 2,785,256 2,839,606
Ginnie Mae, 4.5%, 2033 - 2034 .............. 1,743,544 1,637,608
Ginnie Mae, 5%, 2033 - 2034 ................ 1,896,208 1,844,491
Ginnie Mae, 5.5%, 2033 - 2035 .............. 8,532,135 8,498,520
Ginnie Mae, 6%, 2033 - 2035 ................ 5,399,696 5,478,054
Ginnie Mae, 6.5%, 2035 - 2036 .............. 1,070,170 1,094,010
--------------
$ 287,266,945
--------------
NATURAL GAS -- PIPELINE -- 0.2%
CenterPoint Energy Resources Corp.,
7.875%, 2013 ............................. $ 815,000 $ 904,251
Kinder Morgan Energy Partners LP,
6.75%, 2011 .............................. 740,000 769,959
Kinder Morgan Energy Partners LP,
5.125%, 2014 ............................. 956,000 910,492
Kinder Morgan Energy Partners LP,
7.4%, 2031 ............................... 804,000 880,055
Kinder Morgan Energy Partners LP,
7.75%, 2032 .............................. 590,000 671,900
--------------
$ 4,136,657
--------------
NETWORK & TELECOM -- 0.4%
AT&T, Inc., 6.15%, 2034 .................... $ 1,619,000 $ 1,592,393
BellSouth Corp., 6.55%, 2034 ............... 1,472,000 1,508,981
Telecom Italia Capital, 5.25%, 2013 ........ 752,000 717,024
Telefonica Europe B.V., 7.75%, 2010 ........ 750,000 805,532
Verizon New York, Inc., 6.875%, 2012 ....... 4,213,000 4,367,689
--------------
$ 8,991,619
--------------
OIL SERVICES -- 0.1%
Halliburton Co., 5.5%, 2010 ................ $ 1,071,000 $ 1,069,097
--------------
OILS -- 0.1%
Valero Energy Corp., 6.875%, 2012 .......... $ 1,193,000 $ 1,261,371
--------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 0.8%
Citigroup, Inc., 5%, 2014 .................. $ 3,482,000 $ 3,399,814
Credit Suisse (USA), Inc., 4.125%, 2010 .... 1,530,000 1,484,366
Credit Suisse (USA), Inc., 4.875%, 2010 .... 1,292,000 1,277,944
Mizuho Capital Investment 1 Ltd., 6.686%
to 2016, FRN to 2049 (n) ................. 2,140,000 2,159,089
Nordea Bank AB, 5.424% to 2015,
FRN to 2049 (n) .......................... 1,019,000 977,422
UBS AG, 5.875%, 2016 ....................... 1,610,000 1,664,044
UBS Preferred Funding Trust V,
6.243% to 2016, FRN to 2049 .............. 2,140,000 2,215,942
UFJ Finance Aruba AEC, 6.75%, 2013 ......... 1,624,000 1,733,082
Woori Bank, 6.125% to 2011,
FRN to 2016 (n) .......................... 2,715,000 2,769,246
--------------
$ 17,680,949
--------------
PHARMACEUTICALS -- 0.2%
Allergan, Inc., 5.75%, 2016 ................ $ 1,720,000 $ 1,739,484
Wyeth, 5.5%, 2013 .......................... 1,683,000 1,693,889
--------------
$ 3,433,373
--------------
POLLUTION CONTROL -- 0.1%
USA Waste Services, Inc., 7%, 2028 ......... $ 972,000 $ 1,043,182
Waste Management, Inc., 7.375%, 2010 ....... 1,341,000 1,426,431
--------------
$ 2,469,613
--------------
RAILROAD & SHIPPING -- 0.0%
CSX Corp., 6.75%, 2011 ..................... $ 450,000 $ 472,497
Union Pacific Corp., 6.125%, 2012 .......... 507,000 522,309
--------------
$ 994,806
--------------
REAL ESTATE -- 0.6%
Boston Properties, Inc., REIT, 5%, 2015 .... $ 369,000 $ 354,720
EOP Operating LP, 6.8%, 2009 ............... 1,238,000 1,279,285
HRPT Properties Trust, REIT,
6.25%, 2016 ................................ 1,945,000 2,004,813
Kimco Realty Corp., REIT, 5.783%, 2016 ..... 1,090,000 1,103,895
ProLogis, REIT, 5.75%, 2016 ................ 1,992,000 2,004,161
Simon Property Group LP, REIT,
6.375%, 2007 ............................... 1,069,000 1,077,235
Simon Property Group LP, REIT,
5.1%, 2015 ................................. 1,070,000 1,040,651
Vornado Realty Trust, 4.75%, 2010 .......... 189,000 183,312
Vornado Realty Trust, REIT,
5.625%, 2007 ............................... 3,304,000 3,301,809
--------------
$ 12,349,881
--------------
RETAILERS -- 0.3%
Federated Retail Holdings, Inc.,
5.9%, 2016 ................................. $ 1,890,000 $ 1,887,061
Home Depot, Inc., 5.4%, 2016 ............... 1,375,000 1,344,813
Limited Brands, Inc., 5.25%, 2014 .......... 1,886,000 1,791,928
Wal-Mart Stores, Inc., 5.25%, 2035 ......... 2,241,000 2,057,908
--------------
$ 7,081,710
--------------
TELECOMMUNICATIONS -- WIRELESS -- 0.0%
Cingular Wireless LLC, 6.5%, 2011 .......... $ 693,000 $ 726,155
--------------
U.S. GOVERNMENT AGENCIES -- 2.0%
Fannie Mae, 3%, 2007 ....................... $ 3,350,000 $ 3,337,980
Fannie Mae, 5.25%, 2007 .................... 12,269,000 12,271,503
Fannie Mae, 6.625%, 2009 - 2010 ............ 13,027,000 13,705,845
Fannie Mae, 6%, 2011 ....................... 1,539,000 1,602,458
Federal Home Loan Bank, 3.9%, 2008 ......... 1,240,000 1,222,398
Small Business Administration, 4.77%, 2024 . 973,305 950,802
Small Business Administration, 4.99%, 2024 . 1,389,480 1,372,669
Small Business Administration, 5.18%, 2024 . 1,576,962 1,574,800
Small Business Administration, 5.09%, 2025 . 1,416,214 1,402,915
Small Business Administration, 5.11%, 2025 . 2,963,300 2,940,924
Small Business Administration, 5.39%, 2025 . 1,055,350 1,062,472
--------------
$ 41,444,766
--------------
U.S. TREASURY OBLIGATIONS -- 8.2%
U.S. Treasury Bonds, 6.5%, 2010 ............ $10,736,000 $ 11,278,254
U.S. Treasury Bonds, 10.375%, 2012 ......... 1,482,000 1,547,879
U.S. Treasury Bonds, 8%, 2021 .............. 320,000 424,200
U.S. Treasury Bonds, 6.25%, 2023 ........... 1,899,000 2,185,779
U.S. Treasury Bonds, 6%, 2026 .............. 8,080,000 9,163,859
U.S. Treasury Bonds, 5.375%, 2031 .......... 21,514,000 23,045,194
U.S. Treasury Bonds, 4.5%, 2036 ............ 2,481,000 2,359,277
U.S. Treasury Notes, 5.5%, 2008 ............ 7,085,000 7,124,300
U.S. Treasury Notes, 5.625%, 2008 .......... 25,512,000 25,745,205
U.S. Treasury Notes, 4.75%, 2008 ........... 29,887,000 29,848,476
U.S. Treasury Notes, 3.125%, 2009 .......... 17,250,000 16,639,505
U.S. Treasury Notes, 5.125%, 2011 .......... 19,033,000 19,354,182
U.S. Treasury Notes, 4.375%, 2012 .......... 1,778,000 1,752,441
U.S. Treasury Notes, 4%, 2012 .............. 1,910,000 1,844,120
U.S. Treasury Notes, 3.875%, 2013 .......... 2,121,000 2,029,945
U.S. Treasury Notes, 4.25%, 2013 ........... 2,533,000 2,466,114
U.S. Treasury Notes, TIPS, 4.25%, 2010 ..... 7,587,786 7,986,145
U.S. Treasury Notes, TIPS, 2%, 2014 ........ 8,273,383 8,036,814
--------------
$ 172,831,689
--------------
UTILITIES -- ELECTRIC POWER -- 1.0%
Dominion Resources, Inc., 5.15%, 2015 ...... $ 1,515,000 $ 1,467,449
Duke Capital Corp., 8%, 2019 ............... 987,000 1,147,442
Exelon Generation Co. LLC, 6.95%, 2011 ..... 1,245,000 1,311,568
FirstEnergy Corp., 6.45%, 2011 ............. 2,246,000 2,342,154
MidAmerican Energy Holdings Co.,
3.5%, 2008 ............................... 1,030,000 1,004,284
MidAmerican Energy Holdings Co.,
5.875%, 2012 ............................. 535,000 544,602
MidAmerican Funding LLC, 6.927%, 2029 ...... 2,762,000 3,066,019
Oncor Electric Delivery Co., 7%, 2022 ...... 1,582,000 1,701,689
Pacific Gas & Electric Co., 4.8%, 2014 ..... 425,000 407,372
Progress Energy, Inc., 7.1%, 2011 .......... 1,084,000 1,154,407
PSEG Power LLC, 6.95%, 2012 ................ 697,000 736,862
PSEG Power LLC, 5.5%, 2015 ................. 911,000 891,649
System Energy Resources, Inc.,
5.129%, 2014 (n) ......................... 913,073 891,561
TXU Energy Co., 7%, 2013 ................... 1,575,000 1,648,014
Waterford 3 Funding Corp., 8.09%, 2017 ..... 2,049,738 2,064,885
--------------
$ 20,379,957
--------------
Total Bonds
(Identified Cost, $798,521,280) .................... $ 793,061,285
--------------
SHORT-TERM OBLIGATIONS -- 0.9%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ....................... $19,328,000 $ 19,325,160
--------------
COLLATERAL FOR SECURITIES LOANED -- 3.6%
Navigator Securities Lending
Prime Portfolio, at Cost and
Net Asset Value .......................... 74,891,980 $ 74,891,980
--------------
Total Investments
(Identified Cost, $1,899,829,097) (k) .............. $2,128,892,463
--------------
OTHER ASSETS,
LESS LIABILITIES -- (0.7)% ........................... (15,141,303)
--------------
Net Assets -- 100.0% ............................... $2,113,751,160
==============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
UTILITIES SERIES
COMMON STOCKS -- 93.5%
ISSUER SHARES/PAR VALUE ($)
BROADCASTING -- 3.7%
Citadel Broadcasting Corp. (l) ............. 180,700 $ 1,799,768
Grupo Televisa S.A., ADR ................... 205,600 5,553,256
News Corp., "A" ............................ 251,300 5,397,924
R.H. Donnelley Corp. (l) ................... 17,900 1,122,867
Time Warner, Inc. .......................... 22,700 494,406
Viacom, Inc., "B" (a) ...................... 66,650 2,734,650
------------
$ 17,102,871
------------
CABLE TV -- 0.4%
Comcast Corp., "Special A" (a) ............. 32,200 $ 1,348,536
Net Servicos de Comuicacao S.A., IPS (a) ... 28,400 322,842
------------
$ 1,671,378
------------
ELECTRICAL EQUIPMENT -- 0.2%
Solarfun Power Holdings Co. Ltd., ADR (a) .. 39,240 $ 458,716
Trina Solar Ltd., ADR (a) .................. 23,800 449,820
------------
$ 908,536
------------
ENERGY -- INDEPENDENT -- 2.7%
Apache Corp. ............................... 34,000 $ 2,261,340
CONSOL Energy, Inc. ........................ 81,900 2,631,447
Devon Energy Corp. ......................... 16,400 1,100,112
Talisman Energy, Inc. ...................... 227,300 3,863,456
Venoco, Inc. (a) ........................... 104,560 1,836,074
XTO Energy, Inc. ........................... 10,200 479,910
------------
$ 12,172,339
------------
ENERGY -- INTEGRATED -- 0.9%
Hess Corp. ................................. 35,800 $ 1,774,606
TOTAL S.A. (l) ............................. 32,100 2,315,192
------------
$ 4,089,798
------------
ENGINEERING -- CONSTRUCTION -- 0.6%
Bouygues S.A ............................... 29,600 $ 1,899,712
China Communications Construction Co.
Ltd., (a) ................................ 777,000 767,185
------------
$ 2,666,897
------------
METALS & MINING -- 0.2%
China Coal Energy (a) ...................... 1,460,000 $ 947,900
------------
NATURAL GAS -- DISTRIBUTION -- 5.9%
AGL Resources, Inc. ........................ 192,260 $ 7,480,837
Energen Corp. .............................. 10,000 469,400
Equitable Resources, Inc. .................. 313,200 13,076,100
Gaz de France (l) .......................... 58,900 2,709,006
Questar Corp. .............................. 36,000 2,989,800
------------
$ 26,725,143
------------
NATURAL GAS -- PIPELINE -- 5.3%
Enagas S.A ................................. 342,974 $ 7,975,518
Gazprom OAO, ADR ........................... 5,000 230,000
Williams Cos., Inc. ........................ 605,417 15,813,492
------------
$ 24,019,010
------------
OIL SERVICES -- 3.7%
ENSCO International, Inc. .................. 35,300 $ 1,767,118
GlobalSantaFe Corp. ........................ 129,300 7,600,254
Noble Corp. ................................ 64,000 4,873,600
Schlumberger Ltd. .......................... 16,800 1,061,088
Transocean, Inc. (a) ....................... 20,000 1,617,800
------------
$ 16,919,860
------------
TELECOMMUNICATIONS -- WIRELESS -- 6.5%
America Movil S.A. de C.V., "L", ADR ....... 96,800 $ 4,377,296
Dobson Communications Corp. (a)(l) ......... 680,370 5,926,023
Hutchison Telecommunications International
Ltd. (a) ................................. 992,000 2,499,688
KDDI Corp. ................................. 35 237,263
Rogers Communications, Inc., "B" ........... 126,400 3,765,199
Tim Participacoes S.A., ADR ................ 91,700 3,174,654
Turkcell Iletisim Hizmetleri A.S ........... 47,000 237,139
Turkcell Iletisim Hizmetleri A.S., ADR (l) . 225,200 3,013,176
Vimpel-Communications, ADR (a)(l) .......... 33,200 2,621,140
Vodafone Group PLC ......................... 1,458,900 4,043,221
------------
$ 29,894,799
------------
TELEPHONE SERVICES -- 15.0%
AT&T, Inc. (l) ............................. 375,100 $ 13,409,825
Embarq Corp. ............................... 44,300 2,328,408
France Telecom S.A ......................... 169,920 4,698,079
Neuf Cegetel (a) ........................... 31,740 1,126,811
Orascom Telecom Holding (S.A.E), GDR ....... 12,300 811,800
Philippine Long Distance Telephone Co. ..... 9,400 488,984
Qwest Communications International,
Inc. (a)(l) .............................. 350,100 2,930,337
Singapore Telecommunications Ltd. .......... 1,609,550 3,441,990
Sprint Nextel Corp. ........................ 23,800 449,582
Telecom Argentina S.A., ADR (a) ............ 68,100 1,362,681
Telefonica S.A. (l) ........................ 242,900 5,167,546
Telekom Austria AG ......................... 33,400 894,817
Telenor A.S.A .............................. 352,800 6,636,420
TELUS Corp. (non-voting shares) ............ 244,180 10,906,246
Verizon Communications, Inc. ............... 132,200 4,923,128
Windstream Corp. ........................... 622,355 8,849,888
------------
$ 68,426,542
------------
UTILITIES -- ELECTRIC POWER -- 48.4%
AES Corp. (a) .............................. 192,300 $ 4,238,292
AES Tiete S.A., IPS ........................ 124,484,500 3,632,499
American Electric Power Co., Inc. .......... 224,300 9,550,694
Centerpoint Energy, Inc. (l) ............... 160,100 2,654,458
CEZ AS ..................................... 100,100 4,615,939
CMS Energy Corp. (a)(l) .................... 478,200 7,985,940
Constellation Energy Group, Inc. ........... 185,000 12,740,950
CPFL Energia S.A., ADR (l) ................. 76,450 3,132,921
Dominion Resources, Inc. (l) ............... 22,400 1,878,016
DPL, Inc. (l) .............................. 144,800 4,022,544
Duke Energy Corp. .......................... 249,300 8,279,253
Dynegy Holdings, Inc. (a) .................. 679,498 4,919,566
E.ON AG .................................... 88,900 12,064,614
Edf Energies Nouvelles (a) ................. 8,830 467,418
Edison International ....................... 311,100 14,148,828
Eletropaulo Metropolitana S.A., IPS (a) .... 77,620,000 3,962,801
Endesa S.A ................................. 58,000 2,742,626
Enel S.p.A ................................. 375,930 3,877,286
Energias do Brasil S.A ..................... 16,200 250,398
Enersis S.A., ADR .......................... 254,500 4,072,000
Entergy Corp. .............................. 206,160 12,262,397
Entergy Corp. .............................. 20,200 1,864,864
Equatorial Energia S.A., IEU (a) ........... 60,700 535,923
Exelon Corp. ............................... 65,400 4,047,606
FirstEnergy Corp. .......................... 188,200 11,348,460
Fortum Corp. ............................... 63,300 1,801,127
FPL Group, Inc. (l) ........................ 251,000 13,659,420
Iberdrola S.A .............................. 15,500 677,507
International Power PLC .................... 784,600 5,866,417
Mirant Corp. (a) ........................... 292,800 9,243,696
NRG Energy, Inc. (a)(l) .................... 396,400 22,202,364
Pepco Holdings, Inc. ....................... 17,400 452,574
Portland General Electric Co. .............. 8,400 228,900
Public Service Enterprise Group, Inc. ...... 175,200 11,629,776
Red Electrica de Espana S.A. (l) ........... 79,500 3,408,856
RWE AG ..................................... 59,300 6,534,810
TXU Corp. .................................. 66,800 3,621,228
Veolia Environment ......................... 26,960 2,077,900
------------
$220,700,868
------------
Total Common Stocks
(Identified Cost, $344,972,814) ..................... $426,245,941
------------
BONDS -- 1.4%
ASSET BACKED & SECURITIZED -- 0.0%
Falcon Franchise Loan LLC, FRN, 2.7292%,
2023 (i)(n) .............................. $ 876,860 $ 95,928
------------
CABLE TV -- 0.4%
Rogers Cable, Inc., 5.5%, 2014 ............. $ 1,710,000 $ 1,635,085
------------
UTILITIES -- ELECTRIC POWER -- 1.0%
Beaver Valley Funding Corp., 9%, 2017 ...... $ 771,000 $ 865,825
Empresa Nacional de Electricidad S.A.,
8.35%, 2013 .............................. 927,000 1,051,456
Mirant North American LLC, 7.375%, 2013 .... 1,000,000 1,015,000
TXU Eastern Funding Co., 6.75%, 2009 (d) ... 191,000 11,460
TXU Energy Co., 7%, 2013 ................... 1,545,000 1,616,623
------------
$ 4,560,364
------------
Total Bonds
(Identified Cost, $6,428,041) ....................... $ 6,291,377
------------
CONVERTIBLE PREFERRED STOCKS -- 2.0%
NATURAL GAS -- PIPELINE -- 0.7%
El Paso Corp., 4.99% (n) ................... 2,220 $ 2,941,500
------------
UTILITIES -- ELECTRIC POWER -- 1.3%
NRG Energy, Inc., 5.75% .................... 21,900 $ 5,904,788
------------
Total Convertible Preferred Stocks
(Identified Cost, $7,762,209) ....................... $ 8,846,288
------------
CONVERTIBLE BONDS -- 0.4%
CABLE TV -- 0.3%
EchoStar Communications Corp., 5.75%, 2008 . $ 1,290,000 $ 1,314,188
------------
OIL SERVICES -- 0.1%
Transocean, Inc., 1.5%, 2021 ............... $ 570,000 $ 666,188
------------
Total Convertible Bonds
(Identified Cost, $1,919,930) ....................... $ 1,980,376
------------
SHORT-TERM OBLIGATIONS -- 0.8%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized
Cost and Value (y) ....................... $ 3,724,000 $ 3,723,453
------------
COLLATERAL FOR SECURITIES LOANED -- 10.5%
ISSUER SHARES/PAR VALUE ($)
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value ... 48,057,686 $ 48,057,686
------------
Total Investments
(Identified Cost, $412,864,133) (k) ................. $495,145,121
------------
OTHER ASSETS,
LESS LIABILITIES -- (8.6)% .............................. (39,131,724)
------------
Net Assets -- 100.0% .................................. $456,013,397
============
PORTFOLIO OF INVESTMENTS -- continued
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
Sales and Purchases in the table below are reported by currency.
UTILITIES SERIES:
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
DELIVER/RECEIVE SETTLEMENT DATE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------
SALES
EUR 27,334,109 1/29/07 $36,161,765 $36,129,645 $ 32,120
GBP 3,623,370 2/26/07 - 2/28/07 6,944,676 7,098,609 (153,933)
----------- ----------- ---------
$43,106,441 $43,228,254 $(121,813)
=========== =========== =========
PURCHASES
EUR 1,091,519 1/29/07 $ 1,440,536 $ 1,442,747 $ 2,211
GBP 1,209,571 2/26/07 - 2/28/07 2,350,352 2,369,698 19,346
----------- ----------- ---------
$ 3,790,888 $ 3,812,445 $ 21,557
=========== =========== =========
At December 31, 2006, the series had sufficient cash and/or securities to cover any commitments under these
derivative contracts.
Portfolio Footnotes:
(a) Non-income producing security.
(d) Non-income producing security - in default.
(i) Interest only security for which the series 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 December 31, 2006, the Total Return Series held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $781,147,203 and 36.69% of market value. An independent pricing
service provided an evaluated bid for 36.60% of the market value.
(k) As of December 31, 2006, the Utilities Series held securities fair valued in accordance with the policies
adopted by the Board of Trustees, aggregating $11,117,325 and 2.25% of market value. All of these security
values were provided by an independent pricing service using an evaluated bid.
(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 values and percentages of net assets of these securities
were as follows for each series:
MARKET % OF
SERIES VALUE NET ASSETS
------ ------ ----------
Total Return Series ................................................... $29,325,461 1.4%
Utilities Series ...................................................... $ 3,037,428 0.7%
(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 Total Return Series
holds the following restricted securities:
ACQUISITION ACQUISITION CURRENT TOTAL % OF
RESTRICTED SECURITIES DATE COST MARKET VALUE NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
Bayview Financial Revolving Mortgage Loan Trust, FRN, 6.15%, 2040 . 3/01/06 $1,850,000 $1,852,481
CPS Auto Receivables Trust, 2.89%, 2009 ........................... 3/27/03 358,000 37,968
JPMorgan Chase Commercial Mortgage Securities Corp., 5.44%, 2045 .. 9/22/06 1,209,053 1,206,988
Spirit Master Funding LLC, 5.05%, 2023 ............................ 10/04/05 1,758,097 1,626,050
---------- ---
Total Restricted Securities ....................................... $4,723,487 0.2%
========== ===
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.
GDR Global Depository Receipt
IEU International Equity Unit
IPS International Preference Stock
REIT Real Estate Investment Trust
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:
EUR Euro
GBP British Pound
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2006
These statements represent each series' balance sheet, which details the assets and liabilities comprising the total value of
each series.
Capital Emerging Global Massachusetts
Appreciation Growth Growth Investors Trust
Series Series Series Series
-------------- ------------ ------------ --------------
Assets:
Investments --
Unaffiliated issuers, at identified
cost ............................ $ 519,085,837 $296,982,474 $153,165,767 $ 994,319,571
Unrealized appreciation
(depreciation) .................. 38,348,020 33,404,901 25,696,799 173,326,132
-------------- ------------ ------------ --------------
Total investments, at value
(including securities loaned
of $--, $16,519,760,
$20,399,212, and $14,845,197,
respectively) ............... $ 557,433,857 $330,387,375 $178,862,566 $1,167,645,703
Cash .................... -- -- 194 --
Foreign currency, at value
(identified cost, $--, $21,773,
$2,881, and $--, respectively) .. -- 21,879 2,982 --
Receivable for investments sold ... 1,540,584 1,716,562 -- 1,603,259
Receivable for series shares sold . 432 -- 25,739 384,171
Interest and dividends receivable . 598,291 221,852 151,707 755,415
Receivable from investment adviser -- -- 6,221 --
Other assets ...................... 20,791 12,203 6,777 42,561
-------------- ------------ ------------ --------------
Total assets .................. $ 559,593,955 $332,359,871 $179,056,186 $1,170,431,109
============== ============ ============ ==============
Liabilities:
Payable to custodian .............. $ 9,685 $ 142 $ -- $ 24,704
Payable for investments purchased . -- 1,394,254 -- 7,390,275
Payable for series shares reacquired 381,010 436,897 81,427 746,991
Collateral for securities loaned,
at value ........................ -- 16,917,979 21,306,037 15,256,542
Payable to affiliates --
Management fee .................. 46,259 25,840 15,533 69,568
Distribution fees ............... 842 595 241 8,788
Administrative services fee ..... 1,710 980 492 3,329
Payable for independent trustees'
compensation .................... 1,046 648 331 1,717
Accrued expenses and other
liabilities ..................... 92,108 79,749 135,610 123,295
-------------- ------------ ------------ --------------
Total liabilities ............. $ 532,660 $ 18,857,084 $ 21,539,671 $ 23,625,209
-------------- ------------ ------------ --------------
Net assets .......................... $ 559,061,295 $313,502,787 $157,516,515 $1,146,805,900
============== ============ ============ ==============
Net assets consist of:
Paid-in capital ................... $1,354,540,593 $674,306,433 $190,578,933 $1,157,434,896
Unrealized appreciation
(depreciation) on investments and
translation of assets and
liabilities in foreign currencies 38,348,840 33,406,406 25,697,400 173,325,565
Accumulated net realized
gain (loss) on investments and
foreign currency transactions ... (834,804,184) (394,210,052) (60,979,122) (196,426,920)
Undistributed net investment income 976,046 -- 2,219,304 12,472,359
-------------- ------------ ------------ --------------
Total ......................... $ 559,061,295 $313,502,787 $157,516,515 $1,146,805,900
============== ============ ============ ==============
Net Assets:
Initial Class ..................... $ 528,521,519 $291,964,691 $148,793,450 $ 826,937,396
Service Class ..................... 30,539,776 21,538,096 8,723,065 319,868,504
-------------- ------------ ------------ --------------
Total ......................... $ 559,061,295 $313,502,787 $157,516,515 $1,146,805,900
============== ============ ============ ==============
Shares of beneficial
interest outstanding:
Initial Class ..................... 25,787,444 15,826,639 9,455,835 24,401,928
Service Class ..................... 1,502,755 1,183,961 557,981 9,505,811
---------- ---------- ---------- ----------
Total ............... 27,290,199 17,010,600 10,013,816 33,907,739
========== ========== ========== ==========
Net asset value per share (net
assets/shares of beneficial interest
outstanding):
Initial Class ..................... $20.50 $18.45 $15.74 $33.89
====== ====== ====== ======
Service Class ..................... $20.32 $18.19 $15.63 $33.65
====== ====== ====== ======
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2006 -- continued
Mid Cap Total
Growth Research Return Utilities
Series Series Series Series
-------------- ---------------- ------------------ ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 89,664,668 $322,347,740 $1,899,829,097 $412,864,133
Unrealized appreciation (depreciation) .. 7,955,579 27,009,983 229,063,366 82,280,988
------------ ------------ -------------- ------------
Total investments, at value (including
securities loaned of $7,786,715,
$9,870,701, $73,091,201, and
$46,578,956, respectively) .......... $ 97,620,247 $349,357,723 $2,128,892,463 $495,145,121
Cash ...................................... 822 10,636 23,315 22,638
Foreign currency, at value (identified
cost, $--, $--, $38, and $10,419,
respectively) ........................... -- -- 38 9,555
Receivable for forward foreign currency
exchange contracts ...................... -- -- -- 74,802
Receivable for investments sold ........... 562,305 477,013 55,005,240 11,691,279
Receivable for series shares sold ......... -- 17,068 1,742 153,202
Interest and dividends receivable ......... 48,421 371,009 9,559,922 718,161
Receivable from investment adviser ........ 11,801 -- -- --
Other assets .............................. 3,996 15,012 76,352 17,117
------------ ------------ -------------- ------------
Total assets .......................... $ 98,247,592 $350,248,461 $2,193,559,072 $507,831,875
============ ============ ============== ============
Liabilities:
Payable for forward foreign currency
exchange contracts ...................... $ -- $ -- $ -- $ 175,058
Payable for investments purchased ......... -- 358,119 3,258,755 3,372,218
Payable for series shares reacquired ...... 43,695 595,162 1,241,282 70,661
Collateral for securities loaned, at value 7,975,921 10,110,323 74,891,980 48,057,686
Payable to affiliates --
Management fee .......................... 7,465 27,788 150,537 36,244
Distribution fees ....................... 1,011 808 24,890 2,158
Administrative services fee ............. 284 1,059 5,507 1,404
Payable for independent trustees'
compensation ............................ 284 685 2,859 765
Accrued expenses and other liabilities .... 70,233 81,841 232,102 102,284
------------ ------------ -------------- ------------
Total liabilities ..................... $ 8,098,893 $ 11,175,785 $ 79,807,912 $ 51,818,478
------------ ------------ -------------- ------------
Net assets .................................. $ 90,148,699 $339,072,676 $2,113,751,160 $456,013,397
============ ============ ============== ============
Net assets consist of:
Paid-in capital ........................... $109,062,453 $502,308,204 $1,756,020,330 $416,217,148
Unrealized appreciation (depreciation) on
investments and translation of assets
and liabilities in foreign currencies ... 7,955,579 27,009,654 229,062,727 82,176,372
Accumulated net realized gain (loss) on
investments and foreign currency
transactions ............................ (26,888,444) (192,884,270) 68,857,141 (48,757,653)
Undistributed net investment income ....... 19,111 2,639,088 59,810,962 6,377,530
------------ ------------ -------------- ------------
Total ................................. $ 90,148,699 $339,072,676 $2,113,751,160 $456,013,397
============ ============ ============== ============
Net Assets:
Initial Class ............................. $ 53,503,815 $309,756,859 $1,210,548,672 $377,353,594
Service Class ............................. 36,644,884 29,315,817 903,202,488 78,659,803
------------ ------------ -------------- ------------
Total ................................. $ 90,148,699 $339,072,676 $2,113,751,160 $456,013,397
============ ============ ============== ============
Shares of beneficial interest outstanding:
Initial Class ............................. 8,738,618 16,535,323 60,478,944 16,232,045
Service Class ............................. 6,056,639 1,575,794 45,482,392 3,407,146
---------- ---------- ----------- ----------
Total ................................. 14,795,257 18,111,117 105,961,336 19,639,191
========== ========== =========== ==========
Net asset value per share (net assets/shares
of beneficial interest outstanding):
Initial Class ............................. $6.12 $18.73 $20.02 $23.25
===== ====== ====== ======
Service Class ............................. $6.05 $18.60 $19.86 $23.09
===== ====== ====== ======
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2006
These statements describe how much each series earned in investment income and accrued in expenses. It also describes any
gains and/or losses generated by series' operations.
Capital Emerging Global Massachusetts
Appreciation Growth Growth Investors Trust
Series Series Series Series
------------ ------------ -------------- ------------
Net investment income (loss):
Income --
Dividends ............................... $ 5,430,980 $ 1,983,631 $ 4,079,094 $ 19,144,573
Interest ................................ 519,858 349,130 52,850 851,804
Income on securities loaned ............. -- 63,664 74,085 32,259
Foreign taxes withheld .................. (62,167) (62,356) (184,190) (121,793)
------------ ------------ -------------- ------------
Total investment income ............... $ 5,888,671 $ 2,334,069 $ 4,021,839 $ 19,906,843
------------ ------------ -------------- ------------
Expenses --
Management fee .......................... $ 4,578,104 $ 2,511,649 $ 1,430,443 $ 6,153,178
Distribution fees ....................... 83,603 54,543 20,500 632,564
Administrative services fee ............. 146,800 82,461 39,020 264,598
Independent trustees' compensation ...... 59,657 33,756 15,121 102,666
Custodian fee ........................... -- 106,482 172,480 212,733
Shareholder communications .............. -- 11,990 47,152 14,111
Auditing fees ........................... -- 36,650 48,742 36,018
Legal fees .............................. -- 4,587 5,158 5,141
Other ................................... 48,277 -- -- --
Miscellaneous ........................... -- 31,383 47,143 79,762
------------ ------------ -------------- ------------
Total expenses ........................ $ 4,916,441 $ 2,873,501 $ 1,825,759 $ 7,500,771
Fees paid indirectly .................... (13,063) (8,545) -- (23,517)
------------ ------------ -------------- ------------
Net expenses .......................... $ 4,903,378 $ 2,864,956 $ 1,825,759 $ 7,477,254
------------ ------------ -------------- ------------
Net investment income (loss) .............. $ 985,293 $ (530,887) $ 2,196,080 $ 12,429,589
============ ============ ============== ============
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Realized gain (loss) (identified cost
basis) --
Investment transactions (net of $--, $--,
$56,433, and $-- country tax,
respectively) ......................... $ 16,668,245 $ 50,937,178 $ 19,238,193 $101,580,146
Foreign currency transactions ........... (7,887) (15,180) (58,614) 45,626
------------ ------------ -------------- ------------
Net realized gain (loss) on
investments and foreign currency
transactions ........................ $ 16,660,358 $ 50,921,998 $ 19,179,579 $101,625,772
------------ ------------ -------------- ------------
Change in unrealized appreciation
(depreciation) --
Investments (net of $--, $--, $22,501, and
$-- decrease in deferred country tax,
respectively) ......................... $ 17,353,085 $(25,397,246) $ 3,926,278 $ 25,639,977
Translation of assets and liabilities in
foreign currencies .................... 3,497 3,689 1,377 (536)
------------ ------------ -------------- ------------
$ 17,356,582 $(25,393,557) $ 3,927,655 $ 25,639,441
============ ============ ============== ============
Net realized and unrealized gain
(loss) on investments and foreign
currency .......................... $ 34,016,940 $ 25,528,441 $ 23,107,234 $127,265,213
------------ ------------ -------------- ------------
Change in net assets from operations $ 35,002,233 $ 24,997,554 $ 25,303,314 $139,694,802
============ ============ ============== ============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2006 -- continued
Mid Cap Total
Growth Research Return Utilities
Series Series Series Series
------------ ------------ -------------- ------------
Net investment income (loss):
Income --
Dividends ............................... $ 959,090 $ 5,606,122 $ 30,665,774 $ 12,499,950
Interest ................................ 52,956 83,825 43,467,383 1,063,846
Income on securities loaned ............. 22,780 16,853 71,746 199,137
Foreign taxes withheld .................. (1,306) (32,552) (117,379) (494,687)
------------ ------------ -------------- ------------
Total investment income ............... $ 1,033,520 $ 5,674,248 $ 74,087,524 $ 13,268,246
------------ ------------ -------------- ------------
Expenses --
Management fee .......................... $ 752,368 $ 2,654,525 $ 13,558,814 $ 2,991,548
Distribution fee ........................ 97,397 70,627 2,071,142 149,329
Administrative services fee ............. 24,331 87,841 467,480 101,386
Independent trustees' compensation ...... 10,102 35,837 193,774 36,262
Shareholder communications .............. 23,720 8,402 11,523 55,704
Auditing fees ........................... 36,018 36,650 48,035 37,647
Legal fees .............................. 5,341 5,058 5,401 12,685
Miscellaneous ........................... 11,560 23,585 149,096 39,895
------------ ------------ -------------- ------------
Total expenses ........................ $ 1,026,851 $ 3,019,976 $ 17,009,882 $ 3,598,818
Fees paid indirectly .................... (1,072) (3,789) (41,680) (16,629)
Reduction of expenses by investment
adviser ............................... (16,972) -- -- --
------------ ------------ -------------- ------------
Net expenses .......................... $ 1,008,807 $ 3,016,187 $ 16,968,202 $ 3,582,189
------------ ------------ -------------- ------------
Net investment income ..................... $ 24,713 $ 2,658,061 $ 57,119,322 $ 9,686,057
============ ============ ============== ============
Realized and unrealized gain (loss) on
investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions (net of $--, $--,
$--, and $607 country tax,
respectively) ......................... $ 7,362,869 $ 30,291,132 $ 95,487,102 $ 70,943,432
Foreign currency transactions ........... (558) (10,191) 1,553 (3,153,641)
------------ ------------ -------------- ------------
Net realized gain (loss) on investments
and foreign currency transactions ... $ 7,362,311 $ 30,280,941 $ 95,488,655 $ 67,789,791
------------ ------------ -------------- ------------
Change in unrealized appreciation
(depreciation) --
Investments ............................. $ (5,571,801) $ 2,220,235 $ 86,581,507 $ 39,315,907
Translation of assets and liabilities in
foreign currencies .................... (21) (207) (110) (217,361)
============ ============ ============== ============
Net realized and unrealized gain
(loss) on investments and
foreign currency .................. $ 1,790,489 $ 32,500,969 $ 182,070,052 $106,888,337
------------ ------------ -------------- ------------
Change in net assets from operations $ 1,815,202 $ 35,159,030 $ 239,189,374 $116,574,394
============ ============ ============== ============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2006
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions, and any
shareholder transactions.
Capital Emerging Global Massachusetts
Appreciation Growth Growth Investors Trust
Series Series Series Series
------------ ------------ -------------- --------------
Changes in net assets:
From operations:
Net investment income (loss) ............ $ 985,293 $ (530,887) $ 2,196,080 $ 12,429,589
Net realized gain (loss) on investments
and foreign currency transactions ..... 16,660,358 50,921,998 19,179,579 101,625,772
Net unrealized gain (loss) on investments
and foreign currency translation ...... 17,356,582 (25,393,557) 3,927,655 25,639,441
------------- ------------ -------------- --------------
Change in net assets from operations .. $ 35,002,233 $ 24,997,554 $ 25,303,314 $ 139,694,802
------------- ------------ -------------- --------------
Distributions declared to shareholders:
From net investment income
Initial Class ........................... $ (1,174,123) $ -- $ (845,334) $ (7,057,076)
Service Class ........................... -- -- (26,908) (1,512,887)
------------- ------------ -------------- --------------
Total distributions declared to
shareholders ........................ $ (1,174,123) $ -- $ (872,242) $ (8,569,963)
------------- ------------ -------------- --------------
Change in net assets from series share
transactions .............................. $(159,725,494) $(83,175,351) $ (29,888,578) $ (112,817,168)
------------- ------------ -------------- --------------
Total change in net assets ............ $(125,897,384) $(58,177,797) $ (5,457,506) $ 18,307,671
Net assets:
At beginning of period .................... 684,958,679 371,680,584 162,974,021 1,128,498,229
------------- ------------ -------------- --------------
At end of period .......................... $ 559,061,295 $313,502,787 $ 157,516,515 $1,146,805,900
============= ============ ============== ==============
Undistributed net investment income
included in net assets at end of period ... $ 976,046 $ -- $ 2,219,304 $ 12,472,359
============= ============ ============== ==============
Mid Cap Total
Growth Research Return Utilities
Series Series Series Series
------------ ------------ -------------- ------------
Changes in net assets:
From operations:
Net investment income ................... $ 24,713 $ 2,658,061 $ 57,119,322 $ 9,686,057
Net realized gain (loss) on investments
and foreign currency transactions ..... 7,362,311 30,280,941 95,488,655 67,789,791
Net unrealized gain (loss) on investments
and foreign currency translation ...... (5,571,822) 2,220,028 86,581,397 39,098,546
------------- ------------ -------------- --------------
Change in net assets from operations .. $ 1,815,202 $ 35,159,030 $ 239,189,374 $ 116,574,394
------------- ------------ -------------- --------------
Distributions declared to shareholders:
From net investment income
Initial Class ........................... $ -- $ (2,194,925) $ (35,643,946) $ (10,415,468)
Service Class ........................... -- (117,575) (20,867,672) (1,570,947)
From net realized gain on investments and
foreign currency transactions
Initial Class ........................... -- -- (50,266,953) --
Service Class ........................... -- -- (31,771,800) --
------------- ------------ -------------- --------------
Total distributions declared to
shareholders ........................ $ -- $ (2,312,500) $ (138,550,371) $ (11,986,415)
------------- ------------ -------------- --------------
Change in net assets from series share
transactions .............................. $ (22,016,463) $(88,643,949) $ (128,122,864) $ (40,531,588)
------------- ------------ -------------- --------------
Total change in net assets ............ $ (20,201,261) $(55,797,419) $ (27,483,861) $ 64,056,391
Net assets:
At beginning of period .................... 110,349,960 394,870,095 2,141,235,021 391,957,006
------------- ------------ -------------- --------------
At end of period .......................... $ 90,148,699 $339,072,676 $2,113,751,160 $ 456,013,397
============= ============ ============== ==============
Undistributed net investment income included
in net assets at end of period ............ $ 19,111 $ 2,639,088 $ 59,810,962 $ 6,377,530
============= ============ ============== ==============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2005
Capital Emerging Global Massachusetts
Appreciation Growth Growth Investors Trust
Series Series Series Series
------------ ------------ -------------- --------------
Changes in net assets:
From operations:
Net investment income (loss) ............ $ 1,202,519 $ (1,060,655) $ 971,332 $ 8,562,119
Net realized gain (loss) on investments
and foreign currency transactions ..... 96,429,510 34,816,925 18,438,288 104,152,845
Net unrealized gain (loss) on investments
and foreign currency translation ...... (75,218,128) (2,722,526) (4,456,778) (30,683,478)
------------- ------------ -------------- --------------
Change in net assets from operations .. $ 22,413,901 $ 31,033,744 $ 14,952,842 $ 82,031,486
------------- ------------ -------------- --------------
Distributions declared to shareholders:
From net investment income
Initial Class ........................... $ (4,220,755) $ -- $ (747,488) $ (9,459,588)
Service Class ........................... (132,167) -- (16,861) (1,230,447)
------------- ------------ -------------- --------------
Total distributions declared to
shareholders ........................ $ (4,352,922) $ -- $ (764,349) $ (10,690,035)
------------- ------------ -------------- --------------
Change in net assets from series share
transactions ................................ $ (41,345,711) $(96,303,265) $ (34,145,328) $ (98,483,063)
------------- ------------ -------------- --------------
Total change in net assets ............ $ (23,284,732) $(65,269,521) $ (19,956,835) $ (27,141,612)
Net assets:
At beginning of period .................... 708,243,411 436,950,105 182,930,856 1,155,639,841
------------- ------------ -------------- --------------
At end of period .......................... $ 684,958,679 $371,680,584 $ 162,974,021 $1,128,498,229
============= ============ ============== ==============
Undistributed net investment income
included in net assets at end of period ..... $ 1,173,370 $ -- $ 871,727 $ 8,567,714
============= ============ ============== ==============
Mid Cap Total
Growth Research Return Utilities
Series Series Series Series
------------ ------------ -------------- ------------
Changes in net assets:
From operations:
Net investment income (loss) ............ $ (556,091) $ 2,322,659 $ 52,242,067 $ 6,960,625
Net realized gain (loss) on investments
and foreign currency transactions ..... 8,793,993 54,828,621 83,594,515 68,863,409
Net unrealized gain (loss) on investments
and foreign currency translation ...... (5,800,979) (26,533,143) (73,286,988) (15,952,808)
------------- ------------ -------------- --------------
Change in net assets from operations .. $ 2,436,923 $ 30,618,137 $ 62,549,594 $ 59,871,226
------------- ------------ -------------- --------------
Distributions declared to shareholders:
From net investment income
Initial Class ........................... $ -- $ (2,257,939) $ (38,855,607) $ (3,336,688)
Service Class ........................... -- (96,245) (15,487,606) (304,599)
From net realized gain on investments and
foreign currency transactions
Initial Class ........................... -- -- (37,381,811) --
Service Class ........................... -- -- (15,897,759) --
------------- ------------ -------------- --------------
Total distributions declared to
shareholders ........................ $ -- $ (2,354,184) $ (107,622,783) $ (3,641,287)
------------- ------------ -------------- --------------
Change in net assets from series share
transactions .............................. $ (21,429,298) $(91,027,306) $ 66,689,130 $ (25,412,312)
------------- ------------ -------------- --------------
Total change in net assets ............ $ (18,992,375) $(62,763,353) $ 21,615,941 $ 30,817,627
Net assets:
At beginning of period .................... 129,342,335 457,633,448 2,119,619,080 361,139,379
------------- ------------ -------------- --------------
At end of period .......................... $ 110,349,960 $394,870,095 $2,141,235,021 $ 391,957,006
============= ============ ============== ==============
Undistributed net investment income included
in net assets at end of period ............ $ -- $ 2,311,969 $ 56,500,861 $ 11,785,317
============= ============ ============== ==============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Capital Appreciation Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 19.31 $ 19.25 $ 17.35 $ 13.48 $ 19.97
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (loss) (d) ................ $ 0.03 $ 0.03 $ 0.11 $ 0.01 $ (0.01)
Net realized and unrealized gain
(loss) on investments and foreign currency ..... 1.20 0.14 1.80 3.86 (6.45)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 1.23 $ 0.17 $ 1.91 $ 3.87 $ (6.46)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ (0.04) $ (0.11) $ (0.01) $ -- $ (0.03)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 20.50 $ 19.31 $ 19.25 $ 17.35 $ 13.48
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 6.37 0.92 11.02(b) 28.71(j) (32.39)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 0.79 0.85 0.82 0.82 0.81
Net investment income (loss) ..................... 0.18 0.18 0.62 0.07 (0.05)
Portfolio turnover (%) ............................. 60 153 64 100 77
Net assets at end of period (000 Omitted) .......... $528,522 $649,588 $672,246 $722,980 $657,634
Capital Appreciation Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 19.16 $ 19.11 $ 17.25 $ 13.44 $ 19.95
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (loss) (d) ................. $ (0.01) $ (0.01) $ 0.07 $ (0.03) $ (0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 1.17 0.13 1.79 3.84 (6.45)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 1.16 $ 0.12 $ 1.86 $ 3.81 $ (6.49)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ -- $ (0.07) $ -- $ -- $ (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 20.32 $ 19.16 $ 19.11 $ 17.25 $ 13.44
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 6.05 0.63 10.78(b) 28.35(j) (32.57)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 1.04 1.10 1.07 1.07 1.06
Net investment income (loss) ..................... (0.07) (0.07) 0.40 (0.18) (0.24)
Portfolio turnover (%) ............................. 60 153 64 100 77
Net assets at end of period (000 Omitted) .......... $ 30,540 $ 35,371 $ 35,997 $ 32,177 $ 21,652
(b) The series' 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 series sales. The
non-recurring accrual resulted in an increase in the net asset value of $0.02 per share based on shares outstanding on
the day the proceeds were recorded. Excluding the effect of this accrual from the ending net asset value per share, the
Initial Class and Service Class total returns for the year ended December 31, 2004 would have each been lower by
approximately 0.11%.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(j) The series' net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.28 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share,
the Initial Class and Service Class total returns for the year ended December 31, 2003 would have been lower by
approximately 2.08% and 2.09%, respectively.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Emerging Growth Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 17.08 $ 15.65 $ 13.82 $ 10.51 $ 15.96
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net Investment loss (d) .......................... $ (0.02) $ (0.04) $ (0.02) $ (0.02) $ (0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 1.39 1.47 1.85 3.33 (5.43)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 1.37 $ 1.43 $ 1.83 $ 3.31 $ (5.45)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 18.45 $ 17.08 $ 15.65 $ 13.82 $ 10.51
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 8.02 9.14 13.24(b) 31.49(j) (34.15)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 0.83 0.84 0.80 0.81 0.78
Net investment loss .............................. (0.14) (0.26) (0.13) (0.17) (0.18)
Portfolio turnover (%) ............................. 123 88 94 100 105
Net assets at end of period (000 Omitted) .......... $291,965 $350,083 $414,811 $450,707 $409,015
Emerging Growth Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 16.89 $ 15.51 $ 13.73 $ 10.47 $ 15.94
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment loss (d) .......................... $ (0.07) $ (0.08) $ (0.05) $ (0.05) $ (0.05)
Net realized and unrealized gain (loss)
on investments and foreign currency ............ 1.37 1.46 1.83 3.31 (5.42)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 1.30 $ 1.38 $ 1.78 $ 3.26 $ (5.47)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 18.19 $ 16.89 15.51 $ 13.73 $ 10.47
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 7.70 8.90 12.96(b) 31.14(j) (34.32)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 1.08 1.09 1.06 1.06 1.03
Net investment loss .............................. (0.38) (0.51) (0.36) (0.42) (0.39)
Portfolio turnover (%) ............................. 123 88 94 100 105
Net assets at end of period (000 Omitted) .......... $ 21,538 $ 21,597 $ 22,139 $ 18,147 $ 11,009
(b) The series' 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 series sales. The
non-recurring accrual resulted in an increase in the net asset value of $0.01 per share based on 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.
(j) The series' net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.16 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share,
the Initial Class and Service Class total returns for the year ended December 31, 2003 would have been lower by
approximately 1.48% and 1.50%, respectively.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Global Growth Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 13.48 $ 12.31 $ 10.70 $ 7.94 $ 9.87
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.20 $ 0.07 $ 0.05 $ 0.07 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency ............... $ 2.14 1.16 1.61 2.73 (1.95)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 2.34 $ 1.23 $ 1.66 $ 2.80 $ (1.91)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ (0.08) $ (0.06) $ (0.05) $ (0.04) $ (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 15.74 $ 13.48 $ 12.31 $ 10.70 $ 7.94
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 17.37 10.03 15.61(b) 35.44(j) (19.36)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 1.14 1.08 1.07 1.11 1.08
Net investment income ............................ 1.39 0.59 0.48 0.76 0.49
Portfolio turnover (%) ............................. 92 87 115 147 118
Net assets at end of period (000 Omitted) .......... $148,793 $155,375 $175,146 $185,500 $167,014
Global Growth Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 13.39 $ 12.24 $ 10.64 $ 7.90 $ 9.85
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.17 $ 0.04 $ 0.02 $ 0.04 $ 0.02
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 2.12 1.14 1.61 2.73 (1.95)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 2.29 $ 1.18 $ 1.63 $ 2.77 $ (1.93)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ (0.05) $ (0.03) $ (0.03) $ (0.03) $ (0.02)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 15.63 $ 13.39 $ 12.24 $ 10.64 $ 7.90
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 17.09 9.65 15.41(b) 35.13(j) (19.62)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 1.39 1.33 1.32 1.36 1.33
Net investment income ............................ 1.16 0.34 0.23 0.41 0.25
Portfolio turnover (%) ............................. 92 87 115 147 118
Net assets at end of period (000 Omitted) .......... $ 8,723 $ 7,599 $ 7,785 $ 6,792 $ 3,724
(b) The series' 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 series 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.
(j) The series' net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.06 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share,
the Initial Class and Service Class total returns for the year ended December 31, 2003 would have been lower by
approximately 0.79% and 0.80%, respectively.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Massachusetts Investors Trust Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 30.15 $ 28.27 $ 25.51 $ 21.01 $ 26.92
-------- -------- ---------- ---------- ----------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.37 $ 0.23 $ 0.25 $ 0.23 $ 0.21
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 3.62 1.92 2.77 4.52 (5.88)
-------- -------- ---------- ---------- ----------
Total from investment operations ............. $ 3.99 $ 2.15 $ 3.02 $ 4.75 $ (5.67)
-------- -------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income ....................... $ (0.25) $ (0.27) $ (0.26) $ (0.25) $ (0.24)
-------- -------- ---------- ---------- ----------
Net asset value, end of period ..................... $ 33.89 $ 30.15 $ 28.27 $ 25.51 $ 21.01
======== ======== ========== ========== ==========
Total return (%) (k)(s) ............................ 13.30 7.70 11.99(b) 22.83(j) (21.22)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 0.61 0.63 0.61 0.61 0.60
Net investment income ............................ 1.18 0.79 0.95 1.04 0.88
Portfolio turnover (%) ............................. 35 49 78 78 57
Net assets at end of period (000 Omitted) .......... $826,937 $929,794 $1,073,587 $1,153,238 $1,107,698
Massachusetts Investors Trust Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 29.96 $ 28.13 $ 25.39 $ 20.94 $ 26.89
-------- -------- ---------- ---------- ----------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.28 $ 0.16 $ 0.18 $ 0.18 $ 0.16
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 3.61 1.90 2.77 4.49 (5.88)
-------- -------- ---------- ---------- ----------
Total from investment operations ............. $ 3.89 $ 2.06 $ 2.95 $ 4.67 $ (5.72)
-------- -------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income ....................... $ (0.20) $ (0.23) $ (0.21) $ (0.22) $ (0.23)
-------- -------- ---------- ---------- ----------
Net asset value, end of period ..................... $ 33.65 $ 29.96 $ 28.13 $ 25.39 $ 20.94
======== ======== ========== ========== ==========
Total return (%) (k)(s) ............................ 13.04 7.42 11.74(b) 22.45(j) (21.40)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 0.86 0.88 0.86 0.86 0.85
Net investment income ............................ 0.88 0.54 0.70 0.79 0.70
Portfolio turnover (%) ............................. 35 49 78 78 57
Net assets at end of period (000 Omitted) .......... $319,869 $198,705 $ 82,053 $ 76,899 $ 51,859
(b) The series' 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 series sales. The
non-recurring accrual resulted in an increase in the net asset value of $0.01 per share based on 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.
(j) The series' net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.002 per share based on shares
outstanding on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value
per share, the Initial Class and Service Class total returns for the year ended December 31, 2003 would have each been
lower by approximately 0.01%.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Mid Cap Growth Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 5.98 $ 5.80 $ 5.06 $ 3.67 $ 6.94
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (loss) (d) ................. $ 0.01 $ (0.02) $ (0.03) $ (0.02) $ (0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 0.13 0.20 0.77 1.41 (3.25)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 0.14 $ 0.18 $ 0.74 $ 1.39 $ (3.27)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 6.12 $ 5.98 $ 5.80 $ 5.06 $ 3.67
======== ======== ======== ======== ========
Total return (%) (k)(r)(s) ......................... 2.34 3.10 14.62 37.87 (47.12)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses before expense reductions (f) ........... 0.93 0.89 0.85 0.90 0.85
Expenses after expense reductions (f) ............ 0.91 N/A N/A N/A N/A
Net investment income (loss) ..................... 0.11 (0.40) (0.56) (0.46) (0.39)
Portfolio turnover (%) ............................. 139 81 84 90 160
Net assets at end of period (000 Omitted) .......... $ 53,504 $ 68,637 $ 83,899 $ 76,159 $ 39,941
Mid Cap Growth Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 5.92 $ 5.76 $ 5.04 $ 3.67 $ 6.94
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment loss (d) .......................... $ (0.01) $ (0.04) $ (0.04) $ (0.03) $ (0.03)
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 0.14 0.20 0.76 1.40 (3.24)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 0.13 $ 0.16 $ 0.72 $ 1.37 $ (3.27)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 6.05 $ 5.92 $ 5.76 $ 5.04 $ 3.67
======== ======== ======== ======== ========
Total return (%) (k)(r)(s) ......................... 2.20 2.78 14.29 37.33 (47.12)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses before expense reductions (f) ........... 1.18 1.15 1.10 1.15 1.10
Expenses after expense reductions (f) ............ 1.16 N/A N/A N/A N/A
Net investment loss .............................. (0.11) (0.65) (0.81) (0.72) (0.60)
Portfolio turnover (%) ............................. 139 81 84 90 160
Net assets at end of period (000 Omitted) .......... $ 36,645 $ 41,713 $ 45,443 $ 37,081 $ 14,028
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Research Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 17.04 $ 15.88 $ 13.84 $ 11.14 $ 14.93
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.13 $ 0.09 $ 0.08 $ 0.11 $ 0.08
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 1.67 1.16 2.09 2.69 (3.82)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 1.80 $ 1.25 $ 2.17 $ 2.80 $ (3.74)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ (0.11) $ (0.09) $ (0.13) $ (0.10) $ (0.05)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 18.73 $ 17.04 $ 15.88 $ 13.84 $ 11.14
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 10.62 7.94 15.83(b) 25.32(j) (25.11)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 0.82 0.83 0.80 0.80 0.78
Net investment income ............................ 0.76 0.57 0.53 0.93 0.61
Portfolio turnover (%) ............................. 87 92 118 124 98
Net assets at end of period (000 Omitted) .......... $309,757 $366,831 $432,318 $466,139 $458,394
Research Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 16.93 $ 15.78 $ 13.77 $ 11.09 $ 14.91
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.09 $ 0.05 $ 0.04 $ 0.08 $ 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 1.65 1.16 2.08 2.68 (3.83)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 1.74 $ 1.21 $ 2.12 $ 2.76 $ (3.77)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ (0.07) $ (0.06) $ (0.11) $ (0.08) $ (0.05)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 18.60 $ 16.93 $ 15.78 $ 13.77 $ 11.09
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 10.32 7.71 15.54(b) 25.01(j) (25.36)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 1.07 1.09 1.05 1.05 1.03
Net investment income ............................ 0.54 0.33 0.30 0.67 0.48
Portfolio turnover (%) ............................. 87 92 118 124 98
Net assets at end of period (000 Omitted) .......... $ 29,316 $ 28,039 $ 25,315 $ 16,010 $ 7,134
(b) The series' 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 series sales. The
non-recurring accrual resulted in an increase in the net asset value of $0.01 per share based on 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.
(j) The series' net asset value and total return calculation include proceeds received on March 26, 2003 for the partial
payment of a non-recurring litigation settlement from Cendant Corporation, recorded as a realized gain on investment
transactions. The proceeds resulted in an increase in the net asset value of $0.06 per share based on shares outstanding
on the day the proceeds were received. Excluding the effect of this payment from the ending net asset value per share,
the Initial Class and Service Class total returns for the year ended December 31, 2003 would have each been lower by
approximately 0.52%.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Total Return Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............. $ 19.10 $ 19.55 $ 18.00 $ 15.90 $ 17.95
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations
Net investment income (d) ...................... $ 0.54 $ 0.48 $ 0.48 $ 0.42 $ 0.50
Net realized and unrealized gain (loss) on
investments and foreign currency ............. 1.69 0.07 1.53 2.24 (1.44)
---------- ---------- ---------- ---------- ----------
Total from investment operations ........... $ 2.23 $ 0.55 $ 2.01 $ 2.66 $ (0.94)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income ..................... $ (0.54) $ (0.51) $ (0.46) $ (0.56) $ (0.55)
From net realized gain on investments and
foreign currency transactions ................ $ (0.77) (0.49) -- -- (0.56)
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (1.31) $ (1.00) $ (0.46) $ (0.56) $ (1.11)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................... $ 20.02 $ 19.10 $ 19.55 $ 18.00 $ 15.90
========== ========== ========== ========== ==========
Total return (%) (k)(s) .......................... 12.22 3.02 11.47(b) 17.15 (5.69)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ................................... 0.71 0.71 0.70 0.71 0.70
Net investment income .......................... 2.81 2.52 2.60 2.52 2.95
Portfolio turnover (%) ........................... 48 42 67 65 82
Net assets at end of period (000 Omitted) ........ $1,210,549 $1,370,782 $1,571,550 $1,618,983 $1,571,494
Total Return Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............. $ 18.97 $ 19.43 $ 17.92 $ 15.85 $ 17.93
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations
Net investment income (d) ...................... $ 0.49 $ 0.43 $ 0.43 $ 0.36 $ 0.45
Net realized and unrealized gain (loss) on
investments and foreign currency ............. 1.67 0.08 1.51 2.24 (1.43)
---------- ---------- ---------- ---------- ----------
Total from investment operations ........... $ 2.16 $ 0.51 $ 1.94 $ 2.60 $ (0.98)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income ..................... $ (0.50) $ (0.48) $ (0.43) $ (0.53) $ (0.54)
From net realized gain on investments and
foreign currency transactions ................ (0.77) (0.49) -- -- (0.56)
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders ..... $ (1.27) $ (0.97) $ (0.43) $ (0.53) $ (1.10)
---------- ---------- ---------- ---------- ----------
Net asset value, end of period ................... $ 19.86 $ 18.97 $ 19.43 $ 17.92 $ 15.85
========== ========== ========== ========== ==========
Total return (%) (k)(s) .......................... 11.91 2.81 11.14(b) 16.83 (5.88)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ................................... 0.96 0.96 0.95 0.95 0.95
Net investment income .......................... 2.58 2.28 2.39 2.20 2.77
Portfolio turnover (%) ........................... 48 42 67 65 82
Net assets at end of period (000 Omitted) ........ $ 903,202 $ 770,453 $ 548,069 $ 300,220 $ 152,768
(b) The series' 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 series 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.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years.
Certain information reflects financial results for a single series share. The total returns in the table represent the rate
by which an investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by the series' independent registered public
accounting firm, whose report, together with the series' financial statements, are included in this report.
Utilities Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
INITIAL CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 18.11 $ 15.61 $ 12.23 $ 9.28 $ 12.61
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.48 $ 0.31 $ 0.30 $ 0.24 $ 0.26
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 5.25 2.35 3.34 3.05 (3.22)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 5.73 $ 2.66 $ 3.64 $ 3.29 $ (2.96)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ (0.59) $ (0.16) $ (0.26) $ (0.34) $ (0.37)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 23.25 $ 18.11 $ 15.61 $ 12.23 $ 9.28
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 32.35 17.23 30.37(b)(v) 36.26 (23.87)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 0.84 0.86 0.84 0.84 0.82
Net investment income ............................ 2.41 1.87 2.25 2.28 2.55
Portfolio turnover (%) ............................. 93 96 103 134 79
Net assets at end of period (000 Omitted) .......... $377,354 $344,717 $328,541 $287,648 $241,772
Utilities Series
------------------------------------------------------------------------
Years Ended 12/31
------------------------------------------------------------------------
SERVICE CLASS SHARES 2006 2005 2004 2003 2002
-------- -------- -------- -------- --------
Net asset value, beginning of period ............... $ 18.01 $ 15.53 $ 12.18 $ 9.24 $ 12.59
-------- -------- -------- -------- --------
Income (loss) from investment operations
Net investment income (d) ........................ $ 0.42 $ 0.27 $ 0.26 $ 0.20 $ 0.24
Net realized and unrealized gain (loss) on
investments and foreign currency ............... 5.22 2.35 3.32 3.06 (3.22)
-------- -------- -------- -------- --------
Total from investment operations ............. $ 5.64 $ 2.62 $ 3.58 $ 3.26 $ (2.98)
-------- -------- -------- -------- --------
Less distributions declared to shareholders
From net investment income ....................... $ (0.56) $ (0.14) $ (0.23) $ (0.32) $ (0.37)
-------- -------- -------- -------- --------
Net asset value, end of period ..................... $ 23.09 18.01 $ 15.53 $ 12.18 $ 9.24
======== ======== ======== ======== ========
Total return (%) (k)(s) ............................ 31.96 16.97 30.01(b)(v) 36.03 (24.09)
Ratios (%) (to average net assets) and
Supplemental data:
Expenses (f) ..................................... 1.09 1.11 1.09 1.09 1.07
Net investment income ............................ 2.12 1.62 2.01 1.95 2.41
Portfolio turnover (%) ............................. 93 96 103 134 79
Net assets at end of period (000 Omitted) .......... $ 78,660 $ 47,240 $ 32,599 $ 22,555 $ 12,763
(b) The series' 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 series 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.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the
total return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
(v) The series' total return calculation includes a net increase from gains realized on the disposal of investments in
violation of the series' investment restrictions. The gains resulted in an increase in net asset value of $0.00278 per
share based on shares outstanding on the day the gains were realized. Excluding the offset of these gains from the
series' ending net asset value per share, the total returns for the year ended December 31, 2004 would have been
approximately 30.35% and 29.99% for the Initial Class shares and the Service Class shares, respectively.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
The trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company consisting of twenty-eight separate
series (the series) of shares: Bond Series, Capital Appreciation Series*,
Capital Opportunities Series, Core Equity Series, Emerging Growth Series*,
Emerging Markets Equity Series, Global Governments Series, Global Growth
Series*, Global Total Return Series, Government Securities Series, High Yield
Series, International Growth Series, International Value Series, Massachusetts
Investors Growth Stock Series, Massachusetts Investors Trust Series*, Mid Cap
Growth Series*, Mid Cap Value Series, Money Market Series, New Discovery
Series, Research Series*, Research International Series, Strategic Growth
Series, Strategic Income Series, Strategic Value Series, Technology Series,
Total Return Series*, Utilities Series*, and Value Series. The shares of each
series are sold only to variable accounts established by insurance companies to
fund benefits under variable contracts issued by such companies.
The series denoted with an asterisk above are included within these financial
statements.
(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. Certain
series 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 series' 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 series' 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. 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 series' 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 series' net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
series' foreign equity securities may often be valued at fair value. 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
series' 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 series' net asset value may differ from quoted or published
prices for the same investments.
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 each series, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in each series' financial statements.
Repurchase Agreements - Each series may enter into repurchase agreements with
institutions that the series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each series
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the series to
obtain those securities in the event of a default under the repurchase
agreement. Each series 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 series under each such repurchase agreement. Each series, 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 - Certain series invest in inflation-
adjusted debt securities issued by the U.S. Treasury. Certain series 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 - Each series 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 each series 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 for the Utilities Series.
Forward Foreign Currency Exchange Contracts - Each series 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. Each series may enter into forward
foreign currency exchange contracts for hedging purposes as well as for non-
hedging purposes. For hedging purposes, each series may enter into contracts to
deliver or receive foreign currency it will receive from or require for its
normal investment activities. Each series 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,
each series may enter into contracts with the intent of changing the relative
exposure of the series' 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"), as
lending agent, may loan the securities of each series to certain qualified
institutions (the "Borrowers") approved by the series. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the series with indemnification against Borrower default. Each
series 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 series and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the series and the lending agent. Income
from securities lending is included in interest income on the Statements 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 each series' organizational documents, its officers
and trustees may be indemnified against certain liabilities and expenses
arising out of the performance of their duties to the series. Additionally, in
the normal course of business, each series enters into agreements with service
providers that may contain indemnification clauses. Each series' maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the series that have not yet occurred.
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 each series 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.
Each series 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 series.
Fees Paid Indirectly - Certain series' custody fees are reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
series. These amounts, for the year ended December 31, 2006, are shown as a
reduction of total expenses on the Statements of Operations.
Tax Matters and Distributions - Each series 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 series 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 net operating losses, amortization and
accretion of debt securities, passive foreign investment companies, wash sale
loss deferrals, foreign currency transactions, and foreign taxes.
The tax character of distributions declared to shareholders is as follows:
CAPITAL MASSACHUSETTS
APPRECIATION SERIES EMERGING GROWTH SERIES GLOBAL GROWTH SERIES INVESTORS TRUST SERIES
------------------------ ------------------------ -------------------------- ----------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
- -----------------------------------------------------------------------------------------------------------------------------------
Ordinary income (including
any short-term capital
gains) ................. $1,174,123 $4,352,922 $ -- $ -- $872,242 $764,349 $8,569,963 $10,690,035
========== ========== ===== ===== ======== ======== ========== ===========
MID CAP GROWTH SERIES RESEARCH SERIES TOTAL RETURN SERIES UTILITIES SERIES
------------------------ ------------------------ -------------------------- ----------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
- -----------------------------------------------------------------------------------------------------------------------------------
Ordinary income (including
any short-term capital
gains) .................. $ -- $ -- $2,312,500 $2,354,184 $ 68,720,551 $ 54,343,213 $11,986,415 $3,641,287
Long-term capital gain .... -- -- -- -- 69,829,820 53,279,570 -- --
----- ----- ---------- ---------- ------------ ------------ ----------- ----------
Total distributions .......
$ -- $ -- $2,312,500 $2,354,184 $138,550,371 $107,622,783 $11,986,415 $3,641,287
===== ===== ========== ========== ============ ============ =========== ==========
The federal tax cost and the tax basis components of distributable earnings were as follows:
CAPITAL EMERGING GLOBAL MASSACHUSETTS
APPRECIATION GROWTH GROWTH INVESTORS TRUST
AS OF 12/31/06 SERIES SERIES SERIES SERIES
- ---------------------------------------------------------------------------------------------------------------------------------
Cost of investments .................................... $520,984,953 $297,256,863 $153,541,299 $999,311,372
------------ ------------ ------------ ------------
Gross appreciation ..................................... $ 55,389,368 $ 40,155,604 $ 27,679,434 $192,029,714
Gross depreciation ..................................... (18,940,464) (7,025,092) (2,358,167) (23,695,383)
------------ ------------ ------------ ------------
Net unrealized appreciation (depreciation) ............. $ 36,448,904 $ 33,130,512 $ 25,321,267 $168,334,331
============ ============ ============ ============
Undistributed ordinary income .......................... $976,046 $-- $2,532,758 $12,472,359
Capital loss carryforwards ............................. (832,905,068) (393,935,627) (60,904,282) (191,435,119)
Other temporary differences ............................ 820 1,469 (12,161) (567)
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
AS OF 12/31/06 SERIES SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------------------------
Cost of investments .................................... $89,743,005 $322,628,555 $1,913,744,296 $413,052,585
----------- ------------ -------------- ------------
Gross appreciation ..................................... $10,242,858 $ 35,644,232 $ 246,432,610 $ 84,006,741
Gross depreciation ..................................... (2,365,616) (8,915,064) (31,284,443) (1,914,205)
----------- ------------ -------------- ------------
Net unrealized appreciation (depreciation) ............. $ 7,877,242 $ 26,729,168 $ 215,148,167 $ 82,092,536
=========== ============ ============== ============
Undistributed ordinary income .......................... $19,111 $2,639,088 $67,070,864 $6,336,939
Undistributed long-term capital gain ................... -- -- 76,154,311 --
Capital loss carryforwards ............................. (26,808,648) (192,603,455) -- (48,516,678)
Other temporary differences ............................ (1,459) (329) (642,512) (116,548)
As of December 31, 2006, the following series had capital loss carryforwards available to offset future realized gains. Such
losses expire as follows:
CAPITAL EMERGING GLOBAL MASSACHUSETTS
APPRECIATION GROWTH GROWTH INVESTORS TRUST
EXPIRATION DATE SERIES(a) SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------------------------
12/31/08 ............................................... $(125,950,241) $ -- $ -- $ --
12/31/09 ............................................... (326,599,591) (164,707,760) (15,156,985) --
12/31/10 ............................................... (348,269,974) (229,227,867) (45,747,297) (174,960,419)
12/31/11 ............................................... (32,085,262) -- -- (16,474,700)
------------- ------------- ------------ -------------
Total .................................................. $(832,905,068) $(393,935,627) $(60,904,282) $(191,435,119)
============= ============= ============ =============
MID CAP
GROWTH RESEARCH UTILITIES
EXPIRATION DATE SERIES SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------
12/31/09 ............................................... $ -- $ (30,740,711) $ --
12/31/10 ............................................... (26,808,648) (161,862,744) (48,516,678)
------------ ------------- ------------
Total .................................................. $(26,808,648) $(192,603,455) $(48,516,678)
============ ============= ============
(a) The availability of a portion of the capital loss carryforwards, which were acquired on April 25, 2005 in connection with
the Managed Sector Series 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. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. 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 each series, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on each series' financial statements.
Multiple Classes of Shares of Beneficial Interest - Each series offers multiple
classes of shares, which differ in their respective distribution fees. All
shareholders bear the common expenses of the series based on daily net assets
of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates are
generally due to differences in separate class expenses.
(3) TRANSACTIONS WITH AFFILIATES
Investment Adviser - Each series has an investment advisory agreement with MFS
to provide overall investment management and related administrative services
and facilities to the series. The management fee is computed daily and paid
monthly at an annual rate based on a percentage of each series' average daily
net assets as follows:
Capital Appreciation Series: The management fee is 0.75% of the first $1
billion of average daily net assets, 0.675% of the next $500 million of average
daily net assets, and 0.65% of average daily net assets in excess of $1.5
billion.
Emerging Growth Series: The management fee is 0.75% of the first $300 million
of average daily net assets and 0.675% of average daily net assets in excess of
$300 million.
Global Growth Series: The management fee is 0.90% of the first $1 billion of
average daily net assets, 0.75% of the next $1 billion of average daily net
assets, and 0.65% of average daily net assets in excess of $2 billion.
Massachusetts Investors Trust Series: The management fee is 0.55% of average
daily net assets.
Mid Cap Growth Series: The management fee is 0.75% of the first $1 billion of
average daily net assets and 0.70% of average daily net assets in excess of $1
billion. At the commencement of the period and until August 31, 2006, the
investment adviser had agreed to reduce its management fee to 0.70% of average
daily net assets in excess of $500 million. Effective September 1, 2006, the
investment adviser has agreed in writing to reduce its management fee to 0.65%
of average daily net assets in excess of $2.5 billion. This written agreement
will continue through August 31, 2007, unless changed or rescinded by the
series' Board of Trustees. For the year ended December 31, 2006, the series'
average daily net assets did not exceed $500 million and therefore, the
management fee was not reduced.
Research Series: The management fee is 0.75% of the first $300 million of
average daily net assets and 0.675% of average daily net assets in excess of
$300 million.
Total Return Series: The management fee is 0.75% of the first $300 million of
average daily net assets, 0.675% of the next $700 million of average daily net
assets, and 0.60% of average daily net assets in excess of $1 billion.
Utilities Series: The management fee is 0.75% of the first $300 million of
average daily net assets and 0.675% of average daily net assets in excess of
$300 million.
The investment adviser has agreed to pay a portion of certain series' operating
expenses, exclusive of certain other fees and expenses, such that the total
annual operating expenses of these series do not exceed the expense limitations
indicated below, based on the average daily net assets of such series. The
management fees incurred for the year ended December 31, 2006 were equivalent
to an annual effective rate of each series' average daily net assets as
follows. In addition, the expense limitations incurred for the year ended
December 31, 2006 were as follows:
EFFECTIVE INITIAL CLASS SERVICE CLASS
MANAGEMENT EXPENSE EXPENSE
FEES LIMITATION LIMITATION
- --------------------------------------------------------------------------------
Capital Appreciation Series .......... 0.75% 1.00%(a) 1.25%(a)
Emerging Growth Series ............... 0.74% N/A N/A
Global Growth Series ................. 0.90% N/A N/A
Massachusetts Investors Trust Series . 0.55% 1.00%(a) 1.25%(a)
Mid Cap Growth Series ................ 0.75% 0.95%(b) 1.20%(b)
Research Series ...................... 0.74% N/A N/A
Total Return Series .................. 0.65% 1.00%(a) 1.25%(a)
Utilities Series ..................... 0.73% N/A N/A
(a) MFS' agreement to limit the series' operating expenses, exclusive of
certain other fees and expenses, to 1.25% of the series' average daily net
assets is contained in the investment advisory agreement between MFS and
the series and may not be rescinded without shareholder approval. MFS'
agreement to limit the series' operating expenses, exclusive of certain
other fees and expenses, to 1.00% of the series' average daily net assets
attributable to Initial Class shares may be changed or rescinded at any
time by MFS.
(b) This written agreement became effective on September 1, 2006 and will
continue through August 31, 2007 unless changed or rescinded by the series'
Board of Trustees. For the year ended December 31, 2006, this reduction
amounted to $16,972 for Mid Cap Growth Series and is reflected as a
reduction of total expenses in the Statements of Operations.
For the year ended December 31, 2006, the actual operating expenses for Capital
Appreciation Series, Massachusetts Investors Trust Series, and Total Return
Series did not exceed the limit and therefore, the investment adviser did not
pay any portion of these series' expenses.
The investment adviser reimbursed the Global Growth Series $6,221 for a trade
correction. This amount is included in the realized loss on investment
transactions on the Statements of Operations.
Distributor - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, is the distributor of shares of the series. The Trustees have adopted a
distribution plan for the Service Class shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940.
The series' distribution plan provides that each series will pay MFD
distribution fees equal to 0.25% per annum of its average daily net assets
attributable to Service Class shares as partial consideration for services
performed and expenses incurred by MFD and financial intermediaries in
connection with the sale and distribution of the series' Service Class shares
and the sale and distribution of the variable annuity or variable life
insurance contracts investing indirectly in Service Class shares. MFD may
subsequently pay all, or a portion, of the distribution fees to financial
intermediaries.
Administrator - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to each series.
Under an administrative services agreement, each series partially reimburses
MFS the costs incurred to provide these services. Prior to June 1, 2006, each
series was allocated a portion of these administrative costs based on its size
and relative average net assets. Effective June 1, 2006, each series is charged
an annual fixed amount of $10,000 plus a fee based on calendar year average net
assets.
The administrative services fee incurred for the year ended December 31, 2006
was equivalent to an annual effective rate of each series' average daily net
assets as follows:
PERCENT OF
AVERAGE DAILY
NET ASSETS
----------------------------------------------------------------
Capital Appreciation Series ..................... 0.0241%
Emerging Growth Series .......................... 0.0243%
Global Growth Series ............................ 0.0246%
Massachusetts Investors Trust Series ............ 0.0237%
Mid Cap Growth Series ........................... 0.0243%
Research Series ................................. 0.0244%
Total Return Series ............................. 0.0223%
Utilities Series ................................ 0.0247%
Trustees' and Officers' Compensation - Each series pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to the Board chairperson. Each series does not pay
compensation directly to trustees or officers of the series who are also
officers of the investment adviser, all of whom receive remuneration for their
services to the series from MFS. Certain officers and trustees of the series
are officers or directors of MFS, MFD, and MFSC.
Other - These series 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. MFS has agreed to bear all expenses associated with office space,
other administrative support, and supplies provided to the ICCO. For the year
ended December 31, 2006, payments made by the series to Tarantino LLC amounted
to the following and are included in the miscellaneous expense on the
Statements of Operations:
ICCO Fee
-------------------------------------------------------------
Capital Appreciation Series ..................... $ 3,118
Emerging Growth Series .......................... 1,730
Global Growth Series ............................ 815
Massachusetts Investors Trust Series ............ 5,733
Mid Cap Growth Series ........................... 513
Research Series ................................. 1,843
Total Return Series ............................. 10,761
Utilities Series ................................ 2,082
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
MASSACHUSETTS
CAPITAL EMERGING GLOBAL INVESTORS
APPRECIATION GROWTH GROWTH TRUST
SERIES SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) ..................... $362,355,636 $408,235,279 $146,121,171 $390,354,036
Sales
Investments (non-U.S. government securities) ..................... $505,463,575 $493,445,110 $173,949,746 $495,748,371
MID CAP
GROWTH RESEARCH TOTAL RETURN UTILITIES
SERIES SERIES SERIES SERIES
- ---------------------------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities ....................................... $ -- $ -- $272,410,005 $ --
Investments (non-U.S. government securities) ..................... $137,793,778 $312,406,495 $709,687,104 $373,187,772
Sales
U.S. government securities ....................................... $ -- $ -- $321,724,329 $ --
Investments (non-U.S. government securities) ..................... $157,894,768 $398,909,628 $918,699,970 $421,034,111
(5) SHARES OF BENEFICIAL INTEREST
Each series' Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of
beneficial interest. Transactions in series shares were as follows:
CAPITAL APPRECIATION SERIES EMERGING GROWTH SERIES
---------------------------------------------------------- --------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05 YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ---------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class 271,615 $ 5,292,910 478,166 $ 8,954,870 164,213 $ 2,835,062 184,197 $ 2,775,827
Service Class 121,250 2,323,766 257,520 4,728,219 206,919 3,520,339 118,747 1,829,128
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
392,865 $ 7,616,676 735,686 $ 13,683,089 371,132 $ 6,355,401 302,944 $ 4,604,955
=========== ============= =========== ============= ========== ============= ========== =============
Shares issued
in connection
with
acquisition of
Managed Sectors
Series
Initial Class -- $ -- 6,584,821 $ 118,987,712 -- $ -- -- $ --
Service Class -- -- 142,295 2,548,506 -- -- -- --
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
-- $ -- 6,727,116 $ 121,536,218 -- $ -- -- $ --
=========== ============= =========== ============= ========== ============= ========== =============
Shares issued
to shareholders
in reinvestment
of distributions
Initial Class 59,996 $ 1,174,123 232,548 $ 4,220,755 -- $ -- -- $ --
Service Class -- -- 7,330 132,167 -- -- -- --
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
59,996 $ 1,174,123 239,878 $ 4,352,922 -- $ -- -- $ --
=========== ============= =========== ============= ========== ============= ========== =============
Shares
reacquired
Initial Class (8,182,315) $(159,551,020) (8,570,724) $(172,158,801) (4,828,289) $ (84,376,461) (6,197,009) $ (96,801,108)
Service Class (464,788) (8,965,273) (444,870) (8,759,139) (301,658) (5,154,291) (267,326) (4,107,112)
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
(8,647,103) $(168,516,293) (9,015,594) $(180,917,940) (5,129,947) $ (89,530,752) (6,464,335) $(100,908,220)
=========== ============= =========== ============= ========== ============= ========== =============
Net change
Initial Class (7,850,704) $(153,083,987) (1,275,189) $ (39,995,464) (4,664,076) $ (81,541,399) (6,012,812) $ (94,025,281)
Service Class (343,538) (6,641,507) (37,725) (1,350,247) (94,739) (1,633,952) (148,579) (2,277,984)
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
(8,194,242) $(159,725,494) (1,312,914) $ (41,345,711) (4,758,815) $ (83,175,351) (6,161,391) $ (96,303,265)
=========== ============= =========== ============= ========== ============= ========== =============
GLOBAL GROWTH SERIES MASSACHUSETTS INVESTORS TRUST SERIES
---------------------------------------------------------- --------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05 YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ---------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class 244,457 $ 3,542,071 100,446 $ 1,244,843 98,605 $ 3,158,503 129,267 $ 3,675,270
Service Class 119,680 1,700,954 49,811 619,162 3,136,512 98,044,949 3,883,822 110,370,644
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
364,137 $ 5,243,025 150,257 $ 1,864,005 3,235,117 $ 101,203,452 4,013,089 $ 114,045,914
=========== ============= =========== ============= ========== ============= ========== =============
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class 56,469 $ 845,334 63,779 $ 747,488 225,827 $ 7,057,076 348,163 $ 9,459,588
Service Class 1,807 26,908 1,445 16,861 48,677 1,512,887 45,488 1,230,447
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
58,276 $ 872,242 65,224 $ 764,349 274,504 $ 8,569,963 393,651 $ 10,690,035
=========== ============= =========== ============= ========== ============= ========== =============
Shares
reacquired
Initial Class (2,372,943) $ (34,120,787) (2,858,693) $ (35,289,088) (6,766,259) $(212,683,785) (7,612,038) $(217,170,081)
Service Class (130,814) (1,883,058) (120,002) (1,484,594) (311,429) (9,906,798) (214,347) (6,048,931)
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
(2,503,757) $ (36,003,845) (2,978,695) $ (36,773,682) (7,077,688) $(222,590,583) (7,826,385) $(223,219,012)
=========== ============= =========== ============= ========== ============= ========== =============
Net change
Initial Class (2,072,017) $ (29,733,382) (2,694,468) $ (33,296,757) (6,441,827) $(202,468,206) (7,134,608) $(204,035,223)
Service Class (9,327) (155,196) (68,746) (848,571) 2,873,760 89,651,038 3,714,963 105,552,160
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
(2,081,344) $ (29,888,578) (2,763,214) $ (34,145,328) (3,568,067) $(112,817,168) (3,419,645) $ (98,483,063)
=========== ============= =========== ============= ========== ============= ========== =============
MID CAP GROWTH SERIES RESEARCH SERIES
---------------------------------------------------------- --------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05 YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ---------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class 400,973 $ 2,426,001 403,157 $ 2,238,219 12,107 $ 210,821 45,582 $ 723,056
Service Class 533,490 3,078,905 440,751 2,380,931 175,418 3,037,598 265,500 4,267,442
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
934,463 $ 5,504,906 843,908 $ 4,619,150 187,525 $ 3,248,419 311,082 $ 4,990,498
=========== ============= =========== ============= ========== ============= ========== =============
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class -- $ -- -- $ -- 124,854 $ 2,194,925 148,549 $ 2,257,939
Service Class -- -- -- -- 6,722 117,575 6,365 96,245
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
-- $ -- -- $ -- 131,576 $ 2,312,500 154,914 $ 2,354,184
=========== ============= =========== ============= ========== ============= ========== =============
Shares
reacquired
Initial Class (3,144,946) $ (18,591,829) (3,375,371) $ (18,911,060) (5,123,179) $ (89,614,801) (5,892,243) $ (94,851,276)
Service Class (1,521,208) (8,929,540) (1,280,195) (7,137,388) (262,350) (4,590,067) (219,630) (3,520,712)
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
(4,666,154) $ (27,521,369) (4,655,566) $ (26,048,448) (5,385,529) $ (94,204,868) (6,111,873) $ (98,371,988)
=========== ============= =========== ============= ========== ============= ========== =============
Net change
Initial Class (2,743,973) $ (16,165,828) (2,972,214) $ (16,672,841) (4,986,218) $ (87,209,055) (5,698,112) $ (91,870,281)
Service Class (987,718) (5,850,635) (839,444) (4,756,457) (80,210) (1,434,894) 52,235 842,975
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
(3,731,691) $ (22,016,463) (3,811,658) $ (21,429,298) (5,066,428) $ (88,643,949) (5,645,877) $ (91,027,306)
=========== ============= =========== ============= ========== ============= ========== =============
TOTAL RETURN SERIES UTILITIES SERIES
---------------------------------------------------------- --------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05 YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ---------------------------- --------------------------- ---------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
Shares sold
Initial Class 510,905 $ 9,819,747 598,000 $ 11,438,416 400,673 $ 8,128,199 658,138 $ 10,943,158
Service Class 5,726,393 107,963,264 12,264,006 232,119,108 1,107,172 22,007,063 741,812 12,447,695
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
6,237,298 $ 117,783,011 12,862,006 $ 243,557,524 1,507,845 $ 30,135,262 1,399,950 $ 23,390,853
=========== ============= =========== ============= ========== ============= ========== =============
Shares issued to
shareholders in
reinvestment of
distributions
Initial Class 4,641,324 $ 85,910,899 4,168,257 $ 76,237,418 545,312 $ 10,415,468 212,393 $ 3,336,688
Service Class 2,862,397 52,639,472 1,725,419 31,385,365 82,681 1,570,947 19,476 304,599
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
7,503,721 $ 138,550,371 5,893,676 $ 107,622,783 627,993 $ 11,986,415 231,869 $ 3,641,287
=========== ============= =========== ============= ========== ============= ========== =============
Shares
reacquired
Initial Class (16,442,558) $(313,575,073) (13,389,796) $(254,798,238) (3,743,545) $ (74,496,882) (2,881,281) $ (48,487,965)
Service Class (3,729,015) (70,881,173) (1,569,709) (29,692,939) (406,360) (8,156,383) (236,489) (3,956,487)
----------- ------------- ----------- ------------- ---------- ------------- ---------- -------------
(20,171,573) $(384,456,246) (14,959,505) $(284,491,177) (4,149,905) $ (82,653,265) (3,117,770) $ (52,444,452)
=========== ============= ========== ============= ========== ============= ========== =============
Net change
Initial Class (11,290,329) $(217,844,427) (8,623,539) $(167,122,404) (2,797,560) $ (55,953,215) (2,010,750) $ (34,208,119)
Service Class 4,859,775 89,721,563 12,419,716 233,811,534 783,493 15,421,627 524,799 8,795,807
----------- ------------- ---------- ------------- ---------- ------------- ---------- -------------
(6,430,554) $(128,122,864) 3,796,177 $ 66,689,130 (2,014,067) $ (40,531,588) (1,485,951) $ (25,412,312)
=========== ============= ========== ============= ========== ============= ========== =============
(6) LINE OF CREDIT
Each series and other funds managed by MFS participate in a $1 billion
unsecured committed line of credit provided by a syndication of banks under a
credit agreement. In addition, each series and other funds managed by MFS 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
December 31, 2006, each series' commitment fee and interest expense were as
follows and are included in miscellaneous expense on the Statements of
Operations:
COMMITMENT INTEREST
FEE EXPENSE
----------------------------------------------------------------
Capital Appreciation Series ......... $ 5,276 $13,184
Emerging Growth Series .............. 2,919 --
Global Growth Series ................ 1,339 7,283
Massachusetts Investors Trust Series 9,305 --
Mid Cap Growth Series ............... 878 --
Research Series ..................... 3,079 2,546
Total Return Series ................. 17,671 1,847
Utilities Series .................... 3,339 --
(7) ACQUISITIONS
On April 25, 2005, the Capital Appreciation Series acquired all of the assets
and liabilities of Managed Sectors Series. The acquisition was accomplished by
a tax-free exchange of 6,727,116 shares of the Capital Appreciation Series for
all of the assets and liabilities of Managed Sectors Series. The Managed
Sectors Series net assets on that date were $121,536,218, including
$10,518,687 of unrealized appreciation, $155,623 of accumulated net investment
loss, and $199,387,276 of accumulated net realized loss on investments and
foreign currency transactions. These assets were combined with those of the
series. The aggregate net assets of the Capital Appreciation Series after the
acquisition were $743,705,558.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and the Shareholders of MFS/Sun Life Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of MFS/Sun Life Series Trust (the
"Trust"), comprising Capital Appreciation Series, Emerging Growth Series,
Global Growth Series, Massachusetts Investors Trust Series, Mid Cap Growth
Series, Research Series, Total Return Series and Utilities Series as of
December 31, 2006, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with 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. The Trust is not required to have, nor were we engaged to
perform, an audit of its 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
Trust'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, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2006, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial positions of Capital
Appreciation Series, Emerging Growth Series, Global Growth Series,
Massachusetts Investors Trust Series, Mid Cap Growth Series, Research Series,
Total Return Series and Utilities Series as of December 31, 2006, the results
of their operations for the year then ended, the changes in their net assets
for each of the two years in the period then ended, and their financial
highlights for each of the five years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 20, 2007
MFS/SUN LIFE SERIES TRUST
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of February 1, 2007, 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.
- -------------------------------------------------------------------------------------------------------------------------
POSITION(s) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATIONS DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- -------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
- -------------------------------------------------------------------------------------------------------------------------
David D. Horn(3) Trustee April 1986 Private investor; Retired; Sun Life Assurance
(born 06/07/41) Company of Canada, Former Senior Vice President
and General Manager for the United States
(until 1997)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -------------------------------------------------------------------------------------------------------------------------
J. Kermit Birchfield Chairman May 1997 Consultant; Century Partners, Inc.
(born 01/08/40) (investments), Managing Director; Displaytech,
Inc. (manufacturer of liquid crystal display
technology), Director; Dessin Fournir LLC
(furniture manufacturer), Director (October
2005 to present)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Robert C. Bishop Trustee May 2001 AutoImmune Inc. (pharmaceutical product
(born 01/13/43) development), Chairman, President and Chief
Executive Officer; Caliper Life Sciences Corp.
(laboratory analytical instruments), Director;
Millipore Corporation (purification/ filtration
products), Director; Quintiles Transnational
Corp. (contract services to the medical
industry), Director
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Frederick H. Dulles Trustee May 2001 Attorney; Ten State Street LLP (law firm),
(born 03/12/42) Partner (July 2003 to May 2005); McFadden,
Pilkington & Ward LLP (solicitors and
registered foreign lawyers), Partner (until
June 2003); Jackson & Nash, LLP (law firm), Of
Counsel (January 2000 to November 2000)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Marcia A. Kean Trustee April 2005 Feinstein Kean Healthcare (consulting), Chief
(born 06/30/48) Executive Officer (since December 2002),
Managing Director (prior to May 2001); Ardais
Corporation (biotech products), Senior Vice
President - Commercialization (February 2002
until November 2002)
- -------------------------------------------------------------------------------------------------------------------------
Ronald G. Steinhart Trustee May 2001 Private investor; Bank One, Texas N.A., Vice
(born 06/15/40) Chairman and Director (January 2000 to January
2001); Bank One Corporation, Officer (until
January 2000); Carreker Corporation (consultant
and technology provider to financial
institutions), Director; Prentiss Properties
Trust (real estate investment trust), Director;
United Auto Group, Inc. (automotive retailer),
Director
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Haviland Wright Trustee May 2001 Hawaii Small Business Development Center, Kaua'l
(born 07/21/48) Center, Center Director (since March 2002);
Displaytech, Inc. (manufacturer of liquid
crystal display technology), Chairman and Chief
Executive Officer (until March 2002)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
TRUSTEE EMERITUS
- -------------------------------------------------------------------------------------------------------------------------
Samuel Adams Trustee Emeritus Retired
(born 10/19/25)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
OFFICERS
- -------------------------------------------------------------------------------------------------------------------------
Maria F. Dwyer(4) President November 2005 Massachusetts Financial Services Company,
(born 12/01/58) 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(4) Treasurer September 2005 Massachusetts Financial Services Company, Senior
(born 12/30/64) Vice President (since September 2004);
PricewaterhouseCoo pers LLP, Partner (prior to
September 2004)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Christopher R. Bohane(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice
(born 01/18/74) and Assistant Clerk President and Senior Counsel (since April
2003); Kirkpatrick & Lockhart LLP (law firm),
Associate (prior to April 2003)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Ethan D. Corey(4) Assistant Secretary July 2005 Massachusetts Financial Services Company,
(born 11/21/63) and Assistant Clerk Special Counsel (since December 2004); Dechert
LLP (law firm), Counsel (prior to December
2004)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
David L. DiLorenzo(4) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice
(born 08/10/68) President (since June 2005); JP Morgan Investor
Services, Vice President (January 2001 to June
2005)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Timothy M. Fagan(4) Assistant Secretary September 2005 Massachusetts Financial Services Company, Vice
(born 07/10/68) and Assistant Clerk 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(4) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice
(born 10/27/70) President (since May 2005); JP Morgan
Investment Management Company, Vice President
(prior to May 2005)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Brian E. Langenfeld(4) Assistant Secretary May 2006 Massachusetts Financial Services Company,
(born 03/07/73) and Assistant Clerk 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(4) Assistant Treasurer May 1997 Massachusetts Financial Services Company, Vice
(born 11/13/57) President
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Susan S. Newton(4) Assistant Secretary May 2005 Massachusetts Financial Services Company,
(born 03/07/50) and Assistant Clerk Senior Vice President and Assistant 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(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice
(born 11/05/70) and Assistant Clerk President and Senior Counsel (since June 2004);
Bingham McCutchen LLP (law firm), Associate
(January 2001 to June 2004)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Mark N. Polebaum(4) Secretary and February 2006 Massachusetts Financial Services Company,
(born 05/01/52) Assistant Clerk 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 September 2004 Tarantino LLC (provider of compliance services),
(born 03/07/44) Compliance Officer Principal (since June 2004); CRA Business
Strategies Group (consulting services),
Executive Vice President (April 2003 to June
2004); David L. Babson & Co. (investment
adviser), Managing Director, Chief
Administrative Officer and Director (February
1997 to March 2003)
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
James O. Yost(4) Assistant Treasurer April 1992 Massachusetts Financial Services Company,
(born 06/12/60) Senior Vice President
- -------------------------------------------------------------------------------------------------------------------------
- ------------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product. Each Trustee has served continuously since
appointment.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., "public
companies").
(3) "Interested person" of the Sun Life of Canada (U.S.), 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 Series. The address of Sun
Life of Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street, Boston,
Massachusetts 02116.
The Series do not hold annual meetings for the purpose of electing Trustees, and Trustees are not elected for fixed terms.
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.
All Trustees currently serve as Trustees of the Series and have served in that capacity since originally elected or appointed.
All of the Trustees are also Managers of the Compass Variable Accounts. The executive officers of the MFS Sun Life Series
Trust hold similar offices for the Compass Variable Accounts and other funds in the MFS fund complex. Each Trustee serves as a
Trustee or Manager of 34 Accounts/Series.
The Statement of Additional Information contains further information about the Trustees and is available without charge upon
request by calling 1-800-752-7215.
MFS/SUN LIFE SERIES TRUST
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENTS.
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 Trust's investment
advisory agreements with Massachusetts Financial Services Company (MFS) on
behalf of the Series. The Trustees consider matters bearing on the Series and
their 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 agreements for the Series. The independent Trustees were
assisted in their evaluation of the investment advisory agreements by
independent legal counsel, from whom they received separate legal advice and
with whom they met separately from MFS management during various contract
review meetings. The independent Trustees were also assisted in this process by
the Series' Independent Chief Compliance Officer, a full-time senior officer of
the Series appointed by and reporting to the independent Trustees.
In connection with their deliberations, 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 agreements were considered separately for
each Series, although the Trustees also took into account the common interests
of all Series 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 agreements and other arrangements with the Trust.
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 each Series for
various time periods ended December 31, 2005, compared to the investment
performance of a group of funds with substantially similar investment
classifications/objectives (the "Lipper performance universe"), as well as the
investment performance of a group of funds identified by objective criteria
suggested by MFS ("peer funds"), (ii) information provided by Lipper Inc. on
each Series' advisory fees and other expenses compared to the advisory fees and
other expenses of comparable funds identified by Lipper (the "Lipper expense
group"), as well as the advisory fees and other expenses of peer funds
identified by objective criteria suggested by MFS, (iii) information provided
by MFS on the advisory fees of comparable portfolios of its other clients,
including institutional separate account and other clients, (iv) information as
to whether, and to what extent applicable, expense waivers, reimbursements or
fee "breakpoints" are observed for a Series, (v) information regarding MFS'
financial results and financial condition, including MFS' and certain of its
affiliates' estimated profitability from services performed for the Series,
(vi) MFS' views regarding the outlook for the mutual fund industry and its
strategic business plans, (vii) descriptions of various functions performed by
MFS for the Trust, 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 Series.
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' conclusions as to the continuation of the investment advisory
agreements were based on 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 for each Series, while individual Trustees may have given different
weight to various factors and evaluated the information presented as a whole
differently than another Trustee. The Trustees recognized that the fee
arrangements for the Series reflect 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 compared
each Series' total return investment performance to the performance of peer
groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of each Series' Initial Class shares
in comparison to the performance of funds in its Lipper performance universe
over the one-, three- and five-year periods. The Trustees did not rely on
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 during contract review meetings, as well as during
investment review meetings conducted with portfolio management personnel during
the course of the year. For Series whose performance lagged their peer groups,
they discussed the factors that contributed thereto and MFS' efforts to improve
such Series' performance. After reviewing this information, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreements, that they were satisfied with MFS' responses
and efforts relating to investment performance.
In assessing the reasonableness of each Series' advisory fee, the Trustees
considered, among other information, each Series' advisory fee and the total
expense ratio of the Series' Initial Class shares as a percentage of average
net assets, compared to the advisory fee and total expense ratios of other
comparable funds based on information provided by Lipper Inc. and MFS. The
Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered the generally
broader scope of services provided by MFS to the Trust than those provided to
institutional accounts. The Trustees also considered 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 Series, and the impact on MFS and
related expenses due to the more extensive regulatory regime to which the
Series are subject, compared to institutional accounts.
The Trustees also considered whether a Series is likely to benefit from any
economies of scale due to future asset growth. In this regard, the Trustees
reviewed the adequacy of breakpoints and discussed with MFS any adjustments
necessary for the shareholders' benefits.
The Trustees also considered information prepared by MFS relating to its costs
and profits with respect to the Series and other investment companies and
accounts advised by MFS, as well as MFS' methodologies used to determine and
allocate its costs to the Series and other accounts and products for purposes
of estimating profitability.
After reviewing these and other factors described below, the Trustees concluded
that the advisory fees charged to the Series represent reasonable compensation
in light of the nature and quality of the services being provided by MFS.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Series.
The Trustees also considered the financial resources of MFS and its parent, Sun
Life Financial Inc. The Trustees further considered any advantages and possible
disadvantages of having an adviser which also serves other investment companies
as well as institutional accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the
Series by MFS and its affiliates under agreements and plans other than the
investment advisory agreements, including the 12b-1 fees the Series pay 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
on the Series' behalf, including securities lending programs, directed expense
payment programs, class action recovery programs, and MFS' interaction with
third-party service providers, principally custodians and sub-custodians. The
Trustees concluded that the various non-advisory services provided by MFS and
its affiliates on behalf of the Series were satisfactory. The Trustees also
considered the benefits to MFS from the use of the Series' portfolio brokerage
commissions to pay for research and other similar services (including MFS'
policy not to use "soft dollars" generated by fund portfolio transactions to
pay for third-party research), and various other factors. Additionally, the
Trustees considered so-called "fall-out benefits" to MFS such as reputational
value derived from serving as investment manager to the Trust, and determined
that any such benefits derived by MFS were reasonable and fair.
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 investment advisory agreements
should be continued for an additional one-year period, commencing September 1,
2006.
CAPITAL APPRECIATION SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 4th quintile for the three-year period and the 5th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of steps taken to improve performance, the Board of
Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the existing breakpoints
were sufficient to allow the Series to benefit from economies of scale as its
assets grow. In addition, the Trustees considered that MFS observes a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
EMERGING GROWTH SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 3rd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 5th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of steps taken to improve performance, the Board of
Trustees concluded that the Series' performance was satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the existing breakpoints
were sufficient to allow the Series to benefit from economies of scale as its
assets grow. The Trustees concluded that the fees were reasonable in light of
the nature and quality of services provided.
GLOBAL GROWTH SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 3rd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was below the median and total expense
ratio was approximately at the median of such fees and expenses of funds in the
Lipper expense group. The Trustees further concluded that the existing
breakpoints were sufficient to allow the Series to benefit from economies of
scale as its assets grow. The Trustees concluded that the fees were reasonable
in light of the nature and quality of services provided.
MASSACHUSETTS INVESTORS TRUST SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 2nd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 2nd quintile for the three-year period and the 3rd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each at the
median of such fees and expenses of funds in the Lipper expense group. They
noted that the Series' advisory fee rate schedule is not currently subject to
any breakpoints. In addition, the Trustees considered that MFS observes a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided by MFS, and
determined not to recommend any advisory fee breakpoints for the Series at this
time.
MID CAP GROWTH SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 4th quintile for the three-year period ended and the 5th
quintile for the five-year period December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of steps taken to improve performance, the Board of
Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was below the median and total expense
ratio was approximately at the median of such fees and expenses of funds in the
Lipper expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
RESEARCH SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 2nd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 4th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the existing breakpoints
were sufficient to allow the Series to benefit from economies of scale as its
assets grow. The Trustees concluded that the fees were reasonable in light of
the nature and quality of services provided.
TOTAL RETURN SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 1st quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each above the
median of such fees and expenses of funds in the Lipper expense group. The
Trustees further concluded that the existing breakpoints were sufficient to
allow the Series to benefit from economies of scale as its assets grow. In
addition, the Trustees considered that MFS observes a total expense limitation
for the Series. The Trustees concluded that the fees were reasonable in light
of the nature and quality of services provided.
UTILITIES SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 1st quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 1st quintile for the three-year period and the 1st quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was above the median and total expense
ratio was approximately at the median of such fees and expenses of funds in the
Lipper expense group. The Trustees further concluded that the existing
breakpoints were sufficient to allow the Series to benefit from economies of
scale as its assets grow. The Trustees concluded that the fees were reasonable
in light of the nature and quality of services provided.
A discussion regarding the Board's most recent review and renewal of the
series' Investment Advisory Agreement with MFS is available by clicking on "Sun
Life Annuities" in the "Products and Performance" section of the MFS Web site
(mfs.com).
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.
MFS/SUN LIFE SERIES TRUST
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
PROXY VOTING POLICIES AND INFORMATION
A general description of the series' 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 each series 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
Each series 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. Each series' 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. Each series' 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:
publicinfor@sec.gov or by writing the Public Reference Section at the above
address.
FEDERAL TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
The Total Return Series designates $69,829,820 as capital gain dividends paid
during the fiscal year.
For corporate shareholders, the percentages of the ordinary income dividends
paid during the fiscal year that qualify for the corporate dividends received
deduction are as follows:
DIVIDENDS
RECEIVED
DEDUCTIONS
---------------------------------------------------
Capital Appreciation Series ............ 100.00%
Global Growth Series ................... 49.76%
Massachusetts Investors Trust Series ... 100.00%
Research Series ........................ 100.00%
Total Return Series .................... 28.27%
Utilities Series ....................... 30.49%
Income derived from foreign sources for the Global Growth Series was
$1,991,105. The Global Growth Series intends to pass through foreign tax
credits of $110,970 for the fiscal year.
Sun Life Financial Distributors Inc.
SUN-B-ANN-2/07
MFS(R)/SUN LIFE SERIES TRUST [graphic omitted]
ANNUAL REPORT o DECEMBER 31, 2006
Capital Opportunities Series
Core Equity Series
International Growth Series
Massachusetts Investors Growth Stock Series
Mid Cap Value Series
New Discovery Series
Research International Series
Strategic Growth Series
Strategic Value Series
Technology Series
Value Series
TABLE OF CONTENTS
Letter from the CEO of MFS ................................................ 1
Management Reviews ........................................................ 1
Portfolio Composition ..................................................... 8
Performance Summary ....................................................... 19
Expense Tables ............................................................ 26
Portfolio of Investments .................................................. 28
Financial Statements ...................................................... 49
Notes to Financial Statements ............................................. 66
Report of Independent Registered Public Accounting Firm ................... 76
Trustees and Officers ..................................................... 77
Results of Shareholder Meeting (Unaudited) ................................ 81
Board Review of Investment Advisory Agreements ............................ 82
MFS(R) PRIVACY NOTICE ..................................................... 86
Proxy Voting Policies and Information ............................. Back Cover
Quarterly Portfolio Disclosure .................................... Back Cover
Federal Tax Information (Unaudited) ............................... Back Cover
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THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF CONTRACT OWNERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDEAL GOVERNMENT AGENCY OR NCUA/NCUSIF
- ------------------------------------------------------------------------------
LETTER FROM THE CEO OF MFS
DEAR CONTRACT OWNERS,
The year 2006 proved to be a very good one for many of the world's financial
markets. The U.S. stock market, as one notable example, posted strong gains as
the Dow Jones Industrial Average hit record highs and the Standard & Poor's 500
Stock Index rose to levels not seen since 2000.
While investors were undoubtedly encouraged by these positive developments, we
think it is important to maintain the proper perspective on what appears to be
happening with the world's financial markets. Around the globe, economies seem
to have reached a state of equilibrium. Both stock and bond markets have simply
been less volatile than they were in years past. While there are many factors
behind the low levels of volatility, one of the key reasons is that the U.S.
Federal Reserve Board and other central banks around the world seem to have
found the right formula for simultaneously promoting economic growth and
keeping inflation under control.
This new, calmer state of affairs is no doubt welcomed by many investors, but
with less volatility, the possibilities for earning exceptional returns also
diminish. Investors may have to lower their expectations about what are
reasonable returns from the markets. Those still looking for the types of
returns they had been accustomed to in the past may have to work much harder to
seek out those opportunities and perhaps also accept more risk than they
customarily did. In any market climate, even in a relatively benign one, we
think investors are still best served by spreading their holdings across a
variety of investments that will give them exposure to a range of market
opportunities and varying levels of risk.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
February 15, 2007
The opinions expressed in this letter are subject to change, may not be relied
upon for investment advice, and no forecasts can be guaranteed.
MANAGEMENT REVIEWS
CAPITAL OPPORTUNITIES SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 14.32%, while Service Class shares provided a
total return of 14.02%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 15.79% for the series'
benchmark, the Standard & Poor's 500 Stock Index.
DETRACTORS FROM PERFORMANCE
Relative to the benchmark, health care, utilities and communications, and
leisure were the portfolio's weakest-contributing sectors.
In health care, a combination of stock selection and an overweighted position
hurt relative performance. Our positioning in medical device maker Advanced
Medical Optics(c) was a factor in these disappointing results. Advanced Medical
Optics struggled after the company lowered its earnings guidance for 2007.
Management cited a slowdown in laser vision correction procedures and a
slower-than-expected uptake of its multifocal intraocular lenses, especially in
Europe, as reasons for its dampened outlook.
In the utilities and communications sector, not owning benchmark constituent
AT&T detracted from relative performance as this stock posted strong gains over
the reporting period.
In the leisure sector, it was a combination of stock selection and an
underweighted position that dampened investment results. No individual
securities in this sector were among the portfolio's top detractors.
Stocks in other sectors that had a negative impact on relative performance
included poor-performing multimedia image provider Getty Images(c), package
manufacturer Owens-Illinois(c), direct-sale computer vendor Dell, auto parts
retailer Advance Auto Parts(c), online information portal Yahoo!, and global
telecommunications equipment maker Nortel Networks(c)(g). Getty Images' stock
fell due to a slowing image market that led to a depressed revenue trend.
The portfolio's cash position was also a detractor from relative performance.
The portfolio holds cash to buy new holdings and to provide liquidity. In a
period when equity markets rose, as measured by the portfolio's benchmark,
holding cash hurt performance versus the benchmark, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Retailing, consumer staples, and technology were the portfolio's top
contributing sectors to relative performance over the period. In all three
sectors, stock selection was the key factor.
In retailing, the portfolio's positioning in strong-performing specialty used-
car dealer CarMax(c) had a positive impact on relative returns. CarMax's stock
price appreciated due to strong store traffic, particularly in the company's
new Atlanta buying center. Our holdings in discount department store Kohl's(g)
also helped as this stock outperformed the benchmark.
In the consumer staples sector, our positioning in global food company Nestle
S.A.(c) was beneficial to relative results. In technology, strong contributors
included network equipment company Cisco Systems and enterprise software giant
Oracle.
Elsewhere, our holdings in billing software company Amdocs Ltd.(c)(g), media
conglomerate Walt Disney(g), and property and casualty insurer The St. Paul
Travelers Cos. aided relative results. Not holding weak-performing benchmark
constituents, General Electric and UnitedHealth Group, also helped.
During the reporting period, the portfolio's currency exposure contributed 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.
CORE EQUITY SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 13.74%, while Service Class shares provided a
total return of 13.44%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 15.72% for the series'
benchmark, the Russell 3000 Index. The Russell 3000 Index became the series'
benchmark effective July 20, 2006. For the period December 31, 2005 to July 19,
2006, the series' benchmark was the Standard & Poor's 500 Stock Index (S&P 500
Index). The return for the S&P 500 Index for the twelve months ended December
31, 2006 was 15.79%.
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure sector was the greatest detractor from relative
performance over the period. Within this sector, satellite radio service
company XM Satellite Radio(g) hurt results. XM Satellite Radio's share price
was under pressure due to weaker-than-expected subscriber growth and a slower
rollout of new products.
Security selection in the utilities and communications sector also held back
results. Our positioning in wireless services provider Sprint Nextel(g) was a
top detractor. Shares of Sprint Nextel struggled after the company lowered its
wireless subscriber guidance for 2006. In addition, we believe that its merger
integration with Nextel has disappointed investors. Not holding strong-
performing telecommunications services provider BellSouth also hindered
relative performance.
In the financial services sector, stock selection had a negative impact on
relative returns. Student loans provider SLM Corp. (Sallie Mae) and investment
management firm Legg Mason were among the portfolio's largest detractors. Legg
Mason's shares suffered after the company continued to miss their quarterly
earnings targets as expenses were greater than anticipated.
Individual stocks in other sectors that detracted from relative results
included flash memory storage products maker SanDisk, managed health services
company Health Net(g), newsprint manufacturer Abitibi-Consolidated(c)(g),
integrated logistics company UTi Worldwide(c), and pharmaceuticals manufacturer
Eli Lilly.
CONTRIBUTORS TO PERFORMANCE
Security selection in the energy, health care, and consumer staples sectors
benefited relative results. Within energy, our overweighted position in
integrated oil and gas company Hess was a top contributor. In health care,
health insurance and Medicare/Medicaid provider UnitedHealth Group was another
positive contributor. Avoiding United Healthcare for a majority of the period
and buying our position opportunistically had a positive effect on our relative
results. No individual stocks in the consumer staples sector were among the
portfolio's top contributors.
An underweighted position in the special products and services sector also
helped relative performance. No individual securities within this sector were
among the portfolio's top contributors.
Stocks in other sectors that boosted relative results included diversified
technology company Corning(g), enterprise software provider Salesforce.com,
defense contractor Lockheed Martin, and agrichemical products company Monsanto.
Elsewhere, wireless services provider Rogers Communications(c), business
intelligence software company MicroStrategy(g), sporting goods maker NIKE, and
computer products and services provider Hewlett-Packard benefited results.
INTERNATIONAL GROWTH SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 26.04% while the Service Class shares
provided a total return of 25.75%. These returns do not reflect any applicable
surrender or contract charges and compare with a return of 22.69% for the
series' benchmark, the MSCI EAFE Growth Index.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the retailing sector was a positive factor in the
portfolio's relative performance led by our overweighted position in Hong
Kong-based consumer products export trading and logistics company Li & Fung.
Stock selection in the utilities and communications sector also boosted
results. Wireless communications company China Mobile(c) (Hong Kong),
telecommunications company Telenor (Norway), electric utility company
Iberdrola(g) (Spain) were among the portfolio's top contributors. The stock
price of Iberdrola benefited from merger speculation taking place in the
European utilities industry.
Stock selection and, to a lesser extent, our overweighted positioning in the
financial services sector had a positive impact on results. Financial services
firm Bank of Cyprus(c), banking firms Raiffeisen International Bank Holding
(Austria) and Bank Rakyat Indonesia(c)(g), bolstered relative returns. Avoiding
weak-performing diversified financial services firm Mitsubishi UFJ Financial
Group (Japan) also helped.
Stock selection in the energy sector also strengthened relative returns,
although no individual stocks within this sector were among the portfolio's top
contributors.
Elsewhere, biopharmaceutical company Actelion(c) (Switzerland) was the largest
contributor to relative performance over the period. The company's stock price
climbed significantly due to the accelerating growth of its main drug, Tracleer
(a treatment for pulmonary arterial hypertension) and the weakening competition
facing this drug. Avoiding poor-performing technology investment firm Softbank
(Japan) also aided results.
DETRACTORS FROM PERFORMANCE
Consumer finance firms, AEON Credit Service (Japan) and Aiful(c)(g) (Japan),
were among the portfolio's most significant individual detractors. Aiful
struggled during the period in an increasingly difficult regulatory, business,
and media environment for consumer finance companies. Our positions in
microchip and electronics manufacturer Samsung Electronics(c) (South Korea) and
industrial adhesive tapes maker Nitto Denko (Japan) also dampened results.
During the reporting period, currency exposure was a detractor from 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.
The portfolio's cash position was also a detractor from relative performance.
The portfolio holds cash to buy new holdings and to provide liquidity. In a
period when equity markets rose, as measured by the portfolio's benchmark,
holding cash hurt performance versus the benchmark, which has no cash position.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 7.67%, while Service Class shares provided a
total return of 7.42%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 9.07% for the series' benchmark,
the Russell 1000 Growth Index.
DETRACTORS FROM PERFORMANCE
Stock selection and our positioning in the technology sector held back
performance relative to the benchmark. Within this sector, networking chip
maker Marvell Technology Group(c), data storage systems provider EMC Corp., and
flash memory products maker SanDisk were among the portfolio's top detracting
holdings. Weakness in Marvell's stock was due, in part, to a dilutive
acquisition, a stock option backdating investigation, and disappointing second
and third quarter operating results. EMC's stock was under pressure after the
company pre-announced weak second quarter results. Customer demand for its next
generation high end storage product was under- estimated, causing shipping
delays.
Stock selection in the leisure sector, driven by our holding in Carnival Cruise
Line(c)(g), held back relative performance. Softening demand for Carnival's
Caribbean cruises, primarily in the low and mid level brands, combined with
rising fuel costs, caused Carnival to reduce its 2006 earnings guidance early
in the year. Not holding strong-performing cable company Comcast also detracted
from results.
A combination of stock selection and an underweighted position in the strong-
performing consumer staples sector hurt relative returns. No individual
holdings within this sector were among the portfolio's top detractors.
There were a number of stocks in the health care sector that hurt relative
performance. Biotechnology firm Genzyme, medical device maker Advanced Medical
Optics, and cardiovascular medical devices manufacturer St. Jude Medical were
among the top detractors. Shares of Genzyme declined after the company missed
their first quarter earnings target and reported slightly lower sales of drugs,
Fabrazyme and Synvisc. Higher operating expenses also held back the stock's
performance. Advanced Medical Optics struggled after the company lowered its
earnings guidance for 2007. Management cited a slowdown in laser vision
correction procedures and a slower-than-expected uptake of its multifocal
intraocular lenses, especially in Europe, as reasons for its dampened outlook.
In retailing, home products retailer Williams-Sonoma and specialty apparel
retailer Chico's(g) were among the top detractors. At Williams-Sonoma, strong
sales from the company's emerging brands were unable to offset weaker sales
from their core brands. Weakness in the Chico's brand and heavy investments in
its younger concepts pressured the company's results throughout the period.
CONTRIBUTORS TO PERFORMANCE
Stock selection and an underweighted position in the energy sector helped
relative performance, although no individual names within this sector were
among the top contributors to relative results.
Stock selection in the basic materials and special products and services
sectors also aided relative returns. Within special products and services,
billing software company Amdocs Ltd.(c) was a strong performer relative to the
benchmark. Amdocs continued to benefit from two secular trends within the
communications sector: telecommunications carrier consolidation and the
convergence of wireless, wireline, and cable. No individual holdings within the
basic materials sector were among the top contributors.
The portfolio's underweighted position in transportation, a sector that lagged
the overall benchmark, also benefited relative results.
Elsewhere, network equipment company Cisco Systems and wireless communications
provider America Movil(c) were strong contributors over the period. Cisco's
shares rose as the company reported strong earnings. In the latter half of the
period, the company gave better-than-expected fiscal second quarter guidance
and reiterated their confidence that the company's full year earnings would be
at the high end of their projected range. America Movil gained on continued
strength in subscriber growth and stable ARPUs (average revenue per user).
Casino resorts operator Las Vegas Sands and slot machine maker International
Game Technology(g) contributed to results.
Other stocks that boosted relative returns included biotechnology companies
Celgene and Gilead Sciences(g), wireless equipment company QUALCOMM, and
investment banking firm Morgan Stanley.
During the reporting period, 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.
MID CAP VALUE SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 11.30%, while Service Class shares provided a
total return of 11.01%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 20.22% for the series'
benchmark, the Russell Midcap Value Index.
DETRACTORS FROM PERFORMANCE
Stock selection in the basic materials sector was the primary detractor from
relative performance over the period. Individual holdings within this sector
that hurt results included package manufacturer Owens-Illinois(g), paper
products company Smurfit-Stone Container, and newsprint maker Bowater(c)(g).
Owens-Illinois was hurt by higher energy costs and disappointing results from
its operational improvement initiatives. Bowater was also affected by energy
costs as well as weaker demand for newsprint.
A combination of security selection and our overweighted position in the
technology sector detracted from relative returns. Within this sector, global
telecommunications equipment company Nortel Networks(c)(g) and flash memory
storage products maker SanDisk were among the portfolio's top relative
detractors.
Stock selection in the health care sector also detracted from results, although
no stocks within this sector were among the top detractors.
Other stocks that held back results included retail real estate operator Mills
Corporation(c)(g), homebuilder D.R. Horton, and newspaper publisher Lee
Enterprises. Not owning strong-performing benchmark constituent Archer Daniels
Midland (ADM), an agricultural production company, also dampened relative
returns.
CONTRIBUTORS TO PERFORMANCE
Security selection in the utilities and communications sector was the principal
contributor to relative results. Within this sector, our position in local
communications service provider Embarq, a recent spin-off of Sprint Nextel,
contributed to performance. Driven by increases in high speed Internet
revenues, results at Embarq exceeded market expectations. Natural gas company
Williams Companies and electric power suppliers, American Electric Power and
Northeast Utilities, also helped.
Stock selection in the energy sector aided results, with drill-rig operator
GlobalSantaFe(c) and oil and gas explorer Riata Energy(c)(g) among the
portfolio's top relative contributors.
Elsewhere, the portfolio benefited from our positions in specialty mattress
maker Tempur-Pedic International(c), casino resorts operator MGM MIRAGE(c), and
real estate investment trust Equity Office Properties.
NEW DISCOVERY SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 13.17%, while Service Class shares provided a
total return of 12.90%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 13.35% for the series'
benchmark, the Russell 2000 Growth Index.
DETRACTORS FROM PERFORMANCE
A combination of stock selection and an overweighted position in the health
care sector held back relative performance. Overweighted positions in medical
equipment company Aspect Medical Systems and medical device makers, Cyberonics
and Thoratec, led to disappointing results as all three stocks underperformed
the benchmark. Aspect Medical has penetrated close to 50% of operating rooms in
the U.S. with their hospital room monitoring system (BIS), and sales growth of
monitors has been strong. Nevertheless, the stock was under pressure because of
concerns about the slowing of growth in the company's sensors product.
Cyberonics' stock price declined after the company lowered revenue guidance for
their first fiscal quarter of 2007 and delayed expectations for profitability.
Investigations into the company's stock options practices led to a delay in the
company's SEC filing and uncertainty as to whether NASDAQ would delist its
stock.
Stock selection in the consumer staples sector and a combination of stock
selection and an underweighted position in the basic materials sector also
dampened investment results. No individual securities in either of these
sectors were among the portfolio's top detractors.
Stocks in other sectors that hurt relative returns included LED semiconductor
maker Cree, Inc.(c), casual dining restaurant Red Robin Gourmet Burgers, game
software developer Take-Two Interactive Software(g), automatic card shuffling
device maker Shuffle Master, vision systems producer Cognex(g), retail chain
operator Hot Topic(g), and flash memory disk maker Msystems(c)(g).
CONTRIBUTORS TO PERFORMANCE
Stock selection in the special products and services sector contributed to the
portfolio's relative performance over the reporting period. Our positioning in
managed network services provider Equinix and computer software company Open
Solutions(g) strengthened relative results. Equinix's stock price benefited
from strong demand and its ability to increase pricing on its products and
services.
Stock selection also helped in the technology sector. Our holdings in data
recording products provider NICE Systems(c) and speech and imaging software
firm Nuance Communications aided results as both stocks delivered strong
performance.
The portfolio's underweighted position in the relatively weak autos and housing
sector benefited relative returns. No individual securities in this sector were
among the portfolio's top contributors.
Elsewhere, the portfolio's positioning in permanent birth control device maker
Conceptus, global communications and information services company Level 3
Communications(c), infrastructure services providers InfraSource Services and
Quanta Services, quick service eatery Chipotle Mexican Grill, and retailer
CarMax contributed to relative performance.
RESEARCH INTERNATIONAL SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 27.47%, while the Service Class shares
provided a total return of 27.25%. These returns do not reflect any applicable
surrender or contract charges and compare with a return of 26.86% for the
series' benchmark, the MSCI EAFE Index.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the energy sector boosted performance relative to the
benchmark. Integrated oil company LUKOIL(c)(g) (Russia) and steel tubes
manufacturer Vallourec (France) were among the top contributors in this sector.
Avoiding integrated oil company BP Amoco (UK) also helped as this company
underperformed the benchmark.
Stock selection in the utilities and communications sector enhanced relative
performance. Strong performers in this sector included telecommunications
company Telenor (Norway), energy and utility operations company SUEZ (France),
and electric utility company Iberdrola(g) (Spain). The stock price of Iberdrola
benefited from merger speculation in the European utilities industry.
Stock selection in the basic materials sector also had a positive effect on the
portfolio's relative returns. This was led by steel producer Arcelor
Mittal(c)(g) (Luxembourg) and agrochemical company Sygenta (Switzerland).
Stocks in other sectors that contributed to results included biopharmaceutical
company Actelion(c) (Switzerland) and video game console maker Nintendo
(Japan). Actelion was the largest contributor to the portfolio's relative
performance over the period. The company's stock price climbed significantly
due to the accelerating growth of its main drug, Tracleer (a treatment for
pulmonary arterial hypertension), and the weakening competition facing this
drug.
DETRACTORS FROM PERFORMANCE
Stock selection in the financial services sector was the principal factor
holding back relative performance. Consumer finance firms Aiful(g) (Japan),
AEON Credit Services (Japan), and Takefuji(g) (Japan), real estate investment
consulting firm K.K. Davinci Advisors(g) (Japan), and diversified financial
services firm Mitsubishi UFJ Financial Group (Japan) were among the portfolio's
largest detractors. Aiful and Takefuji struggled during the period in an
increasingly difficult regulatory, business, and media environment for consumer
finance companies.
Elsewhere, microchip and electronics manufacturer Samsung Electronics(c) (South
Korea), basic chemicals, resin, and plastics maker Kaneka(g) (Japan), and
electronics retailer Yamada Denki(g) (Japan) detracted from results. Shares of
Samsung suffered as a result of disappointing earnings in first half of the
period. Our overweighted position in pharmaceutical company GlaxoSmithKline
(UK) also hurt as this stock underperformed the benchmark.
During the reporting period, currency exposure was a detractor from 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.
The portfolio's cash position was also a detractor from relative performance.
The portfolio holds cash to buy new holdings and to provide liquidity. In a
period when equity markets rose, as measured by the portfolio's benchmark,
holding cash hurt performance versus the benchmark, which has no cash position.
STRATEGIC GROWTH SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 6.58%, while Service Class shares provided a
total return of 6.37%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 9.07% for the series' benchmark,
the Russell 1000 Growth Index.
DETRACTORS FROM PERFORMANCE
A combination of stock selection and an overweighted position in the technology
sector held back relative performance. Top detractors included network
equipment manufacturer Juniper Networks, networking chip maker Marvell
Technology Group(c), online information portal Yahoo!, flash memory storage
products company SanDisk, and global telecommunications equipment company
Nortel Networks(c)(g). Juniper Networks' stock was under pressure due, in part,
to an investigation into the company's stock options practices and lowered
earnings guidance in its outlook for the second half of the 2006 year. The
source of disappointing results at Marvell included a dilutive acquisition, a
stock options backdating investigation, and disappointing second and third
quarter operating results. We believe that Nortel's lowered earnings guidance
and general pricing pressures led to the stock's decline.
A combination of stock selection and an overweighted position in the health
care sector hurt relative results over the period. Cardiovascular medical
device maker St. Jude Medical detracted from performance as this stock
underperformed the benchmark. Advanced Medical Optics pre-announced
disappointing third quarter results citing a slowdown in laser vision
correction procedures, and a slower than expected uptake for multifocal lenses,
specifically in Europe. Later in the year, the company was forced to recall eye
care products manufactured in a plant in China due to manufacturing issues.
The portfolio's underweighted position in the industrial goods and services
sector was a detractor from relative performance. Strong performance from
industrial automation products manufacturer Rockwell Automation was not enough
to offset our underweighted position in the sector.
Stocks in other sectors that hurt relative performance included online
auctioneer eBay and multimedia image provider Getty Images(g).
CONTRIBUTORS TO PERFORMANCE
A combination of stock selection and an overweighting in the leisure sector
benefited performance over the period. Casino resorts operator Las Vegas Sands
was a top contributor. The firm increased earnings and revenues throughout the
year due, in part, to growth in its Sands Macau operations located in China.
Stock selection and an overweighted position in the utilities and
communications sector were the principal factors in sustaining the portfolio's
relative performance. Latin American wireless communications firm American
Movil(c) and broadcast and communications tower management firm American Tower
were among the portfolio's top contributors.
Stock selection in the retailing sector was also an area of strength during the
period, although no individual securities within this sector were among the top
contributors.
Other significant contributors to relative performance included biotechnology
companies Celgene and Gilead Sciences along with our underweighted position in
poor-performing chip giant Intel.
STRATEGIC VALUE SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 14.16%, while Service Class shares provided a
total return of 13.92%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 22.25% for the series'
benchmark, the Russell 1000 Value Index.
DETRACTORS FROM PERFORMANCE
A combination of stock selection and an overweighted position in the technology
sector hurt relative performance. In this sector, global telecommunications
equipment company Nortel Networks(c) was a top detractor. We believe that
Nortel's lowered earnings guidance and general pricing pressures led to the
stock's decline. Owning poor-performing direct-sale computer vendor Dell(c)(g)
and software developer Compuware also dampened relative results.
Stock selection in the basic materials sector held back relative performance.
Packaging manufacturer Owens-Illinois and newsprint maker Bowater(c) were among
the portfolio's top detractors. Both stocks were affected by higher energy
costs. Owens-Illinois was also hurt by the company's disappointing results from
its operational improvement initiatives. Bowater's stock was under pressure due
to weaker demand for newsprint.
Stock selection and, to a lesser extent, an underweighting in the energy sector
led to disappointing results. Avoiding Exxon Mobil detracted from results as
the stock outperformed the benchmark over the period.
Stocks in other sectors that detracted from relative returns included wireless
provider Sprint Nextel(g), financial services firm Conseco, and home
improvement products maker Masco. Sprint Nextel's share price was down due to
weaker-than-expected growth in subscribers and concerns regarding the quality
of the firm's customer base.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the retailing sector contributed to the portfolio's relative
performance. Office products retailer OfficeMax and retail chain operator
Saks(g) were top contributors.
A combination of stock selection and an underweighting in the financial
services sector aided relative results. Financial services firms Bank of New
York and PNC Bank benefited performance as both stocks outperformed the
benchmark over the reporting period. Not holding poor-performing insurer
American International Group also helped.
Stock selection in the health care sector was another area of relative
strength. Pharmaceutical company Merck(g) was among the portfolio's top
contributors.
Other stocks that contributed to relative performance included strong-
performing telecommunications service provider Verizon and electric power
supplier FPL Group. Toy manufacturer Mattel and enterprise software giant
Oracle(c)(g) proved positive as both firms performed well over the period.
TECHNOLOGY SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 21.97%, while Service Class shares provided a
total return of 21.59%. These returns do not reflect any applicable contract or
surrender charges and compare with a return of 8.98% for the series' benchmark,
the Goldman Sachs Technology Industry Composite Index.
CONTRIBUTORS TO PERFORMANCE
Strong stock selection and, to a lesser extent, an overweighted position in the
Internet industry were the principal factors contributing to the portfolio's
relative performance. Our investments in Chinese search engine Baidu.com(c) and
Chinese Internet operator Tencent Holdings(c) contributed to relative
performance. On the other hand, not holding online information portal Yahoo!
added to relative results as this stock underperformed the benchmark over the
reporting period.
Stock selection in the business services industry also aided relative
performance. Strong-performing managed network services company Equinix and
information technology consulting services provider Cognizant Technology
Solutions were top contributors.
Stock selection in the computer software industry was also a positive factor.
Overweighting business intelligence software firm MicroStrategy(c)(g) aided
relative results.
Elsewhere, the portfolio's underweighting in weak-performing wireless
communications software firm QUALCOMM(g) and not holding online auctioneer eBay
also helped as both stocks underperformed the benchmark. Entertainment and
games software company Capcom(c) and electronic and power supply manufacturer
Delta Electronics(c)(g) were also among the portfolio's top contributors.
DETRACTORS FROM PERFORMANCE
Stock selection in the network and telecommunications industry detracted from
performance relative to the benchmark. Global telecommunications equipment
company Nortel Networks and network equipment manufacturer Juniper Networks
were top detractors. Nortel's lowered earnings guidance and general pricing
pressures led to the stock's decline. Juniper Networks' shares were under
pressure due, in part, to an investigation into the company's stock options
practices and lowered earnings guidance in its outlook for the second half of
the 2006 year.
The portfolio's underweighted position in the computer systems industry was a
key factor in relative underperformance. Underweighting strong-performing
computer products and services company Hewlett-Packard, and not holding
computer company IBM, hurt performance. Vision systems Cognex(c)(g) also
detracted from results.
Other stocks that detracted from performance included overweighted positions in
flash memory storage products company SanDisk and networking chip maker Marvell
Technology Group. The sources of disappointing results at Marvell included a
dilutive acquisition, a stock options backdating investigation, and
disappointing second and third quarter operating results. Not holding software
giant Microsoft(c) and positioning in computer software firm Filenet(g) also
hurt relative results.
VALUE SERIES
SUMMARY OF RESULTS
For the twelve months ended December 31, 2006, Initial Class shares of the
series provided a total return of 20.96%, while Service Class shares provided a
total return of 20.66%. These compare with a return of 22.25% for the series'
benchmark, the Russell 1000 Value Index.
DETRACTORS FROM PERFORMANCE
Security selection in the utilities and communications sector dampened relative
results during the period. Our overweighted position in weak- performing
wireless provider Sprint Nextel was a primary detractor from relative
performance. The stock was down due to weaker-than-expected growth in
subscribers and concern about the customer base. Overweighting Dominion
Resources, a transmitter and distributor of electricity and natural gas, was
also a drawback as this stock underperformed the benchmark. Not owning strong-
performing benchmark constituents, Bellsouth and AT&T, also detracted.
Stock selection in the energy sector was another area of relative weakness.
Underweighting Exxon Mobil detracted from results as the stock outperformed the
Russell 1000 Value Index.
Stock selection in the basic materials sector was also a detractor, although no
individual securities within this sector were among the portfolio's top
detractors.
Elsewhere, health care company Johnson & Johnson hurt relative returns. Johnson
& Johnson's share price was under pressure during the period due to concerns
surrounding its pharmaceutical patent expirations and a maturation of the drug
eluting stent business. Our overweighted positions in home improvement product
maker Masco and railroad company Burlington Northern Santa Fe and not holding
global financial services firm Morgan Stanley, also negatively affected
relative returns.
The portfolio's cash position was also a detractor from relative performance.
The portfolio holds cash to buy new holdings and to provide liquidity. In a
period when equity markets rose, as measured by the portfolio's benchmark,
holding cash hurt performance versus the benchmark, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the financial services sector was the most positive
contributor to results. A principal factor helping performance was our
overweighted position in investment banking firm Goldman Sachs. During the
year, Goldman Sachs completed a substantial share repurchase program and
delivered earnings results that exceeded expectations. Avoiding insurer
American International Group helped performance as the stock lagged the
benchmark over the period.
Stock selection in the industrial goods and services sector also helped
performance relative to the benchmark. Our positioning in defense contractor
Lockheed Martin(c) aided performance as the company continued to report
quarterly results that exceeded expectations. As a result, this stock
outperformed the broad benchmark. Overweighting Deere & Co. also helped as the
company continued to turn in good quarterly results. Finally, avoiding General
Electric stock positively affected performance as this company substantially
lagged the benchmark.
Stock selection in the consumer staples sector also contributed to our results.
Our positioning in Archer-Daniels Midland (ADM)(g), a processor of oilseeds,
corn, and wheat, performed well on the back of improving secular trends. Owning
Diageo PLC(c) was another source of relative return over the period.
Elsewhere, agrichemical company Syngenta(c) added to relative results as the
stock outperformed over the period. Owning Cisco Systems(c) was also beneficial
to performance as its shares appreciated significantly. Although the utilities
and communications sector was a detractor overall, our overweighting of public
utility holding company FPL Group within this sector was helpful.
During the reporting period, our currency exposure was a contributor to the
portfolio's relative performance. All of MFS' investment decisions are driven
by the fundamentals of each individual opportunity and, as such, it is common
for our portfolios to have different currency exposure than the index.
(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.
PORTFOLIO COMPOSITION -- CAPITAL OPPORTUNITIES SERIES
PORTFOLIO STRUCTURE
Common Stocks 96.9%
Cash & Other Net Assets 3.1%
TOP TEN HOLDINGS
Johnson & Johnson 3.0%
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Nestle S.A. 3.0%
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Wyeth 3.0%
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Tyco International Ltd. 2.8%
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Amgen, Inc. 2.7%
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St. Paul Travelers Cos., Inc. 2.5%
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First Data Corp. 2.5%
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Altria Group, Inc. 2.3%
------------------------------------------------
Berkshire Hathaway, Inc. "B" 2.1%
------------------------------------------------
JPMorgan Chase & Co. 2.1%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 18.9%
------------------------------------------------
Health Care 18.3%
------------------------------------------------
Technology 13.1%
------------------------------------------------
Retailing 8.9%
------------------------------------------------
Energy 8.0%
------------------------------------------------
Special Products & Services 7.8%
------------------------------------------------
Consumer Staples 7.0%
------------------------------------------------
Basic Materials 5.7%
------------------------------------------------
Industrial Goods & Services 4.2%
------------------------------------------------
Leisure 2.0%
------------------------------------------------
Utilities & Communications 1.7%
------------------------------------------------
Autos & Housing 1.3%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- CORE EQUITY SERIES
PORTFOLIO STRUCTURE
Common Stocks 98.7%
Cash & Other Net Assets 1.3%
TOP TEN HOLDINGS
Exxon Mobil Corp. 3.4%
------------------------------------------------
Altria Group, Inc. 3.1%
------------------------------------------------
Hewlett-Packard Co. 2.3%
------------------------------------------------
Wyeth 2.0%
------------------------------------------------
Bank of America Corp. 1.8%
------------------------------------------------
JPMorgan Chase & Co. 1.6%
------------------------------------------------
Eli Lilly & Co. 1.5%
------------------------------------------------
Countrywide Financial Corp. 1.4%
------------------------------------------------
American Express Co. 1.4%
------------------------------------------------
NIKE Inc., "B" 1.4%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 21.8%
------------------------------------------------
Technology 14.3%
------------------------------------------------
Health Care 12.6%
------------------------------------------------
Energy 8.1%
------------------------------------------------
Utilities & Communications 7.1%
------------------------------------------------
Consumer Staples 6.6%
------------------------------------------------
Industrial Goods & Services 6.3%
------------------------------------------------
Retailing 6.2%
------------------------------------------------
Leisure 5.7%
------------------------------------------------
Basic Materials 4.3%
------------------------------------------------
Special Products & Services 2.0%
------------------------------------------------
Autos & Housing 1.9%
------------------------------------------------
Transportation 1.8%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- INTERNATIONAL GROWTH SERIES
PORTFOLIO STRUCTURE
Common Stocks 98.8%
Cash & Other Net Assets 1.2%
TOP TEN HOLDINGS
Roche Holding AG 2.9%
------------------------------------------------
TOTAL S.A. 2.7%
------------------------------------------------
LVMH Moet Hennessy Louis Vuitton S.A. 2.5%
------------------------------------------------
HSBC Holdings PLC 2.4%
------------------------------------------------
GlaxoSmithKline PLC 2.4%
------------------------------------------------
Tesco PLC 2.3%
------------------------------------------------
BHP Billiton Ltd. 2.1%
------------------------------------------------
UBS AG 2.0%
------------------------------------------------
WPP Group PLC 1.9%
------------------------------------------------
Nestle S.A. 1.8%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 20.8%
------------------------------------------------
Technology 12.1%
------------------------------------------------
Retailing 10.0%
------------------------------------------------
Health Care 9.2%
------------------------------------------------
Consumer Staples 9.0%
------------------------------------------------
Leisure 8.3%
------------------------------------------------
Basic Materials 7.6%
------------------------------------------------
Energy 6.9%
------------------------------------------------
Utilities & Communications 6.0%
------------------------------------------------
Industrial Goods & Services 4.8%
------------------------------------------------
Autos & Housing 3.4%
------------------------------------------------
Special Products & Services 0.7%
------------------------------------------------
COUNTRY WEIGHTINGS
United Kingdom 16.2%
------------------------------------------------
Japan 14.7%
------------------------------------------------
France 10.8%
------------------------------------------------
Switzerland 10.2%
------------------------------------------------
Germany 5.4%
------------------------------------------------
Norway 3.5%
------------------------------------------------
Hong Kong 3.4%
------------------------------------------------
Italy 3.1%
------------------------------------------------
South Korea 2.7%
------------------------------------------------
Other Countries 30.0%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
PORTFOLIO STRUCTURE
Common Stocks 96.2%
Cash & Other Net Assets 3.8%
TOP TEN HOLDINGS
Cisco Systems, Inc. 3.9%
------------------------------------------------
General Electric Co. 2.9%
------------------------------------------------
Intel Corp. 2.8%
------------------------------------------------
Johnson & Johnson 2.4%
------------------------------------------------
Procter & Gamble Co. 2.3%
------------------------------------------------
Microsoft Corp. 2.3%
------------------------------------------------
Google, Inc., "A" 2.2%
------------------------------------------------
Adobe Systems, Inc. 1.9%
------------------------------------------------
Medtronic, Inc. 1.9%
------------------------------------------------
Amdocs Ltd. 1.9%
------------------------------------------------
COMMON STOCK SECTORS
Technology 23.1%
------------------------------------------------
Health Care 19.6%
------------------------------------------------
Financial Services 10.0%
------------------------------------------------
Industrial Goods & Services 9.0%
------------------------------------------------
Retailing 7.4%
------------------------------------------------
Special Products & Services 6.8%
------------------------------------------------
Consumer Staples 6.1%
------------------------------------------------
Leisure 5.4%
------------------------------------------------
Energy 4.2%
------------------------------------------------
Basic Materials 1.5%
------------------------------------------------
Transportation 1.4%
------------------------------------------------
Utilities & Communications 0.9%
------------------------------------------------
Autos & Housing 0.8%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- MID CAP VALUE SERIES
PORTFOLIO STRUCTURE
Common Stocks 98.9%
Cash & Other Net Assets 1.1%
TOP TEN HOLDINGS
Equity Office Properties Trust, REIT 2.7%
------------------------------------------------
Embarq Corp. 2.6%
------------------------------------------------
Hess Corp. 2.5%
------------------------------------------------
PG&E Corp. 2.4%
------------------------------------------------
Equity Residential, REIT 2.3%
------------------------------------------------
Constellation Energy Group, Inc. 2.3%
------------------------------------------------
American Electric Power Co., Inc. 2.2%
------------------------------------------------
Eaton Corp. 1.8%
------------------------------------------------
Genworth Financial Inc., "A" 1.8%
------------------------------------------------
Pepco Holdings, Inc. 1.8%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 30.4%
------------------------------------------------
Utilities & Communications 19.1%
------------------------------------------------
Autos & Housing 6.3%
------------------------------------------------
Technology 6.0%
------------------------------------------------
Industrial Goods & Services 5.9%
------------------------------------------------
Retailing 5.8%
------------------------------------------------
Consumer Staples 5.1%
------------------------------------------------
Health Care 5.1%
------------------------------------------------
Leisure 4.3%
------------------------------------------------
Energy 4.2%
------------------------------------------------
Basic Materials 3.3%
------------------------------------------------
Special Products & Services 2.2%
------------------------------------------------
Transportation 1.2%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- NEW DISCOVERY SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.3%
Cash & Other Net Assets 0.7%
TOP TEN HOLDINGS
NICE Systems Ltd., ADR 3.0%
------------------------------------------------
ARM Holdings PLC 1.9%
------------------------------------------------
Millipore Corp. 1.9%
------------------------------------------------
MSC Industrial Direct Co., Inc. "A" 1.8%
------------------------------------------------
Transaction Systems Architects, Inc. 1.8%
------------------------------------------------
Red Robin Gourmet Burgers, Inc. 1.7%
------------------------------------------------
Thoratec Corp. 1.7%
------------------------------------------------
Advanced Medical Optics, Inc. 1.7%
------------------------------------------------
Nuance Communications, Inc. 1.7%
------------------------------------------------
CoStar Group, Inc. 1.6%
------------------------------------------------
COMMON STOCK SECTORS
Health Care 22.0%
------------------------------------------------
Technology 21.7%
------------------------------------------------
Special Products & Services 12.2%
------------------------------------------------
Leisure 9.0%
------------------------------------------------
Retailing 8.1%
------------------------------------------------
Financial Services 6.4%
------------------------------------------------
Industrial Goods & Services 6.1%
------------------------------------------------
Energy 5.7%
------------------------------------------------
Basic Materials 2.7%
------------------------------------------------
Consumer Staples 2.1%
------------------------------------------------
Autos & Housing 1.4%
------------------------------------------------
Utilities & Communications 1.4%
------------------------------------------------
Transportation 0.5%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- RESEARCH INTERNATIONAL SERIES
PORTFOLIO STRUCTURE
Common Stocks 98.7%
Cash & Other Net Assets 1.3%
TOP TEN HOLDINGS
Royal Dutch Shell PLC, "A" 2.5%
------------------------------------------------
TOTAL S.A. 2.4%
------------------------------------------------
GlaxoSmithKline PLC 2.4%
------------------------------------------------
Nestle S.A. 2.2%
------------------------------------------------
E.ON AG 2.1%
------------------------------------------------
Bayer AG 2.0%
------------------------------------------------
UBS AG 2.0%
------------------------------------------------
Royal Bank of Scotland Group PLC 2.0%
------------------------------------------------
BNP Paribas 1.9%
------------------------------------------------
BHP Billiton PLC 1.9%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 29.2%
------------------------------------------------
Utilities & Communications 10.6%
------------------------------------------------
Basic Materials 10.3%
------------------------------------------------
Energy 7.8%
------------------------------------------------
Healthcare 6.9%
------------------------------------------------
Consumer Staples 6.2%
------------------------------------------------
Autos & Housing 6.2%
------------------------------------------------
Technology 6.2%
------------------------------------------------
Leisure 5.1%
------------------------------------------------
Retailing 4.7%
------------------------------------------------
Industrial Goods & Services 3.4%
------------------------------------------------
Special Products & Services 2.1%
------------------------------------------------
COUNTRY WEIGHTINGS
United Kingdom 20.0%
------------------------------------------------
Japan 17.2%
------------------------------------------------
France 13.5%
------------------------------------------------
Germany 11.4%
------------------------------------------------
Switzerland 10.1%
------------------------------------------------
Italy 4.3%
------------------------------------------------
South Korea 3.3%
------------------------------------------------
Norway 2.8%
------------------------------------------------
Brazil 2.1%
------------------------------------------------
Other Countries 15.3%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- STRATEGIC GROWTH SERIES
PORTFOLIO STRUCTURE
Common Stocks 98.1%
Cash & Other Net Assets 1.9%
TOP TEN HOLDINGS
Cisco Systems, Inc. 3.4%
------------------------------------------------
Adobe Systems, Inc. 3.0%
------------------------------------------------
News Corp., "A" 2.7%
------------------------------------------------
Monsanto Co. 2.5%
------------------------------------------------
Roche Holding AG 2.5%
------------------------------------------------
American Express Co. 2.2%
------------------------------------------------
Lockheed Martin Corp. 2.1%
------------------------------------------------
UBS AG 2.1%
------------------------------------------------
Intel Corp. 2.0%
------------------------------------------------
Marvell Technology Group Ltd. 2.0%
------------------------------------------------
COMMON STOCK SECTORS
Technology 21.9%
------------------------------------------------
Health Care 19.6%
------------------------------------------------
Financial Services 12.4%
------------------------------------------------
Leisure 7.7%
------------------------------------------------
Industrial Goods & Services 7.0%
------------------------------------------------
Special Products & Services 6.9%
------------------------------------------------
Retailing 6.3%
------------------------------------------------
Consumer Staples 4.8%
------------------------------------------------
Energy 4.1%
------------------------------------------------
Utilities & Communications 3.5%
------------------------------------------------
Basic Materials 2.5%
------------------------------------------------
Autos & Housing 1.4%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- STRATEGIC VALUE SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.2%
Cash & Other Net Assets 0.8%
TOP TEN HOLDINGS
Verizon Communications, Inc 4.9%
------------------------------------------------
JPMorgan Chase & Co. 4.8%
------------------------------------------------
Nortel Networks Corp. 4.7%
------------------------------------------------
Owens-Illinois, Inc. 4.6%
------------------------------------------------
Tyco International Ltd. 4.5%
------------------------------------------------
Bank of New York Co., Inc. 3.8%
------------------------------------------------
Masco Corp. 3.4%
------------------------------------------------
New York Times Co., "A" 3.3%
------------------------------------------------
Amgen, Inc. 3.3%
------------------------------------------------
Compuware Corp. 3.3%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 25.8%
------------------------------------------------
Health Care 12.9%
------------------------------------------------
Utilities & Communications 10.7%
------------------------------------------------
Technology 9.8%
------------------------------------------------
Energy 8.3%
------------------------------------------------
Leisure 7.7%
------------------------------------------------
Basic Materials 6.5%
------------------------------------------------
Consumer Staples 5.9%
------------------------------------------------
Industrial Goods & Services 4.5%
------------------------------------------------
Autos & Housing 3.9%
------------------------------------------------
Retailing 3.2%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PORTFOLIO COMPOSITION -- TECHNOLOGY SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.2%
Cash & Other Net Assets 0.8%
TOP TEN HOLDINGS
Cisco Systems, Inc. 6.5%
------------------------------------------------
Intel Corp. 5.4%
------------------------------------------------
Applied Materials, Inc. 4.0%
------------------------------------------------
Hewlett-Packard Co. 3.7%
------------------------------------------------
SanDisk Corp. 3.3%
------------------------------------------------
Google, Inc., "A" 3.3%
------------------------------------------------
Marvell Technology Group Ltd. 3.3%
------------------------------------------------
Salesforce.com, Inc. 3.0%
------------------------------------------------
McAfee, Inc. 3.0%
------------------------------------------------
Adobe Systems, Inc. 3.0%
------------------------------------------------
TOP 5 EQUITY INDUSTRIES
Electronics 25.5%
------------------------------------------------
Computer Software 16.6%
------------------------------------------------
Network & Telecom 12.0%
------------------------------------------------
Business Services 10.1%
------------------------------------------------
Personal Computers & Peripherals 8.7%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed, and current holdings may be different.
PORTFOLIO COMPOSITION -- VALUE SERIES
PORTFOLIO STRUCTURE
Common Stocks 99.5%
Cash & Other Net Assets 0.5%
TOP TEN HOLDINGS
Bank of America Corp. 4.2%
------------------------------------------------
Altria Group, Inc. 4.0%
------------------------------------------------
Lockheed Martin Corp. 3.9%
------------------------------------------------
Citigroup, Inc. 3.4%
------------------------------------------------
Allstate Corp. 3.4%
------------------------------------------------
Metlife, Inc. 2.9%
------------------------------------------------
Johnson & Johnson 2.8%
------------------------------------------------
Goldman Sachs Group, Inc. 2.8%
------------------------------------------------
Exxon Mobil Corp. 2.6%
------------------------------------------------
Total S.A., ADR 2.3%
------------------------------------------------
COMMON STOCK SECTORS
Financial Services 32.1%
------------------------------------------------
Energy 11.8%
------------------------------------------------
Industrial Goods & Services 11.2%
------------------------------------------------
Health Care 8.4%
------------------------------------------------
Utilities & Communications 8.3%
------------------------------------------------
Consumer Staples 7.9%
------------------------------------------------
Basic Materials 5.7%
------------------------------------------------
Autos & Housing 3.1%
------------------------------------------------
Retailing 3.0%
------------------------------------------------
Technology 2.7%
------------------------------------------------
Leisure 2.1%
------------------------------------------------
Transportation 2.0%
------------------------------------------------
Special Products & Services 1.2%
------------------------------------------------
Percentages are based on net assets as of 12/31/06.
The portfolio is actively managed and current holdings may be different.
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the historical
performance of each series in comparison to its benchmark(s). Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be more than or less than the line
shown. It is not possible to invest directly in an index. (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 UNITS,
WHEN SOLD, MAY BE WORTH MORE OR LESS THAN THE ORIGINAL COST; CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN QUOTED. THE PERFORMANCE SHOWN DOES NOT
REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A CONTRACT HOLDER WOULD PAY ON
DISTRIBUTIONS OR REDEMPTION OF CONTRACT UNITS.
CAPITAL OPPORTUNITIES SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006)
Capital Standard
Opportunities & Poor's
Series 500 Stock
- Initial Class Index
12/96 $10,000 $10,000
12/97 12,757 13,336
12/98 16,198 17,148
12/99 23,917 20,756
12/00 22,749 18,866
12/01 17,078 16,624
12/02 11,885 12,950
12/03 15,249 16,664
12/04 17,200 18,478
12/05 17,482 19,385
12/06 19,986 22,447
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- --------------------------------------------------------------------------------
Average Annual Total Return 6/03/96 14.32% 3.19% 7.17%
Service Class
- --------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 14.02% 2.93% 7.02%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index (f) 15.79% 6.19% 8.42%
(f) Source: FactSet Research Systems Inc.
CORE EQUITY SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations May
12, 1997 through December 31, 2006)
Core Equity Standard Russell
Series & Poor's 500 3000
- Initial Class Stock Index Index
5/97 $10,000 $10,000 $10,000
12/97 11,020 11,900 12,037
12/98 13,459 15,300 14,943
12/99 14,564 18,520 18,066
12/00 15,015 16,834 16,718
12/01 13,377 14,828 14,803
12/02 10,514 11,551 11,614
12/03 13,443 14,364 15,221
12/04 15,410 16,481 17,040
12/05 16,420 17,291 18,082
12/06 18,676 20,022 20,924
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 5/12/97 13.74% 6.90% 6.70%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 13.44% 6.64% 6.55%
COMPARATIVE BENCHMARKS
- -------------------------------------------------------------------------------
Russell 3000 Index (e)(f) 15.72% 7.17% 7.93%
Standard & Poor's 500 Stock Index (f) 15.79% 6.19% 7.44%
(e) Effective July 20, 2006, we no longer use Standard & Poor's 500 Stock Index
because we believe the Russell 3000 Index better reflects the series'
investment policies and objectives.
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 12, 1997 through the stated period end.
INTERNATIONAL GROWTH SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2006)
International MSCI
Growth Series EAFE
- Initial Class Growth Index
12/96 $10,000 $10,000
12/97 9,836 10,233
12/98 10,027 12,532
12/99 13,560 16,255
12/00 12,502 12,289
12/01 10,513 9,290
12/02 9,264 7,825
12/03 12,846 10,368
12/04 15,279 12,076
12/05 17,557 13,723
12/06 22,129 16,837
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr 10-yr
- -------------------------------------------------------------------------------
Average Annual Total Return 6/03/96 26.04% 16.05% 8.27%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 25.75% 15.78% 8.13%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
MSCI EAFE Growth Index (f) 22.69% 12.63% 5.35%
(f) Source: FactSet Research Systems Inc.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 6, 1998 through December 31, 2006)
Massachusetts Russell
Investors Growth 3000
Stock Series Growth
- Initial Class Index
5/98 $10,000 $10,000
12/98 12,070 11,871
12/99 16,391 15,808
12/00 15,393 12,263
12/01 11,559 9,758
12/02 8,317 7,037
12/03 10,262 9,131
12/04 11,248 9,706
12/05 11,739 10,217
12/06 12,639 11,144
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 5/06/98 7.67% 1.80% 2.74%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 7.42% 1.54% 2.59%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Russell 1000 Growth Index (f) 9.07% 2.69% 1.26%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 6, 1998 through the stated period end.
MID CAP VALUE SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 1, 2002 through December 31, 2006)
Mid Cap Russell
Value Series Midcap
- Initial Class Value Index
5/02 $10,000 $10,000
12/02 7,920 8,380
12/03 10,474 11,570
12/04 12,789 14,312
12/05 13,765 16,122
12/06 15,321 19,382
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr Life (t)
- ------------------------------------------------------------------------------
Average Annual Total Return 5/01/02 11.30% 9.56%
Service Class
- ------------------------------------------------------------------------------
Average Annual Total Return 5/01/02 11.01% 9.35%
COMPARATIVE BENCHMARK
- ------------------------------------------------------------------------------
Russell Midcap Value Index (f) 20.22% 15.23%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 1, 2002 through the stated period end.
NEW DISCOVERY SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 6, 1998 through December 31, 2006)
New Discovery Russell 2000
Series - Initial Class Growth Index
5/98 $10,000 $10,000
12/98 10,620 9,035
12/99 17,019 12,928
12/00 17,077 10,028
12/01 16,203 9,103
12/02 10,786 6,348
12/03 14,593 9,430
12/04 15,685 10,779
12/05 16,502 11,227
12/06 18,675 12,725
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 5/06/98 13.17% 2.88% 7.48%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 12.90% 2.62% 7.31%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Russell 2000 Growth Index (f) 13.35% 6.93% 2.81%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 6, 1998 through the stated period end.
RESEARCH INTERNATIONAL SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 6, 1998 through December 31, 2006)
Research MSCI
International Series EAFE
- Initial Class Index
5/98 $10,000 $10,000
12/98 9,420 10,399
12/99 14,595 13,237
12/00 13,434 11,390
12/01 11,049 8,974
12/02 9,785 7,569
12/03 13,098 10,534
12/04 15,874 12,714
12/05 18,503 14,496
12/06 23,586 18,389
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 5/06/98 27.47% 16.38% 10.42%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 27.25% 16.08% 10.25%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
MSCI EAFE Index (f) 26.86% 15.43% 7.28%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 6, 1998 through the stated period end. Index information is from May 1,
1998.
STRATEGIC GROWTH SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
October 29, 1999 through December 31, 2006)
Strategic Russell
Growth Series 1000
- Initial Class Growth Index
10/99 $10,000 $10,000
12/99 12,130 11,923
12/00 10,918 9,250
12/01 8,227 7,360
12/02 5,754 5,702
12/03 7,338 6,887
12/04 7,839 7,321
12/05 7,948 7,706
12/06 8,471 8,406
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 10/29/99 6.58% 0.59% -2.29%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 6.37% 0.34% -2.45%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Russell 1000 Growth Index (f) 9.07% 2.69% -2.38%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
October 29, 1999 through the stated period end.
STRATEGIC VALUE SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 1, 2002 through December 31, 2006)
Strategic Russell
Value Series 1000
- Initial Class Value Index
5/02 $10,000 $10,000
12/02 7,900 8,404
12/03 10,068 10,928
12/04 11,884 12,730
12/05 11,839 13,628
12/06 13,515 16,660
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 5/01/02 14.16% 6.66%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 5/01/02 13.92% 6.41%
COMPARATIVE BENCHMARK
- ------------------------------------------------------------------------------
Russell 1000 Value Index (f) 22.25% 11.56%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 1, 2002 through the stated period end.
TECHNOLOGY SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
June 16, 2000 through December 31, 2006)
Technology Goldman Sachs
Series Technology Industry
- Initial Class Composite Index
6/00 $10,000 $10,000
12/00 8,540 5,892
12/01 5,221 4,208
12/02 2,820 2,514
12/03 4,101 3,875
12/04 4,201 3,988
12/05 4,461 4,069
12/06 5,441 4,434
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 6/16/00 21.97% 0.83% -8.88%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 21.59% 0.49% -9.11%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Goldman Sachs Technology Industry
Composite Index (f) 8.98% 1.05% -11.66%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
June 16, 2000, through the stated period end.
VALUE SERIES
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 6, 1998 through December 31, 2006)
Value Series Russell 1000
- Initial Class Value Index
5/98 $10,000 $10,000
12/98 10,500 10,234
12/99 11,240 10,985
12/00 14,640 11,756
12/01 13,548 11,099
12/02 11,707 9,376
12/03 14,671 12,192
12/04 16,948 14,203
12/05 18,066 15,204
12/06 21,852 18,587
TOTAL RETURNS THROUGH 12/31/06
Class
Inception
Initial Class Date 1-yr 5-yr Life (t)
- -------------------------------------------------------------------------------
Average Annual Total Return 5/06/98 20.96% 10.03% 9.45%
Service Class
- -------------------------------------------------------------------------------
Average Annual Total Return 8/24/01 20.66% 9.77% 9.28%
COMPARATIVE BENCHMARK
- -------------------------------------------------------------------------------
Russell 1000 Value Index (f) 22.25% 10.86% 7.40%
(f) Source: FactSet Research Systems Inc.
(t) For the period from the commencement of the series' investment operations,
May 6, 1998 through the stated period end.
INDEX DEFINITIONS
GOLDMAN SACHS TECHNOLOGY INDUSTRY COMPOSITE INDEX - a modified capitalization-
weighted index of selected technology stocks.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALASIA, FAR
EAST) GROWTH INDEX - a market capitalization index that is designed to measure
equity market performance for growth securities in the developed markets,
excluding the U.S. and Canada.
MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) EAFE (EUROPE, AUSTRALASIA, FAR
EAST) INDEX - a market capitalization index that is designed to measure equity
market performance in the developed markets, excluding the U.S. and Canada.
RUSSELL 1000 GROWTH INDEX - constructed to provide a comprehensive barometer
for growth securities in the large-cap segment of the U.S. equity universe.
Companies in this index generally have higher price-to-book ratios and higher
forecasted growth values.
RUSSELL 1000 VALUE INDEX - constructed to provide a comprehensive barometer for
the value securities in the large-cap segment of the U.S. equity universe.
Companies in this index generally have lower price-to-book ratios and lower
forecasted growth values.
RUSSELL 2000 GROWTH INDEX - constructed to provide a comprehensive barometer
for growth securities in the small-cap segment of the U.S. equity universe.
Companies in this index generally have higher price-to-book ratios and higher
forecasted growth values.
RUSSELL 3000 INDEX - constructed to provide a comprehensive barometer for the
3,000 largest U.S. companies based on total market capitalization, which
represents approximately 98% of the investable U.S. equity market.
RUSSELL MIDCAP VALUE INDEX - constructed to provide a comprehensive barometer
for the value securities in the mid-cap segment of the U.S. equity universe.
Companies in this index generally have lower price-to-book ratios and lower
forecasted growth values.
STANDARD & POOR'S 500 STOCK INDEX - a capitalization-weighted index of 500
widely held equity securities, designed to measure broad U.S. equity
performance.
It is not possible to invest directly in an index.
NOTES TO PERFORMANCE SUMMARY
Initial Class shares have no sales charge. Service Class shares have no sales
charge and carry a 0.25% annual 12b-1 fee.
Service Class share performance for all series except Mid Cap Value Series and
Strategic Value Series, includes the performance of Initial Class shares for
periods prior to the inception of Service Class shares (blended performance).
These blended performance figures have not been adjusted to take into account
differences in the class-specific operating expenses (such as Rule 12b-1 fees).
Because operating expenses of Service Class shares are generally higher than
those of Initial Class shares, the blended Service Class shares performance
shown is higher than it would have been had Service Class shares been offered
for the entire period.
Performance results, for all series, reflect any applicable expense subsidies
and waivers in effect during the periods shown; without such subsidies and
waivers the series' performance results would be less favorable. Please see the
prospectus for complete details. All results are historical and assume the
reinvestment of dividends and capital gains.
The returns for the series shown do not reflect the deduction of expenses
associated with variable products, such as mortality and expense risk charges,
separate account charges, and sales charges imposed by insurance company
separate accounts. Such expenses would reduce the overall returns shown.
From time to time the series may receive proceeds from litigation settlements,
without which performance would be lower.
EXPENSE TABLES
SERIES EXPENSES BORNE BY THE CONTRACT HOLDERS DURING THE PERIOD,
JULY 1, 2006 THROUGH DECEMBER 31, 2006
As a contract holder of each series, you incur ongoing costs, including
management fees; distribution (12b-1) fees; and other series expenses. The
examples are intended to help you understand your ongoing costs (in dollars) of
investing in the series and to compare these costs with the ongoing costs of
investing in other mutual funds.
The examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period, July 1, 2006 through December 31,
2006.
ACTUAL EXPENSES
The first line for each share class in the following tables 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 tables provides
information about hypothetical account values and hypothetical expenses based
on each series' actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not each series' 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 each series 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 tables are meant to highlight each
series' ongoing costs only and do not take into account the fees and expenses
imposed under the variable contracts through which your investment in each
series is made. Therefore, the second line for each share class in the tables
is useful in comparing ongoing costs associated with an investment in vehicles
(such as the series) which fund benefits under variable annuity and variable
life insurance contracts and to qualified pension and retirement plans only,
and will not help you determine the relative total costs of investing in the
series through variable annuity and variable life insurance contracts. If the
fees and expenses imposed under the variable contracts were included, your
costs would have been higher.
Beginning Ending
Annualized Account Account Expenses Paid
CAPITAL Expense Value Value During Period (p)
OPPORTUNITIES SERIES Ratio 7/1/06 12/31/06 7/1/06-12/31/06
- -----------------------------------------------------------------------------
Initial Class
Actual 0.85% $1,000.00 $1,122.30 $4.55
Hypothetical (h) 0.85% $1,000.00 $1,020.92 $4.33
Service Class
Actual 1.10% $1,000.00 $1,120.50 $5.88
Hypothetical (h) 1.10% $1,000.00 $1,019.66 $5.60
CORE
EQUITY SERIES
- -----------------------------------------------------------------------------
Initial Class
Actual 0.93% $1,000.00 $1,133.70 $5.00
Hypothetical (h) 0.93% $1,000.00 $1,020.52 $4.74
Service Class
Actual 1.18% $1,000.00 $1,132.90 $6.34
Hypothetical (h) 1.18% $1,000.00 $1,019.26 $6.01
INTERNATIONAL GROWTH SERIES
- -----------------------------------------------------------------------------
Initial Class
Actual 1.12% $1,000.00 $1,157.50 $6.09
Hypothetical (h) 1.12% $1,000.00 $1,019.56 $5.70
Service Class
Actual 1.37% $1,000.00 $1,156.10 $7.45
Hypothetical (h) 1.37% $1,000.00 $1,018.30 $6.97
MASSACHUSETTS
INVESTORS GROWTH STOCK SERIES
- -----------------------------------------------------------------------------
Initial Class
Actual 0.80% $1,000.00 $1,087.90 $4.21
Hypothetical (h) 0.80% $1,000.00 $1,021.17 $4.08
Service Class
Actual 1.05% $1,000.00 $1,087.60 $5.52
Hypothetical (h) 1.05% $1,000.00 $1,019.91 $5.35
MID CAP VALUE SERIES
- ------------------------------------------------------------------------------
Initial Class
Actual 1.00% $1,000.00 $1,106.40 $5.31
Hypothetical (h) 1.00% $1,000.00 $1,020.16 $5.09
Service Class
Actual 1.25% $1,000.00 $1,104.30 $6.63
Hypothetical (h) 1.25% $1,000.00 $1,018.90 $6.36
NEW DISCOVERY SERIES
- ------------------------------------------------------------------------------
Initial Class
Actual 0.97% $1,000.00 $1,112.30 $5.16
Hypothetical (h) 0.97% $1,000.00 $1,020.32 $4.94
Service Class
Actual 1.22% $1,000.00 $1,111.00 $6.49
Hypothetical (h) 1.22% $1,000.00 $1,019.06 $6.21
RESEARCH INTERNATIONAL
SERIES
- ------------------------------------------------------------------------------
Initial Class
Actual 1.16% $1,000.00 $1,153.90 $6.30
Hypothetical (h) 1.16% $1,000.00 $1,019.36 $5.90
Service Class
Actual 1.42% $1,000.00 $1,152.80 $7.71
Hypothetical (h) 1.42% $1,000.00 $1,018.05 $7.22
STRATEGIC
GROWTH SERIES
- ------------------------------------------------------------------------------
Initial Class
Actual 0.92% $1,000.00 $1,084.00 $4.83
Hypothetical (h) 0.92% $1,000.00 $1,020.57 $4.69
Service Class
Actual 1.17% $1,000.00 $1,083.40 $6.14
Hypothetical (h) 1.17% $1,000.00 $1,019.31 $5.96
STRATEGIC
VALUE SERIES
- ------------------------------------------------------------------------------
Initial Class
Actual 0.99% $1,000.00 $1,132.80 $5.32
Hypothetical (h) 0.99% $1,000.00 $1,020.21 $5.04
Service Class
Actual 1.24% $1,000.00 $1,130.10 $6.66
Hypothetical (h) 1.24% $1,000.00 $1,018.95 $6.31
TECHNOLOGY SERIES
- ------------------------------------------------------------------------------
Initial Class
Actual 1.00% $1,000.00 $1,211.60 $5.57
Hypothetical (h) 1.00% $1,000.00 $1,020.16 $5.09
Service Class
Actual 1.25% $1,000.00 $1,207.70 $6.96
Hypothetical (h) 1.25% $1,000.00 $1,018.90 $6.36
VALUE SERIES
- ------------------------------------------------------------------------------
Initial Class
Actual 0.88% $1,000.00 $1,140.90 $4.75
Hypothetical (h) 0.88% $1,000.00 $1,020.77 $4.48
Service Class
Actual 1.13% $1,000.00 $1,139.10 $6.09
Hypothetical (h) 1.13% $1,000.00 $1,019.51 $5.75
(h) 5% class return per year before expenses.
(p) Expenses paid is equal to each class' annualized expense ratio, as shown
above, multiplied by the average account value over the period, multiplied
by the number of days in the period, divided by the number of days in the
year.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
CAPITAL OPPORTUNITIES SERIES
COMMON STOCKS -- 96.9%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 1.4%
United Technologies Corp. ................ 43,040 $ 2,690,861
-------------
ALCOHOLIC BEVERAGES -- 0.4%
Grupo Modelo S.A. de C.V., "C" ........... 146,640 $ 814,474
-------------
APPAREL MANUFACTURERS -- 3.0%
LVMH Moet Hennessy Louis Vuitton S.A. (l) 18,150 $ 1,915,080
NIKE, Inc., "B" .......................... 38,000 3,763,140
-------------
$ 5,678,220
-------------
AUTOMOTIVE -- 1.3%
Bayerische Motoren Werke AG .............. 41,700 $ 2,394,512
-------------
BIOTECHNOLOGY -- 6.8%
Amgen, Inc. (a) .......................... 73,790 $ 5,040,595
Genzyme Corp. (a) ........................ 48,461 2,984,228
MedImmune, Inc. (a) ...................... 32,920 1,065,620
Millipore Corp. (a) ...................... 54,680 3,641,688
-------------
$ 12,732,131
-------------
BROADCASTING -- 2.0%
Viacom, Inc., "B" (a) .................... 92,385 $ 3,790,557
-------------
BROKERAGE & ASSET MANAGERS -- 2.6%
Affiliated Managers Group, Inc. (a)(l) ... 18,300 $ 1,923,879
EFG International (a) .................... 25,440 959,035
Franklin Resources, Inc. ................. 17,550 1,933,484
-------------
$ 4,816,398
-------------
BUSINESS SERVICES -- 5.6%
First Data Corp. ......................... 179,900 $ 4,591,048
Getty Images, Inc. (a)(l) ................ 65,550 2,806,851
Global Payments, Inc. .................... 65,160 3,016,908
-------------
$ 10,414,807
-------------
CHEMICALS -- 1.4%
Bayer AG ................................. 48,400 $ 2,597,195
-------------
COMPUTER SOFTWARE -- 2.1%
Oracle Corp. (a) ......................... 89,046 $ 1,526,248
Symantec Corp. (a) ....................... 110,561 2,305,197
-------------
$ 3,831,445
-------------
COMPUTER SOFTWARE - SYSTEMS -- 1.8%
Dell, Inc. (a) ........................... 134,060 $ 3,363,565
-------------
CONSUMER GOODS & SERVICES -- 2.7%
eBay, Inc. (a) ........................... 101,710 $ 3,058,420
ITT Educational Services, Inc. (a) ....... 15,990 1,061,256
Kimberly-Clark de Mexico S.A. de C.V., "A" 187,950 864,510
-------------
$ 4,984,186
-------------
CONTAINERS -- 1.8%
Owens-Illinois, Inc. (a) ................. 186,020 $ 3,432,069
-------------
ELECTRICAL EQUIPMENT -- 2.8%
Tyco International Ltd. .................. 171,375 $ 5,209,800
-------------
ELECTRONICS -- 2.1%
Intel Corp. .............................. 190,820 $ 3,864,105
-------------
ENERGY - INTEGRATED -- 4.6%
Exxon Mobil Corp. ........................ 25,610 $ 1,962,494
Hess Corp. ............................... 75,080 3,721,716
TOTAL S.A., ADR .......................... 40,600 2,919,952
-------------
$ 8,604,162
-------------
FOOD & BEVERAGES -- 3.8%
Nestle S.A ............................... 15,816 $ 5,618,449
PepsiCo, Inc. ............................ 22,800 1,426,140
-------------
$ 7,044,589
-------------
FOOD & DRUG STORES -- 1.4%
CVS Corp. ................................ 84,620 $ 2,615,604
-------------
INSURANCE -- 5.9%
Aflac, Inc. .............................. 54,500 $ 2,507,000
Berkshire Hathaway, Inc., "B" (a) ........ 1,060 3,885,960
St. Paul Travelers Cos., Inc. ............ 86,720 4,655,997
-------------
$ 11,048,957
-------------
INTERNET -- 1.5%
Yahoo!, Inc. (a) ......................... 106,120 $ 2,710,305
-------------
MAJOR BANKS -- 4.3%
Bank of America Corp. .................... 45,388 $ 2,423,265
JPMorgan Chase & Co. ..................... 80,110 3,869,313
PNC Financial Services Group, Inc. ....... 22,210 1,644,428
-------------
$ 7,937,006
-------------
MEDICAL EQUIPMENT -- 5.0%
Advanced Medical Optics, Inc. (a) ........ 81,870 $ 2,881,824
DENTSPLY International, Inc. ............. 31,500 940,275
Medtronic, Inc. .......................... 68,630 3,672,391
Ventana Medical Systems, Inc. (a) ........ 20,530 883,406
Zimmer Holdings, Inc. (a) ................ 13,340 1,045,589
-------------
$ 9,423,485
-------------
METALS & MINING -- 1.4%
BHP Billiton Ltd., ADR (l) ............... 67,590 $ 2,686,703
-------------
NETWORK & TELECOM -- 5.6%
Cisco Systems, Inc. (a) .................. 131,980 $ 3,607,013
Juniper Networks, Inc. (a) ............... 127,320 2,411,441
NICE Systems Ltd., ADR (a) ............... 115,370 3,551,089
TomTom N.V. (a)(l) ....................... 22,380 966,418
-------------
$ 10,535,961
-------------
OIL SERVICES -- 3.4%
Dresser-Rand Group, Inc. (a) ............. 39,400 $ 964,118
GlobalSantaFe Corp. ...................... 46,818 2,751,962
Noble Corp. .............................. 35,760 2,723,124
-------------
$ 6,439,204
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 6 1%
American Express Co. ..................... 49,800 $ 3,021,366
Commerce Bancorp, Inc. (l) ............... 79,210 2,793,737
Investors Financial Services Corp. (l) ... 44,470 1,897,535
New York Community Bancorp, Inc. (l) ..... 130,490 2,100,889
SLM Corp. ................................ 32,740 1,596,730
-------------
$ 11,410,257
-------------
PHARMACEUTICALS -- 6.5%
Eli Lilly & Co. .......................... 17,440 $ 908,624
Johnson & Johnson ........................ 86,240 5,693,565
Wyeth .................................... 108,691 5,534,546
-------------
$ 12,136,735
-------------
SPECIALTY CHEMICALS -- 1.1%
Praxair, Inc. ............................ 34,320 $ 2,036,206
-------------
SPECIALTY STORES -- 4.5%
Advance Auto Parts, Inc. ................. 70,650 $ 2,512,314
CarMax, Inc. (a)(l) ...................... 41,520 2,226,718
PetSmart, Inc. ........................... 86,310 2,490,907
Urban Outfitters, Inc. (a)(l) ............ 51,170 1,178,445
-------------
$ 8,408,384
-------------
TOBACCO -- 2.3%
Altria Group, Inc. ....................... 49,450 $ 4,243,799
-------------
UTILITIES - ELECTRIC POWER -- 1.7%
Constellation Energy Group, Inc. ......... 18,080 $ 1,245,170
NRG Energy, Inc. (a)(l) .................. 33,610 1,882,496
-------------
$ 3,127,666
-------------
Total Common Stocks
(Identified Cost, $169,121,924) .... $ 181,023,348
-------------
SHORT-TERM OBLIGATIONS -- 3.5%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized Cost and
Value (y) .............................. $6,472,000 $ 6,471,049
-------------
COLLATERAL FOR SECURITIES LOANED -- 8.6%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value .. 16,065,163 $ 16,065,163
-------------
Total Investments
(Identified Cost, $191,658,136) ....................... $ 203,559,560
-------------
OTHER ASSETS,
LESS LIABILITIES -- (9.0)% ................................ (16,728,311)
-------------
Net Assets -- 100.0% ................................. $ 186,831,249
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
CORE EQUITY SERIES
COMMON STOCKS -- 98.7%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 2.5%
Lockheed Martin Corp. .................... 7,640 $ 703,415
Precision Castparts Corp. ................ 6,000 469,680
United Technologies Corp. ................ 17,940 1,121,609
-------------
$ 2,294,704
-------------
APPAREL MANUFACTURERS -- 1.6%
NIKE, Inc., "B" .......................... 12,660 $ 1,253,720
Under Armour, Inc. (a)(l) ................ 4,250 214,413
-------------
$ 1,468,133
-------------
AUTOMOTIVE -- 1.2%
Harley-Davidson, Inc. (l) ................ 3,550 $ 250,168
Johnson Controls, Inc. ................... 6,300 541,296
Sauer-Danfoss, Inc. (l) .................. 8,880 286,380
-------------
$ 1,077,844
-------------
BIOTECHNOLOGY -- 2.4%
Amgen, Inc. (a) .......................... 13,980 $ 954,974
Celgene Corp. (a) ........................ 5,400 310,662
Genzyme Corp. (a) ........................ 4,200 258,636
Human Genome Sciences, Inc. (a)(l) ....... 20,620 256,513
Millipore Corp. (a) ...................... 4,700 313,020
Neurochem, Inc. (a)(l) ................... 4,980 106,921
-------------
$ 2,200,726
-------------
BROADCASTING -- 2.3%
News Corp., "A" .......................... 41,330 $ 887,768
Viacom, Inc., "B" (a) .................... 20,765 851,988
Walt Disney Co. .......................... 11,830 405,414
-------------
$ 2,145,170
-------------
BROKERAGE & ASSET MANAGERS -- 3.0%
Affiliated Managers Group, Inc. (a)(l) ... 2,300 $ 241,799
Chicago Mercantile Exchange
Holdings, Inc., "A" .................... 730 372,117
Franklin Resources, Inc. ................. 1,760 193,899
Goldman Sachs Group, Inc. ................ 2,460 490,401
KBW, Inc. (a) ............................ 310 9,111
Lazard Ltd. .............................. 14,540 688,324
Legg Mason, Inc. (l) ..................... 8,580 815,529
-------------
$ 2,811,180
-------------
BUSINESS SERVICES -- 1.2%
CheckFree Corp. (a) ...................... 4,550 $ 182,728
Cognizant Technology Solutions Corp.,
"A" (a) ................................ 3,250 250,770
First Data Corp. ......................... 10,600 270,512
Global Payments, Inc. .................... 4,840 224,092
Satyam Computer Services Ltd., ADR (l) ... 6,450 154,865
-------------
$ 1,082,967
-------------
CABLE TV -- 0.8%
Comcast Corp., "Special A" (a) ........... 11,660 $ 488,321
EchoStar Communications Corp., "A" (a) ... 6,210 236,166
-------------
$ 724,487
-------------
CHEMICALS -- 1.2%
Monsanto Co. ............................. 21,580 $ 1,133,597
-------------
COMPUTER SOFTWARE -- 3.6%
Adobe Systems, Inc. (a) .................. 21,690 $ 891,893
CommVault Systems, Inc. (a) .............. 7,840 156,878
McAfee, Inc. (a) ......................... 15,270 433,363
MSC.Software Corp. (a) ................... 14,744 224,551
Opsware, Inc. (a)(l) ..................... 16,370 144,383
Oracle Corp. (a) ......................... 28,480 488,147
Salesforce.com, Inc. (a)(l) .............. 12,040 438,858
Symantec Corp. (a) ....................... 17,010 354,659
TIBCO Software, Inc. (a) ................. 9,390 88,642
Transaction Systems Architects, Inc. (a) .. 5,240 170,667
-------------
$ 3,392,041
-------------
COMPUTER SOFTWARE - SYSTEMS -- 3.3%
Apple Computer, Inc. (a) ................. 7,920 $ 671,933
Hewlett-Packard Co. ...................... 51,310 2,113,459
Rackable Systems, Inc. (a)(l) ............ 8,390 259,838
-------------
$ 3,045,230
-------------
CONSTRUCTION -- 0.7%
D.R. Horton, Inc. ........................ 5,780 $ 153,112
Masco Corp. (l) .......................... 16,440 491,063
-------------
$ 644,175
-------------
CONSUMER GOODS & SERVICES -- 3.0%
Avon Products, Inc. ...................... 14,700 $ 485,688
Brink's Co. (l) .......................... 1,660 106,107
eBay, Inc. (a) ........................... 6,560 197,259
Estee Lauder Cos., Inc., "A" ............. 12,580 513,516
ITT Educational Services, Inc. (a) ....... 2,950 195,791
Monster Worldwide, Inc. (a) .............. 5,210 242,994
Physicians Formula Holdings, Inc. (a) .... 1,280 23,923
Scotts Miracle-Gro Co. ................... 19,680 1,016,472
Strayer Education, Inc. .................. 500 53,025
-------------
$ 2,834,775
-------------
CONTAINERS -- 0.5%
Crown Holdings, Inc. (a) ................. 7,680 $ 160,666
Owens-Illinois, Inc. (a) ................. 8,790 162,176
Smurfit-Stone Container Corp. (a) ........ 10,400 109,824
-------------
$ 432,666
-------------
ELECTRICAL EQUIPMENT -- 1.7%
MSC Industrial Direct Co., Inc., "A" ..... 2,710 $ 106,097
Rockwell Automation, Inc. ................ 17,760 1,084,781
Tyco International Ltd. .................. 12,140 369,056
-------------
$ 1,559,934
-------------
ELECTRONICS -- 3.5%
Applied Materials, Inc. (l) .............. 15,920 $ 293,724
ASML Holding N.V. (a)(l) ................. 10,870 267,728
Hittite Microwave Corp. (a)(l) ........... 5,370 173,558
Intel Corp. .............................. 52,680 1,066,770
Intersil Corp., "A" ...................... 7,550 180,596
Marvell Technology Group Ltd. (a) ........ 24,490 469,963
NetLogic Microsystems, Inc. (a)(l) ....... 8,980 194,776
SanDisk Corp. (a) ........................ 13,270 571,008
-------------
$ 3,218,123
-------------
ENERGY - INDEPENDENT -- 1.6%
Apache Corp. ............................. 4,810 $ 319,913
CONSOL Energy, Inc. ...................... 4,620 148,441
Devon Energy Corp. ....................... 6,170 413,884
EOG Resources, Inc. ...................... 6,500 405,925
Occidental Petroleum Corp. ............... 4,060 198,250
-------------
$ 1,486,413
-------------
ENERGY - INTEGRATED -- 5.3%
Chevron Corp. ............................ 15,260 $ 1,122,068
Exxon Mobil Corp. ........................ 41,136 3,152,252
Hess Corp. ............................... 13,760 682,083
-------------
$ 4,956,403
-------------
ENGINEERING - CONSTRUCTION -- 0.5%
North American Energy Partners, Inc. (a)(l) 27,150 $ 442,002
-------------
FOOD & BEVERAGES -- 1.3%
Diamond Foods, Inc. (l) .................. 12,780 $ 242,948
General Mills, Inc. ...................... 4,050 233,280
PepsiCo, Inc. ............................ 8,837 552,754
Tyson Foods, Inc., "A" ................... 14,100 231,945
-------------
$ 1,260,927
-------------
FOOD & DRUG STORES -- 1.0%
CVS Corp. ................................ 11,420 $ 352,992
Kroger Co. ............................... 10,060 232,084
SUPERVALU, Inc. .......................... 9,980 356,785
-------------
$ 941,861
-------------
FOREST & PAPER PRODUCTS -- 0.2%
MeadWestvaco Corp. ....................... 7,190 $ 216,131
-------------
GAMING & LODGING -- 0.9%
Hilton Hotels Corp. ...................... 7,390 $ 257,911
International Game Technology ............ 3,490 161,238
Las Vegas Sands Corp. (a) ................ 1,690 151,221
Penn National Gaming, Inc. (a) ........... 3,360 139,843
Shuffle Master, Inc. (a)(l) .............. 3,730 97,726
-------------
$ 807,939
-------------
GENERAL MERCHANDISE -- 0.9%
Family Dollar Stores, Inc. ............... 16,960 $ 497,437
Stage Stores, Inc. ....................... 11,380 345,838
-------------
$ 843,275
-------------
HEALTH MAINTENANCE ORGANIZATIONS -- 1.3%
UnitedHealth Group, Inc. ................. 14,700 $ 789,831
WellPoint, Inc. (a) ...................... 5,420 426,500
-------------
$ 1,216,331
-------------
INSURANCE -- 4.3%
Ace Ltd. ................................. 4,660 $ 282,256
Aflac, Inc. .............................. 7,470 343,620
Allied World Assurance Co., Holdings,
Ltd. (l) ............................... 9,940 433,682
Chubb Corp. .............................. 12,070 638,624
Genworth Financial, Inc., "A" ............ 14,240 487,150
MetLife, Inc. ............................ 10,260 605,443
St. Paul Travelers Cos., Inc. ............ 22,860 1,227,353
-------------
$ 4,018,128
-------------
INTERNET -- 1.2%
CNET Networks, Inc. (a)(l) ............... 23,850 $ 216,796
Google, Inc., "A" (a) .................... 1,150 529,552
Move, Inc. (a) ........................... 28,260 155,713
Tencent Holdings, Ltd. ................... 58,000 206,550
-------------
$ 1,108,611
-------------
LEISURE & TOYS -- 0.5%
Electronic Arts, Inc. (a) ................ 3,320 $ 167,195
Scientific Games Corp. (a)(l) ............ 3,230 97,643
THQ, Inc. (a)(l) ......................... 5,180 168,454
-------------
$ 433,292
-------------
MACHINERY & TOOLS -- 1.6%
Deere & Co. .............................. 10,330 $ 982,073
Eaton Corp. .............................. 6,260 470,376
-------------
$ 1,452,449
-------------
MAJOR BANKS -- 5.6%
Bank of America Corp. .................... 31,658 $ 1,690,221
Bank of New York Co., Inc. ............... 23,530 926,376
JPMorgan Chase & Co. ..................... 30,850 1,490,055
PNC Financial Services Group, Inc. ....... 4,380 324,295
State Street Corp. ....................... 6,660 449,150
SunTrust Banks, Inc. ..................... 3,700 312,465
-------------
$ 5,192,562
-------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.5%
AMICAS, Inc. (a) ......................... 35,500 $ 104,370
Cardinal Health, Inc. .................... 3,050 196,511
Caremark Rx, Inc. ........................ 5,690 324,956
Healthcare Services Group, Inc. .......... 10,290 297,998
McKesson Corp. ........................... 2,210 112,047
MWI Veterinary Supply, Inc. (a) .......... 9,950 321,385
-------------
$ 1,357,267
-------------
MEDICAL EQUIPMENT -- 1.8%
Advanced Medical Optics, Inc. (a) ........ 8,730 $ 307,296
Aspect Medical Systems, Inc. (a)(l) ...... 8,660 162,895
Boston Scientific Corp. (a) .............. 33,920 582,746
Cooper Cos., Inc. ........................ 3,070 136,615
St. Jude Medical, Inc. (a) ............... 6,830 249,705
Thoratec Corp. (a)(l) .................... 13,710 241,022
-------------
$ 1,680,279
-------------
METALS & MINING -- 0.8%
BHP Billiton PLC ......................... 29,990 $ 548,910
Inmet Mining Corp. ....................... 3,700 198,229
-------------
$ 747,139
-------------
NATURAL GAS - PIPELINE -- 0.8%
Williams Cos., Inc. ...................... 29,160 $ 761,659
-------------
NETWORK & TELECOM -- 2.5%
Cisco Systems, Inc. (a) .................. 38,710 $ 1,057,944
Juniper Networks, Inc. (a) ............... 20,430 386,944
NICE Systems Ltd., ADR (a) ............... 13,120 403,834
Nortel Networks Corp. (a) ................ 18,708 500,065
-------------
$ 2,348,787
-------------
OIL SERVICES -- 1.2%
Cameron International Corp. (a) .......... 2,410 $ 127,850
Dresser-Rand Group, Inc. (a) ............. 11,310 276,756
GlobalSantaFe Corp. ...................... 6,050 355,619
National-Oilwell Varco, Inc. (a) ......... 2,060 126,031
Noble Corp. .............................. 2,960 225,404
-------------
$ 1,111,660
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 6 3%
American Express Co. ..................... 21,060 $ 1,277,710
Commerce Bancorp, Inc. (l) ............... 29,720 1,048,224
Countrywide Financial Corp. .............. 31,240 1,326,138
Fannie Mae ............................... 12,360 734,060
Investors Financial Services Corp. (l) ... 6,740 287,596
SLM Corp. ................................ 23,360 1,139,267
-------------
$ 5,812,995
-------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.2%
Nuance Communications, Inc. (a)(l) ....... 15,680 $ 179,693
-------------
PHARMACEUTICALS -- 5.6%
Allergan, Inc. ........................... 5,900 $ 706,466
Bristol-Myers Squibb Co. ................. 33,490 881,457
Eli Lilly & Co. .......................... 26,250 1,367,625
Endo Pharmaceuticals Holdings, Inc. (a) .. 6,600 182,028
Medicis Pharmaceutical Corp., "A" (l) .... 4,110 144,384
Wyeth .................................... 36,880 1,877,930
-------------
$ 5,159,890
-------------
PRINTING & PUBLISHING -- 0.4%
New York Times Co., "A" (l) .............. 14,350 $ 349,566
-------------
RAILROAD & SHIPPING -- 0.7%
Burlington Northern Santa Fe Corp. ....... 4,320 $ 318,859
Norfolk Southern Corp. ................... 5,930 298,220
-------------
$ 617,079
-------------
REAL ESTATE -- 2.6%
Alesco Financial, Inc., REIT ............. 50,480 $ 540,136
BRE Properties, Inc., "A", REIT (l) ...... 7,580 492,852
Macerich Co., REIT ....................... 5,810 502,972
Maguire Properties, Inc., REIT ........... 10,470 418,800
Taubman Centers, Inc., REIT .............. 9,960 506,566
-------------
$ 2,461,326
-------------
RESTAURANTS -- 0.8%
Red Robin Gourmet Burgers, Inc. (a)(l) ... 10,370 $ 371,765
Texas Roadhouse, Inc., "A" (a)(l) ........ 17,090 226,613
YUM! Brands, Inc. ........................ 3,270 192,276
-------------
$ 790,654
-------------
SPECIALTY CHEMICALS -- 1.6%
Air Products & Chemicals, Inc. ........... 7,750 $ 544,670
Albemarle Corp. .......................... 2,580 185,244
Cytec Industries, Inc. ................... 3,280 185,353
Praxair, Inc. ............................ 9,370 555,922
-------------
$ 1,471,189
-------------
SPECIALTY STORES -- 2.7%
Advance Auto Parts, Inc. ................. 9,790 $ 348,132
Aeropostale, Inc. (a) .................... 13,720 423,536
Chico's FAS, Inc. (a)(l) ................. 9,600 198,624
Lowe's Cos., Inc. ........................ 24,610 766,601
PetSmart, Inc. ........................... 12,230 352,958
Urban Outfitters, Inc. (a)(l) ............ 11,260 259,318
Williams-Sonoma, Inc. (l) ................ 4,270 134,249
-------------
$ 2,483,418
-------------
TELECOMMUNICATIONS - WIRELESS -- 0.7%
Dobson Communications Corp. (a) .......... 3,000 $ 26,130
Rogers Communications, Inc., "B" ......... 19,880 592,185
-------------
$ 618,315
-------------
TELEPHONE SERVICES -- 2.3%
AT&T, Inc. ............................... 28,250 $ 1,009,938
Qwest Communications International,
Inc. (a) ............................... 38,600 323,082
TELUS Corp. (non-voting shares) .......... 18,510 826,745
-------------
$ 2,159,765
-------------
TOBACCO -- 3.1%
Altria Group, Inc. ....................... 33,670 $ 2,889,559
-------------
TRUCKING -- 1.1%
FedEx Corp. .............................. 3,250 $ 353,015
UTi Worldwide, Inc. (l) .................. 21,800 651,820
-------------
$ 1,004,835
-------------
UTILITIES - ELECTRIC POWER -- 3.3%
CMS Energy Corp. (a) ..................... 11,390 $ 190,213
Constellation Energy Group, Inc. ......... 3,510 241,734
Dominion Resources, Inc. (l) ............. 5,270 441,837
Edison International ..................... 5,040 229,219
Entergy Corp. ............................ 5,820 537,302
FPL Group, Inc. (l) ...................... 10,580 575,764
NRG Energy, Inc. (a)(l) .................. 8,640 483,926
Public Service Enterprise Group, Inc. .... 5,550 368,409
-------------
$ 3,068,404
-------------
Total Common Stocks
(Identified Cost, $82,817,195) ..... $ 91,515,555
-------------
REPURCHASE AGREEMENTS -- 1.3%
Merrill Lynch, 5.32%, dated 12/29/06, due
1/02/07, total to be received $1,148,679
(secured by various U.S. Treasury and
Federal Agency obligations and Mortgage
Backed securities in a jointly traded
account), at Cost ...................... $1,148,000 $ 1,148,000
-------------
COLLATERAL FOR SECURITIES LOANED -- 12.4%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value .. 11,483,180 $ 11,483,180
-------------
Total Investments
(Identified Cost, $95,448,375) ..... $ 104,146,735
-------------
OTHER ASSETS,
LESS LIABILITIES -- (12.4)% ............ (11,448,607)
-------------
Net Assets -- 100.0% ................. $ 92,698,128
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
INTERNATIONAL GROWTH SERIES
COMMON STOCKS -- 98.8%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 0.8%
Finmeccanica S.p.A. (l) .................. 47,330 $ 1,283,006
-------------
ALCOHOLIC BEVERAGES -- 1.0%
Pernod Ricard S.A. (l) ................... 7,150 $ 1,641,902
-------------
APPAREL MANUFACTURERS -- 4.6%
Adidas AG ................................ 19,210 $ 956,546
Li & Fung Ltd. ........................... 802,600 2,497,081
LVMH Moet Hennessy Louis Vuitton S.A ..... 38,990 4,113,993
-------------
$ 7,567,620
-------------
AUTOMOTIVE -- 2.6%
Continental AG ........................... 12,462 $ 1,448,957
Takata Corp. ............................. 17,700 627,443
Toyota Industries Corp. .................. 47,000 2,159,604
-------------
$ 4,236,004
-------------
BIOTECHNOLOGY -- 1.1%
Actelion Ltd. (a) ........................ 7,890 $ 1,734,777
-------------
BROADCASTING -- 4.1%
Antena 3 de Television S.A. (l) .......... 48,540 $ 1,142,843
Fuji Television Network, Inc. ............ 380 868,243
Grupo Televisa S.A., ADR ................. 57,840 1,562,258
WPP Group PLC ............................ 226,310 3,060,645
-------------
$ 6,633,989
-------------
BROKERAGE & ASSET MANAGERS -- 2.0%
Daiwa Securities Group, Inc. ............. 136,000 $ 1,525,138
EFG International (a) .................... 880 33,174
Julius Baer Holding Ltd. ................. 16,330 1,797,921
-------------
$ 3,356,233
-------------
BUSINESS SERVICES -- 0.7%
Intertek Group PLC ....................... 71,740 $ 1,171,150
-------------
CHEMICALS -- 2.0%
Bayer AG ................................. 30,630 $ 1,643,638
Symrise AG (a) ........................... 9,725 250,274
Wacker Chemie AG (a)(l) .................. 10,000 1,301,010
-------------
$ 3,194,922
-------------
COMPUTER SOFTWARE -- 0.9%
SAP AG ................................... 29,400 $ 1,562,115
-------------
CONSTRUCTION -- 0.8%
Wienerberger AG .......................... 21,170 $ 1,257,260
-------------
CONSUMER GOODS & SERVICES -- 5.3%
AmorePacific Corp. (a) ................... 2,242 $ 1,398,237
Kao Corp. (l) ............................ 54,000 1,456,088
Kimberly-Clark de Mexico S.A. de C.V., "A" 398,070 1,830,995
L'Oreal S.A. (l) ......................... 11,250 1,126,902
Reckitt Benckiser PLC .................... 60,630 2,771,622
-------------
$ 8,583,844
-------------
ELECTRICAL EQUIPMENT -- 2.6%
Keyence Corp. ............................ 5,300 $ 1,312,924
Nitto Denko Corp. (l) .................... 27,100 1,356,764
Schneider Electric S.A. (l) .............. 13,840 1,536,116
-------------
$ 4,205,804
-------------
ELECTRONICS -- 9.9%
ARM Holdings PLC ......................... 337,520 $ 831,291
ASML Holding N.V. (a) .................... 33,580 834,936
Canon, Inc. (l) .......................... 25,700 1,446,428
Hirose Electric Co. Ltd. (l) ............. 16,600 1,883,876
Nippon Electric Glass Co. Ltd. (l) ....... 39,000 819,018
OMRON Corp. .............................. 45,900 1,303,221
Royal Philips Electronics N.V ............ 71,870 2,709,878
Samsung Electronics Co. Ltd. ............. 4,451 2,933,831
Taiwan Semiconductor Manufacturing Co. ...
Ltd., ADR (l) .......................... 147,451 1,611,639
USHIO America, Inc. (l) .................. 48,400 994,061
Venture Corp. Ltd. ....................... 92,600 815,035
-------------
$ 16,183,214
-------------
ENERGY - INDEPENDENT -- 2.1%
CNOOC Ltd. ............................... 1,738,000 $ 1,651,248
Norsk Hydro A.S.A ........................ 31,350 973,220
Talisman Energy, Inc. .................... 46,840 796,147
-------------
$ 3,420,615
-------------
ENERGY - INTEGRATED -- 3.8%
Petroleo Brasileiro S.A., ADR ............ 17,580 $ 1,810,564
TOTAL S.A. (l) ........................... 60,490 4,362,803
-------------
$ 6,173,367
-------------
ENGINEERING - CONSTRUCTION -- 0.5%
Aker Kvaerner A.S.A. (l) ................. 7,230 $ 902,423
-------------
FOOD & BEVERAGES -- 2.7%
Groupe Danone (l) ........................ 9,110 $ 1,380,232
Nestle S.A ............................... 8,408 2,986,844
-------------
$ 4,367,076
-------------
FOOD & DRUG STORES -- 2.6%
Dairy Farm International Holdings Ltd. ... 154,800 $ 526,320
Tesco PLC ................................ 468,408 3,710,978
-------------
$ 4,237,298
-------------
FOREST & PAPER PRODUCTS -- 0.4%
Aracruz Celulose S.A., ADR (l) ........... 10,950 $ 670,578
-------------
GAMING & LODGING -- 2.6%
IG Group Holdings PLC .................... 141,350 $ 804,243
Melco PB Entertainment, ADR (a) .......... 42,610 905,889
Orient-Express Hotels Ltd., "A" (l) ...... 27,620 1,306,978
William Hill PLC ......................... 96,790 1,198,100
-------------
$ 4,215,210
-------------
GENERAL MERCHANDISE -- 0.5%
Massmart Holdings Ltd. ................... 88,600 $ 886,821
-------------
INSURANCE -- 2.0%
Aflac, Inc. .............................. 35,110 $ 1,615,060
Assicurazioni Generali S.p.A ............. 37,280 1,636,894
-------------
$ 3,251,954
-------------
LEISURE & TOYS -- 1.6%
Capcom Co. Ltd. (l) ...................... 65,600 $ 1,182,007
Konami Corp. (l) ......................... 25,800 780,209
NAMCO BANDAI Holdings, Inc. .............. 48,000 703,599
-------------
$ 2,665,815
-------------
MACHINERY & TOOLS -- 0.9%
Fanuc Ltd. ............................... 15,200 $ 1,496,443
-------------
MAJOR BANKS -- 6.7%
Erste Bank der oesterreichischen
Sparkassen AG .......................... 22,770 $ 1,745,947
Industrial & Commercial Bank of China (a) 1,361,490 848,935
Raiffeisen International Bank Holding AG .. 7,020 1,070,160
Societe Generale (l) ..................... 10,461 1,775,440
Standard Chartered PLC ................... 63,670 1,860,584
Sumitomo Mitsui Financial Group, Inc. .... 144 1,475,744
UniCredito Italiano S.p.A ................ 240,250 2,105,345
-------------
$ 10,882,155
-------------
MEDICAL EQUIPMENT -- 2.1%
Smith & Nephew PLC ....................... 132,080 $ 1,378,827
Straumann Holding AG ..................... 3,800 919,682
Synthes, Inc. ............................ 9,640 1,149,144
-------------
$ 3,447,653
-------------
METALS & MINING -- 3.2%
Anglo American PLC ....................... 37,390 $ 1,824,210
BHP Billiton Ltd. (l) .................... 169,720 3,391,336
-------------
$ 5,215,546
-------------
NETWORK & TELECOM -- 1.3%
Ericsson, Inc., "B" ...................... 281,430 $ 1,136,514
NICE Systems Ltd., ADR (a) ............... 31,540 970,801
-------------
$ 2,107,315
-------------
OIL SERVICES -- 1.0%
Acergy S.A. (a) .......................... 81,430 $ 1,567,682
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 10.1%
Absa Group Ltd. .......................... 94,710 $ 1,689,345
AEON Credit Service Co. Ltd. ............. 65,400 1,238,834
Akbank T.A.S ............................. 188,029 1,141,098
Bank of Cyprus Public Co. Ltd. ........... 84,260 1,152,055
CSU Cardsystem S.A. (a) .................. 63,840 325,928
Housing Development Finance Corp. Ltd. ... 62,490 2,296,995
HSBC Holdings PLC ........................ 216,170 3,941,764
UBS AG ................................... 54,675 3,321,588
Unibanco -- Uniao de Bancos Brasileiros
S.A., ADR .............................. 15,550 1,445,528
-------------
$ 16,553,135
-------------
PHARMACEUTICALS -- 6.0%
Astellas Pharma, Inc. .................... 29,100 $ 1,322,449
GlaxoSmithKline PLC ...................... 145,980 3,842,715
Roche Holding AG ......................... 26,240 4,703,782
-------------
$ 9,868,946
-------------
SPECIALTY CHEMICALS -- 2.0%
L'Air Liquide S.A., Bearer Shares (l) .... 7,272 $ 1,726,541
Linde AG (l) ............................. 15,670 1,618,455
-------------
$ 3,344,996
-------------
SPECIALTY STORES -- 2.3%
Esprit Holdings Ltd. ..................... 97,500 $ 1,088,661
Industria de Diseno Textil S.A ........... 29,570 1,592,611
KappAhl Holding AB ....................... 96,490 1,011,145
-------------
$ 3,692,417
-------------
TELECOMMUNICATIONS - WIRELESS -- 0.9%
China Mobile Ltd. ........................ 169,500 $ 1,464,391
-------------
TELEPHONE SERVICES -- 3.9%
Orascom Telecom Holding (S.A.E), GDR ..... 26,900 $ 1,775,400
Reliance Communication Ventures Ltd. (a) . 79,150 843,450
Telenor A.S.A ............................ 120,200 2,261,048
TELUS Corp. .............................. 31,100 1,428,854
-------------
$ 6,308,752
-------------
UTILITIES - ELECTRIC POWER -- 1.2%
CEZ AS ................................... 42,120 $ 1,942,291
-------------
Total Common Stocks
(Identified Cost, $125,321,530) ....................... $ 161,294,719
-------------
SHORT-TERM OBLIGATIONS -- 1.2%
General Electric Capital Corp.,
5.29%, due 1/02/07,
at Amortized Cost (y) .................. $1,871,000 $ 1,870,725
-------------
COLLATERAL FOR SECURITIES LOANED -- 15.2%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value .. 24,790,693 $ 24,790,693
-------------
Total Investments
(Identified Cost, $151,982,948) ....................... $ 187,956,137
-------------
OTHER ASSETS,
LESS LIABILITIES -- (15.2)% ............................... (24,734,982)
-------------
Net Assets -- 100.0% .................................... $ 163,221,155
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
COMMON STOCKS -- 96.2%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 3.0%
Boeing Co. ............................... 52,400 $ 4,655,216
Precision Castparts Corp. ................ 36,970 2,894,012
United Technologies Corp. ................ 83,960 5,249,179
-------------
$ 12,798,407
-------------
APPAREL MANUFACTURERS -- 2.2%
Coach, Inc. (a) .......................... 50,100 $ 2,152,296
LVMH Moet Hennessy Louis Vuitton S.A ..... 29,400 3,102,113
NIKE, Inc., "B" .......................... 42,580 4,216,697
-------------
$ 9,471,106
-------------
AUTOMOTIVE -- 0.8%
Harman International Industries, Inc. .... 32,380 $ 3,235,086
-------------
BIOTECHNOLOGY -- 4.5%
Amgen, Inc. (a) .......................... 108,110 $ 7,384,994
Celgene Corp. (a) ........................ 65,420 3,763,613
Genzyme Corp. (a) ........................ 126,180 7,770,164
-------------
$ 18,918,771
-------------
BROADCASTING -- 1.1%
News Corp., "A" .......................... 224,280 $ 4,817,534
-------------
BROKERAGE & ASSET MANAGERS -- 3.7%
Charles Schwab Corp. ..................... 273,820 $ 5,295,679
Chicago Mercantile Exchange Holdings,
Inc., "A" .............................. 6,140 3,129,865
Merrill Lynch & Co., Inc. ................ 23,930 2,227,883
Morgan Stanley ........................... 62,270 5,070,646
-------------
$ 15,724,073
-------------
BUSINESS SERVICES -- 5.5%
Amdocs Ltd. (a) .......................... 205,220 $ 7,952,275
Automatic Data Processing, Inc. .......... 52,520 2,586,610
CheckFree Corp. (a) ...................... 57,520 2,310,003
First Data Corp. ......................... 288,090 7,352,057
Western Union Co. ........................ 140,090 3,140,818
-------------
$ 23,341,763
-------------
CHEMICALS -- 1.3%
Ecolab, Inc. ............................. 41,190 $ 1,861,788
Monsanto Co. ............................. 71,510 3,756,420
-------------
$ 5,618,208
-------------
COMPUTER SOFTWARE -- 5.8%
Adobe Systems, Inc. (a) .................. 201,166 $ 8,271,946
Microsoft Corp. .......................... 324,424 9,687,301
Oracle Corp. (a) ......................... 381,050 6,531,197
-------------
$ 24,490,444
-------------
COMPUTER SOFTWARE - SYSTEMS -- 3.1%
Apple Computer, Inc. (a) ................. 59,510 $ 5,048,828
Dell, Inc. (a) ........................... 86,500 2,170,285
Hewlett-Packard Co. ...................... 146,960 6,053,282
-------------
$ 13,272,395
-------------
CONGLOMERATES -- 0.5%
Textron, Inc. ............................ 22,300 $ 2,091,071
-------------
CONSUMER GOODS & SERVICES -- 3.7%
Colgate-Palmolive Co. .................... 37,080 $ 2,419,099
eBay, Inc. (a) ........................... 115,120 3,461,658
Procter & Gamble Co. ..................... 153,041 9,835,945
-------------
$ 15,716,702
-------------
ELECTRICAL EQUIPMENT -- 4.9%
Danaher Corp. ............................ 14,800 $ 1,072,112
General Electric Co. ..................... 331,696 12,342,408
Rockwell Automation, Inc. ................ 80,880 4,940,150
W.W. Grainger, Inc. ...................... 32,880 2,299,627
-------------
$ 20,654,297
-------------
ELECTRONICS -- 5.2%
Applied Materials, Inc. .................. 208,160 $ 3,840,552
Intel Corp. .............................. 581,480 11,774,970
Marvell Technology Group Ltd. (a) ........ 170,120 3,264,603
Samsung Electronics Co. Ltd., GDR ........ 6,545 2,153,305
SanDisk Corp. (a) ........................ 27,310 1,175,149
-------------
$ 22,208,579
-------------
ENERGY - INTEGRATED -- 0.6%
Exxon Mobil Corp. ........................ 35,330 $ 2,707,338
-------------
FOOD & BEVERAGES -- 2.4%
Nestle S.A ............................... 13,053 $ 4,636,926
PepsiCo, Inc. ............................ 91,870 5,746,469
-------------
$ 10,383,395
-------------
FOOD & DRUG STORES -- 0.5%
CVS Corp. ................................ 71,940 $ 2,223,665
-------------
GAMING & LODGING -- 2.8%
Harrah's Entertainment, Inc. ............. 12,900 $ 1,067,088
International Game Technology ............ 158,960 7,343,952
Las Vegas Sands Corp. (a) ................ 14,090 1,260,773
Starwood Hotels & Resorts, Inc. .......... 36,990 2,311,875
-------------
$ 11,983,688
-------------
GENERAL MERCHANDISE -- 1.9%
Family Dollar Stores, Inc. ............... 81,510 $ 2,390,688
Target Corp. ............................. 100,860 5,754,063
-------------
$ 8,144,751
-------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.6%
UnitedHealth Group, Inc. ................. 45,160 $ 2,426,447
-------------
INTERNET -- 3.0%
Google, Inc., "A" (a) .................... 19,930 $ 9,177,366
Yahoo!, Inc. (a) ......................... 133,900 3,419,806
-------------
$ 12,597,172
-------------
LEISURE & TOYS -- 1.2%
Electronic Arts, Inc. (a) ................ 96,520 $ 4,860,747
-------------
MACHINERY & TOOLS -- 1.1%
Deere & Co. .............................. 50,300 $ 4,782,021
-------------
MAJOR BANKS -- 1.8%
JPMorgan Chase & Co. ..................... 75,970 $ 3,669,351
State Street Corp. ....................... 61,740 4,163,746
-------------
$ 7,833,097
-------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.4%
Caremark Rx, Inc. ........................ 104,000 $ 5,939,440
-------------
MEDICAL EQUIPMENT -- 4.9%
Advanced Medical Optics, Inc. (a)(l) ..... 113,270 $ 3,987,104
Baxter International, Inc. ............... 90,730 4,208,965
DENTSPLY International, Inc. ............. 69,160 2,064,426
Medtronic, Inc. .......................... 152,330 8,151,178
St. Jude Medical, Inc. (a) ............... 60,660 2,217,730
-------------
$ 20,629,403
-------------
NETWORK & TELECOM -- 5.2%
Cisco Systems, Inc. (a) .................. 604,067 $ 16,509,151
Corning, Inc. (a) ........................ 88,250 1,651,158
Juniper Networks, Inc. (a) ............... 65,760 1,245,494
QUALCOMM, Inc. ........................... 67,960 2,568,208
-------------
$ 21,974,011
-------------
OIL SERVICES -- 3.6%
GlobalSantaFe Corp. ...................... 100,040 $ 5,880,351
Noble Corp. .............................. 52,220 3,976,553
Schlumberger Ltd. ........................ 37,170 2,347,657
Transocean, Inc. (a) ..................... 16,310 1,319,316
Weatherford International Ltd. (a) ....... 43,860 1,832,909
-------------
$ 15,356,786
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 4 5%
American Express Co. ..................... 123,670 $ 7,503,059
SLM Corp. ................................ 100,820 4,916,991
UBS AG ................................... 108,721 6,604,964
-------------
$ 19,025,014
-------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.8%
EMC Corp. (a) ............................ 176,900 $ 2,335,080
Seagate Technology LLC ................... 44,100 1,168,650
-------------
$ 3,503,730
-------------
PHARMACEUTICALS -- 8.2%
Allergan, Inc. ........................... 49,080 $ 5,876,839
Eli Lilly & Co. .......................... 80,260 4,181,546
Johnson & Johnson ........................ 156,720 10,346,654
Roche Holding AG ......................... 41,590 7,455,423
Wyeth .................................... 133,740 6,810,041
-------------
$ 34,670,503
-------------
RAILROAD & SHIPPING -- 0.9%
Burlington Northern Santa Fe Corp. ....... 51,370 $ 3,791,620
-------------
RESTAURANTS -- 0.3%
YUM! Brands, Inc. ........................ 24,040 $ 1,413,552
-------------
SPECIALTY CHEMICALS -- 0.2%
Praxair, Inc. ............................ 17,200 $ 1,020,476
-------------
SPECIALTY STORES -- 2.8%
Lowe's Cos., Inc. ........................ 109,330 $ 3,405,633
Staples, Inc. ............................ 199,430 5,324,781
Williams-Sonoma, Inc. (l) ................ 100,470 3,158,777
-------------
$ 11,889,191
-------------
TELECOMMUNICATIONS - WIRELESS -- 0.9%
America Movil S.A. de C.V., "L", ADR ..... 83,120 $ 3,758,686
-------------
TOBACCO -- 0.8%
Altria Group, Inc. ....................... 41,320 $ 3,546,082
-------------
TRUCKING -- 0.5%
FedEx Corp. .............................. 19,280 $ 2,094,194
-------------
Total Common Stocks
(Identified Cost, $381,607,894) ....................... $ 408,913,445
-------------
REPURCHASE AGREEMENTS -- 3.5%
Merrill Lynch, 5.32%, dated 12/29/06,
due 1/02/07, total to be received
$14,843,578 (secured by various U.S. ...
Treasury and Federal Agency obligations
and Mortgage Backed securities in a
jointly traded account), at Cost ....... $14,837,000 $ 14,837,000
-------------
COLLATERAL FOR SECURITIES LOANED -- 1.6%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value .. 6,712,466 $ 6,712,466
-------------
Total Investments
(Identified Cost, $403,157,360) ....................... $ 430,462,911
-------------
OTHER ASSETS,
LESS LIABILITIES -- (1.3)% ................................ (5,383,475)
-------------
Net Assets -- 100.0% .................................... $ 425,079,436
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
MID CAP VALUE SERIES
COMMON STOCKS -- 98.9%
ISSUER SHARES/PAR VALUE ($)
APPAREL MANUFACTURERS -- 0.1%
Phillips-Van Heusen Corp. ................ 570 $ 28,597
-------------
BROKERAGE & ASSET MANAGERS -- 2.0%
Mellon Financial Corp. ................... 8,910 $ 375,557
Waddell & Reed Financial, Inc., "A" ...... 4,450 121,752
-------------
$ 497,309
-------------
BUSINESS SERVICES -- 0.5%
Alliance Data Systems Corp. (a) .......... 660 $ 41,230
Fidelity National Information Services, Inc. 1,800 72,162
-------------
$ 113,392
-------------
CABLE TV -- 0.2%
Liberty Global, Inc., "A" (a) ............ 1,800 $ 52,470
-------------
CHEMICALS -- 2.1%
Nalco Holding Co. (a) .................... 9,390 $ 192,119
Rohm & Haas Co. .......................... 6,220 317,966
-------------
$ 510,085
-------------
COMPUTER SOFTWARE -- 2.7%
Compuware Corp. (a) ...................... 28,040 $ 233,573
McAfee, Inc. (a) ......................... 15,770 447,553
-------------
$ 681,126
-------------
CONSTRUCTION -- 5.0%
D.R. Horton, Inc. ........................ 14,840 $ 393,112
Masco Corp. .............................. 10,690 319,310
Pulte Homes, Inc. ........................ 5,000 165,600
Sherwin-Williams Co. ..................... 5,730 364,313
-------------
$ 1,242,335
-------------
CONSUMER GOODS & SERVICES -- 3.8%
Brink's Co. .............................. 6,400 $ 409,088
Estee Lauder Cos., Inc., "A" ............. 3,970 162,055
Scotts Miracle-Gro Co. ................... 7,150 369,298
-------------
$ 940,441
-------------
CONTAINERS -- 0.3%
Smurfit-Stone Container Corp. (a) ........ 6,640 $ 70,118
Temple-Inland, Inc. ...................... 280 12,888
-------------
$ 83,006
-------------
ELECTRICAL EQUIPMENT -- 2.4%
Rockwell Automation, Inc. ................ 5,190 $ 317,005
W.W. Grainger, Inc. ...................... 4,150 290,251
-------------
$ 607,256
-------------
ELECTRONICS -- 0.7%
Kronos, Inc. (a) ......................... 480 $ 17,635
SanDisk Corp. (a) ........................ 3,250 139,848
Synopsys, Inc. (a) ....................... 700 18,711
-------------
$ 176,194
-------------
ENERGY - INDEPENDENT -- 1.1%
Newfield Exploration Co. (a) ............. 5,930 $ 272,484
-------------
ENERGY - INTEGRATED -- 2.6%
Hess Corp. ............................... 12,820 $ 635,487
-------------
FOOD & BEVERAGES -- 1.3%
Pepsi Bottling Group, Inc. ............... 10,770 $ 332,901
-------------
FOOD & DRUG STORES -- 1.4%
Kroger Co. ............................... 15,300 $ 352,971
-------------
FOREST & PAPER PRODUCTS -- 0.5%
MeadWestvaco Corp. ....................... 4,150 $ 124,749
-------------
FURNITURE & APPLIANCES -- 1.3%
Tempur-Pedic International, Inc. (a) ..... 3,800 $ 77,748
Tupperware Brands Corp. .................. 10,800 244,188
-------------
$ 321,936
-------------
GAMING & LODGING -- 0.8%
Harrah's Entertainment, Inc. ............. 670 $ 55,422
MGM Mirage (a) ........................... 2,620 150,257
-------------
$ 205,679
-------------
GENERAL MERCHANDISE -- 1.5%
Family Dollar Stores, Inc. ............... 430 $ 12,612
Federated Department Stores, Inc. ........ 9,510 362,616
-------------
$ 375,228
-------------
HEALTH MAINTENANCE ORGANIZATIONS -- 2.2%
AMERIGROUP Corp. (a) ..................... 2,120 $ 76,087
CIGNA Corp. .............................. 2,960 389,447
Health Net, Inc. (a) ..................... 1,700 82,722
-------------
$ 548,256
-------------
INSURANCE -- 9.9%
Ace Ltd. ................................. 2,960 $ 179,287
Endurance Specialty Holdings Ltd. ........ 11,160 408,233
Fidelity National Title Group, Inc. ...... 15,750 376,110
First American Corp. ..................... 9,120 371,002
Genworth Financial, Inc., "A" ............ 13,310 455,335
Mercury General Corp. .................... 210 11,073
MGIC Investment Corp. .................... 2,120 132,585
PartnerRe Ltd. ........................... 5,390 382,852
Protective Life Corp. .................... 640 30,400
Zenith National Insurance Corp. .......... 2,910 136,508
-------------
$ 2,483,385
-------------
INTERNET -- 1.6%
RealNetworks, Inc. (a) ................... 36,120 $ 395,153
-------------
LEISURE & TOYS -- 1.0%
Hasbro, Inc. ............................. 9,510 $ 259,148
-------------
MACHINERY & TOOLS -- 3.5%
Cummins, Inc. ............................ 3,070 $ 362,813
Eaton Corp. .............................. 6,060 455,348
Timken Co. ............................... 1,850 53,983
-------------
$ 872,144
-------------
MAJOR BANKS -- 1.4%
PNC Financial Services Group, Inc. ....... 4,740 $ 350,950
-------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.6%
IMS Health, Inc. ......................... 370 $ 10,168
McKesson Corp. ........................... 2,930 148,551
-------------
$ 158,719
-------------
MEDICAL EQUIPMENT -- 1.8%
Advanced Medical Optics, Inc. (a) ........ 2,370 $ 83,424
Cooper Cos., Inc. ........................ 7,980 355,110
-------------
$ 438,534
-------------
METALS & MINING -- 0.4%
Freeport-McMoRan Copper & Gold,
Inc., "B" .............................. 1,730 $ 96,413
-------------
NATURAL GAS - DISTRIBUTION -- 0.2%
Equitable Resources, Inc. ................ 1,430 $ 59,703
-------------
NATURAL GAS - PIPELINE -- 1.7%
Williams Cos., Inc. ...................... 16,300 $ 425,756
-------------
NETWORK & TELECOM -- 0.2%
InterDigital Communications Corp. (a) ..... 1,690 $ 56,700
-------------
OIL SERVICES -- 0.5%
GlobalSantaFe Corp. ....................... 2,070 $ 121,675
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 7.7%
AmeriCredit Corp. (a) ..................... 2,400 $ 60,408
BankUnited Financial Corp., "A" ........... 5,190 145,112
CIT Group, Inc. ........................... 1,550 86,444
Compass Bancshares, Inc. .................. 5,180 308,987
First Horizon National Corp. .............. 2,260 94,423
IndyMac Bancorp, Inc. ..................... 2,000 90,320
Marshall & Ilsley Corp. ................... 2,210 106,323
New York Community Bancorp, Inc. .......... 22,240 358,064
Northern Trust Corp. ...................... 2,440 148,084
TCF Financial Corp. ....................... 8,170 224,021
Zions Bancorporation ...................... 3,700 305,028
-------------
$ 1,927,214
-------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.8%
Western Digital Corp. (a) ................. 9,600 $ 196,416
-------------
PHARMACEUTICALS -- 0.5%
Endo Pharmaceuticals Holdings, Inc. (a) ... 4,240 $ 116,939
-------------
PRINTING & PUBLISHING -- 1.4%
Lee Enterprises, Inc. ..................... 3,050 $ 94,733
New York Times Co., "A" ................... 1,370 33,373
R.R. Donnelley & Sons Co. ................. 400 14,216
Washington Post Co., "B" .................. 270 201,312
-------------
$ 343,634
-------------
RAILROAD & SHIPPING -- 1.2%
Norfolk Southern Corp. .................... 5,930 $ 298,220
-------------
REAL ESTATE -- 9.4%
CapitalSource, Inc., REIT ................. 3,380 $ 92,308
CBL & Associates Properties, Inc., REIT ... 8,900 385,815
DiamondRock Hospitality Co., REIT ......... 10,370 186,764
Equity Office Properties Trust, REIT ...... 14,030 675,825
Equity Residential, REIT .................. 11,420 579,565
Host Hotels & Resorts, Inc., REIT ......... 17,810 437,236
-------------
$ 2,357,513
-------------
RESTAURANTS -- 0.9%
Jack in the Box, Inc. (a) ................. 1,270 $ 77,521
YUM! Brands, Inc. ......................... 2,680 157,584
-------------
$ 235,105
-------------
SPECIALTY STORES -- 2.8%
Aeropostale, Inc. (a) ..................... 13,740 $ 424,154
OfficeMax, Inc. ........................... 1,200 59,580
PetSmart, Inc. ............................ 7,080 204,329
-------------
$ 688,063
-------------
TELEPHONE SERVICES -- 3.4%
Embarq Corp. ............................. 12,240 $ 643,334
Qwest Communications International,
Inc. (a) ............................... 24,930 208,664
-------------
$ 851,998
-------------
TOBACCO -- 1.7%
Loews Corp. .............................. 4,390 $ 284,121
Reynolds American, Inc. .................. 2,110 138,142
-------------
$ 422,263
-------------
UTILITIES - ELECTRIC POWER -- 13.8%
American Electric Power Co., Inc. ........ 12,590 $ 536,077
CMS Energy Corp. (a) ..................... 17,780 296,926
Constellation Energy Group, Inc. ......... 8,280 570,244
Edison International ..................... 1,220 55,486
FPL Group, Inc. .......................... 5,180 281,896
Northeast Utilities ...................... 10,670 300,467
NRG Energy, Inc. (a) ..................... 2,900 162,429
Pepco Holdings, Inc. ..................... 17,390 452,314
PG&E Corp. ............................... 12,550 593,992
PPL Corp. ................................ 1,350 48,384
Xcel Energy, Inc. ........................ 6,410 147,815
-------------
$ 3,446,030
-------------
Total Common Stocks
(Identified Cost, $21,666,771) ........................ $ 24,703,577
-------------
SHORT-TERM OBLIGATIONS -- 0.8%
Alpine Securitization Corp., 5.3%,
due 1/02/07, at Amortized Cost
and Value (n)(y) ....................... $ 208,000 $ 207,969
-------------
Total Investments
(Identified Cost, $21,874,740) ........................ $ 24,911,546
-------------
OTHER ASSETS,
LESS LIABILITIES -- 0.3% .................................. 74,293
-------------
Net Assets -- 100.0% .................................... $ 24,985,839
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
NEW DISCOVERY SERIES
COMMON STOCKS -- 99.3%
ISSUER SHARES/PAR VALUE ($)
AIRLINES -- 0.5%
Allegiant Travel Co. (a) ................. 66,790 $ 1,874,127
-------------
ALCOHOLIC BEVERAGES -- 0.2%
Castle Brands, Inc. (a) .................. 86,630 $ 539,705
-------------
APPAREL MANUFACTURERS -- 0.8%
Carter's, Inc. (a)(l) .................... 105,640 $ 2,693,820
-------------
BIOTECHNOLOGY -- 4.0%
Cadence Pharmaceuticals, Inc. (a) ........ 96,100 $ 1,183,952
CV Therapeutics, Inc. (a)(l) ............. 176,590 2,465,196
Gen-Probe, Inc. (a) ...................... 67,760 3,548,591
Millipore Corp. (a)(l) ................... 99,570 6,631,362
-------------
$ 13,829,101
-------------
BROKERAGE & ASSET MANAGERS -- 1.2%
MarketAxess Holdings, Inc. (a) ........... 145,960 $ 1,980,677
Thomas Weisel Partners Group LLC (a)(l) .. 102,300 2,158,530
-------------
$ 4,139,207
-------------
BUSINESS SERVICES -- 7.5%
Bright Horizons Family Solutions, Inc. (a) 74,160 $ 2,867,026
Corporate Executive Board Co. (l) ........ 50,410 4,420,957
CoStar Group, Inc. (a) ................... 101,580 5,440,625
Equinix, Inc. (a)(l) ..................... 33,280 2,516,634
Global Payments, Inc. .................... 59,750 2,766,425
LoopNet, Inc. (a)(l) ..................... 93,370 1,398,683
TALX Corp. (l) ........................... 131,390 3,606,656
Ultimate Software Group, Inc. (a)(l) ..... 121,380 2,823,299
-------------
$ 25,840,305
-------------
CHEMICALS -- 1.0%
Nalco Holding Co. (a) .................... 167,640 $ 3,429,914
-------------
COMPUTER SOFTWARE -- 6.1%
CommVault Systems, Inc. (a) .............. 126,670 $ 2,534,667
Guidance Software, Inc. (a) .............. 87,240 1,358,327
MSC.Software Corp. (a) ................... 169,974 2,588,704
Opsware, Inc. (a)(l) ..................... 493,610 4,353,640
TIBCO Software, Inc. (a) ................. 433,040 4,087,898
Transaction Systems Architects, Inc. (a) .. 190,550 6,206,214
-------------
$ 21,129,450
-------------
CONSTRUCTION -- 1.4%
Dayton Superior Corp. (a) ................ 133,000 $ 1,561,420
M.D.C. Holdings, Inc. (l) ................ 57,460 3,278,093
-------------
$ 4,839,513
-------------
CONSUMER GOODS & SERVICES -- 5.8%
Central Garden & Pet Co. (a) ............. 75,310 $ 3,646,510
ITT Educational Services, Inc. (a)(l) .... 57,750 3,832,867
Knot, Inc. (a) ........................... 61,520 1,614,285
Monster Worldwide, Inc. (a) .............. 40,570 1,892,185
New Oriental Educational & Technology
Group, ADR (a) ......................... 115,740 3,881,920
PlanetOut, Inc. (a)(l) ................... 162,860 750,785
Strayer Education, Inc. (l) .............. 40,910 4,338,506
-------------
$ 19,957,058
-------------
ELECTRICAL EQUIPMENT -- 1.8%
MSC Industrial Direct Co., Inc., "A" ..... 162,710 $ 6,370,096
-------------
ELECTRONICS -- 9.1%
ARM Holdings PLC ......................... 2,709,990 $ 6,674,708
Cree, Inc. (a)(l) ........................ 151,790 2,629,003
Entegris, Inc. (a)(l) .................... 392,537 4,247,250
FormFactor, Inc. (a) ..................... 119,600 4,455,100
Hittite Microwave Corp. (a)(l) ........... 90,170 2,914,294
Intersil Corp., "A" ...................... 147,000 3,516,240
Kronos, Inc. (a) ......................... 60,190 2,211,381
Netlist, Inc. (a) ........................ 73,400 713,448
NetLogic Microsystems, Inc. (a)(l) ....... 109,140 2,367,247
Volterra Semiconductor Corp. (a)(l) ...... 108,690 1,630,350
-------------
$ 31,359,021
-------------
ENERGY - INDEPENDENT -- 3.1%
EXCO Resources, Inc. (a) ................. 212,260 $ 3,589,317
Forest Oil Corp. (a)(l) .................. 76,060 2,485,641
Goodrich Petroleum Corp. (a)(l) .......... 79,430 2,873,777
Venoco, Inc. (a) ......................... 100,300 1,761,268
-------------
$ 10,710,003
-------------
ENGINEERING - CONSTRUCTION -- 3.3%
InfraSource Services, Inc. (a)(l) ........ 150,070 $ 3,267,024
North American Energy Partners, Inc. (a) .. 288,750 4,700,850
Quanta Services, Inc. (a)(l) ............. 179,040 3,521,717
-------------
$ 11,489,591
-------------
FOOD & BEVERAGES -- 0.8%
Diamond Foods, Inc. ...................... 141,320 $ 2,686,493
-------------
FOREST & PAPER PRODUCTS -- 0.7%
Universal Forest Products, Inc. .......... 51,000 $ 2,377,620
-------------
GAMING & LODGING -- 2.1%
Shuffle Master, Inc. (a)(l) .............. 124,470 $ 3,261,114
WMS Industries, Inc. (a)(l) .............. 112,540 3,923,144
-------------
$ 7,184,258
-------------
GENERAL MERCHANDISE -- 0.9%
Stage Stores, Inc. (l) ................... 98,660 $ 2,998,277
-------------
INTERNET -- 1.7%
CNET Networks, Inc. (a)(l) ............... 358,530 $ 3,259,038
Move, Inc. (a)(l) ........................ 333,480 1,837,475
Vocus, Inc. (a) .......................... 50,950 855,960
-------------
$ 5,952,473
-------------
LEISURE & TOYS -- 2.3%
Activision, Inc. (a)(l) .................. 236,731 $ 4,081,242
THQ, Inc. (a)(l) ......................... 118,809 3,863,669
-------------
$ 7,944,911
-------------
MACHINERY & TOOLS -- 1.0%
Ritchie Bros. Auctioneers, Inc. .......... 64,830 $ 3,470,998
-------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 4.7%
AMICAS, Inc. (a) ......................... 238,370 $ 700,808
Healthcare Services Group, Inc. (l) ...... 144,720 4,191,091
IDEXX Laboratories, Inc. (a) ............. 40,483 3,210,302
MWI Veterinary Supply, Inc. (a) .......... 129,380 4,178,974
VCA Antech, Inc. (a)(l) .................. 54,860 1,765,943
WebMD Health Corp. (a)(l) ................ 58,700 2,349,174
-------------
$ 16,396,292
-------------
MEDICAL EQUIPMENT -- 10.5%
ABIOMED, Inc. (a)(l) ..................... 40,180 $ 566,538
Advanced Medical Optics, Inc. (a)(l) ..... 165,130 5,812,576
Aspect Medical Systems, Inc. (a)(l) ...... 266,880 5,020,013
AtriCure, Inc. (a) ....................... 133,030 1,197,270
Conceptus, Inc. (a)(l) ................... 205,010 4,364,663
Cyberonics, Inc. (a) ..................... 195,640 4,038,010
Dexcom, Inc. (a)(l) ...................... 140,570 1,386,020
Mindray Medical International Ltd., ADR (a) 79,840 1,909,773
NxStage Medical, Inc. (a)(l) ............. 39,480 330,842
Thoratec Corp. (a)(l) .................... 335,290 5,894,398
Ventana Medical Systems, Inc. (a)(l) ..... 78,140 3,362,364
Volcano Corp. (a) ........................ 153,880 2,522,093
-------------
$ 36,404,560
-------------
NETWORK & TELECOM -- 3.0%
NICE Systems Ltd., ADR (a) ............... 340,530 $ 10,481,513
-------------
OIL SERVICES -- 2.6%
Dresser-Rand Group, Inc. (a) ............. 199,930 $ 4,892,287
Natural Gas Services Group, Inc. (a)(l) .. 99,160 1,378,324
Universal Compression Holdings, Inc. (a) .. 44,680 2,775,075
-------------
$ 9,045,686
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 4 1%
Commerce Bancorp, Inc. (l) ............... 81,820 $ 2,885,791
Investors Financial Services Corp. (l) ... 106,170 4,530,274
New York Community Bancorp, Inc. (l) ..... 207,470 3,340,267
Signature Bank (a) ....................... 104,900 3,249,802
-------------
$ 14,006,134
-------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.8%
Isilon Systems, Inc. (a) ................. 19,530 $ 539,028
Nuance Communications, Inc. (a)(l) ....... 497,575 5,702,210
-------------
$ 6,241,238
-------------
PHARMACEUTICALS -- 2.8%
Endo Pharmaceuticals Holdings, Inc. (a) .. 125,320 $ 3,456,326
Medicis Pharmaceutical Corp., "A" (l) .... 128,660 4,519,826
Warner Chilcott Ltd., "A" (a) ............ 116,960 1,616,387
-------------
$ 9,592,539
-------------
PRINTING & PUBLISHING -- 0.5%
Morningstar, Inc. (a)(l) ................. 36,130 $ 1,627,656
-------------
REAL ESTATE -- 1.1%
Alesco Financial, Inc., REIT ............. 220,970 $ 2,364,379
Global Signal, Inc., REIT (l) ............ 27,550 1,451,058
-------------
$ 3,815,437
-------------
RESTAURANTS -- 4.1%
Chipotle Mexican Grill, Inc., "A" (a)(l) .. 42,480 $ 2,421,360
Peet's Coffee & Tea, Inc. (a)(l) ......... 54,320 1,425,357
Red Robin Gourmet Burgers, Inc. (a)(l) ... 164,500 5,897,325
Texas Roadhouse, Inc., "A" (a)(l) ........ 334,820 4,439,713
-------------
$ 14,183,755
-------------
SPECIALTY CHEMICALS -- 1.0%
Innophos Holdings, Inc. (a) .............. 141,800 $ 2,081,624
NuCO2, Inc. (a)(l) ....................... 57,580 1,415,892
-------------
$ 3,497,516
-------------
SPECIALTY STORES -- 6.4%
A.C. Moore Arts & Crafts, Inc. (a) ....... 109,340 $ 2,369,398
CarMax, Inc. (a) ......................... 52,150 2,796,804
Citi Trends, Inc. (a)(l) ................. 61,390 2,433,500
Dick's Sporting Goods, Inc. (a)(l) ....... 52,370 2,565,606
Hibbett Sporting Goods, Inc. (a)(l) ...... 101,680 3,104,290
Monro Muffler Brake, Inc. ................ 63,340 2,223,234
Susser Holdings Corp. (a) ................ 96,150 1,730,700
Urban Outfitters, Inc. (a)(l) ............ 212,230 4,887,657
-------------
$ 22,111,189
-------------
TELEPHONE SERVICES -- 1.4%
Level 3 Communications, Inc. (a)(l) ...... 835,830 $ 4,680,648
-------------
Total Common Stocks
(Identified Cost, $318,704,647) ....................... $ 342,900,104
=============
SHORT-TERM OBLIGATIONS -- 0.2%
General Electric Capital Corp., 5.29%,
due 1/02/07, at Amortized Cost (y) ..... $ 617,000 $ 616,909
-------------
COLLATERAL FOR SECURITIES LOANED -- 16.9%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value .. 58,385,188 $ 58,385,188
-------------
Total Investments
(Identified Cost, $377,706,744) ....................... $ 401,902,201
-------------
OTHER ASSETS,
LESS LIABILITIES -- (16.4)% ............................... (56,609,302)
-------------
Net Assets -- 100.0% .................................... $ 345,292,899
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
RESEARCH INTERNATIONAL SERIES
COMMON STOCKS -- 98.7%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 0.8%
Finmeccanica S.p.A. (l) .................. 84,820 $ 2,299,273
-------------
ALCOHOLIC BEVERAGES -- 1.7%
Diageo PLC ............................... 146,780 $ 2,882,019
Grupo Modelo S.A. de C.V., "C" ........... 83,320 462,780
Pernod Ricard S.A. (l) ................... 5,700 1,308,929
-------------
$ 4,653,728
-------------
APPAREL MANUFACTURERS -- 2.6%
Adidas AG ................................ 55,270 $ 2,752,125
Li & Fung Ltd. ........................... 621,600 1,933,947
LVMH Moet Hennessy Louis Vuitton S.A. (l) 24,140 2,547,109
-------------
$ 7,233,181
-------------
AUTOMOTIVE -- 4.4%
Bayerische Motoren Werke AG .............. 53,140 $ 3,051,423
Continental AG ........................... 37,673 4,380,240
Honda Motor Co. Ltd. (l) ................. 115,500 4,560,040
-------------
$ 11,991,703
-------------
BIOTECHNOLOGY -- 1.1%
Actelion Ltd. (a) ........................ 13,980 $ 3,073,788
-------------
BROADCASTING -- 3.3%
Antena 3 de Television S.A. (l) .......... 59,635 $ 1,404,067
Grupo Televisa S.A., ADR ................. 35,760 965,878
Nippon Television Network Corp. .......... 11,500 1,705,994
WPP Group PLC ............................ 373,930 5,057,077
-------------
$ 9,133,016
-------------
BROKERAGE & ASSET MANAGERS -- 0.6%
EFG International (a) .................... 43,830 $ 1,652,300
-------------
BUSINESS SERVICES -- 0.7%
Mitsubishi Corp. ......................... 104,600 $ 1,968,197
-------------
CHEMICALS -- 4.3%
Bayer AG ................................. 104,230 $ 5,593,092
Syngenta AG .............................. 20,502 3,813,113
Umicore .................................. 14,170 2,412,411
-------------
$ 11,818,616
-------------
COMPUTER SOFTWARE - SYSTEMS -- 0.8%
Cap Gemini S.A ........................... 33,350 $ 2,092,850
-------------
CONGLOMERATES -- 1.4%
Siemens AG ............................... 37,880 $ 3,756,410
-------------
CONSTRUCTION -- 1.8%
CEMEX S.A. de C.V., ADR (a) .............. 35,824 $ 1,213,717
CRH PLC .................................. 68,310 2,843,399
Siam Cement Public Co. Ltd. .............. 117,100 822,777
-------------
$ 4,879,893
-------------
CONSUMER GOODS & SERVICES -- 2.0%
Kao Corp. ................................ 100,000 $ 2,696,459
Kimberly-Clark de Mexico S.A. de C.V., "A" 126,800 583,240
Reckitt Benckiser PLC .................... 49,730 2,273,342
-------------
$ 5,553,041
-------------
ELECTRICAL EQUIPMENT -- 1.2%
Schneider Electric S.A. (l) .............. 30,804 $ 3,418,967
-------------
ELECTRONICS -- 5.2%
ARM Holdings PLC ......................... 495,410 $ 1,220,164
ASML Holding N.V. (a) .................... 47,880 1,190,493
Konica Minolta Holdings, Inc. (l) ........ 130,500 1,841,657
Nintendo Co. Ltd. (l) .................... 9,100 2,362,048
Nippon Electric Glass Co. Ltd. ........... 39,000 819,018
Royal Philips Electronics N.V ............ 82,020 3,092,586
Samsung Electronics Co. Ltd. ............. 5,596 3,688,546
-------------
$ 14,214,512
-------------
ENERGY - INDEPENDENT -- 0.7%
Norsk Hydro A.S.A ........................ 64,350 $ 1,997,662
-------------
ENERGY - INTEGRATED -- 6.6%
Petroleo Brasileiro S.A., ADR ............ 6,870 $ 707,541
Royal Dutch Shell PLC, "A" ............... 194,700 6,806,906
Sasol Ltd. ............................... 26,580 980,771
Statoil A.S.A. (l) ....................... 116,950 3,100,517
TOTAL S.A. (l) ........................... 92,060 6,639,769
-------------
$ 18,235,504
-------------
FOOD & BEVERAGES -- 2.5%
Nestle S.A ............................... 16,861 $ 5,989,673
Nong Shim Co. Ltd. (a) ................... 2,802 858,677
-------------
$ 6,848,350
-------------
FOOD & DRUG STORES -- 1.3%
Sundrug Co. Ltd. ......................... 43,400 $ 960,637
Tesco PLC ................................ 338,639 2,682,879
-------------
$ 3,643,516
-------------
FOREST & PAPER PRODUCTS -- 0.0%
Votorantim Celulose e Papel S.A., ADR .... 1,420 $ 27,846
-------------
INSURANCE -- 2.7%
Assicurazioni Generali S.p.A ............. 54,910 $ 2,410,994
AXA (l) .................................. 124,570 5,042,188
-------------
$ 7,453,182
-------------
INTERNET -- 0.2%
Universo Online S.A., IPS (a) ............ 107,400 $ 584,035
-------------
LEISURE & TOYS -- 1.8%
Capcom Co. Ltd. (l) ...................... 65,100 $ 1,172,998
Konami Corp. (l) ......................... 66,500 2,011,004
NAMCO BANDAI Holdings, Inc. .............. 117,200 1,717,955
-------------
$ 4,901,957
-------------
MACHINERY & TOOLS -- 1.4%
Fanuc Ltd. ............................... 26,400 $ 2,599,084
GEA Group AG ............................. 52,000 1,171,463
-------------
$ 3,770,547
-------------
MAJOR BANKS -- 15.1%
Barclays PLC ............................. 340,820 $ 4,872,967
BNP Paribas (l) .......................... 48,699 5,311,959
BOC Hong Kong Holdings Ltd. .............. 1,394,000 3,781,493
Credit Agricole S.A. (l) ................. 111,617 4,693,188
Deutsche Postbank AG ..................... 21,760 1,837,076
Erste Bank der oesterreichischen
Sparkassen AG (l) ...................... 28,036 2,149,730
Industrial & Commercial Bank of China, "H"
(a) .................................... 13,000 8,106
Mitsubishi Tokyo Financial Group, Inc. ... 310 3,827,964
Royal Bank of Scotland Group PLC ......... 139,260 5,435,997
Standard Chartered PLC ................... 65,510 1,914,353
Sumitomo Mitsui Financial Group, Inc. .... 426 4,365,744
UniCredito Italiano S.p.A. (l) ........... 394,400 3,456,184
-------------
$ 41,654,761
-------------
METALS & MINING -- 3.4%
BHP Billiton PLC ......................... 282,160 $ 5,164,405
Companhia Siderurgica Nacional S.A.,
ADR (l) ................................ 28,770 862,525
POSCO .................................... 8,720 2,897,290
TMK OAO, GDR (a)(z) ...................... 10,410 364,350
-------------
$ 9,288,570
-------------
NATURAL GAS - DISTRIBUTION -- 1.2%
Gaz de France (l) ........................ 26,460 $ 1,216,983
Tokyo Gas Co. Ltd. ....................... 384,000 2,041,850
-------------
$ 3,258,833
-------------
NATURAL GAS - PIPELINE -- 0.3%
Gazprom OAO, ADR ......................... 20,820 $ 957,720
-------------
OIL SERVICES -- 0.5%
Saipem S.p.A ............................. 39,340 $ 1,025,867
Vallourec S.A ............................ 990 287,834
-------------
$ 1,313,701
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 10.8%
AEON Credit Service Co. Ltd. ............. 124,000 $ 2,348,860
Akbank T.A.S ............................. 349,214 2,119,286
Banche Popolari Unite Scpa ............... 91,720 2,520,209
Banco Nossa Caixa S.A .................... 31,150 700,328
Bangkok Bank Public Co. Ltd. ............. 334,600 1,064,426
Bank of Cyprus Public Co. Ltd. ........... 70,950 970,072
CSU Cardsystem S.A. (a) .................. 99,440 507,680
Hana Financial Group, Inc. ............... 33,860 1,780,381
HSBC Holdings PLC ........................ 268,605 4,897,893
ORIX Corp. (l) ........................... 4,490 1,299,345
Shinsei Bank Ltd. ........................ 264,000 1,552,354
SinoPac Holdings ......................... 1,990,000 1,065,690
Suncorp-Metway Ltd. ...................... 132,290 2,126,222
UBS AG ................................... 91,452 5,555,846
Unibanco -- Uniao de Bancos Brasileiros
S.A., ADR .............................. 14,220 1,321,891
-------------
$ 29,830,483
-------------
PHARMACEUTICALS -- 5.8%
Astellas Pharma, Inc. .................... 77,600 $ 3,526,532
GlaxoSmithKline PLC ...................... 251,010 6,607,480
Novartis AG .............................. 29,060 1,674,842
Roche Holding AG ......................... 23,870 4,278,936
-------------
$ 16,087,790
-------------
SPECIALTY CHEMICALS -- 2.6%
Asahi Glass Co. Ltd. (l) ................. 202,000 $ 2,426,477
Linde AG (l) ............................. 30,250 3,124,331
Lonza Group AG ........................... 19,800 1,710,509
-------------
$ 7,261,317
-------------
SPECIALTY STORES -- 0.8%
NEXT PLC ................................. 58,920 $ 2,077,212
-------------
TELECOMMUNICATIONS - WIRELESS -- 2.5%
America Movil S.A. de C.V., "L", ADR ..... 17,130 $ 774,619
KDDI Corp. ............................... 247 1,674,400
Rogers Communications, Inc., "B" ......... 39,800 1,185,561
Vodafone Group PLC ....................... 1,144,580 3,172,109
-------------
$ 6,806,689
-------------
TELEPHONE SERVICES -- 3.0%
France Telecom S.A ....................... 91,660 $ 2,534,286
Philippine Long Distance Telephone Co. ... 14,900 775,092
Telenor A.S.A ............................ 136,240 2,562,772
TELUS Corp. .............................. 50,940 2,340,380
-------------
$ 8,212,530
-------------
UTILITIES - ELECTRIC POWER -- 3.6%
CEZ AS ................................... 23,180 $ 1,068,906
E.ON AG .................................. 43,070 5,845,027
Equatorial Energia S.A., IEU (a) ......... 115,280 1,017,812
SUEZ S.A. (l) ............................ 40,941 2,119,673
-------------
$ 10,051,418
-------------
Total Common Stocks
(Identified Cost, $224,555,050) ....................... $ 272,003,098
-------------
SHORT-TERM OBLIGATIONS -- 1.3%
General Electric Capital Corp., 5.29%,
due 1/02/07, at Amortized Cost
and Value (y) .......................... $3,537,000 $ 3,536,480
-------------
COLLATERAL FOR SECURITIES LOANED -- 15.2%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value .. 41,916,962 $ 41,916,962
-------------
Total Investments
(Identified Cost, $270,008,492) (k).................... $ 317,456,540
-------------
OTHER ASSETS,
LESS LIABILITIES -- (15.2)% ............................... (41,954,107)
-------------
Net Assets -- 100.0% .................................... $ 275,502,433
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
STRATEGIC GROWTH SERIES
COMMON STOCKS -- 98.1%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 4.1%
Lockheed Martin Corp. .................... 16,190 $ 1,490,613
United Technologies Corp. ................ 22,490 1,406,075
-------------
$ 2,896,688
-------------
APPAREL MANUFACTURERS -- 2.0%
Coach, Inc. (a) .......................... 14,500 $ 622,920
NIKE, Inc., "B" .......................... 8,000 792,240
-------------
$ 1,415,160
-------------
AUTOMOTIVE -- 1.4%
Harman International Industries, Inc. .... 9,900 $ 989,109
-------------
BIOTECHNOLOGY -- 6.5%
Amgen, Inc. (a) .......................... 13,500 $ 922,185
Celgene Corp. (a) ........................ 16,330 939,465
Genentech, Inc. (a) ...................... 9,410 763,433
Genzyme Corp. (a) ........................ 17,840 1,098,587
Gilead Sciences, Inc. (a) ................ 5,330 346,077
Millipore Corp. (a) ...................... 7,610 506,826
-------------
$ 4,576,573
-------------
BROADCASTING -- 3.6%
Grupo Televisa S.A., ADR ................. 23,340 $ 630,413
News Corp., "A" .......................... 87,260 1,874,345
-------------
$ 2,504,758
-------------
BROKERAGE & ASSET MANAGERS -- 4.5%
Charles Schwab Corp. ..................... 59,110 $ 1,143,187
Chicago Mercantile Exchange Holdings,
Inc., "A" .............................. 2,140 1,090,865
Goldman Sachs Group, Inc. ................ 4,660 928,971
-------------
$ 3,163,023
-------------
BUSINESS SERVICES -- 6.2%
Amdocs Ltd. (a) .......................... 26,880 $ 1,041,600
Cognizant Technology Solutions Corp.,
"A" (a) ................................ 10,800 833,328
First Data Corp. ......................... 52,160 1,331,123
Western Union Co. ........................ 52,160 1,169,427
-------------
$ 4,375,478
-------------
CHEMICALS -- 2.5%
Monsanto Co. ............................. 33,930 $ 1,782,343
-------------
COMPUTER SOFTWARE -- 3.0%
Adobe Systems, Inc. (a) .................. 51,380 $ 2,112,746
-------------
COMPUTER SOFTWARE - SYSTEMS -- 1.6%
Apple Computer, Inc. (a) ................. 13,460 $ 1,141,946
-------------
CONSUMER GOODS & SERVICES -- 0.7%
eBay, Inc. (a) ........................... 17,330 $ 521,113
-------------
ELECTRICAL EQUIPMENT -- 1.9%
Rockwell Automation, Inc. ................ 22,510 $ 1,374,911
-------------
ELECTRONICS -- 7.9%
Applied Materials, Inc. .................. 58,500 $ 1,079,325
Intel Corp. .............................. 70,820 1,434,105
Marvell Technology Group Ltd. (a) ........ 73,700 1,414,303
Samsung Electronics Co. Ltd., GDR ........ 1,937 637,273
SanDisk Corp. (a) ........................ 22,560 970,757
-------------
$ 5,535,763
-------------
FOOD & BEVERAGES -- 3.1%
Nestle S.A ............................... 2,776 $ 986,142
PepsiCo, Inc. ............................ 19,570 1,224,104
-------------
$ 2,210,246
-------------
GAMING & LODGING -- 2.6%
International Game Technology ............ 24,480 $ 1,130,976
Las Vegas Sands Corp. (a) ................ 7,990 714,945
-------------
$ 1,845,921
-------------
GENERAL MERCHANDISE -- 1.0%
Costco Wholesale Corp. ................... 13,340 $ 705,286
-------------
INTERNET -- 2.3%
Google, Inc., "A" (a) .................... 2,840 $ 1,307,763
Yahoo!, Inc. (a) ......................... 13,720 350,409
-------------
$ 1,658,172
-------------
LEISURE & TOYS -- 1.5%
Electronic Arts, Inc. (a) ................ 20,490 $ 1,031,876
-------------
MACHINERY & TOOLS -- 1.0%
Deere & Co. .............................. 7,220 $ 686,405
-------------
MAJOR BANKS -- 3.6%
Bank of New York Co., Inc. ............... 29,640 $ 1,166,927
State Street Corp. ....................... 19,880 1,340,707
-------------
$ 2,507,634
-------------
MEDICAL EQUIPMENT -- 5.6%
Advanced Medical Optics, Inc. (a)(l) ..... 26,050 $ 916,960
Cytyc Corp. (a) .......................... 35,970 1,017,951
Medtronic, Inc. .......................... 19,600 1,048,796
St. Jude Medical, Inc. (a) ............... 26,300 961,528
-------------
$ 3,945,235
-------------
NETWORK & TELECOM -- 5.6%
Cisco Systems, Inc. (a) .................. 86,970 $ 2,376,890
Juniper Networks, Inc. (a)(l) ............ 31,560 597,746
QUALCOMM, Inc. ........................... 19,370 731,992
Research In Motion Ltd. (a) .............. 1,900 242,782
-------------
$ 3,949,410
-------------
OIL SERVICES -- 4.1%
GlobalSantaFe Corp. ...................... 18,860 $ 1,108,591
National-Oilwell Varco, Inc. (a) ......... 12,500 764,750
Schlumberger Ltd. ........................ 15,600 985,296
-------------
$ 2,858,637
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 4.3%
American Express Co. ..................... 25,560 $ 1,550,725
UBS AG ................................... 24,190 1,459,383
-------------
$ 3,010,108
-------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.5%
EMC Corp. (a) ............................ 31,500 $ 415,800
Network Appliance, Inc. (a) .............. 15,600 612,768
-------------
$ 1,028,568
-------------
PHARMACEUTICALS -- 7.5%
Allergan, Inc. ........................... 11,590 $ 1,387,787
GlaxoSmithKline PLC ...................... 37,650 991,083
Johnson & Johnson ........................ 17,400 1,148,748
Roche Holding AG ......................... 9,740 1,745,992
-------------
$ 5,273,610
-------------
SPECIALTY STORES -- 3.3%
Best Buy Co., Inc. ....................... 10,600 $ 521,414
Lowe's Cos., Inc. ........................ 33,500 1,043,525
Staples, Inc. ............................ 28,200 752,940
-------------
$ 2,317,879
-------------
TELECOMMUNICATIONS - WIRELESS -- 1.6%
America Movil S.A. de C.V., "L", ADR ..... 25,390 $ 1,148,136
-------------
TELEPHONE SERVICES -- 1.9%
American Tower Corp., "A" (a)(l) ......... 36,420 $ 1,357,738
-------------
TOBACCO -- 1.7%
Altria Group, Inc. ....................... 13,680 $ 1,174,018
-------------
Total Common Stocks
(Identified Cost, $64,073,116) ........................ $ 69,098,490
-------------
SHORT-TERM OBLIGATIONS -- 2.2%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized Cost and
Value (y) .............................. $1,527,000 $ 1,526,776
-------------
COLLATERAL FOR SECURITIES LOANED -- 2.8%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value . 2,014,182 $ 2,014,182
-------------
Total Investments
(Identified Cost, $67,614,074) ........................ $ 72,639,448
-------------
OTHER ASSETS,
LESS LIABILITIES -- (3.1)% ................................ (2,208,802)
-------------
Net Assets -- 100.0% .................................... $ 70,430,646
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
STRATEGIC VALUE SERIES
COMMON STOCKS -- 99.2%
ISSUER SHARES/PAR VALUE ($)
ALCOHOLIC BEVERAGES -- 0.7%
Molson Coors Brewing Co. ................. 820 $ 62,681
-------------
BIOTECHNOLOGY -- 3.9%
Amgen, Inc. (a) .......................... 4,370 $ 298,515
Millipore Corp. (a) ...................... 810 53,946
-------------
$ 352,461
-------------
BROADCASTING -- 3.2%
CBS Corp., "B" ........................... 5,875 $ 183,182
E. W. Scripps Co., "A" ................... 1,760 87,894
Idearc, Inc. (a) ......................... 603 17,276
-------------
$ 288,352
-------------
BROKERAGE & ASSET MANAGERS -- 1.2%
Merrill Lynch & Co., Inc. ................ 1,175 $ 109,392
-------------
COMPUTER SOFTWARE -- 5.1%
Compuware Corp. (a) ...................... 35,520 $ 295,882
Symantec Corp. (a) ....................... 8,040 167,634
-------------
$ 463,516
-------------
CONSTRUCTION -- 3.9%
D.R. Horton, Inc. ........................ 1,720 $ 45,563
Masco Corp. .............................. 10,430 311,544
-------------
$ 357,107
-------------
CONSUMER GOODS & SERVICES -- 3.0%
Alberto Culver Co. ....................... 4,620 $ 99,099
Estee Lauder Cos., Inc., "A" ............. 4,370 178,383
-------------
$ 277,482
-------------
CONTAINERS -- 4.6%
Owens-Illinois, Inc. (a) ................. 22,670 $ 418,262
-------------
ELECTRICAL EQUIPMENT -- 4.5%
Tyco International Ltd. .................. 13,330 $ 405,232
-------------
ENERGY - INDEPENDENT -- 5.3%
Apache Corp. ............................. 3,300 $ 219,483
Devon Energy Corp. ....................... 3,930 263,624
-------------
$ 483,107
-------------
ENERGY - INTEGRATED -- 0.6%
Hess Corp. ............................... 1,050 $ 52,048
-------------
FOOD & BEVERAGES -- 0.5%
General Mills, Inc. ...................... 730 $ 42,048
-------------
FOOD & DRUG STORES -- 0.4%
Sally Beauty Holdings, Inc. (a) .......... 5,190 $ 40,482
-------------
FOREST & PAPER PRODUCTS -- 1.9%
Bowater, Inc. ............................ 7,632 $ 171,720
-------------
GENERAL MERCHANDISE -- 0.8%
Federated Department Stores, Inc. ........ 1,940 $ 73,972
-------------
INSURANCE -- 11.3%
Allstate Corp. ........................... 3,480 $ 226,583
Conseco, Inc. (a) ........................ 13,080 261,338
Genworth Financial, Inc., "A" ............ 7,950 271,969
St. Paul Travelers Cos., Inc. ............ 5,010 268,987
-------------
$ 1,028,877
-------------
LEISURE & TOYS -- 1.2%
Mattel, Inc. ............................. 4,940 $ 111,940
-------------
MAJOR BANKS -- 12.3%
Bank of America Corp. .................... 4,636 $ 247,516
Bank of New York Co., Inc. ............... 8,760 344,881
JPMorgan Chase & Co. ..................... 9,120 440,496
PNC Financial Services Group, Inc. ....... 1,150 85,146
-------------
$ 1,118,039
-------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.2%
Tenet Healthcare Corp. (a) ............... 15,300 $ 106,641
-------------
MEDICAL EQUIPMENT -- 4.6%
Boston Scientific Corp. (a) .............. 9,770 $ 167,849
Pall Corp. ............................... 7,290 251,870
-------------
$ 419,719
-------------
NATURAL GAS - DISTRIBUTION -- 0.5%
Questar Corp. ............................ 530 $ 44,017
-------------
NATURAL GAS - PIPELINE -- 1.9%
Williams Cos., Inc. ...................... 6,800 $ 177,616
-------------
NETWORK & TELECOM -- 4.7%
Nortel Networks Corp. (a) ................ 16,138 $ 431,369
-------------
OIL SERVICES -- 2.4%
GlobalSantaFe Corp. ...................... 1,895 $ 111,388
Noble Corp. .............................. 1,400 106,610
-------------
$ 217,998
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 1 0%
New York Community Bancorp, Inc. ......... 5,390 $ 86,779
-------------
PHARMACEUTICALS -- 3.2%
Warner Chilcott Ltd., "A" (a) ............ 5,380 $ 74,352
Wyeth .................................... 4,350 221,502
-------------
$ 295,854
-------------
PRINTING & PUBLISHING -- 3.3%
New York Times Co., "A" .................. 12,410 $ 302,308
-------------
SPECIALTY STORES -- 2.0%
OfficeMax, Inc. .......................... 3,640 $ 180,726
-------------
TELEPHONE SERVICES -- 5.2%
AT&T, Inc. ............................... 700 $ 25,025
Verizon Communications, Inc. ............. 12,045 448,556
-------------
$ 473,581
-------------
TOBACCO -- 1.7%
Altria Group, Inc. ....................... 1,780 $ 152,760
-------------
UTILITIES - ELECTRIC POWER -- 3.1%
FPL Group, Inc. .......................... 5,110 $ 278,086
-------------
Total Common Stocks
(Identified Cost, $8,040,404) ......................... $ 9,024,172
-------------
SHORT-TERM OBLIGATIONS -- 1.3%
Alpine Securitization Corp., 5.3%,
due 1/02/07, at Amortized Cost
and Value (t)(y) ....................... $ 117,000 $ 116,983
-------------
Total Investments
(Identified Cost, $8,157,387) ......................... $ 9,141,155
-------------
OTHER ASSETS,
LESS LIABILITIES -- (0.5)% ................................ (41,065)
-------------
Net Assets -- 100.0% .................................... $ 9,100,090
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
TECHNOLOGY SERIES
COMMON STOCKS -- 99.2%
ISSUER SHARES/PAR VALUE ($)
BUSINESS SERVICES -- 10.1%
Amdocs Ltd. (a) .......................... 11,380 $ 440,975
Cognizant Technology Solutions Corp.,
"A" (a) ................................ 3,770 290,893
Equinix, Inc. (a)(l) ..................... 3,470 262,401
First Data Corp. ......................... 19,510 497,895
Global Payments, Inc. .................... 8,510 394,013
Ultimate Software Group, Inc. (a)(l) ..... 14,140 328,896
-------------
$ 2,215,073
-------------
COMPUTER SOFTWARE -- 16.6%
Adobe Systems, Inc. (a) .................. 15,890 $ 653,397
McAfee, Inc. (a) ......................... 23,050 654,159
MSC.Software Corp. (a) ................... 30,114 458,636
Oracle Corp. (a) ......................... 25,100 430,214
Salesforce.com, Inc. (a)(l) .............. 18,300 667,035
Symantec Corp. (a) ....................... 31,251 651,583
TIBCO Software, Inc. (a) ................. 13,540 127,818
-------------
$ 3,642,842
-------------
COMPUTER SOFTWARE - SYSTEMS -- 6.5%
Cray, Inc. (a)(l) ........................ 32,890 $ 390,733
Dell, Inc. (a)(l) ........................ 9,360 234,842
Hewlett-Packard Co. ...................... 19,470 801,969
-------------
$ 1,427,544
-------------
CONSUMER GOODS & SERVICES -- 1.9%
ITT Educational Services, Inc. (a)(l) .... 2,790 $ 185,172
Monster Worldwide, Inc. (a) .............. 4,980 232,267
-------------
$ 417,439
-------------
ELECTRONICS -- 25.5%
Applied Materials, Inc. (l) .............. 47,290 $ 872,501
FormFactor, Inc. (a)(l) .................. 6,470 241,008
Hutchinson Technology, Inc. (a)(l) ....... 11,560 272,469
Intel Corp. .............................. 58,240 1,179,360
Intersil Corp., "A" ...................... 8,900 212,888
Marvell Technology Group Ltd. (a) ........ 37,630 722,120
NetLogic Microsystems, Inc. (a)(l) ....... 8,100 175,689
Nintendo Co. Ltd. ........................ 2,350 609,979
Samsung Electronics Co. Ltd., GDR ........ 1,001 329,329
SanDisk Corp. (a)(l) ..................... 17,070 734,522
Synopsys, Inc. (a) ....................... 9,470 253,133
-------------
$ 5,602,998
-------------
INTERNET -- 8.6%
Baidu.com, Inc., ADR (a) ................. 2,700 $ 304,344
CNET Networks, Inc. (a)(l) ............... 23,500 213,615
Google, Inc., "A" (a) .................... 1,575 725,256
NHN Corp. ................................ 3,649 447,689
Tencent Holdings, Ltd. ................... 57,000 202,989
-------------
$ 1,893,893
-------------
LEISURE & TOYS -- 3.4%
Activision, Inc. (a)(l) .................. 17,940 $ 309,286
Capcom Co. Ltd. .......................... 12,600 227,032
UbiSoft Entertainment S.A. (a) ........... 5,989 202,105
-------------
$ 738,423
-------------
NETWORK & TELECOM -- 12.0%
Cisco Systems, Inc. (a) .................. 52,590 $ 1,437,285
Juniper Networks, Inc. (a) ............... 18,230 345,276
NICE Systems Ltd., ADR (a) ............... 5,160 158,825
Nortel Networks Corp. (a)(l) ............. 17,657 471,972
Research In Motion Ltd. (a) .............. 1,200 153,336
Sonus Networks, Inc. (a) ................. 11,600 76,444
-------------
$ 2,643,138
-------------
PERSONAL COMPUTERS & PERIPHERALS -- 8.7%
EMC Corp. (a) ............................ 40,910 $ 540,012
Ingram Micro, Inc., "A" (a) .............. 17,420 355,542
Network Appliance, Inc. (a) .............. 4,170 163,798
Seagate Technology LLC ................... 13,170 349,005
Western Digital Corp. (a) ................ 24,760 506,590
-------------
$ 1,914,947
-------------
SPECIALTY STORES -- 0.2%
Insight Enterprises, Inc. (a) ............ 2,900 $ 54,723
-------------
TELEPHONE SERVICES -- 5.7%
AT&T, Inc. ............................... 5,300 $ 189,475
Global Crossing Ltd. (a)(l) .............. 16,150 396,483
Level 3 Communications, Inc. (a)(l) ...... 41,000 229,600
Qwest Communications International,
Inc. (a)(l) ............................ 29,100 243,567
Windstream Corp. ......................... 12,860 182,869
-------------
$ 1,241,994
-------------
Total Common Stocks
(Identified Cost, $20,964,089) ........................ $ 21,793,014
-------------
COLLATERAL FOR SECURITIES LOANED -- 23.7%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value . 5,190,948 $ 5,190,948
-------------
Total Investments
(Identified Cost, $26,155,037) ........................ $ 26,983,962
-------------
OTHER ASSETS,
LESS LIABILITIES -- (22.9)% ............................... (5,022,668)
-------------
Net Assets -- 100.0% .................................... $ 21,961,294
=============
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2006
VALUE SERIES
COMMON STOCKS -- 99.5%
ISSUER SHARES/PAR VALUE ($)
AEROSPACE -- 7.3%
Lockheed Martin Corp. .................... 194,730 $ 17,928,791
Northrop Grumman Corp. ................... 138,130 9,351,401
United Technologies Corp. ................ 108,630 6,791,548
-------------
$ 34,071,740
-------------
ALCOHOLIC BEVERAGES -- 1.1%
Diageo PLC ............................... 253,519 $ 4,977,835
-------------
APPAREL MANUFACTURERS -- 1.4%
Hanesbrands, Inc. (a) .................... 14,897 $ 351,867
NIKE, Inc., "B" .......................... 62,410 6,180,462
-------------
$ 6,532,329
-------------
AUTOMOTIVE -- 0.4%
Johnson Controls, Inc. ................... 24,580 $ 2,111,914
-------------
BROADCASTING -- 1.6%
Viacom, Inc., "B" (a) .................... 91,874 $ 3,769,590
Walt Disney Co. .......................... 54,400 1,864,288
WPP Group PLC ............................ 147,550 1,995,485
-------------
$ 7,629,363
-------------
BROKERAGE & ASSET MANAGERS -- 5.8%
Franklin Resources, Inc. ................. 26,040 $ 2,868,827
Goldman Sachs Group, Inc. ................ 65,050 12,967,718
Lehman Brothers Holdings, Inc. ........... 46,070 3,598,988
Mellon Financial Corp. ................... 104,120 4,388,658
Merrill Lynch & Co., Inc. ................ 34,310 3,194,261
-------------
$ 27,018,452
-------------
BUSINESS SERVICES -- 1.2%
Accenture Ltd., "A" ...................... 146,300 $ 5,402,859
-------------
CHEMICALS -- 3.5%
Dow Chemical Co. ......................... 81,000 $ 3,235,140
Nalco Holding Co. (a) .................... 52,880 1,081,925
PPG Industries, Inc. ..................... 92,610 5,946,488
Syngenta AG .............................. 31,180 5,799,086
-------------
$ 16,062,639
-------------
COMPUTER SOFTWARE -- 0.9%
Oracle Corp. (a) ......................... 234,490 $ 4,019,159
-------------
COMPUTER SOFTWARE - SYSTEMS -- 0.4%
Hewlett-Packard Co. ...................... 43,320 $ 1,784,351
-------------
CONSTRUCTION -- 2.7%
Masco Corp. (l) .......................... 297,460 $ 8,885,130
Sherwin-Williams Co. ..................... 37,160 2,362,633
Toll Brothers, Inc. (a) .................. 36,560 1,178,329
-------------
$ 12,426,092
-------------
CONTAINERS -- 0.2%
Smurfit-Stone Container Corp. (a) ........ 76,680 $ 809,741
-------------
ELECTRICAL EQUIPMENT -- 1.3%
Cooper Industries Ltd., "A" .............. 10,030 $ 907,013
Rockwell Automation, Inc. ................ 35,940 2,195,215
W.W. Grainger, Inc. ...................... 41,330 2,890,620
-------------
$ 5,992,848
-------------
ELECTRONICS -- 1.0%
Analog Devices, Inc. ..................... 21,140 $ 694,872
Intel Corp. .............................. 193,420 3,916,755
-------------
$ 4,611,627
-------------
ENERGY - INDEPENDENT -- 2.2%
Apache Corp. ............................. 48,910 $ 3,253,004
Devon Energy Corp. ....................... 64,840 4,349,467
EOG Resources, Inc. ...................... 43,440 2,712,828
-------------
$ 10,315,299
-------------
ENERGY - INTEGRATED -- 9.2%
Chevron Corp. ............................ 47,655 $ 3,504,072
ConocoPhillips ........................... 125,110 9,001,665
Exxon Mobil Corp. ........................ 153,612 11,771,288
Hess Corp. ............................... 104,530 5,181,552
Royal Dutch Shell PLC, ADR ............... 32,640 2,310,586
TOTAL S.A., ADR .......................... 151,360 10,885,811
-------------
$ 42,654,974
-------------
FOOD & BEVERAGES -- 2.8%
Kellogg Co. .............................. 104,860 $ 5,249,292
Nestle S.A ............................... 11,825 4,200,693
PepsiCo, Inc. ............................ 44,528 2,785,226
Tyson Foods, Inc., "A" ................... 58,900 968,905
-------------
$ 13,204,116
-------------
FOOD & DRUG STORES -- 0.5%
CVS Corp. ................................ 76,550 $ 2,366,161
-------------
FOREST & PAPER PRODUCTS -- 0.6%
Bowater, Inc. (l) ........................ 30,560 $ 687,600
International Paper Co. .................. 63,950 2,180,695
-------------
$ 2,868,295
-------------
GENERAL MERCHANDISE -- 1.1%
Federated Department Stores, Inc. ........ 134,110 $ 5,113,614
-------------
HEALTH MAINTENANCE ORGANIZATIONS -- 1.2%
UnitedHealth Group, Inc. ................. 24,800 $ 1,332,504
WellPoint, Inc. (a) ...................... 53,250 4,190,243
-------------
$ 5,522,747
-------------
INSURANCE -- 9.2%
Aflac, Inc. .............................. 36,780 $ 1,691,880
Allstate Corp. ........................... 240,740 15,674,581
Chubb Corp. .............................. 55,830 2,953,965
Genworth Financial, Inc., "A" ............ 140,510 4,806,847
Hartford Financial Services Group, Inc. .. 48,250 4,502,208
MetLife, Inc. ............................ 225,830 13,326,228
-------------
$ 42,955,709
-------------
LEISURE & TOYS -- 0.3%
Hasbro, Inc. ............................. 51,720 $ 1,409,370
-------------
MACHINERY & TOOLS -- 2.6%
Deere & Co. .............................. 110,780 $ 10,531,855
Finning International, Inc. .............. 14,220 583,375
Illinois Tool Works, Inc. ................ 19,060 880,381
-------------
$ 11,995,611
-------------
MAJOR BANKS -- 9.1%
Bank of America Corp. .................... 361,724 $ 19,312,444
Bank of New York Co., Inc. ............... 171,260 6,742,506
PNC Financial Services Group, Inc. ....... 86,020 6,368,921
SunTrust Banks, Inc. ..................... 117,440 9,917,808
-------------
$ 42,341,679
-------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.3%
Caremark Rx, Inc. ........................ 24,990 $ 1,427,179
-------------
NETWORK & TELECOM -- 0.4%
Cisco Systems, Inc. (a) .................. 67,580 $ 1,846,961
-------------
OIL SERVICES -- 0.4%
Noble Corp. .............................. 22,170 $ 1,688,246
-------------
OTHER BANKS & DIVERSIFIED FINANCIALS -- 8.0%
American Express Co. ..................... 75,560 $ 4,584,225
Citigroup, Inc. .......................... 285,500 15,902,350
Fannie Mae ............................... 144,060 8,555,723
Freddie Mac .............................. 33,300 2,261,070
UBS AG ................................... 100,070 6,079,402
-------------
$ 37,382,770
-------------
PHARMACEUTICALS -- 6.9%
Abbott Laboratories ...................... 52,900 $ 2,576,759
Eli Lilly & Co. .......................... 76,300 3,975,230
Johnson & Johnson ........................ 198,760 13,122,135
Merck & Co., Inc. ........................ 114,190 4,978,684
Wyeth .................................... 145,880 7,428,210
-------------
$ 32,081,018
-------------
PRINTING & PUBLISHING -- 0.2%
New York Times Co., "A" (l) .............. 47,240 $ 1,150,766
-------------
RAILROAD & SHIPPING -- 1.9%
Burlington Northern Santa Fe Corp. ....... 73,230 $ 5,405,106
Norfolk Southern Corp. ................... 65,660 3,302,041
-------------
$ 8,707,147
-------------
SPECIALTY CHEMICALS -- 1.4%
Air Products & Chemicals, Inc. ........... 50,167 $ 3,525,737
Praxair, Inc. ............................ 47,350 2,809,276
-------------
$ 6,335,013
-------------
TELECOMMUNICATIONS - WIRELESS -- 1.0%
Vodafone Group PLC ....................... 1,679,287 $ 4,654,006
-------------
TELEPHONE SERVICES -- 2.5%
Embarq Corp. ............................. 44,524 $ 2,340,181
Sprint Nextel Corp. ...................... 338,680 6,397,665
TELUS Corp. (non-voting shares) .......... 16,300 728,036
Verizon Communications, Inc. ............. 57,090 2,126,032
-------------
$ 11,591,914
-------------
TOBACCO -- 4.0%
Altria Group, Inc. ....................... 214,670 $ 18,422,979
-------------
TRUCKING -- 0.1%
Con-way, Inc. ............................ 6,890 $ 303,436
-------------
UTILITIES - ELECTRIC POWER -- 4.8%
Dominion Resources, Inc. ................. 102,830 $ 8,621,267
Entergy Corp. ............................ 33,120 3,057,638
FPL Group, Inc. .......................... 95,600 5,202,552
PPL Corp. ................................ 32,440 1,162,650
Public Service Enterprise Group, Inc. .... 15,380 1,020,924
TXU Corp. ................................ 57,980 3,143,096
-------------
$ 22,208,127
-------------
Total Common Stocks
(Identified Cost, $336,688,784) ....................... $ 461,998,086
-------------
SHORT-TERM OBLIGATIONS -- 0.1%
General Electric Capital Corp.,
5.29%, due 1/02/07, at Amortized Cost and
Value (y) .............................. $ 214,000 $ 213,969
-------------
COLLATERAL FOR SECURITIES LOANED -- 0.8%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value .. 3,861,012 $ 3,861,012
-------------
Total Investments
(Identified Cost, $340,763,765) ....................... $ 466,073,067
-------------
OTHER ASSETS,
LESS LIABILITIES -- (0.4)% ................................ (1,645,043)
-------------
Net Assets -- 100.0% .................................... $ 464,428,024
=============
PORTFOLIO FOOTNOTES:
(a) Non-income producing security.
(k) As of December 31, 2006, the Research International Series had one security
that was fair valued, aggregating $364,350 and 0.11% 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 $207,969,
representing 0.83% of net assets for the Mid Cap Value Series.
(t) Security exempt from registration with the U.S. Securities and Exchange
Commission under Section 4(2) of the Securities Act of 1933.
(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 Research International Series holds the following
restricted security:
CURRENT
ACQUISITION ACQUISITION MARKET TOTAL % OF
RESTRICTED SECURITY DATE COST VALUE NET ASSETS
- -------------------------------------------------------------------------------
TMK OAO, GDR ........... 10/31/06 $224,856 $364,350 0.1%
The following abbreviations are used in this report and are defined:
ADR American Depository Receipt
GDR Global Depository Receipt
IEU International Equity Unit
IPS International Preference Stock
REIT Real Estate Investment Trust
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2006
These statements represent each series' balance sheet, which details the assets and liabilities comprising the total value
of each series.
INTER- MASSACHUSETTS
CAPITAL CORE NATIONAL INVESTORS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH GROWTH VALUE DISCOVERY
SERIES SERIES SERIES STOCK SERIES SERIES SERIES
------------- ------------- ------------- ------------- ------------- -------------
Assets:
Investments --
Unaffiliated issuers,
at identified cost ........... $ 191,658,136 $ 95,448,375 $ 151,982,948 $ 403,157,360 $ 21,874,740 $ 377,706,744
Unrealized appreciation
(depreciation) ............... 11,901,424 8,698,360 35,973,189 27,305,551 3,036,806 24,195,457
------------- ------------- ------------- ------------- ------------- -------------
Total investments, at value
(including securities
loaned of $15,680,755,
$11,216,016, $23,682,327,
$6,553,922, $--, and
$56,968,225, respectively) . $ 203,559,560 $ 104,146,735 $ 187,956,137 $ 430,462,911 $ 24,911,546 $ 401,902,201
Cash ............................. 143 882 689 -- 465 20,708
Foreign currency, at value
(identified cost, $--, $--<
$2,025, $--, $-- and
$--, respectively) ............. -- -- 2,938 -- -- --
Receivable for investments sold .. 75,945 225,872 -- 1,145,426 347,754 1,780,146
Receivable for series shares
sold ............................ 9,369 78 27,363 9,270 -- 121,480
Interest and dividends
receivable ..................... 116,712 93,864 193,498 426,279 50,049 30,507
Receivable from investment
adviser ........................ -- 6,596 -- -- 5,230 36,376
Other assets ..................... 7,654 4,187 7,187 16,129 1,600 14,177
------------- ------------- ------------- ------------- ------------- -------------
Total assets ................. $ 203,769,383 $ 104,478,214 $ 188,187,812 $ 432,060,015 $ 25,316,644 $ 403,905,595
============= ============= ============= ============= ============= =============
Liabilities:
Payable to custodian ............. $ -- $ -- $ $ 651 $ -- $ --
Payable for investments
purchased ....................... 494,255 186,625 6,128 -- 278,548 1,666
Payable for series shares
reacquired ...................... 286,157 35,233 2,948 152,142 373 79,589
Collateral for securities
loaned, at value ................ 16,065,163 11,483,180 24,790,693 6,712,466 -- 58,385,188
Payable to affiliates --
Management fee ................. 15,549 7,630 16,052 35,163 2,068 34,297
Distribution fees .............. 453 349 634 2,439 688 5,001
Administrative services fee .... 591 290 508 1,317 110 1,076
Payable for independent
trustees' compensation .......... 454 286 331 882 116 591
Accrued expenses and
other liabilities ............... 75,512 66,493 149,363 75,519 48,902 105,288
------------- ------------- ------------- ------------- ------------- -------------
Total liabilities ............ $ 16,938,134 $ 11,780,086 $ 24,966,657 $ 6,980,579 $ 330,805 $ 58,612,696
------------- ------------- ------------- ------------- ------------- -------------
Net assets ......................... $ 186,831,249 $ 92,698,128 $ 163,221,155 $ 425,079,436 $ 24,985,839 $ 345,292,899
============= ============= ============= ============= ============= =============
Net assets consist of:
Paid-in capital .................. $ 447,724,336 $ 73,012,828 $ 100,492,457 $ 788,173,916 $ 20,887,806 $ 312,312,458
Unrealized appreciation
(depreciation) on investments
and translation of assets
and liabilities in foreign
currencies (net of deferred
country tax of $--, $--,
$36,486, $--, $--, and $--,
respectively) .................. 11,901,382 8,698,279 35,938,666 27,305,782 3,036,806 24,195,457
Accumulated net realized
gain (loss) on investments
and foreign currency
transactions ................... (273,452,563) 10,568,815 24,861,739 (391,705,266) 941,238 8,784,984
Undistributed net investment
income ......................... 658,094 418,206 1,928,293 1,305,004 119,989 --
------------- ------------- ------------- ------------- ------------- -------------
Total ........................ $ 186,831,249 $ 92,698,128 $ 163,221,155 $ 425,079,436 $ 24,985,839 $ 345,292,899
============= ============= ============= ============= ============= =============
Net Assets:
Initial Class .................... $ 170,397,997 $ 80,023,561 $ 140,241,891 $ 336,383,281 $ 34,486 $ 163,824,765
Service Class .................... 16,433,252 12,674,567 22,979,264 88,696,155 24,951,353 181,468,134
------------- ------------- ------------- ------------- ------------- -------------
Total ........................ $ 186,831,249 $ 92,698,128 $ 163,221,155 $ 425,079,436 $ 24,985,839 $ 345,292,899
============= ============= ============= ============= ============= =============
Shares of beneficial
interest outstanding:
Initial Class .................... 11,190,861 4,671,443 7,821,706 31,973,315 2,988 10,085,826
Service Class .................... 1,083,687 743,532 1,287,661 8,503,834 2,182,839 11,324,871
------------- ------------- ------------- ------------- ------------- -------------
Total ........................ 12,274,548 5,414,975 9,109,367 40,477,149 2,185,827 21,410,697
============= ============= ============= ============= ============= =============
Net asset value per share
(net assets / shares of
beneficial interest
outstanding):
Initial Class .................... $ 15.23 $ 17.13 $ 17.93 $ 10.52 $ 11.54 $ 16.24
============= ============= ============= ============= ============= =============
Service Class .................... $ 15.16 $ 17.05 $ 17.85 $ 10.43 $ 11.43 $ 16.02
============= ============= ============= ============= ============= =============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2006 -- continued
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES SERIES SERIES
------------- ------------- ------------- ------------- -------------
Assets:
Investments --
Unaffiliated issuers,
at identified cost $ 270,008,492 $ 67,614,074 $ 8,157,387 $ 26,155,037 $ 340,763,765
Unrealized appreciation
(depreciation) ............... 47,448,048 5,025,374 983,768 828,925 125,309,302
------------- ------------- ------------- ------------- -------------
Total investments, at value
(including securities
loaned of $39,918,488,
$1,965,051, $--,
$5,049,843, and
$3,774,659, respectively) .. $ 317,456,540 $ 72,639,448 $ 9,141,155 $ 26,983,962 $ 466,073,067
Cash ............................. 138 665 340 -- --
Foreign currency, at value
(identified cost, $1,541,522,
$--, $--, $274,465, and
$--, respectively) ............. 1,536,779 -- -- 267,508 --
Receivable for investments sold .. 2,772,402 -- -- 247,323 2,596,598
Receivable for series shares sold 224,447 -- -- -- 87,104
Interest and dividends receivable 343,211 51,244 8,588 5,829 729,824
Receivable from investment adviser -- -- 14,610 19,794 --
Other assets ..................... 9,108 3,310 691 1,294 17,560
------------- ------------- ------------- ------------- -------------
Total assets ................. $ 322,342,625 $ 72,694,667 $ 9,165,384 $ 27,525,710 $ 469,504,153
============= ============= ============= ============= =============
Liabilities:
Payable to custodian ............. $ -- $ -- $ -- $ 117,978 $ 26,297
Payable for investments
purchased ....................... 3,820,568 182,063 2,319 196,369 525,118
Payable for series shares
reacquired ...................... 871,419 5,050 6,600 3,753 478,363
Collateral for securities
loaned, at value ................ 41,916,962 2,014,182 -- 5,190,948 3,861,012
Payable to affiliates --
Management fee ................. 27,177 5,812 755 1,812 38,409
Distribution fees .............. 4,246 1,101 251 87 3,896
Administrative services fee .... 858 221 110 110 1,436
Payable for independent
trustees' compensation ......... 400 332 128 124 825
Accrued expenses and other
liabilities ..................... 198,562 55,260 55,131 53,235 140,773
------------- ------------- ------------- ------------- -------------
Total liabilities ............ $ 46,840,192 $ 2,264,021 $ 65,294 $ 5,564,416 $ 5,076,129
------------- ------------- ------------- ------------- -------------
Net assets ......................... $ 275,502,433 $ 70,430,646 $ 9,100,090 $ 21,961,294 $ 464,428,024
============= ============= ============= ============= =============
Net assets consist of:
Paid-in capital .................. $ 193,150,920 $ 108,061,092 $ 7,516,250 $ 52,503,669 $ 306,992,004
Unrealized appreciation
(depreciation) on investments
and translation of assets and
liabilities in foreign
currencies (net of deferred
country tax of $8,760, $--,
$--, $--, and $--,
respectively) .................. 47,439,837 5,025,594 983,768 821,963 125,311,073
Accumulated net realized gain
(loss) on investments
and foreign currency
transactions ................... 32,550,162 (42,656,040) 470,755 (31,364,338) 25,214,493
Undistributed net investment
income ......................... 2,361,514 -- 129,317 -- 6,910,454
------------- ------------- ------------- ------------- -------------
Total ........................ $ 275,502,433 $ 70,430,646 $ 9,100,090 $ 21,961,294 $ 464,428,024
============= ============= ============= ============= =============
Net Assets:
Initial Class .................... $ 119,533,834 $ 30,385,000 $ 10,151 $ 18,813,007 $ 323,093,702
Service Class .................... 155,968,599 40,045,646 9,089,939 3,148,287 141,334,322
------------- ------------- ------------- ------------- -------------
Total ........................ $ 275,502,433 $ 70,430,646 $ 9,100,090 $ 21,961,294 $ 464,428,024
============= ============= ============= ============= =============
Shares of beneficial interest
outstanding:
Initial Class .................... 5,993,760 3,677,536 952 3,459,873 17,277,184
Service Class .................... 7,891,049 4,898,085 857,286 588,406 7,602,926
------------- ------------- ------------- ------------- -------------
Total ........................ 13,884,809 8,575,621 858,238 4,048,279 24,880,110
============= ============= ============= ============= =============
Net asset value per share
(net assets / shares of beneficial
interest outstanding):
Initial Class .................... $ 19.94 $ 8.26 $ 10.66 $ 5.44 $ 18.70
============= ============= ============= ============= =============
Service Class .................... $ 19.77 $ 8.18 $ 10.60 $ 5.35 $ 18.59
============= ============= ============= ============= =============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2006
These statements describe how much each series earned in investment income and accrued in expenses. It also describes any gains
and/or losses generated by series' operations.
INTER- MASSACHUSETTS
CAPITAL CORE NATIONAL INVESTORS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH GROWTH VALUE DISCOVERY
SERIES SERIES SERIES STOCK SERIES SERIES SERIES
------------- ------------- ------------- ------------- ------------- -------------
Net investment income (loss):
Income --
Dividends .................... $ 2,147,566 $ 1,244,709 $ 3,847,843 $ 4,062,228 $ 442,397 $ 828,542
Interest ..................... 236,881 36,590 102,353 1,179,470 11,310 150,714
Income on securities loaned .. 20,011 20,092 107,071 24,420 -- 267,869
Foreign taxes withheld ....... (22,030) (4,676) (243,184) (54,741) -- (6,113)
------------- ------------- ------------- ------------- ------------- -----------
Total investment income .... $ 2,382,428 $ 1,296,715 $ 3,814,083 $ 5,211,377 $ 453,707 $ 1,241,012
------------- ------------- ------------- ------------- ------------- -----------
Expenses --
Management fee ............... $ 1,465,449 $ 678,533 $ 1,360,843 $ 3,368,972 $ 189,153 $ 2,941,186
Distribution fees ............ 38,284 29,613 53,310 222,185 62,971 389,784
Administrative services fee .. 48,024 22,199 37,501 109,340 7,806 80,703
Independent trustees'
compensation ............... 19,483 8,672 13,082 44,092 2,716 28,583
Custodian fee ................ 58,333 53,463 197,804 78,874 21,298 108,416
Shareholder communications ... 20,220 7,229 17,130 16,694 571 56,094
Auditing fees ................ 36,013 36,018 40,955 36,288 38,548 36,018
Legal fees ................... 5,181 5,191 5,191 3,745 5,191 5,191
Miscellaneous ................ 23,977 15,460 27,590 33,395 9,676 29,758
------------- ------------- ------------- ------------- ------------- -----------
Total expenses ............. $ 1,714,964 $ 856,378 $ 1,753,406 $ 3,913,585 $ 337,930 $ 3,675,733
Fees paid indirectly ......... (3,444) (1,509) (2,679) (9,688) -- (10,464)
Reduction of expenses by
investment adviser .......... -- (6,596) -- -- (22,631) (88,069)
------------- ------------- ------------- ------------- ------------- -----------
Net expenses ............... $ 1,711,520 $ 848,273 $ 1,750,727 $ 3,903,897 $ 315,299 $ 3,577,200
------------- ------------- ------------- ------------- ------------- -----------
Net investment income (loss) ..... $ 670,908 $ 448,442 $ 2,063,356 $ 1,307,480 $ 138,408 $(2,336,188)
============= ============= ============= ============= ============= ===========
Realized and unrealized gain
(loss) on investments
and foreign currency
transactions:
Realized gain (loss)
(identified cost basis) --
Investment transactions ...... $ 24,237,176 $ 13,314,041 $ 25,005,539 $ 17,621,334 $ 976,740 $49,358,319
Foreign currency transactions (11,657) (3,868) (129,802) (1,347) (9) 8,107
------------- ------------- ------------- ------------- ------------- -----------
Net realized gain (loss)
on investments and foreign
currency transactions .... $ 24,225,519 $ 13,310,173 $ 24,875,737 $ 17,619,987 $ 976,731 $49,366,426
------------- ------------- ------------- ------------- ------------- -----------
Change in unrealized
appreciation (depreciation) --
Investments (net of $--,
$--, $4,145, $--, $--, and
$-- increase in deferred
country tax, respectively) ... $ 676,727 $ (2,381,185) $ 8,335,882 $ 12,893,009 $ 1,525,845 $(5,555,714)
Translation of assets and
liabilities in foreign
currencies ................. (42) (82) 58,006 (2,274) 9 (3)
------------- ------------- ------------- ------------- ------------- -----------
Net unrealized gain (loss)
on investments and
foreign currency
translation .............. $ 676,685 $ (2,381,267) $ 8,393,888 $ 12,890,735 $ 1,525,854 $(5,555,717)
------------- ------------- ------------- ------------- ------------- -----------
Net realized and unrealized
gain (loss) on
investments and
foreign currency ......... $ 24,902,204 $ 10,928,906 $ 33,269,625 $ 30,510,722 $ 2,502,585 $43,810,709
------------- ------------- ------------- ------------- ------------- -----------
Change in net assets from
operations ..................... $ 25,573,112 $ 11,377,348 $ 35,332,981 $ 31,818,202 $ 2,640,993 $41,474,521
============= ============= ============= ============= ============= ===========
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2006 -- continued
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES SERIES SERIES
------------- ------------- ------------- ------------- -------------
Net investment income (loss)
Income --
Dividends ...................... $ 5,541,667 $ 463,115 $ 242,023 $ 62,851 $ 10,926,458
Interest ....................... 136,092 90,281 7,083 16,735 177,551
Income on securities loaned .... 160,028 8,703 -- 12,471 24,749
Foreign taxes withheld ......... (488,733) (15,358) -- (1,692) (81,916)
------------- ------------- ------------- ------------- -------------
Total investment income ...... $ 5,349,054 $ 546,741 $ 249,106 $ 90,365 $ 11,046,842
------------- ------------- ------------- ------------- -------------
Expenses --
Management fee ................. $ 2,078,035 $ 545,947 $ 71,625 $ 162,204 $ 3,352,161
Distribution fees .............. 298,564 99,931 23,852 8,118 328,617
Administrative services fee .... 58,011 17,730 6,634 7,606 109,784
Independent trustees'
compensation ................. 17,775 7,493 1,472 2,393 41,036
Custodian fee .................. 349,192 32,969 15,984 39,900 112,505
Shareholder communications ..... 26,491 2,899 11,998 13,787 138,589
Auditing fees .................. 39,083 36,018 38,548 36,018 36,018
Legal fees ..................... 5,191 5,191 5,191 17,511 5,399
Miscellaneous .................. 39,711 14,813 10,376 9,814 31,715
------------- ------------- ------------- ------------- -------------
Total expenses ............... $ 2,912,053 $ 762,991 $ 185,680 $ 297,351 $ 4,155,824
Fees paid indirectly ........... (2,035) (3,211) (69) (6,568) (9,052)
Reduction of expenses by
investment adviser ........... -- -- (66,933) (72,899) --
------------- ------------- ------------- ------------- -------------
Net expenses ................. $ 2,910,018 $ 759,780 $ 118,678 $ 217,884 $ 4,146,772
------------- ------------- ------------- ------------- -------------
Net investment income (loss) ....... $ 2,439,036 $ (213,039) $ 130,428 $ (127,519) $ 6,900,070
============= ============= ============= ============= =============
Realized and unrealized gain (loss)
on investments and foreign
currency transactions:
Realized gain (loss)
(identified cost basis) --
Investment transactions
(net of country tax of
$4,698, $--, $--, $--, and
$--, respectively) ............ $ 33,942,576 $ 4,101,605 $ 773,612 $ 5,584,962 $ 25,836,973
Foreign currency transactions .. (53,075) (1,011) -- (3,658) 12,477
------------- ------------- ------------- ------------- -------------
Net realized gain (loss)
on investments and foreign
currency transactions ....... $ 33,889,501 $ 4,100,594 $ 773,612 $ 5,581,304 $ 25,849,450
------------- ------------- ------------- ------------- -------------
Change in unrealized appreciation
(depreciation) --
Investments (net of $1,498,
$--, $--, $--, and $--
decrease in deferred
country tax) ................. $ 18,897,397 $ 664,295 $ 312,085 $ (1,236,551) $ 52,346,725
Translation of assets and
liabilities in foreign
currencies ................... (1,322) 220 -- (7,325) 2,046
------------- ------------- ------------- ------------- -------------
Net unrealized gain (loss)
on investments and foreign
currency transactions ....... $ 18,896,075 $ 664,515 $ 312,085 $ (1,243,876) $ 52,348,771
------------- ------------- ------------- ------------- -------------
Net realized and unrealized
gain (loss) on investments
and foreign currency ....... $ 52,785,576 $ 4,765,109 $ 1,085,697 $ 4,337,428 $ 78,198,221
------------- ------------- ------------- ------------- -------------
Change in net assets from
operations ....................... $ 55,224,612 $ 4,552,070 $ 1,216,125 $ 4,209,909 $ 85,098,291
============= ============= ============= ============= =============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2006
These statements describe the increases and/or decreases in net assets resulting from operations, any distributions,
and any shareholder transactions.
INTER- MASSACHUSETTS
CAPITAL CORE NATIONAL INVESTORS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH GROWTH VALUE DISCOVERY
SERIES SERIES SERIES STOCK SERIES SERIES SERIES
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets:
From operations --
Net investment income (loss) ... $ 670,908 $ 448,442 $ 2,063,356 $ 1,307,480 $ 138,408 $ (2,336,188)
Net realized gain (loss)
on investments and foreign
currency transactions ........ 24,225,519 13,310,173 24,875,737 17,619,987 976,731 49,366,426
Net unrealized gain (loss)
on investments and foreign
currency translation ......... 676,685 (2,381,267) 8,393,888 12,890,735 1,525,854 (5,555,717)
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets
from operations ............ $ 25,573,112 $ 11,377,348 $ 35,332,981 $ 31,818,202 $ 2,640,993 $ 41,474,521
------------- ------------- ------------- ------------- ------------- -------------
Distributions declared to
shareholders --
From net investment income
Initial Class .................. $ (940,362) $ (475,009) $ (860,676) $ (344,988) $ -- $ --
Service Class .................. (38,321) (48,229) (96,429) -- -- --
From net realized gain on
investments and foreign
currency transactions
Initial Class .................. -- -- (9,955,492) -- (3,796) --
Service Class .................. -- -- (1,637,251) -- (3,082,304) --
------------- ------------- ------------- ------------- ------------- -------------
Total distributions declared
to shareholders ................. $ (978,683) $ (523,238) $ (12,549,848) $ (344,988) $ (3,086,100) $ --
------------- ------------- ------------- ------------- ------------- -------------
Change in net assets from
series share transactions ....... $ (49,572,912) $ (8,856,099) $ 1,986 $ (91,490,009) $ (592,803) $ (4,319,464)
------------- ------------- ------------- ------------- ------------- -------------
Total change in net assets ..... $ (24,978,483) $ 1,998,011 $ 22,785,119 $ (60,016,795) $ (1,037,910) $ 37,155,057
Net assets --
At beginning of period ........... 211,809,732 90,700,117 140,436,036 485,096,231 26,023,749 308,137,842
------------- ------------- ------------- ------------- ------------- -------------
At end of period ................. $ 186,831,249 $ 92,698,128 $ 163,221,155 $ 425,079,436 $ 24,985,839 $ 345,292,899
============= ============= ============= ============= ============= =============
Undistributed net investment
income included in net
assets at end of period ......... $ 658,094 $ 418,206 $ 1,928,293 $ 1,305,004 $ 119,989 $ --
============= ============= ============= ============= ============= =============
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES SERIES SERIES
------------- ------------- ------------- ------------- -------------
Change in net assets:
From operations --
Net investment income (loss) ... $ 2,439,036 $ (213,039) $ 130,428 $ (127,519) $6,00,070
Net realized gain (loss)
on investments and
foreign currency
transactions ................. 33,889,501 4,100,594 773,612 5,581,304 25,849,450
Net unrealized gain (loss)
on investments and
foreign currency
translation .................. 18,896,075 664,515 312,085 (1,243,876) 52,348,771
------------- ------------- ------------- ------------- -------------
Change in net assets
from operations ............. $ 55,224,612 $ 4,552,070 $ 1,216,125 $ 4,209,909 $ 85,098,291
------------- ------------- ------------- ------------- -------------
Distributions declared to
shareholders --
From net investment income
Initial Class .................. $ (1,271,028) $ -- $ (73) $ -- $ (4,852,928)
Service Class .................. (1,111,844) -- (52,423) -- (1,683,628)
From net realized gain on
investments and foreign
currency transactions
Initial Class .................. (6,698,659) -- (743) -- (11,895,426)
Service Class .................. (6,785,735) -- (808,934) -- (4,878,814)
------------- ------------- ------------- ------------- -------------
Total distributions declared to
shareholders ..................... $ (15,867,266) $ -- $ (862,173) $ -- $ (23,310,796)
------------- ------------- ------------- ------------- -------------
Change in net assets from series
share transactions ............... $ 50,317,686 $ (11,689,087) $ (1,914,183) $ (4,601,314) $ (44,120,463)
------------- ------------- ------------- ------------- -------------
Total change in net assets ..... $ 89,675,032 $ (7,137,017) $ (1,560,231) $ (391,405) $ 17,667,032
Net assets --
At beginning of period ........... 185,827,401 77,567,663 10,660,321 22,352,699 446,760,992
------------- ------------- ------------- ------------- -------------
At end of period ................. $ 275,502,433 $ 70,430,646 $ 9,100,090 $ 21,961,294 $ 464,428,024
============= ============= ============= ============= =============
Undistributed net investment
income included in net assets
at end of period ................. $ 2,361,514 $ -- $ 129,317 $ -- $ 6,910,454
============= ============= ============= ============= =============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2005
INTER- MASSACHUSETTS
CAPITAL CORE NATIONAL INVESTORS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH GROWTH VALUE DISCOVERY
SERIES SERIES SERIES STOCK SERIES SERIES SERIES
------------- ----------- ------------ ------------- ------------- -------------
Change in net assets:
From operations --
Net investment income (loss) ... $ 979,446 $ 551,056 $ 1,093,208 $ 390,021 $ 13,693 $ (1,936,103)
Net realized gain (loss)
on investments and foreign
currency transactions ........ 23,158,737 8,781,316 20,385,576 43,309,566 3,053,564 31,375,026
Net unrealized gain (loss)
on investments and foreign
currency translation ......... (21,764,776) (3,678,573) (2,775,014) (24,205,445) (1,269,962) (14,541,791)
------------ ----------- ------------ ------------- ------------- -------------
Change in net assets from
operations .................. $ 2,373,407 $ 5,653,799 $ 18,703,770 $ 19,494,142 $ 1,797,295 $ 14,897,132
------------ ----------- ------------ ------------- ------------- -------------
Distributions declared to
shareholders --
From net investment income
Initial Class .................. $ (2,050,777) $ (555,472) $ (1,088,407) $ (2,166,960) $ -- $ --
Service Class .................. (106,607) (42,210) (126,541) (241,775) -- --
From net realized gain on
investments and foreign
currency transactions
Initial Class .................. -- -- -- -- (3,404) --
Service Class .................. -- -- -- -- (2,858,933) --
------------ ----------- ------------ ------------- ------------- -------------
Total distributions declared to
shareholders .................... $ (2,157,384) $ (597,682) $ (1,214,948) $ (2,408,735) $ (2,862,337) $--
------------ ----------- ------------ ------------- ------------- -------------
Change in net assets from series
share transactions .............. $(54,253,530) $(7,490,675) $(16,247,611) $ (87,413,420) $ 2,581,108 ($ 20,517,837)
------------ ----------- ------------ ------------- ------------- -------------
Total change in net assets ..... $(54,037,507) $(2,434,558) $ 1,241,211 $ (70,328,013) $ 1,516,066 $ (5,620,705)
Net assets --
At beginning of period ........... 265,847,239 93,134,675 139,194,825 555,424,244 24,507,683 313,758,547
------------ ----------- ------------ ------------- ------------- -------------
At end of period ................. $211,809,732 $90,700,117 $140,436,036 $ 485,096,231 $ 26,023,749 $ 308,137,842
============ =========== ============ ============= ============= =============
Undistributed net investment
income included in net
assets at end of period ........ $ 978,133 $ 522,742 $ 942,572 $ 344,466 $ -- $ --
============ =========== ============ ============= ============= =============
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES SERIES SERIES
------------- ------------- ------------- ------------- -------------
Change in net assets:
From operations --
Net investment income (loss) ... $ 1,535,325 $ (143,389) $ 52,388 $ (158,464) $ 6,557,586
Net realized gain (loss)
on investments and foreign
currency transactions ........ 20,336,351 5,455,385 555,994 2,307,959 28,438,209
Net unrealized gain (loss)
on investments and foreign
currency translation ......... 4,061,390 (4,495,132) (705,533) (1,127,924) (6,467,883)
------------- ------------- ------------- ------------- -------------
Change in net assets
from operations ............ $ 25,933,066 $ 816,864 $ (97,151) $ 1,021,571 $ 28,527,912
------------- ------------- ------------- ------------- -------------
Distributions declared to
shareholders --
From net investment income
Initial Class .................. $ (701,713) $ (137,497) $ (83) $-- $ (4,634,835)
Service Class .................. (413,921) (46,942) (81,898) -- (1,454,306)
From net realized gain on
investments and foreign
currency transactions
Initial Class .................. -- -- (872) -- --
Service Class .................. -- -- (1,117,721) -- --
------------- ------------- ------------- ------------- -------------
Total distributions declared
to shareholders .................. $ (1,115,634) $ (184,439) $ (1,200,574) $-- $ (6,089,141)
------------- ------------- ------------- ------------- -------------
Change in net assets from series
share transactions ............... $ 13,397,162 $ (10,938,732) $ 352,507 $ (5,373,369) $ (34,878,038)
------------- ------------- ------------- ------------- -------------
Total change in net assets ..... $ 38,214,594 $ (10,306,307) $ (945,218) $ (4,351,798) $ (12,439,267)
Net assets --
At beginning of period ........... 147,612,807 87,873,970 11,605,539 26,704,497 459,200,259
------------- ------------- ------------- ------------- -------------
At end of period ................. $ 185,827,401 $ 77,567,663 $ 10,660,321 $ 22,352,699 $ 446,760,992
============= ============= ============= ============= =============
Undistributed net investment
income included in net assets
at end of period ............... $ 1,339,858 $-- $ 51,992 $-- $ 6,535,070
============= ============= ============= ============= =============
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the series' independent registered public accounting firm, whose
report, together with the series' financial statements, are included in this report.
CAPITAL OPPORTUNITIES SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 13.39 $ 13.30 $ 11.85 $ 9.27 $ 13.33
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.05 $ 0.06 $ 0.10 $ 0.05 $ 0.03
Net realized and unrealized gain (loss)
on investments and foreign currency ... 1.86 0.15 1.41 2.57 (4.08)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.91 $ 0.21 $ 1.51 $ 2.62 $ (4.05)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.07) $ (0.12) $ (0.06) $ (0.04) $ (0.01)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 15.23 $ 13.39 $ 13.30 $ 11.85 $ 9.27
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 14.32 1.64 12.80(b) 28.30 (30.41)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 0.86 0.86 0.84 0.84 0.82
Net investment income ................... 0.36 0.44 0.82 0.50 0.26
Portfolio turnover (%) .................... 84 91 73 64 93
Net assets at end of period (000 Omitted) . $ 170,398 $ 196,612 $ 248,925 $ 269,630 $ 251,974
CAPITAL OPPORTUNITIES SERIES
---------------------------------------------------------------------------
YEARS ENDED 12/31
---------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 13.33 $ 13.25 $ 11.81 $ 9.24 $ 13.31
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.02 $ 0.02 $ 0.07 $ 0.03 $ 0.01
Net realized and unrealized gain (loss)
on investments and foreign currency ... 1.85 0.15 1.40 2.55 (4.07)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.87 $ 0.17 $ 1.47 $ 2.58 $ (4.06)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.04) $ (0.09) $ (0.03) $ (0.01) $ (0.01)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 15.16 $ 13.33 $ 13.25 $ 11.81 $ 9.24
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 14.02 1.31 12.52(b) 28.00 (30.54)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 1.11 1.11 1.09 1.09 1.07
Net investment income ................... 0.11 0.19 0.60 0.26 0.09
Portfolio turnover (%) .................... 84 91 73 64 93
Net assets at end of period (000 Omitted) . $ 16,433 $ 15,198 $ 16,922 $ 15,116 $ 10,913
(b) The series' 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 series 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.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series (assuming reinvestment of all distributions) held for the
entire period. This information has been audited by the series' independent registered public accounting firm, whose report,
together with the series' financial statements, are included in this report.
CORE EQUITY SERIES
---------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 15.15 $ 14.32 $ 12.58 $ 9.92 $ 12.70
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.08 $ 0.09 $ 0.09 $ 0.08 $ 0.08
Net realized and unrealized gain (loss)
on investments and foreign currency .. 1.99 0.84 1.74 2.67 (2.78)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 2.07 $ 0.93 $ 1.83 $ 2.75 $ (2.70)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.09) $ (0.10) $ (0.09) $ (0.09) $ (0.08)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 17.13 $ 15.15 $ 14.32 $ 12.58 $ 9.92
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 13.74 6.56 14.63(b) 27.86 (21.40)
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) .. 0.91 0.90 0.88 0.90 0.86
Expenses after expense reductions (f) ... 0.91 N/A N/A N/A N/A
Net investment income ................... 0.53 0.64 0.70 0.78 0.67
Portfolio turnover (%) .................... 122 92 97 147 96
Net assets at end of period (000 Omitted) . $ 80,024 $ 80,710 $ 83,219 $ 80,059 $ 64,126
CORE EQUITY SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 15.09 $ 14.25 $ 12.53 $ 9.89 $ 12.69
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.04 $ 0.06 $ 0.06 $ 0.06 $ 0.05
Net realized and unrealized gain (loss)
on investments and foreign currency .. 1.98 0.84 1.72 2.65 (2.78)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 2.02 $ 0.90 $ 1.78 $ 2.71 $ (2.73)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.06) $ (0.06) $ (0.06) $ (0.07) $ (0.07)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 17.05 $ 15.09 $ 14.25 $ 12.53 $ 9.89
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 13.44 6.39 14.29(b) 27.49 (21.59)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) .. 1.16 1.15 1.13 1.15 1.11
Expenses after expense reductions (f) ... 1.16 N/A N/A N/A N/A
Net investment income ................... 0.29 0.39 0.45 0.53 0.49
Portfolio turnover (%) .................... 122 92 97 147 96
Net assets at end of period (000 Omitted) . $ 12,675 $ 9,990 $ 9,916 $ 8,920 $ 6,428
(b) The series' 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 series 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.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series (assuming reinvestment of all distributions) held for the
entire period. This information has been audited by the series' independent registered public accounting firm, whose report,
together with the series' financial statements, are included in this report.
INTERNATIONAL GROWTH SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 15.42 $ 13.55 $ 11.46 $ 8.33 $ 9.50
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.23 $ 0.12 $ 0.13 $ 0.06 $ 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency ...... 3.70 1.88 2.03 3.14 (1.18)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 3.93 $ 2.00 $ 2.16 $ 3.20 $ (1.12)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.11) $ (0.13) $ (0.07) $ (0.07) $ (0.05)
From net realized gain on investments and
foreign currency transactions ......... (1.31) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ....................... $ (1.42) $ (0.13) $ (0.07) $ (0.07) $ (0.05)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 17.93 $ 15.42 $ 13.55 $ 11.46 $ 8.33
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 26.04 14.91 18.94 38.67 (11.88)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 1.12 1.14 1.11 1.24 1.23
Net investment income ................... 1.40 0.85 1.09 0.67 0.70
Portfolio turnover (%) .................... 86 80 93 89 119
Net assets at end of period (000 Omitted) . $ 140,242 $ 121,147 $ 120,913 $ 108,114 $ 88,537
INTERNATIONAL GROWTH SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 15.36 $ 13.50 $ 11.43 $ 8.31 $ 9.49
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.19 $ 0.08 $ 0.10 $ 0.04 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency ...... 3.69 1.88 2.01 3.13 (1.17)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 3.88 $ 1.96 $ 2.11 $ 3.17 $ (1.13)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.08) $ (0.10) $ (0.04) $ (0.05) $ (0.05)
From net realized gain on investments
and foreign currency transactions ..... (1.31) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ...................... $ (1.39) $ (0.10) $ (0.04) $ (0.05) $ (0.05)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 17.85 $ 15.36 $ 13.50 $ 11.43 $ 8.31
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 25.75 14.62 18.58 38.35 (12.01)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 1.37 1.39 1.36 1.49 1.48
Net investment income ................... 1.15 0.59 0.86 0.39 0.46
Portfolio turnover (%) .................... 86 80 93 89 119
Net assets at end of period (000 Omitted) . $ 22,979 $ 19,289 $ 18,282 $ 15,171 $ 10,449
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the series' independent registered public accounting firm, whose
report, together with the series' financial statements, are included in this report.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 9.78 $ 9.42 $ 8.60 $ 6.97 $ 9.70
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (loss) (d) ........ $ 0.03 $ 0.01 $ 0.04 $ 0.01 $ (0.00)(w)
Net realized and unrealized gain (loss)
on investments and foreign
currency ............................... 0.72 0.40 0.79 1.62 (2.72)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 0.75 $ 0.41 $ 0.83 $ 1.63 $ (2.72)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.01) $ (0.05) $ (0.01) $ -- $ (0.01)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 10.52 $ 9.78 $ 9.42 $ 8.60 $ 6.97
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 7.67 4.37 9.61(b) 23.39 (28.05)
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) ............................ 0.82 0.85 0.83 0.83 0.82
Net investment income (loss) ............ 0.34 0.12 0.47 0.09 (0.01)
Portfolio turnover (%) .................... 72 136 139 265 207
Net assets at end of period (000 Omitted) . $ 336,383 $ 395,782 $ 468,181 $ 504,123 $ 448,235
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 9.71 $ 9.35 $ 8.55 $ 6.96 $ 9.70
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (loss) (d) ........ $ 0.01 $ (0.01) $ 0.02 $ (0.01) $ (0.02)
Net realized and unrealized gain (loss)
on investments and foreign
currency .............................. 0.71 0.40 0.78 1.60 (2.71)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 0.72 $ 0.39 $ 0.80 $ 1.59 $ (2.73)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ -- $ (0.03) $ -- $ -- $ (0.01)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 10.43 $ 9.71 $ 9.35 $ 8.55 $ 6.96
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 7.42 4.15 9.36(b) 22.84 (28.17)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 1.07 1.10 1.08 1.08 1.07
Net investment income (loss) ............ 0.09 (0.13) 0.25 (0.16) (0.21)
Portfolio turnover (%) .................... 72 136 139 265 207
Net assets at end of period (000 Omitted) . $ 88,696 $ 89,314 $ 87,243 $ 73,697 $ 37,109
(b) The series' 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 series sales. The
non-recurring accrual resulted in an increase in the net asset value of $0.01 per share based on the shares outstanding on the
day the proceeds were recorded. Excluding the effect of this accrual from the ending net asset value per share, the Initial
Class and Service Class total returns for the year ended December 31, 2004 would have been lower by approximately 0.13%.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
re turn figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
(w) Per share amount was less than $0.01.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years (or life
of a particular share class, if shorter). Certain information reflects financial results for a single series share. The total
returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the series share
class (assuming reinvestment of all distributions) held for the entire period. This information has been audited by the series'
independent registered public accounting firm, whose report, together with the series' financial statements, are included in this
report.
MID CAP VALUE SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002(c)
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 11.73 $ 12.46 $ 10.46 $ 7.92 $ 10.00
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.09 $ 0.04 $ 0.01 $ 0.02 $ 0.04
Net realized and unrealized gain (loss)
on investments and foreign currency ... 1.16 0.70 2.25 2.53 (2.12)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.25 $ 0.74 $ 2.26 $ 2.55 $ (2.08)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ -- $ -- $ (0.01) $ (0.01) $--
From net realized gain on investments and
foreign currency transactions ......... (1.44) (1.47) (0.25) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (1.44) $ (1.47) $ (0.26) $ (0.01) $ --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 11.54 $ 11.73 $ 12.46 $ 10.46 $ 7.92
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 11.30 7.63 22.10 32.24 (20.80)(n)
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) .. 1.10 1.11 1.10 1.81 8.05(a)
Expenses after expense reductions (f) ... 1.00 1.00 1.00 0.99 1.02(a)
Net investment income ................... 0.81 0.31 0.10 0.26 0.54(a)
Portfolio turnover (%) .................... 110 142 147 109 82
Net assets at end of period (000 Omitted) . $ 34 $ 31 $ 29 $ 24 $ 18
MID CAP VALUE SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002(c)
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 11.66 $ 12.42 $ 10.44 $ 7.93 $ 10.00
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (loss) (d) ........ $ 0.06 $ 0.01 $ (0.02) $ 0.00(w) $ 0.04
Net realized and unrealized gain (loss)
on investments and foreign currency ... 1.15 0.70 2.25 2.52 (2.11)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.21 $ 0.71 $ 2.23 $ 2.52 $ (2.07)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ -- $ -- $(0.00)(w) $ (0.01) $ --
From net realized gain on investments and
foreign currency transactions ........ (1.44) (1.47) (0.25) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ...................... $ (1.44) $ (1.47) $ (0.25) $ (0.01) $ --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 11.43 $ 11.66 $ 12.42 $ 10.44 $ 7.93
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 11.01 7.40 21.75 31.90 (20.70)(n)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) .. 1.34 1.36 1.35 2.07 8.30(a)
Expenses after expense reductions (f) ... 1.25 1.25 1.25 1.25 1.27(a)
Net investment income (loss) ............ 0.55 0.06 (0.15) 0.04 0.53(a)
Portfolio turnover (%) .................... 110 142 147 109 82
Net assets at end of period (000 Omitted) . $ 24,951 $ 25,993 $ 24,479 $ 15,954 $ 707
(a) Annualized.
(c) For the period from the commencement of the series' investment operations, May 1, 2002, through the stated period end.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
(w) Per share amount was less than $0.01.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the series' independent registered public accounting firm, whose
report, together with the series' financial statements, are included in this report.
NEW DISCOVERY SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 14.35 $ 13.64 $ 12.69 $ 9.38 $ 14.10
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment loss (d) ................. $ (0.09) $ (0.07) $ (0.08) $ (0.06) $ (0.07)
Net realized and unrealized gain (loss)
on investments and foreign currency .. 1.98 0.78 1.03 3.37 (4.65)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.89 $ 0.71 $ 0.95 $ 3.31 $ (4.72)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 16.24 $ 14.35 $ 13.64 $ 12.69 $ 9.38
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 13.17 5.21 7.49(b) 35.29 (33.43)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) .. 1.00 1.00 0.99 1.00 0.98
Expenses after expense reductions (f) ... 0.98 N/A N/A N/A N/A
Net investment loss ..................... (0.60) (0.56) (0.65) (0.59) (0.59)
Portfolio turnover (%) .................... 107 127 139 100 97
Net assets at end of period (000 Omitted) . $ 163,825 $ 176,958 $ 209,503 $ 220,278 $ 177,028
NEW DISCOVERY SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 14.19 $ 13.52 $ 12.61 $ 9.34 $ 14.08
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment loss (d) ................. $ (0.13) $ (0.11) $ (0.11) $ (0.09) $ (0.08)
Net realized and unrealized gain (loss) on
investments and foreign currency ..... 1.96 0.78 1.02 3.36 (4.66)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.83 $ 0.67 $ 0.91 $ 3.27 $ (4.74)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 16.02 $ 14.19 $ 13.52 $ 12.61 $ 9.34
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 12.90 4.96 7.22(b) 35.01 (33.66)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) .. 1.26 1.26 1.24 1.24 1.23
Expenses after expense reductions (f) ... 1.23 N/A N/A N/A N/A
Net investment loss ..................... (0.84) (0.81) (0.89) (0.84) (0.78)
Portfolio turnover (%) .................... 107 127 139 100 97
Net assets at end of period (000 Omitted) . $ 181,468 $ 131,180 $ 104,256 $ 71,049 $ 34,691
(b) The series' 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 series 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.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the series' independent registered public accounting firm, whose
report, together with the series' financial statements, are included in this report.
RESEARCH INTERNATIONAL SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 16.74 $ 14.48 $ 12.01 $ 9.03 $ 10.22
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.22 $ 0.17 $ 0.14 $ 0.08 $ 0.06
Net realized and unrealized gain (loss)
on investments and foreign currency .. 4.30 2.21 2.39 2.96 (1.23)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 4.52 $ 2.38 $ 2.53 $ 3.04 $ (1.17)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.21) $ (0.12) $ (0.06) $ (0.06) $ (0.02)
From net realized gain on investments
and foreign currency transactions ..... (1.11) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ...................... $ (1.32) $ (0.12) $ (0.06) $ (0.06) $ (0.02)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 19.94 $ 16.74 $ 14.48 $ 12.01 $ 9.03
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 27.47 16.56 21.20 33.86 (11.44)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 1.13 1.12 1.10 1.30 1.26
Net investment income ................... 1.23 1.11 1.11 0.83 0.61
Portfolio turnover (%) .................... 80 83 102 97 136
Net assets at end of period (000 Omitted) . $ 119,534 $ 95,752 $ 86,526 $ 74,262 $ 62,555
RESEARCH INTERNATIONAL SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 16.61 $ 14.39 $ 11.95 $ 9.00 $ 10.21
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.16 $ 0.12 $ 0.10 $ 0.03 $ 0.03
Net realized and unrealized gain (loss)
on investments and foreign currency ... 4.29 2.19 2.39 2.96 (1.22)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 4.45 $ 2.31 $ 2.49 $ 2.99 $ (1.19)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.18) $ (0.09) $ (0.05) $ (0.04) $ (0.02)
From net realized gain on investments
and foreign currency transactions ..... (1.11) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ...................... $ (1.29) $ (0.09) $ (0.05) $ (0.04) $ (0.02)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 19.77 $ 16.61 $ 14.39 $ 11.95 $ 9.00
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 27.25 16.19 20.96 33.40 (11.66)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 1.38 1.37 1.36 1.57 1.51
Net investment income ................... 0.89 0.78 0.78 0.33 0.35
Portfolio turnover (%) .................... 80 83 102 97 136
Net assets at end of period (000 Omitted) . $ 155,969 $ 90,076 $ 61,087 $ 27,282 $ 5,783
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series (assuming reinvestment of all distributions) held for the
entire period. This information has been audited by the series' independent registered public accounting firm, whose report,
together with the series' financial statements, are included in this report.
STRATEGIC GROWTH SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 7.75 $ 7.67 $ 7.18 $ 5.63 $ 8.05
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (loss) (d) ........ $ (0.01) $ (0.00)(w)$ 0.02 $ (0.00)(w)$ (0.01)
Net realized and unrealized gain (loss)
on investments and foreign currency .. 0.52 0.11 0.47 1.55 (2.41)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 0.51 $ 0.11 $ 0.49 $ 1.55 $ (2.42)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ -- $ (0.03) $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 8.26 $ 7.75 $ 7.67 $ 7.18 $ 5.63
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 6.58 1.40 6.82 27.53 (30.06)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 0.91 0.92 0.88 0.91 0.88
Net investment income (loss) ............ (0.16) (0.05) 0.31 (0.01) (0.18)
Portfolio turnover (%) .................... 111 125 74 74 98
Net assets at end of period (000 Omitted) . $ 30,385 $ 36,492 $ 45,471 $ 47,910 $ 38,486
STRATEGIC GROWTH SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 7.69 $ 7.61 $ 7.14 $ 5.62 $ 8.05
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (loss) (d) ........ $ (0.03) $ (0.02) $ 0.01 $ (0.01) $ (0.02)
Net realized and unrealized gain (loss)
on investments and foreign currency ... 0.52 0.11 0.46 1.53 (2.41)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 0.49 $ 0.09 $ 0.47 $ 1.52 $ (2.43)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $-- $ (0.01) $ -- $ -- $ --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 8.18 $ 7.69 $ 7.61 $ 7.14 $ 5.62
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 6.37 1.17 6.58 27.05 (30.19)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 1.16 1.17 1.13 1.16 1.13
Net investment income (loss) ............ (0.40) (0.30) 0.12 (0.23) (0.38)
Portfolio turnover (%) .................... 111 125 74 74 98
Net assets at end of period (000 Omitted) . $ 40,046 $ 41,076 $ 42,403 $ 30,403 $ 4,997
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
(w) Per share amount was less than $0.01.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years (or life
of a particular share class, if shorter). Certain information reflects financial results for a single series share. The total
returns in the table represent the rate by which an investor would have earned (or lost) on an investment in the series share
class (assuming reinvestment of all distributions) held for the entire period. This information has been audited by the series'
independent registered public accounting firm, whose report, together with the series' financial statements, are included in this
report.
STRATEGIC VALUE SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002(c)
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 10.23 $ 11.57 $ 10.05 $ 7.90 $ 10.00
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.17 $ 0.08 $ 0.11 $ 0.07 $ 0.07
Net realized and unrealized gain (loss)
on investments and foreign currency .. 1.19 (0.18) 1.63 2.09 (2.17)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.36 $ (0.10) $ 1.74 $ 2.16 $ (2.10)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.08) $ (0.11) $ (0.04) $ (0.01) $ --
From net realized gain on investments
and foreign currency transactions .... (0.85) (1.13) (0.18) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ..................... $ (0.93) $ (1.24) $ (0.22) $ (0.01) $ --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 10.66 $ 10.23 $ 11.57 $ 10.05 $ 7.90
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 14.16 (0.39) 18.05 27.44 (21.00)(n)
Ratios (%) (to average net assets) and Supplemental data:
Expenses before expense reductions (f) .. 1.71 1.44 1.29 1.59 6.20(a)
Expenses after expense reductions (f) ... 0.99 1.00 0.99 1.00 1.01(a)
Net investment income ................... 1.69 0.74 1.05 0.80 0.89(a)
Portfolio turnover (%) .................... 56 60 70 38 53
Net assets at end of period (000 Omitted) . $ 10 $ 9 $ 9 $ 8 $ 6
STRATEGIC VALUE SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002(c)
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 10.17 $ 11.52 $ 10.02 $ 7.90 $ 10.00
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.14 $ 0.05 $ 0.09 $ 0.05 $ 0.06
Net realized and unrealized gain (loss)
on investments and foreign currency .. 1.20 (0.19) 1.61 2.08 (2.16)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 1.34 $ (0.14) $ 1.70 $ 2.13 $ (2.10)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.06) $ (0.08) $ (0.02) $ (0.01) $ --
From net realized gain on investments
and foreign currency transactions .... (0.85) (1.13) (0.18) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ..................... $ (0.91) $ (1.21) $ (0.20) $ (0.01) $ --
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 10.60 $ 10.17 $ 11.52 $ 10.02 $ 7.90
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 13.92 (0.72) 17.77 27.01 (21.00)(n)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) .. 1.94 1.69 1.55 1.84 6.45(a)
Expenses after expense reductions (f) ... 1.24 1.25 1.25 1.25 1.26(a)
Net investment income ................... 1.37 0.48 0.82 0.56 0.81(a)
Portfolio turnover (%) .................... 56 60 70 38 53
Net assets at end of period (000 Omitted) . $ 9,090 $ 10,651 $ 11,597 $ 8,199 $ 1,072
(a) Annualized.
(c) For the period from the commencement of the series' investment operations, May 1, 2002 through the stated period end.
(d) Per share data are based on average shares outstanding.
(f) Ratios do not reflect reductions from fees paid indirectly.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(n) Not annualized.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the series' independent registered public accounting firm, whose
report, together with the series' financial statements, are included in this report.
TECHNOLOGY SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 4.46 $ 4.20 $ 4.10 $ 2.82 $ 5.22
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment loss (d) ................. $ (0.03) $ (0.03) $ (0.01) $ (0.02) $ (0.02)
Net realized and unrealized gain (loss)
on investments and foreign currency .. 1.01 0.29 0.11 1.30 (2.38)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 0.98 $ 0.26 $ 0.10 $ 1.28 $ (2.40)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 5.44 $ 4.46 $ 4.20 $ 4.10 $ 2.82
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 21.97 6.19 2.44(b) 45.39 (45.98)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) .. 1.34 1.18 1.11 1.09 0.91
Expenses after expense reductions (f) ... 1.00 1.00 1.01 1.06 N/A
Net investment loss ..................... (0.55) (0.66) (0.21) (0.65) (0.61)
Portfolio turnover (%) .................... 234 196 110 191 210
Net assets at end of period (000 Omitted) . $ 18,813 $ 18,978 $ 23,069 $ 28,376 $ 14,020
TECHNOLOGY SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 4.40 $ 4.15 $ 4.07 $ 2.80 $ 5.22
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment loss (d) ................. $ (0.04) $ (0.04) $ (0.02) $ (0.03) $ (0.03)
Net realized and unrealized gain (loss)
on investments and foreign currency .. 0.99 0.29 0.10 1.30 (2.39)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 0.95 $ 0.25 $ 0.08 $ 1.27 $ (2.42)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 5.35 $ 4.40 $ 4.15 $ 4.07 $ 2.80
=========== =========== =========== =========== ===========
Total return (%) (k)(r)(s) ................ 21.59 6.02 1.97(b) 45.36 (46.36)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses before expense reductions (f) .. 1.59 1.43 1.36 1.33 1.16
Expenses after expense reductions (f) ... 1.25 1.25 1.26 1.30 N/A
Net investment loss ..................... (0.80) (0.92) (0.45) (0.91) (0.85)
Portfolio turnover (%) .................... 234 196 110 191 210
Net assets at end of period (000 Omitted) . $ 3,148 $ 3,375 $ 3,636 $ 4,094 $ 1,509
(b) The series' 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 series 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.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(r) Certain expenses have been reduced without which performance would have been lower.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
FINANCIAL HIGHLIGHTS -- continued
The financial highlights table is intended to help you understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total returns in the table represent the rate by which an
investor would have earned (or lost) on an investment in the series share class (assuming reinvestment of all distributions) held
for the entire period. This information has been audited by the series' independent registered public accounting firm, whose
report, together with the series' financial statements, are included in this report.
VALUE SERIES
-------------------------------------------------------------------------
YEARS ENDED 12/31
-------------------------------------------------------------------------
2006 2005 2004 2003 2002
INITIAL CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 16.30 $ 15.51 $ 13.61 $ 11.05 $ 12.88
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.28 $ 0.24 $ 0.21 $ 0.19 $ 0.19
Net realized and unrealized gain (loss)
on investments and foreign currency .. 3.04 0.77 1.87 2.56 (1.93)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 3.32 $ 1.01 $ 2.08 $ 2.75 $ (1.74)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.27) $ (0.22) $ (0.18) $ (0.19) $ (0.09)
From net realized gain on investments
and foreign currency transactions .... (0.65) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ...................... $ (0.92) $ (0.22) $ (0.18) $ (0.19) $ (0.09)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 18.70 $ 16.30 $ 15.51 $ 13.61 $ 11.05
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 20.96 6.60 15.52(b) 25.31 (13.58)
Ratios (%) (to average net assets)
and Supplemental data:
Expenses (f) ............................ 0.86 0.85 0.83 0.84 0.83
Net investment income ................... 1.62 1.51 1.53 1.65 1.57
Portfolio turnover (%) .................... 26 22 36 57 51
Net assets at end of period (000 Omitted) . $ 323,094 $ 319,952 $ 339,705 $ 310,818 $ 266,892
VALUE SERIES
--------------------------------------------------------------------------
YEARS ENDED 12/31
--------------------------------------------------------------------------
2006 2005 2004 2003 2002
SERVICE CLASS SHARES ----------- ----------- ----------- ----------- -----------
Net asset value, beginning of period ...... $ 16.21 $ 15.43 $ 13.56 $ 11.01 $ 12.86
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations
Net investment income (d) ............... $ 0.23 $ 0.20 $ 0.18 $ 0.16 $ 0.17
Net realized and unrealized gain (loss)
on investments and foreign currency .. 3.02 0.77 1.85 2.56 (1.93)
----------- ----------- ----------- ----------- -----------
Total from investment operations .... $ 3.25 $ 0.97 $ 2.03 $ 2.72 $ (1.76)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders
From net investment income .............. $ (0.22) $ (0.19) $ (0.16) $ (0.17) $ (0.09)
From net realized gain on investments
and foreign currency transactions .... (0.65) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to
shareholders ...................... $ (0.87) $ (0.19) $ (0.16) $ (0.17) $ (0.09)
----------- ----------- ----------- ----------- -----------
Net asset value, end of period ............ $ 18.59 $ 16.21 $ 15.43 $ 13.56 $ 11.01
=========== =========== =========== =========== ===========
Total return (%) (k)(s) ................... 20.66 6.34 15.18(b) 25.09 (13.77)
Ratios (%) (to average net assets) and Supplemental data:
Expenses (f) ............................ 1.11 1.10 1.08 1.09 1.08
Net investment income ................... 1.37 1.27 1.28 1.39 1.41
Portfolio turnover (%) .................... 26 22 36 57 51
Net assets at end of period (000 Omitted) . $ 141,334 $ 126,809 $ 119,496 $ 83,780 $ 46,646
(b) The series' 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 series 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.
(k) The total return does not reflect expenses that apply to separate accounts. Inclusion of these charges would reduce the total
return figures for all periods shown.
(s) From time to time the series may receive proceeds from litigation settlements, without which performance would be lower.
See notes to financial statements.
MFS/SUN LIFE SERIES TRUST
NOTES TO FINANCIAL STATEMENTS
(1) BUSINESS AND ORGANIZATION
The trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, (the "1940 Act") as an
open-end management investment company consisting of twenty-eight separate
series (the series) of shares: Bond Series, Capital Appreciation Series,
Capital Opportunities Series*, Core Equity Series*, Emerging Growth Series,
Emerging Market Equity Series, Global Governments Series, Global Growth Series,
Global Total Return Series, Government Securities Series, High Yield Series,
International Growth Series*, International Value Series, Massachusetts
Investors Growth Stock Series*, Massachusetts Investors Trust Series, Mid Cap
Growth Series, Mid Cap Value Series*, Money Market Series, New Discovery
Series*, Research Series, Research International Series*, Strategic Growth
Series*, Strategic Income Series, Strategic Value Series*, Technology Series*,
Total Return Series, Utilities Series, and Value Series*. The shares of each
series are sold only to variable accounts established by insurance companies to
fund benefits under variable contracts issued by such companies.
The series denoted with an asterisk above are included within these financial
statements.
(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. Certain
series 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. 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 series' 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 series' 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. 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 series' 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 series' net asset value may be deemed to have a material
affect on the value of securities traded in foreign markets. Accordingly, the
series' foreign equity securities may often be valued at fair value. 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
series' 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 series' net asset value may differ from quoted or published
prices for the same investments.
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 series, and believes the
impact will be limited to expanded disclosures resulting from the adoption of
this Statement in each series financial statements.
Repurchase Agreements - Each series may enter into repurchase agreements with
institutions that the series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each series
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the series to
obtain those securities in the event of a default under the repurchase
agreement. Each series 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 series under each such repurchase agreement. Each series, 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"), as
lending agent, may loan the securities of each series to certain qualified
institutions (the "Borrowers") approved by the series. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State
Street provides the series with indemnification against Borrower default. Each
series 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 series and the lending agent. On loans
collateralized by U.S. Treasury securities, a fee is received from the
Borrower, and is allocated between the series and the lending agent. 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 each series' organizational documents, its officers
and trustees may be indemnified against certain liabilities and expenses
arising out of the performance of their duties to the series. Additionally, in
the normal course of business, each series enters into agreements with service
providers that may contain indemnification clauses. Each series' maximum
exposure under these agreements is unknown as this would involve future claims
that may be made against the series that have not yet occurred.
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 each series 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.
Each series 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 series.
Fees Paid Indirectly - Certain series' custody fees are reduced according to an
arrangement that measures the value of cash deposited with the custodian by the
series. These amounts, for the year ended December 31, 2006, are shown as a
reduction of total expenses on the Statements of Operations.
Tax Matters and Distributions - Each series 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 series 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 net operating losses, real estate
investment trusts, passive foreign investment companies, wash sale loss
deferrals, foreign currency transactions, and foreign taxes.
The tax character of distributions declared to shareholders is as follows:
CAPITAL OPPORTUNITIES INTERNATIONAL GROWTH MASSACHUSETTS INVESTORS
SERIES CORE EQUITY SERIES SERIES GROWTH STOCK SERIES
------------------------ ------------------------ ------------------------ -----------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Ordinary income (including
any short-term capital
gains) ................... $ 978,683 $ 2,157,384 $ 523,238 $ 597,682 $ 957,105 $ 1,214,948 $ 344,988 $2,408,735
Long-term capital gain ..... -- -- -- -- 11,592,743 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total distributions ........ $ 978,683 $ 2,157,384 $ 523,238 $ 597,682 $12,549,848 $ 1,214,948 $ 344,988 $2,408,735
=========== =========== =========== ========== =========== =========== =========== ==========
RESEARCH INTERNATIONAL
MID CAP VALUE SERIES NEW DISCOVERY SERIES SERIES STRATEGIC GROWTH SERIES
------------------------ ------------------------ ------------------------ -----------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Ordinary income (including
any short-term capital
gains) ................... $ 1,728,975 $ 2,449,607 $ -- $ -- $ 4,590,713 $ 1,115,634 $ -- $ 184,439
Long-term capital gain ..... 1,357,125 412,730 -- -- 11,276,553 -- -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------
Total distributions ........ $ 3,086,100 $ 2,862,337 $ -- $ -- $15,867,266 $ 1,115,634 $ -- $ 184,439
=========== =========== =========== =========== =========== =========== =========== ==========
STRATEGIC VALUE SERIES TECHNOLOGY SERIES VALUE SERIES
------------------------ ------------------------ ------------------------
12/31/06 12/31/05 12/31/06 12/31/05 12/31/06 12/31/05
----------- ----------- ----------- ----------- ----------- -----------
Ordinary income (including
any short-term capital
gains) ................... $ 326,612 $ 598,886 $ -- $ -- $ 6,536,556 $ 6,089,141
Long-term capital gain ..... 535,561 601,688 -- -- 16,774,240 --
----------- ----------- ----------- ----------- ----------- -----------
Total distributions ........ $ 862,173 $ 1,200,574 $ -- $ -- $23,310,796 $ 6,089,141
=========== =========== =========== =========== =========== ===========
The federal tax cost and the tax basis components of distributable earnings were as follows:
MASSACHUSETTS
CAPITAL CORE INTERNATIONAL INVESTORS
OPPORTUNITIES EQUITY GROWTH GROWTH STOCK
AS OF 12/31/06 SERIES SERIES SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of investments ................................................ $ 192,497,713 $ 95,556,706 $ 152,462,035 $409,730,865
------------- ------------- ------------- ------------
Gross appreciation ................................................. $ 16,916,981 $ 10,410,197 $ 36,461,328 $ 34,001,294
Gross depreciation ................................................. (5,855,134) (1,820,168) (967,226) (13,269,248)
------------- ------------- ------------- ------------
Net unrealized appreciation (depreciation) ......................... $ 11,061,847 $ 8,590,029 $ 35,494,102 $ 20,732,046
============= ============= ============= ============
Undistributed ordinary income ...................................... $ 658,094 $ 2,796,732 $ 10,093,843 $ 1,305,004
Undistributed long-term capital gain ............................... -- 8,299,752 17,197,444 --
Capital loss carryforwards ......................................... (272,612,986) -- -- (385,131,761)
Other temporary differences ........................................ (42) (1,213) (56,691) 231
MID CAP NEW RESEARCH STRATEGIC
VALUE DISCOVERY INTERNATIONAL GROWTH
AS OF 12/31/06 SERIES SERIES SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of investments ................................................ $ 21,892,875 $ 378,223,147 $ 271,141,554 $ 67,759,665
------------- ------------- ------------- ------------
Gross appreciation ................................................. $ 3,368,563 $ 39,438,674 $ 48,486,366 $ 6,845,820
Gross depreciation ................................................. (349,892) (15,759,620) (2,171,380) (1,966,037)
------------- ------------- ------------- ------------
Net unrealized appreciation (depreciation) ......................... $ 3,018,671 $ 23,679,054 $ 46,314,986 $ 4,879,783
============= ============= ============= ============
Undistributed ordinary income ...................................... $ 488,419 $ -- $ 16,497,893 $ --
Undistributed long-term capital gain ............................... 590,943 9,318,265 19,568,303 --
Capital loss carryforwards ......................................... -- -- -- (42,510,449)
Other temporary differences ........................................ -- (16,878) (29,669) 220
STRATEGIC
VALUE TECHNOLOGY VALUE
AS OF 12/31/06 SERIES SERIES SERIES
- -------------------------------------------------------------------------------------------------------------------
Cost of investments ................................................ $ 8,287,289 $ 6,215,197 $ 341,852,129
------------- ------------- -------------
Gross appreciation ................................................. $ 1,115,611 $ 1,619,284 $ 128,254,297
Gross depreciation ................................................. (261,745) (850,519) (4,033,359)
------------- ------------- -------------
Net unrealized appreciation (depreciation) ......................... $ 853,866 $ 768,765 $ 124,220,938
============= ============= =============
Undistributed ordinary income ...................................... $ 229,997 $ -- $ 7,801,744
Undistributed long-term capital gain ............................... 499,977 -- 25,411,567
Capital loss carryforwards ......................................... -- (31,304,178) --
Other temporary differences ........................................ -- (6,962) 1,771
As of December 31, 2006, the following series had capital loss carryforwards available to offset future realized gains.
Such losses expire as follows:
MASSACHUSETTS
CAPITAL INVESTORS STRATEGIC
OPPORTUNITIES GROWTH STOCK GROWTH TECHNOLOGY
EXPIRATION DATE SERIES SERIES SERIES SERIES (a)
- ---------------------------------------------------------------------------------------------------------------------------
12/31/08 ................................................... $ -- $ -- $ -- $ (1,186,301)
12/31/09 ................................................... (126,252,434) (209,623,812) (22,621,235) (13,615,807)
12/31/10 ................................................... (146,360,552) (175,507,949) (17,626,481) (16,502,070)
12/31/11 ................................................... -- -- (2,262,733) --
------------- ------------- ------------- ------------
Total ...................................................... $(272,612,986) $(385,131,761) $ (42,510,449) $(31,304,178)
============= ============= ============= ============
(a) The availability of a portion of the capital loss carryforwards, which were acquired on September 5, 2003 in connection
with the Global Telecommunications Series 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. On December 22, 2006, the SEC delayed the implementation
of the Interpretation for regulated investment companies for an additional six
months. 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 each series, and has not at
this time determined the impact, if any, resulting from the adoption of this
Interpretation on each series' financial statements.
Multiple Classes of Shares of Beneficial Interest - Each series offers multiple
classes of shares, which differ in their respective distribution fees. All
shareholders bear the common expenses of the series based on daily net assets of
each class, without distinction between share classes. Dividends are declared
separately for each class. Differences in per share dividend rates are generally
due to differences in separate class expenses.
(3) TRANSACTIONS WITH AFFILIATES
Investment Adviser - Each series has an investment advisory agreement with MFS
to provide overall investment management and related administrative services
and facilities to the series. The management fee is computed daily and paid
monthly at an annual rate based on a percentage of each series' average daily
net assets as follows:
Capital Opportunities Series: The management fee is 0.75% of the first $300
million of average daily net assets and 0.675% of average daily net assets in
excess of $300 million.
Core Equity Series: The management fee is 0.75% of the first $1 billion of
average daily net assets and 0.65% of average daily net assets in excess of $1
billion. At the commencement of the period and until August 31, 2006, the
investment adviser had agreed to reduce its management fee to 0.65% of average
daily net assets in excess of $500 million. Effective September 1, 2006, the
investment adviser has agreed in writing to reduce its management fee to 0.60%
of average daily net assets in excess of $2.5 billion. This written agreement
will continue through August 31, 2007, unless changed or rescinded by the
series' Board of Trustees. For the year ended December 31, 2006, the series'
average daily net assets did not exceed $500 million and therefore, the
management fee was not reduced.
International Growth Series: The management fee is 0.90% of the first $1
billion of average daily net assets, 0.80% of the next $1 billion of average
daily net assets, and 0.70% of average daily net assets in excess of $2
billion.
Massachusetts Investors Growth Stock Series: The management fee is 0.75% of
average daily net assets. The investment adviser has agreed in writing to
reduce its management fee to 0.70% of average daily net assets in excess of $1
billion. This written agreement may be rescinded only upon consent of the
series' Board of Trustees. For the year ended December 31, 2006, the series'
average daily net assets did not exceed $1 billion and therefore, the
management fee was not reduced.
Mid Cap Value Series: The management fee is 0.75% of the first $1 billion of
average daily net assets and 0.70% of average daily net assets in excess of $1
billion. At the commencement of the period and until August 31, 2006, the
investment adviser had agreed to reduce its management fee to 0.70% of average
daily net assets in excess of $500 million. Effective September 1, 2006, this
agreement was rescinded by the series' Board of Trustees. For the year ended
December 31, 2006, the series' average daily net assets did not exceed $500
million and therefore, the management fee was not reduced.
New Discovery Series: The management fee is 0.90% of the first $1 billion of
average daily net assets and 0.80% of average daily net assets in excess of $1
billion. At the commencement of the period and until August 31, 2006, the
investment adviser had agreed to reduce its management fee to 0.80% in excess
of $500 million. Effective September 1, 2006, the investment adviser has
agreed in writing to reduce its management fee to 0.75% of average daily net
assets in excess of $2.5 billion. This written agreement will continue through
August 31, 2007 unless changed or rescinded by the series' Board of Trustees.
For the year ended December 31, 2006, the series' average daily net assets did
not exceed $500 million and therefore, the management fee was not reduced.
Research International Series: The management fee is 0.90% of the first $1
billion of average daily net assets, 0.80% of the next $1 billion of average
daily net assets, and 0.70% of average daily net assets in excess of $2
billion.
Strategic Growth Series: The management fee is 0.75% of the first $1 billion of
average daily net assets and 0.65% of average daily net assets in excess of $1
billion. At the commencement of the period and until August 31, 2006, the
investment adviser had agreed to reduce its management fee to 0.65% of average
daily net assets in excess of $500 million. Effective September 1, 2006, the
investment adviser has agreed in writing to reduce its management fee to 0.60%
of average daily net assets in excess of $2.5 billion. This written agreement
will continue through August 31, 2007 unless changed or rescinded by the
series' Board of Trustees. For the year ended December 31, 2006, the series'
average daily net assets did not exceed $500 million and therefore, the
management fee was not reduced.
Strategic Value Series: The management fee is 0.75% of the first $1 billion of
average daily net assets and 0.65% of average daily net assets in excess of $1
billion. At the commencement of the period and until August 31, 2006, the
investment adviser had agreed to reduce its management fee to 0.65% of average
daily net assets in excess of $500 million. Effective September 1, 2006, this
agreement was rescinded by the series' Board of Trustees. For the year ended
December 31, 2006, the series' average daily net assets did not exceed $500
million and therefore, the management fee was not reduced.
Technology Series: The management fee is 0.75% of the first $1 billion of
average daily net assets and 0.70% of average daily net assets in excess of $1
billion. At the commencement of the period and until August 31, 2006, the
investment adviser had agreed to reduce its management fee to 0.70% of average
daily net assets in excess of $500 million. Effective September 1, 2006, this
agreement was rescinded by the series' Board of Trustees. For the year ended
December 31, 2006, the series' average daily net assets did not exceed $500
million and therefore, the management fee was not reduced.
Value Series: The management fee is 0.75% of the first $1 billion of average
daily net assets and 0.65% of average daily net assets in excess of $1 billion.
At the commencement of the period and until August 31, 2006, the investment
adviser had agreed to reduce its management fee to 0.65% of average daily net
assets in excess of $500 million. Effective September 1, 2006, this agreement
was rescinded by the series' Board of Trustees. For the year ended December 31,
2006, the series' average daily net assets did not exceed $500 million and
therefore, the management fee was not reduced.
Effective September 1, 2006, the investment adviser has agreed in writing to
pay a portion of certain series' operating expenses, exclusive of certain other
fees and expenses, such that the total annual operating expenses of these
series do not exceed the expense limitations indicated below, based on the
average daily net assets of such series. The management fees incurred for the
year ended December 31, 2006 were equivalent to an annual effective rate of
each series' average daily net assets as follows. In addition, the expense
limitations incurred for the year ended December 31, 2006 were as follows:
INITIAL SERVICE
EFFECTIVE CLASS CLASS
MANAGEMENT EXPENSE EXPENSE
FEES LIMITATION LIMITATION
- -------------------------------------------------------------------------------------------------------------------------------
Capital Opportunities Series .......................................... 0.75% N/A N/A
Core Equity Series .................................................... 0.75% 0.95%(a) 1.20%(a)
International Growth Series ........................................... 0.90% N/A N/A
Massachusetts Investors Growth Stock Series ........................... 0.75% N/A N/A
Mid Cap Value Series .................................................. 0.75% 1.00%(a)(b) 1.25%(a)(b)
New Discovery Series .................................................. 0.90% 0.95%(a) 1.20%(a)
Research International Series ......................................... 0.90% N/A N/A
Strategic Growth Series ............................................... 0.75% 0.95%(a) 1.20%(a)
Strategic Value Series ................................................ 0.75% 0.98%(a)(b) 1.23%(a)(b)
Technology Series ..................................................... 0.75% 1.00%(a)(b) 1.25%(a)(b)
Value Series .......................................................... 0.75% 0.90%(a) 1.15%(a)
(a) This written agreement will continue through August 31, 2007 unless changed or rescinded by the series' Board of Trustees.
(b) At the commencement of the period, the investment adviser had agreed to pay a portion of the series' operating expenses,
exclusive of management, distribution, and certain other fees and expenses, such that the operating expenses did not exceed
0.25% of average daily net assets.
For the year ended December 31, 2006, these reductions amounted to the
following for each series and is reflected as a reduction of total expenses in
the Statements of Operations:
EXPENSE
REDUCTION
- ----------------------------------------------------------------------------
Core Equity Series ............................................ $ 6,596
Mid Cap Value Series .......................................... 22,631
New Discovery Series .......................................... 88,069
Strategic Value Series ........................................ 66,933
Technology Series ............................................. 72,899
For the year ended December 31, 2006, the actual operating expenses for
Strategic Growth Series and Value Series did not exceed the limit and
therefore, the investment adviser did not pay any portion of these series'
expenses.
Distributor - MFS Fund Distributors, Inc. (MFD), a wholly-owned subsidiary of
MFS, is the distributor of shares of the series. The Trustees have adopted a
distribution plan for the Service Class shares pursuant to Rule 12b-1 under the
Investment Company Act of 1940.
The series' distribution plan provides that each series will pay MFD
distribution fees equal to 0.25% per annum of its average daily net assets
attributable to Service Class shares as partial consideration for services
performed and expenses incurred by MFD and financial intermediaries in
connection with the sale and distribution of the series' Service Class shares
and the sale and distribution of the variable annuity or variable life
insurance contracts investing indirectly in Service Class shares. MFD may
subsequently pay all, or a portion, of the distribution fees to financial
intermediaries.
Administrator - MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to each series.
Under an administrative services agreement, each series partially reimburses
MFS the costs incurred to provide these services. Prior to June 1, 2006, each
fund was allocated a portion of these administrative costs based on its size
and relative average net assets. Effective June 1, 2006, each series is charged
an annual fixed amount of $10,000 plus a fee based on calendar year average net
assets.
The administrative services fee incurred for the year ended December 31, 2006
was equivalent to an annual effective rate of each series' average daily net
assets as follows:
PERCENT OF
AVERAGE DAILY
NET ASSETS
- ----------------------------------------------------------------------------
Capital Opportunities Series ............................ 0.0246%
Core Equity Series ...................................... 0.0245%
International Growth Series ............................. 0.0248%
Massachusetts Investors Growth Stock Series ............. 0.0243%
Mid Cap Value Series .................................... 0.0310%
New Discovery Series .................................... 0.0247%
Research International Series ........................... 0.0251%
Strategic Growth Series ................................. 0.0244%
Strategic Value Series .................................. 0.0695%
Technology Series ....................................... 0.0352%
Value Series ............................................ 0.0246%
Trustees' and Officers' Compensation - Each series pays compensation to
independent trustees in the form of a retainer, attendance fees, and
additional compensation to the Board chairperson. Each series does not pay
compensation directly to trustees or officers of the series who are also
officers of the investment adviser, all of whom receive remuneration for their
services to the series from MFS. Certain officers and trustees of the series
are officers or directors of MFS, MFD, and MFSC.
Other - These series 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. MFS
has agreed to bear all expenses associated with office space, other
administrative support, and supplies provided to the ICCO. For the year ended
December 31, 2006, payments made by the series to Tarantino LLC amounted to the
following and are included in the miscellaneous expense on the Statements of
Operations:
ICCO FEE
- -----------------------------------------------------------------------------
Capital Opportunities Series ............................. $ 999
Core Equity Series ....................................... 463
International Growth Series .............................. 777
Massachusetts Investors Growth Stock Series .............. 2,298
Mid Cap Value Series ..................................... 129
New Discovery Series ..................................... 1,669
Research International Series ............................ 1,186
Strategic Growth Series .................................. 371
Strategic Value Series ................................... 49
Technology Series ........................................ 111
Value Series ............................................. 2,285
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than U.S. government securities,
purchased option transactions, and short-term obligations, were as follows:
MASSACHUSETTS
CAPITAL CORE INTERNATIONAL INVESTORS
OPPORTUNITIES EQUITY GROWTH GROWTH STOCK
SERIES SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------------
Investment Purchases .............................. $159,275,051 $109,788,972 $128,945,548 $306,312,805
Investment Sales .................................. $203,942,559 $119,106,550 $139,254,335 $388,403,456
MID CAP NEW RESEARCH STRATEGIC
VALUE DISCOVERY INTERNATIONAL GROWTH
SERIES SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------------
Investment Purchases .............................. $27,642,289 $349,401,571 $219,119,552 $78,982,914
Investment Sales .................................. $31,124,454 $353,729,245 $183,487,206 $90,913,569
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------
Investment Purchases .............................. $5,285,407 $49,766,346 $115,605,848
Investment Sales .................................. $7,944,179 $54,319,149 $175,967,369
(5) SHARES OF BENEFICIAL INTEREST
Each series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
CAPITAL OPPORTUNITIES SERIES
-------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 16,517 $ 235,749 104,269 $ 1,361,979
Service Class ............. 102,347 1,422,986 72,056 936,625
------------ ------------ ------------ ------------
118,864 $ 1,658,735 176,325 $ 2,298,604
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 67,409 $ 940,362 164,589 $ 2,050,777
Service Class ............. 2,753 38,321 8,576 106,607
------------ ------------ ------------ ------------
70,162 $ 978,683 173,165 $ 2,157,384
============ ============ ============ ============
Shares reacquired
Initial Class ............. (3,577,864) $(49,979,600) (4,298,177) $(55,880,260)
Service Class ............. (161,224) (2,230,730) (218,299) (2,829,258)
------------ ------------ ------------ ------------
(3,739,088) $(52,210,330) (4,516,476) $(58,709,518)
============ ============ ============ ============
Net change
Initial Class ............. (3,493,938) $(48,803,489) (4,029,319) $(52,467,504)
Service Class ............. (56,124) (769,423) (137,667) (1,786,026)
------------ ------------ ------------ ------------
(3,550,062) $(49,572,912) (4,166,986) $(54,253,530)
============ ============ ============ ============
CORE EQUITY SERIES
-------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 312,826 $ 5,003,198 330,602 $ 4,742,399
Service Class ............. 247,615 3,851,420 64,342 936,068
------------ ------------ ------------ ------------
560,441 $ 8,854,618 394,944 $ 5,678,467
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 30,391 $ 475,009 40,516 $ 555,472
Service Class ............. 3,096 48,229 3,088 42,210
------------ ------------ ------------ ------------
33,487 $ 523,238 43,604 $ 597,682
============ ============ ============ ============
Shares reacquired
Initial Class ............. (998,630) $(15,593,079) (857,064) $(12,329,230)
Service Class ............. (169,419) (2,640,876) (100,848) (1,437,594)
------------ ------------ ------------ ------------
(1,168,049) $(18,233,955) (957,912) $(13,766,824)
============ ============ ============ ============
Net change
Initial Class ............. (655,413) $(10,114,872) (485,946) $ (7,031,359)
Service Class ............. 81,292 1,258,773 (33,418) (459,316)
------------ ------------ ------------ ------------
(574,121) $ (8,856,099) (519,364) $ (7,490,675)
============ ============ ============ ============
INTERNATIONAL GROWTH SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 732,337 $ 11,504,709 324,103 $ 4,406,471
Service Class ............. 234,667 3,791,904 128,093 1,772,745
------------ ------------ ------------ ------------
967,004 $ 15,296,613 452,196 $ 6,179,216
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 639,253 $ 10,816,168 83,531 $ 1,088,407
Service Class ............. 102,828 1,733,680 9,734 126,541
------------ ------------ ------------ ------------
742,081 $ 12,549,848 93,265 $ 1,214,948
============ ============ ============ ============
Shares reacquired
Initial Class ............. (1,405,942) $(22,836,046) (1,476,056) $(20,373,123)
Service Class ............. (305,530) (5,008,429) (236,474) (3,268,652)
------------ ------------ ------------ ------------
(1,711,472) $(27,844,475) (1,712,530) $(23,641,775)
============ ============ ============ ============
Net change
Initial Class ............. (34,352) $ (515,169) (1,068,422) $(14,878,245)
Service Class ............. 31,965 517,155 (98,647) (1,369,366)
------------ ------------ ------------ ------------
(2,387) $ 1,986 (1,167,069) $(16,247,611)
============ ============ ============ ============
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 359,234 $ 3,639,849 394,815 $ 3,703,767
Service Class ............. 776,618 7,634,816 906,975 8,377,359
------------ ------------ ------------ ------------
1,135,852 $ 11,274,665 1,301,790 $ 12,081,126
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 34,499 $ 344,988 243,752 $ 2,166,960
Service Class ............. -- -- 27,350 241,775
------------ ------------ ------------ ------------
34,499 $ 344,988 271,102 $ 2,408,735
============ ============ ============ ============
Shares reacquired
Initial Class ............. (8,891,386) $(88,512,406) (9,880,601) $(92,028,248)
Service Class ............. (1,470,69) (14,597,256) (1,064,902) (9,875,033)
------------ ------------ ------------ ------------
(10,362,085) (103,109,662) (10,945,503) (101,903,281)
============ ============ ============ ============
Net change
Initial Class ............. (8,497,653) $(84,527,569) (9,242,034) $(86,157,521)
Service Class ............. (694,081) (6,962,440) (130,577) (1,255,899)
------------ ------------ ------------ ------------
(9,191,734) $(91,490,009) (9,372,61) $(87,413,420)
============ ============ ============ ============
MID CAP VALUE SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. -- $ -- -- $ --
Service Class ............. 183,028 2,089,221 367,378 4,157,075
------------ ------------ ------------ ------------
183,028 $ 2,089,221 367,378 $ 4,157,075
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 347 $ 3,796 331 $ 3,404
Service Class ............. 284,083 3,082,304 279,466 2,858,933
------------ ------------ ------------ ------------
284,430 $ 3,086,100 279,797 $ 2,862,337
============ ============ ============ ============
Shares reacquired
Initial Class ............. -- $ -- -- $ --
Service Class ............. (514,091) (5,768,124) (387,245) (4,438,304)
------------ ------------ ------------ ------------
(514,091) $ (5,768,124) (387,245) $ (4,438,304)
============ ============ ============ ============
Net change
Initial Class ............. 347 $ 3,796 331 $ 3,404
Service Class ............. (46,980) (596,599) 259,599 2,577,704
------------ ------------ ------------ ------------
(46,633) $ (592,803) 259,930 $ 2,581,108
============ ============ ============ ============
NEW DISCOVERY SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 425,391 $ 6,275,390 360,523 $ 4,603,054
Service Class ............. 3,563,774 52,684,200 2,437,511 31,813,031
------------ ------------ ------------ ------------
3,989,165 $ 58,959,590 2,798,034 $ 36,416,085
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. -- $ -- -- $ --
Service Class ............. -- -- -- --
------------ ------------ ------------ ------------
$ -- $ -- -- $ --
============ ============ ============ ============
Shares reacquired
Initial Class ............. (2,675,264) $(40,407,070) (3,388,563) $(44,928,044)
Service Class ............. (1,485,598) (22,871,984) (902,492) (12,005,878)
------------ ------------ ------------ ------------
(4,160,862) $(63,279,054) (4,291,055) $(56,933,922)
============ ============ ============ ============
Net change
Initial Class ............. (2,249,873) $(34,131,680) (3,028,040) $(40,324,990)
Service Class ............. 2,078,176 29,812,216 1,535,019 19,807,153
------------ ------------ ------------ ------------
(171,697) $ (4,319,464) (1,493,021) $(20,517,837)
============ ============ ============ ============
RESEARCH INTERNATIONAL SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 724,258 $ 13,183,034 485,813 $ 7,172,973
Service Class ............. 2,578,912 46,665,150 1,771,273 26,364,326
------------ ------------ ------------ ------------
3,303,170 $ 59,848,184 2,257,086 $ 33,537,299
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 423,469 $ 7,969,687 50,122 $ 701,713
Service Class ............. 422,783 7,897,579 29,736 413,921
------------ ------------ ------------ ------------
846,252 $ 15,867,266 79,858 $ 1,115,634
============ ============ ============ ============
Shares reacquired
Initial Class ............. (874,788) $(15,901,318) (790,610) $(11,923,678)
Service Class ............. (532,402) (9,496,446) (625,576) (9,332,093)
------------ ------------ ------------ ------------
(1,407,190) $(25,397,764) 1,416,186) $(21,255,771)
============ ============ ============ ============
Net change
Initial Class ............. 272,939 $ 5,251,403 (254,675) $ (4,048,992)
Service Class ............. 2,469,293 45,066,283 1,175,433 17,446,154
------------ ------------ ------------ ------------
2,742,232 $ 50,317,686 920,758 $ 13,397,162
============ ============ ============ ============
STRATEGIC GROWTH SERIES
--------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
----------------------------- -----------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 199,322 $ 1,592,767 218,115 $ 1,655,048
Service Class ............. 578,697 4,456,611 567,070 4,160,821
------------ ------------ ------------ ------------
778,019 $ 6,049,378 785,185 $ 5,815,869
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. -- $ -- 19,124 $ 137,497
Service Class ............. -- -- 6,574 46,942
------------ ------------ ------------ ------------
-- $ -- 25,698 $ 184,439
============ ============ ============ ============
Shares reacquired
Initial Class ............. (1,230,419) $ (9,658,721) (1,454,461) $(10,940,500)
Service Class ............. (1,023,190) (8,079,744) (800,291) (5,998,540)
------------ ------------ ------------ ------------
(2,253,609) $(17,738,465) (2,254,752) $(16,939,040)
============ ============ ============ ============
Net change
Initial Class ............. (1,031,097) $ (8,065,954) (1,217,222) $ (9,147,955)
Service Class ............. (444,493) (3,623,133) (226,647) (1,790,777)
------------ ------------ ------------ ------------
(1,475,590) $(11,689,087) (1,443,869) $(10,938,732)
============ ============ ============ ============
STRATEGIC VALUE SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. -- $ -- $ --
Service Class ............. 47,690 470,541 78,391 820,532
------------ ------------ ------------ ------------
47,690 $ 470,541 78,391 $ 820,532
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 83 $ 816 98 $ 955
Service Class ............. 88,073 861,357 123,165 1,199,619
------------ ------------ ------------ ------------
88,156 $ 862,173 123,263 $ 1,200,574
============ ============ ============ ============
Shares reacquired
Initial Class ............. -- $ -- -- $ --
Service Class ............. (325,565) (3,246,897) (161,095) (1,668,599)
------------ ------------ ------------ ------------
(325,565) $ (3,246,897) (161,095) $ (1,668,599)
============ ============ ============ ============
Net change
Initial Class ............. 83 $ 816 98 $ 955
Service Class ............. (189,802) (1,914,999) 40,461 351,552
------------ ------------ ------------ ------------
(189,719) $ (1,914,183) 40,559 $ 352,507
============ ============ ============ ============
TECHNOLOGY SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 558,854 $ 2,736,403 248,102 $ 1,013,724
Service Class ............. 108,297 493,805 59,386 236,567
------------ ------------ ------------ ------------
667,151 $ 3,230,208 307,488 $ 1,250,291
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. -- $ -- -- $ --
Service Class ............. -- -- -- --
------------ ------------ ------------ ------------
-- $ -- -- $ --
============ ============ ============ ============
Shares reacquired
Initial Class ............. (1,356,989) $ (6,503,016) (1,484,357) $ (5,967,365)
Service Class ............. (287,427) (1,328,506) (167,371) (656,295)
------------ ------------ ------------ ------------
(1,644,416) $ (7,831,522) (1,651,728) $ (6,623,660)
============ ============ ============ ============
Net change
Initial Class ............. (798,135) $ (3,766,613) (1,236,255) $ (4,953,641)
Service Class ............. (179,130) (834,701) (107,985) (419,728)
------------ ------------ ------------ ------------
(977,265) $ (4,601,314) (1,344,240) $ (5,373,369)
============ ============ ============ ============
VALUE SERIES
------------------------------------------------------------
YEAR ENDED 12/31/06 YEAR ENDED 12/31/05
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------
Shares sold
Initial Class ............. 353,749 $ 6,188,916 415,889 $ 6,481,877
Service Class ............. 474,451 8,113,573 645,416 10,088,938
------------ ------------ ------------ ------------
828,200 $ 14,302,489 1,061,305 $ 16,570,815
============ ============ ============ ============
Shares issued to shareholders
in reinvestment of
distributions
Initial Class ............. 992,201 $ 16,748,354 304,923 $ 4,634,835
Service Class ............. 390,389 6,562,442 96,057 1,454,306
------------ ------------ ------------ ------------
1,382,590 $ 23,310,796 400,980 $ 6,089,141
============ ============ ============ ============
Shares reacquired
Initial Class ............. (3,701,196) $(63,174,279) (2,991,207) $(47,182,709)
Service Class ............. (1,086,414) (18,559,469) (660,956) (10,355,285)
------------ ------------ ------------ ------------
(4,787,610) $(81,733,748) (3,652,163) $(57,537,994)
============ ============ ============ ============
Net change
Initial Class ............. (2,355,246) $(40,237,009) (2,270,395) $(36,065,997)
Service Class ............. (221,574) (3,883,454) 80,517 1,187,959
------------ ------------ ------------ ------------
(2,576,820) $(44,120,463) (2,189,878) $(34,878,038)
============ ============ ============ ============
(6) LINE OF CREDIT Each series and other funds managed by MFS participate in a
$1 billion unsecured committed line of credit provided by a syndication of
banks under a credit agreement. In addition, each series and other funds
managed by MFS 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 December 31, 2006, each series' commitment fee and interest expense were
as follows and are included in miscellaneous expense on the Statements of
Operations:
COMMITMENT INTEREST
FEE EXPENSE
- -----------------------------------------------------------------------------
Capital Opportunities Series .................... $1,672 $ --
Core Equity Series .............................. 757 289
International Growth Series ..................... 1,249 4,614
Massachusetts Investors Growth Stock Series ..... 3,839 --
Mid Cap Value Series ............................ 213 --
New Discovery Series ............................ 2,689 3,875
Research International Series ................... 1,847 1,983
Strategic Growth Series ......................... 623 --
Strategic Value Series .......................... 82 --
Technology Series ............................... 179 --
Value Series .................................... 3,738 591
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and the Shareholders of MFS/Sun Life Series Trust:
We have audited the accompanying statements of assets and liabilities,
including the portfolios of investments, of MFS/Sun Life Series Trust (the
"Trust"), comprising Capital Opportunities Series, Core Equity Series,
International Growth Series, Massachusetts Investors Growth Stock Series, Mid
Cap Value Series, New Discovery Series, Research International Series,
Strategic Growth Series, Strategic Value Series, Technology Series and Value
Series as of December 31, 2006, and the related statements of operations for
the year then ended, the statements of changes in net assets for each of the
two years in the period then ended, and the financial highlights for each of
the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with 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. The Trust is not required to have, nor were we engaged to
perform, an audit of its 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
Trust'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, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2006, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial positions of Capital
Opportunities Series, Core Equity Series, International Growth Series,
Massachusetts Investors Growth Stock Series, Mid Cap Value Series, New
Discovery Series, Research International Series, Strategic Growth Series,
Strategic Value Series, Technology Series and Value Series as of December 31,
2006, the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and their
financial highlights for each of the five years in the period then ended, in
conformity with accounting principles generally accepted in the United States
of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 15, 2007
MFS/SUN LIFE SERIES TRUST
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the Trust, as of February 1, 2007, 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.
- -----------------------------------------------------------------------------------------------------------------------------------
POSITION(s) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATIONS DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- -----------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
- -----------------------------------------------------------------------------------------------------------------------------------
David D. Horn(3) Trustee April 1986 Private investor; Retired; Sun Life Assurance Company
(born 06/07/41) of Canada, Former Senior Vice President
and General Manager for the United States (until 1997)
- -----------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- -----------------------------------------------------------------------------------------------------------------------------------
J. Kermit Birchfield Chairman May 1997 Consultant; Century Partners, Inc.(investments),
(born 01/08/40) Managing Director; Displaytech, Inc. (manufacturer of liquid
crystal display technology), Director; Dessin Fournir LLC
(furniture manufacturer), Director (October 2005 to present)
- -----------------------------------------------------------------------------------------------------------------------------------
Robert C. Bishop Trustee May 2001 AutoImmune Inc. (pharmaceutical product development),
(born 01/13/43) Chairman, President and Chief Executive Officer; Caliper
Life Sciences Corp. (laboratory analytical instruments),
Director; Millipore Corporation (purification/ filtration
products), Director; Quintiles Transnational Corp. (contract
services to the medical industry), Director
- -----------------------------------------------------------------------------------------------------------------------------------
Frederick H. Dulles Trustee May 2001 Attorney; Ten State Street LLP (law firm), Partner
(born 03/12/42) (July 2003 to May 2005); McFadden, Pilkington & Ward
LLP (solicitors and registered foreign lawyers), Partner
(until June 2003); Jackson & Nash, LLP (law firm), Of
Counsel (January 2000 to November 2000)
- -----------------------------------------------------------------------------------------------------------------------------------
Marcia A. Kean Trustee April 2005 Feinstein Kean Healthcare (consulting), Chief Executive
(born 06/30/48) Officer (since December 2002), Managing Director (prior to
May 2001); Ardais Corporation (biotech products), Senior
Vice President - Commercialization (February 2002 until
November 2002)
- -----------------------------------------------------------------------------------------------------------------------------------
Ronald G. Steinhart Trustee May 2001 Private investor; Bank One, Texas N.A., Vice Chairman and
(born 06/15/40) Director (January 2000 to January 2001); Bank One
Corporation, Officer (until January 2000); Carreker
Corporation (consultant and technology provider to financial
institutions), Director; Prentiss Properties Trust (real
estate investment trust), Director; United Auto Group, Inc.
(automotive retailer), Director
- -----------------------------------------------------------------------------------------------------------------------------------
Haviland Wright Trustee May 2001 Hawaii Small Business Development Center, Kaua'l Center,
(born 07/21/48) Center Director (since March 2002); Displaytech, Inc.
(manufacturer of liquid crystal display technology),
Chairman and Chief Executive Officer (until March 2002)
- -----------------------------------------------------------------------------------------------------------------------------------
TRUSTEE EMERITUS
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel Adams Trustee Emeritus Retired
(born 10/19/25)
- -----------------------------------------------------------------------------------------------------------------------------------
OFFICERS
- -----------------------------------------------------------------------------------------------------------------------------------
Maria F. Dwyer(4) President November 2005 Massachusetts Financial Services Company, Executive
(born 12/01/58) 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(4) Treasurer September 2005 Massachusetts Financial Services Company, Senior Vice
(born 12/30/64) President (since September 2004); PricewaterhouseCoo pers
LLP, Partner (prior to September 2004)
- -----------------------------------------------------------------------------------------------------------------------------------
Christopher R. Bohane(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice President and
(born 01/18/74) and Assistant Clerk Senior Counsel (since April 2003); Kirkpatrick & Lockhart
LLP (law firm), Associate (prior to April 2003)
- -----------------------------------------------------------------------------------------------------------------------------------
Ethan D. Corey(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Special Counsel
(born 11/21/63) and Assistant Clerk (since December 2004); Dechert LLP (law firm), Counsel
(prior to December 2004)
- -----------------------------------------------------------------------------------------------------------------------------------
David L. DiLorenzo(4) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice
(born 08/10/68) President (since June 2005); JP Morgan Investor Services,
Vice President (January 2001 to June 2005)
- -----------------------------------------------------------------------------------------------------------------------------------
Timothy M. Fagan(4) Assistant Secretary September 2005 Massachusetts Financial Services Company, Vice
(born 07/10/68) and Assistant Clerk 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(4) Assistant Treasurer July 2005 Massachusetts Financial Services Company, Vice
(born 10/27/70) President (since May 2005); JP Morgan Investment Management
Company, Vice President (prior to May 2005)
- -----------------------------------------------------------------------------------------------------------------------------------
Brian E. Langenfeld(4) Assistant Secretary May 2006 Massachusetts Financial Services Company, Assistant
(born 03/07/73) and Assistant Clerk 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(4) Assistant Treasurer May 1997 Massachusetts Financial Services Company, Vice President
(born 11/13/57)
- -----------------------------------------------------------------------------------------------------------------------------------
Susan S. Newton(4) Assistant Secretary May 2005 Massachusetts Financial Services Company, Senior
(born 03/07/50) and Assistant Clerk Vice President and Assistant 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(4) Assistant Secretary July 2005 Massachusetts Financial Services Company, Vice
(born 11/05/70) and Assistant Clerk President and Senior Counsel (since June 2004); Bingham
McCutchen LLP (law firm), Associate (January 2001 to June
2004)
- -----------------------------------------------------------------------------------------------------------------------------------
Mark N. Polebaum(4) Secretary and February 2006 Massachusetts Financial Services Company, Executive
(born 05/01/52) Assistant Clerk 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 September 2004 Tarantino LLC (provider of compliance services),
(born 03/07/44) Compliance Officer Principal (since June 2004); CRA Business Strategies Group
(consulting services), Executive Vice President (April 2003
to June 2004); David L. Babson & Co. (investment adviser),
Managing Director, Chief Administrative Officer and Director
(February 1997 to March 2003)
- -----------------------------------------------------------------------------------------------------------------------------------
James O. Yost(4) Assistant Treasurer April 1992 Massachusetts Financial Services Company,
(born 06/12/60) Senior Vice President
- -----------------------------------------------------------------------------------------------------------------------------------
- ------------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product. Each Trustee has served continuously since
appointment.
(2) Directorships or trusteeships of companies required to report to the Securities and Exchange Commission (i.e., "public
companies").
(3) "Interested person" of the Sun Life of Canada (U.S.), 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 Series. The address of
Sun Life of Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street,
Boston, Massachusetts 02116.
The Series do not hold annual meetings for the purpose of electing Trustees,
and Trustees are not elected for fixed terms. 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.
All Trustees currently serve as Trustees of the Series and have served in that
capacity since originally elected or appointed. All of the Trustees are also
Managers of the Compass Variable Accounts. The executive officers of the MFS
Sun Life Series Trust hold similar offices for the Compass Variable Accounts
and other funds in the MFS fund complex. Each Trustee serves as a Trustee or
Manager of 34 Accounts/Series.
The Statement of Additional Information contains further information about the
Trustees and is available without charge upon request by calling
1-800-752-7215.
MFS/SUN LIFE SERIES TRUST
RESULTS OF SHAREHOLDER MEETING (UNAUDITED) -- 12/31/06
At a special meeting of shareholders of the Technology Series, which was held
on August 15, 2006, the following actions were taken:
Item 1. To approve a change to the Series' sub-classification under the
Investment Company Act of 1940 from a diversified company to a non-diversified
company:
NUMBER OF DOLLARS
Affirmative ........... $17,595,735.63
Against ................ 1,790,756.31
Abstain ................ 1,061,697.75
Item 2. To approve an amendment to the Series' fundamental investment policy
concerning concentration.
NUMBER OF DOLLARS
Affirmative ........... $17,435,948.03
Against ................ 1,941,685.55
Abstain ................ 1,070,556.11
BOARD REVIEW OF INVESTMENT ADVISORY AGREEMENTS
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 Trust's investment
advisory agreements with Massachusetts Financial Services Company (MFS) on
behalf of the Series. The Trustees consider matters bearing on the Series and
their 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 agreements for the Series. The independent Trustees were
assisted in their evaluation of the investment advisory agreements by
independent legal counsel, from whom they received separate legal advice and
with whom they met separately from MFS management during various contract
review meetings. The independent Trustees were also assisted in this process by
the Series' Independent Chief Compliance Officer, a full-time senior officer of
the Series appointed by and reporting to the independent Trustees.
In connection with their deliberations, 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 agreements were considered separately for
each Series, although the Trustees also took into account the common interests
of all Series 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 agreements and other arrangements with the Trust.
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 each Series for
various time periods ended December 31, 2005, compared to the investment
performance of a group of funds with substantially similar investment
classifications/objectives (the "Lipper performance universe"), as well as the
investment performance of a group of funds identified by objective criteria
suggested by MFS ("peer funds"), (ii) information provided by Lipper Inc. on
each Series' advisory fees and other expenses compared to the advisory fees and
other expenses of comparable funds identified by Lipper (the "Lipper expense
group"), as well as the advisory fees and other expenses of peer funds
identified by objective criteria suggested by MFS, (iii) information provided
by MFS on the advisory fees of comparable portfolios of its other clients,
including institutional separate account and other clients, (iv) information as
to whether, and to what extent applicable, expense waivers, reimbursements or
fee "breakpoints" are observed for a Series, (v) information regarding MFS'
financial results and financial condition, including MFS' and certain of its
affiliates' estimated profitability from services performed for the Series,
(vi) MFS' views regarding the outlook for the mutual fund industry and its
strategic business plans, (vii) descriptions of various functions performed by
MFS for the Trust, 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 Series.
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' conclusions as to the continuation of the investment advisory
agreements were based on 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 for each Series, while individual Trustees may have given different
weight to various factors and evaluated the information presented as a whole
differently than another Trustee. The Trustees recognized that the fee
arrangements for the Series reflect 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 compared
each Series' total return investment performance to the performance of peer
groups of funds over various time periods. The Trustees placed particular
emphasis on the total return performance of each Series' Initial Class shares
in comparison to the performance of funds in its Lipper performance universe
over the one-, three- and five-year periods. The Trustees did not rely on
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 during contract review meetings, as well as during
investment review meetings conducted with portfolio management personnel during
the course of the year. For Series whose performance lagged their peer groups,
they discussed the factors that contributed thereto and MFS' efforts to improve
such Series' performance. After reviewing this information, the Trustees
concluded, within the context of their overall conclusions regarding the
investment advisory agreements, that they were satisfied with MFS' responses
and efforts relating to investment performance.
In assessing the reasonableness of each Series' advisory fee, the Trustees
considered, among other information, each Series' advisory fee and the total
expense ratio of the Series' Initial Class shares as a percentage of average
net assets, compared to the advisory fee and total expense ratios of other
comparable funds based on information provided by Lipper Inc. and MFS. The
Trustees also considered the advisory fees charged by MFS to institutional
accounts. In comparing these fees, the Trustees considered the generally
broader scope of services provided by MFS to the Trust than those provided to
institutional accounts. The Trustees also considered 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 Series, and the impact on MFS and
related expenses due to the more extensive regulatory regime to which the
Series are subject, compared to institutional accounts.
The Trustees also considered whether a Series is likely to benefit from any
economies of scale due to future asset growth. In this regard, the Trustees
reviewed the adequacy of breakpoints and discussed with MFS any adjustments
necessary for the shareholders' benefits.
The Trustees also considered information prepared by MFS relating to its costs
and profits with respect to the Series and other investment companies and
accounts advised by MFS, as well as MFS' methodologies used to determine and
allocate its costs to the Series and other accounts and products for purposes
of estimating profitability.
After reviewing these and other factors described below, the Trustees concluded
that the advisory fees charged to the Series represent reasonable compensation
in light of the nature and quality of the services being provided by MFS.
In addition, the Trustees considered MFS' resources and related efforts to
continue to retain, attract and motivate capable personnel to serve the Series.
The Trustees also considered the financial resources of MFS and its parent, Sun
Life Financial Inc. The Trustees further considered any advantages and possible
disadvantages of having an adviser which also serves other investment companies
as well as institutional accounts.
The Trustees also considered the nature, quality, cost, and extent of
administrative, transfer agency, and distribution services provided to the
Series by MFS and its affiliates under agreements and plans other than the
investment advisory agreements, including the 12b-1 fees the Series pay 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
on the Series' behalf, including securities lending programs, directed expense
payment programs, class action recovery programs, and MFS' interaction with
third-party service providers, principally custodians and sub-custodians. The
Trustees concluded that the various non-advisory services provided by MFS and
its affiliates on behalf of the Series were satisfactory. The Trustees also
considered the benefits to MFS from the use of the Series' portfolio brokerage
commissions to pay for research and other similar services (including MFS'
policy not to use "soft dollars" generated by fund portfolio transactions to
pay for third-party research), and various other factors. Additionally, the
Trustees considered so-called "fall-out benefits" to MFS such as reputational
value derived from serving as investment manager to the Trust, and determined
that any such benefits derived by MFS were reasonable and fair.
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 investment advisory agreements
should be continued for an additional one-year period, commencing September 1,
2006.
CAPITAL OPPORTUNITIES SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 4th quintile for the three-year period and the 5th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was at the median and total expense ratio
was approximately at the median of such fees and expenses of funds in the
Lipper expense group. The Trustees further concluded that the existing
breakpoints were sufficient to allow the Series to benefit from economies of
scale as its assets grow. The Trustees concluded that the fees were reasonable
in light of the nature and quality of services provided.
CORE EQUITY SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 3rd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 3rd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
INTERNATIONAL GROWTH SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 3rd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 2nd quintile for the three-year period and the 1st quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each above the
median of such fees and expenses of funds in the Lipper expense group. The
Trustees further concluded that the existing breakpoints were sufficient to
allow the Series to benefit from economies of scale as its assets grow. The
Trustees concluded that the fees were reasonable in light of the nature and
quality of services provided.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 4th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 4th quintile for the three-year period and the 5th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of steps taken to improve performance, the Board of
Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the existing breakpoints
were sufficient to allow the Series to benefit from economies of scale as its
assets grow. The Trustees concluded that the fees were reasonable in light of
the nature and quality of services provided.
MID CAP VALUE SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period ended December 31,
2005, relative to the Lipper performance universe. (The Series has been in
existence for less than five years.) Based on the nature and quality of
services provided by MFS and MFS' explanation of recent steps taken to improve
performance, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was below the median, and total expense
ratio was approximately at the median of such fees and expenses of funds in the
Lipper expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
NEW DISCOVERY SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 4th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 5th quintile for the three-year period and the 4th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of steps taken to improve performance, the Board of
Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was above the median, and total expense
ratio was approximately at the median of such fees and expenses in the Lipper
expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
RESEARCH INTERNATIONAL SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 2nd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 2nd quintile for the three-year period and the 1st quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each above the
median of such fees and expenses of funds in the Lipper expense group. The
Trustees further concluded that the existing breakpoints were sufficient to
allow the Series to benefit from economies of scale as its assets grow. The
Trustees concluded that the fees were reasonable in light of the nature and
quality of services provided.
STRATEGIC GROWTH SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 5th quintile for the three-year period and the 5th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
STRATEGIC VALUE SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 5th quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 5th quintile for the three-year period ended December 31,
2005, relative to the Lipper performance universe. (The Series has been in
existence for less than five years.) Based on the nature and quality of
services provided by MFS and MFS' explanation of recent steps taken to improve
performance, the Board of Trustees concluded that the Series' performance was
adequate.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was below the median and total expense
ratio was at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
TECHNOLOGY SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 3rd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 3rd quintile for the three-year period and the 5th quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS and MFS' explanation of recent steps taken to improve performance, the
Board of Trustees concluded that the Series' performance was satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate was below the median and total expense
ratio was above the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
VALUE SERIES
The Trustees noted the performance of the Series' Initial Class shares was in
the 2nd quintile relative to the other funds in the Lipper performance universe
for the one-year period (the 1st quintile being the best performers and the 5th
quintile being the worst performers). The total return performance of the
Series was in the 1st quintile for the three-year period and the 2nd quintile
for the five-year period ended December 31, 2005, relative to the Lipper
performance universe. Based on the nature and quality of services provided by
MFS, the Board of Trustees concluded that the Series' performance was
satisfactory.
In considering the fees, the Trustees noted from the Lipper data that the
Series' effective advisory fee rate and total expense ratio were each
approximately at the median of such fees and expenses of funds in the Lipper
expense group. The Trustees further concluded that the breakpoints were
sufficient to allow the Series to benefit from economies of scale as its assets
grow. In addition, the Trustees considered that MFS agreed to observe a total
expense limitation for the Series. The Trustees concluded that the fees were
reasonable in light of the nature and quality of services provided.
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.
MFS/SUN LIFE SERIES TRUST
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
PROXY VOTING POLICIES AND INFORMATION
A general description of the series' 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 each series 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
Each series 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. Each series' 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 1-800-SEC-0330. Each series' 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:
publicinfor@sec.gov or by writing the Public Reference Section at the above
address.
FEDERAL TAX INFORMATION (UNAUDITED)
The following information is provided pursuant to provisions of the Internal
Revenue Code.
Each series below designates the following as capital gain dividends paid
during the fiscal year.
CAPITAL
GAINS
DIVIDENDS
-----------------------------------------------------------
International Growth Series ................. $11,592,743
Mid Cap Value Series ........................ 1,357,125
Research International Series ............... 11,276,553
Strategic Value Series ...................... 535,561
Value Series ................................ 16,774,240
For corporate shareholders, the percentages of the ordinary income dividends
paid during the fiscal year that qualify for the corporate dividends received
deduction are as follows:
DIVIDENDS
RECEIVED
DEDUCTIONS
-----------------------------------------------------------
Capital Opportunities Series ................ 100.00%
Core Equity Series .......................... 100.00%
International Growth Series ................. 3.09%
Massachusetts Investors Growth Stock Series . 100.00%
Strategic Value Series ...................... 51.53%
Value Series ................................ 100.00%
Income derived from foreign sources was $2,851,703 and $3,802,175 for
International Growth Series and Research International Series, respectively.
These series intend to pass through foreign tax credits of $221,720 and
$251,633 for International Growth Series and Research International Series,
respectively, for the fiscal year.
Sun Life Financial Distributors Inc. SUN-C-ANN-2/07
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.
A copy of the Code of Ethics is filed as an exhibit to this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Messrs. J. Kermit Birchfield, Robert C. Bishop, Ronald G. Steinhart and
Haviland Wright, 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. J. Kermit Birchfield, Robert C. Bishop, Ronald G. Steinhart
and Haviland Wright are "independent" members of the Audit Committee as defined
in Form N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(a) THROUGH 4(d) AND 4(g):
The Board of Trustees has appointed Deloitte & Touche LLP ("Deloitte") to serve
as independent registered public accounting firm to each series of the
Registrant (collectively, the "Funds"). The tables below set forth the audit
fees billed to the Funds as well as fees for non-audit services provided to the
Funds and/or to the Funds' investment adviser, Massachusetts Financial Services
Company ("MFS") and to various entities either controlling, controlled by, or
under common control with MFS that provide ongoing services to the Funds ("MFS
Related Entities").
For the fiscal years ended December 31, 2006 and 2005, audit fees billed to the
Funds by Deloitte were as follows:
Audit Fees
FEES BILLED BY DELOITTE: 2006 2005
---- ----
Bond Series $45,435 $45,080
Capital Appreciation Series 33,418 33,063
Capital Opportunities Series 33,418 33,063
Core Equity Series 33,418 33,063
Emerging Growth Series 34,050 33,695
Emerging Markets Equity Series 35,315 34,960
Global Governments Series 45,435 45,080
Global Growth Series 43,538 43,183
Global Total Return Series 45,538 43,183
Government Securities Series 38,478 38,123
High Yield Series 43,538 43,183
International Growth Series 35,315 34,960
International Value Series 35,948 35,593
Massachusetts Investors Growth Stock Series 33,418 33,063
Massachusetts Investors Trust Series 33,418 33,063
Mid Cap Growth Series 33,418 33,063
Mid Cap Value Series 35,948 35,593
Money Market Series 20,135 19,780
New Discovery Series 33,418 33,063
Research International Series 33,418 33,063
Research Series 34,050 33,695
Strategic Growth Series 33,418 33,063
Strategic Income Series 33,418 33,063
Strategic Value Series 35,948 35,593
Technology Series 33,418 33,063
Total Return Series 45,435 45,080
Utilities Series 33,418 33,063
Value Series 33,418 33,063
---------- --------
TOTAL $1,006,540 $996,600
For the fiscal years ended December 31, 2006 and 2005, fees billed by Deloitte
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 DELOITTE: 2006 2005 2006 2005 2006 2005
---- ---- ---- ---- ---- ----
To Bond Series $0 $0 $4,450 $6,550 $379 $0
To Capital Appreciation Series 0 0 4,450 6,550 379 0
To Capital Opportunities Series 0 0 4,450 6,550 379 0
To Core Equity Series 0 0 4,450 6,550 379 0
To Emerging Growth Series 0 0 4,450 6,550 379 0
To Emerging Markets Equity Series 0 0 4,450 6,550 379 0
To Global Governments Series 0 0 4,450 6,550 379 0
To Global Growth Series 0 0 4,450 6,550 379 0
To Global Total Return Series 0 0 4,450 6,550 379 0
To Government Securities Series 0 0 4,450 6,550 379 0
To High Yield Series 0 0 4,450 6,550 379 0
To International Growth Series 0 0 4,450 6,550 379 0
To International Value Series 0 0 4,450 6,550 379 0
To Massachusetts Investors 0 0 4,450 6,550 379 0
Growth Stock Series
To Massachusetts Investors 0 0 4,450 6,550 379 0
Trust Series
To Mid Cap Growth Series 0 0 4,450 6,550 379 0
To Mid Cap Value Series 0 0 4,450 6,550 379 0
To Money Market Series 0 0 4,450 6,550 379 0
To New Discovery Series 0 0 4,450 6,550 379 0
To Research International Series 0 0 4,450 6,550 379 0
To Research Series 0 0 4,450 6,550 379 0
To Strategic Growth Series 0 0 4,450 6,550 379 0
To Strategic Income Series 0 0 4,450 6,550 379 0
To Strategic Value Series 0 0 4,450 6,550 379 0
To Technology Series 0 0 4,450 6,550 379 0
To Total Return Series 0 0 4,450 6,550 379 0
To Utilities Series 0 0 4,450 6,550 379 0
To Value Series 0 0 4,450 6,550 379 0
TOTAL FEES BILLED BY DELOITTE $0 $0 $124,600 $183,400 $10,612 $0
TO ABOVE FUNDS:
To MFS and MFS Related Entities $981,825 $841,371 $0 $0 $418,092 $403,825
of Bond Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Capital Appreciation Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Capital Opportunities Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Core Equity Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Emerging Growth Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Emerging Markets Equity Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Global Governments Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Global Growth Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Global Total Return Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Government Securities Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of High Yield Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of International Growth Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of International Value Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Massachusetts Investors Growth
Stock Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Massachusetts Investors
Trust Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Mid Cap Growth Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Mid Cap Value Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Money Market Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of New Discovery Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Research International Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Research Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Strategic Growth Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Strategic Income Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Strategic Value Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of MFS Technology Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Total Return Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Utilities Series*
To MFS and MFS Related Entities 981,825 841,371 0 0 418,092 403,825
of Value Series*
AGGREGATE FEES FOR NON-AUDIT
SERVICES:
2006 2005
---- ----
To Bond Series, MFS and
MFS Related Entities# $1,547,931 $1,285,192
To Capital Appreciation Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Capital Opportunities Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Core Equity Series, MFS and 1,547,931 1,285,192
MFS Related Entities#
To Emerging Growth Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Emerging Markets Equity Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Global Governments Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To MFS Global Growth, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Global Total Return Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Governments Securities Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To High Yield Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To International Growth Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To International Value Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Massachusetts Investors 1,547,931 1,285,192
Growth Stock Series,
MFS and MFS Related Entities#
To Massachusetts Investors 1,547,931 1,285,192
Trust Series,
MFS and MFS Related Entities#
To Mid Cap Growth Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Mid Cap Value Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Money Market Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To New Discovery Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Research International Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Research Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Strategic Growth Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Strategic Income Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Strategic Value Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Technology Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Total Return Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Utilities Series, 1,547,931 1,285,192
MFS and MFS Related Entities#
To Value Series, 1,547,931 1,285,192
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 Deloitte, 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 Deloitte other than those reported under "Audit Fees,"
"Audit-Related Fees" and "Tax Fees," including fees for services related to
sales tax refunds, consultation on internal cost allocations, consultation
on allocation of monies pursuant to an administrative proceeding regarding
disclosure of brokerage allocation practices in connection with fund sales,
analysis of certain portfolio holdings versus investment styles, review of
internal controls and review of Rule 38a-1 compliance program.
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 in each period between regular meetings of the Audit Committee. Any
engagement pre-approved by the Chair between regular meetings of the Audit
Committee shall be presented for ratification by the entire Audit Committee at
its next regularly scheduled meeting.
ITEM 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Fund and MFS and MFS Related Entities relating
directly to the operations and financial reporting of the Registrant disclosed
above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X (which permits audit committee approval after
the start of the engagement with respect to services other than audit, review
or attest services, if certain conditions are satisfied).
ITEM 4(f): Not applicable.
ITEM 4(h): The Registrant's Audit Committee has considered whether the
provision by a Registrant's independent registered public accounting firm of
non-audit services to MFS and MFS Related Entities that were not pre-approved
by the Committee (because such services 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 407(c)(2)(iv) of Regulation S-K (as required by Item
22(b)(15) 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 report on 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/SUN LIFE SERIES TRUST
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By (Signature and Title)* MARIA F. DWYER
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Maria F. Dwyer, President
Date: February 20, 2007
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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
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Maria F. Dwyer, President (Principal Executive
Officer)
Date: February 20, 2007
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By (Signature and Title)* TRACY ATKINSON
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Tracy Atkinson, Treasurer (Principal Financial Officer
and Accounting Officer)
Date: February 20, 2007
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* Print name and title of each signing officer under his or her signature.