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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
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MFS/SUN LIFE SERIES TRUST
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(Exact name of registrant as specified in charter)
500 Boylston Street, Boston, Massachusetts 02116
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(Address of principal executive offices) (Zip code)
Stephen E. Cavan
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
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Date of fiscal year end: 12/31/03
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Date of reporting period: 12/31/03
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ITEM 1. REPORTS TO STOCKHOLDERS.
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[MFS(R)/SUN LIFE SERIES TRUST LOGO]
ANNUAL REPORT - DECEMBER 31, 2003
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
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TABLE OF CONTENTS
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Letter from the Chairman 1
Management Review 2
Performance Summary 7
Portfolio of Investments 12
Financial Statements 38
Notes to Financial Statements 53
Independent Auditors' Report 66
Federal Tax Information 67
Board of Managers and Officers Back Cover
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
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LETTER FROM THE CHAIRMAN
DEAR CONTRACT OWNERS,
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for our contract owners. But we
also think it's a time to reinforce the fundamentals of a sound investment
strategy.
We think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, allocate your holdings across the major asset classes. Second,
diversify within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, rebalance your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings into the current,
"hottest" performing investment. History suggests, however, that it is difficult
to predict year after year what the best performing sector or market will be.
While it is true that the past cannot offer any guarantees for the future, the
markets historically have demonstrated the benefits of taking the prudent
approach and spreading your assets across a variety of holdings. For investors
with a long-term goal such as retirement, a balanced approach usually makes the
most sense. As always, your investment professional can help you identify an
appropriate mix of investments for your needs.
Respectfully,
/s/ C. James Prieur
C. James Prieur
Chairman of the MFS(R)/Sun Life Series Trust
January 19, 2004
The opinions expressed in this letter are those of C. James Prieur, and no
forecasts can be guaranteed.
Note to contract owners: Effective January 1, 2004, J. Kermit Birchfield, an
independent trustee, was appointed Chairman of the Compass Board, which oversees
the MFS/SunLife Series Trust.
MARKET ENVIRONMENT
In the early months of 2003, investors were battered by economic and
geopolitical uncertainty. By year-end, however, investors were celebrating 2003
as the first positive year for global markets since 1999. The turnaround in
global stock markets began in March and April of 2003, when it became apparent
that the U.S.- and British-led coalition was on the verge of military success in
Iraq. The release of increasingly positive economic numbers as 2003 progressed,
particularly in the corporate earnings area, helped drive the ensuing equity
rally. In addition, investor concern over issues that had held back the market
in the first quarter -- including the Iraq situation, a short-lived SARS
epidemic, and corporate misdeeds -- largely faded as the year progressed.
In the equity markets, the big surprise of 2003 was investors' appetite for
risk. After a brutal three-year market decline, many observers -- including MFS
and Sun Life -- believed investors would avoid risky investments. Instead, we
experienced an equity rally led by relatively low-quality, higher-risk stocks --
stocks of companies with substantial debt on their balance sheets, low profit
margins, and/or second- and third-tier competitive positioning. For much of
2003, investors seemed to favor the stocks that had previously fallen the
hardest, rather than bidding up industry leaders that had weathered the global
downturn relatively well. Toward the end of the year, however, we felt the
market was beginning to rotate toward less risky companies with stronger
fundamentals (business factors such as earnings and cash flow growth).
For U.S. investors in overseas stock markets, the big story of 2003 was the
decline of the dollar relative to other currencies. While many developed-nation
stock markets performed roughly in line with the broad U.S. market -- and
developing nations in general did even better -- the declining dollar increased
those returns for U.S. investors in overseas equities. For example, the Morgan
Stanley Capital International (MSCI) EAFE (Europe, Australasia, Far East) Index,
a commonly used measure of the international stock market, returned 20.8%
measured in local currencies but 39.2% when returns were converted into dollars.
(Source: Morgan Stanley Capital International)
Factors that contributed to the dollar's decline against most currencies
included a U.S. trade deficit that overseas investors viewed as excessive; low
interest rates that decreased the attractiveness of dollar-denominated
investments; and the Bush administration's apparent abandonment of a
long-standing U.S. policy of publicly advocating a strong dollar.
In the bond market, we saw interest rates in many developed nations fall to
historical lows in 2003. But by year-end, an improving global economy began to
put upward pressure on rates, and Australia and the United Kingdom became the
first major developed nations to raise rates. In the United States, the Federal
Reserve Board kept short-term rates at a four-decade low through year-end.
However, long-term U.S. Treasury rates -- which are largely determined by
investor sentiment -- rose modestly for the period as a whole and experienced
sharp volatility in the spring and summer. Ten-year rates fell when the Fed,
after its May meeting, expressed a strong desire to keep rates low and implied
that it might use some unconventional strategies to do so -- such as buying
longer-term bonds. Then long-term rates shot up in late June and July after the
Fed lowered the short-term rate by only a quarter-point at its June meeting,
disappointing a market that had expected a half-point drop. Many investors read
the quarter-point move as a sign that perhaps the economy was improving faster
than the Fed had expected.
In contrast, U.S. corporate bonds generally benefited from an accelerating
recovery. Growth in GDP (gross domestic product), employment, and other economic
measures pointed toward improving corporate bond fundamentals (factors such as
earnings, cash flow growth, and credit quality).
In response, investors became less risk averse, and the "flight to quality" that
had characterized the bond market in late 2002 began to fade. With Treasury
yields at four-decade lows, investors in 2003 sought out higher-yielding
corporate debt. Riskier, lower-rated bonds showed the best performance for the
year.
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MANAGEMENT REVIEW
BOND SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 9.72%, and Service Class shares 9.43%. These returns,
which include the reinvestment of any dividends and capital gains distributions
but do not reflect any applicable contract or surrender charges, compare with a
return of 4.67% over the same period for the series' benchmark, the Lehman
Brothers Government/Credit Index (the Lehman Index). The Lehman Index measures
the performance of all debt obligations of the U.S. Treasury and U.S. government
agencies, and all investment-grade domestic corporate debt. Over the same
period, the average corporate-debt "BBB"-rated fund tracked by Lipper Inc., an
independent firm that reports mutual fund performance, returned 8.23%.
LOWER-RATED DEBT DROVE RELATIVE PERFORMANCE
A key driver of the series' outperformance against its benchmark, the Lehman
Brothers Government/Credit Index, was a relative overweighting in bonds of "BBB"
and "BB" credit quality. Over the period, we increased the portfolio's
concentration in those areas and decreased its allocation to higher-rated bonds.
This downward shift in overall credit quality was based on our belief going into
the period that credit spreads were wide and were likely to narrow, and that an
improving economy would benefit corporate bonds. In fact our strategy worked
well over the period as the U.S. economic recovery accelerated and lower-rated
bonds outperformed.
One area of strength was our position in "BB"-rated securities. These
noninvestment-grade bonds are one level below investment-grade territory ("BBB"
is the lowest investment-grade rating) and are often referred to as "crossover"
bonds. Our research strives to uncover "BB"-rated bonds that we believe have a
strong probability of crossing over to an investment-grade rating. Such an
upgrade increases the number of potential buyers for a bond and thus generally
increases its price.
Specific industry and security selection was another key area of strength. Some
of the worst-performing segments of the market in 2002 were among the strongest
beneficiaries of the improving economy in 2003. More specifically, over the
period the series' holdings in four industries did particularly well: autos,
telecommunications, media and cable, and utilities.
In our view, bonds of U.S. auto companies, especially those of Ford Motor
Company, had been somewhat over-penalized in 2002. As rating agencies downgraded
Ford debt in 2002, many investors feared a credit crisis if the market refused
to refinance the firm's short-term debt. When those fears did not come to
fruition, our Ford bonds and other auto industry bonds performed well.
In the telecommunications area, we feel investors came to the conclusion that
the WorldCom debacle was not indicative of the industry as a whole. While
telecom bonds as a group were hard-hit in 2002, over the period bonds of some of
the industry's major firms rallied. Portfolio performance benefited from our
holdings in Verizon, Sprint, and Canadian telecommunications company Telus.
In the utilities industry, we witnessed a situation that paralleled events in
the telecom area: fraud at a major firm, Enron, caused investors to question the
health of the entire industry in 2002. In the first quarter of 2003, however,
the panic started to subside. Utilities had begun to improve their balance
sheets by issuing equity to pay down debt. Banks restructured utility debt.
Investors seemed to realize that most utilities were not going to go bankrupt
and that perhaps their securities had become undervalued. The result was strong
performance of the series' utility holdings over the period.
In the media and cable business, our Comcast position (composed of former TCI
bonds) did particularly well. Previous to the period, Comcast bonds had been
held back by concerns that the firm would struggle with the integration of its
largest-ever acquisition, the cable business of AT&T (the former TCI
Communications). As Comcast displayed its ability to manage the business better
than AT&T had done, Comcast bonds rallied.
Although not all of the portfolio's investments performed as well as those
described above, this was a period in which the market environment was
particularly favorable for the asset class -- corporate debt -- in which we were
overweighted. That situation contrasted with the environment in some earlier
periods, during which our corporate holdings struggled under the weight of a
sluggish economy.
EMERGING MARKETS EQUITY SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 52.60%, and Service Class shares 52.12%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 56.28% over the same period for the series' benchmark,
the Morgan Stanley Capital International (MSCI) Emerging Markets Free (EMF)
Index (the MSCI EMF Index), which measures the performance of emerging market
stocks. During the same period, the Lipper Emerging Markets Fund Index, which
measures the performance of emerging market equity funds, returned 56.96%.
The combination of several factors made the period particularly good for
emerging market stocks. Emerging market issues have historically tended to be
sensitive to global economic and corporate earnings growth. As global growth was
particularly strong during the period -- driven largely by China, the Pacific
Rim economies, and a recovery in Latin America -- emerging market stocks
appreciated. China was perhaps the largest influence on the world economy, as
its growing manufacturing sector demanded massive amounts of raw materials and
shipping capacity from the rest of the world.
Low valuations were another factor that made emerging market issues attractive
to investors. Emerging market stocks entered the period at significantly lower
valuations than equities of developed markets. Although valuations rose over the
period, at period-end emerging market stocks were still selling at significant
discounts to comparable developed-nation equities. In addition, investors
displayed an increased appetite for risk over the period; this was positive for
emerging market stocks, which have historically been viewed by investors as a
relatively risky asset class. Finally, the dramatic weakening of the U.S. dollar
was another positive factor, as dollar-denominated investors saw appreciation in
the value of assets denominated in foreign currency.
DETRACTORS FROM PERFORMANCE
Relative to the MSCI EMF Index, the portfolio's three weakest sectors over the
period were consumer staples, industrial goods and services, and basic
materials. Our holding in Grupo Modelo, a Mexican brewery known for Corona beer,
was the key detractor in the consumer staples area. Although the firm had high
market share and strong profit margins, it was in a relatively stable line of
business
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during a period when the strongest stock performance came from industries that
were more sensitive to an economic upturn.
In the industrial goods and services sector, the series did not own Embraer and
was underweighted in Hyundai Mobis, two stocks that appreciated sharply. While
Brazilian aircraft maker Embraer did well as airlines bought smaller, more
efficient aircraft for regional routes, we avoided the stock because we believed
the financial condition of its customer base, the airline industry, was poor. We
were underweighted in South Korean auto parts maker Hyundai Mobis, and did not
own it at period-end, because of concerns about the firm's corporate governance.
In the basic materials sector, relative performance was held back by three South
African mining firms whose stocks underperformed the broad market. The
depreciation of the dollar relative to the South African rand squeezed profit
margins at mining and exporting firms Gold Fields, Anglo American Platinum, and
Impala Platinum. By period-end, Gold Fields had been sold out of the portfolio.
However, other holdings in the basic materials sector were among the series'
strongest performers. Norilsk Nickel, a Russian firm that is the world's largest
nickel supplier, and Companhia Vale Do Rio Doce (CVRD) in Brazil, the world's
largest miner of iron ore, did well as commodity demand and prices were robust
over the period, largely because of Chinese demand.
Individual holdings that hurt relative performance included Telefonos de Mexico
(TelMex), the dominant wireline phone provider in Mexico. TelMex was a
relatively defensive stock during a period when the market shunned defensive
issues in favor of higher-growth companies. We briefly held a position in
Infosys Technologies, an Indian information technology consulting firm, which we
sold prior to a substantial rally in Infosys stock and in the broad Indian
market.
The portfolio's cash position also detracted from relative performance. The
series holds some cash in reserve to buy new holdings and to cover investor
exchanges or redemptions -- as do nearly all series. In a period when equity
markets rose sharply, cash hurt performance against our benchmark, the MSCI EMF
Index, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Autos and housing, financial services, and energy were the series'
strongest-performing sectors on a relative basis. In the autos and housing
sector, stock in Hong Kong-listed Denway Motors rose sharply. A Honda joint
venture that manufactures cars in China, the firm benefited from exploding
demand; the wait for a new Honda Accord was several months. By period-end, we
had sold our Denway stock and taken profits. Corporation Geo, a Mexican builder
of low- and moderate-income housing, benefited from the combination of a young
population, a rising middle class, and low interest rates that released a
pent-up demand for housing. In Thailand, Siam Cement also benefited from low
interest rates that fueled a construction boom.
In the financial services sector, we owned Turkish firm Akbank as a way to
participate in an improving Turkish economy; the bank benefited from higher loan
volume and falling interest rates, and is known for high-quality reporting to
shareholders. Being underweighted in Korea's Kookmin Bank also helped relative
performance, as Kookmin was hurt by its ownership of two credit card companies
that went bankrupt. Our holding in ICICI Bank in India profited from factors
similar to those we saw in Mexico: the combination of low interest rates, an
expanding middle class, and a young population looking to buy homes created a
strong demand for mortgage and consumer loans. By period-end, we had eliminated
Kookmin from the portfolio and sold our ICICI position at a profit.
In the energy area, the series benefited from an overweighted position in one of
the strongest-performing sectors over the period. A trend toward consolidation
in the Russian oil industry drove two of our largest contributors in the sector.
We sold our Surgutneftegaz stock after it rose on speculation that the firm
would be taken over. Siberian Oil Company (Sibneft) stock also rose when the
company was taken over by Yukos, and we sold our Sibneft holding.
GLOBAL GOVERNMENT SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 15.60%, and Service Class shares 15.30%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with the return of 14.91% over the same period for the series'
benchmark, the Citigroup World Government Bond Index. The Citigroup World
Government Bond Index measures developed country government bond markets around
the world.
A BOND-FRIENDLY ENVIRONMENT
The global environment was characterized by weak economic activity during the
first half (H1) of 2003 (especially during the lead up to, and subsequent
intervention, in Iraq), followed by a moderate upswing in second-half (H2)
growth. This growth was primarily driven by more buoyant conditions in the
United States as well as improving prospects for Japan and Europe. Despite
improved conditions, excess global production capacity and low inflation led
most of the major developed countries to follow H1 interest rate cuts with
steady low and accommodative rates in H2. All of this fostered a bond-friendly
environment as central bankers were more concerned with the risk of excess
disinflation than with excess inflation.
With the exception of a brief upswing mid year, the dollar displayed persistent
weakness against most major global currencies during 2003. The large and growing
U.S. current account deficit demanded an increasingly large share of global
savings, which, in turn caused a sharp depreciation of the currency. The dollar
depreciated by approximately 20% against the euro in 2003, and by between
20%-35% against the "dollar bloc" currencies of Canada, Australia, and New
Zealand. Heavy Japanese official intervention tempered the appreciation of the
yen to only 10% versus the U.S. dollar.
KEY CONTRIBUTORS TO PERFORMANCE
The portfolio benefited from a significant underweighted position relative to
its benchmark in the U.S. dollar, as the currency decline was both broad based
and precipitous. The overweighted position in the euro was particularly
beneficial. The overweighted bond position in the euro area also benefited
performance. Holdings in bonds of the "dollar bloc" countries and in the
Scandinavian region were additional sources of outperformance. The series'
overweighted bond and currency positions in Canada boosted performance as did
the overweighted currency and underweighted bond positions in Australia. The
overweighted bond positions in Denmark and Sweden also provided a means of
outperformance.
KEY DETRACTORS FROM PERFORMANCE
Our underweighting in Japanese government bonds and the Swiss franc were modest
detractors from performance.
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GLOBAL TOTAL RETURN SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 22.97% and Service Class shares provided a total
return of 22.53%. These returns include the reinvestment of any dividends and
capital gains distributions, but do not reflect any applicable contract or
surrender charges. They compare with returns over the same period for the
series' benchmarks: 28.67% for the Standard & Poor's 500 Stock Index (the S&P
500); 25.02% for the Lipper Global Flexible Fund Index; and 25.63% for a
customized benchmark comprised of 60% of the Morgan Stanley Capital
International (MSCI) World Index and 40% for the J.P. Morgan Global Government
Bond Index (the Morgan Index). The MSCI World Index is a broad, unmanaged index
of global equities. The Morgan Index measures the performance of government bond
markets around the world. The Lipper Global Flexible Fund Index measures the
performance of funds that allocate their investments across various asset
classes.
EQUITY DETRACTORS FROM PERFORMANCE
The series continued to be underweighted in technology stocks relative to its
benchmark indices. Although the sector made a strong contribution to absolute
fund returns for the period, the portfolio's underweighting held back relative
returns. We believed that technology stocks were overvalued during the period
relative to the growth potential that we saw for many of these companies.
Stock selection in the basic materials sector also contributed to relative
underperformance, though the sector did provide positive absolute returns.
Stock detractors from performance included Akzo Nobel of the Netherlands and
British educational publisher Reed Elsevier. Akzo Nobel stock underperformed the
wider market as the company posted mixed results during the period. Reed's stock
declined as education spending cuts in the United States led to concern among
investors about the strength of the company's U.S. textbook business.
FIXED-INCOME DETRACTORS FROM PERFORMANCE
An underweight position in Japanese Yen compared with the benchmark was a
significant detractor from relative performance, as the series aimed to insulate
itself from Japanese economic and financial uncertainties. The series has
moderated this underweighting as we have become more comfortable with Japanese
fundamentals.
EQUITY CONTRIBUTORS TO PERFORMANCE
Stocks in the transportation sector provided the greatest relative contributions
to overall positive performance during the period.
Stock selection in the retail sector also contributed strong relative returns
for the period. In our view, the performance for the sector reflects optimism
abroad for worldwide consumer spending.
Our decision to be underweight in the health care sector proved to benefit the
portfolio as many pharmaceutical stocks in the group continued to suffer from
competition, patent challenges, and investor concerns about thin pipelines of
new drugs in development.
FIXED-INCOME CONTRIBUTORS TO PERFORMANCE
The portfolio benefited from a significantly underweighted position relative to
its benchmark in the U.S. dollar, as the currency declined broadly and
precipitously during the period. Overweight positions in the euro, Canadian
dollar, and Australian dollar also contributed markedly to performance.
The series also had an overweight position in euro area bonds, which helped
benefit performance, as did the portfolio's overall U.S. bond positioning.
GOVERNMENT SECURITIES SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
2.15% for Initial Class shares and 1.87% for Service Class shares. These
returns, which include the reinvestment of any capital gains and dividend
distributions, but do not reflect any applicable contract or surrender charges,
compare with a return of 2.73% over the same period for the series' benchmark,
the Lehman Brothers Government/Mortgage Index (the Lehman Index). The Lehman
Brothers Government/Mortgage Index measures the performance of the government
and mortgage securities markets. Over the same period, the average general U.S.
government fund tracked by Lipper Inc. returned 1.30%.
MARKET ENVIRONMENT
The bond market for the 12 months ended December 31, 2003 was influenced by an
accommodative U.S. monetary policy and low interest rates paid by U.S.
government bonds. Although interest rates on December 31, 2003, were not that
different from what they had been a year earlier, they were fairly volatile
during the 12-month period, especially in June and July. For example, the
10-year U.S. Treasury bond reached 3.10% in June -- a four-decade low. However,
Treasury interest rates then backed up from late June through August and reached
4.60% in September 2003.
SERIES POSITIONING
The biggest shifts in portfolio holdings occurred primarily in the second half
of 2003. We reduced the series' holdings in U.S. Treasury bonds and
mortgage-backed securities because we expected the early summer's volatility to
continue through year end.
By December 31, 2003, the series' Treasury position was cut nearly in half and
the mortgage-backed holdings were reduced by nearly 10%. At the same time, we
increased series' holdings in U.S. government agency bonds.
DETRACTORS AND CONTRIBUTORS TO PERFORMANCE
The series outperformed the majority of its actively managed peers, as indicated
by the Lipper results, but it underperformed its unmanaged benchmark index, the
Lehman Brothers Government Mortgage Index.
Mortgage-backed securities performed well for most of the year, with the
exception of the summer months. However, our mortgage strategy detracted from
the series' overall results because we had reduced our holdings in the group in
the second half of 2003. As a result, the series did not participate fully in
the sector's second-half performance.
Contributions to return came from the series' allocations to 15-year
mortgage-backed securities and to government agency securities, especially those
issued by the Financing Corporation (FICO). Issues from this agency are less
liquid than other agency securities because they are traded less frequently. As
a consequence, FICO provides a slight yield advantage over other government
agencies and U.S. Treasury issues. (FICO was formed in the late 1980s by the
Federal Home Loan Bank board to help rescue thrift institutions.)
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HIGH YIELD SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 21.44% and Service Class shares provided a total
return of 21.21%. These returns include the reinvestment of any dividends and
capital gains distributions but do not reflect any applicable contract or
surrender charges. They compare to returns over the same period of 28.97% and
26.36%, respectively, for the series' benchmarks, the Lehman Brothers High Yield
Index (the Lehman Index) and the Lipper High Yield Bond Index (the Lipper
Index). The Lehman Index measures the performance of the high-yield bond market.
The Lipper indices measure the performance of funds within their respective
classifications.
DETRACTORS FROM PERFORMANCE
Overall, the portfolio's holdings were decidedly defensive relative to the
high-yield market at large. While the series' defensiveness served investors
well in recent years, it contributed to its underperformance during this period,
as investors favored riskier options. The series continued to have significant
underweight exposure to the wireline segment of the telecommunications industry,
which still faced many fundamental challenges, including significant
overcapacity. The series also had underweight exposure to the utilities sector,
which proved to be one of the leaders of the high-yield rally during the period.
In general, our strategy is to focus on credit issuers with improving
fundamentals and not to take excessive risk. We continue to remain true to our
discipline focus because we believe fundamentals drive performance over the long
term.
CONTRIBUTORS TO PERFORMANCE
The rebound in the high-yield market was led by the telecommunications,
utilities, and media sectors. While we were underweight in some of these
sectors, or portions of them, we were able to strategically take advantage of
the rally in the utilities sector and in the wireline segment of the
telecommunications sector by choosing select names we felt were attractive from
fundamental and valuation standpoints.
We had overweight exposure to the media sector, where we also favored companies
with the ability to generate strong free cash flow. Many of these were
broadcasting companies, which have tended to benefit from an increase in
advertising revenue in past economic recoveries.
INTERNATIONAL VALUE SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 33.63% and Service Class shares provided a total
return of 33.20%. These returns include the reinvestment of any dividends and
capital gains distributions, but do not reflect any applicable contract or
surrender charges. They compare with returns over the same period of 39.17% and
36.00%, respectively, for the series' benchmarks, the MSCI EAFE Index and the
Lipper International Fund Index. The Lipper International Fund Index measures
the performance of international equity funds. The MSCI EAFE Index is a commonly
used measure of the international stock market.
DETRACTORS FROM PERFORMANCE
The portfolio's cash position was a primary cause of relative underperformance.
As with nearly all series, this series holds some cash to buy new holdings and
to cover investor exchanges or redemptions. In a period when equity markets rose
sharply, cash hurt performance against our benchmarks, which have no cash
positions.
Stocks in the consumer staples sector also contributed to relative
underperformance, though they provided positive absolute returns to the
portfolio. Stocks in this sector were generally out of favor during the period,
as investors sought the stocks of those companies with more leverage to an
economic upturn. Shiseido, a Japanese cosmetics company, was a key
underperformer that we sold because of its disappointing sales growth and high
costs associated with promotional and advertising spending. Diageo, the UK
beverage company, provided positive absolute returns but underperformed the
market in general because of slowing sales of their "malternative" or
"ready-to-drink" products.
Business products and services stocks were also a prime contributor to relative
underperformance. Drake Beam Morin, a Japanese outplacement services firm, saw
its short-term profit outlook decline as restructuring efforts in Japan slowed
during the period. We believe the stock continues to have long-term growth
potential. Intertek, a U.K. company that does product testing in Asia, provided
positive absolute returns, but underperformed the overall market because of
earnings disappointments due to the strength of the British pound. We do
believe, however, that this stock also has long-term growth potential as
developed countries continue to move manufacturing facilities to Asia. In
addition, not owning Siemens was a detractor from relative performance during
the period.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the retail sector was a primary contributor to positive
performance during the period. In our view, the sector's performance reflected
generally good expectations for consumer spending worldwide. A slate of retail
stocks contributed strong returns to the portfolio.
The portfolio also benefited from its stock selection in the energy sector.
Energy is a fairly defensive sector that often underperforms other sectors
during periods of economic improvement. We avoided positions in several big-name
energy companies that underperformed the market in general.
MONEY MARKET SERIES (6), (7)
For the 12 months ended December 31, 2003, the series provided a total return of
0.63% for Initial Class shares and 0.38% for Service Class shares. These
returns, which include the reinvestment of any capital gains and dividend
distributions, but do not reflect any applicable contract or surrender charges,
compare with a return of 0.44% for the average money market portfolio tracked by
Lipper Inc., an independent firm that tracks portfolio performance. As of
December 31, 2003, the 7-day yield with and without waivers was 0.65%. The 7-day
yield is based on the latest 7 days ended December 31, 2003, with dividends
annualized. The yield quotation more closely reflects the current earnings of
the Money Market portfolio than the total return quotation.
MARKET ENVIRONMENT
The reporting period began with an unsettled market environment that was
characterized by geopolitical concerns, high jobless claims, mixed economic
news, and volatile energy prices. By the end of the period on December 31, 2003,
economic conditions appeared to be significantly improved, jobless claims were
down, but energy prices were still high.
5
<Page>
A key event for the marketplace was the Federal Reserve Board's (the Fed's) late
June decision to cut short-term interest rates by 25 basis points (0.25%). The
quarter of a percent reduction was less than the 50 basis points (0.50%) that
some investment professionals had anticipated. The Fed made no other adjustment
to short-term interest rates for the remainder of 2003 and indicated that it
wouldn't make any further changes "for a considerable period."
SERIES POSITIONING
On December 31, 2002, when there was significant volatility in interest rate
expectations, the series' weighted average maturity was 31 days. With the easing
of both geopolitical tensions and the reduction in the Fed funds rate, we
extended our average maturity. By December 31, 2003, the weighted average for
the series was 57 days.
CONTINUED SHORT SUPPLY OF COMMERCIAL PAPER
In the first half of 2003, the precarious nature of the economy caused companies
to pull back on spending. That pull-back reduced need for short-term financing
and limited the supply of new commercial paper. Despite growing economic
strength in the second half of 2003, the supply of commercial paper continued to
be constrained by cautious corporate spending. Businesses also took advantage of
the low interest rate environment by issuing longer-term debt in place of
commercial paper. On December 31, 2003, approximately 82% of the series was
invested in commercial paper with the balance of the portfolio invested in
government paper and repurchase agreements.
COMMITMENT TO QUALITY
Regardless of market or economic conditions, we intend to maintain the series'
high quality as we focus on the series objectives of income, capital
preservation, and liquidity.
STRATEGIC INCOME SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the fund
provided a total return of 12.89% and Service Class shares provided a total
return of 12.48%. These returns include the reinvestment of any dividends and
capital gains distributions but do not reflect any applicable contract or
surrender charges. They compare to returns over the same period for the series'
five benchmarks, the Lehman Brothers Government Credit Index, 4.67%; Lehman
Brothers High Yield Index, 28.97%; Citigroup World Government Bond Non-Dollar
Hedged Index, 1.88%; Lehman Brothers Aggregate Bond Index; 4.1%; and the JP
Morgan Emerging Market Bond Index Global, 25.66%.
This is our most broadly diversified bond fund, and we actively manage the
portfolio's asset allocation across four broad fixed-income sectors: U.S.
government bonds, international bonds (including emerging market debt),
high-grade corporate bonds, and high-yield bonds.
DETRACTORS TO PERFORMANCE
The portfolio began the period underweight relative to its benchmarks in
high-yield and emerging-market bonds, which were by far the two best-performing
fixed-income sectors during the year. Although fundamentals improved in these
two sectors, strong supply-demand technicals were the main driver of
performance: higher-yielding securities experienced tremendous inflows as
investors continually sought higher-yielding securities because of the low
interest rate environment.
Our underweighting in high-yield and emerging-market debt sectors at the
beginning of the period hurt relative returns because we missed some of the
early period of appreciation in these sectors of the bond market. At the start
of the reporting period, we were reluctant to aggressively add high-yield bonds
as many of these issuers had substantial near-term debt maturities. These
distressed high-yield issuers had very limited access to the capital markets in
prior years. But during the period, the capital markets reopened and investor
demand for yield drove the prices of some high-yield corporate bonds and
emerging market debt issues substantially higher.
CONTRIBUTORS TO PERFORMANCE
At the start of the reporting period, we had around 20% of the portfolio
invested in high-yield securities. We responded to a new liquidity environment
by rebalancing the portfolio's exposure to lower-rated credit and, subsequently,
relative performance has improved. As we cut our U.S. government position we
reinvested the proceeds in high-yield bonds. We also reduced our high-quality
corporate bond position in favor of developed-country and emerging-market debt.
Our emerging market debt holdings at the beginning of the period represented
about 6% of the portfolio's holdings and grew to about 13.5% by the end of the
period.
Despite being underweighted during the early part of the high-yield rally, the
series did receive strong absolute returns from the high-yield sector. By
aggressively increasing our commitment to these issuers, we recaptured some of
the returns lost earlier. Yields for the group were somewhat lower toward the
end of the period, but we felt that high-yield bonds still offered good value
for investors, especially as global economic conditions continued to strengthen.
The series also experienced strong absolute returns from its emerging-market
debt holdings. Typically, this group generates the strongest returns in periods
of economic recovery and economic strength. As global economic conditions
continued to show signs of improvement during the period, the value of
emerging-market debt rose. Returns in this sector received an added lift as
investors, after a sustained period of low yield, responded aggressively to the
promise of higher yields.
--------------------
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
The portfolios are actively managed, and current holdings may be different.
Variable annuities are designed for long-term retirement investing; please see
your investment professional for more information.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the
About MFS section of MFS.COM or by visiting the SEC's website at
HTTP://WWW.SEC.GOV.
6
<Page>
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the growth of a
hypothetical $10,000 investment for each series during the period indicated.
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. Series results do not
reflect the deduction of separate account charges. (See Notes to Performance
Summary.)
VISIT SUNLIFE-USA.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND UNITS, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE PERFORMANCE DATA QUOTED
REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE OF FUTURE RESULTS.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF THE MORTALITY AND EXPENSE RISK
CHARGES AND ADMINISTRATION FEES.
[CHART]
BOND SERIES (1), (2)
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2003. Index information is from May 1, 1998.)
<Table>
<Caption>
BOND SERIES - LEHMAN BROTHERS
INITIAL CLASS GOVERNMENT/CREDIT INDEX
5/1998 $ 10,000 $ 10,000
12/1999 $ 10,509 $ 10,499
12/2000 $ 11,579 $ 11,744
12/2001 $ 12,488 $ 12,742
12/2002 $ 13,678 $ 14,149
12/2003 $ 15,007 $ 14,809
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +9.72% +29.60% +40.38% +50.07%
Average Annual Total Return +9.72% +9.03% +7.02% +7.44%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +9.43% +28.81% +39.53% +49.16%
Average Annual Total Return +9.43% +8.81% +6.89% +7.32%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Average corporate debt BBB-rated fund+ +8.23% +7.79% +6.11% +5.97%
Lehman Brothers Government/Credit Index# +4.67% +8.04% +6.66% +7.17%
</Table>
* For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2003. Index information is from May 1,
1998.
++ Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
[CHART]
EMERGING MARKETS EQUITY SERIES (1), (3)
(For the period from the commencement of the series' investment operations,
June 5, 1996, through December 31, 2003. Index information is from June 1,
1996.)
<Table>
<Caption>
EMERGING MARKETS EQUITY LIPPER EMERGING MARKETS MSCI EMERGING MARKETS
SERIES - INITIAL CLASS FUND INDEX+ FREE INDEX#
6/30/1996 $ 10,000 $ 10,000 $ 10,000
12/31/1998 $ 7,735 $ 6,481 $ 6,364
12/31/2000 $ 9,110 $ 7,567 $ 7,349
12/31/2001 $ 9,017 $ 7,303 $ 7,174
12/31/2002 $ 8,847 $ 6,966 $ 6,744
12/31/2003 $ 13,501 $ 10,933 $ 10,539
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +52.60% +48.21% +74.55% +35.01%
Average Annual Total Return +52.60% +14.01% +11.78% +4.04%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +52.12% +47.22% +73.38% +34.11%
Average Annual Total Return +52.12% +13.76% +11.64% +3.95%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Lipper Emerging Markets Fund Index+ +56.96% +13.05% +11.02% +1.18%
MSCI Emerging Markets Free Index# +56.28% +12.77% +10.62% +0.69%
</Table>
* For the period from the commencement of the series' investment operations
June 5, 1996, through Decemeber 31, 2003. Index information is from June 1,
1996.
++ Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
7
<Page>
[CHART]
GLOBAL GOVERNMENT SERIES (1), (3), (4), (5)
(For the 10-year period ended December 31, 2003.)
<Table>
<Caption>
GLOBAL GOVERNMENT SERIES CITIGROUP WORLD GOVERNMENT
- INITIAL CLASS BOND INDEX
12/31/1993 $ 10,000 $ 10,000
12/31/1995 $ 11,053 $ 12,183
12/31/1997 $ 11,480 $ 12,653
12/31/1999 $ 12,568 $ 13,968
12/31/2001 $ 12,453 $ 14,049
12/31/2003 $ 17,365 $ 19,291
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +15.60% +36.51% +31.02% +73.65%
Average Annual Total Return +15.60% +10.93% +5.55% +5.67%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +15.30% +35.70% +30.24% +72.62%
Average Annual Total Return +15.30% +10.71% +5.43% +5.61%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Citigroup World
Government Bond Index# +14.91% +10.78% +5.75% +6.79%
</Table>
++ Average annual rates of return.
# Source: Standard & Poor's Micropal, Inc.
[CHART]
GLOBAL TOTAL RETURN SERIES (1), (2)
(For the period from the commencement of the series' investment operations,
November 7, 1994, through December 31, 2003. Index information is from November
1, 1994.)
<Table>
<Caption>
GLOBAL TOTAL RETURN SERIES - LIPPER GLOBAL FLEXIBLE 60% MSCI WORLD/40% J.P. MORGAN STANDARD & POOR'S 500
INITIAL CLASS PORTFOLIO INDEX GLOBAL GOVERNMENT BOND INDEX STOCK INDEX
11/7/1994 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/31/1995 $ 11,837 $ 11,399 $ 11,725 $ 13,449
12/31/1997 $ 15,375 $ 14,654 $ 14,178 $ 22,050
12/31/1998 $ 18,200 $ 15,971 $ 17,202 $ 28,351
12/31/1999 $ 19,733 $ 19,544 $ 19,301 $ 34,316
12/31/2000 $ 20,183 $ 19,269 $ 17,931 $ 31,195
12/31/2001 $ 18,937 $ 17,270 $ 16,083 $ 27,490
12/31/2002 $ 19,046 $ 15,747 $ 15,231 $ 21,417
12/31/2003 $ 23,422 $ 19,687 $ 27,556 $ 19,135
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +22.97% +16.05% +28.70% +134.22%
Average Annual Total Return +22.97% +5.09% +5.17% +9.75%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +22.53% +15.36% +27.93% +132.83%
Average Annual Total Return +22.53% +4.88% +5.05% +9.68%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Average global flexible fund+ +26.93% +1.55% +4.29% +8.77%
Lipper Global Flexible Fund Index+ +25.02% +0.72% +4.27% +7.67%
60% MSCI World/40% J.P. Morgan
Global Government Bond Index# +25.63% +2.19% +2.15% +7.34%
Standard & Poor's 500 Stock Index# +28.67% -4.05% -0.57% +11.69%
</Table>
* For the period from the commencement of the series' investment operations,
November 7, 1994, through December 31, 2003. Index information is from
November 1, 1994.
++ Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
8
<Page>
[CHART]
GOVERNMENT SECURITIES SERIES (5), (6)
(FOR THE 10-YEAR PERIOD ENDED DECEMBER 31, 2003.)
<Table>
<Caption>
GOVERNMENT SECURITIES LEHMAN BROTHERS
SERIES - INITIAL CLASS GOVERNMENT/MORTGAGE INDEX
12/1993 $ 10,000 $ 10,000
12/1995 $ 11,505 $ 11,455
12/1997 $ 12,715 $ 13,010
12/1999 $ 13,561 $ 14,069
12/2001 $ 16,340 $ 17,016
12/2003 $ 18,327 $ 19,238
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +2.15% +20.54% +32.61% +83.27%
Average Annual Total Return +2.15% +6.43% +5.81% +6.25%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return Excluding
Sales Charge +1.87% +19.84% +31.84% +82.21%
Average Annual Total Return +1.87% +6.22% +5.68% +6.18%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Average general U.S. government fund+ +1.30% +5.78% +5.17% +5.69%
Lehman Brothers Government/Mortgage
Index# +2.73% +6.79% +6.34% +6.76%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
[CHART]
HIGH YIELD SERIES (1), (2), (4)
(For the 10-year period ended December 31, 2003.)
<Table>
<Caption>
HIGH YIELD SERIES - INITIAL CLASS LIPPER HIGH YIELD BOND INDEX LEHMAN BROTHERS HIGH YIELD INDEX
12/1993 $ 10,000 $ 10,000 $ 10,000
12/1995 $ 11,440 $ 11,309 $ 11,795
12/1997 $ 14,525 $ 14,461 $ 14,810
12/1999 $ 15,620 $ 15,140 $ 15,477
12/2001 $ 14,821 $ 13,528 $ 15,310
12/2003 $ 18,484 $ 16,682 $ 19,467
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +21.44% +26.96% +26.52% +84.84%
Average Annual Total Return +21.44% +8.28% +4.82% +6.34%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +21.21% +26.14% +25.70% +83.64%
Average Annual Total Return +21.21% +8.05% +4.68% +6.27%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------------------------------------
Lipper High Yield Bond Index+ +26.36% +6.87% +2.91% +5.25%
Lehman Brothers High Yield Index# +28.97% +10.21% +5.23% +6.89%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
9
<Page>
[CHART]
INTERNATIONAL VALUE SERIES (1), (3)
(For the period from the commencement of the series' investment operations,
October 2, 1995, through December 31, 2003. Index information is from October 1,
1995.)
<Table>
<Caption>
INTERNATIONAL VALUE SERIES - INITIAL CLASS LIPPER INTERNATIONAL FUND INDEX+ MSCI EAFE INDEX#
10/1995 $ 10,000 $ 10,000 $ 10,000
12/1995 $ 10,130 $ 10,181 $ 10,413
12/1997 $ 11,314 $ 12,494 $ 11,303
12/1999 $ 16,135 $ 19,401 $ 17,314
12/2001 $ 13,453 $ 13,345 $ 11,739
12/2003 $ 16,923 $ 15,638 $ 13,778
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +33.63% +7.38% +22.92% +69.23%
Average Annual Total Return +33.63% +2.40% +4.21% +6.59%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +33.20% +6.92% +22.39% +68.49%
Average Annual Total Return +33.20% +2.25% +4.12% +6.53%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Average lipper international fund+ +34.75% -3.96% +1.29% +4.52%
MSCI EAFE Index# +39.17% -2.57% +0.26% +3.96%
Lipper International Fund Index+ +36.00% -1.86% +2.13% +5.57%
</Table>
* For the period from the commencement of the series' investment operations
October 2, 1995, through December 31, 2003. Index information is from
October 1, 1995.
++ Average annual rates of return.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
[CHART]
STRATEGIC INCOME SERIES (1), (2), (4)
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2003. Index information is from May 1, 1998.)
<Table>
<Caption>
CITIGROUP WORLD
STRATEGIC INCOME GOVERNMENT BOND JP MORGAN EMERGING LEHMAN BROTHERS LEHMAN BROTHERS LEHMAN BROTHERS
SERIES - CITIGROUP WORLD NON-DOLLAR MARKETS BOND AGGREGATE BOND GOVERNMENT CREDIT HIGH YIELD
INITIAL CLASS GOVT BOND INDEX HEDGED INDEX INDEX GLOBAL INDEX INDEX INDEX
5/1998 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
12/1999 $ 10,503 $ 10,780 $ 11,077 $ 10,390 $ 10,559 $ 10,499 $ 10,052
12/2000 $ 10,805 $ 10,952 $ 12,144 $ 11,886 $ 11,787 $ 11,744 $ 9,463
12/2001 $ 11,162 $ 10,843 $ 12,887 $ 12,048 $ 12,782 $ 12,742 $ 9,962
12/2002 $ 12,001 $ 12,957 $ 13,770 $ 13,628 $ 14,093 $ 14,149 $ 9,822
12/2003 $ 13,548 $ 14,889 $ 14,029 $ 17,125 $ 14,671 $ 14,809 $ 12,668
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +12.89% +25.38% +34.94% +35.48%
Average Annual Total Return +12.89% +7.83% +6.18% +5.52%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Cumulative Total Return +12.48% +24.56% +34.05% +34.59%
Average Annual Total Return +12.48% +7.60% +6.04% +5.39%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ----------------------------------------------------------------------------------------------------
Average multisector income portfolio+ +16.11% +8.85% +5.81% +4.97%
Citigroup World Govt Bond Index#** +14.91 +10.78 +5.75 +6.79
Citigroup World Government Bond
Non-Dollar Hedged Index# +1.88% +4.93% +5.44% +6.16%
JP Morgan Emerging Markets Bond
Index Global^^ +25.66% +12.94% +15.40% +9.96%
Lehman Brothers Aggregate Bond Index# +4.10% +7.57% +6.62% +7.00%
Lehman Brothers Government Credit
Index#*** +4.67% +8.04% +6.66% +7.17%
Lehman Brothers High Yield Index# +28.97% +10.21% +5.23% +4.26%
</Table>
* For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2003. Index information is from May 1,
1998.
++ Average annual rates of return.
+ Source: Lipper Inc.
^^ Source: Bloomberg
# Source: Standard & Poor's Micropal, Inc.
** Effective June 9, 2003, we no longer use the Citigroup World Govt Bond
Index as a benchmark because we believe the Citigroup World Government Bond
Non-Dollar Hedged Index better reflects the fund's investment policies and
objectives. ***Effective June 9, 2003, we no longer use the Lehman Brothers
Government Credit Index as a benchmark because we believe the Lehman
Brothers Aggregate Bond Index better reflects the fund's investment
policies and objectives.
10
<Page>
NOTES TO PERFORMANCE SUMMARY
Initial Class shares have no sales charge. Service Class shares, which have an
inception date of August 24, 2001, have no sales charge and carry a 0.25% annual
12b-1 fee. Service Class share performance includes the performance of Initial
Class shares for periods prior to the inception of Service Class. Because
operating expenses of Service Class shares are higher than those of Initial
Class, the Service Class performance generally would have been lower than
Initial Class performance.
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.
KEY RISK CONSIDERATIONS
(1) Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions.
(2) Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
(3) The portfolio may invest a substantial amount of its assets in issuers
located in a limited number of countries and therefore is susceptible to
adverse economic, political or regulatory developments affecting those
countries.
(4) Because the portfolio invests in a limited number of companies a change in
one security's value may have a more significant effect on the portfolio's
value.
(5) The portfolio may invest in mortgage-backed securities, which during times
of fluctuating interest rates, may increase or decrease more than other
fixed-income securities.
(6) Government guarantees apply to the underlying securities only and not to
the prices and yields of the portfolio.
Investments in the portfolio are not insured or guaranteed by the FDIC
or any other government agency. Although the portfolio seeks to preserve
the value of your investment, it is possible to lose money by investing
in the portfolio. The portfolio's yield will fluctuate with changes in
market conditions.
These risks may increase unit price volatility. Please see the prospectus
for more details about these and other risk considerations.
11
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
BOND SERIES
BONDS -- 94.5%
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- 80.5%
ADVERTISING & BROADCASTING -- 0.8%
Chancellor Media Corp., 8s, 2008 $ 760 $ 879,700
Clear Channel Communications, Inc.,
7.65s, 2010 524 613,363
Echostar DBS Corp., 9.125s, 2009 657 735,019
----------------
$ 2,228,082
----------------
AEROSPACE -- 0.4%
BAE Systems Holding, Inc., 6.4s, 2011## $ 1,059 $ 1,138,346
----------------
AIRLINES -- 0.8%
Continental Airlines Pass-Through
Trust, Inc., 6.545s, 2020 $ 1,519 $ 1,501,202
Delta Air Lines, Inc., 7.379s, 2010 597 619,692
----------------
$ 2,120,894
----------------
ALCOHOLIC BEVERAGES -- 0.3%
Miller Brewing Co., 5.5s, 2013## $ 744 $ 760,102
----------------
ASSET BACKED & SECURITIZED -- 8.6%
Amresco Commercial Mortgage
Funding I Corp., 7s, 2029 $ 900 $ 900,808
Capital One Auto Finance Trust,
2.47s, 2010 400 394,566
Citibank Credit Card Issuance Trust,
6.65s, 2008 1,200 1,296,111
Commercial Mortgage Acceptance Corp.,
6.04s, 2008 1,150 1,259,704
Commercial Mortgage Acceptance Corp.,
5.44s, 2013 1,000 886,349
Commercial Mortgage Acceptance Corp.,
1.47s, 2030 (Interest Only) 10,839 481,558
Commercial Mortgage Acceptance Corp.,
7.03s, 2031 1,500 1,713,787
CPS Auto Receivables Trust,
3.52s, 2009## 706 714,003
Criimi Mae Corp., 7s, 2033## 1,050 1,138,122
Deutsche Mortgage and Asset
Receiving Corp., 6.538s, 2031 800 876,143
Drive Auto Receivables Trust,
2.5s, 2009## 673 668,426
Drivetime Auto Owner Trust,
1.918s, 2008## 1,090 1,075,830
Falcon Franchise Loan LLC,
4.187s, 2023 (Interest Only) 3,259 621,617
First Union-Lehman Brothers Commercial,
7s, 2029 607 570,520
Fortress CBO Investments I, Ltd.,
1.791s, 2038 655 655,614
Fortress CBO Investments I, Ltd.,
1.941s, 2038 675 674,789
GMAC Commercial Mortgage
Security, Inc., 6.02s, 2033 800 715,822
Ikon Receivables Funding LLC,
3.27s, 2011 735 740,728
Lehman Brothers Commercial Conduit
Mortgage Trust, 6.78s, 2009 1,250 1,410,221
Lehman Brothers Commercial Conduit
Mortgage Trust,1.16s, 2028
(Interest Only) 9,196 320,105
Morgan Stanley Capital I, Inc.,
6.86s, 2010 1,155 1,209,913
Morgan Stanley Capital I, Inc.,
7.738s, 2010 350 337,525
Morgan Stanley Capital I, Inc., 0.825s,
2030 (Interest Only)## 28,732 819,350
Morgan Stanley Capital I, Inc.,
6.01s, 2030 93 97,924
Morgan Stanley Capital I, Inc.,
6.48s, 2030 625 695,999
Morgan Stanley Dean Witter Capital I,
5.72s, 2032 $ 730 $ 787,077
Mortgage Capital Funding, Inc.,
1.078s, 2031 (Interest Only) 11,427 365,054
Residential Asset Securitization Trust,
3.49s, 2029 725 733,428
TIAA Retail Commercial Mortgage Trust,
7.17s, 2032## 633 689,768
----------------
$ 22,850,861
----------------
AUTOMOTIVE -- 5.7%
DaimlerChrysler NA Holdings Co.,
7.2s, 2009 $ 650 $ 724,899
Dana Corp., 9s, 2011 700 843,500
Dura Operating Corp., 8.625s, 2012 445 473,925
Ford Motor Credit Co., 6.875s, 2006 1,590 1,697,020
Ford Motor Credit Co., 7.875s, 2010 2,007 2,242,551
Ford Motor Credit Co., 7s, 2013 1,140 1,202,334
General Motors Acceptance Corp.,
6.75s, 2006 1,872 2,009,684
General Motors Acceptance Corp.,
7.25s, 2011 524 574,884
General Motors Corp., 8.375s, 2033 2,714 3,090,188
Lear Corp., 7.96s, 2005 753 805,710
Lear Corp., 8.11s, 2009 685 805,731
TRW Automotive, Inc., 9.375s, 2013 575 656,938
----------------
$ 15,127,364
----------------
BANKS & CREDIT COMPANIES -- 5.7%
Abbey National Capital Trust I,
8.963s to 2030, 3.998s to 2049 $ 700 $ 929,450
Associates Corp., 5.5s, 2004 185 185,889
Bank of America Corp., 7.4s, 2011 205 240,430
Citigroup, Inc., 7.25s, 2010 490 571,124
Citigroup, Inc., 6.625s, 2032 848 918,627
Credit Suisse First Boston USA,
6.125s, 2011 1,447 1,575,395
Natexis AMBS Co. LLC, 8.44s to 2008,
4.608s to 2049## 2,202 2,587,282
Popular North America, Inc., 4.25s, 2008 1,212 1,232,459
Royal Bank of Scotland Capital Trust II,
6.425s to 2034, 3.114s to 2049 1,042 1,053,124
Socgen Real Estate Co., 7.64s to 2007,
3.821s to 2049## 2,322 2,623,321
Unicredito Italiano Capital Trust,
9.2s, 2049## 1,481 1,860,496
Wachovia Corp., 6.605s, 2025 1,270 1,399,115
----------------
$ 15,176,712
----------------
BROADCAST & CABLE TV -- 2.1%
Cox Communications, Inc., 7.75s, 2010 $ 886 $ 1,055,456
CSC Holdings, Inc., 7.875s, 2007 975 1,028,625
CSC Holdings, Inc., 7.625s, 2011 356 374,690
TCI Communications Financing III,
9.65s, 2027 2,081 2,507,605
TCI Communications, Inc., 9.8s, 2012 439 572,652
----------------
$ 5,539,028
----------------
BROKERAGE & ASSET MANAGERS -- 1.3%
Lehman Brothers Holdings, Inc.,
8.25s, 2007 $ 1,765 $ 2,057,321
Morgan Stanley Dean Witter & Co.,
6.6s, 2012 1,240 1,378,024
----------------
$ 3,435,345
----------------
</Table>
12
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
BUILDING -- 1.0%
American Standard, Inc., 7.375s, 2008 $ 1,150 $ 1,270,750
Building Materials Corp., 8s, 2008 780 768,300
Nortek, Inc., 9.25s, 2007 620 637,050
----------------
$ 2,676,100
----------------
CHEMICALS -- 0.7%
Dow Chemical Co., 5s, 2007 $ 589 $ 620,631
Dow Chemical Co., 5.75s, 2008 1,128 1,209,419
----------------
$ 1,830,050
----------------
CONGLOMERATES -- 0.8%
General Electric Capital Corp., 8.7s, 2007 $ 4 $ 4,681
Tyco International Group S.A.,
6.75s, 2011 2,011 2,197,018
----------------
$ 2,201,699
----------------
CONSUMER CYCLICAL -- 0.6%
Cendant Corp., 6.875s, 2006 $ 709 $ 777,874
Cendant Corp., 6.25s, 2010 723 786,220
----------------
$ 1,564,094
----------------
DEFENSE ELECTRONICS -- 1.1%
Litton, Inc., 8s, 2009 $ 1,300 $ 1,544,763
Raytheon Co., 8.3s, 2010 1,228 1,473,487
----------------
$ 3,018,250
----------------
ENERGY - INDEPENDENT -- 1.9%
Chesapeake Energy Corp.,
8.125s, 2011## $ 800 $ 888,000
Forest Oil Corp., 8s, 2008 875 953,750
Occidental Petroleum Corp., 7.65s, 2006 410 449,282
Ocean Energy, Inc., 7.625s, 2005 475 515,317
Ocean Energy, Inc., 7.25s, 2011 1,010 1,162,389
XTO Energy, Inc., 6.25s, 2013 974 1,025,135
----------------
$ 4,993,873
----------------
ENERGY - INTEGRATED -- 0.3%
Amerada Hess Corp., 7.3s, 2031 $ 841 $ 868,414
----------------
ENTERTAINMENT -- 2.4%
Disney (Walt) Co., 6.75s, 2006 $ 725 $ 788,543
News America Holdings, Inc.,
6.703s, 2004 1,000 1,015,963
News America Holdings, Inc.,
7.75s, 2024 1,250 1,465,050
News America Holdings, Inc., 8.5s, 2025 450 562,744
News America, Inc., 6.55s, 2033 333 345,929
Time Warner, Inc., 9.125s, 2013 1,022 1,298,428
Time Warner, Inc., 6.95s, 2028 749 799,945
----------------
$ 6,276,602
----------------
FINANCIAL INSTITUTIONS -- 1.9%
Capital One Bank, 8.25s, 2005 $ 484 $ 523,561
Capital One Bank, 4.25s, 2008 600 596,823
Countrywide Home Loans, Inc.,
5.5s, 2006 748 798,982
Household Finance Corp., 4.125s, 2008 973 981,718
Household Finance Corp., 6.75s, 2011 550 619,159
SLM Corp., 4s, 2009 1,400 1,409,617
----------------
$ 4,929,860
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.4%
Tyson Foods, Inc., 8.25s, 2011 $ 898 $ 1,041,289
----------------
FOREST & PAPER PRODUCTS -- 0.7%
MeadWestvaco Corp., 6.8s, 2032 $ 1,899 $ 1,952,785
----------------
GAMING & LODGING -- 0.8%
Harrahs Operating Co., Inc., 7.125s, 2007 $ 935 $ 1,041,208
MGM Grand, Inc., 6.95s, 2005 567 589,680
MGM Mirage, Inc., 8.5s, 2010 495 568,012
----------------
$ 2,198,900
----------------
INSURANCE -- 0.5%
Prudential Insurance Co., 7.65s, 2007## $ 1,100 $ 1,230,382
----------------
INSURANCE - PROPERTY & CASUALTY -- 0.7%
SAFECO Corp., 4.875s, 2010 $ 620 $ 639,196
SAFECO Corp., 7.25s, 2012 334 383,519
Willis Corroon Corp., 9s, 2009 915 960,750
----------------
$ 1,983,465
----------------
MACHINERY & TOOLS -- 0.9%
Ingersoll Rand Co., 6.25s, 2006 $ 1,000 $ 1,083,918
Joy Global, Inc., 8.75s, 2012 355 395,825
Kennametal, Inc., 7.2s, 2012 757 802,919
----------------
$ 2,282,662
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.8%
HCA Healthcare Co., 8.75s, 2010 $ 1,113 $ 1,325,288
HCA Healthcare Co., 7.875s, 2011 787 897,582
----------------
$ 2,222,870
----------------
METALS & MINING -- 0.4%
Phelps Dodge Corp., 8.75s, 2011 $ 784 $ 957,143
----------------
MORTGAGE BACKED -- 7.0%
Federal National Mortgage Assn.,
6s, 2016 $ 918 $ 964,359
Federal National Mortgage Assn.,
5.5s, 2017 1,379 1,430,759
Federal National Mortgage Assn.,
6s, 2017 1,746 1,833,192
Federal National Mortgage Assn.,
4.5s, 2018 2,765 2,770,866
Federal National Mortgage Assn.,
6s, 2022 62 64,042
Federal National Mortgage Assn.,
7.5s, 2030 236 252,364
Federal National Mortgage Assn.,
7.5s, 2031 773 826,107
Federal National Mortgage Assn.,
6.5s, 2032 4,041 4,227,209
Federal National Mortgage Assn.,
5.5s, 2033 4,083 4,138,621
Federal National Mortgage Assn.,
6s, 2033 1,103 1,140,752
Government National Mortgage Assn.,
6.5s, 2028 735 775,720
Government National Mortgage Assn.,
7.5s, 2029 214 229,221
----------------
$ 18,653,212
----------------
MUNICIPALS -- 1.5%
Metropolitan Pier & Exposition Authority,
5s, 2028 $ 1,260 $ 1,283,096
Metropolitan Transportation Authority
New York, 5.5s, 2013 1,450 1,673,749
Metropolitan Transportation Authority
New York, 5s, 2030 1,115 1,140,801
----------------
$ 4,097,646
----------------
NATURAL GAS - PIPELINE -- 0.4%
Kinder Morgan Energy Partners, 7.4s, 2031 $ 990 $ 1,130,721
----------------
OIL SERVICES -- 0.8%
Dresser, Inc., 9.375s, 2011 $ 700 $ 761,250
Halliburton Co., 5.5s, 2010## 1,278 1,336,554
----------------
$ 2,097,804
----------------
OILS -- 0.3%
Valero Energy Corp., 7.5s, 2032 $ 712 $ 793,503
----------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.5%
Jabil Circuit, Inc., 5.875s, 2010 $ 1,278 $ 1,333,045
----------------
</Table>
13
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
PHARMACEUTICALS -- 0.5%
Schering-Plough Corp., 6.5s, 2033 $ 528 $ 549,244
Wyeth Co., 6.5s, 2034 697 711,093
----------------
$ 1,260,337
----------------
PHOTOGRAPHIC PRODUCTS -- 0.2%
Eastman Kodak Co., 7.25s, 2013 $ 394 $ 413,399
----------------
POLLUTION CONTROL -- 1.3%
Allied Waste North America, Inc.,
7.875s, 2013 $ 970 $ 1,050,025
Waste Management, Inc., 6.5s, 2008 760 836,401
WMX Technologies, Inc., 7.1s, 2026 1,545 1,670,780
----------------
$ 3,557,206
----------------
PRINTING & PUBLISHING -- 0.7%
Belo (A.H.) Corp., 7.75s, 2027 $ 876 $ 1,000,890
Dex Media West LLC, 9.875s, 2013## 675 784,687
----------------
$ 1,785,577
----------------
RAILROAD & SHIPPING -- 0.7%
Union Pacific Corp., 6.39s, 2004 $ 288 $ 297,946
Union Pacific Corp., 5.75s, 2007 1,350 1,456,871
----------------
$ 1,754,817
----------------
REAL ESTATE -- 2.3%
EOP Operating Ltd., 6.625s, 2005 $ 535 $ 562,082
EOP Operating Ltd., 8.375s, 2006 978 1,095,101
EOP Operating Ltd., 6.8s, 2009 1,137 1,275,246
Simon Property Group L.P., 6.375s, 2007 1,200 1,323,368
Simon Property Group L.P., 6.35s, 2012 629 683,515
Vornado Realty Trust, 5.625s, 2007 975 1,040,954
----------------
$ 5,980,266
----------------
RESTAURANTS -- 0.4%
Yum! Brands, Inc., 8.875s, 2011 $ 886 $ 1,074,275
----------------
RETAILERS -- 1.1%
Dollar General Corp., 8.625s, 2010 $ 725 $ 814,719
Gap, Inc., 10.55s, 2008 1,215 1,497,488
Penney (J.C.) Co., Inc., 8s, 2010 625 716,406
----------------
$ 3,028,613
----------------
SUPERMARKETS -- 0.4%
Kroger Co., 7.8s, 2007 $ 845 $ 964,158
----------------
SUPRANATIONAL -- 0.3%
Corporacion Andina de Fomento,
6.875s, 2012 $ 831 $ 922,046
----------------
TELECOMMUNICATIONS - WIRELINE -- 2.6%
AT&T Corp., 8.5s, 2031 $ 1,359 $ 1,588,077
Citizens Communications Co., 8.5s, 2006 1,190 1,299,315
Citizens Communications Co.,
7.625s, 2008 700 766,466
Citizens Communications Co.,
9s, 2031 558 651,089
Sprint Capital Corp., 6.875s, 2028 2,072 2,021,924
Telecom de Puerto Rico, Inc., 6.65s, 2006 172 186,424
Telecom de Puerto Rico, Inc., 6.8s, 2009 274 306,315
----------------
$ 6,819,610
----------------
TOBACCO -- 0.8%
Altria Group, Inc., 7s, 2013 $ 826 $ 881,173
Reynolds (R.J.) Tobacco Holdings, Inc.,
7.25s, 2012 1,271 1,251,935
----------------
$ 2,133,108
----------------
TRANSPORTATION - SERVICES -- 0.5%
Federal Express Corp., 9.65s, 2012 $ 1,052 $ 1,376,120
----------------
U.S. GOVERNMENT AGENCIES -- 3.6%
Federal National Mortgage Assn.,
7.125s, 2005 $ 2,295 $ 2,440,069
Federal National Mortgage Assn.,
6s, 2008 $ 3,423 $ 3,794,389
Federal National Mortgage Assn.,
5.25s, 2012 833 854,142
Federal National Mortgage Assn.,
6.125s, 2012 2,254 2,510,449
----------------
$ 9,599,049
----------------
U.S. TREASURY OBLIGATIONS -- 4.6%
U.S. Treasury Bonds, 9.875s, 2015 $ 482 $ 718,670
U.S. Treasury Bonds, 5.375s, 2031 1,870 1,950,133
U.S. Treasury Notes, 3.375s, 2007 2,216 2,400,890
U.S. Treasury Notes, 4.75s, 2008 888 950,646
U.S. Treasury Notes, 6s, 2009 2,489 2,819,278
U.S. Treasury Notes, 3s, 2012 1,279 1,394,307
U.S. Treasury Notes, 4.25s, 2013 1,954 1,954,909
----------------
$ 12,188,833
----------------
UTILITIES - ELECTRIC POWER -- 7.3%
Beaver Valley II Funding, 9s, 2017 $ 2,022 $ 2,324,127
Centerpoint Energy Resources Corp.,
7.875s, 2013## 446 504,915
Cleveland Electric Illuminating Co.,
7.67s, 2004 225 231,406
DTE Energy Co., 7.05s, 2011 940 1,054,061
Entergy Mississippi, Inc., 6.2s, 2004 83 84,157
Exelon Generation Co. LLC, 6.95s, 2011 1,670 1,875,410
FirstEnergy Corp., 6.45s, 2011 679 703,748
GGIB Funding Corp., 7.43s, 2011 578 595,249
Gulf States Utilities Co., 8.25s, 2004 271 275,256
Midamerican Energy Holdings,
5.875s, 2012 906 949,968
Niagara Mohawk Power Corp.,
5.375s, 2004 550 562,007
NiSource Finance Corp., 7.875s, 2010 1,222 1,453,436
Northeast Utilities, 8.58s, 2006 462 505,482
Progress Energy, Inc., 7s, 2031 1,118 1,196,581
PSEG Power Energy Holding, 7.75s, 2007 976 1,035,780
PSEG Power LLC, 7.75s, 2011 1,015 1,194,681
PSEG Power LLC, 8.625s, 2031 340 437,901
Reliant Energy Resources Corp.,
8.125s, 2005 916 978,322
Toledo Edison Co., 7.875s, 2004 636 656,656
TXU Corp., 6.375s, 2006 1,499 1,585,192
Waterford 3 Funding Entergy Corp.,
8.09s, 2017 958 1,090,899
----------------
$ 19,295,234
----------------
WIRELESS COMMUNICATIONS -- 1.1%
AT&T Wireless Services Inc., 8.75s, 2031 $ 1,397 $ 1,723,659
Nextel Communications, Inc.,
9.375s, 2009 675 735,750
Verizon Wireless Capital LLC,
5.375s, 2006 461 491,934
----------------
$ 2,951,343
----------------
Total U.S. Bonds $ 213,815,094
----------------
FOREIGN BONDS -- 14.0%
AUSTRALIA -- 0.4%
Burns Philp Capital Property Ltd.,
9.75s, 2012 (Food & Non
Alcoholic Beverages)## $ 925 $ 989,750
----------------
BRAZIL -- 0.3%
Brazilian Merchant Voucher, 5.911s, 2011
(Credit Cards)## $ 820 $ 799,500
----------------
</Table>
14
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
FOREIGN BONDS -- continued
BULGARIA -- 0.3%
Republic of Bulgaria, 8.25s, 2015## $ 716 $ 839,510
----------------
CANADA -- 2.3%
Abitibi Consolidated, Inc., 6.95s, 2008
(Forest & Paper Products) $ 700 $ 733,508
Abitibi Consolidated, Inc., 7.875s, 2009
(Forest & Paper Products) 466 503,941
Anderson Exploration Ltd., 6.75s, 2011
(Energy - Independent) 675 748,570
Rogers Cable, Inc, 7.875s, 2012
(Broadcast & Cable TV) 811 904,265
Rogers Cable, Inc., 6.25s, 2013
(Broadcast & Cable TV) 838 844,285
TELUS Corp., 8s, 2011
(Telecommunications - Wireline) 2,101 2,456,672
----------------
$ 6,191,241
----------------
CAYMAN ISLANDS -- 0.2%
DBS Capital Funding Corp., 7.657s, 2049
(Banks & Credit Companies)## $ 524 $ 603,386
----------------
CHILE -- 0.1%
Corporacion Nacional del Cobre de Chile,
6.375s, 2012 (Metals & Mining)## $ 342 $ 369,990
----------------
DENMARK -- 0.3%
Kingdom of Denmark, 6s, 2009 DKK 4,137 $ 775,054
----------------
DOMINICAN REPUBLIC -- 0.2%
Dominican Republic, 9.5s, 2006## $ 420 $ 352,800
Dominican Republic, 9.04s, 2013## 103 78,280
----------------
$ 431,080
----------------
FINLAND -- 0.3%
Republic of Finland, 5.375s, 2013 EUR 559 $ 762,929
----------------
FRANCE -- 0.7%
Crown European Holdings S.A., 9.5s, 2011
(Containers) $ 900 $ 1,019,250
France Telecom S.A., 9s, 2011
(Telecommunications - Wireline) 672 807,127
----------------
$ 1,826,377
----------------
GERMANY -- 1.5%
Deutsche Telekom International, 8.5s, 2010
(Telecommunications - Wireline) $ 1,388 $ 1,678,253
Deutsche Telekom International,
8.75s, 2030 (Telecommunications -
Wireline) 1,212 1,548,243
KFW International Finance, Inc., 9.4s, 2004
(Banks & Credit Cos.) 768 791,951
----------------
$ 4,018,447
----------------
HONG KONG -- 0.3%
PCCW Capital II Ltd., 6s, 2013
(Telecommunications - Wireline)## $ 781 $ 785,061
----------------
IRELAND -- 0.3%
Republic of Ireland, 5s, 2013 EUR 572 $ 760,225
----------------
ITALY -- 0.3%
Telecom Italia, 4s, 2008
(Telecommunications - Wireline)## $ 725 $ 729,589
----------------
JAPAN -- 0.3%
UFJ Finance Aruba AEC, 6.75s, 2013
(Banks & Credit Cos.) $ 703 $ 749,749
----------------
LUXEMBOURG -- 0.5%
Telecom Italia, 5.25s, 2013
(Telecommunications - Wireline)## $ 1,443 $ 1,445,873
----------------
MALAYSIA -- 0.2%
Petronas Capital Ltd., 7.875s, 2022
(Oil Services)## $ 430 $ 509,531
----------------
MEXICO -- 1.5%
BBVA Bancomer, 10.5s, 2011
(Banks & Credit Cos.)## $ 1,013 $ 1,142,158
Pemex Finance, Ltd, 9.69s, 2009
(Energy - Integrated) 427 495,320
Pemex Project Funding Master Trust,
8.625s, 2022 (Oil Services) 312 345,540
United Mexican States, 8s, 2022 307 335,858
United Mexican States, 11.5s, 2026 1,217 1,761,607
----------------
$ 4,080,483
----------------
NETHERLANDS -- 0.4%
Telefonica Europe BV, 8.25s, 2030
(Telecommunications - Wireline) $ 758 $ 956,805
----------------
PANAMA -- 0.3%
Republic of Panama, 9.375s, 2029 $ 750 $ 843,750
----------------
RUSSIA -- 0.7%
Gazprom OAO, 9.625s, 2013
(Utilities - Gas)## $ 420 $ 463,050
Ministry of Finance, 3s, 2011 200 157,000
Mobile Telesystems Finance S.A.,
9.75s, 2008 (Wireless
Communications)# 559 605,118
OAO Siberian Oil Co., 10.75s, 2009
(Energy - Integrated) 528 595,584
----------------
$ 1,820,752
----------------
UNITED KINGDOM -- 2.6%
Barclays Bank PLC, 8.55s, 2049
(Banks & Credit Cos.)## $ 1,682 $ 2,066,487
British Sky Broadcasting Group, 7.3s, 2006
(Advertising & Broadcasting) 700 779,428
British Sky Broadcasting Group,
8.2s, 2009 (Advertising &
Broadcasting) 1,282 1,526,233
Orange PLC, 9s, 2009 (Wireless
Communications) 1,351 1,454,379
SABMiller PLC, 6.625s, 2033 (Alcoholic
Beverages)## 1,076 1,137,565
----------------
$ 6,964,092
----------------
Total Foreign Bonds $ 37,253,174
----------------
Total Bonds
(Identified Cost, $238,095,416) $ 251,068,268
----------------
SHORT-TERM OBLIGATIONS -- 4.4%
Old Line Funding Corp., due 1/02/04 $ 1,128 $ 1,127,970
New Center Asset Trust, due 1/02/04 10,618 10,617,714
----------------
Total Short-Term Obligations, at Amortized Cost $ 11,745,684
----------------
Total Investments
(Identified Cost, $249,841,100 ) $ 262,813,952
----------------
OTHER ASSETS,
LESS LIABILITIES -- 1.1% 3,011,543
----------------
Net Assets -- 100.0% $ 265,825,495
================
</Table>
See portfolio footnotes and notes to financial statements.
15
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
EMERGING MARKETS EQUITY SERIES
STOCKS -- 96.2%
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 96.2%
ARGENTINA -- 0.7%
IRSA Inversiones y Representaciones S.A.
(Real Estate)^ 8,100 $ 81,000
Tenaris S.A., ADR (Oil Services) 9,300 309,876
----------------
$ 390,876
----------------
BRAZIL -- 11.2%
Aracruz Celulose S.A., ADR
(Forest & Paper Products) 8,500 $ 297,840
Banco Bradesco S.A. (Banks & Credit Cos.) 80,569,500 423,757
Banco Itau Holding Financeira S.A.
(Banks & Credit Cos.) 4,615,600 458,366
Brasil Telecom Participacoes, ADR
(Telephone Services) 11,800 446,040
Caemi Mineracao Metalurgica S.A.
(Metals & Mining) 581,500 255,543
Companhia Vale Do Rio Doce, ADR
(Metals & Mining) 25,600 1,497,600
Petroleo Brasileiro S.A., ADR
(Energy - Integrated) 72,810 2,128,964
Votorantim Celulose Papel S.A., ADR
(Forest & Paper Products) 9,200 288,420
----------------
$ 5,796,530
----------------
CHINA -- 1.3%
PetroChina Co., Ltd. (Energy - Integrated) 1,202,000 $ 688,958
----------------
CZECHOSLOVAKIA -- 0.5%
Cesky Telecom (Telephone Services) 23,530 $ 267,751
----------------
ESTONIA -- 1.0%
AS Eesti Telekom (Telephone Services) 20,700 $ 511,290
----------------
GREECE -- 0.9%
Coca-Cola Hellenic Bottling Co., S.A.
(Food & Non-Alcoholic Beverages) 22,800 $ 475,143
----------------
HONG KONG -- 3.7%
China Mobile (Hong Kong) Ltd.
(Wireless Communications) 372,000 $ 1,140,377
CNOOC Ltd. (Energy - Independent) 297,500 584,366
Hong Kong & China Gas Ltd.
(Natural Gas Distribution) 139,000 212,159
----------------
$ 1,936,902
----------------
HUNGARY -- 3.1%
Gedeon Richter Ltd., GDR (Pharmaceuticals) 2,330 $ 275,837
Magyar Olaj Es Gazipari KT
(Energy - Integrated) 8,600 260,287
Magyar Tavkozlesi Rt., ADR
(Telephone Services) 26,600 497,686
OTP Bank Rt., ADR (Banks & Credit Cos.)* 21,160 555,450
----------------
$ 1,589,260
----------------
INDIA -- 4.7%
Gujarat Ambuja Cem (Home Construction) 37,500 $ 250,426
HDFC Bank Ltd. (Banks & Credit Cos.) 35,300 284,456
Hero Honda Motors Ltd. (Automotive) 28,400 280,161
Hindustan Petroleum Corp., Ltd.
(Energy - Independent) 22,200 213,462
ITC Ltd. (Tobacco) 13,700 296,447
Reliance Industries Ltd.
(Energy - Independent) 49,790 627,026
Sun Pharmaceutical Industries Ltd.
(Pharmaceuticals) 14,100 184,493
Zee Telefilms (Entertainment) 88,600 292,185
----------------
$ 2,428,656
----------------
INDONESIA -- 3.1%
Astra International (Automotive) 289,000 $ 171,564
Bank Central Asia (Banks & Credit Cos.) 542,500 214,166
Bank Danamon (Bank & Credit Cos.) 509,500 122,498
Bank Mandiri (Banks & Credit Cos.)* 2,042,500 $ 242,505
Bank Rakyat Indonesia
(Banks & Credit Cos.)* 1,006,000 149,302
Hanjaya Mandala Sampoerna (Tobacco) 223,500 118,749
Telekomunikasi Indonesia (Telephone Services) 732,000 586,643
----------------
$ 1,605,427
----------------
ISRAEL -- 0.9%
Bank Leumi Israel B.M. (Banks & Credit Cos.)* 139,100 $ 263,444
Koor Industries (Conglomerates)* 4,800 186,843
----------------
$ 450,287
----------------
MALAYSIA -- 1.8%
BAT Malaysia Berhad (Tobacco) 17,600 $ 201,474
IOI Corp. (Specialty Chemicals) 113,000 228,974
Perusahaan Otomobil Berhad (Automotive) 106,000 235,710
Resorts World Berhad (Gaming & Lodging) 50,600 134,489
TA Enterprise Bhd
(Brokerage & Asset Managers) 542,800 134,272
----------------
$ 934,919
----------------
MEXICO -- 7.9%
Alfa S.A. de C.V., "A" (Conglomerates) 55,400 $ 166,146
America Movil S.A. de C.V., ADR
(Wireless Communications) 22,400 612,416
Apasco S.A. (Home Construction) 27,000 222,497
Controladora Comercial Mexicana,
S.A. de C.V.
(General Merchandise) 134,500 135,254
Corporacion GEO, S.A. de C.V., "B"
(Home Construction)* 40,600 206,920
Grupo Elektra, S.A. de C.V. (Specialty Stores) 33,500 177,383
Grupo Financiero BBVA Bancomer,
S.A. de C.V. (Banks & Credit Cos.)* 627,300 535,915
Grupo Financiero Inbursa, S.A. de C.V.
(Banks & Credit Cos.) 188,400 204,378
Grupo Modelo, S.A. de C.V.
(Alcoholic Beverages) 65,700 157,278
Grupo Televisa S.A., ADR
(Broadcast & Cable TV)* 7,800 310,908
Telefonos de Mexico S.A., ADR
(Telephone Services) 41,700 1,377,351
----------------
$ 4,106,446
----------------
PHILIPPINES -- 0.5%
Ayala Corp. (Conglomerate) 2,640,100 $ 247,272
----------------
POLAND -- 0.5%
Polski Koncern Naftowy Orlen S.A., GDR
(Energy - Integrated) 10,100 $ 134,922
Telekomunikacja Polska S.A., GDR
(Telephone Services)* 31,600 127,907
----------------
$ 262,829
----------------
RUSSIA -- 5.3%
JSC Mining & Smelting Co. Norilsk Nickel, ADR
(Metals & Mining) 14,240 $ 946,960
Unified Energy Systems, GDR
(Utilities - Electric Power)* 22,400 610,400
YUKOS Corp., ADR (Energy - Independent)^ 27,887 1,171,254
----------------
$ 2,728,614
----------------
SOUTH AFRICA -- 9.4%
ABSA Group Ltd. (Banks & Credit Cos.) 65,100 $ 410,056
African Bank Investments Ltd. (Banks &
Credit Cos.) 163,700 230,987
Anglo American Platinum Corp., Ltd.
(Precious Metals) 12,860 560,334
Barloworld Ltd (Conglomerates) 25,000 262,141
Bidvest Group (Conglomerates)* 15,806 118,130
Impala Platinum Holdings Ltd.
(Precious Metals) 7,620 660,618
</Table>
16
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
SOUTH AFRICA -- continued
Investec Ltd. (Banks & Credit Cos.) 12,500 $ 239,159
MTN Group Ltd. (Wireless Communications) 66,400 282,369
Murray & Roberts Holdings
(Engineering - Construction) 61,600 126,145
Sasol Ltd. (Energy - Integrated) 54,000 766,805
Standard Bank Investment Corp., Ltd.
(Banks & Credit Cos.) 125,900 737,323
Telkom Group Ltd. (Telephone Services) 35,200 365,411
Tiger Brands (Food & Non Alcohol Beverages) 10,700 126,351
----------------
$ 4,885,829
----------------
SOUTH KOREA -- 19.2%
Daewoo Motor Sales (Automotive)* 26,430 $ 167,919
Hana Bank (Banks & Credit Cos.)* 18,800 347,125
Hanaro Telecom, Inc. (Telephone Services) 89,900 246,348
Hyundai Motor Co., Ltd. (Automotive)* 17,700 750,189
Industrial Bank of Korea (Banks &
Credit Cos.)* 34,440 198,030
Kia Motors Corp. (Automotive)* 22,000 201,259
Korea Exchange Bank (Banks & Credit Cos.) 25,640 136,001
KT Corp. (Telephone Services) 19,900 379,493
KT&G Corp. (Tobacco) 21,400 371,784
LG Electronics Inc. (Furniture & Appliances)* 7,900 388,535
POSCO (Metals & Mining) 35,680 1,212,050
Samsung Corp. (Business Services)* 15,510 128,870
Samsung Display Devices Co.
(Electrical Equipment) 3,300 389,131
Samsung Electronics (Electronics) 8,180 3,096,248
Samsung Fire & Marine Insurance Co., Ltd.
(Insurance) 5,760 331,146
Samsung Securities Co. Ltd.
(Brokerage & Asset Managers) 4,920 105,296
Shinhan Financial Group Co., Ltd.
(Banks & Credit Cos.)* 16,690 266,844
Shinsegae Co., Ltd. (Specialty Stores)* 2,100 511,120
SK Telecom Co., Ltd. (Wireless
Communications) 4,360 728,191
----------------
$ 9,955,579
----------------
TAIWAN -- 10.5%
Asustek Computer, Inc.
(Computer Software - Systems)* 85,000 $ 187,776
China Motor Co. (Automotive) 2,350 4,015
China Steel Corp. (Metals & Mining) 614,000 510,009
Chunghwa Telecom Co Ltd
(Telephone Services) 8,900 129,050
Eva Airways (Airlines) 566,000 230,901
Evergreen Marine Corp. (Railroad & Shipping)* 270,040 235,440
Flexium Interconne (Electrical Equipment)* 193,000 253,543
Formosa Plastic Corp. (Specialty Chemicals) 59 97
Fubon Financial Holdings Co., Ltd.
(Banks & Credit Cos.) 468,000 448,012
High Tech Computer
(Computer Software-Systems) 58,000 212,695
Hon Hai Precision Industry Co., Ltd.
(PC & Peripheral)* 109,400 430,189
MediaTek, Inc. (Electronics) 22,600 212,354
Mega Financial Hd (Banks & Credit Cos.) 802,000 481,909
Nan Ya Plastics Corp. (Specialty Chemicals) 309,740 447,047
President Chain Store Corp.
(Food & Drug Stores) 154,000 235,876
Quanta Computer
(Computer Software-Systems) 94,000 231,193
United Microelectronics Corp. (Electronics) 1,014,333 869,428
Wan Hai Lines Ltd. (Railroad & Shipping) 336,000 303,835
----------------
$ 5,423,369
----------------
THAILAND -- 3.3%
BEC World Public Co., Ltd. PLC
(Broadcast & Cable TV) 35,700 $ 203,627
PTT Exploration & Production Public
Co., Ltd. (Energy - Independent) 52,100 352,396
Siam Cement Co. (Home Construction) 54,900 382,419
Siam Commercial Bank (Banks &
Credit Cos.) 155,700 212,197
Thai Airways Intl Plc (Airlines) 145,500 168,001
Thai Farmers Bank (Banks & Credit Cos.) 234,200 413,755
----------------
$ 1,732,395
----------------
TURKEY -- 1.1%
Akbank T.A.S. (Banks & Credit Cos.) 46,446,600 $ 243,063
Turkcell Iletisim Hizmetleri A.S.
(Wireless Communications)*^ 11,500 305,325
----------------
$ 548,388
----------------
UNITED KINGDOM -- 5.6%
Anglo American PLC (Metals & Mining)* 105,930 $ 2,282,322
Old Mutual PLC (Insurance) 380,000 624,054
----------------
$ 2,906,376
----------------
Total Foreign Stocks
(Identified Cost, $38,257,186) $ 49,873,096
----------------
WARRANTS
Bidvest Group (Conglomerates) 12/06/08*,
(Identified Cost, $0) 1,117 $ 720
----------------
COLLATERAL FOR SECURITIES LOANED -- 3.0%
Navigator Securities Lending Prime
Portfolio, at Cost 1,539,580 $ 1,539,580
----------------
REPURCHASE AGREEMENT -- 2.9%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch & Co., Inc. dated 12/31/03
due 1/02/04, total to be received
$1,480,078 (secured by various U.S.
Treasury and federal Agency
obligations in a jointly traded
account), at Cost $ 1,480 $ 1,480,000
----------------
Total Investments
(Identified Cost, $41,276,766 ) $ 52,893,396
----------------
OTHER ASSETS,
LESS LIABILITIES -- (2.1%) (1,075,668)
----------------
Net Assets -- 100.0% $ 51,817,728
================
</Table>
See portfolio footnotes and notes to financial statements.
17
<Page>
EMESPORTFOLIO OF INVESTMENTS -- December 31, 2003
GLOBAL GOVERNMENTS SERIES
BONDS -- 85.8%
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
FOREIGN BONDS -- 67.8%
AUSTRALIA -- 0.5%
Commonwealth of Australia, 6.5s, 2013 AUD 464 $ 371,469
----------------
AUSTRIA -- 4.9%
Republic of Austria, 5.5s, 2007 EUR 1,678 $ 2,275,573
Republic of Austria, 5s, 2012 293 389,724
Republic of Austria, 4.65s, 2018 742 938,416
----------------
$ 3,603,713
----------------
BELGIUM -- 1.6%
Kingdom of Belgium, 3.75s, 2009 EUR 832 $ 1,051,918
Kingdom of Belgium, 5s, 2012 90 119,535
----------------
$ 1,171,453
----------------
CANADA -- 2.9%
Government of Canada, 5.5s, 2009 CAD 1,158 $ 956,158
Government of Canada, 5.25s, 2012 900 728,663
Government of Canada, 8s, 2023 387 403,536
----------------
$ 2,088,357
----------------
DENMARK -- 2.7%
Kingdom of Denmark, 7s, 2007 DKK 3,399 $ 648,940
Kingdom of Denmark, 6s, 2009 6,130 1,148,437
Kingdom of Denmark, 5s, 2013 950 167,410
----------------
$ 1,964,787
----------------
FINLAND -- 5.0%
Republic of Finland, 2.75s, 2006 EUR 315 $ 396,064
Republic of Finland, 3s, 2008 1,995 2,459,081
Republic of Finland, 5.375s, 2013 571 779,307
----------------
$ 3,634,452
----------------
FRANCE -- 5.2%
Republic of France, 4.75s, 2007 EUR 553 $ 733,444
Republic of France, 4s, 2009 2,098 2,677,846
Republic of France, 6s, 2025 262 379,073
----------------
$ 3,790,363
----------------
GERMANY -- 12.6%
Federal Republic of Germany, 4.75s, 2008 EUR 1,447 $ 1,925,537
Federal Republic of Germany, 4.5s, 2009 3,589 4,700,964
Federal Republic of Germany, 5.25s, 2010 754 1,021,757
Kreditanstalt Fur Wiederaufbau (Banks),
3.25s, 2008 1,234 1,542,364
----------------
$ 9,190,622
----------------
GREECE -- 1.1%
Republc of Greece, 3.5s, 2008 EUR 609 $ 767,057
----------------
IRELAND -- 4.8%
Republic of Ireland, 4.25s, 2007 EUR 1,006 $ 1,310,585
Republic of Ireland, 3.25s, 2009 628 776,688
Republic of Ireland, 5s, 2013 753 1,000,786
Republic of Ireland, 4.6s, 2016 323 410,510
----------------
$ 3,498,569
----------------
ITALY -- 4.6%
Republic of Italy, 4.75s, 2013 EUR 1,265 $ 1,645,900
Republic of Italy, 5.25s, 2017 1,261 1,680,050
----------------
$ 3,325,950
----------------
MEXICO -- 0.6%
Pemex Project Funding Master Trust, 8.625s,
2022(Oil Services) $ 429 $ 475,117
----------------
NETHERLANDS -- 5.6%
Kingdom of Netherlands, 5.75s, 2007 EUR 591 $ 802,910
Kingdom of Netherlands, 3.75s, 2009 1,540 1,945,495
Kingdom of Netherlands, 5s, 2012 1,021 1,362,785
----------------
$ 4,111,190
----------------
NEW ZEALAND -- 1.6%
Government of New Zealand, 7s, 2009 NZD 508 $ 350,642
Government of New Zealand, 6.5s, 2013 1,180 803,339
----------------
$ 1,153,981
----------------
PORTUGAL -- 1.4%
Republic of Portugal, 5.45s, 2013 EUR 723 $ 988,204
----------------
QATAR -- 0.4%
State of Qatar, 9.75s, 2030 $ 205 $ 289,050
----------------
SOUTH AFRICA -- 0.4%
Republic of South Africa, 8.5s, 2017 $ 245 $ 292,162
----------------
SPAIN -- 7.8%
Kingdom of Spain, 6s, 2008 EUR 2,592 $ 3,594,849
Kingdom of Spain, 5.35s, 2011 1,252 1,706,163
Kingdom of Spain, 5.5s, 2017 282 387,731
----------------
$ 5,688,743
----------------
SWEDEN -- 2.7%
Kingdom of Sweden, 5.5s, 2012 SEK 3,295 $ 485,308
Spintab AB, 5s, 2008(Banks & Credit Cos.) 10,400 1,482,120
----------------
$ 1,967,428
----------------
UNITED KINGDOM -- 1.4%
United Kingdom Treasury, 5s, 2012 GBP 567 $ 1,028,116
----------------
Total Foreign Bonds $ 49,400,783
----------------
U.S. BONDS -- 18%
ASSET BACKED & SECURITIZED -- 3.5%
Commercial Mortgage Asset Trust,
.907s, 2032## (interest only) $ 9,682 $ 550,801
Deutsche Mortgage & Asset Receiving Corp.,
6.538s, 2031 344 376,742
First Union Lehman Brothers Bank,
6.56s, 2035 164 183,466
First Union National Bank Commercial
Mortgage Trust, 7.39s, 2031 342 396,266
First Union National Bank Commercial
Mortgage Trust, .975s, 2043
(interest only) 9,737 532,621
GMAC Commercial Mortgage Security, Inc.,
6.42s, 2035 164 182,972
LB UBS Commercial Mortgage Trust,
7.95s, 2010 257 306,013
----------------
$ 2,528,881
----------------
MUNICIPAL BONDS -- 1.9%
New Jersey Turnpike Authority Turnpike Rev.,
6s, 2013 $ 830 $ 989,178
University of California Rev., 5s, 2033 405 415,392
----------------
$ 1,404,570
----------------
U.S. GOVERNMENT AGENCIES -- 4.7%
Federal National Mortgage Assn.,
1.75s, 2008 JPY 350,000 $ 3,430,045
----------------
U.S. TREASURY OBLIGATIONS -- 7.9%
U.S. Treasury Bonds, 8s, 2021 $ 377 $ 509,156
U.S. Treasury Notes, 2s, 2004 1,185 1,193,471
U.S. Treasury Notes, 3.5s, 2006 513 530,254
U.S. Treasury Notes, 6.125s, 2007 354 396,190
U.S. Treasury Notes, 3.125s, 2008 182 181,893
U.S. Treasury Notes, 4.25s, 2010 969 1,126,265
U.S. Treasury Notes, 1.875s, 2013 379 376,026
U.S. Treasury Notes, 4.25s, 2013 1,425 1,426,781
----------------
$ 5,740,036
----------------
Total U.S. Bonds $ 13,103,532
----------------
Total Bonds
(Identified Cost, $54,192,508) $ 62,504,315
----------------
</Table>
18
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
SHORT-TERM OBLIGATIONS -- 7.6%
Federal National Mortgage Assn.,
due 1/02/04, at Amortized Cost $ 5,517 $ 5,516,877
----------------
REPURCHASE AGREEMENT -- 5.6%
Merrill Lynch & Co., dated 12/31/03,
due 1/02/04, total to be received
$3,276,193 (secured by various U.S.
Treasury and Federal Agency
obligations in a jointly traded
account) $ 3,276 $ 3,276,000
Morgan Stanley Co, dated 12/31/03,
due 1/02/04, total to be received
$793,042 (secured by various U.S.
Treasury and Federal Agency
obligations in a jointly traded
account) 793 793,000
----------------
Total Repurchase Agreement, at Cost $ 4,069,000
----------------
CALL OPTIONS PURCHASED
<Caption>
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/PRICE (000 OMITTED)
Japanese Yen/February/103
(Premiums Paid, $10,961) $ 547,328 $ 4,379
----------------
Total Investments
(Identified Cost, $65,168,718) $ 72,094,571
----------------
OTHER ASSETS,
LESS LIABILITIES -- 1.0% 733,123
----------------
Net Assets -- 100.0% $ 72,827,694
================
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2003
GLOBAL TOTAL RETURN SERIES
STOCKS -- 61.0%
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 33.2%
AUSTRALIA -- 0.3%
Australia & New Zealand Banking Group Ltd.
(Banks & Credit Cos.)* 25,846 $ 344,066
The News Corp., Ltd. (Broadcast & Cable TV)* 25,282 228,243
Virgin Blue Holdings (Airlines)* 8,670 15,537
----------------
$ 587,846
----------------
AUSTRIA -- 0.3%
Boehler-Uddeholm AG (Steel) 1,420 $ 95,790
Erste Bank der Oesterreichischen
Sparkassen AG (Banks & Credit Cos.) 3,080 380,187
----------------
$ 475,977
----------------
BERMUDA -- 0.4%
Ace Ltd. (Insurance) 16,200 $ 671,004
----------------
CANADA -- 1.0%
BCE, Inc. (Telephone Services) 14,922 $ 333,691
Canadian National Railway Co.
(Railroad & Shipping) 13,318 842,763
Canadian Natural Resources Ltd.
(Oil Services) 4,300 217,504
Talisman Energy, Inc. (Energy - Independent) 3,700 210,488
----------------
$ 1,604,446
----------------
DENMARK -- 0.4%
Danske Bank (Banks & Credit Cos.) 30,050 $ 704,194
----------------
FINLAND -- 0.6%
Fortum Oyj (Energy - Independent) 93,700 $ 965,709
----------------
FRANCE -- 4.6%
Cap Gemini S.A. (Computer
Software - Systems)^ 6,100 $ 270,613
Carrefour S.A. (Food & Drug Stores)^ 5,000 274,165
Credit Agricole S.A. (Banks & Credit Cos.) 44,218 1,054,637
France Telecom S.A. (Telephone Services) 36,400 1,039,237
L'Air Liquide S.A. (Specialty Chemicals) 4,950 873,146
Renault S.A. (Automotive) 7,000 482,435
Sanofi-Synthelabo S.A. (Pharmaceuticals) 6,070 456,580
Societe Television Francaise 1
(Broadcast & Cable TV) 4,656 162,380
Suez S.A. (Utilities - Electric Power) 24,700 495,754
Total Fina S.A., ADR (Energy - Integrated) 20,002 1,850,385
Total S.A. (Energy - Independent) 4,625 858,940
----------------
$ 7,818,272
----------------
GERMANY -- 0.9%
Bayerische Motoren Werke AG (Automotive) 17,710 $ 820,029
Porsche AG, Preferred (Automotive) 385 228,240
Schering AG (Pharmaceuticals) 10,130 512,447
----------------
$ 1,560,716
----------------
HONG KONG -- 0.5%
CNOOC Ltd. (Energy - Independent) 207,000 $ 406,601
Esprit Holdings, Ltd. (Specialty Stores) 4,000 13,292
Hong Kong Electric Holdings Ltd.
(Utilities - Electric Power) 87,420 345,683
----------------
$ 765,576
----------------
IRELAND -- 0.7%
Bank of Ireland (Banks & Credit Cos.) 38,430 $ 522,935
Irish Life & Permanent PLC
(Banks & Credit Cos.) 36,540 589,294
----------------
$ 1,112,229
----------------
ITALY -- 1.0%
Eni S.p.A. (Energy - Integrated) 49,400 $ 931,134
Italcementi S.p.A. (Home Construction) 69,200 527,491
Telecom Italia Mobile S.p.A.
(Wireless Communications) 45,200 245,453
----------------
$ 1,704,078
----------------
</Table>
19
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
LUXEMBOURG -- 0.3%
Tenaris S.A., ADR (Oil Services) 14,000 $ 466,480
----------------
JAPAN -- 4.7%
Brother Industries Ltd. (Electronics)^ 43,000 $ 394,540
Canon, Inc. (PC & Peripheral) 18,000 838,381
Chugai Pharmaceutical Co., Ltd.
(Pharmaceuticals) 57,400 825,626
Credit Saison Co., Ltd.
(Banks & Credit Cos.) 11,800 266,542
Denso Corp. (Automotive) 22,000 433,285
Heiwa Corp. (Leisure & Toys) 19,200 278,676
Honda Motor Co., Ltd. (Automotive) 24,600 1,092,976
KDDI Corp. (Telephone Services) 120 687,730
Lawson, Inc. (Specialty Stores) 11,000 375,788
Nissan Motor Co. (Automotive) 14,000 159,948
Sekisui Chemical Co. (Home Construction) 43,000 219,144
Tokyo Broadcasting System, Inc.
(Broadcast & Cable TV) 18,000 286,797
Tokyo Gas Co., Ltd. (Natural Gas
Distribution) 250,000 891,399
Toyota Industries Corp. (Automotive) 10,400 220,843
Toyota Motor Corp. (Automotive) 21,200 716,330
Vodafone Holdings K.K
(Telephone Services) 56 150,016
----------------
$ 7,838,021
----------------
MEXICO -- 0.1%
Grupo Financiero Inbursa, S.A. de C.V.
(Banks & Credit Cos.) 227,800 $ 247,120
----------------
NETHERLANDS -- 0.9%
Reed Elsevier N.V. (Printing & Publishing) 41,940 $ 520,497
STMicroelectronics N.V. (Electronics) 10,700 289,851
Unilever N.V. (Food & Non Alcohol Beverages) 7,200 470,365
VNU N.V. (Printing & Publishing)* 7,208 227,497
----------------
$ 1,508,210
----------------
NEW ZEALAND -- 0.2%
Telecom Corp. of New Zealand, Ltd.
(Telephone Services)* 94,262 $ 331,654
----------------
NORWAY -- 0.6%
DnB Holding ASA (Banks & Credit Cos.)^ 148,000 $ 985,779
----------------
SINGAPORE -- 0.5%
DBS Group Holdings Ltd.
(Banks & Credit Cos.) 39,000 $ 337,573
Singapore Telecommunications Ltd.
(Telephone Services) 266,000 306,989
United Overseas Bank Ltd.
(Banks & Credit Cos.) 29,000 225,402
----------------
$ 869,964
----------------
SOUTH KOREA -- 0.4%
Hyundai Motor Co., Ltd. (Automotive)* 12,000 $ 508,603
Samsung Electronics Co., Ltd. (Electronics) 620 234,679
----------------
$ 743,282
----------------
SPAIN -- 1.1%
Altadis S.A. (Tobacco) 14,410 $ 408,507
Antena 3 Television S.A.
(Broadcast & Cable TV)* 292 12,855
Iberdrola S.A. (Utilities - Electric Power)^ 11,880 234,552
Telefonica S.A. (Telephone Services) 86,486 1,268,388
----------------
$ 1,924,302
----------------
SWEDEN -- 0.6%
Autoliv, Inc. (Automotive) 12,500 $ 474,433
Swedish Match AB (Tobacco) 57,900 591,654
----------------
$ 1,066,087
----------------
SWITZERLAND -- 3.8%
Converium Holdings AG (Insurance) 5,880 $ 312,462
Givaudan S.A. (Consumer Goods & Services) 650 337,267
Nestle S.A. (Food & Non Alcohol Beverages) 4,733 1,182,007
Novartis AG (Pharmaceuticals) 31,900 1,447,656
Roche Holdings AG (Pharmaceuticals) 6,700 675,523
Syngenta AG (Chemicals) 21,792 1,467,125
UBS AG (Banks & Credit Cos.) 13,174 901,833
----------------
$ 6,323,873
----------------
UNITED KINGDOM -- 9.3%
Amdocs Ltd., (Computer Software)* 5,220 $ 117,346
AstraZeneca Group PLC (Pharmaceuticals) 14,240 681,233
Aviva PLC (Insurance)* 42,000 367,551
BOC Group PLC (Specialty Chemicals)* 25,500 388,503
BP Amoco PLC (Energy-Integrated)* 49,700 401,888
BP Amoco PLC, ADR
(Energy - Integrated) 33,552 1,655,791
British Sky Broadcasting Group PLC
(Broadcast & Cable TV) 18,760 235,418
Cadbury Schweppes PLC
(Food & Non Alcohol Beverages)* 178,230 1,305,209
Diageo PLC (Alcoholic Beverages)* 79,128 1,038,169
GlaxoSmithKline PLC (Pharmaceuticals)* 14,400 329,021
Granada PLC (Broadcast & Cable TV)* 233,700 508,943
Imperial Tobacco Group PLC (Tobacco)* 17,830 350,102
Johnston Press PLC (Printing & Publishing) 36,500 303,456
Kingfisher PLC (Specialty Stores)* 68,775 341,906
Next PLC (General Merchandise) 18,200 364,839
Reckitt Benckiser PLC
(Consumer Goods & Services)* 42,770 965,022
Reed Elsevier PLC (Printing & Publishing) 98,030 817,634
Royal Bank of Scotland Group PLC
(Banks & Credit Cos.)* 32,411 952,298
Severn Trent PLC
(Utilities - Electric Power) 34,400 459,929
Unilever PLC
(Food & Non Alcohol Beverages)* 41,849 389,014
United Utilities PLC
(Utilities - Electric Power) 195,900 1,064,811
Vedanta Resources PLC (Metals & Mining)* 13,170 86,514
Vodafone Group PLC
(Wireless Communications)* 450,803 1,114,518
William Hill PLC (Gaming & Lodging) 72,590 553,293
Yell Group PLC (Broadcast & Cable TV) 155,900 848,783
----------------
$ 15,641,191
----------------
Total Foreign Stocks $ 55,916,010
----------------
U.S. STOCKS -- 27.8%
AEROSPACE -- 0.7%
Alliant Techsystems, Inc.* 1,380 $ 79,709
Lockheed Martin Corp. 7,150 367,510
Northrop Grumman Corp. 7,390 706,484
----------------
$ 1,153,703
----------------
BANKS & CREDIT COMPANIES -- 6.4%
American Express Co. 10,300 $ 496,769
Bank of America Corp. 20,000 1,608,600
Bank One Corp. 8,400 382,956
Citigroup, Inc. 40,293 1,955,822
Fannie Mae 18,330 1,375,850
FleetBoston Financial Corp. 34,640 1,512,036
MBNA Corp. 7,540 187,369
Mellon Financial Corp. 25,460 817,520
PNC Financial Services Group 9,600 525,408
SunTrust Banks, Inc. 14,860 1,062,490
</Table>
20
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
BANKS & CREDIT COMPANIES -- continued
U.S. Bancorp 9,460 $ 281,719
Wachovia Corp. 3,020 140,702
Washington Mutual, Inc. 3,580 143,630
Wells Fargo Co. 4,800 282,672
----------------
$ 10,773,543
----------------
BIOTECHNOLOGY -- 0.1%
Genzyme Corp.* 4,660 $ 229,924
----------------
BROADCAST & CABLE TV -- 1.0%
Clear Channel Communications, Inc. 2,610 $ 122,226
Comcast Corp.* 20,600 644,368
Cox Communications, Inc., "A"* 14,000 482,300
Hearst-Argyle Television, Inc. 2,760 76,066
Time Warner, Inc.* 21,100 379,589
----------------
$ 1,704,549
----------------
BROKERAGE & ASSET MANAGERS -- 1.3%
Goldman Sachs Group, Inc. 11,570 $ 1,142,306
Lehman Brothers Holdings, Inc. 3,030 233,977
Merrill Lynch & Co., Inc. 14,580 855,117
----------------
$ 2,231,400
----------------
BUSINESS SERVICES -- 0.2%
Convergys Corp.* 3,310 $ 57,793
First Data Corp. 5,490 225,584
----------------
$ 283,377
----------------
CHEMICALS -- 1.1%
Air Products & Chemicals, Inc. 6,740 $ 356,074
Dow Chemical Co. 19,120 794,819
PPG Industries, Inc. 10,350 662,607
----------------
$ 1,813,500
----------------
COMPUTER SOFTWARE -- 0.5%
Microsoft Corp. 17,760 $ 489,110
Oracle Corp.* 25,250 333,300
----------------
$ 822,410
----------------
COMPUTER SOFTWARE - SYSTEMS -- 0.4%
IBM Corp. 7,390 $ 684,905
Xerox Corp.* 4,930 68,034
----------------
$ 752,939
----------------
CONSUMER GOODS & SERVICES -- 0.8%
Gillette Co. 4,930 $ 181,079
Kimberly-Clark Corp. 19,470 1,150,482
----------------
$ 1,331,561
----------------
CONSUMER SERVICES
Education Management Corp.* 1,380 $ 42,835
----------------
CONTAINERS -- 0.1%
Owens-Illinois, Inc.* 4,920 $ 58,499
Smurfit-Stone Container Corp.* 8,200 152,274
----------------
$ 210,773
----------------
ELECTRICAL EQUIPMENT -- 0.8%
Emerson Electric Co. 11,200 $ 725,200
General Electric Co. 19,470 603,181
----------------
$ 1,328,381
----------------
ELECTRONICS
NVIDIA Corp.*^ 2,060 $ 47,895
----------------
ENERGY - INDEPENDENT -- 0.4%
Marathon Oil Corp. 3,020 $ 99,932
Unocal Corp. 15,850 583,755
Valero Energy Corp. 1,370 63,486
----------------
$ 747,173
----------------
ENERGY - INTEGRATED -- 0.9%
ConocoPhillips 12,560 $ 823,559
ExxonMobil Corp. 16,870 691,670
----------------
$ 1,515,229
----------------
ENTERTAINMENT -- 0.6%
Viacom, Inc., "B" 20,796 $ 922,926
----------------
FOOD & DRUG STORES -- 0.1%
Kroger Co.* 8,220 $ 152,152
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 1.7%
Archer-Daniels-Midland Co. 34,580 $ 526,308
Coca-Cola Co. 1,240 62,930
Fresh Del Monte Produce, Inc. 2,200 52,426
H.J. Heinz Co. 16,640 606,195
Kellogg Co. 31,640 1,204,851
PepsiCo, Inc. 3,564 166,154
Sara Lee Corp. 6,990 151,753
Tyson Foods, Inc., "A" 10,700 141,668
----------------
$ 2,912,285
----------------
FOREST & PAPER PRODUCTS -- 0.3%
International Paper Co. 10,070 $ 434,118
----------------
GAMING & LODGING -- 0.1%
Cendant Corp.* 4,800 $ 106,896
----------------
GENERAL MERCHANDISE -- 0.4%
Sears, Roebuck & Co. 8,480 $ 385,755
Target Corp. 6,440 247,296
----------------
$ 633,051
----------------
INSURANCE -- 1.9%
Allstate Corp. 16,570 $ 712,841
Chubb Corp. 3,400 231,540
Hartford Financial Services Group, Inc. 7,160 422,655
MetLife, Inc. 34,040 1,146,127
Travelers Property Casualty Corp., "A" 32,000 536,960
UnumProvident Corp. 3,690 58,191
----------------
$ 3,108,314
----------------
MACHINERY & TOOLS -- 0.2%
Deere & Co. 6,290 $ 409,165
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.1%
Apria Healthcare Group, Inc.* 3,010 $ 85,695
Medco Health Solutions, Inc.* 893 30,353
----------------
$ 116,048
----------------
MEDICAL EQUIPMENT -- 0.4%
Baxter International, Inc. 6,170 $ 188,308
Becton, Dickinson & Co. 690 28,387
Boston Scientific Corp.* 3,580 131,601
Guidant Corp. 4,560 274,512
Pall Corp. 3,580 96,051
----------------
$ 718,859
----------------
METALS & MINING -- 0.1%
Alcoa, Inc. 4,660 $ 177,080
----------------
OIL SERVICES -- 0.4%
BJ Services Co.* 1,510 $ 54,209
Nabors Industries, Ltd.* 1,380 57,270
Noble Corp.* 8,500 304,130
Schlumberger Ltd. 5,500 300,960
----------------
$ 716,569
----------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.1%
Lexmark International, Inc.* 2,200 $ 173,008
----------------
PHARMACEUTICALS -- 2.0%
Johnson & Johnson Co. 18,670 $ 964,492
Merck & Co., Inc. 7,410 342,342
Pfizer, Inc. 30,832 1,089,295
Schering-Plough Corp. 46,300 805,157
Wyeth 3,430 145,603
----------------
$ 3,346,889
----------------
PRINTING & PUBLISHING -- 0.5%
Tribune Co. 15,430 $ 796,188
----------------
</Table>
21
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
RAILROAD & SHIPPING -- 0.6%
Norfolk Southern Corp. 6,310 $ 149,232
Union Pacific Corp. 11,200 778,176
----------------
$ 927,408
----------------
RESTAURANTS -- 0.1%
Brinker International, Inc.* 2,890 $ 95,832
McDonald's Corp. 3,830 95,099
----------------
$ 190,931
----------------
SPECIALTY STORES -- 0.3%
Home Depot, Inc. 7,410 $ 262,981
Lowe's Cos., Inc. 5,090 281,935
----------------
$ 544,916
----------------
TELECOM - WIRELINE -- 0.3%
Motorola, Inc. 36,420 $ 512,429
----------------
TELEPHONE SERVICES -- 1.2%
AT&T Corp. 6,020 $ 122,206
BellSouth Corp. 10,420 294,886
SBC Communications, Inc. 35,080 914,536
Verizon Communications, Inc. 20,990 736,329
----------------
$ 2,067,957
----------------
TOBACCO -- 1.1%
Altria Group, Inc. 32,896 $ 1,790,200
----------------
UTILITIES - ELECTRIC POWER -- 0.6%
Dominion Resources, Inc. 690 $ 44,043
Duke Energy Corp. 3,280 67,076
Energy East Corp. 6,190 138,656
PG&E Corp.* 9,190 255,206
Public Service Enterprise Group, Inc. 1,930 84,534
TXU Corp. 15,800 374,776
----------------
$ 964,291
----------------
Total U.S. Stocks $ 46,710,872
----------------
Total Stocks (Identified Cost, $85,280,465) $ 102,626,882
----------------
BONDS -- 37.3%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
FOREIGN BONDS -- 29.4%
AUSTRALIA -- 0.2%
Australian Government, 6.5s, 2013 AUD 424 $ 339,445
----------------
AUSTRIA -- 1.9%
Pfandbriefstelle der oesterreichischen
Landes-Hypothekenbanken, 1.6s, 2011
(Banks & Credit Cos.) JPY 21,000 $ 203,126
Republic of Austria, 5.5s, 2007 EUR 1,166 1,581,239
Republic of Austria, 5s, 2012 367 488,152
Republic of Austria, 4.65s, 2018 706 892,886
----------------
$ 3,165,403
----------------
BELGIUM -- 0.4%
Kingdom of Belgium, 3.75s, 2009 EUR 283 $ 357,804
Kingdom of Belgium, 5s, 2012 240 318,759
----------------
$ 676,563
----------------
CANADA -- 1.3%
Government of Canada, 5.5s, 2009 CAD 583 $ 481,382
Government of Canada, 5.25s, 2012 1,320 1,068,706
Government of Canada, 8s, 2023 179 186,648
Province of Quebec, 1.6s, 2013 39,000 370,900
----------------
$ 2,107,636
----------------
DENMARK -- 1.2%
Kingdom of Denmark, 7s, 2007 DKK 3,588 $ 685,024
Kingdom of Denmark, 6s, 2009 3,819 715,478
Kingdom of Denmark, 5s, 2013 3,298 581,175
----------------
$ 1,981,677
----------------
FINLAND -- 2.1%
Republic of Finland, 2.75s, 2006 EUR 167 $ 209,977
Republic of Finland, 3s, 2008 1,727 2,128,738
Republic of Finland, 5.375s, 2013 933 1,273,369
----------------
$ 3,612,084
----------------
FRANCE -- 2.6%
Government of France, 4.75s, 2007 EUR 489 $ 648,560
Government of France, 4s, 2009 2,072 2,644,660
Government of France, 5s, 2011 156 207,429
Government of France, 4.75s, 2012 349 457,091
Government of France, 6s, 2025 321 464,437
----------------
$ 4,422,177
----------------
GERMANY -- 5.4%
Federal Republic of Germany,
4.75s, 2008^ EUR 356 $ 473,733
Federal Republic of Germany, 4.5s, 2009 3,778 4,948,521
Federal Republic of Germany, 5.25s, 2010 1,662 2,252,202
KFW Kreditanstalt fuer Wiederaufbau,
3.25s, 2008 1,070 1,337,382
----------------
$ 9,011,838
----------------
GREECE -- 0.4%
Republic of Greece, 3.5s, 2008 EUR 545 $ 686,447
----------------
IRELAND -- 1.9%
Republic of Ireland, 4.25s, 2007 EUR 645 $ 840,286
Republic of Ireland, 3.25s, 2009 523 646,827
Republic of Ireland, 5s, 2013 1,088 1,446,023
Republic of Ireland, 4.6s, 2016 221 280,875
----------------
$ 3,214,011
----------------
ITALY -- 1.9%
Republic of Italy, 4.5s, 2007 EUR 366 $ 479,918
Republic of Italy, 4.75s, 2013 982 1,277,687
Republic of Italy, 5.25s, 2017 1,089 1,450,892
----------------
$ 3,208,497
----------------
MALAYSIA -- 0.1%
Petronas Capital Ltd., 7.875s,
2022(Oil Services)## $ 100 $ 118,496
----------------
MEXICO -- 0.2%
Pemex Project Funding Master Trust,
8.625s, 2022(Oil Services) $ 346 $ 383,195
----------------
NETHERLANDS -- 2.5%
Kingdom of Netherlands, 5.75s, 2007 EUR 307 $ 417,078
Kingdom of Netherlands, 3.75s, 2009 1,813 2,290,378
Kingdom of Netherlands, 5s, 2012 1,130 1,508,043
----------------
$ 4,215,499
----------------
NEW ZEALAND -- 0.6%
Government of New Zealand, 7s, 2009 NZD 313 $ 216,046
Government of New Zealand, 6.5s, 2013 1,243 846,229
----------------
$ 1,062,275
----------------
PORTUGAL -- 0.5%
Republic of Portugal, 5.45s, 2013 EUR 617 $ 843,322
----------------
QATAR
State of Qatar, 9.75s, 2030 $ 43 $ 60,630
----------------
SOUTH AFRICA -- 0.2%
Republic of South Africa, 8.5s, 2017 $ 212 $ 252,810
----------------
SPAIN -- 3.8%
Kingdom of Spain, 6s, 2008 EUR 2,779 $ 3,854,200
Kingdom of Spain, 5.35s, 2011 1,290 1,757,947
Kingdom of Spain, 5.5s, 2017 615 845,584
----------------
$ 6,457,731
----------------
</Table>
22
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
FOREIGN BONDS -- continued
SWEDEN -- 1.0%
Kingdom of Sweden, 5.5s, 2012 SEK 2,375 $ 349,805
Spintab AB, 5s, 2008
(Banks & Credit Cos.) 9,400 1,339,608
----------------
$ 1,689,413
----------------
UNITED KINGDOM -- 1.2%
United Kingdom Treasury, 7.25s, 2007 GBP 1,010 $ 1,974,178
----------------
Total Foreign Bonds $ 49,483,327
----------------
U.S. BONDS -- 6.8%
AEROSPACE -- 0.1%
BAE Systems Holding, Inc.,
6.4s, 2011## $ 80 $ 85,994
----------------
ASSET BACKED & SECURITIZED -- 1.2%
Commercial Mortgage Asset Trust,
0.91s, 2032(Interest Only)## $ 4,651 $ 264,600
Deutsche Mortgage & Asset
Receiving Corp., 6.538s, 2031 287 314,317
First Union Lehman Brothers Bank,
6.56s, 2035 146 163,027
First Union National Bank Commercial
Mortgage Trust, 7.39s, 2031 293 339,517
First Union National Bank Commercial
Mortgage Trust,
0.98s, 2043 (Interest Only)## 8,885 486,053
GMAC Commercial
Mortgage Securities, Inc.,
6.42s, 2035 146 162,588
LB-UBS Commercial Mortgage Trust,
7.95s, 2010 220 262,190
----------------
$ 1,992,292
----------------
AUTOMOTIVE -- 0.1%
General Motors Acceptance Corp.,
6.125s, 2006 $ 217 $ 232,244
----------------
ENERGY - INTEGRATED -- 0.1%
Amerada Hess Corp., 7.3s, 2031 $ 183 $ 188,965
----------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES - 0.1%
HCA, Inc., 8.75s, 2010 $ 140 $ 166,703
----------------
OIL SERVICES -- 0.1%
Halliburton Co., 5.5s, 2010## $ 147 $ 153,735
----------------
SUPRANATIONAL -- 0.1%
Corp. Andina De Fomento, 6.875s,
2012 $ 208 $ 230,789
----------------
U.S. TREASURY OBLIGATIONS -- 4.9%
U.S. Treasury Bonds, 8s, 2021 $ 251 $ 338,987
U.S. Treasury Notes, 2.375s, 2006 717 720,865
U.S. Treasury Notes, 3.5s, 2006 546 564,364
U.S. Treasury Notes, 3.25s, 2007 625 637,524
U.S. Treasury Notes, 3.375s, 2007 2,383 2,581,780
U.S. Treasury Notes, 6.125s, 2007 348 389,475
U.S. Treasury Notes, 2.625s, 2008 206 202,902
U.S. Treasury Notes, 3.125s, 2008 320 319,813
U.S. Treasury Notes, 5s, 2011 502 539,120
U.S. Treasury Notes, 4s, 2012 763 755,668
U.S. Treasury Notes, 4.25s, 2013 1,088 1,089,360
----------------
$ 8,139,858
----------------
UTILITIES - ELECTRIC POWER -- 0.1%
FirstEnergy Corp., 6.45s, 2011 $ 148 $ 153,394
----------------
Total U.S. Bonds $ 11,343,974
----------------
MUNICIPAL BONDS -- 1.1%
California Infrastructure & Economic
Development Bank Revenue, 5s, 2033 $ 1,000 $ 1,027,660
Metropolitan Transportation Authority
New York, 5s, 2032 200 204,774
New Jersey State Turnpike Authority
Turnpike Revenue, 6s, 2013 430 512,466
University of California Revenue,
5s, 2033 170 174,362
----------------
Total Municipal Bonds $ 1,919,262
----------------
Total Bonds (Identified Cost, $56,018,958) $ 62,746,563
----------------
SHORT-TERM OBLIGATIONS -- 1.1%
New Center Asset Trust, due 1/02/04, at
Amortized Cost $ 1,769 $ 1,768,952
----------------
COLLATERAL FOR SECURITIES LOANED -- 1.0%
Navigator Securities Lending Prime Portfolio $ 48,925 $ 48,925
Goldman Sachs & Co. Repurchase
Agreement 1.2%, 1/02/04 1,626,660 1,626,660
----------------
Total Collateral for Securities loaned,
at Cost $ 1,675,585
----------------
CALL OPTIONS PURCHASED
<Caption>
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/PRICE (000 OMITTED)
Japanese Yen/February/103
(Premiums Paid, $10,026) $ 500,716 $ 4,006
----------------
Total Investments
(Identified Cost, $144,753,986) $ 168,821,988
----------------
OTHER ASSETS,
LESS LIABILITIES -- (0.4%) (602,181)
----------------
Net Assets -- 100.0% $ 168,219,807
================
</Table>
See portfolio footnotes and notes to financial statements.
23
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
GOVERNMENT SECURITIES SERIES
BONDS -- 97.2%
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
ASSET BACKED & SECURITIZED -- 0.2%
Federal Home Loan Mortgage Corp.,
3.108s, 2035 $ 1,335 $ 1,328,325
----------------
MORTGAGE BACKED -- 29.4%
Federal Home Loan Bank, 7.5s, 2027 $ 348 $ 374,102
Federal Home Loan Mortgage Corp.,
6.5s, 2032 14,635 15,330,196
Federal Home Loan Mortgage Corp., 7s, 2032 2,376 2,513,766
Federal Home Loan Mortgage Corp.,
5.5s, 2033 35,568 36,016,056
Federal National Mortgage Assn., 5s, 2018 2,844 2,904,107
Federal National Mortgage Assn., 5.5s,
1999 - 2033 75,875 77,301,323
Federal National Mortgage Assn.,
5.975s, 2020 12 12,137
Federal National Mortgage Assn., 6.5s,
2016 - 2032 80,462 84,413,707
Federal National Mortgage Assn., 7.5s,
2017 - 2031 5,317 5,685,408
Government National Mortgage Assn.,
12.25s, 2015 2 2,607
Government National Mortgage Assn.,
7.5s, 2023 185 199,505
Government National Mortgage Assn.,
6.5s, 2024 11 11,168
Government National Mortgage Assn.,
7.5s, 2024 314 337,929
Government National Mortgage Assn.,
6.5s, 2026 140 147,537
Government National Mortgage Assn.,
6.5s, 2028 7,159 7,555,280
Government National Mortgage Assn.,
7.5s, 2030 2,574 2,740,823
----------------
$ 235,545,651
----------------
U.S. GOVERNMENT AGENCIES -- 52.8%
Aid To Lebanon, 7.62s, 2009 $ 5,822 $ 6,633,639
Aid To Peru, 9.98s, 2008 2,729 3,122,502
Empresa Energetica Cornito Ltd., 6.07s, 2010 8,160 9,025,694
Federal Home Loan Bank, 2.25s, 2006 22,465 22,470,055
Federal Home Loan Bank, 2.875s, 2006 17,245 17,428,176
Federal Home Loan Bank, 4.5s, 2013 6,150 6,058,961
Federal Home Loan Mortgage Corp.,
2.875s, 2006 15,914 16,028,087
Federal Home Loan Mortgage Corp.,
2.75s, 2008 23,205 22,833,975
Federal Home Loan Mortgage Corp.,
3.625s, 2008 14,744 14,841,561
Federal Home Loan Mortgage Corp., 7s, 2010 8,626 10,065,792
Federal National Mortgage Assn., 3.25s, 2008 36,295 36,006,237
Federal National Mortgage Assn.,
6s, 2008 - 2033 117,492 123,842,266
Federal National Mortgage Assn., 5.5s, 2011 13,355 14,402,152
Federal National Mortgage Assn.,
5.125s, 2014 12,069 12,110,976
Financing Corp., 9.8s, 2018 7,760 11,403,080
Financing Corp., 10.35s, 2018 3,535 5,414,181
Resolution Funding Corp., 8.875s, 2020 6,000 8,365,014
Small Business Administration, 8.4s, 2007 74 77,584
Small Business Administration, 9.65s, 2007 36 38,279
Small Business Administration, 8.7s, 2009 315 336,451
Small Business Administration, 9.05s, 2009 59 62,516
Small Business Administration, 10.05s, 2009 28 30,557
Small Business Administration, 6.34s, 2021 3,430 3,721,365
Small Business Administration, 6.35s, 2021 4,213 4,574,454
Small Business Administration, 6.44s, 2021 4,346 4,735,368
Small Business Administration, 6.625s, 2021 $ 4,507 $ 4,949,959
Small Business Administration, 6.07s, 2022 3,745 4,010,059
Small Business Administration, 4.89s, 2023 5,051 5,023,093
Small Business Administration, 4.98s, 2023 1,968 1,970,557
Student Loan Marketing Assn., 5.25s, 2006 30,315 32,323,399
Tennessee Valley Authority, 0s, 2042 12,573 8,520,345
U.S. Department of Housing & Urban
Development, 6.36s, 2016 6,000 6,633,198
U.S. Department of Housing & Urban
Development, 6.59s, 2016 5,744 6,250,828
----------------
$ 423,310,360
----------------
U.S. TREASURY OBLIGATIONS -- 14.8%
Principal Stripped Payments, 0s, 2017 $ 18,000 $ 9,191,160
Principal Stripped Payments, 0s, 2023 13,345 4,702,231
U.S. Treasury Bonds, 12s, 2013 199 274,946
U.S. Treasury Bonds, 7.25s, 2016 5,592 6,975,802
U.S. Treasury Bonds, 9.25s, 2016 10,880 15,616,630
U.S. Treasury Bonds, 6.875s, 2025 7,944 9,718,054
U.S. Treasury Bonds, 6.125s, 2029 4,217 4,778,717
U.S. Treasury Bonds, 6.25s, 2030 9,958 11,491,373
U.S. Treasury Bonds, 5.375s, 2031 2,533 2,641,544
U.S. Treasury Notes, 5.75s, 2005 21,355 22,928,265
U.S. Treasury Notes, 3.375s, 2007 17,912 19,403,192
U.S. Treasury Notes, 5s, 2011 1,877 2,015,795
U.S. Treasury Notes, 1.875s, 2013 9,300 9,233,641
----------------
$ 118,971,350
----------------
Total U.S. Bonds $ 779,155,686
----------------
Total Bonds
(Identified Cost, $759,268,128) $ 779,155,686
----------------
REPURCHASE AGREEMENT -- 2.0%
Goldman Sachs, Inc.,dated 12/31/03,
due 1/2/04, total to be received
$16,259,447 (secured by various U.S.
Treasury and Federal Agency
obligations in a jointly traded
account), at Cost $ 16,259 $ 16,259,000
----------------
Total Investments
(Identified Cost, $775,527,128) $ 795,414,686
----------------
OTHER ASSETS,
LESS LIABILITIES -- 0.8% 6,428,495
----------------
Net Assets -- 100.0% $ 801,843,181
================
</Table>
See portfolio footnotes and notes to financial statements.
24
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
HIGH YIELD SERIES
BONDS -- 91.6%
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- 83.1%
ADVERTISING & BROADCASTING -- 4.7%
Allbritton Communications Co., 7.75s, 2012 $ 2,050 $ 2,126,875
Emmis Communications Corp., 0s to 2006,
12.5s to 2011 1,777 1,645,946
Granite Broadcasting Corp., 10.375s, 2005 894 895,118
Granite Broadcasting Corp., 9.75s, 2010 2,245 2,239,387
Lamar Media Corp., 7.25s, 2013 1,225 1,316,875
Muzak LLC/Muzak Finance Corp., 10s, 2009 1,265 1,347,225
Paxson Communications Corp., 10.75s, 2008 1,065 1,162,181
Paxson Communications Corp., 0s to 2006,
12.25s, 2009 1,285 1,127,588
Pegasus Communications Corp., 12.5s, 2007 1,250 1,181,250
Primedia, Inc., 8s, 2013 500 510,000
Radio One, Inc., 8.875s, 2011 1,140 1,256,850
Spanish Broadcasting Systems, Inc.,
9.625s, 2009 2,305 2,460,587
XM Satellite Radio, Inc., 0s to 2005,
14s to 2009 1,503 1,343,101
XM Satellite Radio, Inc., 12s, 2010 960 1,084,800
Young Broadcasting, Inc., 8.5s, 2008 1,750 1,881,250
----------------
$ 21,579,033
----------------
AEROSPACE -- 1.7%
Alliant Techsystems, Inc., 8.5s, 2011 $ 1,655 $ 1,820,500
Be Aerospace, Inc., 8.5s, 2010 210 225,225
Be Aerospace, Inc., 8.875s, 2011 900 843,750
Hexcel Corp., 9.875s, 2008 235 264,963
Hexcel Corp., 9.75s, 2009 1,900 1,990,250
K & F Industries, Inc., 9.25s, 2007 1,262 1,301,437
K & F Industries, Inc., 9.625s, 2010 535 599,869
Transdigm, Inc., 8.375s, 2011 925 983,969
----------------
$ 8,029,963
----------------
AIRLINES -- 0.6%
Continental Airlines, Inc., 6.748s, 2017 $ 380 $ 313,962
Continental Airlines, Inc., 6.9s, 2017 390 326,492
Continental Airlines, Inc., 6.795s, 2020 988 834,452
Continental Airlines, Inc., 7.566s, 2020 1,212 1,021,775
Delta Air Lines, Inc., 7.92s, 2012 370 335,008
----------------
$ 2,831,689
----------------
AIRLINES PASS-THROUGH
Airplane Pass-Through Trust, 10.875s, 2019+ $ 691 $ 13,828
----------------
APPAREL MANUFACTURERS -- 0.1%
Westpoint Stevens, Inc., 7.875s, 2005** $ 3,585 $ 466,050
Westpoint Stevens, Inc., 7.875s, 2008** 610 79,300
----------------
$ 545,350
----------------
AUTOMOTIVE -- 3.8%
Advanced Accesory Systems LLC,
10.75s, 2011 $ 350 $ 385,438
Arvinmeritor, Inc., 8.75s, 2012 1,310 1,499,950
Collins & Aikman Products Co., 10.75s, 2011 1,385 1,360,762
Cummins Engine Co., Inc., 9.5s, 2010## 555 638,250
Dana Corp., 6.5s, 2009 700 742,875
Dana Corp., 10.125s, 2010 405 471,825
Dana Corp., 9s, 2011 525 632,625
Dura Operating Corp., 9s, 2009 555 555,000
Eagle-Picher, Inc., 9.75s, 2013 660 712,800
Ford Motor Credit Co., 7s, 2013 2,177 2,296,036
Metaldyne Corp., 11s, 2012 1,465 1,347,800
Metaldyne Corp., 10s, 2013 705 712,050
Navistar International Corp., 9.375s, 2006 740 816,775
Tenneco Automative, Inc., 10.25s, 2013 1,980 2,252,250
Tenneco Automotive, Inc., 11.625s, 2009 1,005 1,085,400
TRW Automotive Acquisition Corp.,
9.375s, 2013 1,130 1,291,025
TRW Automotive Acquisition Corp., 11s, 2013 $ 480 $ 565,200
Venture Holdings, 9.5s, 2005** 980 24,500
----------------
$ 17,390,561
----------------
BASIC INDUSTRY -- 0.4%
Foamex LP/ Capital Corp., 10.75s, 2009 $ 905 $ 862,013
Trimas Corp., 9.875s, 2012 760 792,300
----------------
$ 1,654,313
----------------
BROADCAST & CABLE TV -- 4.1%
Avalon Cable Holdings LLC, 11.875s, 2008 $ 1,229 $ 1,296,500
CCO Holdings LLC, 8.75s, 2013 665 676,637
Charter Communications Holdings,
8.25s, 2007 3,430 3,224,200
Charter Communications Holdings,
8.625s, 2009 3,100 2,704,750
CSC Holdings, Inc., 8.125s, 2009 3,035 3,262,625
DirecTv Holdings LLC, 8.375s, 2013 565 655,400
Insight Midwest, 9.75s, 2009 2,440 2,580,300
Mediacom Broadband LLC, 11s, 2013 1,390 1,560,275
Mediacom LLC/Capital Corp., 9.5s, 2013 1,455 1,542,300
Telenet Communications, 9s, 2013 895 1,161,485
----------------
$ 18,664,472
----------------
BUILDING -- 1.9%
Atrium Cos., Inc., 10.5s, 2009 $ 1,605 $ 1,717,350
Formica Corp., 10.875s, 2009** 1,310 229,250
Interface, Inc., 10.375s, 2010 1,235 1,306,013
Jacuzzi Brands, Inc., 9.625s, 2010## 675 742,500
MMI Products, Inc., 11.25s, 2007 345 281,175
Nortek, Inc., 9.25s, 2007 1,790 1,839,225
Nortek, Inc., 8.875s, 2008 915 957,319
Nortek, Inc., 9.875s, 2011 165 181,912
Williams Scotsman, Inc., 9.875s, 2007 1,315 1,331,437
Williams Scotsman, Inc., 10s, 2008 275 301,469
----------------
$ 8,887,650
----------------
BUSINESS SERVICES -- 1.7%
General Binding Corp., 9.375s, 2008 $ 1,840 $ 1,858,400
Iron Mountain, Inc., 8.625s, 2013 760 820,800
Iron Mountain, Inc., 7.75s, 2015 650 680,875
Lucent Technologies, Inc., 5.5s, 2008 2,500 2,325,000
Xerox Corp., 7.625s, 2013 2,135 2,305,800
----------------
$ 7,990,875
----------------
CHEMICALS -- 3.9%
Compass Minerals Group, Inc., 10s, 2011 $ 1,530 $ 1,713,600
Equistar Chemicals, 10.625s, 2011 2,495 2,738,224
Huntsman ICI Holdings, 0s, 2009 250 120,625
Huntsman ICI Holdings, 9.875s, 2009 325 355,875
Huntsman ICI Holdings, 10.125s, 2009 2,005 2,065,150
Huntsman International LLC, 9.875s, 2009## 340 372,300
IMC Global, Inc., 10.875s, 2013## 1,570 1,719,150
Johnson Diversey, Inc., 9.625s, 2012 EUR 1,580 1,808,013
Johnson Diversey, Inc., 10.67s, 2013 $ 1,020 780,300
Koppers, Inc., 9.875s, 2013 280 308,700
Lyondell Chemical Co., 9.875s, 2007 280 295,400
Lyondell Chemical Co., 9.5s, 2008 650 679,250
MacDermid, Inc., 9.125s, 2011 770 862,400
Nalco Co., 7.75s, 2011 470 502,900
Nalco Co., 8.875s, 2013 885 938,100
Resolution Performance Products, 8s, 2009 440 455,400
Rockwood Specialties Corp.,
10.625s, 2011## 995 1,109,425
Sovereign Specialty Chemicals,
11.875s, 2010 1,200 1,200,000
----------------
$ 18,024,812
----------------
</Table>
25
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
CONGLOMERATES -- 0.4%
Rexnord Corp., 10.125s, 2012 $ 620 $ 678,900
SPX Corp., 7.5s, 2013 1,160 1,261,500
----------------
$ 1,940,400
----------------
CONSUMER GOODS & SERVICES -- 2.1%
American Safety Razor Co., 9.875s, 2005 $ 1,000 $ 1,000,000
Kindercare Learning Centers, Inc., 9.5s, 2009 2,155 2,187,325
Remington Arms, Inc., 10.5s, 2011 1,420 1,512,300
Revlon Consumer Products Corp., 12s, 2005 520 520,000
Samsonite Corp., 10.75s, 2008 1,175 1,216,125
Sealy Mattress, 9.875s, 2007 2,265 2,344,275
Tempur Pedic, Inc., 10.25s, 2010 695 774,925
----------------
$ 9,554,950
----------------
CONTAINERS -- 1.7%
Graham Packaging Co., 8.75s, 2008## $ 1,500 $ 1,533,750
Huntsman Packaging Corp., 13s, 2010 1,455 1,331,325
Owens-Brockway Glass Container,
8.75s, 2012 1,285 1,431,169
Owens-Brockway Glass Container,
8.25s, 2013 2,565 2,754,168
Plastipak Holdings, Inc., 10.75s, 2011 705 784,313
----------------
$ 7,834,725
----------------
CORPORATE ASSET-BACKED -- 2.2%
Anthracite CDO Ltd., 6s, 2037## $ 1,300 $ 1,088,344
Commercial Mortgage Acceptance Corp.,
5.44s, 2013 2,700 2,393,143
Deutsche Mortgage & Asset Receiving Corp.,
7.5s, 2031 1,100 821,306
First Union Lehman Brothers Commercial,
7s, 2029 600 563,940
Morgan Stanley Capital I, Inc., 7.738s, 2039 1,490 1,436,894
Mortgage Capital Funding, Inc., 7.214s, 2007 1,000 1,016,588
Nationslink Funding Corp., 5s, 2010 3,000 2,733,004
----------------
$ 10,053,219
----------------
DEFENSE ELECTRONICS -- 0.2%
L-3 Communications Corp., 8s, 2008 $ 800 $ 833,000
----------------
ENERGY - INDEPENDENT -- 2.7%
Belden & Blake Corp., 9.875s, 2007 $ 755 $ 743,675
Chesapeake Energy Corp., 8.125s, 2011## 1,730 1,920,300
Chesapeake Energy Corp., 6.875s, 2016 1,400 1,442,000
Encore Acquisition Co., 8.375s, 2012 1,610 1,742,825
Magnum Hunter Resources, Inc., 9.6s, 2012 820 930,700
Pioneer Natural Resources Co., 7.5s, 2012 975 1,120,603
Stone Energy Corp., 8.25s, 2011 570 619,875
Vintage Petroleum, Inc., 8.25s, 2012 975 1,060,312
Westport Resources Corp., 8.25s, 2011 2,495 2,744,500
----------------
$ 12,324,790
----------------
ENTERTAINMENT -- 2.1%
AMC Entertainment, Inc., 9.5s, 2011 $ 2,495 $ 2,619,750
Premier Parks, Inc., 9.75s, 2007 165 173,044
Regal Cinemas Corp., 9.375s, 2012 1,700 1,921,000
Six Flags, Inc., 9.75s, 2013 2,085 2,194,462
Six Flags, Inc., 9.625s, 2014 720 754,200
Vail Resorts, Inc., 8.75s, 2009 1,815 1,914,825
----------------
$ 9,577,281
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.7%
Merisant Co., 9.5s, 2013## $ 1,455 $ 1,549,575
Michael Foods, Inc., 8s, 2013 990 1,032,075
Pinnacle Foods Holding Corp., 8.25s, 2013 215 219,300
Seminis Vegetable Seeds, Inc., 10.25s, 2013 250 268,750
----------------
$ 3,069,700
----------------
FOREST & PAPER PRODUCTS -- 2.8%
Boise Cascade Corp., 7s, 2013 $ 1,380 $ 1,434,569
Buckeye Cellulose Corp., 8s, 2010 395 387,100
Buckeye Technologies, Inc., 8.5s, 2013 $ 1,165 $ 1,246,550
Fibermark, Inc., 10.75s, 2011 1,100 682,000
Georgia Pacific Corp., 9.375s, 2013 2,220 2,553,000
Graphic Packaging International, Inc.,
8.5s, 2011 420 459,900
Graphic Packaging International, Inc.,
9.5s, 2013 2,140 2,364,700
Greif Brothers Corp., 8.875s, 2012 1,135 1,248,500
Jefferson Smurfit Corp., 8.25s, 2012 1,695 1,839,075
Speciality Paperboard, Inc., 9.375s, 2006 800 496,000
----------------
$ 12,711,394
----------------
GAMING & LODGING -- 4.1%
Ameristar Casinos, Inc., 10.75s, 2009 $ 910 $ 1,046,500
Argosy Gaming Co., 9s, 2011 530 586,975
Aztar Corp., 8.875s, 2007 1,365 1,424,719
Aztar Corp., 9s, 2011 450 493,875
CBRE Escrow, Inc., 9.75s, 2010## 220 244,200
Coast Hotels & Casinos, Inc., 9.5s, 2009 1,155 1,221,413
Corrections Corp. of America, 9.875s, 2009 1,040 1,160,900
Corrections Corp. of America, 7.5s, 2011 590 619,500
Forest City Enterprises, Inc., 7.625s, 2015 165 175,106
Hilton Hotels Corp., 7.625s, 2012 875 983,281
Hollywood Park, Inc., 9.25s, 2007 1,585 1,640,475
Host Marriott LP, 9.5s, 2007 25 27,813
Host Marriott LP, 8.45s, 2008 807 841,297
Mandalay Resort Group, 9.375s, 2010 1,245 1,450,425
MGM Mirage, Inc., 8.5s, 2010 1,165 1,336,837
Park Place Entertainment Corp., 8.125s, 2011 1,320 1,480,050
Pinnacle Entertainment, Inc., 8.75s, 2013 495 503,663
Starwood Hotels & Resorts, 7.875s, 2012 815 916,875
Venetian Casino Resort LLC, 11s, 2010 1,670 1,937,200
Wackenhut Corrections Corp., 8.25s, 2013 540 572,400
----------------
$ 18,663,504
----------------
HOME CONSTRUCTION -- 0.8%
D.R. Horton, Inc., 8s, 2009 $ 1,080 $ 1,220,400
Technical Olympic USA, Inc., 9s, 2010 435 467,625
WCI Communities, Inc., 7.875s, 2013 2,100 2,215,500
----------------
$ 3,903,525
----------------
INDUSTRIAL -- 1.0%
Blount, Inc., 7s, 2005 $ 1,815 $ 1,824,075
Blount, Inc., 13s, 2009 985 1,061,338
Motors & Gears, Inc., 10.75s, 2006 1,075 870,750
MSW Energy Holdings LLC, 7.375s, 2010 850 888,250
----------------
$ 4,644,413
----------------
INSURANCE - PROPERTY & CASUALTY -- 0.6%
Willis Corroon Corp., 9s, 2009 $ 2,690 $ 2,824,500
----------------
MACHINERY & TOOLS -- 3.9%
Agco Corp., 9.5s, 2008 $ 2,375 $ 2,594,688
Amsted Industries, Inc., 10.25s, 2011 1,325 1,464,125
Case New Holland, Inc., 9.25s, 2011## 1,560 1,747,200
Columbus McKinnon Corp., 8.5s, 2008 515 481,525
Columbus McKinnon Corp., 10s, 2010 670 713,550
JLG Industries, Inc., 8.25s, 2008 445 483,381
Joy Global, Inc., 8.75s, 2012 1,890 2,107,350
Manitowoc Co., Inc., 10.375s, 2011 EUR 810 1,122,616
Manitowoc Co., Inc., 10.5s, 2012 $ 865 985,019
Terex Corp., 9.25s, 2011 400 440,000
Terex Corp., 10.375s, 2011 1,810 2,027,200
Terex Corp., 7.375s, 2014 900 920,250
United Rentals, Inc., 10.75s, 2008 2,000 2,250,000
United Rentals, Inc., 7.75s, 2013 425 434,031
----------------
$ 17,770,935
----------------
</Table>
26
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 3.3%
Alliance Imaging, Inc., 10.375s, 2011 $ 1,550 $ 1,643,000
Beverly Enterprises, Inc., 9.625s, 2009 1,875 2,071,875
Fisher Scientific International, Inc.,
8.125s, 2012 1,755 1,882,237
Genesis Healthcare Corp., 8s, 2013 195 203,288
HCA Healthcare Co., 7.875s, 2011 1,830 2,087,135
Insight Health Services Corp., 9.875s, 2011 1,280 1,356,800
Mariner Health Care, Inc., 8.25s, 2013 1,090 1,103,625
NDC Health Corp., 10.5s, 2012 375 421,875
Prime Medical Services, Inc., 8.75s, 2008 610 588,650
Tenet Healthcare Corp., 6.5s, 2012 1,305 1,251,169
Triad Hospital, Inc., 8.75s, 2009 985 1,067,494
Triad Hospital, Inc., 7s, 2013 1,450 1,460,875
----------------
$ 15,138,023
----------------
MEDICAL EQUIPMENT -- 0.2%
Alpharma, Inc., 8.625s, 2011## $ 1,120 $ 1,134,000
----------------
METALS & MINING -- 1.4%
Arch Western Finance, LLC, 6.75s, 2013## $ 970 $ 996,675
Doe Run Resources Corp., 8.5s, 2008 646 238,974
Kaiser Aluminum & Chemical Corp.,
9.875s, 2049** 1,275 1,147,500
Kaiser Aluminum & Chemical Corp.,
12.75s, 2049** 255 56,100
Peabody Energy Corp., 6.875s, 2013 1,795 1,893,725
Steel Dynamics, Inc., 9.5s, 2009 1,130 1,254,300
U.S. Steel Corp., 9.75s, 2010 970 1,091,250
----------------
$ 6,678,524
----------------
NATURAL GAS - DISTRIBUTION -- 0.3%
Amerigas Partners LLP, 8.875s, 2011 $ 1,070 $ 1,177,000
----------------
NATURAL GAS - PIPELINE -- 3.8%
ANR Pipeline Co., 8.875s, 2010 $ 370 $ 416,250
ANR Pipeline Co., 9.625s, 2021 1,800 2,139,750
El Paso Natural Gas Corp., 7.625s, 2010 2,100 2,157,750
El Paso Production Holdings Corp.,
7.75s, 2013## 2,105 2,073,425
Northwest Pipeline Corp., 8.125s, 2010 310 344,100
Plains All American Pipeline LP, 7.75s, 2012 1,710 1,972,913
Southern Natural Gas Co., 8.875s, 2010 1,320 1,485,000
Williams Cos., Inc., 8.625s, 2010 555 628,537
Williams Cos., Inc., 7.125s, 2011 6,000 6,345,000
----------------
$ 17,562,725
----------------
OIL SERVICES -- 1.6%
Dresser, Inc., 9.375s, 2011 $ 1,190 $ 1,294,125
Gulfmark Offshore, Inc., 8.75s, 2008 1,795 1,857,825
Hanover Compressor Co., 0s, 2007 200 147,000
Hanover Compressor Co., 8.625s, 2010 155 162,845
Hanover Equipment Trust, 8.75s, 2011 1,800 1,908,000
Parker Drilling Co., 9.625s, 2013 315 326,812
Premcor Refining Group, Inc., 7.75s, 2012 555 571,650
SESI LLC, 8.875s, 2011 1,190 1,297,100
----------------
$ 7,565,357
----------------
OILS -- 0.3%
Citgo Petroleum Corp., 11.375s, 2011 $ 645 $ 748,200
Tesoro Petroleum Corp., 8s, 2008 400 425,000
----------------
$ 1,173,200
----------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.2%
Unisys Corp., 8.125s, 2006 $ 830 $ 896,400
----------------
POLLUTION CONTROL -- 1.5%
Allied Waste North America, Inc., 8.875s, 2008 $ 1,135 $ 1,271,200
Allied Waste North America, Inc., 6.5s, 2010 3,605 3,659,075
Allied Waste North America, Inc., 7.875s, 2013 1,700 1,840,250
----------------
$ 6,770,525
----------------
PRINTING & PUBLISHING -- 2.3%
Dex Media East LLC, 9.875s, 2009 $ 985 $ 1,127,825
Dex Media West LLC, 8.5s, 2010 160 178,200
Dex Media West LLC, 9.875s, 2013 1,740 2,022,750
Dex Media, Inc., 8s, 2013 1,490 1,564,500
Hollinger International Publishing, Inc.,
9s, 2010 880 935,000
Hollinger International Publishing, Inc.,
11.875s, 2011## 595 646,319
Mail-Well Corp., 9.625s, 2012 770 854,700
Medianews Group, Inc., 6.875s, 2013 1,330 1,353,275
RH Donnelley Finance Corp., 8.875s, 2010 350 393,750
RH Donnelley Finance Corp., 10.875s, 2012 1,015 1,204,043
Transwestern Publishing Co., 9.625s, 2007 425 439,875
----------------
$ 10,720,237
----------------
RAILROAD & SHIPPING -- 0.4%
Kansas City Southern Railway Co., 7.5s, 2009 $ 1,795 $ 1,839,875
----------------
RETAILERS -- 3.2%
Cole National Group, Inc., 8.625s, 2007 $ 1,135 $ 1,157,700
Cole National Group, Inc., 8.875s, 2012 1,645 1,760,150
Couche-Tard, 7.5s, 2013 320 337,600
Dollar General Corp., 8.625s, 2010 1,375 1,545,156
Finlay Enterprises, Inc., 9s, 2008 450 460,688
Finlay Fine Jewelry Corp., 8.375s, 2008 1,805 1,868,175
J.Crew Operating Corp., 10.375s, 2007 1,370 1,399,112
Oxford Industries, Inc., 8.875s, 2011## 725 792,969
PCA LLC, 11.875s, 2009 1,290 1,412,550
Rite Aid Corp, 12.5s, 2006 955 1,107,800
Rite Aid Corp., 9.5s, 2011 550 620,125
Rite Aid Corp., 9.25s, 2013 2,095 2,299,262
----------------
$ 14,761,287
----------------
STEEL -- 0.6%
Commonwealth Aluminum Corp., 10.75s, 2006 $ 1,405 $ 1,433,100
Jorgensen (Earle M) Co., 9.75s, 2012 1,060 1,176,600
WCI Steel, Inc., 10s, 2004** 75 24,375
----------------
$ 2,634,075
----------------
SUPERMARKETS -- 0.4%
Roundy's, Inc., 8.875s, 2012 $ 1,685 $ 1,798,738
----------------
TELECOMMUNICATIONS - WIRELINE -- 3.5%
Qwest Services Corp., 13.5s, 2010## $ 4,900 $ 5,953,500
Qwest Services Corp., 7.25s, 2011 4,200 4,137,000
Qwest Services Corp., 9.125s, 2012## 1,800 2,065,500
Time Warner Telecom, Inc., 10.125s, 2011 1,400 1,491,000
Worldcom, Inc., 7.5s, 2011** 6,735 2,256,225
----------------
$ 15,903,225
----------------
UTILITIES - ELECTRIC POWER -- 6.2%
AES Corp., 8.875s, 2011 $ 2,080 $ 2,267,200
AES Corp., 8.75s, 2013## 2,175 2,430,562
AES Corp., 9s, 2015## 1,175 1,327,750
Allegheny Energy Supply Co., 8.75s, 2012 1,400 1,319,500
Aquila, Inc., 8.75s, 2006 683 696,190
Calpine Corp., 8.5s, 2011 1,455 1,151,269
Calpine Corp., 8.75s, 2013## 2,745 2,655,787
Centerpoint Energy Resources Corp.,
7.875s, 2013## 1,741 1,970,981
CMS Energy Corp., 8.5s, 2011 2,400 2,592,000
Dynegy Holdings, Inc., 9.875s, 2010 1,220 1,372,500
Dynegy Holdings, Inc., 6.875s, 2011 2,540 2,339,975
Illinois Power Co., 11.5s, 2010 690 828,000
NRG Energy, Inc., 8s, 2013 650 682,500
PG&E Corp., 6.875s, 2008## 290 313,925
PSEG Energy Holdings, Inc., 8.625s, 2008 1,850 2,018,813
Reliant Resources, Inc., 9.25s, 2010## 1,285 1,362,100
Reliant Resources, Inc., 9.5s, 2013## 925 989,750
Teco Energy, Inc., 10.5s, 2007 725 846,438
Teco Energy, Inc., 7.5s, 2010 1,125 1,203,750
----------------
$ 28,368,990
----------------
</Table>
27
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
UTILITIES - TELEPHONE -- 0.3%
Cincinnati Bell, Inc., 7.25s, 2013## $ 870 $ 913,500
Cincinnati Bell, Inc., 8.375s, 2014 495 532,125
----------------
$ 1,445,625
----------------
WIRELESS COMMUNICATIONS -- 5.4%
Alamosa Delaware, Inc., 0s, 2009 $ 1,477 $ 1,329,300
Alamosa Delaware, Inc., 11s, 2010 331 359,135
American Tower Corp., 9.375s, 2009 1,150 1,224,750
American Tower Corp., 7.25s, 2011 475 483,313
Centennial Communications Corp.,
10.125s, 2013 1,840 2,019,400
Crown Castle International Corp., 7.5s, 2013 1,385 1,391,925
Dobson Communications Corp., 8.875s, 2013 2,095 2,121,187
Nextel Communications, Inc., 5.25s, 2010 2,000 2,030,000
Nextel Communications, Inc., 7.375s, 2015 6,065 6,519,875
Rural Cellular Corp., 9.75s, 2010 1,280 1,251,200
Rural Cellular Corp., 9.875s, 2010 1,560 1,661,400
Triton PCS, Inc., 8.75s, 2011 1,025 1,009,625
Triton PCS, Inc., 8.5s, 2013 1,040 1,118,000
Western Wireless Corp., 9.25s, 2013 2,060 2,173,300
----------------
$ 24,692,410
----------------
Total U.S. Bonds $ 381,579,098
----------------
FOREIGN BONDS -- 8.5%
AUSTRALIA -- 0.6%
Burns Philip Capital Property Ltd., 9.75s, 2012
(Food & Non Alcoholic Beverages) $ 2,580 $ 2,760,600
----------------
CANADA -- 1.9%
Abitibi Consolidated, Inc., 8.55s, 2010
(Forest & Paper Products) $ 1,535 $ 1,709,376
Acetex Corp., 10.875s, 2009 (Chemicals) 1,465 1,626,150
Bombardier Recreational Products,
8.375s, 2013 (Industrial) 530 553,850
Canwest Media, Inc., 10.625s, 2011
(Advertising & Broadcasting) 320 365,600
Norske Skog Ltd., 8.625s, 2011
(Forest & Paper Products) 1,735 1,821,750
Russel Metals, Inc., 10s, 2009
(Metals & Mining) 870 924,375
Videotron LTEE, 6.875s, 2014
(Broadcast & Cable TV) 1,670 1,724,275
----------------
$ 8,725,376
----------------
CHILE -- 0.3%
Empresa Nacional de Electric, 8.35s, 2013
(Utilities - Electric Power) $ 1,190 $ 1,337,730
----------------
FRANCE -- 1.5%
Crown Cork & Seal, 9.5s, 2011
(Containers) $ 1,960 $ 2,219,700
Crown Cork & Seal, 10.875s, 2013(Containers) 1,630 1,917,287
Rhodia SA, 8.875s, 2011(Chemicals)## 1,345 1,237,400
Vivendi Universal S.A. 6.25s, 2008
(Advertising & Broadcasting)## 600 635,250
Vivendi Universal S.A. 9.25s, 2010
(Advertising & Broadcasting)## 845 1,001,325
----------------
$ 7,010,962
----------------
GERMANY -- 0.3%
Kronos International, Inc., 8.875s,
2009(Chemicals) EUR 70 $ 95,252
Messer Grieshiem, 10.375s, 2011(Chemicals) 745 1,084,156
----------------
$ 1,179,408
----------------
IRELAND -- 0.6%
Eircom Funding, 8.25s, 2013
(Telecommunications - Wireline) $ 595 $ 658,963
MDP Acquisitions PLC, 9.625s, 2012
(Forest & Paper Products) 1,860 2,083,200
----------------
$ 2,742,163
----------------
LUXEMBOURG -- 0.7%
Millicom International Cellular S.A. 10s, 2013
(Wireless Communications) $ 880 $ 928,400
Tyco International Group S.A. 6.75s, 2011
(Conglomerates) 2,100 2,294,250
----------------
$ 3,222,650
----------------
MEXICO -- 0.5%
Corparacion Durango S.A. 13.75s, 2009
(Forest & Paper Products)**## $ 1,800 $ 1,080,000
Innova, 9.375s, 2013(Wireless
Communications) 1,100 1,128,875
TFM SA DE CV, 12.5s, 2012
(Transportation Services) 264 300,960
----------------
$ 2,509,835
----------------
NETHERLANDS -- 0.6%
Aspropulsion, BV, 9.625s, 2013
(Aerospace) EUR 100 $ 132,295
Kappa Beheer BV, 10.625s, 2009
(Forest & Paper Products) $ 2,415 2,584,050
----------------
$ 2,716,345
----------------
NORWAY -- 0.2%
Ocean Rig Norway AS, 10.25s, 2008
(Oil Services) $ 1,060 $ 996,400
----------------
RUSSIA -- 0.1%
Gazpromoao, 9.625s, 2013
(Utilities - Gas)## $ 590 $ 650,475
----------------
SINGAPORE -- 0.1%
Flextronics International Ltd., 6.5s, 2013
(Electronics) $ 300 $ 310,500
----------------
UNITED KINGDOM -- 1.1%
Colt Telecom Group PLC, ADR, 7.625s, 2009
(Telecommunications - Wireline) EUR 1,800 $ 2,267,911
Energis PLC, 9.75s, 2009
(Telecommunications - Wireline)** $ 620 12,400
Global Tele Systems Ltd., 10.875s, 2008
(Telecommunications - Wireline)** 200 20
Premier International Foods PLC, 12s, 2009
(Food & Non Alcoholic Beverage Products) 400 438,000
Telewest Communications PLC, 9.625s, 2006
(Broadcast & Cable TV)** 440 278,300
Telewest Communications PLC, 11s, 2007
(Broadcast & Cable TV)** 755 490,750
Telewest Communications PLC, 0s to 2004,
9.25s, 2009(Broadcast & Cable TV)** 850 446,250
Telewest Communications PLC, 0s to 2005,
11.375s, 2010(Broadcast & Cable TV)** 415 203,350
United Biscuits Finance PLC, 10.625s, 2011
(Food & Non Alcohol Beverage Products) 600 865,586
----------------
$ 5,002,567
----------------
Total Foreign Bonds $ 39,165,011
----------------
Total Bonds
(Identified Cost, $397,504,875) $ 420,744,109
----------------
</Table>
28
<Page>
STOCKS -- 1.3%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 0.8%
APPAREL MANUFACTURERS
Sind Holdings, Inc. 3,355 $ 218,075
----------------
AUTOMOTIVE -- 0.2%
Hayes Lemmerz International, Inc. 46,631 $ 844,954
Oxford Automotive, Inc. 21 4,673
----------------
$ 849,627
----------------
BASIC INDUSTRY
Thermadyne Holdings Corp. 6,890 $ 84,747
----------------
BROADCAST & CABLE TV -- 0.2%
Sirius Satellite Radio, Inc. 259,867 $ 821,180
----------------
CHEMICALS
Sterling Chemicals, Inc. 882 $ 22,050
----------------
MACHINERY & TOOLS
Simonds Industries, Inc. 3,637 $ 9,784
----------------
SPECIAL PRODUCTS & SERVICES
Ranger Industries, Inc. 788 $ 39
----------------
TELECOMMUNICATIONS -- WIRELINE
XO Communications, Inc. 651 $ 3,743
----------------
TELEPHONE SERVICES -- 0.3%
NTL, Inc.* 21,195 $ 1,478,351
----------------
UTILITIES - TELEPHONE -- 0.1%
ITC Deltacom, Inc. 48,631 $ 294,655
----------------
Total U.S. Stocks $ 3,782,251
----------------
FOREIGN STOCKS -- 0.5%
BERMUDA
Global Crossings Holdings Ltd., Preferred,
(Telecommunications - Wireline) 12,893 $ 125,707
----------------
NETHERLANDS -- 0.2%
Completel Europe N.V. (Telephone Services) 18,750 $ 664,309
Versatel Telecom International N.V.,
(Telecommunications - Wireline) 20,520 44,728
----------------
$ 709,037
----------------
SWEDEN -- 0.3%
Song Networks Holding AB (Telephone Services) 134,897 $ 1,265,925
Song Networks Holding AB
(Telephone Services), * 14,580 79,054
----------------
$ 1,344,979
----------------
UNITED KINGDOM
Jazztel PLC (Telecommunications - Wireline)* 438,049 $ 187,653
----------------
Total Foreign Stocks $ 2,367,376
----------------
Total Stocks
(Identified Cost, $14,253,062) $ 6,149,627
----------------
PREFERRED STOCKS -- 0.9%
UNITED STATES -- 0.9%
AUTOMOTIVE
Hayes Lemmerz International, Inc., 8s 155 $ 11,470
----------------
BROADCAST & CABLE TV -- 0.5%
CSC Holdings, Inc., 11.125s 19,533 $ 2,050,965
----------------
PRINTING & PUBLISHING -- 0.4%
Primedia, Inc., 8.625s 20,165 $ 1,835,015
----------------
TELEPHONE SERVICES
NTL, Inc., 10.5s 38 $ 285
----------------
Total Preferred Stocks
(Identified Cost, $3,182,976) $ 3,897,735
----------------
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
CONVERTIBLE PREFERRED STOCK -- 0.2%
WIRELESS COMMUNICATIONS -- 0.2%
Alamosa Holdings, Inc.,
(Identified Cost, $592,000) $ 2,368 $ 757,760
----------------
CONVERTIBLE BOND
UNITED KINGDOM
Jazztel PLC, 12s, 2012
(Telecommunications - Wireline)**
(Identified Cost $217,553) $ 134 $ 85,958
----------------
WARRANTS
<Caption>
SHARES
GT Group Telecom, Inc. (Telephone Services)* 2,900 $ 725
Loral Orion Network Systems, Inc.
(Business Services)* 1,000 25
Loral Orion Network Systems, Inc.
(Business Services)* 1,100 31
Metronet Communications Corp.
(Broadcast & Cable TV)*## 650 7
Ono Finance PLC (Broadcast & Cable TV)* 3,185 32
Ono Finance PLC (Broadcast & Cable TV)* 750 7
Pliant Corp. (Containers)*## 660 7
Sterling Chemicals, Inc. (Chemicals)* 40 40
Thermadyne Holdings Corp. (Basic Industry)* 10,899 9,809
Thermadyne Holdings Corp. (Basic Industry)* 6,594 6,594
XM Satellite Radio, Inc. (Broadcast & Cable TV)* 1,030 21,372
XO Communications, Inc.
(Telecommunications - Wireline)* 1,302 2,539
XO Communications, Inc.
(Telecommunications - Wireline)* 976 1,659
XO Communications, Inc.
(Telecommunications - Wireline)* 976 1,074
----------------
Total Warrants (Identified Cost, $1,135,055) $ 43,921
----------------
SHORT-TERM OBLIGATION 4.0%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Old Line Funding Corp., due 1/02/04, at
Amortized Cost $ 18,356 $ 18,355,505
----------------
REPURCHASE AGREEMENT -- 0.1%
Merrill Lynch, dated 12/31/03,
due 1/2/04, total to be received
$391,021(secured by various U.S.
Treasury and Federal Agency
obligations in a jointly traded
account), at Cost $ 391 $ 391,000
----------------
Total Investments
(Identified Cost, $437,599,587) $ 450,425,615
----------------
OTHER ASSETS,
LESS LIABILITIES -- 1.9% 8,712,488
----------------
Net Assets -- 100.0% $ 459,138,103
================
</Table>
See portfolio footnotes and notes to financial statements.
29
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
INTERNATIONAL VALUE SERIES
STOCKS -- 99.9%
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 99.9%
AUSTRALIA -- 1.7%
APN News & Media Ltd.
(Printing & Publishing)* 169,255 $ 509,762
Australia & New Zealand Banking Group Ltd.
(Banks & Credit Cos.)* 43,983 585,509
Virgin Blue Holdings Ltd. (Airlines)* 14,820 26,558
----------------
$ 1,121,829
----------------
AUSTRIA -- 0.8%
Boehler-Uddeholm AG (Steel) 2,470 $ 166,621
Erste Bank der Oesterreichischen
Sparkassen AG (Banks & Credit Cos.) 2,790 344,390
----------------
$ 511,011
----------------
BELGIUM -- 1.0%
Fortis (Banks & Credit Cos.) 33,340 $ 670,848
----------------
BRAZIL -- 0.3%
Votorantim Celulose e Papel S.A., ADR
(Forest & Paper Products) 7,000 $ 219,450
----------------
CANADA -- 1.7%
Canadian National Railway Co.
(Railroad & Shipping) 8,292 $ 524,718
Encana Corp. (Natural Gas - Pipeline)^ 6,390 252,168
Talisman Energy, Inc.
(Energy - Independent) 6,200 350,920
----------------
$ 1,127,806
----------------
CHINA -- 0.3%
Huaneng Power International, Inc.
(Utilities - Electric Power) 122,000 $ 211,354
----------------
DENMARK -- 1.8%
Danske Bank (Banks & Credit Cos.) 51,200 $ 1,199,824
----------------
FINLAND -- 1.3%
Fortum Oyj (Energy - Independent) 81,200 $ 836,879
----------------
FRANCE -- 9.1%
Aventis S.A. (Pharmaceuticals) 5,170 $ 341,331
Credit Agricole S.A. (Banks & Credit Cos.) 34,263 817,202
France Telecom S.A. (Telephone Services) 35,140 1,003,264
Renault S.A. (Automotive) 7,200 496,219
Sanofi-Synthelabo S.A. (Pharmaceuticals) 5,625 423,107
Suez S.A. (Utilities - Electric Power) 34,200 686,428
Total Fina S.A., ADR
(Energy - Integrated) 23,920 2,212,839
----------------
$ 5,980,390
----------------
GERMANY -- 3.7%
Bayerische Motoren Werke AG (Automotive) 18,570 $ 859,850
Linde AG (Specialty Chemicals)^ 5,250 282,449
Porsche AG, Preferred (Automotive) 576 341,471
Schering AG (Pharmaceuticals) 12,940 654,596
Schwarz Pharma AG (Pharmaceuticals)^ 11,400 308,958
----------------
$ 2,447,324
----------------
GREECE -- 0.9%
Cosmote Mobile Communications S.A.
(Telephone Services) 23,300 $ 315,880
OPAP S.A. (Gaming & Lodging) 18,100 261,802
----------------
$ 577,682
----------------
HONG KONG -- 1.3%
CNOOC Ltd. (Energy - Independent) 178,500 $ 350,620
Hong Kong Electric Holdings Ltd.
(Utilities - Electric Power) 127,080 502,509
----------------
$ 853,129
----------------
HUNGARY -- 0.4%
OTP Bank Rt., GDR (Banks & Credit Cos.)* 8,500 $ 223,125
----------------
INDIA -- 0.3%
Bajaj Auto Ltd., GDR (Automotive) 9,100 $ 221,130
----------------
INDONESIA -- 0.2%
PT Bank Rakyat Indonesia
(Banks & Credit Cos.)* 1,012,500 $ 150,267
----------------
IRELAND -- 4.2%
Anglo Irish Bank Corp., PLC
(Banks & Credit Cos.)* 34,300 $ 543,229
Bank of Ireland (Banks & Credit Cos.) 82,230 1,118,942
Depfa Bank PLC (Banks & Credit Cos.)^ 2,700 340,527
IAWS Group PLC (Specialty Chemicals) 22,800 278,651
Irish Life & Permanent PLC
(Banks & Credit Cos.) 30,860 497,690
----------------
$ 2,779,039
----------------
ITALY -- 3.5%
Eni S.p.A (Energy - Integrated) 53,900 $ 1,015,954
Italcementi S.p.A (Home Construction) 59,800 455,838
Riunione Adriatica di Sicurta S.p.A (Insurance) 18,900 321,476
Telecom Italia Mobile S.p.A.
(Wireless Communications)^ 88,700 481,675
----------------
$ 2,274,943
----------------
JAPAN -- 16.6%
Aeon Credit Service Co., Ltd.
(Banks & Credit Cos.) 6,300 $ 268,736
Brother Industries, Ltd. (Electronics) 35,000 321,137
Canon, Inc. (Personal Computers &
Peripheral) 14,000 652,074
Chugai Pharmaceutical Co., Ltd.
(Pharmaceuticals) 42,300 608,431
Citizen Watch Co., Ltd. (Electronics) 22,000 202,268
Credit Saison Co., Ltd.
(Banks & Credit Cos.) 18,400 415,625
DENSO Corp. (Automotive) 20,100 395,865
Drake Beam Morin-Japan Inc.
(Business Services)^ 9,400 242,162
East Japan Railway Co.
(Railroad & Shipping) 25 117,842
EDION Corp. (Specialty Stores) 18,800 176,006
Heiwa Corp. (Leisure & Toys)^ 35,000 508,004
Honda Motor Co., Ltd. (Automotive) 24,200 1,075,204
IMPACT 21 Co., Ltd
(Consumer Goods & Services) 23,400 448,845
JACCS Co., Ltd. (Banks & Credit Cos.) 150,000 553,041
KDDI Corp. (Telephone Services)^ 123 704,924
LAWSON, Inc. (Speciatly Stores) 13,600 464,610
Seiko Epson Corp. (Electronics) 8,100 378,028
Sekisui Chemical Co., Ltd.
(Home Construction) 65,000 331,264
Tamron Co., Ltd. (Leisure & Toys) 4,000 201,615
The Chiba Bank, Ltd.
(Banks & Credit Cos.) 107,000 438,447
Tokyo Broadcasting System, Inc.
(Broadcast & Cable TV) 35,000 557,661
Tokyo Gas Co., Ltd.
(Natural Gas Distribution)^ 244,000 870,005
Toyota Industries Corp. (Automotive) 14,200 301,535
Toyota Motor Corp. (Automotive) 14,700 496,700
Vodafone Holdings K.K.
(Telephone Services) 76 203,594
----------------
$ 10,933,623
----------------
LUXEMBOURG -- 0.6%
Tenaris S.A., ADR (Oil Services) 12,300 $ 409,836
----------------
MEXICO -- 0.6%
Grupo Financiero Banorte S.A. de C.V.
(Banks & Credit Cos.) 48,600 $ 168,675
Grupo Financiero Inbursa, S.A. de C.V.
(Banks & Credit Cos.) 224,900 243,973
----------------
$ 412,648
----------------
</Table>
30
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
NETHERLANDS -- 2.2%
Akzo Nobel N.V
(Specialty Chemicals) 8,110 $ 312,677
Euronext N.V. (Banks & Credit Cos.) 6,770 171,195
Fugro N.V. (Oil Services)* 5,580 286,845
Koninklijke KPN N.V. (Telephone Services) 47,750 368,195
VNU N.V. (Printing & Publishing)* 10,321 325,749
----------------
$ 1,464,661
----------------
NEW ZEALAND -- 0.8%
Telecom Corp. of New Zealand, Ltd.
(Telephone Services)* 146,911 $ 516,895
----------------
NORWAY -- 1.4%
DNB Holding ASA
(Banks & Credit Cos.)^ 131,960 $ 878,941
----------------
RUSSIA -- 0.2%
YUKOS Corp., ADR (Energy -
Independent)^ 3,100 $ 130,200
----------------
SINGAPORE -- 1.7%
MobileOne Ltd.
(Wireless Communications) 467,000 $ 412,471
Singapore Post Ltd. (Trucking) 711,000 290,965
Singapore Telecommunications Ltd.
(Telephone Services) 356,000 410,858
----------------
$ 1,114,294
----------------
SOUTH KOREA -- 1.9%
Hanaro Telecom Inc.
(Telephone Services) 92,100 $ 252,376
Hyundai Motor Co., Ltd. (Automotive)* 9,570 405,611
Korea Tobacco & Ginseng Corp.,
GDR (Tobacco)## 30,930 271,565
Samsung Electronics Co., Ltd.
(Electronics) 790 299,027
----------------
$ 1,228,579
----------------
SPAIN -- 2.9%
Altadis S.A. (Tobacco) 18,280 $ 518,218
Antena 3 Television, S.A.
(Broadcast & Cable TV)*^ 240 10,566
Iberdrola S.A.
(Utilities - Electric Power)^ 16,700 329,715
Telefonica S.A. (Telephone Services) 71,231 1,044,661
----------------
$ 1,903,160
----------------
SWEDEN -- 3.3%
Alfa Laval AB (Machinery & Tools) 10,300 $ 156,803
Autoliv, Inc. (Automotive) 14,700 557,933
D. Carnegie & Co. AB
(Brokerage & Asset Managers) 30,800 304,026
Nordea AB (Banks & Credit Cos.) 40,600 304,805
Swedish Match AB (Tobacco) 79,500 812,375
----------------
$ 2,135,942
----------------
SWITZERLAND -- 10.0%
Converium Holding AG (Insurance) 10,350 $ 549,998
Givaudan S.A. (Consumer Goods & Services) 1,370 710,854
Nestle S.A. (Food & Non Alcohol Beverages) 5,037 1,257,927
Novartis AG (Pharmaceuticals) 28,990 1,315,597
Roche Holdings AG (Pharmaceuticals) 5,500 554,534
Syngenta AG (Chemicals) 23,937 1,611,535
UBS AG (Banks & Credit Cos.) 8,068 552,299
----------------
$ 6,552,744
----------------
UNITED KINGDOM -- 25.2%
Amlin PLC (Insurance)* 49,920 $ 114,060
AstraZeneca PLC (Pharmaceuticals) 12,130 580,292
Aviva PLC (Insurance)* 53,390 467,227
Benfield Group PLC (Insurance)* 63,120 294,075
BG Group PLC (Energy - Independent) 66,860 342,232
BP Amoco PLC, ADR
(Energy - Integrated) 40,836 $ 2,015,257
Burberry Group PLC
(Apparel Manufacturers) 56,200 366,669
Cadbury Schweppes PLC
(Food & Non Alcohol Beverages)* 128,600 941,760
Close Brothers Group PLC
(Banks & Credit Cos.) 28,780 377,083
Diageo PLC (Alcoholic Beverages)* 77,858 1,021,507
EasyJet PLC (Airlines) 65,970 345,036
Hiscox PLC (Insurance) 68,250 174,216
Imperial Tobacco Group PLC (Tobacco)* 36,320 713,164
Intertek Testing Servicing PLC
(Special Products & Services) 18,830 154,954
Johnston Press PLC
(Printing & Publishing) 74,920 622,876
Kingfisher PLC (Specialty Stores)* 58,426 290,457
Legal & General Group PLC (Insurance)* 190,000 340,008
Next PLC (General Merchandise) 15,000 300,692
Reckitt Benckiser PLC
(Consumer Goods & Services)* 30,888 696,927
Reed Elsevier PLC (Printing & Publishing) 122,130 1,018,644
Royal Bank of Scotland Group PLC
(Banks & Credit Cos.)* 38,371 1,127,414
Severn Trent PLC (Utilities - Electric Power) 26,100 348,958
St. Jame's Place Capital PLC (Insurance) 138,500 390,623
Unilever PLC (Food &
Non Alcohol Beverages)* 51,130 475,287
United Utilities PLC, "A"
(Utilities - Electric Power) 141,900 771,295
Vedanta Resources PLC
(Metals & Mining)* 22,730 149,313
Vodafone Group PLC
(Wireless Communications)* 281,353 695,588
Wellington Underwriting
PLC (Insurance) 119,430 165,221
William Hill PLC
(Gaming & Lodging) 55,700 424,555
Yell Group PLC
(Broadcast & Cable TV) 157,430 857,113
----------------
$ 16,582,503
----------------
Total Foreign Stocks
(Identified Cost, $52,413,784) $ 65,670,056
----------------
COLLATERAL FOR SECURITIES LOANED -- 6.1%
Navigator Securities Lending Prime Portfolio,
at Cost 3,996,933 $ 3,996,933
----------------
REPURCHASE AGREEMENT
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch & Co., Inc., dated 12/31/03,
due 1/2/04, total to be received $27,001
(secured by various U.S. Treasury and
Federal Agency obligations in a
jointly traded account), at Cost $ 27 $ 27,000
----------------
Total Investments
(Identified Cost, $56,437,717) $ 69,693,989
----------------
OTHER ASSETS,
LESS LIABILITIES -- (6.0%) (3,940,537)
----------------
Net Assets -- 100.0% $ 65,753,452
================
</Table>
See portfolio footnotes and notes to financial statements.
31
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
MONEY MARKET SERIES
COMMERCIAL PAPER -- 82.0%
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
Archer Daniels Midland Co.,
due 3/16/04 $ 9,692 $ 9,669,789
Bank of America Corp., due 3/15/04 19,764 19,719,311
Barclays U.S. Funding, due 3/05/04 16,550 16,517,930
Barton Capital Corp.,
due 1/08/04 - 1/21/04 9,031 9,028,026
Citibank Credit Card Issuance Trust,
due 1/07/04 - 2/10/04 19,217 19,202,527
Citigroup, Inc., due 1/12/04 11,500 11,496,205
Coca-Cola Co., due 3/05/04 2,332 2,327,730
Dexia Delaware, due 1/09/04 19,721 19,716,223
Edison Asset Securitization LLC,
due 1/13/04 16,500 16,494,005
Equitable Resources, Inc., due 1/13/04 15,000 14,994,800
Falcon Asset Securitization, due 1/27/04 19,381 19,365,813
FCAR Owner Trust Series, due 3/02/04 15,000 14,971,533
Florida Power & Light Co., due 2/27/04 19,602 19,569,412
General Electric Capital Corp.,
due 3/03/04 - 4/06/04 20,380 20,325,583
Goldman Sachs Group LP, due 1/30/04 19,751 19,733,498
GovCo, Inc., due 2/18/04 - 2/23/04 15,171 15,148,095
HBOS Treasury Services PLC,
due 2/04/04 19,445 19,424,799
HSBC America, Inc., due 2/06/04 10,610 10,598,223
ING America Insurance Holdings,
due 5/27/04 19,163 19,074,579
Jupiter Securitization, due 1/08/04 18,953 18,948,983
Metropolitan Life Funding, Inc.,
due 3/04/04 10,500 10,479,420
Morgan Stanley Dean Witter, due
1/21/04 10,000 9,994,000
Old Line Funding Corp., due 1/14/04 3,506 3,504,607
Preferred Receivables Funding, due
1/15/04 3,390 3,388,563
Salomon Smith Barney Holdings, Inc.,
due 3/25/04 7,765 7,745,432
Sheffield Receivables Corp.,
due 1/07/04 1,500 1,499,728
Svenska Handelsbanken, Inc,
due 2/25/04 19,721 19,688,159
Thunder Bay Funding, Inc.,
due 1/09/04 - 1/14/04 17,316 17,309,474
----------------
Total Commercial Paper, at
Amortized Cost $ 389,936,447
----------------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 11.0%
Federal Home Loan Bank, due
2/26/04 - 6/18/04 17,400 $ 17,340,234
Federal Home Loan Mortgage Corp.,
due 4/22/04 10,000 9,964,533
Federal National Mortgage Assn.,
due 4/14/04 - 6/09/04 25,000 24,902,372
----------------
Total U.S. Government and Agency
Obligations, at Amortized Cost $ 52,207,139
----------------
REPURCHASE AGREEMENT -- 7.1%
Goldman Sachs, dated 12/31/03, due
1/02/04, total to be received $33,958,868
(secured by various U.S. Treasury and
Federal Agency obligations in a jointly
traded account), at Cost $ 33,957 $ 33,957,000
----------------
Total Investments, at Amortized Cost $ 476,100,586
----------------
OTHER ASSETS,
LESS LIABILITIES -- (0.1%) (566,648)
----------------
Net Assets -- 100.0% $ 475,533,938
================
</Table>
See portfolio footnotes and notes to financial statements.
32
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
STRATEGIC INCOME SERIES
BONDS -- 96.1%
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- 60.6%
ADVERTISING & BROADCASTING -- 3.4%
Allbritton Communications Co.,
7.75s, 2012 $ 300 $ 311,250
Emmis Communications Corp., 12.5s, 2011 300 277,875
Granite Broadcasting Corp., 9.75s, 2010 440 438,900
Lamar Media Corp., 7.25s, 2013 200 215,000
Muzak LLC, 10s, 2009 60 63,900
Paxson Communications Corp.,
10.75s, 2008 200 218,250
Paxson Communications Corp.,
12.25s, 2009 310 272,025
Radio One, Inc., 8.875s, 2011 200 220,500
Spanish Broadcasting Systems, Inc.,
9.625s, 2009 375 400,312
XM Satellite Radio, Inc., 14s, 2009 60 53,625
Xm Satellite Radio, Inc., 12s, 2010 230 259,900
Young Broadcasting, Inc., 8.5s, 2008 250 268,750
----------------
$ 3,000,287
----------------
AEROSPACE -- 1.1%
BAE Systems Holding, Inc., 6.4s, 2011 $ 253 $ 271,956
Hexcel Corp., 9.875s, 2008 200 225,500
Hexcel Corp., 9.75s, 2009 130 136,175
K & F Industries, Inc., 9.625s, 2010 ## 200 224,250
Transdigm, Inc., 8.375s, 2011 150 159,563
----------------
$ 1,017,444
----------------
AIRLINES -- 0.2%
Continental Airlines Inc., 6.545s, 2019 $ 217 $ 214,457
----------------
APPAREL MANUFACTURERS -- 0.1%
Westpoint Stevens, Inc., 7.875s, 2005 $ 450 $ 58,500
Westpoint Stevens, Inc., 7.875s, 2008 110 14,300
----------------
$ 72,800
----------------
ASSET BACKED & SECURITIZED -- 0.4%
Chase Commercial Mortgage Secs Corp.,
6.6s, 2012 $ 360 $ 348,661
----------------
AUTOMOTIVE -- 2.9%
Collins & Aikman Products Co.,
10.75s, 2011 $ 244 $ 239,730
Daimler Chrysler Holdings, 8.5s, 2031 160 191,165
Eagle-Picher, Inc., 9.75s, 2013 135 145,800
Ford Motor Credit Co., 7.875s, 2010 465 519,575
Ford Motor Credit Co., 7s, 2013 159 167,694
General Motors Acceptance Corp.,
7s, 2012 324 348,347
General Motors Acceptance Corp.,
8s, 2031 177 198,765
Metaldyne Corp., 11s, 2012 305 280,600
Tenneco Automotive, Inc., 10.25s, 2013 255 290,062
TRW Automotive Acquisition,
9.375s, 2013 85 97,113
TRW Automotive Acquisition,
11s, 2013 80 94,200
----------------
$ 2,573,051
----------------
BANKS & CREDIT COMPANIES -- 0.8%
Popular North America, Inc.,
4.25s, 2008 $ 213 $ 216,595
RBS Capital Trust, 6.425s, 2049 128 129,367
Unicredito Italiano Capital Trust,
1s, 2049 320 401,998
----------------
$ 747,960
----------------
BASIC INDUSTRY -- 0.2%
Trimas Corp., 9.875s, 2012 $ 205 $ 213,713
----------------
BROADCAST & CABLE TV -- 2.1%
Charter Communications Holdings,
8.625s, 2009 $ 500 $ 436,250
Continental Cablevision, 9.5s, 2013 322 371,945
CSC Holdings, Inc., 8.125s, 2009 438 470,850
Directv Holdings LLC, 8.375s, 2013 85 98,600
Mediacom Broadband LLC, 11s, 2013 300 336,750
Tele Communications, Inc., 9.8s, 2012 145 189,144
----------------
$ 1,903,539
----------------
BUILDING -- 1.7%
American Standard, Inc.,
7.625s, 2010 $ 475 $ 539,125
Atrium Cos, Inc., 10.5s, 2009 200 214,000
Jacuzzi Brands, Inc., 9.625s, 2010## 75 82,500
Nortek, Inc., 9.25s, 2007 400 411,000
Williams Scotsman, Inc.,
9.875s, 2007 225 227,812
Williams Scotsman, Inc.,
10s, 2008 30 32,888
----------------
$ 1,507,325
----------------
BUSINESS SERVICES -- 1.6%
Iron Mountain, Inc., 8.625s, 2013 $ 330 $ 356,400
Iron Mountain, Inc., 7.75s, 2015 150 157,125
Lucent Technologies, Inc., 5.5s, 2008 320 297,600
Unisys Corp., 8.125s, 2006 355 383,400
Xerox Corp., 7.625s, 2013 235 253,800
----------------
$ 1,448,325
----------------
CHEMICALS -- 2.0%
Equistar Chemicals L P,
10.625s, 2011 $ 190 $ 208,525
Huntsman ICI Holdings,
10.125s, 2009 300 309,000
IMC Global, Inc., 10.875s, 2013## 260 284,700
Johnson Diversey, Inc., 9.625s, 2012 200 223,000
Johnson Diversey, Inc., 10.67s, 2013 225 172,125
Koppers, Inc., Pennsylvania,
9.875s, 2013 60 66,150
Lyondell Chemical Co., 9.625s, 2007 200 212,000
Lyondell Chemical Co., 11.125s, 2012 140 155,400
Nalco Co., 7.75s, 2011 105 112,350
----------------
$ 1,743,250
----------------
CONSUMER GOODS & SERVICES -- 0.9%
Kindercare Learning Centers, Inc.,
9.5s, 2009 $ 250 $ 253,750
Remington Arms, Inc., 10.5s, 2011 250 266,250
Sealy Mattress Co., 9.875s, 2007 250 258,750
----------------
$ 778,750
----------------
CONTAINERS -- 1.0%
Graham Packaging Co.,
8.75s, 2008## $ 200 $ 204,500
Huntsman Packaging Corp., 13s, 2010 30 27,450
Owens-Brockway Glass Container,
8.875s, 2009 160 175,400
Owens-Brockway Glass Container,
8.25s, 2013 290 311,388
Pliant Corp., 13s, 2010 175 160,125
----------------
$ 878,863
----------------
CORPORATE ASSET-BACKED -- 4.0%
Anthracite CDO Ltd., 6s, 2037 $ 200 $ 167,437
Commercial Mortgage Acceptance
Corp., 5.44s, 2030 630 558,400
Deutsche Mortgage Acceptance Corp.,
7.5s, 2031 250 186,660
</Table>
33
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
CORPORATE ASSET-BACKED -- continued
DLJ Commercial Mortgage Corp.,
7.64s, 2005 $ 14,500 $ 156,303
Falcon Auto Dealership LLC,
3.085s, 2023 924 135,891
Falcon Auto Dealership LLC, 3.87s, 2023 973 185,613
First Union Lehman Brothers Bank,
0s, 2028(Interest Only) 10,559 274,603
First Union Lehman Brothers Commercial,
7s, 2029 150 140,985
GMAC Commercial Mortgage Security,
Inc., 6.02s, 2033 350 313,172
Morgan Stanley Capital I, Inc.,
6.86s, 2010 250 261,886
Morgan Stanley Capital I, Inc.,
7.738s, 2039 250 241,090
Mortgage Capital Funding, Inc.,
7.214s, 2007 250 254,147
Nationslink Funding Corp., 5s, 2031 740 674,141
----------------
$ 3,550,328
----------------
DEFENSE ELECTRONICS -- 0.2%
L-3 Communications Corp., 7.625s, 2012 $ 170 $ 184,238
----------------
ENERGY - INDEPENDENT -- 0.7%
Chesapeake Energy Corp., 8.125s, 2011## $ 325 $ 360,750
Ocean Energy, Inc., 4.375s, 2007 113 116,745
Westport Resources Corp., 8.25s, 2011 110 121,000
----------------
$ 598,495
----------------
ENTERTAINMENT -- 2.1%
AMC Entertainment, Inc., 9.5s, 2011 $ 310 $ 325,500
News America Holdings, Inc.,
7.7s, 2025 66 76,871
News America, Inc., 6.55s, 2033 73 75,834
Regal Cinemas Corp., 9.375s, 2012 290 327,700
Six Flags, Inc., 9.75s, 2013 300 315,750
Turner Broadcasting Systems, Inc.,
8.375s, 2013 334 408,035
Walt Disney Co., 6.75s, 2006 276 300,190
----------------
$ 1,829,880
----------------
FINANCIAL INSTITUTIONS -- 0.2%
Household Finance Corp.,
4.125s, 2008 $ 211 $ 212,891
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.3%
Michael Foods, Inc., 8s, 2013 $ 195 $ 203,288
Seminis Vegetable Seeds, Inc.,
10.25s, 2013 55 59,125
----------------
$ 262,413
----------------
FOREST & PAPER PRODUCTS -- 2.0%
Buckeye Cellulose Corp., 9.25s, 2008 $ 450 $ 455,625
Buckeye Technologies, Inc., 8.5s, 2013 255 272,850
Fibermark, Inc., 10.75s, 2011 150 93,000
Georgia Pacific Corp., 9.375s, 2013 300 345,000
Graphic Packaging International, Inc.,
8.5s, 2011 90 98,550
Graphic Packaging International, Inc.,
9.5s, 2013 440 486,200
----------------
$ 1,751,225
----------------
GAMING & LODGING -- 3.5%
Aztar Corp., 8.875s, 2007 $ 230 $ 240,062
Coast Hotels & Casinos, Inc., 9.5s, 2009 135 142,763
Forest City Enterprises, Inc., 7.625s, 2015 40 42,450
Hilton Hotels Corp., 7.625s, 2012 400 449,500
Host Marriott L P, 8.45s, 2008 164 170,970
MGM Mirage, Inc., 8.375s, 2011 $ 390 $ 441,675
Park Place Entertainment Corp.,
8.875s, 2008 405 458,662
Pinnacle Entertainment, Inc.,
8.75s, 2013 150 152,625
Starwood Hotels & Resorts,
7.875s, 2012 500 562,500
Venetian Casino Resort LLC,
11s, 2010 200 232,000
Wackenhut Corrections Corp.,
8.25s, 2013 165 174,900
----------------
$ 3,068,107
----------------
HOME CONSTRUCTION -- 0.3%
D.R. Horton, Inc., 8s, 2009 $ 220 $ 248,600
----------------
INDUSTRIAL -- 0.2%
MSW Energy Holdings LLC,
7.375s, 2010 $ 165 $ 172,425
----------------
INSURANCE - PROPERTY & CASUALTY -- 0.2%
Willis Corroon Corp., 9s, 2009 $ 190 $ 199,500
----------------
MACHINERY & TOOLS -- 2.1%
Agco Corp., 9.5s, 2008 $ 250 $ 273,125
Amsted Industries, Inc., 10.25s, 2011 280 309,400
Blount, Inc., 7s, 2005 155 155,775
Case New Holland, Inc., 9.25s, 2011## 330 369,600
Manitowoc Co., Inc., 10.5s, 2012 185 210,669
Terex Corp., 9.25s, 2011 125 137,500
Terex Corp., 10.375s, 2011 180 201,600
United Rentals, Inc., 10.75s, 2008 220 247,500
----------------
$ 1,905,169
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.9%
Alliance Imaging, Inc., 10.375s, 2011 $ 250 $ 265,000
Beverly Enterprises, Inc., 9.625s, 2009 100 110,500
Fisher Scientific International, Inc.,
8.125s, 2012 122 130,845
Genesis Healthcare Corp., 8s, 2013 40 41,700
Tenet Healthcare Corp., 6.5s, 2012 300 287,625
----------------
$ 835,670
----------------
METALS & MINING -- 0.5%
Arch Western Finance, LLC,
6.75s, 2013## $ 115 $ 118,162
Peabody Energy Corp., 6.875s, 2013 40 42,200
Phelps Dodge Corp., 8.75s, 2011 66 80,576
U.S. Steel Corp., 9.75s, 2010 155 174,375
----------------
$ 415,313
----------------
MORTGAGE BACKED -- 2.3%
FNMA, 6s, 2017 $ 370 $ 388,762
FNMA, 6.5s, 2032 972 1,016,348
FNMA, 5.5s, 2033 585 592,890
----------------
$ 1,998,000
----------------
NATURAL GAS - DISTRIBUTION -- 0.1%
Amerigas Partners LLP,
8.875s, 2011 $ 120 $ 132,000
----------------
NATURAL GAS - PIPELINE -- 1.5%
ANR Pipeline Co., 8.875s, 2010 $ 60 $ 67,500
El Paso Natural Gas Co.,
7.625s, 2010 435 446,962
Southern Natural Gas Co.,
8.875s, 2010 310 348,750
Williams Cos., Inc., 7.125s, 2011 440 465,300
----------------
$ 1,328,512
----------------
</Table>
34
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
OIL SERVICES -- 0.9%
Gulfmark Offshore, Inc., 8.75s, 2008 $ 300 $ 310,500
Gulfterra Energy Partners L P, 8.5s, 2010 255 289,425
Hanover Compressor Co.,
8.625s, 2010 185 194,363
----------------
$ 794,288
----------------
OILS -- 0.2%
Valero Energy Corp., 6.875s, 2012 $ 140 $ 154,924
----------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.2%
Jabil Circuit, Inc., 5.875s, 2010 $ 156 $ 162,719
----------------
PHARMACEUTICALS -- 0.3%
Schering Plough Corp., 6.5s, 2033 $ 154 $ 160,196
Wyeth, 6.5s, 2034 98 99,982
----------------
$ 260,178
----------------
PHOTOGRAPHIC PRODUCTS -- 0.2%
Eastman Kodak Co., 7.25s, 2013 $ 128 $ 134,302
----------------
POLLUTION CONTROL -- 0.6%
Allied Waste North America, Inc.,
6.5s, 2010 $ 100 $ 101,500
Allied Waste North America, Inc.,
7.875s, 2013 375 405,938
----------------
$ 507,438
----------------
PRINTING & PUBLISHING -- 1.9%
Dex Media East LLC, 9.875s, 2009 $ 200 $ 229,000
Dex Media West LLC, 9.875s, 2013 290 337,125
Hollinger International Publishing, Inc.,
9s, 2010 120 127,500
Mail-Well Corp., 9.625s, 2012 295 327,450
Medianews Group, Inc., 6.875s, 2013 265 269,637
R H Donnelley Finance Corp.,
10.875s, 2012 300 355,875
----------------
$ 1,646,587
----------------
RESIDENTIAL MORTGAGE-BACKED -- 0.2%
Residential Accredit Loans, Inc.,
7.75s, 2027 $ 167 $ 166,319
----------------
RETAILERS -- 0.8%
Couche Tard United States L P,
7.5s, 2013 $ 60 $ 63,300
J.Crew Operating Corp.,
10.375s, 2007 180 183,825
Rite Aid Corp., 9.5s, 2011 260 293,150
Rite Aid Corp., 9.25s, 2013 185 203,038
----------------
$ 743,313
----------------
SUPERMARKETS -- 0.4%
Roundys, Inc., 8.875s, 2012 $ 300 $ 320,250
----------------
SUPRANATIONAL -- 0.2%
Central American Bank Economic,
6.75s, 2013 $ 138 $ 148,723
----------------
TELECOMMUNICATIONS - WIRELESS -- 0.8%
Qwest Services Corp., 13.5s, 2010## $ 370 $ 449,550
Worldcom, Inc., 7.5s, 2011** 800 268,000
----------------
$ 717,550
----------------
TELECOMMUNICATIONS - WIRELINE -- 0.2%
At&t Corp., 8.75s, 2031 $ 170 $ 198,656
----------------
U.S. TREASURY OBLIGATIONS -- 7.3%
U.S. Treasury Notes, 5.75s, 2005 $ 965 $ 1,036,094
U.S. Treasury Notes, 3s, 2007 2,910 2,935,008
U.S. Treasury Notes, 3.375s, 2007 1,597 1,730,463
U.S. Treasury Notes, 4s, 2012 760 752,697
----------------
$ 6,454,262
----------------
UTILITIES - ELECTRIC POWER -- 4.3%
AES Corp., 8.75s, 2013## $ 160 $ 178,800
AES Corp., 9s, 2015## 160 180,800
Allegheny Energy Supply Co., LLC,
8.75s, 2012 250 235,625
Beaver Valley II Funding, 9s, 2017 354 406,895
Calpine Corp., 8.5s, 2011 350 276,937
Calpine Corp., 8.75s, 2013## 170 164,475
CMS Energy Corp., 8.5s, 2011 300 324,000
Dynegy Holdings, Inc., 9.875s, 2010 175 196,875
Dynegy, Inc., 6.875s, 2011 250 230,312
Midland Funding Corp., "B",
13.25s, 2006 75 87,750
NRG Energy, Inc., 8s, 2013 125 131,250
PG&E Corp., 6.875s, 2008 60 64,950
PSE&G Power LLC, 7.75s, 2007 463 491,359
Reliant Resources, Inc.,
9.25s, 2010## 180 190,800
Reliant Resources, Inc.,
9.5s, 2013## 95 101,650
TXU Corp., 6.375s, 2006 508 537,210
----------------
$ 3,799,688
----------------
UTILITIES - TELEPHONE -- 0.2%
Cincinnati Bell, Inc.,
7.25s, 2013## $ 180 $ 189,000
----------------
WIRELESS COMMUNICATIONS -- 2.4%
Alamosa Delaware, Inc., 11s, 2010 $ 204 $ 221,340
Centennial Cellular Operating Co.,
10.75s, 2008 200 211,000
Centennial Communications Corp.,
10.125s, 2013 70 76,825
Crown Castle International Corp.,
7.5s, 2013 270 271,350
Dobson Communications Corp.,
8.875s, 2013 75 75,937
Nextel Communications, Inc.,
9.375s, 2009 300 327,000
Nextel Communications, Inc.,
5.25s, 2010 100 101,500
Rural Cellular Corp., 9.75s, 2010 210 205,275
Rural Cellular Corp., 9.875s, 2010 175 186,375
Triton Pcs, Inc., 8.5s, 2013 150 161,250
Western Wireless Corp., 9.25s, 2013 255 269,025
----------------
$ 2,106,877
----------------
Total U.S. Bonds $ 53,646,265
----------------
FOREIGN BONDS -- 35.5%
AUSTRALIA -- 0.8%
Burns Philip Capital Property Ltd.,
9.75s, 2012(Food & Non Alcoholic
Beverage)## $ 405 $ 433,350
Commomwealth of Australia,
6.5s, 2013 AUD 289 231,367
----------------
$ 664,717
----------------
AUSTRIA -- 1.5%
Republic of Austria, 5.5s, 2007 EUR 694 $ 941,149
Republic of Austria, 5s, 2012 131 174,245
Republic of Austria, 4.65s, 2018 164 207,413
----------------
$ 1,322,807
----------------
BELGIUM -- 0.4%
Kingdom of Belgium, 3.75s, 2009 EUR 204 $ 257,922
Kingdom of Belgium, 5s, 2012 41 54,455
----------------
$ 312,377
----------------
</Table>
35
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
FOREIGN BONDS -- continued
BRAZIL -- 3.5%
Federal Republic of Brazil, 9.25s, 2010 $ 267 $ 287,025
Federal Republic of Brazil, 10s, 2011 219 241,995
Federal Republic of Brazil, 2.063s, 2012 358 322,200
Federal Republic of Brazil, 10.25s, 2013 131 147,047
Federal Republic of Brazil, 8s, 2014 1,129 1,106,619
Federal Republic of Brazil, 2s, 2024 252 216,090
Federal Republic of Brazil, 8.875s, 2024 464 452,400
Federal Republic of Brazil, 11s, 2040 298 327,800
----------------
$ 3,101,176
----------------
BULGARIA -- 0.4%
Republic of Bulgaria, 8.25s, 2015## $ 310 $ 364,765
----------------
CANADA -- 2.2%
Abitibi Consolidated, Inc., 8.3s, 2005
(Forest & Paper Products) $ 401 $ 424,315
Acetex Corp., 10.875s, 2009
(Chemicals)## 250 277,500
Government of Canada, 5.5s, 2009 CAD 634 523,492
Government of Canada, 5.5s, 2010 269 221,967
Government of Canada, 5.25s, 2012 151 122,254
Government of Canada, 8s, 2023 124 129,298
Rogers Cable, Inc., 6.25s, 2013
(Broadcast & Cable TV) $ 261 262,957
----------------
$ 1,961,783
----------------
CHILE -- 0.4%
Empresa Nacional de Electric, 8.35s, 2013
(Utilities - Electric Power) $ 158 $ 177,614
Enersis S.A. (Utilities - Electric Power),
7.375s, 2014
(Utilities - Electric Power) 203 209,002
----------------
$ 386,616
----------------
COLOMBIA -- 0.4%
Republic of Colombia, 10.75s, 2013 $ 227 $ 258,213
Republic of Columbia, 9.75s, 2009 65 71,695
----------------
$ 329,908
----------------
DENMARK -- 0.9%
Kingdom of Denmark, 7s, 2007 DKK 565 $ 107,870
Kingdom of Denmark, 6s, 2009 3,240 607,004
Kingdom of Denmark, 5s, 2013 356 62,735
----------------
$ 777,609
----------------
DOMINICAN REPUBLIC -- 0.0%
Republic of Dominican, 9.5s, 2006 $ 25 $ 21,000
Republic of Dominican, 9.04s, 2013 24 18,240
----------------
$ 39,240
----------------
FINLAND -- 1.6%
Republic of Finland, 2.75s, 2006 EUR 49 $ 61,610
Republic of Finland, 3s, 2008 978 1,205,504
Republic of Finland, 5.375s, 2013 118 161,048
----------------
$ 1,428,162
----------------
FRANCE -- 2.9%
Crown European Holdings S.A.,
9.5s, 2011(Containers) $ 275 $ 311,438
Crown European Holdings S.A.,
10.875s, 2013(Containers) 200 235,250
France Telecom S.A., 9.75s, 2031
(Telecom - Wireline) 297 394,616
Republic of France, 4.75s, 2007 EUR 174 230,776
Republic of France, 4s, 2009 472 602,452
Republic of France, 4.75s, 2012 69 90,370
Rhodia S.A., 8.875s, 2011(Chemicals)## $ 370 340,400
Vivendi Universal S.A., 6.25s, 2008
(Advertising & Broadcasting)## 335 354,681
----------------
$ 2,559,983
----------------
GERMANY -- 3.7%
Deutsche Telekom, 8.75s, 2030
(Telecom - Wireline) $ 184 $ 235,047
Federal Republic of Germany,
4.5s, 2009 EUR 1,252 1,639,901
Federal Republic of Germany,
5.25s, 2010 717 971,618
Kreditanstalt Fur Wiederaufbau,
3.25s, 2008 311 388,716
Kronos International, Inc., 8.875s, 2009
(Chemicals) 15 20,411
----------------
$ 3,255,693
----------------
GREECE -- 0.3%
Republc of Greece, 3.5s, 2008 EUR 128 $ 161,220
Republic of Greece, 4.6s, 2013 80 102,405
----------------
$ 263,625
----------------
IRELAND -- 1.8%
Eircom Fdg, 8.25s, 2013
(Telecom - Wireline) $ 120 $ 132,900
MDP Acquisitions PLC, 9.625s, 2012
(Forest & Paper Products) 115 128,800
Republic of Ireland, 4.25s, 2007 EUR 491 639,659
Republic of Ireland, 3.25s, 2009 393 486,048
Republic of Ireland, 5s, 2013 162 215,309
----------------
$ 1,602,716
----------------
ITALY -- 0.8%
Republic of Italy, 4.5s, 2007 EUR 170 $ 222,913
Republic of Italy, 4.75s, 2013 29 37,732
Republic of Italy, 5.25s, 2017 159 211,838
Telecom Italia Cap, 5.25s, 2013
(Telcom - Wireline) $ 217 217,432
----------------
$ 689,915
----------------
KAZAKHSTAN -- 0.7%
Kazkommerts International B.V.,
10.125s, 2007(Banks & Credit Cos.) $ 321 $ 361,927
Kazkommerts International B.V.,
8.5s, 2013(Banks & Credit Cos.) 130 136,013
Kaztransoil Co., 8.5s, 2006
(Oil Services) 120 127,500
----------------
$ 625,440
----------------
LUXEMBOURG -- 0.8%
Tyco International Group S.A.,
6.75s, 2011(Conglomerates) $ 160 $ 174,800
Millicom International Cellular S.A.,
10s, 2013(Wireless Communications) 175 184,625
Mobile Telesystems Fin S.A.,
8.375s, 2010(Wireless Communications) 372 379,440
----------------
$ 738,865
----------------
MALAYSIA -- 0.5%
Petroliam Nasional, 7.75s, 2015 $ 120 $ 144,429
Petronas Capital Ltd., 7.875s, 2022
(Oil Services) 236 279,649
----------------
$ 424,078
----------------
MEXICO -- 2.9%
BBVA Bancomer, 10.5s, 2011
(Banks & Credit Cos.)## $ 80 $ 90,200
Grupo Televisa S.A. de C.V., 8.5s, 2032
(Broadcast & Cable TV) 164 172,200
Innova S De R.L. De C.V., 9.375s, 2013
(Wireless Communications) 100 102,625
Pemex Project Funding Master Trust,
9.125s, 2010(Oil Services) 70 82,950
Pemex Project Funding Master Trust,
8.625s, 2022(Oil Services) 900 996,750
</Table>
36
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
FOREIGN BONDS -- continued
MEXICO -- continued
Petroleos Mexicanos, 9.5s, 2027(Oils) $ 320 $ 377,600
United Mexican States, 8.125s, 2019 48 53,640
United Mexican States, 11.5s, 2026 455 658,613
----------------
$ 2,534,578
----------------
NETHERLANDS -- 1.6%
Kingdom of Netherlands, 3.75s, 2009 EUR 808 $ 1,020,753
Kingdom of Netherlands, 5s, 2012 304 405,625
----------------
$ 1,426,378
----------------
NEW ZEALAND -- 0.7%
Government of New Zealand,
7s, 2009 NZD 301 $ 207,762
Government of New Zealand,
6.5s, 2013 584 397,585
----------------
$ 605,347
----------------
PANAMA -- 0.6%
Republic of Panama, 1.938s, 2016 $ 285 $ 246,708
Republic of Panama, 9.375s, 2029 230 258,750
----------------
$ 505,458
----------------
POLAND -- 0.2%
PTC International Finance II S.A., 11.25s,
2009 (Wireless Communications) $ 157 $ 172,700
----------------
PORTUGAL -- 0.4%
Republic of Portugal, 5.45s, 2013 EUR 232 $ 317,100
----------------
QATAR -- 0.6%
State of Qatar, 9.75s, 2030 $ 394 $ 555,540
----------------
RUSSIA -- 1.6%
AO Siberian Oil Co., 10.75s, 2009
(Energy - Integrated) $ 163 $ 183,864
Gazprom, 9.625s, 2013
(Utilities - Gas) 390 430,300
Mobile Telesystems Fin S.A.,
10.95s, 2004
(Wireless - Communications) 130 138,288
Russian Federation, 3s, 2011 220 172,700
Russian Federation, 11s, 2018 87 117,450
Tyumen Oil Co., 11s, 2007
(Oil Services) 179 204,731
Vimpelcom, 10.45s, 2005
(Wireless Communication) 200 213,500
----------------
$ 1,460,833
----------------
SINGAPORE -- 0.2%
Flextronics Intl Ltd, 6.5s, 2013
(Electronics) $ 160 $ 165,600
----------------
SPAIN -- 1.5%
Kingdom of Spain, 6s, 2008 EUR 701 $ 972,218
Kingdom of Spain, 5.35s, 2011 266 362,492
----------------
$ 1,334,710
----------------
SWEDEN -- 0.4%
Kingdom of Sweden, 5.5s, 2012 SEK 550 $ 81,008
Spintab AB, 5s, 2008
(Banks & Credit Cos.) 2,200 313,525
----------------
$ 394,533
----------------
UNITED KINGDOM -- 0.4%
United Kingdom Treasury,
7.25s, 2007 GBP 104 $ 203,282
United Kingdom Treasury, 5.75s, 2009 54 101,752
United Kingdom Treasury, 5s, 2012 39 70,717
----------------
$ 375,751
----------------
VENEZUELA -- 0.3%
Republic of Venezuela, 10.75s, 2013 $ 222 $ 236,985
----------------
UKRAINE -- 0.5%
Ukraine Cabinet of Ministers,
7.65s, 2013 $ 467 $ 485,680
----------------
Total Foreign Bonds $ 31,420,668
----------------
Total Bonds (Identified Cost, $79,024,624) $ 85,066,933
----------------
CONVERTIBLE PREFERRED STOCK -- 0.1%
U.S. STOCKS -- 0.1%
WIRELESS COMMUNICATIONS -- 0.1%
Alamosa Holdings, Inc.,
(Identified Cost, $78,750) $ 315 $ 100,800
----------------
SHORT-TERM OBLIGATIONS -- 2.8%
New Center Asset Trust, due 1/02/04,
at Amortized Cost $ 2,532 $ 2,531,932
----------------
Total Investments
(Identified Cost, $81,635,306) $ 87,699,665
----------------
OTHER ASSETS,
LESS LIABILITIES -- 1.0% 854,888
----------------
Net Assets -- 100.0% $ 88,554,553
================
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO FOOTNOTES:
* Non-income producing security.
** Non-income producing security - in default.
## SEC Rule 144A restriction.
+ Restricted security.
++ Security valued by or at the direction of the Trustees.
^ All or a portion of this security is on loan.
~ Security was fair valued at reporting date.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. Dollar. A list of abbreviations is shown below.
AUD = Australian Dollars
CAD = Canadian Dollars
DKK = Danish Kroner
EUR = Euro
GBP = British Pounds
JPY = Japanese Yen
NOK = Norwegian Kroner
NZD = New Zealand Dollars
SEK = Swedish Kronor
37
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- DECEMBER 31, 2003
<Table>
<Caption>
GLOBAL
BOND EMERGING MARKETS GOVERNMENTS
SERIES EQUITY SERIES SERIES
-------------- ---------------- -------------
Assets:
Investments, at value:
Unaffiliated issuers, (including $-, $1,505,853, $-, $933,312, and $-,
of securities on loan, respectively) at identified cost $ 249,841,100 $ 41,276,766 $ 65,168,718
Unrealized appreciation 12,972,852 11,616,630 6,925,853
-------------- ---------------- -------------
Total investments, at value $ 262,813,952 $ 52,893,396 $ 72,094,571
Cash 7,475 158,448 390
Receivable for forward foreign currency exchange contracts -- -- 414,049
Foreign currency, at value (identified cost, $-, $427,283, $-, $- and $-,
respectively) -- 427,739 --
Receivable for daily variation margin on open futures contracts -- -- 7
Receivable for investments sold -- 9,646 --
Receivable for series shares sold 418,061 114,820 23,382
Interest and dividends receivable 3,479,875 240,184 1,147,508
Other assets -- 262 --
-------------- ---------------- -------------
Total assets $ 266,719,363 $ 53,844,495 $ 73,679,907
============== ================ =============
Liabilities:
Payable for investments purchased $ 565,623 $ 428,682 $ 10,961
Payable for series shares reacquired 240,163 12,817 51,753
Payable for forward foreign currency exchange contracts -- -- 730,310
Payable for daily variation margin on open future contracts 6,000 -- --
Collateral for securities loaned, at value -- 1,539,580 --
Payable to affiliates --
Management fee 4,370 1,737 1,526
Distribution fee (Service Class) 453 34 37
Accrued expenses and other liabilities 77,259 43,917 57,626
-------------- ---------------- -------------
Total liabilities $ 893,868 $ 2,026,767 $ 852,213
-------------- ---------------- -------------
Net assets $ 265,825,495 $ 51,817,728 $ 72,827,694
============== ================ =============
Net assets consist of:
Paid-in capital $ 235,568,966 $ 47,339,638 $ 60,142,226
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies 12,949,814 11,614,968 6,681,515
Accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions 2,116,346 (7,590,835) (785,770)
Accumulated undistributed net investment income 15,190,369 453,957 6,789,723
-------------- ---------------- -------------
Total $ 265,825,495 $ 51,817,728 $ 72,827,694
============== ================ =============
Net Assets:
Initial Class $ 199,734,993 46,769,033 $ 67,472,397
Service Class 66,090,502 5,048,695 5,355,297
-------------- ---------------- -------------
Total $ 265,825,495 $ 51,817,728 $ 72,827,694
============== ================ =============
Shares of beneficial interest outstanding:
Initial Class 16,123,187 3,639,184 5,220,362
Service Class 5,360,714 394,566 416,673
-------------- ---------------- -------------
Total 21,483,901 4,033,750 5,637,035
============== ================ =============
Net asset value:
(net assets / shares of beneficial interest outstanding)
Initial Class $ 12.39 $ 12.85 $ 12.92
============== ================ =============
Service Class $ 12.33 $ 12.80 $ 12.85
============== ================ =============
<Caption>
GOVERNMENT
GLOBAL TOTAL SECURITIES
RETURN SERIES SERIES
-------------- --------------
Assets:
Investments, at value:
Unaffiliated issuers, (including $-, $1,505,853, $-, $933,312, and $-,
of securities on loan, respectively) at identified cost $ 144,753,986 $ 775,527,128
Unrealized appreciation 24,068,002 19,887,558
-------------- --------------
Total investments, at value $ 168,821,988 $ 795,414,686
Cash 3,423 135
Receivable for forward foreign currency exchange contracts 256,563 --
Foreign currency, at value (identified cost, $-, $427,283, $-, $- and $-,
respectively) -- --
Receivable for daily variation margin on open futures contracts -- --
Receivable for investments sold 594,651 --
Receivable for series shares sold 161,319 344,063
Interest and dividends receivable 1,418,556 7,032,940
Other assets -- 5,536
-------------- --------------
Total assets $ 171,256,500 $ 802,797,360
============== ==============
Liabilities:
Payable for investments purchased $ 253,464 $ --
Payable for series shares reacquired 90,969 827,670
Payable for forward foreign currency exchange contracts 898,269 --
Payable for daily variation margin on open future contracts -- --
Collateral for securities loaned, at value 1,675,585 --
Payable to affiliates --
Management fee 3,433 12,054
Distribution fee (Service Class) 78 1,175
Accrued expenses and other liabilities 114,895 113,280
-------------- --------------
Total liabilities $ 3,036,693 $ 954,179
-------------- --------------
Net assets $ 168,219,807 $ 801,843,181
============== ==============
Net assets consist of:
Paid-in capital $ 158,029,079 $ 753,078,394
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies 23,512,573 19,887,558
Accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions (15,903,618) (11,916,579)
Accumulated undistributed net investment income 2,581,773 40,793,808
-------------- --------------
Total $ 168,219,807 $ 801,843,181
============== ==============
Net Assets:
Initial Class $ 156,674,728 $ 629,264,597
Service Class 11,545,079 172,578,584
-------------- --------------
Total $ 168,219,807 $ 801,843,181
============== ==============
Shares of beneficial interest outstanding:
Initial Class 9,981,068 46,836,159
Service Class 738,456 12,897,447
-------------- --------------
Total 10,719,524 59,733,606
============== ==============
Net asset value:
(net assets / shares of beneficial interest outstanding)
Initial Class $ 15.70 $ 13.44
============== ==============
Service Class $ 15.63 $ 13.38
============== ==============
</Table>
See notes to financial statements
38
<Page>
<Table>
<Caption>
HIGH INTERNATIONAL
YIELD VALUE
SERIES SERIES
-------------- --------------
Assets:
Investments --
Unaffiliated issuers, (including $--, 3,805,497, --, and -- of
securities on loan, respectively) at identified cost $ 437,599,587 $ 56,437,717
Unrealized appreciation 12,826,028 13,256,272
-------------- --------------
Total investments, at value $ 450,425,615 $ 69,693,989
Cash 111,609 3,126
Foreign currency, at value (Identified cost, $--, $271, $-- and $833,
respectively) -- 260
Receivable for forward foreign currency exchange contracts -- --
Receivable for investments sold 670,155 --
Receivable for series shares sold 395,709 32,670
Interest and dividends receivable 8,444,301 104,235
Other assets 3,765 338
-------------- --------------
Total assets $ 460,051,154 $ 69,834,618
============== ==============
Liabilities:
Payable for investments purchased $ 96,250 $ --
Payable for series shares reacquired 282,938 27,995
Payable for forward foreign currency exchange contracts 421,828 --
Collateral for securities loaned, at value -- 3,996,933
Payable to affiliates --
Management fee 9,404 1,756
Distribution fee (Service Class) 673 32
Accrued expenses and other liabilities 101,958 54,450
-------------- --------------
Total liabilities $ 913,051 $ 4,081,166
-------------- --------------
Net assets $ 459,138,103 $ 65,753,452
============== ==============
Net assets consist of:
Paid-in capital $ 528,728,259 $ 60,561,509
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies 12,406,630 13,259,675
Accumulated net realized loss on investments and foreign currency
transactions (113,540,623) (8,600,742)
Accumulated undistributed net investment income 31,543,837 533,010
-------------- --------------
Total $ 459,138,103 $ 65,753,452
============== ==============
Net Assets:
Initial Class $ 360,207,177 $ 61,107,867
Service Class 98,930,926 4,645,585
-------------- --------------
Total $ 459,138,103 $ 65,753,452
============== ==============
Shares of beneficial interest outstanding:
Initial Class 49,574,682 4,981,485
Service Class 13,685,778 379,396
-------------- --------------
Total 63,260,460 5,360,881
============== ==============
Net asset value:
(net assets / shares of beneficial interest outstanding)
Initial Class $ 7.27 $ 12.27
============== ==============
Service Class $ 7.23 $ 12.24
============== ==============
<Caption>
MONEY STRATEGIC
MARKET INCOME
SERIES SERIES
-------------- --------------
Assets:
Investments --
Unaffiliated issuers, (including $--, 3,805,497, --, and -- of securities
on loan, respectively) at identified cost $ 476,100,586 $ 81,635,306
Unrealized appreciation -- 6,064,359
-------------- --------------
Total investments, at value $ 476,100,586 $ 87,699,665
Cash 6,850 22,019
Foreign currency, at value (Identified cost, $--, $271, $-- and $833,
respectively) -- 839
Receivable for forward foreign currency exchange contracts -- 107,337
Receivable for investments sold -- 814
Receivable for series shares sold 1,326,151 139,441
Interest and dividends receivable 934 1,510,719
Other assets 6,143 --
-------------- --------------
Total assets $ 477,440,664 $ 89,480,834
============== ==============
Liabilities:
Payable for investments purchased $ -- $ --
Payable for series shares reacquired 1,814,665 38,450
Payable for forward foreign currency exchange contracts -- 845,972
Collateral for securities loaned, at value -- --
Payable to affiliates --
Management fee 6,504 1,782
Distribution fee (Service Class) 337 143
Accrued expenses and other liabilities 85,220 39,934
-------------- --------------
Total liabilities $ 1,906,726 $ 926,281
-------------- --------------
Net assets $ 475,533,938 $ 88,554,553
============== ==============
Net assets consist of:
Paid-in capital $ 475,533,938 $ 80,266,751
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies -- 5,346,803
Accumulated net realized loss on investments and foreign currency
transactions -- (1,018,051)
Accumulated undistributed net investment income -- 3,959,050
-------------- --------------
Total $ 475,533,938 $ 88,554,553
============== ==============
Net Assets:
Initial Class $ 426,154,040 $ 67,546,643
Service Class 49,379,898 21,007,910
-------------- --------------
Total $ 475,533,938 $ 88,554,553
============== ==============
Shares of beneficial interest outstanding:
Initial Class 426,154,040 6,075,974
Service Class 49,379,898 1,899,081
-------------- --------------
Total 475,533,938 7,975,055
============== ==============
Net asset value:
(net assets / shares of beneficial interest outstanding)
Initial Class $ 1.00 $ 11.12
============== ==============
Service Class $ 1.00 $ 11.06
============== ==============
</Table>
See notes to financial statements.
39
<Page>
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2003
<Table>
<Caption>
EMERGING GLOBAL
BOND MARKETS EQUITY GOVERNMENTS
SERIES SERIES SERIES
------------- -------------- -------------
Net investment income:
Income --
Interest $ 15,472,133 $ 33,472 $ 2,819,251
Dividends -- 1,414,920 --
Foreign taxes withheld -- (142,617) --
------------- ------------- -------------
Total investment income $ 15,472,133 $ 1,305,775 $ 2,819,251
------------- ------------- -------------
Expenses --
Management fee $ 1,607,951 $ 449,073 $ 571,789
Trustees' compensation 21,386 2,630 6,718
Administrative fee 26,560 3,009 7,690
Distribution fee (Service Class) 124,883 6,998 13,162
Custodian fee 117,970 85,324 76,677
Printing 18,506 6,593 10,602
Auditing fees 42,600 30,496 42,600
Legal fees 6,472 4,243 4,554
Miscellaneous 15,086 10,829 5,341
------------- ------------- -------------
Total expenses $ 1,981,414 $ 599,195 $ 739,133
Fees paid indirectly (3,123) -- (150)
------------- ------------- -------------
Net expenses $ 1,978,291 $ 599,195 $ 738,983
------------- ------------- -------------
Net investment income $ 13,493,842 $ 706,580 $ 2,080,268
============= ============= =============
Realized and unrealized gain (loss) on investments and foreign
currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions $ 8,519,759 $ 3,030,833 $ 5,998,363
Foreign currency transactions (158,632) (102,357) 1,070,084
Futures contracts (17,467) -- (46,136)
Written options transactions -- -- (385,319)
------------- ------------- -------------
Net realized gain on investments and foreign currency
transactions $ 8,343,660 $ 2,928,476 $ 6,636,992
------------- ------------- -------------
Change in unrealized appreciation (depreciation) --
Investments $ 2,191,470 $ 12,277,862 $ 2,644,400
Translation of assets and liabilities in foreign currencies 88,256 (10,634) (535,267)
Futures contracts (26,823) -- (62,285)
------------- ------------- -------------
Net unrealized gain (loss) on investments and foreign
currency translation $ 2,252,903 $ 12,267,228 $ 2,046,848
------------- ------------- -------------
Net realized and unrealized gain (loss) on investments and
foreign currency $ 10,596,563 $ 15,195,704 $ 8,683,840
------------- ------------- -------------
Increase in net assets from operations $ 24,090,405 $ 15,902,284 $ 10,764,108
============= ============= =============
<Caption>
GLOBAL GOVERNMENT
TOTAL SECURITIES
RETURN SERIES SERIES
------------- -------------
Net investment income:
Income --
Interest $ 1,856,400 $ 35,987,512
Dividends 1,519,508 --
Foreign taxes withheld (78,792) --
------------- -------------
Total investment income $ 3,297,116 $ 35,987,512
------------- -------------
Expenses --
Management fee $ 823,278 5,227,686
Trustees' compensation 7,083 93,230
Administrative fee 8,420 100,990
Distribution fee (Service Class) 19,187 383,074
Custodian fee 108,485 318,906
Printing 20,471 49,841
Auditing fees 43,746 36,550
Legal fees 5,049 3,780
Miscellaneous 13,920 27,131
------------- -------------
Total expenses $ 1,049,639 $ 6,241,188
Fees paid indirectly (739) (2,766)
------------- -------------
Net expenses $ 1,048,900 $ 6,238,422
------------- -------------
Net investment income $ 2,248,216 $ 29,749,090
============= =============
Realized and unrealized gain (loss) on investments and foreign
currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions $ 5,759,041 $ 5,545,766
Foreign currency transactions (1,312,448) --
Futures contracts -- --
Written options transactions 67,444 --
------------- -------------
Net realized gain on investments and foreign currency
transactions $ 4,514,037 $ 5,545,766
------------- -------------
Change in unrealized appreciation (depreciation) --
Investments $ 19,839,667 $ (17,310,845)
Translation of assets and liabilities in foreign currencies (372,355) --
Futures contracts -- --
------------- -------------
Net unrealized gain (loss) on investments and foreign
currency translation $ 19,467,312 $ (17,310,845)
------------- -------------
Net realized and unrealized gain (loss) on investments and
foreign currency $ 23,981,349 $ (11,765,079)
------------- -------------
Increase in net assets from operations $ 26,229,565 $ 17,984,011
============= =============
</Table>
See notes to financial statements.
40
<Page>
<Table>
<Caption>
HIGH INTERNATIONAL
YIELD VALUE
SERIES SERIES
------------- -------------
Net investment income:
Income --
Interest $ 34,203,680 $ 44,559
Dividends 310,356 1,380,907
Foreign taxes withheld -- (147,991)
------------- -------------
Total investment income $ 34,514,036 $ 1,277,475
------------- -------------
Expenses --
Management fee $ 2,970,202 $ 534,713
Distribution fee (Service Class) 162,153 8,081
Trustees' compensation 34,269 4,345
Administrative fee 37,185 5,053
Legal fees 4,653 4,225
Custodian fee 151,935 98,348
Printing 37,539 8,359
Auditing fees 40,950 34,046
Miscellaneous 21,653 12,250
------------- -------------
Total expenses $ 3,460,539 $ 709,420
Fees paid indirectly (7,068) (172)
------------- -------------
Net expenses $ 3,453,471 $ 709,248
------------- -------------
Net investment income $ 31,060,565 $ 568,227
============= =============
Realized and unrealized gain (loss) on investments and foreign
currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions $ 294,171 $ 2,143,283
Foreign currency transactions (325,875) (19,972)
Written options transactions -- --
------------- -------------
Net realized gain (loss) on investments and foreign currency
transactions $ (31,704) $ 2,123,311
------------- -------------
Change in unrealized appreciation (depreciation) --
Investments $ 45,455,120 $ 13,863,388
Translation of assets and liabilities in foreign currencies (351,011) (1,327)
------------- -------------
Net unrealized gain on investments and foreign currency
translation $ 45,104,109 $ 13,862,061
------------- -------------
Net realized and unrealized gain on investments and foreign
currency $ 45,072,405 $ 15,985,372
------------- -------------
Increase in net assets from operations $ 76,132,970 $ 16,553,599
============= =============
<Caption>
MONEY STRATEGIC
MARKET INCOME
SERIES SERIES
------------- -------------
Net investment income:
Income --
Interest $ 7,660,868 $ 5,276,682
Dividends -- --
Foreign taxes withheld -- --
------------- -------------
Total investment income $ 7,660,868 $ 5,276,682
------------- -------------
Expenses --
Management fee $ 3,172,213 $ 610,845
Distribution fee (Service Class) 141,532 43,183
Trustees' compensation 72,636 5,739
Administrative fee 67,335 7,621
Legal fees 4,594 1,752
Custodian fee 198,850 69,975
Printing 46,104 945
Auditing fees 19,800 34,701
Miscellaneous 51,174 2,799
------------- -------------
Total expenses $ 3,774,238 $ 777,560
Fees paid indirectly (430) (4,599)
------------- -------------
Net expenses $ 3,773,808 $ 772,961
------------- -------------
Net investment income $ 3,887,060 $ 4,503,721
============= =============
Realized and unrealized gain (loss) on investments and foreign
currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions -- $ 3,754,658
Foreign currency transactions -- (1,690,194)
Written options transactions -- (9,952)
------------- -------------
Net realized gain (loss) on investments and foreign currency
transactions -- $ 2,054,512
------------- -------------
Change in unrealized appreciation (depreciation) --
Investments -- $ 3,574,909
Translation of assets and liabilities in foreign currencies -- (395,447)
------------- -------------
Net unrealized gain on investments and foreign currency
translation -- $ 3,179,462
------------- -------------
Net realized and unrealized gain on investments and foreign
currency -- $ 5,233,974
------------- -------------
Increase in net assets from operations $ 3,887,060 $ 9,737,695
============= =============
</Table>
See notes to financial statements.
41
<Page>
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2003
<Table>
<Caption>
EMERGING GLOBAL
BOND MARKETS EQUITY GOVERNMENTS
SERIES SERIES SERIES
--------------- --------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income $ 13,493,842 $ 706,580 $ 2,080,268
Net realized gain on investments and foreign currency
transactions 8,343,660 2,928,476 6,636,992
Net unrealized gain (loss) on investments and foreign
currency translation 2,252,903 12,267,228 2,046,848
--------------- --------------- ---------------
Increase in net assets from operations $ 24,090,405 $ 15,902,284 $ 10,764,108
--------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (10,972,659) $ (196,547) $ (3,796,736)
From net investment income (Service Class) (2,121,732) (11,199) (292,331)
From net realized gain on investments (Initial Class) -- -- --
From net realized gain on investments (Service Class) -- -- --
--------------- --------------- ---------------
Total distributions declared to shareholders $ (13,094,391) $ (207,746) $ (4,089,067)
--------------- --------------- ---------------
Net increase (decrease) in net assets from series share
transactions $ 6,112,812 $ 3,663,511 $ (8,430,211)
--------------- --------------- ---------------
Total increase (decrease) in net assets $ 17,108,826 $ 19,358,049 $ (1,755,170)
Net Assets --
At beginning of period 248,716,669 32,459,679 74,582,864
--------------- --------------- ---------------
At end of period $ 265,825,495 $ 51,817,728 $ 72,827,694
=============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 15,190,369 $ 453,957 $ 6,789,723
=============== =============== ===============
<Caption>
GLOBAL GOVERNMENT
TOTAL RETURN SECURITIES
SERIES SERIES
--------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income $ 2,248,216 $ 29,749,090
Net realized gain on investments and foreign currency
transactions 4,514,037 5,545,766
Net unrealized gain (loss) on investments and foreign
currency translation 19,467,312 (17,310,845)
--------------- ---------------
Increase in net assets from operations $ 26,229,565 $ 17,984,011
--------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (2,121,952) $ (36,917,647)
From net investment income (Service Class) (160,935) (6,290,519)
From net realized gain on investments (Initial Class) -- (7,169,052)
From net realized gain on investments (Service Class) -- (1,259,686)
--------------- ---------------
Total distributions declared to shareholders $ (2,282,887) $ (51,636,904)
--------------- ---------------
Net increase (decrease) in net assets from series share
transactions $ 58,423,279 $ (173,754,393)
--------------- ---------------
Total increase (decrease) in net assets $ 82,369,957 $ (207,407,286)
Net Assets --
At beginning of period 85,849,850 1,009,250,467
--------------- ---------------
At end of period $ 168,219,807 $ 801,843,181
=============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 2,581,773 $ 40,793,808
=============== ===============
<Caption>
HIGH INTERNATIONAL MONEY STRATEGICH
YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income $ 31,060,565 $ 568,227 $ 3,887,060 $ 4,503,721
Net realized gain (loss) on investments and foreign
currency transactions (31,704) 2,123,311 -- 2,054,512
Net unrealized gain on investments and foreign
currency translation 45,104,109 13,862,061 -- 3,179,462
--------------- --------------- --------------- ---------------
Increase in net assets from operations $ 76,132,970 $ 16,553,599 $ 3,887,060 $ 9,737,695
--------------- --------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (29,599,917) $ (526,764) $ (3,676,461) $ (2,858,537)
From net investment income (Service Class) (5,353,220) (21,943) (210,599) (697,541)
--------------- --------------- --------------- ---------------
Total distributions declared to shareholders $ (34,953,137) $ (548,707) $ (3,887,060) $ (3,556,078)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from series share
transactions $ 67,938,029 $ (3,106,318) $ (267,337,186) $ 12,414,309
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets $ 109,117,862 $ 12,898,574 $ (267,337,186) $ 18,595,926
Net Assets --
At beginning of period 350,020,241 52,854,878 742,871,124 69,958,627
--------------- --------------- --------------- ---------------
At end of period $ 459,138,103 $ 65,753,452 $ 475,533,938 $ 88,554,553
=============== =============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 31,543,837 $ 533,010 -- $ 3,959,050
=============== =============== =============== ===============
</Table>
See notes to financial statements.
42
<Page>
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2002
<Table>
<Caption>
EMERGING GLOBAL
BOND MARKETS EQUITY GOVERNMENTS
SERIES SERIES SERIES
--------------- --------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income $ 12,392,091 $ 379,796 $ 1,897,481
Net realized gain (loss) on investments and foreign
currency transactions (3,077,582) (383,240) 2,401,336
Net unrealized gain (loss) on investments and foreign
currency translation 11,152,251 (1,951,244) 6,361,734
--------------- --------------- ---------------
Increase (decrease) in net assets from operations $ 20,466,760 $ (1,954,688) $ 10,660,551
--------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (6,812,055) $ (443,352) --
From net investment income (Service Class) (864,050) (20,475) --
From net realized gain on investments and foreign
currency transactions (Initial Class) (395,159) -- --
From net realized gain on investments and foreign
currency transactions (Service Class) (50,322) -- --
In excess of net realized gain on investments and
foreign currency transactions (Initial Class) (663,467) -- --
In excess of net realized gain on investments and
foreign currency transactions (Service Class) (84,490) -- --
--------------- --------------- ---------------
Total distributions declared to shareholders $ (8,869,543) $ (463,827) --
--------------- --------------- ---------------
Net increase (decrease) in net assets from series share
transactions $ 56,258,640 $ 2,322,482 $ 13,563,870
--------------- --------------- ---------------
Total increase (decrease) in net assets $ 67,855,857 $ (96,033) $ 24,224,421
Net Assets --
At beginning of period 180,860,812 32,555,712 50,358,443
--------------- --------------- ---------------
At end of period $ 248,716,669 $ 32,459,679 $ 74,582,864
=============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 13,106,586 $ 193,828 $ 3,469,642
=============== =============== ===============
<Caption>
GLOBAL GOVERNMENT
TOTAL RETURN SECURITIES
SERIES SERIES
--------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income $ 2,034,321 $ 36,872,388
Net realized gain (loss) on investments and foreign
currency transactions (1,270,726) 13,227,418
Net unrealized gain (loss) on investments and foreign
currency translation (378,760) 29,822,285
--------------- ---------------
Increase (decrease) in net assets from operations $ 384,835 $ 79,922,091
--------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (1,607,431) $ (34,598,337)
From net investment income (Service Class) (63,012) (2,992,380)
From net realized gain on investments and foreign
currency transactions (Initial Class) -- --
From net realized gain on investments and foreign
currency transactions (Service Class) -- --
In excess of net realized gain on investments and
foreign currency transactions (Initial Class) -- --
In excess of net realized gain on investments and
foreign currency transactions (Service Class) -- --
--------------- ---------------
Total distributions declared to shareholders $ (1,670,443) $ (37,590,717)
--------------- ---------------
Net increase (decrease) in net assets from series share
transactions $ (2,539,460) $ 240,578,202
--------------- ---------------
Total increase (decrease) in net assets $ (3,825,068) $ 282,909,576
Net Assets --
At beginning of period 89,674,918 726,340,891
--------------- ---------------
At end of period $ 85,849,850 $ 1,009,250,467
=============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 2,071,002 $ 43,205,874
=============== ===============
<Caption>
HIGH INTERNATIONAL MONEY STRATEGICH
YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets:
Net investment income $ 33,512,905 $ 536,070 $ 9,444,519 $ 3,498,437
Net realized gain (loss) on investments and foreign
currency transactions (52,741,972) (5,936,400) -- (2,906,272)
Net unrealized gain on investments and foreign
currency 27,397,612 1,715,389 -- 3,985,813
--------------- --------------- --------------- ---------------
Increase (decrease) in net assets from operations $ 8,168,545 $ (3,684,941) $ 9,444,519 $ 4,577,978
--------------- --------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (34,582,305) $ (465,998) $ (9,022,879) $ (2,333,502)
From net investment income (Service Class) (3,023,477) (17,107) (421,640) (315,293)
--------------- --------------- --------------- ---------------
Total distributions declared to shareholders $ (37,605,782) $ (483,105) $ (9,444,519) $ (2,648,795)
--------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from series share
transactions $ (505,418) $ (7,535,951) $ 19,570,019 $ 17,632,001
--------------- --------------- --------------- ---------------
Total increase (decrease) in net assets $ (29,942,655) $ (11,703,997) $ 19,570,019 $ 19,561,184
Net Assets --
At beginning of period 379,962,896 64,558,875 723,301,105 50,397,443
--------------- --------------- --------------- ---------------
At end of period $ 350,020,241 $ 52,854,878 $ 742,871,124 $ 69,958,627
=============== =============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 33,979,256 $ 533,463 -- $ 3,304,818
=============== =============== =============== ===============
</Table>
See notes to financial statements.
43
<Page>
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 (or, if shorter, the period of the
series' operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
BOND SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout each
period):
Net asset value -- beginning of period $ 11.85 $ 11.34 $ 10.91 $ 10.36 $ 10.69
---------- ---------- ---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.62 $ 0.66 $ 0.65 $ 0.71 $ 0.67
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.51 0.37 0.19 0.30 (0.85)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 1.13 $ 1.03 $ 0.84 $ 1.01 $ (0.18)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.59) $ (0.45) $ (0.41) $ (0.46) $ (0.10)
From net realized gain on investments and foreign
currency transactions -- (0.03) -- -- (0.05)
In excess of net realized gain on investments and
foreign currency transactions -- (0.04) -- -- (0.00)+++
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.59) $ (0.52) $ (0.41) $ (0.46) $ (0.15)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.39 $ 11.85 $ 11.34 $ 10.91 $ 10.36
========== ========== ========== ========== ==========
Total return^^ 9.72% 9.53% 7.85% 10.18% (1.69)%
Ratios (to average net assets)/Supplemental data
Expenses## 0.69% 0.68% 0.71% 0.72% 0.72%
Net investment income@ 5.10% 5.87% 5.80% 6.85% 6.37%
Portfolio turnover 96% 130% 236% 252% 267%
Net assets at end of period (000 Omitted) $ 199,735 $ 211,757 $ 170,392 $ 75,961 $ 52,141
<Caption>
BOND SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.81 $ 11.32 $ 11.19
---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.57 $ 0.63 $ 0.22
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.53 0.38 (0.09)
---------- ---------- ----------
Total from investment operations $ 1.10 $ 1.01 $ 0.13
---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.58) $ (0.45) --
From net realized gain on investments and foreign
currency transactions -- (0.03) --
In excess of net realized gain on investments and
foreign currency transactions -- (0.04) --
---------- ---------- ----------
Total distributions declared to shareholders $ (0.58) $ (0.52) --
---------- ---------- ----------
Net asset value -- end of period $ 12.33 $ 11.81 $ 11.32
========== ========== ==========
Total return^^ 9.43% 9.34% 1.16%++
Ratios (to average net assets)/Supplemental data
Expenses## 0.94% 0.93% 0.96%+
Net investment income@ 4.77% 5.62% 5.52%+
Portfolio turnover 96% 130% 236%
Net assets at end of period (000 Omitted) $ 66,091 $ 36,960 $ 10,468
</Table>
+ Annualized
++ Not Annualized
+++ Per share amount was less than $0.01.
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
@ As required, effective January 1, 2001, the series has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of this change,
for both classes, for the year ended December 31, 2001, was to decrease net
investment income per share by $0.01, increase net realized and unrealized
gains and losses per share by $0.01, and decrease the ratio of net
investment income to average net assets by 0.13%. Per share, ratios, and
supplemental data for periods prior to January 1, 2001 have not been
restated to reflect this change in presentation.
See notes to financial statements.
44
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years (or, if shorter, the period of the
series' operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
EMERGING MARKETS EQUITY SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 8.48 $ 8.73 $ 8.82 $ 11.42 $ 7.49
---------- ---------- ---------- ---------- ----------
Income from investment operations#@ --
Net investment income (loss) $ 0.20 $ 0.09 $ 0.14 $ (0.01) $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 4.23 (0.24) (0.23) (2.59) 3.89
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 4.43 $ (0.15) $ (0.09) $ (2.60) $ 3.93
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.06) $ (0.10) $ -- $ (0.00)+++ $ --
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.85 $ 8.48 $ 8.73 $ 8.82 $ 11.42
========== ========== ========== ========== ==========
Total return^^ 52.60% (1.88)% (1.02)% (22.76)% 52.47%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.65% 1.49% 1.62% 1.57% 1.60%
Net investment income@ 1.99% 1.01% 1.63% (0.12)% 0.44%
Portfolio turnover 125% 246% 179% 149% 137%
Net assets at end of period (000 Omitted) $ 46,769 $ 30,393 $ 32,175 $ 36,345 $ 38,139
<Caption>
EMERGING MARKETS EQUITY SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 8.45 $ 8.72 $ 8.35
---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.17 $ 0.06 $ 0.00+++
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 4.22 (0.23) 0.37
---------- ---------- ----------
Total from investment operations $ 4.39 $ (0.17) $ 0.37
---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.04) $ (0.10) $ --
---------- ---------- ----------
Net asset value -- end of period $ 12.80 $ 8.45 $ 8.72
========== ========== ==========
Total return^^ 52.12% (2.12)% 4.43%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.89% 1.74% 1.87%+
Net investment income@ 1.71% 0.70% 0.22%+
Portfolio turnover 125% 246% 179%
Net assets at end of period (000 Omitted) $ 5,049 $ 2,066 $ 381
</Table>
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life Canada (U.S.) and Sun
Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
@ As required, effective January 1, 2001 the series adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. There was no effect of this change
for the year ended December 31, 2001. Per share, ratios, and supplemental
data for periods prior to January 1, 2001 have not been restated to reflect
this change in presentation.
See notes to financial statements.
45
<Page>
The financial highlights table is intended to help you understand the series'
financial for the past 5 years (or, if shorter, the period of the series'
operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
GLOBAL GOVERNMENTS SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.75 $ 9.74 $ 9.95 $ 10.27 $ 12.23
---------- ---------- ---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.34 $ 0.35 $ 0.38 $ 0.50 $ 0.50
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 1.45 1.66 (0.59) (0.40) (1.11)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 1.79 $ 2.01 $ (0.21) $ 0.10 $ (0.61)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.62) $ -- $ -- $ (0.42) $ (1.01)
From net realized gain on investments and foreign
currency transactions -- -- -- -- (0.34)
In excess of net realized gain on investments and
foreign currency transactions -- -- -- -- (0.00)+++
From paid-in capital -- -- -- (0.00)+++ --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.62) $ -- $ -- $ (0.42) $ (1.35)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.92 $ 11.75 $ 9.74 $ 9.95 $ 10.27
========== ========== ========== ========== ==========
Total return^^ 15.60% 20.64% (2.11)% 1.22% (5.18)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.95% 0.93% 0.98% 0.94% 0.90%
Net investment income@ 2.75% 3.36% 3.81% 5.11% 4.55%
Portfolio turnover 143% 120% 67% 131% 176%
Net assets at end of period (000 Omitted) $ 67,472 $ 70,613 $ 50,189 $ 61,441 $ 74,318
<Caption>
GLOBAL GOVERNMENTS SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.71 $ 9.73 $ 9.98
---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.30 $ 0.33 $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 1.45 1.65 (0.37)
---------- ---------- ----------
Total from investment operations $ 1.75 $ 1.98 $ (0.25)
---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.61) $ -- $ --
---------- ---------- ----------
Net asset value -- end of period $ 12.85 $ 11.71 $ 9.73
========== ========== ==========
Total return++ 15.30% 20.35% (2.51)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.20% 1.18% 1.23%+
Net investment income@ 2.50% 3.03% 3.34%+
Portfolio turnover 143% 120% 67%
Net assets at end of period (000 Omitted) $ 5,355 $ 3,969 $ 169
</Table>
+ Annualized
++ Not Annualized
+++ Per share amount was less than $0.01.
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
# Per share data are based on average assets outstanding
## Rations do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all years shown.
@ As required , effective January 1, 2001 the series adopted the provisions of
the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of the change on the
Initial Class for the period ended December 31, 2001 was to decrease net
investment income per share by $0.04, and increase realized and unrealized
gains and losses per share by $0.04 and decrease the ratio of net investment
income to average net assets by 0.40%. The effect of this change on the
Service Class for the same period was to decrease net investment income per
share by less than $0.01, increase realized and unrealized gains and losses
per share by less than $0.01, and decrease the ratio of net investment
income to average net assets by 0.38%. Per share rations and supplemental
data for periods prior to January 1, 2001 have not been restated to reflect
this change in presentation.
See notes to financial statements.
46
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years (or, if shorter, the period of the
series' operation). 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 independent auditors, whose report, together with the
series' financial statements, are included in this report.
<Table>
<Caption>
GLOBAL TOTAL RETURN SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 13.11 $ 13.28 $ 15.74 $ 16.65 $ 16.61
---------- ---------- ---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.29 $ 0.31 $ 0.31 $ 0.50 $ 0.39
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.66 (0.23) (1.24) (0.16) 0.90
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 2.95 $ 0.08 $ (0.93) $ 0.34 $ 1.29
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.36) $ (0.25) $ (0.61) $ (0.37) $ (0.52)
From net realized gain on investments and foreign
currency transactions -- -- (0.92) (0.88) (0.73)
In excess of net realized gain on investments -- -- (0.00)** -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.36) $ (0.25) $ (1.53) $ (1.25) $ (1.25)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 15.70 $ 13.11 $ 13.28 $ 15.74 $ 16.65
========== ========== ========== ========== ==========
Total return^^ 22.97% 0.58% (6.17)% 2.28% 8.43%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.94% 0.90% 0.91% 0.91% 0.89%
Net investment income@ 2.06% 2.34% 2.19% 3.13% 2.48%
Portfolio turnover 93% 84% 66% 86% 116%
Net assets at end of period (000 Omitted) $ 156,675 $ 80,150 $ 88,199 $ 101,692 $ 107,099
<Caption>
GLOBAL TOTAL RETURN SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 13.08 $ 13.28 $ 13.58
---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.26 $ 0.27 $ 0.09
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.63 (0.22) (0.39)+++
---------- ---------- ----------
Total from investment operations $ 2.89 $ 0.05 $ (0.30)
---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.34) $ (0.25) --
---------- ---------- ----------
Net asset value -- end of period $ 15.63 $ 13.08 $ 13.28
========== ========== ==========
Total return^^ 22.53% 0.41% (2.20)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.19% 1.15% 1.16%+
Net investment income@ 1.83% 2.10% 1.82%+
Portfolio turnover 93% 84% 66%
Net assets at end of period (000 Omitted) $ 11,545 $ 5,699 $ 1,476
</Table>
+ Annualized
++ Not Annualized
+++ The per share amount is not in accordance with the net realized and
unrealized gain/loss for the period becaue of the timing of sales of series
shares and the amount of per share realized and unrealized gain and losses
at such time.
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
** Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from certain expense offset arrangements.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
@ As, required, effective January 1, 2001, the series has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of the change on
the Initial Class for the year ended December 31, 2001 was to decrease net
investment income per share by $0.02, increase net realized and unrealized
gains and losses per share by $0.02, and to decrease the ratio of net
investment income to average net assets by 0.17%. The effect of the change
on the Service Class for the year ended December 31, 2001 was to decrease
net investment income per share by $0.01, ncrease net realized and
unrealized gains and losses per share by $0.01, and to decrease the ratio of
net investment income to average net assets by 0.16%. Per share, ratios, and
supplemental data for periods prior to January 1, 2001 have not been
restated to reflect this change in presentation.
See notes to financial statements.
47
<Page>
The financial highlights table is intended to help you understand the series'
financial for the past 5 years (or, if shorter, the period of the series'
operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
GOVERNMENT SECURITIES SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 13.85 $ 13.28 $ 13.11 $ 12.48 $ 13.40
---------- ---------- ---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.44 $ 0.58 $ 0.73 $ 0.81 $ 0.81
Net realized and unrealized gain (loss) on
investments (0.14) 0.67 0.22 0.62 (1.06)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 0.30 $ 1.25 $ 0.95 $ 1.43 $ (0.25)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.59) $ (0.68) $ (0.78) $ (0.80) $ (0.67)
From net realized gain on investments (0.12) -- -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.71) $ (0.68) $ (0.78) $ (0.80) $ (0.67)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 13.44 $ 13.85 $ 13.28 $ 13.11 $ 12.48
========== ========== ========== ========== ==========
Total return^^ 2.15% 9.80% 7.47% 12.11% (1.88)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.62% 0.60% 0.62% 0.62% 0.61%
Net investment income@ 3.22% 4.33% 5.55% 6.47% 6.30%
Portfolio turnover 144% 157% 97% 70% 83%
Net assets at end of period (000 Omitted) $ 629,265 $ 877,180 $ 696,167 $ 567,008 $ 510,760
<Caption>
GOVERNMENT SECURITIES SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 13.81 $ 13.27 $ 13.06
---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.36 $ 0.51 $ 0.28
Net realized and unrealized gain (loss) on
investments $ (0.10) 0.71 (0.07)
---------- ---------- ----------
Total from investment operations $ 0.26 $ 1.22 $ 0.21
---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.57) $ (0.68) $ --
From net realized gain on investments (0.12) -- --
---------- ---------- ----------
Total distributions declared to shareholders $ (0.69) $ (0.68) $ --
---------- ---------- ----------
Net asset value -- end of period $ 13.38 $ 13.81 $ 13.27
========== ========== ==========
Total return 1.87% 9.55% 1.61%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.87% 0.85% 0.87%+
Net investment income@ 2.64% 3.86% 5.52%+
Portfolio turnover 144% 157% 97%
Net assets at end of period (000 Omitted) $ 172,578 $ 132,071 $ 30,174
</Table>
+ Annualized.
++ Not Annualized
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
@ As required, effective January 1, 2001, the series has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of the change on
the Initial Class for the year ended December 31, 2001 was to decrease net
investment income per share by $0.03, increase realized and unrealized gains
and losses per share by $0.03, and decrease the ratio of net investment
income to average net assets by 0.26%. The effect of this change on the
Service Class for the same period was to decrease net investment income per
share by $0.01, increase realized and unrealized gains and losses per share
by $0.01, and decrease the ratio of net investment income to average net
assets by 0.02%. Per share, ratios, and supplemental data for periods prior
to January 1, 2001 have not been restated to reflect this change in
presentation.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
48
<Page>
Financial HighlightsThe financial highlights table is intended to help you
understand the series' financial performance for the past 5 years (or, if
shorter, the period of the series' operation). 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
auditors whose report, together with the series' financial statements, are
inlcuded in this report.
<Table>
<Caption>
HIGH YIELD SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value beginning of period $ 6.56 $ 7.05 $ 7.63 $ 9.02 $ 9.16
---------- ---------- ---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.54 $ 0.61 $ 0.73 $ 0.84 $ 0.83
Net realized and unrealized gain (loss) on
investments and foreign currency 0.80 (0.42) (0.57) (1.39) (0.20)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 1.34 $ 0.19 $ 0.16 $ (0.55) $ 0.63
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.63) $ (0.68) $ (0.74) $ (0.84) $ (0.77)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 7.27 $ 6.56 $ 7.05 $ 7.63 $ 9.02
========== ========== ========== ========== ==========
Total return^^ 21.44% 2.70% 1.80% (6.79)% 6.92%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.83% 0.82% 0.84% 0.83% 0.83%
Net investment income@ 7.89% 9.15% 9.93% 9.96% 9.10%
Portfolio turnover 92% 75% 58% 56% 86%
Net assets at end of period (000 Omitted) $ 360,207 $ 305,487 $ 367,973 $ 333,042 $ 355,100
<Caption>
HIGH YIELD SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 6.53 $ 7.04 $ 7.09
---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.51 $ 0.58 $ 0.25
Net realized and unrealized gain (loss) on
investments and foreign currency 0.81 (0.41) (0.30)
---------- ---------- ----------
Total from investment operations $ 1.32 $ 0.17 $ (0.05)
---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.62) $ (0.68) $ --
---------- ---------- ----------
Net asset value -- end of period $ 7.23 $ 6.53 $ 7.04
========== ========== ==========
Total return 21.21% 2.37% 1.66%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.08% 1.07% 1.09%+
Net investment income@ 7.59% 8.99% 9.55%+
Portfolio turnover 92% 75% 58%
Net assets at end of period (000 Omitted) $ 98,931 $ 44,533 $ 11,990
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
@ As required, effective January 1, 2001, the series has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of this change
on the Initial Class for the period ended December 31, 2001 was to decrease
net investment income per share by $0.01, increase realized and unrealized
gains and losses per share by $0.01 and to decrease the ratio of net
investment income to average net assets by decreased 0.01%. The effect of
this change on the Service Class for the same period was to decrease net
investment income per share by less than $0.01, increase realized and
unrealized gains and losses by less than $0.01, and decrease the ratio of
net investment income to average net assets by less than 0.01%. Per share
ratios and supplemental data for periods prior to January 1, 2001 have not
been restated to reflect this change in presentation.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
49
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years (or, if shorter, the period of the
series' operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
INTERNATIONAL VALUE SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.28 $ 9.93 $ 13.16 $ 14.97 $ 13.19
---------- ---------- ---------- ---------- ----------
Income from investment operations# --
Net investment income $ 0.11 $ 0.09 $ 0.08 $ 0.25 $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.98 (0.66) (1.89) (0.58) 2.07
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 3.09 $ (0.57) $ (1.81) $ (0.33) $ 2.19
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.10) $ (0.08) $ (0.24) $ (0.12) $ (0.09)
From net realized gain on investments and foreign
currency transactions -- -- (1.12) (1.36) (0.32)
In excess of net realized gain on investments and
foreign currency transactions -- -- (0.06) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.10) $ (0.08) $ (1.42) $ (1.48) $ (0.41)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.27 $ 9.28 $ 9.93 $ 13.16 $ 14.97
========== ========== ========== ========== ==========
Total return^^ 33.63% (5.86)% (14.63)% (2.33)% 17.20%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.28% 1.24% 1.23% 1.21% 1.16%
Net investment income 1.06% 0.91% 0.76% 1.81% 0.96%
Portfolio turnover 84% 80% 112% 80% 103%
Net assets at end of period (000 omitted) $ 61,108 $ 50,609 $ 64,134 $ 82,942 $ 84,569
<Caption>
INTERNATIONAL VALUE SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.27 $ 9.93 $ 10.57
---------- ---------- ----------
Income from investment operations# --
Net investment income (loss) $ 0.07 $ 0.04 $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.98 (0.62) (0.63)+++
---------- ---------- ----------
Total from investment operations $ 3.05 $ (0.58) $ (0.64)
---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.08) $ (0.08) $ --
---------- ---------- ----------
Net asset value -- end of period $ 12.24 $ 9.27 $ 9.93
========== ========== ==========
Total return^^ 33.20% (5.97)% (6.05)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.53% 1.49% 1.48%+
Net investment income 0.67% 0.44% (0.17)%+
Portfolio turnover 84% 80% 112%
Net assets at end of period (000 omitted) $ 4,646 $ 2,246 $ 425
</Table>
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with the net realized and
unrealized gain/ loss for the period because of the timing of sales of
series shares and the amount of per share realized and unrealized gains and
losses at such time.
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
50
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years (or, if shorter, the period of the
series' operation). 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
reinvestmentof all distributions) held for the entire period. This information
has been audited by the series' independent auditors whose report, together with
the series' financial statements, are inlcuded in this report.
<Table>
<Caption>
MONEY MARKET SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
---------- ---------- ---------- ---------- ----------
Income from investment operations# --
Net investment income $ 0.01 $ 0.01 $ 0.04 $ 0.06 $ 0.05
---------- ---------- ---------- ---------- ----------
Less distributions from net investment income $ (0.01) $ (0.01) $ (0.04) $ (0.06) $ (0.05)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return^^ 0.63% 1.27% 3.78% 5.95% 4.66%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.57% 0.57% 0.57% 0.58% 0.57%
Net investment income 0.64% 1.27% 3.56% 5.76% 4.57%
Net assets at end of period (000 Omitted) $ 426,154 $ 690,127 $ 702,808 $ 476,370 $ 501,914
<Caption>
MONEY MARKET SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 1.00 $ 1.00 $ 1.00
---------- ---------- ----------
Income from investment operations# --
Net investment income $ 0.00+++ $ 0.01 $ 0.01
---------- ---------- ----------
Less distributions from net investment income $ (0.00)+++ $ (0.01) $ (0.01)
---------- ---------- ----------
Net asset value -- end of period $ 1.00 $ 1.00 $ 1.00
========== ========== ==========
Total return^^ 0.38% 1.02% 0.72%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.82% 0.82% 0.82%+
Net investment income 0.37% 0.99% 3.31%+
Net assets at end of period (000 Omitted) $ 49,380 $ 52,745 $ 20,493
</Table>
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
51
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years (or, if shorter, the period of the
series' operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
STRATEGIC INCOME SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 10.31 $ 10.04 $ 10.10 $ 10.25 $ 10.04
---------- ---------- ---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.59 $ 0.57 $ 0.67 $ 0.79 $ 0.70
Net realized and unrealized loss on investments and
foreign currency 0.71 0.16 (0.34) (0.51) (0.25)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 1.30 $ 0.73 $ 0.33 $ 0.28 $ 0.45
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.49) $ (0.46) $ (0.35) $ (0.43) $ (0.14)
From net realized gain on investments and foreign
currency transactions -- -- (0.03) -- (0.04)
In excess of net realized gain on investments and
foreign currency transactions -- -- (0.01) -- (0.06)
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.49) $ (0.46) $ (0.39) $ (0.43) $ (0.24)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 11.12 $ 10.31 $ 10.04 $ 10.10 $ 10.25
========== ========== ========== ========== ==========
Total return^^ 12.89% 7.52% 3.31% 2.87% 4.61%
Ratios (to average net assets)/Supplemental
data@:
Expenses## 0.90% 0.86% 1.01% 0.98% 1.08%
Net investment income@ 5.58% 5.74% 6.69% 7.90% 6.90%
Portfolio turnover 127% 137% 179% 107% 150%
Net assets at end of period (000 Omitted) $ 67,547 $ 56,980 $ 47,813 $ 33,323 $ 19,683
<Caption>
STRATEGIC INCOME SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------- PERIOD ENDED
2003 2002 DECEMBER 31, 2001*
---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 10.28 $ 10.03 $ 9.91
---------- ---------- ----------
Income from investment operations#@ --
Net investment income $ 0.57 $ 0.53 $ 0.21
Net realized and unrealized loss on investments and
foreign currency 0.68 0.18 (0.09)
---------- ---------- ----------
Total from investment operations $ 1.25 $ 0.71 $ 0.12
---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.47) $ (0.46) $ --
---------- ---------- ----------
Net asset value -- end of period $ 11.06 $ 10.28 $ 10.03
========== ========== ==========
Total return^^ 12.48% 7.31% 3.20%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.15% 1.11% 1.26%+
Net investment income@ 5.36% 5.41% 6.00%+
Portfolio turnover 127% 137% 179%
Net assets at end of period (000 Omitted) $ 21,008 $ 12,979 $ 2,585
</Table>
+ Annualized.
++ Not annualized.
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset
arrangements.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the toal return
figures for all periods shown.
@ As required, effective January 1, 2001 the series has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change on the
initial class for the period ended December 31, 2001 was to decrease net
investment income per share by $0.01, increase realized and unrealized gains
and losses per share by $0.01 and decrease the ratio of net investment
income to average net assets decreased by 0.06%. The effect of this change
on the Service Class for the same period was to decrease net investment
income per share by less than $0.01, increase realized and unrealized gains
and losses by less than $0.01, and decrease the ratio of net investment
income to average net asset by 0.06%. Per share ratios and supplemental data
for periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
See notes to financial statements.
52
<Page>
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, as an open-end management
investment company consisting of twenty-nine separate series (the series) of
shares: Bond Series*, Capital Appreciation Series, Capital Opportunities 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*, Managed Sectors 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 Growth and Income Series, Research International
Series, Strategic Growth Series, Strategic Income Series*, Strategic Value
Series, Technology Series, Total Return Series, Utilities Series, and Value
Series. All of these series are diversified except for the Global Governments
Series, High Yield Series, Managed Sectors Series, Strategic Income Series, and
Utilities Series, which are non-diversified as that term is defined in the
Investment Company Act of 1940, as amended. The shares of each series are sold
only to variable accounts established by Sun Life Assurance Company of Canada
(U.S.) and Sun Life Insurance and Annuity Company of New York 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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
The 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.
Certain series can invest in foreign securities. Investments in foreign
securities are vulnerable to the effects of changes in the relative values of
the local currency and the U.S. dollar and to the effects of changes in each
country's legal, political, and economic environment.
Investment Valuations -- Each series uses independent pricing services approved
by the Board of Trustees wherever possible to value its portfolio securities.
Portfolio securities are valued at current market prices where current market
prices are readily available, or the fund may fair value portfolio securities
under the direction of the Board of Trustees when a determination is made that
current market prices are not readily available. Equity securities in each
series' portfolio for which market quotations are available are valued at the
last sale or official closing price as reported by an independent pricing
service on the primary market or exchange on which they are primarily traded, or
at the last quoted bid price for securities in which there were no sales during
the day. Equity securities traded over the counter are valued at the last sales
price traded each day as reported by an independent pricing service, or to the
extent there are no sales reported, such securities are valued on the basis of
quotations obtained from brokers and dealers. Equity securities for which it is
determined that current market prices are not readily available will be fair
valued under the direction of the Board of Trustees. Each series may also fair
value foreign equity securities in cases where closing market prices are not
readily available or are deemed not reflective of readily available market
prices. For example, significant events (such as movement in the U.S. securities
market, or other regional and local developments) may occur between the time
that foreign markets close (where the security is principally traded) and the
time that each series calculates its net asset value (generally, the close of
the NYSE) that may impact the value of securities traded in these foreign
markets. In these cases, each series may utilize information from an external
vendor or other sources to adjust closing market prices of foreign equity
securities to reflect what it believes to be the fair value of the securities as
of each series' valuation time. Because the frequency of significant events is
not predictable, fair valuation of foreign equity securities may occur on a
frequent basis. Bonds and other fixed income securities (other than short-term
obligations) in each series' portfolio are valued at an evaluated bid price as
reported by an independent pricing service, or to the extent a valuation is not
reported by a pricing service, such securities are valued on the basis of quotes
from brokers and dealers. Prices obtained from pricing services utilize both
dealer-supplied valuations and electronic data processing techniques which take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities. Bonds and
other fixed income securities for which it is determined that current market
prices are not readily available will be fair valued under the direction of the
Board of Trustees. Foreign currency options are valued using an internal pricing
model approved by the Board of Trustees that uses market data from an
independent pricing service. Futures contracts are valued at the settlement
price as reported by an independent pricing service on the primary exchange on
which they are traded. Forward foreign currency contracts are valued using spot
rates and forward points as reported by an independent pricing service.
Short-term obligations with a remaining maturity in excess of 60 days will be
valued upon dealer-supplied valuations. All other short-term obligations in each
series' portfolio are valued at amortized cost, which constitutes market value
as determined by the Board of Trustees. Money market instruments are valued at
amortized cost, which the Trustees have determined in good faith #Notes to
Financial Statements -- continuedapproximates market value. Each series' use of
amortized cost is subject to the series' compliance with certain conditions as
specified under Rule 2a-7 of the Investment Company Act of 1940.
Repurchase Agreements -- Certain 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 -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based
53
<Page>
upon currency exchange rates prevailing on the respective dates of such
transactions. Gains and losses attributable to foreign currency exchange rates
on sales of securities are recorded for financial statement purposes as net
realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options -- Certain series may write call or put options in exchange for
a premium. The premium is initially recorded as a liability, which is
subsequently adjusted to the current value of the option contract. When a
written option expires, the series realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the premium
received is offset against the proceeds to determine the realized gain or loss.
When a written put option is exercised, the premium reduces the cost basis of
the security purchased by the series. The series, as writer of an option, may
have no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable change
in the price of the securities underlying the written option. In general,
written call options may serve as a partial hedge against decreases in value in
the underlying securities to the extent of the premium received. Written options
may also be used as part of an income producing strategy reflecting the view of
the series' management on the direction of interest rates.
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, the
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 the 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 the series. Each series' investment in futures
contracts is designed to hedge against anticipated future changes in interest or
securities prices. Investments in interest rate futures for purposes other than
hedging may be made to modify the duration of the portfolio without incurring
the additional transaction costs involved in buying and selling the underlying
securities. Investments in currency futures for purposes other than hedging may
be made to change the series' relative position in one or more currencies
without buying and selling portfolio assets. Investments in equity index
contracts or contracts on related options for purposes other than hedging, may
be made when the series has cash on hand and wishes to participate in
anticipated market appreciation while the cash is being invested. Should
interest or exchange rates or securities prices move unexpectedly, the series
may not achieve the anticipated benefits of the futures contracts and may
realize a loss.
Security Loans -- State Street Bank and Trust Company ("State Street") and J.P.
Morgan Chase and Co. ("Chase"), as lending agents, may loan the securities of
the 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 and Chase provide the series with indemnification against
Borrower default. The series bears the risk of loss with respect to the
investment of cash collateral.
Cash collateral is invested in a money market fund and/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 agents. On loans collateralized by U.S. Treasury securities, a fee is
received from the Borrower, and is allocated between the series and the lending
agents. Income from securities lending is included in interest income on the
Statement of Operations. The dividend and interest income earned on the
securities loaned is accounted for in the same manner as other dividend and
interest income.
Forward Foreign Currency Exchange Contracts -- 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 a foreign currency relative to the U.S. dollar. The
series may enter into forward foreign currency exchange contracts for hedging
purposes as well as for non-hedging purposes. For hedging purposes, the series
may enter into contracts to deliver or receive foreign currency it will receive
from or require for its normal investment activities. The 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, the 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.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis.
All premium and discount is amortized or accreted for financial statement
purposes in accordance with accounting principles generally accepted in the
United States of America. All discount is accreted for tax reporting purposes as
required by federal income tax regulations. For the 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. Dividends received in cash
are recorded on the ex-dividend date. Some securities may be purchased on a
"when-issued" or "forward delivery" basis, which means that the securities will
be delivered to the series at a future date, usually beyond customary settlement
time.
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 0.1%. 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, according to the procedures
described under "Investment Valuations" above.
54
<Page>
Certain series may enter into TBA sale commitments to hedge portfolio positions
or to sell mortgage-backed securities owned 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.
Legal fees and other related expenses incurred to preserve and protect the value
of a security owned are added to the cost of the security; other legal fees are
expensed. Capital infusions made directly to the security issuer, which are
generally non-recurring, incurred to protect or enhance the value of high-yield
debt securities, are reported as additions to the cost basis of the security.
Costs that are incurred to negotiate the terms or conditions of capital
infusions or that are expected to result in a plan of reorganization are
reported as realized losses. Ongoing costs incurred to protect or enhance an
investment, or costs incurred to pursue other claims or legal actions, are
expensed.
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. During the year ended December 31, 2003, certain series' custodian fees
were reduced under this arrangement as noted below. Each series has entered into
a directed brokerage agreement, under which the broker will credit the series a
portion of the commissions generated, to offset certain expenses of the series.
For the year ended December 31, 2003, the series' miscellaneous expenses were
reduced under this agreement as noted below. These amounts are shown as a
reduction of total expenses on the Statement of Operations.
<Table>
<Caption>
EMERGING MARKETS GLOBAL GLOBAL
BOND EQUITY GOVERNMENTS TOTAL RETURN GOVERNMENT
SERIES SERIES SERIES SERIES SECURITIES SERIES
------------------------------------------------------------------------------------------------------------------
Balance credits $ 3,123 $ -- $ 150 $ 228 $ 2,766
Directed brokerage credits -- -- -- 511 --
---------- ---------- ---------- ---------- ----------
Total $ 3,123 $ -- $ 150 $ 739 $ 2,766
---------- ---------- ---------- ---------- ----------
<Caption>
INTERNATIONAL MONEY STRATEGIC
HIGH YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------
Balance credits $ 7,068 $ 172 $ 430 $ 4,599
Directed brokerage credits -- -- -- --
---------- ---------- ---------- ----------
Total $ 7,068 $ 172 $ 430 $ 4,599
---------- ---------- ---------- ----------
</Table>
Tax Matters and Distributions -- Each series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. Each series
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
real estate investment trusts, defaulted bonds, capital losses, and amortization
and accretion on debt securities.
The tax character of distributions declared for the years ended December 31,
2003 and December 31, 2002 was as follows:
<Table>
<Caption>
BOND SERIES EMERGING MARKETS EQUITY SERIES GLOBAL GOVERNMENTS SERIES
--------------------------- ------------------------------ ---------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------------------- ------------------------------ ---------------------------
2003 2002 2003 2002 2003 2002
--------------------------- ------------------------------ ---------------------------
Distributions declared from:
Ordinary income $ 13,094,391 $ 8,505,967 $ 207,746 $ 463,827 $ 4,089,067 $ --
Long-term capital gain -- 363,576 -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total distributions declared $ 13,094,391 $ 8,869,543 $ 207,746 $ 463,827 $ 4,089,067 $ --
------------ ------------ ------------ ------------ ------------ ------------
<Caption>
GLOBAL TOTAL RETURN SERIES GOVERNMENT SECURITIES SERIES HIGH YIELD SERIES
--------------------------- ---------------------------- ---------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------------------- ---------------------------- ---------------------------
2003 2002 2003 2002 2003 2002
--------------------------- ---------------------------- ---------------------------
Distributions declared from:
Ordinary income $ 2,282,887 $ 1,670,443 $ 45,340,898 $ 37,590,717 $ 34,953,137 $ 37,605,782
Long-term capital gain -- -- 6,296,006 -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total distributions declared $ 2,282,887 $ 1,670,443 $ 51,636,904 $ 37,590,717 $ 34,953,137 $ 37,605,782
------------ ------------ ------------ ------------ ------------ ------------
<Caption>
INTERNATIONAL VALUE SERIES MONEY MARKET SERIES STRATEGIC INCOME SERIES
--------------------------- --------------------------- ---------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------------------- --------------------------- ---------------------------
2003 2002 2003 2002 2003 2002
--------------------------- --------------------------- ---------------------------
Distributions declared from:
Ordinary income $ 548,707 $ 483,105 $ 3,887,060 $ 9,444,519 $ 3,556,078 $ 2,648,795
Long-term capital gain -- -- -- -- -- --
------------ ------------ ------------ ------------ ------------ ------------
Total distributions declared $ 548,707 $ 483,105 $ 3,887,060 $ 9,444,519 $ 3,556,078 $ 2,648,795
------------ ------------ ------------ ------------ ------------ ------------
</Table>
55
<Page>
During the year ended December 31, 2003, the following amounts were reclassified
due to differences between book and tax accounting and the offset of net
investment loss against short-term capital gains.
<Table>
<Caption>
EMERGING MARKETS GLOBAL GOVERNMENTS GLOBAL TOTAL
BOND SERIES EQUITY SERIES SERIES RETURN SERIES
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease):
Paid-in capital $ 275,553 $ 1,721 $ (6,525) $ 9,492
Accumulated undistributed net realized gain on investments
and foreign currency transactions (1,959,885) 236,984 (5,322,355) (723,672)
Accumulated undistributed net investment income(loss) 1,684,332 (238,705) 5,328,880 714,180
<Caption>
GOVERNMENT
SECURITIES HIGH YIELD INTERNATIONAL STRATEGIC INCOME
SERIES SERIES VALUE SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ -- $ (288,860) $ 1 $ 4,357
Accumulated undistributed net realized gain on investments
and foreign currency transactions (11,047,010) (1,168,293) 19,972 289,054
Accumulated undistributed net investment income(loss) 11,047,010 1,457,153 (19,973) (293,411)
</Table>
As of December 31, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
<Table>
<Caption>
EMERGING GLOBAL GLOBAL GOVERNMENT
BOND MARKETS GOVERNMENTS TOTAL RETURN SECURITIES
SERIES EQUITY SERIES SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 15,984,445 $ 552,277 $ 8,403,594 $ 4,172,302 $ 40,793,806
Undistributed long-term capital gain 2,879,089 -- -- -- --
Capital loss carryforward -- (7,128,514) (61,138) (14,924,959) (4,003,424)
Unrealized appreciation (depreciation) on investments
and foreign currency translations 11,392,997 11,152,647 6,234,468 23,124,204 11,974,402
Other temporary differences (2) (98,320) (1,891,456) (2,180,819) --
<Caption>
HIGH INTERNATIONAL MONEY STRATEGIC
YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 31,911,279 $ 542,381 $ 1,718 $ 4,572,151
Undistributed long-term capital gain -- -- -- --
Capital loss carryforward (102,703,045) (7,765,979) (1,577) (554,958)
Unrealized appreciation (depreciation) on investments
and foreign currency translations 11,927,842 12,423,377 -- 5,873,691
Other temporary differences (10,726,232) (7,836) -- (1,603,082)
</Table>
At December 31, 2003, the following series, for federal income tax purposes, had
a capital loss carryforward which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration.
<Table>
<Caption>
EMERGING MARKETS GLOBAL GOVERNMENTS GLOBAL TOTAL GOVERNMENT
EXPIRATION DATE EQUITY SERIES SERIES RETURN SERIES SECURITIES SERIES
- ---------------------------------------------------------------------------------------------------------
December 31, 2006 $ (592,389) $ -- $ -- $ --
December 31, 2007 -- -- -- --
December 31, 2008 -- (61,138) (8,793,830) --
December 31, 2009 (6,536,125) -- (5,728,398) --
December 31, 2010 -- -- (402,731) --
December 31, 2011 -- -- -- (4,003,424)
--------------- --------------- --------------- ---------------
Total $ (7,128,514) $ (61,138) $ (14,924,959) $ (4,003,424)
--------------- --------------- --------------- ---------------
<Caption>
HIGH INTERNATIONAL MONEY MARKET STRATEGIC
EXPIRATION DATE YIELD SERIES VALUE SERIES SERIES INCOME SERIES
- --------------------------------------------------------------------------------------------------------
December 31, 2004 $ -- $ -- $ (530) $ --
December 31, 2005 -- -- -- --
December 31, 2006 (5,630,168) -- -- --
December 31, 2007 (6,145,967) -- -- --
December 31, 2008 (6,617,797) -- -- --
December 31, 2009 (37,568,488) (2,759,062) -- (541,986)
December 31, 2010 (46,740,625) (5,006,917) (776) (12,972)
December 31, 2011 -- -- (271) --
--------------- --------------- --------------- ---------------
Total $ (102,703,045) $ (7,765,979) $ (1,577) $ (554,958)
--------------- --------------- --------------- ---------------
</Table>
56
<Page>
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 the 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
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of based on
a percentage of each series' average daily net assets. The agreement also
provides that each series will be reimbursed for expenses in excess of the
expense limitation indicated below, based on the average net assets of each
series. Management fees and expense limitations are as follows:
<Table>
<Caption>
MANAGEMENT TOTAL EXPENSE
FEE LIMITATION
----------------------------------------------------------------------
Bond Series 0.60% N/A
Emerging Markets Equity Series 1.25%# N/A
Global Governments Series 0.75%* 1.25%
Global Total Return Series 0.75%* N/A
Government Securities Series 0.55% 1.25%
High Yield Series 0.75%* 1.25%
International Value Series 0.975%*## N/A
Money Market Series 0.50% 0.60%**
Strategic Income Series 0.75% N/A
</Table>
# Effective 01/01/04 the management fee for the Emerging Market Equity Series is
1.05% of the first $500 million of average net assets and 1.00% on average daily
net assets in excess of $500 million.
## Effective 01/01/04 the management fee for the International Value Series is
0.90% of the first $1 billion of average daily net assets, 0.80% on average
daily net assets in excess of $1 billion and up to $2 billion, and 0.70% on
average daily net assets in excess of $2 billion.
* The management fee for the Global Governments Series and Global Total Return
Series is 0.75% of the first $300 million of average daily net assets of each
series and is reduced to 0.675% of the average daily net assets of each series
in excess of $300 million. The management fee for the International Value Series
is reduced to 0.925% of the average daily net assets in excess of $500 million.
The management fee for the High Yield Series is 0.75% of the first $1 billion of
average daily nets assets. The management fee is reduced to 0.70% of the average
daily net assets in excess of $1 billion.
** Total expense limitation is 0.60% and 0.85%, respectively, for the Initial
Class and Service Class Shares.
Each series pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the series, 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, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
Administrator -- Each series has an administrative services agreement with MFS
to provide the series with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the series pays MFS an administrative fee
up to the following annual percentage rates of the series' average daily net
assets:
<Table>
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
</Table>
Distributor -- 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 as follows:
The series' distribution plan provides that each series will pay up to 0.25% per
annum of its average daily net assets attributable to Service Class shares to
cover marketing and other fees to support the sale and distribution of Service
Class shares. Fees incurred under the distribution plan during the year ended
December 31, 2003 were 0.25% of average daily net assets attributable to Service
Class shares on an annualized basis.
57
<Page>
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
<Table>
<Caption>
EMERGING MARKETS GLOBAL
BOND EQUITY GOVERNMENTS GLOBAL TOTAL
SERIES SERIES SERIES RETURN SERIES
- --------------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities $ 89,824,138 -- $ 20,518,059 $ 11,486,269
=============== =============== =============== ===============
Investments (non-U.S. government securities) $ 164,263,597 $ 46,712,218 $ 72,331,285 $ 105,626,282
=============== =============== =============== ===============
Sales
U.S. government securities $ 101,545,869 -- $ 27,176,079 $ 15,676,462
=============== =============== =============== ===============
Investments (non-U.S. government securities) $ 151,547,213 $ 43,677,681 $ 68,938,815 $ 82,223,826
=============== =============== =============== ===============
<Caption>
GOVERNMENT INTERNATIONAL STRATEGIC
SECURITIES HIGH YIELD VALUE INCOME
SERIES SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities $ 1,425,943,195 -- -- $ 16,870,677
=============== =============== =============== ===============
Investments (non-U.S. government securities) $ 47,633 $ 399,350,715 $ 44,631,064 $ 94,174,435
=============== =============== =============== ===============
Sales
U.S. government securities $ 1,301,689,237 -- -- $ 26,721,897
=============== =============== =============== ===============
Investments (non-U.S. government securities) $ 17,464,393 $ 346,157,225 $ 46,294,060 $ 70,626,895
=============== =============== =============== ===============
</Table>
Purchases and sales of investments for the Money Market Series, which consist
solely of short-term obligations, amounted to $16,754,301,060 and
$17,060,971,188, respectively, excluding repurchase agreements.
58
<Page>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the series, as computed on a federal income tax basis, are
as follows:
<Table>
<Caption>
EMERGING GLOBAL GLOBAL GOVERNMENT
BOND MARKETS GOVERNMENTS TOTAL RETURN SECURITIES
SERIES EQUITY SERIES SERIES SERIES SERIES
- ---------------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 251,424,741 $ 41,798,175 $ 65,904,015 $ 145,612,472 $ 783,440,284
=============== =============== =============== =============== ===============
Gross unrealized appreciation $ 12,426,542 $ 11,616,630 $ 6,316,346 $ 23,792,449 $ 14,626,793
Gross unrealized depreciation (1,037,331) (521,049) (125,790) (582,933) (2,652,391)
--------------- --------------- --------------- --------------- ---------------
Net unrealized appreciation $ 11,389,211 $ 11,095,221 $ 6,190,556 $ 23,209,516 $ 11,974,402
=============== =============== =============== =============== ===============
<Caption>
INTERNATIONAL MONEY STRATEGIC
HIGH YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------
Aggregate cost $ 438,289,510 $ 57,274,015 $ 476,100,586 $ 81,827,733
=============== =============== =============== ===============
Gross unrealized appreciation $ 31,658,427 $ 12,703,901 -- $ 6,239,382
Gross unrealized depreciation (19,522,322) (283,927) -- (367,450)
--------------- --------------- --------------- ---------------
Net unrealized appreciation $ 12,136,105 $ 12,419,974 -- $ 5,871,932
=============== =============== =============== ===============
</Table>
(5) SHARES OF BENEFICIAL INTEREST
The 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:
<Table>
<Caption>
BOND SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------ ------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 8,518,314 $ 103,456,069 12,385,680 $ 140,102,699
Shares issued to shareholders in
reinvestment of distributions 913,627 10,972,659 722,081 7,870,681
Shares reacquired (11,177,186) (135,237,773) (10,268,156) (116,574,366)
------------- -------------- ------------- -------------
Net increase (decrease) (1,745,245) $ (20,809,045) 2,839,605 $ 31,399,014
============= ============== ============= =============
<Caption>
BOND SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------ ------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 6,013,204 $ 72,838,218 4,080,860 $ 46,302,782
Shares issued to shareholders in
reinvestment of distributions 177,254 2,121,732 91,807 998,862
Shares reacquired (3,959,389) (48,038,093) (1,967,424) (22,442,018)
------------- -------------- ------------- -------------
Net increase 2,231,069 $ 26,921,857 2,205,243 $ 24,859,626
============= ============== ============= =============
<Caption>
EMERGING MARKETS EQUITY SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------ ------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 3,586,252 $ 36,502,780 5,234,531 $ 49,235,260
Shares issued to shareholders in
reinvestment of distributions 22,566 196,547 44,071 443,352
Shares reacquired (3,552,667) (34,722,921) (5,380,073) (49,323,031)
------------- ------------- ------------- -------------
Net increase (decrease) 56,151 $ 1,976,406 (101,471) $ 355,581
============= ============= ============= =============
<Caption>
EMERGING MARKETS EQUITY SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------ ------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 661,605 $ 6,730,289 796,161 $ 7,197,182
Shares issued to shareholders in
reinvestment of distributions 1,290 11,199 2,039 20,475
Shares reacquired (512,906) (5,054,383) (597,276) (5,250,756)
------------- ------------- ------------- -------------
Net increase 149,989 $ 1,687,105 200,924 $ 1,966,901
============= ============= ============= =============
</Table>
59
<Page>
<Table>
<Caption>
GLOBAL GOVERNMENTS SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
----------------------------------------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 4,426,516 $ 53,689,650 5,580,333 $ 59,659,317
Shares issued in connection with
acquisition of MFS Sun Life
Global
Asset Allocation Fund -- -- -- --
Shares issued to shareholders in
reinvestment of distributions 314,821 3,796,736 -- --
Shares reacquired (5,530,631) (66,865,020) (4,722,829) (49,541,428)
------------- ------------- ------------- -------------
Net increase (decrease) (789,294) $ (9,378,634) 857,504 $ 10,117,889
============= ============= ============= =============
<Caption>
GLOBAL GOVERNMENTS SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------ ------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 586,594 $ 7,085,614 700,512 $ 7,479,364
Shares issued in connection with
acquisition of MFS Sun Life
Global
Asset Allocation Fund -- -- -- --
Shares issued to shareholders in
reinvestment of distributions 24,341 292,331 -- --
Shares reacquired (533,289) (6,429,522) (378,854) (4,033,383)
------------- ------------- ------------- -------------
Net increase 77,646 $ 948,423 321,658 $ 3,445,981
============= ============= ============= =============
<Caption>
GLOBAL TOTAL RETURN SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------ ------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 2,379,356 $ 34,051,595 2,424,009 $ 31,595,017
Shares issued in connection with
acquisition of MFS Sun Life
Global
Asset Allocation Fund 4,463,188 62,618,528 -- --
Shares issued to shareholders in
reinvestment of distributions 156,949 2,121,952 120,859 1,607,431
Shares reacquired (3,130,328) (44,587,980) (3,072,078) (39,995,286)
------------- ------------- ------------- -------------
Net increase (decrease) 3,869,165 $ 54,204,095 (527,210) $ (6,792,838)
============= ============= ============= =============
<Caption>
GLOBAL TOTAL RETURN SERIES
----------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------ ------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------
Shares sold 531,379 $ 7,586,250 711,871 $ 9,180,421
Shares issued in connection with
acquisition of MFS Sun Life
Global
Asset Allocation Fund 163,179 2,281,243 -- --
Shares issued to shareholders in
reinvestment of distributions 11,930 160,935 4,745 63,012
Shares reacquired (403,843) (5,809,244) (392,011) (4,990,055)
------------- ------------- ------------- -------------
Net increase 302,645 $ 4,219,184 324,605 $ 4,253,378
============= ============= ============= =============
<Caption>
GOVERNMENT SECURITIES SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------------------------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 48,615,846 $ 661,291,502 81,951,135 $ 1,099,691,747
Shares issued to shareholders in
reinvestment of distributions 3,292,509 44,086,698 2,692,478 34,598,337
Shares reacquired (68,425,724) (924,384,825) (73,723,693) (991,269,453)
--------------- --------------- --------------- ---------------
Net increase (decrease) (16,517,369) $ (219,006,625) 10,919,920 $ 143,020,631
=============== =============== =============== ===============
<Caption>
GOVERNMENT SECURITIES SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 19,569,763 $ 263,850,175 15,552,849 $ 208,950,834
Shares issued to shareholders in
reinvestment of distributions 565,135 7,550,206 233,051 2,992,380
Shares reacquired (16,802,233) (226,148,149) (8,494,548) (114,385,643)
--------------- --------------- --------------- ---------------
Net increase 3,332,665 $ 45,252,232 7,291,352 $ 97,557,571
=============== =============== =============== ===============
<Caption>
HIGH YIELD SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
------------------------------------------------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 40,240,208 $ 275,485,544 48,332,803 $ 321,092,066
Shares issued to shareholders in
reinvestment of distributions 4,525,981 29,599,917 5,295,912 34,582,305
Shares reacquired (41,794,394) (284,722,941) (59,255,259) (390,817,321)
--------------- --------------- --------------- ---------------
Net increase (decrease) 2,971,795 $ 20,362,520 (5,626,544) $ (35,142,950)
=============== =============== =============== ===============
<Caption>
HIGH YIELD SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 19,509,181 $ 133,457,842 16,105,341 $ 105,864,564
Shares issued to shareholders in
reinvestment of distributions 821,046 5,353,220 463,724 3,023,476
Shares reacquired (13,462,615) (91,235,553) (11,453,728) (74,250,508)
--------------- --------------- --------------- ---------------
Net increase 6,867,612 $ 47,575,509 5,115,337 $ 34,637,532
=============== =============== =============== ===============
</Table>
60
<Page>
<Table>
<Caption>
INTERNATIONAL VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 2,114,125 22,031,275 2,226,383 21,413,342
Shares issued to shareholders in
reinvestment of distributions 54,814 526,764 44,850 465,998
Shares reacquired (2,643,234) (27,028,162) (3,271,412) (31,165,831)
--------------- --------------- --------------- ---------------
Net decrease (474,295) $ (4,470,123) (1,000,179) $ (9,286,491)
=============== =============== =============== ===============
<Caption>
INTERNATIONAL VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 804,308 $ 8,016,668 4,856,425 $ 46,038,010
Shares issued to shareholders in
reinvestment of distributions 2,283 21,942 1,647 17,107
Shares reacquired (669,560) (6,674,805) (4,658,519) (44,304,577)
--------------- --------------- --------------- ---------------
Net increase (decrease) 137,031 $ 1,363,805 199,553 $ 1,750,540
=============== =============== =============== ===============
<Caption>
MONEY MARKET SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 356,969,984 $ 356,969,984 821,895,482 $ 821,895,482
Shares issued to shareholders in
reinvestment of distributions 3,676,461 3,676,461 9,022,879 9,022,879
Shares reacquired (624,618,965) (624,618,965) (843,599,886) (843,599,886)
--------------- --------------- --------------- ---------------
Net decrease (263,972,520) $ (263,972,520) (12,681,525) $ (12,681,525)
=============== =============== =============== ===============
<Caption>
MONEY MARKET SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 200,981,677 $ 200,981,677 320,963,947 $ 320,963,947
Shares issued to shareholders in
reinvestment of distributions 210,600 210,600 421,639 421,639
Shares reacquired (204,556,943) (204,556,943) (289,134,042) (289,134,042)
--------------- --------------- --------------- ---------------
Net increase (decrease) (3,364,666) $ (3,364,666) 32,251,544 $ 32,251,544
=============== =============== =============== ===============
<Caption>
STRATEGIC INCOME SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 4,133,384 $ 44,207,581 3,933,969 $ 39,411,467
Shares issued to shareholders in
reinvestment of distributions 272,761 2,858,537 239,825 2,333,502
Shares reacquired (3,856,341) (41,334,838) (3,408,445) (34,139,223)
--------------- --------------- --------------- ---------------
Net increase 549,804 $ 5,731,280 765,349 $ 7,605,746
=============== =============== =============== ===============
<Caption>
STRATEGIC INCOME SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------
Shares sold 2,078,301 $ 22,162,933 1,604,389 $ 16,041,425
Shares issued to shareholders in
reinvestment of distributions 66,750 697,541 32,471 315,293
Shares reacquired (1,508,887) (16,177,445) (631,538) (6,330,463)
--------------- --------------- --------------- ---------------
Net increase 636,164 $ 6,683,029 1,005,322 $ 10,026,255
=============== =============== =============== ===============
</Table>
For the Money Market Funds the series Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest.
(6) LINE OF CREDIT
Each series and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each series, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at the
end of each quarter. Each series had no significant borrowings during the year.
The commitment fee allocated to each series for the year ended December 31, 2003
was as follows:
<Table>
<Caption>
COMMITMENT FEE
----------------------------------------------------------------------
Bond Series $ 1,933
Emerging Markets Equity Series 245
Global Governments Series 547
Global Total Return Series 715
Government Securities Series 8,681
High Yield Series 2,715
International Value Series 334
Money Market Series 3,479
Strategic Income Series 534
</Table>
61
<Page>
(7) FINANCIAL INSTRUMENTS
Each series trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency exchange
contracts, swap agreements, and futures contracts. The notional or contractual
amounts of these instruments represent the investment the series has in
particular classes of financial instruments and does not necessarily represent
the amounts potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and offsetting
transactions are considered.
WRITTEN OPTION TRANSACTIONS -- GLOBAL GOVERNMENTS SERIES
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-----------------------------------------------------------------------
Outstanding, beginning of year -- $ --
Options written 4 208,728
Options exercised (2) (180,120)
Options expired (2) (29,608)
--------- ----------
Outstanding, end of year -- $ --
========= ==========
</Table>
WRITTEN OPTION TRANSACTIONS -- GLOBAL TOTAL RETURN SERIES
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
-----------------------------------------------------------------------
Outstanding, beginning of year -- $ --
Options written 2 67,444
Options exercised (1) (59,519)
Options expired (1) (7,925)
--------- ----------
Outstanding, end of year -- $ --
========= ==========
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- GLOBAL GOVERNMENTS SERIES
<Table>
<Caption>
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
Sales
01/13/04 AUD 484,959 $ 354,810 $ 364,586 $ (9,776)
01/13/04 CAD 254,089 192,540 196,494 (3,954)
02/09/04 DKK 6,632,122 1,092,827 1,120,839 (28,012)
01/13/04-01/26/04 EUR 10,133,359 12,171,367 12,760,474 (589,107)
01/13/04 NOK 2,347,493 349,511 352,000 (2,489)
03/15/04 NZD 1,811,591 1,161,067 1,176,703 (15,636)
01/13/04-02/9/04 SEK 16,281,294 2,178,455 2,259,791 (81,336)
------------ ------------ -----------
$ 17,500,577 $ 18,230,887 $ (730,310)
============ ============ ===========
Purchases
01/13/04 AUD 1,063,837 $ 744,032 $ 799,780 $ 55,748
01/13/04 CAD 570,881 434,226 441,477 7,251
01/13/04 EUR 1,709,788 2,098,054 2,153,473 55,419
01/13/04 GBP 2,337,152 3,967,687 4,167,809 200,122
03/15/04 JPY 2,122,740,296 19,772,548 19,860,668 88,120
01/13/04 NOK 4,735,467 709,553 710,070 517
02/09/04 SEK 2,796,924 381,213 388,085 6,872
------------ ------------ -----------
$ 28,107,313 $ 28,521,362 $ 414,049
============ ============ ===========
</Table>
62
<Page>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- GLOBAL TOTAL RETURN SERIES
<Table>
<Caption>
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
Sales
01/13/04 AUD 443,152 $ 324,223 $ 333,156 $ (8,933)
02/09/04 DKK 8,297,760 1,365,008 1,402,335 (37,327)
01/13/04-01/26/04 EUR 12,169,055 14,567,344 15,324,485 (757,141)
01/13/04 NOK 2,140,239 318,654 320,923 (2,269)
03/15/04 NZD 1,660,534 1,064,253 1,078,585 (14,332)
01/13/04-02/09/04 SEK 13,842,177 1,843,227 1,921,494 (78,267)
------------ ------------ -----------
$ 19,482,709 $ 20,380,978 $ (898,269)
============ ============ ===========
Purchases
01/13/04 AUD 920,698 $ 643,923 $ 692,170 $ 48,247
01/13/04 CAD 433,713 330,652 335,401 4,749
01/13/04 EUR 1,372,904 1,691,542 1,729,169 37,627
01/13/04 GBP 1,468,940 2,495,126 2,619,540 124,414
03/15/04 JPY 1,221,247,421 11,391,182 11,426,168 34,986
01/13/04 NOK 4,723,348 640,349 640,776 427
02/09/04 SEK 2,487,961 339,102 345,215 6,113
------------ ------------ -----------
$ 17,531,876 $ 17,788,439 $ 256,563
============ ============ ===========
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- HIGH YIELD SERIES
<Table>
<Caption>
CONTRACTS TO CONTRACTS NET UNREALIZED
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
Sales
01/13/04 EUR 5,262,929 $ 6,206,816 $ 6,628,644 $ (421,828)
------------ ------------ -----------
$ 6,206,816 $ 6,628,644 $ (421,828)
============ ============ ===========
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- STRATEGIC INCOME SERIES
<Table>
<Caption>
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------------
Sales
01/13/04 AUD 303,057 $ 221,926 $ 227,835 $ (5,909)
01/13/04 CAD 933,163 710,030 721,639 (11,609)
02/09/04 DKK 3,983,835 653,955 673,275 (19,320)
01/13/04-01/26/04 EUR 9,203,839 10,818,164 11,591,482 (773,318)
01/13/04 GBP 39,914 67,462 71,178 (3,716)
03/15/04 NZD 930,965 596,665 604,700 (8,035)
01/13/04-02/09/04 SEK 3,057,158 400,480 424,545 (24,065)
------------ ------------ -----------
$ 13,468,682 $ 14,314,654 $ (845,972)
============ ============ ===========
Purchases
01/13/04 AUD 512,903 $ 358,717 $ 385,594 $ 26,877
01/13/04 CAD 433,984 331,075 335,611 4,536
01/13/04 EUR 761,301 911,096 958,857 47,761
01/13/04 GBP 264,645 446,719 471,938 25,219
03/15/04 JPY 23,341,639 216,857 218,388 1,531
02/09/04 SEK 574,562 78,311 79,724 1,413
------------ ------------ -----------
$ 2,342,775 $ 2,450,112 $ 107,337
============ ============ ===========
</Table>
At December 31, 2003, the series had sufficient cash and/or securities to cover
any commitments under these contracts.
63
<Page>
FUTURES CONTRACTS -- BOND SERIES
<Table>
<Caption>
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
- ---------------------------------------------------------------------------------------------------
U.S. 5-Yr. Treasury Notes March 2004 48 Short $ (26,823)
</Table>
FUTURES CONTRACTS -- GLOBAL GOVERNMENTS SERIES
<Table>
<Caption>
UNREALIZED
DESCRIPTION EXPIRATION CONTRACTS POSITION DEPRECIATION
- ---------------------------------------------------------------------------------------------------
Japanese Government Bonds March 2004 6 Long $ (8,681)
</Table>
At December 31, 2003, the series had sufficient cash and/or securities to cover
any margin requirements under these contracts.
(8) RESTRICTED SECURITIES
Certain series of the trust are restricted from investing more than a certain
amount in securities which are subject to legal or contractual restrictions on
resale. Such restrictions range from 0% to 15% of the series' net assets. At
December 31, 2003, the High Yield Series owned the following restricted
securities, excluding securities issued under Rule 144A, constituting 0.003% of
net assets which may not be publicly sold without registration under the
Securities Act of 1933. The series does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations furnished by dealers or by a pricing service, or if not available, in
good faith at the direction of the Trustees.
<Table>
<Caption>
DATE OF SHARE/PRINCIPAL
SERIES DESCRIPTION ACQUISITION AMOUNT COST VALUE
- -----------------------------------------------------------------------------------------------------------------------------
High Yield Series Airplane Pass-Through Trust, 10.875s, 2019 3/13/96 691 $ 691,390 $ 13,828
--------
</Table>
(9) ACQUISITIONS
At close of business on September 5, 2003, MFS Sun Life Global Total Return
Series acquired all of the assets and liabilities of MFS Sun Life Global Asset
Allocation Series. The acquisition was accomplished by a tax-free exchange of
4,463,188 and 163,179 shares of Class IC and Class SC of the fund valued at
$62,618,528 and $2,281,243, respectively, for all of the assets and liabilities
of MFS Sun Life Global Asset Allocation Series. The MFS Sun Life Global Asset
Allocation Series then converted all of its outstanding shares for the shares of
the fund and distributed those shares to its shareholders. MFS Sun Life Global
Asset Allocation Series' net assets on that date were $64,899,771, including
$3,424,473 of unrealized appreciation, $(168,738) of accumulated net investment
loss, and $(16,113,858) of accumulated net realized loss on investments and
foreign currency transactions. These assets were combined with those of the
fund. The aggregate net assets of the fund after the acquisition were
$155,938,089.
(10) RESULTS OF SHAREHOLDER MEETING (UNAUDITED)
At the special meeting of shareholders of MFS/Sun Life Series Global Asset
Allocation Series, which was held on July 28, 2003, the following action was
taken:
Item 1. Approval of the Plan of Reorganization and Termination providing for the
transfer of all of the assets of Global Asset Allocation Series to Global Total
Return Series, each a series of MFS/Sun Life Series Trust, in exchange for
shares of beneficial interest of Global Total Return Series and the assumption
by Global Total Return Series of the liabilities of Global Asset Allocation
Series, and the distribution of such shares to the shareholders of Global Asset
Allocation Series in liquidation of Global Asset Allocation Series and the
termination of Global Asset Allocation Series.
<Table>
<Caption>
NUMBER OF % OF OUTSTANDING % OF DOLLARS
DOLLARS DOLLARS VOTED
- -------------------------------------------------------------------------------
Affirmative $ 55,800,365.37 86.477% 86.477%
Against 1,275,785.08 1.977% 1.977%
Abstain 7,450,259.04 11.546% 11.546%
--------------- ------- -------
Total $ 64,526,409.50 100.000% 100.000%
=============== ======= =======
</Table>
(11) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the series' investment
adviser, has reached agreement with the Securities and Exchange Commission
("SEC"), the New York Attorney General ("NYAG") and the Bureau of Securities
Regulation of the State of New Hampshire ("NH") to settle administrative
proceedings alleging false and misleading information in certain retail fund
prospectuses regarding market timing and related matters. These regulators
alleged that prospectus language for certain MFS funds was false and
misleading because, although the prospectuses for those funds in the
regulators' view indicated that the funds prohibited market timing, MFS did
not limit trading activity in 11 domestic large cap stock, high grade bond
and money market funds. The complaints by these regulatory authorities did
not involve the series, but rather involved MFS' retail funds, MFS' former
Chief Executive Officer, John W. Ballen, and former President, Kevin R.
Parke, have also reached agreement with the SEC. Under the terms of the
settlements, MFS and the executives neither admit nor deny wrongdoing.
Under the terms of the settlements, a $225 million pool will be established and
funded by MFS for distribution to retail fund shareholders. MFS has further
agreed with the NYAG to reduce its management fees by approximately $25 million
annually over the next five years, and not to increase certain management fees
during this period. MFS will also pay an administrative fine to NH in the amount
of $1 million. In addition, MFS and the retail funds will adopt certain
governance changes.
Messrs. Ballen and Parke have agreed to temporary suspensions from association
with any registered investment company or investment adviser, will pay
approximately $315,000 each to the SEC, and resigned their positions as trustees
of all MFS funds, and Mr. Ballen resigned his position as President of all MFS
funds.
MFS and certain MFS funds and their trustees and affiliates have been named as
defendants in class action and other lawsuits alleging similar claims concerning
market timing and seeking damages of unspecified amounts.
64
<Page>
In November 2003, the SEC and Morgan Stanley DW, Inc. (Morgan Stanley) settled
an enforcement action against Morgan Stanley relating to the undisclosed receipt
of fees from certain mutual fund companies in return for preferred marketing of
their funds. MFS was one of the 14 fund companies reported to be on Morgan
Stanley's preferred list. As a result, MFS has been under investigation by the
SEC relating to its directed brokerage and revenue-sharing arrangements with
various distributors of its products, including Morgan Stanley. MFS is
cooperating with the SEC's investigation, which is ongoing. The outcome of this
investigation is not yet determinable and may result in sanctions, compensation
payments or other financial penalties.
Although MFS does not believe that these regulatory developments will have a
material adverse effect on the series, there can be no assurance that these
developments and/or the ongoing adverse publicity resulting from these
developments will not result in increased redemptions, reduced sales or other
adverse consequences.
65
<Page>
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE SHAREHOLDERS OF MFS/SUN LIFE SERIES TRUST:
We have audited the accompanying statements of assets and liabilities, 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, Strategic Income Series (each a portfolio of
MFS/Sun Life Series Trust), including the portfolio of investments, as of
December 31, 2003, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above and present fairly, in all material respects, the financial position 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, 2003, the results of their operations, for the year then ended
the changes in their net assets for each of the two years in the period then
ended and their financial highlights for the 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 17, 2004
66
<Page>
MFS/SUN LIFE SERIES TRUST
FEDERAL TAX INFORMATION (Unaudited)
The series' below have designated the following as a capital gain dividend for
the year ended December 31, 2003.
<Table>
<Caption>
LONG-TERM
CAPITAL GAINS
- --------------------------------------------------------------------------
Government Securities Series $ 6,296,006
</Table>
For the year ended December 31, 2003, the amount of distributions from income
eligible for the 70% dividends Received deduction for corporations was as
follows:
<Table>
<Caption>
DIVIDENDS RECEIVED
REDUCTION
---------------------------------------------------------------------------
Global Total Return Series 18.72%
High Yield Series 1.33%
International Value Series 9.16%
</Table>
For the year ended December 31, 2003, income from foreign sources and the
foreign tax credit were as follows:
<Table>
<Caption>
INTEREST AND
DIVIDENDS TAXES
- --------------------------------------------------------------------------------
Emerging Markets Equity Series $ 1,414,920 $ 248,080
Global Total Return Series 2,252,773 75,986
International Value Series 1,365,380 155,201
</Table>
THIS PUBLICATION IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR
ACCOMPANIED BY A PROSPECTUS FOR THE PORTFOLIO BEING OFFERED.
67
<Page>
TRUSTEES AND OFFICERS
MFS(R)/SUN LIFE SERIES TRUST
500 Boylston Street, Boston, MA 02116-3741
The following table presents certain information regarding the Trustees and
executive officers of the Trust, including their principal occupations, which,
unless specific dates are shown, are of more than five years duration, although
the titles may not have been the same throughout.
NAME, POSITION WITH TRUST, LENGTH OF TIME SERVED, AGE, PRINCIPAL OCCUPATION AND
OTHER DIRECTORSHIPS(1):
INTERESTED TRUSTEES
C. James Prieur* Trustee (since July 1999) (born 4/21/51)
Sun Life Assurance Company of Canada, President and Chief Executive Officer
(since April 1999), General Manager, U.S. (until April 1999).
David D. Horn* Trustee (since April 1986) (born 6/7/41)
Private Investor; Retired; Sun Life Assurance Company of Canada, Former Senior
Vice President and General Manager for the United States (until 1997).
INDEPENDENT TRUSTEES
J. Kermit Birchfield Trustee and Chairman (since May 1997) (born 1/8/40)
Consultant; Century Partners, Inc. (investments), Managing Director; Dairy
Mart Convenience Stores, Inc. (convenience stores), Chairman; Displaytech,
Inc. (manufacturer of liquid crystal display technology), Director; HPSC, Inc.
(medical financing), Director; Intermountain Gas Company, Inc. (public utility
gas distribution), Director.
Robert C. Bishop Trustee (since May 2001) (born 1/13/43)
AutoImmune, Inc. (pharmaceutical product development), Chairman, President and
Chief Executive Officer; Caliper Technologies, Inc. (laboratory analytical
instruments), Director; Millipore Corporation (purification/filtration
products), Director; Quintiles Transnational Corp. (contract services to the
medical industry), Director.
Frederick H. Dulles Trustee (since May 2001) (born 3/12/42)
McFadden, Pilkington & Ward LLP (solicitors and registered foreign lawyers),
Partner; Jackson & Nash, LLP (law firm), Of Counsel (January 2000 to November
2000).
Derwyn F. Phillips Trustee (since April 1986) (born 8/31/30)
Retired.
Robert G. Steinhart Trustee (since May 2001) (born 6/15/40)
Private Investor; Bank One, Texas N.A., Vice 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 (since May 2001) (born 7/21/48)
Hawaii Small Business Development Center, Kaua'i Center, Center Director
(since March 2002); Displaytech, Inc. (manufacturer of liquid crystal display
technology), Chairman and Chief Executive Officer (until March 2002).
TRUSTEES EMERITUS
Garth Marston Trustee Emeritus (born 4/28/26)
Retired.
Samuel Adams(2)** Trustee Emeritus (born 10/19/25)
Retired.
OFFICERS
John W. Ballen(3)++ President (born 9/12/59)
Massachusetts Financial Services Company, Chief Executive Officer and
Director.
James R. Bordewick, Jr.++ Assistant Secretary and Assistant Clerk (born 3/6/59)
Massachusetts Financial Services Company, Senior Vice President and Associate
General Counsel.
Stephen E. Cavan++ Secretary and Clerk (born 11/6/53)
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Secretary.
Stephanie A. DeSisto++ Assistant Treasurer (born 10/01/53)
Massachusetts Financial Services Company, Vice President, (since April 2003);
Brown Brothers Harriman & co., Senior Vice President (November 2002 to April
2003); ING Group N.V./Aveltus Investment Management, Senior Vice President
(prior to November 2002)
Robert R. Flaherty++ Assistant Treasurer (born 9/18/63)
Massachusetts Financial Services Company, Vice President (since August 2000);
UAM Fund Services, Senior Vice President (prior to August 2000).
Richard M. Hisey++ Treasurer (born 8/29/58)
Massachusetts Financial Services Company, Senior Vice President (since July
2002); The Bank of New York, Senior Vice President (September 2000 to July
2002); Lexington Global Asset Managers, Inc., Executive Vice President and
Cheif Financial Officer (prior to September 2000); Lexington Funds, Treasurer
(prior to September 2000).
Robert J. Manning(4)++ President (born 10/20/63)
Massachusetts Financial Services Company, Chief Executive Officer,
President,Chief Investment Officer and Director
Ellen Moynihan++ Assistant Treasurer (born 11/13/57)
Massachusetts Financial Services Company, Vice President.
James O. Yost++ Assistant Treasurer (born 6/12/60)
Massachusetts Financial Services Company, Senior Vice President.
- ----------
(1) Directorships of companies required to report to the Securities and Exchange
Commission (the "SEC") (i.e. "public companies").
(2) Retired December 31, 2003, and became Trustee Emeritus.
(3) Resigned February 6, 2004.
(4) Appointed on February 6, 2004.
* "Interested person" of 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 Trust. The address
of Sun Life of Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills,
Massachusetts.
** "Interested person" of Massachusetts Financial Services Company ("MFS"),
within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street,
Boston, Massachusetts. Samuel Adams was an "interested person" of MFS because
the law firm of Kirkpatrick & Lockhart, LLP, where Mr. Adams was Of Counsel, has
served as counsel to some investment companies managed by MFS, and to MFS and
its affiliates within the past two fiscal years of the Trust.
The Series does not hold annual meetings for the purpose of electing Trustees,
and Trustees are not elected for fixed terms. this means that each Trustee is
elected to hold office until his or her successor is chosen and qualified or
until his or her earlier death, resignation, retirement or removal. Each officer
holds office until his or her successor is chosen and qualified, or until he or
she retires, resigns or is removed from office.
All Trustees currently serve as Trustees of each fund and have served in that
capacity continuously since originally elected or appointed.
All of the Trustees are also Managers of the Compass Variable Accounts,
separate accounts registered as investment companies. The executive officers of
the 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 36
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.
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
PORTFOLIO MANAGERS++
William J. Adams
S. Irfan Ali
David A. Antonelli
David M. Calabro
James J. Calmas
Barry P. Dargan
Dale A. Dutile
Kenneth J. Enright
Eric B. Fischman
Joseph C. Flaherty, Jr.
Steven R. Gorham
Robert Henderson
John D. Laupheimer, Jr.
Gregory Locraft
Constantine Mokas
Lisa B. Nurme
Edward L. O'Dette
Stephen Pesek
Donald F. Pitcher, Jr.
Michael W. Roberge
Matthew W. Ryan
Bernard Scozzafava
David E. Sette-Ducati
Maura A. Shaughnessy
Nicholas Smithie
James T. Swanson
Brooks Taylor
Peter C. Vaream
Terri A. Vitozzi
Barnaby Wiener
(C) 2004 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA.
++MFS Investment Management(R)
SUNA-ANN-2/04 203M
<Page>
[MFS(R)/SUN LIFE SERIES TRUST LOGO]
ANNUAL REPORT - DECEMBER 31, 2003
CAPITAL APPRECIATION SERIES
EMERGING GROWTH SERIES
GLOBAL GROWTH SERIES
MANAGED SECTORS SERIES
MASSACHUSETTS INVESTORS TRUST SERIES
MID CAP GROWTH SERIES
RESEARCH SERIES
TOTAL RETURN SERIES
UTILITIES SERIES
<Page>
TABLE OF CONTENTS
<Table>
Letter from the Chairman 1
Management Review 2
Performance Summary 10
Portfolio of Investments 16
Financial Statements 37
Notes to Financial Statements 52
Independent Auditors' Report 61
Federal Tax Information 62
Board of Trustees and Officers Back Cover
</Table>
NOT FDIC INSURED
NOT A DEPOSIT
MAY LOSE VALUE
NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
NO BANK GUARANTEE
<Page>
LETTER FROM THE CHAIRMAN
DEAR CONTRACT OWNERS,
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for our contract owners. But we
also think it's a time to reinforce the fundamentals of a sound investment
strategy.
We think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, ALLOCATE your holdings across the major asset classes. Second,
DIVERSIFY within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, REBALANCE your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings into the current,
"hottest" performing investment. History suggests, however, that it is difficult
to predict year after year what the best performing sector or market will be.
While it is true that the past cannot offer any guarantees for the future, the
markets historically have demonstrated the benefits of taking the prudent
approach and spreading your assets across a variety of holdings. For investors
with a long-term goal such as retirement, a balanced approach usually makes the
most sense. As always, your investment professional can help you identify an
appropriate mix of investments for your needs.
Respectfully,
/s/ C. James Prieur
C. James Prieur
President and Chief Operating Officer, Sun Life Financial, Inc.
NOTE TO CONTRACT OWNERS: EFFECTIVE JANUARY 1, 2004, J. KERMIT BIRCHFIELD, AN
INDEPENDENT TRUSTEE, WAS APPOINTED CHAIRMAN OF THE COMPASS BOARD, WHICH OVERSEES
THE MFS/SUN LIFE SERIES TRUST.
January 19, 2004
The opinions expressed in this letter are those of C. James Prieur, and no
forecasts can be guaranteed.
MARKET ENVIRONMENT
In the early months of 2003, investors were battered by economic and
geopolitical uncertainty. By year-end, however, investors were celebrating 2003
as the first positive year for global markets since 1999. The turnaround in
global stock markets began in March and April of 2003, when it became apparent
that the U.S.- and British-led coalition was on the verge of military success in
Iraq. The release of increasingly positive economic numbers as 2003 progressed,
particularly in the corporate earnings area, helped drive the ensuing equity
rally. In addition, investor concern over issues that had held back the market
in the first quarter -- including the Iraq situation, a short-lived SARS
epidemic, and corporate misdeeds -- largely faded as the year progressed.
In the equity markets, the big surprise of 2003 was investors' appetite for
risk. After a brutal three-year market decline, many observers -- including MFS
and Sun Life -- believed investors would avoid risky investments. Instead, we
experienced an equity rally led by relatively low-quality, higher-risk stocks --
stocks of companies with substantial debt on their balance sheets, low profit
margins, and/or second- and third-tier competitive positioning. For much of
2003, investors seemed to favor the stocks that had previously fallen the
hardest, rather than bidding up industry leaders that had weathered the global
downturn relatively well. Toward the end of the year, however, we felt the
market was beginning to rotate toward less risky companies with stronger
fundamentals (business factors such as earnings and cash flow growth).
For U.S. investors in overseas stock markets, the big story of 2003 was the
decline of the dollar relative to other currencies. While many developed-nation
stock markets performed roughly in line with the broad U.S. market -- and
developing nations in general did even better -- the declining dollar increased
those returns for U.S. investors in overseas equities. For example, the Morgan
Stanley Capital International (MSCI) EAFE (Europe, Australasia, Far East) Index,
a commonly used measure of the international stock market, returned 20.8%
measured in local currencies but 39.2% when returns were converted into dollars.
(Source: Morgan Stanley Capital International)
Factors that contributed to the dollar's decline against most currencies
included a U.S. trade deficit that overseas investors viewed as excessive; low
interest rates that decreased the attractiveness of dollar-denominated
investments; and the Bush administration's apparent abandonment of a
long-standing U.S. policy of publicly advocating a strong dollar.
In the bond market, we saw interest rates in many developed nations fall to
historical lows in 2003. But by year-end, an improving global economy began to
put upward pressure on rates, and Australia and the United Kingdom became the
first major developed nations to raise rates. In the United States, the Federal
Reserve Board kept short-term rates at a four-decade low through year-end.
However, long-term U.S. Treasury rates -- which are largely determined by
investor sentiment -- rose modestly for the period as a whole and experienced
sharp volatility in the spring and summer. Ten-year rates fell when the Fed,
after its May meeting, expressed a strong desire to keep rates low and implied
that it might use some unconventional strategies to do so -- such as buying
longer-term bonds. Then long-term rates shot up in late June and July after the
Fed lowered the short-term rate by only a quarter-point at its June meeting,
disappointing a market that had expected a half-point drop. Many investors read
the quarter-point move as a sign that perhaps the economy was improving faster
than the Fed had expected.
In contrast, U.S. corporate bonds generally benefited from an accelerating
recovery. Growth in GDP (gross domestic product), employment, and other economic
measures pointed toward improving corporate bond fundamentals (factors such as
earnings, cash flow growth, and credit quality).
In response, investors became less risk averse, and the "flight to quality" that
had characterized the bond market in late 2002 began to fade. With Treasury
yields at four-decade lows, investors
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MANAGEMENT REVIEW
CAPITAL APPRECIATION SERIES
in 2003 sought out higher-yielding corporate debt. Riskier, lower-rated bonds
showed the best performance for the year.
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 28.71% and Service Class shares 28.35%. These
returns, which include the reinvestment of any dividends and capital gains
distributions, compare with a return of 29.75% over the same period for the
series' benchmark, the Russell 1000 Growth Index, which measures the performance
of large-cap U.S. growth stocks. Over the same period, the average large-cap
growth fund tracked by Lipper Inc., an independent firm that reports mutual fund
performance, returned 26.75%.
PORTFOLIO MANAGEMENT UPDATE
Gregory W. Locraft, Jr. assumed investment responsibilities for the portfolio in
November 2003, replacing John E. Lathrop. There has been no change to the
series' investment philosophy or objective: the series will continue to seek to
maximize capital appreciation by investing in securities of all types, with
major emphasis on common stocks identified through MFS' bottom-up Original
Research(SM) process.
DETRACTORS FROM PERFORMANCE
While the series outperformed its Lipper peers over the period, it did
underperform its benchmark. The portfolio's weakest-performing areas over the
period were technology and business services. In technology, the portfolio's
stock selection and an underweighted position in semiconductor stocks in
general, and industry leader Intel in particular, hurt relative results as
stocks of electronic component makers and equipment suppliers rallied strongly
over the period. Our position in human resources software firm PeopleSoft also
detracted from results. While we were encouraged by evidence of strength in
specific product markets, our positioning in technology remained somewhat
cautious because we felt stock valuations in the sector were overly high and we
believed the market was pricing in somewhat optimistic views of future growth.
However, the portfolio's relative performance was helped by our overweighted
positions in semiconductor maker Analog Devices and storage software firm
VERITAS Software.
Stock selection among business services concerns also held back performance
during the period. Business outsourcing firm BISYS Group lost value amid a
negative market environment for its insurance and education divisions and
problems with executing its business strategy. Our holding in payroll giant
Automatic Data Processing was another source of weakness in the business
services area. A shift from cost cutting to increasing business spending in the
face of poor sales trends made us concerned that ADP's issues were more
longer-term in nature. We sold ADP out of the portfolio.
Outside of the business services and technology areas, individual stock
detractors included media concern Viacom, which lost traction on continued weak
demand for radio advertising. We believe conditions in 2004 should offer good
growth opportunities for advertising-sensitive media companies, given the
confluence of a stronger economy, a U.S. presidential election, and the summer
Olympics in Greece. As of period-end, Viacom remained a significant position in
the portfolio.
Our holding in retailer Kohl's also hurt performance. Weakness in the
moderate-price apparel area led the company to report disappointing sales and
earnings. We see this setback as temporary in nature, and, as of the end of the
period, we viewed Kohl's as offering attractive longer-term growth potential.
Other detractors from performance included insurance and reinsurance firm XL
Capital and aerospace and defense company Northrop Grumman.
The portfolio's cash position also detracted from relative performance. As with
nearly all annuity subaccounts, this series holds some cash to buy new holdings
and to cover investor exchanges or redemptions. In a period when equity markets
rose sharply, cash hurt performance against our benchmark, the Russell 1000
Growth Index, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Holdings in the health care sector boosted portfolio results. We avoided or
underweighted a number of large-cap pharmaceutical stocks because we felt their
medium-term growth prospects would be limited by patent expirations on key
products as well as by a dearth of new drugs in the development pipeline.
Instead, we trained our sights on concerns elsewhere in health care that we
believed would offer stronger sustainable growth. For example, we favored
Genentech over Johnson & Johnson and Pfizer, in which we were relatively
underweighted over the period, and Merck, which we did not own. This positioning
proved beneficial for results, and we sold our Genentech position after it
reached our price target. However, several health care holdings did detract from
relative performance, including Schering-Plough, Wyeth, and AmerisourceBergen.
Underweighting consumer staples concerns also contributed to performance as that
sector lagged the broader market. For example, Coca-Cola, which we avoided over
the period, underperformed as volume growth failed to live up to investor
expectations. Not owning Anheuser-Busch over the period also helped relative
results.
Stock selection in the financial services sector also helped performance. In
particular, our position in Merrill Lynch did well over the period.
Other contributors to performance included our holdings in travel and real
estate firm Cendant, satellite television broadcaster Echostar, and conglomerate
Tyco International. Underweighting retail giant Wal-Mart also helped performance
as that firm's stock underperformed the broad market.
In addition, a cash settlement from a class-action lawsuit contributed to
performance over the period. The series was a participant in a suit against
Cendant related to alleged accounting fraud that was uncovered in 1998, after
Cendant was formed by the merger of HFS and CUC International. The series had
owned both HFS and CUC, and then Cendant, during the merger period. Along with
other participants in the lawsuit, the portfolio had suffered losses on Cendant
stock in 1998.
EMERGING GROWTH SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 31.49%, and Service Class shares 31.14%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 30.97% over the same period for the series' benchmark,
the Russell 3000 Growth Index (the Russell Index). The Russell Index measures
the performance of U.S. growth stocks.
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CONTRIBUTORS TO PERFORMANCE
Health care was by far the portfolio's strongest sector over the period. We were
overweighted in biotech, medical equipment, and health care services stocks that
we felt offered strong growth potential. In the biotech area, Genzyme, with two
new drug approvals from the FDA (Food & Drug Administration), helped portfolio
results. Biotech instrumentation company Invitrogen was also a strong
contributor, as was Caremark Rx, which helps corporations contain prescription
drug costs for employees.
Elsewhere in health care, we were underweighted in large cap pharmaceutical
names because we do not see them as the types of aggressive growth stocks that
we try to pursue in this series. Not owning Merck and being underweighted in
firms such as Pfizer and Johnson & Johnson helped performance as large-cap
pharmaceutical firms generally struggled over the period, weighed down by patent
expirations and a dearth of new drugs in the development pipeline. By
period-end, we had sold our Pfizer position.
In the utilities and communications sector, we saw strong performance from Crown
Castle International and American Tower, two firms that rent antenna towers to
cellular telephone companies. Stocks of these companies rebounded in 2003 as
investor concerns about the firms' high debt loads were alleviated by debt
refinancing that improved their balance sheets and by improved cash flows, as
cellular carriers increased spending to expand capacity.
Contributors in the leisure sector included Cendant, which benefited from a
rebound in travel and from strong housing sales; satellite TV operator EchoStar
Communications, which expanded its subscriber base and reported healthy gains in
free cash flow; and internet travel firm Expedia, which benefited from market
share gains in the online travel business.
Relative performance also benefited from the portfolio's underweighting in the
consumer staples area. That sector, which is often seen as relatively defensive,
underperformed during much of the period as investors favored more economically
sensitive areas such as technology that they felt would benefit more from an
economic recovery. Stock selection in the financial services sector also helped
relative results.
Although technology holdings as a group hurt results, a number of the series'
long-time holdings in the sector were strong performers. These included storage
software firm VERITAS Software and chip maker Analog Devices, which benefited
from accelerating sales and order trends. Our underweighting of Microsoft also
helped results as that stock lagged over the period.
Contributors to performance also included conglomerate Tyco, whose business
benefited from the economic rebound and from a restructuring program, and German
enterprise software firm SAP, which benefited from a general rebound in
technology spending and from improving market share. Underweighting Wal-Mart
also helped relative performance as the retailer's stock lagged the broad
market.
In addition, a cash settlement from a class-action lawsuit was a modest
contributor to performance over the period. The series was a participant in a
suit against Cendant related to alleged accounting fraud that was uncovered in
1998, after Cendant was formed by the merger of HFS and CUC International. The
series had owned both HFS and CUC, and then Cendant, during the merger period.
Along with other participants in the lawsuit, the portfolio had suffered losses
on Cendant stock in 1998.
DETRACTORS FROM PERFORMANCE
Technology was the portfolio's weakest sector over the period. Our
underweighting of Intel, Texas Instruments, and Cisco Systems hurt performance
as those stocks climbed.
In the business services area, Bisys Group and Weight Watchers were key
detractors. Business outsourcing firm Bisys Group lost value because of problems
in its insurance and education divisions. Weight Watchers stock retreated as
high-protein, low-carbohydrate diet programs took market share. Both stocks were
sold out of the portfolio during the period.
The series' energy sector positions, which were largely in oil field services
companies, generally underperformed when those firms failed to achieve the
pricing power (ability to raise prices) that we had expected.
Media holdings Viacom and Westwood One lagged as the recovery we had anticipated
in advertising was slow to materialize. Shares of specialty department store
chain Kohl's declined as a result of disappointing sales trends. Drug
distributor AmerisourceBergen detracted from performance as the firm lost two
important customers during the period.
The portfolio's cash position also detracted from relative performance. As with
nearly all annuity subaccounts, the series holds some cash to buy new holdings
and to cover investor exchanges or redemptions. In a period when equity markets
rose sharply, cash hurt performance against our benchmark, the Russell 3000
Growth Index, which has no cash position.
NOTE TO CONTRACT OWNERS: EFFECTIVE OCTOBER 2003, JOHN E. LATHROP WAS NO LONGER A
MANAGER OF THE PORTFOLIO.
GLOBAL GROWTH SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
35.44% for Initial Class shares and 35.13% for Service Class shares. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return over the same period of 34.63% for the series' benchmark,
the Morgan Stanley Capital International (MSCI) All Country World Free Index.
The MSCI All Country World Free Index measures the performance of developed and
emerging market stock markets. Over the same period, the average global fund
tracked by Lipper Inc. returned 32.09%.
PORTFOLIO POSITIONING
Although our analysts saw solid growth potential in U.S. stocks, they were more
attracted to the lower valuations they found abroad. As a result, the series
favored developed overseas markets and emerging markets stocks.
CONTRIBUTORS TO PERFORMANCE
Utilities and communications stocks made a strong contribution to series'
performance. Standouts in the group included Chinese Huaneng Power and Japanese
cellular telephone company KDDI. Huaneng's stock price rose because of China's
ever expanding demand for electricity and results from the company's acquisition
of small regional electrical companies. Increased Japanese market share from new
data packages and ringtone service buoyed the stock price of KDDI. The company's
ringtone service is particularly popular with teenaged girls, one of the largest
cell phone user groups in Japan . The series' postion in Huaneng was sold when
it reached our objectives.
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VERITAS, Analog Devices, and Stanley Electric were strong contributors from the
technology sector. Fundamentals at VERITAS were very positive because of strong
growth in their industry niche (data storage and protection as well as software
applications) and the overall recovery in tech spending. The stock of Analog
Devices rose because of apparent market share gains from well-positioned
products and an upward trend in the semiconductor industry. Stanley Electric
continued to benefit from increased usage of its lighting products in cell
phones, computers, and autos. Positions in both VERITAS and Analog Devices were
sold when they achieved the series' performance targets.
Our decision to avoid pharmaceutical company Merck also contributed to series'
results because it underperformed the series' benchmark.
In addition, a cash settlement from a class-action lawsuit contributed to
performance over the period. The series was a participant in a suit against
Cendant related to alleged accounting fraud that was uncovered in 1998, after
Cendant was formed by the merger of HFS and CUC International. The series had
owned both HFS and CUC, and then Cendant, during the merger period. Along with
other participants in the lawsuit, the series had suffered losses on Cendant
stock in 1998.
DETRACTORS FROM PERFORMANCE
Results from the series' financial stocks lagged that group's benchmark returns.
We had stayed away from higher-risk banks, particularly those in Germany and
Japan, which were large corporate lenders and/or exposed to global stock
markets. This conservative strategy trimmed performance when the markets turned
up in March 2003 and the banks we had avoided rebounded sharply.
Japanese cosmetics firm Shiseido produced disappointing results in 2003.
Shiseido's stock price fell early in the year when it announced
lower-than-expected 2002 earnings that the company attributed to the economic
downturn. The series sold this stock because of its poor performance.
Performance from Tokyo Gas and Vodafone detracted from series results for the
period. The price of Tokyo Gas fell when investors moved into higher-risk stocks
and away from more defensive investments. The stock of telecommunications
company Vodafone declined when the company missed its earnings target, delayed
the rollout of its 3G wireless telephone, and forecast lower revenues due to
increased handset subsidies.
Other detractors included British publishing company Reed Elsevier in the
leisure sector and Intel. Leisure holding Reed Elsevier suffered from investor
concerns about the company's US textbook business, its European business
magazine directories, and its on-line media business. The portfolio's
underweighting in semiconductor manufacturer Intel hurt relative results as
stocks of electronics component makers rallied strongly over the period.
The portfolio's cash position also detracted from relative performance. As with
nearly all annuity subaccounts, this series holds some cash to buy new holdings
and to cover investor exchanges or redemptions. In a period when equity markets
rose sharply, cash hurt performance against our benchmark which has no cash
position.
MANAGED SECTORS SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 25.28% and Service Class shares 24.91%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return over the same period of 29.75% for the series' benchmark,
the Russell 1000 Growth Index (the Russell Index), which measures the
performance of large-cap U.S. growth stocks. The series' returns also compare to
returns over the same period of 30.97% for the Russell 3000 Growth Index and
35.39% for the Lipper Multi-Cap Growth Index. The Lipper Indices measure the
performance of funds within their respective classifications.
DETRACTORS FROM PERFORMANCE
On a sector basis, our positioning among leisure stocks proved the most
significant impediment to performance. Media conglomerate Viacom lost traction
on continued near-term weak demand for radio advertising. As of period-end,
however, Viacom remained a significant position in the portfolio because we
believe market conditions in 2004 could offer growth opportunities for
advertising-sensitive media companies -- given the confluence of a stronger
economy, a U.S. presidential election, and the summer Olympics. Elsewhere in the
leisure sector, holdings in newspaper concerns Tribune Co. and The New York
Times Co. also detracted from results as the firms' ad sales in their respective
major metropolitan areas were slow to rebound. By period-end we had sold our
position in Tribune Co.
Holdings in the business services group also hurt relative performance. In early
2003, Automatic Data Processing, which had benefited from conservative expense
management amid soft demand for its payroll and trade processing services,
announced plans to increase spending. We felt that this change in strategy would
dampen future earnings growth. ADP stock fell on the news, and we sold our
position. BISYS Group, which supports financial institutions and corporate
clients with investment and educational services, also weighed on results. Soft
demand for the company's high-end insurance products led BISYS to post
disappointing earnings. As we believed the company would be able to address this
issue in time, we maintained a position in the stock.
On an individual stock basis, the most significant detractor from performance
was Intel. We initiated a position in the stock based on our view that the
company's new focus on microprocessor battery life and size could give the firm
a sustainable competitive edge. Staying true to our valuation discipline,
however, kept us from moving to an overweighted position as the stock soared
higher in the second half of the year. Unfortunately, successful stockpicking
elsewhere in technology -- including strong-performing positions in VERITAS
Software, Analog Devices, and Cisco Systems -- was not sufficient enough to
offset the impact of being underweighted in Intel.
Moderate-priced apparel retailer Kohl's also hurt performance. Mediocre
merchandising, together with adverse weather in key markets, led Kohl's to
report weak operating results. We viewed these issues as surmountable and
increased our holdings over the period. Other detractors from performance
included insurance and reinsurance firm XL Capital and aerospace and defense
company Northrop Grumman -- which were sold out of the portfolio during the
period -- and pharmaceutical and health care products firm Wyeth.
CONTRIBUTORS TO PERFORMANCE
In the health care sector, we avoided or underweighted several large-cap
pharmaceutical firms because we felt their medium-term growth prospects would be
limited by patent expirations on key products as well as by a dearth of new
drugs in the development pipeline. Instead, we invested in companies
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elsewhere in health care that we believed would offer stronger sustainable
growth. For example, on a relative basis, we favored Genentech and Genzyme over
Johnson & Johnson, in which we were underweighted, and Merck, which we did not
own. This positioning proved beneficial for results.
Underweighting consumer staples concerns also helped performance as that sector
lagged the overall market. Avoiding Coca-Cola was particularly helpful, as the
company reported lackluster volume growth. Exiting positions in
Colgate-Palmolive and Anheuser-Busch in favor of other opportunities earlier in
2003 also proved beneficial to performance. Positions in
capital-markets-sensitive companies such as Merrill Lynch and Goldman Sachs also
helped portfolio performance as bond spreads narrowed, trading volumes rose, and
underwriting activity showed signs of renewed life.
In addition, a cash settlement from a class-action lawsuit contributed to
performance over the period. The series was a participant in a suit against
Cendant related to alleged accounting fraud that was uncovered in 1998, after
Cendant was formed by the merger of HFS and CUC International. The series had
owned both HFS and CUC, and then Cendant, during the merger period. Along with
other participants in the lawsuit, the portfolio had suffered losses on Cendant
stock in 1998.
NOTE TO SHAREHOLDERS: EFFECTIVE MAY 28, 2003, THE RUSSELL 1000 GROWTH INDEX
REPLACED THE RUSSELL 3000 GROWTH INDEX AS THE BENCHMARK OF THE SERIES. WE
BELIEVE THE RUSSELL 1000 GROWTH INDEX MORE ACCURATELY REFLECTS THE PORTFOLIO'S
INVESTMENT DISCIPLINE, OFFERING INVESTORS A MORE RELIABLE OBJECTIVE MEASURE OF
THE SERIES' PERFORMANCE.
MASSACHUSETTS INVESTORS TRUST SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
22.83% for Initial Class shares and 22.45% for Service Class shares. These
returns, which include the reinvestment of any capital gains and dividend
distributions, but do not reflect any applicable contract or surrender charges,
compare with a return of 28.67% for the series' benchmark, the Standard & Poor's
500 Stock Index. The S&P 500 is a commonly used measure of the broad U.S. stock
market.
DETRACTORS TO PERFORMANCE
Although the series' performance for the 12-month period ending December 31,
2003 was much stronger than it was at mid-year, it trailed that of the S&P 500.
The primary detractors to relative performance were the technology, financial
and leisure sectors.
Although we believed the economy would continue to improve in 2003, we thought
that technology stock prices were too high at the beginning of the year. It
seemed to us that those prices were the result of investors' expectations for
significant improvements in earnings and balance sheets. Even though those
improvements occurred late in the year, investors pushed technology stocks to
the forefront of a market rally that began in March and lasted through the end
of the period.
Although the series received strong absolute returns from stocks such as Analog
Devices, Cisco, and VERITAS, it could not overcome the negative impact from
being underweighted in technology and stock selection elsewhere in the sector.
Intel was the largest detractor to performance because we did not participate
fully in the stock's steep, upward climb in 2003. Intel benefited from
better-than-projected chip sales to the personal computer industry and, in our
view, a positive semiconductor environment. In addition, we had avoided eBay and
Yahoo and missed the powerful performance of the Internet industry.
During 2003, banks and credit companies outperformed the S&P 500; however, stock
selection and a slight underweighting in this group and that hurt performance.
The biggest detractor among financial holdings was Federal National Mortgage
Association (Fannie Mae) stock. The company struggled with a slowdown in the
mortgage market. In addition, potential regulatory and political changes
partially stemming from the accounting woes of Federal Home Loan Mortgage
Corporation appeared to have a negative affect on this stock as well (The series
sold this stock during the period).
Although we underweighted insurance stocks in the financial sector, we did not
escape the weak performance from the insurance group that detracted from series'
returns. For example, the Hartford Group had to increase its reserves and that
negatively impacted its stock price. The series no longer owns Travelers and
UnumProvident stock.
We had overweighted leisure stocks, especially in print and publishing because
we believed this group would be positively affected by an improving economy and
a corresponding upturn in advertising revenues. However, ad revenues,
particularly from local markets, did not pick up as much as we expected. As a
result, a number of companies lowered their earnings expectations, including New
York Times, Reed Elsevier, and Tribune. Media firm Viacom was also negatively
affected by lower local advertising revenues. The series sold its positions in
Tribune and Reed during the period.
The series' cash position also detracted from relative performance. As with
nearly all annuity sub-accounts, this series holds some cash to facilitate
transactions and to provide liquidity. In a period when equity markets rose
sharply, cash hurt performance relative to the S&P 500 which has no cash
position.
CONTRIBUTORS TO PERFORMANCE
An underweighting in the consumer staples sector, solid performance from Altria
(formerly Philip Morris), and our avoidance of Coca-Cola helped results for the
reporting period. Many consumer staples stocks had performed well in 2002 when
the securities markets were so unsettled. However, by the end of 2002, we saw
better opportunities in other groups that had greater exposure to an improving
economy. Altria's stock price continued to rebound from earlier concerns about
litigation and competitive pressures.
Health care holdings Genentech and Guidant were strong contributors to series'
returns. Genentech's stock price rose on positive testing data for its
colorectal cancer drug, Avastin, and approval of several new drugs. We sold
Genentech stock when it reached our target objective. Guidant's stock price was
depressed at the start of 2003 because investors, in our view, failed to
appreciate the strength of the company's cardiac rhythm management business, and
they had discounted the company's drug-coated stent program. Later in the year,
the company reported good revenue and its stock price appreciated substantially.
In addition, the series was underweighted in Merck and the underweighting
contributed to the series' returns.
Solid results from Analog Devices, Cisco, and VERITAS enhanced series'
performance. Analog Devices, a high-quality semiconductor company in our view,
reported improved fundamental results and rallied strongly with the rest of the
semiconductor industry. Computer networking and
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communications company Cisco Systems began 2003 at a reasonable price level. The
company's prospects for a pick-up in its telecommunications service business,
continued market share gains in its business enterprise unit, and significant
gains in net income pushed Cisco's stock price higher. Signs of improving
balance sheet strength led to strong performance for data storage software
company VERITAS.
Home Depot also contributed to series' returns. The company exceeded its
earnings projections in part because of its appliance sales and its exclusive
sales arrangement with John Deere for lawn care equipment.
MID CAP GROWTH SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 37.87%, and Service Class shares 37.33%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 42.71% over the same period for the series' benchmark,
the Russell MidCap Growth Index. The Russell MidCap Growth Index measures the
performance of U.S. mid-cap growth stocks. Over the same period, the average
mid-cap growth fund tracked by Lipper Inc., returned 35.93%.
DETRACTORS FROM PERFORMANCE
In the technology sector, our holdings generated strong gains but trailed the
benchmark. Networks Associates lagged as sales of the company's industry leading
anti-spam and anti-virus software were slow to accelerate. Software developer
Peoplesoft detracted from performance as demand for the company's release of its
product upgrade was not as robust as anticipated. Peoplesoft was sold out of the
series prior to the end of the period. The stock price of specialty glass
product manufacturers Corning started to rebound from very low levels before we
began accumulating the stock, which detracted from our performance relative to
the index.
Media holding Westwood One detracted from performance as the pickup in
advertising pricing proved slower than expected. Weight Watchers' stock price
declined as high-protein, low-carbohydrate diets seemed to take market share and
the company was unable to meet fundamental expectations. Weight Watchers was
sold out of the series prior to the end of the period. Adult education provider
Career Education's stock retreated late in the period amid allegations that
employees falsified accreditation documents, charges that management vigorously
denies. Also among the detractors are two stocks in the index that performed
well but that we did not own: Amazon, which we avoided based on valuation; and
Nextel, which we did not own based on concerns about the competitive dynamic
among wireless carriers.
The portfolio's cash position also detracted from relative performance. As with
nearly all annuity subaccounts, this series holds some cash to buy new holdings
and to cover investor exchanges or redemptions. In a period when equity markets
rose sharply, the series' cash holdings hurt performance against our benchmark,
the Russell MidCap Growth Index, which has no cash position.
PERFORMANCE CONTRIBUTORS
Wireless tower rental companies Crown Castle and American Tower were among our
best performing stocks. Cash flow growth and improving fundamentals drove these
stocks higher, in addition to debt refinancing, which improved the overall
balance sheets for these companies.
In the leisure sector, Internet travel firm Expedia posted excellent returns as
the company showed strong online travel market share gains. In third-quarter
2003, parent Interactive Corp. bought the remaining outstanding shares of
Expedia at a premium. Satellite TV operator EchoStar posted strong gains as the
company expanded its subscriber base and generated strong growth in free cash
flows. Shares of NTL Inc., the largest broadband and cable operator in the U.K.
and Ireland, soared after the company emerged from bankruptcy and continued to
strengthen its balance sheet and drive free cash flow growth.
Contributors in technology included data storage software supplier VERITAS,
which benefited from recovery in technology spending for storage software.
Semiconductor companies Analog Devices and Xilinx contributed to performance,
due to an upswing in semiconductor demand and market share gains for their
well-positioned products.
Our investments in health care also contributed to performance. Medical
equipment leader Invitrogen, which sells life science tools used in research and
drug manufacturing, benefited from a fundamental recovery and improving product
offerings and efficiency gains under a new CEO. Genentech's stock soared after
receiving FDA approval for Avastin, an innovative new cancer drug. We sold
Genentech during the period and took some profits. Guidant posted strong gains
after an earlier sell-off, based on the company's leading position in cardiac
rhythm management and future possibilities in drug-coated stents.
CONSIDERATIONS FOR INVESTORS
Investments in mid cap growth companies may be subject to more abrupt or erratic
market movements and may involve greater risk than investments in more mature
companies. Mid cap growth companies often have limited product lines, markets
and financial resources and are dependent on management by one or a few key
individuals. The shares of mid cap growth companies often suffer
steeper-than-average price declines after disappointing news of earnings reports
and may be more difficult to sell at satisfactory prices.
Investing in foreign and/or mid cap growth market securities involves risks
relating to interest rates, currency exchange rates, and economic and political
conditions. These risks may increase share volatility. Please see the prospectus
for further information regarding these and other risk considerations.
RESEARCH SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 25.32% and Service Class shares 25.01%. These
returns, which include the reinvestment of any dividends and capital gains
distributions, but do not reflect any applicable contract or surrender charges,
compare with a return of 28.67% for the series' benchmark, the S&P 500.
DETRACTORS FROM PERFORMANCE
Our underweighting in technology stocks compared to the S&P 500 hurt relative
performance as the technology sector rallied, and our relative performance also
suffered due to individual stock selection.
Schering Plough's stock price declined sharply because of announcements of
lower earnings, investigations of past pricing and shareholder reporting
practices, and marketing difficulties with its prescription allergy drug
Clarinex. These factors are offset, in our opinion, by the strength of the
company's pipeline of new drugs.
6
<Page>
Discount retailer Kohl's suffered from softness in the discount retail sector
later in the year, while computer service outsourcer Automatic Data Processing
suffered a decline in its share price based on continued softness in business
spending. ADP was subsequently sold out of the portfolio.
Underweighting with respect to Intel, on a relative basis, also hurt performance
versus the benchmark, as did the series' cash position. As with nearly all
annuity subaccounts, this series holds some cash to buy new holdings and to
cover investor exchanges or redemptions. In a period when equity markets rose
sharply, cash hurt performance against our benchmark, the S&P 500, which has no
cash position.
KEY CONTRIBUTORS TO PERFORMANCE
Health care and consumer staples were the two strongest-performing sectors for
the series relative to our benchmark. In both sectors stock selection was the
lead factor behind the portfolio's returns.
Holdings from the healthcare sector, such as biotechnology companies Genentech
and Genzyme, performed well for the period. Genentech stock rose significantly
on unexpectedly positive data from a drug in its pipeline and approval of
several new drugs. Likewise, shares of Genzyme rose when it became apparent that
the company would be introducing two enzyme replacement therapies for the
treatment of certain genetic disorders. We sold our Genentech holdings during
the period and took some profits.
Discount retail giant Wal-Mart Inc., data storage software supplier VERITAS
Software Corp., oil and mining concern BHP Billiton PLC, and consumer products
giant Philip Morris (now known as Altria group) all contributed to the series'
strong performance. We subsequently sold our positions in Wal-Mart and VERITAS
after these stocks reached our price targets. In the health care sector, our
avoidance of Merck & Co. added to the series' performance relative to its
benchmark.
The portfolio was also a participant in a suit against Cendant related to
alleged accounting fraud that was uncovered in 1998, after Cendant was formed by
the merger of HFS and CUC International. The portfolio had owned HFS and CUC,
and then Cendant, during the merger period. Along with other participants in the
lawsuit, the portfolio had suffered losses on Cendant stock in 1998. A cash
settlement from this class-action lawsuit contributed to performance over the
period.
TOTAL RETURN SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
17.15% for Initial Class shares and 16.83% for Service Class shares. These
returns, which include the reinvestment of any dividends and capital gains
distributions, compare with returns of 28.67% and 4.10%, respectively, for the
series' benchmarks, the S&P 500 and the Lehman Brothers Aggregate Bond Index
(the Lehman Index). The Lehman Index is a measure of the U.S. bond market.
SERIES POSITIONING
This series normally invests between 55% to 60% of its assets in inexpensive,
lower-risk stocks with the balance in higher-quality bonds and short-term cash
equivalent securities. (Cash-equivalent securities are used to facilitate
transactions and provide liquidity.) In this environment, the series' results
over the past year lagged stock market returns. In 2003, stocks outperformed
bonds and cash, and higher-risk, lower-quality issues led returns within the
equity and fixed-income markets.
During periods of rising equity markets such as we saw in 2003, the series' cash
holdings detracted from performance versus the S&P 500 benchmark.
DETRACTORS TO PERFORMANCE
Our underweighted position in technology, conservative stock selections in
leisure and overweighting in telecommunications were the primary reasons the
series underperformed its stock benchmark. We maintained an underweighting in
technology primarily because we felt that many stocks in the sector did not meet
our valuation criteria. However, the sector rose through much of the period,
buoyed by signs of economic growth, and increases in capital spending. In
absolute terms, the group was one of the best performing portfolio sectors.
However, our underweighting contributed to the series' relative underperformance
versus the benchmark index. For example, the series received strong returns from
Texas Instruments. However, our underweighting in stocks such as Intel (or
avoiding Cisco Systems) caused the series' relative performance to lag benchmark
returns.
The performance of the series' leisure holdings was disappointing. The stock of
publisher Reed Elsevier underperformed because of concerns about the company's
U.S. textbook business. Lower advertising revenues negatively affected the stock
prices of newspaper publishers such as New York Times.
In the utilities and communications sector, our overweighted position in
telephone services stocks such as AT&T detracted from performance as competitive
pressures intensified and outweighed inexpensive valuations.
Other stocks that detracted from series results included Noble Corporation, and
Schering Plough.
CONTRIBUTORS TO PERFORMANCE
Holdings in the financial services sector provided strong relative returns for
the period. Banks benefited from falling interest rates, an improving outlook
for corporate credit, and strength in mortgage lending activity. FleetBoston's
stock price received a significant boost following Bank of America's
announcement of a $47 billion takeover offer. In addition, the market rally
boosted the stock prices of companies such as T. Rowe Price. The strong
performance of this and other financial stocks was offset somewhat by the
decline of Federal Home Loan Mortgage Corporation's (Freddie Mac) stock.
Our underweighted position and stock selection in consumer staples also
contributed to performance as investors turned toward cyclical companies whose
earnings tend to be more sensitive to an economic recovery.
The series also received strong results from Alcoa and Occidental Petroleum.
Rising commodity prices helped boost Alcoa's stock price. Continued high oil
prices buoyed the stock price of Occidental.
Other contributors to performance included avoiding or underweighting a number
of stocks -- such as Wal-Mart and American International Group, which we did not
own, Merck, Microsoft, Pfizer, and Johnson & Johnson, all of which were
underweighted.
In the fixed income market, corporate bonds in general outperformed U.S.
Treasuries over the period. In that environment, our relative overweighting
in corporate debt and
7
<Page>
underweighting in Treasuries helped the fixed income portion
of the fund outperform the overall U.S. bond market, as measured by the Lehman
Brothers Aggregate Bond Index. (Principal and interest of U.S. Treasury
securities, however, are guaranteed by the U.S. government if held to maturity.)
UTILITIES SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 36.26% and Service Class shares 36.03%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not include any applicable contract or surrender charges,
compare with a return of 26.26% over the same period for the series' benchmark,
the Standard & Poor's Utilities Index (the S&P Utilities Index), which measures
the performance of the utilities sector. Over the same period, the average
utility fund tracked by Lipper Inc. returned 22.68%.
MARKET ENVIRONMENT
Over the one-year period, the electric utility and natural gas industries
experienced a dramatic recovery from the devastation initiated by Enron. In
mid-2002, in the wake of the Enron scandal, utilities became the poster children
for what was wrong with American business. Credit rating agencies took a dim
view of any company with energy trading or merchant generation exposure and
viewed most utilities as having too much debt on their balance sheets. This
initiated a downward spiral in the middle of 2002 that decimated both stocks and
bonds of many utilities. In our view, the rating agencies and investors largely
ignored the fact that Enron went bankrupt because of fraud, not because it was
in the energy trading or electric generation business.
Over the period, the panic subsided. Investors seemed to realize that most
utilities were not going to go bankrupt and that perhaps their securities had
become undervalued. Utilities began to improve their balance sheets by issuing
equity to pay down debt. Banks restructured utility debt at lower rates and
longer maturities. The result was strong performance in the first half of 2003
as beaten-down utility securities recovered from the turmoil of mid-2002.
In the second half of 2003, however, utility issues were largely left behind in
a stock market rally that focused on more cyclical companies, particularly in
the technology and financial services sectors. As of the end of the period on
December 31, we felt that many utility issues, especially in the electric
utility area, were somewhat undervalued. Our research indicated electric
companies in general were beginning to generate strong free cash flow. We also
felt the benefits of the dividend tax cut were not yet reflected in their stock
prices.
In the telecommunications area, performance over the period was mixed. Earnings
of regional Bell operating companies (RBOCs), the phone companies created by the
breakup of AT&T, continued to be hampered by a murky regulatory environment
that, in our view, put them at a disadvantage relative to competition from cable
companies. In contrast, many overseas telephone companies delivered strong
performance because they were operating in more favorable environments. In
general, regulatory environments overseas were more beneficial to incumbent
telecom firms, and competition from cable firms was either nonexistent or much
weaker than in the United States.
CONTRIBUTORS TO PERFORMANCE
For the one-year period, the series outperformed the utilities sector as
measured by its benchmark, the S&P Utilities Index.
In terms of industries, the top contributor to performance, relative to the S&P
Utilities Index, was electric power generators. On a relative basis, the series
benefited by not owning several companies that underperformed, including
Consolidated Edison, Southern Company, and Duke Energy. In the ultra-defensive
environment of 2002, investors, in our opinion, had placed a large premium on
the perceived safety of industry stalwarts such as Con Edison and Southern. We
felt those stocks had risen to levels where there was little value and declined
to own them. That decision helped relative performance as Con Edison and
Southern underperformed when other utility stocks rose sharply from depressed
levels. Duke Energy declined in price because of its exposure to the wholesale
power generation business. We also benefited by largely avoiding DTE Energy
(Detroit Edison), which had some problems related to synthetic fuel regulations;
we bought the stock late in the period when we felt it had fallen to an
attractive valuation.
Elsewhere in the electric power industry, Spanish utility Iberdrola, one of the
series' better-performing holdings, benefited from new management that delivered
on earnings expectations. We sold the stock when we felt it had become fairly
valued. Two other Spanish firms, natural gas company Enagas and electric utility
Endesa, also helped performance as they benefited from both a good regulatory
environment and strong growth in energy demand in Spain.
Convertible preferred bonds of electric power generator AES Corp. also
contributed strongly to performance. The firm's credit outlook, and thus its
bond prices, strengthened over the period as the company improved its cash flow
and negotiated more favorable terms on its debt.
In the wireless phone industry, the series' positions in America Movil and NII
Holdings (Nextel International) benefited from a positive regulatory and
competitive environment in Mexico. Both firms saw their business grow strongly
over the period.
As natural gas prices appreciated over the winter of 2002-2003, portfolio
performance was also helped by positions in what we viewed as some of the
best-managed companies in the industry: integrated gas production and
distribution firm Questar, pipeline company Kinder Morgan, and distribution firm
AGL Resources.
DETRACTORS FROM PERFORMANCE
Over the period, some of the largest detractors from performance were positions
in several RBOCs, including BellSouth, which was sold out of the portfolio
during the period, Verizon, and SBC Communications. Regional phone company
Cincinnati Bell also held back results. As mentioned earlier, a difficult
regulatory environment hampered these firms' efforts to meet strong competition
from cable companies that were expanding into local telephone markets.
Relative to the S&P Utilities Index, performance was also hurt by our
underweighted positions in some electric generation and natural gas companies
that performed very well over the period. In several cases, we avoided these
securities for most of the
8
<Page>
period or had only small holdings because we felt they were relatively risky
positions. For example, AES stock, in which we were underweighted, performed
very well on an absolute basis; as mentioned earlier, we had chosen to
concentrate on the company's convertible bonds, which we felt entailed less
risk. As the period began, we had felt the survival of natural gas firms
Williams Cos. and Dynegy was in question. We largely avoided their securities
and did not own them at period-end. However, management succeeded in turning
those firms around, and their stocks appreciated sharply from very depressed
levels.
The portfolio's cash position also detracted from relative performance. As with
nearly all annuity subaccounts, this series holds some cash to buy new holdings
and to cover investor exchanges or redemptions. In a period when equity markets
rose sharply, cash hurt performance against our benchmark, the S&P Utilities
Index, which has no cash position.
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. These views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
The portfolios are actively managed, and current holdings may be different.
Variable annuities are designed for long-term retirement investing; please see
your investment professional for more information.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the
About MFS section of MFS.COM or by visiting the SEC's website at
http://www.sec.gov.
9
<Page>
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the growth of a
hypothetical $10,000 investment for each series during the period indicated.
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.)
VISIT SUNLIFE-USA.COM FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND
UNITS, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF THE MORTALITY AND EXPENSE RISK
CHARGES AND ADMINISTRATION FEES.
CAPITAL APPRECIATION SERIES(1)
(For the 10-year period ended December 31, 2003)
[CHART]
<Table>
<Caption>
CAPITAL APPRECIATION SERIES - INITIAL CLASS RUSSELL 1000 GROWTH INDEX#
12/93 $ 10,000 $ 10,000
12/95 $ 12,962 $ 14,077
12/97 $ 19,389 $ 22,617
12/99 $ 33,098 $ 41,773
12/01 $ 21,893 $ 25,787
12/03 $ 19,051 $ 24,129
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +28.71% -35.02% -23.66% +90.51%
Average Annual Total Return +28.71% -13.39% -5.26% +6.66%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +28.35% -35.41% -24.11% +89.37%
Average Annual Total Return +28.35% -13.56% -5.37% +6.59%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Average large-cap growth fund+ +26.75% -11.00% -3.88% +7.53%
Russell 1000 Growth Index# +29.75% -9.36% -5.11% +9.21%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc., an independent firm that reports performance.
# Source: Standard & Poor's Micropal, Inc.
A portion of the returns shown is attributable to the receipt of a non-recurring
payment in settlement of a class action lawsuit. See Notes to Financial
Statements.
EMERGING GROWTH SERIES(1),(2)
(For the period from the commencement of the series' investment operations, May
1, 1995, through December 31, 2003. Index information is from May 1, 1995.)
[CHART]
<Table>
<Caption>
EMERGING GROWTH SERIES - INITIAL CLASS RUSSELL 3000 GROWTH INDEX#
5/1/95 $ 10,000 $ 10,000
12/1/97 $ 18,112 $ 19,230
12/1/99 $ 42,631 $ 34,747
12/1/2001 $ 22,563 $ 21,667
12/1/2003 $ 19,538 $ 20,422
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------
Cumulative Total Return +31.49% -43.35% -19.43% +95.38%
Average Annual Total Return +31.49% -17.25% -4.23% +8.03%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------
Cumulative Total Return +31.14% -43.72% -19.95% +94.10%
Average Annual Total Return +31.14% -17.43% -4.35% +7.95%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------
Russell 3000 Growth Index# +30.97% -8.84% -4.69% +8.59%
</Table>
* For the period from the commencement of the series' investment operations,
May 1, 1995, through December 31, 2003. Index information is from May 1,
1995.
++ Average annual rates of return.
# Source: Standard & Poor's Micropal, Inc.
A portion of the returns shown is attributable to the receipt of a non-recurring
payment in settlement of a class action lawsuit. See Notes to Financial
Statements.
10
<Page>
GLOBAL GROWTH SERIES(1),(2),(3)
(For the 10-year period ended December 31, 2003)
[CHART]
<Table>
<Caption>
GLOBAL GROWTH SERIES - INITIAL CLASS MSCI ALL COUNTRY WORLD FREE INDEX#
12/16/93 $ 10,000 $ 10,000
12/31/95 $ 11,937 $ 12,546
12/31/97 $ 15,559 $ 16,332
12/31/99 $ 29,824 $ 25,262
12/31/2001 $ 20,816 $ 18,281
12/31/2003 $ 22,736 $ 19,942
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +35.44% -12.23% +27.50% +127.36%
Average Annual Total Return +35.44% -4.25% +4.98% +8.56%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +35.13% -12.89% +26.54% +125.64%
Average Annual Total Return +35.13% -4.50% +4.82% +8.48%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Average global fund+ +32.09% -3.91% +2.20% +7.45%
MSCI All Country World Free Index# +34.63% -2.84% +0.02% +7.15%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc., an independent firm that reports performance.
# Source: Standard & Poor's Micropal, Inc
A portion of the returns shown is attributable to the receipt of a non-recurring
payment in settlement of a class action lawsuit. See Notes to Financial
Statements.
MANAGED SECTORS SERIES(1),(4),(5)
(For the 10-year period ended December 31, 2003)
[CHART]
<Table>
<Caption>
MANAGED SECTORS SERIES - INITIAL CLASS LIPPER MULTI-CAP GROWTH INDEX+
12/1/93 $ 10,000 $ 10,000
12/1/95 $ 12,973 $ 14,077
12/1/97 $ 19,164 $ 22,617
12/1/99 $ 39,931 $ 41,773
12/1/2001 $ 20,389 $ 25,787
12/1/2003 $ 18,904 $ 24,129
<Caption>
RUSSELL 1000 GROWTH INDEX# RUSSELL 3000 GROWTH INDEX#
12/1/93 $ 10,000 $ 10,000
12/1/95 $ 13,958 $ 12,997
12/1/97 $ 21,901 $ 18,829
12/1/99 $ 39,573 $ 34,393
12/1/2001 $ 24,676 $ 22,641
12/1/2003 $ 23,259 $ 21,513
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +25.28% -40.21% -12.12% +89.04%
Average Annual Total Return +25.28% -15.75% -2.55% +6.57%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +24.91% -40.57% -12.65% +87.89%
Average Annual Total Return +24.91% -15.92% -2.67% +6.51%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Lipper Multi-Cap Growth Index+ +35.39% -10.74% -1.75% +7.96%
Russell 1000 Growth Index# +29.75% -9.36% -5.11% +9.21%
Russell 3000 Growth Index# +30.97% -8.84% -4.69% +8.81%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc., an independent firm that reports performance.
# Source: Standard & Poor's Micropal, Inc.
A portion of the returns shown is attributable to the receipt of a non-recurring
payment in settlement of a class action lawsuit. See Notes to Financial
Statements.
11
<Page>
MASSACHUSETTS INVESTORS TRUST SERIES(1)
(For the 10-year period ended December 31, 2003)
<Table>
<Caption>
Massachusetts Investors Trust Series - Initial Class Standard & Poor's 500 Stock Index#
12/31/93 $ 10,000 $ 10,000
12/31/95 $ 13,591 $ 13,934
12/31/97 $ 22,488 $ 22,845
12/31/99 $ 29,851 $ 35,553
12/31/2001 $ 25,183 $ 28,481
12/31/2003 $ 24,368 $ 28,550
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +22.83% -18.44% -12.50% +143.68%
Average Annual Total Return +22.83% -6.57% -2.64% +9.32%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +22.45% -18.97% -13.07% +142.11%
Average Annual Total Return +22.45% -6.77% -2.76% +9.24%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Average large cap core fund+ +25.53% -6.63% -1.79% +8.77%
Standard & Poor's 500 Stock Index# +28.67% -4.05% -0.57% +11.06%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc., an independent firm that reports performance.
# Source: Standard & Poor's Micropal, Inc.
A portion of the returns shown is attributable to the receipt of a non-recurring
payment in settlement of a class action lawsuit. See Notes to Financial
Statements.
MID CAP GROWTH SERIES(1, 6)
(For the period from the commencement of the series' investment operations,
August 31, 2000, through December 31, 2003. Index information is from September
1, 2000.)
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- --------------------------------------------------------------------
Cumulative Total Return +37.87% -44.04% -49.18%
Average Annual Total Return +37.87% -17.59% -18.37%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- --------------------------------------------------------------------
Cumulative Total Return +37.33% -44.26% -49.39%
Average Annual Total Return +37.33% -17.70% -18.47%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- --------------------------------------------------------------------
Average mid-cap growth fund+ +35.93% -8.78% -14.47%
Russell MidCap Growth Index# +42.71% -6.13% -14.04%
</Table>
++ Average annual rates of return.
* For the period from the commencement of the series' investment operations,
August 31, 2000, through December 31, 2003. Index information is from
September 1, 2000.
+ Source: Lipper Inc., an independent firm that reports performance.
# Source: Standard & Poor's Micropal, Inc.
12
<Page>
RESEARCH SERIES(1)
(For the period from the commencement of the series' investment operations,
November 7, 1994, through December 31, 2003. Index information is from November
1, 1994.)
[CHART]
<Table>
<Caption>
RESEARCH SERIES - INITIAL CLASS STANDARD & POOR'S 500 STOCK INDEX#
11/94 $ 10,000 $ 10,000
12/95 $ 13,585 $ 13,449
12/97 $ 20,320 $ 22,050
12/99 $ 31,183 $ 34,316
12/01 $ 23,505 $ 27,490
12/03 $ 22,060 $ 27,556
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------
Cumulative Total Return +25.32% -26.23% -12.18% +120.60%
Average Annual Total Return +25.32% -9.65% -2.56% +9.03%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------
Cumulative Total Return +25.01% -26.76% -12.80% +119.04%
Average Annual Total Return +25.01% -9.86% -2.70% +8.95%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------
Standard & Poor's 500 Stock Index# +28.67% -4.05% -0.57% +11.69%
</Table>
* For the period from the commencement of the series' investment operations,
November 7, 1994, through December 31, 2003. Index information is from
November 1, 1994.
++ Average annual rates of return.
# Source: Standard & Poor's Micropal, Inc.
A portion of the returns shown is attributable to the receipt of a non-recurring
payment in settlement of a class action lawsuit. See Notes to Financial
Statements.
TOTAL RETURN SERIES(1),(7)
(For the 10-year period ended December 31, 2003)
[CHART]
<Table>
<Caption>
TOTAL RETURN SERIES - INITIAL CLASS LEHMAN BROTHERS AGGREGATE BOND INDEX# STANDARD & POOR'S 500 STOCK INDEX#
12/95 $ 12,390 $ 11,502 $ 13,934
12/97 $ 17,245 $ 13,070 $ 22,845
12/99 $ 19,811 $ 14,089 $ 35,553
12/01 $ 23,253 $ 17,055 $ 28,481
12/03 $ 25,692 $ 19,576 $ 28,550
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +17.15% +11.06% +33.37% +156.92%
Average Annual Total Return +17.15% +3.56% +5.93% +9.90%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +16.83% +10.41% +32.59% +155.41%
Average Annual Total Return +16.83% +3.36% +5.80% +9.83%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Average balanced fund+ +19.08% +0.27% +2.34% +8.08%
Lehman Brothers Aggregate Bond Index# +4.10% +7.57% +6.62% +6.95%
Standard & Poor's 500 Stock Index# +28.67% -4.05% -0.57% +11.06%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc., an independent firm that reports performance.
# Source: Standard & Poor's Micropal, Inc.
13
<Page>
UTILITIES SERIES(1),(7),(8),(9)
(For the 10-year period ended December 31, 2003)
[CHART]
<Table>
<Caption>
UTILITIES SERIES - INITIAL CLASS STANDARD & POOR'S 500 UTILITIES INDEX
12/16/93 $ 10,000 $ 10,000
12/31/94 $ 9,505 $ 8,821
12/31/97 $ 20,097 $ 15,426
12/31/99 $ 31,017 $ 16,088
12/31/2001 $ 25,111 $ 17,591
12/31/2003 $ 26,050 $ 15,548
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +36.26% -21.51% +10.27% +160.50%
Average Annual Total Return +36.26% -7.76% +1.97% +10.05%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Cumulative Total Return +36.03% -21.99% +9.59% +158.90%
Average Annual Total Return +36.03% -7.94% +1.85% +9.98%
</Table>
COMPARATIVE BENCHMARKS++
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------------------------------------------------------------------------------
Average utility fund+ +22.68% -9.76% -1.05% +6.60%
Standard & Poor's Utilities Index# +26.26% -14.97% -2.57% +4.51%
</Table>
++ Average annual rates of return.
+ Source: Lipper Inc., an independent firm that reports performance.
# Source: Standard & Poor's Micropal, Inc.
14
<Page>
NOTES TO PERFORMANCE SUMMARY
Initial Class shares have no sales charge. Service Class shares, which have an
inception date of August 24, 2001, have no sales charge and carry a 0.25% annual
12b-1 fee. Service Class share performance includes the performance of Initial
Class shares for periods prior to the inception of Service Class. Because
operating expenses of Service Class shares are higher than those of Initial
Class, the Service Class performance generally would have been lower than
Initial Class performance.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the annuity product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
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.
KEY RISK CONSIDERATIONS
(1) Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions.
(2) Investing in small and/or emerging growth companies is riskier than
investing in more-established companies.
(3) The portfolio may invest a substantial amount of its assets in issuers
located in a limited number of countries and therefore is susceptible to
adverse economic, political or regulatory developments affecting those
countries.
(4) The portfolio focuses on companies in a limited number of sectors making it
more susceptible to adverse economic, political, or regulatory developments
affecting those sectors than a portfolio that invests more broadly.
(5) When concentrating on one issuer, the portfolio is sensitive to changes in
the value of these securities.
(6) Investing in mid-sized companies is riskier than investing in
more-established companies.
(7) Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
(8) Because the portfolio invests in a limited number of companies, a change in
one security's value may have a more significant effect on the portfolio's
value.
(9) By concentrating on one industry or on a group of related industries, the
portfolio is more susceptible to adverse economic, political or regulatory
developments affecting those industries than is a portfolio that invests
more broadly.
These risks may increase unit price volatility. Please see the prospectus
for further information regarding these and other risk considerations.
RESULTS OF SHAREHOLDER MEETING (UNAUDITED)
At the special meeting of shareholders of MFS/Sun Life Series Trust Global
Telecommunications Series, which was held on July 28, 2003, the following action
was taken:
ITEM 1. Approval of the Plan of Reorganization and Termination providing for the
transfer of all of the assets of Global Telecommunications Series to Technology
Series, each a series of MFS/Sun Life Series Trust, in exchange for shares of
beneficial interest of Technology Series and the assumption by Technology Series
of the liabilities of Global Telecommunications Series, and the distribution of
such shares to the shareholders of Global Telecommunications Series in
liquidation of Global Telecommunications Series and the termination of Global
Telecommunications Series.
<Table>
<Caption>
NUMBER % OF % OF
OF OUTSTANDING DOLLARS
DOLLARS DOLLARS VOTED
------------------------------------------------------------------
Affirmative 1,732,719.90 87.053% 87.053%
Against 108,193.95 5.436% 5.436%
Abstain 149,512.77 7.511% 7.511%
------------ ----------- -------
Total 1,990,426.62 100.000% 100.000%
============ =========== =======
</Table>
15
<Page>
PORTFOLIO OF INVESTMENTS -- DECEMBER 31, 2003
CAPITAL APPRECIATION SERIES
STOCKS -- 96.0%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 91.0%
AEROSPACE -- 1.5%
Honeywell International, Inc. 50,000 $ 1,671,500
L-3 Communications Holding, Inc.* 38,300 1,967,088
Lockheed Martin Corp. 151,400 7,781,960
----------------
$ 11,420,548
----------------
APPAREL MANUFACTURERS -- 0.7%
Nike, Inc., "B" 33,200 $ 2,272,872
Reebok International Ltd. 77,700 3,055,164
----------------
$ 5,328,036
----------------
AUTOMOTIVE -- 0.3%
Harley-Davidson, Inc. 47,200 $ 2,243,416
----------------
BANKS & CREDIT COMPANIES -- 5.0%
American Express Co. 187,600 $ 9,047,948
Citigroup, Inc. 327,403 15,892,142
Fannie Mae 129,000 9,682,740
MBNA Corp. 134,200 3,334,870
----------------
$ 37,957,700
----------------
BIOTECHNOLOGY -- 3.5%
Amgen, Inc.* 248,700 $ 15,369,660
Genzyme Corp.* 146,300 7,218,442
Gilead Sciences, Inc.* 71,400 4,151,196
----------------
$ 26,739,298
----------------
BROADCAST & CABLE TV -- 5.7%
Citadel Broadcasting Corp.* 54,200 $ 1,212,454
Clear Channel Communications, Inc. 239,795 11,229,600
Comcast Corp., "A"* 439,700 14,452,939
EchoStar Communications Corp., "A"* 212,195 7,214,630
NTL, Inc.* 32,500 2,266,875
Time Warner, Inc.* 160,000 2,878,400
Westwood One, Inc.* 101,000 3,455,210
----------------
$ 42,710,108
----------------
BROKERAGE & ASSET MANAGERS -- 2.3%
Goldman Sachs Group, Inc. 74,280 $ 7,333,664
Merrill Lynch & Co., Inc. 165,070 9,681,356
----------------
$ 17,015,020
----------------
BUSINESS SERVICES -- 2.4%
BISYS Group, Inc.* 128,500 $ 1,912,080
DST Systems, Inc.* 99,600 4,159,296
Getty Images, Inc.* 83,400 4,180,842
Manpower, Inc. 63,900 3,008,412
SunGard Data Systems, Inc.* 165,900 4,597,089
----------------
$ 17,857,719
----------------
CHEMICALS -- 1.1%
3M Co. 96,000 $ 8,162,880
----------------
COMPUTER SOFTWARE -- 6.4%
BEA Systems, Inc.* 199,400 $ 2,452,620
Manhattan Associates, Inc.* 50,400 1,393,056
Microsoft Corp. 1,126,500 31,023,810
Netscreen Technologies, Inc.* 167,700 4,150,575
Networks Associates, Inc.* 268,800 4,042,752
Symantec Corp.* 44,300 1,534,995
VERITAS Software Corp.* 100,915 3,750,001
----------------
$ 48,347,809
----------------
COMPUTER SOFTWARE -- SYSTEMS -- 2.1%
Hewlett-Packard Co. 197,400 $ 4,534,278
IBM Corp. 119,800 11,103,064
----------------
$ 15,637,342
----------------
CONSUMER GOODS & SERVICES -- 2.6%
Colgate-Palmolive Co. 143,700 $ 7,192,185
Procter & Gamble Co. 121,900 12,175,372
----------------
$ 19,367,557
----------------
CONSUMER SERVICES -- 0.9%
Apollo Group, Inc., "A"* 45,200 $ 3,073,600
Career Education Corp.* 80,300 3,217,621
Orbitz, Inc., "A" 23,800 552,160
----------------
$ 6,843,381
----------------
CONTAINERS -- 0.3%
Smurfit-Stone Container Corp.* 133,400 $ 2,477,238
----------------
ELECTRICAL EQUIPMENT -- 5.0%
Emerson Electric Co. 18,500 $ 1,197,875
General Electric Co. 705,400 21,853,292
Molex, Inc. 44,800 1,563,072
Tyco International Ltd. 503,900 13,353,350
----------------
$ 37,967,589
----------------
ELECTRONICS -- 6.9%
Agere Systems, Inc., "B"* 996,800 $ 2,890,720
Amphenol Corp., "A"* 29,900 1,911,507
Analog Devices, Inc. 164,190 7,495,273
Applied Materials, Inc.* 92,400 2,074,380
Intel Corp. 612,300 19,716,060
Maxim Integrated Products, Inc. 46,800 2,330,640
Novellus Systems, Inc.* 73,200 3,078,060
Texas Instruments, Inc. 294,600 8,655,348
Xilinx, Inc.* 104,900 4,063,826
----------------
$ 52,215,814
----------------
ENTERTAINMENT -- 1.8%
Viacom, Inc., "B" 224,387 $ 9,958,295
Walt Disney Co. 159,000 3,709,470
----------------
$ 13,667,765
----------------
FOOD & DRUG STORES -- 1.6%
CVS Corp. 218,800 $ 7,903,056
Walgreen Co. 111,600 4,060,008
----------------
$ 11,963,064
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 1.9%
PepsiCo, Inc. 247,800 $ 11,552,436
Sysco Corp. 80,800 3,008,184
----------------
$ 14,560,620
----------------
GAMING & LODGING -- 1.1%
Carnival Corp. 76,900 $ 3,055,237
Cendant Corp.* 253,900 5,654,353
----------------
$ 8,709,590
----------------
GENERAL MERCHANDISE -- 3.1%
Kohl's Corp.* 81,500 $ 3,662,610
Target Corp. 328,940 12,631,296
Wal-Mart Stores, Inc. 140,500 7,453,525
----------------
$ 23,747,431
----------------
INSURANCE -- 2.1%
American International Group, Inc. 237,200 $ 15,721,616
----------------
INTERNET -- 2.3%
Ebay, Inc.* 133,600 $ 8,629,224
InterActive Corp.* 256,800 8,713,224
----------------
$ 17,342,448
----------------
MACHINERY & TOOLS -- 0.8%
Eaton Corp. 27,500 $ 2,969,450
Illinois Tool Works, Inc. 35,600 2,987,196
----------------
$ 5,956,646
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.7%
Cardinal Health, Inc. 90,700 $ 5,547,212
Caremark Rx, Inc.* 176,600 4,473,278
Tenet Healthcare Corp.* 171,300 2,749,365
----------------
$ 12,769,855
----------------
</Table>
16
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
MEDICAL EQUIPMENT -- 5.1%
AmerisourceBergen Corp. 89,900 $ 5,047,885
Baxter International, Inc. 149,300 4,556,636
C.R. Bard, Inc. 42,000 3,412,500
CTI Molecular Imaging, Inc.* 167,600 2,834,116
Cyberonics, Inc.* 34,800 1,113,948
Edwards Lifesciences Corp.* 37,000 1,112,960
Guidant Corp. 91,200 5,490,240
Medtronic, Inc. 226,200 10,995,582
Thermo Electron Corp.* 159,400 4,016,880
----------------
$ 38,580,747
----------------
OIL SERVICES -- 1.9%
BJ Services Co.* 61,100 $ 2,193,490
GlobalSantaFe Corp. 169,700 4,213,651
Noble Corp.* 123,800 4,429,564
Smith International, Inc.* 88,600 3,678,672
----------------
$ 14,515,377
----------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.4%
Dell, Inc.* 310,900 $ 10,558,164
----------------
PHARMACEUTICALS -- 9.6%
Abbott Laboratories, Inc. 162,100 $ 7,553,860
Eli Lilly & Co. 51,600 3,629,028
Johnson & Johnson Co. 427,000 22,058,820
Pfizer, Inc. 651,585 23,020,498
Schering-Plough Corp. 241,800 4,204,902
Wyeth 285,700 12,127,965
----------------
$ 72,595,073
----------------
POLLUTION CONTROL -- 0.1%
Waste Management, Inc. 25,400 $ 751,840
----------------
RESTAURANTS -- 0.5%
Outback Steakhouse, Inc. 87,600 $ 3,872,796
----------------
SPECIALTY CHEMICALS -- 0.2%
Georgia Gulf Corp. 41,300 $ 1,192,744
----------------
SPECIALTY STORES -- 3.1%
Best Buy Co., Inc. 57,200 $ 2,988,128
CarMax, Inc.* 114,400 3,538,392
Home Depot, Inc. 105,300 3,737,097
Staples, Inc.* 129,400 3,532,620
The TJX Cos., Inc. 276,100 6,088,005
Williams-Sonoma, Inc.* 93,900 3,264,903
----------------
$ 23,149,145
----------------
TELECOMMUNICATIONS -- WIRELESS -- 0.8%
AT&T Wireless Services, Inc.* 300,100 $ 2,397,799
Sprint Corp. (PCS Group)* 640,000 3,596,800
----------------
$ 5,994,599
----------------
TELECOMMUNICATIONS -- WIRELINE -- 4.0%
ADTRAN, Inc. 45,000 $ 1,395,000
Andrew Corp.* 259,500 2,986,845
Cisco Systems, Inc.* 1,024,640 24,888,506
QUALCOMM, Inc. 24,800 1,337,464
----------------
$ 30,607,815
----------------
TRUCKING -- 1.2%
Fedex Corp. 80,100 $ 5,406,750
United Parcel Service, Inc., "B" 45,700 3,406,935
----------------
$ 8,813,685
----------------
TOTAL U.S. STOCKS $ 687,362,475
----------------
FOREIGN STOCKS -- 5.0%
BERMUDA -- 0.8%
Accenture Ltd., "A" (Business Services)* 106,500 $ 2,803,080
Marvell Technology Group Ltd.
(Electronics)* 81,500 3,091,295
----------------
$ 5,894,375
----------------
CANADA -- 0.5%
Nortel Networks Corp.
(Telecommunications -- Wireline)* 896,700 $ 3,793,041
----------------
GERMANY -- 0.3%
Bayerische Motoren Werke AG
(Automotive) 40,600 $ 1,879,909
----------------
NETHERLANDS -- 0.3%
STMicroelectronics N.V. (Electronics) 82,500 $ 2,228,325
----------------
SWITZERLAND -- 1.6%
Alcon, Inc. (Medical Equipment) 63,200 $ 3,826,128
Novartis AG (Pharmaceuticals) 89,200 4,047,991
Roche Holdings AG (Pharmaceuticals) 40,900 4,123,717
----------------
$ 11,997,836
----------------
TAIWAN -- 0.5%
Taiwan Semiconductor
Manufacturing Co. Ltd., ADR
(Electronics) 380,500 $ 3,896,320
----------------
UNITED KINGDOM -- 1.0%
Amdocs Ltd. (Computer Software)* 170,600 $ 3,835,088
AstraZeneca Group PLC
(Pharmaceuticals) 80,200 3,836,718
----------------
$ 7,671,806
----------------
TOTAL FOREIGN STOCKS $ 37,361,612
----------------
TOTAL STOCKS
(IDENTIFIED COST, $658,234,033) $ 724,724,087
----------------
REPURCHASE AGREEMENT -- 3.7%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch & Co., dated 12/31/03,
due 1/02/04, total to be received
$27,951,475 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at cost $ 27,950 $ 27,950,000
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $686,184,033) $ 752,674,087
----------------
OTHER ASSETS,
LESS LIABILITIES -- 0.3% 2,482,632
----------------
Net Assets -- 100.0% $ 755,156,719
================
</Table>
See portfolio footnotes and notes to financial statements.
17
<Page>
EMERGING GROWTH SERIES
STOCKS -- 99.0%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 87.7%
AIRLINES -- 1.3%
JetBlue Airways Corp.*^ 89,500 $ 2,373,540
Southwest Airlines Co. 242,000 3,905,880
----------------
$ 6,279,420
----------------
APPAREL MANUFACTURERS -- 0.9%
Coach, Inc.* 16,700 $ 630,425
Reebok International Ltd. 66,200 2,602,984
Talbots, Inc. 30,400 935,712
----------------
$ 4,169,121
----------------
BANKS & CREDIT COMPANIES -- 2.0%
Citigroup, Inc. 105,359 $ 5,114,126
Investors Financial Services Corp.^ 52,700 2,024,207
SLM Corp. 54,200 2,042,256
----------------
$ 9,180,589
----------------
BIOTECHNOLOGY -- 3.9%
Amgen, Inc.* 54,600 $ 3,374,280
Biogen Idec, Inc.* 29,600 1,088,688
Celgene Corp.*^ 10,100 454,702
Genentech, Inc.* 14,000 1,309,980
Genzyme Corp.* 74,850 3,693,099
Gilead Sciences, Inc.* 115,700 6,726,798
ICOS Corp.*^ 11,600 478,848
Millennium Pharmaceuticals, Inc.* 45,200 843,884
Neurocrine Biosciences, Inc.*^ 8,700 474,498
----------------
$ 18,444,777
----------------
BROADCAST & CABLE TV -- 9.3%
Citadel Broadcasting Corp.* 65,500 $ 1,465,235
Clear Channel Communications, Inc. 111,910 5,240,745
Comcast Corp., "A"* 221,400 7,277,418
E.W. Scripps Co., "A" 18,740 1,764,184
EchoStar Communications Corp., "A"* 225,770 7,676,180
Entercom Communications Corp., "A"* 87,288 4,622,772
LIN TV Corp., "A"* 30,800 794,948
NTL, Inc.*^ 93,970 6,554,408
Time Warner, Inc.* 187,500 3,373,125
Westwood One, Inc.* 143,820 4,920,082
----------------
$ 43,689,097
----------------
BROKERAGE & ASSET MANAGERS -- 4.1%
Affiliated Managers Group, Inc.*^ 9,700 $ 675,023
Ameritrade Holding Corp.* 101,900 1,433,733
Franklin Resources, Inc. 111,000 5,778,660
Goldman Sachs Group, Inc. 44,274 4,371,172
Legg Mason, Inc. 23,400 1,806,012
Merrill Lynch & Co., Inc. 85,924 5,039,443
----------------
$ 19,104,043
----------------
BUSINESS SERVICES -- 4.4%
Affiliated Computer Services, Inc., "A"*^ 81,340 $ 4,429,776
Alliance Data Systems Corp.* 13,600 376,448
Corporate Executive Board Co.* 30,800 1,437,436
DST Systems, Inc.* 97,900 4,088,304
Fiserv, Inc.* 57,960 2,290,000
Getty Images, Inc.* 45,000 2,255,850
Manpower, Inc.^ 36,140 1,701,471
Monster Worldwide, Inc.*^ 78,000 1,712,880
Paychex, Inc. 25,200 937,440
Robert Half International, Inc.* 30,100 702,534
SunGard Data Systems, Inc.* 24,120 668,365
----------------
$ 20,600,504
----------------
CHEMICALS -- 0.1%
Lyondell Chemical Co. 19,410 $ 329,000
----------------
COMPUTER SOFTWARE -- 6.8%
Akamai Technologies, Inc.*^ 123,800 $ 1,330,850
Ascential Software Corp.* 14,100 365,613
BEA Systems, Inc.* 102,892 $ 1,265,572
Mercury Interactive Corp.* 38,400 1,867,776
Microsoft Corp. 365,400 10,063,116
Netscreen Technologies, Inc.* 115,900 2,868,525
Networks Associates, Inc.* 90,920 1,367,437
Oracle Corp.* 238,897 3,153,440
Symantec Corp.*^ 137,100 4,750,515
VERITAS Software Corp.* 131,910 4,901,775
----------------
$ 31,934,619
----------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.7%
Hewlett-Packard Co. 130,600 $ 2,999,882
IBM Corp. 600 55,608
Micros Systems, Inc. * 7,700 333,872
----------------
$ 3,389,362
----------------
CONSUMER GOODS & SERVICES -- 0.7%
Avon Products, Inc. 52,120 $ 3,517,579
----------------
CONSUMER SERVICES -- 1.6%
Apollo Group, Inc., "A"* 19,800 $ 1,346,400
Career Education Corp.* 105,600 4,231,392
Corinthian Colleges, Inc.* 36,400 2,022,384
Orbitz, Inc., "A"^ 1,900 44,080
----------------
$ 7,644,256
----------------
ELECTRICAL EQUIPMENT -- 2.5%
American Standard Cos., Inc.* 13,600 $ 1,369,520
Rockwell Automation, Inc. 47,900 1,705,240
Tyco International Ltd. 308,300 8,169,950
W.W. Grainger, Inc. 14,500 687,155
----------------
$ 11,931,865
----------------
ELECTRONICS -- 7.8%
Agere Systems, Inc., "B"* 1,403,100 $ 4,068,990
Amphenol Corp., "A"* 13,800 882,234
Analog Devices, Inc. 148,072 6,759,487
California Amplifier, Inc.* 135 1,899
Cymer, Inc.*^ 30,400 1,404,176
Intel Corp. 107,800 3,471,160
Linear Technology Corp. 32,330 1,360,123
Microchip Technology, Inc. 23,900 797,304
Novellus Systems, Inc.* 74,476 3,131,716
Nvidia Corp.* 53,800 1,250,850
PMC-Sierra, Inc.*^ 80,400 1,620,060
Texas Instruments, Inc. 152,500 4,480,450
Vishay Intertechnology, Inc.*^ 63,300 1,449,570
Xilinx, Inc.* 148,500 5,752,890
----------------
$ 36,430,909
----------------
ENTERTAINMENT -- 1.5%
Viacom, Inc., "B" 75,550 $ 3,352,909
Walt Disney Co. 150,600 3,513,498
----------------
$ 6,866,407
----------------
FOOD & DRUG STORES -- 1.8%
CVS Corp. 90,700 $ 3,276,084
Rite Aid Corp.* 261,800 1,581,272
Walgreen Co. 100,940 3,672,197
----------------
$ 8,529,553
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.7%
Hershey Foods Corp. 13,100 $ 1,008,569
Sysco Corp. 63,000 2,345,490
----------------
$ 3,354,059
----------------
GAMING & LODGING -- 2.9%
Carnival Corp. 61,800 $ 2,455,314
Cendant Corp.* 205,880 4,584,948
Hilton Hotels Corp. 73,200 1,253,916
</Table>
18
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
GAMING & LODGING -- continued
Royal Caribbean Cruises Ltd.^ 37,900 $ 1,318,541
Starwood Hotels & Resorts Co., "B" 114,060 4,102,738
----------------
$ 13,715,457
----------------
GENERAL MERCHANDISE -- 1.6%
Kohl's Corp.* 64,120 $ 2,881,553
Target Corp. 119,020 4,570,368
----------------
$ 7,451,921
----------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.4%
Aetna, Inc. 25,300 $ 1,709,774
----------------
HOME CONSTRUCTION -- 0.2%
Toll Brothers, Inc.* 22,200 $ 882,672
----------------
INSURANCE -- 0.7%
Marsh & McLennan Cos., Inc. 65,200 $ 3,122,428
----------------
INTERNET -- 1.5%
Ebay, Inc.* 70,800 $ 4,572,972
InterActive Corp.*^ 72,599 2,463,284
----------------
$ 7,036,256
----------------
MACHINERY & TOOLS -- 0.6%
Illinois Tool Works, Inc. 36,200 $ 3,037,542
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 2.4%
Cardinal Health, Inc. 48,900 $ 2,990,724
Caremark Rx, Inc.*^ 138,040 3,496,553
Fisher Scientific International, Inc.* 88,400 3,657,108
Tenet Healthcare Corp.* 80,000 1,284,000
----------------
$ 11,428,385
----------------
MEDICAL EQUIPMENT -- 7.4%
AmerisourceBergen Corp. 63,500 $ 3,565,525
Apogent Technologies, Inc.* 36,000 829,440
Applera Corp. 83,000 1,718,930
Baxter International, Inc. 78,000 2,380,560
C.R. Bard, Inc. 48,100 3,908,125
Cytyc Corp.* 226,420 3,115,539
DENTSPLY International, Inc. 41,800 1,888,106
Guidant Corp. 55,700 3,353,140
Invitrogen Corp.*^ 40,200 2,814,000
K-V Pharmaceutical Co., "A"* 26,850 684,675
Medtronic, Inc. 93,500 4,545,035
Millipore Corp.* 63,100 2,716,455
Thermo Electron Corp.* 70,200 1,769,040
Thoratec Corp.*^ 34,700 451,447
Waters Corp.* 24,200 802,472
----------------
$ 34,542,489
----------------
OIL SERVICES-- 1.7%
BJ Services Co.* 80,420 $ 2,887,078
Cooper Cameron Corp.* 22,760 1,060,616
GlobalSantaFe Corp. 41,900 1,040,377
Nabors Industries Ltd.* 25,500 1,058,250
Rowan Cos., Inc.* 29,500 683,515
Smith International, Inc.* 29,200 1,212,384
----------------
$ 7,942,220
----------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.3%
Apple Computer, Inc.* 83,300 $ 1,780,121
Dell, Inc.* 205,280 6,971,309
Ingram Micro, Inc., "A"* 99,400 1,580,460
Zebra Technologies Corp., "A"* 6,100 404,857
----------------
$ 10,736,747
----------------
PHARMACEUTICALS -- 1.7%
Johnson & Johnson Co. 66,900 $ 3,456,054
Medicis Pharmaceutical Corp., "A" 48,700 3,472,310
Watson Pharmaceuticals, Inc.* 26,700 1,228,200
----------------
$ 8,156,564
----------------
PRINTING & PUBLISHING -- 0.6%
Lamar Advertising Co., "A"* 17,400 $ 649,368
Meredith Corp. 39,600 1,932,876
----------------
$ 2,582,244
----------------
RESTAURANTS -- 2.2%
Aramark Corp., "B" 160,070 $ 4,389,120
Darden Restaurants, Inc. 43,300 911,032
Outback Steakhouse, Inc. 78,620 3,475,790
The Cheesecake Factory*^ 29,900 1,316,497
----------------
$ 10,092,439
----------------
SPECIALTY CHEMICALS -- 0.6%
Praxair, Inc. 76,140 $ 2,908,548
----------------
SPECIALTY STORES -- 4.3%
Best Buy Co., Inc. 31,900 $ 1,666,456
Home Depot, Inc. 48,230 1,711,683
Hot Topic, Inc.* 11,100 327,006
Office Depot, Inc.* 56,400 942,444
Pacific Sunwear of California* 16,900 356,928
PETsMART, Inc. 68,300 1,625,540
Ross Stores, Inc. 190,400 5,032,272
Staples, Inc.* 123,900 3,382,470
Tiffany & Co. 46,350 2,095,020
Williams-Sonoma, Inc.* 81,300 2,826,801
----------------
$ 19,966,620
----------------
TELECOMMUNICATIONS -- WIRELESS -- 0.2%
Spectrasite, Inc. * 22,650 $ 787,087
----------------
TELECOMMUNICATIONS -- WIRELINE -- 3.7%
ADTRAN, Inc. 101,400 $ 3,143,400
Andrew Corp.* 35,000 402,850
CIENA Corp.* 101,900 676,616
Cisco Systems, Inc.* 398,661 9,683,476
Corning, Inc.* 141,600 1,476,888
F5 Networks, Inc.* 5,150 129,265
Juniper Networks, Inc.*^ 69,800 1,303,864
Scientific-Atlanta, Inc. 24,000 655,200
----------------
$ 17,471,559
----------------
TRUCKING -- 1.1%
Expeditors International of
Washington, Inc.^ 30,400 $ 1,144,864
Fedex Corp. 47,600 3,213,000
Swift Transportation, Inc.* 44,700 939,594
----------------
$ 5,297,458
----------------
WIRELESS COMMUNICATIONS -- 1.5%
American Tower Corp., "A"*^ 224,860 $ 2,432,985
Crown Castle International Corp.* 160,900 1,774,727
NEXTEL Communications, Inc., "A"* 95,400 2,676,924
----------------
$ 6,884,636
----------------
TOTAL U.S. STOCKS $ 411,148,206
----------------
FOREIGN STOCKS -- 11.3%
BERMUDA -- 0.7%
Marvell Technology Group Ltd.
(Electronics)* 88,300 $ 3,349,219
----------------
BRAZIL -- 0.1%
Embraer-Empresa Brasileira de Aeronautica,
ADR (Aerospace) 12,600 $ 441,378
----------------
CANADA -- 1.2%
Cognos, Inc. (Computer Software)* 59,700 $ 1,828,014
Four Seasons Hotels, Inc.
(Gaming & Lodging) 15,000 767,250
Nortel Networks Corp.
(Telecommunications -- Wireline)*^ 668,000 2,825,640
----------------
$ 5,420,904
----------------
</Table>
19
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
CAYMAN ISLANDS -- 0.5%
Seagate Technology
(Personal Computers & Peripherals) 127,800 $ 2,415,420
----------------
FINLAND -- 0.8%
Nokia Corp., ADR
(Telecommunications -- Wireless) 227,800 $ 3,872,600
----------------
GERMANY -- 1.4%
Bayerische Motoren Werke
AG (Automotive) 105,900 $ 4,903,507
SAP AG, ADR (Computer Software) 40,900 1,699,804
----------------
$ 6,603,311
----------------
ISRAEL -- 0.8%
Teva Pharmaceutical Industries Ltd., ADR
(Pharmaceuticals) 64,900 $ 3,680,479
----------------
MEXICO -- 0.3%
America Movil S.A. de C.V., ADR
(Wireless Communications) 49,800 $ 1,361,532
----------------
SINGAPORE -- 0.6%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 186,300 $ 2,764,692
----------------
SWITZERLAND -- 1.2%
Alcon, Inc. (Medical Equipment) 42,300 $ 2,560,842
Novartis AG (Pharmaceuticals) 69,000 3,131,294
----------------
$ 5,692,136
----------------
TAIWAN -- 0.6%
Taiwan Semiconductor
Manufacturing Co. Ltd., ADR
(Electronics) 274,000 $ 2,805,760
----------------
UNITED KINGDOM -- 3.1%
Amdocs Ltd. (Computer Software)* 274,600 $ 6,173,008
AstraZeneca Group PLC (Pharmaceuticals) 129,500 6,195,199
Vodafone Group PLC, ADR
(Wireless Communications)^ 93,182 2,333,277
----------------
$ 14,701,484
----------------
TOTAL FOREIGN STOCKS $ 53,108,915
----------------
TOTAL STOCKS
(IDENTIFIED COST, $416,631,910) $ 464,257,121
----------------
REPURCHASE AGREEMENT -- 0.5%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch & Co., Inc., dated 12/31/03,
due 1/2/04, total to be received
$2,317,122 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at cost $ 2,317 $ 2,317,000
----------------
COLLATERAL FOR SECURITIES LOANED -- 4.6%
<Caption>
SHARES
Navigator Securities Lending Prime
Portfolio 21,441,514 $ 21,441,514
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $440,390,424 ) $ 488,015,635
----------------
OTHER ASSETS,
LESS LIABILITIES (4.1)% (19,161,110)
----------------
Net Assets -- 100.0% $ 468,854,525
================
</Table>
See portfolio footnotes and notes to financial statements.
GLOBAL GROWTH SERIES
STOCKS -- 98.0%
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 71.9%
AUSTRALIA -- 2.0%
APN News & Media Ltd.
(Printing & Publishing)* 330,399 $ 995,096
John Fairfax Holdings Ltd.
(Printing & Publishing) 353,930 938,051
News Corp., Ltd. (Broadcast & Cable TV)* 106,800 964,177
QBE Insurance Group Ltd. (Insurance)* 121,100 966,532
Virgin Blue Holdings (Airlines)* 32,980 59,101
----------------
$ 3,922,957
----------------
AUSTRIA -- 0.4%
Erste Bank der Oesterreichischen
Sparkassen AG (Banks & Credit Cos.) 6,470 $ 798,640
----------------
BRAZIL
Celular CRT Participacoes S.A., Preferred
(Telecommunications) 0.026 $ 5
----------------
CANADA -- 2.5%
Encana Corp. (Natural Gas -- Pipeline)^ 24,980 $ 985,786
Four Seasons Hotels, Inc.
(Gaming & Lodging) 16,500 843,975
Magna International, Inc., "A"
(Automotive) 11,600 928,580
Molson, Inc. (Alcoholic Beverages) 33,060 923,485
Talisman Energy, Inc.
(Energy -- Independent)^ 18,140 1,031,959
----------------
$ 4,713,785
----------------
FRANCE -- 7.7%
Alcatel Co. (Telecom -- Wireline) 70,200 $ 903,059
Axa (Insurance) 70,660 1,510,807
Cap Gemini S.A.
(Computer Software-- Systems)^ 27,590 1,223,971
Credit Agricole S.A. (Banks & Credit Cos.) 84,827 2,023,197
France Telecom S.A. (Telephone Services) 69,850 1,994,251
L'Air Liquide S.A. (Specialty Chemicals) 11,170 1,970,311
Sanofi-Synthelabo S.A. (Pharmaceuticals) 26,220 1,972,243
Total Fina Elf S.A., "B"
(Energy -- Independent) 17,020 3,160,898
----------------
$ 14,758,737
----------------
GERMANY -- 2.5%
Bayerische Motoren Werke
AG (Automotive) 30,680 $ 1,420,582
EPCOS AG (Electronics)^ 39,800 897,614
Porsche AG, Preferred (Automotive) 2,597 1,539,584
Stada Arzneimittel AG (Pharmaceuticals)^ 16,424 1,017,703
----------------
$ 4,875,483
----------------
GREECE -- 0.5%
Coca-Cola Hellenic Bottling Co., S.A
(Food & Non-Alcoholic Beverages) 41,900 $ 873,178
----------------
HUNGARY -- 1.0%
Gedeon Richter Ltd., GDR
(Pharmaceuticals) 8,700 $ 1,029,949
OTP Bank Rt., GDR (Banks & Credit Cos.)* 35,350 927,937
----------------
$ 1,957,886
----------------
INDIA -- 0.9%
Reliance Industries Ltd.
(Energy -- Independent) 134,000 $ 1,687,516
----------------
INDONESIA -- 0.5%
PT Telekomunikasi Indonesia
(Telephone Services) 1,231,600 $ 987,035
----------------
IRELAND -- 1.4%
Anglo Irish Bank Corp., PLC
(Banks & Credit Cos.)* 74,861 $ 1,185,617
Depfa Bank PLC (Banks & Credit Cos.) 11,600 1,463,004
----------------
$ 2,648,621
----------------
</Table>
20
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
ITALY -- 0.7%
Mediaset S.p.A. (Broadcast & Cable TV) 121,500 $ 1,442,051
----------------
JAPAN -- 11.3%
Brother Industries Ltd. (Electronics) 103,000 $ 945,060
Canon, Inc. (PC & Peripheral) 40,000 1,863,070
Chugai Pharmaceutical Co., Ltd.
(Pharmaceuticals)^ 97,200 1,398,098
Citizen Watch Co. (Electronics) 117,000 1,075,699
Fujikura Ltd. (Electrical Equipment) 136,000 802,278
Honda Motor Co., Ltd. (Automotive) 22,900 1,017,445
Ibiden Co. (Electronics)^ 73,400 924,908
KDDI Corp. (Telephone Services) 260 1,490,083
Kibun Food Chemifa Co. Ltd.
(Food & Non-Alcoholic Beverages) 80,000 1,034,956
Lawson, Inc. (Specialty Retailers) 24,700 843,814
Nishimatsuya Chain Co., Ltd.
(Specialty Retailers)^ 33,200 859,943
Nitto Denko Corp. (Electrical Equipment) 17,800 947,029
Round One Corp. (Entertainment) 98 226,854
Seiko Epson Corp. (Electronics) 59,300 2,767,536
Stanley Electric Co., Ltd. (Electronics) 47,300 916,111
Sumitomo Bakelite (Specialty Chemicals) 122,000 795,986
Tamron Co., Ltd. (Leisure & Toys) 19,000 957,670
Tokyo Broadcasting System, Inc.
(Broadcast & Cable TV) 62,600 997,416
Tokyo Gas Co., Ltd.
(Natural Gas Distribution) 516,000 1,839,847
----------------
$ 21,703,803
----------------
MEXICO -- 0.7%
Grupo Televisa S.A., ADR
(Broadcast & Cable TV)* 33,900 $ 1,351,254
----------------
NETHERLANDS -- 2.4%
Koninklijke Philips Electronics N.V.
(Electronics) 64,000 $ 1,866,743
STMicroelectronics N.V., ADR (Electronics) 32,200 869,722
VNU N.V. (Printing & Publishing)* 57,676 1,820,356
----------------
$ 4,556,821
----------------
RUSSIA -- 1.3%
Unified Energy Systems, GDR
(Utilities -- Electric Power)* 35,900 $ 978,275
YUKOS Corp., ADR
(Energy -- Independent)^ 35,362 1,485,204
----------------
$ 2,463,479
----------------
SINGAPORE -- 0.5%
Singapore Telecommunications Ltd.
(Telephone Services) 883,600 $ 1,019,759
----------------
SOUTH AFRICA -- 0.5%
Barloworld Ltd (Conglomerates) 96,300 $ 1,009,767
----------------
SOUTH KOREA -- 4.9%
Hyundai Motor Co., Ltd. (Automotive)* 38,770 $ 1,643,210
POSCO Co. Ltd. ADR (Metals & Mining) 90,950 3,089,572
Samsung Electronics (Electronics) 9,610 3,637,524
Shinsegae Co., Ltd. (Specialty Retailers)* 4,600 1,119,597
----------------
$ 9,489,903
----------------
SPAIN -- 1.9%
Antena 3 TV S.A.
(Broadcast & Cable TV)*^ 13,941 $ 613,720
Telefonica S.A. (Telephone Services)* 210,879 3,092,714
----------------
$ 3,706,434
----------------
SWEDEN -- 1.9%
Alfa Laval AB (Machinery & Tools) 65,630 $ 999,122
Atlas Copco AB (Machinery & Tools) 25,110 898,930
Autoliv, Inc. (Automotive) 21,300 808,434
Hennes & Mauritz AB (Specialty Retailers) 38,510 $ 915,528
----------------
$ 3,622,014
----------------
SWITZERLAND -- 8.0%
Alcon, Inc. (Medical Equipment) 15,400 $ 932,316
Credit Suisse Group (Banks & Credit Cos.) 54,320 1,986,568
Givaudan AG
(Consumer Goods & Services) 1,660 861,327
Nestle S.A.
(Food & Non-Alcoholic Beverages) 7,955 1,986,660
Novartis AG (Pharmaceuticals) 64,020 2,905,296
Roche Holdings AG (Pharmaceuticals) 24,370 2,457,090
Synthes-Stratec, Inc. (Medical Equipment) 1,385 1,370,112
UBS AG (Banks & Credit Cos.) 42,644 2,919,217
----------------
$ 15,418,586
----------------
TAIWAN
Formosa Plastic Corp.
(Specialty Chemicals) 9 $ 15
----------------
TURKEY -- 0.6%
Turkcell Iletisim Hizmetleri A.S., ADR
(Wireless Communications)*^ 43,800 $ 1,162,890
----------------
UNITED KINGDOM -- 17.8%
Anglo American PLC (Metals & Mining) 128,360 $ 2,765,589
AstraZeneca Group PLC (Pharmaceuticals) 67,560 3,232,028
Aviva PLC (Insurance) 109,356 956,998
BP Amoco PLC, ADR
(Energy -- Integrated) 61,728 3,046,277
British Sky Broadcasting Group PLC
(Broadcast & Cable TV) 113,120 1,419,533
Diageo PLC (Alcoholic Beverages) 146,665 1,924,263
Easy Jet PLC (Airlines) 152,380 796,978
Johnston Press PLC (Printing & Publishing) 180,428 1,500,056
Kingfisher PLC (Specialty Retailers) 282,852 1,406,161
Legal & General Group PLC (Insurance) 511,250 914,889
Next PLC (General Merchandise) 78,406 1,571,737
Reckitt Benckiser PLC
(Consumer Goods & Services) 103,590 2,337,306
Reed Elsevier PLC (Printing & Publishing) 222,520 1,855,962
Royal Bank of Scotland Group PLC
(Banks & Credit Cos.) 98,297 2,888,157
Smith & Nephew PLC
(Medical Equipment) 115,300 965,793
Standard Chartered PLC
(Banks & Credit Cos.) 84,400 1,389,823
Unilever PLC
(Food & Non-Alcoholic Beverages) 152,300 1,415,728
Vodafone Group PLC
(Wireless Communications) 1,138,400 2,814,462
Yell Group PLC (Broadcast & Cable TV) 175,900 957,671
----------------
$ 34,159,411
----------------
TOTAL FOREIGN STOCKS $ 138,330,030
----------------
U.S. STOCKS -- 26.1%
AEROSPACE -- 0.5%
Lockheed Martin Corp. 19,300 $ 992,020
----------------
AIRLINES -- 0.3%
JetBlue Airways Corp.* 24,200 $ 641,784
----------------
BANKS & CREDIT COMPANIES -- 2.9%
American Express Co. 39,400 $ 1,900,262
Bank One Corp. 20,400 930,036
Citigroup, Inc. 56,542 2,744,549
----------------
$ 5,574,847
----------------
</Table>
21
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
BIOTECHNOLOGY -- 1.0%
Genzyme Corp.* 27,700 $ 1,366,718
Gilead Sciences, Inc.* 10,800 627,912
----------------
$ 1,994,630
----------------
BROADCAST & CABLE TV -- 3.4%
Citadel Broadcasting Corp.* 33,900 $ 758,343
Clear Channel Communications, Inc. 21,730 1,017,616
Comcast Corp., "A"* 54,800 1,801,276
EchoStar Communications Corp., "A"* 25,940 881,960
Time Warner, Inc.* 111,500 2,005,885
----------------
$ 6,465,080
----------------
BROKERAGE & ASSET MANAGERS -- 2.9%
E*TRADE Group, Inc.* 84,300 $ 1,066,395
Franklin Resources, Inc. 39,200 2,040,752
Goldman Sachs Group, Inc. 13,900 1,372,347
Janus Capital Group, Inc. 62,100 1,019,061
----------------
$ 5,498,555
----------------
BUSINESS SERVICES -- 1.5%
Getty Images, Inc.* 21,100 $ 1,057,743
Manpower, Inc. 37,530 1,766,912
----------------
$ 2,824,655
----------------
COMPUTER SOFTWARE -- 1.2%
Akamai Technologies, Inc.^ 69,100 $ 742,825
Networks Associates, Inc.* 109,400 1,645,376
----------------
$ 2,388,201
----------------
CONSUMER GOODS & SERVICES -- 0.4%
Colgate-Palmolive Co. 17,000 $ 850,850
----------------
ELECTRONICS -- 2.6%
Agere Systems, Inc., "B"* 555,300 $ 1,610,370
Applied Films Corp.* 24,700 815,594
Intel Corp. 79,300 2,553,460
----------------
$ 4,979,424
----------------
ENTERTAINMENT -- 0.5%
Viacom, Inc., "B" 23,060 $ 1,023,403
----------------
GAMING & LODGING -- 0.5%
Carnival Corp. 26,200 $ 1,040,926
----------------
INTERNET -- 0.6%
Ebay, Inc.* 16,200 $ 1,046,358
----------------
MACHINERY & TOOLS -- 0.5%
Eaton Corp. 8,700 $ 939,426
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.5%
Tenet Healthcare Corp.* 61,500 $ 987,075
----------------
MEDICAL EQUIPMENT -- 1.5%
AmerisourceBergen Corp. 14,100 $ 791,715
CTI Molecular Imaging, Inc* 60,800 1,028,128
Discovery Partners International* 60 369
Guidant Corp. 16,000 963,200
----------------
$ 2,783,412
----------------
PHARMACEUTICALS -- 1.1%
Johnson & Johnson Co. 25,400 $ 1,312,164
Medicis Pharmaceutical Corp., "A"^ 10,600 755,780
----------------
$ 2,067,944
----------------
PRINTING & PUBLISHING -- 0.5%
Meredith Corp. 18,400 $ 898,104
----------------
RESTAURANTS -- 0.9%
Aramark Corp., "B" 33,000 $ 904,860
Outback Steakhouse, Inc. 20,200 893,042
----------------
$ 1,797,902
----------------
SPECIALTY RETAILERS -- 1.8%
Home Depot, Inc. 48,100 $ 1,707,069
The TJX Cos., Inc. 79,500 1,752,975
----------------
$ 3,460,044
----------------
TELECOMMUNICATIONS -- WIRELINE -- 1.0%
Cisco Systems, Inc.* 78,070 $ 1,896,320
----------------
TOTAL U.S. STOCKS $ 50,150,960
----------------
TOTAL STOCKS
(IDENTIFIED COST, $169,667,339) $ 188,480,990
----------------
REPURCHASE AGREEMENT -- 2.2%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch, dated 12/31/03,
due 1/2/04 total to be received
$4,111,217 (secured by various
U.S. Treasury and Federal Agency
Obligations in a jointly traded account),
at cost $ 4,111 $ 4,111,000
----------------
COLLATERAL FOR SECURITIES LOANED -- 4.3%
Navigator Securities Lending Prime
Portfolio 8,261,745 $ 8,261,745
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $182,040,084) $ 200,853,735
----------------
OTHER ASSETS,
LESS LIABILITIES -- (4.5)% (8,561,910)
----------------
Net Assets -- 100.0% $ 192,291,825
================
</Table>
See portfolio footnotes and notes to financial statements.
22
<Page>
MANAGED SECTORS SERIES
STOCKS -- 99.7%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 99.0%
BASIC MATERIALS -- 1.1%
3M Co. 21,240 $ 1,806,037
----------------
CONSUMER STAPLES -- 2.5%
Avon Products, Inc. 29,940 $ 2,020,651
PepsiCo, Inc. 46,790 2,181,350
----------------
$ 4,202,001
----------------
FINANCIAL SERVICES -- 13.7%
American Express Co. 61,300 $ 2,956,499
American International Group, Inc. 57,800 3,830,984
Bank of New York Co., Inc. 39,200 1,298,304
Citigroup, Inc. 75,580 3,668,653
Fannie Mae 22,400 1,681,344
Goldman Sachs Group, Inc. 18,320 1,808,734
MBNA Corp. 98,400 2,445,240
Mellon Financial Corp. 41,690 1,338,666
Merrill Lynch & Co., Inc. 32,150 1,885,597
Northern Trust Corp. 22,400 1,039,808
SLM Corp. 24,560 925,421
----------------
$ 22,879,250
----------------
HEALTHCARE -- 16.2%
Abbott Laboratories, Inc. 42,880 $ 1,998,208
Amgen, Inc.* 40,500 2,502,900
Caremark Rx, Inc.* 39,200 992,936
Genentech, Inc.* 5,300 495,921
Genzyme Corp.* 46,200 2,279,508
Gilead Sciences, Inc.* 47,400 2,755,836
Guidant Corp. 19,700 1,185,940
Johnson & Johnson Co. 79,840 4,124,534
Medtronic, Inc. 37,100 1,803,431
Pfizer, Inc. 160,150 5,658,100
Thermo Electron Corp.* 43,500 1,096,200
Wyeth 50,000 2,122,500
----------------
$ 27,016,014
----------------
INDUSTRIAL GOODS & SERVICES -- 4.6%
Danaher Corp. 12,900 $ 1,183,575
Emerson Electric Co. 16,900 1,094,275
General Electric Co. 130,350 4,038,243
Illinois Tool Works, Inc. 16,300 1,367,733
----------------
$ 7,683,826
----------------
LEISURE -- 13.8%
Clear Channel Communications, Inc. 63,680 $ 2,982,135
Comcast Corp., "A"* 82,530 2,712,761
Cox Communications, Inc., "A"* 28,700 988,715
EchoStar Communications Corp., "A"* 53,700 1,825,800
InterActive Corp.* 71,890 2,439,228
Lamar Advertising Co., "A"* 28,350 1,058,022
New York Times Co. 22,900 1,094,391
Outback Steakhouse, Inc. 16,700 738,307
Starwood Hotels & Resorts Co. 30,760 1,106,437
Time Warner, Inc.* 142,370 2,561,236
Viacom, Inc., "B" 80,290 3,563,270
Walt Disney Co. 16,000 373,280
Westwood One, Inc.* 48,710 1,666,369
----------------
$ 23,109,951
----------------
MISCELLANEOUS -- 2.2%
Apollo Group, Inc.* 21,800 $ 1,482,400
BISYS Group, Inc.* 57,440 854,707
Career Education Corp.* 19,000 761,330
DST Systems, Inc.* 13,930 581,717
----------------
$ 3,680,154
----------------
RETAIL -- 10.9%
CVS Corp. 17,500 $ 632,100
Home Depot, Inc. 31,390 1,114,031
Kohl's Corp.* 69,650 $ 3,130,071
Nike, Inc., "B" 19,700 1,348,662
Staples, Inc.* 53,380 1,457,274
Target Corp. 88,170 3,385,728
The TJX Cos., Inc. 84,240 1,857,492
Wal-Mart Stores, Inc. 66,460 3,525,703
Walgreen Co. 30,600 1,113,228
Williams-Sonoma, Inc.* 16,600 577,182
----------------
$ 18,141,471
----------------
TECHNOLOGY -- 29.8%
ADTRAN, Inc. 37,400 $ 1,159,400
Analog Devices, Inc. 63,110 2,880,971
BEA Systems, Inc.* 60,000 738,000
Cisco Systems, Inc.* 288,060 6,996,977
Corning, Inc.* 78,300 816,669
Dell, Inc.* 101,860 3,459,166
Ebay, Inc.* 24,300 1,569,537
IBM Corp. 39,040 3,618,227
Intel Corp. 84,340 2,715,748
Linear Technology Corp. 32,370 1,361,806
Maxim Integrated Products, Inc. 25,280 1,258,944
Mercury Interactive Corp.* 34,300 1,668,352
Microchip Technology, Inc. 45,480 1,517,213
Microsoft Corp. 280,680 7,729,927
Networks Associates, Inc.* 50,300 756,512
Novellus Systems, Inc.* 30,450 1,280,423
Oracle Corp.* 145,030 1,914,396
QUALCOMM, Inc. 17,700 954,561
Texas Instruments, Inc. 71,900 2,112,422
VERITAS Software Corp.* 82,230 3,055,667
Xilinx, Inc.* 57,800 2,239,172
----------------
$ 49,804,090
----------------
TRANSPORTATION -- 2.7%
Fedex Corp. 27,000 $ 1,822,500
Southwest Airlines Co. 93,900 1,515,546
United Parcel Service, Inc., "B" 16,020 1,194,291
----------------
$ 4,532,337
----------------
UTILITIES & COMMUNICATIONS -- 1.5%
AT&T Wireless Services, Inc.* 191,300 $ 1,528,487
Sprint Corp. (PCS Group)* 180,400 1,013,848
----------------
$ 2,542,335
----------------
TOTAL U.S. STOCKS $ 165,397,466
----------------
FOREIGN STOCKS -- 0.7%
BERMUDA -- 0.7%
Ace Ltd. (Financial Services) 29,560 $ 1,224,375
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $140,550,745) $ 166,621,841
----------------
OTHER ASSETS,
LESS LIABILITIES -- 0.3% 439,158
----------------
Net Assets -- 100.0% $ 167,060,999
================
</Table>
See portfolio footnotes and notes to financial statements.
23
<Page>
MASSACHUSETTS INVESTORS TRUST SERIES
STOCKS -- 97.2%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 88.5%
AEROSPACE -- 0.7%
Lockheed Martin Corp. 143,510 $ 7,376,414
United Technologies Corp. 17,900 1,696,383
----------------
$ 9,072,797
----------------
AIRLINES -- 0.2%
Southwest Airlines Co. 159,600 $ 2,575,944
----------------
ALCOHOLIC BEVERAGES -- 0.5%
Anheuser-Busch Cos., Inc. 114,520 $ 6,032,914
----------------
AUTOMOTIVE -- 0.2%
Harley-Davidson, Inc. 47,700 $ 2,267,181
----------------
BANKS & CREDIT COMPANIES -- 14.3%
American Express Co. 224,500 $ 10,827,635
Bank of America Corp. 253,460 20,385,788
Bank of New York Co., Inc. 94,400 3,126,528
Bank One Corp. 191,460 8,728,661
Citigroup, Inc. 835,080 40,534,783
Federal National Mortgage Assn. 360,600 27,066,636
Golden West Financial Corp. 59,150 6,103,688
MBNA Corp. 179,490 4,460,326
Mellon Financial Corp. 123,970 3,980,677
State Street Corp. 84,200 4,385,136
SunTrust Banks, Inc. 80,580 5,761,470
U.S. Bancorp 369,620 11,007,284
Wells Fargo Co. 492,720 29,016,281
----------------
$ 175,384,893
----------------
BIOTECHNOLOGY -- 1.0%
Genzyme Corp.* 117,900 $ 5,817,186
Gilead Sciences, Inc.* 100,700 5,854,698
----------------
$ 11,671,884
----------------
BROADCAST & CABLE TV -- 3.8%
Clear Channel Communications, Inc. 306,570 $ 14,356,673
Comcast Corp., "A"* 410,422 13,490,571
EchoStar Communications Corp., "A"* 98,420 3,346,280
Time Warner, Inc.* 837,490 15,066,445
----------------
$ 46,259,969
----------------
BROKERAGE & ASSET MANAGERS -- 2.2%
Goldman Sachs Group, Inc. 40,220 $ 3,970,921
Lehman Brothers Holdings, Inc. 64,360 4,969,879
Merrill Lynch & Co., Inc. 311,420 18,264,783
----------------
$ 27,205,583
----------------
CHEMICALS -- 1.7%
Air Products & Chemicals, Inc. 98,570 $ 5,207,453
Dow Chemical Co. 178,000 7,399,460
Monsanto Co. 21,300 613,014
PPG Industries, Inc. 120,390 7,707,368
----------------
$ 20,927,295
----------------
COMPUTER SOFTWARE -- 4.0%
Microsoft Corp. 1,659,170 $ 45,693,542
VERITAS Software Corp.* 89,990 3,344,028
----------------
$ 49,037,570
----------------
COMPUTER SOFTWARE -- SYSTEMS -- 3.6%
Hewlett-Packard Co. 527,639 $ 12,119,868
IBM Corp. 291,370 27,004,171
Xerox Corp.*^ 370,400 5,111,520
----------------
$ 44,235,559
----------------
CONSUMER GOODS & SERVICES -- 3.1%
Colgate-Palmolive Co. 91,800 $ 4,594,590
Kimberly-Clark Corp. 102,130 6,034,861
Newell Rubbermaid, Inc. 352,140 8,018,228
Procter & Gamble Co. 201,050 20,080,875
----------------
$ 38,728,554
----------------
U.S. STOCKS -- continued
ELECTRICAL EQUIPMENT -- 5.7%
American Standard Cos., Inc.* 35,820 $ 3,607,074
Danaher Corp. 35,100 3,220,425
Emerson Electric Co. 95,520 6,184,920
General Electric Co. 1,151,230 35,665,105
Grainger (W.W.), Inc. 99,500 4,715,305
Rockwell Automation, Inc. 86,660 3,085,096
Tyco International Ltd. 533,030 14,125,295
----------------
$ 70,603,220
----------------
ELECTRONICS -- 2.4%
Analog Devices, Inc. 202,500 $ 9,244,125
Intel Corp. 510,910 16,451,302
Texas Instruments, Inc. 117,900 3,463,902
----------------
$ 29,159,329
----------------
ENERGY -- INDEPENDENT -- 0.8%
Unocal Corp. 283,290 $ 10,433,571
----------------
ENERGY -- INTEGRATED -- 2.8%
Exxon Mobil Corp. 853,484 $ 34,992,844
----------------
ENTERTAINMENT -- 2.0%
Disney (Walt) Co. 126,300 $ 2,946,579
Viacom, Inc., "B" 478,250 21,224,735
----------------
$ 24,171,314
----------------
FOOD & DRUG STORES -- 0.8%
CVS Corp. 191,460 $ 6,915,535
Safeway, Inc.* 117,500 2,574,425
----------------
$ 9,489,960
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 1.6%
Archer Daniels Midland Co. 173,670 $ 2,643,257
PepsiCo, Inc. 356,340 16,612,571
----------------
$ 19,255,828
----------------
GAMING & LODGING -- 0.2%
Starwood Hotels & Resorts Co., "B" 66,810 $ 2,403,156
----------------
GENERAL MERCHANDISE -- 3.5%
Kohl's Corp.* 149,370 $ 6,712,688
May Department Stores Co. 227,800 6,622,146
Target Corp. 319,100 12,253,440
Wal-Mart Stores, Inc. 318,830 16,913,931
----------------
$ 42,502,205
----------------
INSURANCE -- 2.8%
American International Group, Inc. 208,597 $ 13,825,809
Chubb Corp. 103,190 7,027,239
Hartford Financial Services Group, Inc. 76,630 4,523,469
Marsh & McLennan Cos., Inc. 96,940 4,642,457
MetLife, Inc. 141,730 4,772,049
----------------
$ 34,791,023
----------------
INTERNET -- 0.2%
InterActive Corp.* 60,030 $ 2,036,818
----------------
MACHINERY & TOOLS -- 0.8%
Eaton Corp. 48,700 $ 5,258,626
Illinois Tool Works, Inc. 57,070 4,788,744
----------------
$ 10,047,370
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.4%
Cardinal Health, Inc. 61,900 $ 3,785,804
HCA, Inc. 44,400 1,907,424
Tenet Healthcare Corp.* 702,840 11,280,582
----------------
$ 16,973,810
----------------
MEDICAL EQUIPMENT -- 3.1%
AmerisourceBergen Corp. 220,760 $ 12,395,674
Applera Corp. 37,100 768,341
Bard (C.R.), Inc. 37,650 3,059,062
Baxter International, Inc. 310,040 9,462,421
Guidant Corp. 215,700 12,985,140
----------------
$ 38,670,638
----------------
</Table>
24
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
OIL SERVICES -- 1.6%
Halliburton Co. 295,650 $ 7,686,900
Noble Corp.* 87,090 3,116,080
Schlumberger Ltd. 169,460 9,272,851
----------------
$ 20,075,831
----------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.2%
Dell, Inc.* 82,000 $ 2,784,720
----------------
PHARMACEUTICALS -- 6.9%
Abbott Laboratories, Inc. 213,980 $ 9,971,468
Johnson & Johnson Co. 578,170 29,868,262
Pfizer, Inc. 411,735 14,546,597
Schering-Plough Corp. 664,440 11,554,612
Wyeth 435,120 18,470,844
----------------
$ 84,411,783
----------------
PRINTING & PUBLISHING -- 1.6%
Gannett Co., Inc. 57,520 $ 5,128,483
New York Times Co., "A" 315,040 15,055,762
----------------
$ 20,184,245
----------------
RAILROAD & SHIPPING -- 0.9%
Union Pacific Corp. 161,730 $ 11,237,000
----------------
RESTAURANTS -- 0.7%
Aramark Corp., "B" 159,700 $ 4,378,974
McDonald's Corp. 155,860 3,870,004
----------------
$ 8,248,978
----------------
SPECIALTY CHEMICALS -- 1.0%
Praxair, Inc. 312,780 $ 11,948,196
----------------
SPECIALTY STORES -- 2.0%
Home Depot, Inc. 434,750 $ 15,429,278
TJX Cos., Inc. 436,920 9,634,086
----------------
$ 25,063,364
----------------
TELECOMMUNICATIONS -- WIRELINE -- 2.4%
Cisco Systems, Inc.* 1,229,840 $ 29,872,814
----------------
TELEPHONE SERVICES -- 1.6%
SBC Communications, Inc. 276,400 $ 7,205,748
Verizon Communications, Inc. 364,260 12,778,241
----------------
$ 19,983,989
----------------
TOBACCO -- 1.8%
Altria Group, Inc. 417,840 $ 22,738,853
----------------
TRUCKING -- 1.3%
Federal Express Corp. 131,290 $ 8,862,075
United Parcel Service, Inc., "B" 87,350 6,511,943
----------------
$ 15,374,018
----------------
UTILITIES -- ELECTRIC POWER -- 2.5%
Dominion Resources, Inc. 165,770 $ 10,581,099
Entergy Corp. 24,300 1,388,259
Exelon Corp. 174,390 11,572,521
FirstEnergy Corp. 95,000 3,344,000
PPL Corp. 74,800 3,272,500
----------------
$ 30,158,379
----------------
WIRELESS COMMUNICATIONS -- 0.6%
AT&T Wireless Services, Inc.* 682,580 $ 5,453,814
Sprint Corp., (PCS Group)*^ 339,160 1,906,079
----------------
$ 7,359,893
----------------
TOTAL U.S. STOCKS $ 1,088,373,292
----------------
FOREIGN STOCKS -- 8.7%
BERMUDA -- 0.9%
Accenture Ltd. "A" (Business Services)* 205,300 $ 5,403,496
XL Capital Ltd., "A" (Insurance) 77,850 6,037,267
----------------
$ 11,440,763
----------------
CANADA -- 1.4%
Canadian National Railway Co.
(Railroad & Shipping) 127,364 $ 8,059,594
EnCana Corp. (Energy -- Independent) 54,080 2,132,915
EnCana Corp. (Energy-Independent) 91,310 $ 3,603,366
Magna International, Inc., "A" (Automotive) 36,710 2,938,635
----------------
$ 16,734,510
----------------
CAYMAN ISLANDS -- 0.3%
Transocean, Inc. (Oil Services)* 157,500 $ 3,781,575
----------------
FINLAND -- 0.2%
Nokia Corp., ADR
(Telecommunications -- Wireless)^ 145,840 $ 2,479,280
----------------
FRANCE -- 0.5%
Total S.A., ADR (Energy -- Integrated) 64,310 $ 5,949,318
----------------
GERMANY -- 1.0%
Bayerische Motoren Werke AG (Automotive) 184,970 $ 8,564,699
Porsche AG, Preferred (Automotive) 6,813 4,038,964
----------------
$ 12,603,663
----------------
NETHERLANDS -- 0.4%
Koninklijke KPN N.V. (Telephone Services) 288,300 $ 2,223,052
STMicroelectronics N.V. (Electronics) 109,010 2,944,360
----------------
$ 5,167,412
----------------
SWITZERLAND -- 2.0%
Novartis AG (Pharmaceuticals) 338,440 $ 15,358,770
Roche Holdings AG (Pharmaceuticals) 93,400 9,416,997
----------------
$ 24,775,767
----------------
UNITED KINGDOM -- 2.0%
Amdocs Ltd. (Computer Software)* 86,300 $ 1,940,024
AstraZeneca Group PLC (Pharmaceuticals) 167,450 8,010,703
BHP Billiton PLC (Metals & Mining) 378,400 3,296,261
BP PLC, ADR (Energy -- Integrated) 51,122 2,522,871
Reckitt Benckiser PLC
(Consumer Goods & Services)* 372,820 8,411,956
----------------
$ 24,181,815
----------------
TOTAL FOREIGN STOCKS $ 107,114,103
----------------
TOTAL STOCKS (IDENTIFIED COST, $1,076,293,068) $ 1,195,487,395
----------------
SHORT-TERM OBLIGATIONS -- 0.5%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
General Motors Acceptance Corp.,
due 1/12/04, at Amortized Cost $ 5,900 $ 5,897,512
----------------
REPURCHASE AGREEMENT -- 2.4%
Merrill Lynch & Co., Inc., dated 12/31/03,
due 1/2/04, total to be received
$29,702,568 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded
account), at cost $ 29,701 $ 29,701,000
----------------
COLLATERAL FOR SECURITIES LOANED -- 0.6%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 7,702,427 $ 7,702,427
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $1,119,594,007) $ 1,238,788,334
----------------
OTHER ASSETS,
LESS LIABILITIES -- (0.7)% (8,650,832)
----------------
Net Assets -- 100.0% $ 1,230,137,502
================
</Table>
See portfolio footnotes and notes to financial statements.
25
<Page>
MID CAP GROWTH SERIES
STOCKS -- 96.4%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 92.3%
AIRLINES -- 0.8%
JetBlue Airways Corp.* 35,740 $ 947,825
----------------
APPAREL MANUFACTURERS -- 1.7%
Coach, Inc.* 14,300 $ 539,825
Reebok International Ltd. 13,460 529,247
Talbots, Inc. 26,190 806,128
----------------
$ 1,875,200
----------------
BANKS & CREDIT COMPANIES -- 1.5%
Investors Financial Services Corp. 44,950 $ 1,726,529
----------------
BIOTECHNOLOGY -- 4.4%
Biogen Idec, Inc.* 23,460 $ 862,859
Celgene Corp.* 8,730 393,025
Genzyme Corp.* 16,550 816,577
Gilead Sciences, Inc.* 25,200 1,465,128
ICOS Corp.* 8,230 339,734
Millennium Pharmaceuticals, Inc.* 37,900 707,593
Neurocrine Biosciences, Inc.* 7,020 382,871
----------------
$ 4,967,787
----------------
BROADCAST & CABLE TV -- 10.7%
Citadel Broadcasting Corp.* 55,680 $ 1,245,562
E.W. Scripps Co., "A" 16,110 1,516,595
EchoStar Communications Corp., "A"* 50,890 1,730,260
Entercom Communications Corp., "A"* 29,560 1,565,498
LIN TV Corp., "A"* 19,100 492,971
NTL, Inc.* 51,039 3,559,970
Westwood One, Inc.* 57,590 1,970,154
----------------
$ 12,081,010
----------------
BROKERAGE & ASSET MANAGERS -- 2.8%
Affiliated Managers Group, Inc.* 7,400 $ 514,966
Ameritrade Holding Corp.* 83,900 1,180,473
Legg Mason, Inc. 19,690 1,519,674
----------------
$ 3,215,113
----------------
BUSINESS SERVICES -- 8.2%
Alliance Data Systems Corp.* 11,000 $ 304,480
Corporate Executive Board Co.* 25,600 1,194,752
DST Systems, Inc.* 30,130 1,258,229
Getty Images, Inc.* 37,280 1,868,847
Manpower, Inc. 30,280 1,425,582
Monster Worldwide, Inc.* 65,390 1,435,964
Paychex, Inc. 19,940 741,768
Robert Half International, Inc.* 21,060 491,540
SunGard Data Systems, Inc.* 20,010 554,477
----------------
$ 9,275,639
----------------
CHEMICALS -- 0.2%
Lyondell Chemical Co. 15,560 $ 263,742
----------------
COMPUTER SOFTWARE -- 5.3%
Akamai Technologies, Inc.* 15,300 $ 164,475
Ascential Software Corp.* 12,000 311,160
BEA Systems, Inc.* 78,330 963,459
Netscreen Technologies, Inc.* 27,020 668,745
Networks Associates, Inc.* 65,780 989,331
Symantec Corp.* 41,760 1,446,984
Veritas Software Corp.* 40,110 1,490,488
----------------
$ 6,034,642
----------------
CONSUMER SERVICES -- 3.1%
Career Education Corp.* 45,900 $ 1,839,213
Corinthian Colleges, Inc.* 30,700 1,705,692
Orbitz, Inc., "A" 1,500 34,800
----------------
$ 3,579,705
----------------
ELECTRICAL EQUIPMENT -- 2.7%
American Standard Cos., Inc.* 10,380 $ 1,045,266
Rockwell Automation, Inc. 39,110 1,392,316
W.W. Grainger, Inc. 12,200 578,158
----------------
$ 3,015,740
----------------
ELECTRONICS -- 10.0%
Agere Systems, Inc., "B"* 446,060 $ 1,293,574
Amphenol Corp., "A"* 11,500 735,195
Analog Devices, Inc. 26,670 1,217,486
Cymer, Inc.* 25,220 1,164,912
Novellus Systems, Inc.* 25,720 1,081,526
Nvidia Corp.* 45,200 1,050,900
PMC-Sierra, Inc.* 69,210 1,394,581
Vishay Intertechnology, Inc.* 52,690 1,206,601
Xilinx, Inc.* 56,550 2,190,747
----------------
$ 11,335,522
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.7%
Hershey Foods Corp. 10,140 $ 780,679
----------------
GAMING & LODGING -- 1.5%
Royal Caribbean Cruises Ltd. 31,680 $ 1,102,147
Starwood Hotels& Resorts Co., "B" 15,530 558,614
----------------
$ 1,660,761
----------------
INTERNET -- 0.8%
InterActive Corp.* 28,097 $ 953,331
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.9%
Fisher Scientific International, Inc.* 26,700 $ 1,104,579
Tenet Healthcare Corp.* 61,300 983,865
----------------
$ 2,088,444
----------------
MEDICAL EQUIPMENT -- 14.9%
AmerisourceBergen Corp. 11,470 $ 644,041
Apogent Technologies, Inc.* 34,530 795,571
Applera Corp. 67,630 1,400,617
C.R. Bard, Inc. 18,120 1,472,250
Cytyc Corp.* 190,940 2,627,334
DENTSPLY International, Inc. 33,640 1,519,519
Guidant Corp. 20,840 1,254,568
Invitrogen Corp.* 33,780 2,364,600
Millipore Corp.* 54,790 2,358,710
Thermo Electron Corp.* 58,400 1,471,680
Thoratec Corp.* 29,600 385,096
Waters Corp.* 18,820 624,071
----------------
$ 16,918,057
----------------
OIL SERVICES -- 3.1%
BJ Services Co.* 50,440 $ 1,810,796
Cooper Cameron Corp.* 14,520 676,632
Smith International, Inc.* 23,830 989,422
----------------
$ 3,476,850
----------------
PHARMACEUTICALS -- 1.2%
Medicis Pharmaceutical Corp., "A" 19,090 $ 1,361,117
----------------
PRINTING & PUBLISHING -- 1.5%
Meredith Corp. 33,660 $ 1,642,945
----------------
RESTAURANTS -- 1.7%
Outback Steakhouse, Inc. 17,930 $ 792,685
The Cheesecake Factory, Inc.* 26,140 1,150,944
----------------
$ 1,943,629
----------------
SPECIALTY STORES -- 5.1%
Hot Topic, Inc.* 9,400 $ 276,924
Office Depot, Inc.* 47,790 798,571
Pacific Sunwear of California Co.* 14,500 306,240
PETsMART, Inc. 57,900 1,378,020
Ross Stores, Inc. 45,880 1,212,608
Tiffany & Co. 39,210 1,772,292
----------------
$ 5,744,655
----------------
TELECOMMUNICATIONS -- WIRELINE -- 3.4%
ADTRAN, Inc. 16,660 $ 516,460
Andrew Corp.* 29,700 341,847
CIENA Corp.* 84,620 561,877
Corning, Inc.* 119,500 1,246,385
</Table>
26
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
TELECOMMUNICATIONS -- WIRELINE -- continued
F5 Networks, Inc.* 4,300 $ 107,930
Juniper Networks, Inc.* 56,450 1,054,486
----------------
$ 3,828,985
----------------
TRUCKING -- 1.5%
Expeditors International of Washington, Inc. 25,310 $ 953,174
Swift Transportation, Inc.* 36,840 774,377
----------------
$ 1,727,551
----------------
WIRELESS COMMUNICATIONS -- 3.6%
American Tower Corp., "A"* 178,530 $ 1,931,695
Crown Castle International Corp.* 133,100 1,468,093
Spectrasite, Inc.* 19,550 679,363
----------------
$ 4,079,151
----------------
TOTAL U.S.STOCKS $ 104,524,609
----------------
FOREIGN STOCKS -- 4.1%
BERMUDA -- 1.0%
Marvell Technology Group Ltd. (Electronics) 30,500 $ 1,156,865
----------------
BRAZIL -- 0.3%
Embraer-Empresa Brasileira de Aeronautica,
ADR (Aerospace) 10,300 $ 360,809
----------------
CANADA -- 0.5%
Four Seasons Hotels, Inc.
(Gaming & Lodging) 10,790 $ 551,908
----------------
SINGAPORE-- 1.0%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 73,190 $ 1,086,140
----------------
UNITED KINGDOM-- 1.3%
Amdocs Ltd. (Computer Software)* 65,650 $ 1,475,812
----------------
TOTAL FOREIGN STOCKS $ 4,631,534
----------------
TOTAL STOCKS
(IDENTIFIED COST, $94,511,580) $ 109,156,143
----------------
SHORT-TERM OBLIGATIONS -- 4.0%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
New Center Asset Trust, due 1/02/04
at Amortized Cost $ 4,509 $ 4,508,878
----------------
TOTAL INVESTMENTS (IDENTIFIED COST, $99,020,458) $ 113,665,021
----------------
OTHER ASSETS,
LESS LIABILITIES -- (0.4)% (425,176)
----------------
Net Assets -- 100.0% $ 113,239,845
================
</Table>
See portfolio footnotes and notes to financial statements.
RESEARCH SERIES
STOCKS -- 97.8%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 86.8%
AEROSPACE -- 1.4%
Lockheed Martin Corp. 130,110 $ 6,687,654
----------------
AIRLINES -- 0.9%
Southwest Airlines Co. 266,000 $ 4,293,240
----------------
APPAREL MANUFACTURERS -- 0.5%
Reebok International Ltd. 56,700 $ 2,229,444
----------------
BANKS & CREDIT COMPANIES -- 11.4%
American Express Co. 181,600 $ 8,758,568
Bank of America Corp. 114,510 9,210,039
Bank One Corp. 106,360 4,848,953
Citigroup, Inc. 295,258 14,331,823
Freddie Mac 108,210 6,310,807
Investors Financial Services Corp.^ 25,900 994,819
Mellon Financial Corp. 216,890 6,964,338
TCF Financial Corp.^ 68,170 3,500,530
----------------
$ 54,919,877
----------------
BIOTECHNOLOGY -- 1.5%
Genzyme Corp.* 100,600 $ 4,963,604
Gilead Sciences, Inc.* 39,100 2,273,274
----------------
$ 7,236,878
----------------
BROADCAST & CABLE TV -- 3.5%
Clear Channel Communications, Inc. 163,250 $ 7,644,998
Comcast Corp., "A"* 192,500 6,327,475
Cumulus Media, Inc., "A"*^ 119,600 2,631,200
----------------
$ 16,603,673
----------------
BROKERAGE & ASSET MANAGERS -- 5.5%
Franklin Resources, Inc. 157,590 $ 8,204,136
Janus Capital Group, Inc. 244,800 4,017,168
Lehman Brothers Holdings, Inc. 63,800 4,926,636
Merrill Lynch & Co., Inc. 159,020 9,326,523
----------------
$ 26,474,463
----------------
BUSINESS SERVICES -- 1.8%
Getty Images, Inc.* 122,800 $ 6,155,964
Monster Worldwide, Inc.* 117,600 2,582,496
----------------
$ 8,738,460
----------------
CHEMICALS -- 2.6%
Air Products & Chemicals, Inc. 92,180 $ 4,869,869
Dow Chemical Co. 118,660 4,932,696
Lyondell Chemical Co.^ 169,890 2,879,636
----------------
$ 12,682,201
----------------
COMPUTER SOFTWARE -- 4.8%
Akamai Technologies, Inc.*^ 180,000 $ 1,935,000
Microsoft Corp. 530,960 14,622,638
Netscreen Technologies, Inc.* 180,160 4,458,960
Networks Associates, Inc.* 141,970 2,135,229
----------------
$ 23,151,827
----------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.6%
Hewlett-Packard Co. 192,540 $ 4,422,644
IBM Corp. 35,890 3,326,285
----------------
$ 7,748,929
----------------
CONSUMER GOODS & SERVICES -- 4.5%
Colgate-Palmolive Co. 104,800 $ 5,245,240
Kimberly-Clark Corp. 75,540 4,463,659
Newell Rubbermaid, Inc. 221,160 5,035,813
Procter & Gamble Co. 70,930 7,084,488
----------------
$ 21,829,200
----------------
CONSUMER SERVICES -- 0.8%
Corinthian Colleges, Inc.* 72,400 $ 4,022,544
----------------
CONTAINERS -- 0.8%
Smurfit-Stone Container Corp.* 218,100 $ 4,050,117
----------------
</Table>
27
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
ELECTRICAL EQUIPMENT -- 3.1%
General Electric Co. 169,500 $ 5,251,110
Tyco International Ltd. 366,500 9,712,250
----------------
$ 14,963,360
----------------
ELECTRONICS -- 2.4%
Agere Systems, Inc., "B"* 1,509,300 $ 4,376,970
Intel Corp. 138,900 4,472,580
Novellus Systems, Inc.* 66,400 2,792,120
----------------
$ 11,641,670
----------------
ENERGY -- INDEPENDENT -- 0.5%
Unocal Corp. 70,400 $ 2,592,832
----------------
ENERGY -- INTEGRATED -- 0.9%
Amerada-Hess Corp. 13,700 $ 728,429
ExxonMobil Corp. 86,066 3,528,706
----------------
$ 4,257,135
----------------
ENTERTAINMENT -- 1.1%
Viacom, Inc., "B" 115,651 $ 5,132,591
----------------
FOOD & DRUG STORES -- 0.5%
CVS Corp. 31,600 $ 1,141,392
Rite Aid Corp.*^ 209,100 1,262,964
----------------
$ 2,404,356
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 1.4%
PepsiCo, Inc. 142,170 $ 6,627,965
----------------
FOREST & PAPER PRODUCTS -- 0.9%
Boise Cascade Corp.^ 93,700 $ 3,078,982
Bowater, Inc. 29,180 1,351,326
----------------
$ 4,430,308
----------------
GAMING & LODGING -- 0.5%
Hilton Hotels Corp. 140,760 $ 2,411,219
----------------
GENERAL MERCHANDISE -- 3.4%
Kohl's Corp.* 215,480 $ 9,683,671
Target Corp. 177,530 6,817,152
----------------
$ 16,500,823
----------------
INSURANCE -- 1.0%
American International Group, Inc. 73,030 $ 4,840,428
----------------
INTERNET -- 2.1%
Ebay, Inc.* 81,100 $ 5,238,249
InterActive Corp.* 143,970 4,884,902
----------------
$ 10,123,151
----------------
MACHINERY & TOOLS -- 0.4%
Eaton Corp. 19,800 $ 2,138,004
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 2.4%
Caremark Rx, Inc.* 101,900 $ 2,581,127
Fisher Scientific International, Inc.* 57,770 2,389,945
Tenet Healthcare Corp.* 411,800 6,609,390
----------------
$ 11,580,462
----------------
MEDICAL EQUIPMENT -- 4.0%
AmerisourceBergen Corp. 35,820 $ 2,011,293
Applera Corp. 91,980 1,904,906
Baxter International, Inc. 147,610 4,505,057
Guidant Corp. 129,520 7,797,104
Millipore Corp.* 30,640 1,319,052
Thermo Electron Corp.* 72,100 1,816,920
----------------
$ 19,354,332
----------------
OIL SERVICES -- 2.2%
GlobalSantaFe Corp. 182,605 $ 4,534,082
Halliburton Co. 141,230 3,671,980
Noble Corp.* 64,130 2,294,572
----------------
$ 10,500,634
----------------
PHARMACEUTICALS -- 5.0%
Johnson & Johnson Co. 257,860 $ 13,321,048
Schering Plough Corp. 402,580 7,000,866
Wyeth 90,400 3,837,480
----------------
$ 24,159,394
----------------
PRINTING & PUBLISHING -- 0.9%
Lamar Advertising Co., "A"* 109,680 $ 4,093,258
----------------
RAILROAD & SHIPPING -- 1.3%
Union Pacific Corp. 88,640 $ 6,158,707
----------------
SPECIALTY STORES -- 1.3%
Home Depot, Inc. 128,180 $ 4,549,108
Hot Topic, Inc.*^ 59,600 1,755,816
----------------
$ 6,304,924
----------------
TELECOMMUNICATIONS -- WIRELINE -- 1.9%
ADTRAN, Inc. 73,800 $ 2,287,800
Cisco Systems, Inc.* 284,980 6,922,164
----------------
$ 9,209,964
----------------
TELEPHONE SERVICES -- 1.4%
Cincinnati Bell, Inc.*^ 242,950 $ 1,226,897
Verizon Communications, Inc. 160,210 5,620,167
----------------
$ 6,847,064
----------------
TOBACCO -- 2.4%
Altria Group, Inc. 212,410 $ 11,559,352
----------------
UTILITIES -- ELECTRIC POWER -- 2.3%
Calpine Corp.* 214,100 $ 1,029,821
Dominion Resources, Inc. 36,460 2,327,242
Exelon Corp. 29,800 1,977,528
FirstEnergy Corp. 89,730 3,158,496
PPL Corp. 56,200 2,458,750
----------------
$ 10,951,837
----------------
WIRELESS COMMUNICATIONS -- 1.9%
AT&T Wireless Services, Inc.* 525,410 $ 4,198,026
Sprint Corp. (PCS Group)* 857,250 4,817,745
----------------
$ 9,015,771
----------------
TOTAL U.S.STOCKS $ 418,468,048
----------------
FOREIGN STOCKS -- 11.0%
BERMUDA -- 2.2%
Ace Ltd. (Insurance) 121,340 $ 5,025,903
Marvell Technology Group Ltd.
(Electronics)*^ 61,000 2,313,730
XL Capital Ltd., "A" (Insurance) 45,950 3,563,422
----------------
$ 10,903,055
----------------
CANADA -- 1.9%
Magna International, Inc., "A" (Automotive) 29,410 $ 2,354,270
Nortel Networks Corp.
(Telecommunications -- Wireline)*^ 894,870 3,785,300
Talisman Energy, Inc.
(Energy -- Independent) 50,260 2,859,222
----------------
$ 8,998,792
----------------
CAYMAN ISLANDS -- 0.5%
Transocean Sedco Forex, Inc.
(Oil Services)* 107,200 $ 2,573,872
----------------
NETHERLANDS -- 1.2%
STMicroelectronics N.V. (Electronics)^ 208,960 $ 5,644,010
----------------
SINGAPORE -- 0.5%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 156,300 $ 2,319,492
----------------
SWITZERLAND -- 0.4%
Alcon, Inc. (Medical Equipment) 30,800 $ 1,864,632
----------------
UNITED KINGDOM -- 4.3%
Amdocs Ltd. (Computer Software)* 338,460 $ 7,608,581
BHP Billiton PLC (Metals & Mining) 553,660 4,822,960
BP Amoco PLC (Energy -- Integrated)* 871,300 7,045,578
Diageo PLC (Alcoholic Beverages)* 104,110 1,365,936
----------------
$ 20,843,055
----------------
Total Foreign Stocks $ 53,146,908
----------------
Total Stocks
(Identified Cost, $436,990,686) $ 471,614,956
----------------
</Table>
28
<Page>
CONVERTIBLE PREFERRED STOCK -- 0.1%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 0.1%
ENERGY -- INTEGRATED -- 0.1%
Amerada-Hess Corp. 7.00%,
(Identified Cost, $313,500) 6,270 $ 343,909
----------------
REPURCHASE AGREEMENT -- 2.5%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch & Co., Inc., dated 12/31/03,
due 01/02/04, total to be received
$12,168,642 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at cost $ 12,168 $ 12,168,000
----------------
COLLATERAL FOR SECURITIES LOANED -- 5.2%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 25,228,215 $ 25,228,215
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $474,700,401) $ 509,355,080
----------------
OTHER ASSETS,
LESS LIABILITIES -- (5.6)% (27,205,183)
----------------
Net Assets -- 100.0% $ 482,149,897
================
</Table>
See portfolio footnotes and notes to financial statements.
TOTAL RETURN SERIES
STOCKS -- 59.6%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 56.3%
AEROSPACE -- 0.8%
Honeywell International, Inc.,^ 32,400 $ 1,083,132
Lockheed Martin Corp. 196,200 10,084,680
Northrop Grumman Corp. 37,800 3,613,680
----------------
$ 14,781,492
----------------
BANKS & CREDIT COMPANIES -- 8.9%
American Express Co. 88,800 $ 4,282,824
Bank of America Corp.,^ 153,690 12,361,287
Bank One Corp. 214,100 9,760,819
Citigroup, Inc. 752,633 36,532,806
Federal Home Loan Mortgage Corp. 205,320 11,974,262
Federal National Mortgage Assn. 180,330 13,535,570
FleetBoston Financial Corp. 456,480 19,925,352
J. P. Morgan Chase & Co. 149,100 5,476,443
Mellon Financial Corp. 830,900 26,680,199
PNC Financial Services Group Co. 69,600 3,809,208
SouthTrust Corp. 123,200 4,032,336
SunTrust Banks, Inc. 192,500 13,763,750
U.S. Bancorp,^ 180,809 5,384,492
Wachovia Corp. 54,200 2,525,178
Wells Fargo Co.,^ 22,000 1,295,580
----------------
$ 171,340,106
----------------
BROADCAST & CABLE TV -- 1.7%
Comcast Corp., "Special A"* 723,950 $ 22,645,156
Cox Communications, Inc., "A",*^ 171,500 5,908,175
Time Warner, Inc.* 230,000 4,137,700
----------------
$ 32,691,031
----------------
BROKERAGE & ASSET MANAGERS -- 1.6%
Franklin Resources, Inc.,^ 26,300 $ 1,369,178
Merrill Lynch & Co., Inc. 355,500 20,850,075
Morgan Stanley Dean Witter & Co. 155,700 9,010,359
----------------
$ 31,229,612
----------------
CHEMICALS -- 1.9%
Air Products & Chemicals, Inc.,^ 250,450 $ 13,231,273
Dow Chemical Co.,^ 191,700 7,968,969
Lyondell Chemical Co.,^ 221,730 3,758,324
PPG Industries Corp. 166,400 10,652,928
Praxair, Inc. 27,400 1,046,680
----------------
$ 36,658,174
----------------
COMPUTER SOFTWARE -- 1.1%
Microsoft Corp. 650,700 $ 17,920,278
Networks Associates, Inc.* 280,200 4,214,208
----------------
$ 22,134,486
----------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.6%
Hewlett-Packard Co. 222,000 $ 5,099,340
IBM Corp. 60,390 5,596,945
----------------
$ 10,696,285
----------------
CONSUMER GOODS & SERVICES -- 2.2%
Colgate-Palmolive Co. 33,000 $ 1,651,650
Gillette Co. 102,100 3,750,133
Kimberly-Clark Corp. 397,900 23,511,911
Newell Rubbermaid, Inc. 517,600 11,785,752
Procter & Gamble Co. 12,230 1,221,532
----------------
$ 41,920,978
----------------
CONTAINERS -- 0.7%
Owens Illinois, Inc.* 684,200 $ 8,135,138
Smurfit-Stone Container Corp.,*^ 288,900 5,364,873
----------------
$ 13,500,011
----------------
ELECTRICAL EQUIPMENT -- 1.7%
Emerson Electric Co. 114,600 $ 7,420,350
General Electric Co.,^ 490,800 15,204,984
Tyco International Ltd. 373,500 9,897,750
----------------
$ 32,523,084
----------------
</Table>
29
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
ELECTRONICS -- 0.3%
Texas Instruments, Inc. 226,520 $ 6,655,158
----------------
ENERGY -- INDEPENDENT -- 1.2%
Devon Energy Corp. 371,410 $ 21,266,937
Unocal Corp.,^ 64,500 2,375,535
----------------
$ 23,642,472
----------------
ENERGY -- INTEGRATED -- 2.0%
ConocoPhillips Co., 73,300 $ 4,806,281
ExxonMobil Corp.,^ 531,596 21,795,436
Occidental Petroleum Corp. 298,140 12,593,434
----------------
$ 39,195,151
----------------
ENTERTAINMENT -- 1.6%
Viacom, Inc., "B" 625,583 $ 27,763,374
Walt Disney Co. 128,980 3,009,103
----------------
$ 30,772,477
----------------
FOOD & DRUG STORES -- 0.7%
Kroger Co.* 633,240 $ 11,721,272
Rite Aid Corp.,*^ 176,300 1,064,852
----------------
$ 12,786,124
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 1.1%
Archer-Daniels-Midland Co.,^ 489,345 $ 7,447,831
Kellogg Co.,^ 305,600 11,637,248
PepsiCo, Inc. 54,228 2,528,109
----------------
$ 21,613,188
----------------
FOREST & PAPER PRODUCTS -- 0.9%
Boise Cascade Corp.,^ 33,200 $ 1,090,952
Bowater, Inc.,^ 159,700 7,395,707
International Paper Co.,^ 220,400 9,501,444
----------------
$ 17,988,103
----------------
GAMING & LODGING -- 0.2%
Hilton Hotels Corp.,^ 134,500 $ 2,303,985
Starwood Hotels & Resorts Co., "B" 42,400 1,525,128
----------------
$ 3,829,113
----------------
GENERAL MERCHANDISE -- 0.9%
May Department Stores Co.,^ 79,100 $ 2,299,437
Sears, Roebuck & Co. 343,400 15,621,266
----------------
$ 17,920,703
----------------
INSURANCE -- 3.5%
Allstate Insurance Corp. 542,830 $ 23,352,547
Chubb Corp. 122,500 8,342,250
Hartford Financial Services Group, Inc. 318,940 18,827,028
Marsh & McLennan Cos., Inc. 15,700 751,873
Metropolitan Life Insurance Co.,^ 172,890 5,821,206
Travelers Property Casualty Corp., "A",^ 628,200 10,541,196
----------------
$ 67,636,100
----------------
MACHINERY & TOOLS -- 0.3%
Deere & Co. 90,660 $ 5,897,433
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.3%
Tenet Healthcare Corp.* 323,100 $ 5,185,755
----------------
MEDICAL EQUIPMENT -- 0.4%
Baxter International, Inc 228,700 $ 6,979,924
----------------
METALS & MINING -- 0.9%
Alcoa, Inc. 434,329 $ 16,504,502
----------------
NATURAL GAS -- DISTRIBUTION -- 0.6%
National Fuel Gas Co.,^ 153,490 $ 3,751,295
NiSource, Inc.,^ 331,019 7,262,557
WGL Holdings, Inc. 42,430 1,179,130
----------------
$ 12,192,982
----------------
OIL SERVICES -- 3.8%
BJ Services Co.* 213,400 $ 7,661,060
Cooper Cameron Corp.* 121,880 5,679,608
GlobalSantaFe Corp. 804,400 19,973,252
Noble Corp.** 656,400 23,485,992
Schlumberger Ltd.,^ 299,640 16,396,301
----------------
$ 73,196,213
----------------
PHARMACEUTICALS -- 4.9%
Eli Lilly & Co. 97,980 $ 6,890,934
Johnson & Johnson Co. 487,500 25,184,250
Merck& Co., Inc. 278,100 12,848,220
Pfizer, Inc. 659,600 23,303,668
Schering- Plough Corp. 1,301,570 22,634,302
Wyeth 63,200 2,682,840
----------------
$ 93,544,214
----------------
PRINTING & PUBLISHING -- 0.9%
New York Times Co., "A" 173,700 $ 8,301,123
Tribune Co. 172,600 8,906,160
----------------
$ 17,207,283
----------------
RAILROAD & SHIPPING -- 0.9%
Burlington Northern Santa Fe Railway Co. 274,580 $ 8,882,663
Union Pacific Corp. 117,000 8,129,160
----------------
$ 17,011,823
----------------
REAL ESTATE -- 0.4%
Equity Residential Properties Trust 252,820 $ 7,460,718
Healthcare Realty Trust 8,800 314,600
----------------
$ 7,775,318
----------------
RESTAURANTS -- 0.3%
McDonald's Corp. 220,400 $ 5,472,532
----------------
SPECIALTY STORES -- 0.4%
Home Depot, Inc. 192,100 $ 6,817,629
----------------
TELEPHONE SERVICES-- 3.7%
AT&T Corp.,^ 928,830 $ 18,855,249
BellSouth Corp. 233,300 6,602,390
SBC Communications, Inc. 452,646 11,800,481
Verizon Communications, Inc. 987,512 34,641,921
----------------
$ 71,900,041
----------------
TOBACCO -- 0.6%
Altria Group, Inc. 205,300 $ 11,172,426
----------------
UTILITIES -- ELECTRIC POWER -- 2.5%
Calpine Corp.* 1,812,000 $ 8,715,720
Cinergy Corp.,^ 75,200 2,918,512
Dominion Resources, Inc.,^ 34,000 2,170,220
Entergy Corp.,^ 50,900 2,907,917
Exelon Corp.,^ 51,140 3,393,650
FirstEnergy Corp. 110,270 3,881,504
FPL Group, Inc. 38,080 2,491,194
PPL Corp.,^ 124,400 5,442,500
TXU Corp.,^ 578,900 13,731,508
----------------
$ 45,652,725
----------------
WIRELESS COMMUNICATIONS -- 1.8%
AT&T Wireless Services, Inc.* 3,140,326 $ 25,091,205
Telephone & Data Systems, Inc. 154,595 9,669,917
----------------
$ 34,761,122
----------------
TOTAL U.S.STOCKS $ 1,080,785,770
----------------
FOREIGN STOCKS -- 3.3%
AUSTRALIA -- 0.2%
BHP Billiton Ltd. (Metals& Mining) 526,100 $ 4,828,790
----------------
FRANCE -- 0.2%
Total Fina S.A., ADR
(Energy -- Integrated),^ 37,000 $ 3,422,870
----------------
SWITZERLAND -- 1.0%
Novartis AG (Pharmaceuticals) 183,300 $ 8,318,350
Roche Holdings AG (Pharmaceuticals) 55,000 5,545,341
Syngenta AG (Chemicals) 66,600 4,483,779
----------------
$ 18,347,470
----------------
UNITED KINGDOM -- 1.9%
BP PLC, ADR (Energy -- Integrated) 284,020 $ 14,016,387
Diageo PLC (Alcoholic Beverages)* 245,000 3,214,431
Reed Elsevier PLC (Printing & Publishing) 1,281,000 10,684,375
</Table>
30
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
UNITED KINGDOM -- continued
Vodafone Group PLC, ADR
(Wireless Communications),^ 360,071 $ 9,016,178
----------------
$ 36,931,371
----------------
TOTAL FOREIGN STOCKS $ 63,530,501
----------------
TOTAL STOCKS
(IDENTIFIED COST, $998,427,643) $ 1,144,316,271
----------------
BONDS -- 37.0%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
U.S. BONDS -- 35.9%
AEROSPACE -- 0.5%
BAE Systems Holding, Inc., 6.4s, 2011## $ 1,950 $ 2,096,104
Boeing Capital Corp., 6.5s, 2012 3,252 3,555,548
Northrop Grumman Corp., 7.75s, 2031 2,738 3,329,400
----------------
$ 8,981,052
----------------
AIRLINES -- 0.2%
Continental Airlines, Inc., 6.648s, 2017 $ 2,438 $ 2,381,470
Continental Airlines, Inc., 7.256s, 2020 1,524 1,548,697
Jet Equipment Trust, 11.44s, 2014# 1,200 6,000
----------------
$ 3,936,167
----------------
ALCOHOLIC BEVERAGES
Miller Brewing Co., 5.5s, 2013## $ 957 $ 977,712
----------------
ASSET BACKED & SECURITIZED -- 2.5%
BCF LLC, 7.75s, 2026## $ 381 $ 299,638
Bear Stearns Commercial Mortgage
Securities, Inc., 6.8s, 2008 2,451 2,607,722
Beneficial Home Equity Loan Trust,
1.239s, 2037 1,864 1,847,685
Capital One Auto Finance Trust,
4.79s, 2009 1,750 1,819,782
Certificates Funding Corp., 6.716s, 2004## 5,773 5,880,657
Chase Commercial Mortgage Securities
Corp., 6.39s, 2030 2,893 3,214,520
Chase Commercial Mortgage Securities
Corp., 7.543s, 2032 833 924,478
Chase Mortgage Finance Trust, 6s, 2017 357 358,739
Citibank Credit Card Issuance Trust,
6.65s, 2008 4,743 5,122,880
CPS Auto Receivables Trust, 2.89s, 2009 307 307,079
Criimi Mae Commercial Mortgage Trust,
7s, 2033## 1,630 1,766,799
Criimi Mae Corp., 6.701s, 2030## 1,272 1,362,370
CWMBS, Inc. Pass-Through Trust, 8s, 2030 3,677 3,737,650
Deutsche Mortgage and Asset Receiving
Corp., 6.538s, 2031 2,033 2,226,500
Federal National Mortgage Assn.,
4.08s, 2031 2,351 2,358,362
First Union Lehman Brothers Bank,
6.56s, 2035 887 988,891
First Union-Lehman Brothers Commercial
Mortgage, 7.38s, 2029 790 878,914
GS Mortgage Securities Corp, II,
6.06s, 2030 2,270 2,369,457
J. P. Morgan Commercial Mortgage Finance
Corp., 6.613s, 2030 1,179 1,306,749
Merrill Lynch Mortgage Investors, Inc.,
6.39s, 2030 869 950,113
Morgan Stanley Capital I, Inc.,
0.6649s, 2030, (Interest Only)## 79,829 2,276,471
Mortgage Capital Funding, Inc.,
6.337s, 2031 2,846 3,143,857
Multi Family Capital Access One, Inc.,
6.65s, 2024 609 678,817
</Table>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
ASSET BACKED & SECURITIZED -- continued
Residential Accredit Loans, Inc., 7s, 2028 $ 828 $ 830,251
Residential Funding Mortgage
Securities, Inc., 6s, 2016 445 447,772
----------------
$ 47,706,153
----------------
AUTOMOTIVE -- 0.7%
DaimlerChrysler North America Holdings,
6.5s, 2013 $ 1,495 $ 1,574,848
Ford Motor Credit Co., 6.875s, 2006 625 667,067
Ford Motor Credit Co., 7s, 2013 1,006 1,061,007
Ford MotorCo., 7.45s, 2031 1,655 1,672,412
General Motors Acceptance Corp.,
5.36s, 2004 5,000 5,099,730
General Motors Acceptance Corp.,
6.875s, 2011 2,196 2,365,371
General Motors Acceptance Corp.,
8s, 2031 1,396 1,567,662
General Motors Corp., 7.2s, 2011 376 413,407
----------------
$ 14,421,504
----------------
BANKS & CREDIT COMPANIES -- 1.5%
Abbey National Capital Trust I,
8.963s, 2030 $ 1,558 $ 2,068,691
Associates Corp., 5.5s, 2004 2,130 2,140,239
Bank of America Corp., 7.4s, 2011 2,792 3,274,541
Citigroup, Inc., 7.25s, 2010 3,761 4,383,664
Credit Suisse First Boston (USA), Inc.,
4.625s, 2008 6,364 6,615,187
Credit Suisse First Boston (USA), Inc.,
6.125s, 2011 614 668,482
Natexis AMBS Co., LLC, 8.44s, 2008## 135 158,621
Popular North America, Inc., 4.25s, 2008 1,839 1,870,042
RBS Capital Trust, 6.425s, 2049 1,490 1,505,907
Socgen Real Estate Co., 7.64s, 2049## 3,128 3,533,914
Unicredito Italiano
Capital Trust, 9.2s, 2049## 1,509 $ 1,895,670
----------------
$ 28,114,958
----------------
BROADCAST & CABLE TV -- 0.5%
Cox Communications, Inc., 7.75s, 2010 $ 2,881 $ 3,432,020
TCI Communications Financing III,
9.65s, 2027 4,805 5,790,025
----------------
$ 9,222,045
----------------
BROKERAGE & ASSET MANAGERS -- 0.3%
Lehman Brothers Holdings, Inc.,
7.75s, 2005 $ 1,583 $ 1,691,515
Lehman Brothers Holdings, Inc.,
8.25s, 2007 1,405 1,637,697
Morgan Stanley Dean Witter & Co.,
6.1s, 2006 3,045 3,295,055
----------------
$ 6,624,267
----------------
BUILDING -- 0.1%
CRH America, Inc., 6.95s, 2012 $ 1,847 $ 2,083,833
----------------
CHEMICALS -- 0.1%
Dow Chemical Co., 5.75s, 2008 $ 1,416 $ 1,518,207
----------------
CONGLOMERATES -- 0.3%
General Electric Capital Corp., 7.5s, 2005 $ 3,643 $ 3,926,160
General Electric Capital Corp., 8.75s, 2007 904 1,071,622
----------------
$ 4,997,782
----------------
CONSUMER CYCLICAL -- 0.1%
Cendant Corp., 6.875s, 2006 $ 1,280 $ 1,404,342
Cendant Corp., 6.25s, 2008 750 818,121
----------------
$ 2,222,463
----------------
DEFENSE ELECTRONICS -- 0.1%
Raytheon Co., 6.15s, 2008 $ 1,817 $ 1,977,152
----------------
</Table>
31
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
ENERGY -- INDEPENDENT -- 0.2%
Devon Financing Corp., ULC, 6.875s, 2011 $ 3,000 $ 3,401,775
----------------
ENERGY -- INTEGRATED -- 0.1%
Amerada Hess Corp., 7.3s, 2031 $ 578 $ 596,841
Phillips Petroleum Co., 8.5s, 2005 2,211 2,410,258
----------------
$ 3,007,099
----------------
ENTERTAINMENT -- 0.4%
AOL Time Warner, Inc., 6.15s, 2007 $ 751 $ 817,114
News America, Inc., 6.703s, 2004 3,822 3,883,011
Time Warner, Inc., 10.15s, 2012 335 447,058
Time Warner, Inc., 6.875s, 2018 1,180 1,297,633
Walt Disney Co., 6.75s, 2006 597 649,325
----------------
$ 7,094,141
----------------
FINANCIAL SERVICES -- 0.3%
Countrywide Home Loan, Inc., 6.85s, 2004 $ 1,792 $ 1,834,791
SLM Corp., 4s, 2009 1,394 1,403,575
SLM Corp., 5.375s, 2013 1,702 1,746,475
----------------
$ 4,984,841
----------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.2%
Kellogg Co., 6s, 2006 $ 2,170 $ 2,325,242
Kraft Foods, Inc., 6.25s, 2012 1,079 1,175,960
----------------
$ 3,501,202
----------------
FOREST & PAPER PRODUCTS -- 0.2%
MeadWestvaco Corp., 6.8s, 2032 $ 915 $ 940,915
Weyerhaeuser Co., 6.75s, 2012 2,123 2,316,066
----------------
$ 3,256,981
----------------
GAMING & LODGING -- 0.2%
Harrah's Entertainment, Inc., 7.125s, 2007 $ 1,476 $ 1,643,660
MGM Mirage, Inc., 8.5s, 2010 1,563 1,793,543
----------------
$ 3,437,203
----------------
INSURANCE -- 0.5%
AIG SunAmerica, 7.6s, 2005## $ 3,135 $ 3,406,212
AIG SunAmerica Institutional Funding,
5.75s, 2009 2,804 3,024,114
Metropolitan Life Insurance Co., 6.5s, 2032 1,575 1,670,081
Prudential Funding Corp., 6.6s, 2008## 1,544 1,718,761
----------------
$ 9,819,168
----------------
INSURANCE -- PROPERTY & CASUALTY -- 0.1%
Allstate Insurance Corp., 6.125s, 2032 $ 1,617 $ 1,662,763
SAFECO, Inc., 4.875s, 2010 283 291,762
Travelers Property Casualty Corp.,
6.375s, 2033 736 767,478
----------------
$ 2,722,003
----------------
MACHINERY & TOOLS -- 0.1%
Kennametal, Inc., 7.2s, 2012 $ 1,780 $ 1,887,973
----------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.2%
HCA, Inc., 8.75s, 2010 $ 550 $ 654,904
HCA, Inc., 6.95s, 2012 2,004 2,148,713
HCA, Inc., 6.25s, 2013 580 593,692
----------------
$ 3,397,309
----------------
MORTGAGE BACKED-- 12.7%
Federal Home Loan MortgageCorp.,
4.5s, 2018 $ 10,124 $ 10,134,764
Federal Home Loan MortgageCorp.,
5s, 2017-2033 15,817 15,784,890
Federal Home Loan MortgageCorp.,
5.5s, 2033 13,092 13,256,893
Federal National Mortgage Assn.,
4.5s, 2018 7,765 7,782,393
Federal National Mortgage Assn.,
5s, 2018 17,894 18,267,212
Federal National Mortgage Assn.,
5.5s, 2016-2033 53,304 54,336,700
Federal National Mortgage Assn.,
5.722s, 2009 $ 5,090 $ 5,486,420
Federal National Mortgage Assn.,
6s, 2016-2033 46,396 48,235,627
Federal National Mortgage Assn.,
6.5s, 2028 31,280 32,725,380
Federal National Mortgage Assn.,
7.5s, 2030 3,644 3,894,841
Government National Mortgage Assn.,
5.5s, 2033 18,625 18,954,456
Government National Mortgage Assn.,
6s, 2033 8,663 9,010,708
Government National Mortgage Assn.,
6.5s, 2028-2033 4,701 4,959,376
Government National Mortgage Assn.,
7s, 2032 250 266,827
Government National Mortgage Assn.,
7.5s, 2024-2028 22 23,618
----------------
$ 243,120,105
----------------
NATURAL GAS -- PIPELINE -- 0.2%
Kinder Morgan Energy Partners,
6.75s, 2011 $ 740 $ 830,646
Kinder Morgan Energy Partners,
7.4s, 2031 1,373 1,568,161
Kinder Morgan Energy Partners,
7.75s, 2032 980 1,169,121
----------------
$ 3,567,928
----------------
PHARMACEUTICALS
Wyeth, 6.5s, 2034 $ 289 $ 294,843
----------------
POLLUTION CONTROL -- 0.2%
Waste Management, Inc., 7.375s, 2010 $ 3,703 $ 4,278,928
----------------
PRINTING & PUBLISHING -- 0.1%
Belo Corp., 7.75s, 2027 $ 2,533 $ 2,894,125
----------------
REAL ESTATE-- 0.5%
Boston Properties Limited Partnership,
5s, 2015 $ 369 $ 352,426
EOP Operating Limited Partnership,
6.8s, 2009 1,238 1,388,526
Simon Property Group, LP, 6.75s, 2004 4,593 4,615,175
Vornado Realty Trust, 5.625s, 2007 3,304 3,527,499
----------------
$ 9,883,626
----------------
TELECOMMUNICATIONS -- WIRELINE -- 0.7%
ALLTEL Corp., 7.875s, 2032 $ 1,115 $ 1,358,109
Citizens Communications Co., 8.5s, 2006 1,645 1,796,112
Citizens Communications Co., 7.625s, 2008 2,281 2,497,583
Sprint Capital Corp., 7.125s, 2006 1,035 1,119,733
Sprint Capital Corp., 6.875s, 2028 1,079 1,052,923
Telecomunicaciones de Puerto Rico, Inc.,
6.65s, 2006 1,716 1,859,909
Verizon New York, Inc., 6.875s, 2012 4,213 4,661,714
----------------
$ 14,346,083
----------------
U.S. GOVERNMENT AGENCIES -- 4.3%
Federal Home Loan Bank, 2.875s, 2006 $ 3,325 $ 3,360,318
Federal Home Loan Mortgage Corp.,
2.875s, 2006 2,198 2,213,757
Federal Home Loan Mortgage Corp.,
4.875s, 2013 15,364 15,530,085
Federal Home Loan Mortgage Corp.,
5.5s, 2006 7,104 7,654,191
Federal Home Loan Mortgage Corp.,
6s, 2011 784 870,157
Federal Home Loan Mortgage Corp.,
7s, 2005 9,270 10,015,577
</Table>
32
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
U.S. GOVERNMENT AGENCIES -- continued
Federal National Mortgage Assn.,
5.125s, 2014 $ 2,617 $ 2,626,102
Federal National Mortgage Assn.,
5.25s, 2007 12,890 13,874,383
Federal National Mortgage Assn.,
6.625s, 2009-2010 19,184 21,980,175
Small Business Administration,
4.35s, 2023 462 445,221
Student Loan Marketing Assn.,
5s, 2004 3,495 3,564,509
----------------
$ 82,134,475
----------------
U.S. TREASURY OBLIGATIONS -- 6.1%
U.S. Treasury Bonds, 5.375s, 2031 $ 3,016 $ 3,145,242
U.S. Treasury Bonds, 6.25s, 2023 18,048 20,585,606
U.S. Treasury Bonds, 8s, 2021 12,528 16,919,653
U.S. Treasury Notes, 1.25s, 2005 3,404 3,394,959
U.S. Treasury Notes, 3s, 2012 9,984 10,884,116
U.S. Treasury Notes, 3.875s, 2013 8,294 8,119,046
U.S. Treasury Notes, 4.25s, 2010 6,460 7,510,565
U.S. Treasury Notes, 4.375s, 2012 1,778 1,813,283
U.S. Treasury Notes, 5.5s, 2008 27,648 30,481,920
U.S. Treasury Notes, 6.5s, 2005 3,354 3,584,587
U.S. Treasury Notes, 6.875s, 2006 6,270 6,970,234
U.S. Treasury Notes, 4s, 2012 3,923 3,885,304
----------------
$ 117,294,515
----------------
UTILITIES -- ELECTRIC POWER -- 1.6%
Centerpoint Energy Resources Corp.,
7.875s, 2013## $ 562 $ 636,239
DTE Energy Co., 7.05s, 2011 1,827 2,048,690
Entergy Corp., 6.2s, 2004 1,620 1,642,586
Exelon Generation Co. LLC, 6.95s, 2011 1,500 1,684,500
FirstEnergy Corp., 6.45s, 2011 619 641,561
Gulf States Utilities Co., 8.25s, 2004 816 828,814
MidAmerican Energy Holdings Co.,
3.5s, 2008 1,030 1,012,619
MidAmerican Energy Holdings Co.,
5.875s, 2012 535 560,963
MidAmerican Funding LLC, 6.927s, 2029 2,762 2,997,234
Niagara Mohawk Power Corp., 7.75s, 2006 942 1,051,868
Northeast Utilities Service Co., 8.58s, 2006 999 1,092,710
Oncor Electric Delivery Co., 7s, 2032 2,720 3,000,565
Progress Energy, Inc., 6.85s, 2012 1,715 1,911,332
Progress Energy, Inc., 7.1s, 2011 608 684,987
PSEG Power LLC, 6.95s, 2012 1,068 1,204,475
PSEG Power LLC, 8.625s, 2031 2,310 2,975,153
Systems Energy Resources, 7.43s, 2011 819 843,729
Toledo Edison Co., 7.875s, 2004 1,725 1,781,025
TXU Energy Co., LLC, 7s, 2013 619 684,612
Waterford 3 Funding Entergy Corp.,
8.09s, 2017 2,291 2,609,970
----------------
$ 29,893,632
----------------
WIRELESS COMMUNICATIONS -- 0.1%
AT&T Wireless Services, Inc., 7.35s, 2006 $ 903 $ 987,456
AT&T Wireless Services, Inc., 8.75s, 2031 1,101 1,358,445
----------------
$ 2,345,901
----------------
TOTAL U.S.BONDS $ 689,347,151
----------------
FOREIGN BONDS -- 1.1%
CANADA -- 0.1%
Hydro Quebec, 6.3s, 2011(Energy) $ 2,256 $ 2,544,333
----------------
CAYMAN ISLANDS -- 0.1%
The Development Bank of Singapore Ltd.,
7.657s, 2049 (Banks & Credit Cos.)## $ 1,476 $ 1,699,614
----------------
FRANCE -- 0.1%
France Telecom S.A., 9.75s, 2031
(Telecommunications -- Wireline) $ 2,000 $ 2,657,350
----------------
GERMANY -- 0.1%
Deutsche Telekom, 8.75s, 2030
(Telecommunications -- Wireline) $ 612 $ 781,786
KfW International Finance, Inc., 4.25s, 2005
(Quasi -- Government) 1,600 1,654,952
----------------
$ 2,436,738
----------------
HONG KONG -- 0.1%
PCCW-HKTC Capital Ltd., 6s, 2013
(Telecommunications-- Wireline)## $ 1,321 $ 1,327,869
----------------
ISRAEL -- 0.1%
State of Israel, 4.625s, 2013 $ 981 $ 935,570
----------------
ITALY -- 0.3%
Republic of Italy, 4.625s, 2005 $ 3,119 $ 3,241,945
Telecom Italia S.p.A, 5.25s, 2013
(Telecommunications -- Wireline)## 2,249 2,253,478
----------------
$ 5,495,423
----------------
MEXICO -- 0.2%
Pemex Project Funding Master Trust,
9.125s, 2010 (Oil Services) $ 2,351 $ 2,785,935
Pemex Project Funding Master Trust,
8.625s, 2022 (Oil Services) 343 379,872
United Mexican States, 8s, 2022 485 530,590
United Mexican States, 8.125s, 2019 726 811,305
----------------
$ 4,507,702
----------------
TOTAL FOREIGN BONDS $ 21,604,599
----------------
TOTAL BONDS
(IDENTIFIED COST, $689,026,835) $ 710,951,750
----------------
CONVERTIBLE PREFERRED STOCKS -- 0.4%
U.S. STOCKS -- 0.4%
INSURANCE -- 0.3%
Chubb Corp., 7.0s $ 64,400 $ 1,839,264
Hartford Financial Services Group, Inc.,
6.0s 57,000 3,369,840
----------------
$ 5,209,104
----------------
TELECOMMUNICATIONS -- WIRELINE -- 0.1%
Motorola, Inc., 7.0s,^ $ 48,800 $ 2,119,384
----------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST, $6,515,159) $ 7,328,488
----------------
SHORT-TERM OBLIGATIONS -- 1.1%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Federal National Mortgage Assn.,
due 1/02/04 $ 17,875 $ 17,874,603
General Motors Acceptance Corp.,
due 1/12/04 2,600 2,598,903
----------------
TOTAL SHORT-TERM OBLIGATIONS,
AT AMORTIZED COST $ 20,473,506
----------------
REPURCHASE AGREEMENT -- 1.8%
Merrill Lynch, dated 12/31/03, due
1/02/04, total to be received
$33,617,774 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded
account), at cost $ 33,616 $ 33,616,000
----------------
</Table>
33
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
COLLATERAL FOR SECURITIES LOANED -- 5.1%
Navigator Securities Lending Prime Portfolio 98,332,134 $ 98,332,134
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $1,846,391,277) $ 2,015,018,149
----------------
OTHER ASSETS,
LESS LIABILITIES -- (5.0)% (95,814,801)
----------------
Net Assets -- 100.0% $ 1,919,203,348
================
</Table>
See portfolio footnotes and notes to financial statements.
UTILITIES SERIES
STOCKS -- 85.2%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 55.1%
BROADCAST & CABLE TV -- 8.3%
Cablevision Systems Corp."A"*^ 80,900 $ 1,892,251
Comcast Corp., "A"* 13,100 430,597
Comcast Corp., "Special A"* 215,700 6,747,096
Cox Communications, Inc., "A"* 45,300 1,560,585
Cox Radio, Inc., "A"* 64,000 1,614,720
EchoStar Communications Corp., "A"* 178,600 6,072,400
Lamar Advertising Co., "A"* 81,500 3,041,580
NTL, Inc.* 4,200 292,950
Time Warner, Inc.* 221,500 3,984,785
----------------
$ 25,636,964
----------------
ENTERTAINMENT -- 2.2%
Clear Channel Communications, Inc. 42,900 2,009,007
Fox Entertainment Group, Inc.* 72,000 2,098,800
Viacom, Inc., "B" 62,500 2,773,750
----------------
$ 6,881,557
----------------
NATURAL GAS -- DISTRIBUTION -- 9.5%
AGL Resources, Inc. 53,000 $ 1,542,300
Equitable Resources, Inc. 279,600 12,000,432
Kinder Morgan, Inc. 81,370 4,808,967
NiSource, Inc. 114,900 2,520,906
ONEOK, Inc. 76,000 1,678,080
Questar Corp. 58,400 2,052,760
Sempra Energy 162,300 4,878,738
----------------
$ 29,482,183
----------------
OIL SERVICES -- 2.8%
GlobalSantaFe Corp. 95,100 $ 2,361,333
Halliburton Co. 135,300 3,517,800
Noble Corp.* 78,000 2,790,840
----------------
$ 8,669,973
----------------
TELEPHONE SERVICES -- 7.9%
CenturyTel, Inc. 18,100 $ 590,422
Cincinnati Bell, Inc.* 861,600 4,351,080
Citizens Communications Co.* 164,200 2,039,364
Verizon Communications, Inc. 236,250 8,287,650
Winstar Communications, Inc.* 153,150 153
SBC Communications, Inc. 354,500 9,241,815
----------------
$ 24,510,484
----------------
UTILITIES -- ELECTRIC POWER -- 21.3%
AES Corp.* 380,700 $ 3,593,808
Cinergy Corp. 56,100 2,177,241
Constellation Energy Group, Inc. 134,000 5,247,440
Dominion Resources, Inc. 81,500 5,202,145
DTE Energy Co.^ 7,200 283,680
Entergy Corp. 83,200 4,753,216
Exelon Corp. 194,800 12,926,928
FirstEnergy Corp. 181,040 6,372,608
FPL Group, Inc. 19,500 1,275,690
MDU Resources Group, Inc. 53,350 1,270,264
PG&E Corp.* 142,500 3,957,225
PPL Corp. 159,600 6,982,500
Public Service Enterprise Group 42,900 1,879,020
Reliant Resources, Inc.*^ 661,000 4,864,960
SCANA Corp. 4,200 143,850
TXU Corp. 214,900 5,097,428
----------------
$ 66,028,003
----------------
WIRELESS COMMUNICATIONS -- 3.1%
AT&T Wireless Services, Inc.* 493,560 $ 3,943,544
NII Holdings, Inc., "B" *^ 14,300 1,067,209
Sprint Corp. (PCS Group)* 847,300 4,761,826
----------------
$ 9,772,579
----------------
TOTAL U.S. STOCKS $ 170,981,743
----------------
</Table>
34
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 30.1%
BRAZIL -- 0.4%
Brasil Telecom Participacoes,
ADR (Telephone Services)^ 34,200 $ 1,292,760
----------------
CANADA -- 1.0%
Encana Corp. (Energy -- Independent) 28,300 $ 1,116,803
Talisman Energy, Inc. (Energy -- Independent) 37,200 2,116,256
----------------
$ 3,233,059
----------------
CAYMAN ISLANDS -- 0.4%
Transocean Sedco Forex, Inc.
(Oil Services)* 50,800 $ 1,219,708
----------------
CHILE -- 0.4%
Empresa Nacional de Electricidad,
ADR (Utilities -- Electric Power)* 102,300 $ 1,196,910
Enersis S.A., ADR (Utilities -- Electric Power)* 19,300 142,048
----------------
$ 1,338,958
----------------
FRANCE -- 4.0%
France Telecom S.A. (Telephone Services) 210,100 $ 5,998,455
Suez S.A. (Utilities -- Electric Power) 110,500 2,217,847
Veolia Environnement
(Utilities -- Electric Power) 152,033 4,080,101
----------------
$ 12,296,403
----------------
GERMANY -- 2.2%
Deutsche Telekom AG
(Telephone Services) 226,600 $ 4,142,674
VEBA AG (Utilities -- Electric Power) 39,400 2,568,480
----------------
$ 6,711,154
----------------
GREECE -- 0.6%
Cosmote S.A. (Telephone Services) 144,300 $ 1,956,285
----------------
ITALY -- 1.1%
Enel S.p.A (Utilities -- Electric Power) 278,100 $ 1,888,614
Snam Rete Gas S.p.A
(Natural Gas -- Distribution) 337,830 1,430,181
----------------
$ 3,318,795
----------------
JAPAN -- 0.5%
VodafoneHoldings Co., Ltd.
(Telephone Services) 589 $ 1,577,851
----------------
MEXICO -- 4.9%
America Movil S.A. de C.V., ADR
(Wireless Communications)^ 205,900 $ 5,629,306
Grupo Televisa S.A., ADR
(Broadcasting & Cable TV)* 35,900 1,430,974
Telefonos de Mexico S.A., ADR
(Telephone Services) 191,900 6,338,457
TV Azteca, S.A. de C.V., ADR
(Broadcast & Cable TV)^ 209,000 1,901,900
----------------
$ 15,300,637
----------------
NETHERLANDS -- 2.3%
Completel Europe N.V
(Telephone Services)* 8,693 $ 307,991
Koninklijke KPN N.V
(Telephone Services) 870,800 6,714,649
----------------
$ 7,022,640
----------------
NEW ZEALAND-- 0.8%
Telecom Corp. of New Zealand, Ltd.
(Telephone Services)* 708,021 $ 2,491,117
----------------
SINGAPORE -- 0.8%
MobileOne Asia Ltd.
(Wireless-- Communications) 2,925,000 $ 2,583,466
----------------
SOUTH KOREA -- 2.0%
Hanaro Telecom, Inc.
(Telephone Services) 814,100 $ 2,230,832
KT Corp. (Telephone Services) 134,410 2,563,199
SK Telecom Co., Ltd.
(Wireless Communications) 7,730 $ 1,291,036
----------------
$ 6,085,067
----------------
SPAIN -- 4.5%
Enagas S.A. (Natural Gas -- Pipeline) 519,474 $ 5,628,799
Endesa S.A., ADR
(Utilities -- Electric Power) 209,700 4,029,227
Red Electrica de Espana
(Utilities -- Electric Power) 103,900 1,701,815
Telefonica S.A. (Telephone Services) 177,000 2,595,851
----------------
$ 13,955,692
----------------
UNITED KINGDOM -- 4.2%
AWG PLC (Utilities -- Electric Power)* 45,300 $ 434,233
AWG PLC New (Utilities -- Electric Power)* 2,044,000 3,649
National Grid Group PLC
(Utilities -- Electric Power) 556,700 3,977,437
Scottish Power PLC
(Utilities -- Electric Power)* 43,300 287,722
Severn Trent PLC
(Utilities -- Electric Power) 43,200 577,586
United Utilities PLC
(Utilities -- Electric Power) 79,800 705,825
United Utilities PLC, "A"
(Utilities -- Electric Power) 132,800 721,832
Vodafone Group PLC
(Wireless Communications)* 2,554,960 6,316,617
----------------
$ 13,024,901
----------------
TOTAL FOREIGN STOCKS $ 93,408,493
----------------
TOTAL STOCKS
(IDENTIFIED COST, $235,909,485) $ 264,390,236
----------------
BONDS -- 8.1%
<Caption>
PRINCIPAL AMOUNT
(000 Omitted)
U.S. BONDS -- 5.8%
AUTOMOTIVE
Daimler Chrysler Holdings, 8.5s, 2031 $ 83 $ 99,167
----------------
BROADCAST & CABLE TV -- 0.1%
Continental Cablevision, 9.5s, 2013 $ 103 $ 118,976
CSC Holdings, Inc., 8.125s, 2009 95 102,125
Tele Communications, Inc., 9.8s, 2012 164 213,929
----------------
$ 435,030
----------------
BUILDING -- 0.1%
American Standard, Inc., 7.375s, 2008 $ 170 $ 187,850
----------------
CORPORATE ASSET-BACKED -- 0.2%
Falcon Auto Dealership LLC,
3.084s, 2023## $ 1,128 $ 166,045
TIAA Retail Commercial Mortgage Trust,
7.17s, 2032## 470 512,784
----------------
$ 678,829
----------------
ENERGY -- INDEPENDENT -- 0.1%
Devon Financing Corp., ULC, 6.875s, 2011 $ 256 $ 290,285
----------------
MANUFACTURING-- 0.2%
Vanderbilt Mortgage & Finance, Inc.,
5.17s, 2014 $ 466 $ 472,773
----------------
</Table>
35
<Page>
<Table>
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
U.S. BONDS -- continued
NATURAL GAS -- PIPELINE -- 0.2%
Kern River Funding Corp., 4.893s, 2018## $ 244 $ 242,725
Kinder Morgan Energy Partners, 7.3s, 2033 175 198,851
----------------
$ 441,576
----------------
TELECOMMUNICATIONS -- WIRELINE -- 0.2%
Citizens Communications Co., 8.5s, 2006 $ 55 $ 60,052
Sprint Capital Corp., 6.875s, 2028 103 100,511
Telecomunicaciones de Puerto Rico, Inc.,
6.65s, 2006 $ 72 $ 78,038
Telecomunicaciones de Puerto Rico, Inc.,
6.8s, 2009 175 195,639
Verizon New York, Inc., 6.875s, 2012 155 171,509
----------------
$ 605,749
----------------
UTILITIES -- ELECTRIC POWER -- 4.3%
AES Corp., 8.75s, 2013## $ 1,210 $ 1,352,175
AES Corp., 9s, 2015## 1,225 1,384,250
Beaver Valley II Funding, 9s, 2017 771 886,203
FirstEnergy Corp., 6.45s, 2011 1,523 1,578,510
Midamerican Energy Holdings,
5.875s, 2012 598 627,021
Midamerican Funding LLC,
6.927s, 2029 310 336,402
NiSource Finance Corp.,
7.875s, 2010 1,188 1,412,996
PSEG Energy Holdings, Inc., 7.75s, 2007 1,268 1,345,665
PSEG Energy Holdings, Inc.,
8.625s, 2008 1,131 1,234,204
Reliant Resources, Inc.,
9.25s, 2010## 935 991,100
Reliant Resources, Inc.,
9.5s, 2013## 1,730 1,851,100
TXU Corp., 6.375s, 2006 420 444,150
TXU Eastern Funding Co.,
6.75s, 2009# 191 25,785
----------------
$ 13,469,561
----------------
WIRELESS COMMUNICATIONS -- 0.4%
AT&T Wireless, 8.125s, 2012 $ 885 $ 1,040,717
Verizon Wireless Capital LLC,
5.375s, 2006 133 141,924
----------------
$ 1,182,641
----------------
TOTAL U.S.BONDS $ 17,863,461
----------------
FOREIGN BONDS -- 2.3%
CANADA -- 0.3%
Rogers Cable, Inc.,
6.25s, 2013 (Broadcast & Cable TV) $ 326 $ 328,445
Telus Corp., 8s, 2011
(Telecommunications -- Wireline) 464 542,549
----------------
$ 870,994
----------------
CHILE -- 1.5%
Empresa Nacional de Electricdad S.A.,
8.35s, 2013 (Utilities -- Electric Power) $ 2,213 $ 2,487,728
Enersis S. A., 7.375s, 2014
(Utilities -- Electric Power)## 2,084 2,145,616
----------------
$ 4,633,344
----------------
FRANCE -- 0.1%
France Telecom S.A., 9.75s, 2031
(Telecommunications -- Wireline) $ 250 $ 332,169
----------------
GERMANY -- 0.2%
Deutsche Telekom, 5.25s, 2013
(Telecommunications -- Wireline) $ 644 $ 650,581
Deutsche Telekom, 8.75s, 2030
(Telecommunications -- Wireline) 70 89,420
----------------
$ 740,001
----------------
MALAYSIA
Petronas Capital Ltd., 7.875s, 2022
(Oil Services)## $ 105 $ 124,420
----------------
MEXICO -- 0.1%
United Mexican States, 11.5s, 2026 $ 214 $ 309,765
----------------
UNITED KINGDOM -- 0.1%
British Sky Broadcasting Group,
7.3s, 2006 (Advertising & Broadcasting) $ 169 $ 188,176
----------------
TOTAL FOREIGN BONDS $ 7,198,869
----------------
TOTAL BONDS
(IDENTIFIED COST, $23,667,622) $ 25,062,330
----------------
CONVERTIBLE BONDS -- 1.3%
U.S. BONDS -- 1.3%
NATURAL GAS -- DISTRIBUTION -- 1.0%
El Paso Corp., 0s, 2021 $ 6,620 $ 3,111,400
----------------
UTILITIES -- ELECTRIC POWER -- 0.3%
Reliant Resources, Inc., 5s, 2010## $ 862 $ 977,293
----------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST, $3,702,370) $ 4,088,693
----------------
CONVERTIBLE PREFERRED STOCKS -- 2.1%
U.S. STOCKS -- 2.1%
NATURAL GAS -- DISTRIBUTION -- 0.3%
Sempra Energy, 8.5s $ 31,200 $ 887,952
----------------
TELEPHONE SERVICES -- 0.5%
CenturyTel, Inc., 6.875s $ 59,800 $ 1,614,600
----------------
UTILITIES -- ELECTRIC POWER -- 1.3%
AES Trust III, 6.75s $ 30,300 $ 1,310,475
AES Trust VII, 6s^ 24,200 1,107,150
CMS Energy Corp., 4.5s## 5,600 312,900
Dominion Resources, Inc., 8.75s^ 22,800 1,252,860
----------------
$ 3,983,385
----------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST, $6,550,762) $ 6,485,937
----------------
SHORT-TERM OBLIGATIONS -- 1.9%
New Center Asset Trust,
due 1/02/04, at Amortized Cost $ 5,930 $ 5,929,840
----------------
COLLATERAL FOR SECURITIES LOANED -- 7.2%
<Caption>
SHARES/
PRINCIPAL AMOUNT
Goldman Sachs & Co.
Repurchase Agreement, 1.02% 14,202,545 $ 14,202,545
Navigator Securities
Lending Prime Portfolio 8,164,548 8,164,548
----------------
$ 22,367,093
----------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $298,127,172) $ 328,324,129
----------------
OTHER ASSETS,
LESS LIABILITIES-- (5.8)% (18,121,530)
----------------
Net Assets-- 100.0% $ 310,202,599
================
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO FOOTNOTES:
* Non-income producing security.
# Non-income producing security -- in default.
## SEC Rule 144A restriction.
^ All or a portion of this security is on loan.
36
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2003
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
ASSETS:
Investments --
Unaffiliated issuers, at identified cost $ 686,184,033 $ 440,390,424 $ 182,040,084
Unrealized appreciation 66,490,054 47,625,211 18,813,651
--------------- --------------- ---------------
Total investments, at value (including $--, $20,824,472,
$7,975,087, $-- and $7,483,718, of securities on loan,
respectively) $ 752,674,087 $ 488,015,635 $ 200,853,735
Cash 976 93 180
Foreign currency, at value (identified cost, $--, $--,
$17,046, $-- and $--, respectively) -- -- 21,186
Receivable for investments sold 18,336,256 6,287,757 --
Receivable for series shares sold 133,640 166,421 20,054
Interest and dividends receivable 593,132 272,788 292,033
Other assets -- 6,606 3,159
--------------- --------------- ---------------
Total assets $ 771,738,091 $ 494,749,300 $ 201,190,347
--------------- --------------- ---------------
LIABILITIES:
Payable to custodian $ -- $ -- $ --
Payable for investments purchased 16,096,673 4,061,829 353,808
Payable for series shares reacquired 386,536 308,509 187,700
Collateral for securities loaned, at value -- 21,441,514 8,261,745
Payable to affiliates --
Management fee 16,424 9,547 4,715
Distribution fee (Service Class) 217 124 46
Accrued expenses and other liabilities 81,522 73,252 90,508
--------------- --------------- ---------------
Total liabilities $ 16,581,372 $ 25,894,775 $ 8,898,522
--------------- --------------- ---------------
Net assets $ 755,156,719 $ 468,854,525 $ 192,291,825
=============== =============== ===============
Net assets consist of:
Paid-in capital $ 1,475,578,809 $ 940,586,106 $ 288,770,316
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies 66,495,334 47,626,610 18,821,882
Accumulated net realized loss on investments and
foreign currency transactions (787,351,232) (519,358,191) (116,108,950)
Accumulated undistributed net investment income 433,808 -- 808,577
--------------- --------------- ---------------
Total $ 755,156,719 $ 468,854,525 $ 192,291,825
=============== =============== ===============
NET ASSETS:
Initial Class $ 722,979,838 $ 450,707,449 $ 185,499,966
Service Class 32,176,881 18,147,076 6,791,859
--------------- --------------- ---------------
Total $ 755,156,719 $ 468,854,525 $ 192,291,825
=============== =============== ===============
Shares of beneficial interest outstanding:
Initial Class 41,670,976 32,609,522 17,340,202
Service Class 1,865,515 1,321,485 638,279
--------------- --------------- ---------------
Total 43,536,491 33,931,007 17,978,481
=============== =============== ===============
Net asset value, offering price and redemption price per share:
(net assets DIVIDED BY shares of beneficial interest outstanding)
Initial Class $ 17.35 $ 13.82 $ 10.70
=============== =============== ===============
Service Class $ 17.25 $ 13.73 $ 10.64
=============== =============== ===============
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS
SERIES TRUST SERIES
--------------- ---------------
ASSETS:
Investments --
Unaffiliated issuers, at identified cost $ 140,550,745 $ 1,119,594,007
Unrealized appreciation 26,071,096 119,194,327
--------------- ---------------
Total investments, at value (including $--, $20,824,472,
$7,975,087, $-- and $7,483,718, of securities on loan,
respectively) $ 166,621,841 $ 1,238,788,334
Cash -- 87,883
Foreign currency, at value (identified cost, $--, $--,
$17,046, $-- and $--, respectively) -- --
Receivable for investments sold 2,771,097 942,676
Receivable for series shares sold 20,715 310,228
Interest and dividends receivable 133,418 1,674,373
Other assets 4,174 17,231
--------------- ---------------
Total assets $ 169,551,245 $ 1,241,820,725
--------------- ---------------
LIABILITIES:
Payable to custodian $ 76,369 $ --
Payable for investments purchased 2,232,433 3,252,495
Payable for series shares reacquired 139,516 583,273
Collateral for securities loaned, at value -- 7,702,427
Payable to affiliates --
Management fee 3,680 18,463
Distribution fee (Service Class) 20 522
Accrued expenses and other liabilities 38,228 126,043
--------------- ---------------
Total liabilities $ 2,490,246 $ 11,683,223
--------------- ---------------
Net assets $ 167,060,999 $ 1,230,137,502
=============== ===============
Net assets consist of:
Paid-in capital $ 354,132,094 $ 1,558,392,004
Unrealized appreciation on investments and translation of assets and
liabilities in foreign currencies 26,071,096 119,202,282
Accumulated net realized loss on investments and
foreign currency transactions (213,205,779) (459,152,870)
Accumulated undistributed net investment income 63,588 11,696,086
--------------- ---------------
Total $ 167,060,999 $ 1,230,137,502
=============== ===============
NET ASSETS:
Initial Class $ 164,166,061 $ 1,153,238,130
Service Class 2,894,938 76,899,372
--------------- ---------------
Total $ 167,060,999 $ 1,230,137,502
=============== ===============
Shares of beneficial interest outstanding:
Initial Class 9,918,401 45,213,689
Service Class 175,945 3,028,289
--------------- ---------------
Total 10,094,346 48,241,978
=============== ===============
Net asset value, offering price and redemption price per share:
(net assets DIVIDED BY shares of beneficial interest outstanding)
Initial Class $ 16.55 $ 25.51
=============== ===============
Service Class $ 16.45 $ 25.39
=============== ===============
</Table>
See notes to financial statements.
37
<Page>
<Table>
<Caption>
MID CAP
GROWTH RESEARCH
SERIES SERIES
--------------- ---------------
ASSETS:
Investments --
Unaffiliated issuers, at identified cost $ 99,020,458 $ 474,700,401
Unrealized appreciation 14,644,563 34,654,679
--------------- ---------------
Total investments, at value (including $--, $24,440,219,
$96,066,449 and $21,551,388, of securities on loan, respectively) $ 113,665,021 $ 509,355,080
Cash 129 14,179
Foreign currency, at value (identified cost, $--, $--, $-- and $2,
respectively) -- --
Receivable for investments sold 151,278 5,537,483
Receivable for series shares sold 272,589 101,697
Interest and dividends receivable 27,991 594,669
Other assets -- --
--------------- ---------------
Total assets $ 114,117,008 $ 515,603,108
--------------- ---------------
LIABILITIES:
Payable for investments purchased $ 807,933 $ 7,685,474
Payable for series shares reacquired 23,601 452,010
Collateral for securities loaned, at value -- 25,228,215
Payable to affiliates --
Management fee 2,327 9,499
Distribution fee (Service Class) 254 109
Accrued expenses and other liabilities 43,048 77,904
--------------- ---------------
Total liabilities $ 877,163 $ 33,453,211
--------------- ---------------
Net assets $ 113,239,845 $ 482,149,897
=============== ===============
Net assets consist of:
Paid-in capital $ 153,784,469 $ 768,330,938
Unrealized appreciation on investments and translation of assets
and liabilities in foreign currencies 14,644,702 34,655,656
Accumulated net realized loss on investments and
foreign currency transactions (55,189,326) (325,038,214)
Accumulated undistributed net investment income -- 4,201,517
--------------- ---------------
Total $ 113,239,845 $ 482,149,897
=============== ===============
NET ASSETS:
Initial Class $ 76,158,907 $ 466,139,452
Service Class 37,080,938 16,010,445
--------------- ---------------
Total $ 113,239,845 $ 482,149,897
=============== ===============
Shares of beneficial interest outstanding:
Initial Class 15,048,301 33,674,437
Service Class 7,359,156 1,162,372
--------------- ---------------
Total 22,407,457 34,836,809
=============== ===============
Net asset value, offering price and redemption price per share;
(net assets DIVIDED BY shares of beneficial interest outstanding)
Initial Class $ 5.06 $ 13.84
=============== ===============
Service Class $ 5.04 $ 13.77
=============== ===============
<Caption>
TOTAL RETURN UTILITIES
SERIES SERIES
--------------- ---------------
ASSETS:
Investments --
Unaffiliated issuers, at identified cost $ 1,846,391,277 $ 298,127,172
Unrealized appreciation 168,626,872 30,196,957
--------------- ---------------
Total investments, at value (including $--, $24,440,219,
$96,066,449 and $21,551,388, of securities on loan, respectively) $ 2,015,018,149 $ 328,324,129
Cash 698,315 18,950
Foreign currency, at value (identified cost, $--, $--, $-- and $2,
respectively) -- 2
Receivable for investments sold 6,683,176 5,583,973
Receivable for series shares sold 1,698,597 131,936
Interest and dividends receivable 10,092,442 950,870
Other assets 22,768 1,987
--------------- ---------------
Total assets $ 2,034,213,447 $ 335,011,847
--------------- ---------------
LIABILITIES:
Payable for investments purchased $ 14,676,590 $ 2,282,268
Payable for series shares reacquired 1,856,261 96,889
Collateral for securities loaned, at value 98,332,134 22,367,093*
Payable to affiliates--
Management fee 35,495 6,327
Distribution fee (Service Class) 2,052 154
Accrued expenses and other liabilities 107,567 56,517
--------------- ---------------
Total liabilities $ 115,010,099 $ 24,809,248
--------------- ---------------
Net assets $ 1,919,203,348 $ 310,202,599
=============== ===============
Net assets consist of:
Paid-in capital $ 1,785,150,445 $ 512,055,541
Unrealized appreciation on investments and translation of assets and
liabilities foreign currencies 168,637,042 30,203,692
Accumulated net realized loss on investments and
foreign currency transactions (82,995,883) (238,208,486)
Accumulated undistributed net investment income 48,411,744 6,151,852
--------------- ---------------
Total $ 1,919,203,348 $ 310,202,599
=============== ===============
NET ASSETS:
Initial Class $ 1,618,983,317 $ 287,647,575
Service Class 300,220,031 22,555,024
--------------- ---------------
Total $ 1,919,203,348 $ 310,202,599
=============== ===============
Shares of beneficial interest outstanding:
Initial Class 89,926,430 23,512,221
Service Class 16,753,491 1,852,003
--------------- ---------------
Total 106,679,921 25,364,224
=============== ===============
Net asset value, offering price and redemption price per share;
(net asset DIVIDED BY shares of beneficial interest outstanding)
Initial Class $ 18.00 $ 12.23
=============== ===============
Service Class $ 17.92 $ 12.18
=============== ===============
</Table>
*Non-cash collateral not included.
See notes to financial statements.
38
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2003
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
NET INVESTMENT INCOME (LOSS):
Income --
Dividends $ 6,009,515 $ 2,632,294 $ 3,417,881
Interest 205,716 189,397 90,437
Foreign taxes withheld (60,211) (35,953) (319,575)
--------------- --------------- ---------------
Total investment income $ 6,155,020 $ 2,785,738 $ 3,188,743
--------------- --------------- ---------------
Expenses --
Management fee $ 5,254,349 $ 3,168,903 $ 1,539,634
Trustees' compensation 59,171 35,433 15,000
Distribution fee (Service Class) 64,947 33,981 11,724
Administrative fee 66,293 40,913 15,952
Custodian fee 242,372 195,623 265,418
Printing 30,823 32,808 9,651
Auditing fees 31,350 31,900 41,146
Legal fees 4,673 4,462 4,243
Miscellaneous 38,034 18,995 3,351
--------------- --------------- ---------------
Total expenses $ 5,792,012 $ 3,563,018 $ 1,906,119
Fees paid indirectly (41,622) (15,895) (1,126)
--------------- --------------- ---------------
Net expenses $ 5,750,390 $ 3,547,123 $ 1,904,993
--------------- --------------- ---------------
Net investment income (loss) $ 404,630 $ (761,385) $ 1,283,750
--------------- --------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Realized gain (loss) (identified cost basis) --
Investment transactions* $ (22,979,920) $ 23,813,680 $ 16,181,759
Written options transactions -- 512,058 --
Foreign currency transactions 29,178 9,353 (292,664)
--------------- --------------- ---------------
Net realized gain (loss) on investments and foreign currency
transactions $ (22,950,742) $ 24,335,091 $ 15,889,095
--------------- --------------- ---------------
Change in unrealized appreciation (depreciation) --
Investments $ 198,123,606 $ 94,578,727 $ 35,127,401
Written options -- (62,752) --
Translation of assets and liabilities in foreign currencies 2,550 (7,749) (6,142)
--------------- --------------- ---------------
Net unrealized gain on investments and foreign
currency translation $ 198,126,156 $ 94,508,226 $ 35,121,259
--------------- --------------- ---------------
Net realized and unrealized gain on investments
and foreign currency $ 175,175,414 $ 118,843,317 $ 51,010,354
--------------- --------------- ---------------
Increase in net assets from operations $ 175,580,044 $ 118,081,932 $ 52,294,104
=============== =============== ===============
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS
SERIES TRUST SERIES
--------------- ---------------
NET INVESTMENT INCOME (LOSS):
Income --
Dividends $ 1,404,922 $ 18,676,537
Interest 12,295 340,902
Foreign taxes withheld -- (175,916)
--------------- ---------------
Total investment income $ 1,417,217 $ 18,841,523
--------------- ---------------
Expenses --
Management fee 1,201,347 $ 6,292,113
Trustees' compensation 14,946 100,952
Distribution fee (Service Class) 6,453 153,749
Administrative fee 15,360 109,239
Custodian fee 73,929 375,578
Printing 3,220 42,192
Auditing fees 32,450 29,946
Legal fees 4,068 3,951
Miscellaneous 2,124 25,389
--------------- ---------------
Total expenses $ 1,353,897 $ 7,133,109
Fees paid indirectly (178) (33,389)
--------------- ---------------
Net expenses $ 1,353,719 $ 7,099,720
--------------- ---------------
Net investment income (loss) $ 63,498 $ 11,741,803
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Realized gain (loss) (identified cost basis) --
Investment transactions* $ 7,266,492 $ (7,014,530)
Written options transactions -- --
Foreign currency transactions 90 (35,787)
--------------- ---------------
Net realized gain (loss) on investments and foreign currency
transactions $ 7,266,582 $ (7,050,317)
--------------- ---------------
Change in unrealized appreciation (depreciation) --
Investments $ 28,371,306 $ 229,925,036
Written options -- --
Translation of assets and liabilities in foreign currencies -- (4,449)
--------------- ---------------
Net unrealized gain on investments and foreign
currency translation $ 28,371,306 $ 229,920,587
--------------- ---------------
Net realized and unrealized gain on investments
and foreign currency $ 35,637,888 $ 222,870,270
--------------- ---------------
Increase in net assets from operations $ 35,701,386 $ 234,612,073
=============== ===============
</Table>
*Includes proceeds received from a non-recurring cash settlement in the amount
of $13,278,304, $5,764,504, $1,246,578, $635,017, and $106,672 for the Capital
Appreciation, Emerging Growth, Global Growth, Managed Sectors and Massachusetts
Investors Trust Series, respectively, from a class-action lawsuit against
Cendant Corporation.
See notes to financial statements.
39
<Page>
<Table>
<Caption>
MID CAP
GROWTH RESEARCH
SERIES SERIES
--------------- ---------------
NET INVESTMENT INCOME (LOSS):
Income --
Dividends $ 272,507 $ 7,807,657
Interest 47,200 115,832
Foreign taxes withheld (2,439) (56,173)
--------------- ---------------
Total investment income $ 317,268 $ 7,867,316
--------------- ---------------
Expenses --
Management fee $ 548,911 $ 3,292,858
Trustees' compensation 4,671 39,121
Distribution fee (Service Class) 54,011 24,827
Administrative fee 5,551 43,614
Custodian fee 44,300 191,850
Printing 4,437 29,672
Auditing fees 32,046 31,900
Legal fees 2,973 4,188
Miscellaneous 13,050 24,509
--------------- ---------------
Total expenses $ 709,950 $ 3,682,539
Fees paid indirectly -- (15,098)
--------------- ---------------
Net expenses $ 709,950 $ 3,667,441
--------------- ---------------
Net investment income (loss) $ (392,682) $ 4,199,875
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Realized gain (loss) (identified cost basis) --
Investment transactions* $ 4,546,201 $ 9,742,278
Foreign currency transactions (564) 2,149
--------------- ---------------
Net realized gain (loss) on investments and foreign currency
transaction $ 4,545,637 $ 9,744,427
--------------- ---------------
Change in unrealized appreciation (depreciation) --
Investments $ 18,166,432 $ 88,104,466
Translation of assets and liabilities in foreign currencies 152 (6,513)
--------------- ---------------
Net unrealized gain on investments and foreign currency translation $ 18,166,584 $ 88,097,953
--------------- ---------------
Net realized and unrealized gain on investments and foreign
currency $ 22,712,221 $ 97,842,380
--------------- ---------------
Increase in net assets from operations $ 22,319,539 $ 102,042,255
=============== ===============
<Caption>
TOTAL RETURN UTILITIES
SERIES SERIES
--------------- ---------------
NET INVESTMENT INCOME (LOSS):
Income --
Dividends $ 22,103,423 $ 6,796,197
Interest 34,358,842 1,910,659
Foreign taxes withheld (130,937) (210,915)
--------------- ---------------
Total investment income $ 56,331,328 $ 8,495,941
--------------- ---------------
Expenses --
Management fee $ 11,497,984 $ 2,046,734
Trustees' compensation 144,377 21,383
Distribution fee (Service Class) 507,379 42,127
Administrative fee 166,462 25,511
Custodian fee 437,689 148,600
Printing 35,958 13,725
Auditing fees 42,796 42,796
Legal fees 4,388 4,272
Miscellaneous 41,019 2,308
--------------- ---------------
Total expenses $ 12,878,052 $ 2,347,456
Fees paid indirectly (3,854) (13,437)
--------------- ---------------
Net expenses $ 12,874,198 $ 2,334,019
--------------- ---------------
Net investment income (loss) $ 43,457,130 $ 6,161,922
--------------- ---------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS:
Realized gain (loss) (identified cost basis) --
Investment transactions* $ (770,247) $ 7,268,680
Foreign currency transactions 585 (11,111)
--------------- ---------------
Net realized gain (loss) on investments and foreign currency
transactions $ (769,662) $ 7,257,569
--------------- ---------------
Change in unrealized appreciation (depreciation) --
Investments $ 236,247,202 $ 71,481,731
Translation of assets and liabilities in foreign currencies (2,640) 3,847
--------------- ---------------
Net unrealized gain on investments and foreign currency translation $ 236,244,562 $ 71,485,578
--------------- ---------------
Net realized and unrealized gain on investments and foreign
curreny $ 235,474,900 $ 78,743,147
--------------- ---------------
Increase in net assets from operations $ 278,932,030 $ 84,905,069
=============== ===============
</Table>
* Includes proceeds received from a non-recurring cash settlement in the amount
of $2,202,987 for the Research Series from a class-action lawsuit against
Cendant Corporation.
See notes to financial statements.
40
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2003
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net investment income (loss) $ 404,630 $ (761,385) $ 1,283,750
Net realized gain (loss) on investments and foreign currency
transactions (22,950,742) 24,335,091 15,889,095
Net unrealized gain on investments and foreign currency translation 198,126,156 94,508,226 35,121,259
--------------- --------------- ---------------
Increase in net assets from operations $ 175,580,044 $ 118,081,932 $ 52,294,104
--------------- --------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ -- $ -- $ (802,813)
From net investment income (Service Class) -- -- (12,306)
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ -- $ (815,119)
--------------- --------------- ---------------
Net decrease in net assets from series share transactions $ (99,709,511) $ (69,251,035) $ (29,925,274)
--------------- --------------- ---------------
Total increase in net assets $ 75,870,533 $ 48,830,897 $ 21,553,711
NET ASSETS --
At beginning of period 679,286,186 420,023,628 170,738,114
--------------- --------------- ---------------
At end of period $ 755,156,719 $ 468,854,525 $ 192,291,825
=============== =============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ 433,808 $ -- $ 808,577
=============== =============== ===============
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS
SERIES TRUST SERIES
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net investment income (loss) $ 63,498 $ 11,741,803
Net realized gain (loss) on investments and foreign currency
transactions 7,266,582 (7,050,317)
Net unrealized gain on investments and foreign currency translation 28,371,306 229,920,587
--------------- ---------------
Increase in net assets from operations $ 35,701,386 $ 234,612,073
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ -- $ (12,283,774)
From net investment income (Service Class) -- (562,379)
--------------- ---------------
Total distributions declared to shareholders $ -- $ (12,846,153)
--------------- ---------------
Net decrease in net assets from series share transactions $ (29,254,954) $ (151,185,714)
--------------- ---------------
Total increase in net assets $ 6,446,432 $ 70,580,206
NET ASSETS --
At beginning of period 160,614,567 1,159,557,296
--------------- ---------------
At end of period $ 167,060,999 $ 1,230,137,502
=============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ 63,588 $ 11,696,086
=============== ===============
<Caption>
MID CAP
GROWTH RESEARCH
SERIES SERIES
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS--
Net investment income (loss) $ (392,682) $ 4,199,875
Net realized gain (loss) on investments and foreign currency transactions 4,545,637 9,744,427
Net unrealized gain on investments and foreign currency translation 18,166,584 88,097,953
--------------- ---------------
Increase in net assets from operations $ 22,319,539 $ 102,042,255
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ -- $ (3,780,030)
From net investment income (Service Class) -- (53,733)
--------------- ---------------
Total distributions declared to shareholders $ -- $ (3,833,763)
--------------- ---------------
Net increase (decrease) in net assets from series share transactions $ 36,950,927 $ (81,587,261)
--------------- ---------------
Total increase in net assets $ 59,270,466 $ 16,621,231
NET ASSETS --
At beginning of period 53,969,379 465,528,666
--------------- ---------------
At end of period $ 113,239,845 $ 482,149,897
=============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ -- $ 4,201,517
=============== ===============
<Caption>
TOTAL RETURN UTILITIES
SERIES SERIES
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net investment income (loss) $ 43,457,130 $ 6,161,922
Net realized gain (loss) on investments and foreign currency transactions (769,662) 7,257,569
Net unrealized gain on investments and foreign currency translation 236,244,562 71,485,578
--------------- ---------------
Increase in net assets from operations $ 278,932,030 $ 84,905,069
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ (51,583,867) $ (8,106,762)
From net investment income (Service Class) (5,597,210) (450,737)
--------------- ---------------
Total distributions declared to shareholders $ (57,181,077) $ (8,557,499)
--------------- ---------------
Net increase (decrease) in net assets from series share transactions $ (26,809,020) $ (20,680,059)
--------------- ---------------
Total increase in net assets $ 194,941,933 $ 55,667,511
NET ASSETS --
At beginning of period 1,724,261,415 254,535,088
--------------- ---------------
At end of period $ 1,919,203,348 $ 310,202,599
=============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ 48,411,744 $ 6,151,852
=============== ===============
</Table>
See notes to financial statements.
41
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2002
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net investment income (loss) $ (483,674) $ (1,079,456) $ 1,071,024
Net realized loss on investments and foreign currency transactions (344,121,516) (166,172,618) (44,185,589)
Net unrealized loss on investments and foreign currency translation (37,724,449) (103,096,103) (5,092,933)
--------------- --------------- ---------------
Decrease in net assets from operations $ (382,329,639) $ (270,348,177) $ (48,207,498)
--------------- --------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ (1,565,201) $ -- $ (603,651)
From net investment income (Service Class) (28,249) -- (6,621)
In excess of net investment income (Initial Class) (202) -- --
In excess of net investment income (Service Class) (4) -- --
--------------- --------------- ---------------
Total distributions declared to shareholders $ (1,593,656) $ -- $ (610,272)
--------------- --------------- ---------------
Net decrease in net assets from series share transactions $ (188,020,495) $ (160,495,797) $ (58,572,935)
--------------- --------------- ---------------
Total decrease in net assets $ (571,943,790) $ (430,843,974) $ (107,390,705)
NET ASSETS --
At beginning of period 1,251,229,976 850,867,602 278,128,819
--------------- --------------- ---------------
At end of period $ 679,286,186 $ 420,023,628 $ 170,738,114
=============== =============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ -- $ -- $ 792,060
=============== =============== ===============
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS
SERIES TRUST SERIES
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net investment income (loss) $ (371,734) $ 12,861,081
Net realized loss on investments and foreign currency transactions (47,784,363) (229,245,237)
Net unrealized loss on investments and foreign currency translation (19,746,753) (147,695,978)
--------------- ---------------
Decrease in net assets from operations $ (67,902,850) $ (364,080,134)
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ -- $ (14,827,081)
From net investment income (Service Class) -- (391,897)
In excess of net investment income (Initial Class) -- --
In excess of net investment income (Service Class) -- --
--------------- ---------------
Total distributions declared to shareholders $ -- $ (15,218,978)
--------------- ---------------
Net decrease in net assets from series share transactions $ (59,158,129) $ (281,503,909)
--------------- ---------------
Total decrease in net assets $ (127,060,979) $ (660,803,021)
NET ASSETS --
At beginning of period 287,675,546 1,820,360,317
--------------- ---------------
At end of period $ 160,614,567 $ 1,159,557,296
=============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ -- $ 12,836,224
=============== ===============
<Caption>
MID CAP
GROWTH RESEARCH
SERIES SERIES
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net investment income (loss) $ (280,392) $ 3,859,716
Net realized loss on investments and foreign currency transactions (52,097,435) (161,874,853)
Net unrealized gain (loss) on investments and foreign currency
translation 6,203,323 (33,567,210)
--------------- ---------------
Decrease in net assets from operations $ (46,174,504) $ (191,582,347)
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ -- $ (2,646,176)
From net investment income (Service Class) -- (23,670)
From net realized gain on investments and foreign currency transactions
(Initial Class) -- --
From net realized gain on investments and foreign currency transactions
(Service Class) -- --
In excess of net realized gain on investments and foreign currency
transactions (Initial Class) -- --
In excess of net realized gain on investments and foreign currency
transactions (Service Class) -- --
--------------- ---------------
Total distributions declared to shareholders $ -- $ (2,669,846)
--------------- ---------------
Net increase (decrease) in net assets from series share transactions $ 17,749,862 $ (169,642,713)
--------------- ---------------
Total decrease in net assets $ (28,424,642) $ (363,894,906)
NET ASSETS --
At beginning of period 82,394,021 829,423,572
--------------- ---------------
At end of period $ 53,969,379 $ 465,528,666
=============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ -- $ 3,833,256
=============== ===============
<Caption>
TOTAL RETURN UTILITIES
SERIES SERIES
--------------- ---------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net investment income (loss) $ 54,596,889 $ 8,548,277
Net realized loss on investments and foreign currency transactions (64,286,992) (121,315,018)
Net unrealized gain (loss) on investments and foreign currency
translation (106,346,603) 3,608,785
--------------- ---------------
Decrease in net assets from operations $ (116,036,706) $ (109,157,956)
--------------- ---------------
DISTRIBUTIONS DECLARED TO SHAREHOLDERS --
From net investment income (Initial Class) $ (56,481,797) $ (12,376,218)
From net investment income (Service Class) (3,028,966) (448,541)
From net realized gain on investments and foreign currency transactions
(Initial Class) (48,461,324) --
From net realized gain on investments and foreign currency transactions
(Service Class) (2,610,497) --
In excess of net realized gain on investments and foreign currency
transactions (Initial Class) (9,863,853) --
In excess of net realized gain on investments and foreign currency
transactions (Service Class) (531,342) --
--------------- ---------------
Total distributions declared to shareholders $ (120,977,779) $ (12,824,759)
--------------- ---------------
Net increase (decrease) in net assets from series share transactions $ 50,075,899 $ (99,033,029)
--------------- ---------------
Total decrease in net assets $ (186,938,586) $ (221,015,744)
NET ASSETS --
At beginning of period 1,911,200,001 475,550,832
--------------- ---------------
At end of period $ 1,724,261,415 $ 254,535,088
=============== ===============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME INCLUDED IN NET
ASSETS AT END OF PERIOD $ 57,538,132 $ 8,467,184
=============== ===============
</Table>
See notes to financial statements.
42
<Page>
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 (or, if shorter, the period of the
series' operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
CAPITAL APPRECIATION SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.48 $ 19.97 $ 41.55
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.01 $ (0.01) $ 0.03
Net realized and unrealized gain (loss) on investments and foreign
currency 3.86 (6.45) (8.84)
--------------- --------------- ---------------
Total from investment operations $ 3.87 $ (6.46) $ (8.81)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ -- $ (0.03) $ (0.12)
In excess of net investment income -- (0.00)* --
From net realized gain on investments and foreign currency transactions -- -- (12.19)
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.46)
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ (0.03) $ (12.77)
--------------- --------------- ---------------
Net asset value -- end of period $ 17.35 $ 13.48 $ 19.97
=============== =============== ===============
Total return++ 28.71%& (32.39)% (25.33)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.82% 0.81% 0.78%
Net investment income (loss) 0.07% (0.05)% 0.12%
Portfolio turnover 100% 77% 119%
Net assets at end of period (000 Omitted) $ 722,980 $ 657,634 $ 1,239,047
<Caption>
CAPITAL APPRECIATION SERIES
----------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 54.12 $ 45.93
--------------- ---------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.12 $ (0.07)
Net realized and unrealized gain (loss) on investments and foreign
currency (5.73) 13.53
--------------- ---------------
Total from investment operations $ (5.61) $ 13.46
--------------- ---------------
Less distributions declared to shareholders --
From net investment income $ -- $ --
In excess of net investment income -- --
From net realized gain on investments and foreign currency transactions (6.96) (5.27)
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (6.96) $ (5.27)
--------------- ---------------
Net asset value -- end of period $ 41.55 $ 54.12
=============== ===============
Total return++ (11.42)% 32.64%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.75% 0.76%
Net investment income (loss) 0.12% (0.15)%
Portfolio turnover 141% 89%
Net assets at end of period (000 Omitted) $ 1,813,066 $ 2,121,575
</Table>
<Table>
<Caption>
CAPITAL APPRECIATION SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001**
--------------- --------------- ---------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.44 $ 19.95 $ 20.45
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment loss $ (0.03) $ (0.04) $ (0.02)
Net realized and unrealized gain (loss) on investments and foreign
currency 3.84 (6.45) (0.48)
--------------- --------------- ---------------
Total from investment operations $ 3.81 $ (6.49) $ (0.50)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ -- $ (0.02) $ --
In excess of net investment income -- (0.00)* --
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ (0.02) $ --
--------------- --------------- ---------------
Net asset value -- end of period $ 17.25 $ 13.44 $ 19.95
=============== =============== ===============
Total return++ 28.35%& (32.57)% (2.40)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.07% 1.06% 1.03%+
Net investment loss (0.18)% (0.24)% (0.35)%+
Portfolio turnover 100% 77% 119%
Net assets at end of period (000 Omitted) $ 32,177 $ 21,652 $ 12,183
</Table>
*Per share impact was less than $0.01.
**For the period from the inception of the Service Class shares, August 24,
2001, through December 31, 2001.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##Ratios do not reflect reductions from fees paid indirectly.
++The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
&The series' total return calculation includes proceeds received on March 26,
2003 from a non-recurring litigation settlement 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 series'
ending net asset value per share, total returns for the year ended
December 31, 2003 would have been 26.63% and 26.26% for Initial Class and
Service Class shares, respectively.
See notes to financial statements.
43
<Page>
<Table>
<Caption>
EMERGING GROWTH SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 10.51 $ 15.96 $ 29.32
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment loss $ (0.02) $ (0.02) $ (0.01)
Net realized and unrealized gain (loss) on investments and foreign
currency 3.33 (5.43) (9.51)
--------------- --------------- ---------------
Total from investment operations $ 3.31 $ (5.45) $ (9.52)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net realized gain on investments and foreign currency transactions $ -- $ -- $ (3.50)
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.34)
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ -- $ (3.84)
--------------- --------------- ---------------
Net asset value -- end of period $ 13.82 $ 10.51 $ 15.96
=============== =============== ===============
TOTAL RETURN++ 31.49%& (34.15)% (34.57)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.81% 0.78% 0.76%
Net investment loss (0.17)% (0.18)% (0.07)%
PORTFOLIO TURNOVER 100% 105% 230%
NET ASSETS AT, END OF PERIOD (000 OMITTED) $ 450,707 $ 409,015 $ 844,779
<Caption>
EMERGING GROWTH SERIES
----------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 40.28 $ 23.28
--------------- ---------------
Income (loss) from investment operations# --
Net investment loss $ (0.01) $ (0.04)
Net realized and unrealized gain (loss) on investments and foreign
currency (7.22) 17.43
--------------- ---------------
Total from investment operations $ (7.23) $ 17.39
--------------- ---------------
Less distributions declared to shareholders --
From net realized gain on investments and foreign currency transactions $ (3.73) $ (0.39)
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (3.73) $ (0.39)
--------------- ---------------
Net asset value -- end of period $ 29.32 $ 40.28
=============== ===============
TOTAL RETURN++ (19.11)% 75.81%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.74% 0.75%
Net investment loss (0.04)% (0.17)%
PORTFOLIO TURNOVER 201% 166%
NET ASSETS AT, END OF PERIOD (000 OMITTED) $ 1,421,753 $ 1,444,210
</Table>
<Table>
<Caption>
EMERGING GROWTH SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001**
--------------- --------------- ---------------
SERVICE CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 10.47 $ 15.94 $ 16.32
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment loss $ (0.05) $ (0.05) $ (0.03)
Net realized and unrealized gain (loss) on investments and foreign
currency 3.31 (5.42) (0.35)
--------------- --------------- ---------------
Total from investment operations $ 3.26 $ (5.47) $ (0.38)
--------------- --------------- ---------------
Net asset value -- end of period $ 13.73 $ 10.47 $ 15.94
=============== =============== ===============
TOTAL RETURN++ 31.14%& (34.32)% (2.33)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.06% 1.03% 1.01%+
Net investment loss (0.42)% (0.39)% (0.48)%+
PORTFOLIO TURNOVER 100% 105% 230%
NET ASSETS AT, END OF PERIOD (000 OMITTED) $ 18,147 $ 11,009 $ 6,089
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
++ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
& The series' total return calculation includes proceeds received on March 26,
2003 from a non-recurring litigation settlement 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
proceeds were received. Excluding the effect of this payment from the
series' ending net asset value per share, total returns for the year ended
December 31, 2003 would have been 30.01% and 29.64% for Initial Class and
Service Class shares, respectively.
See notes to financial statements
44
<Page>
<Table>
<Caption>
GLOBAL GROWTH SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 7.94 $ 9.87 $ 18.47
--------------- --------------- ---------------
Income (loss) from investment operations#@ --
Net investment income $ 0.07 $ 0.04 $ 0.03
Net realized and unrealized gain (loss) on investments and foreign
currency 2.73 (1.95) (2.97)
--------------- --------------- ---------------
Total from investment operations $ 2.80 $ (1.91) $ (2.94)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.04) $ (0.02) $ (0.11)
From net realized gain on investments and foreign currency
transactions -- -- (5.45)
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.10)
--------------- --------------- ---------------
Total distributions declared to shareholders $ (0.04) $ (0.02) $ (5.66)
--------------- --------------- ---------------
Net asset value -- end of period $ 10.70 $ 7.94 $ 9.87
=============== =============== ===============
TOTAL RETURN++ 35.44%& (19.36)% (19.64)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.11% 1.08% 1.05%
Net investment income 0.76% 0.49% 0.28%
PORTFOLIO TURNOVER 147% 118% 113%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 185,500 $ 167,014 $ 276,769
<Caption>
GLOBAL GROWTH SERIES
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value-- beginning of period $ 25.16 $ 15.66
Income (loss) from investment operations#@ --
--------------- ---------------
Net investment income $ 0.13 $ 0.03
Net realized and unrealized gain (loss) on investments and foreign
currency (3.15) 10.15
--------------- ---------------
Total from investment operations $ (3.02) $ 10.18
--------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.01) $ (0.04)
From net realized gain on investments and foreign currency
transactions (3.66) (0.64)
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (3.67) $ (0.68)
--------------- ---------------
Net asset value -- end of period $ 18.47 $ 25.16
=============== ===============
TOTAL RETURN++ (13.15)% 67.25%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.04% 1.01%
Net investment income 0.60% 0.16%
PORTFOLIO TURNOVER 173% 163%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 412,547 $ 451,753
</Table>
<Table>
<Caption>
GLOBAL GROWTH SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001**
--------------- --------------- ---------------
SERVICE CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 7.90 $ 9.85 $ 10.14
--------------- --------------- ---------------
Income (loss) from investment operations#@ --
Net investment income (loss) $ 0.04 $ 0.02 $ (0.01)
Net realized and unrealized gain (loss) on investments and foreign
currency 2.73 (1.95) (0.28)
--------------- --------------- ---------------
Total from investment operations $ 2.77 $ (1.93) $ (0.29)
--------------- --------------- ---------------
Less distributions declared to shareholders from net investment income $ (0.03) $ (0.02) $ --
--------------- --------------- ---------------
Net asset value -- end of period $ 10.64 $ 7.90 $ 9.85
=============== =============== ===============
TOTAL RETURN++ 35.13%& (19.62)% (2.86)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.36% 1.33% 1.30%+
Net investment income (loss)@ 0.41% 0.25% (0.39)%+
PORTFOLIO TURNOVER 147% 118% 113%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 6,792 $ 3,724 $ 1,360
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized
++ Not Annualized
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from fees paid indirectly.
++ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
@ As required, effective January 1, 2001 the series has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
year ended December 31, 2001 was to decrease net investment income per share
by $0.01, increase net realized and unrealized gains and losses per share by
less than $0.01, and decrease the ratio of net investment income to average
net assets by less than 0.01%. Per share, ratios, and supplemental data for
periods prior to January 1, 2001 have not been restated to reflect this
change in presentation.
& The series' total return calculation includes proceeds received on March 26,
2003 from a non-recurring litigation settlement 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
series' ending net asset value per share, total returns for the year ended
December 31, 2003 would have been 34.65% and 34.33% for Initial Class and
Service Class shares, respectively.
See notes to financial statements
45
<Page>
<Table>
<Caption>
MANAGED SECTORS SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 13.21 $ 17.85 $ 33.35
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.01 $ (0.03) $ 0.00*
Net realized and unrealized gain (loss) on investments and foreign
currency 3.33 (4.61) (11.24)
--------------- --------------- ---------------
Total from investment operations $ 3.34 $ (4.64) $ (11.24)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net realized gain on investments and foreign currency
transactions $ -- $ -- $ (3.49)
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.77)
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ -- $ (4.26)
--------------- --------------- ---------------
Net asset value -- end of period $ 16.55 $ 13.21 $ 17.85
=============== =============== ===============
TOTAL RETURN++ 25.28%& (25.99)% (35.51)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.84% 0.82% 0.84%
Net investment income (loss) 0.04% (0.17)% 0.00%**
PORTFOLIO TURNOVER 77% 261% 293%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 164,166 $ 158,349 $ 286,916
<Caption>
MANAGED SECTORS SERIES
----------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 52.42 $ 28.24
--------------- ---------------
Income (loss) from investment operations# --
Net investment income (loss) $ (0.01) $ 0.02
Net realized and unrealized gain (loss) on investments and foreign
currency (9.80) 24.16
--------------- ---------------
Total from investment operations $ (9.81) $ 24.18
--------------- ---------------
Less distributions declared to shareholders --
From net realized gain on investments and foreign currency
transactions $ (9.26) $ --
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (9.26) $ --
--------------- ---------------
Net asset value -- end of period $ 33.35 $ 52.42
=============== ===============
TOTAL RETURN++ (20.82)% 85.62%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.76% 0.79%
Net investment income (loss) (0.03)% 0.05%
PORTFOLIO TURNOVER 441% 415%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 559,586 $ 685,808
</Table>
<Table>
<Caption>
MANAGED SECTORS SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001**
--------------- --------------- ---------------
SERVICE CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 13.16 $ 17.83 $ 18.40
--------------- --------------- ---------------
Income from investment operations# --
Net investment loss $ (0.03) $ (0.04) $ (0.05)
Net realized and unrealized gain (loss) on investments and foreign
currency 3.32 (4.63) (0.52)
--------------- --------------- ---------------
Total from investment operations $ 3.29 $ (4.67) $ (0.57)
--------------- --------------- ---------------
Net asset value -- end of period $ 16.45 $ 13.16 $ 17.83
=============== =============== ===============
TOTAL RETURN++ 24.91%& (26.14)% (3.10)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.09% 1.07% 1.09%+
Net investment loss (0.20)% (0.31)% (0.74)%+
PORTFOLIO TURNOVER 77% 261% 293%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 2,895 $ 2,266 $ 759
</Table>
* Per share impact was less than $0.01.
** Ratio is less than 0.01%.
*** For the period from the inception of the Service Class shares, August 24,
2001, through December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
++ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
& The series' total return calculation includes proceeds received on March 26,
2003 from a non-recurring litigation settlement 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
series' ending net asset value per share, total returns for the year ended
December 31, 2003 would have been 24.83% and 24.45% for Initial Class and
Service Class shares, respectively.
See notes to financial statements.
46
<Page>
<Table>
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 21.01 $ 26.92 $ 35.12
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment income $ 0.23 $ 0.21 $ 0.25
Net realized and unrealized gain (loss) on investments and foreign
currency 4.52 (5.88) (5.49)
--------------- --------------- ---------------
Total from investment operations $ 4.75 $ (5.67) $ (5.24)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.25) $ (0.24) $ (0.25)
From net realized gain on investments and foreign currency
transactions -- -- (2.55)
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.16)
--------------- --------------- ---------------
Total distributions declared to shareholders $ (0.25) $ (0.24) $ (2.96)
--------------- --------------- ---------------
Net asset value -- end of period $ 25.51 $ 21.01 $ 26.92
=============== =============== ===============
TOTAL RETURN++ 22.83%& (21.22)% (15.71)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.61% 0.60% 0.60%
Net investment income 1.04% 0.88% 0.84%
PORTFOLIO TURNOVER 78% 57% 83%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 1,153,238 $ 1,107,698 $ 1,798,744
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 37.95 $ 38.25
--------------- ---------------
Income (loss) from investment operations# --
Net investment income $ 0.26 $ 0.30
Net realized and unrealized gain (loss) on investments and foreign
currency (0.28) 2.38
--------------- ---------------
Total from investment operations $ (0.02) $ 2.68
--------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.28) $ (0.28)
From net realized gain on investments and foreign currency
transactions (2.53) (2.70)
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (2.81) $ (2.98)
--------------- ---------------
Net asset value -- end of period $ 35.12 $ 37.95
=============== ===============
TOTAL RETURN++ 0.09% 7.18%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.60% 0.59%
Net investment income 0.73% 0.81%
PORTFOLIO TURNOVER 76% 70%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 2,263,535 $ 2,235,783
</Table>
<Table>
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001**
--------------- --------------- ---------------
SERVICE CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 20.94 $ 26.89 $ 27.80
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment income $ 0.18 $ 0.16 $ 0.05
Net realized and unrealized gain (loss) on investments and foreign
currency 4.49 (5.88) (0.96)
--------------- --------------- ---------------
Total from investment operations $ 4.67 $ (5.72) $ (0.91)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.22) $ (0.23) $ --
--------------- --------------- ---------------
Net asset value -- end of period $ 25.39 $ 20.94 $ 26.89
=============== =============== ===============
TOTAL RETURN++ 22.45%& (21.40)% (3.27)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.86% 0.85% 0.85%+
Net investment income 0.79% 0.70% 0.53%+
PORTFOLIO TURNOVER 78% 57% 83%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 76,899 $ 51,859 $ 21,616
</Table>
* For the period from the inception of the Service Class shares, August 24,
2001, through December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
++ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y). Inclusion of these charges would reduce the total return
figures for all periods shown.
& The series' total return calculation includes proceeds received on March 26,
2003 from a non-recurring litigation settlement 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
series' ending net asset value per share, the total returns for the year
ended December 31, 2003 would have been 22.82% and 22.44% for the Initial
Class and the Service Class shares, respectively.
See notes to financial statements
47
<Page>
<Table>
<Caption>
MID CAP GROWTH SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 3.67 $ 6.94 $ 9.08
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment income (loss) $ (0.02) $ (0.02) $ (0.01)
Net realized and unrealized gain (loss) on investments and foreign
currency 1.41 (3.25) (2.09)
--------------- --------------- ---------------
Total from investment operations $ 1.39 $ (3.27) $ (2.10)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ -- $ -- $ (0.01)
From net realized gain on investments and foreign currency
transactions -- -- (0.00)+++
In excess of net investment income -- -- (0.00)+++
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.03)
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ -- $ (0.04)
--------------- --------------- ---------------
Net asset value -- end of period $ 5.06 $ 3.67 $ 6.94
=============== =============== ===============
TOTAL RETURN++ 37.87% (47.12)% (23.24)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.90% 0.85% 0.84%
Net investment (loss) (0.46)% (0.39)% (0.16)%
PORTFOLIO TURNOVER 90% 160% 85%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 76,159 $ 39,941 $ 75,413
<Caption>
MID CAP GROWTH SERIES
---------------------
PERIOD ENDED
DECEMBER 31,
2000*
---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 10.00
---------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.03
Net realized and unrealized gain (loss) on investments and foreign
currency (0.95)
---------------
Total from investment operations $ (0.92)
---------------
Less distributions declared to shareholders --
From net investment income $ --
From net realized gain on investments and foreign currency
transactions --
In excess of net investment income --
In excess of net realized gain on investments and foreign currency
transactions --
---------------
Total distributions declared to shareholders $ --
---------------
Net asset value -- end of period $ 9.08
===============
TOTAL RETURN++ (9.24)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.01%+
Net investment (loss) 0.97%+
PORTFOLIO TURNOVER 39%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 26,556
</Table>
<Table>
<Caption>
MID CAP GROWTH SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001**
--------------- --------------- ---------------
SERVICE CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 3.67 $ 6.94 $ 7.09
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment loss $ (0.03) $ (0.03) $ (0.01)
Net realized and unrealized gain (loss) on investments and foreign
currency 1.40 (3.24) (0.14)
--------------- --------------- ---------------
Total from investment operations $ 1.37 $ (3.27) $ (0.15)
--------------- --------------- ---------------
Net asset value -- end of period $ 5.04 $ 3.67 $ 6.94
=============== =============== ===============
TOTAL RETURN++ 37.33% (47.12)% (2.12)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.15% 1.10% 1.09%+
Net investment loss (0.72)% (0.60)% (0.50)%+
PORTFOLIO TURNOVER 90% 160% 85%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 37,081 $ 14,028 $ 6,981
</Table>
* For the period from the commencement of the series' investment operations,
August 31, 2000, through December 31, 2000.
** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $(0.01).
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
++ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
48
<Page>
<Table>
<Caption>
RESEARCH SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 11.14 $ 14.93 $ 23.65
--------------- --------------- ---------------
Income (loss) from investment operations# --
Net investment income $ 0.11 $ 0.08 $ 0.05
Net realized and unrealized gain (loss) on investments and foreign
currency 2.69 (3.82) (4.54)
--------------- --------------- ---------------
Total from investment operations $ 2.80 $ (3.74) $ (4.49)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.10) $ (0.05) $ (0.01)
From net realized gain on investments and foreign currency
transactions -- -- (4.19)
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.03)
--------------- --------------- ---------------
Total distributions declared to shareholders $ (0.10) $ (0.05) $ (4.23)
--------------- --------------- ---------------
Net asset value -- end of period $ 13.84 $ 11.14 $ 14.93
=============== =============== ===============
TOTAL RETURN++ 25.32%& (25.11)% (21.40)%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.80% 0.78% 0.76%
Net investment income 0.93% 0.61% 0.28%
PORTFOLIO TURNOVER 124% 98% 89%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 466,139 $ 458,394 $ 826,315
<Caption>
RESEARCH SERIES
------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 27.61 $ 23.02
--------------- ---------------
Income (loss) from investment operations# --
Net investment income $ 0.01 $ 0.03
Net realized and unrealized gain (loss) on investments and foreign
currency (0.99) 5.37
--------------- ---------------
Total from investment operations $ (0.98) $ 5.40
--------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.03) $ (0.07)
From net realized gain on investments and foreign currency
transactions (2.95) (0.74)
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (2.98) $ (0.81)
--------------- ---------------
Net asset value -- end of period $ 23.65 $ 27.61
=============== ===============
TOTAL RETURN++ (4.10)% 24.14%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.74% 0.75%
Net investment income 0.03% 0.14%
PORTFOLIO TURNOVER 95% 94%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 1,209,927 $ 1,245,431
</Table>
<Table>
<Caption>
RESEARCH SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001*
--------------- --------------- ---------------
SERVICE CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 11.09 $ 14.91 $ 15.42
--------------- --------------- ---------------
Income from investment operations# --
Net investment income $ 0.08 $ 0.06 $ 0.01
Net realized and unrealized gain (loss) on investments and foreign
currency 2.68 (3.83) (0.52)
--------------- --------------- ---------------
Total from investment operations $ 2.76 $ (3.77) $ (0.51)
--------------- --------------- ---------------
Less distributions declared to shareholders from net investment income $ (0.08) $ (0.05) $--
--------------- --------------- ---------------
Net asset value -- end of period $ 13.77 $ 11.09 $ 14.91
=============== =============== ===============
TOTAL RETURN++ 25.01%& (25.36)% (3.31)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 1.05% 1.03% 1.01%+
Net investment income 0.67% 0.48% 0.17%+
PORTFOLIO TURNOVER 124% 98% 89%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 16,010 $ 7,134 $ 3,109
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
++ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
& The series' total return calculation includes proceeds received on March 26,
2003 from a non-recurring litigation settlement 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
series' ending net asset value per share, total returns for the year ended
December 31, 2003 would have been 24.80% and 24.49% for Initial Class and
Service Class shares, respectively.
See notes to financial statements.
49
<Page>
<Table>
<Caption>
TOTAL RETURN SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 15.90 $ 17.95 $ 19.69
--------------- --------------- ---------------
Income (loss) from investment operations#@ --
Net investment income $ 0.42 $ 0.50 $ 0.57
Net realized and unrealized gain (loss) on investments and foreign
currency 2.24 (1.44) (0.46)
--------------- --------------- ---------------
Total from investment operations $ 2.66 $ (0.94) $ 0.11
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.56) $ (0.55) $ (0.66)
From net realized gain on investments and foreign currency
transactions -- (0.47) (1.19)
In excess of net realized gain on investments and foreign currency
transactions -- (0.09) --
--------------- --------------- ---------------
Total distributions declared to shareholders $ (0.56) $ (1.11) $ (1.85)
--------------- --------------- ---------------
Net asset value -- end of period $ 18.00 $ 15.90 $ 17.95
=============== =============== ===============
TOTAL RETURN++ 17.15% (5.69)% 0.52%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.71% 0.70% 0.70%
Net investment income@ 2.52% 2.95% 3.13%
PORTFOLIO TURNOVER 65% 82% 101%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 1,618,983 $ 1,571,494 $ 1,872,185
<Caption>
TOTAL RETURN SERIES
------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 18.76 $ 21.26
--------------- ---------------
Income (loss) from investment operations#@
Net investment income $ 0.66 $ 0.65
Net realized and unrealized gain (loss) on investments and foreign
currency 2.20 0.04
--------------- ---------------
Total from investment operations $ 2.86 $ 0.69
--------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.71) $ (0.71)
From net realized gain on investments and foreign currency
transactions (1.22) (2.48)
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (1.93) $ (3.19)
--------------- ---------------
Net asset value -- end of period $ 19.69 $ 18.76
=============== ===============
TOTAL RETURN++ 16.77% 2.84%
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.70% 0.69%
Net investment incomeSection 3.60% 3.30%
PORTFOLIO TURNOVER 94% 113%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 1,841,586 $ 1,879,946
</Table>
<Table>
<Caption>
TOTAL RETURN SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001*
--------------- --------------- ---------------
SERVICE CLASS SHARES
PER SHARE DATA (FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD):
Net asset value -- beginning of period $ 15.85 $ 17.93 $ 17.94
--------------- --------------- ---------------
Income (loss) from investment operations#@@ --
Net investment income $ 0.36 $ 0.45 $ 0.33
Net realized and unrealized gain (loss) on investments and foreign
currency 2.24 (1.43) (0.34)
--------------- --------------- ---------------
Total from investment operations $ 2.60 $ (0.98) $ (0.01)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.53) $ (0.54) $ --
From net realized gain on investments and foreign currency
transactions -- (0.47) --
In excess of net realized gain on investments and foreign currency
transactions -- (0.09) --
--------------- --------------- ---------------
Total distributions declared to shareholders $ (0.53) $ (1.10) $ --
--------------- --------------- ---------------
Net asset value -- end of period $ 17.92 $ 15.85 $ 17.93
=============== =============== ===============
TOTAL RETURN++ 16.83% (5.88)% (0.06)%++
RATIOS (TO AVERAGE NET ASSETS)/SUPPLEMENTAL DATA:
Expenses## 0.95% 0.95% 0.97%+
Net investment income@ 2.20% 2.77% 2.35%+
PORTFOLIO TURNOVER 65% 82% 101%
NET ASSETS AT END OF PERIOD (000 OMITTED) $ 300,220 $ 152,768 $ 39,015
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
++ The total return information shown above does not reflect expenses that apply
to the separate accounts established by Sun Life of Canada (U.S.) and Sun
Life (N.Y.). Inclusion of these charges would reduce the total return figures
for all periods shown.
@ As required, effective January 1, 2001, the series has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
period ended December 31, 2001 was to decrease net investment income per
share by less than $0.01, increase net realized and unrealized gains and
losses per share by less than $0.01 and decrease the ratio of net investment
income to average net assets by 0.05%. Per share, ratios and supplemental
data for periods prior to January 1, 2001, have not been restated to reflect
this change in presentation.
@@ As required, effective January 1, 2001, the series has adopted the provisions
of the AICPA Audit and Accounting Guide for Investment Companies and began
amortizing premium on debt securities. The effect of this change for the
period ended December 31, 2001 was to decrease net investment income per
share by less than $0.05, increase net realized and unrealized gains and
losses per share by less than $0.05, and decrease the ratio of net investment
income to average net assets by 0.38%. Per share, ratios and supplemental
data for periods prior to January 1, 2001 have not been restated to reflect
this change in presentation.
See notes to financial statements.
50
<Page>
<Table>
<Caption>
UTILITIES SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
2003 2002 2001
--------------- --------------- ---------------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 9.28 $ 12.61 $ 19.08
--------------- --------------- ---------------
Income (loss) from investment operations#@ --
Net investment income $ 0.24 $ 0.26 $ 0.35
Net realized and unrealized gain (loss) on investments and foreign
currency 3.05 (3.22) (4.46)
--------------- --------------- ---------------
Total from investment operations $ 3.29 $ (2.96) $ (4.11)
--------------- --------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.34) $ (0.37) $ (0.63)
From net realized gain on investments and foreign currency
transactions -- -- (1.71)
In excess of net investment income -- -- (0.00)+++
In excess of net realized gain on investments and foreign currency
transactions -- -- (0.02)
--------------- --------------- ---------------
Total distributions declared to shareholders $ (0.34) $ (0.37) $ (2.36)
--------------- --------------- ---------------
Net asset value -- end of period $ 12.23 $ 9.28 $ 12.61
=============== =============== ===============
Total return++ 36.26% (23.87)% (24.34)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.84% 0.82% 0.78%
Net investment income@ 2.28% 2.55% 2.25%
Portfolio turnover 134% 79% 104%
Net assets at end of period (000 Omitted) $ 287,648 $ 241,772 $ 467,632
<Caption>
UTILITIES SERIES
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
2000 1999
--------------- ---------------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 19.84 $ 17.08
--------------- ---------------
Income (loss) from investment operations#@ --
Net investment income $ 0.80 $ 0.35
Net realized and unrealized gain (loss) on investments and foreign
currency 0.49 4.52
--------------- ---------------
Total from investment operations $ 1.29 $ 4.87
--------------- ---------------
Less distributions declared to shareholders --
From net investment income $ (0.24) $ (0.30)
From net realized gain on investments and foreign currency
transactions (1.81) (1.81)
In excess of net investment income -- --
In excess of net realized gain on investments and foreign currency
transactions -- --
--------------- ---------------
Total distributions declared to shareholders $ (2.05) $ (2.11)
--------------- ---------------
Net asset value -- end of period $ 19.08 $ 19.84
=============== ===============
Total return++ 7.00% 31.30%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.80% 0.82%
Net investment income@ 4.11% 2.01%
Portfolio turnover 118% 139%
Net assets at end of period (000 Omitted) $ 622,564 $ 408,901
</Table>
<Table>
<Caption>
UTILITIES SERIES
-------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------------------- DECEMBER 31,
2003 2002 2001**
--------------- --------------- ---------------
SERVICE CLASS SHARES
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 9.24 $ 12.59 $ 14.01
--------------- --------------- ---------------
Income (loss) from investment operations#@@ --
Net investment income $ 0.20 $ 0.24 $ 0.08
Net realized and unrealized gain (loss) on investments and foreign
currency 3.06 (3.22) (1.50)
--------------- --------------- ---------------
Total from investment operations $ 3.26 $ (2.98) $ (1.42)
--------------- --------------- ---------------
Less distributions declared to shareholders from net investment income $ (0.32) $ (0.37) $ --
--------------- --------------- ---------------
Net asset value -- end of period $ 12.18 $ 9.24 $ 12.59
=============== =============== ===============
Total return++ 36.03% (24.09)% (10.14)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.09% 1.07% 1.05%+
Net investment income@@ 1.95% 2.41% 1.60%+
Portfolio turnover 134% 79% 104%
Net assets at end of period (000 Omitted) $ 22,555 $ 12,763 $ 7,919
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $(0.01). #Per share data are based on average
shares outstanding. ## Ratios do not reflect reductions from fees paid
indirectly.
++ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
@ As required, effective January 1, 2001, the series has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of this change
for the period ended December 31, 2001 was to decrease net investment income
per share by less than $0.01, increase net realized and unrealized gains and
losses per share by less than $0.01 and decrease the ratio of net investment
income to average net assets by 0.03%. Per share, ratios and supplemental
data for periods prior to January 1, 2001, have not been restated to reflect
this change in presentation.
@@ As required, effective January 1, 2001, the series has adopted the
provisions of the AICPA Audit and Accounting Guide for Investment Companies
and began amortizing premium on debt securities. The effect of this change
for the period ended December 31, 2001 was to decrease net investment income
per share by less than $0.01, increase net realized and unrealized gains and
losses per share by less than $0.01 and decrease the ratio of net investment
income to average net assets by 0.02%. Per share, ratios and supplemental
data for periods prior to January 1, 2001 have not been restated to reflect
this change in presentation.
See notes to financial statements.
51
<Page>
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-nine separate series (the
series) of shares: Bond Series, Capital Appreciation Series*, Capital
Opportunities 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, Managed Sectors 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 Growth and Income Series, Research International
Series, Strategic Growth Series, Strategic Income Series, Strategic Value
Series, Technology Series, Total Return Series*, Utilities Series*, and Value
Series. All of these series are diversified except for the Global Governments
Series, High Yield Series, Managed Sectors Series, Strategic Income Series, and
Utilities Series, which are non-diversified as that term is defined in the 1940
Act, as amended. The shares of each series are sold only to variable accounts
established by Sun Life Assurance Company of Canada (U.S.) and Sun Life
Insurance and Annuity Company of New York 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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The series can invest in foreign securities. Investments in foreign
securities are vulnerable to the effects of changes in the relative values of
the local currency and the U.S. dollar and to the effects of changes in each
country's legal, political, and economic environment.
INVESTMENT VALUATIONS -- Each series uses independent pricing services approved
by the Board of Trustees wherever possible to value its portfolio securities.
Portfolio securities are valued at current market prices where current market
prices are readily available, or each series may fair value portfolio securities
under the direction of the Board of Trustees when a determination is made that
current market prices are not readily available. Equity securities in each
series' portfolio for which market quotations are available are valued at the
last sale or official closing price as reported by an independent pricing
service on the primary market or exchange on which they are primarily traded, or
at the last quoted bid price for securities in which there were no sales during
the day. Equity securities traded over the counter are valued at the last sales
price traded each day as reported by an independent pricing service, or to the
extent there are no sales reported, such securities are valued on the basis of
quotations obtained from brokers and dealers. Equity securities for which it is
determined that current market prices are not readily available will be fair
valued under the direction of the Board of Trustees. Each series may also fair
value foreign equity securities in cases where closing market prices are not
readily available or are deemed not reflective of readily available market
prices. For example, significant events (such as movement in the U.S. securities
market, or other regional and local developments) may occur between the time
that foreign markets close (where the security is principally traded) and the
time that each series calculates its net asset value (generally, the close of
the NYSE) that may impact the value of securities traded in these foreign
markets. In these cases, each series may utilize information from an external
vendor or other sources to adjust closing market prices of foreign equity
securities to reflect what it believes to be the fair value of the securities as
of each series' valuation time. Because the frequency of significant events is
not predictable, fair valuation of foreign equity securities may occur on a
frequent basis. Bonds and other fixed income securities (other than short-term
obligations) in each series' portfolio are valued at an evaluated bid price as
reported by an independent pricing service, or to the extent a valuation is not
reported by a pricing service, such securities are valued on the basis of quotes
from brokers and dealers. Prices obtained from pricing services utilize both
dealer-supplied valuations and electronic data processing techniques which take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics, and other market data without exclusive reliance upon
quoted prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities. Bonds and
other fixed income securities for which it is determined that current market
prices are not readily available will be fair valued under the direction of the
Board of Trustees. Listed options are valued at the closing price as reported by
an independent pricing service on the principal exchange on which they are
traded. Unlisted options are valued by an independent pricing service or on the
basis of quotations obtained from brokers and dealers. Short-term obligations
with a remaining maturity in excess of 60 days will be valued upon
dealer-supplied valuations. All other short-term obligations in each series'
portfolio are valued at amortized cost, which constitutes market value as
determined by the Board of Trustees. Money market instruments are valued at
amortized cost, which the Trustees have determined in good faith approximates
market value. Each series' use of amortized cost is subject to each series'
compliance with certain conditions as specified under Rule 2a-7 of the 1940 Act.
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 -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
52
<Page>
WRITTEN OPTIONS -- Each series may write call or put options in exchange for a
premium. The premium is initially recorded as a liability, which is subsequently
adjusted to the current value of the option contract. When a written option
expires, the series realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the series. Each series, as writer of an option, may have
no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable change
in the price of the securities underlying the written option. In general,
written call options may serve as a partial hedge against decreases in value in
the underlying securities to the extent of the premium received. Written options
may also be used as part of an income producing strategy reflecting the view of
each series' management on the direction of interest rates.
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.
Cash collateral is invested in a money market fund and/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.
At December 31, 2003, the value of securities loaned for the Utilities Series
was $21,551,388. These loans were collateralized by cash of $22,367,093 and
non-cash U.S. Treasury obligations of $1,166,150.
INVESTMENT TRANSACTIONS AND INCOME -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States of
America. All discount is accreted for tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date.
The following series were participants in a class-action lawsuit against Cendant
Corporation. On March 26, 2003, the series received a cash settlement, recorded
as a realized gain on investment transactions. The proceeds from the
non-recurring litigation settlement resulted in an increase in net asset value
per share based on the shares outstanding on the day proceeds were received as
follows.
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
----------------------------------------------------------------------------------------------
Cash Settlement $ 13,278,304 $ 5,764,504 $ 1,246,578
Increase in net asset value per share $ 0.28 $ 0.16 $ 0.06
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS TRUST RESEARCH
SERIES SERIES SERIES
----------------------------------------------------------------------------------------------
Cash Settlement $ 635,017 $ 106,672 $ 2,202,987
Increase in net asset value per share $ 0.06 $ 0.002 $ 0.06
</Table>
Excluding the effect of these payments from the series' ending net asset value
per share, total return for the year ended December 31, 2003 would have been
lower by:
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS TRUST RESEARCH
SERIES SERIES SERIES SERIES SERIES SERIES
-------------------------------------------------------------------------------------------------------------------
Initial Class 2.08% 1.48% 0.79% 0.45% 0.01% 0.52%
Service Class 2.09% 1.50% 0.80% 0.46% 0.01% 0.52%
</Table>
Each 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, according to the procedures
described under "Investment Valuations" above.
53
<Page>
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. During the year ended December 31, 2003, each series' custodian fees
were reduced under this arrangement as noted below. Each series has entered into
a directed brokerage agreement, under which the broker will credit the series a
portion of the commissions generated, to offset certain expenses of the series.
For the year ended December 31, 2003, the series' miscellaneous expenses were
reduced under this agreement as noted below. These amounts are shown as a
reduction of expenses on the Statements of Operations.
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS TRUST
SERIES SERIES SERIES SERIES SERIES
---------------------------------------------------------------------------------------------------------------------
Balance credits $ 429 $ 389 $ 185 $ -- $ --
Directed brokerage credits 41,193 15,506 941 178 33,389
-------- -------- -------- -------- ---------
Total $ 41,622 $ 15,895 $ 1,126 $ 178 $ 33,389
-------- -------- -------- -------- ---------
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
SERIES SERIES SERIES SERIES
---------------------------------------------------------------------------------------------------------------------
Balance credits $ -- $ 11 $ 1,812 $ 236
Directed brokerage credits -- 15,087 2,042 13,201
-------- -------- -------- ---------
Total $ -- $ 15,098 $ 3,854 $ 13,437
-------- -------- -------- ---------
</Table>
TAX MATTERS AND DISTRIBUTIONS -- Each series' policy is to comply with the
provisions of the Internal Revenue Code (the "Code") applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. Each series
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, mortgage-backed securities, derivatives,
real estate investment trusts, defaulted bonds, capital losses, and amortization
and accretion on debt securities.
The tax character of distributions declared for the years ended December 31,
2003 and December 31, 2002 was as follows:
<Table>
<Caption>
CAPITAL APPRECIATION SERIES EMERGING GROWTH SERIES
--------------------------------- ---------------------------------
DECEMBER 31, DECEMBER 31,
--------------------------------- ---------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ -- $ 1,593,656 $ -- $ --
<Caption>
GLOBAL GROWTH SERIES
---------------------------------
DECEMBER 31,
---------------------------------
2003 2002
- -----------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 815,119 $ 610,272
</Table>
<Table>
<Caption>
MASSACHUSETTS
MANAGED SECTORS SERIES INVESTORS TRUST SERIES
--------------------------------- ---------------------------------
DECEMBER 31, DECEMBER 31,
--------------------------------- ---------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ -- $ -- $ 12,846,153 $ 15,218,978
<Caption>
MID CAP GROWTH SERIES
---------------------------------
DECEMBER 31,
---------------------------------
2003 2002
- -----------------------------------------------------------------------
Distributions declared from:
Ordinary income $ -- $ --
</Table>
<Table>
<Caption>
RESEARCH SERIES TOTAL RETURN SERIES
--------------------------------- ---------------------------------
DECEMBER 31, DECEMBER 31,
--------------------------------- ---------------------------------
2003 2002 2003 2002
- -----------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 3,833,763 $ 2,669,846 $ 57,181,077 $ 87,978,356
Long-term capital gain -- -- -- 32,999,423
--------------- --------------- --------------- ---------------
$ 3,833,763 $ 2,669,846 $ 57,181,077 $ 120,977,779
=============== =============== =============== ===============
<Caption>
UTILITIES SERIES
---------------------------------
DECEMBER 31,
---------------------------------
2003 2002
- -----------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 8,557,499 $ 12,824,759
Long-term capital gain -- --
--------------- ---------------
$ 8,557,499 $ 12,824,759
=============== ===============
</Table>
54
<Page>
During the year ended December 31, 2003, the reclassifications due to
differences between book and tax accounting were as follows:
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS TRUST
SERIES SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
Increase (decrease)
Paid-in-capital $ -- $ (752,032) $ -- $ -- $ 1
Accumulated undistributed net
realized gain (loss) on investments
and foreign currency transactions (29,178) (9,353) 452,114 (90) 35,787
Accumulated undistributed net
investment income 29,178 761,385 (452,114) 90 (35,788)
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
Increase (decrease)
Paid-in-capital $ (393,247) $ -- $ -- $ --
Accumulated undistributed net
realized gain (loss) on investments
and foreign currency transactions 565 (2,149) (4,597,559) (80,245)
Accumulated undistributed net
investment income 392,682 2,149 4,597,559 80,245
</Table>
As of December 31, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS
SERIES SERIES SERIES SERIES TRUST SERIES
------------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 433,808 $ -- $ 842,108 $ 63,588 $ 11,696,086
Capital loss carryforward (780,477,428) (509,354,163) (115,140,821) (212,869,084) (425,476,832)
Unrealized gain 59,621,530 37,622,582 17,853,753 25,734,401 85,526,244
Other temporary differences -- -- (33,531) -- --
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ -- $ 4,201,517 $ 48,370,035 $ 6,197,610
Capital loss carryforward (54,606,893) (321,202,683) (57,659,657) (233,169,383)
Unrealized gain 13,669,022 30,820,125 143,357,016 25,164,589
Other temporary differences -- -- (14,491) (45,758)
</Table>
At December 31, 2003, each series, for federal income tax purposes, had capital
loss carryforwards, which may be applied against any net taxable realized gains
of each succeeding year until the earlier of its utilization or expiration.
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS
EXPIRATION DATE SERIES SERIES SERIES SERIES TRUST SERIES
------------------------------------------------------------------------------------------------------------------------------
December 31, 2009 $ (400,122,192) $ (280,126,296) $ (69,393,524) $ (155,812,076) $ (201,118,577)
December 31, 2010 (348,269,974) (229,227,867) (45,747,297) (57,057,008) (207,883,555)
December 31, 2011 (32,085,262) -- -- -- (16,474,700)
--------------- --------------- ---------------- --------------- ---------------
Total $ (780,477,428) $ (509,354,163) $ (115,140,821) $ (212,869,084) $ (425,476,832)
=============== =============== ================ =============== ===============
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
EXPIRATION DATE SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------------------
December 31, 2009 $ (176,382) $ (159,339,939) $ -- $ (110,126,560)
December 31, 2010 (54,430,511) (161,862,744) (57,659,657) (123,042,823)
--------------- ---------------- --------------- ---------------
Total $ (54,606,893) $ (321,202,683) $ (57,659,657) $ (233,169,383)
=============== ================ =============== ===============
</Table>
For the Global Growth Series, realized gain is reported net of any foreign
capital gains tax in the statement of operations.
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.
55
<Page>
(3) TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER -- Each series has an investment advisory agreement with MFS
to provide overall investment advisory and administrative services, and general
office facilities. The management fee is computed daily and paid monthly at an
annual rate based on a percentage of each series' average daily net assets. The
agreement also provides that each series will be reimbursed for expenses in
excess of the expense limitation indicated below, based on the average net
assets of each series. Management fees and expense limitations are as follows:
<Table>
<Caption>
MANAGEMENT EXPENSE
FEES LIMITATIONS
---------------------------------------------------------------------------------------
Capital Appreciation Series 0.75%* 1.25%
Emerging Growth Series 0.75%* N/A
Global Growth Series 0.90%# N/A
Managed Sectors Series 0.75%* 1.25%
Massachusetts Investors Trust Series 0.55% 1.25%
Mid Cap Growth Series 0.75% N/A
Research Series 0.75%* N/A
Total Return Series 0.75%* 1.25%
Utilities Series 0.75%* N/A
</Table>
* The management fee for Capital Appreciation Series is 0.75% of the first $1
billion of average net assets, 0.675% of the average net assets of the next $500
million and 0.65% of the average net assets in excess of $1.5 billion. The
management fee for the Emerging Growth Series, Managed Sectors Series, Research
Series, Total Return Series and Utilities Series is 0.75% of the first $300
million of average net assets and 0.675% of the average net assets in excess of
$300 million. The management fee for the Total Return Series is reduced to 0.60%
of the average net assets in excess of $1 billion.
# Effective 01/01/04 the management fee for the Global Growth Series will be
0.90% for the first $1 billion of average net assets, 0.75% of the next $1
billion of average net assets, and 0.65% of average net assets in excess of $2
billion.
Each series pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the series, 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, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
ADMINISTRATOR -- Each series has an administrative services agreement with MFS
to provide the series with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the series pays MFS an administrative fee
up to the following annual percentage rates of the series' average daily net
assets:
<Table>
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
</Table>
DISTRIBUTOR -- 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 of the Investment Company Act of
1940 as follows:
The series' distribution plan provides that each series will pay up to 0.25% per
annum of its average daily net assets attributable to Service Class shares to
cover marketing and other fees to support the sale and distribution of Service
Class shares. Fees incurred under the distribution plan during the year ended
December 31, 2003 were 0.25% of average daily net assets attributable to Service
Class shares on an annualized basis.
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECITAION GROWTH GROWTH
SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) $ 681,078,796 $ 426,802,698 $ 246,411,036
============== =============== =============
Sales
Investments (non-U.S. government securities) $ 769,356,042 $ 486,458,524 $ 273,100,340
============== =============== =============
<Caption>
MASSACHUSETTS
MANAGED INVESTORS MID CAP
SECTORS TRUST GROWTH
SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) $ 122,091,758 $ 867,112,806 $ 97,588,496
============== =============== =============
Sales
Investments (non-U.S. government securities) $ 149,683,733 $ 1,021,367,354 $ 63,712,346
============== =============== =============
</Table>
56
<Page>
<Table>
<Caption>
TOTAL
RESEARCH RETURN UTILITIES
SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities $ -- $ 466,102,764 $ 2,567,256
============== =============== =============
Investments (non-U.S. government securities) $ 551,366,939 $ 618,469,712 $ 351,469,237
============== =============== =============
Sales
U.S. government securities $ -- $ 438,124,866 $ 7,923,099
============== =============== =============
Investments (non-U.S. government securities) $ 630,881,519 $ 661,643,366 $ 368,490,433
============== =============== =============
</Table>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each series, as computed on a federal income tax basis, are
as follows:
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS
SERIES SERIES SERIES SERIES TRUST SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 693,057,837 $ 450,394,452 $ 183,007,345 $ 140,887,440 $ 1,153,270,045
=============== =============== =============== =============== ===============
Gross unrealized appreciation 67,597,468 47,803,984 20,430,362 27,022,971 103,005,871
Gross unrealized depreciation (7,981,219) (10,182,801) (2,583,972) (1,288,570) (17,487,582)
--------------- --------------- --------------- --------------- ---------------
Net unrealized appreciation $ 59,616,250 $ 37,621,183 $ 17,846,390 $ 25,734,401 $ 85,518,289
=============== =============== =============== =============== ===============
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
SERIES SERIES SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------
Aggregate cost $ 99,602,891 $ 478,535,932 $ 1,871,671,303 $ 303,166,275
=============== =============== =============== ===============
Gross unrealized appreciation 15,597,818 38,886,669 164,259,203 33,284,654
Gross unrealized depreciation (1,535,688) (8,067,521) (20,912,357) (8,126,800)
--------------- --------------- --------------- ---------------
Net unrealized appreciation $ 14,062,130 $ 30,819,148 $ 143,346,846 $ 25,157,854
=============== =============== =============== ===============
</Table>
(5) SHARES OF BENEFICIAL INTEREST
The trust's 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:
<Table>
<Caption>
CAPITAL APPRECIATION SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 36,430,830 $ 555,737,786 42,474,155 $ 682,946,501
Shares issued to shareholders in
reinvestment of distributions -- -- 90,906 1,565,403
Shares redeemed (43,541,461) (659,490,318) (55,840,522) (889,386,800)
--------------- --------------- --------------- ---------------
Net decrease (7,110,631) $ (103,752,532) (13,275,461) $ (204,874,896)
=============== =============== =============== ===============
<Caption>
EMERGING GROWTH SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 17,237,076 $ 211,585,016 20,253,765 $ 253,927,926
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (23,555,654) (284,330,504) (34,253,773) (423,717,122)
--------------- --------------- --------------- ---------------
Net decrease (6,318,578) $ (72,745,488) (14,000,008) $ (169,789,196)
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 3,463,604 $ 53,156,979 3,381,409 $ 53,439,768
Shares issued to shareholders in
reinvestment of distributions -- -- 1,644 28,253
Shares redeemed (3,209,643) (49,113,958) (2,382,212) (36,613,620)
--------------- --------------- --------------- ---------------
Net increase 253,961 $ 4,043,021 1,000,841 $ 16,854,401
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 2,393,685 $ 29,186,780 2,228,880 $ 27,843,598
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (2,124,183) (25,692,327) (1,558,799) (18,550,199)
--------------- --------------- --------------- ---------------
Net increase 269,502 $ 3,494,453 670,081 $ 9,293,399
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
GLOBAL GROWTH SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 3,261,710 $ 30,596,849 3,856,438 $ 33,369,620
Shares issued to shareholders in
reinvestment of distributions 95,459 802,813 62,880 603,651
Shares redeemed (7,049,798) (62,881,388) (10,934,299) (95,476,070)
--------------- --------------- --------------- ---------------
Net decrease (3,692,629) $ (31,481,726) (7,014,981) $ (61,502,799)
=============== =============== =============== ===============
<Caption>
MANAGED SECTORS SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 1,470,625 $ 22,495,048 1,963,693 $ 29,198,203
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (3,539,753) (51,788,451) (6,051,645) (90,422,441)
--------------- --------------- --------------- ---------------
Net decrease (2,069,128) $ (29,293,403) (4,087,952) $ (61,224,238)
=============== =============== =============== ===============
</Table>
57
<Page>
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 1,530,109 $ 13,660,385 1,758,881 $ 15,293,619
Shares issued to shareholders in
reinvestment of distributions 1,468 12,306 692 6,621
Shares redeemed (1,364,494) (12,116,239) (1,426,430) (12,370,376)
--------------- --------------- --------------- ---------------
Net increase 167,083 $ 1,556,452 333,143 $ 2,929,864
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 135,985 $ 2,044,987 220,169 $ 3,327,852
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (132,155) (2,006,538) (90,626) (1,261,743)
--------------- --------------- --------------- ---------------
Net increase 3,830 $ 38,449 129,543 $ 2,066,109
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 18,119,817 $ 415,204,427 21,194,992 $ 495,701,108
Shares issued to shareholders in
reinvestment of distributions 562,444 12,283,774 590,015 14,827,084
Shares redeemed (26,183,745) (591,212,146) (35,897,100) (833,050,961)
--------------- --------------- --------------- ---------------
Net increase (decrease) (7,501,484) $ (163,723,945) (14,112,093) $ (322,522,769)
=============== =============== =============== ===============
<Caption>
MID CAP GROWTH SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 11,902,265 $ 54,284,348 9,620,735 $ 45,939,404
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (7,727,781) (33,796,739) (9,610,707) (43,188,070)
--------------- --------------- --------------- ---------------
Net increase (decrease) 4,174,484 $ 20,487,609 0,028 $ 2,751,334
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 4,191,568 $ 95,283,815 4,095,094 $ 95,430,886
Shares issued to shareholders in
reinvestment of distributions 25,821 562,379 15,626 391,897
Shares redeemed (3,666,249) (83,307,963) (2,437,421) (54,803,923)
--------------- --------------- --------------- ---------------
Net increase 551,140 $ 12,538,231 1,673,299 $ 41,018,860
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 8,520,907 $ 40,749,200 5,553,162 $ 25,963,163
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (4,988,390) (24,285,882) (2,731,972) (10,964,635)
--------------- --------------- --------------- ---------------
Net increase ,532,517 $ 16,463,318 2,821,190 $ 14,998,528
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
RESEARCH SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 5,919,002 $ 74,898,604 7,745,297 $ 96,759,973
Shares issued to shareholders in
reinvestment of distributions 323,079 3,780,030 190,922 2,646,176
Shares redeemed (13,727,969) (166,837,306) (22,112,692) (275,035,840)
--------------- --------------- --------------- ---------------
Net decrease (7,485,888) $ (88,158,672) (14,176,473) $ (175,629,691)
=============== =============== =============== ===============
<Caption>
TOTAL RETURN SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 17,626,716 $ 294,494,534 27,552,402 $ 458,385,379
Shares issued to shareholders in
reinvestment of distributions 3,226,008 51,583,867 6,686,488 114,806,974
Shares redeemed (29,751,984) (491,830,115) (39,696,095) (650,964,298)
--------------- --------------- --------------- ---------------
Net decrease (8,899,260) $ (145,751,714) (5,457,205) $ (77,771,945)
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 1,398,843 $ 17,711,972 777,100 $ 9,978,777
Shares issued to shareholders in
reinvestment of distributions 4,608 53,733 1,711 23,670
Shares redeemed (884,403) (11,194,294) (343,961) (4,015,469)
--------------- --------------- --------------- ---------------
Net increase 519,048 $ 6,571,411 434,850 $ 5,986,978
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 13,709,379 $ 230,394,938 11,179,458 $ 187,090,249
Shares issued to shareholders in
reinvestment of distributions 351,142 5,597,210 360,023 6,170,805
Shares redeemed (6,948,290) (117,049,454) (4,074,091) (65,413,210)
--------------- --------------- --------------- ---------------
Net increase 7,112,231 $ 118,942,694 7,465,390 $ 127,847,844
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
UTILITIES SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 7,142,580 $ 77,482,205 7,281,139 $ 72,443,492
Shares issued to shareholders in
reinvestment of distributions 812,301 8,106,762 1,156,656 12,376,218
Shares redeemed (10,500,562) (111,187,382) (19,463,689) (192,365,678)
--------------- --------------- --------------- ---------------
Net decrease (2,545,681) $ (25,598,415) (11,025,894) $ (107,545,968)
=============== =============== =============== ===============
</Table>
58
<Page>
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------
Shares sold 1,652,995 $ 17,674,211 1,829,644 $ 18,612,930
Shares issued to shareholders in
reinvestment of distributions 45,300 450,737 41,998 448,541
Shares redeemed (1,227,397) (13,206,592) (1,119,354) (10,548,532)
--------------- --------------- --------------- ---------------
Net increase 470,898 $ 4,918,356 752,288 $ 8,512,939
=============== =============== =============== ===============
</Table>
THIS PUBLICATION IS AUTHORIZED FOR DISTRIBUTION ONLY WHEN PRECEDED OR
ACCOMPANIED BY A PROSPECTUS FOR THE PORTFOLIO BEING OFFERED.
(6) LINE OF CREDIT
Each series and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each series, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating funds at the
end of each quarter. The commitment fee allocated to the series for the year
ended December 31, 2003 was as follows:
<Table>
<Caption>
COMMITMENT
FEE
---------------------------------------------------------------
Capital Appreciation Series $ 4,793
Emerging Growth Series 2,302
Global Growth Series 1,149
Managed Sectors Series 1,066
Massachusetts Investors Trust Series 7,126
Mid Cap Growth Series 539
Research Series 2,428
Total Return Series 12,078
Utilities Series 1,908
</Table>
Each series had no significant borrowings during the year.
(7) FINANCIAL INSTRUMENTS
The series trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options. The notional or contractual
amounts of these instruments represent the investment the series has in
particular classes of financial instruments and does not necessarily represent
the amounts potentially subject to risk. The measurement of the risks associated
with these instruments is meaningful only when all related and offsetting
transactions are considered.
Written Option Transactions -- Emerging Growth Series
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
---------------------------------------------------------------------------------
Outstanding, beginning of period 677 $ 111,692
Options written 6,316 825,657
Options terminated in closing transactions (2,516) (398,210)
Options exercised (364) (24,427)
Options expired (4,113) (514,712)
------------- -------------
Outstanding, end of period -- $ --
------------- -------------
</Table>
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the series' investment
adviser, has reached agreement with the Securities and Exchange Commission
("SEC"), the New York Attorney General ("NYAG") and the Bureau of Securities
Regulation of the State of New Hampshire ("NH") to settle administrative
proceedings alleging false and misleading information in certain retail fund
prospectuses regarding market timing and related matters. These regulators
alleged that prospectus language for certain MFS funds was false and misleading
because, although the prospectuses for those funds in the regulators' view
indicated that the funds prohibited market timing, MFS did not limit trading
activity in 11 domestic large cap stock, high grade bond and money market funds.
The complaints by these regulatory authorities did not involve the series, but
rather involved MFS' retail funds. MFS' former Chief Executive Officer, John W.
Ballen, and former President, Kevin R. Parke, have also reached agreement with
the SEC. Under the terms of the settlements, MFS and the executives neither
admit or deny wrongdoing.
Under the terms of the settlements, a $225 million pool will be established and
funded by MFS for distribution to retail fund shareholders. MFS has further
agreed with the NYAG to reduce its management fees by approximately $25 million
annually over the next five years, and not to increase certain management fees
during this period. MFS will also pay an administrative fine to NH in the amount
of $1 million. In addition, MFS and the retail funds will adopt certain
governance changes.
59
<Page>
Messrs. Ballen and Parke have agreed to temporary suspensions from association
with any registered investment company or investment adviser, will pay
approximately $315,000 each to the SEC, and resigned their positions as trustees
of all MFS funds, and Mr. Ballen resigned his position as President of all MFS
funds.
MFS and certain MFS funds and their trustees and affiliates have been named as
defendants in class action and other lawsuits alleging similar claims concerning
market timing and seeking damages of unspecified amounts.
In November 2003, the SEC and Morgan Stanley DW, Inc. (Morgan Stanley) settled
an enforcement action against Morgan Stanley relating to the undisclosed receipt
of fees from certain mutual fund companies in return for preferred marketing of
their funds. MFS was one of the 14 fund companies reported to be on Morgan
Stanley's preferred list. As a result, MFS has been under investigation by the
SEC relating to its directed brokerage and revenue-sharing arrangements with
various distributors of its products, including Morgan Stanley. MFS is
cooperating with the SEC's investigation, which is ongoing. The outcome of this
investigation is not yet determinable and may result in sanctions, compensation
payments or other financial penalties.
Although MFS does not believe that these regulatory developments will have a
material adverse effect on the series, there can be no assurance that these
developments and/or the ongoing adverse publicity resulting from these
developments will not result in increased redemptions, reduced sales or other
adverse consequences.
This MFS(R)/Sun Life Series Trust Annual Report is prepared for the general
information of contract owners. It is authorized for distribution to
prospective investors only when preceded or accompanied by the current
prospectus.
60
<Page>
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE SHAREHOLDERS OF MFS/SUN LIFE SERIES TRUST:
We have audited the accompanying statements of assets and liabilities of Capital
Appreciation Series, Emerging Growth Series, Global Growth Series, Managed
Sectors Series, Massachusetts Investors Trust Series, Mid Cap Growth Series,
Research Series, Total Return Series, and Utilities Series, (each a portfolio of
MFS/Sun Life Series Trust), including the portfolios of investments, as of
December 31, 2003, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial positions of
Capital Appreciation Series, Emerging Growth Series, Global Growth Series,
Managed Sectors Series, Massachusetts Investors Trust Series, Mid Cap Growth
Series, Research Series, Total Return Series, and Utilities Series as of
December 31, 2003, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for each of the five years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 17, 2004
61
<Page>
MFS/SUN LIFE SERIES TRUST
FEDERAL TAX INFORMATION (UNAUDITED)
DIVIDENDS RECEIVED DEDUCTION
For the year ended December 31, 2003, the amounts of distributions from income
eligible for the 70% dividends received deduction for corporations were as
follows:
<Table>
<Caption>
DIVIDENDS RECEIVED
DEDUCTIONS
-----------------------------------------------------------------
Global Growth Series 48.48%
Massachusetts Investors Trust Series 100%
Total Return Series 32.17%
Utilities Series 64.25%
</Table>
For the year ended December 31, 2003, income from foreign sources for the Global
Growth Series was $2,983,589, and the series designated a foreign tax credit of
$523,318.
62
<Page>
TRUSTEES AND OFFICERS
MFS(R)/SUN LIFE SERIES TRUST
500 Boylston Street, Boston, MA 02116-3741
The following table presents certain information regarding the Trustees and
executive officers of the Trust, including their principal occupations, which,
unless specific dates are shown, are of more than five years duration, although
the titles may not have been the same throughout.
NAME, POSITION WITH TRUST, LENGTH OF TIME SERVED, AGE, PRINCIPAL OCCUPATION AND
OTHER DIRECTORSHIPS(1):
INTERESTED TRUSTEES
C. James Prieur* Trustee (since July 1999) (born 4/21/51)
Sun Life Assurance Company of Canada, President and Chief Executive Officer
(since April 1999), General Manager, U.S. (until April 1999).
David D. Horn* Trustee (since April 1986) (born 6/7/41)
Private Investor; Retired; Sun Life Assurance Company of Canada, Former
Senior Vice President and General Manager for the United States (until 1997).
INDEPENDENT TRUSTEES
J. Kermit Birchfield Trustee and Chairman (since May 1997) (born 1/8/40)
Consultant; Century Partners, Inc. (investments), Managing Director; Dairy
Mart Convenience Stores, Inc. (convenience stores), Chairman; Displaytech,
Inc. (manufacturer of liquid crystal display technology), Director; HPSC,
Inc. (medical financing), Director; Intermountain Gas Company, Inc. (public
utility gas distribution), Director.
Robert C. Bishop Trustee (since May 2001) (born 1/13/43)
AutoImmune, Inc. (pharmaceutical product development), Chairman, President
and Chief Executive Officer; Caliper Technologies, Inc. (laboratory
analytical instruments), Director; Millipore Corporation
(purification/filtration products), Director; Quintiles Transnational Corp.
(contract services to the medical industry), Director.
Frederick H. Dulles Trustee (since May 2001) (born 3/12/42)
McFadden, Pilkington & Ward LLP (solicitors and registered foreign lawyers),
Partner; Jackson & Nash, LLP (law firm), Of Counsel (January 2000 to November
2000).
Derwyn F. Phillips Trustee (since April 1986) (born 8/31/30)
Retired.
Robert G. Steinhart Trustee (since May 2001) (born 6/15/40)
Private Investor; Bank One, Texas N.A., Vice 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 (since May 2001) (born 7/21/48)
Hawaii Small Business Development Center, Kaua'i Center, Center Director
(since March 2002); Displaytech, Inc. (manufacturer of liquid crystal display
technology), Chairman and Chief Executive Officer (until March 2002).
TRUSTEES EMERITUS
Garth Marston Trustee Emeritus (born 4/28/26)
Retired.
Samuel Adams(2)** Trustee Emeritus (born 10/19/25)
Retired.
OFFICERS
John W. Ballen(3)++ President (born 9/12/59)
Massachusetts Financial Services Company, Chief Executive Officer and
Director.
James R. Bordewick, Jr.++ Assistant Secretary and Assistant Clerk (born 3/6/59)
Massachusetts Financial Services Company, Senior Vice President and Associate
General Counsel.
Stephen E. Cavan++ Secretary and Clerk (born 11/6/53)
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Secretary.
Stephanie A. DeSisto++ Assistant Treasurer (born 10/01/53)
Massachusetts Financial Services Company, Vice President, (since April 2003);
Brown Brothers Harriman & co., Senior Vice President (November 2002 to April
2003); ING Group N.V./Aveltus Investment Management, Senior Vice President
(prior to November 2002)
Robert R. Flaherty++ Assistant Treasurer (born 9/18/63)
Massachusetts Financial Services Company, Vice President (since August 2000);
UAM Fund Services, Senior Vice President (prior to August 2000).
Richard M. Hisey++ Treasurer (born 8/29/58)
Massachusetts Financial Services Company, Senior Vice President (since July
2002); The Bank of New York, Senior Vice President (September 2000 to July
2002); Lexington Global Asset Managers, Inc., Executive Vice President and
Cheif Financial Officer (prior to September 2000); Lexington Funds, Treasurer
(prior to September 2000).
Robert J. Manning(4)++ President (born 10/20/63)
Massachusetts Financial Services Company, Chief Executive Officer,
President, Chief Investment Officer and Director
Ellen Moynihan++ Assistant Treasurer (born 11/13/57)
Massachusetts Financial Services Company, Vice President.
James O. Yost++ Assistant Treasurer (born 6/12/60)
Massachusetts Financial Services Company, Senior Vice President.
- ----------
(1) Directorships of companies required to report to the Securities and
Exchange Commission (the "SEC") (i.e. "public companies").
(2) Retired December 31, 2003, and became Trustee Emeritus.
(3) Resigned February 6, 2004.
(4) Appointed on February 6, 2004.
* "Interested person" of 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 Trust. The address
of Sun Life of Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills,
Massachusetts.
** "Interested person" of Massachusetts Financial Services Company ("MFS"),
within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street,
Boston, Massachusetts. Samuel Adams was an "interested person" of MFS because
the law firm of Kirkpatrick & Lockhart, LLP, where Mr. Adams was Of Counsel, has
served as counsel to some investment companies managed by MFS, and to MFS and
its affiliates within the past two fiscal years of the Trust.
The Series does not hold annual meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. this means that each
Trustee is elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer holds office until his or her successor is chosen and qualified, or
until he or she retires, resigns or is removed from office.
All Trustees currently serve as Trustees of each fund and have served in
that capacity continuously since originally elected or appointed.
All of the Trustees are also Managers of the Compass Variable Accounts,
separate accounts registered as investment companies. The executive officers of
the 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 36
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.
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
PORTFOLIO MANAGERS++
William J. Adams
S. Irfan Ali
David A. Antonelli
David M. Calabro
James J. Calmas
Barry P. Dargan
Dale A. Dutile
Kenneth J. Enright
Eric B. Fischman
Joseph C. Flaherty, Jr.
Steven R. Gorham
Robert Henderson
John D. Laupheimer, Jr.
Gregory Locraft
Constantine Mokas
Lisa B. Nurme
Edward L. O'Dette
Stephen Pesek
Donald F. Pitcher, Jr.
Michael W. Roberge
Matthew W. Ryan
Bernard Scozzafava
David E. Sette-Ducati
Maura A. Shaughnessy
Nicholas Smithie
James T. Swanson
Brooks Taylor
Peter C. Vaream
Terri A. Vitozzi
Barnaby Wiener
(C) 2004 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA.
++ MFS Investment Management(R)
<Page>
[MFS(R)/SUN LIFE SERIES TRUST LOGO]
ANNUAL REPORT - DECEMBER 31, 2003
CAPITAL OPPORTUNITIES SERIES
INTERNATIONAL GROWTH SERIES
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
MID CAP VALUE SERIES
NEW DISCOVERY SERIES
RESEARCH GROWTH AND INCOME SERIES
RESEARCH INTERNATIONAL SERIES
STRATEGIC GROWTH SERIES
STRATEGIC VALUE SERIES
TECHNOLOGY SERIES
VALUE SERIES
<Page>
TABLE OF CONTENTS
<Table>
Letter from the Chairman 1
Management Review 2
Performance Summary 11
Portfolio of Investments 18
Financial Statements 41
Notes to Financial Statements 58
Independent Auditors' Report 68
Federal Tax Information 69
Board of Managers and Officers Back Cover
</Table>
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
<Page>
LETTER FROM THE CHAIRMAN
DEAR CONTRACT OWNERS,
In our view, the past year has been a promising one for investors. Financial
markets have improved steadily, spurred by indications of a global economic
recovery.
These developments make this an encouraging time for our contract owners. But we
also think it's a time to reinforce the fundamentals of a sound investment
strategy.
We think in any market environment the best approach for investors is
disciplined diversification. This method of investing involves three simple
steps. First, ALLOCATE your holdings across the major asset classes. Second,
DIVERSIFY within each class so that you get exposure to different investment
styles, such as growth and value, and market sectors, such as government and
corporate bonds. Finally, to respond to the way market activity can shift the
value of your accounts, REBALANCE your accounts on a routine schedule, such as
once per year. Doing so will help you maintain your desired allocation across
each asset class.
These investing fundamentals are often lost when markets are on an upswing. At
such times, it's easy to be tempted to shift your holdings in the current,
"hottest" performing investment. History suggests, however, that it is difficult
to predict year after year what the best performing sector or market will be.
While it is true that the past cannot offer any guarantees for the future, the
markets historically have demonstrated the benefits of taking the prudent
approach and spreading your assets across a variety of holdings. For investors
with a long-term goal such as retirement, a balanced approach usually makes the
most sense. As always, your investment professional can help you identify an
appropriate mix of investments for your needs.
Respectfully,
/s/ C. James Prieur
C. James Prieur
President and Chief Operating Officer, Sun Life Financial, Inc.
January 19, 2004
The opinions expressed in this letter are those of C. James Prieur, and no
forecasts can be guaranteed.
Note to contract owners: Effective January 1, 2004, J. Kermit Birchfield, an
independent trustee, was appointed Chairman of the Compass Board, which oversees
the MFS/Sun Life Series Trust.
MARKET ENVIRONMENT
In the early months of 2003, investors were battered by economic and
geopolitical uncertainty. By year-end, however, investors were celebrating 2003
as the first positive year for global markets since 1999. The turnaround in
global stock markets began in March and April of 2003, when it became apparent
that the U.S.- and British-led coalition was on the verge of military success in
Iraq. The release of increasingly positive economic numbers as 2003 progressed,
particularly in the corporate earnings area, helped drive the ensuing equity
rally. In addition, investor concern over issues that had held back the market
in the first quarter -- including the Iraq situation, a short-lived SARS
epidemic, and corporate misdeeds -- largely faded as the year progressed.
In the equity markets, the big surprise of 2003 was investors' appetite for
risk. After a brutal three-year market decline, many observers -- including MFS
and Sun Life -- believed investors would avoid risky investments. Instead, we
experienced an equity rally led by relatively low-quality, higher-risk stocks --
stocks of companies with substantial debt on their balance sheets, low profit
margins, and/or second- and third-tier competitive positioning. For much of
2003, investors seemed to favor the stocks that had previously fallen the
hardest, rather than bidding up industry leaders that had weathered the global
downturn relatively well. Toward the end of the year, however, we felt the
market was beginning to rotate toward less risky companies with stronger
fundamentals (business factors such as earnings and cash flow growth).
For U.S. investors in overseas stock markets, the big story of 2003 was the
decline of the dollar relative to other currencies. While many developed-nation
stock markets performed roughly in line with the broad U.S. market -- and
developing nations in general did even better -- the declining dollar increased
those returns for U.S. investors in overseas equities. For example, the Morgan
Stanley Capital International (MSCI) EAFE (Europe, Australasia, Far East) Index,
a commonly used measure of the international stock market, returned 20.8%
measured in local currencies but 39.2% when returns were converted into dollars.
(Source: Morgan Stanley Capital International)
Factors that contributed to the dollar's decline against most currencies
included a U.S. trade deficit that overseas investors viewed as excessive; low
interest rates that decreased the attractiveness of dollar-denominated
investments; and the Bush administration's apparent abandonment of a
long-standing U.S. policy of publicly advocating a strong dollar.
In the bond market, we saw interest rates in many developed nations fall to
historical lows in 2003. But by year-end, an improving global economy began to
put upward pressure on rates, and Australia and the United Kingdom became the
first major developed nations to raise rates. In the United States, the Federal
Reserve Board kept short-term rates at a four-decade low through year-end.
However, long-term U.S. Treasury rates -- which are largely determined by
investor sentiment -- rose modestly for the period as a whole and experienced
sharp volatility in the spring and summer. Ten-year rates fell when the Fed,
after its May meeting, expressed a strong desire to keep rates low and implied
that it might use some unconventional strategies to do so -- such as buying
longer-term bonds. Then long-term rates shot up in late June and July after the
Fed lowered the short-term rate by only a quarter-point at its June meeting,
disappointing a market that had expected a half-point drop. Many investors read
the quarter-point move as a sign that perhaps the economy was improving faster
than the Fed had expected.
In contrast, U.S. corporate bonds generally benefited from an accelerating
recovery. Growth in GDP (gross domestic product), employment, and other economic
measures pointed toward improving corporate bond fundamentals (factors such as
earnings, cash flow growth, and credit quality).
In response, investors became less risk averse, and the "flight to quality" that
had characterized the bond market in late 2002 began to fade. With Treasury
yields at four-decade lows, investors in 2003 sought out higher-yielding
corporate debt. Riskier, lower-rated bonds showed the best performance for the
year.
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MANAGEMENT REVIEW
CAPITAL OPPORTUNITIES SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
28.30% for Initial Class shares and 28.00% for Service Class shares. These
returns, which include the reinvestment of any capital gains and dividend
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 28.67% over the same period for the series' benchmark,
the Standard & Poor's 500 Stock Index. The S&P 500 is a commonly used measure of
the broad stock market. Over the same period, the average multi-cap core fund
tracked by Lipper Inc., an independent firm that reports fund performance,
returned 29.98%.
DETRACTORS FROM PERFORMANCE
Holdings in the technology, leisure and business services sectors were behind
the series' underperformance relative to its benchmark.
During the period, the series had an underweighted position in Intel, which was
the leading contributor to underperformance. Investor concerns over Intel's weak
corporate technology spending abated, while the stock, which was sold during the
period, improved on the news that certain products, such as its microprocessors
in laptop PCs, had showed surprising strength.
Also underperforming in the technology sector was Network Associates. Network
Associates stock fell after missing Wall Street analysts' earnings projections
because of a sizable drop in customer spending on its Web security and
anti-virus software products. The company blamed the shortfall on continued
weakness in business technology spending.
Elsewhere in technology, however, the portfolio's relative performance was
helped by our overweighted position in storage software firm VERITAS Software.
In basic materials, the stock of Owens Illinois, a company that manufactures
glass and plastic packaging, was also a source of negative performance as it had
to deal with pressure from rising prices for the oil used to make its plastic
bottles and for the natural gas used to power several of its factories.
Investors were also concerned by the company's highly leveraged balance sheet
and potential liabilities associated with asbestos in its plants.
Pharmaceutical company Schering Plough saw its stock price decline sharply
during the period because of announcements of lower earnings, investigations of
past pricing and shareholder reporting practices, and marketing difficulties
with its prescription allergy drug Clarinex.
The series' position in energy companies such as Noble Corp. also hurt relative
performance. During the period, concerns arose over sustainable natural gas
prices and the lack of evidence of capital spending in the industry, which
caused the stocks to do poorly.
CONTRIBUTORS TO PERFORMANCE
The series generated its best performance relative to the benchmark from its
positions in the retailing, consumer staples, and health care sectors.
Sears was the biggest contributor to positive performance in the retail sector.
The stock had been selling at low valuations early in the period because of
concerns about the performance of Sears' credit card division. The company then
sold the credit card division at a very attractive price and used the proceeds
to buy back some of its own stock. The company's ability to shed an
underperforming division and focus on its retail business, coupled with the fact
that its stock had been selling at a very cheap multiple, had a very positive
effect on its value to investors.
In the health care sector, Genentech stock benefited from a string of good news
that boosted the company's long-term prospects. New data about its colorectal
drug Avastin came in better than expected while the company released promising
clinical reports about psoriasis drug Raptiva and arthritis drug Rituxan. This
stock was sold during the period.
The series' position in AT&T Wireless also helped performance, as the third
largest U.S. wireless telephone company boosted sales and reduced costs.
The Consumer Staples sector also added positive relative returns, largely
because it avoided stocks such as Coke, Sara Lee, and Proctor & Gamble.
INTERNATIONAL GROWTH SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 38.67% and Service Class shares 38.35%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return over the same period of 39.17% for the series' benchmark,
the Morgan Stanley Capital International (MSCI) EAFE (Europe, Australasia, Far
East) Index, a commonly used measure of the international stock market. These
returns also compare with a return over the same period of 36.00% for the Lipper
International Fund Index. The Lipper Indices measure the performance of funds
within their respective classifications. Over the same period, the average
international fund tracked by Lipper Inc. returned 34.75%.
DETRACTORS FROM PERFORMANCE
Relative to the MSCI EAFE Index, portfolio performance suffered from an
underweighting in the financial services sector, which performed very well over
the period. Stock selection in the sector also held back performance. In
particular, we did not own several banking stocks that had suffered in earlier
periods but soared in the 2003 rally, including Deutsche Bank in Germany and UFJ
Holdings in Japan. Not owning U.K.-based HSBC Holdings also hurt relative
performance as the international financial services firm benefited from its
exposure to the global recovery and in particular from its purchase of U.S.
sub-prime lender Household International. Not owning Banco Santander also
detracted from relative results.
However, several other financial services stocks were among the series'
strongest-performing holdings. Our position in Australian insurer QBE rose
sharply as the company benefited from a global trend toward higher policy
prices. Anglo Irish Bank and Irish-listed German lender Depfa Bank also added to
portfolio results. Both firms are niche lenders that benefited from high
margins.
Stock selection and a relative overweighting in the leisure sector also hurt
performance as the sector lagged the overall market. Our position in Anglo-Dutch
publisher Reed Elsevier offered a relatively unexciting outlook as the firm's
U.S. textbook business suffered from state budget cutbacks.
An overweighting in the consumer staples sector also held back performance, as
the market rotated away from relatively defensive holdings in that sector and
favored areas such as technology that were more linked to an economic recovery.
In particular, our
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holding in Unilever was left behind in the rally as the firm failed to meet
its management's aggressive growth targets. Similarly, Japanese cosmetics
firm Shiseido was plagued by disappointing sales. Both Unilever and Shiseido
were sold out of the portfolio over the period. And although our position in
U.K.-based food and cleaning products giant Reckitt Benckiser performed
strongly on an absolute basis, it still underperformed relative to the broad
market, as represented by our benchmark, the MSCI EAFE Index.
The portfolio's cash position also detracted from relative performance. As with
nearly all series, this series holds some cash to buy new holdings and to cover
investor exchanges or redemptions. In a period when equity markets rose sharply,
cash hurt performance against our benchmark, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Strong stock selection in utilities and communications made that sector the
best-performing area in the portfolio over the period, on a relative basis.
Previous to the period, telecommunications stocks in general had fallen
dramatically for several years as the industry paid the price for a capital
spending binge that had led to overcapacity and weak pricing. In late 2002 and
2003, we saw the industry start to recover. Telecom firms cut debt and began to
run their operations in what we felt was a more sensible manner. Holdings that
benefited from that recovery included KDDI, a Japanese cellular and long
distance operator, and America Movil, a Latin American cellular operator.
Elsewhere in the utilities and communications sector, the series' position in
Chinese electric utility Huaneng Power did well. The firm experienced strong
growth as electric utilities in China struggled to keep pace with the country's
rapid expansion of manufacturing.
While telecommunications holdings overall helped performance, two of the series'
largest detractors over the period were also telecom stocks. Vodafone Holdings,
which changed its name from Japan Telecom last year, lost value, and we sold our
position. However, we maintained a position in its U.K.-based parent company,
Vodafone Group; that position increased in value over the period, although it
underperformed the broader market. Our position in Korean broadband operator
Hanaro Telecom was hurt during the period by corporate sellers of the stock. But
as of period-end we still favored Hanaro stock over the longer term, as the
company was one of the few remaining operators in a market that has been
consolidating.
Several retail stocks helped performance in that sector over the period. U.K.
clothing retailer Next continued to grow its sales. Fashion firm Fast Retailing
recovered from problems caused by merchandising issues and an overly ambitious
expansion plan. We had owned the stock previously and sold it when
year-over-year same-store sales (a key measure of retail businesses) turned
negative. We repurchased the stock as the company addressed its problems and
same-store sales once again turned positive and sold it during the period at a
profit. Kingfisher, a British chain of do-it-yourself stores, began implementing
a restructuring plan. And Mexican electronics retailer Grupo Elektra benefited
from an expanding middle class and increased home ownership.
Stock selection in technology also helped relative performance. ARM Holdings, a
U.K.-based semiconductor design firm, was the strongest contributor in the
sector. This was a company that our analysts felt had a good business, but had
been unjustifiably beaten down by the market. We bought the stock at what we
felt was an attractive price, benefited when the stock recovered, and sold our
position when we felt it had become fairly valued. Performance was also aided by
Stanley Electric, a supplier of parts to Honda Motor, Netherlands-based consumer
electronics firm Philips Electronics, and Finnish cellular handset firm Nokia.
We sold our Nokia stock during the period and took some profits.
Individual stocks that contributed to performance also included
German-headquartered chemical firm Celanese, Swiss medical devices company
Synthes-Stratec, and Japanese venture capital firm JAFCO. Celanese and JAFCO
were subsequently sold from the portfolio.
NOTE TO CONTRACT OWNERS: EFFECTIVE AUGUST 26, 2003, THE LIPPER INTERNATIONAL
FUNDS INDEX WAS NO LONGER A BENCHMARK OF THE PORTFOLIO.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 23.39% and Service Class shares 22.84%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 29.75% over the same period for the series' benchmark,
the Russell 1000 Growth Index, which measures the performance of large-cap U.S.
growth stocks. Over the same period, the average large-cap growth fund tracked
by Lipper Inc. returned 26.75%.
PORTFOLIO MANAGEMENT UPDATE
In November 2003, Irfan Ali and Gregory Locraft joined Stephen Pesek in managing
the portfolio. There has been no change to the series' investment philosophy or
approach. The portfolio will continue to pursue its traditional bottom-up,
well-diversified, growth-at-a-reasonable-price strategy.
DETRACTORS FROM PERFORMANCE
The series' performance lagged that of its benchmark during the period.
Positioning among technology, industrial goods and services, and business
services concerns comprised the chief areas of disappointment.
Maintaining an underweighted position among technology stocks in general, and
semiconductor concerns in particular, hurt relative results. Overall stock
selection in the sector also hurt performance. Strong gains from portfolio
holdings such as chip maker Analog Devices and storage software provider VERITAS
Software failed to fully offset the performance drag of being underweighted in
semiconductor giants Intel and Texas Instruments. Stocks of electronic component
makers and equipment suppliers rallied strongly over the period as investors
anticipated a cyclical rebound in demand. By the end of the period, evidence of
strength in specific product markets led us to selectively increase our exposure
to those areas.
Stock selection in the industrial goods and services area also hurt performance.
Our holding in aerospace and defense firm Northrop Grumman disappointed as a
number of one-time charges masked otherwise good operating performance. We sold
the stock during the period. Being underweighted in General Electric also
detracted from relative results as the stock delivered strong performance for
the year.
In business services, our position in Automatic Data Processing held back
performance. Early in 2003, the company had managed amid a weak environment --
soft demand for its payroll
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and financial services trade processing services -- by cutting costs. In March,
ADP management signaled that they would increase spending in the firm's payroll
processing business, a move that we felt would dampen future earnings potential.
The stock fell on the news of the change in strategy, and we sold our position.
Retailer Kohl's was also a significant performance detractor. Weakness in the
moderate price apparel area led the company to report disappointing sales and
earnings. As of the end of the period, we felt this setback was temporary in
nature.
The portfolio's cash position also detracted from relative performance. As with
nearly all series, this series holds some cash to buy new holdings and to cover
investor exchanges or redemptions. In a period when equity markets rose sharply,
cash hurt performance against our benchmark, the Russell 1000 Growth Index,
which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Holdings in the health care sector boosted portfolio results. We avoided or
underweighted a number of large-cap pharmaceutical stocks because we felt their
medium-term growth prospects would be limited by patent expirations on key
products as well as by a dearth of new drugs in the development pipeline.
Instead, we trained our sights on select biotechnology concerns we believed
would offer stronger sustainable growth. For example, we favored Genentech and
Amgen over Johnson & Johnson, in which we were relatively underweighted, and
Merck, which we did not own. This positioning proved beneficial during the
period. Our holdings in pharmaceutical and health care products company Wyeth,
however, detracted from results.
Underweighting consumer staples concerns also helped performance as that sector
lagged the overall market. Avoiding Coca Cola was particularly helpful, as the
company reported lackluster volume growth. Reducing our position in
Colgate-Palmolive in favor of other opportunities also proved beneficial to
performance.
Other contributors to performance included overweighted positions in
InterActiveCorp in the leisure sector and Best Buy in the retailing sector.
MID CAP VALUE SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
32.24% for Initial Class shares and 31.90% for Service Class shares. These
returns, which include the reinvestment of any capital gains and dividend
distributions, but do not reflect any applicable contract or surrender charges,
compare with a return of 38.07% over the same period for the series' benchmark,
the Russell Midcap Value Index (the Russell Index). The Russell Index measures
the performance of U.S. mid-cap value stocks. During the same period, the
average mid-cap value fund tracked by Lipper Inc. returned 39.85%.
DETRACTORS FROM PERFORMANCE
Basic materials, leisure and the health care sectors were the three most
significant detractors from relative performance, other than cash. Among the
series' basic materials holdings, specialty paper companies such as Bowater
turned in weak performance. Bowater makes, among other products, specialty
papers and newsprint. Newspaper print advertising, especially at the local
level, did not recover in this economic recovery as quickly as it has in the
past. As a result, sales for the company suffered.
Bottling is a core product of Owens Illinois, which is also part of the basic
materials sector. Owens uses natural gas as its chief energy source in making
bottles, and the price of natural gas rose throughout the period. Owens was not
able to pass on that increase to its customers, so the increased costs directly
impacted revenues.
Although the series avoided the poor performance of Eastman Kodak, its leisure
holdings produced disappointing results. Quebecor World, also in the leisure
group, is a large commercial printer that announced the resignation of its CEO
and lower earnings on the same day late in 2002. We sold the last of our
position in the first quarter of 2003.
The Series' overweighted position in health care, as well as stock selection,
hurt relative performance. Tenet Healthcare, Lifepoint Hospitals, and
AmeriSourceBergen were particularly disappointing even though they were not
among the top detractors for the series. Tenet's stock price declined because
the company was being investigated for Medicare billing and doctor referral
practices. Wholesale drug distributor AmeriSourceBergen announced in December
2003 that it would miss its earnings target and that it lost its biggest
client, the Veterans Administration. The stock dropped sharply. Lifepoint
Hospitals also detracted from returns and was sold from the portfolio.
Other stocks that detracted from results were Noble Corporation and Networks
Associates. Noble is an oil and natural gas exploration, production, and
marketing company. Network Associates was a victim of the slow recovery in
business' technology spending. As a result, the company missed its earnings
estimate. The series also received weak results from Alliant Techsystems,
GlobalSantaFe, and Cincinnati Bell.
The series' cash position also detracted from relative performance. As with
nearly all series, this series holds some cash to facilitate transactions and to
provide liquidity. In a period when equity markets rose sharply, cash hurt
performance relative to the Russell Index, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Financial services, special business products and services, and retailing were
the series' strongest-performing sectors. Although there were no financial
stocks among the series' top contributors, financial holdings that did the best
were thrift institutions located in metropolitan New York and New Jersey.
Regional institutions such as Dime Community Bancshares and New York Community
Bancorp continued to benefit from a strong mortgage environment, especially in
multi-family housing. Other financial services contributors included Mellon
Financial and iStar Financial. The stock market's rally helped increase Mellon's
revenues from its stock custody business and its investment management
activities. iStar is a real estate investment trust that experienced increased
deal flow as a result of an improved commercial real estate market. Dime
Community and Mellon were sold when they reached our price target.
The retail climate continues to be strong buoyed by consumer spending.
Beneficiaries of that spending include Best Buy, Foot Locker, Liz Claiborne,
and Office Depot, none of which were among top series' contributors. Office
Depot stock received an added lift from announcing a new management team
early in the year and the company's restructuring efforts. Avoidance of
JCPenney and Jones Apparel also contributed to relative results. Sears
Roebuck delivered strong returns as a result of selling its
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credit card business to Citigroup. The series sold its positions in Best Buy
and Foot Locker.
Special business products and services include a diverse group of companies, a
number of which contributed to series' returns. For example, Modus Professional
Services (MPS) stock rose on the strength of increased requests for temporary
help in the technology, law, and engineering industries. School Specialty, which
sell school desks, chairs, and related supplies, performed better than the
company had projected because school budgets were not slashed as deeply as the
company expected.
Other stocks that contributed to performance included VERITAS, Applied Micro
Circuits, Cypress Semiconductor, and Calpine. Signs of improving balance sheet
strength led to strong performance for data storage software company VERITAS.
The stock prices of Applied Micro Circuits and Cypress rose as the environment
for capital spending on technology improved. Calpine restructured its debt, and
demand started to catch up to the company's generating capacity when the economy
began to improve. VERITAS, Applied Micro Circuits and Cypress Semiconductor were
sold from the portfolio by period end.
NEW DISCOVERY SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 35.29% and Service Class shares 35.01%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 48.54% over the same period for the series' benchmark,
the Russell 2000 Growth Index (the Russell Index). The Russell Index measures
the performance of U.S. small-cap growth stocks. During the same period, the
average small-cap growth fund tracked by Lipper Inc. returned 44.77%.
MARKET ENVIRONMENT
In the early months of 2003, investors were battered by economic and
geopolitical uncertainty. By year-end, however, investors were celebrating 2003
as the first positive year for global markets since 1999. The turnaround in
global stock markets began in March and April, when it became apparent that the
U.S.- and British-led coalition was on the verge of military success in Iraq.
The release of increasingly positive economic numbers as 2003 progressed,
particularly in the corporate earnings area, helped drive the ensuing equity
rally. In addition, investor concern over issues that had held back the market
in the first quarter -- including the Iraq situation, a short-lived SARS
epidemic, and corporate misdeeds -- largely faded as the year progressed.
In the equity markets, the big surprise of 2003 was investors' appetite for
risk. After a brutal three-year market decline, many observers -- including MFS
- -- believed investors would avoid risky investments. Instead, we experienced an
equity rally led by relatively low-quality, higher-risk stocks -- stocks of
companies with substantial debt on their balance sheets, low profit margins,
and/or second- and third-tier competitive positioning. For much of 2003,
investors seemed to favor the stocks that had previously fallen the hardest,
rather than bidding up industry leaders that had weathered the global downturn
relatively well. Toward the end of the year, however, we felt the market was
beginning to rotate toward less risky companies with stronger fundamentals
(business factors such as earnings and cash flow growth).
DETRACTORS FROM PERFORMANCE
We think the series' underperformance over the period, relative to its Russell
2000 Growth benchmark, can be attributed in part to the character of the 2003
rally. In general, we felt some of the better-performing stocks over the period
were lower quality, more speculative companies -- companies with low or no
earnings, high valuations and/or substantial debt. Many were stocks that had
fallen to extremely low prices before the market appeared to bottom in March and
then delivered strong performance off that bottom. Most of those stocks did not
fit the series' strategy of investing in firms that we feel have strong
long-term business fundamentals. While sticking with our strategy hurt
performance over the period, we believe that avoiding stocks with relatively
weak fundamentals helps our contract owners over the longer term.
Our technology holdings underperformed on a relative basis. The stock price of
Network Associates, a leading provider of anti-spam and anti-virus software,
declined when the firm brought down earnings guidance and had to restate five
years of earnings following a government investigation. We continued to hold the
stock at the end of the period, as signs of accelerating sales trends began to
emerge.
Health care was another area that held back portfolio performance. AMN
Healthcare's stock price tumbled as investors were disappointed by weak demand
for the company's temporary nursing services, and the position was sold out of
the portfolio by period end. Pharmaceutical Product Development, a provider of
outsourced biotechnology research services, experienced a slow down in demand as
large pharmaceutical companies cut their research budgets. Much of the market's
strong performance in the sector came from rather speculative biotechnology
stocks, and we were underweighted in that industry. Meanwhile, we did have a
number of strong-performing health care positions, including long-term acute
care provider Select Medical and our long-time holding in pharmaceutical
benefits manager Caremark Rx.
Leisure sector holdings also detracted from performance. Scholastic Corp.'s
stock tumbled because the weak economy hurt sales of children's books and
educational materials. California Pizza Kitchen struggled with the introduction
of a new dinner menu and lower volumes at some of its newer restaurants. Both
positions were sold out of the portfolio by period-end.
The series' cash position also detracted from relative performance. As with
nearly all series, this series holds some cash to buy new holdings and to cover
investor exchanges or redemptions. In a period when equity markets rose sharply,
cash hurt performance against our benchmark, the Russell 2000 Growth Index,
which has no cash position.
CONTRIBUTORS TO PERFORMANCE
In the financial services sector, relative performance was helped by a general
avoidance of several areas that underperformed, particularly banks, whose
profits were hurt for much of the year by low interest rates, and insurance
brokers. Stock selection played a significant role in performance, as we did own
a number of brokerage firms that profited from increased market activity.
Friedman Billings Ramsey, an investment banking and brokerage firm, was our
best-performing holding in this area.
In business services, adult education companies Career Education and Strayer
Education were among the series' strongest holdings for the period. Both
companies saw increasing enrollment rates as more working adults are pursuing
training and
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certification to bolster their employment prospects. Stock selection in the
automotive sector also contributed to the relative return of the series during
the period.
While our technology holdings as a group underperformed on a relative basis,
some individual positions delivered strong results over the period; in fact, two
of the series' three top-performing holdings were in the sector. Lexar Media's
stock rose sharply on strong demand for the firm's removable storage media for
digital cameras, and Avid Technology continued to be a market leader in digital
editing equipment for the film and broadcasting industries.
Other contributors to performance included semiconductor manufacturers Cypress
and PMC Sierra, which benefited from an upturn in network and telecom spending.
RESEARCH GROWTH AND INCOME SERIES
For the 12 months ended December 31, 2003, the Initial Class shares of the
series provided a total return of 27.86% and the Service Class shares provided a
return of 27.49%. These returns, which include the reinvestment of any dividends
and capital gains distributions but do not reflect any applicable contract or
surrender charges, compare to returns over the same period of 28.67% for the
series' benchmark, the S&P 500. During the same period, the average large-cap
core fund tracked by Lipper Inc. returned 25.53%.
DETRACTORS FROM PERFORMANCE
Our underweighted position in the technology sector, especially Intel, as
well as stock selection hurt relative performance. Although health care
sector stocks were significant contributors to performance, our larger
relative position to the benchmark in several companies -- Schering-Plough,
Wyeth, and Abbott Labs -- detracted from overall performance.
Schering-Plough's stock price declined sharply because of announcements of lower
earnings, investigations of past pricing and shareholder reporting practices,
and marketing difficulties with its prescription allergy drug Clarinex. These
factors are offset, in our opinion, by the strength of the company's pipeline of
new drugs.
Discount retailer Kohl's suffered from softness in the discount retail sector
later in the year, while computer service outsourcer Automatic Data Processing
suffered a decline in its share price based on continued softness in business
spending. ADP was subsequently sold out of the portfolio.
The series' cash position also hurt our performance versus our benchmark. As
with nearly all series, this series holds some cash to buy new holdings and to
cover investor exchanges or redemptions. In a period when equity markets rose
sharply, cash hurt performance against our benchmark, the S&P 500, which has no
cash position.
CONTRIBUTORS TO PERFORMANCE
Health care and financial services were the two strongest-performing sectors for
the series relative to our benchmark. Overall, stock selection was the lead
factor behind series' returns.
In health care, positions in biotech company Genentech's stock rose
significantly on positive data on a drug in development and FDA approval of
several new drugs. We sold our Genentech holdings during the period and took
some profits. Health care and pharmaceutical products company Johnson & Johnson
and medical imaging systems manufacturer Hologic, also contributed to series'
performance during the period. We sold Hologic out of the series after it
reached our price target. Our avoidance of drug maker Merck & Co. also added
to the series' performance relative to its benchmark.
In the financial sector, our positions in financial giant FleetBoston Financial
Corp., which saw an increase on its share price after the announcement of a
planned merger with Bank of America, and credit-card provider MBNA, which posted
strong performance on an improved economic outlook, also boosted performance.
Technology stocks semiconductor manufacturer Analog Devices and network
semiconductor manufacturer PMC-Sierra, Inc. were the strongest contributors in
the portfolio. We sold PMC-Sierra during the period at a profit.
RESEARCH INTERNATIONAL SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
33.86% for Initial Class shares and 33.40% for Service Class shares. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return over the same period of 39.17% for the series' benchmark,
the Morgan Stanley Capital International (MSCI) EAFE (Europe, Australasia, Far
East) Index. The MSCI EAFE is a commonly used measure of the international stock
market. Over the same period, the average international fund tracked by Lipper
Inc. returned 34.75%.
DETRACTORS FROM PERFORMANCE
Results from the series' financial stocks lagged that group's benchmark
returns and was the largest detractor from the series relative performance.
We had stayed away from higher-risk banks, particularly those in Germany and
Japan, which were large corporate lenders and/or exposed to global stock
markets. Our conservative strategy trimmed performance when the markets turned
up in March 2003, and the banks we had avoided rebounded sharply.
Throughout the period, the series was overweighted in consumer staples stocks,
and that position held back returns when investors turned toward more
economically sensitive sectors. One of the holdings that detracted from
performance was Japanese cosmetics firm Shiseido. Shiseido's stock price fell
early in the year when it announced lower-than-expected 2002 earnings that the
company attributed to the economic downturn. The series sold this stock because
of its poor performance.
Performance from Tokyo Gas and Vodafone Holdings also detracted from series
results for the quarter. The price of Tokyo Gas fell when investors moved into
higher-risk stocks and away from more-defensive investments. The stock price of
Japanese telecommunications company, Vodafone Holdings, declined when the
company missed its earnings target, delayed the rollout of its 3G wireless
telephone, and forecasted lower revenues due to increased handset subsidies.
Other detractors included British publishing company Reed Elsevier and
heart-care surgical products company Jomed. Leisure holding Reed Elsevier
suffered from concerns about the company's U.S. textbook business, its
European business magazine directories, and its on-line media business. Jomed
detracted from the series' return when the company announced that its
financial position was grossly overstated. The series no longer owns this
stock.
6
<Page>
The portfolio's cash position also detracted from relative performance. As with
nearly all series, this series holds some cash to facilitate transactions and to
provide liquidity. In a period when global equity markets rose sharply, cash
hurt performance against our benchmark which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Stock selection in retailing made strong contributions to series performance for
the period. Two stocks in particular added healthy returns to the portfolio:
British retailers Kingfisher and Next. Kingfisher is a do-it-yourself retailer
that cut costs and spun off its electrical business so that it could focus on
its core business. Kingfisher benefited from strong sales in both its British
and French stores. The stock price of Next, a clothing retailer, rose largely,
in our view, on investor confidence in the British consumer.
Utilities and communications stocks made a strong contribution to series'
performance. Standouts in the group included Chinese Huaneng Power and Japanese
cellular telephone company KDDI. Huaneng's stock price rose because of China's
ever-expanding demand for electricity and results from the company's acquisition
of small regional electrical companies. Increased Japanese market share from new
data packages and custom ring-tone service buoyed the stock price of KDDI. The
company's ring-tone service is particularly popular with teenaged girls, one of
the largest cell phone user groups in Japan . The series' position in Huaneng
was sold when it reached our objectives.
Automakers Denway, Nissan, and BMW led returns from the autos and housing group
even though they were not among the series' top performers. Chinese manufacturer
Denway Motors had a hard time keeping up with demand from cash-paying customers.
(Denway makes Hondas for the Chinese market and was sold from the portfolio by
period end.) Nissan successfully introduced many new models, especially in the
light truck area where it cut into the market share of U.S. automakers. We sold
this stock when it reached our price target. Although BMW had a difficult start
to 2003, it had a very positive second half. The company had success with the
launch of its 7 Series, its SUVs, and the Mini Cooper. Additionally the launch
of the 5 Series has met with better-than-expected results.
Other contributors included Stanley Electric and Fujikura. Japanese technology
firm Stanley Electric continued to benefit from increased usage of its lighting
products in cell phones, computers, and autos. Strong demand for digital cameras
and flip cell phones contributed to solid stock returns from Japanese industrial
company Fujikura, a manufacturer of flexible circuit boards. Our avoidance of
BP also contributed to the series' relative returns.
STRATEGIC GROWTH SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 27.53% and Service Class shares 27.05%. These
returns, which include the reinvestment of any dividends and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 29.75% over the same period for the series' benchmark,
the Russell 1000 Growth Index (the Russell Index), which measures the
performance of large-cap U.S. growth stocks. Over the same period, the average
large-cap growth fund tracked by Lipper Inc. returned 26.75%.
DETRACTORS FROM PERFORMANCE
On a sector basis, our positioning among business services stocks proved the
most significant impediment to performance. In early 2003, Automatic Data
Processing, which had benefited from conservative expense management amid soft
demand for its payroll and trade processing services, announced plans to
increase spending. We felt that this change in strategy would dampen future
earnings growth. ADP stock fell on the news, and we sold our position. BISYS
Group, which supports financial institutions and corporate clients with
investment and educational services, also weighed on results. Soft demand for
the company's high-end insurance products led BISYS to post disappointing
earnings. As we believed the company would be able to address this issue in
time, we maintained a position in the stock. Finally, despite posting solid
revenues, bookings, and earnings, shares of technology outsourcing firm
Affiliated Computer Services languished. We exited the position in favor of
other opportunities during the period.
Holdings in the leisure sector also hurt relative performance. Radio and
television programming provider Westwood One and media conglomerate Viacom lost
traction on continued near-term weak demand for radio advertising. As of
period-end, however, both stocks remained significant positions in the portfolio
because we believe market conditions in 2004 could offer growth opportunities
for advertising-sensitive media companies -- given the confluence of a stronger
economy, a U.S. presidential election, and the summer Olympics. Elsewhere in the
leisure sector, holdings in newspaper concerns New York Times Co. and Tribune
Co. also detracted from results as ad sales in their respective major
metropolitan areas were slow to rebound. By period-end we had sold our position
in Tribune Co.
On an individual stock basis, the most significant detractor from performance
was not owning chip giant Intel. Semiconductor stocks staged a strong rebound
during the period. This, together with evidence that Intel's shift in focus
from improving processor speed to optimizing battery life and size was
improving the company's competitive position, led the index-leading stock to
more than double during the period. An overweighting in Network Associates
also hurt performance as that stock retreated. Strong relative positioning
elsewhere in technology --including overweighted positions in storage
solution provider VERITAS Software and semiconductor maker Analog Devices, as
well as an underweighting in Microsoft -- did not fully offset the impact of
underweighting Intel and overweighting Network Associates.
Our position in moderate-priced apparel retailer Kohl's also hurt performance.
High inventory levels, together with adverse weather in key markets, led Kohl's
to report weak operating results. We viewed these issues as surmountable and
increased our holdings over the period.
The portfolio's cash position also detracted from relative performance. As with
nearly all series, this series holds some cash to buy new holdings and to cover
investor exchanges or redemptions. In a period when equity markets rose sharply,
cash hurt performance against our benchmark, the Russell 1000 Growth Index,
which has no cash position.
CONTRIBUTORS TO PERFORMANCE
In the health care sector, we avoided or underweighted several large-cap
pharmaceutical firms because we felt their medium-term growth prospects would be
limited by poor revenue growth because of patent expirations on key products and
a dearth of new drugs in the development pipeline. Instead, we invested in
7
<Page>
companies elsewhere in health care that we believed would offer stronger
sustainable growth. For example, we favored Genentech and Genzyme over
Johnson & Johnson, in which we were relatively underweighted, and Merck,
which we did not own. This positioning proved beneficial for results and we
sold our Genentech position after it reached our price target.
Underweighting consumer staples concerns also helped performance as that sector
lagged the overall market. Avoiding Coca Cola was particularly helpful, as the
company reported lackluster volume growth. Similarly, avoiding Proctor & Gamble
also added to relative results.
Stock selection in the financial services sector also helped performance. In
particular, the portfolio's focus on capital-markets-sensitive franchises such
as Merrill Lynch, Citigroup, and Goldman Sachs helped performance as bond
spreads narrowed, trading volumes rose, and underwriting activity showed signs
of renewed life.
Other contributors to performance included our holdings in satellite television
broadcaster EchoStar and conglomerate Tyco International.
STRATEGIC VALUE SERIES
For the 12 months ended December 31, 2003, the series' Initial Class shares
provided a total return of 27.44% and Service Class shares provided a total
return of 27.01%. These returns, which include the reinvestment of any capital
gains and dividend distributions but do not reflect any applicable contract or
surrender charges, compare with a return of 30.03% over the same period for the
series' benchmark, the Russell 1000 Value Index (the Russell Index), which
measures the performance of large-cap U.S. value stocks. During the same period,
the average multi-cap value fund tracked by Lipper Inc. returned 30.71%.
DETRACTORS TO PERFORMANCE
Our underweighted positions, as well as stock selection, in both the
healthcare and energy sectors were key factors in the series' relative
underperformance compared to its benchmark.
Pharmaceutical company Schering-Plough saw its stock price decline sharply
during the period because of announcements of lower earnings, investigations of
past pricing and shareholder reporting practices, and marketing difficulties
with its prescription allergy drug Clarinex.
The series' position in energy companies such as Noble Energy also hurt relative
performance. During the period, concerns arose over sustainable natural gas
prices and the lack of evidence of capital spending in the industry, which
caused the stocks to do poorly.
In basic materials, the stock of Owens Illinois, a company that manufactures
glass and plastic packaging, was also a source of negative performance as it had
to deal with pressure from rising prices for the oil used to make its plastic
bottles and for the natural gas used to power several of its factories.
There were also concerns about the company's highly leveraged balance sheet
and potential liabilities associated with asbestos in its plants.
The portfolio's cash position also detracted from relative performance. In a
period when equity markets rose sharply, cash hurt performance against our
benchmark, the Russell 1000 Value Index, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
Retailing and utilities and communications were the series'
strongest-performing sectors on a relative basis over the period, and
individual holdings in several other sectors, such as financial services,
contributed to performance.
Sears was the biggest contributor to positive performance in the retail sector.
The stock had been selling at low valuations early in the period because of
concerns about the performance of Sears' credit card division. The company then
sold the credit card division at a very attractive price and used the proceeds
to buy back some of its own stock. The company's ability to shed an
underperforming division and focus on its retail business, coupled with the fact
that its stock had been selling at a very cheap multiple, had a very positive
effect on its value to investors.
Calpine Corp performed well in the utilities and communication sector as the
company's stock rose on the news that it had reached an agreement to roll over
its bank lines and had completed a $1.8 billion debt deal.
The series' position in AT&T Wireless also helped performance, as the third
largest U.S. wireless telephone company boosted sales and reduced costs.
TECHNOLOGY SERIES
For the 12 months ended December 31, 2003, the series provided a total return of
45.39% for Initial Class shares and 45.36% for Service Class shares. These
returns, which include the reinvestment of any dividend and capital gains
distributions but do not reflect any applicable contract or surrender charges,
compare with a return of 54.18% over the same period for the series' benchmark,
the Goldman Sachs Technology Index. The series' former benchmark, the Merrill
Lynch 100 Technology Index, returned 68.83% for the same period. The Goldman
Sachs Technology Index is a commonly used measure of technology stock
performance. The Merrill Lynch 100 Technology Index is a broad measure of the
technology sector. Over the same period, the average specialty/miscellaneous
fund tracked by Lipper Inc. returned 31.17%.
MARKET ENVIRONMENT
The historically more volatile stocks led the 2003 rally and turned in stronger
results than their more conservative counterparts. Larger companies, as measured
by market capitalization, generated lower returns than smaller, more
aggressively managed firms.
SERIES POSITIONING
Despite generating high absolute returns for the period ended December 31, 2003,
the series underperformed its benchmark, the Goldman Sachs Technology Index. The
primary reason for the series' underperformance was our preference for owning
the stocks of larger companies and lower risk companies, particularly early in
the period. However, in the latter half of the period, the series was less
conservative in its stock selections and was underweight in large-cap names such
as IBM and Microsoft in favor of smaller cap names. That move contributed to
relative returns.
During the third quarter, the series was merged with the MFS Global Telecom
Series. Assets of this fund were roughly half of the Technology Series. Despite
significant synergies, the Telecom series' heavy weight in utilities and
telephone services companies reduced series exposures to the more pure
technology industries.
8
<Page>
Throughout the period, the series maintained a small position in short term cash
equivalent securities, which are used to facilitate transactions and provide
liquidity. During periods of rapidly rising equity markets such as we witnessed
in 2003, the series' cash holdings detracted from performance versus the
benchmark which by design has no cash position.
DETRACTORS FROM PERFORMANCE
The largest detractors from performance were our stock selection and an
underweighting in network and communications stocks, particularly in the
wireless and wireline infrastructure industry. (Telecom infrastructure routes
long distance calls and data for telephone services companies). Until early
2003, the service companies had not been spending on infrastructure, choosing
to focus on internal problems and accounting issues. We believed that the
infrastructure group was speculative and carried more risk than we generally
preferred to take. However, infrastructure spending came back with a
vengeance which led to dramatic price movements in some of the higher risk
names, such as Corning, Nortel, and Lucent. The series never owned Lucent and
only had a small position in Corning during 2003. As of December 31, 2003,
the series still owned Nortel.
The series underweighting in Intel was also a significant detractor. While the
Intel weight in the series was more than 4.5% and one of the fund's largest
positions, the benchmark weight is 9% which hurt the series in a year when
Intel's performance was superior to many stocks in its industry. We continue to
believe that diversifying our exposure will pay off in the long term and would
not hold such a large exposure to any one name. Cisco Systems and Texas
Instruments were two other examples that contributed to solid absolute
performance but detracted from relative performance due to their high weights in
the Goldman Sachs Technology Index.
Other detractors included BISYS, Intuit, and Yahoo. BISYS failed to meet its
revenue expectations for its fee business and insurance divisions; Intuit
suffered when the company announced lower tax season sales and warned about
weaker future growth; Yahoo was a strong performer, but the series acquired it
mid-year and the stock had already appreciated significantly.
Lastly, performance was hindered by the relatively high weighting in utilities
and communications brought on by the August merger, mentioned above, as
telecommunications companies underperformed in the technology rally.
CONTRIBUTORS TO PERFORMANCE
Avid Technology continued to be one of the strongest contributors to
performance. The company makes digital animation and film editing hardware and
software for broadcasters and filmmakers. Avid's sales to broadcasters picked up
significantly because the Federal Communications Commission is requiring
broadcasters to upgrade to high definition TV (which is a digital signal). As a
result, broadcasters have to upgrade to digital editing equipment, such as that
made by Avid, so that programs can be properly mastered.
A number of the series' better performers came from the electronics industry,
including Marvell Technology Group, Arm Holdings, Analog Devices, and National
Semiconductor. Marvell Technology Group makes semiconductor chips for broadband
communications and data storage. Its Gigabit Ethernet products provide faster
access to the Internet, other computers, and software applications than current
industry-standard 100-megabit products. The company's market share grew in a
rapidly expanding industry segment and its stock price increased.
ARM Holdings' stock price rose because the company's royalty fee revenues
increased. Every cellular telephone manufacturer that uses ARM technology pays a
royalty to ARM for each handset made. The series sold ARM when it reached our
performance target. Analog Devices made cost-cutting moves several years ago
that have begun to have an impact on operating margins. In addition, increased
usage of both its analog computer chips and its digital signal processing chips
added to the company's growth potential. The stock price of National
Semiconductor rallied with the rest of the semiconductor industry. An
underweighting in IBM and Microsoft also contributed to relative performance.
NOTE TO CONTRACT OWNERS: EFFECTIVE JUNE 30, 2003, THE GOLDMAN SACHS TECHNOLOGY
INDEX REPLACED THE MERRILL LYNCH 100 TECHNOLOGY INDEX AS THE SERIES' BENCHMARK.
THE GOLDMAN SACHS TECHNOLOGY INDEX IS WEIGHTED IN MARKET CAPITALIZATION AND IS
MORE REPRESENTATIVE OF THE SERIES' INVESTMENTS.
VALUE SERIES
For the 12 months ended December 31, 2003, Initial Class shares of the series
provided a total return of 25.31% and Service Class shares provided a total
return of 25.09%. The returns, which include the reinvestment of any dividends
and capital gains distributions but do not reflect any applicable contract or
surrender charges, compare with a 30.03% return over the same period for the
series' benchmark, the Russell 1000 Value Index, which measures the performance
of U.S. large-cap value stocks. During the same period, the average equity
income fund tracked by Lipper Inc. returned 26.11%.
INVESTMENT ENVIRONMENT
After two years of falling markets for value investors, absolute returns for
value stocks improved during the 12-month period ended December 31, 2003.
However, we recognize that the series' return for the reporting period lagged
that of the Russell 1000 Value Index. The series' underperformance largely
occurred in the first six months of 2003, which was a challenging market
environment for our conservative, quality-focused style. For the first half of
the year, technology stocks and lower-quality stocks with weaker balance sheets
led stock market returns. Lower interest rates spurred that sharp rebound, in
our view.
With the release of second-quarter corporate earnings in July 2003, market
leadership began to expand to include a broader-based group of economically
sensitive stocks such as basic materials, industrials, energy, and
transportation (railroad) issues.
PORTFOLIO POSITIONING
Our sector positioning did not change significantly during the reporting period
that ended December 31, 2003. However, we found opportunities to shift into more
reasonably valued names within sectors where company fundamentals had improved
but stock prices had lagged returns from that sector's leaders.
DETRACTORS FROM PERFORMANCE
As has been the case for most of this year, the largest negative impact to
relative performance came from our conservative positioning. Throughout the
period, our underweighting in autos and housing, technology, and financial
stocks detracted from performance. Our cautious positioning within the
leisure sector also detracted from the series' relative return.
9
<Page>
The portfolio's cash position also detracted from relative performance. The
series holds some cash to facilitate transactions and provide liquidity. In a
period when equity markets rose sharply, cash hurt performance against our
benchmark, the Russell 1000 Value Index, which has no cash position.
Our underweighted position in the financial sector caused relative returns to
lag the benchmark even though the group was a leading sector for the series in
contributing to absolute returns. Strong returns from FleetBoston and Goldman
Sachs were somewhat offset by weaker returns from other financial stocks.
FleetBoston was the object of a $47 billion takeover by Bank of America, and
Goldman Sachs benefited from an increase in merger and acquisition activity and
the recovery of the securities markets.
In the leisure sector, cable and publishing holdings such as Viacom and
Tribune experienced weaker-than-expected advertising revenues. Although the
price of both stocks rose, they lagged the sector. Reed Elsevier, which
publishes professional journals and textbooks, trailed other leisure stocks.
There was concern about tight school budgets and weakness in advertising
revenues from its business-to-business publications. The series was
overweighted in all three of these leisure stocks.
Prices of auto stocks rose, however, we continued to be concerned about U.S.
market share losses to overseas manufacturers, weak pricing, poor earnings
quality, and pension and health care liabilities. As a result we were
underweighted in the group and that underweighting negatively affected
returns for the series.
CONTRIBUTORS TO PERFORMANCE
Returns from Lockheed Martin, Caterpillar, Deere, and Emerson Electric led
relative performance in the industrial goods and services sector. Lockheed's
management has become more focused on improving margins, diversifying into
the information technology area, and returning more cash to shareholders.
Rising commodity prices combined with increased farm subsidies improved the
outlook for spending on agricultural equipment, benefiting Deere & Co. Also,
restructuring initiatives continue to drive improvements in margins and free
cash flow. Strong quarterly earnings reports and continued expectations for
improved economic activity helped move both Caterpillar and Emerson higher.
The series sold Caterpillar when it reached our target price.
Although technology was a relatively small sector in the portfolio, our holdings
in this group provided the strongest absolute returns for the 12-month reporting
period ended December 31, 2003. Contributors within this group included Nortel
Networks, Texas Instruments, Intel, and Motorola. Nortel's stock rose sharply in
the third quarter when the company announced a number of new contracts with
large wireless companies such as Verizon and AT&T. Improvements in
telecommunications-related equipment sales also helped to boost Texas
Instruments' stock price. Intel's stock price soared throughout the period when
the company experienced strong personal computer chip sales, positive earnings,
and a generally positive semiconductor environment. Motorola's stock price rose
as a result of an improved outlook for its handset sales and a more focused
corporate strategy. Texas Instruments, Nortel Networks, and Intel were sold when
they achieved our price objectives.
Altria, formerly Philip Morris, led the series' consumer staples holdings. The
company continued to rebound from earlier concerns about litigation and
competitive pressures.
THE OPINIONS EXPRESSED IN THIS REPORT ARE THOSE OF THE PORTFOLIO MANAGERS AND
ARE CURRENT ONLY THROUGH THE END OF THE PERIOD OF THE REPORT AS STATED ON THE
COVER. THESE VIEWS ARE SUBJECT TO CHANGE AT ANY TIME BASED ON MARKET AND OTHER
CONDITIONS, AND NO FORECASTS CAN BE GUARANTEED.
THE PORTFOLIOS ARE ACTIVELY MANAGED, AND CURRENT HOLDINGS MAY BE DIFFERENT.
VARIABLE ANNUITIES ARE DESIGNED FOR LONG-TERM RETIREMENT INVESTING; PLEASE SEE
YOUR INVESTMENT PROFESSIONAL FOR MORE INFORMATION.
A general description of the MFS Funds proxy voting policies is available
without charge, upon request, by calling 1-800-225-2606, by visiting the
About MFS section of MFS.COM or by visiting the SEC's website at
HTTP://WWW.SEC.GOV.
10
<Page>
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the growth of a
hypothetical $10,000 investment for each series during the period indicated.
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.)
VISIT sunlife-usa.com FOR THE MOST RECENT MONTH-END PERFORMANCE RESULTS. MARKET
VOLATILITY CAN SIGNIFICANTLY AFFECT SHORT-TERM PERFORMANCE, AND CURRENT
PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND UNITS, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST.
THE PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE, WHICH IS NO GUARANTEE
OF FUTURE RESULTS. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF THE MORTALITY
AND EXPENSE RISK CHARGES AND ADMINISTRATION FEES.
CAPITAL OPPORTUNITIES SERIES(1)
(For the period from the commencement of the series' investment operations, June
3, 1996, through December 31, 2003. Index information is from June 1, 1996.)
[CHART]
<Table>
<Caption>
CAPITAL OPPORTUNITIES SERIES - INITIAL CLASS STANDARD & POOR'S 500 STOCK INDEX
6/96 $ 10,000 $ 10,000
12/97 $ 14,046 $ 14,949
12/99 $ 26,333 $ 23,265
12/01 $ 18,803 $ 18,637
12/03 $ 16,789 $ 18,682
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +28.30% -32.97% -5.86% +67.89%
Average Annual Total Return +28.30% -12.48% -1.20% +7.08%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +28.00% -33.36% -6.40% +66.92%
Average Annual Total Return +28.00% -12.65% -1.32% +6.99%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average multi-cap core fund+ +29.98% -2.53% +2.70% +7.74%
Standard & Poor's 500 Stock Index# +28.67% -4.05% -0.57% +8.59%
</Table>
* For the period from the commencement of the series' investment operations,
June 3, 1996, through December 31, 2003. Index information is from June 1,
1996.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
INTERNATIONAL GROWTH SERIES(1), (2)
(For the period from the commencement of the series' investment operations, June
3, 1996, through December 31, 2003. Index information is from June 1, 1996.)
[CHART]
<Table>
<Caption>
INTERNATIONAL GROWTH SERIES - INITIAL CLASS MSCI EAFE INDEX LIPPER INTERNATIONAL FUND INDEX
6/96 $ 10,000 $ 10,000 $ 10,000
12/97 $ 9,668 $ 10,432 $ 11,396
12/99 $ 13,329 $ 15,979 $ 17,696
12/04 $ 10,335 $ 10,833 $ 12,172
12/04 $ 12,628 $ 12,716 $ 14,264
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +38.67% +2.75% +28.12% +26.28%
Average Annual Total Return +38.67% +0.91% +5.08% +3.13%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +38.35% +2.27% +27.51% +25.68%
Average Annual Total Return +38.35% +0.75% +4.98% +3.06%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average international fund+ +34.75% -3.96% +1.29% +3.78%
MSCI EAFE Index# +39.17% -2.57% +0.26% +3.22%
Lipper International Fund Index+ +36.00% -1.86% +2.13% +4.79%
</Table>
* For the period from the commencement of the series' investment operations,
June 3, 1996, through December 31, 2003. Index information is from June 1,
1996.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
11
<Page>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES(1)
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2003. Index information is from May 1, 1998.)
[CHART]
<Table>
<Caption>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES - INITIAL CLASS RUSSELL 1000 GROWTH INDEX
5/98 $ 10,000 $ 10,000
12/99 $ 16,391 $ 15,821
12/00 $ 15,393 $ 12,273
12/01 $ 11,559 $ 9,766
12/02 $ 8,317 $ 7,043
12/03 $ 10,262 $ 9,138
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +23.39% -33.34% -14.98% +2.62%
Average Annual Total Return +23.39% -12.64% -3.19% +0.46%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +22.84% -33.74% -15.49% +2.00%
Average Annual Total Return +22.84% -12.82% -3.31% +0.35%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average large-cap growth fund+ +26.75% -11.00% -3.88% 1.10%
Russell 1000 Growth Index# +29.75% -9.36% -5.11% 1.58%
</Table>
* For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2003. Index information is from May 1,
1998.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
MID CAP VALUE SERIES(1), (3)
(For the period from the commencement of the series' investment operations, May
1, 2002, through December 31, 2003. Index information is from May 1, 2002.)
[CHART]
<Table>
<Caption>
MID CAP VALUE SERIES - INITIAL CLASS RUSSELL MID CAP VALUE INDEX
5/02 $ 10,000 $ 10,000
12/02 $ 7,920 $ 8,380
12/03 $ 10,474 $ 11,570
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +32.24% +4.74%
Average Annual Total Return +32.24% +2.81%
<Caption>
SERVICE CLASS 1 YEAR LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +31.90% +4.60%
Average Annual Total Return +31.90% +2.73%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR LIFE*
- ---------------------------------------------------------------------------------
Average mid-cap value fund+ +39.85% +7.64%
Russell Mid Cap Value Index# +38.07% +9.14%
</Table>
* For the period from the commencement of the series' investment operations,
May 1, 2002, through December 31, 2003. Index information is from May 1,
2002.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
12
<Page>
NEW DISCOVERY SERIES(1), (4)
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2003. Index information is from May 1, 1998.)
[CHART]
<Table>
<Caption>
NEW DISCOVERY SERIES - INITIAL CLASS RUSSELL 2000 GROWTH INDEX
5/98 $ 10,000 $ 10,000
12/99 $ 17,019 $ 12,868
12/00 $ 17,077 $ 9,982
12/01 $ 16,203 $ 9,061
12/02 $ 10,786 $ 6,319
12/03 $ 14,593 $ 9,386
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +35.29% -14.55% +37.41% +45.93%
Average Annual Total Return +35.29% -5.11% +6.56% +6.91%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +35.01% -15.09% +36.54% +45.01%
Average Annual Total Return +35.01% -5.31% +6.43% +6.79%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average small-cap growth fund+ +44.77% -3.31% +4.86% +2.62%
Russell 2000 Growth Index# +48.54% -2.03% +0.86% -1.11%
</Table>
* For the period of the commencement of the series' investment operations, May
6, 1998, through December 31, 2003. Index information is from May 1, 1998.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
RESEARCH GROWTH AND INCOME SERIES(1)
(For the period from the commencement of the series' investment operations, May
13, 1997, through December 31, 2003. Index information is from May 1,
1997.)
[CHART]
<Table>
<Caption>
RESEARCH GROWTH AND INCOME SERIES - INITIAL CLASS STANDARD & POOR'S 500 STOCK INDEX
5/97 $ 10,000 $ 10,000
12/97 $ 11,020 $ 12,255
12/99 $ 14,564 $ 19,073
12/01 $ 13,377 $ 15,279
12/03 $ 13,443 $ 15,316
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +27.86% -10.47% -0.12% +34.43%
Average Annual Total Return +27.86% -3.62% -0.02% +4.56%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +27.49% -11.01% -0.72% +33.62%
Average Annual Total Return +27.49% -3.81% -0.15% +4.46%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average large-cap core fund+ +25.53% -6.63% -1.79% +4.90%
Standard & Poor's 500 Stock Index# +28.67% -4.05% -0.57% +6.60%
</Table>
* For the period from the commencement of the series' investment operations,
May 13, 1997, through December 31, 2003. Index information is from May 1,
1997.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
13
<Page>
RESEARCH INTERNATIONAL SERIES(1), (2)
(For the period from the commencement of the series' investment operations, May
5, 1998, through December 31, 2003. Index information is from May 1, 1998.)
[CHART]
<Table>
<Caption>
RESEARCH INTERNATIONAL SERIES - INITIAL CLASS MSCI EAFE INDEX
5/98 $ 10,000 $ 10,000
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
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +33.86% -2.50% +39.04% +30.98%
Average Annual Total Return +33.86% -0.84% +6.81% +4.89%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +33.40% -3.17% +38.09% +30.08%
Average Annual Total Return +33.40% -1.07% +6.67% +4.76%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average international fund+ +34.75% -3.96% +1.29% +0.41%
MSCI EAFE Index# +39.17% -2.57% +0.26% +0.92%
</Table>
* For the period from the commencement of the series' investment operations,
May 5, 1998, through December 31, 2003. Index information is from May 1,
1998.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
STRATEGIC GROWTH SERIES(1)
(For the period from the commencement of the series' investment operations,
October 29, 1999, through December 31, 2003. Index information is from November
1, 1999.)
[CHART]
<Table>
<Caption>
STRATEGIC GROWTH SERIES - INITIAL CLASS RUSSELL 1000 GROWTH INDEX
10/99 $ 10,000 $ 10,000
12/99 $ 12,130 $ 11,636
12/01 $ 8,227 $ 7,183
12/02 $ 5,754 $ 5,180
12/03 $ 7,338 $ 6,721
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +27.53% -32.79% -26.62%
Average Annual Total Return +27.53% -12.40% -7.15%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +27.05% -33.16% -27.03%
Average Annual Total Return +27.05% -12.57% -7.27%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average large-cap growth fund+ +26.75% -11.00% -7.84%
Russell 1000 Growth Index# +29.75% -9.36% -9.10%
</Table>
* For the period from the commencement of the series' investment operations,
October 29, 1999, through December 31, 2003. Index information is from
November 1, 1999.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
14
<Page>
STRATEGIC VALUE SERIES(1), (5)
(For the period from the commencement of the series' investment operations, May
1, 2002, through December 31, 2003. Index information is from May 1, 2002.)
[CHART]
<Table>
<Caption>
STRATEGIC VALUE SERIES - INITIAL CLASS RUSSELL 1000 VALUE INDEX
5/02 $ 10,000 $ 10,000
12/02 $ 7,900 $ 8,404
12/03 $ 10,068 $ 10,928
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +27.44% +0.68%
Average Annual Total Return +27.44% +0.40%
<Caption>
SERVICE CLASS 1 YEAR LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +27.01% +0.34%
Average Annual Total Return +27.01% +0.20%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR LIFE*
- ---------------------------------------------------------------------------------
Average multi-cap value fund+ +30.71% +4.03%
Russell 1000 Value Index# +30.03% +5.47%
</Table>
* For the period from the commencement of the series' investment operations,
May 1, 2002, through December 31, 2003. Index information is from May 1,
2002.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
TECHNOLOGY SERIES(1), (4), (6), (7)
(For the period from the commencement of the series' investment operations, June
16, 2000, through December 31, 2003. Index information is from July 1, 2000.)
[CHART]
<Table>
<Caption>
TECHNOLOGY SERIES - INITIAL CLASS MERRILL LYNCH 100 TECHNOLOGY INDEX GOLDMAN SACHS TECHNOLOGY INDEX
6/00 $ 10,000 $ 10,000 $ 10,000
12/00 $ 8,540 $ 5,845 $ 5,884
12/01 $ 5,221 $ 3,943 $ 4,204
12/02 $ 2,820 $ 2,305 $ 2,511
12/03 $ 4,101 $ 3,891 $ 3,872
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +45.39% -51.98% -58.99%
Average Annual Total Return +45.39% -21.69% -22.25%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +45.36% -52.33% -59.29%
Average Annual Total Return +45.36% -21.89% -22.41%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average specialty/miscellaneous fund+ +31.17% +3.51% +4.68%
Merrill Lynch 100 Technology Index# +68.83% -12.68% -23.64%
Goldman Sachs Technology Index## +54.18% -13.02% -23.75%
</Table>
* For the period from the commencement of the series' investment operations,
June 16, 2000, through December 31, 2003. Index information is from July 1,
2000.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
## Source: Bloomberg L.P.
15
<Page>
VALUE SERIES(1)
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2003. Index information is from May 1, 1998.)
[CHART]
<Table>
<Caption>
VALUE SERIES - INITIAL CLASS RUSSELL 1000 VALUE INDEX
5/98 $ 10,000 $ 10,000
12/99 $ 11,240 $ 11,043
12/00 $ 14,640 $ 11,817
12/01 $ 13,548 $ 11,157
12/02 $ 11,707 $ 9,425
12/03 $ 14,671 $ 12,255
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2003
<Table>
<Caption>
INITIAL CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +25.31% +0.21% +39.72% +46.71%
Average Annual Total Return +25.31% +0.07% +6.92% +7.01%
<Caption>
SERVICE CLASS 1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Cumulative Total Return +25.09% -0.34% +38.95% +45.89%
Average Annual Total Return +25.09% -0.11% +6.80% +6.90%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ---------------------------------------------------------------------------------
Average equity income fund+ +26.11% +0.23% +2.76% +2.61%
Russell 1000 Value Index# +30.03% +1.22% +3.56% +3.65%
</Table>
* For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2003. Index information is from May 1,
1998.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
16
<Page>
NOTES TO PERFORMANCE SUMMARY
Initial Class shares have no sales charge. Service Class shares, which have an
inception date of August 24, 2001, except for Mid Cap Value Series and Strategic
Value Series, whose Service Class shares have an inception date of May 1, 2002,
have no sales charge and carry a 0.25% annual 12b-1 fee. Service Class share
performance includes the performance of Initial Class shares for periods prior
to the inception of Service Class. Because operating expenses of Service Class
shares are higher than those of Initial Class, the Service Class performance
generally would have been lower had Service Class shares been outstanding 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.
KEY RISK CONSIDERATIONS
(1) Investing in foreign and/or emerging markets securities involves risks
relating to interest rates, currency exchange rates, economic, and
political conditions.
(2) The portfolio may invest a substantial amount of its assets in issuers
located in a limited number of countries and therefore is susceptible to
adverse economic, political or regulatory developments affecting those
countries.
(3) Investing in mid-sized companies is riskier than investing in
more-established companies.
(4) Investing in small and/or emerging growth companies is riskier than
investing in more-established companies.
(5) Investments in high yield or lower-rated securities may provide greater
returns but are subject to greater-than-average risk.
(6) The portfolio focuses on companies in a limited number of sectors making it
more susceptible to adverse economic, political, or regulatory developments
affecting those sectors than a portfolio that invests more broadly.
(7) When concentrating on one issuer, the portfolio is sensitive to changes in
the value of these securities.
These risks may increase unit price volatility. Please see the prospectus
for further information regarding these and other risk considerations.
17
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
CAPITAL OPPORTUNITIES SERIES
STOCKS -- 98.7%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 96.4%
AEROSPACE -- 0.8%
Lockheed Martin Corp. 46,100 $ 2,369,540
--------------
AIRLINES -- 0.1%
Southwest Airlines Co.* 19,600 $ 316,344
--------------
APPAREL MANUFACTURERS -- 0.5%
Reebok International Ltd. 33,800 $ 1,329,016
--------------
BANKS & CREDIT COMPANIES -- 8.7%
American Express Co. 50,300 $ 2,425,969
Bank of New York Co., Inc. 34,800 1,152,576
Citigroup, Inc. 125,778 6,105,264
Federal Home Loan Mortgage Corp. 50,400 2,939,328
Federal National Mortgage Assn 10,770 808,396
FleetBoston Financial Corp. 35,870 1,565,726
J. P. Morgan Chase & Co. 45,100 1,656,523
MBNA Corp. 52,400 1,302,140
Mellon Financial Corp. 134,500 4,318,795
Northern Trust Corp. 28,100 1,304,402
PNC Financial Services Group Co.* 18,100 990,613
SLM Corp. 3,710 139,793
--------------
$ 24,709,525
--------------
BIOTECHNOLOGY -- 1.6%
Amgen, Inc.* 17,850 $ 1,103,130
Genzyme Corp.* 22,691 1,119,574
Gilead Sciences, Inc.* 39,530 2,298,274
--------------
$ 4,520,978
--------------
BROADCAST & CABLE TV -- 4.6%
Clear Channel Communications, Inc. 43,060 $ 2,016,500
Comcast Corp.* 190,040 5,944,451
Cox Communications, Inc.* 16,290 561,190
EchoStar Communications Corp., "A"* 16,531 562,054
Entercom Communications Corp., "A"* 9,740 515,830
Time Warner, Inc.* 45,430 817,286
Univision Communications, Inc., "A"*^ 31,130 1,235,550
Westwood One, Inc.* 43,980 1,504,556
--------------
$ 13,157,417
--------------
BROKERAGE & ASSET MANAGERS -- 2.5%
Goldman Sachs Group, Inc. 18,700 $ 1,846,251
Merrill Lynch & Co., Inc. 87,720 5,144,778
--------------
$ 6,991,029
--------------
BUSINESS SERVICES -- 1.0%
BISYS Group, Inc.* 48,450 $ 720,936
DST Systems, Inc.* 20,700 864,432
Getty Images, Inc.* 10,310 516,840
Monster Worldwide, Inc.* 28,400 623,664
SunGard Data Systems, Inc.* 6,600 182,886
--------------
$ 2,908,758
--------------
CHEMICALS -- 0.9%
Air Products & Chemicals, Inc. 27,400 $ 1,447,542
Lyondell Chemical Co. 65,380 1,108,191
--------------
$ 2,555,733
--------------
COMPUTER SOFTWARE -- 6.6%
Akamai Technologies, Inc.*^ 68,450 $ 735,838
BEA Systems, Inc.*^ 46,230 568,629
Manhattan Associates, Inc.*^ 9,080 250,971
Mercury Interactive Corp.*^ 29,570 1,438,285
Microsoft Corp. 326,250 8,984,925
Network Associates, Inc.* 195,200 2,935,808
Oracle Corp.* 102,666 1,355,191
Synopsys, Inc.*^ 18,490 624,222
Veritas Software Corp.* 52,500 1,950,900
--------------
$ 18,844,769
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.1%
IBM Corp. 32,080 $ 2,973,174
--------------
CONSUMER GOODS & SERVICES -- 2.7%
Avon Products, Inc. 23,820 $ 1,607,612
Kimberly-Clark Corp. 48,500 2,865,865
Newell Rubbermaid, Inc. 140,500 3,199,185
--------------
$ 7,672,662
--------------
CONTAINERS -- 1.3%
Owens Illinois, Inc.* 202,470 $ 2,407,368
Smurfit-Stone Container Corp.* 70,200 1,303,614
--------------
$ 3,710,982
--------------
ELECTRICAL EQUIPMENT -- 4.6%
Cooper Industries Ltd., "A"* 9,900 $ 573,507
Danaher Corp.^ 6,810 624,818
Emerson Electric Co.* 10,980 710,955
General Electric Co. 156,030 4,833,809
Molex, Inc.^ 25,850 901,907
Tyco International Ltd. 209,322 5,547,033
--------------
$ 13,192,029
--------------
ELECTRONICS -- 4.1%
Amphenol Corp., "A"*^ 5,700 $ 364,401
Analog Devices, Inc. 47,500 2,168,375
Linear Technology Corp. 31,290 1,316,370
Maxim Integrated Products, Inc. 26,600 1,324,680
Microchip Technology, Inc. 35,540 1,185,614
Novellus Systems, Inc.* 26,790 1,126,520
PMC-Sierra, Inc.*^ 38,950 784,843
Texas Instruments, Inc. 52,910 1,554,496
Xilinx, Inc.* 47,980 1,858,745
--------------
$ 11,684,044
--------------
ENERGY -- INDEPENDENT -- 0.8%
Devon Energy Corp. 40,690 $ 2,329,909
--------------
ENERGY -- INTEGRATED -- 0.6%
Occidental Petroleum Corp. 39,750 $ 1,679,040
--------------
ENTERTAINMENT -- 3.1%
Viacom, Inc., "B" 195,020 $ 8,654,988
Walt Disney Co. 755 17,614
--------------
$ 8,672,602
--------------
FOOD & DRUG STORES -- 2.0%
CVS Corp. 24,700 $ 892,164
Kroger Co.* 168,500 3,118,935
Rite Aid Corp.* 152,500 921,100
Walgreen Co. 19,100 694,858
--------------
$ 5,627,057
--------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.5%
PepsiCo, Inc. 30,280 $ 1,411,654
--------------
FOREST & PAPER PRODUCTS -- 0.8%
Boise Cascade Corp.^ 10,500 $ 345,030
Bowater, Inc. 39,200 1,815,352
--------------
$ 2,160,382
--------------
GAMING & LODGING -- 0.7%
Carnival Corp.* 10,000 $ 397,300
Hilton Hotels Corp. 74,490 1,276,014
Starwood Hotels & Resorts Co., "B" 12,140 436,676
--------------
$ 2,109,990
--------------
GENERAL MERCHANDISE -- 3.7%
Kohl's Corp.* 43,740 $ 1,965,676
Sears, Roebuck & Co. 86,300 3,925,787
Target Corp. 66,010 2,534,784
Wal-Mart Stores, Inc. 41,750 2,214,837
--------------
$ 10,641,084
--------------
INSURANCE -- 5.3%
Allstate Corp. 82,700 $ 3,557,754
American International Group, Inc. 42,250 2,800,330
Hartford Financial Services Group, Inc. 78,670 4,643,890
Marsh & McLennan Cos., Inc. 16,780 803,594
Travelers Property Casualty Corp., "A" 154,900 2,599,222
UnumProvident Corp. 34,200 539,334
--------------
$ 14,944,124
--------------
</Table>
18
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
INTERNET -- 0.6%
InterActive Corp.*^ 50,970 $ 1,729,412
--------------
MACHINERY & TOOLS -- 0.5%
Eaton Corp.* 2,600 $ 280,748
Illinois Tool Works, Inc. 8,960 751,834
Parker-Hannifin Corp. 8,400 499,800
--------------
$ 1,532,382
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.6%
Tenet Healthcare Corp.* 103,500 $ 1,661,175
--------------
MEDICAL EQUIPMENT -- 2.0%
Applera Corp. 31,040 $ 642,838
Baxter International, Inc. 82,982 2,532,611
Medtronic, Inc. 26,670 1,296,429
Thermo Electron Corp.* 43,870 1,105,524
--------------
$ 5,577,402
--------------
METALS & MINING -- 1.0%
Alcoa, Inc. 76,500 $ 2,907,000
--------------
NATURAL GAS -- DISTRIBUTION -- 0.7%
NiSource, Inc. 85,400 $ 1,873,676
--------------
OIL SERVICES -- 4.8%
BJ Services Co.* 56,340 $ 2,022,606
Cooper Cameron Corp.* 38,470 1,792,702
GlobalSantaFe Corp. 165,958 4,120,737
Noble Corp.* 107,840 3,858,515
Schlumberger Ltd. 33,630 1,840,234
--------------
$ 13,634,794
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.9%
Avid Technology, Inc.*^ 10,210 $ 490,080
Dell, Inc.* 59,010 2,003,980
--------------
$ 2,494,060
--------------
PHARMACEUTICALS -- 9.4%
Abbott Laboratories, Inc. 32,880 $ 1,532,208
Eli Lilly & Co. 18,778 1,320,657
Johnson & Johnson Co. 125,570 6,486,946
Merck & Co., Inc. 72,930 3,369,366
Pfizer, Inc. 200,355 7,078,542
Schering Plough Corp. 321,960 5,598,885
Wyeth 35,291 1,498,103
--------------
$ 26,884,707
--------------
PRINTING & PUBLISHING -- 0.9%
Lamar Advertising Co., "A"* 39,560 $ 1,476,379
New York Times Co. "A" 24,430 1,167,510
--------------
$ 2,643,889
--------------
RESTAURANTS -- 0.9%
McDonald's Corp. 43,990 $ 1,092,272
Outback Steakhouse, Inc. 31,260 1,382,004
--------------
$ 2,474,276
--------------
SPECIALTY STORES -- 2.2%
Chico's FAS, Inc.*^ 3,450 $ 127,478
Home Depot, Inc. 75,660 2,685,173
Hot Topic, Inc.*^ 15,200 447,792
Pier 1 Imports, Inc. 18,690 408,563
Staples, Inc.* 39,720 1,084,356
The TJX Cos., Inc. 31,880 702,954
Williams-Sonoma, Inc.* 18,800 653,676
--------------
$ 6,109,992
--------------
TELECOMMUNICATIONS -- WIRELINE -- 3.1%
ADTRAN, Inc. 56,500 $ 1,751,500
Cisco Systems, Inc.* 205,710 4,996,696
Corning, Inc.* 69,100 720,713
Foundry Networks, Inc.*^ 26,630 728,597
Juniper Networks, Inc.*^ 23,370 436,551
QUALCOMM, Inc. 5,230 282,054
--------------
$ 8,916,111
--------------
TELEPHONE SERVICES -- 3.9%
AT&T Corp. 205,080 $ 4,163,124
Verizon Communications, Inc. 201,300 7,061,604
Winstar Communications, Inc.* 123,400 123
--------------
$ 11,224,851
--------------
TRUCKING -- 0.8%
Fedex Corp. 20,050 $ 1,353,375
United Parcel Service, Inc., "B" 14,000 1,043,700
--------------
$ 2,397,075
--------------
UTILITIES -- ELECTRIC POWER -- 2.0%
Calpine Corp.* 590,400 $ 2,839,824
FirstEnergy Corp. 15,390 541,728
TXU Corp. 102,800 2,438,416
--------------
$ 5,819,968
--------------
WIRELESS COMMUNICATIONS -- 3.5%
AT&T Wireless Services, Inc.* 841,980 $ 6,727,420
Sprint Corp. (PCS Group)*^ 91,060 511,757
Telephone & Data Systems, Inc. 45,600 2,852,280
--------------
$ 10,091,457
--------------
Total U.S. Stocks $ 274,484,069
--------------
FOREIGN STOCKS -- 2.3%
BERMUDA -- 0.9%
Ace Ltd. (Insurance) 24,540 $ 1,016,447
Marvell Technology Group Ltd. (Electronics)*^ 28,500 1,081,005
XL Capital Ltd., "A" (Insurance) 6,680 518,034
--------------
$ 2,615,486
--------------
CANADA -- 0.4%
Nortel Networks Corp.
(Telecommunications -- Wireline)* 273,930 $ 1,158,724
--------------
FINLAND -- 0.5%
Nokia Corp., ADR
(Telecommunications -- Wireless)* 78,030 $ 1,326,510
--------------
SINGAPORE -- 0.3%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 63,040 $ 935,513
--------------
UNITED KINGDOM -- 0.2%
Amdocs Ltd. (Computer Software)* 24,600 $ 553,008
--------------
Total Foreign Stocks $ 6,589,241
--------------
Total Stocks (Identified Cost, $246,673,295) $ 281,073,310
REPURCHASE AGREEMENT -- 0.8%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch, dated 12/31/03, due 01/02/04, total
to be received $2,229,118 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost $ 2,229 $ 2,229,000
--------------
COLLATERAL FOR SECURITIES LOANED -- 4.1%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 11,742,769 $ 11,742,769
--------------
Total Investments
(Identified Cost, $260,645,064 ) $ 295,045,079
--------------
OTHER ASSETS,
LESS LIABILITIES -- (3.6)% (10,299,631)
--------------
Net Assets -- 100.0% $ 284,745,448
==============
</Table>
See portfolio footnotes and notes to financial statements.
19
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
INTERNATIONAL GROWTH SERIES
STOCKS -- 99.7%
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 98.7%
AUSTRALIA -- 4.6%
APN News & Media Ltd.
(Printing & Publishing) 299,855 $ 903,104
BHP Billiton Ltd. (Metals & Mining) 144,990 1,330,786
John Fairfax Holdings Ltd.
(Printing & Publishing) 241,741 640,707
News Corp., Ltd. (Broadcast & Cable TV) 93,171 841,136
QBE Insurance Group Ltd. (Insurance) 163,272 1,303,118
Tabcorp Holdings Ltd.
(Gaming & Lodging)* 70,000 591,894
Virgin Blue Holdings Ltd. (Airlines)* 27,670 49,585
--------------
$ 5,660,330
--------------
AUSTRIA -- 0.6%
Erste Bank der Oesterreichischen
Sparkassen AG (Banks &
Credit Companies) 6,070 $ 749,265
--------------
BRAZIL -- 1.3%
Aracruz Celulose SA, ADR
(Forest & Paper Products)* 21,000 $ 735,840
Companhia Vale do Rio Doce, ADR
(Metals & Mining)* 14,000 819,000
--------------
$ 1,554,840
--------------
CANADA -- 1.8%
EnCana Corp. (Energy -- Independent)^ 23,010 $ 908,044
Rona, Inc. (Specialty Stores)## 23,310 562,571
Talisman Energy, Inc.
(Energy -- Independent)^ 12,540 713,383
--------------
$ 2,183,998
--------------
CHINA -- 1.0%
Huaneng Power International, Inc.
(Utilities -- Electric Power) 738,000 $ 1,278,519
--------------
CROATIA -- 0.5%
Pliva d.d., GDR (Pharmaceuticals) 33,890 $ 552,407
--------------
FRANCE -- 9.3%
Air Liquide SA (Specialty Chemicals) 7,333 $ 1,293,490
Alcatel SA (Telecommunications -- Wireline)* 48,990 630,212
AXA SA (Insurance)* 55,800 1,193,080
Cap Gemini SA
(Computer Software -- Systems)* 24,840 1,101,973
Credit Agricole SA
(Banks & Credit Companies)* 42,545 1,014,735
France Telecom SA
(Telephone Services)* 61,420 1,753,570
Renault Regie Nationale
(Automotive)* 7,350 506,557
Sanofi-Synthelabo SA (Pharmaceuticals) 18,050 1,357,704
Total SA (Energy -- Independent) 14,290 2,653,892
--------------
$ 11,505,213
--------------
GERMANY -- 3.7%
Bayerische Motoren Werke AG
(Automotive) 23,760 $ 1,100,164
Epcos AG (Electronics)*^ 27,040 609,836
Porsche AG, Preferred (Automotive) 1,790 1,061,169
Schering AG (Pharmaceuticals) 12,600 637,396
Stada Arzneimittel AG (Pharmaceuticals)*^ 17,500 1,084,377
--------------
$ 4,492,942
--------------
GREECE -- 0.5%
Coca-Cola HBC SA
(Food & Non-Alcoholic Beverages) 30,630 $ 638,316
--------------
HONG KONG -- 0.5%
Esprit Asia Holdings Ltd. (Specialty Stores) 198,000 $ 657,981
--------------
HUNGARY -- 0.6%
OTP Bank Rt., GDR
(Banks & Credit Companies)* 28,040 $ 736,050
--------------
INDIA -- 1.3%
Bajaj Auto Ltd. (Automotive)* 22,000 $ 549,928
Housing Development Finance Corp., Ltd.
(Banks & Credit Companies)* 75,000 1,062,115
--------------
$ 1,612,043
--------------
INDONESIA -- 0.5%
PT Telekomunikasi Indonesia, ADR
(Telephone Services)* 40,150 $ 659,263
--------------
IRELAND -- 2.3%
Anglo Irish Bank Corp., PLC
(Banks & Credit Companies) 70,830 $ 1,121,776
Depfa Bank PLC
(Banks & Credit Companies)^ 7,710 972,393
IAWS Group PLC (Specialty Chemicals)* 55,000 672,183
--------------
$ 2,766,352
--------------
ITALY -- 1.4%
Eni SpA (Energy -- Integrated)* 53,800 $ 1,014,069
Mediaset SpA (Broadcast & Cable TV)* 58,000 688,386
--------------
$ 1,702,455
--------------
JAPAN -- 15.5%
Brother Industries Ltd. (Electronics) 117,000 $ 1,073,515
Canon, Inc.
(Personal Computers & Peripherals) 34,000 1,583,609
Chugai Pharmaceutical Co., Ltd.
(Pharmaceuticals) 86,100 1,238,438
Citizen Watch Co., Ltd. (Electronics)*^ 75,000 689,551
Fuji Television Network, Inc.
(Broadcast & Cable TV) 95 514,304
Fujikura Ltd. (Electrical Equipment)^ 141,000 831,773
Fujimi, Inc. (Special Products & Services) 11,400 350,082
Heiwa Corp. (Leisure & Toys)^ 25,700 373,020
Honda Motor Co., Ltd. (Automotive) 24,700 1,097,419
Hunet, Inc. (Real Estate)* 137,000 292,836
Ibiden Co., Ltd. (Electronics)^ 32,100 404,490
Impact 21 Co., Ltd.
(Consumer Goods & Services)* 29,400 563,933
JACCS Co., Ltd.
(Banks & Credit Companies)* 138,000 508,797
KDDI Corp. (Telephone Services)^ 140 802,352
Kibun Food Chemifa Co., Ltd.
(Food & Non-Alcoholic Beverages)* 59,000 763,280
Mimasu Semiconductor Industry Co., Ltd.
(Electronics)^ 20,200 258,498
Nishimatsuya Chain Co., Ltd.
(Specialty Stores)*^ 15,000 388,529
Nitto Denko Corp. (Electrical Equipment) 17,100 909,787
Seiko Epson Corp. (Electronics)* 37,800 1,764,129
Stanley Electric Co., Ltd. (Electronics) 60,300 1,167,896
Sumitomo Bakelite Co., Ltd.
(Specialty Chemicals) 103,000 672,021
Tamron Co., Ltd. (Leisure & Toys) 15,000 756,055
Tokyo Broadcasting System, Inc.
(Broadcast & Cable TV) 42,800 681,940
Tokyo Gas Co., Ltd.
(Natural Gas Distribution) 253,000 902,096
Yamaha Corp. (Leisure & Toys)* 29,000 569,795
--------------
$ 19,158,145
--------------
LUXEMBOURG -- 0.4%
Tenaris SA, ADR (Oil Services)* 14,960 $ 498,467
--------------
</Table>
20
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
MEXICO -- 2.8%
America Movil SA, ADR
(Wireless Communications) 25,120 $ 686,781
Apasco SA de CV (Home Construction) 47,600 392,254
Corporacion GEO SA de CV, "B"
(Home Construction)* 88,540 451,249
Grupo Elektra SA de CV
(Specialty Stores)* 142,900 756,656
Grupo Financiero Inbursa SA de CV
(Banks & Credit Companies)* 391,900 425,137
TV Azteca SA de CV, ADR
(Broadcast & Cable TV) 83,250 757,575
--------------
$ 3,469,652
--------------
NETHERLANDS -- 4.9%
Philips Electronics NV (Electronics) 61,580 $ 1,796,156
Reed Elsevier NV (Printing & Publishing) 141,620 1,757,577
STMicroelectronics NV (Electronics) 35,880 971,951
VNU NV (Printing & Publishing) 48,923 1,544,096
--------------
$ 6,069,780
--------------
RUSSIA -- 1.0%
Mobile Telesystems Open Joint Stock Co.,
ADR (Telephone Services) 7,870 $ 651,636
Yukos Corp., ADR
(Energy -- Independent)* 14,000 588,000
--------------
$ 1,239,636
--------------
SINGAPORE -- 0.7%
Singapore Telecommunications Ltd.
(Telephone Services) 788,000 $ 909,427
--------------
SOUTH KOREA -- 3.1%
Hanaro Telecom, Inc.
(Telephone Services)* 458,200 $ 1,255,580
Hyundai Motor Co., Ltd. (Automotive)* 19,520 827,327
Samsung Electronics Co., Ltd.
(Electronics) 2,990 1,131,758
Samsung SDI Co., Ltd.
(Electrical Equipment)* 5,230 616,714
--------------
$ 3,831,379
--------------
SPAIN -- 3.0%
Antena 3 TV SA (Broadcast & Cable TV)* 16,354 $ 719,947
Iberdrola SA (Utilities -- Electric Power) 37,440 739,194
Telefonica SA (Telephone Services)* 149,866 2,197,908
--------------
$ 3,657,049
--------------
SWEDEN -- 2.1%
Alfa Laval AB (Machinery & Tools) 53,100 $ 808,371
Atlas Copco AB (Machinery & Tools)* 14,000 501,196
Autoliv AB (Automotive) 17,600 668,001
Hennes & Mauritz AB (Specialty Stores)* 26,450 628,816
--------------
$ 2,606,384
--------------
SWITZERLAND -- 9.1%
Credit Suisse Group
(Banks & Credit Companies) 33,050 $ 1,208,690
Givaudan SA (Consumer
Goods & Services) 1,165 604,486
Nestle SA (Food & Non-Alcoholic
Beverages) 4,813 1,201,986
Novartis AG (Pharmaceuticals) 41,480 1,882,407
Roche Holding AG (Pharmaceuticals)* 16,030 1,616,215
Straumann Holding
AG (Medical Equipment)* 4,610 707,912
Synthes-Stratec, Inc. (Medical Equipment) 1,258 1,244,477
UBS AG (Banks & Credit Companies) 40,443 2,768,546
--------------
$ 11,234,719
--------------
THAILAND -- 1.2%
AEON Thana Sinsap PCL
(Banks & Credit Companies) 135,600 $ 588,635
Hana Microelectronics Co., Ltd. (Electronics)* 98,100 309,483
Krung Thai Bank Ltd.
(Banks & Credit Companies)* 1,972,600 612,354
--------------
$ 1,510,472
--------------
UNITED KINGDOM -- 25.0%
Amvescap PLC (Brokerage &
Asset Managers) 135,100 $ 978,508
AstraZeneca Group PLC (Pharmaceuticals) 55,160 2,638,820
Aviva PLC (Insurance) 74,866 655,168
BP PLC (Energy -- Integrated) 278,417 2,251,358
British Sky Broadcasting Group PLC
(Broadcast & Cable TV)* 100,600 1,262,420
Close Brothers Group PLC
(Banks & Credit Companies) 68,140 892,789
Cookson Group PLC (Electronics)* 809,000 577,643
Daily Mail & General Trust
(Printing & Publishing) 59,870 704,280
Diageo PLC (Alcoholic Beverages) 119,628 1,569,535
easyJet PLC (Airlines)* 125,000 653,775
Johnston Press PLC
(Printing & Publishing) 124,080 1,031,586
Kingfisher PLC (Specialty Stores) 185,414 921,761
Legal & General Group PLC (Insurance) 589,160 1,054,310
Next PLC (General Merchandise) 56,200 1,126,592
Reckitt Benckiser PLC
(Consumer Goods & Services) 73,740 1,663,799
Royal Bank of Scotland Group PLC
(Banks & Credit Companies) 82,535 2,425,039
Schroders PLC (Brokerage
& Assets Managers) 50,250 566,897
Signet Group PLC (Specialty Stores)* 289,130 531,595
Smith & Nephew PLC (Medical Equipment)* 98,010 820,966
St. James Place Capital PLC (Insurance)* 219,220 618,284
Standard Chartered PLC
(Banks & Credit Companies) 67,260 1,107,577
Taylor & Francis Group PLC
(Printing & Publishing) 53,120 482,644
United Utilities PLC
(Utilities -- Electric Power) 160,000 869,677
Vodafone Group PLC
(Wireless Communications) 1,139,440 2,817,033
Wolfson Microelectronics PLC
(Electronics)* 97,690 558,021
WPP Group PLC (Broadcast & Cable TV) 78,560 769,182
Yell Group PLC (Broadcast & Cable TV) 230,370 1,254,228
--------------
$ 30,803,487
--------------
Total Foreign Stocks $ 121,738,571
--------------
U.S. STOCKS -- 1.0%
BUSINESS SERVICES -- 1.0%
Manpower, Inc. 26,240 $ 1,235,379
--------------
Total Stocks (Identified Cost, $95,447,522) $ 122,973,950
--------------
COLLATERAL FOR SECURITIES LOANED -- 5.7%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 7,075,894 $ 7,075,894
--------------
Total Investments
(Identified Cost, $102,523,416 ) $ 130,049,844
--------------
OTHER ASSETS,
LESS LIABILITIES -- (5.4)% (6,764,632)
--------------
Net Assets -- 100.0% $ 123,285,212
==============
</Table>
See portfolio footnotes and notes to financial statements.
21
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
STOCKS -- 96.8%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 92.3%
AEROSPACE -- 0.1%
Honeywell International, Inc. 3,800 $ 127,034
L-3 Communications Holding, Inc.*^ 2,900 148,944
Lockheed Martin Corp. 11,300 580,820
--------------
$ 856,798
--------------
AIRLINES -- 1.0%
JetBlue Airways Corp.*^ 28,349 $ 751,816
Southwest Airlines Co. 295,900 4,775,826
--------------
$ 5,527,642
--------------
ALCOHOLIC BEVERAGES -- 0.1%
Anheuser-Busch Cos., Inc. 15,500 $ 816,540
--------------
APPAREL MANUFACTURERS -- 1.4%
Coach, Inc.* 47,800 $ 1,804,450
Nike, Inc., "B" 62,800 4,299,288
Reebok International Ltd. 48,600 1,910,952
--------------
$ 8,014,690
--------------
AUTOMOTIVE -- 0.4%
Harley-Davidson, Inc. 44,900 $ 2,134,097
--------------
BANKS & CREDIT COMPANIES -- 6.9%
American Express Co. 177,700 $ 8,570,471
Bank of New York Co., Inc. 124,100 4,110,192
Citigroup, Inc. 210,054 10,196,021
Fannie Mae 76,300 5,727,078
MBNA Corp. 215,900 5,365,115
Mellon Financial Corp. 30,000 963,300
Northern Trust Corp. 37,400 1,736,108
SLM Corp. 79,200 2,984,256
--------------
$ 39,652,541
--------------
BIOTECHNOLOGY -- 3.2%
Amgen, Inc.* 87,300 $ 5,395,140
Genentech, Inc.* 5,300 495,921
Genzyme Corp.* 99,900 4,929,066
Gilead Sciences, Inc.* 127,200 7,395,408
--------------
$ 18,215,535
--------------
BROADCAST & CABLE TV -- 6.5%
Citadel Broadcasting Corp.* 4,100 $ 91,717
Clear Channel Communications, Inc. 163,200 7,642,656
Comcast Corp., "A"* 236,059 7,759,259
Cox Communications, Inc., "A"* 21,700 747,565
EchoStar Communications Corp., "A"* 171,100 5,817,400
Entercom Communications Corp., "A"* 12,500 662,000
Liberty Media Corp., "A"* 166,800 1,983,252
NTL, Inc.* 22,300 1,555,425
Time Warner, Inc.* 411,700 7,406,483
Univision Communications, Inc., "A"*^ 40,500 1,607,445
Westwood One, Inc.* 59,900 2,049,179
--------------
$ 37,322,381
--------------
BROKERAGE & ASSET MANAGERS -- 2.1%
Charles Schwab Corp. 84,100 $ 995,744
Goldman Sachs Group, Inc. 28,200 2,784,186
Merrill Lynch & Co., Inc. 74,400 4,363,560
Morgan Stanley Dean Witter & Co. 66,800 3,865,716
--------------
$ 12,009,206
--------------
BUSINESS SERVICES -- 1.6%
Affiliated Computer Services, Inc., "A"*^ 37,800 $ 2,058,588
BISYS Group, Inc.* 21,000 312,480
DST Systems, Inc.* 32,600 1,361,376
First Data Corp. 20,600 846,454
Fiserv, Inc.* 62,600 2,473,326
Getty Images, Inc.* 20,400 1,022,652
Manpower, Inc. 4,800 225,984
Monster Worldwide, Inc.* 37,800 830,088
SunGard Data Systems, Inc.* 10,400 288,184
--------------
$ 9,419,132
--------------
CHEMICALS -- 1.1%
3M Co. 55,800 $ 4,744,674
Air Products & Chemicals, Inc. 28,300 1,495,089
--------------
$ 6,239,763
--------------
COMPUTER SOFTWARE -- 8.7%
Akamai Technologies, Inc.*^ 91,000 $ 978,250
BEA Systems, Inc.*^ 75,000 922,500
Cadence Design Systems, Inc.* 96,200 1,729,676
Intuit, Inc.* 33,300 1,761,903
Manhattan Associates, Inc.*^ 11,800 326,152
Mercury Interactive Corp.*^ 67,400 3,278,336
Microsoft Corp. 864,464 23,807,339
Netscreen Technologies, Inc.* 11,800 292,050
Networks Associates, Inc.* 71,300 1,072,352
Oracle Corp.* 393,674 5,196,497
Symantec Corp.* 135,400 4,691,610
Synopsys, Inc.* 24,600 830,496
VERITAS Software Corp.* 148,583 5,521,344
--------------
$ 50,408,505
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.6%
EMC Corp.* 63,000 $ 813,960
Hewlett-Packard Co. 14,800 339,956
International Business Machines Corp. 87,600 8,118,768
--------------
$ 9,272,684
--------------
CONSUMER GOODS & SERVICES -- 2.2%
Avon Products, Inc. 68,400 $ 4,616,316
Clorox Co. 27,300 1,325,688
Colgate-Palmolive Co. 66,000 3,303,300
Procter & Gamble Co. 33,800 3,375,944
--------------
$ 12,621,248
--------------
CONSUMER SERVICES -- 0.6%
Apollo Group, Inc., "A"* 26,400 $ 1,795,200
Career Education Corp.* 44,400 1,779,108
Orbitz, Inc., "A" 1,800 41,760
--------------
$ 3,616,068
--------------
CONTAINERS
Smurfit-Stone Container Corp.* 10,100 $ 187,557
--------------
ELECTRICAL EQUIPMENT -- 5.8%
Cooper Industries, Ltd., "A" 13,200 $ 764,676
Danaher Corp.^ 35,600 3,266,300
Emerson Electric Co. 16,000 1,036,000
General Electric Co. 419,336 12,991,029
Molex, Inc.^ 37,600 1,311,864
Rockwell Automation, Inc. 23,400 833,040
Tyco International Ltd. 467,100 12,378,150
W.W. Grainger, Inc. 16,700 791,413
--------------
$ 33,372,472
--------------
ELECTRONICS -- 6.9%
Agere Systems, Inc., "B"* 60,800 $ 176,320
Amphenol Corp., "A"*^ 9,900 632,907
Analog Devices, Inc. 155,900 7,116,835
Applied Materials, Inc.* 7,000 157,150
Intel Corp. 320,200 10,310,440
Linear Technology Corp. 40,700 1,712,249
Maxim Integrated Products, Inc. 38,200 1,902,360
Microchip Technology, Inc. 98,100 3,272,616
Novellus Systems, Inc.* 68,700 2,888,835
PMC-Sierra, Inc.*^ 51,700 1,041,755
Texas Instruments, Inc. 208,000 6,111,040
Xilinx, Inc.* 112,900 4,373,746
--------------
$ 39,696,253
--------------
ENTERTAINMENT -- 1.6%
Viacom, Inc., "B" 199,176 $ 8,839,431
Walt Disney Co. 13,000 303,290
--------------
$ 9,142,721
--------------
</Table>
22
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
FOOD & DRUG STORES -- 1.1%
CVS Corp. 47,800 $ 1,726,536
Rite Aid Corp.* 127,600 770,704
Walgreen Co. 99,600 3,623,448
--------------
$ 6,120,688
--------------
FOOD & NON ALCOHOLIC BEVERAGES -- 1.1%
PepsiCo, Inc. 123,700 $ 5,766,894
Sysco Corp. 15,000 558,450
--------------
$ 6,325,344
--------------
GAMING & LODGING -- 1.1%
Carnival Corp. 112,500 $ 4,469,625
Cendant Corp.* 13,000 289,510
Hilton Hotels Corp. 62,800 1,075,764
Starwood Hotels & Resorts Co., "B" 16,100 579,117
--------------
$ 6,414,016
--------------
GENERAL MERCHANDISE -- 4.1%
Kohl's Corp.* 154,600 $ 6,947,724
Target Corp. 261,900 10,056,960
Wal-Mart Stores, Inc. 131,300 6,965,465
--------------
$ 23,970,149
--------------
INSURANCE -- 2.6%
American International Group, Inc. 177,400 $ 11,758,072
Hartford Financial Services Group, Inc. 34,100 2,012,923
Marsh & McLennan Cos., Inc. 12,400 593,836
UnumProvident Corp. 46,200 728,574
--------------
$ 15,093,405
--------------
INTERNET -- 2.1%
Ebay, Inc.* 76,600 $ 4,947,594
InterActive Corp.*^ 193,300 6,558,669
Yahoo! Inc.* 19,200 867,264
--------------
$ 12,373,527
--------------
LEISURE & TOYS -- 0.2%
International Game Technology 33,100 $ 1,181,670
--------------
MACHINERY & TOOLS -- 0.9%
Eaton Corp. 13,300 $ 1,436,134
Illinois Tool Works, Inc. 34,600 2,903,286
Parker-Hannifin Corp. 11,100 660,450
--------------
$ 4,999,870
--------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES -- 1.4%
Cardinal Health, Inc. 64,900 $ 3,969,284
Caremark Rx, Inc.* 105,600 2,674,848
HCA, Inc. 30,700 1,318,872
Tenet Healthcare Corp.* 10,900 174,945
--------------
$ 8,137,949
--------------
MEDICAL EQUIPMENT -- 4.0%
AmerisourceBergen Corp. 12,600 $ 707,490
Applera Corp. 42,500 880,175
Baxter International, Inc. 82,700 2,524,004
Biomet, Inc. 65,100 2,370,291
C.R. Bard, Inc. 27,400 2,226,250
CTI Molecular Imaging, Inc*^ 12,600 213,066
Cyberonics, Inc.*^ 3,200 102,432
Edwards Lifesciences Corp.*^ 2,800 84,224
Guidant Corp. 66,400 3,997,280
Invitrogen Corp.* 12,000 840,000
Medtronic, Inc. 104,500 5,079,745
Thermo Electron Corp.* 72,800 1,834,560
Zimmer Holdings, Inc.* 35,200 2,478,080
--------------
$ 23,337,597
--------------
OIL SERVICES -- 0.6%
BJ Services Co.* 33,600 $ 1,206,240
GlobalSantaFe Corp. 12,800 317,824
Noble Corp.* 9,400 336,332
Smith International, Inc.*^ 33,800 $ 1,403,376
--------------
$ 3,263,772
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.1%
Apple Computer, Inc.* 41,900 $ 895,403
Avid Technology, Inc.*^ 12,900 619,200
Dell, Inc.* 307,074 10,428,233
Zebra Technologies Corp., "A"* 2,900 192,473
--------------
$ 12,135,309
--------------
PHARMACEUTICALS -- 8.1%
Abbott Laboratories, Inc. 125,500 $ 5,848,300
Allergan, Inc.^ 15,000 1,152,150
Eli Lilly & Co. 21,600 1,519,128
Forest Laboratories, Inc.* 29,100 1,798,380
Johnson & Johnson Co. 241,600 12,481,056
Pfizer, Inc. 432,331 15,274,254
Schering-Plough Corp. 141,000 2,451,990
Watson Pharmaceuticals, Inc.* 16,900 777,400
Wyeth 126,700 5,378,415
--------------
$ 46,681,073
--------------
POLLUTION CONTROL
Waste Management, Inc. 1,900 $ 56,240
--------------
PRINTING & PUBLISHING -- 0.6%
Lamar Advertising Co., "A"* 53,700 $ 2,004,084
New York Times Co., "A" 32,300 1,543,617
--------------
$ 3,547,701
--------------
RESTAURANTS -- 0.8%
McDonald's Corp. 75,900 $ 1,884,597
Outback Steakhouse, Inc. 66,600 2,944,386
--------------
$ 4,828,983
--------------
SPECIALTY CHEMICALS
Georgia Gulf Corp.^ 3,100 $ 89,528
--------------
SPECIALTY STORES -- 2.7%
Best Buy Co., Inc. 38,900 $ 2,032,136
CarMax Inc.* 27,300 844,389
Home Depot, Inc. 85,600 3,037,944
Hot Topic, Inc.* 20,200 595,092
Lowe's Cos., Inc. 20,500 1,135,495
Pier 1 Imports, Inc. 21,700 474,362
Staples, Inc.* 122,400 3,341,520
The TJX Cos., Inc. 135,400 2,985,570
Williams-Sonoma, Inc.* 29,500 1,025,715
--------------
$ 15,472,223
--------------
TELECOMMUNICATIONS -- WIRELINE -- 4.8%
ADTRAN, Inc. 78,400 $ 2,430,400
Andrew Corp.*^ 19,600 225,596
Cisco Systems, Inc.* 806,177 19,582,039
Corning, Inc.* 219,900 2,293,557
Foundry Networks, Inc.* 35,400 968,544
Juniper Networks, Inc.*^ 30,900 577,212
QUALCOMM, Inc. 35,000 1,887,550
--------------
$ 27,964,898
--------------
TOBACCO -- 0.3%
Altria Group, Inc. 29,900 $ 1,627,158
--------------
TRUCKING -- 1.0%
Fedex Corp. 63,500 $ 4,286,250
United Parcel Service, Inc., "B" 22,200 1,655,010
--------------
$ 5,941,260
--------------
WIRELESS COMMUNICATIONS -- 0.9%
AT&T Wireless Services, Inc.* 261,400 $ 2,088,586
Nextel Communications, Inc., "A"* 84,800 2,379,488
Sprint Corp. (PCS Group)* 158,000 887,960
--------------
$ 5,356,034
--------------
Total U.S. Stocks $ 533,444,227
--------------
</Table>
23
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 4.5%
AUSTRALIA -- 0.6%
BHP Billiton Ltd. (Metals & Mining) 58,100 $ 1,060,906
News Corp., Ltd. ADR (Broadcast &
Cable TV)^ 59,300 2,140,730
--------------
$ 3,201,636
--------------
BERMUDA -- 1.2%
Accenture Ltd., "A" (Business Services)* 71,500 $ 1,881,880
Ace Ltd. (Insurance) 32,700 1,354,434
Marvell Technology Group Ltd.
(Electronics)* 77,600 2,943,368
XL Capital Ltd., "A" (Insurance) 9,000 697,950
--------------
$ 6,877,632
--------------
CANADA -- 0.3%
Nortel Networks Corp.
(Telecommunications -- Wireline)* 421,100 $ 1,781,253
--------------
FINLAND -- 0.3%
Nokia Corp., ADR
(Telecommunications -- Wireless) 103,600 $ 1,761,200
--------------
GERMANY -- 0.2%
Bayerische Motoren Werke AG (Automotive) 21,200 $ 981,627
--------------
NETHERLANDS
STMicroelectronics N.V. (Electronics) 6,100 $ 164,761
--------------
SINGAPORE -- 0.2%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 83,600 $ 1,240,624
--------------
SWITZERLAND -- 0.6%
Alcon, Inc. (Medical Equipment)^ 27,200 $ 1,646,688
Novartis AG (Pharmaceuticals) 6,500 294,977
Roche Holdings AG (Pharmaceuticals) 12,600 1,270,387
--------------
$ 3,212,052
--------------
TAIWAN -- 0.3%
Taiwan Semiconductor Manufacturing Co.
Ltd., ADR (Electronics) 197,348 $ 2,020,844
--------------
UNITED KINGDOM -- 0.8%
Amdocs Ltd. (Computer Software)* 95,500 $ 2,146,840
AstraZeneca Group PLC (Pharmaceuticals) 6,500 310,956
Vodafone Group PLC
(Wireless Communications)* 698,900 1,727,888
Vodafone Group PLC, ADR
(Wireless Communications)* 25,790 645,781
--------------
$ 4,831,465
--------------
Total Foreign Stocks $ 26,073,094
--------------
Total Stocks (Identified Cost, $532,690,668) $ 559,517,321
--------------
REPURCHASE AGREEMENT -- 2.2%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch, dated 12/31/03
due 01/02/04, total to be received $12,428,656
(secured by various U.S. Treasury and Federal
Agency obligations in a jointly traded account), at Cost $ 12,428 $ 12,428,000
--------------
COLLATERAL FOR SECURITIES LOANED -- 4.4%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 25,329,898 $ 25,329,898
--------------
Total Investments (Identified Cost, $570,448,566 ) $ 597,275,219
--------------
OTHER ASSETS,
LESS LIABILITIES -- (3.4)% (19,455,431)
--------------
Net Assets -- 100.0% $ 577,819,788
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2003
MID CAP VALUE SERIES
STOCKS -- 95.1%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 91.1%
AEROSPACE -- 2.3%
Alliant Techsystems, Inc.* 3,000 $ 173,280
EDO Corp. 3,200 78,880
United Defense Industries, Inc.* 3,500 111,580
--------------
$ 363,740
--------------
ALCOHOLIC BEVERAGES -- 0.4%
Constellation Brands, Inc.* 1,900 $ 62,567
--------------
APPAREL MANUFACTURERS -- 3.4%
Kellwood Co. 4,300 $ 176,300
Liz Claiborne, Inc. 1,500 53,190
Polo Ralph Lauren Corp. 6,000 172,800
Reebok International Ltd. 3,700 145,484
--------------
$ 547,774
--------------
AUTOMOTIVE -- 1.5%
Autoliv, Inc. 3,200 $ 120,480
Johnson Controls, Inc. 500 58,060
Lear Corp. 950 58,264
--------------
$ 236,804
--------------
BANKS & CREDIT COMPANIES -- 8.8%
Astoria Financial Corp. 2,000 $ 74,400
Banknorth Group, Inc. 3,700 120,361
Charter One Financial, Inc. 4,600 158,930
First Tennessee National Corp. 4,500 198,450
Greenpoint Financial Corp. 3,700 130,684
Mercantile Bankshares Corp. 3,100 141,298
National Commerce Financial Corp. 2,900 79,112
New York Community Bancorp, Inc. 2,050 78,002
Provident Financial Services 3,200 60,480
Riggs National Corp. 4,700 77,691
TCF Financial Corp. 2,100 107,835
The South Financial Group, Inc. 3,900 108,654
SouthTrust Corp. 2,400 78,552
--------------
$ 1,414,449
--------------
BIOTECHNOLOGY -- 0.9%
Neurocrine Biosciences, Inc.* 2,700 $ 147,258
--------------
BROADCAST & CABLE TV -- 2.6%
Cablevision Systems Corp* 3,200 $ 74,848
Cox Radio, Inc.* 5,300 133,719
Hearst-Argyle Television, Inc. 4,900 135,044
Interpublic Group of Cos., Inc.* 5,000 78,000
--------------
$ 421,611
--------------
BROKERAGE & ASSET MANAGERS -- 4.7%
E*TRADE Group, Inc.* 6,200 $ 78,430
Eaton Vance Corp. 3,200 117,248
Federated Investors, Inc. 4,100 120,376
Franklin Resources, Inc. 1,800 93,708
Janus Capital Group, Inc. 7,700 126,357
Legg Mason, Inc. 2,000 154,360
Waddell & Reed Financial, Inc., 2,300 53,958
--------------
$ 744,437
--------------
BUSINESS SERVICES -- 1.8%
DST Systems, Inc.* 1,880 $ 78,509
MPS Group, Inc.* 4,300 40,205
School Specialty, Inc.* 2,700 91,827
Volume Services America Holdings, Inc.* 5,000 83,250
--------------
$ 293,791
--------------
CHEMICALS -- 1.8%
Lyondell Chemical Co. 11,400 $ 193,230
Monsanto Co. 600 17,268
PPG Industries, Inc. 1,300 83,226
--------------
$ 293,724
--------------
</Table>
24
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
COMPUTER SOFTWARE -- 1.2%
Cadence Design Systems, Inc.* 2,100 $ 37,758
Networks Associates, Inc.* 10,000 150,400
--------------
$ 188,158
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.8%
Acxiom Corp.* 8,600 $ 159,702
Xerox Corp.* 8,900 122,820
--------------
$ 282,522
--------------
CONSUMER GOODS & SERVICES -- 1.3%
Newell Rubbermaid, Inc. 9,000 $ 204,930
--------------
CONTAINERS -- 3.3%
Anchor Glass Container Corp. 7,800 $ 124,800
Owens Illinois, Inc.* 12,800 152,192
Smurfit-Stone Container Corp.* 8,000 148,560
Sonoco Products Co. 4,300 105,866
--------------
$ 531,418
--------------
ELECTRICAL EQUIPMENT -- 1.1%
American Standard Cos., Inc.* 700 $ 70,490
Ametek, Inc. 500 24,130
Black & Decker Corp. 1,600 78,912
--------------
$ 173,532
--------------
ELECTRONICS -- 2.9%
Agere Systems, Inc.* 50,000 $ 145,000
Amphenol Corp.* 1,600 102,288
Fairchild Semiconductor International Co.* 1,000 24,970
Novellus Systems, Inc.* 1,600 67,280
Vishay Intertechnology, Inc.* 5,300 121,370
--------------
$ 460,908
--------------
ENERGY -- INDEPENDENT -- 4.2%
Devon Energy Corp. 3,200 $ 183,232
EOG Resources, Inc. 2,100 96,957
Massey Energy Co. 4,400 91,520
Newfield Exploration Co.* 1,600 71,264
Tom Brown, Inc.* 3,200 103,200
Unocal Corp. 3,200 117,856
--------------
$ 664,029
--------------
ENERGY -- INTEGRATED -- 1.1%
Amerada Hess Corp.* 3,200 $ 170,144
--------------
FOOD & DRUG STORES -- 0.4%
Rite Aid Corp.* 11,800 $ 71,272
--------------
FOOD & NON ALCOHOLIC BEVERAGES -- 2.4%
Archer-Daniels-Midland Co. 5,300 $ 80,666
Dean Foods Co.* 2,400 78,888
Del Monte Foods Co.* 7,500 78,000
Smithfield Foods, Inc.* 6,800 140,760
--------------
$ 378,314
--------------
FOREST & PAPER PRODUCTS -- 2.1%
Boise Cascade Corp. 5,000 $ 164,300
Bowater, Inc. 3,700 171,347
--------------
$ 335,647
--------------
FURNITURE & APPLIANCES -- 0.2%
Tempur Pedic International, Inc.* 2,000 $ 31,000
--------------
GAMING & LODGING -- 0.9%
Hilton Hotels Corp. 5,600 $ 95,928
MGM Mirage, Inc.* 1,400 52,654
--------------
$ 148,582
--------------
GENERAL MERCHANDISE -- 2.4%
Big Lots, Inc.* 15,100 $ 214,571
May Department Stores Co. 2,800 81,396
Sears, Roebuck & Co. 1,800 81,882
--------------
$ 377,849
--------------
INSURANCE -- 3.2%
PMI Group, Inc.* 3,200 $ 119,136
Safeco Corp. 2,900 112,897
The St. Paul Cos., Inc. 2,700 107,055
U.S.I. Holdings Corp.* 4,200 54,810
UnumProvident Corp. 7,000 110,390
--------------
$ 504,288
--------------
LEISURE & TOYS -- 0.5%
Hasbro, Inc. 4,000 $ 85,120
--------------
MACHINERY & TOOLS -- 0.8%
AGCO Corp.* 6,300 $ 126,882
--------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES -- 3.1%
Apria Healthcare Group, Inc.* 2,500 $ 71,175
Caremark Rx, Inc.* 3,200 81,056
Fisher Scientific International, Inc.* 4,800 198,576
Tenet Healthcare Corp.* 9,000 144,450
--------------
$ 495,257
--------------
MEDICAL EQUIPMENT -- 5.7%
AmerisourceBergen Corp. 2,700 $ 151,605
Applera Corp. 5,300 109,763
Aspect Medical Systems, Inc.* 400 4,564
C.R. Bard, Inc. 1,100 89,375
Conceptus, Inc.* 10,000 106,200
CTI Molecular Imaging, Inc.* 10,700 180,937
DENTSPLY International, Inc. 1,100 49,687
Millipore Corp.* 3,700 159,285
Thermo Electron Corp.* 2,700 68,040
--------------
$ 919,456
--------------
METALS & MINING -- 0.5%
Compass Minerals International, Inc.* 6,000 $ 85,680
--------------
NATURAL GAS -- DISTRIBUTION -- 0.3%
AGL Resources, Inc. 1,600 $ 46,560
--------------
OIL SERVICES -- 3.8%
GlobalSantaFe Corp. 8,600 $ 213,538
Noble Corp.* 4,800 171,744
Smith International, Inc.* 5,300 220,056
--------------
$ 605,338
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.0%
Ingram Micro, Inc.* 7,500 $ 119,250
Solectron Corp.* 35,000 206,850
--------------
$ 326,100
--------------
PHARMACEUTICALS -- 0.6%
Acusphere, Inc. 3,100 $ 27,218
United Therapeutics Corp.* 3,000 68,850
--------------
$ 96,068
--------------
PRINTING & PUBLISHING -- 3.6%
Bowne & Co., Inc. 7,800 $ 105,768
Dun & Bradstreet Corp. * 900 45,639
Lamar Advertising Co.* 4,800 179,136
Meredith Corp. 2,000 97,620
New York Times Co. 3,200 152,928
--------------
$ 581,091
--------------
RAILROAD & SHIPPING -- 1.4%
CSX Corp. 4,300 $ 154,542
Kansas City Southern Industries, Inc.* 5,300 75,896
--------------
$ 230,438
--------------
REAL ESTATE -- 1.2%
American Financial Realty Trust 2,000 $ 34,100
Boston Properties, Inc. 1,600 77,104
iStar Financial, Inc. 2,100 81,690
--------------
$ 192,894
--------------
</Table>
25
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
REAL ESTATE INVESTMENT TRUSTS -- 0.7%
MeriStar Hospitality Corp. 17,000 $ 110,670
--------------
RESTAURANTS -- 1.1%
Aramark Corp. 1,600 $ 43,872
Darden Restaurants, Inc. 6,000 126,240
--------------
$ 170,112
--------------
SPECIALTY CHEMICALS -- 0.6%
Georgia Gulf Corp. 3,200 $ 92,416
--------------
SPECIALTY STORES -- 1.1%
Office Depot, Inc.* 5,900 $ 98,589
Pier 1 Imports, Inc. 3,200 69,952
--------------
$ 168,541
--------------
TELECOMMUNICATIONS -- WIRELESS -- 0.5%
Spectrasite, Inc. * 2,300 $ 79,925
--------------
TELEPHONE SERVICES -- 1.3%
Cincinnati Bell, Inc.* 31,500 $ 159,075
Citizens Communications Co.* 4,500 55,890
--------------
$ 214,965
--------------
TRUCKING -- 1.0%
Werner Enterprises, Inc. 7,900 $ 153,971
--------------
UTILITIES -- ELECTRIC POWER -- 3.2%
Calpine Corp.* 24,400 $ 117,364
FirstEnergy Corp. 2,280 80,256
PPL Corp. 4,500 196,875
TXU Corp. 4,700 111,484
--------------
$ 505,979
--------------
WIRELESS COMMUNICATIONS -- 1.4%
Sprint Corp. (PCS Group)* 28,600 $ 160,732
Telephone & Data Systems, Inc. 1,100 68,805
--------------
$ 229,537
--------------
Total U.S. Stocks $ 14,565,748
--------------
FOREIGN STOCKS -- 4.0%
BERMUDA -- 0.9%
Ace Ltd. (Insurance) 3,300 $ 136,686
--------------
CANADA -- 2.1%
Abitibi-Consolidated, Inc.
(Forest & Paper Products) 8,600 $ 69,746
Magna International, Inc. (Automotive) 2,500 200,125
Talisman Energy, Inc.
(Energy -- Independent) 1,100 62,260
--------------
$ 332,131
--------------
GRAND CAYMAN ISLANDS -- 1.0%
Transocean Sedco Forex, Inc. (Oil Services)* 7,000 $ 168,070
--------------
Total Foreign Stocks $ 636,887
--------------
Total Stocks (Identified Cost, $13,790,768) $ 15,202,635
--------------
CONVERTIBLE BONDS -- 1.5%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
COMPUTER SOFTWARE -- SERVICES -- 0.7%
Serena Software, Inc., 1.5s, 2023 $ 100 $ 107,750
--------------
PHARMACEUTICALS -- 0.3%
Valeant Pharmaceuticals International,
3s, 2010 $ 50 $ 54,937
--------------
WIRELESS COMMUNICATIONS -- 0.5%
American Tower Corp., 3.25s, 2010 $ 60 $ 71,100
--------------
$ 233,787
--------------
Total Convertible Bond
(Identified Cost, $210,000) $ 233,787
--------------
<Caption>
ISSUER SHARES VALUE
PREFERRED STOCKS -- 1.3%
BROADCAST & CABLE TV -- 0.7%
Interpublic Group Cos., Inc. 2,000 $ 114,700
--------------
ENERGY -- INTEGRATED -- 0.2%
Amerada Hess Corp. 460 $ 25,231
--------------
INSURANCE -- 0.4%
PMI Group, Inc. 1,500 $ 38,610
Unumprovident Corp. 700 23,702
--------------
$ 62,312
--------------
Total Preferred Stock
(Identified Cost, $178,000) $ 202,243
--------------
SHORT-TERM INVESTMENT -- 4.0%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Old Line Funding Corp., due 1/02/04,
at Amortized Cost $ 635 $ 634,983
--------------
REPURCHASE AGREEMENT -- 5.1%
Merrill Lynch, dated 12/31/03, due
1/2/04, total to be received
$824,043 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 824 $ 824,000
--------------
Total Investments
(Identified Cost, $15,637,751) $ 17,097,648
--------------
OTHER ASSETS,
LESS LIABILITIES -- (7.0)% (1,119,844)
--------------
Net Assets -- 100.0% $ 15,977,804
==============
</Table>
See portfolio footnotes and notes to financial statements.
26
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
NEW DISCOVERY SERIES
STOCKS -- 97.6%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 92.5%
AIRLINES -- 0.6%
Airtran Holdings, Inc.*^ 15,900 $ 189,210
Alaska Air Group, Inc.* 20,600 562,174
Atlantic Coast Airlines Holdings*^ 14,000 138,600
Frontier Airlines, Inc.* 12,000 171,120
Mesa Air Group, Inc.* 28,700 359,324
Skywest, Inc. 18,000 326,160
--------------
$ 1,746,588
--------------
APPAREL MANUFACTURERS -- 1.3%
Carter Holdings* 25,150 $ 640,068
Kellwood Co.^ 13,100 537,100
Quiksilver, Inc.* 15,300 271,269
Reebok International Ltd. 36,700 1,443,044
Wolverine World Wide, Inc. 51,700 1,053,646
--------------
$ 3,945,127
--------------
AUTOMOTIVE -- 0.2%
Quantum Fuel Systems Technologies* 60,200 $ 484,008
--------------
BANKS & CREDIT COMPANIES -- 2.6%
BankUnited Financial Corp., "A"* 35,200 $ 907,808
East West Bancorp, Inc. 18,100 971,608
First Community Bancorp.^ 8,000 289,120
Franklin Bank Corp.* 8,070 153,330
Glacier Bancorp, Inc. 3,360 108,864
Harbor Florida Bancshares, Inc. 22,400 665,504
Independence Community Bank Corp. 9,200 330,924
Investors Financial Services Corp. 38,500 1,478,785
Nara Bancorp, Inc. 3,400 92,820
Nelnet, Inc.*^ 14,700 329,280
UCBH Holdings, Inc. 43,000 1,675,710
Wintrust Financial Corp.^ 13,500 608,850
--------------
$ 7,612,603
--------------
BIOTECHNOLOGY -- 3.5%
Antigenics, Inc.*^ 43,860 $ 496,495
Bruker Biosciences Corp.* 69,200 314,860
Cell Genesys, Inc.* 37,700 487,838
CryoLife, Inc.*^ 102,600 593,028
CV Therapeutics, Inc.* 27,700 406,082
ICOS Corp.*^ 19,300 796,704
ILEX Oncology, Inc.* 20,500 435,625
Introgen Therapeutics, Inc.*^ 44,700 378,162
Ligand Pharmaceuticals, Inc.* 21,100 309,959
MGI Pharma, Inc.* 7,500 308,625
Neurocrine Biosciences, Inc.* 30,500 1,663,470
Pharmos Corp.*^ 111,600 390,600
Serologicals Corp.*^ 81,700 1,519,620
Tanox, Inc.*^ 5,400 80,190
Telik, Inc.*^ 75,300 1,732,653
Vertex Pharmaceuticals, Inc.* 25,000 255,750
--------------
$ 10,169,661
--------------
BROADCAST & CABLE TV -- 4.2%
aQuantive, Inc.* 92,900 $ 952,225
Citadel Broadcasting Corp.* 40,500 905,985
Cox Radio, Inc., "A"* 56,000 1,412,880
Cumulus Media, Inc., "A"* 23,000 506,000
Emmis Communications Corp., "A"*^ 27,000 730,350
Entercom Communications Corp., "A"* 39,675 2,101,188
Harris Interactive, Inc.* 227,300 1,886,590
Hearst-Argyle Television, Inc. 28,200 777,192
LIN TV Corp., "A"* 56,050 1,446,650
LodgeNet Entertainment Corp.* 17,500 319,900
Saga Communications, Inc., "A"* 37,700 698,581
Spanish Broadcasting Systems, Inc.* 56,000 588,000
--------------
$ 12,325,541
--------------
BROKERAGE & ASSET MANAGERS -- 2.4%
First Albany Cos., Inc. 11,200 $ 157,248
Friedman, Billings, Ramsey Group, Inc. "A" 81,660 1,884,713
Jeffries Group, Inc.^ 41,600 1,373,632
Knight Trading Group, Inc.* 82,600 1,209,264
Raymond James Financial, Inc. 17,900 674,830
Soundview Technology Group, Inc.* 7,600 117,724
SWS Group, Inc.^ 43,500 774,300
Waddell & Reed Financial, Inc., "A" 39,900 936,054
--------------
$ 7,127,765
--------------
BUSINESS SERVICES -- 8.0%
Alliance Data Systems Corp.* 37,100 $ 1,026,928
Bright Horizons Family Solutions, Inc.* 24,900 1,045,800
CDI Corp. 22,600 740,150
Charles River Associates, Inc.* 22,310 713,697
Corporate Executive Board Co.* 41,700 1,946,139
Costar Group, Inc.*^ 49,630 2,068,578
Diamondcluster International, Inc., "A"* 70,100 715,020
Digital Insight Corp.*^ 19,700 490,530
Digitas, Inc.*^ 170,630 1,590,272
Getty Images, Inc.* 48,000 2,406,240
Global Payments, Inc. 54,163 2,552,160
Integrated Alarm Services Group, Inc.*^ 121,590 1,033,515
kforce.com, Inc.* 19,900 185,866
LECG Corp.* 1,100 25,179
Monster Worldwide, Inc.* 65,000 1,427,400
MPS Group, Inc.* 144,600 1,352,010
Perot Systems Corp., "A"*^ 86,450 1,165,346
Resources Connection, Inc.* 2,700 73,737
Sirva, Inc.* 111,070 2,170,308
Universal Technical Institute, Inc.*^ 16,200 486,000
--------------
$ 23,214,875
--------------
COMPUTER SOFTWARE -- 9.1%
Akamai Technologies, Inc.*^ 83,000 $ 892,250
Altiris, Inc.*^ 7,800 284,544
Ansys, Inc.* 62,400 2,477,280
Ascential Software Corp.* 43,100 1,117,583
Aspect Communications, Inc.* 33,100 521,656
E.piphany, Inc.* 69,000 497,490
Hyperion Solutions Corp.* 18,000 542,520
InterVideo, Inc.*^ 32,780 385,165
Kronos, Inc.* 79,300 3,141,073
Magma Design Automation, Inc.*^ 64,700 1,510,098
Manhattan Associates, Inc.*^ 151,500 4,187,460
Microstrategy, Inc., "A"* 13,100 687,488
Netscreen Technologies, Inc.* 77,900 1,928,025
Networks Associates, Inc.* 148,000 2,225,920
Palmsource, Inc.*^ 32,860 716,019
Progress Software Corp.* 84,600 1,730,916
Safenet, Inc.*^ 22,400 689,248
Secure Computing Corp.*^ 65,700 1,176,687
Serena Software, Inc.*^ 83,400 1,530,390
Vignette Corp.* 79,500 180,465
--------------
$ 26,422,277
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.7%
Mentor Graphics Corp.*^ 100,500 $ 1,461,270
Micros Systems, Inc. * 4,100 177,776
Opsware, Inc.*^ 6,000 44,400
SS&C Technologies, Inc. 14,800 413,660
--------------
$ 2,097,106
--------------
CONSUMER SERVICES -- 4.9%
Autobytel, Inc.* 9,500 $ 86,260
Autobytel, Inc.* 105,000 956,550
Career Education Corp.* 77,400 3,101,418
</Table>
27
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
CONSUMER SERVICES -- continued
Corinthian Colleges, Inc.* 13,500 $ 750,060
Education Management Corp.* 61,200 1,899,648
First Marblehead Corp.* 30,060 657,713
ITT Educational Services, Inc.* 37,000 1,737,890
Orbitz, Inc., "A"^ 28,500 661,200
Priceline.com, Inc.*^ 35,350 632,765
Strayer Education, Inc.^ 34,200 3,721,986
--------------
$ 14,205,490
--------------
ELECTRICAL EQUIPMENT -- 0.4%
A.O. Smith Corp. 30,400 $ 1,065,520
Ametek, Inc. 300 14,478
--------------
$ 1,079,998
--------------
ELECTRONICS -- 16.6%
Advanced Energy Industries, Inc.*^ 29,700 $ 773,685
American Superconductor Corp.*^ 179,600 2,489,256
Amis Holdings, Inc.* 115,400 2,109,512
Amphenol Corp., "A"* 35,800 2,288,694
Applied Films Corp.* 38,000 1,254,760
Applied Micro Circuits Corp.* 73,000 436,540
Arrow Electronics, Inc.* 20,200 467,428
Axcelis Technologies, Inc.* 49,300 503,846
Benchmark Electronics, Inc.* 20,650 718,827
Brooks Automation, Inc.* 40,700 983,719
Cirrus Logic, Inc.*^ 41,000 314,470
CTS Corp. 35,100 403,650
Cymer, Inc.* 45,300 2,092,407
Cypress Semiconductor Corp.*^ 114,600 2,447,856
DSP Group, Inc.* 94,520 2,354,493
Exar Corp.* 21,100 360,388
Excel Technology, Inc.* 16,900 555,334
Genesis Microchip, Inc.* 21,000 378,840
Genus, Inc.*^ 45,600 273,600
GlobespanVirata, Inc.* 72,000 423,360
Integrated Circuit Systems, Inc.* 32,400 923,076
Integrated Device Technology, Inc.* 71,600 1,229,372
Kemet Corp.* 35,400 484,626
Kopin Corp.* 105,600 708,576
Lam Research Corp.* 37,500 1,211,250
Lexar Media, Inc.* 61,400 1,070,202
Micrel, Inc.* 145,900 2,273,122
Mindspeed Technologies, Inc.* 150,100 1,028,185
MKS Instruments, Inc.*^ 43,400 1,258,600
NPTest Holding Corp.* 51,010 563,150
OmniVision Technologies, Inc.* 4,770 263,543
Pemstar, Inc.*^ 142,600 469,154
Photon Dynamics, Inc.*^ 25,000 1,006,000
Planar Systems, Inc.* 15,100 367,232
Plexus Corp.*^ 37,800 649,026
PMC-Sierra, Inc.*^ 121,300 2,444,195
RF Micro Devices, Inc.*^ 40,500 407,025
Semtech Corp.* 17,200 390,956
Sigmatel, Inc.* 20,300 501,004
Silicon Laboratories, Inc.*^ 40,400 1,746,088
Skyworks Solutions, Inc.*^ 81,000 704,700
Technitrol, Inc.* 56,900 1,180,106
Tessera Technologies, Inc.* 19,700 370,557
Three Five Systems, Inc.*^ 105,000 550,200
Ultratech, Inc.* 24,800 728,376
Vishay Intertechnology, Inc.* 73,500 1,683,150
Vitesse Semiconductor Corp.*^ 146,600 860,542
White Electronic Designs Corp.* 125,600 1,105,280
Zoran Corp.*^ 41,000 712,990
--------------
$ 48,520,948
--------------
ENERGY -- INDEPENDENT -- 0.6%
Newfield Exploration Co.* 37,818 $ 1,684,414
--------------
ENGINEERING -- CONSTRUCTION -- 0.2%
Shaw Group, Inc.* 36,000 $ 490,320
--------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.4%
Performance Food Group, Co.*^ 29,800 $ 1,077,866
--------------
FURNITURE & APPLIANCES -- 0.2%
Select Comfort Corp.* 28,000 $ 693,280
--------------
GAMING & LODGING -- 0.5%
Prime Hospitality Corp.* 136,000 $ 1,387,200
--------------
GENERAL MERCHANDISE -- 0.3%
Big Lots, Inc.* 50,500 $ 717,605
Freds, Inc. 4,900 151,802
--------------
$ 869,407
--------------
HOME CONSTRUCTION -- 0.1%
Florida Rock Industries, Inc. 4,000 $ 219,400
--------------
INSURANCE -- 0.3%
American Equity Investment Life^ 85,500 $ 852,435
--------------
INTERNET -- 2.0%
Digital River, Inc.* 89,390 $ 1,975,519
Earthlink, Inc.*^ 210,200 2,102,000
eCollege.com, Inc.*^ 30,400 561,184
GSI Commerce, Inc.*^ 28,600 279,164
Kintera, Inc.* 4,300 53,320
Portal Software, Inc.* 128,060 861,844
--------------
$ 5,833,031
--------------
LEISURE & TOYS -- 0.6%
Leapfrog Enterprises, Inc.*^ 38,600 $ 1,024,058
WMS Industries, Inc.*^ 29,500 772,900
--------------
$ 1,796,958
--------------
MACHINERY & TOOLS -- 0.4%
Cognex Corp. 37,000 $ 1,044,880
NN, Inc. 14,500 182,555
--------------
$ 1,227,435
--------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES -- 4.4%
Apria Healthcare Group, Inc.*^ 69,915 $ 1,990,480
Caremark Rx, Inc.* 126,000 3,191,580
Fisher Scientific International, Inc.* 19,000 786,030
LCA-Vision, Inc.* 37,300 789,641
Odyssey Healthcare, Inc.* 43,600 1,275,736
Option Care, Inc.* 54,500 582,060
Select Medical Corp.* 46,000 748,880
The Advisory Board Co.* 59,700 2,084,127
VCA Antech, Inc.*^ 41,300 1,279,474
--------------
$ 12,728,008
--------------
MEDICAL EQUIPMENT -- 5.8%
Aspect Medical Systems, Inc.* 31,600 $ 360,556
Conceptus, Inc.*^ 82,400 875,088
CTI Molecular Imaging, Inc*^ 107,900 1,824,589
Cyberonics, Inc.*^ 73,900 2,365,539
Cytyc Corp.* 117,700 1,619,552
Dade Behring Holdings, Inc.* 28,300 1,011,442
Fischer Imaging Corp.* 25,200 112,140
Hologic, Inc.*^ 42,000 727,860
IDEXX Laboratories, Inc.*^ 33,643 1,556,998
Integra Lifesciences Corp.* 5,100 146,013
Molecular Devices Corp.*^ 12,100 229,779
Nektar Therapeutics*^ 136,520 1,858,037
Orasure Technologies, Inc.*^ 46,700 371,732
STAAR Surgical Co.*^ 97,800 1,101,228
</Table>
28
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
MEDICAL EQUIPMENT -- continued
Therasense, Inc.* 38,000 $ 771,400
Thoratec Corp.*^ 88,500 1,151,385
Viasys Healthcare, Inc.* 35,780 737,068
--------------
$ 16,820,406
--------------
OIL SERVICES -- 1.0%
National-Oilwell, Inc.* 19,000 $ 424,840
Pride International, Inc.* 64,500 1,202,280
Rowan Cos., Inc.* 52,800 1,223,376
--------------
$ 2,850,496
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.5%
Avid Technology, Inc.*^ 46,500 $ 2,232,000
Dot Hill Systems Corp.* 92,800 1,405,920
Ingram Micro, Inc., "A"* 36,300 577,170
Sigma Designs, Inc.*^ 19,600 147,588
--------------
$ 4,362,678
--------------
PHARMACEUTICALS -- 2.7%
Atherogenics, Inc.*^ 25,000 $ 373,750
Bradley Pharmaceuticals, Inc.*^ 25,640 652,025
Connetics Corp.* 49,000 889,840
Inspire Phamaceutical, Inc.* 97,600 1,382,016
Medicis Pharmaceutical Corp., "A"^ 32,000 2,281,600
Pharmaceutical Product Development, Inc.* 27,000 728,190
United Therapeutics Corp.*^ 65,500 1,503,225
--------------
$ 7,810,646
--------------
PRINTING & PUBLISHING -- 1.1%
A.H. Belo Corp. 24,500 $ 694,330
Bowne & Co., Inc. 19,000 257,640
McClatchy Co., "A" 23,000 1,582,400
Playboy Enterprises, Inc., "B"* 46,000 743,360
--------------
$ 3,277,730
--------------
REAL ESTATE -- 0.1%
American Financial Realty Trust* 27,700 $ 472,285
--------------
RESTAURANTS -- 0.7%
Buffalo Wild Wings, Inc.* 19,050 $ 494,348
The Cheesecake Factory* 37,000 1,629,110
--------------
$ 2,123,458
--------------
SPECIAL PRODUCTS & SERVICES -- 0.1%
Ceradyne, Inc.*^ 8,690 $ 295,981
--------------
SPECIALTY CHEMICALS -- 0.7%
Delta & Pine Land Co. 52,225 $ 1,326,515
Georgia Gulf Corp. 21,200 612,256
--------------
$ 1,938,771
--------------
SPECIALTY STORES -- 6.3%
1-800-Flowers.com* 54,600 $ 603,876
A.C. Moore Arts & Crafts, Inc.* 42,600 820,476
Charming Shoppes, Inc.*^ 225,000 1,215,000
Chico's FAS, Inc.* 29,800 1,101,110
Christopher & Banks Corp. 15,300 298,809
Hot Topic, Inc.* 23,700 698,202
O'Reilly Automotive, Inc.*^ 27,500 1,054,900
Pacific Sunwear of California* 56,500 1,193,280
PETCO Animal Supplies, Inc.* 76,195 2,320,138
PETsMART, Inc. 129,600 3,084,480
Pier 1 Imports, Inc. 47,000 1,027,420
Regis Corp. 66,500 2,628,080
Restoration Hardware, Inc.* 58,800 279,300
Too, Inc.*^ 50,200 847,376
Tuesday Morning Corp.* 44,800 1,355,200
--------------
$ 18,527,647
--------------
TELECOMMUNICATIONS -- WIRELINE -- 5.2%
ADTRAN, Inc. 101,400 $ 3,143,400
Advanced Fibre Communications, Inc.* 29,000 584,350
Andrew Corp.* 268,500 3,090,435
Corvis Corp.* 677,400 1,151,580
F5 Networks, Inc.* 110,500 $ 2,773,550
Finisar Corp.*^ 192,700 603,151
Harmonic, Inc.*^ 110,200 798,950
McDATA Corp., "A"*^ 34,000 324,020
McDATA Corp., "B"*^ 68,000 648,040
Openwave Systems, Inc.*^ 32,766 360,426
Powerwave Technologies, Inc.*^ 10,500 80,325
Sonus Networks, Inc.*^ 169,500 1,281,420
Tekelec Co.* 22,700 352,985
--------------
$ 15,192,632
--------------
TRUCKING -- 2.8%
C.H. Robinson Worldwide, Inc. 10,745 $ 407,343
Central Freight Lines, Inc.* 6,660 118,215
Forward Air Corp.* 16,000 440,000
Heartland Express, Inc. 64,667 1,564,295
J.B. Hunt Transport Services, Inc.* 38,000 1,026,380
Knight Transportation, Inc.* 59,200 1,518,480
Overnite Corp.* 29,000 659,750
Quality Distribution, Inc.* 47,050 919,828
Werner Enterprises, Inc. 72,950 1,421,795
--------------
$ 8,076,086
--------------
Total U.S. Stocks $ 269,560,557
--------------
FOREIGN STOCKS -- 5.1%
AUSTRALIA -- 0.2%
Billabong International Ltd.
(Apparel Manufacturers)^ 129,200 $ 693,615
--------------
BERMUDA -- 0.4%
W.P. Stewart & Co., Ltd.
(Brokerage & Asset Managers)^ 11,900 $ 256,207
XOMA Ltd. (Biotechnology)*^ 129,300 853,380
--------------
$ 1,109,587
--------------
CANADA -- 3.0%
ATI Technologies, Inc.
(Personal Computers & Peripherals)* 57,100 $ 863,352
Cognos, Inc. (Computer Software)* 44,400 1,359,528
GSI Lumonics, Inc. (Electronics)* 38,300 450,791
Neurochem, Inc. (Biotechnology)* 12,800 301,964
Open Text Corp. (Computer Software)*^ 186,200 3,569,454
Vasogen, Inc. (Biotechnology)* 41,000 307,090
Zarlink Semiconductor, Inc.
(Electronics)* 567,705 1,918,843
--------------
$ 8,771,022
--------------
CAYMAN ISLANDS -- 0.3%
02Micro International Ltd. (Electronics)*^ 34,100 $ 763,840
--------------
ISRAEL -- 0.5%
AudioCodes Ltd. (Telecommunications -- Wireline)* 15,500 $ 161,820
Orbotech Ltd. (Electronics)* 18,000 430,560
Radware Ltd. (Telecommunications -- Wireline)* 15,300 416,925
Verisity Ltd. (Computer Software)*^ 23,400 298,350
--------------
$ 1,307,655
--------------
LUXEMBOURG -- 0.2%
UTI Worldwide, Inc. (Trucking) 17,300 $ 656,189
--------------
NETHERLANDS -- 0.1%
ASM International N.V. (Electronics)*^ 20,000 $ 404,800
--------------
SWITZERLAND -- 0.4%
Mettler-Toledo International, Inc.
(Electrical Equipment)* 24,590 $ 1,037,944
--------------
Total Foreign Stocks $ 14,744,652
--------------
Total Stocks
(Identified Cost, $234,798,438) $ 284,305,209
--------------
</Table>
29
<Page>
PREFERRED STOCK -- 0.8%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 0.8%
INTERNET -- 0.8%
eCollege.com, Inc.*
(Identified Cost, $1,246,350) 118,700 $ 2,191,202
--------------
REPURCHASE AGREEMENT -- 1.7%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch, dated 12/31/03,
due 01/02/04, total to be received
$5,019,265 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 5,019 $ 5,019,000
--------------
COLLATERAL FOR SECURITIES LOANED -- 20.6%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 60,130,997 $ 60,130,997
--------------
Total Investments
(Identified Cost, $301,194,785 ) $ 351,646,408
--------------
OTHER ASSETS,
LESS LIABILITIES -- (20.7)% (60,319,276)
--------------
Net Assets -- 100.0% $ 291,327,132
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2003
RESEARCH GROWTH AND INCOME SERIES
STOCKS -- 96.7%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 88.0%
AEROSPACE -- 1.9%
Alliant Techsystems, Inc.* 2,720 $ 157,107
Lockheed Martin Corp. 16,320 838,848
Northrop Grumman Corp. 6,950 664,420
--------------
$ 1,660,375
--------------
ALCOHOLIC BEVERAGES -- 0.7%
Anheuser-Busch Cos., Inc. 11,660 $ 614,249
--------------
APPAREL MANUFACTURERS -- 0.3%
Reebok International Ltd. 7,320 $ 287,822
--------------
AUTOMOTIVE -- 0.4%
Harley-Davidson, Inc. 7,700 $ 365,981
--------------
BANKS & CREDIT COMPANIES -- 13.0%
American Express Co. 16,420 $ 791,937
Bank of America Corp. 18,420 1,481,521
Bank One Corp. 20,920 953,743
Banknorth Group, Inc. 10,100 328,553
Citigroup, Inc. 51,562 2,502,819
Federal Home Loan Mortgage Corp. 14,300 833,976
Federal National Mortgage Assn. 5,400 405,324
First Tennessee National Corp. 10,300 454,230
FleetBoston Financial Corp. 31,450 1,372,792
Golden West Financial Corp. 4,640 478,802
MBNA Corp. 14,410 358,088
Mellon Financial Corp. 16,570 532,063
SunTrust Banks, Inc. 14,430 1,031,745
--------------
$ 11,525,593
--------------
BIOTECHNOLOGY -- 1.1%
Genzyme Corp.* 10,900 $ 537,806
Gilead Sciences, Inc.* 7,300 424,422
--------------
$ 962,228
--------------
BROADCAST & CABLE TV -- 3.4%
Clear Channel Communications, Inc. 19,320 $ 904,756
Comcast Corp., "A"* 13,900 456,893
Cumulus Media, Inc., "A"* 6,800 149,600
EchoStar Communications Corp.* 26,250 892,500
Fox Entertainment Group, Inc.* 6,200 180,730
LodgeNet Entertainment Corp.* 5,300 96,884
Time Warner, Inc. 17,200 309,428
--------------
$ 2,990,791
--------------
BROKERAGE & ASSET MANAGERS -- 2.2%
Friedman, Billings, Ramsey Group, Inc., "A" 12,800 $ 295,424
Goldman Sachs Group, Inc. 5,970 589,418
Janus Capital Group, Inc. 23,900 392,199
Merrill Lynch & Co., Inc. 12,350 724,328
--------------
$ 2,001,369
--------------
BUSINESS SERVICES -- 1.0%
DST Systems, Inc.* 3,670 $ 153,259
Fiserv, Inc.* 8,500 335,835
Getty Images, Inc.* 2,500 125,325
SunGard Data Systems, Inc. 8,630 239,137
--------------
$ 853,556
--------------
CHEMICALS -- 1.5%
Air Products & Chemicals, Inc. 4,140 $ 218,716
Dow Chemical Co. 5,480 227,804
Lyondell Chemical Co. 52,200 884,790
--------------
$ 1,331,310
--------------
COMPUTER SOFTWARE -- 4.4%
Akamai Technologies, Inc.*^ 19,100 $ 205,325
Manhattan Associates, Inc.* 15,200 420,128
Microsoft Corp. 92,230 2,540,014
Network Associates, Inc.* 48,740 733,050
--------------
$ 3,898,517
--------------
</Table>
30
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
COMPUTER SOFTWARE -- SYSTEMS -- 3.0%
Hewlett-Packard Co. 51,000 $ 1,171,470
IBM Corp. 16,570 1,535,708
--------------
$ 2,707,178
--------------
CONSUMER GOODS & SERVICES -- 2.6%
Colgate-Palmolive Co. 18,600 $ 930,930
Newell Rubbermaid, Inc. 29,100 662,607
Procter & Gamble Co. 6,870 686,176
--------------
$ 2,279,713
--------------
CONSUMER SERVICES -- 0.6%
Career Education Corp.* 6,160 $ 246,831
Corinthian Colleges, Inc.* 4,400 244,464
--------------
$ 491,295
--------------
CONTAINERS -- 0.7%
Smurfit-Stone Container Corp. 34,030 $ 631,937
--------------
ELECTRICAL EQUIPMENT -- 4.4%
American Standard Cos., Inc.* 470 $ 47,329
Black & Decker Corp. 4,400 217,008
Emerson Electric Co. 2,450 158,638
General Electric Co. 90,190 2,794,086
Tyco International Ltd. 26,020 689,530
--------------
$ 3,906,591
--------------
ELECTRONICS -- 2.6%
Analog Devices, Inc. 21,940 $ 1,001,561
Intel Corp. 28,400 914,480
Novellus Systems, Inc.* 6,170 259,448
Vishay Intertechnology, Inc. 5,500 125,950
--------------
$ 2,301,439
--------------
ENERGY -- INDEPENDENT -- 0.7%
Unocal Corp. 17,300 $ 637,159
--------------
ENERGY -- INTEGRATED -- 1.6%
Amerada Hess Corp. 5,300 $ 281,801
Exxon Mobil Corp. 27,546 1,129,386
--------------
$ 1,411,187
--------------
FOOD & DRUG STORES -- 0.9%
CVS Corp. 14,100 $ 509,292
Rite Aid Corp.* 45,800 276,632
--------------
$ 785,924
--------------
FOOD & NON ALCOHOLIC BEVERAGES -- 2.0%
General Mills, Inc. 4,800 $ 217,440
PepsiCo, Inc. 33,757 1,573,751
--------------
$ 1,791,191
--------------
FURNITURE & APPLIANCES -- 0.2%
Furniture Brands International, Inc. 6,600 $ 193,578
--------------
GAMING & LODGING -- 0.6%
Carnival Corp. 5,900 $ 234,407
Hilton Hotels Corp. 16,500 282,645
--------------
$ 517,052
--------------
GENERAL MERCHANDISE -- 2.8%
Kohl's Corp.* 23,000 $ 1,033,620
Sears, Roebuck & Co. 12,760 580,452
Target Corp. 21,700 833,280
--------------
$ 2,447,352
--------------
HOME CONSTRUCTION -- 0.3%
Masco Corp. 11,240 $ 308,088
--------------
INSURANCE -- 3.2%
American International Group, Inc. 26,500 $ 1,756,420
Chubb Corp. 3,700 251,970
MetLife, Inc. 12,380 416,835
UnumProvident Corp. 26,830 423,109
--------------
$ 2,848,334
--------------
INTERNET -- 0.5%
Digital River, Inc.* 19,800 $ 437,580
--------------
LEISURE & TOYS -- 0.2%
Hasbro, Inc. 7,400 $ 157,472
--------------
MACHINERY & TOOLS -- 0.7%
AGCO Corp.* 6,570 $ 132,320
Deere & Co. 2,410 156,770
Eaton Corp. 1,000 107,980
Illinois Tool Works, Inc. 2,800 234,948
--------------
$ 632,018
--------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES -- 0.9%
Lincare Holdings, Inc.* 1,900 $ 57,057
Tenet Healthcare Corp. 49,100 788,055
--------------
$ 845,112
--------------
MEDICAL EQUIPMENT -- 2.6%
AmerisourceBergen Corp. 9,300 $ 522,195
Aspect Medical Systems, Inc.* 12,800 146,048
CTI Molecular Imaging, Inc.* 52,700 891,157
Cyberonics, Inc.* 22,400 717,024
Millipore Corp.* 1,250 53,812
--------------
$ 2,330,236
--------------
NATURAL GAS -- DISTRIBUTION -- 0.4%
Southern Union Co. 18,700 $ 344,080
--------------
OIL SERVICES -- 0.5%
GlobalSantaFe Corp. 10,732 $ 266,475
Smith International, Inc. 5,340 221,717
--------------
$ 488,192
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.0%
Dell, Inc.* 23,080 $ 783,797
Solectron Corp. 15,350 90,718
--------------
$ 874,515
--------------
PHARMACEUTICALS -- 8.1%
Abbott Laboratories, Inc. 18,460 $ 860,236
Johnson & Johnson Co. 57,500 2,970,450
Pharmaceutical Product Development, Inc.* 5,400 145,638
Schering-Plough Corp. 78,930 1,372,593
Wyeth 42,900 1,821,105
--------------
$ 7,170,022
--------------
POLLUTION CONTROL -- 0.2%
Waste Management, Inc. 5,730 $ 169,608
--------------
PRINTING & PUBLISHING -- 0.6%
Lamar Advertising Co., "A"* 2,660 $ 99,271
New York Times Co. 9,770 466,908
--------------
$ 566,179
--------------
RAILROAD & SHIPPING -- 0.4%
Union Pacific Corp. 5,610 $ 389,783
--------------
REAL ESTATE -- 0.4%
American Financial Realty Trust 10,550 $ 179,878
CBL & Associates Properties, Inc. 2,900 163,850
--------------
$ 343,728
--------------
RESTAURANTS -- 0.5%
McDonald's Corp. 14,110 $ 350,351
Outback Steakhouse, Inc. 2,310 102,125
--------------
$ 452,476
--------------
SPECIALTY CHEMICALS -- 0.6%
Georgia Gulf Corp. 19,270 $ 556,518
--------------
SPECIALTY STORES -- 3.0%
Home Depot, Inc. 39,250 $ 1,392,983
Hot Topic, Inc.* 22,070 650,182
Pacific Sunwear of California, Inc.* 10,100 213,312
TJX Cos., Inc. 20,300 447,615
--------------
$ 2,704,092
--------------
</Table>
31
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
TELECOMMUNICATIONS -- WIRELESS -- 0.4%
SpectraSite, Inc. 10,590 $ 368,003
--------------
TELECOMMUNICATIONS -- WIRELINE -- 2.2%
ADTRAN, Inc. 14,360 $ 445,160
Andrew Corp.* 28,300 325,733
Cisco Systems, Inc.* 42,870 1,041,312
Scientific-Atlanta, Inc. 4,850 132,405
--------------
$ 1,944,610
--------------
TELEPHONE SERVICES -- 1.2%
Cincinnati Bell, Inc.* 67,600 $ 341,380
Verizon Communications, Inc. 21,720 761,938
--------------
$ 1,103,318
--------------
TOBACCO -- 2.3%
Altria Group, Inc. 32,880 $ 1,789,330
Loews Corp. -- Carolina Group 9,500 239,780
--------------
$ 2,029,110
--------------
TRUCKING -- 1.2%
United Parcel Service, Inc., "B" 9,110 $ 679,150
Werner Enterprises, Inc. 20,350 396,622
--------------
$ 1,075,772
--------------
UTILITIES -- ELECTRIC POWER -- 2.4%
Dominion Resources, Inc. 7,480 $ 477,448
PG&E Corp.* 21,940 609,274
PPL Corp. 12,800 560,000
Public Service Enterprise Group, Inc. 11,510 504,138
--------------
$ 2,150,860
--------------
WIRELESS COMMUNICATIONS -- 1.6%
AT&T Wireless Services, Inc.* 71,800 $ 573,682
Sprint Corp. (PCS Group) 145,860 819,733
--------------
$ 1,393,415
--------------
Total U.S. Stocks $ 78,276,508
--------------
FOREIGN STOCKS -- 8.7%
BERMUDA -- 2.4%
Accenture Ltd. (Business Services)* 16,160 $ 425,331
Ace Ltd. (Insurance) 24,390 1,010,234
Ingersoll-Rand Co. (Machinery & Tools) 3,200 217,216
Marvell Technology Group Ltd.
(Electronics)* 3,600 136,548
XL Capital Ltd., "A" (Insurance) 4,230 328,036
--------------
$ 2,117,365
--------------
CANADA -- 2.6%
ATI Technologies, Inc.
(Personal Computers & Peripherals)* 28,800 $ 435,456
EnCana Corp. (Energy -- Independent)^ 16,900 666,925
Intrawest Corp. (Gaming & Lodging) 6,200 114,638
Magna International, Inc., "A" (Automotive) 4,800 384,240
Talisman Energy, Inc.
(Energy -- Independent)^ 12,900 733,863
--------------
$ 2,335,122
--------------
GRAND CAYMAN ISLANDS -- 0.3%
Transocean, Inc. (Oil Services)* 11,600 $ 278,516
--------------
HONG KONG -- 0.1%
Radica Games Ltd. (Gaming & Lodging)* 7,100 $ 52,519
--------------
NETHERLANDS -- 1.4%
ASML Holding NV (Electronics)* 21,760 $ 436,288
STMicroelectronics NV, ADR (Electronics) 30,820 832,448
--------------
$ 1,268,736
--------------
SINGAPORE -- 0.1%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 7,720 $ 114,565
--------------
UNITED KINGDOM -- 1.8%
BHP Billiton PLC (Metals & Mining) 64,180 $ 559,075
BP PLC (Energy -- Integrated)* 126,200 $ 1,020,489
--------------
$ 1,579,564
--------------
Total Foreign Stocks $ 7,746,387
--------------
Total Stocks (Identified Cost, $75,909,694) $ 86,022,895
--------------
REPURCHASE AGREEMENT -- 3.1%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch Repurchase Agreement,
dated 12/31/03, due 1/2/04, total to be
received $2,785,147 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 2,785 $ 2,785,000
--------------
COLLATERAL FOR SECURITIES LOANED -- 1.7%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 1,534,119 $ 1,534,119
--------------
Total Investments
(Identified Cost, $80,228,813 ) $ 90,342,014
--------------
OTHER ASSETS,
LESS LIABILITIES -- (1.5)% (1,363,191)
--------------
Net Assets -- 100.0% $ 88,978,823
==============
</Table>
See portfolio footnotes and notes to financial statements.
32
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
RESEARCH INTERNATIONAL SERIES
STOCKS -- 97.0%
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- 96.1%
AUSTRALIA -- 1.4%
APN News & Media Ltd.
(Printing & Publishing)* 42,788 $ 128,869
Australia & New Zealand Banking Group
Ltd. (Banks & Credit Companies)* 76,510 1,018,513
John Fairfax Holdings Ltd.
(Printing & Publishing) 102,660 272,089
--------------
$ 1,419,471
--------------
AUSTRIA -- 0.8%
Erste Bank der oesterreichischen
Sparkassen AG (Banks &
Credit Companies) 6,370 $ 786,296
--------------
BELGIUM -- 1.0%
Fortis (Banks & Credit Companies) 50,620 $ 1,018,546
--------------
BRAZIL -- 1.7%
Aracruz Celulose S.A., ADR
(Forest & Paper Products) 25,800 $ 904,032
Companhia Vale Do Rio Doce, ADR
(Metals & Mining) 13,600 795,600
--------------
$ 1,699,632
--------------
CANADA -- 2.5%
EnCana Corp. (Energy -- Independent)^ 18,810 $ 742,299
Molson, Inc. (Alcoholic Beverages) 34,040 950,860
Talisman Energy, Inc.
(Energy -- Independent)^ 14,970 851,623
--------------
$ 2,544,782
--------------
CHINA -- 1.2%
China Life Insurance Co., Ltd. (Insurance)* 500,000 $ 408,952
Huaneng Power International, Inc.
(Utilities -- Electric Power) 492,000 852,346
--------------
$ 1,261,298
--------------
DENMARK -- 1.2%
Danske Bank (Banks & Credit Companies) 52,610 $ 1,232,866
--------------
FRANCE -- 9.2%
AXA (Insurance) 54,500 $ 1,165,284
BNP Paribas S.A.
(Banks & Credit Companies) 16,500 1,037,796
Cap Gemini S.A.
(Computer Software -- Systems)^ 9,600 425,884
Credit Agricole S.A.
(Banks & Credit Companies) 51,027 1,217,038
France Telecom S.A. (Telephone Services) 70,670 2,017,662
Sanofi-Synthelabo S.A. (Pharmaceuticals) 19,870 1,494,602
Suez S.A. (Utilities -- Electric Power)^ 46,800 939,323
Total S.A., "B" (Energy -- Independent) 5,545 1,029,799
--------------
$ 9,327,388
--------------
GERMANY -- 4.5%
Bayerische Motoren Werke AG
(Automotive) 29,480 $ 1,365,018
Hypo Real Estate Holding AG (Real Estate)* 27,000 673,229
Linde AG (Specialty Chemicals)^ 13,710 737,596
Porsche AG, Preferred (Automotive) 2,338 1,386,041
Stada Arzneimittel AG (Pharmaceuticals)^ 5,849 362,430
--------------
$ 4,524,314
--------------
HONG KONG -- 0.5%
CNOOC Ltd. (Energy -- Independent) 246,500 $ 484,189
--------------
HUNGARY -- 0.7%
OTP Bank Rt., GDR
(Banks & Credit Companies)* 25,400 $ 666,750
--------------
INDIA -- 1.1%
Bajaj Auto Ltd. (Automotive) 16,744 $ 418,545
Bharti Tele Venture (Telephone Services) 181,800 419,938
HDFC Bank Ltd.
(Banks & Credit Companies) 37,300 300,572
--------------
$ 1,139,055
--------------
IRELAND -- 1.0%
Anglo Irish Bank Corp., PLC
(Banks & Credit Companies)* 41,877 $ 663,230
Depfa Bank PLC (Banks & Credit Companies) 3,000 378,363
--------------
$ 1,041,593
--------------
ITALY -- 0.8%
Mediaset S.p.A. (Broadcast & Cable TV) 31,000 $ 367,931
Riunione Adriatica di Sicurta S.p.A.
(Insurance) 26,700 454,149
--------------
$ 822,080
--------------
JAPAN -- 20.5%
Aeon Credit Service Co., Ltd.
(Banks & Credit Companies) 9,300 $ 396,705
Alps Electric Co. (Electronics)^ 37,000 541,522
Bridgestone Corp. (Automotive)^ 52,000 699,417
Brother Industries Ltd. (Electronics) 111,000 1,018,463
Canon, Inc.
(Personal Computers & Peripherals) 20,000 931,535
Chiba Bank Ltd. (Banks & Credit Companies) 113,000 463,033
Chugai Pharmaceutical Co., Ltd.
(Pharmaceuticals)^ 79,100 1,137,752
Citizen Electronic Co., Ltd. (Electronics) 8,700 791,758
Credit Saison Co., Ltd.
(Banks & Credit Companies) 21,700 490,167
Fujikura Ltd. (Electrical Equipment)^ 164,000 967,452
Heiwa Corp. (Leisure & Toys)^ 13,200 191,590
Honda Motor Co., Ltd. (Automotive) 35,300 1,568,376
Hunet, Inc. (Real Estate) 47,000 100,462
Ibiden Co. (Electronics)^ 18,200 229,337
Impact 21 Co., Ltd.
(Consumer Goods & Services) 7,200 138,106
KDDI Corp. (Telephone Services)^ 175 1,002,940
Kibun Food Chemifa Co., Ltd.
(Food & Non Alchoholic Beverages) 21,000 271,676
Konica Minolta Holdings, Inc. (Electronics) 40,500 544,738
Lawson, Inc. (Specialty Stores) 13,400 457,778
Nippon Electric Glass Co., Ltd. (Electronics)^ 36,000 700,611
Nishimatsuya Chain Co., Ltd.
(Specialty Stores)^ 11,800 305,643
Pentax Corp. (Furniture & Appliances) 70,000 423,391
Round One Corp. (Entertainment) 265 613,432
Seiko Epson Corp. (Electronics) 16,900 788,725
Sekisui Chemical Co., Ltd.
(Home Construction) 110,000 560,601
Stanley Electric Co., Ltd. (Electronics) 52,400 1,014,888
Sumitomo Bakelite Co., Ltd.
(Specialty Chemicals) 76,000 495,860
Tamron Co., Ltd. (Leisure & Toys) 13,000 655,248
Tokyo Broadcasting System, Inc.
(Broadcast & Cable TV) 43,500 693,093
Tokyo Gas Co., Ltd.
(Natural Gas -- Distribution) 463,000 1,650,870
Uni-Charm Corp.
(Consumer Goods & Services) 8,500 418,117
Yamaha Corp. (Leisure & Toys) 26,800 526,569
--------------
$ 20,789,855
--------------
LUXEMBOURG -- 0.4%
Tenaris S.A., ADR (Oil Services) 11,400 $ 379,848
--------------
MEXICO -- 1.0%
America Movil S.A. de C.V., ADR
(Wireless Communications) 18,500 $ 505,790
Apasco S.A. (Home Construction) 28,600 235,682
Telefonos de Mexico S.A., ADR
(Telephone Services) 9,400 310,482
--------------
$ 1,051,954
--------------
</Table>
33
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
NETHERLANDS -- 2.7%
ABN AMRO Bank N.V.
(Brokerage & Asset Managers) 29,900 $ 698,825
IHC Caland N.V. (Oil Services)* 8,000 433,423
Koninklijke KPN N.V. (Telephone Services) 96,640 745,181
VNU N.V. (Printing & Publishing)* 26,298 830,011
--------------
$ 2,707,440
--------------
NORWAY -- 0.5%
Den norske Bank ASA
(Banks & Credit Companies) 82,040 $ 546,441
--------------
RUSSIA -- 0.2%
YUKOS Corp., ADR
(Energy -- Independent)^ 5,700 $ 239,400
--------------
SINGAPORE -- 1.6%
MobileOne Asia Ltd.
(Wireless -- Communications) 270,000 $ 238,474
Singapore Telecommunications Ltd.
(Telephone Services) 317,000 365,848
The Development Bank of Singapore Ltd.
(Banks & Credit Companies) 63,000 545,310
United Overseas Bank Ltd.
(Banks & Credit Companies) 57,000 443,031
--------------
$ 1,592,663
--------------
SOUTH AFRICA -- 0.4%
Impala Platinum Holdings Ltd.
(Precious Metals) 4,870 $ 422,206
--------------
SOUTH KOREA -- 2.8%
Hanaro Telecom, Inc.
(Telephone Services) 234,180 $ 641,710
Hyundai Motor Co., Ltd. (Automotive) 23,050 976,941
KT & G Corp., GDR (Tobacco)## 56,530 496,334
Samsung Electronics Co., Ltd.
(Electronics) 1,890 715,392
--------------
$ 2,830,377
--------------
SPAIN -- 2.3%
Altadis S.A. (Tobacco) 20,270 $ 574,632
Telefonica S.A. (Telephone Services) 117,902 1,729,130
--------------
$ 2,303,762
--------------
SWEDEN -- 2.9%
Alfa Laval AB (Machinery & Tools) 49,510 $ 753,718
Atlas Copco AB (Machinery & Tools) 20,000 715,994
Hennes & Mauritz AB (Specialty Stores) 43,520 1,034,635
Swedish Match AB (Tobacco)* 44,600 455,747
--------------
$ 2,960,094
--------------
SWITZERLAND -- 9.3%
Credit Suisse Group
(Banks & Credit Companies) 21,900 $ 800,917
Givaudan S.A. (Consumer Goods &
Services) 670 347,644
Nestle S.A.
(Food & Non -- Alcoholic Beverages) 4,110 1,026,420
Novartis AG (Pharmaceuticals) 57,920 2,628,472
Roche Holdings AG (Pharmaceuticals) 14,100 1,421,624
Syngenta AG (Chemicals) 13,082 880,733
Synthes-Stratec (Medical Equipment) 380 375,915
UBS AG (Banks & Credit Companies) 29,362 2,009,991
--------------
$ 9,491,716
--------------
UNITED KINGDOM -- 23.9%
AstraZeneca Group PLC
(Pharmaceuticals) 62,220 $ 2,976,566
Aviva PLC (Insurance)* 117,148 1,025,187
Barclays PLC (Banks &
Credit Companies) 136,800 $ 1,216,702
BG Group PLC (Energy -- Independent) 188,390 964,300
BHP Billiton PLC (Metals & Mining) 79,770 694,880
BP PLC, ADR (Energy -- Integrated) 58,821 2,902,816
British Sky Broadcasting Group PLC
(Broadcast & Cable TV) 59,720 749,421
Burberry Group PLC
(Apparel Manufacturers) 57,200 373,194
Cadbury Schweppes PLC
(Food & Non Alcoholic Beverages)* 134,700 986,431
Diageo PLC (Alcoholic Beverages)* 77,092 1,011,457
EasyJet PLC (Airlines) 100,700 526,681
Johnston Press PLC (Printing & Publishing) 79,164 658,160
Kingfisher PLC (Specialty Stores)* 212,523 1,056,530
Legal & General Group PLC (Insurance)* 498,900 892,788
Next PLC (General Merchandise) 28,042 562,133
Reckitt Benckiser PLC
(Consumer Goods & Services) 43,980 992,323
Reed Elsevier PLC (Printing & Publishing) 116,920 975,189
Royal Bank of Scotland Group PLC
(Banks & Credit Companies)* 76,270 2,240,961
Vodafone Group PLC
(Wireless Communications)* 977,080 2,415,631
William Hill Organization Ltd., PLC
(Gaming & Lodging) 63,500 484,008
Yell Group PLC (Broadcast & Cable TV) 111,440 606,725
--------------
$ 24,312,083
--------------
Total Foreign Stocks $ 97,596,099
--------------
U.S. STOCKS -- 0.9%
BUSINESS SERVICES -- 0.9%
Manpower, Inc., 18,580 $ 874,746
--------------
Total Stocks
(Identified Cost, $80,801,600) $ 98,470,845
--------------
REPURCHASE AGREEMENT -- 2.5%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Merrill Lynch, dated 12/31/03, due
01/02/04, total to be received
$2,583,136 (secured by various
U.S. Treasury obligations
in a jointly traded account),
at Cost $ 2,583 $ 2,583,000
--------------
COLLATERAL FOR SECURITIES LOANED -- 7.1%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 7,171,701 $ 7,171,701
--------------
Total Investments
(Identified Cost, $90,556,301) $ 108,225,546
--------------
OTHER ASSETS,
LESS LIABILITIES -- (6.6)% (6,681,141)
--------------
Net Assets -- 100.0% $ 101,544,405
==============
</Table>
See portfolio footnotes and notes to financial statements.
34
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
STRATEGIC GROWTH SERIES
STOCKS -- 94.7%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 89.9%
AIRLINES -- 0.2%
Southwest Airlines Co. 10,500 $ 169,470
--------------
APPAREL MANUFACTURERS -- 0.9%
Reebok International Ltd. 18,270 $ 718,376
--------------
BANKS & CREDIT COMPANIES -- 6.9%
American Express Co. 26,930 $ 1,298,834
Bank of New York Co., Inc. 17,270 571,982
Citigroup, Inc. 25,470 1,236,314
Federal National Mortgage Assn. 5,900 442,854
MBNA Corp 27,160 674,926
Mellon Financial Corp. 11,200 359,632
Northern Trust Corp. 15,530 720,903
SLM Corp. 2,040 76,867
--------------
$ 5,382,312
--------------
BIOTECHNOLOGY -- 3.2%
Amgen, Inc.* 9,700 $ 599,460
Genzyme Corp.* 12,530 618,230
Gilead Sciences, Inc.* 21,640 1,258,150
--------------
$ 2,475,840
--------------
BROADCAST & CABLE TV -- 6.3%
Clear Channel Communications, Inc. 23,670 $ 1,108,466
Comcast Corp., "A"* 34,200 1,069,776
Cox Communications, Inc.* 9,080 312,806
EchoStar Communications Corp.* 8,920 303,280
Entercom Communications Corp.* 4,720 249,971
Time Warner, Inc.* 24,040 432,480
Univision Communications, Inc., "A"*^ 15,510 615,592
Westwood One, Inc.* 24,030 822,066
--------------
$ 4,914,437
--------------
BROKERAGE & ASSET MANAGERS -- 2.6%
Goldman Sachs Group, Inc. 9,930 $ 980,389
Merrill Lynch & Co., Inc. 18,070 1,059,805
--------------
$ 2,040,194
--------------
BUSINESS SERVICES -- 2.1%
BISYS Group, Inc.* 26,850 $ 399,528
DST Systems, Inc.* 10,450 436,392
Getty Images, Inc.* 5,520 276,718
Monster Worldwide, Inc.* 15,800 346,968
SunGard Data Systems, Inc.* 5,720 158,501
--------------
$ 1,618,107
--------------
COMPUTER SOFTWARE -- 9.9%
Akamai Technologies, Inc.*^ 38,000 $ 408,500
BEA Systems, Inc.* 25,680 315,864
Manhattan Associates, Inc.*^ 4,390 121,340
Mercury Interactive Corp.* 16,430 799,155
Microsoft Corp. 119,130 3,280,840
Network Associates, Inc.* 43,580 655,443
Oracle Corp.* 55,810 736,692
Synopsys, Inc.* 9,490 320,382
VERITAS Software Corp.* 29,109 1,081,691
--------------
$ 7,719,907
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.8%
IBM Corp. 15,480 $ 1,434,686
--------------
CONSUMER GOODS & SERVICES -- 1.0%
Avon Products, Inc. 11,530 $ 778,160
--------------
ELECTRICAL EQUIPMENT -- 5.4%
Cooper Industries, Ltd., "A" 5,400 $ 312,822
Danaher Corp. 3,410 312,868
Emerson Electric Co. 5,880 380,730
General Electric Co. 46,990 1,455,750
Molex, Inc. 13,950 486,715
Tyco International Ltd. 48,620 1,288,430
--------------
$ 4,237,315
--------------
ELECTRONICS -- 7.5%
Amphenol Corp., "A"* 3,100 $ 198,183
Analog Devices, Inc. 26,330 1,201,964
Linear Technology Corp. 14,610 614,643
Maxim Integrated Products, Inc. 12,470 621,006
Microchip Technology, Inc. 18,780 626,501
Novellus Systems, Inc.* 13,830 581,551
PMC-Sierra, Inc.* 21,060 424,359
Texas Instruments, Inc. 24,940 732,737
Xilinx, Inc.* 23,220 899,543
--------------
$ 5,900,487
--------------
ENTERTAINMENT -- 2.3%
Disney (Walt) Co. 570 $ 13,298
Viacom, Inc., "B" 40,043 1,777,108
--------------
$ 1,790,406
--------------
FOOD & DRUG STORES -- 1.5%
CVS Corp. 13,800 $ 498,456
Rite Aid Corp.* 52,110 314,744
Walgreen Co. 10,520 382,718
--------------
$ 1,195,918
--------------
FOOD & NON ALCOHOLIC BEVERAGES -- 0.9%
PepsiCo, Inc. 14,970 $ 697,901
--------------
GAMING & LODGING -- 0.9%
Carnival Corp. 5,350 $ 212,556
Hilton Hotels Corp. 15,670 268,427
Starwood Hotels & Resorts Co. 6,350 228,409
--------------
$ 709,392
--------------
GENERAL MERCHANDISE -- 4.6%
Kohl's Corp.* 23,400 $ 1,051,596
Target Corp. 35,260 1,353,984
Wal-Mart Stores, Inc. 22,470 1,192,034
--------------
$ 3,597,614
--------------
INSURANCE -- 3.8%
American International Group, Inc. 22,595 $ 1,497,597
Hartford Financial Services Group, Inc. 13,210 779,786
Marsh & McLennan Cos., Inc. 8,860 424,305
UnumProvident Corp. 18,150 286,226
--------------
$ 2,987,914
--------------
INTERNET -- 1.2%
InterActive Corp.* 26,570 $ 901,520
--------------
MACHINERY & TOOLS -- 1.1%
Eaton Corp. 1,460 $ 157,651
Illinois Tool Works, Inc. 4,820 404,446
Parker Hannifin Corp. 4,510 268,345
--------------
$ 830,442
--------------
MEDICAL EQUIPMENT -- 2.3%
Applera Corp. 17,240 $ 357,040
Baxter International, Inc. 7,600 231,952
Medtronic, Inc. 12,560 610,542
Thermo Electron Corp.* 23,480 591,696
--------------
$ 1,791,230
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.7%
Avid Technology, Inc.*^ 4,610 $ 221,280
Dell, Inc.* 32,430 1,101,323
--------------
$ 1,322,603
--------------
PHARMACEUTICALS -- 7.0%
Abbott Laboratories, Inc. 16,720 $ 779,152
Johnson & Johnson Co. 27,210 1,405,669
Pfizer, Inc. 47,722 1,686,018
Schering-Plough Corp. 48,230 838,720
Wyeth 17,665 749,879
--------------
$ 5,459,438
--------------
</Table>
35
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
PRINTING & PUBLISHING -- 1.8%
Lamar Advertising Co., "A"* 20,950 $ 781,854
New York Times Co. 13,140 627,961
--------------
$ 1,409,815
--------------
RESTAURANTS -- 1.6%
McDonald's Corp. 22,430 $ 556,937
Outback Steakhouse, Inc. 16,380 724,160
--------------
$ 1,281,097
--------------
SPECIALTY STORES -- 2.7%
Chico's FAS, Inc.* 1,900 $ 70,205
Home Depot, Inc. 8,170 289,953
Hot Topic, Inc.* 8,500 250,410
Pier 1 Imports, Inc. 10,040 219,475
Staples, Inc.* 21,300 581,490
TJX Cos., Inc. 17,240 380,142
Williams-Sonoma, Inc.* 10,290 357,783
--------------
$ 2,149,458
--------------
TELECOMMUNICATIONS -- WIRELINE -- 6.0%
ADTRAN, Inc. 31,320 $ 970,920
Cisco Systems, Inc.* 106,030 2,575,469
Corning, Inc.* 38,200 398,426
Foundry Networks, Inc.* 14,450 395,352
Juniper Networks, Inc.* 12,540 234,247
QUALCOMM, Inc. 2,810 151,543
--------------
$ 4,725,957
--------------
TELEPHONE SERVICES
Winstar Communications, Inc.* 9,820 $ 10
--------------
TRUCKING -- 1.6%
Federal Express Corp. 10,870 $ 733,725
United Parcel Service, Inc., "B" 6,770 504,704
--------------
$ 1,238,429
--------------
WIRELESS COMMUNICATIONS -- 1.1%
AT&T Wireless Services, Inc.* 78,140 $ 624,338
Sprint Corp. (PCS Group)* 47,890 269,142
--------------
$ 893,480
--------------
Total U.S. Stocks $ 70,371,915
--------------
FOREIGN STOCKS -- 4.8%
BERMUDA -- 1.8%
Ace Ltd. (Insurance) 13,740 $ 569,111
Marvell Technology Group Ltd. (Electronics)* 15,360 582,605
XL Capital Ltd., "A" (Insurance) 3,490 270,649
--------------
$ 1,422,365
--------------
CANADA -- 0.7%
Nortel Networks Corp.
(Telecommunications -- Wireline)* 134,080 $ 567,159
--------------
FINLAND -- 0.9%
Nokia Corp., ADR
(Telecommunications -- Wireless) 42,430 $ 721,310
--------------
SINGAPORE -- 0.7%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 34,380 $ 510,199
--------------
UNITED KINGDOM -- 0.7%
Amdocs Ltd. (Computer Software)* 13,500 $ 303,480
Vodafone Group PLC, ADR
(Wireless Communications) 9,859 246,869
--------------
$ 550,349
--------------
Total Foreign Stocks $ 3,771,382
--------------
Total Stocks (Identified Cost, $67,369,702) $ 74,143,297
--------------
<Caption>
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
REPURCHASE AGREEMENT -- 8.3%
Merrill Lynch Repurchase Agreement,
dated 12/31/03, due 1/2/04, total to be
received $6,525,344 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 6,525 $ 6,525,000
--------------
COLLATERAL FOR SECURITIES LOANED -- 0.5%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 402,284 $ 402,284
--------------
Total Investments
(Identified Cost, $74,296,986 ) $ 81,070,581
--------------
OTHER ASSETS,
LESS LIABILITIES -- (3.5)% (2,757,373)
--------------
Net Assets -- 100.0% $ 78,313,208
==============
</Table>
See portfolio footnotes and notes to financial statements.
36
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
STRATEGIC VALUE SERIES
STOCKS -- 96.4%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 91.5%
AEROSPACE -- 1.6%
Lockheed Martin Corp. 2,610 $ 134,154
--------------
BANKS & CREDIT COMPANIES -- 10.0%
Citigroup, Inc. 4,340 $ 210,664
FleetBoston Financial Corp. 2,030 88,610
Freddie Mac 2,845 165,920
J. P. Morgan Chase & Co. 2,540 93,294
Mellon Financial Corp. 6,275 201,490
PNC Financial Services Group Co. 1,030 56,372
--------------
$ 816,350
--------------
BROADCAST & CABLE TV -- 2.8%
Comcast Corp., "A Special"* 7,230 $ 226,154
--------------
BROKERAGE & ASSET MANAGERS -- 2.1%
Merrill Lynch & Co., Inc. 2,955 $ 173,311
--------------
CHEMICALS -- 1.7%
Air Products & Chemicals, Inc. 1,500 $ 79,245
Lyondell Petrochemical Co. 3,690 62,546
--------------
$ 141,791
--------------
COMPUTER SOFTWARE -- 2.8%
Microsoft Corp. 5,970 $ 164,414
Networks Associates, Inc.* 4,410 66,326
--------------
$ 230,740
--------------
CONSUMER GOODS & SERVICES -- 4.2%
Kimberly-Clark Corp. 2,740 $ 161,906
Newell Rubbermaid, Inc. 7,970 181,477
--------------
$ 343,383
--------------
CONTAINERS -- 2.4%
Owens-Illinois, Inc.* 10,530 $ 125,202
Smurfit-Stone Container Corp.* 3,930 72,980
--------------
$ 198,182
--------------
ELECTRICAL EQUIPMENT -- 1.5%
General Electric Co. 3,950 $ 122,371
--------------
ENERGY -- INDEPENDENT -- 1.6%
Devon Energy Corp. 2,305 $ 131,984
--------------
ENERGY -- INTEGRATED -- 1.1%
Occidental Petroleum Corp. 2,180 $ 92,083
--------------
ENTERTAINMENT -- 3.7%
Viacom, Inc., "B" 6,830 $ 303,115
--------------
FOOD & DRUG STORES -- 2.4%
Kroger Co.* 9,520 $ 176,215
Rite Aid Corp.* 3,280 19,811
--------------
$ 196,026
--------------
FOREST & PAPER PRODUCTS -- 1.5%
Boise Cascade Corp. 650 $ 21,359
Bowater, Inc. 2,212 102,438
--------------
$ 123,797
--------------
GAMING & LODGING -- 0.5%
Hilton Hotels Corp. 2,400 $ 41,112
--------------
GENERAL MERCHANDISE -- 2.5%
Sears, Roebuck & Co. 4,560 $ 207,434
--------------
INSURANCE -- 6.4%
Allstate Corp. 4,680 $ 201,334
Hartford Financial Services Group, Inc. 3,035 179,156
Travelers Property Casualty Corp., "A" 8,750 146,825
--------------
$ 527,315
--------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES -- 1.2%
Tenet Healthcare Corp.* 5,850 $ 93,893
--------------
MEDICAL EQUIPMENT -- 1.5%
Baxter International, Inc. 3,910 $ 119,333
--------------
METALS & MINING -- 2.0%
Alcoa, Inc. 4,320 $ 164,160
--------------
OIL SERVICES -- 6.5%
BJ Services Co.* 3,180 $ 114,162
Cooper Cameron Corp.* 2,180 101,588
Noble Corp.* 6,080 217,542
Schlumberger Ltd. 1,880 102,874
--------------
$ 536,166
--------------
PHARMACEUTICALS -- 11.3%
Eli Lilly & Co. 1,065 $ 74,901
Johnson & Johnson Co. 4,250 219,555
Merck & Co., Inc. 4,115 190,113
Pfizer, Inc. 6,205 219,223
Schering-Plough Corp. 12,945 225,114
--------------
$ 928,906
--------------
SPECIALTY STORES -- 1.5%
Home Depot, Inc. 3,430 $ 121,731
--------------
TELEPHONE SERVICES -- 7.8%
AT&T Corp. 11,590 $ 235,277
Verizon Communications, Inc. 11,395 399,737
--------------
$ 635,014
--------------
UTILITIES -- ELECTRIC POWER -- 5.3%
Calpine Corp.* 33,335 $ 160,341
FirstEnergy Corp. 870 30,624
NiSource, Inc. 4,820 105,751
TXU Corp. 5,810 137,813
--------------
$ 434,529
--------------
WIRELESS COMMUNICATIONS -- 5.6%
AT&T Wireless Services, Inc.* 38,519 $ 307,767
Telephone & Data Systems, Inc. 2,475 154,811
--------------
$ 462,578
--------------
Total U.S. Stocks $ 7,505,612
--------------
FOREIGN STOCKS -- 4.9%
BERMUDA -- 2.1%
Tyco International Ltd.
(Electrical Equipment) 6,530 $ 173,045
--------------
CAYMAN ISLANDS -- 2.8%
GlobalSantaFe Corp. (Oil Services) 9,375 $ 232,781
--------------
Total Foreign Stocks $ 405,826
--------------
Total Stocks (Identified Cost, $7,033,439) $ 7,911,438
--------------
SHORT-TERM OBLIGATION -- 2.8%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
New Center Asset Trust, due 1/02/04,
at Amortized Cost $ 229 $ 228,994
--------------
Total Investments
(Identified Cost, $7,262,433 ) $ 8,140,432
--------------
OTHER ASSETS,
LESS LIABILITIES -- 0.8% 65,643
--------------
Net Assets -- 100.0% $ 8,206,075
==============
</Table>
See portfolio footnotes and notes to financial statements.
37
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2003
TECHNOLOGY SERIES
STOCKS -- 97.7%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 75.3%
AEROSPACE -- 0.4%
L-3 Communications Holding, Inc.* 2,610 $ 134,050
--------------
BUSINESS SERVICES -- 9.4%
Alliance Data Systems Corp.* 6,500 $ 179,920
Certegy, Inc. 4,720 154,816
Computer Sciences Corp.* 4,480 198,150
Convergys Corp.* 8,610 150,331
Digitas, Inc.* 39,810 371,029
DST Systems, Inc.* 11,210 468,130
Getty Images, Inc.* 5,420 271,705
Jack Henry & Associates, Inc. 6,290 129,448
Monster Worldwide, Inc.* 19,500 428,220
Perot Systems Corp., "A"* 26,200 353,176
Technology Select Sector SPDR Trust 16,300 332,194
--------------
$ 3,037,119
--------------
COMPUTER SOFTWARE -- 18.2%
Akamai Technologies, Inc.* 29,700 $ 319,275
Ansys, Inc.* 14,720 584,384
Ascential Software Corp.* 4,620 119,797
Citrix Systems, Inc.* 18,010 381,992
Manhattan Associates, Inc.* 10,320 285,245
Microsoft Corp. 46,650 1,284,741
Netscreen Technologies, Inc.* 16,100 398,475
Network Associates, Inc.* 8,100 121,824
Oracle Corp.* 51,180 675,576
Progress Software Corp.* 14,670 300,148
RSA Security, Inc.* 4,600 65,320
Serena Software, Inc.* 32,950 604,632
Sybase, Inc.* 8,070 166,081
VERITAS Software Corp.* 16,340 607,194
--------------
$ 5,914,684
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 6.8%
Anteon International Corp.* 2,500 $ 90,125
Avnet, Inc.* 9,100 197,106
CDW Corp.* 2,100 121,296
Hewlett-Packard Co. 41,600 955,552
IBM Corp. 2,550 236,334
Reynolds & Reynolds Co., "A" 6,000 174,300
Tech Data Corp.* 4,580 181,780
Unisys Corp.* 4,220 62,667
Xerox Corp.* 13,850 191,130
--------------
$ 2,210,290
--------------
ELECTRONICS -- 20%
Agere Systems, Inc., "B"* 224,110 $ 649,919
Amphenol Corp., "A"* 4,450 284,489
Analog Devices, Inc. 14,830 676,989
Applied Films Corp.* 4,600 151,892
Applied Materials, Inc.* 7,100 159,395
Arrow Electronics, Inc.* 10,000 231,400
DSP Group, Inc.* 5,500 137,005
ESS Technology, Inc.* 7,910 134,549
Intel Corp. 50,320 1,620,304
International Rectifier Corp.* 4,540 224,321
Lam Research Corp.* 4,900 158,270
National Semiconductor Corp.* 9,020 355,478
PerkinElmer, Inc. 3,950 67,427
Silicon Laboratories, Inc.* 3,880 167,694
Texas Instruments, Inc. 20,090 590,244
Vishay Intertechnology, Inc.* 27,400 627,460
White Electronic Designs Corp.* 19,160 168,608
Xilinx, Inc.* 2,480 96,075
--------------
$ 2,441,690
--------------
INTERNET -- 2.5%
Digital River, Inc.* 19,100 $ 422,110
Earthlink, Inc.* 40,700 407,000
--------------
$ 829,110
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 6.2%
Avid Technology, Inc.* 2,700 $ 129,600
Dell, Inc.* 16,100 546,756
Ingram Micro, Inc., "A"* 15,150 240,885
Jabil Circuit, Inc.* 4,090 115,747
Maxtor Corp.* 19,990 221,889
Sanmina-SCI Corp.* 18,590 234,420
Solectron Corp.* 65,800 388,878
Western Digital Corp.* 10,880 128,275
--------------
$ 2,006,450
--------------
TELECOMMUNICATIONS -- WIRELINE -- 11.6%
ADTRAN, Inc. 7,460 $ 231,260
Andrew Corp.* 22,100 254,371
Cisco Systems, Inc.* 75,830 1,841,911
F5 Networks, Inc.* 3,900 97,890
Foundry Networks, Inc.* 4,000 109,440
Motorola, Inc. 33,860 476,410
QUALCOMM, Inc. 2,900 156,397
Scientific-Atlanta, Inc. 17,230 470,379
UTStarcom, Inc.* 3,400 126,038
--------------
$ 3,764,096
--------------
TELEPHONE SERVICES -- 0.2%
Cincinnati Bell, Inc.* 13,370 $ 67,518
--------------
Total U.S. Stocks $ 24,464,836
--------------
FOREIGN STOCKS -- 22.4%
BERMUDA -- 2.3%
Accenture Ltd., "A" (Business Services)* 18,600 $ 489,552
Marvell Technology Group Ltd.
(Electronics)* 6,970 264,372
--------------
$ 753,924
--------------
CANADA -- 2.8%
ATI Technologies, Inc.
(Personal Computers & Peripherals)* 35,000 $ 529,200
Nortel Networks Corp.
(Telecommunications -- Wireline)* 21,200 89,676
Open Text Corp. (Computer Software)* 15,280 292,918
--------------
$ 911,794
--------------
FRANCE -- 1.1%
France Telecom SA (Telephone Services)* 12,070 $ 344,604
--------------
GERMANY -- 1.5%
EPCOS AG (Electronics)* 13,900 $ 313,488
SAP AG, ADR (Computer Software) 3,830 159,175
--------------
$ 472,663
--------------
INDIA -- 0.4%
Infosys Technologies Ltd., ADR
(Computer Software -- Systems)* 1,400 $ 133,980
--------------
JAPAN -- 2.8%
Canon, Inc., ADR
(Personal Computers & Peripherals) 7,300 $ 347,772
KDDI Corp. (Telephone Services) 17 97,429
Seiko Epson Corp. (Electronics)* 6,500 303,356
Stanley Electric Co., Ltd. (Electronics) 9,200 178,186
--------------
$ 926,743
--------------
</Table>
38
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
FOREIGN STOCKS -- continued
MEXICO -- 1.0%
America Movil SA, ADR
(Wireless Communications) 7,490 $ 204,777
TV Azteca SA de CV, ADR
(Broadcast & Cable TV)* 13,490 122,759
--------------
$ 327,536
--------------
NETHERLANDS -- 2.3%
KPN NV (Telephone Services)* 13,000 $ 100,241
STMicroelectronics NV, ADR (Electronics) 24,170 652,832
--------------
$ 753,073
--------------
SINGAPORE -- 3.1%
Flextronics International Ltd.
(Personal Computers & Peripherals)* 46,650 $ 692,286
MobileOne Asia Ltd.
(Wireless Communications) 133,000 117,470
Singapore Telecommunications Ltd.
(Telephone Services) 162,000 186,964
--------------
$ 996,720
--------------
SOUTH KOREA -- 1.9%
Samsung Electronics Co., Ltd., GDR
(Electronics) 3,210 $ 603,480
--------------
TAIWAN -- 0.3%
AU Optronics Corp., ADR (Electronics)* 7,700 $ 91,784
--------------
UNITED KINGDOM -- 2.9%
Amdocs Ltd. (Computer Software)* 28,730 $ 645,850
Vodafone Group PLC
(Wireless Communications) 123,200 304,587
--------------
$ 950,437
--------------
Total Foreign Stocks $ 7,266,738
--------------
Total Stocks (Identified Cost, $27,694,152) $ 31,731,574
--------------
CONVERTIBLE BOND -- 0.3%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
COMPUTER SOFTWARE -- SYSTEMS -- 0.3%
Brocade Communications Systems, Inc.,
2s, 2007* (Identified Cost $114,352) $ 115 $ 103,644
--------------
SHORT-TERM OBLIGATION -- 1.4%
New Center Asset Trust, due 1/02/04,
at Amortized Cost $ 438 $ 437,988
--------------
Total Investments
(Identified Cost, $28,246,492 ) $ 32,273,206
--------------
OTHER ASSETS,
LESS LIABILITIES -- 0.6% 196,431
--------------
Net Assets -- 100.0% $ 32,469,637
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2003
VALUE SERIES
STOCKS -- 95.6%
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- 86.1%
AEROSPACE -- 2.3%
Honeywell International, Inc. 19,930 $ 666,260
Lockheed Martin Corp. 43,100 2,215,340
Northrop Grumman Corp. 66,600 6,366,960
--------------
$ 9,248,560
--------------
BANKS & CREDIT COMPANIES -- 18.5%
American Express Co. 87,400 $ 4,215,302
Bank of America Corp. 127,230 10,233,109
Bank One Corp. 82,100 3,742,939
Citigroup, Inc. 256,800 12,465,072
Federal National Mortgage Assn. 106,800 8,016,408
FleetBoston Financial Corp. 250,780 10,946,547
Mellon Financial Corp. 224,300 7,202,273
PNC Financial Services Group Co. 52,900 2,895,217
SouthTrust Corp. 57,740 1,889,830
SunTrust Banks, Inc. 123,300 8,815,950
Wells Fargo Co. 42,000 2,473,380
--------------
$ 72,896,027
--------------
BROADCAST & CABLE TV -- 3.2%
Comcast Corp.* 134,200 $ 4,197,776
Cox Communications, Inc.* 129,200 4,450,940
Time Warner, Inc.* 228,800 4,116,112
--------------
$ 12,764,828
--------------
BROKERAGE & ASSET MANAGERS -- 3.6%
Goldman Sachs Group, Inc. 83,400 $ 8,234,082
Janus Capital Group, Inc.^ 12,000 196,920
Merrill Lynch & Co., Inc. 101,780 5,969,397
--------------
$ 14,400,399
--------------
CHEMICALS -- 4.0%
Air Products & Chemicals, Inc. 88,547 $ 4,677,938
Dow Chemical Co. 94,100 3,911,737
Monsanto Co. 6,700 192,826
PPG Industries, Inc. 90,900 5,819,418
Praxair, Inc. 32,600 1,245,320
--------------
$ 15,847,239
--------------
COMPUTER SOFTWARE -- 0.8%
Microsoft Corp. 111,800 $ 3,078,972
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.5%
Hewlett-Packard Co. 52,800 $ 1,212,816
IBM Corp. 51,000 4,726,680
--------------
$ 5,939,496
--------------
CONSUMER GOODS & SERVICES -- 2.6%
Kimberly-Clark Corp. 137,800 $ 8,142,602
Newell Rubbermaid, Inc. 91,600 2,085,732
--------------
$ 10,228,334
--------------
CONTAINERS -- 0.5%
Smurfit-Stone Container Corp.* 96,000 $ 1,782,720
--------------
ELECTRICAL EQUIPMENT -- 1.3%
Emerson Electric Co. 80,500 $ 5,212,375
--------------
ENERGY -- INDEPENDENT -- 1.7%
Devon Energy Corp. 26,030 $ 1,490,478
Unocal Corp. 142,252 5,239,141
--------------
$ 6,729,619
--------------
ENERGY -- INTEGRATED -- 5.7%
ChevronTexaco Corp. 40,800 $ 3,524,712
ConocoPhillips Co. 112,800 7,396,296
Exxon Mobil Corp. 280,972 11,519,852
--------------
$ 22,440,860
--------------
ENTERTAINMENT -- 1.8%
Viacom, Inc., "B" 157,818 $ 7,003,963
--------------
FOOD & DRUG STORES -- 0.2%
Safeway, Inc.*^ 27,400 $ 600,334
--------------
</Table>
39
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
U.S. STOCKS -- continued
FOOD & NON ALCOHOLIC BEVERAGES -- 5.0%
Archer-Daniels-Midland Co. 371,765 $ 5,658,263
Heinz Co. 105,200 3,832,436
Kellogg Co. 213,700 8,137,696
PepsiCo, Inc. 29,198 1,361,211
Tyson Foods, Inc. 47,900 634,196
--------------
$ 19,623,802
--------------
FOREST & PAPER PRODUCTS -- 1.3%
Bowater, Inc. 36,300 $ 1,681,053
International Paper Co. 76,200 3,284,982
--------------
$ 4,966,035
--------------
GENERAL MERCHANDISE -- 0.5%
Sears, Roebuck & Co. 45,800 $ 2,083,442
--------------
INSURANCE -- 6.1%
Allstate Corp. 111,060 $ 4,777,801
Chubb Corp. 47,780 3,253,818
Hartford Financial Services Group, Inc. 56,040 3,308,041
Marsh & McLennan Cos., Inc. 21,000 1,005,690
MetLife, Inc. 199,280 6,709,758
Travelers Property Casualty Corp. 304,385 5,107,580
--------------
$ 24,162,688
--------------
LEISURE & TOYS -- 0.2%
Hasbro, Inc.^ 38,400 $ 817,152
--------------
MACHINERY & TOOLS -- 0.7%
Deere & Co. 44,510 $ 2,895,376
--------------
MEDICAL EQUIPMENT -- 0.2%
Guidant Corp. 14,100 $ 848,820
--------------
NATURAL GAS -- DISTRIBUTION -- 0.6%
Keyspan Corp.^ 38,400 $ 1,413,120
National Fuel Gas Co. 46,656 1,140,273
--------------
$ 2,553,393
--------------
OIL SERVICES -- 1.9%
Baker Hughes, Inc. 30,500 $ 980,880
Noble Corp.* 85,710 3,066,704
Schlumberger Ltd. 60,300 3,299,616
--------------
$ 7,347,200
--------------
PHARMACEUTICALS -- 5.9%
Johnson & Johnson Co. 177,800 $ 9,185,148
Pfizer, Inc. 240,100 8,482,733
Schering Plough Corp. 332,400 5,780,436
--------------
$ 23,448,317
--------------
PRINTING & PUBLISHING -- 1.4%
Tribune Co. 108,617 $ 5,604,637
--------------
RAILROAD & SHIPPING -- 1.7%
Union Pacific Corp. 93,800 $ 6,517,224
--------------
RESTAURANTS -- 0.3%
McDonald's Corp. 45,800 $ 1,137,214
--------------
TELECOMMUNICATIONS -- WIRELINE -- 0.9%
Motorola, Inc. 248,900 $ 3,502,023
--------------
TELEPHONE SERVICES -- 4.4%
BellSouth Corp. 68,000 $ 1,924,400
SBC Communications, Inc. 327,900 8,548,353
Verizon Communications, Inc. 195,100 6,844,108
--------------
$ 17,316,861
--------------
TOBACCO -- 2.7%
Altria Group, Inc. 193,370 $ 10,523,195
--------------
UTILITIES -- ELECTRIC POWER -- 4.1%
Cinergy Corp. 70,300 $ 2,728,343
Dominion Resources, Inc. 24,800 1,582,984
Energy East Corp. 92,300 2,067,520
Entergy Corp. 17,700 1,011,201
FirstEnergy Corp. 25,740 906,048
FPL Group, Inc. 24,460 $ 1,600,173
NSTAR Co. 36,273 1,759,241
PPL Corp. 40,150 1,756,562
TXU Corp. 115,600 2,742,032
--------------
$ 16,154,104
--------------
WIRELESS COMMUNICATIONS -- 0.5%
AT&T Wireless Services, Inc.* 255,800 $ 2,043,842
--------------
Total U.S. Stocks $ 339,719,051
--------------
FOREIGN STOCKS -- 9.5%
CANADA -- 0.1%
Finning International, Inc. (Macinery & Tools) 16,700 $ 387,666
--------------
FRANCE -- 0.8%
Total S.A., ADR (Energy-Integrated) 35,400 $ 3,274,854
--------------
SWITZERLAND -- 3.4%
Novartis AG (Pharmaceuticals) 104,200 $ 4,728,707
Roche Holding AG (Pharmaceuticals) 42,900 4,325,366
Syngenta AG (Chemicals) 63,220 4,256,224
--------------
$ 13,310,297
--------------
UNITED KINGDOM -- 5.2%
BHP Billiton PLC (Metals & Mining) 296,000 $ 2,578,471
BP PLC, ADR (Energy -- Integrated) 177,500 8,759,625
Diageo PLC (Alcoholic Beverages)* 211,203 2,771,010
Reed Elsevier PLC (Printing & Publishing) 587,900 4,903,469
Rio Tinto PLC (Metals & Mining)* 59,400 1,636,075
--------------
$ 20,648,650
--------------
Total Foreign Stocks $ 37,621,467
--------------
Total Stocks (Identified Cost, $335,678,798) $ 377,340,518
--------------
SHORT-TERM OBLIGATION -- 4.0%
<Caption>
PRINCIPAL AMOUNT
(000 OMITTED)
Old Line Funding Corp., due 1/02/04,
at Amortized Cost $ 15,730 $ 15,729,576
--------------
REPURCHASE AGREEMENT -- 0.2%
Merrill Lynch, dated 12/31/03,
due 1/02/04, total to be received
$518,027 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 518 $ 518,000
--------------
COLLATERAL FOR SECURITIES LOANED -- 0.2%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio 905,519 $ 905,519
--------------
Total Investments
(Identified Cost, $352,831,893) $ 394,493,613
--------------
OTHER ASSETS,
LESS LIABILITIES 104,749
--------------
Net Assets -- 100.0% $ 394,598,362
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO FOOTNOTES:
* Non-income producing security.
^ All or a portion of this security is on loan.
## SEC Rule 144A restriction.
40
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2003
<Table>
<Caption>
CAPITAL INTERNATIONAL MASSACHUSETTS MID NEW
OPPORTUNITIES GROWTH INVESTORS GROWTH CAP VALUE DISCOVERY
SERIES SERIES STOCK SERIES SERIES SERIES
-------------- -------------- ---------------- -------------- --------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 260,645,064 $ 102,523,416 $ 570,448,566 $ 15,637,751 $ 301,194,785
Unrealized appreciation 34,400,015 27,526,428 26,826,653 1,459,897 50,451,623
-------------- -------------- ---------------- -------------- --------------
Total investments, at value (including
securities loaned of $11,462,337,
$6,732,110, $24,734,075, $-, and
$58,493,110, respectively) $ 295,045,079 $ 130,049,844 $ 597,275,219 $ 17,097,648 $ 351,646,408
Cash 671 328 50,085 927 11,446
Foreign currency, at value (identified
cost, $--, $4,575, $--, $--, and $--,
respectively) -- 4,578 -- -- --
Receivable for investments sold 1,396,653 1,305,497 14,132,433 204,081 937,160
Receivable for series shares sold 180,747 97,152 345,822 69,087 176,441
Interest and dividends receivable 378,055 143,492 375,273 13,225 69,882
Receivable from investment adviser -- -- -- 42,289 --
Other assets 1,503 181 7,630 -- 727
-------------- -------------- ---------------- -------------- --------------
Total assets $ 297,002,708 $ 131,601,072 $ 612,186,462 $ 1 7,427,257 $ 352,842,064
============== ============== ================ ============== ==============
Liabilities:
Notes payable $ -- $ 1,139,000 $ -- $ -- $ --
Payable for investments purchased 353,973 -- 8,834,988 1,424,361 1,132,896
Payable for series shares reacquired 82,500 20,884 125,275 7,482 192,841
Collateral for securities loaned, at value 11,742,769 7,075,894 25,329,898 -- 60,130,997*
Payable to affiliates --
Management fee 6,154 3,265 11,821 341 7,398
Distribution fee (Service Class) 104 103 498 184 723
Accrued expenses and other liabilities 71,760 76,714 64,194 17,085 50,077
-------------- -------------- ---------------- -------------- --------------
Total liabilities $ 12,257,260 $ 8,315,860 $ 34,366,674 $ 1,449,453 $ 61,514,932
-------------- -------------- ---------------- -------------- --------------
Net assets $ 284,745,448 $ 123,285,212 $ 577,819,788 $ 15,977,804 $ 291,327,132
============== ============== ================ ============== ==============
Net assets consist of:
Paid-in capital $ 600,538,979 $ 122,495,374 $ 1,037,787,473 $ 14,067,437 $ 342,396,985
Unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 34,400,015 27,533,018 26,827,700 1,459,900 50,451,623
Accumulated undistributed net realized
gain (loss) on investments and foreign
currency transactions (351,468,147) (27,395,746) (487,115,767) 448,647 (101,528,414)
Accumulated undistributed net investment
income 1,274,601 652,566 320,382 1,820 6,938
-------------- -------------- ---------------- -------------- --------------
Total $ 284,745,448 $ 1 23,285,212 $ 577,819,788 $ 15,977,804 $ 291,327,132
============== ============== ================ ============== ==============
Net assets:
Initial Class $ 269,629,509 $ 108,113,655 $ 504,122,506 $ 23,567 $ 220,278,337
Service Class 15,115,939 15,171,557 73,697,282 15,954,237 71,048,795
-------------- -------------- ---------------- -------------- --------------
Total $ 284,745,448 $ 123,285,212 $ 577,819,788 $ 15,977,804 $ 291,327,132
============== ============== ================ ============== ==============
Shares of beneficial interest outstanding:
Initial Class 22,747,937 9,432,037 58,629,365 2,254 17,363,628
Service Class 1,280,045 1,327,699 8,614,916 1,527,531 5,634,891
-------------- -------------- ---------------- -------------- --------------
Total 24,027,982 10,759,736 67,244,281 1,529,785 22,998,519
============== ============== ================ ============== ==============
Net asset value, offering price and
redemption price per share:
(net assets DIVIDED BY shares of
beneficial interest outstanding)
Initial Class $ 11.85 $ 11.46 $ 8.60 $ 10.46 $ 12.69
============== ============== ================ ============== ==============
Service Class $ 11.81 $ 11.43 $ 8.55 $ 10.44 $ 12.61
============== ============== ================ ============== ==============
</Table>
* Non cash collateral not included.
See notes to financial statements.
41
<Page>
<Table>
<Caption>
RESEARCH GROWTH RESEARCH STRATEGIC STRATEGIC
AND INCOME INTERNATIONAL GROWTH VALUE
SERIES SERIES SERIES SERIES
---------------- --------------- --------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 80,228,813 $ 90,556,301 $ 74,296,986 $ 7,262,433
Unrealized appreciation 10,113,201 17,669,245 6,773,595 877,999
---------------- --------------- --------------- ---------------
Total investments, at value (including
securities loaned of $1,466,339,
$6,830,965, $393,781, $--, $-- and
$883,166, respectively) $ 90,342,014 $ 108,225,546 $ 81,070,581 $ 8,140,432
Cash 825 43,736 379 123
Foreign currency, at value
(identified cost $4,502, $77,476, $--,
$ --, $2 and $ --, respectively) 4,505 78,002 -- --
Receivable for investments sold 593,075 -- 633,790 --
Receivable for series shares sold 15,824 432,857 128,335 52,022
Interest and dividends receivable 120,099 113,526 48,687 15,412
Receivable from investment adviser -- -- -- 24,200
Other assets 247 13 -- --
---------------- --------------- --------------- ---------------
Total assets $ 91,076,589 $ 108,893,680 $ 81,881,772 $ 8,232,189
================ =============== =============== ===============
Liabilities:
Payable for investments purchased $ 439,436 $ 43,124 $ 3,096,380 $ 9,036
Payable for series shares reacquired 76,029 66,135 27,802 387
Collateral for securities loaned, at value 1,534,119 7,171,701 402,284 --
Payable to affiliates --
Management fee 1,827 2,715 1,609 188
Distribution fee (Service Class) 61 182 208 162
Accrued expenses and other liabilities 46,294 65,418 40,281 16,341
---------------- --------------- --------------- ---------------
Total liabilities $ 2,097,766 $ 7,349,275 $ 3,568,564 $ 26,114
---------------- --------------- --------------- ---------------
Net assets $ 88,978,823 $ 101,544,405 $ 78,313,208 $ 8,206,075
================ =============== =============== ===============
Net assets consist of:
Paid-in capital $ 96,623,344 $ 107,228,533 $ 126,785,893 $ 7,146,328
Unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 10,113,295 17,673,269 6,773,701 877,999
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions (18,329,692) (23,871,257) (55,246,386) 159,070
Accumulated undistributed net investment
income 571,876 513,860 -- 22,678
---------------- --------------- --------------- ---------------
Total $ 88,978,823 $ 101,544,405 $ 78,313,208 $ 8,206,075
================ =============== =============== ===============
Net assets:
Initial Class $ 80,059,253 $ 74,261,952 $ 47,909,791 $ 7,561
Service Class 8,919,570 27,282,453 30,403,417 8,198,514
---------------- --------------- --------------- ---------------
Total $ 88,978,823 $ 101,544,405 $ 78,313,208 $ 8,206,075
================ =============== =============== ===============
Shares of beneficial interest outstanding:
Initial Class 6,362,965 6,184,703 6,670,044 752
Service Class 711,765 2,283,088 4,255,423 818,238
---------------- --------------- --------------- ---------------
Total 7,074,730 8,467,791 10,925,467 818,990
================ =============== =============== ===============
Net asset value, offering price and redemption
price per share:
(net assets DIVIDED BY shares of beneficial
interest outstanding)
Initial Class $ 12.58 $ 12.01 $ 7.18 $ 10.05
================ =============== =============== ===============
Service Class $ 12.53 $ 11.95 $ 7.14 $ 10.02
================ =============== =============== ===============
<Caption>
TECHNOLOGY VALUE
SERIES SERIES
--------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 28,246,492 $ 352,831,893
Unrealized appreciation 4,026,714 41,661,720
--------------- ---------------
Total investments, at value (including
securities loaned of $1,466,339,
$6,830,965, $393,781, $--, $-- and
$883,166, respectively) $ 32,273,206 $ 394,493,613
Cash 768 807
Foreign currency, at value
(identified cost $4,502, $77,476, $--,
$--, $2 and $--, respectively) 2 --
Receivable for investments sold 1,746,119 --
Receivable for series shares sold 60,847 757,675
Interest and dividends receivable 13,376 610,792
Receivable from investment adviser 6,087 --
Other assets 44,842 --
--------------- ---------------
Total assets $ 34,145,247 $ 395,862,887
=============== ===============
Liabilities:
Payable for investments purchased $ 1,633,440 $ 71,275
Payable for series shares reacquired 8,733 203,371
Collateral for securities loaned, at value -- 905,519
Payable to affiliates --
Management fee 665 8,108
Distribution fee (Service Class) 28 574
Accrued expenses and other liabilities 32,744 75,678
--------------- ---------------
Total liabilities $ 1,675,610 $ 1,264,525
--------------- ---------------
Net assets $ 32,469,637 $ 394,598,362
=============== ===============
Net assets consist of:
Paid-in capital $ 68,642,588 $ 377,487,216
Unrealized appreciation on investments and
translation of assets and liabilities in
foreign currencies 4,026,809 41,662,656
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions (40,199,760) (29,786,551)
Accumulated undistributed net investment
income -- 5,235,041
--------------- ---------------
Total $ 32,469,637 $ 394,598,362
=============== ===============
Net assets:
Initial Class $ 28,376,178 $ 310,818,092
Service Class 4,093,459 83,780,270
--------------- ---------------
Total $ 32,469,637 $ 394,598,362
=============== ===============
Shares of beneficial interest outstanding:
Initial Class 6,915,479 22,832,009
Service Class 1,006,237 6,179,434
--------------- ---------------
Total 7,921,716 29,011,443
=============== ===============
Net asset value, offering price and redemption
price per share:
(net assets DIVIDED BY shares of beneficial
interest outstanding)
Initial Class $ 4.10 $ 13.61
=============== ===============
Service Class $ 4.07 $ 13.56
=============== ===============
</Table>
See notes to financial statements.
42
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENT OF OPERATIONS -- Year Ended December 31, 2003
<Table>
<Caption>
CAPITAL INTERNATIONAL MASSACHUSETTS MID NEW
OPPORTUNITIES GROWTH INVESTORS GROWTH CAP VALUE DISCOVERY
SERIES SERIES STOCK SERIES SERIES SERIES
-------------- -------------- ---------------- -------------- --------------
Net investment income (loss):
Income --
Dividends $ 3,477,751 $ 2,106,685 $ 4,484,779 $ 60,273 $ 733,665
Interest 38,311 18,552 193,210 6,478 135,021
Income on securities loaned 13,728 29,417 22,758 -- 90,713
Foreign taxes withheld (6,411) (202,261) (36,612) (227) (190)
-------------- -------------- ---------------- -------------- --------------
Total investment income $ 3,523,379 $ 1,952,393 $ 4,664,135 $ 66,524 $ 959,209
-------------- -------------- ---------------- -------------- --------------
Expenses --
Management fee $ 1,965,925 $ 997,017 $ 3,870,358 $ 38,647 $ 2,134,117
Trustees' compensation 22,970 8,610 40,773 60 17,650
Distribution fee (Service Class) 31,051 30,083 127,822 12,829 121,903
Administrative fee 24,788 9,308 47,780 174 20,621
Custodian fee 111,264 193,109 214,707 11,491 114,919
Printing 26,799 13,477 29,877 -- 20,502
Auditing fees 32,113 33,500 31,350 15,195 31,350
Legal fees 4,120 4,319 4,731 2,948 4,579
Miscellaneous 24,163 11,366 24,138 25,357 17,016
-------------- -------------- ---------------- -------------- --------------
Total expenses $ 2,243,193 $ 1,300,789 $ 4,391,536 $ 106,701 $ 2,482,657
Fees paid indirectly (4,660) -- (63,027) (54) (375)
Reduction of expenses by investment
adviser -- -- -- (42,289) --
-------------- -------------- ---------------- -------------- --------------
Net expenses $ 2,238,533 $ 1,300,789 $ 4,328,509 $ 64,358 $ 2,482,282
-------------- -------------- ---------------- -------------- --------------
Net investment income (loss) $ 1,284,846 $ 651,604 $ 335,626 $ 2,166 $ (1,523,073)
-------------- -------------- ---------------- -------------- --------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Realized gain (loss) (identified cost
basis) --
Investment transactions $ 1,173,314 $ 3,561,572 $ 44,629,910 $ 472,172 $ 6,565,954
Foreign currency transactions 450 16,378 (15,244) 11 837
-------------- -------------- ---------------- -------------- --------------
Net realized gain on investments and
foreign currency transactions $ 1,173,764 $ 3,577,950 $ 44,614,666 $ 472,183 $ 6,566,791
-------------- -------------- ---------------- -------------- --------------
Change in unrealized appreciation
(depreciation) --
Investments $ 62,172,843 $ 30,701,334 $ 61,153,496 $ 1,483,716 $ 66,461,094
Translation of assets and liabilities in
foreign currencies (243) 1,796 (381) 3 --
-------------- -------------- ---------------- -------------- --------------
Net unrealized gain on investments and
foreign currency translation $ 62,172,600 $ 30,703,130 $ 61,153,115 $ 1,483,719 $ 66,461,094
-------------- -------------- ---------------- -------------- --------------
Net realized and unrealized gain on
investments and foreign currency $ 63,346,364 $ 34,281,080 $ 105,767,781 $ 1,955,902 $ 73,027,885
-------------- -------------- ---------------- -------------- --------------
Increase in net assets from operations $ 64,631,210 $ 34,932,684 $ 106,103,407 $ 1,958,068 $ 71,504,812
============== ============== ================ ============== ==============
</Table>
See notes to financial statements.
43
<Page>
<Table>
<Caption>
RESEARCH GROWTH RESEARCH STRATEGIC STRATEGIC
AND INCOME INTERNATIONAL GROWTH VALUE
SERIES SERIES SERIES SERIES
---------------- --------------- --------------- ---------------
Net investment income (loss):
Income --
Dividends $ 1,223,973 $ 1,674,157 $ 445,621 $ 71,819
Interest 25,178 19,580 28,841 2,147
Income on securities loaned 3,344 31,892 2,423 --
Foreign taxes withheld (5,368) (187,634) (772) (156)
---------------- --------------- --------------- ---------------
Total investment income $ 1,247,127 $ 1,537,995 $ 476,113 $ 73,810
---------------- --------------- --------------- ---------------
Expenses --
Management fee $ 561,416 $ 733,657 $ 394,397 $ 30,571
Trustees' compensation 6,053 6,200 3,715 19
Distribution fee (Service Class) 18,320 27,782 29,053 10,190
Administrative fee 6,781 6,411 4,323 226
Custodian fee 39,264 153,424 26,413 10,544
Printing 6,506 5,711 4,800 48
Auditing fees 32,446 32,346 32,146 14,296
Legal fees 4,381 4,375 2,980 3,053
Miscellaneous 17,330 12,250 10,836 6,209
---------------- --------------- --------------- ---------------
Total expenses $ 692,497 $ 982,156 $ 508,663 $ 75,156
Fees paid indirectly (10,512) -- (1,620) (28)
Reduction of expenses by investment
adviser -- -- -- (24,200)
---------------- --------------- --------------- ---------------
Net expenses $ 681,985 $ 982,156 $ 507,043 $ 50,928
---------------- --------------- --------------- ---------------
Net investment income (loss) $ 565,142 $ 555,839 $ (30,930) $ 22,882
---------------- --------------- --------------- ---------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Realized gain (loss) (identified cost
basis) --
Investment transactions $ 2,238,977 $ 3,405,410 $ (2,298,140) $ 214,204
Foreign currency transactions 8,137 (33,871) 181 --
---------------- --------------- --------------- ---------------
Net realized gain (loss) on investments
and foreign currency transactions $ 2,247,114 $ 3,371,539 $ (2,297,959) $ 214,204
---------------- --------------- --------------- ---------------
Change in unrealized appreciation
(depreciation) --
Investments $ 15,763,809 $ 19,198,547 $ 15,030,054 $ 896,916
Translation of assets and liabilities in
foreign currencies 33 1,854 (12) --
---------------- --------------- --------------- ---------------
Net unrealized gain on investments and
foreign currency translation $ 15,763,842 $ 19,200,401 $ 15,030,042 $ 896,916
---------------- --------------- --------------- ---------------
Net realized and unrealized gain on
investments and foreign currency $ 18,010,956 $ 22,571,940 $ 12,732,083 $ 1,111,120
---------------- --------------- --------------- ---------------
Increase in net assets from
operations $ 18,576,098 $ 23,127,779 $ 12,701,153 $ 1,134,002
================ =============== =============== ===============
<Caption>
TECHNOLOGY VALUE
SERIES SERIES
--------------- ---------------
Net investment income (loss):
Income --
Dividends $ 79,582 $ 8,039,579
Interest 14,478 108,359
Income on securities loaned -- 13,864
Foreign taxes withheld (2,389) (78,178)
--------------- ---------------
Total investment income $ 91,671 $ 8,083,624
--------------- ---------------
Expenses --
Management fee $ 168,950 $ 2,439,100
Trustees' compensation 1,299 27,061
Distribution fee (Service Class) 6,224 143,147
Administrative fee 1,753 29,841
Custodian fee 19,006 149,739
Printing 7,104 21,650
Auditing fees 31,850 32,850
Legal fees 4,790 5,700
Miscellaneous 9,289 19,841
--------------- ---------------
Total expenses $ 250,265 $ 2,868,929
Fees paid indirectly (136) (9,656)
Reduction of expenses by investment adviser (6,087) --
--------------- ---------------
Net expenses $ 244,042 $ 2,859,273
--------------- ---------------
Net investment income (loss) $ (152,371) $ 5,224,351
--------------- ---------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Realized gain (loss) (identified cost
basis) --
Investment transactions $ 2,171,887 $ (4,071,487)
Foreign currency transactions (2,228) 21,654
--------------- ---------------
Net realized gain (loss) on investments
and foreign currency transactions $ 2,169,659 $ (4,049,833)
--------------- ---------------
Change in unrealized appreciation
(depreciation) --
Investments $ 5,855,139 $ 75,048,552
Translation of assets and liabilities in
foreign currencies (187) 420
--------------- ---------------
Net unrealized gain on investments and
foreign currency translation $ 5,854,952 $ 75,048,972
--------------- ---------------
Net realized and unrealized gain on
investments and foreign currency $ 8,024,611 $ 70,999,139
--------------- ---------------
Increase in net assets from
operations $ 7,872,240 $ 76,223,490
=============== ===============
</Table>
See notes to financial statements.
44
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2003
<Table>
<Caption>
CAPITAL INTERNATIONAL MASSACHUSETTS MID NEW
OPPORTUNITIES GROWTH INVESTORS GROWTH CAP VALUE DISCOVERY
SERIES SERIES STOCK SERIES SERIES SERIES
-------------- -------------- ---------------- -------------- --------------
Increase (decrease) in net assets:
From operations --
Net investment income (loss) $ 1,284,846 $ 651,604 $ 335,626 $ 2,166 $ (1,523,073)
Net realized gain on investments and foreign
currency transactions 1,173,764 3,577,950 44,614,666 472,183 6,566,791
Net unrealized gain on investments and
foreign currency translation 62,172,600 30,703,130 61,153,115 1,483,719 66,461,094
-------------- -------------- ---------------- -------------- --------------
Increase in net assets from operations $ 64,631,210 $ 34,932,684 $ 106,103,407 $ 1,958,068 $ 71,504,812
-------------- -------------- ---------------- -------------- --------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (890,293) $ (673,301) $ -- $ (24) $ --
From net investment income (Service Class) (17,096) (64,825) -- (1,627) --
-------------- -------------- ---------------- -------------- --------------
Total distributions declared to
shareholders $ (907,389) $ (738,126) $ -- $ (1,651) $ --
-------------- -------------- ---------------- -------------- --------------
Net increase (decrease) in net assets from
series share transactions $ (41,864,815) $ (9,894,881) $ (13,628,110) $ 13,296,335 $ 8,103,150
-------------- -------------- ---------------- -------------- --------------
Total increase in net assets $ 21,859,006 $ 24,299,677 $ 92,475,297 $ 15,252,752 $ 79,607,962
Net assets --
At beginning of period 262,886,442 98,985,535 485,344,491 725,052 211,719,170
-------------- -------------- ---------------- -------------- --------------
At end of period $ 284,745,448 $ 123,285,212 $ 577,819,788 $ 15,977,804 $ 291,327,132
============== ============== ================ ============== ==============
Accumulated undistributed net investment
income included in net assets at end
of period $ 1,274,601 $ 652,566 $ 320,382 $ 1,820 $ 6,938
============== ============== ================ ============== ==============
<Caption>
RESEARCH GROWTH RESEARCH STRATEGIC STRATEGIC
AND INCOME INTERNATIONAL GROWTH VALUE
SERIES SERIES SERIES SERIES
---------------- --------------- --------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income (loss) $ 565,142 $ 555,839 $ (30,930) $ 22,882
Net realized gain (loss) on investments and
foreign currency transactions 2,247,114 3,371,539 (2,297,959) 214,204
Net unrealized gain on investments and
foreign currency translation 15,763,842 19,200,401 15,030,042 896,916
---------------- --------------- --------------- ---------------
Increase in net assets from operations $ 18,576,098 $ 23,127,779 $ 12,701,153 $ 1,134,002
---------------- --------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (518,633) $ (380,627) $ -- $ (11)
From net investment income (Service Class) (43,208) (30,347) -- (3,639)
---------------- --------------- --------------- ---------------
Total distributions declared to
shareholders $ (561,841) $ (410,974) $ -- $ (3,650)
---------------- --------------- --------------- ---------------
Net increase in net assets from series share
transactions $ 410,319 $ 10,489,671 $ 22,129,203 $ 5,997,580
---------------- --------------- --------------- ---------------
Total increase in net assets $ 18,424,576 $ 33,206,476 $ 34,830,356 $ 7,127,932
Net assets --
At beginning of period 70,554,247 68,337,929 43,482,852 1,078,143
---------------- --------------- --------------- ---------------
At end of period $ 88,978,823 $ 101,544,405 $ 78,313,208 $ 8,206,075
================ =============== =============== ===============
Accumulated undistributed net investment
income included in net assets at end
of period $ 571,876 $ 513,860 $ -- $ 22,678
================ =============== =============== ===============
<Caption>
TECHNOLOGY VALUE
SERIES SERIES
--------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income (loss) $ (152,371) $ 5,224,351
Net realized gain (loss) on investments and
foreign currency transactions 2,169,659 (4,049,833)
Net unrealized gain on investments and
foreign currency translation 5,854,952 75,048,972
--------------- ---------------
Increase in net assets from operations $ 7,872,240 $ 76,223,490
--------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ -- $ (4,371,388)
From net investment income (Service Class) -- (779,643)
--------------- ---------------
Total distributions declared to
shareholders $ -- $ (5,151,031)
--------------- ---------------
Net increase in net assets from series share
transactions $ 9,068,879 $ 9,988,016
--------------- ---------------
Total increase in net assets $ 16,941,119 $ 81,060,475
Net assets --
At beginning of period 15,528,518 313,537,887
--------------- ---------------
At end of period $ 32,469,637 $ 394,598,362
=============== ===============
Accumulated undistributed net investment
income included in net assets at end
of period $ -- $ 5,235,041
=============== ===============
</Table>
See notes to financial statements.
45
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2002
<Table>
<Caption>
CAPITAL INTERNATIONAL MASSACHUSETTS MID NEW
OPPORTUNITIES GROWTH INVESTORS GROWTH CAP VALUE DISCOVERY
SERIES SERIES STOCK SERIES SERIES* SERIES
-------------- -------------- ---------------- -------------- --------------
Increase (decrease) in net assets:
From operations --
Net investment income (loss) $ 936,546 $ 767,497 $ (118,930) $ 1,603 $ (1,478,947)
Net realized loss on investments and foreign
currency transactions (150,550,293) (12,789,018) (138,664,036) (23,835) (69,124,293)
Net unrealized gain (loss) on investments
and foreign currency translation 5,920,278 (781,773) (80,306,372) (23,819) (30,853,959)
-------------- -------------- ---------------- -------------- --------------
Decrease in net assets from operations $ (143,693,469) $ (12,803,294) $ (219,089,338) $ (46,051) $ (101,457,199)
-------------- -------------- ---------------- -------------- --------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (310,693) $ (579,362) $ (887,163) $ -- $ --
From net investment income (Service Class) (5,734) (57,725) (38,235) -- --
In excess of net investment income
(Initial Class) -- -- (1,520) -- --
In excess of net investment income
(Service Class) -- -- (66) -- --
-------------- -------------- ---------------- -------------- --------------
Total distributions declared to
shareholders $ (316,427) $ (637,087) $ (926,984) $ -- $ --
-------------- -------------- ---------------- -------------- --------------
Net increase (decrease) in net assets from
series share transactions $ (101,104,236) $ (8,966,931) $ (109,068,708) $ 771,103 $ 26,001,850
-------------- -------------- ---------------- -------------- --------------
Total increase (decrease) in net assets $ (245,114,132) $ (22,407,312) $ (329,085,030) $ 725,052 $ (75,455,349)
Net assets --
At beginning of period 508,000,574 121,392,847 814,429,521 -- 287,174,519
-------------- -------------- ---------------- -------------- --------------
At end of period $ 262,886,442 $ 98,985,535 $ 485,344,491 $ 725,052 $ 211,719,170
============== ============== ================ ============== ==============
Accumulated undistributed net investment
income included in net assets at end
of period $ 896,693 $ 697,178 $ -- $ 1,591 $ --
============== ============== ================ ============== ==============
<Caption>
RESEARCH GROWTH RESEARCH STRATEGIC STRATEGIC
AND INCOME INTERNATIONAL GROWTH VALUE
SERIES SERIES SERIES SERIES*
---------------- --------------- --------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income (loss) $ 561,352 $ 459,461 $ (108,373) $ 3,461
Net realized loss on investments and foreign
currency transactions (14,519,076) (8,877,032) (16,616,909) (55,149)
Net unrealized loss on investments and
foreign currency translation (7,436,978) (968,124) (5,781,991) (18,917)
---------------- --------------- ------------- ---------------
Decrease in net assets from operations $ (21,394,702) $ (9,385,695) $ (22,507,273) $ (70,605)
---------------- --------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (563,146) $ (187,845) $ -- $ --
From net investment income (Service Class) (36,298) (12,452) -- --
---------------- --------------- --------------- ---------------
Total distributions declared to
shareholders $ (599,444) $ (200,297) $ -- $ --
---------------- --------------- --------------- ---------------
Net increase (decrease) in net assets from
series share transactions $ (6,021,004) $ (5,351,595) $ (10,469,960) $ 1,148,748
---------------- --------------- --------------- ---------------
Total increase (decrease) in net assets $ (28,015,150) $ (14,937,587) $ (32,977,233) $ 1,078,143
Net assets --
At beginning of period 98,569,397 83,275,516 76,460,085 --
---------------- --------------- --------------- ---------------
At end of period $ 70,554,247 $ 68,337,929 $ 43,482,852 $ 1,078,143
================ =============== =============== ===============
Accumulated undistributed net investment
income included in net assets at end
of period $ 561,721 $ 396,907 $ -- $ 3,446
================ =============== =============== ===============
<Caption>
TECHNOLOGY VALUE
SERIES SERIES
--------------- ---------------
Increase (decrease) in net assets:
From operations --
Net investment income (loss) $ (143,601) $ 5,183,865
Net realized loss on investments and foreign
currency transactions (12,810,544) (20,717,350)
Net unrealized loss on investments and
foreign currency translation (3,098,504) (38,367,106)
--------------- ---------------
Decrease in net assets from operations $ (16,052,649) $ (53,900,591)
--------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ -- $ (2,450,119)
From net investment income (Service Class) -- (277,043)
--------------- ---------------
Total distributions declared to
shareholders $ -- $ (2,727,162)
--------------- ---------------
Net increase (decrease) in net assets from
series share transactions $ (3,220,274) $ 65,445,550
--------------- ---------------
Total increase (decrease) in net assets $ (19,272,923) $ 8,817,797
Net assets --
At beginning of period 34,801,441 304,720,090
--------------- ---------------
At end of period $ 15,528,518 $ 313,537,887
=============== ===============
Accumulated undistributed net investment
income included in net assets at end
of period $ -- $ 5,183,389
=============== ===============
</Table>
* For the period from the commencement of the series' investment operations,
May 1, 2002, through December 31, 2002.
See notes to financial statements.
46
<Page>
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 (or, if shorter, the period of the
series' operation). 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 auditors, whose report, together
with the series' financial statements, are included in this report.
<Table>
<Caption>
CAPITAL OPPORTUNITIES SERIES
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
INITIAL CLASS 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.27 $ 13.33 $ 20.71 $ 24.51 $ 16.98
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.05 $ 0.03 $ 0.01 $ --+++ $ --+++
Net realized and unrealized gain (loss) on
investments and foreign currency 2.57 (4.08) (4.66) (0.96) 7.96
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 2.62 $ (4.05) $ (4.65) $ (0.96) $ 7.96
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.04) $ (0.01) $ -- $ -- $ (0.04)
From net realized gain on investments and
foreign currency transactions -- -- (2.64) (2.84) (0.39)
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.09) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.04) $ (0.01) $ (2.73) $ (2.84) $ (0.43)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 11.85 $ 9.27 $ 13.33 $ 20.71 $ 24.51
========== ========== ========== ========== ==========
Total return^^ 28.30% (30.41)% (24.93)% (4.88)% 47.65%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.84% 0.82% 0.79% 0.79% 0.84%
Net investment income (loss) 0.50% 0.26% 0.05% (0.01)% 0.02%
Portfolio turnover 64% 93% 109% 117% 145%
Net assets at end of period (000 Omitted) $ 269,630 $ 251,974 $ 501,269 $ 688,432 $ 437,204
<Caption>
CAPITAL OPPORTUNITIES SERIES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001*
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.24 $ 13.31 $ 13.93
---------- ---------- ------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.03 $ 0.01 $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.55 (4.07) (0.61)
---------- ---------- ------------
Total from investment operations $ 2.58 $ (4.06) $ (0.62)
---------- ---------- ------------
Less distributions declared to shareholders from
net investment income $ (0.01) $ (0.01) $ --
---------- ---------- ------------
Net asset value -- end of period $ 11.81 $ 9.24 $ 13.31
========== ========== ============
Total return^^ 28.00% (30.54)% (4.45)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.09% 1.07% 1.04%+
Net investment income (loss) 0.26% 0.09% (0.24)%+
Portfolio turnover 64% 93% 109%
Net assets at end of period (000 Omitted) $ 15,116 $ 10,913 $ 6,732
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
47
<Page>
<Table>
<Caption>
INTERNATIONAL GROWTH SERIES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
INITIAL CLASS 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 8.33 $ 9.50 $ 11.84 $ 13.10 $ 9.73
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations# --
Net investment income $ 0.06 $ 0.06 $ 0.06 $ 0.12 $ 0.06
Net realized and unrealized gain (loss)
on investments and foreign currency 3.14 (1.18) (1.89) (1.13) 3.37
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 3.20 $ (1.12) $ (1.83) $ (1.01) $ 3.43
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.07) $ (0.05) $ (0.07) $ (0.04) $ (0.06)
From net realized gain on investments and
foreign currency transactions -- -- (0.42) (0.21) --
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.02) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.07) $ (0.05) $ (0.51) $ (0.25) $ (0.06)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 11.46 $ 8.33 $ 9.50 $ 11.84 $ 13.10
========== ========== ========== ========== ==========
Total return^^ 38.67% (11.88)% (15.91)% (7.80)% 35.24%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.24% 1.23% 1.23% 1.24% 1.23%
Net investment income 0.67% 0.70% 0.58% 0.94% 0.59%
Portfolio turnover 89% 119% 108% 71% 88%
Net assets at end of period (000 Omitted) $ 108,114 $ 88,537 $ 118,286 $ 117,486 $ 66,907
<Caption>
INTERNATIONAL GROWTH SERIES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001*
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 8.31 $ 9.49 $ 9.94
---------- ---------- ------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.04 $ 0.04 $ (0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency 3.13 (1.17) (0.43)
---------- ---------- ------------
Total from investment operations $ 3.17 $ (1.13) $ (0.45)
---------- ---------- ------------
Less distributions declared to shareholders from
net investment income -- $ (0.05) $ (0.05) $ --
---------- ---------- ------------
Net asset value -- end of period $ 11.43 $ 8.31 $ 9.49
========== ========== ============
Total return^^ 38.35% (12.01)% (4.53)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.49% 1.48% 1.49%+
Net investment income (loss) 0.39% 0.46% (0.59)%+
Portfolio turnover 89% 119% 108%
Net assets at end of period (000 Omitted) $ 15,171 $ 10,449 $ 3,107
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
48
<Page>
<Table>
<Caption>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
INITIAL CLASS 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 6.97 $ 9.70 $ 14.51 $ 16.13 $ 12.08
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.01 $ --+++ $ 0.01 $ 0.02 $ 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency 1.62 (2.72) (3.46) (0.97) 4.22
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 1.63 $ (2.72) $ (3.45) $ (0.95) $ 4.25
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ -- $ (0.01) $ (0.01) $ (0.01) $ --
From net realized gain on investments and
foreign currency transactions -- -- (0.15) (0.66) (0.20)
In excess of net investment income -- --+++ -- -- --
In excess of net realized gain on investments
and foreign currency transactions -- -- (1.20) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ -- $ (0.01) $ (1.36) $ (0.67) $ (0.20)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 8.60 $ 6.97 $ 9.70 $ 14.51 $ 16.13
========== ========== ========== ========== ==========
Total return^^ 23.39% (28.05)% (24.91)% (6.09)% 35.80%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.83% 0.82% 0.82% 0.81% 0.83%
Net investment income (loss) 0.09% (0.01)% 0.12% 0.14% 0.25%
Portfolio turnover 265% 207% 289% 250% 147%
Net assets at end of period (000 Omitted) $ 504,123 $ 448,235 $ 797,118 $ 974,508 $ 543,930
<Caption>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
-------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001*
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 6.96 $ 9.70 $ 9.89
---------- ---------- ------------
Income (loss) from investment operations# --
Net investment loss $ (0.01) $ (0.02) $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.60 (2.71) (0.18)
---------- ---------- ------------
Total from investment operations $ 1.59 $ (2.73) $ (0.19)
---------- ---------- ------------
Less distributions declared to shareholders --
From net investment income $ -- $ (0.01) $ --
In excess of net investment income -- --+++ --
---------- ---------- ------------
Total distributions declared to shareholders $ -- $ (0.01) $ --
---------- ---------- ------------
Net asset value -- end of period $ 8.55 $ 6.96 $ 9.70
========== ========== ============
Total return^^ 22.84% (28.17)% (1.92)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.08% 1.07% 1.07%+
Net investment loss (0.16)% (0.21)% (0.24)%+
Portfolio turnover 265% 207% 289%
Net assets at end of period (000 Omitted) $ 73,697 $ 37,109 $ 17,312
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
49
<Page>
<Table>
<Caption>
MID CAP VALUE SERIES
----------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
INITIAL CLASS 2003 2002*
------------ ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 7.92 $ 10.00
------------ ------------
Income from investment operations# --
Net investment income @ $ 0.02 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency 2.53 (2.12)
------------ ------------
Total from investment operations $ 2.55 $ (2.08)
------------ ------------
Less distributions declared to shareholders --
From net investment income $ (0.01) --
------------ ------------
Net asset value -- end of period $ 10.46 $ 7.92
============ ============
Total return^^ 32.24% (20.80)%++
Ratios (to average net assets)/Supplemental
data@:
Expenses## 0.99% 1.02%+
Net investment income 0.26% 0.54%+
Portfolio turnover 109% 82%
Net assets at end of period (000 Omitted) $ 24 $ 18
</Table>
@ The investment adviser contractually agreed under a temporary expense
agreement to pay all of the series' operating expenses, exclusive of
management fees, in excess of 0.25% of average daily net assets. To
the extent actual expenses were over this limitation, net investment
loss per share and the ratios would have been:
<Table>
Net investment loss $ (0.05) $ (0.53)
Ratios (to average net assets):
Expenses## 1.81% 8.05%+
Net investment loss (0.56)% (6.49)%+
</Table>
<Table>
<Caption>
MID CAP VALUE SERIES
----------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
SERVICE CLASS 2003 2002*
------------ ------------
Per share data (for a share outstanding throughout
period):
Net asset value -- beginning of period $ 7.93 $ 10.00
------------ ------------
Income from investment operations # --
Net investment income@ $ 0.00+++ $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency 2.52 (2.11)
------------ ------------
Total from investment operations $ 2.52 $ (2.07)
------------ ------------
Less distributions declared to shareholders from
net investment income -- $ (0.01) $ --
------------ ------------
Net asset value -- end of period $ 10.44 $ 7.93
============ ============
Total return^^ 31.90% (20.70)%++
Ratios (to average net assets)/Supplemental
data@:
Expenses## 1.25% 1.27%+
Net investment income 0.04% 0.53%+
Portfolio turnover 109% 82%
Net assets at end of period (000 Omitted) $ 15,954 $ 707
</Table>
@ The investment adviser contractually agreed under a temporary expense
agreement to pay all of the series' operating expenses, exclusive of
management and distribution fees in excess of 0.25% of average daily net
assets. To the extent actual expenses were over this limitation, net
investment loss per share and the ratios would have been:
<Table>
Net investment loss $ (0.07) $ (0.50)
Ratios (to average net assets):
Expenses## 2.07% 8.30%+
Net investment loss (0.78)% (6.50)%+
</Table>
* For the period from the inception of the series' investment operations,
May 1, 2002, through December 31, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
50
<Page>
<Table>
<Caption>
NEW DISCOVERY SERIES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
INITIAL CLASS 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.38 $ 14.10 $ 15.98 $ 16.89 $ 10.62
---------- ---------- ---------- ---------- ----------
Income from investment operations# --
Net investment loss $ (0.06) $ (0.07) $ (0.07) $ (0.07) $ (0.08)
Net realized and unrealized gain (loss) on
investments and foreign currency 3.37 (4.65) (0.71) 0.15 6.42
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 3.31 $ (4.72) $ (0.78) $ 0.08 $ 6.34
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net realized gain on investments and
foreign currency transactions $ -- $ -- $ (0.97) $ (0.99) $ (0.07)
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.13) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ -- $ -- $ (1.10) $ (0.99) $ (0.07)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.69 $ 9.38 $ 14.10 $ 15.98 $ 16.89
========== ========== ========== ========== ==========
Total return^^ 35.29% (33.43)% (5.12)% 0.34% 60.25%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.00% 0.98% 0.97% 0.99% 1.06%
Net investment loss (0.59)% (0.59)% (0.49)% (0.43)% (0.65)%
Portfolio turnover 100% 97% 64% 74% 149%
Net assets at end of period (000 Omitted) $ 220,278 $ 177,028 $ 277,090 $ 233,297 $ 65,782
<Caption>
NEW DISCOVERY SERIES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001*
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.34 $ 14.08 $ 13.55
---------- ---------- ------------
Income from investment operations# --
Net investment loss $ (0.09) $ (0.08) $ (0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency 3.36 (4.66) 0.57
---------- ---------- ------------
Total from investment operations $ 3.27 $ (4.74) $ 0.53
---------- ---------- ------------
Net asset value -- end of period $ 12.61 $ 9.34 $ 14.08
========== ========== ============
Total return^^ 35.01% (33.66)% 3.91%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.24% 1.23% 1.22%+
Net investment loss (0.84)% (0.78)% (0.90)%+
Portfolio turnover 100% 97% 64%
Net assets at end of period (000 Omitted) $ 71,049 $ 34,691 $ 10,085
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
to December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data is based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements
51
<Page>
<Table>
<Caption>
RESEARCH GROWTH AND INCOME SERIES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
INITIAL CLASS 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.92 $ 12.70 $ 14.62 $ 14.44 $ 13.39
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations# --
Net investment income $ 0.08 $ 0.08 $ 0.09 $ 0.07 $ 0.09
Net realized and unrealized gain (loss) on
investments and foreign currency 2.67 (2.78) (1.67) 0.37 1.01
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 2.75 $ (2.70) $ (1.58) $ 0.44 $ 1.10
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.09) $ (0.08) $ (0.06) $ (0.07) $ (0.05)
From net realized gain on investments and
foreign currency transactions -- -- (0.25) (0.19) --
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.03) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.09) $ (0.08) $ (0.34) $ (0.26) $ (0.05)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.58 $ 9.92 $ 12.70 $ 14.62 $ 14.44
========== ========== ========== ========== ==========
Total return^^ 27.86% (21.40)% (10.91)% 3.09% 8.21%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.90% 0.86% 0.87% 0.88% 0.86%
Net investment income 0.78% 0.67% 0.66% 0.50% 0.63%
Portfolio turnover 147% 96% 84% 75% 73%
Net assets at end of period (000 Omitted) $ 80,059 $ 64,126 $ 95,414 $ 92,961 $ 79,092
<Caption>
RESEARCH GROWTH AND INCOME SERIES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001*
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.89 $ 12.69 $ 12.79
---------- ---------- ------------
Income (loss) from investment operations# --
Net investment income $ 0.06 $ 0.05 $ 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency $ 2.65 (2.78) (0.11)+++
---------- ---------- ------------
Total from investment operations $ 2.71 $ (2.73) $ (0.10)
---------- ---------- ------------
Less distributions declared to shareholders
from net investment income -- $ (0.07) $ (0.07) $ --
---------- ---------- ------------
Net asset value -- end of period $ 12.53 $ 9.89 $ 12.69
========== ========== ============
Total return^^ 27.49% (21.59)% (0.79)%++
Ratios (to average net assets)/Supplemental
data:
Expenses ## 1.15% 1.11% 1.12%+
Net investment income 0.53% 0.49% 0.19%+
Portfolio turnover 147% 96% 84%
Net assets at end of period (000 Omitted) $ 8,920 $ 6,428 $ 3,155
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
+++ The per share amount is not in accordance with net realized and unrealized
gain/loss for the period because of the timing of sales of series shares,
and the amount of per share realized and unrealized gains and losses at such
time.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
52
<Page>
<Table>
<Caption>
RESEARCH INTERNATIONAL SERIES
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
INITIAL CLASS 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.03 $ 10.22 $ 12.70 $ 14.59 $ 9.42
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations# --
Net investment income $ 0.08 $ 0.06 $ 0.04 $ 0.19 $ 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency 2.96 (1.23) (2.27) (1.30) 5.14
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 3.04 $ (1.17) $ (2.23) $ (1.11) $ 5.17
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.06) $ (0.02) $ (0.09) $ --+++ $ --+++
From net realized gain on investments and
foreign currency transactions -- -- (0.12) (0.78) --
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.04) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.06) $ (0.02) $ (0.25) $ (0.78) $ --+++
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.01 $ 9.03 $ 10.22 $ 12.70 $ 14.59
========== ========== ========== ========== ==========
Total return^^ 33.86% (11.44)% (17.76)% (7.95)% 54.94%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.30% 1.26% 1.26% 1.28% 1.50%
Net investment income 0.83% 0.61% 0.36% 1.43% 0.28%
Portfolio turnover 97% 136% 145% 110% 164%
Net assets at end of period (000 Omitted) $ 74,262 $ 62,555 $ 80,738 $ 82,945 $ 30,150
<Caption>
RESEARCH INTERNATIONAL SERIES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001*
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 9.00 $ 10.21 $ 10.81
---------- ---------- ------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.03 $ 0.03 $ (0.03)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.96 (1.22) (0.57)
---------- ---------- ------------
Total from investment operations $ 2.99 $ (1.19) $ (0.60)
---------- ---------- ------------
Less distributions declared to shareholders from
net investment income -- $ (0.04) $ (0.02) $ --
---------- ---------- ------------
Net asset value -- end of period $ 11.95 $ 9.00 $ 10.21
========== ========== ============
Total return^^ 33.40% (11.66)% (5.55)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.57% 1.51% 1.51%+
Net investment income (loss) 0.33% 0.35% (0.81)%+
Portfolio turnover 97% 136% 145%
Net assets at end of period (000 Omitted) $ 27,282 $ 5,783 $ 2,537
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
53
<Page>
<Table>
<Caption>
STRATEGIC GROWTH SERIES
--------------------------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
--------------------------------------------------- DECEMBER 31,
INITIAL CLASS 2003 2002 2001 2000 1999*
---------- ---------- ---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 5.63 $ 8.05 $ 10.91 $ 12.13 $ 10.00
---------- ---------- ---------- ---------- ------------
Income (loss) from investment operations# --
Net investment income (loss)@ $ (0.00)+++ $ (0.01) $ (0.01) $ (0.01) $ 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency 1.55 (2.41) (2.65) (1.20) 1.61
---------- ---------- ---------- ---------- ------------
Total from investment operations $ 1.55 $ (2.42) $ (2.66) $ (1.21) $ 1.67
---------- ---------- ---------- ---------- ------------
Less distributions declared to shareholders --
From net investment income $ -- $ -- $ -- $ (0.01) $ --
From net realized gain on investments and
foreign currency transactions -- -- (0.20) (0.00)+++ --
---------- ---------- ---------- ---------- ------------
Total distributions declared to shareholders $ -- $ -- $ (0.20) $ (0.01) $ --
---------- ---------- ---------- ---------- ------------
Capital contribution by investment adviser $ -- $ -- $ -- $ -- $ 0.46
---------- ---------- ---------- ---------- ------------
Net asset value -- end of period $ 7.18 $ 5.63 $ 8.05 $ 10.91 $ 12.13
---------- ---------- ---------- ---------- ------------
Total return^^ 27.53% (30.06)% (24.65)% (9.99)% 21.30%++**
Ratios (to average net assets)/Supplemental
data@:
Expenses## 0.91% 0.88% 0.86% 0.94% 1.00%+
Net investment income (loss) (0.01)% (0.18)% (0.11)% (0.06)% 2.61%+
Portfolio turnover 74% 98% 123% 86% 4%
Net assets at end of period (000 Omitted) $ 47,910 $ 38,486 $ 74,471 $ 86,823 $ 9,158
</Table>
@ The investment adviser contractually agreed under a temporary expense
agreement to pay all of the series' operating expenses, exclusive of
management fees, in excess of 0.25% of average daily net assets for the
period indicated. To the extent actual expenses were over this limitation
the net investment loss per share and the ratios would have been:
<Table>
Net investment loss $ -- $ -- $ -- $ -- $ (0.01)
Ratios (to average net assets):
Expenses## -- -- -- -- 4.01%+
Net investment loss -- -- -- -- (0.40)%+
<Caption>
STRATEGIC GROWTH SERIES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001***
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 5.62 $ 8.05 $ 8.21
---------- ---------- ------------
Income (loss) from investment operations# --
Net investment loss $ (0.01) $ (0.02) $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.53 (2.41) (0.15)++++
---------- ---------- ------------
Total from investment operations $ 1.52 $ (2.43) $ (0.16)
---------- ---------- ------------
Net asset value end of period $ 7.14 $ 5.62 $ 8.05
========== ========== ============
Total return^^ 27.05% (30.19)% (1.95)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.16% 1.13% 1.11%+
Net investment loss (0.23)% (0.38)% (0.27)%+
Portfolio turnover 74% 98% 123%
Net assets at end of period (000 Omitted) $ 30,403 $ 4,997 $ 1,989
</Table>
* For the period from the commencement of the series' investment operations,
October 29, 1999, through December 31, 1999.
** The investment adviser voluntarily agreed to make a capital contribution of
$126,028 to the Strategic Growth Series in order to equate the series'
total return for the period to that of another MFS fund with the same
portfolio manager and investment objective. To the extent the investment
adviser had not made this capital contribution, the total return of the
series would have been 10.16%.
*** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
^^ Not annualized.
+++ Per share amount was less than $0.01.
++++ The per share amount is not in accordance with net realized and unrealized
gain/loss for the period because of the timing of sales of series shares,
and the amount of per share realized and unrealized gains and losses at
such time.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
54
<Page>
<Table>
<Caption>
STRATEGIC VALUE SERIES
----------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
INITIAL CLASS 2003 2002*
------------ ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 7.90 $ 10.00
------------ ------------
Income from investment operations# --
Net investment income@ $ 0.07 $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency 2.09 (2.17)
------------ ------------
Total from investment operations $ 2.16 $ (2.10)
------------ ------------
Less distributions declared to shareholders--
From net investment income $ (0.01) $ --
------------ ------------
Net asset value -- end of period $ 10.05 $ 7.90
============ ============
Total return^^ 27.44% (21.00)%++
Ratios (to average net assets)/Supplemental
data@:
Expenses## 1.00% 1.01%+
Net investment income 0.80% 0.89%+
Portfolio turnover 38% 53%
Net assets at end of period (000 Omitted) $ 8 $ 6
</Table>
@ The investment adviser contractually agreed under a temporary expense
agreement to pay all of the series operating expenses, exclusive of
management fees, in excess of 0.25% of average daily net assets. To the
extent actual expenses were over this limitation, the net investment income
(loss) per share and the ratios would have been:
<Table>
Net investment income (loss) $ 0.02 $ (0.35)
Ratios (to average net assets):
Expenses## 1.59% 6.20%+
Net investment income (loss) 0.21% (4.30)%+
</Table>
<Table>
<Caption>
STRATEGIC VALUE SERIES
----------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, DECEMBER 31,
SERVICE CLASS 2003 2002*
------------ ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 7.90 $ 10.00
------------ ------------
Income from investment operations# --
Net investment income@ $ 0.05 $ 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency 2.08 (2.16)
------------ ------------
Total from investment operations $ 2.13 $ (2.10)
------------ ------------
Less distributions declared to shareholders --
From net investment income $ (0.01) $ --
------------ ------------
Net asset value -- end of period $ 10.02 $ 7.90
============ ============
Total return^^ 27.01% (21.00)%++
Ratios (to average net assets)/Supplemental
data@ :
Expenses## 1.25% 1.26%+
Net investment income 0.56% 0.81%+
Portfolio turnover 38% 53%
Net assets at end of period (000 Omitted) $ 8,199 $ 1,072
</Table>
@ The investment adviser contractually agreed under a temporary expense
agreement to pay all of the series' operating expenses, exclusive of
management and distribution fees, in excess of 0.25% of average daily net
assets. To the extent actual expenses were over this limitation, the net
investment income (loss) per share and the ratios would have been:
<Table>
Net investment loss $ --+++ $ (0.33)
Ratios (to average net assets):
Expenses## 1.84% 6.45%+
Net investment loss (0.03)% (4.38)%+
</Table>
* For the period from the commencement of the series' investment operations,
May 1, 2002, through December 31, 2002.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by SunLife of Canada (U.S.) and
SunLife (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
55
<Page>
<Table>
<Caption>
TECHNOLOGY SERIES
-----------------------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
------------------------------------ DECEMBER 31,
INITIAL CLASS 2003 2002 2001 2000*
---------- ---------- ---------- -------------
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 2.82 $ 5.22 $ 8.52 $ 10.00
---------- ---------- ---------- -------------
Income (loss) from investment operations# --
Net investment income (loss)@ $ (0.02) $ (0.02) $ (0.02) $ 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency 1.30 (2.38) (3.28) (1.49)
---------- ---------- ---------- -------------
Total from investment operations $ 1.28 $ (2.40) $ (3.30) $ (1.48)
---------- ---------- ---------- -------------
Less distributions declared to shareholders --
From net investment income $ -- $ -- $ --+++ $ --
In excess of net investment income -- -- --+++ --
---------- ---------- ---------- -------------
Total distributions declared to shareholders $ -- $ -- $ --+++ $ --
---------- ---------- ---------- -------------
Net asset value -- end of period $ 4.10 $ 2.82 $ 5.22 $ 8.52
========== ========== ========== =============
Total return^^ 45.39% (45.98)% (38.87)% (14.60)%++
Ratios (to average net assets)/Supplemental
data@:
Expenses## 1.06% 0.91% 0.90% 1.02%+
Net investment income (loss) (0.65)% (0.61)% (0.39)% 0.09%+
Portfolio turnover 191% 210% 310% 271%
Net assets at end of period (000 Omitted) $ 28,376 $ 14,020 $ 33,855 $ 31,907
</Table>
@ The investment adviser contractually agreed under a temporary expense
agreement to pay all of the series' operating expenses, exclusive of
management fees, in excess of 0.25% of average daily net assets for a
portion of the periods indicated. To the extent actual expenses were over
this limitation the net investment loss per share and the ratios would have
been:
<Table>
Net investment income (loss) $ (0.02) $ -- $ -- $ --+++
Ratios (to average net assets):
Expenses## 1.09% -- -- 1.16%+
Net investment loss (0.68)% -- -- (0.05)%+
</Table>
<Table>
<Caption>
TECHNOLOGY SERIES
---------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------- PERIOD ENDED
SERVICE CLASS 2003 2002 DECEMBER 31, 2001**
---------- ---------- -------------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 2.80 $ 5.22 $ 5.32
---------- ---------- -------------------
Income (loss) from investment operations# --
Net investment loss@ $ (0.03) $ (0.03) $ (0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency $ 1.30 (2.39) (0.08)
---------- ---------- -------------------
Total from investment operations $ 1.27 $ (2.42) $ (0.10)
---------- ---------- -------------------
Net asset value -- end of period $ 4.07 $ 2.80 $ 5.22
========== ========== ===================
Total return^^ 45.36% (46.36)% (1.88)%++
Ratios (to average net assets)/Supplemental
data@ :
Expenses## 1.30% 1.16% 1.15%+
Net investment loss (0.91)% (0.85)% (0.90)%+
Portfolio turnover 191% 210% 310%
Net assets at end of period (000 Omitted) $ 4,094 $ 1,509 $ 947
</Table>
@ The investment adviser contractually agreed under a temporary expense
agreement to pay all of the series' operating expenses, exclusive of
management and distribution fees, in excess of 0.25% of average daily net
assets for a portion of the period indicated. To the extent actual expenses
were over this limitation the net investment loss per share and the ratios
would have been:
<Table>
Net investment loss $ (0.03)
Ratios (to average net assets):
Expenses## 1.33%
Net investment loss (0.94)%
</Table>
* For the period from the commencement of the series' investment operations,
June 16, 2000, through December 31, 2000.
** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
56
<Page>
<Table>
<Caption>
VALUE SERIES
--------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
INITIAL CLASS 2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.05 $ 12.88 $ 14.45 $ 11.21 $ 10.50
---------- ---------- ---------- ---------- ----------
Income (loss) from investment operations# --
Net investment income $ 0.19 $ 0.19 $ 0.17 $ 0.20 $ 0.20
Net realized and unrealized gain (loss) on
investments and foreign currency 2.56 (1.93) (0.55) 3.16 0.54
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 2.75 $ (1.74) $ (0.38) $ 3.36 $ 0.74
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.19) $ (0.09) $ (0.75) $ (0.07) $ (0.03)
From net realized gain on investments and
foreign currency transactions -- -- (0.42) (0.05) --
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.02) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.19) $ (0.09) $ (1.19) $ (0.12) $ (0.03)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 13.61 $ 11.05 $ 12.88 $ 14.45 $ 11.21
========== ========== ========== ========== ==========
Total return^^ 25.31% (13.58)% (7.46)% 30.25% 7.05%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.84% 0.83% 0.85% 0.87% 1.01%
Net investment income 1.65% 1.57% 1.31% 1.66% 1.81%
Portfolio turnover 57% 51% 63% 85% 76%
Net assets at end of period (000 Omitted) $ 310,818 $ 266,892 $ 288,239 $ 124,221 $ 41,172
<Caption>
VALUE SERIES
--------------------------------------
YEAR ENDED DECEMBER 31, PERIOD ENDED
----------------------- DECEMBER 31,
SERVICE CLASS 2003 2002 2001*
---------- ---------- ------------
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.01 $ 12.86 $ 13.12
---------- ---------- ------------
Income (loss) from investment operations# --
Net investment income $ 0.16 $ 0.17 $ 0.05
Net realized and unrealized gain (loss) on
investments and foreign currency 2.56 (1.93) (0.31)
---------- ---------- ------------
Total from investment operations $ 2.72 $ (1.76) $ (0.26)
---------- ---------- ------------
Less distributions declared to shareholders from
net investment income -- $ (0.17) $ (0.09) $ --
---------- ---------- ------------
Net asset value -- end of period $ 13.56 $ 11.01 $ 12.86
========== ========== ============
Total return^^ 25.09% (13.77)% (1.98)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.09% 1.08% 1.11%+
Net investment income 1.39% 1.41% 1.00%+
Portfolio turnover 57% 51% 63%
Net assets at end of period (000 Omitted) $ 83,780 $ 46,646 $ 16,481
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
^^ The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
See notes to financial statements.
57
<Page>
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 (the 1940 Act), as amended, as an open-end
management investment company consisting of twenty-nine separate series (the
series) of shares: Bond Series, Capital Appreciation Series, Capital
Opportunities 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, Managed Sectors 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 Growth and Income Series*, Research International
Series*, Strategic Growth Series*, Strategic Income Series, Strategic Value
Series*, Technology Series*, Total Return Series, Utilities Series and Value
Series*. All of these series are diversified except for the Global Governments
Series, Global Growth Series, Global Total Return Series, High Yield Series,
Managed Sectors Series, Mid Cap Growth Series, Strategic Income Series and
Utilities Series, which are non-diversified as that term is defined in the 1940
Act. The shares of each series are sold only to variable accounts established by
Sun Life Assurance Company of Canada (U.S.) and Sun Life Insurance and Annuity
Company of New York 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 accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. Certain series can invest in foreign securities. Investments in
foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations -- Each series uses independent pricing services approved
by the Board of Trustees wherever possible to value its portfolio securities.
Portfolio securities are valued at current market prices where current market
prices are readily available, or each series may fair value portfolio securities
under the direction of the Board of Trustees when a determination is made that
current market prices are not readily available. Equity securities in each
series' portfolio for which market quotations are available are valued at the
last sale or official closing price as reported by an independent pricing
service on the primary market or exchange on which they are primarily traded, or
at the last quoted bid price for securities in which there were no sales during
the day. Equity securities traded over the counter are valued at the last sales
price traded each day as reported by an independent pricing service, or to the
extent there are no sales reported, such securities are valued on the basis of
quotations obtained from brokers and dealers. Equity securities for which it is
determined that current market prices are not readily available will be fair
valued under the direction of the Board of Trustees. Each series may also fair
value foreign equity securities in cases where closing market prices are not
readily available or are deemed not reflective of readily available market
prices. For example, significant events (such as movement in the U.S. securities
market, or other regional and local developments) may occur between the time
that foreign markets close (where the security is principally traded) and the
time that each series calculates its net asset value (generally, the close of
the NYSE) that may impact the value of securities traded in these foreign
markets. In these cases, each series may utilize information from an external
vendor or other sources to adjust closing market prices of foreign equity
securities to reflect what it believes to be the fair value of the securities as
of the series' valuation time. Because the frequency of significant events is
not predictable, fair valuation of foreign equity securities may occur on a
frequent basis. Short-term obligations with a remaining maturity in excess of 60
days will be valued upon dealer-supplied valuations. All other short-term
obligations in each series' portfolio are valued at amortized cost, which
constitutes market value as determined by the Board of Trustees.
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 of the
Trust, along with other affiliated entities of Massachusetts Financial Services
Company (MFS), may utilize a joint trading account for the purpose of entering
into one or more repurchase agreements.
Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Security Loans -- State Street Bank and Trust Company ("State Street") and J.P.
Morgan Chase and Co. ("Chase"), as lending agents, 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 and Chase provide each series with indemnification against
Borrower default. Each series bears the risk of loss with respect to the
investment of cash collateral.
Cash collateral is invested in a money market fund and/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 agents. On loans collateralized by U.S. Treasury securities, a fee is
received
58
<Page>
from the Borrower, and is allocated between the series and the lending
agents. Income from securities lending is included in interest income on the
Statement of Operations. The dividend and interest income earned on the
securities loaned is accounted for in the same manner as other dividend and
interest income.
At December 31, 2003, the value of securities loaned for the New Discovery
Series was $58,493,110. These loans were collateralized by cash of $60,130,997
and non-cash U.S. Treasury obligations of $296,224.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with accounting principles generally accepted in the United States of
America. All discount is accreted for tax reporting purposes as required by
federal income tax regulations. Dividends received in cash are recorded on the
ex-dividend date. Dividend and interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date. 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.
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. For the year ended December 31, 2003, each series' custodian fees were
reduced under this arrangement as noted below. Each series has entered into a
directed brokerage agreement, under which the broker will credit the series a
portion of the commissions generated, to offset certain expenses of the series.
For the year ended December 31, 2003, each series' miscellaneous expenses were
reduced under this agreement as noted below. These amounts are shown as a
reduction of total expenses on the Statement of Operations.
<Table>
<Caption>
CAPITAL INTERNATIONAL MASSACHUSETTS MID CAP
OPPORTUNITIES GROWTH INVESTORS GROWTH VALUE
SERIES SERIES STOCK SERIES SERIES
------------------------------------------------------------------------------------------------------
Balance credits $ 360 $ -- $ -- $ 54
Directed brokerage credits 4,300 -- 63,027 --
------------- ----------------- ---------------- ---------
Total $ 4,660 $ -- $ 63,027 $ 54
------------- ----------------- ---------------- ---------
<Caption>
NEW RESEARCH RESEARCH STRATEGIC
DISCOVERY GROWTH AND INCOME INTERNATIONAL GROWTH
SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------
Balance credits $ 102 $ 85 $ -- $ 16
Directed brokerage credits 273 10,427 -- 1,604
------------- ----------------- ---------------- ---------
Total $ 375 $ 10,512 $ -- $ 1,620
------------- ----------------- ---------------- ---------
<Caption>
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------
Balance credits $ 28 $ 10 $ 241
Directed brokerage credits -- 126 9,415
----------------- ---------------- ---------
Total $ 28 $ 136 $ 9,656
----------------- ---------------- ---------
</Table>
Tax Matters and Distributions -- Each series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. Each series
distinguishes between distributions on a tax basis and a financial reporting
basis and only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. Common
types of book and tax differences that could occur include differences in
accounting for currency transactions, real estate investment trusts, and net
operating losses.
59
<Page>
The tax character of distributions declared for the years ended December 31,
2003, and December 31, 2002, was as follows:
<Table>
<Caption>
MASSACHUSETTS INVESTORS
CAPITAL OPPORTUNITIES SERIES INTERNATIONAL GROWTH SERIES GROWTH STOCK SERIES
----------------------------- --------------------------------- -----------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- --------------------------------- -----------------------
2003 2002 2003 2002 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 907,389 $ 316,427 $ 738,126 $ 637,087 $ -- $ 926,984
------------- ------------- --------------- --------------- ---------- ----------
<Caption>
MID CAP VALUE SERIES RESEARCH GROWTH AND INCOME SERIES
----------------------------- ---------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------------
2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 1,651 $ -- $ 561,841 $ 599,444
------------- ------------- --------------- ---------------
<Caption>
RESEARCH INTERNATIONAL SERIES STRATEGIC VALUE SERIES
----------------------------- ---------------------------------
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- ---------------------------------
2003 2002 2003 2002
- -------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 410,974 $ 200,297 $ 3,650 $ --
------------- ------------- --------------- ---------------
<Caption>
VALUE SERIES
-----------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
2003 2002
- -------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 5,151,031 $ 2,727,162
------------- -------------
</Table>
For the year ended December 31, 2003, Massachusetts Investors Growth Stock
Series, New Discovery Series, Strategic Growth Series and Technology Series paid
no distributions. For the year ended December 31, 2002, New Discovery Series,
Strategic Growth Series, and Technology Series paid no distributions. For the
period from their commencement of operations on May 1, 2002 through December 31,
2002, Mid Cap Value Series and Strategic Value Series paid no distributions.
During the year ended December 31, 2003, the following amounts were reclassified
due to the difference between book and tax accounting for currency transactions,
net operating losses, and real estate investment trusts. These changes had no
effect on the net assets or net asset value per share.
<Table>
<Caption>
MASSACHUSETTS
CAPITAL INTERNATIONAL INVESTORS MID CAP
OPPORTUNITIES GROWTH GROWTH STOCK VALUE
INCREASE (DECREASE): SERIES SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ -- $ -- $ -- $ (1)
Accumulated net realized gain (loss) on investments and
foreign currency transactions (451) (41,910) 15,244 287
Accumulated undistributed net investment income (loss) 451 41,910 (15,244) (286)
<Caption>
RESEARCH
NEW GROWTH RESEARCH STRATEGIC
DISCOVERY AND INTERNATIONAL GROWTH
INCREASE (DECREASE): SERIES INCOME SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ (1,531,241) $ -- $ -- $ (30,748)
Accumulated net realized gain (loss) on investments and
foreign currency transactions 1,230 (6,854) 27,912 (182)
Accumulated undistributed net investment income (loss) 1,530,011 6,854 (27,912) 30,930
<Caption>
STRATEGIC
VALUE TECHNOLOLGY VALUE
INCREASE (DECREASE): SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ -- $ (154,599) $ 15,847
Accumulated net realized gain (loss) on investments and
foreign currency transactions -- 2,228 5,821
Accumulated undistributed net investment income (loss) -- 152,371 (21,668)
</Table>
60
<Page>
As of December 31, 2003, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
<Table>
<Caption>
MASSACHUSETTS
CAPITAL INTERNATIONAL INVESTORS MID CAP
OPPORTUNITIES GROWTH GROWTH STOCK VALUE
SERIES SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 1,274,601 $ 661,348 $ 320,382 $ 432,635
Undistributed long-term capital gain -- -- -- 25,645
Capital loss carryforward (343,044,353) (26,198,701) (462,695,771) --
Unrealized appreciation 25,976,221 26,335,973 2,407,704 1,452,087
Other temporary differences -- (8,782) -- --
<Caption>
RESEARCH
NEW GROWTH RESEARCH STRATEGIC
DISCOVERY AND INTERNATIONAL GROWTH
SERIES INCOME SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ -- $ 569,233 $ 525,163 $ --
Undistributed long-term capital gain -- -- -- --
Capital loss carryforward (100,964,259) (17,614,958) (22,487,348) (53,555,747)
Unrealized appreciation 49,894,406 9,401,204 16,289,361 5,083,062
Other temporary differences -- -- (11,302) --
<Caption>
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 193,957 $ -- $ 5,235,041
Undistributed long-term capital gain 29,193 -- --
Capital loss carryforward -- (39,749,356) (28,615,435)
Unrealized appreciation 836,597 3,576,405 40,491,540
Other temporary differences -- -- --
</Table>
At December 31, 2003, for federal income tax purposes, the following series had
a capital loss carryforward that may be applied against any net taxable realized
gains of each succeeding year until the earlier of its utilization or
expiration.
<Table>
<Caption>
CAPITAL INTERNATIONAL MASSACHUSETTS MID CAP
OPPORTUNITIES GROWTH INVESTORS GROWTH VALUE
EXPIRATION DATE SERIES SERIES STOCK SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 2009 $ (196,683,801) $ (13,437,011) $ (287,187,822) $ --
December 31, 2010 (146,360,552) (12,761,690) (175,507,949) --
December 31, 2011 -- -- -- --
-------------- -------------- ---------------- --------------
Total $ (343,044,353) $ (26,198,701) $ (462,695,771) $ --
============== ============== ================ ==============
<Caption>
NEW RESEARCH GROWTH RESEARCH STRATEGIC
DISCOVERY AND INCOME INTERNATIONAL GROWTH
SERIES SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
December 31, 2009 $ (30,293,725) $ (3,791,704) $ (13,343,908) $ (33,666,533)
December 31, 2010 (70,670,534) (13,823,254) (9,143,440) (17,626,481)
December 31, 2011 -- -- -- (2,262,733)
-------------- -------------- ---------------- --------------
Total $ (100,964,259) $ (17,614,958) $ (22,487,348) $ (53,555,747)
============== ============== ================ ==============
<Caption>
STRATEGIC
VALUE TECHNOLOLGY VALUE
SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------
December 31, 2008 $ -- $ (1,060,599) $ --
December 31, 2009 -- (22,186,687) (4,533,168)
December 31, 2010 -- (16,502,070) (20,121,899)
December 31, 2011 -- -- (3,960,368)
-------------- -------------- ----------------
Total $ -- $ (39,749,356) $ (28,615,435)
============== ============== ================
</Table>
For Technology Series, the availability of a portion of these respective capital
loss carryforwards which were acquired on September 5, 2003 in connection with
the MFS/Sun Life Global Telecommunications Series acquisition, may be limited in
a given year.
Realized gain is reported net of any foreign capital gains tax in the Statement
of Operations.
61
<Page>
Multiple Classes of Shares of Beneficial Interest -- Each series offers multiple
classes of shares, which differ in their respective distribution and service
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,
an indirect subsidiary of Sun Life Assurance Company of Canada (U.S.), to
provide overall investment advisory and administrative services, and general
office facilities. The management fee is computed daily and paid monthly at an
annual rate based on a percentage of each series' average daily net assets. The
agreement also provides that each series will be reimbursed for expenses in
excess of the expense limitation indicated below, based on the average net
assets of each series. Management fees and expense limitations are as follow:
<Table>
<Caption>
TOTAL
MANAGEMENT EXPENSE
FEE LIMITATION
----------------------------------------------------------------------------
Capital Opportunities Series 0.75%* N/A
International Growth Series 0.975%*# N/A
Massachusetts Investors Growth Stock Series 0.75%* N/A
Mid Cap Value Series 0.75% 0.25%**
New Discovery Series 0.90% N/A
Research Growth and Income Series 0.75% N/A
Research International Series 1.00%# N/A
Strategic Growth Series 0.75% N/A
Strategic Value Series 0.75% 0.25%**
Technology Series 0.75% 0.25%**
Value Series 0.75% N/A
</Table>
* The management fee for Capital Opportunities Series is 0.75% of the first $300
million of average net assets and 0.675% of average net assets in excess of $300
million. For the year ended December 31, 2003, the management fee for
International Growth Series was 0.975% of the first $500 million of average net
assets and 0.925% of average net assets in excess of $500 million. The
investment adviser has voluntarily agreed to reduce the management fee of
Massachusetts Investors Growth Stock Series to 0.70% of average net assets in
excess of $1 billion. This voluntary reduction in the management fee may be
rescinded by MFS only with the approval of the series' Board of Trustees.
** For Mid Cap Value Series, Strategic Value Series, and Technology Series, the
investment adviser contractually agreed under a temporary expense agreement to
pay all of the series' operating expenses, exclusive of management and
distribution fees, in excess of 0.25% of average daily net assets.
# Effective 01/01/04, the management fee for International Growth Series and
Research International Series will be 0.90% of the first $1 billion of average
net assets, 0.80% of the next $1 billion of average net assets, and 0.70% of
average net assets in excess of $2 billion.
Each series pays compensation to the Independent Trustees ("Trustees") in the
form of both a retainer and attendance fees, and pays no compensation directly
to its Trustees who are officers of the investment adviser, or to officers of
the series, 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, MFS Fund Distributors, Inc. (MFD), and MFS Service Center, Inc. (MFSC).
Administrator -- Each series has an administrative services agreement with MFS
to provide the series with certain financial, legal, shareholder communications,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each series pays MFS an administrative fee
up to the following annual percentage rates of the series' average daily net
assets:
<Table>
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
</Table>
Distributor -- MFD, a wholly owned subsidiary of MFS, is distributor of the
shares of the series. The Trustees have adopted a distribution plan for the
Service Class shares pursuant to Rule 12b-1 of the Investment Company Act of
1940 as follows:
Each series' distribution plan provides that the series will pay up to 0.25% per
annum of its average daily net assets attributable to Service Class shares to
cover marketing and other fees to support the sale and distribution of Service
Class shares. Fees incurred under the distribution plan during the year ended
December 31, 2003 were 0.25% of average daily net assets attributable to Service
Class shares on an annualized basis.
62
<Page>
(4) PORTFOLIO SECURITIES Purchases and sales of investments, other than
purchased option transactions and short-term obligations, were as follows:
<Table>
<Caption>
MASSACHUSETTS
CAPITAL INTERNATIONAL INVESTORS MID CAP
OPPORTUNITIES GROWTH GROWTH STOCK VALUE
SERIES SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) $ 164,887,673 $ 89,773,633 $ 1,324,401,807 $ 18,606,338
============== ============== ================ ==============
Sales
Investments (non-U.S. government securities) $ 205,738,800 $ 98,530,934 $ 1,341,658,580 $ 5,643,762
============== ============== ================ ==============
<Caption>
NEW RESEARCH RESEARCH STRATEGIC
DISCOVERY GROWTH AND INTERNATIONAL GROWTH
SERIES INCOME SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) $ 248,173,788 $ 107,037,449 $ 78,473,665 $ 57,000,596
============== ============== ================ ==============
Sales
Investments (non-U.S. government securities) $ 226,408,793 $ 107,183,801 $ 69,891,156 $ 37,763,701
============== ============== ================ ==============
<Caption>
STRATEGIC
VALUE TECHNOLOLGY VALUE
SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) $ 7,276,060 $ 49,724,182 $ 184,628,881
============== ============== ================
Sales
Investments (non-U.S. government securities) $ 1,509,852 $ 41,376,441 $ 181,483,632
============== ============== ================
</Table>
The cost and unrealized appreciation and depreciation in the value of the
investments owned by each series, as computed on a federal income tax basis, are
as follows:
<Table>
<Caption>
CAPITAL INTERNATIONAL MASSACHUSETTS
OPPORTUNITIES GROWTH INVESTORS GROWTH
SERIES SERIES STOCK SERIES
- ------------------------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 269,068,858 $ 103,720,461 $ 594,868,562
============== ================ ===============
Gross unrealized appreciation $ 40,929,683 $ 27,249,183 $ 9,990,932
Gross unrealized depreciation (14,953,462) (919,800) (7,584,275)
-------------- ---------------- ---------------
Net unrealized appreciation $ 25,976,221 $ 26,329,383 $ 2,406,657
============== ================ ===============
<Caption>
MID CAP NEW RESEARCH
VALUE DISCOVERY GROWTH AND
SERIES SERIES INCOME SERIES
- ----------------------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 15,645,561 $ 301,752,002 $ 80,940,904
============== ================ ===============
Gross unrealized appreciation $ 1,524,176 $ 58,014,996 $ 11,160,347
Gross unrealized depreciation (72,094) (8,120,590) (1,759,237)
-------------- ---------------- ---------------
Net unrealized appreciation $ 1,452,087 $ 49,894,406 $ 9,401,110
============== ================ ===============
<Caption>
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE
SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 91,940,209 $ 75,987,626 $ 7,303,835
============== ================ ===============
Gross unrealized appreciation $ 16,810,236 $ 7,951,634 $ 849,339
Gross unrealized depreciation (524,899) (2,868,678) (12,742)
-------------- ---------------- ---------------
Net unrealized appreciation $ 16,285,337 $ 5,082,956 $ 836,597
============== ================ ===============
<Caption>
TECHNOLOLGY
SERIES VALUE SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 28,696,896 $ 354,003,009
================ ===============
Gross unrealized appreciation $ 3,838,911 $ 43,033,941
Gross unrealized depreciation (262,601) (2,543,337)
---------------- ---------------
Net unrealized appreciation $ 3,576,310 $ 40,490,604
================ ===============
</Table>
63
<Page>
(5) SHARES OF BENEFICIAL INTEREST
The Trust's 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:
<Table>
<Caption>
CAPITAL OPPORTUNITIES SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 5,731,529 $ 62,261,227 7,816,185 $ 83,222,063
Shares issued to shareholders in
reinvestment of distributions 90,020 890,293 25,572 310,693
Shares reacquired (10,242,917) (106,123,750) (18,290,054) (192,767,726)
--------------- --------------- --------------- ---------------
Net decrease (4,421,368) $ (42,972,230) (10,448,297) $ (109,234,970)
=============== =============== =============== ===============
<Caption>
INTERNATIONAL GROWTH SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 17,427,446 $ 158,475,766 21,405,681 $ 190,592,764
Shares issued to shareholders in
reinvestment of distributions 78,473 673,301 59,605 579,362
Shares reacquired (18,699,087) (169,539,648) (23,287,477) (207,369,928)
--------------- --------------- --------------- ---------------
Net decrease (1,193,168) $ (10,390,581) (1,822,191) $ (16,197,802)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 1,050,333 $ 11,275,332 1,428,102 $ 15,671,550
Shares issued to shareholders in
reinvestment of distributions 1,732 17,096 473 5,734
Shares reacquired (952,712) (10,185,013) (753,704) (7,546,550)
--------------- --------------- --------------- ---------------
Net increase 99,353 $ 1,107,415 674,871 $ 8,130,734
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 4,889,389 $ 43,375,201 15,736,307 $ 139,445,776
Shares issued to shareholders in
reinvestment of distributions 7,564 64,825 5,945 57,725
Shares reacquired (4,826,366) (42,944,326) (14,812,511) (132,272,630)
--------------- --------------- --------------- ---------------
Net increase 70,587 $ 495,700 929,741 $ 7,230,871
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 20,408,527 $ 163,430,484 22,425,218 $ 177,682,791
Shares issued to shareholders in
reinvestment of distributions -- -- 102,030 888,683
Shares reacquired (26,056,445) (203,246,211) (40,439,370) (318,222,783)
--------------- --------------- --------------- ---------------
Net increase (decrease) (5,647,918) $ (39,815,727) (17,912,122) $ (139,651,309)
=============== =============== =============== ===============
<Caption>
MID CAP VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002*
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- 11,251 $ 112,510
Shares issued to shareholders in
reinvestment of distributions 3 24 -- --
Shares reacquired -- -- (9,000) (73,080)
--------------- --------------- --------------- ---------------
Net increase (decrease) 3 $ 24 2,251 $ 39,430
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 8,700,962 $ 69,795,492 7,225,853 $ 58,183,854
Shares issued to shareholders in
reinvestment of distributions -- -- 4,402 38,301
Shares reacquired (5,421,405) (43,607,875) (3,680,401) (27,639,554)
--------------- --------------- --------------- ---------------
Net increase 3,279,557 $ 26,187,617 3,549,854 $ 30,582,601
=============== =============== =============== ===============
<Caption>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002*
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 2,401,174 $ 22,364,748 136,684 $ 1,111,793
Shares issued to shareholders in
reinvestment of distributions 197 1,626 -- --
Shares reacquired (963,044) (9,070,063) (47,480) (380,120)
--------------- --------------- --------------- ---------------
Net increase 1,438,327 $ 13,296,311 89,204 $ 731,673
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
NEW DISCOVERY SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 22,713,040 $ 247,375,353 22,418,328 $ 250,596,854
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares reacquired (24,228,090) (260,743,048) (23,198,343) (257,626,974)
--------------- --------------- --------------- ---------------
Net decrease (1,515,050) $ (13,367,695) (780,015) $ (7,030,120)
=============== =============== =============== ===============
<Caption>
RESEARCH GROWTH AND INCOME SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 2,988,914 $ 33,507,139 3,042,239 $ 33,300,168
Shares issued to shareholders in
reinvestment of distributions 49,630 518,633 46,812 563,146
Shares reacquired (3,140,709) (34,316,777) (4,136,375) (44,611,348)
--------------- --------------- --------------- ---------------
Net decrease (102,165) $ (291,005) (1,047,324) $ (10,748,034)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 12,808,961 $ 142,295,303 7,244,088 $ 76,373,617
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares reacquired (10,887,079) (120,824,458) (4,247,202) (43,341,647)
--------------- --------------- --------------- ---------------
Net increase 1,921,882 $ 21,470,845 2,996,886 $ 33,031,970
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 400,134 $ 4,534,610 730,108 $ 8,177,436
Shares issued to shareholders in
reinvestment of distributions 4,147 43,208 3,022 36,298
Shares reacquired (342,681) (3,876,494) (331,578) (3,486,704)
--------------- --------------- --------------- ---------------
Net increase 61,600 $ 701,324 401,552 $ 4,727,030
=============== =============== =============== ===============
</Table>
* For the period from the commencement of the series' investment operations, May
1, 2002, through December 31, 2002.
64
<Page>
<Table>
<Caption>
RESEARCH INTERNATIONAL SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 2,906,178 $ 30,361,049 3,870,545 $ 36,745,010
Shares issued to shareholders in
reinvestment of distributions 40,840 380,627 17,856 187,845
Shares reacquired (3,691,524) (37,365,238) (4,859,276) (45,935,708)
--------------- --------------- --------------- ---------------
Net decrease (744,506) $ (6,623,562) (970,875) $ (9,002,853)
=============== =============== =============== ===============
<Caption>
STRATEGIC GROWTH SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 3,236,703 $ 21,208,639 2,872,976 $ 17,945,619
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares reacquired (3,400,634) (21,655,558) (5,289,852) (32,818,496)
--------------- --------------- --------------- ---------------
Net decrease (163,931) $ (446,919) (2,416,876) $ (14,872,877)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 5,228,152 $ 53,171,179 3,501,926 $ 32,766,975
Shares issued to shareholders in
reinvestment of distributions 3,267 30,347 1,186 12,452
Shares reacquired (3,591,239) (36,088,293) (3,108,667) (29,128,169)
--------------- --------------- --------------- ---------------
Net increase 1,640,180 $ 17,113,233 394,445 $ 3,651,258
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 6,207,143 $ 41,658,338 1,156,278 $ 7,443,300
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares reacquired (2,841,608) (19,082,216) (513,573) (3,040,383)
--------------- --------------- --------------- ---------------
Net increase 3,365,535 $ 22,576,122 642,705 $ 4,402,917
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
STRATEGIC VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED PERIOD ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002*
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- 11,251 $ 112,510
Shares issued to shareholders in
reinvestment of distributions 1 11 -- --
Shares reacquired -- -- (10,500) (87,150)
--------------- --------------- --------------- ---------------
Net increase 1 $ 11 751 $ 25,360
=============== =============== =============== ===============
<Caption>
YEAR ENDED PERIOD ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002*
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 1,245,004 $ 11,220,828 225,391 $ 1,843,446
Shares issued to shareholders in
reinvestment of distributions 438 3,639 -- --
Shares reacquired (562,914) (5,226,898) (89,682) (720,058)
--------------- --------------- --------------- ---------------
Net increase 682,528 $ 5,997,569 135,709 $ 1,123,388
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
TECHNOLOGY SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 5,647,401 $ 19,930,088 2,955,565 $ 9,895,925
Shares issued in connection with
acquisition of MFS/Sun Life Global
Telecommunications Series 414,189 1,619,479 -- --
Shares reacquired (4,120,441) (14,463,021) (4,464,947) (15,004,381)
--------------- --------------- --------------- ---------------
Net increase (decrease) 1,941,149 $ 7,086,546 (1,509,382) $ (5,108,456)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 874,566 $ 3,202,873 1,253,061 $ 5,296,694
Shares issued in connection with
acquisition of MFS/Sun Life Global
Telecommunications Series 149,182 578,825 -- --
Shares reacquired (556,004) (2,070,145) (896,115) (3,408,512)
--------------- --------------- --------------- ---------------
Net increase 467,744 $ 1,711,553 356,946 $ 1,888,182
=============== =============== =============== ===============
</Table>
*For the period from the commencement of the series' investment operations, May
1, 2002, through December 31, 2002.
65
<Page>
<Table>
<Caption>
VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 10,095,874 $ 121,420,880 16,279,634 $ 196,846,331
Shares issued to shareholders in
reinvestment of distributions 392,757 4,371,388 188,906 2,450,119
Shares reacquired (11,813,004) (139,315,973) (14,693,043) (170,712,187)
--------------- --------------- --------------- ---------------
Net increase (decrease) (1,324,373) $ (13,523,705) 1,775,497 $ 28,584,263
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 5,856,038 $ 71,134,766 5,427,667 $ 65,312,163
Shares issued to shareholders in
reinvestment of distributions 70,238 779,643 21,393 277,042
Shares reacquired (3,982,922) (48,402,688) (2,494,077) (28,727,918)
--------------- --------------- --------------- ---------------
Net increase 1,943,354 $ 23,511,721 2,954,983 $ 36,861,287
=============== =============== =============== ===============
</Table>
(6) LINE OF CREDIT
The Trust and other affiliated funds participate in an $800 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made for temporary financing needs. Interest is
charged to each series, based on its borrowings, at a rate equal to the bank's
base rate. In addition, a commitment fee, based on the average daily unused
portion of the line of credit, is allocated among the participating series at
the end of each quarter. The commitment fee allocated to each series for the
year ended December 31, 2003 was as follows:
<Table>
<Caption>
COMMITMENT
FEE
----------------------------------------------------------------------
Capital Opportunities Series $ 1,748
International Growth Series 613
Massachusetts Investors Growth Stock Series 3,498
Mid Cap Value Series 39
New Discovery Series 1,600
Research Growth and Income Series 444
Research International Series 441
Strategic Growth Series 301
Strategic Value Series 35
Technology Series 146
Value Series 2,047
</Table>
No series had significant borrowings during the year.
(7) ACQUISITIONS
At close of business on September 5, 2003, the MFS/Sun Life Technology Series
acquired all of the assets and liabilities of MFS/Sun Life Global
Telecommunications Series. The acquisition was accomplished by a tax-free
exchange of 414,189 and 149,182 shares of Initial Class and Service Class shares
of the series valued at $1,619,479 and $578,825, respectively for all of the
assets and liabilities of the MFS/Sun Life Global Telecommunications Series. The
MFS/Sun Life Global Telecommunications Series then converted all of its
outstanding shares for the shares of the MFS/Sun Life Technology Series and
distributed those shares to its shareholders. The MFS/Sun Life Global
Telecommunications Series net assets on that date were $2,198,304 including
$270,780 of unrealized appreciation, $0 of accumulated net investment income,
and $3,303,123 of accumulated net realized loss on investments and foreign
currency transactions. These assets were combined with those of the MFS/Sun Life
Technology Series. The aggregate net assets of the MFS/Sun Life Technology
Series after the acquisition were $27,814,932.
(8) LEGAL PROCEEDINGS
Massachusetts Financial Services Company ("MFS"), the series' investment
adviser, has reached agreement with the Securities and Exchange Commission
("SEC"), the New York Attorney General ("NYAG") and the Bureau of Securities
Regulation of the State of New Hampshire ("NH") to settle administrative
proceedings alleging false and misleading information in certain retail fund
prospectuses regarding market timing and related matters. These regulators
alleged that prospectus language for certain MFS funds was false and misleading
because, although the prospectuses for those funds in the regulators' view
indicated that the funds prohibited market timing, MFS did not limit trading
activity in 11 domestic large cap stock, high grade bond and money market funds.
The complaints by these regulatory authorities did not involve the series, but
rather involved MFS' retail funds. MFS' former Chief Executive Officer, John W.
Ballen, and former President, Keven R. Parke, have also reached agreement with
the SEC. Under the terms of the settlements, MFS and the executives neither
admit nor deny wrongdoing.
Under the terms of the settlements, a $225 million pool will be established and
funded by MFS for distribution to retail fund shareholders. MFS has further
agreed with the NYAG to reduce its management fees by approximately $25 million
annually over the next five years, and not to increase certain management
66
<Page>
fees during this period. MFS will also pay an administrative fine to NH in the
amount of $1 million. In addition, MFS and the retail funds will adopt certain
governance changes.
Messrs. Ballen and Parke have agreed to temporary suspensions from association
with any registered investment company or investment adviser, will pay
approximately $315,000 each to the SEC, and resigned their positions as trustees
of all MFS funds, and Mr. Ballen resigned his position as President of all MFS
funds.
MFS and certain MFS funds and their trustees and affiliates have been named as
defendants in class action and other lawsuits alleging similar claims concerning
market timing and seeking damages of unspecified amounts. In November 2003, the
SEC and Morgan Stanley DW, Inc. (Morgan Stanley) settled an enforcement action
against Morgan Stanely relating to the undisclosed receipt of fees from certain
mutual fund companies in return for preferred marketing of their funds. MFS was
one of the 14 fund companies reported to be on Morgan Stanley's preferred list.
As a result, MFS has been under investigation by the SEC relating to its
directed brokerage and revenue-sharing arrangements with various distributors of
its products, including Morgan Stanley. MFS is cooperating with the SEC's
investigation, which is ongoing. The outcome of this investigation is not yet
determinable and may result in sanctions, compensation payments or other
financial penalties.
Although MFS does not believe that these regulatory developments will have a
material adverse effect on the series, there can be no assurance that these
developments and/or the ongoing adverse publicity resulting from these
developments will not result in increased redemptions, reduced sales or other
adverse consequences.
This MFS(R)/Sun life Series Trust Annual Report is prepared for the general
information of contract owners. It is authorized for distribution to prospective
investors only when preceded or accompanied by the current prospectus.
67
<Page>
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE SHAREHOLDERS OF MFS/SUN LIFE SERIES TRUST:
We have audited the accompanying statement of assets and liabilities of Capital
Opportunities Series, International Growth Series, Massachusetts Investors
Growth Stock Series, Mid Cap Value Series, New Discovery Series, Research Growth
and Income Series, Research International Series, Strategic Growth Series,
Strategic Value Series, Technology Series and Value Series (each a portfolio of
MFS/Sun Life Series Trust) (the Trust), including the portfolios of investments,
as of December 31, 2003, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended. These financial statements and financial highlights
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2003, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Opportunities Series, International Growth Series, Massachusetts
Investors Growth Stock Series, Mid Cap Value Series, New Discovery Series,
Research Growth and Income Series, Research International Series, Strategic
Growth Series, Strategic Value Series, Technology Series, and Value Series, as
of December 31, 2003, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and the 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 17, 2004
68
<Page>
MFS/SUN LIFE SERIES TRUST
FEDERAL TAX INFORMATION -- Unaudited
For the year ended December 31, 2003, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations was as
follows:
<Table>
<Caption>
DIVIDENDS RECEIVED
DEDUCTION
------------------------------------------------------------------------------
Capital Opportunities Series 100%
International Growth Series 1.09%
Mid Cap Value Series 100%
Research Growth and Income Series 100%
Research International Series 0.42%
Strategic Value Series 100%
Value Series 100%
</Table>
For the year ended December 31, 2003, income from foreign sources and the
foreign tax credit were as follows:
<Table>
<Caption>
FOREIGN SOURCE FOREIGN
INCOME AND TAX
DIVIDENDS CREDIT
--------------------------------------------------------------------------
International Growth Series $ 2,102,478 $ 214,021
Research International Series 1,671,092 186,634
</Table>
69
<Page>
TRUSTEES AND OFFICERS
MFS(R)/SUN LIFE SERIES TRUST
500 Boylston Street, Boston, MA 02116-3741
The following table presents certain information regarding the Trustees and
executive officers of the Trust, including their principal occupations, which,
unless specific dates are shown, are of more than five years duration, although
the titles may not have been the same throughout.
NAME, POSITION WITH TRUST, LENGTH OF TIME SERVED, AGE,
PRINCIPAL OCCUPATION AND OTHER DIRECTORSHIPS(1):
INTERESTED TRUSTEES
C. James Prieur* Trustee (since July 1999) (born 4/21/51)
Sun Life Assurance Company of Canada, President and Chief Executive Officer
(since April 1999), General Manager, U.S. (until April 1999).
David D. Horn* Trustee (since April 1986) (born 6/7/41)
Private Investor; Retired; Sun Life Assurance Company of Canada, Former
Senior Vice President and General Manager for the United States (until 1997).
INDEPENDENT TRUSTEES
J. Kermit Birchfield Trustee and Chairman (since May 1997) (born 1/8/40)
Consultant; Century Partners, Inc. (investments), Managing Director; Dairy
Mart Convenience Stores, Inc. (convenience stores), Chairman; Displaytech,
Inc. (manufacturer of liquid crystal display technology), Director; HPSC,
Inc. (medical financing), Director; Intermountain Gas Company, Inc. (public
utility gas distribution), Director.
Robert C. Bishop Trustee (since May 2001) (born 1/13/43)
AutoImmune, Inc. (pharmaceutical product development), Chairman, President
and Chief Executive Officer; Caliper Technologies, Inc. (laboratory
analytical instruments), Director; Millipore Corporation
(purification/filtration products), Director; Quintiles Transnational Corp.
(contract services to the medical industry), Director.
Frederick H. Dulles Trustee (since May 2001) (born 3/12/42)
McFadden, Pilkington & Ward LLP (solicitors and registered foreign lawyers),
Partner; Jackson & Nash, LLP (law firm), Of Counsel (January 2000 to November
2000).
Derwyn F. Phillips Trustee (since April 1986) (born 8/31/30)
Retired.
Robert G. Steinhart Trustee (since May 2001) (born 6/15/40)
Private Investor; Bank One, Texas N.A., Vice 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 (since May 2001) (born 7/21/48)
Hawaii Small Business Development Center, Kaua'i Center, Center Director
(since March 2002); Displaytech, Inc. (manufacturer of liquid crystal display
technology), Chairman and Chief Executive Officer (until March 2002).
TRUSTEES EMERITUS
Garth Marston Trustee Emeritus (born 4/28/26)
Retired.
Samuel Adams(2)** Trustee Emeritus (born 10/19/25)
Retired.
OFFICERS
John W. Ballen(3)++ President (born 9/12/59)
Massachusetts Financial Services Company, Chief Executive Officer and
Director.
James R. Bordewick, Jr.++ Assistant Secretary and Assistant Clerk (born 3/6/59)
Massachusetts Financial Services Company, Senior Vice President and Associate
General Counsel.
Stephen E. Cavan++ Secretary and Clerk (born 11/6/53)
Massachusetts Financial Services Company, Senior Vice President, General
Counsel and Secretary.
Stephanie A. DeSisto++ Assistant Treasurer (born 10/01/53)
Massachusetts Financial Services Company, Vice President, (since April 2003);
Brown Brothers Harriman & co., Senior Vice President (November 2002 to April
2003); ING Group N.V./Aveltus Investment Management, Senior Vice President
(prior to November 2002)
Robert R. Flaherty++ Assistant Treasurer (born 9/18/63)
Massachusetts Financial Services Company, Vice President (since August 2000);
UAM Fund Services, Senior Vice President (prior to August 2000).
Richard M. Hisey++ Treasurer (born 8/29/58)
Massachusetts Financial Services Company, Senior Vice President (since July
2002); The Bank of New York, Senior Vice President (September 2000 to July
2002); Lexington Global Asset Managers, Inc., Executive Vice President and
Cheif Financial Officer (prior to September 2000); Lexington Funds, Treasurer
(prior to September 2000).
Robert J. Manning(4)++ President (born 10/20/63)
Massachusetts Financial Services Company, Chief Executive Officer,
President,Chief Investment Officer and Director
Ellen Moynihan++ Assistant Treasurer (born 11/13/57)
Massachusetts Financial Services Company, Vice President.
James O. Yost++ Assistant Treasurer (born 6/12/60)
Massachusetts Financial Services Company, Senior Vice President.
- ----------
(1) Directorships of companies required to report to the Securities and Exchange
Commission (the "SEC") (i.e. "public companies").
(2) Retired December 31, 2003, and became Trustee Emeritus.
(3) Resigned February 6, 2004.
(4) Appointed on February 6, 2004.
* "Interested person" of 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 Trust. The address
of Sun Life of Canada (U.S.) is One Sun Life Executive Park, Wellesley Hills,
Massachusetts.
** "Interested person" of Massachusetts Financial Services Company ("MFS"),
within the meaning of the 1940 Act. The address of MFS is 500 Boylston Street,
Boston, Massachusetts. Samuel Adams was an "interested person" of MFS because
the law firm of Kirkpatrick & Lockhart, LLP, where Mr. Adams was Of Counsel, has
served as counsel to some investment companies managed by MFS, and to MFS and
its affiliates within the past two fiscal years of the Trust.
The Series does not hold annual meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. this means that each
Trustee is elected to hold office until his or her successor is chosen and
qualified or until his or her earlier death, resignation, retirement or removal.
Each officer holds office until his or her successor is chosen and qualified, or
until he or she retires, resigns or is removed from office.
All Trustees currently serve as Trustees of each fund and have served in
that capacity continuously since originally elected or appointed.
All of the Trustees are also Managers of the Compass Variable Accounts,
separate accounts registered as investment companies. The executive officers of
the 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 36
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.
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
PORTFOLIO MANAGERS++
William J. Adams
S. Irfan Ali
David A. Antonelli
David M. Calabro
James J. Calmas
Barry P. Dargan
Dale A. Dutile
Kenneth J. Enright
Eric B. Fischman
Joseph C. Flaherty, Jr.
Steven R. Gorham
Robert Henderson
John D. Laupheimer, Jr.
Gregory Locraft
Constantine Mokas
Lisa B. Nurme
Edward L. O'Dette
Stephen Pesek
Donald F. Pitcher, Jr.
Michael W. Roberge
Matthew W. Ryan
Bernard Scozzafava
David E. Sette-Ducati
Maura A. Shaughnessy
Nicholas Smithie
James T. Swanson
Brooks Taylor
Peter C. Vaream
Terri A. Vitozzi
Barnaby Wiener
(C) 2004 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA.
++MFS Investment Management(R) SUNC-ANN-2/04 192M
<Page>
ITEM 2. CODE OF ETHICS.
The Registrant has adopted a Code of Ethics pursuant to Section 406 of the
Sarbanes-Oxley Act and as defined in the instructions to Form N-CSR that applies
to the Registrant's principal executive officer and principal financial and
accounting officer.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Messrs. Birchfield, Bishop, Steinhart and 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 the instructions to Form N-CSR. In addition, Messrs.
Birchfield, Bishop, Steinhart and Wright are each "independent" members of the
Audit Committee as defined in the instructions to 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 accountants to the series ("Funds") of the Registrant. In
addition, Deloitte may provide non-audit related services 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, 2003 and 2002, audit fees billed to the
Funds by Deloitte were as follows:
<Table>
<Caption>
REGISTRANT'S
AUDIT FEES
Fees billed by Deloitte: 2003 2002
---- ----
MFS/Sun Life - Bond Series $35,800 $35,800
MFS/Sun Life - Capital Appreciation Series 26,300 26,300
MFS/Sun Life - Capital Opportunities Series 26,300 26,300
MFS/Sun Life - Emerging Growth Series 26,300 26,800
MFS/Sun Life - Emerging Markets Equity Series 27,800 27,800
MFS/Sun Life - Global Governments Series 35,800 35,800
MFS/Sun Life - Global Growth Series 34,300 34,300
MFS/Sun Life - Global Total Return Series 36,300 34,300
MFS/Sun Life - Government Securities Series 30,300 30,300
MFS/Sun Life - High Yield Series 34,300 34,300
MFS/Sun Life - International Growth Series 27,800 27,800
MFS/Sun Life - International Value Series 28,300 28,300
MFS/Sun Life - Managed Sectors Series 26,800 26,800
MFS/Sun Life - Mass Investors Growth Stock Series 26,300 26,300
MFS/Sun Life - Mass Investors Trust Series 26,300 26,300
MFS/Sun Life - Mid Cap Growth Series 17,500 12,500
MFS/Sun Life - Mid Cap Value Series 12,000 12,600
MFS/Sun Life - Money Market Series 15,800 15,800
MFS/Sun Life - New Discovery Series 26,300 26,400
MFS/Sun Life - Research Growth and Income Series 26,300 26,300
MFS/Sun Life - Research International Series 26,300 26,300
MFS/Sun Life - Research Series 26,800 26,800
MFS/Sun Life - Strategic Growth Series 26,000 21,500
MFS/Sun Life - Strategic Income Series 26,300 26,300
MFS/Sun Life - Strategic Value Series 12,000 2,100
MFS/Sun Life - Technology Series 14,000 12,500
MFS/Sun Life - Total Return Series 35,800 35,800
MFS/Sun Life - Utilities Series 26,300 26,300
MFS/Sun Life - Value Series 26,300 26,300
------ ------
TOTAL $ 766,700 $ 745,000
--------- ---------
</Table>
For the fiscal years ended December 31, 2003 and 2002, fees billed by Deloitte
for audit-related, tax and other services provided to the Funds, MFS and MFS
Related Entities were as follows:
<Table>
<Caption>
AUDIT-RELATED TOTAL
FEES(1) TAX FEES(2) ALL OTHER FEES(3) NON-AUDIT FEES
Fees billed by Deloitte: 2003 2002 2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ---- ---- ----
To the Registrant:
MFS/Sun Life - Bond Series $ 0 $ 0 $3,000 $ 3,000 $ 0 $ 0 $3,000 $3,000
MFS/Sun Life - Capital Appreciation Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Capital Opportunities Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Emerging Growth Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Emerging Markets Equity Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Global Governments Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Global Growth Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Global Total Return Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Government Securities Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - High Yield Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - International Growth Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - International Value Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Managed Sectors Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Mass Investors Growth Stock Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Mass Investors Trust Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Mid Cap Growth Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Mid Cap Value Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Money Market Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - New Discovery Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Research Growth and Income Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Research International Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Research Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Strategic Growth Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Strategic Income Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Strategic Value Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Technology Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Total Return Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Utilities Series 0 0 3,000 3,000 0 0 3,000 3,000
MFS/Sun Life - Value Series 0 0 3,000 3,000 0 0 3,000 3,000
-------- -------- -------- -------- ------- -------- -------- --------
TOTAL FEES BILLED TO REGISTRANT $ 0 $ 0 $87,000 $87,000 $ 0 $ 0 $87,000 $87,000
-------- -------- -------- -------- ------- -------- -------- --------
To MFS and MFS Related Entities $430,950 $184,500 $2,195 $63,501 $94,000 $350,771 $527,145 $598,772
-------- -------- -------- -------- ------- -------- -------- --------
TOTAL FEES BILLED $430,950 $184,500 $ 89,195 $150,501 $94,000 $350,771 $614,145 $685,772
-------- -------- -------- -------- ------- -------- -------- --------
</Table>
(1) There were no Audit-Related services provided to the Funds by Deloitte for
the fiscal years ended December 31, 2003 and 2002. Audit-Related Fees for MFS
and MFS Related entities includes fees for internal control reviews.
(2) Fees included in the Tax Fees category comprise all services performed by
professional staff in the independent accountant's tax division except those
services related to the audit. This category includes fees for tax compliance,
tax planning, and tax advice. Tax compliance, tax advice, and tax planning
services include preparation of original and amended tax returns, tax advice
related to income recognition and distribution policies.
(3) All Other Fees includes fees for services related to financial information
system implementation, consultation on internal cost allocations, and in 2002,
staff assistance in preparing certain information required for tax disclosures
in financial reports.
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:
Pre-approval is needed for all planned and anticipated 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/or financial
reporting of the Funds. In the event such services arise between
regular meetings of the Audit Committee and it is not practical to seek
pre-approval at the next regular meeting of the Audit Committee, such
services may be referred to the Chair of the Audit Committee for
approval; provided that, the Chair may not approve any individual
engagement for such services exceeding $50,000 or multiple engagements
for such services in the aggregate exceeding $100,000 between such
regular meetings of the Audit Committee. Any engagement 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 Registrant and MFS and MFS Related Entities disclosed
above were approved by the audit committee pursuant to paragraph (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): Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to the Registrant.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not required at this time. [Required for reporting periods ending after January
1, 2004 (beginning with N-CSR's filed at the end of March 2004, for January 31,
2004 reporting period).]
<Page>
ITEM 10. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the registrant's principal financial officer and principal executive
officer have concluded that those disclosure controls and procedures provide
reasonable assurance that the material information required to be disclosed
by the registrant on this report is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the registrant's last fiscal half-year (the registrant's second fiscal
half-year in the case of an annual report) that has materially affected, or
is reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 11. 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.
<Page>
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
By (Signature and Title)* ROBERT J. MANNING
-----------------------------------------------------
Robert J. Manning, President
Date: FEBRUARY 23, 2004
-----------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* ROBERT J. MANNING
-----------------------------------------------------
Robert J. Manning, President (Principal Executive
Officer)
Date: FEBRUARY 23, 2004
-----------------------
By (Signature and Title)* RICHARD M. HISEY
-----------------------------------------------------
Richard M. Hisey, Treasurer (Principal Financial
Officer and Accounting Officer)
Date: FEBRUARY 23, 2004
-----------------------
* Print name and title of each signing officer under his or her signature.