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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
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)
James R. Bordewick, Jr.
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
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(Name and address of agents for service)
Registrant's telephone number, including area code: (617) 954-5000
Date of fiscal year end: December 31
Date of reporting period: December 31, 2004
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ITEM 1. REPORTS TO STOCKHOLDERS.
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MFS(R)/SUN LIFE SERIES TRUST
ANNUAL REPORT - DECEMBER 31, 2004
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 CEO of MFS 1
Management Review 2
Portfolio Composition 7
Performance Summary 16
Expense Table 22
Portfolio of Investments 24
Financial Statements 47
Notes to Financial Statements 62
Report of Independent Registered Public Accounting Firm 75
Federal Tax Information 76
Trustees and Officers 77
Proxy Voting Policies and Information Back Cover
Quarterly Portfolio Disclosure Back Cover
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THIS REPORT IS PREPARED FOR THE GENERAL INFORMATION OF CONTRACT OWNERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
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LETTER FROM THE CEO OF MFS
DEAR CONTRACT OWNERS,
For most investors, the main factor in determining long-term success is asset
allocation how they spread their money among stocks, bonds, and cash. In fact,
the total returns of investors may be more influenced by their asset allocation
strategy than by their security selection within each asset class. The principle
behind asset allocation is simple: by diversifying across a variety of types of
securities, investors reduce the overall risk of their portfolio because gains
in one area are likely to offset losses in another.
One of the dangers of not having an asset allocation plan is the temptation to
simply chase performance, by moving money into whichever asset class appears to
be outperforming at the moment. The problem with this approach is that by the
time a particular area of the market comes into favor, investors may have
already missed some of the best performance. We would suggest that one way to
benefit from swings in the market is to acquire a diversified portfolio so that
investors hold a range of asset classes BEFORE the market swings in their
direction.
UNDERSTAND YOUR EMOTIONS
It usually takes a bear market for people to appreciate the benefits of
diversification. At MFS, we believe proper asset allocation is important in all
market environments. But we understand that there are emotional components of
investment decisions that sometimes keep investors from achieving their long
term goals. The three common behaviors that negatively impact investment
decisions are overconfidence, looking backwards, and loss aversion.
- - OVERCONFIDENCE. After experiencing gains in the market, particularly during a
bull market, investors have a natural tendency to overestimate their own
abilities. During the global bull market of the late 1990s, for example, a
large number of investors traded their own stocks and made significant
profits. However, most of these same investors later handed back those
profitshares and then some -- because they focused more on short-term blips in
the market and less on the fundamental factors that affect a company's
long-term prospects.
- - LOOKING BACKWARDS. Although security prices are determined by expectations
about the future, many investors make choices based on the recent past.
Investors who have achieved momentary success in the market tend to take on
too much risk, believing that better than-average returns can be easily
duplicated. On the other hand, those who have had negative experiences tend to
become overly cautious and take on too little risk. Recent historical
experience tends to dictate an investor's frame of reference and may lead to
irrational decisions.
- - LOSS AVERSION. Simply put, investors would rather avoid the immediate pain of
losses than enjoy the future pleasure of gains. As a result, some investors
tend to overreact to short term downturns in the market by seeking to mitigate
their losses, rather than remaining invested to benefit from the long-term
growth potential of the stock and bond markets.
THINK LIKE A PROFESSIONAL INVESTOR
Asset allocation helps reduce the emotional factors that tend to affect the long
term returns of investors. Professional investors -- those who manage assets for
money management firms, pension funds, and endowments -- have tended to
outperform the average retirement investor because they focus on asset
allocation. For example, the investment performance of the average 401(k)
participant has lagged these professional investors by more than two percentage
points a year, on average, over the past 10 years.(1)
We think asset allocation is one of the most important decisions for investors.
A study of the performance of 91 large U.S. corporate pension plans with assets
of more than $100 million over a 10 year period beginning in 1974 concluded that
asset allocation policies accounted for 93.6% of their returns, while individual
security selection and the timing of their investments accounted for only 6.4%
of their overall performance.(2)
Professional investors target a realistic level of return based on the amount of
risk they are willing to take, then set allocations to meet their goals. On
average, U.S. professional investors allocate 35% to 40% of their assets to
domestic equity stocks; 20% to 30% to fixed income issues; 10% to international
stocks; and between 10% and 20% to other investment classes such as real
estate.(3) And within those categories, they hold a broad range of styles and
asset classes.
In contrast, 401(k) participants who held company stock in their retirement
plans at the end of 2002 had roughly 42% of their retirement assets in company
stock while the rest was allocated to either growth or value stock funds.(4)
These participants virtually ignored the broad range of equity, fixed-income,
and international offerings provided by their retirement plans.
ALLOCATE, DIVERSIFY, REBALANCE
We recommend working with a professional adviser to find an optimal mix of
investments based on your individual goals. In our view, a disciplined asset
allocation strategy is composed of three simple steps: allocate, diversify and
rebalance.
- - ALLOCATE. Investors should work with their financial adviser to specify their
long-term goals and tolerance for risk. Then investors should allocate their
assets across the major asset classes -- stocks, bonds, and cash -- to help
them pursue an investment return that is consistent with their risk tolerance
level.
- - DIVERSIFY. By diversifying their assets, investors trade some performance in
the top performing categories for a more predictable and stable portfolio. At
the same time, investors should include different investment styles and market
capitalizations of stocks and a range of fixed-income investments, as well as
U.S. and non-U.S. securities. Because security subclasses tend to move in and
out of favor during various market and economic environments, a broad
portfolio increases the benefits of diversification.
- - REBALANCE. We suggest that investors consult with their professional advisers
periodically to rebalance their portfolios to maintain the percentages that
they have dedicated to each asset class. Allocations can shift as markets rise
and fall, making for a riskier or more conservative portfolio than an investor
originally intended. For example, a portfolio of 50% stocks and 50% bonds at
the start of 2000 would have shifted to 32% stocks and 68% bonds at the end of
2002 because of the weak stock market.(5)
In short, these three simple concepts -- allocate, diversify and rebalance --
help take emotion out of the investment process and help prevent investors from
trying to outguess the market. An asset allocation strategy cannot turn a down
market cycle into a good one, but it is an invaluable tool to manage risk and
keep investors on track toward reaching their long term investment goals.
A DISCIPLINED INVESTMENT PROCESS IS PARAMOUNT
Disciplined diversification has helped investors pursue long-term, above-average
results through the years. Since 1924, when we invented the mutual fund, MFS(R)
has strived to give investors the products and tools they need to maintain
well-diversified portfolios. MFS provides a variety of products in each asset
class as well as a family of asset allocation funds. These asset allocation
portfolios cover a range from conservative to moderate, growth,
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and aggressive growth allocations, each with a strategy based on a distinct
level of risk. We recommend developing a comprehensive financial plan with an
investment advisor who is familiar with your risk tolerance, your individual
goals, and your financial situation.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
Investment Advisor to the MFS/Sun Life Series Trust
January 14, 2005
Asset allocation and diversification can not guarantee a profit or protect
against a loss. The opinions expressed in this letter are those of MFS, and no
forecasts can be guaranteed.
(1) Source: Watson Wyatt
(2) "Determinants of Portfolio Performance," in Financial Analysts Journal,
January/February 1995, by Gary P. Brinson, L. Randolph Hood, and Gilbert L.
Beebower
(3) Source: Greenwich Associates
(4) Source: Hewitt Associates
(5) Source: Lipper Inc.
STOCK MARKET ENVIRONMENT
In 2004, many measures of global economic growth, including employment and
corporate spending, continued to improve, although we feel that record high oil
prices, rising short-term interest rates in the U.S., a decline in the value of
the U.S. dollar against most major currencies, as well as geopolitical
uncertainty impacted markets. Going into the last quarter of 2004, oil prices
pulled back from their record levels, and in our view, investors seemed to
recognize that corporate profits and economic growth were up considerably for
the year.
BOND MARKET ENVIRONMENT
Bond market returns in 2004 turned out to be a pleasant surprise. At about
mid-year, we believe improving economic fundamentals prompted the U.S. Federal
Reserve Board to raise short-term rates -- marking the first rate increase in
four years. While the Fed followed with four more hikes throughout the year, we
feel that enough uncertainty about the strength of the economic recovery
remained to fuel investor demand in U.S. Treasuries and other high-quality
bonds, both of which are seen as a refuge in times of economic concern.
(Principal and interest of U.S. Treasury securities are guaranteed by the U.S.
government if held to maturity.) Perhaps the biggest surprise of 2004 was that
long-term interest rates -- which we believed were expected to rise -- did not.
In the high yield market, we believe easy access to capital, a declining default
rate, and stronger credit profiles aided returns throughout the year.
From our perspective, the improvement in equity markets going into the last
quarter of 2004 prevented significant advances in most bond markets. Even so,
the slowdown in U.S. GDP and job growth, in the second half of the year, curbed
expectations about the pace of the economic recovery. We believe that such
concerns, combined with geopolitical worries about Iraq and fear of future
terrorist attacks, kept investors focused on bond markets
MANAGEMENT REVIEW
BOND SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 6.25% while Service Class shares provided a return of
5.91%. These returns do not reflect any applicable contract or surrender charges
and compare with a return of 4.19% for the series' benchmark, the Lehman
Brothers Government/Credit Index. The series mainly seeks as high a level of
current income as is believed to be consistent with prudent investment risk; its
secondary objective is to seek to protect contract owners' capital. The series
invests, under normal market conditions, at least 80% of its net assets in fixed
income securities, including U.S. government securities, mortgage-backed and
asset-backed securities, and corporate bonds.
CONTRIBUTORS TO PERFORMANCE
Over the period, the portfolio benefited from an overweight position in
corporate bonds and a consequent underweight in U.S. Treasuries relative to our
benchmark, the Lehman Brothers Government/Credit Index. Our exposure to
investment-grade corporate bonds and higher quality high yield bonds contributed
to relative results. These bonds outperformed treasuries over the period, while
also generating a favorable yield advantage over our benchmark. Overweight
positions in the industrials, telecommunications, utility, and bank and finance
sectors aided results. Good bond selection in the energy and electric utility
groups, as well as in the commercial mortgage-backed securities sector, also
contributed to favorable results. Finally, while we do not actively manage
interest rates, our overall duration positioning was slightly shorter than the
series' benchmark, thereby contributing to positive results. (Duration is a
measure of sensitivity to interest rate changes.)
DETRACTORS FROM PERFORMANCE
On the negative side, our allocation to the agency and supranational sectors
detracted from relative results. As the period began, we felt that the
strengthening U.S. economy and improving fundamentals in credit quality would
benefit corporate bonds. While that outlook proved to be correct, our subsequent
underweighting of higher-quality sectors such as agencies and supranationals
detracted from performance as these sectors also outperformed treasuries.
Finally, while overall security selection within the corporate bond market
benefited the series, our positions in telecommunications firm Citizens
Communications and Cox Communications, a cable television company, held back
results. In our view, both companies' bonds were impacted by shareholder
friendly financial engineering during the period. Citizens bonds were impacted
negatively when the company leveraged its balance sheet to buy back stock.
Historically, a leveraged buyout has generally proven bad for bond holders
because a company's debt load increases and the value of existing debt often
declines on concerns about the firm's ability to carry a heavier debt load. Cox
Communications debt declined in value when the company was taken private by its
controlling shareholders.
EMERGING MARKETS EQUITY SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 27.18%, while Service Class shares provided a return
of 26.96%. These returns do not reflect any applicable surrender or contract
charges and compare with a return of 25.95% for the series' benchmark, the MSCI
Emerging Markets Index. The investment objective of the series is to seek
capital
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appreciation. The series invests, under normal market conditions, at least 80%
of its net assets in common stocks and related securities, such as preferred
stock, convertible securities and depositary receipts, of emerging market
issuers.
CONTRIBUTORS TO PERFORMANCE
Stock selection and, to a lesser extent, our overweighted position in the
financial services sector boosted relative results for the period. Absa Group,
African Bank Investments, and Standard Bank Group were among the series' overall
top contributors to relative performance. Our avoidance of troubled finance
company LG Card, South Korea's largest credit card issuer, also helped results.
In the technology sector, our underweighted position as well as stock selection
aided relative returns. Our relative positioning in poor-performing UTD Micro
Electronics* contributed to overall results.
Stock selection in the basic materials sector also helped the series' relative
performance. Our holdings of Brazilian mining company Companhia Vale do Rio Doce
boosted relative returns for the period. Our positioning in Mexico City-based
Corp. Geo SA, a leading developer of housing in Mexico and Latin America, also
aided relative results. Avoiding Yukos, one of Russia's largest oil firms,
contributed to performance as the company filed for bankruptcy during the
period.
DETRACTORS FROM PERFORMANCE
Stock selection in the health care sector and our underweighted position in the
utilities and communications sector held back relative performance for the
period. Health care company Taro Pharmaceutical* was among the series' overall
top detractors. In the utilities and communications sector, our holdings of
Brasil Telecom held back relative results.
Stocks in other sectors that detracted from the series' relative performance
included mining company MMC Norilsk Nickel, technology company AU Optronics, and
Brazilian energy company Petroleo Brasileiro.
During the reporting period, the total impact of currency movements was a
detractor to performance relative to the benchmark. The base currency of the
series is the U.S. dollar and the performance of the series and its benchmark is
presented in terms of this currency. Nevertheless, specific holdings of the
series and benchmark may be denominated in different currencies and, therefore,
present the possibility of currency depreciation or appreciation. Because the
exposures of the series and the benchmark to foreign currency movements may
differ, from time to time, these movements may have a material impact on
relative performance. The series' cash position also held back relative
performance. As with nearly all annuity subaccounts, this series holds some cash
to buy new holdings and to provide liquidity. In a period when emerging markets
- -- as measured by the MSCI Emerging Markets Index -- rose, holding any cash hurt
relative performance. The index does not have a cash position.
* Stock was not held in the portfolio at the end of the period.
GLOBAL GOVERNMENT SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 10.06%, while Service Class shares provided a return
of 9.80%. These returns do not reflect any applicable contract or surrender
charges and compare with a return of 10.35% for the series' benchmark, the
Citigroup World Government Bond Index. The series seeks to provide moderate
current income, preservation of capital and growth of capital by investing in
debt obligations that are issued or guaranteed as to principal and interest by
either (i) the U.S. Government, its agencies, authorities or instrumentalities
or (ii) the governments of foreign countries. The series invests, under normal
market conditions, at least 80% of its net assets in fixed-income securities of
the U.S. government and foreign government securities of developed countries.
The series may also invest in derivative instruments to offset adverse impacts
in various markets.
DETRACTORS FROM PERFORMANCE
During the reporting period, the portfolio was adversely affected by our
position in the British pound, as well as an underweight in Japanese bonds. Our
country selection in euro-area bonds also detracted from performance.
CONTRIBUTORS TO PERFORMANCE
The portfolio benefited markedly from an overweight in the euro, as well as from
currency overweights in the dollar bloc (Canada, Australia, and New Zealand),
Sweden, and Eastern Europe (Poland and the Czech Republic). We also added value
with bond overweights in Denmark, Sweden, and Australia. Our underweight and
sector selection in U.S. bonds also added to performance, as did our curve
positioning in U.K. bonds.
GLOBAL TOTAL RETURN SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 17.12%, while Service Class shares provided a total
return of 16.88%. These returns, which do not reflect any applicable contract or
surrender charges, compare with a return of 10.87% for the series' primary
benchmark, the Standard & Poor's 500 Stock Index, and a return of 12.90% for the
series' secondary benchmark, a customized benchmark comprised of 60% of the
Morgan Stanley Capital International (MSCI) World Index, and 40% of the J.P.
Morgan Global Government Bond Index. The series seeks total return by investing
in securities which will provide above-average current income (compared to a
portfolio invested entirely in equity securities) and opportunities for
long-term growth of capital and income. The series is a "global balanced fund,"
and invests in a combination of global equity and fixed income securities. Under
normal market conditions, the series invests at least 40%, but not more than
75%, of its net assets in equity securities. In addition, at least 25% of its
net assets are invested in fixed-income securities.
CONTRIBUTORS TO PERFORMANCE
For the equity portion of the portfolio, stock selection in utilities and
communications, and health care contributed significantly to performance
relative to the MSCI World Index. From an allocation perspective, our decision
to underweight the lackluster technology sector contributed to results. In
utilities and communications, the series benefited from our positions in energy
provider Fortum Corp. and Texas-based electric power generator TXU. Prices for
both stocks rose sharply over the period. The portfolio also benefited from
avoiding Intel and Cisco Systems, two technology stocks that declined
significantly during the period. Stocks in other sectors that contributed to
relative performance included Syngenta, Italcementi, and Yell Group, from the
basic materials, autos and housing, and leisure sectors, respectively. Our
relative positioning in poor-performing health care company Pfizer also
contributed to the series' relative results.
For the fixed income portion of the portfolio, the series benefited markedly
from an overweight in the euro, as well as from currency overweights in the
dollar bloc (Canada, Australia, and New Zealand), Sweden, Switzerland, and
Eastern Europe (Poland and the Czech Republic). We also added value with bond
overweights in the euro area, Denmark, Sweden, and Australia. Our underweight,
curve positioning, and sector selection in U.S. bonds also added significantly
to performance. Our curve positioning in U.K. bonds also benefited the series.
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DETRACTORS FROM PERFORMANCE
For the equity portion of the portfolio, stock selection in financial services
and retailing detracted from results relative to the MSCI World Index. To a
lesser extent, slightly overweighting financial services and underweighting
retailing also held back relative returns. At the stock level, financial
services firms Converium Holdings*, Fannie Mae, and Goldman Sachs Group held
back results. Although the utilities and communications sector was a top overall
contributor, two stocks from this sector, France Telecom* and KDDI Corp., were
among our top detractors. In the leisure sector, media conglomerates Tribune and
Viacom detracted from relative results. Stocks in other sectors that held back
results included Sanyo Shokai and Union Pacific*, from the leisure and
transportation sectors respectively.
During the reporting period, the fixed income portion of the portfolio was
adversely affected by our positions in the British pound and Japanese yen, as
well as an underweight in Japanese bonds. Our position in Canadian bonds, as
well as country selection in euro-area bonds also detracted from performance.
The series' cash position held back relative performance for the equity portion
of the portfolio. As with nearly all annuity subaccounts, this series holds some
cash to buy new holdings and to provide liquidity. In a period when markets rose
noticeably, holding any cash hurt performance against all three of our
benchmarks, the MSCI World Index, the S&P 500 Stock Index and the J.P. Morgan
Global Government Bond Index, which have no cash positions.
* Stock was not held in the portfolio at the end of the period.
GOVERNMENT SECURITIES SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 3.76%, while Service Class shares provided a total
return of 3.55%. These returns do not reflect any applicable contract or
surrender charges and compares with a return of 4.08% for the series' benchmark,
the Lehman Brothers Government/Mortgage Index. The series seeks current income
and preservation of capital by investing in U.S. Government and U.S.
Government-related securities. The series invests, under normal market
conditions, at least 80% of its net assets in U.S Government securities.
DETRACTORS FROM PERFORMANCE
Holding lower-yielding issues relative to the portfolio's benchmark held back
results for the period. Relative to the benchmark, we were underweighted in
30-year mortgage-backed securities, which outperformed comparable-maturity
treasuries. The portfolio was adversely impacted by prepayments on certain
longer-term mortgage-backed securities.
CONTRIBUTORS TO PERFORMANCE
Over the period the portfolio benefited from its allocation to government agency
securities. Our duration positioning also contributed to relative results.
(Duration is a measure of sensitivity to interest rate changes.)
HIGH YIELD SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 9.54%, while Service Class shares provided a return
of 9.37%. The returns do not reflect any applicable contract or surrender
charges and compare with returns of 10.33% and 11.13%, for the series'
benchmarks, the Lipper High Yield Bond Index and the Lehman Brothers High Yield
Index, respectively, The series seeks to provide high current income and capital
appreciation by investing primarily in certain lower rated or unrated fixed
income securities (possibly with equity features) of U.S. and foreign issuers.
The series invests, under normal market conditions, at least 80% of its net
assets in high income securities, generally lower rated bonds.
DETRACTORS FROM PERFORMANCE
The portfolio's underperformance versus its benchmarks was attributable in part
to our underweighted positions in the more speculative lower-rated sectors of
the high yield market, which generated above average returns in 2004. Several
specific holdings also detracted from relative performance, including Dobson
Communications, a regional wireless services provider, Pegasus Communications*,
and poor-performing textile manufacturer Westpoint Stevens*.
CONTRIBUTORS TO PERFORMANCE
The portfolio's relative performance was helped by several individual holdings
that performed well during the period. These included Safilo, a maker of
corrective eyewear and sunglasses, chemical company Rhodia, St. Louis-based
mining company Doe Run Resources, Texas energy company El Paso Corp., retail
energy firm Mirant Americas*, and agricultural company IMC Global.
* Security was not held in the portfolio at the end of the period.
INTERNATIONAL VALUE SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 28.02%, while Service Class shares provided a return
of 27.82%. These returns do not reflect any applicable contract or surrender
charges and compare with returns of 20.70% and 24.88% for the series'
benchmarks, the MSCI EAFE Index and the MSCI EAFE Value Index, respectively. The
series seeks long-term growth of capital with a secondary objective of seeking
reasonable current income. The series invests, under normal market conditions,
at least 65% of its net assets in equity securities of foreign (including
emerging market) companies that MFS believes are undervalued in the market
relative to their long term potential.
CONTRIBUTORS TO PERFORMANCE
The series benefited most significantly during the period from stock selection
in the financial services, energy, and utilities and communications sectors.
Several of our financial services positions, such as JACCS Co. and Chiba Bank,
posted strong absolute returns and were among the leading individual
contributors to relative performance versus the portfolio's primary benchmark,
the MSCI EAFE Index.
In the energy sector, our relative positions in strong-performing CNOOC Ltd., a
Chinese offshore oil and gas company, and Hungarian oil and gas company MOL
Magyar aided relative returns. Our positions in Nordic utilities company Fortum
and U.K. company United Utilities also contributed to strong results.
Other leading individual contributors to relative performance included
agribusiness firm Syngenta, Japanese housing company Sekisui Chemical (also
known for their plastics business), Italian cement company Italcementi, and U.K.
directories business Yell Group.
DETRACTORS FROM PERFORMANCE
Stock selection in the transportation sector held back relative performance for
the period. Our holdings of poor-performing easyJet, which is not tracked by the
MSCI EAFE Index, hurt relative results. Although our underweighted position in
the industrial goods and services sector detracted from the series' performance
overall, no individual stocks within the sector were among the series' top
detractors. Individual stocks in other sectors
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that held back relative returns during the period included financial services
company Converium Holdings, retailer Sanyo Shokai, leisure company Tamron,
utilities and communications companies France Telecom* and KDDI Corp., and
frozen novelties company CoolBrands International.
The series' cash position also held back relative performance. As with nearly
all portfolios, this series holds some cash to buy new holdings and to provide
liquidity. In a period when equity markets -- as measured by the MSCI EAFE Index
- -- rose, holding any cash hurt relative performance. The index does not have a
cash position.
* Stock was not held in the portfolio at the end of the period.
MONEY MARKET SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 0.83%, while Service Class shares provided a return
of 0.57%. These returns do not reflect any applicable contract or surrender
charges. As of year end, the seven-day yields with and without waiver, were
1.61%, and 1.36% for the Initial Class and Service Class respectively. The
seven-day yield is based on the latest seven days ended December 31, 2004, with
dividends annualized. The yield quotation more closely reflects the current
earnings of the money market portfolio than does the total return. The
investment objective of the series is to seek maximum current income to the
extent consistent with stability of principal by investing exclusively in money
market investments maturing in less than 13 months. The series invests in U.S.
dollar-denominated money market instruments such as obligations of, or
guaranteed by, the U.S. Government, its agencies or instrumentalities,
certificates of deposit, commercial paper, repurchase agreements collateralized
by U.S. Government securities, and other short-term obligations which are rated
within the highest credit ratings by one or more rating agencies or are unrated
and considered by MFS to be of comparable quality. The series may invest up to
35% of its total net assets in U.S. dollar-denominated securities of foreign
issuers.
PORTFOLIO PERFORMANCE
We believed that interest rates would rise during the period and, as such, we
shortened the weighted average maturity for the series significantly, from 49
days at the start of the period to 33 days as the period ended. Essentially, we
looked to cut our interest-rate risk anticipating short-term rates would begin
to rise and continue to do so throughout the period.
On December 31, 2004, approximately 94% of the series' assets were invested in
first tier commercial paper with the remainder in U.S. government sponsored
agencies and repurchase agreements collateralized by U.S. government sponsored
agencies.
STRATEGIC INCOME SERIES
To gauge performance of this portfolio, we use four benchmarks reflecting the
varying results of the different markets in which we invest. For the year ended
December 31, 2004, Initial Class shares of the MFS Strategic Income Series
provided a total return of 8.04%, while Service Class Shares provided a return
of 7.83%. These returns do not reflect any applicable contract or surrender
charges and compare with the following returns over the same period for the
series' multiple benchmarks: 11.73% for the J.P. Morgan Emerging Markets Bond
Global Index; 11.13% for the Lehman Brothers High Yield Index; 5.17% for the
Citigroup World Government Bond Non-dollar Hedged Index; and 4.34% for the
Lehman Brothers Aggregate Bond Index.
The series seeks to provide high current income by investing in fixed-income
securities and seeks to take advantage of opportunities to realize significant
capital appreciation while maintaining a high level of current income. The
series invests, under normal market conditions, at least 65% of its net assets
in fixed-income securities. These securities include U.S. government securities,
foreign government securities, mortgage-backed and asset-backed securities,
corporate bonds, and emerging market securities.
DETRACTORS FROM PERFORMANCE
The portfolio's underweighted allocation to both mortgage-backed securities and
the supranational sector held back relative results as both sectors outperformed
Treasuries during the period. Entering the period, we believed higher yielding
sectors of the fixed income market such as investment grade and high yield
corporate bonds offered more value than the higher quality sectors given our
favorable view of the U.S. economy and credit quality. While that view was
substantiated during the course of 2004, our underweighted position in mortgages
and supranationals detracted from performance relative to the series' benchmark.
Additionally, we do not believe that the riskiest parts of the high yield
market, i.e., lower quality "B"- and "CCC"- rated securities, fall within an
appropriate risk tolerance for the series. As such, the portfolio underperformed
the series' benchmarks due to our underweighted position in "B"- and "CCC"-
rated corporate bonds when those bonds rallied in the final quarter of the
period.
CONTRIBUTORS TO PERFORMANCE
The series benefited from a positive currency effect generated largely from our
exposure to bonds denominated in the Euro, Swedish Krona, and Japanese Yen. In
addition, our holdings in many European and other sovereign bonds contributed
positively to performance. Overweighted positions in bonds issued by the
governments of Germany, Ireland, New Zealand, the Netherlands, and Brazil helped
relative results. Finally, given our favorable view toward the improving U.S.
economy and improving credit quality in the U.S., the portfolio maintained
overweighted positions in both investment grade corporate bonds and higher
quality high yield corporate bonds. As such, our allocation to "BBB"- and "BB"-
rated securities in the industrial, utility, and finance sectors benefited
performance.
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or as an indication of
trading intent on behalf of any MFS/Sun Life Series. References to specific
securities are not recommendations of such securities and may not be
representative of any MFS/Sun Life Series' current or future investments.
Variable annuities are designed for long-term retirement investing; please see
your investment professional for more information.
INDEX DEFINITIONS
Citigroup World Government Bond Index measures the government bond markets
around the world.
CitigroupWorld Government Bond Non-dollar Hedged Index measures the government
bond markets around the world.
J.P. Morgan Global Government Bond Index measures government bond markets around
the world.
5
<Page>
J.P. Morgan Emerging Markets Bond Global Index (the EMBI Global) tracks debt
instruments in the emerging markets (includes a broader array of countries than
the EMBI Plus).
Lehman Brothers Aggregate Bond Index measures the U.S. investment grade, fixed
rate bond market, with index components for government and corporate securities,
mortgage pass-through securities, and asset-backed securities.
Lehman Brothers Government/Credit Index measures all debt obligations of the
U.S. Treasury and U.S. government agencies, and all investment-grade domestic
corporate debt.
Lehman Brothers Government/Mortgage Index measures government and mortgage
securities markets.
Lehman Brothers High Yield Index measures the universe of non-investment grade,
fixed rate debt. Pay-in-kind (PIK) bonds, Eurobonds, and debt issues from
countries designated as emerging markets (e.g., Argentina, Brazil, Venezuela,
etc.) are excluded.
Lipper High Yield Bond Index measures the 30 largest retail mutual funds in the
Lipper High Yield Bond Category.
MSCI EAFE (Europe, Australasia, Far East) Index is a free float-adjusted market
capitalization index that is designed to measure developed market equity
performance, excluding the US & Canada.
MSCI EAFE (Europe, Australasia, Far East) Value Index is a free float-adjusted
market capitalization index that is designed to measure developed market value
equity performance, excluding the US and Canada.
MSCI Emerging Markets Index is a free float-adjusted market capitalization index
that is designed to measure equity market performance in the global emerging
markets.
MSCI World Index measures stock markets in the developed world.
Standard & Poor's 500 Stock Index (S&P 500) is a capitalization- weighted index
of 500 widely held stocks, designed to measure broad U.S. equity performance.
IT IS NOT POSSIBLE TO INVEST DIRECTLY IN AN INDEX.
6
<Page>
PORTFOLIO COMPOSITION -- BOND SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Bonds 96.6%
Cash & Other Net Assets 3.4%
</Table>
MARKET SECTORS*
<Table>
High Grade Corporates 55.5%
High Yield Corporates 11.6%
Commercial Mortgage Backed 7.3%
Mortgage Backed 6.4%
Emerging Markets Debt 4.8%
U.S. Government Agencies 4.3%
Cash & Other Net Assets 3.4%
Asset Backed 2.8%
U.S. Treasuries 2.6%
International Sovereigns 1.3%
</Table>
CREDIT QUALITY**
<Table>
AAA 21.5%
AA 3.7%
A 12.9%
BBB 41.8%
BB 14.7%
B 4.2%
Other 1.2%
</Table>
PORTFOLIO FACTS
<Table>
Average Duration 5.1
Average Life 8.6
Average Maturity*** 13.7
Average Quality A-
Average Quality Short Term Bonds A-1
</Table>
* For purposes of this graphical presentation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
** Credit quality ratings are based on a weighted average of each security's
rating from Moody's Investors Service. If not rated by Moody's, the rating
will be that assigned by Standard & Poor's. Likewise, if not assigned a
rating by Standard & Poor's, it will be based on the rating assigned by
Fitch, Inc. U.S. Treasuries and mortgage-backed securities are included in
the "AAA"-rating category.
*** The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which have
been pre-refunded to an earlier date or which have a mandatory put date
prior to the stated maturity. The average life shown takes into account
these earlier dates.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
7
<Page>
PORTFOLIO COMPOSITION -- EMERGING MARKETS EQUITY SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 98.1%
Cash & Other Net Assets 0.8%
Preferred Stocks 1.1%
</Table>
TOP TEN HOLDINGS
<Table>
Samsung Electronics Co. Ltd. 6.2%
Anglo American PLC 4.5%
OAO Lukoil, ADR 2.5%
Teva Pharmaceutical Industries Ltd. 2.4%
China Mobile (Hong Kong) Ltd. 2.4%
POSCO 2.3%
Petroleo Brasileiro S/A 2.2%
Companhia Vale Do Rio Doce 2.1%
Sasol Ltd. 2.1%
Standard Bank Group Ltd. 2.0%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 24.7%
Basic Materials 19.4%
Utilities & Communications 13.6%
Technology 11.1%
Energy 10.0%
Autos & Housing 5.5%
Consumer Staples 4.5%
Health Care 3.0%
Leisure 2.9%
Special Products & Services 1.9%
Retailing 1.1%
Industrial Goods & Services 1.0%
Transportation 0.5%
</Table>
COUNTRY WEIGHTINGS
<Table>
South Korea 19.0%
Brazil 10.8%
Taiwan 10.7%
South Africa 10.4%
Mexico 8.6%
China 6.6%
Russia 4.8%
India 4.7%
Israel 4.7%
Other 19.7%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
8
<Page>
PORTFOLIO COMPOSITION -- GLOBAL GOVERNMENTS SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Bonds 94.5%
Cash & Other Net Assets 5.5%
</Table>
MARKET SECTORS*
<Table>
International Sovereigns 81.0%
Cash & Other Net Assets 5.5%
U.S. Treasuries 4.8%
Commercial Mortgage Backed 3.5%
Emerging Markets Debt 3.0%
Mortgage Backed 1.2%
Municipal 1.0%
</Table>
CREDIT QUALITY**
<Table>
AAA 74.7%
AA 8.8%
A 4.7%
BBB 2.2%
Other 9.6%
</Table>
PORTFOLIO FACTS
<Table>
Average Duration 5.6
Average Life 8.3
Average Maturity*** 9.3
Average Quality AA+
Average Quality Short Term Bonds A-1
</Table>
COUNTRY WEIGHTINGS
<Table>
United States 18.2%
Germany 13.8%
France 9.2%
Japan 7.5%
United Kingdom 7.5%
Finland 6.3%
Ireland 6.1%
New Zealand 5.1%
Canada 5.0%
Other 21.3%
</Table>
* For purposes of this graphical presentation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
** Credit quality ratings are based on a weighted average of each security's
rating from Moody's Investors Service. If not rated by Moody's, the rating
will be that assigned by Standard & Poor's. Likewise, if not assigned a
rating by Standard & Poor's, it will be based on the rating assigned by
Fitch, Inc. U.S. Treasuries and mortgage-backed securities are included in
the "AAA"-rating category.
*** The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which have
been pre-refunded to an earlier date or which have a mandatory put date
prior to the stated maturity. The average life shown takes into account
these earlier dates.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
9
<Page>
PORTFOLIO COMPOSITION -- GLOBAL TOTAL RETURN SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Stocks 60.9%
Bonds 36.9%
Cash & Other Net Assets 2.2%
</Table>
TOP TEN HOLDINGS*
<Table>
United Kingdom Treasury, 5%, 2012 1.9%
Federal Republic of Germany, 5.25%, 2010 1.9%
Quebec Province, 1.6%, 2013 1.8%
Republic of France, 4.75%, 2007 1.6%
Republic of Ireland, 4.25%, 2007 1.6%
Government of New Zealand, 6.5%, 2013 1.5%
Federal Republic of Germany, 6.25%, 2030 1.5%
Republic of Finland, 3%, 2008 1.5%
TOTAL S.A., ADR 1.3%
U.S. Treasury Bonds, 6.25%, 2030 1.3%
</Table>
EQUITY SECTOR WEIGHTINGS
<Table>
Financial Services 14.6%
Utilities & Communications 10.8%
Energy 6.8%
Consumer Staples 5.7%
Health Care 4.3%
Basic Materials 3.8%
Autos & Housing 3.5%
Leisure 3.3%
Industrial Goods & Services 3.1%
Retailing 1.9%
Transportation 1.9%
Technology 0.8%
Special Products & Services 0.4%
</Table>
TOP FIVE BOND MARKET SECTORS*
<Table>
International Sovereigns 30.9%
U.S. Treasuries 2.8%
Emerging Markets Debt 1.1%
Commercial Mortgage Backed 1.0%
Mortgage Backed 0.4%
</Table>
COUNTRY WEIGHTINGS
<Table>
United States 31.7%
United Kingdom 11.4%
Japan 8.9%
France 8.4%
Germany 6.4%
Switzerland 5.5%
Finland 3.5%
Canada 3.2%
Netherlands 2.7%
Other 18.3%
</Table>
* For purposes of this graphical presentation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
10
<Page>
PORTFOLIO COMPOSITION -- GOVERNMENT SECURITIES SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Bonds 90.5%
Cash & Other Net Assets 9.5%
</Table>
MARKET SECTORS*
<Table>
Mortgage Backed 58.0%
U.S. Government Agencies 25.5%
Cash & Other Net Assets 9.5%
U.S. Treasuries 6.8%
Residential Mortgage Backed 0.2%
</Table>
CREDIT QUALITY**
<Table>
AAA 98.6%
Not Rated 0.3%
Other 1.1%
</Table>
PORTFOLIO FACTS
<Table>
Average Duration 3.9
Average Life 6.2
Average Maturity*** 17.3
Average Quality AAA
Average Quality Short Term Bonds A-1
</Table>
* For purposes of this graphical presentation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
** Credit quality ratings are based on a weighted average of each security's
rating from Moody's Investors Service. If not rated by Moody's, the rating
will be that assigned by Standard & Poor's. Likewise, if not assigned a
rating by Standard & Poor's, it will be based on the rating assigned by
Fitch, Inc. If not rated by any of the three agencies, the security is
considered not rated, except for U.S. Treasuries and mortgage-backed
securities, which are included in the "AAA"-rating category.
*** The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which have
been pre-refunded to an earlier date or which have a mandatory put date
prior to the stated maturity. The average life shown takes into account
these earlier dates.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
11
<Page>
PORTFOLIO COMPOSITION -- HIGH YIELD SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Bonds 94.1%
Cash & Other Net Assets 4.1%
Stocks 1.0%
Convertible Preferred Stocks 0.3%
Preferred Stocks 0.5%
</Table>
TOP FIVE BOND INDUSTRIES*
<Table>
Utilities-Electric Power 8.8%
Telecom-Wireline 6.2%
Gaming & Lodging 5.4%
Chemicals 5.4%
Wireless Communications 4.6%
</Table>
CREDIT QUALITY**
<Table>
BBB 3.0%
BB 27.9%
B 45.5%
CCC 14.6%
CC 1.7%
D 0.4%
Not Rated 0.9%
Equity 1.8%
Other 4.2%
</Table>
PORTFOLIO FACTS
<Table>
Average Duration 4.4
Average Life 7.9
Average Maturity*** 8.2
Average Quality B
Average Quality Short Term Bonds A-1
</Table>
* For purposes of this graphical presentation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
** Credit quality ratings are based on a weighted average of each security's
rating from Moody's Investors Service. If not rated by Moody's, the rating
will be that assigned by Standard & Poor's. Likewise, if not assigned a
rating by Standard & Poor's, it will be based on the rating assigned by
Fitch, Inc. If not rated by any of the three agencies, the security is
considered not rated.
*** The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which have
been pre-refunded to an earlier date or which have a mandatory put date
prior to the stated maturity. The average life shown takes into account
these earlier dates.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
12
<Page>
PORTFOLIO COMPOSITION -- INTERNATIONAL VALUE SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 97.7%
Cash & Other Net Assets 2.3%
</Table>
TOP TEN HOLDINGS
<Table>
Total S.A. 2.9%
BP PLC 2.0%
Royal Bank of Scotland Group PLC 1.9%
Vodafone Group PLC 1.9%
Nestle S.A. 1.9%
Syngenta AG 1.8%
Takefuji Corp. 1.8%
Deutsche Telekom AG 1.5%
TPG NV 1.5%
Tokyo Gas Co. Ltd. 1.4%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 19.3%
Utilities & Communications 18.8%
Energy 11.6%
Consumer Staples 8.2%
Autos & Housing 8.2%
Leisure 6.7%
Retailing 5.5%
Health Care 5.4%
Transportation 3.7%
Industrial Goods & Services 3.7%
Basic Materials 3.3%
Technology 2.7%
Special Products & Services 0.6%
</Table>
COUNTRY WEIGHTINGS
<Table>
Great Britain 24.9%
Japan 18.6%
France 10.8%
Switzerland 4.7%
Sweden 4.6%
Germany 4.1%
Netherlands 3.9%
Spain 3.5%
South Korea 3.4%
Other 21.5%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
13
<Page>
PORTFOLIO COMPOSITION -- MONEY MARKET SERIES
SHORT TERM CREDIT**
<Table>
Average Quality Short Term Bonds A-1
</Table>
MATURITY BREAKDOWN
<Table>
0 to 29 days 57.1%
30 to 59 days 29.6%
60 to 89 days 6.7%
90 to 365 days 6.4%
Fixed Income Other 0.2%
</Table>
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Commercial Paper 93.5%
U.S. Government Agencies 6.3%
Other 0.2%
</Table>
* For purposes of this graphical presentation, the fixed income portion
includes both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
** Short-term credit quality is based upon the average of the ratings from
Moody's Investors Service, Standard & Poor's, and Fitch, Inc. for each
security. If not rated by any of the three agencies, the security is
considered not rated.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed, and current holdings may be different.
14
<Page>
PORTFOLIO COMPOSITION -- STRATEGIC INCOME SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Bonds 91.7%
Cash & Other Net Assets 8.0%
Stocks 0.3%
</Table>
MARKET SECTORS*
<Table>
High Yield Corporates 34.2%
International Sovereigns 17.4%
Emerging Markets Debt 14.3%
High Grade Corporates 10.8%
Cash & Other Net Assets 8.0%
Commercial Mortgage Backed 8.0%
Mortgage Backed 5.3%
U.S. Government Agencies 1.6%
Domestic Convertibles 0.3%
Residential Mortgage Backed 0.1%
</Table>
CREDIT QUALITY**
<Table>
AAA 28.7%
AA 1.5%
A 3.7%
BBB 14.1%
BB 18.2%
B 24.1%
CCC 4.8%
CC 0.4%
Not Rated 0.3%
Equity 0.3%
Other 3.9%
</Table>
PORTFOLIO FACTS
<Table>
Average Duration 4.1
Average Life 7.9
Average Maturity*** 10.7
Average Quality BBB
Average Quality Short Term Bonds A-1
</Table>
COUNTRY WEIGHTINGS
<Table>
United States 62.5%
Germany 4.9%
Brazil 3.3%
Russia 3.0%
Mexico 2.7%
United Kingdom 2.5%
Ireland 2.3%
Netherlands 1.9%
France 1.8%
Other 15.1%
</Table>
* For purposes of this graphical presentation, the bond component includes
both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
** Credit quality ratings are based on a weighted average of each security's
rating from Moody's Investors Service. If not rated by Moody's, the rating
will be that assigned by Standard & Poor's. Likewise, if not assigned a
rating by Standard & Poor's, it will be based on the rating assigned by
Fitch, Inc. If not rated by any of the three agencies, the security is
considered not rated, except for U.S. Treasuries and mortgage-backed
securities, which are included in the "AAA"-rating category.
*** The average maturity shown is calculated using the final stated maturity on
the portfolio's holdings without taking into account any holdings which have
been pre-refunded to an earlier date or which have a mandatory put date
prior to the stated maturity. The average life shown takes into account
these earlier dates.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
15
<Page>
PERFORMANCE SUMMARY
The information below and on the following pages illustrates
the historical performance of each series in comparison to its benchmark(s).
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be more than or less than the line
shown. It is not possible to invest directly in an index. (See Notes to
Performance Summary.)
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. ANY HIGH
SHORT-TERM RETURNS MAY BE AND LIKELY WERE ATTRIBUTED TO RECENT FAVORABLE MARKET
CONDITIONS WHICH MAY NOT BE REPEATED.
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. THE
PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A
CONTRACT OWNER WOULD PAY ON DISTRIBUTIONS OR THE REDEMPTION OF CONTRACT
UNITS.
BOND SERIES(1),(2),(5),(7),(9),(10),(14)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2004. Index information is from May 1, 1998.)
<Table>
<Caption>
BOND SERIES - LEHMAN BROTHERS
INITIAL CLASS GOVERNMENT/CREDIT INDEX#
May-98 $ 10,000 $ 10,000
Dec-98 $ 10,690 $ 10,730
Dec-99 $ 10,509 $ 10,499
Dec-00 $ 11,579 $ 11,744
Dec-01 $ 12,488 $ 12,742
Dec-02 $ 13,678 $ 14,149
Dec-03 $ 15,007 $ 14,809
Dec-04 $ 15,945 $ 15,430
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +6.25% +27.68% +51.73% +59.45%
Average Annual Total Return +6.25% +8.49% +8.70% +7.26%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +5.91% +26.72% +50.32% +57.97%
Average Annual Total Return +5.91% +8.21% +8.49% +7.11%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Average corporate debt BBB-rated fund+ +5.11% +7.03% +7.53% +5.86%
Lehman Brothers Government/
Credit Index# +4.19% +6.59% +8.00% +6.72%
</Table>
* For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2004. Index information is from May 1,
1998.
+ Source: Lipper Inc., an independent firm that reports mutual fund
performance.
# Source: Standard & Poor's Micropal, Inc.
EMERGING MARKETS EQUITY SERIES(1),(3),(8),(9)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, June
5, 1996, through December 31, 2004. Index information is from June 1, 1996.)
<Table>
<Caption>
EMERGING MARKETS MSCI EMERGING
EQUITY SERIES - INITIAL CLASS MARKETS INDEX#
Jun-96 $ 10,000 $ 10,000
Dec-96 $ 10,000 $ 9,641
Dec-97 $ 11,046 $ 8,524
Dec-98 $ 7,735 $ 6,364
Dec-99 $ 11,794 $ 10,590
Dec-00 $ 9,110 $ 7,349
Dec-01 $ 9,017 $ 7,174
Dec-02 $ 8,847 $ 6,744
Dec-03 $ 13,501 $ 10,539
Dec-04 $ 17,171 $ 13,274
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +27.18% +90.43% +45.60% +71.71%
Average Annual Total Return +27.18% +23.95% +7.80% +6.51%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +26.96% +89.06% +44.38% +70.27%
Average Annual Total Return +26.96% +23.65% +7.62% +6.41%
</Table>
COMPARATIVE BENCHMARK
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
MSCI Emerging Markets Index# +25.95% +22.77% +4.62% +3.35%
</Table>
* For the period from the commencement of the series' investment operations,
June 5, 1996, through December 31, 2004. Index information is from
June 1, 1996.
# Source: Standard & Poor's Micropal, Inc.
16
<Page>
GLOBAL GOVERNMENT SERIES(1),(3),(4),(5),(6),(7),(9),(10),(14)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
GLOBAL GOVERNMENT CITIGROUP WORLD
SERIES - INITIAL CLASS GOVERNMENT BOND INDEX#
Dec-94 $ 10,000 $ 10,000
Dec-95 $ 11,569 $ 11,904
Dec-96 $ 12,107 $ 12,335
Dec-97 $ 12,016 $ 12,363
Dec-98 $ 13,873 $ 14,256
Dec-99 $ 13,154 $ 13,647
Dec-00 $ 13,315 $ 13,864
Dec-01 $ 13,034 $ 13,727
Dec-02 $ 15,723 $ 16,403
Dec-03 $ 18,176 $ 18,849
Dec-04 $ 20,004 $ 20,800
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +10.06% +53.48% +52.07% +100.04%
Average Annual Total Return +10.06% +15.35% +8.74% +7.18%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +9.80% +52.36% +50.81% +98.38%
Average Annual Total Return +9.80% +15.07% +8.56% +7.09%
</Table>
COMPARATIVE BENCHMARK
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Citigroup World Government Bond Index# +10.35% +14.86% +8.79% +7.60%
</Table>
#Source: Standard & Poor's Micropal, Inc.
GLOBAL TOTAL RETURN SERIES(1),(2),(5),(7),(9),(10),(14)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
GLOBAL TOTAL RETURN 60% MSCI WORLD/40% J.P. MORGAN STANDARD & POOR'S
SERIES - INITIAL CLASS GLOBAL GOVERNMENT BOND INDEX# 500 STOCK INDEX#
Dec-94 $ 10,000 $ 10,000 $ 10,000
Dec-95 $ 11,789 $ 12,024 $ 13,753
Dec-96 $ 13,479 $ 13,209 $ 16,909
Dec-97 $ 15,313 $ 14,538 $ 22,548
Dec-98 $ 18,127 $ 17,639 $ 28,992
Dec-99 $ 19,654 $ 19,791 $ 35,092
Dec-00 $ 20,103 $ 18,387 $ 31,900
Dec-01 $ 18,861 $ 16,492 $ 28,111
Dec-02 $ 18,971 $ 15,619 $ 21,901
Dec-03 $ 23,329 $ 19,621 $ 28,179
Dec-04 $ 27,322 $ 22,152 $ 31,243
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +17.12% +44.85% +39.01% +173.22%
Average Annual Total Return +17.12% +13.15% +6.81% +10.57%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +16.88% +43.80% +37.90% +171.03%
Average Annual Total Return +16.88% +12.87% +6.64% +10.48%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Average global flexible port fund+ +13.31% +9.05% +2.94% +9.72%
60% MSCI World/40% J.P. Morgan
Global Government Bond Index# +12.90% +10.34% +2.28% +8.28%
Standard & Poor's 500 Stock Index# +10.87% +3.58% -2.30% +12.07%
</Table>
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
17
<Page>
GOVERNMENT SECURITIES SERIES(5),(6),(9)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
GOVERNMENT SECURITIES LEHMAN BROTHERS
SERIES - INITIAL CLASS# GOVERNMENT/MORTGAGE INDEX#
Dec-94 $ 10,000 $ 10,000
Dec-95 $ 11,766 $ 11,781
Dec-96 $ 11,960 $ 12,214
Dec-97 $ 13,003 $ 13,380
Dec-98 $ 14,134 $ 14,547
Dec-99 $ 13,869 $ 14,469
Dec-00 $ 15,549 $ 16,247
Dec-01 $ 16,760 $ 17,500
Dec-02 $ 18,348 $ 19,260
Dec-03 $ 18,742 $ 19,785
Dec-04 $ 19,447 $ 20,592
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +3.76% +16.38% +40.23% +94.47%
Average Annual Total Return +3.76% +5.19% +7.00% +6.88%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +3.55% +15.56% +39.13% +92.96%
Average Annual Total Return +3.55% +4.94% +6.83% +6.79%
COMPARATIVE BENCHMARKS
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Average general U.S. government fund+ +3.19% +4.75% +6.43% +6.43%
Lehman Brothers Government/Mortgage
Index# +4.08% +5.57% +7.31% +7.49%
</Table>
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
HIGH YIELD SERIES(1),(2),(4),(7),(10)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
HIGH YIELD SERIES - LEHMAN BROTHERS
INITIAL CLASS HIGH YIELD INDEX#
Dec-94 $ 10,000 $ 10,000
Dec-95 $ 11,693 $ 11,917
Dec-96 $ 13,111 $ 13,270
Dec-97 $ 14,846 $ 14,964
Dec-98 $ 14,932 $ 15,243
Dec-99 $ 15,965 $ 15,608
Dec-00 $ 14,881 $ 14,693
Dec-01 $ 15,148 $ 15,469
Dec-02 $ 15,557 $ 15,251
Dec-03 $ 18,892 $ 19,670
Dec-04 $ 20,695 $ 21,859
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +9.54% +36.62% +29.63% +106.95%
Average Annual Total Return +9.54% +10.96% +5.33% +7.54%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +9.37% +35.71% +28.58% +105.29%
Average Annual Total Return +9.37% +10.71% +5.16% +7.46%
COMPARATIVE BENCHMARKS
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------------------------------------------------------------------------------------------------------
Lipper High Yield Bond Index+ +10.33% +10.81% +3.98% +6.69%
Lehman Brothers High Yield Index# +11.13% +12.22% +6.97% +8.13%
</Table>
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
18
<Page>
INTERNATIONAL VALUE SERIES(1),(3),(11),(12)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
October 2, 1995, through December 31, 2004. Index information is from
October 1, 1995.)
<Table>
<Caption>
INTERNATIONAL VALUE
SERIES - INITIAL CLASS MSCI EAFE VALUE INDEX# MSCI EAFE INDEX#
Oct-95 $ 10,000 $ 10,000 $ 10,000
Dec-95 $ 10,130 $ 10,481 $ 10,413
Dec-96 $ 10,620 $ 11,447 $ 11,075
Dec-97 $ 11,314 $ 11,655 $ 11,303
Dec-98 $ 13,767 $ 13,764 $ 13,601
Dec-99 $ 16,135 $ 17,141 $ 17,314
Dec-00 $ 15,759 $ 16,658 $ 14,898
Dec-01 $ 13,453 $ 13,623 $ 11,739
Dec-02 $ 12,664 $ 11,497 $ 9,901
Dec-03 $ 16,923 $ 16,782 $ 13,778
Dec-04 $ 21,665 $ 20,957 $ 16,630
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +28.02% +61.04% +34.28% +116.65%
Average Annual Total Return +28.02% +17.21% +6.07% +8.72%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +27.82% +60.09% +33.48% +115.37%
Average Annual Total Return +27.82% +16.98% +5.95% +8.65%
COMPARATIVE BENCHMARKS
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
MSCI EAFE Value Index# +24.88% +15.44% +4.10% +8.33%
MSCI EAFE Index# +20.70% +12.31% -0.80% +5.65%
</Table>
* For the period from the commencement of the series' investment operations,
October 2, 1995, through December 31, 2004. Index information is from
October 1, 1995.
# Source: Standard & Poor's Micropal, Inc.
MONEY MARKET SERIES(1),(13),(15) PERFORMANCE SUMMARY THROUGH 12/31/04
<Table>
<Caption>
CURRENT 7-DAY YIELD*
CLASS INCEPTION 1 YEAR TOTAL RETURN (WITH AND WITHOUT WAIVER)
----- --------- ------------------- ------------------------
Initial Class 7/19/85 0.83% 1.61%
Service Class 8/24/01 0.57% 1.36%
</Table>
* Based on the latest seven days ended as of December 31, 2004, with dividends
annualized. The yield quotation more closely reflects the current earnings of
the fund than the total return quotation.
19
<Page>
STRATEGIC INCOME SERIES(1),(2),(4),(5),(7),(9),(10),(14)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2004. Index information is from May 1, 1998.)
<Table>
<Caption>
CITIGROUP WORLD JP MORGAN
STRATEGIC INCOME GOVERNMENT BOND EMERGING MARKETS LEHMAN BROTHERS LEHMAN BROTHERS
SERIES - INITIAL CLASS NON-DOLLAR HEDGED INDEX# BOND GLOBAL INDEX++ AGGREGATE BOND INDEX# HIGH YIELD INDEX#
May-98 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000
Dec-98 $ 10,040 $ 10,767 $ 8,367 $ 10,647 $ 9,817
Dec-99 $ 10,503 $ 11,077 $ 10,390 $ 10,559 $ 10,052
Dec-00 $ 10,805 $ 12,144 $ 11,866 $ 11,787 $ 9,463
Dec-01 $ 11,162 $ 12,887 $ 12,048 $ 12,782 $ 9,962
Dec-02 $ 12,001 $ 13,770 $ 13,621 $ 14,093 $ 9,822
Dec-03 $ 13,548 $ 14,029 $ 17,125 $ 14,671 $ 12,668
Dec-04 $ 14,637 $ 14,755 $ 19,133 $ 15,308 $ 14,078
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +8.04% +31.13% +39.36% +46.37%
Average Annual Total Return +8.04% +9.46% +6.86% +5.89%
Service Class
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Cumulative Total Return +7.83% +30.15% +38.17% +45.12%
Average Annual Total Return +7.83% +9.18% +6.68% +5.76%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------------------------
Average general bond fund+ +4.27% +5.56% +6.02% +5.24%
Citigroup World Government Bond
Non-Dollar Hedged Index# +5.17% +4.61% +5.90% +6.01%
JP Morgan Emerging Markets Bond
Global Index++ +11.73% +16.67% +12.99% +10.22%
Lehman Brothers Aggregate Bond Index# +4.34% +6.19% +7.71% +6.59%
Lehman Brothers High Yield Index# +11.13% +12.22% +6.97% +5.26%
</Table>
* For the period from the commencement of the series' investment operations,
May 6, 1998, through December 31, 2004. Index information is from
May 1, 1998.
+ Source: Lipper Inc.
++ Source: Bloomberg.
# Source: Standard & Poor's Micropal, Inc.
20
<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. For performance that reflects the deduction of
fees and charges imposed by insurance company separate accounts, visit
sunlife-usa.com.
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.
From time to time the series may receive proceeds from the settlement of a class
action lawsuit, without which performance would be lower.
KEY RISK CONSIDERATIONS
(1) The portfolio may invest in foreign and/or emerging markets securities,
which are more susceptible to interest rate, currency exchange rate,
economic, and political risks.
(2) The portfolio may invest in high yield or lower-rated securities, which 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) The portfolio may invest a relatively high percentage of its assets in a
small number of issuers or even in a single issuer. This makes the
portfolio's value more sensitive to developments associated with the issuer
and the overall market.
(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) The portfolio may invest in government guaranteed securities. These
guarantees apply to the underlying securities only and not to the prices
and yields of the portfolio.
(7) The series will allocate its investments based upon judgments made by MFS.
The series could miss attractive investment opportunities by underweighting
markets where there are significant returns, or could lose value
overweighting markets where there are significant declines.
(8) Over-the-counter (OTC) transactions involve risks in addition to those
associated with transactions in securities traded on exchanges. OTC-listed
companies may have limited product lines, markets or financial resources.
Many OTC stocks trade less frequently and in smaller volume than
exchange-listed stocks. The values of these stocks may be more volatile
than exchange-listed stocks, and the series may experience difficulty in
buying and selling these stocks at prevailing market prices.
(9) The series has engaged and may engage in active and frequent trading to
achieve its principal investment strategies. Frequent trading increases
transaction costs, which could detract from the series' performance.
(10) The fixed income securities purchased by the series may be traded in the
over-the-counter market rather than on an organized exchange and are
subject to liquidity risk. This means that they may be harder to purchase
or sell at a fair price. The inability to purchase or sell these fixed
income securities at a fair price could have a negative impact on the
series' performance.
(11) Prices of value company securities held by the series may decline due to
changing economic, political or market conditions, or due to the financial
condition of the company which issued the security. If anticipated events
do not occur or are delayed, or if investor perceptions about the
securities do not improve, the market price of value securities may not
rise as expected or may fall.
(12) Large cap companies tend to go in and out of favor based on market and
economic conditions. Large cap companies tend to be less volatile than
companies with smaller market capitalizations. In exchange for this
potentially lower risk, the series' value may not rise as much as the value
of portfolios that emphasize smaller cap companies.
(13) The portfolio may invest in municipal bonds that are general obligations
backed by the full faith and credit of the municipal issuer. The portfolio
may also invest in municipal bonds called revenue obligations that are not
backed by the full faith and credit of the municipal issuer. These
securities are subject to a higher degree of credit risk than general
obligations.
(14) The portfolio may invest in derivative securities, which may include
futures and options. These types of instruments can increase price
fluctuations.
(15) Investments in the portfolio are not insured or guaranteed by the Federal
Deposit Insurance Corporation (FDIC) or any other government agency.
Although the portfolio seeks to preserve the value of your investment at
$1.00 per unit, it is possible to lose money by investing in the portfolio.
The portfolio's yield will fluctuate with changes in market conditions.
The portfolios' values will vary daily in response to issuer, market,
regulatory, economic, or political developments. Because stocks tend to be
more volatile than some other investments, such as bonds, the more assets a
portfolio dedicates to stocks, generally the more volatile the portfolios'
values will be. Bond prices will decline when interest rates rise and will
increase when interest rates fall. Many bonds also carry credit risk, which
is the risk that issuers may fail to make timely principal or interest
payments. In addition, bonds with longer maturity dates will be subject to
greater price fluctuations than those with shorter maturity periods.
However, stocks historically have outperformed bonds over time.
Please see the prospectus for further information regarding these and other
risk considerations.
21
<Page>
EXPENSE TABLE
SERIES EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
JULY 1, 2004 THROUGH DECEMBER 31, 2004
As a shareholder of the series, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other series expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the series and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period July 1, 2004 through December 31, 2004
ACTUAL EXPENSES
The first line for each share class in the table below provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table below provides information
about hypothetical account values and hypothetical expenses based on the series'
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the series' actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the series and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the
series' ongoing costs only and do not take into account the fees and expenses
imposed under the variable contracts through which your investment in the series
is made. Therefore, the second line for each share class in the table is useful
in comparing ongoing costs associated with an investment in vehicles (such as
the series) which fund benefits under variable annuity and variable life
insurance contracts and to qualified pension and retirement plans only, and will
not help you determine the relative total costs of investing in the series
through variable annuity and variable life insurance contracts. If the fees and
expenses imposed under the variable contracts were included, your costs would
have been higher.
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
BOND SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 0.69% $ 1,000 $ 1,059 $ 3.58
Hypothetical* 0.69% $ 1,000 $ 1,022 $ 3.52
Service Class
Actual 0.94% $ 1,000 $ 1,057 $ 4.87
Hypothetical* 0.94% $ 1,000 $ 1,020 $ 4.79
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EMERGING MARKETS EXPENSE VALUE VALUE DURING PERIOD**
EQUITY SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 1.35% $ 1,000 $ 1,281 $ 7.76
Hypothetical* 1.35% $ 1,000 $ 1,018 $ 6.87
Service Class
Actual 1.59% $ 1,000 $ 1,280 $ 9.14
Hypothetical* 1.59% $ 1,000 $ 1,017 $ 8.08
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
GLOBAL EXPENSE VALUE VALUE DURING PERIOD**
GOVERNMENTS SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 0.98% $ 1,000 $ 1,118 $ 5.23
Hypothetical* 0.98% $ 1,000 $ 1,020 $ 4.99
Service Class
Actual 1.23% $ 1,000 $ 1,117 $ 6.56
Hypothetical* 1.23% $ 1,000 $ 1,019 $ 6.26
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
GLOBAL TOTAL EXPENSE VALUE VALUE DURING PERIOD**
RETURN SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 0.87% $ 1,000 $ 1,139 $ 4.69
Hypothetical* 0.87% $ 1,000 $ 1,021 $ 4.43
Service Class
Actual 1.12% $ 1,000 $ 1,137 $ 6.03
Hypothetical* 1.12% $ 1,000 $ 1,020 $ 5.70
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
GOVERNMENT EXPENSE VALUE VALUE DURING PERIOD**
SECURITIES SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 0.61% $ 1,000 $ 1,036 $ 3.13
Hypothetical* 0.61% $ 1,000 $ 1,022 $ 3.11
Service Class
Actual 0.86% $ 1,000 $ 1,035 $ 4.41
Hypothetical* 0.86% $ 1,000 $ 1,021 $ 4.38
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
HIGH YIELD SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 0.83% $ 1,000 $ 1,091 $ 4.37
Hypothetical* 0.83% $ 1,000 $ 1,021 $ 4.23
Service Class
Actual 1.08% $ 1,000 $ 1,090 $ 5.69
Hypothetical* 1.08% $ 1,000 $ 1,020 $ 5.50
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
INTERNATIONAL EXPENSE VALUE VALUE DURING PERIOD**
VALUE SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 1.13% $ 1,000 $ 1,164 $ 6.16
Hypothetical* 1.13% $ 1,000 $ 1,020 $ 5.75
Service Class
Actual 1.38% $ 1,000 $ 1,162 $ 7.52
Hypothetical* 1.38% $ 1,000 $ 1,018 $ 7.02
</Table>
22
<Page>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
MONEY MARKET SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 0.57% $ 1,000 $ 1,006 $ 2.88
Hypothetical* 0.57% $ 1,000 $ 1,022 $ 2.91
Service Class
Actual 0.82% $ 1,000 $ 1,005 $ 4.14
Hypothetical* 0.82% $ 1,000 $ 1,021 $ 4.18
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
STRATEGIC EXPENSE VALUE VALUE DURING PERIOD**
INCOME SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- -------------------------------------------------------------------------------------------------------
Initial Class
Actual 0.89% $ 1,000 $ 1,078 $ 4.66
Hypothetical* 0.89% $ 1,000 $ 1,021 $ 4.53
Service Class
Actual 1.14% $ 1,000 $ 1,078 $ 5.97
Hypothetical* 1.14% $ 1,000 $ 1,019 $ 5.80
</Table>
* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year.
23
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
BOND SERIES
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- 97.5%
ADVERTISING & BROADCASTING -- 2.1%
British Sky Broadcasting Group PLC,
8.2%, 2009 $ 822,000 $ 950,160
Chancellor Media Corp., 8%, 2008 760,000 853,317
EchoStar DBS Corp., 9.125%, 2009 657,000 722,700
News America Holdings, 7.75%, 2024 1,250,000 1,482,353
News America Holdings, 8.5%, 2025 770,000 979,908
---------------
$ 4,988,438
---------------
AEROSPACE -- 0.5%
BAE Systems Holdings, Inc.,
6.4%, 2011## $ 1,059,000 $ 1,186,926
---------------
AIRLINES -- 0.8%
Continental Airlines, Inc., 6.545%, 2020 $ 1,475,578 $ 1,465,959
Delta Air Lines, Inc., 7.379%, 2010 514,881 508,608
---------------
$ 1,974,567
---------------
ALCOHOLIC BEVERAGES -- 0.5%
SABMiller PLC, 6.625%, 2033## $ 1,076,000 $ 1,220,539
---------------
ASSET BACKED & SECURITIZED -- 10.1%
ARCap REIT, Inc., 6.0996%, 2045## $ 350,000 $ 326,308
Amresco Commercial Mortgage
Funding I, 7%, 2029 900,000 943,101
Asset Securitization Corp.,
8.005%, 2026 775,000 813,592
Brazilian Merchant Voucher Receivables
Ltd., 5.911%, 2011## 820,000 811,800
CPS Auto Receivables Trust,
3.52%, 2009## 397,726 398,223
CRIIMI MAE Commercial Mortgage Trust,
7%, 2033## 1,050,000 1,126,808
Capital One Auto Finance Trust,
2.47%, 2010 400,000 394,596
Citibank Credit Card Issuance Trust,
6.65%, 2008 1,200,000 1,248,529
Commercial Mortgage Acceptance
Corp., 5.44%, 2013## 1,000,000 1,010,631
Commercial Mortgage Acceptance
Corp., 1.0121%, 2030^^ 10,127,769 369,761
Commercial Mortgage Acceptance
Corp., 6.04%, 2030 1,150,000 1,225,256
Commercial Mortgage Acceptance
Corp., 7.03%, 2031 750,000 833,859
DLJ Commercial Mortgage Corp.,
7.6131%, 2009 700,000 793,981
DLJ Commercial Mortgage Corp.,
6.04%, 2031 625,000 627,572
Deutsche Mortgage & Asset Receiving
Corp., 6.538%, 2031 766,892 815,630
Drive Auto Receivables Trust,
2.5%, 2009## 673,000 659,083
Drivetime Auto Owner Trust,
1.918%, 2008## 1,090,000 1,079,100
Falcon Auto Dealership LLC,
4.14%, 2023^^ 3,148,058 562,421
First Union-Lehman Brothers Commercial
Mortgage Trust, 7%, 2029## 607,000 679,615
GMAC Commercial Mortgage Securities,
Inc., 7.6527%, 2011## 825,000 923,983
GMAC Commercial Mortgage Securities,
Inc., 6.02%, 2033 800,000 766,095
Holmes Financing PLC, 2.79%, 2040 181,000 181,735
IKON Receivables Funding LLC,
3.27%, 2011 735,000 734,080
Lehman Brothers Commercial Conduit
Mortgage Trust, 0.9511%, 2028^^ 7,721,954 267,411
Lehman Brothers Commercial Conduit
Mortgage Trust, 6.78%, 2031 500,000 550,830
Morgan Stanley Capital I, Inc.,
6.86%, 2010 $ 1,155,000 $ 1,215,920
Morgan Stanley Capital I, Inc.,
7.3%, 2030## 852,000 914,458
Morgan Stanley Capital I, Inc.,
0.6197%, 2030^^## 26,623,995 610,044
Morgan Stanley Capital I, Inc.,
6.01%, 2030 23,559 23,819
Morgan Stanley Capital I, Inc.,
5.72%, 2032 479,840 510,823
Mortgage Capital Funding, Inc.,
0.8661%, 2031^^ 10,373,511 240,801
Nomura Asset Acceptance Corp.,
4.423%, 2034 683,416 675,693
Prudential Securities Secured Financing
Corp., 7.3317%, 2013## 567,000 624,054
Residential Asset Mortgage, Inc.,
3.49%, 2029 525,363 525,195
TIAA Retail Estate CDO Ltd.,
7.17%, 2032## 469,763 498,393
---------------
$ 23,983,200
---------------
AUTOMOTIVE -- 4.8%
DaimlerChrysler N.A. Holdings Corp.,
7.2%, 2009 $ 900,000 $ 1,001,714
Ford Motor Co., 7.45%, 2031 2,034,000 2,045,671
Ford Motor Credit Co., 7.875%, 2010 1,769,000 1,949,013
Ford Motor Credit Co., 7.375%, 2011 980,000 1,056,196
General Motors Acceptance Corp.,
7.75%, 2010 1,374,000 1,474,736
General Motors Acceptance Corp.,
7.25%, 2011 524,000 548,608
General Motors Corp., 8.375%, 2033 1,457,000 1,509,573
Lear Corp., 7.96%, 2005 753,000 765,025
Lear Corp., 8.11%, 2009 451,000 511,502
TRW Automotive, Inc., 9.375%, 2013 513,000 595,080
---------------
$ 11,457,118
---------------
BANKS & CREDIT COMPANIES -- 9.5%
Abbey National Capital Trust I, 8.963% to
2030, 5.389% to 2049 $ 700,000 $ 975,619
BBVA Bancomer Capital Trust I,
10.5%, 2011## 867,000 932,025
Banco Mercantil del Norte S.A.,
5.875%, 2014## 1,000,000 1,027,500
Bank of America Corp., 7.4%, 2011 1,230,000 1,424,805
Barclays Bank PLC, 8.55% to 2011,
5.56438% to 2049## 1,682,000 2,048,141
Citigroup, Inc., 5%, 2014## 938,000 942,525
Citigroup, Inc., 6.625%, 2032 1,275,000 1,428,011
HBOS Capital Funding LP, 6.071% to
2014, 4.464% to 2049## 1,205,000 1,291,468
Mizuho Financial Group, Inc.,
5.79%, 2014## 929,000 975,821
Natexis AMBS Co. LLC, 8.44% to 2008,
5.846% to 2049## 1,637,000 1,844,293
Popular North America, Inc.,
4.25%, 2008 612,000 617,775
RBS Capital Trust II, 6.425% to 2034,
4.507% to 2049 1,042,000 1,100,420
Socgen Real Estate LLC, 7.64% to 2007,
5.34263% to 2049## 2,047,000 2,245,350
Turanalem Finance B.V., 8%, 2014## 635,000 622,300
UFJ Finance Aruba AEC, 6.75%, 2013 328,000 365,514
UniCredito Italiano Capital Trust II,
9.2% to 2010, 5.914% to 2049## 1,481,000 1,819,326
Wachovia Corp., 4.875%, 2014 652,000 649,834
</Table>
24
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
BANKS & CREDIT COMPANIES -- CONTINUED
Wachovia Corp., 6.605%, 2025 $ 1,270,000 $ 1,407,979
Woori Bank, 5.75%, 2014## 932,000 976,089
---------------
$ 22,694,795
---------------
BROADCAST & CABLE TV -- 2.4%
CSC Holdings, Inc., 7.875%, 2007 $ 995,000 $ 1,067,138
Cox Communications, Inc., 4.625%, 2013 994,000 950,876
Rogers Cable, Inc., 5.5%, 2014 727,000 685,198
TCI Communications Financing III,
9.65%, 2027 2,081,000 2,406,772
TCI Communications, Inc., 9.8%, 2012 439,000 565,868
---------------
$ 5,675,852
---------------
BROKERAGE & ASSET MANAGERS -- 1.9%
Amvescap PLC, 4.5%, 2009## $ 684,000 $ 683,275
Credit Suisse First Boston USA, Inc.,
4.7%, 2009 958,000 980,233
Lehman Brothers Holdings, Inc.,
8.25%, 2007 1,265,000 1,403,340
Morgan Stanley Dean Witter, Inc.,
6.6%, 2012 1,240,000 1,382,993
---------------
$ 4,449,841
---------------
BUILDING -- 1.2%
American Standard Cos., Inc.,
7.375%, 2008 $ 1,150,000 $ 1,261,349
Building Materials Corp. of America,
8%, 2008 780,000 803,400
CRH North America, Inc., 6.95%, 2012 712,000 811,576
---------------
$ 2,876,325
---------------
CHEMICALS -- 1.0%
BCP Caylux Holdings Luxembourg S.A.,
9.625%, 2014## $ 490,000 $ 552,475
Dow Chemical Co., 5%, 2007 589,000 608,836
Dow Chemical Co., 5.75%, 2008 548,000 583,534
Dow Chemical Co., 6.125%, 2011 580,000 635,282
---------------
$ 2,380,127
---------------
CONGLOMERATES -- 1.2%
Kennametal, Inc., 7.2%, 2012 $ 816,000 $ 906,768
Tyco International Group S.A.,
6.75%, 2011 1,679,000 1,881,803
---------------
$ 2,788,571
---------------
CONSUMER CYCLICAL -- 0.5%
Cendant Corp., 6.875%, 2006 $ 709,000 $ 745,914
Cendant Corp., 6.25%, 2010 393,000 425,322
---------------
$ 1,171,236
---------------
CONTAINERS -- 0.8%
Crown European Holdings S.A.,
9.5%, 2011 $ 900,000 $ 1,026,000
Owens-Brockway Glass Container, Inc.,
8.25%, 2013 770,000 847,000
---------------
$ 1,873,000
---------------
DEFENSE ELECTRONICS -- 1.2%
Litton Industries, Inc., 8%, 2009 $ 1,300,000 $ 1,488,672
Raytheon Co., 8.3%, 2010 1,228,000 1,455,171
---------------
$ 2,943,843
---------------
EMERGING MARKET QUASI-SOVEREIGN -- 1.2%
Export-Import Banks of Korea,
5.25%, 2014## $ 596,000 $ 606,885
Gazprom OAO, 9.625%, 2013## 280,000 331,100
Gazprom OAO, 8.625%, 2034## 260,000 304,200
Pemex Finance Ltd., 9.69%, 2009 405,650 454,328
Pemex Project Funding Master Trust,
8.625%, 2022 288,000 335,088
Petroliam Nasional Berhad, 7.75%, 2015 296,000 357,942
Petronas Capital Ltd., 7.875%, 2022## 430,000 533,997
---------------
$ 2,923,540
---------------
EMERGING MARKET SOVEREIGN -- 1.1%
Federal Republic of Brazil, 8%, 2014 $ 430,054 $ 439,730
Republic of Panama,
9.375%, 2023 - 2029 593,000 692,275
Republic of Panama, 8.875%, 2027 188,000 206,800
Russian Federation, 3%, 2011 150,000 125,625
United Mexican States, 8%, 2022 25,000 28,838
United Mexican States, 7.5%, 2033 1,005,000 1,085,400
---------------
$ 2,578,668
---------------
ENERGY - INDEPENDENT -- 3.1%
Anderson Exploration Ltd., 6.75%, 2011 $ 675,000 $ 748,220
Chesapeake Energy Corp.,
8.125%, 2011## 800,000 866,000
Chesapeake Energy Corp., 7.5%, 2014 250,000 273,125
Chesapeake Energy Corp.,
6.375%, 2015## 20,000 20,550
EnCana Holdings Finance Corp.,
5.8%, 2014 454,000 482,361
Forest Oil Corp., 8%, 2008 875,000 965,781
Kerr-McGee Corp., 6.95%, 2024 1,449,000 1,602,356
Occidental Petroleum Corp.,
7.65%, 2006 835,000 874,121
Ocean Energy, Inc., 7.625%, 2005 475,000 485,689
Ocean Energy, Inc., 7.25%, 2011 901,000 1,026,892
---------------
$ 7,345,095
---------------
ENERGY - INTEGRATED -- 0.8%
Amerada Hess Corp., 7.3%, 2031 $ 1,442,000 $ 1,608,697
Siberian Oil Co., 10.75%, 2009 224,000 238,560
---------------
$ 1,847,257
---------------
ENTERTAINMENT -- 1.7%
Liberty Media Corp., 5.7%, 2013 $ 841,000 $ 834,489
Time Warner, Inc., 9.125%, 2013 1,216,000 1,563,215
Walt Disney Co., 6.75%, 2006 620,000 645,987
Walt Disney Co., 6.375%, 2012 923,000 1,027,917
---------------
$ 4,071,608
---------------
FINANCIAL INSTITUTIONS -- 1.1%
Capital One Bank, 8.25%, 2005 $ 484,000 $ 494,750
Capital One Bank, 4.25%, 2008 600,000 604,363
General Electric Capital Corp.,
8.7%, 2007 4,000 4,419
HSBC Financial Corp., 6.75%, 2011 550,000 617,222
SLM Corp., 4%, 2009 1,000,000 999,516
---------------
$ 2,720,270
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 0.9%
Burns, Philp & Co. Ltd., 9.75%, 2012 $ 925,000 $ 1,017,500
Tyson Foods, Inc., 8.25%, 2011 1,019,000 1,210,012
---------------
$ 2,227,512
---------------
FOREST & PAPER PRODUCTS -- 0.8%
Abitibi-Consolidated, Inc., 6.95%, 2008 $ 472,000 $ 486,160
MeadWestvaco Corp., 6.8%, 2032 1,320,000 1,442,934
---------------
$ 1,929,094
---------------
GAMING & LODGING -- 1.1%
Harrah's Operating Co., Inc.,
7.125%, 2007 $ 935,000 $ 1,001,596
MGM Mirage, Inc., 8.5%, 2010 705,000 801,938
Royal Caribbean Cruises Ltd., 8%, 2010 705,000 796,650
---------------
$ 2,600,184
---------------
INSURANCE -- 0.5%
Prudential Insurance Co., 7.65%, 2007## $ 1,100,000 $ 1,196,227
---------------
INSURANCE - PROPERTY & CASUALTY -- 0.6%
Fund American Cos., Inc.,
5.875%, 2013 $ 723,000 $ 735,838
Safeco Corp., 4.875%, 2010 620,000 634,819
---------------
$ 1,370,657
---------------
</Table>
25
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
INTERNATIONAL MARKET SOVEREIGN -- 1.1%
Kingdom of Denmark, 6%, 2009 DKK 4,137,000 $ 849,853
Republic of Finland, 5.375%, 2013 EUR 559,000 859,722
Republic of Ireland, 5%, 2013 572,000 858,742
---------------
$ 2,568,317
---------------
MACHINERY & TOOLS -- 0.6%
Ingersoll Rand Co., 6.25%, 2006 $ 1,000,000 $ 1,038,724
Joy Global, Inc., 8.75%, 2012 355,000 397,600
---------------
$ 1,436,324
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.9%
HCA, Inc., 8.75%, 2010 $ 1,113,000 $ 1,272,254
HCA, Inc., 7.875%, 2011 787,000 866,881
---------------
$ 2,139,135
---------------
METALS & MINING -- 1.0%
Corporacion Nacional del Cobre de Chile,
6.375%, 2012## $ 342,000 $ 377,368
International Steel Group, Inc.,
6.5%, 2014 894,000 958,815
Phelps Dodge Corp., 8.75%, 2011 891,000 1,086,373
---------------
$ 2,422,556
---------------
MORTGAGE BACKED -- 6.4%
Fannie Mae, 6%, 2016 - 2022 $ 1,700,514 $ 1,782,683
Fannie Mae, 5.5%, 2017 - 2034 4,827,415 4,922,883
Fannie Mae, 4.5%, 2018 2,477,312 2,475,004
Fannie Mae, 7.5%, 2030 - 2031 505,433 541,581
Fannie Mae, 6.5%, 2032 2,220,611 2,330,797
Fannie Mae, 5%, 2034 1,985,139 1,973,494
Freddie Mac, 6%, 2034 631,825 652,970
Ginnie Mae, 6.5%, 2028 - 2031 391,004 412,075
Ginnie Mae, 7.5%, 2029 - 2031 63,155 67,833
---------------
$ 15,159,320
---------------
NATURAL GAS - PIPELINE -- 2.3%
CenterPoint Energy Resources Corp.,
7.875%, 2013 $ 1,383,000 $ 1,643,820
Enterprise Products Partners LP,
6.875%, 2033 981,000 1,042,673
Kinder Morgan Energy Partners LP,
7.4%, 2031 990,000 1,151,349
Kinder Morgan, Inc., 6.8%, 2008 600,000 647,876
Magellan Midstream Partners LP,
5.65%, 2016 489,000 494,404
Williams Cos., Inc., 8.75%, 2032 412,000 473,285
---------------
$ 5,453,407
---------------
OIL SERVICES -- 0.7%
Dresser, Inc., 9.375%, 2011 $ 700,000 $ 766,500
Halliburton Co., 5.5%, 2010 921,000 970,069
---------------
$ 1,736,569
---------------
OILS -- 0.5%
Valero Energy Corp., 7.5%, 2032 $ 992,000 $ 1,196,532
---------------
PHARMACEUTICALS -- 0.4%
Wyeth, 5.5%, 2013 $ 864,000 $ 897,975
---------------
POLLUTION CONTROL -- 0.5%
Allied Waste North America, Inc.,
7.875%, 2013 $ 335,000 $ 343,375
Waste Management, Inc., 7.1%, 2026 745,000 842,989
---------------
$ 1,186,364
---------------
PRINTING & PUBLISHING -- 0.6%
Belo Corp., 7.75%, 2027 $ 676,000 $ 801,902
Dex Media West LLC, 9.875%, 2013 659,000 759,498
---------------
$ 1,561,400
---------------
RAILROAD & SHIPPING -- 0.4%
CSX Corp., 6.3%, 2012 $ 826,000 $ 907,423
---------------
REAL ESTATE -- 2.7%
EOP Operating LP, 6.625%, 2005 $ 535,000 $ 537,408
EOP Operating LP, 8.375%, 2006 978,000 1,031,564
EOP Operating LP, 6.8%, 2009 1,137,000 1,246,282
HRPT Properties Trust, 6.25%, 2016 556,000 586,467
Simon Property Group LP, 6.375%, 2007 1,200,000 1,280,273
Simon Property Group LP, 6.35%, 2012 629,000 687,173
Vornado Realty Trust, 5.625%, 2007 975,000 1,012,273
---------------
$ 6,381,440
---------------
RESTAURANTS -- 0.5%
YUM! Brands, Inc., 8.875%, 2011 $ 1,011,000 $ 1,249,110
---------------
RETAILERS -- 1.6%
Couche-Tard, Inc., 7.5%, 2013 $ 700,000 $ 750,750
Dollar General Corp., 8.625%, 2010 725,000 842,813
Gap, Inc., 10.05%, 2008 950,000 1,156,625
Limited Brands, Inc., 5.25%, 2014 969,000 960,126
---------------
$ 3,710,314
---------------
SUPERMARKETS -- 0.4%
Kroger Co., 7.8%, 2007 $ 845,000 $ 926,703
---------------
SUPRANATIONAL -- 0.2%
Corporacion Andina de Fomento,
6.875%, 2012 $ 481,000 $ 540,543
---------------
TELECOMMUNICATIONS - WIRELESS -- 1.6%
AT&T Wireless Services, Inc.,
8.75%, 2031 $ 454,000 $ 612,134
American Tower Escrow Corp., 0%, 2008 1,070,000 799,825
Mobile TeleSystems OJSC,
9.75%, 2008## 559,000 589,745
Rogers Wireless, Inc., 7.25%, 2012## 535,000 567,100
Sprint Capital Corp., 6.875%, 2028 428,000 468,569
Vimpel-Communications, 10%, 2009## 634,000 665,700
---------------
$ 3,703,073
---------------
TELECOMMUNICATIONS - WIRELINE -- 5.6%
BellSouth Corp., 6.55%, 2034 $ 1,237,000 $ 1,347,891
Citizens Communications Co.,
9.25%, 2011 688,000 804,960
Deutsche Telekom International Finance
B.V., 8.5%, 2010 1,388,000 1,653,626
Deutsche Telekom International Finance
B.V., 8.75%, 2030 1,212,000 1,600,395
SBC Communications, Inc., 5.1%, 2014 961,000 969,932
TELUS Corp., 8%, 2011 805,000 953,989
Telecom Italia Capital, 5.25%, 2013 698,000 705,493
Telecom Italia Capital, 6%, 2034## 979,000 957,124
Telecom Italia S.p.A., 5.625%, 2007 EUR 557,00 795,183
Telecomunicaciones de Puerto Rico, Inc.,
6.65%, 2006 $ 572,000 593,206
Telecomunicaciones de Puerto Rico, Inc.,
6.8%, 2009 375,000 399,209
Verizon New York, Inc., 6.875%, 2012 1,530,000 1,717,391
Verizon New York, Inc., 7.375%, 2032 653,000 749,028
---------------
$ 13,247,427
---------------
TOBACCO -- 0.9%
Altria Group, Inc., 7%, 2013 $ 826,000 $ 895,011
R.J. Reynolds Tobacco Holdings, Inc.,
7.25%, 2012 1,271,000 1,305,953
---------------
$ 2,200,964
---------------
TRANSPORTATION - SERVICES -- 0.6%
FedEx Corp., 9.65%, 2012 $ 1,052,000 $ 1,366,172
---------------
U.S. GOVERNMENT AGENCIES -- 4.2%
Fannie Mae, 7.125%, 2005 $ 1,450,000 $ 1,457,537
Fannie Mae, 6%, 2008 1,833,000 1,972,383
Fannie Mae, 6.125%, 2012 1,934,000 2,148,788
Fannie Mae, 5.25%, 2012 406,000 421,278
</Table>
26
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
U.S. GOVERNMENT AGENCIES -- continued
Small Business Administration,
4.93%, 2024 $ 1,857,942 $ 1,879,691
Small Business Administration,
4.34%, 2024 1,281,755 1,249,902
Small Business Administration,
4.99%, 2024 800,000 809,180
---------------
$ 9,938,759
---------------
U.S. TREASURY OBLIGATIONS -- 4.8%
U.S. Treasury Bonds, 9.875%, 2015 $ 307,000 $ 453,545
U.S. Treasury Bonds, 5.375%, 2031### 592,000 640,146
U.S. Treasury Notes, 3.375%, 2007 802,330 849,750
U.S. Treasury Notes, 4.375%, 2007 4,272,000 4,390,646
U.S. Treasury Notes, 3%, 2012 1,811,021 2,020,915
U.S. Treasury Notes, 2%, 2014 1,154,341 1,190,956
U.S. Treasury Notes, 4.25%, 2014 1,784,000 1,788,669
---------------
$ 11,334,627
---------------
UTILITIES - ELECTRIC POWER -- 7.6%
Beaver Valley Funding Corp., 9%, 2017 $ 2,022,000 $ 2,391,399
DPL, Inc., 6.875%, 2011 853,000 931,589
DTE Energy Co., 7.05%, 2011 1,490,000 1,687,200
Duke Capital Corp., 8%, 2019 1,451,000 1,770,712
Enersis S.A., 7.375%, 2014 686,000 747,654
Exelon Generation Co. LLC, 6.95%, 2011 1,321,000 1,491,058
FirstEnergy Corp., 6.45%, 2011 679,000 737,713
NiSource Finance Corp., 7.875%, 2010 505,000 593,667
NorthWestern Corp., 5.875%, 2014## 35,000 35,804
Northeast Utilities, 8.58%, 2006 315,817 330,676
PSEG Energy Holdings LLC,
7.75%, 2007 148,000 156,510
PSEG Power LLC, 7.75%, 2011 421,000 490,885
PSEG Power LLC, 8.625%, 2031 286,000 379,745
Pacific Gas & Electric Co., 6.05%, 2034 1,403,000 1,457,178
Reliant Energy, Inc., 8.125%, 2005 916,000 940,127
System Energy Resources, Inc.,
5.129%, 2014## 916,000 916,751
TXU Corp., 6.375%, 2006 843,000 875,207
TXU Corp., 6.5%, 2024## 1,192,000 1,193,989
W3A Funding Corp., 8.09%, 2017 873,531 966,492
---------------
$ 18,094,356
---------------
Total Bonds
(Identified Cost, $221,918,118) $ 231,833,300
---------------
REPURCHASE AGREEMENT -- 1.1%
Morgan Stanley, 2.19%, dated 12/31/04,
due 01/03/05, total to be received
$2,650,484 (secured by various U.S.
Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 2,650,000 $ 2,650,000
---------------
Total Investments
(Identified Cost, $224,568,118) $ 234,483,300
---------------
OTHER ASSETS,
LESS LIABILITIES -- 1.4% 3,315,336
---------------
Net Assets -- 100.0% $ 237,798,636
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
EMERGING MARKETS EQUITY SERIES
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
STOCKS - 98.1%
ALCOHOLIC BEVERAGES -- 1.5%
Anadolu Efes 21,425,000 $ 432,949
Grupo Modelo S.A. de C.V. 193,580 532,445
---------------
$ 965,394
---------------
AUTOMOTIVE -- 1.4%
Hyundai Motor Co. Ltd.* 16,330 $ 875,497
---------------
BANKS & CREDIT COMPANIES -- 21.4%
Absa Group Ltd. 61,520 $ 828,150
African Bank Investments Ltd. 151,180 490,096
Akbank T.A.S. 140,120,562 867,636
Bangkok Bank Public Co. Ltd. 157,850 462,903
Bank Colombia S.A. ADR 29,600 417,952
Bank Hapoalim B.M. 90,820 306,307
Bank Leumi le-Israel B.M. 126,430 345,048
Bank Rakyat Indonesia 2,167,000 671,169
Chinatrust Financial Holding Co. Ltd. 480,714 573,107
FirstRand Ltd. 321,880 761,222
Fubon Financial Holding Co. Ltd. 475,000 485,609
Grupo Financiero Inbursa S.A. de C.V. 324,090 596,312
Hana Bank 23,430 583,939
Krung Thai Bank PLC 928,500 214,964
LIC Housing Finance Ltd. 164,460 786,176
Mega Financial Holding Co. Ltd. 742,000 511,161
OTP Bank Ltd., GDR 11,670 711,870
PT Bank Central Asia Tbk. 1,845,500 591,475
PT Bank Danamon Tbk. 608,500 286,796
Shinhan Financial Group Co. Ltd.* 30,050 679,260
Standard Bank Group Ltd. 107,497 1,253,021
Taishin Financial Holdings Co. Ltd. 672,000 629,934
Unibanco - Uniao de Bancos
Brasileiros S.A. 22,080 700,378
---------------
$ 13,754,485
---------------
BROADCAST & CABLE TV -- 2.0%
Grupo Televisa S.A., ADR 11,080 $ 670,340
TV Azteca S.A. de C.V., ADR 57,700 593,156
---------------
$ 1,263,496
---------------
BUSINESS SERVICES -- 0.4%
CITIC Pacific Ltd. 100,000 $ 282,388
---------------
CHEMICALS -- 2.5%
Formosa Chemicals & Fibre Corp. 163,800 $ 311,730
Sasol Ltd. 61,700 1,322,533
---------------
$ 1,634,263
---------------
COMPUTER SOFTWARE - SYSTEMS -- 0.9%
Acer, Inc. 166,432 $ 274,856
High Tech Computer Corp. 64,400 309,947
---------------
$ 584,803
---------------
CONGLOMERATES -- 0.4%
Koor Industries Ltd.* 4,370 $ 227,503
---------------
CONSTRUCTION -- 3.1%
Corporacion GEO S.A. de C.V.* 365,980 $ 732,157
Gujarat Ambuja Cements Ltd.* 34,510 320,404
Siam Cement Public Co. Ltd. 87,950 624,433
Urbi Desarrollos Urbanos S.A. de C.V.* 69,390 303,157
---------------
$ 1,980,151
---------------
CONSUMER GOODS & SERVICES -- 0.5%
Kimberly-Clark de Mexico S.A. de C.V 90,880 $ 313,885
---------------
ELECTRONICS -- 9.3%
AU Optronics Corp. 308,300 $ 445,139
MediaTek, Inc. 53,214 361,567
Samsung Electronics Co. Ltd. 9,150 3,981,912
Taiwan Semiconductor Manufacturing Co.
Ltd. 743,000 1,180,293
---------------
$ 5,968,911
---------------
</Table>
27
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
ENERGY - INDEPENDENT -- 3.9%
CNOOC Ltd. 548,000 $ 294,339
Oil & Natural Gas Corp. Ltd. 24,520 464,633
Polski Koncern Naftowy Orlen S.A. 16,310 411,012
PTT Public Co. 124,400 553,614
Reliance Industries Ltd. 60,500 746,703
---------------
$ 2,470,301
---------------
ENERGY - INTEGRATED -- 6.1%
OAO LUKOIL, ADR 13,220 $ 1,619,450
PetroChina Co. Ltd. 1,722,000 919,375
Petroleo Brasileiro S.A., ADR 34,860 1,386,731
---------------
$ 3,925,556
---------------
FOREST & PAPER PRODUCTS -- 1.8%
Aracruz Celulose S.A., ADR 13,880 $ 523,276
Votorantim Celulose e Papel S.A., ADR^ 39,935 646,947
---------------
$ 1,170,223
---------------
FURNITURE & APPLIANCES -- 1.0%
LG Electronics, Inc.* 10,070 $ 623,538
---------------
GAMING & LODGING -- 0.9%
Genting Berhad 116,000 $ 580,000
---------------
INSURANCE -- 3.3%
Liberty Group Ltd. 55,716 $ 657,340
Samsung Fire & Marine Insurance Co. Ltd. 8,820 694,387
Sanlam Group 344,470 793,288
---------------
$ 2,145,015
---------------
MACHINERY & TOOLS -- 1.0%
Hyundai Mobis 10,440 $ 660,568
---------------
METALS & MINING -- 13.1%
Aluminum Corp. of China Ltd. 1,020,000 $ 603,628
Anglo American PLC 123,600 2,918,508
China Steel Corp. 585,895 659,800
Companhia Siderurgica Nacional S.A. 18,090 345,881
Companhia Vale do Rio Doce, ADR 45,800 1,328,658
Mechel Steel Group OAO* 17,200 384,420
Mining and Metallurgical Co. Norilsk Nickel,
ADR^ 13,120 728,160
POSCO, ADR 32,930 1,466,373
---------------
$ 8,435,428
---------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.9%
Hon Hai Precision Industry Co. Ltd. 119,359 $ 551,927
---------------
PHARMACEUTICALS -- 3.0%
Sun Pharmaceutical Industries Ltd. 27,180 $ 348,438
Teva Pharmaceutical Industries Ltd., ADR 51,890 1,549,435
---------------
$ 1,897,873
---------------
PRECIOUS METALS & MINERALS -- 0.9%
Impala Platinum Holdings Ltd. 7,010 $ 594,826
---------------
RAILROAD & SHIPPING -- 0.5%
Wan Hai Lines Ltd. 325,350 $ 338,757
---------------
SPECIALTY CHEMICALS -- 1.1%
IOI Corp. 107,000 $ 267,500
LG Chemical Ltd.* 4,950 197,244
Nan Ya Plastics Corp. 163,000 249,192
---------------
$ 713,936
---------------
SPECIALTY STORES -- 1.1%
Grupo Elektra S.A. de C.V. 72,640 $ 674,463
---------------
TELECOMMUNICATIONS - WIRELESS -- 7.6%
Advanced Info Service PLC 206,700 $ 568,938
America Movil S.A. de C.V., ADR 20,690 1,083,121
Celular CRT Participacoes S.A. 1 4
China Mobile Ltd. 447,500 1,516,998
Partner Communication Co. Ltd.* 69,690 597,243
SK Telecom Co. Ltd. 4,030 766,915
Vimpel-Communictaions Public
Joint Stock Co.* 10,100 $ 365,014
---------------
$ 4,898,233
---------------
TELEPHONE SERVICES -- 5.6%
Brasil Telecom Participacoes S.A., ADR 18,880 $ 720,272
China Netcom Group Corp. Ltd.* 464,000 629,770
China Telecom Corp. Ltd. 1,676,000 614,512
KT Corp., ADR 18,340 399,995
KT Freetel Co. Ltd.* 28,300 675,241
Tele Norte Leste Participacoes, ADR^ 33,310 561,940
---------------
$ 3,601,730
---------------
TOBACCO -- 2.5%
British American Tobacco 23,000 $ 276,908
ITC Ltd.* 12,630 382,492
KT&G Corp., ADR* 19,750 590,478
PT Hanjaya Mandala Sampoerna Tbk 448,500 321,306
---------------
$ 1,571,184
---------------
UTILITIES - ELECTRIC POWER -- 0.4%
YTL Power International Bhd 556,600 $ 263,653
---------------
Total Stocks (Identified Cost, $46,095,596) $ 62,967,987
---------------
PREFERRED STOCKS -- 1.1%
CONGLOMERATES -- 1.1%
Bradespar S.A. (Identified Cost, $607,046) 21,380 $ 704,349
---------------
COLLATERAL FOR SECURITIES LOANED -- 2.3%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value 1,465,603 $ 1,465,603
---------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 0.3%
Morgan Stanley, 2.19%, dated 12/31/04,
due 01/03/05, total to be received
$231,042 (secured by various U.S.
Treasury and Federal Agency obligations
in a jointly traded account), at Cost $ 231,000 $ 231,000
---------------
Total Investments
(Identified Cost, $48,399,245) $ 65,368,939
---------------
OTHER ASSETS,
LESS LIABILITIES -- (1.8)% (1,173,844)
---------------
Net Assets -- 100.0% $ 64,195,095
===============
</Table>
See portfolio footnotes and notes to financial statements.
28
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
GLOBAL GOVERNMENTS SERIES
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- 88.9%
FOREIGN BONDS -- 76.3%
AUSTRALIA -- 1.9%
Government of Australia, 8.75%, 2008 AUD 779,000 $ 679,770
Government of Australia, 6.25%, 2015 709,000 593,679
---------------
$ 1,273,449
---------------
AUSTRIA -- 3.4%
Republic of Austria, 5.5%, 2007 EUR 868,000 $ 1,262,738
Republic of Austria, 5%, 2012 393,000 587,355
Republic of Austria, 4.65%, 2018 286,000 416,145
---------------
$ 2,266,238
---------------
BELGIUM -- 3.2%
Kingdom of Belgium, 3.75%, 2009 EUR 875,000 $ 1,222,426
Kingdom of Belgium, 5%, 2012 613,000 916,548
---------------
$ 2,138,974
---------------
CANADA -- 4.9%
Canada Housing Trust, 4.65%, 2009 CAD 400,000 $ 345,557
Government of Canada, 5.25%, 2012 377,000 336,704
Quebec Province, 1.6%, 2013 JPY 265,000,000 2,635,847
---------------
$ 3,318,108
---------------
DENMARK -- 0.7%
Kingdom of Denmark, 5%, 2013 DKK 2,265,000 $ 454,724
---------------
FINLAND -- 6.2%
Republic of Finland, 2.75%, 2006 EUR 857,000 $ 1,167,503
Republic of Finland, 3%, 2008 2,183,000 2,974,404
---------------
$ 4,141,907
---------------
FRANCE -- 9.1%
Republic of France, 4.75%, 2007 - 2012 EUR 3,074,000 $ 4,427,983
Republic of France, 6%, 2025 978,000 1,660,188
---------------
$ 6,088,171
---------------
GERMANY -- 13.4%
Federal Republic of Germany,
3.5%, 2008 EUR 1,056,000 $ 1,462,343
Federal Republic of Germany,
5.25%, 2010 1,743,000 2,609,360
Federal Republic of Germany,
6.25%, 2024 - 2030 1,822,000 3,197,575
Kreditanstalt fur Wiederaufbau,
3.25%, 2008 1,234,000 1,697,111
---------------
$ 8,966,389
---------------
IRELAND -- 6.0%
Republic of Ireland, 4.25%, 2007 EUR 2,068,000 $ 2,918,763
Republic of Ireland, 4.6%, 2016 736,000 1,074,700
---------------
$ 3,993,463
---------------
ITALY -- 2.0%
Republic of Italy, 5.25%, 2017 EUR 899,000 $ 1,377,867
---------------
JAPAN -- 3.5%
Development Bank of Japan,
1.4%, 2012 JPY 95,000,000 $ 941,758
Development Bank of Japan, 1.6%, 2014 140,000,000 1,379,277
---------------
$ 2,321,035
---------------
MEXICO -- 1.3%
Pemex Project Funding Master Trust,
8.625%, 2022 $ 710,000 $ 826,085
United Mexican States, 8%, 2022 MXN 64,000 73,824
---------------
$ 899,909
---------------
NETHERLANDS -- 3.9%
Kingdom of Netherlands, 5.75%, 2007 EUR 1,695,000 $ 2,444,994
Kingdom of Netherlands, 5%, 2012 118,354 177,160
---------------
$ 2,622,154
---------------
NEW ZEALAND -- 5.0%
Government of New Zealand, 7%, 2009 NZD 815,000 $ 607,732
Government of New Zealand,
6.5%, 2013 3,670,000 2,723,365
---------------
$ 3,331,097
---------------
QATAR -- 0.8%
State of Qatar, 9.75%, 2030 $ 351,000 $ 510,217
---------------
RUSSIA -- 0.8%
Russian Federation, 11%, 2018 $ 375,000 $ 524,325
---------------
SPAIN -- 2.8%
Kingdom of Spain, 6%, 2008 EUR 1,220,000 $ 1,809,840
Kingdom of Spain, 5.35%, 2011 64,000 97,280
---------------
$ 1,907,120
---------------
UNITED KINGDOM -- 7.4%
United Kingdom Treasury, 5.75%, 2009 GBP 324,000 $ 655,008
United Kingdom Treasury, 5%, 2012 2,170,000 4,280,468
---------------
$ 4,935,476
---------------
Total Foreign Bonds $ 51,070,623
---------------
U.S. BONDS -- 12.6%
ASSET BACKED & SECURITIZED -- 3.4%
Commercial Mortgage Asset Trust,
0.8711%, 2032##^^ $ 9,295,306 $ 459,881
Deutsche Mortgage & Asset Receiving
Corp., 6.538%, 2031 329,764 350,721
First Union National Bank Commercial
Mortgage Trust, 7.39%, 2031 342,032 387,635
First Union National Bank Commercial
Mortgage Trust, 0.9667%, 2043##^^ 9,521,595 453,764
First Union-Lehman Brothers Bank of
America, 6.56%, 2035 164,477 176,835
GMAC Commercial Mortgage
Securities, Inc., 6.42%, 2035 164,477 176,771
Lehman Brothers-UBS Commercial
Mortgage Trust, 7.95%, 2010 256,524 297,842
---------------
$ 2,303,449
---------------
MORTGAGE BACKED -- 1.2%
Fannie Mae, 6%, 2017 - 2018 $ 768,162 $ 805,412
---------------
MUNICIPAL BONDS -- 1.0%
New York, NY, City Municipal Water
Finance Authority, Water & Sewer
SystemsRev., "B", 5%, 2036 $ 630,000 $ 642,348
---------------
SUPRANATIONAL -- 2.2%
Inter-American Development Bank,
1.9%, 2009 JPY 142,000,000 $ 1,467,963
---------------
U.S. TREASURY OBLIGATIONS -- 4.8%
U.S. Treasury Bonds, 8%, 2021### $ 230,000 $ 315,720
U.S. Treasury Bonds, 6.25%, 2030 1,293,000 1,545,893
U.S. Treasury Notes, 4.25%, 2013 667,000 671,195
U.S. Treasury Notes, 2%, 2014 621,854 643,619
---------------
$ 3,176,427
---------------
Total U.S.Bonds $ 8,395,599
---------------
Total Bonds
(Identified Cost, $53,677,689) $ 59,466,222
---------------
SHORT-TERM OBLIGATION -- 1.1%
Federal Home Loan Bank, 1%,
due 1/03/05, at Amortized Cost@@ $ 745,000 $ 744,959
---------------
</Table>
29
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
REPURCHASE AGREEMENT -- 9.0%
Goldman Sachs, 2.23%, dated 12/31/04,
due 01/03/05, total to be received
$3,020,561 (secured by various U.S.
Treasury and Federal Agency
obligations in a jointly traded
account) $ 3,020,000 $ 3,020,000
Morgan Stanley, 2.19%, dated 12/31/04,
due 01/03/05, total to be received
$3,020,551 (secured by various U.S.
Treasury and Federal Agency obligations
in a jointly traded account) 3,020,000 $ 3,020,000
---------------
Total Repurchase Agreement, at Cost $ 6,040,000
---------------
Total Investments
(Identified Cost, $60,462,648) $ 66,251,181
---------------
OTHER ASSETS,
LESS LIABILITIES -- 1.0% 688,234
---------------
Net Assets -- 100.0% $ 66,939,415
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
GLOBAL TOTAL RETURN SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 60.9%
AEROSPACE -- 1.3%
Lockheed Martin Corp. 18,350 $ 1,019,343
Northrop Grumman Corp. 14,580 792,569
United Technologies Corp. 4,400 454,740
---------------
$ 2,266,652
---------------
AIRLINES -- 1.0%
Air China Ltd.* 138,000 $ 53,261
easyJet Airline Co. Ltd.* 182,700 657,431
TPG N.V. 42,300 1,144,761
---------------
$ 1,855,453
---------------
ALCOHOLIC BEVERAGES -- 0.4%
Diageo PLC 55,728 $ 793,586
---------------
APPAREL MANUFACTURERS -- 0.3%
Sanyo Shokai Ltd. 98,000 $ 532,075
---------------
AUTOMOTIVE -- 2.0%
Autoliv, Inc. 9,200 $ 439,332
Bayerische Motoren Werke AG 17,910 805,402
Compagnie Generale des Etablissements
Michelin 8,500 543,310
Nissan Motor Co. Ltd. 50,000 541,961
PSA Peugeot Citroen S.A. 9,900 626,226
Renault S.A. 8,000 666,956
---------------
$ 3,623,187
---------------
BANKS & CREDIT COMPANIES -- 9.4%
Acom Co. Ltd. 5,370 $ 400,758
American Express Co. 14,400 811,728
Bank of America Corp. 47,658 2,239,449
Citigroup, Inc. 41,293 1,989,497
Credit Agricole S.A. 36,000 1,082,516
Fannie Mae 22,930 1,632,845
Freddie Mac 5,400 397,980
Grupo Financiero Inbursa S.A. de C.V. 147,300 271,026
Irish Life & Permanent PLC 23,940 447,489
J.P. Morgan Chase & Co. 16,520 644,445
MBNA Corp. 13,900 391,841
Nordea Bank AB 117,400 1,181,193
PNC Financial Services Group, Inc. 14,200 815,648
Promise Co. Ltd. 4,000 284,894
Royal Bank of Scotland Group PLC 42,131 1,414,711
SunTrust Banks, Inc. 18,660 1,378,601
Takefuji Corp. 16,770 1,130,782
Wells Fargo & Co. 6,900 428,835
---------------
$ 16,944,238
---------------
BROADCAST & CABLE TV -- 1.6%
Comcast Corp., "Special A"* 18,000 $ 591,120
Pages Jaunes* 35,200 851,059
Tokyo Broadcasting System, Inc. 28,800 468,254
Viacom, Inc., "B" 25,996 945,994
---------------
$ 2,856,427
---------------
BROKERAGE & ASSET MANAGERS -- 2.0%
Franklin Resources, Inc. 5,100 $ 355,215
Goldman Sachs Group, Inc. 15,570 1,619,903
ING Canada, Inc.## 3,900 95,246
Lehman Brothers Holdings, Inc. 3,900 341,172
Mellon Financial Corp. 20,860 648,955
Merrill Lynch & Co., Inc. 8,580 512,827
---------------
$ 3,573,318
---------------
BUSINESS SERVICES -- 0.4%
Accenture Ltd., "A"* 24,940 $ 673,380
---------------
CHEMICALS -- 2.3%
Dow Chemical Co. 12,620 $ 624,816
E.I. du Pont de Nemours & Co. 9,200 451,260
Monsanto Co. 9,000 499,950
PPG Industries, Inc. 13,550 923,568
</Table>
30
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
CHEMICALS -- continued
Syngenta AG 15,500 $ 1,640,657
---------------
$ 4,140,251
---------------
CONSTRUCTION -- 1.5%
Italcementi S.p.A. 81,700 $ 932,886
Italcementi S.p.A. - Ordinary 27,500 441,398
Masco Corp. 14,700 536,991
Sekisui Chemical Co. Ltd. 108,000 787,079
---------------
$ 2,698,354
---------------
CONSUMER GOODS & SERVICES -- 0.7%
Kimberly-Clark Corp. 11,870 $ 781,165
Reckitt Benckiser PLC 18,570 560,207
---------------
$ 1,341,372
---------------
ELECTRICAL EQUIPMENT -- 0.4%
Cooper Industries Ltd., "A" 5,600 $ 380,184
Emerson Electric Co. 6,200 434,620
---------------
$ 814,804
---------------
ELECTRONICS -- 0.8%
CANON, Inc. 12,000 $ 645,682
Samsung Electronics Co. Ltd. 1,720 748,512
---------------
$ 1,394,194
---------------
ENERGY - INDEPENDENT -- 1.4%
CNOOC Ltd. 1,157,000 $ 621,443
EnCana Corp. 15,400 877,690
EOG Resources, Inc. 3,300 235,488
Unocal Corp. 16,950 732,918
---------------
$ 2,467,539
---------------
ENERGY - INTEGRATED -- 4.8%
BP PLC 30,000 $ 292,090
BP PLC, ADR 26,952 1,573,997
China Petroleum & Chemical Corp. 1,026,000 419,085
ConocoPhillips 13,960 1,212,147
Exxon Mobil Corp. 11,370 582,826
Repsol YPF S.A. 25,300 656,591
Statoil A.S.A. 71,200 1,111,504
TOTAL S.A. 2,000 435,336
TOTAL S.A., ADR^ 22,000 2,416,480
---------------
$ 8,700,056
---------------
FOOD & DRUG STORES -- 0.5%
Lawson, Inc. 13,200 $ 485,488
William Morrison Supermarkets PLC 127,300 505,045
---------------
$ 990,533
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.6%
Archer Daniels Midland Co. 43,980 $ 981,194
H.J. Heinz Co. 10,440 407,056
Kellogg Co. 23,640 1,055,762
Nestle S.A. 5,294 1,380,035
PepsiCo, Inc. 6,200 323,640
Sara Lee Corp. 22,690 547,737
---------------
$ 4,695,424
---------------
FOREST & PAPER PRODUCTS -- 0.5%
International Paper Co. 21,370 $ 897,540
---------------
INSURANCE -- 3.2%
AFLAC, Inc. 9,700 $ 386,448
Allstate Corp. 25,570 1,322,480
Aviva PLC 52,000 625,885
Chubb Corp. 3,700 284,530
Hartford Financial Services Group, Inc. 9,860 683,397
Jardine Lloyd Thompson Group PLC 66,400 473,416
MetLife, Inc. 36,540 1,480,235
Riunione Adriatica di Sicurta S.p.A. 25,200 567,980
---------------
$ 5,824,371
---------------
LEISURE & TOYS -- 0.5%
Heiwa Corp. 19,200 $ 319,829
Nintendo Co. Ltd. 4,500 563,513
---------------
$ 883,342
---------------
MACHINERY & TOOLS -- 1.4%
Assa Abloy AB 30,300 $ 516,436
Deere & Co. 10,890 810,216
Finning International, Inc.##* 8,560 249,564
Hyundai Mobis 5,500 348,000
Sandvik AB 13,200 531,235
---------------
$ 2,455,451
---------------
MEDICAL EQUIPMENT -- 0.1%
Baxter International, Inc. 8,000 $ 276,320
---------------
METALS & MINING -- 0.5%
Anglo American PLC 39,000 $ 920,888
---------------
NATURAL GAS - DISTRIBUTION -- 0.8%
Tokyo Gas Co. Ltd. 350,000 $ 1,430,309
---------------
OIL SERVICES -- 0.6%
Noble Corp.* 16,500 $ 820,710
Tenaris S.A. 4,400 215,160
---------------
$ 1,035,870
---------------
PHARMACEUTICALS -- 4.2%
Abbott Laboratories 17,000 $ 793,050
AstraZeneca PLC 20,840 754,504
Chugai Pharmaceutical Co. Ltd. 37,700 621,394
Johnson & Johnson 17,770 1,126,973
Merck & Co., Inc. 37,500 1,205,250
Pfizer, Inc. 7,132 191,779
Roche Holdings AG 8,000 917,590
Sanofi-Aventis 9,770 778,128
Tanabe Seiyaku Co. Ltd. 68,000 698,691
Wyeth 11,330 482,545
---------------
$ 7,569,904
---------------
PRINTING & PUBLISHING -- 1.0%
Tribune Co. 13,630 $ 574,368
Yell Group PLC 141,800 1,195,806
---------------
$ 1,770,174
---------------
RAILROAD & SHIPPING -- 0.6%
Burlington Northern Santa Fe Corp. 7,300 $ 345,363
Canadian National Railway Co. 12,177 745,841
---------------
$ 1,091,204
---------------
RESTAURANTS -- 0.2%
McDonald's Corp. 11,930 $ 382,476
---------------
SPECIALTY CHEMICALS -- 0.5%
Air Products & Chemicals, Inc. 16,000 $ 927,520
---------------
SPECIALTY STORES -- 1.1%
Gap, Inc. 32,700 $ 690,624
Matalan PLC 185,300 786,649
TJX Cos., Inc. 20,300 510,139
---------------
$ 1,987,412
---------------
TELECOMMUNICATIONS - WIRELESS -- 1.8%
KDDI Corp. 210 $ 1,127,901
mm02 PLC* 238,600 561,337
Vodafone Group PLC 608,003 1,645,985
---------------
$ 3,335,223
---------------
TELEPHONE SERVICES -- 4.5%
Brasil Telecom Participacoes S.A., ADR 11,800 $ 450,170
Deutsche Telekom AG 64,200 1,447,865
KT Freetel Co. Ltd. 16,600 396,078
Royal KPN N.V 140,100 1,326,460
Sprint Corp. 58,300 1,448,755
Telecom Corp. of New Zealand Ltd. 124,700 550,829
Telefonica S.A. 66,486 1,248,166
</Table>
31
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
TELEPHONE SERVICES -- continued
Verizon Communications, Inc. 26,890 $ 1,089,314
ZTE Corp.* 51,600 166,955
---------------
$ 8,124,592
---------------
TOBACCO -- 2.0%
Altria Group, Inc. 27,496 $ 1,680,006
British American Tobacco PLC 46,900 806,750
Imperial Tobacco Group PLC 22,800 623,578
Swedish Match AB 46,300 535,365
---------------
$ 3,645,699
---------------
TRUCKING -- 0.3%
Singapore Post Ltd. 859,900 $ 468,711
---------------
UTILITIES - ELECTRIC POWER -- 3.7%
Dominion Resources, Inc. 15,900 $ 1,077,066
Fortum Corp. 73,000 1,346,725
Iberdrola S.A. 21,880 554,202
Kelda Group PLC 44,600 540,664
Severn Trent PLC 27,400 507,819
Suez S.A. 43,900 1,166,655
Tohoku Electric Power Co., Inc. 50,100 896,950
TXU Corp. 8,000 516,480
---------------
$ 6,606,561
---------------
Total Stocks
(Identified Cost, $87,452,088) $ 109,994,410
---------------
<Caption>
PAR AMOUNT
BONDS -- 34.9%
ADVERTISING & BROADCASTING -- 0.2%
News America Holdings, 7.75%, 2024 $ 219,000 $ 259,708
---------------
ASSET BACKED & SECURITIZED -- 1.0%
Commercial Mortgage Asset Trust,
0.8711%, 2032^^## $ 4,465,392 $ 220,923
Deutsche Mortgage & Asset Receiving
Corp., 6.538%, 2031 275,123 292,607
First Union National Bank Commercial
Mortgage Trust, 7.39%, 2031 293,050 332,122
First Union National Bank Commercial
Mortgage Trust, 0.9667%, 2043^^## 8,689,106 414,091
First Union-Lehman Brothers Bank of
America, 6.56%, 2035 146,153 157,134
GMAC Commercial Mortgage Securities,
Inc., 6.42%, 2035 146,153 157,077
Lehman Brothers-UBS Commercial
Mortgage Trust, 7.95%, 2010 219,788 255,189
---------------
$ 1,829,143
---------------
BANKS & CREDIT COMPANIES -- 0.2%
Pfandbriefstelle der osterreichischen
Landes-Hypothekenbanken,
1.6%, 2011 JPY 21,000,000 $ 212,981
Woori Bank, 5.75%, 2014## $ 185,000 193,752
---------------
$ 406,733
---------------
EMERGING MARKET QUASI-SOVEREIGN -- 0.5%
Pemex Project Funding Master Trust,
8.625%, 2022 $ 472,000 $ 549,172
Petroleos Mexicanos, 9.5%, 2027 130,000 163,150
Petronas Capital Ltd., 7.875%, 2022## 100,000 124,185
---------------
$ 836,507
---------------
EMERGING MARKET SOVEREIGN -- 0.6%
Russian Federation, 11%, 2018 $ 240,000 $ 335,568
State of Qatar, 9.75%, 2030 344,000 500,042
United Mexican States, 6.625%, 2015 102,000 109,548
United Mexican States, 8%, 2022 28,000 32,298
---------------
$ 977,456
---------------
<Caption>
ISSUER PAR AMOUNT VALUE
INTERNATIONAL MARKET QUASI-SOVEREIGN -- 2.1%
Development Bank of Japan,
1.4%, 2012 JPY 102,000,000 $ 1,011,150
Development Bank of Japan, 1.6%, 2014 140,000,000 1,379,277
Kreditanstalt fur Wiederaufbau,
3.25%, 2008 EUR 1,070,000 1,471,563
---------------
$ 3,861,990
---------------
INTERNATIONAL MARKET SOVEREIGN -- 26.0%
Canada Housing Trust, 4.65%, 2009 CAD 375,000 $ 323,960
Federal Republic of Germany,
3.5%, 2008 EUR 373,000 516,528
Federal Republic of Germany,
5.25%, 2010 2,246,000 3,362,377
Federal Republic of Germany,
6.25%, 2024 - 2030 2,055,000 3,609,447
Government of Australia, 8.75%, 2008 AUD 807,000 704,203
Government of Australia, 6.25%, 2015 625,000 523,342
Government of Canada, 5.25%, 2012 CAD 356,000 317,948
Government of New Zealand, 7%, 2009 NZD 802,000 598,038
Government of New Zealand,
6.5%, 2013 3,757,000 2,787,925
Kingdom of Belgium, 3.75%, 2009 EUR 839,000 1,172,132
Kingdom of Belgium, 5%, 2012 618,000 924,024
Kingdom of Denmark, 5%, 2013 DKK 3,684,000 739,605
Kingdom of Netherlands, 5.75%, 2007 EUR 1,186,000 1,710,775
Kingdom of Netherlands, 5%, 2012 414,219 620,029
Kingdom of Spain, 6%, 2008 656,000 973,160
Kingdom of Spain, 5.35%, 2011 563,000 855,763
Quebec Province, 1.6%, 2013 JPY 320,000,000 3,182,909
Republic of Austria, 5.5%, 2007 EUR 1,151,000 1,674,438
Republic of Austria, 5%, 2012 96,000 143,476
Republic of Austria, 4.65%, 2018 212,000 308,471
Republic of Finland, 2.75%, 2006 1,577,000 2,148,369
Republic of Finland, 3%, 2008 1,998,000 2,722,334
Republic of France, 4.75%, 2007 - 2012 3,335,000 4,813,433
Republic of France, 6%, 2025 999,000 1,695,836
Republic of Ireland, 4.25%, 2007 2,009,000 2,835,491
Republic of Ireland, 4.6%, 2016 720,000 1,051,338
Republic of Italy, 5.25%, 2017 881,000 1,350,279
United Kingdom Treasury, 7.25%, 2007 GBP 583,000 1,201,740
United Kingdom Treasury, 5.75%, 2009 344,000 695,441
United Kingdom Treasury, 5%, 2012 1,741,000 3,434,237
---------------
$ 46,997,048
---------------
MORTGAGE BACKED -- 0.4%
Fannie Mae, 6%, 2017 - 2018 $ 755,491 $ 792,128
---------------
MUNICIPALS -- 0.4%
New York, NY, City Municipal Water
Finance Authority, Water & Sewer
Systems Rev., "B", 5%, 2036 $ 675,000 $ 688,230
---------------
SUPRANATIONAL -- 0.7%
Inter-American Development Bank,
1.9%, 2009 JPY 124,000,000 $ 1,281,883
---------------
U.S. TREASURY OBLIGATIONS -- 2.8%
U.S. Treasury Bonds, 8%, 2021### $ 248,000 $ 340,428
U.S. Treasury Bonds, 6.25%, 2030 1,996,000 2,386,390
U.S. Treasury Notes, 4.25%, 2013 1,561,000 1,570,817
U.S. Treasury Notes, 2%, 2014 652,843 675,693
---------------
$ 4,973,328
---------------
Total Bonds
(Identified Cost, $56,859,055) $ 62,904,154
---------------
SHORT-TERM OBLIGATION -- 3.3%
UBS Finance, Inc., 2.23%, due 1/03/05,
at Amortized Cost@@ $ 5,983,000 $ 5,982,259
---------------
</Table>
32
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
COLLATERAL FOR SECURITIES LOANED -- 1.0%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset
Value 1,808,123 $ 1,808,123
---------------
Total Investments~
(Identified Cost, $152,101,525) $ 180,688,946
---------------
OTHER ASSETS,
LESS LIABILITIES -- (0.1)% (194,853)
---------------
Net Assets -- 100.0% $ 180,494,093
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
GOVERNMENT SECURITIES SERIES
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- 98.1%
AGENCY - OTHER -- 3.6%
Financing Corp., 9.8%, 2018 $ 7,760,000 $ 11,434,632
Financing Corp., 10.35%, 2018 3,535,000 5,420,629
Resolution Funding Corp., 8.875%, 2020 6,000,000 8,481,552
---------------
$ 25,336,813
---------------
ASSET BACKED & SECURITIZED -- 0.2%
Freddie Mac, 3.108%, 2035 $ 1,335,000 $ 1,327,399
---------------
MORTGAGE BACKED -- 57.1%
Fannie Mae, 4.79%, 2012 $ 6,259,642 $ 6,284,670
Fannie Mae, 4.45%, 2014 2,206,733 2,182,024
Fannie Mae, 4.652%, 2014 5,557,097 5,577,490
Fannie Mae, 4.846%, 2014 6,246,216 6,347,717
Fannie Mae, 6.5%, 2016 - 2033 45,844,118 48,239,910
Fannie Mae, 6%, 2016 - 2034 19,763,270 20,704,013
Fannie Mae, 7.5%, 2017 - 2031 2,938,927 3,151,126
Fannie Mae, 5.5%, 2017 - 2034 81,882,033 83,580,859
Fannie Mae, 5%, 2018 - 2019 54,656,485 55,583,565
Fannie Mae, 4.5%, 2019 52,810,361 52,675,422
Fannie Mae, 5.9957%, 2020 10,494 10,478
Fannie Mae TBA, 6%, 2032 ~~ 29,234,000 30,220,649
Freddie Mac, 7.5%, 2027 206,656 222,209
Freddie Mac, 7%, 2032 1,396,963 1,480,565
Freddie Mac, 6.5%, 2032 8,698,268 9,133,546
Freddie Mac, 5.5%, 2034 33,610,938 34,176,137
Freddie Mac, 6%, 2034 33,818,941 34,950,770
Ginnie Mae, 12.25%, 2015 2,131 2,414
Ginnie Mae, 7.5%, 2023 - 2024 312,693 337,478
Ginnie Mae, 6.5%, 2024 - 2028 3,389,608 3,572,695
---------------
$ 398,433,737
---------------
U.S. GOVERNMENT AGENCIES -- 22.2%
Aid to Israel, 5.5%, 2023 $ 7,403,000 $ 7,737,231
Aid to Israel, 0%, 2024 9,624,000 3,384,693
Aid to Lebanon, 7.62%, 2009 5,071,144 5,489,513
Aid to Peru, 9.98%, 2008 2,183,655 2,387,260
Empresa Energetica Cornito Ltd.,
6.07%, 2010 7,192,000 7,615,105
Fannie Mae, 3.41%, 2007 7,109,000 7,085,014
Fannie Mae, 4.771%, 2014 4,418,117 4,483,333
Fannie Mae, 4.625%, 2014 21,834,000 21,850,397
Freddie Mac, 7%, 2010 8,626,000 9,851,272
Freddie Mac, 4.875%, 2013 6,000,000 6,169,932
Overseas Private Investment Corp.,
0%, 2007 3,394,778 3,385,598
Small Business Administration,
8.4%, 2007 11,797 12,135
Small Business Administration,
9.65%, 2007 22,247 23,210
Small Business Administration,
8.7%, 2009 231,034 246,793
Small Business Administration,
9.05%, 2009 28,948 30,834
Small Business Administration,
10.05%, 2009 18,035 19,395
Small Business Administration,
6.34%, 2021 3,053,263 3,285,275
Small Business Administration,
6.35%, 2021 3,433,586 3,694,681
Small Business Administration,
6.44%, 2021 3,711,820 4,005,805
Small Business Administration,
6.625%, 2021 3,950,007 4,289,921
Small Business Administration,
6.07%, 2022 3,344,307 3,567,130
Small Business Administration,
4.98%, 2023 1,887,383 1,914,418
</Table>
33
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
U.S. GOVERNMENT AGENCIES -- continued
Small Business Administration,
4.89%, 2023 $ 4,863,873 $ 4,907,928
Small Business Administration,
4.34%, 2024 2,683,337 2,616,654
Small Business Administration,
4.72%, 2024 4,972,252 4,971,512
Small Business Administration,
4.77%, 2024 3,627,224 3,631,906
Small Business Administration,
4.86%, 2024 2,349,000 2,357,466
Small Business Administration,
4.87%, 2024 2,793,000 2,801,189
Small Business Administration,
4.88%, 2024 2,142,000 2,150,829
Small Business Administration,
4.99%, 2024 3,057,000 3,092,078
Small Business Administration,
5.19%, 2024 2,910,000 2,978,023
Small Business Administration,
5.52%, 2024 2,729,756 2,840,805
Tennessee Valley Authority STRIPS
(Interest Only), 0%, 2042 12,573,000 9,396,557
U.S. Department of Housing & Urban
Development, 6.36%, 2016 6,000,000 6,593,760
U.S. Department of Housing & Urban
Development, 6.59%, 2016 5,744,000 6,156,569
---------------
$ 155,024,221
---------------
U.S. TREASURY OBLIGATIONS -- 15.0%
U.S. Treasury Bonds, 9.25%, 2016 $ 577,000 $ 823,645
U.S. Treasury Bonds, 6.875%, 2025 504,000 634,823
U.S. Treasury Bonds, 6%, 2026 5,704,000 6,533,978
U.S. Treasury Bonds, 6.25%, 2030 2,006,000 2,398,347
U.S. Treasury Bonds, 5.375%, 2031 2,533,000 2,739,004
U.S. Treasury Notes, 3.375%, 2007 13,882,963 14,703,474
U.S. Treasury Notes, 3.625%, 2008### 13,044,279 14,208,585
U.S. Treasury Notes, 5.5%, 2008 - 2009 25,462,000 27,240,436
U.S. Treasury Notes, 6.5%, 2010 14,897,000 16,865,609
U.S. Treasury Notes, 2%, 2014 13,433,905 13,904,092
U.S. Treasury STRIPS (Interest Only),
0%, 2016 7,940,000 4,708,714
---------------
$ 104,760,707
---------------
Total Bonds
(Identified Cost, $672,433,668) $ 684,882,877
---------------
REPURCHASE AGREEMENT -- 5.5%
Goldman Sachs, 2.23%, dated 12/31/04,
due 01/03/05, total to be received
$38,107,080 (secured by various
U.S. Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 38,100,000 $ 38,100,000
---------------
Total Investments
(Identified Cost, $710,533,668) $ 722,982,877
---------------
OTHER ASSETS,
LESS LIABILITIES -- (3.6)% (24,878,413)
---------------
Net Assets -- 100.0% $ 698,104,464
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
HIGH YIELD SERIES
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- 92.4%
ADVERTISING & BROADCASTING -- 3.1%
Allbritton Communications Co.,
7.75%, 2012 $ 1,918,000 $ 1,985,130
DIRECTV Holdings LLC, 8.375%, 2013 770,000 863,363
Echostar DBS Corp., 6.375%, 2011 1,930,000 1,973,425
Emmis Operating Co., 6.875%, 2012 960,000 1,004,400
Granite Broadcasting Corp., 9.75%, 2010 2,150,000 2,053,250
Lamar Media Corp., 7.25%, 2013 760,000 820,800
PRIMEDIA, Inc., 8.875%, 2011 210,000 222,075
PRIMEDIA, Inc., 8%, 2013## 500,000 514,375
Paxson Communications Corp., 0% to 2006,
12.25% to 2009 3,340,000 3,122,900
Spanish Broadcasting System, Inc.,
9.625%, 2009 780,000 819,000
Young Broadcasting, Inc., 8.5%, 2008 40,000 42,800
---------------
$ 13,421,518
---------------
AEROSPACE -- 1.7%
ASPropulsion Capital B.V.,
9.625%, 2013## EUR 100,000 $ 156,106
Argo Tech Corp., 9.25%, 2011 $ 1,170,000 1,284,075
BE Aerospace, Inc., 8.875%, 2011 1,595,000 1,666,775
Hexcel Corp., 9.75%, 2009 1,900,000 1,976,000
K&F Acquisition, Inc., 7.75%, 2014## 350,000 361,375
Standard Aero Holdings, Inc.,
8.25%, 2014## 585,000 631,800
TransDigm Holding Co., 8.375%, 2011 1,150,000 1,233,375
---------------
$ 7,309,506
---------------
AIRLINES -- 0.6%
Continental Airlines, Inc., 6.748%, 2017 $ 371,735 $ 303,520
Continental Airlines, Inc., 6.9%, 2017 412,918 349,889
Continental Airlines, Inc., 6.795%, 2020 950,008 830,185
Continental Airlines, Inc., 7.566%, 2020 1,207,185 1,019,357
---------------
$ 2,502,951
---------------
APPAREL MANUFACTURERS -- 0.3%
Levi Strauss & Co., 7%, 2006 $ 1,275,000 $ 1,338,750
---------------
ASSET BACKED & SECURITIZED -- 2.8%
Airplane Pass-Through Trust,
10.875%, 2019* $ 691,390 $ 3,457
Anthracite CDO Ltd., 6%, 2037## 1,300,000 1,104,350
Asset Securitization Corp., 8.005%, 2026 754,009 791,556
Commercial Mortgage Acceptance Corp.,
5.44%, 2013## 2,700,000 2,728,703
Deutsche Mortgage & Asset Receiving
Corp., 7.5%, 2031 1,100,000 936,560
First Union National Bank Commercial
Mortgage Corp., 6.75%, 2010 855,000 809,787
GE Capital Commercial Mortgage Corp.,
7.5117%, 2033## 665,000 738,541
GMAC Commercial Mortgage Securities,
Inc., 7.6527%, 2034## 882,000 987,821
Mortgage Capital Funding, Inc.,
7.214%, 2007 1,000,000 1,053,412
Nationslink Funding Corp., 5%, 2009 3,000,000 3,039,942
---------------
$ 12,194,129
---------------
AUTOMOTIVE -- 2.2%
Affinia Group, Inc., 9%, 2014## $ 1,240,000 $ 1,292,700
Dana Corp., 7%, 2029 1,690,000 1,685,775
Metaldyne Corp., 11%, 2012 480,000 398,400
Metaldyne Corp., 10%, 2013## 705,000 669,750
Navistar International Corp., 7.5%, 2011 1,525,000 1,635,563
TRW Automotive, Inc., 9.375%, 2013 1,323,000 1,534,680
TRW Automotive, Inc., 11%, 2013 312,000 375,960
Tenneco Automotive, Inc., 10.25%, 2013 600,000 708,000
Tenneco Automotive, Inc.,
8.625%, 2014## 385,000 400,400
</Table>
34
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
AUTOMOTIVE -- continued
Visteon Corp., 7%, 2014 $ 835,000 $ 797,425
---------------
$ 9,498,653
---------------
BASIC INDUSTRY -- 0.2%
Thermadyne Holdings Corp.,
9.25%, 2014 $ 750,000 $ 731,250
---------------
BROADCAST & CABLE TV -- 3.7%
CCO Holdings LLC, 8.75%, 2013 $ 665,000 $ 686,613
CSC Holdings, Inc., 8.125%, 2009 1,835,000 2,007,031
CSC Holdings, Inc., 6.75%, 2012## 1,085,000 1,117,550
Cablevision Systems Corp., 8%, 2012## 1,805,000 1,922,325
Charter Communications, Inc.,
8.625%, 2009 3,100,000 2,689,250
Charter Communications, Inc.,
9.92%, 2011 3,315,000 2,826,038
Charter Communications, Inc.,
8.375%, 2014## 590,000 622,450
FrontierVision Holdings LP, 11.875%, 2007* 430,000 574,050
FrontierVision Holdings LP, 11.875%, 2007* 290,000 387,150
Frontiervision Operating Partners LP,
11%, 2006* 1,060,000 1,388,600
Mediacom Broadband LLC, 9.5%, 2013 875,000 878,281
Mediacom Broadband LLC, 11%, 2013 400,000 430,000
Rogers Cable, Inc., 8.75%, 2032 210,000 233,100
---------------
$ 15,762,438
---------------
BROKERAGE & ASSET MANAGERS -- 0.2%
Refco Finance Holdings LLC, 9%, 2012## $ 815,000 $ 892,425
---------------
BUILDING -- 1.1%
Building Materials Corp. of America,
7.75%, 2014## $ 1,905,000 $ 1,921,669
Interface, Inc., 10.375%, 2010 1,075,000 1,236,250
Jacuzzi Brands, Inc., 9.625%, 2010 445,000 493,950
Nortek, Inc., 8.5%, 2014## 1,200,000 1,254,000
---------------
$ 4,905,869
---------------
BUSINESS SERVICES -- 1.6%
Iron Mountain, Inc., 8.625%, 2013 $ 760,000 $ 807,500
Iron Mountain, Inc., 7.75%, 2015 950,000 964,250
Lucent Technologies, Inc., 5.5%, 2008 1,300,000 1,335,750
Nortel Networks Ltd., 6.125%, 2006 1,595,000 1,622,913
Xerox Corp., 7.625%, 2013 1,930,000 2,118,175
---------------
$ 6,848,588
---------------
CHEMICALS -- 5.3%
ARCO Chemical Co., 9.8%, 2020 $ 730,000 $ 832,200
Acetex Corp., 10.875%, 2009 1,045,000 1,136,438
BCP Caylux Holdings Luxembourg S.A.,
9.625%, 2014## 705,000 794,888
Crystal U.S. Holdings LLC, 0% to 2009,
10.5% to 2014,## 1,395,000 955,575
Crystal U.S. Holdings LLC, 0% to 2010,
10% to 2014, 535,000 370,488
Equistar Chemicals LP, 10.625%, 2011 1,895,000 2,198,200
Hercules, Inc., 6.75%, 2029 1,335,000 1,378,388
Huntsman International LLC,
10.125%, 2009 1,366,000 1,437,715
Huntsman International LLC, 0%, 2009 250,000 140,000
Huntsman International LLC, 7.375%, 2015 955,000 957,388
IMC Global, Inc., 10.875%, 2013 1,125,000 1,406,250
KI Holdings, Inc., 0% to 2009,
9.875% to 2014,## 1,305,000 835,200
Kronos International, Inc., 8.875%, 2009 EUR 70,000 102,163
Lyondell Chemical Co., 9.5%, 2008 $ 730,000 792,050
Lyondell Chemical Co., 11.125%, 2012 750,000 890,625
Nalco Co., 7.75%, 2011 470,000 507,600
Nalco Financial Holdings LLC, 0% to 2009,
9% to 2014 $ 770,000 $ 569,800
Nova Chemicals Corp., 6.5%, 2012 1,230,000 1,303,800
Resolution Performance Products LLC,
13.5%, 2010 900,000 978,750
Rhodia S.A., 8.875%, 2011 2,695,000 2,715,213
Rockwood Specialties Group, Inc.,
10.625%, 2011 995,000 1,144,250
Rockwood Specialties Group, Inc.,
7.5%, 2014## 395,000 409,813
Sovereign Specialty Chemicals, Inc.,
11.875%, 2010 835,000 894,494
---------------
$ 22,751,288
---------------
CONGLOMERATES -- 0.6%
Invensys PLC, 9.875%, 2011## $ 1,110,000 $ 1,227,938
SPX Corp., 7.5%, 2013 1,105,000 1,198,925
---------------
$ 2,426,863
---------------
CONSTRUCTION -- 1.0%
D.R. Horton, Inc., 8%, 2009 $ 1,460,000 $ 1,633,375
Technical Olympic USA, Inc., 9%, 2010 435,000 465,450
Technical Olympic USA, Inc.,
7.5%, 2011 310,000 312,325
Technical Olympic USA, Inc.,
7.5%,2015## 840,000 833,700
WCI Communities, Inc., 7.875%, 2013 1,145,000 1,205,113
---------------
$ 4,449,963
---------------
CONSUMER CYCLICAL -- 0.6%
Corrections Corp. of America,
9.875%, 2009 $ 385,000 $ 427,350
Corrections Corp. of America, 7.5%, 2011 590,000 630,563
GEO Group, Inc., 8.25%, 2013 540,000 577,800
KinderCare Learning Centers, Inc.,
9.5%, 2009 990,000 993,713
---------------
$ 2,629,426
---------------
CONSUMER GOODS & SERVICES -- 2.4%
Bombardier Recreational Products, Inc.,
8.375%, 2013 $ 940,000 $ 1,003,450
Church & Dwight Co., Inc., 6%, 2012 715,000 727,513
Integrated Electrical Services, Inc.,
9.375%, 2009 745,000 700,300
K2, Inc., 7.375%, 2014## 1,135,000 1,242,825
Remington Arms Co., Inc., 10.5%, 2011 615,000 593,475
Revlon Consumer Products Corp.,
8.625%, 2008 1,510,000 1,347,675
Safilo Capital International S.A.,
9.625%, 2013## EUR 1,970,000 2,715,061
Samsonite Corp., 8.875%, 2011 $ 1,145,000 1,239,463
Werner Holding Co., Inc., 10%, 2007 870,000 722,100
---------------
$ 10,291,862
---------------
CONTAINERS -- 2.6%
Crown European Holdings S.A.,
9.5%, 2011 $ 1,960,000 $ 2,234,400
Crown European Holdings S.A.,
10.875%, 2013 1,150,000 1,359,875
Greif, Inc., 8.875%, 2012 1,160,000 1,290,500
Owens-Brockway Glass Container, Inc.,
8.75%, 2012 1,285,000 1,448,838
Owens-Brockway Glass Container, Inc.,
8.25%, 2013 2,065,000 2,271,500
Owens-Illinois, Inc., 7.8%, 2018 430,000 447,200
Plastipak Holdings, Inc., 10.75%, 2011 705,000 793,125
Pliant Corp., 13%, 2010 1,106,000 1,074,170
Pliant Corp., 0% to 2006, 11.125% to 2009 145,000 133,944
---------------
$ 11,053,552
---------------
</Table>
35
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
DEFENSE ELECTRONICS -- 0.5%
L-3 Communications Holdings, Inc.,
6.125%, 2014 $ 1,295,000 $ 1,333,850
L-3 Communications Holdings, Inc.,
5.875%, 2015## 920,000 917,700
---------------
$ 2,251,550
---------------
ELECTRONICS -- 0.4%
Flextronics International Ltd., 6.5%, 2013 $ 1,310,000 $ 1,342,750
Magnachip Semiconductor S.A.,
8%, 2014 155,000 161,588
---------------
$ 1,504,338
---------------
EMERGING MARKET QUASI-SOVEREIGN -- 0.5%
Gazprom OAO, 9.625%, 2013## $ 610,000 $ 721,325
Gazprom OAO, 8.625%, 2034## 1,120,000 1,310,400
---------------
$ 2,031,725
---------------
EMERGING MARKET SOVEREIGN -- 0.7%
Federal Republic of Brazil, 8.875%, 2019 $ 1,182,000 $ 1,247,010
Republic of Panama, 9.375%, 2023 814,000 940,170
Russian Ministry of Finance,
12.75%, 2028 486,000 797,186
---------------
$ 2,984,366
---------------
ENERGY - INDEPENDENT -- 1.9%
Belden Blake Corp., 8.75%, 2012## $ 1,135,000 $ 1,152,025
Chesapeake Energy Corp.,
8.125%, 2011## 755,000 817,288
Chesapeake Energy Corp., 7%, 2014 1,203,000 1,281,195
Chesapeake Energy Corp., 6.375%, 2015 710,000 729,525
Chesapeake Energy Corp., 6.875%, 2016 1,760,000 1,843,600
Encore Acquisition Co., 8.375%, 2012 725,000 806,563
Newfield Exploration Co., 6.625%, 2014## 405,000 428,288
Plains Exploration & Production Co.,
7.125%, 2014 860,000 937,400
---------------
$ 7,995,884
---------------
ENTERTAINMENT -- 1.5%
AMC Entertainment, Inc., 9.5%, 2011 $ 766,000 $ 791,853
AMC Entertainment, Inc., 8.625%, 2012## 1,520,000 1,679,600
AMF Bowling Worldwide, Inc., 10%, 2010 760,000 811,300
Intrawest Corp., 7.5%, 2013## 345,000 366,994
Loews Cineplex Entertainment Corp.,
9%, 2014## 1,185,000 1,282,763
Six Flags, Inc., 9.75%, 2013 1,645,000 1,669,675
---------------
$ 6,602,185
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 1.6%
Burns, Philp & Co. Ltd., 9.75%, 2012 $ 1,870,000 $ 2,057,000
Merisant Co., 9.75%, 2013## 490,000 436,100
Michael Foods, Inc., 8%, 2013 990,000 1,044,450
Seminis Vegetable Seeds, Inc.,
10.25%, 2013 1,145,000 1,288,125
Smithfield Foods, Inc., 7%, 2011 345,000 368,288
Smithfield Foods, Inc., 7%, 2011## 895,000 955,413
United Biscuits Finance PLC,
10.625%, 2011 EUR 600,000 861,462
---------------
$ 7,010,838
---------------
FOREST & PAPER PRODUCTS -- 4.3%
Abitibi-Consolidated, Inc., 8.55%, 2010 $ 1,885,000 $ 2,042,869
Buckeye Technologies, Inc., 8.5%, 2013 1,165,000 1,264,025
Corporacion Durango S.A. de C.V.,
13.75%, 2009##* 1,800,000 1,206,000
Georgia Pacific Corp., 9.375%, 2013 3,465,000 4,036,725
Graphic Packaging International, Inc.,
9.5%, 2013 1,430,000 1,626,625
Jefferson Smurfit Corp., 8.25%, 2012 1,120,000 1,220,800
Kappa Beheer B.V., 10.625%, 2009 1,285,000 1,362,100
MDP Acquisitions PLC, 9.625%, 2012 1,455,000 1,622,325
Newark Group, Inc., 9.75%, 2014## $ 1,030,000 $ 1,096,950
Norske Skog Canada Ltd., 8.625%, 2011 1,055,000 1,131,488
Norske Skog Canada Ltd., 7.375%, 2014 770,000 802,725
Stone Container Corp., 7.375%, 2014 1,170,000 1,246,050
---------------
$ 18,658,682
---------------
GAMING & LODGING -- 5.4%
Aztar Corp., 7.875%, 2014 $ 1,165,000 $ 1,284,413
Boyd Gaming Corp., 6.75%, 2014 1,585,000 1,660,288
Caesars Entertainment, Inc.,
8.875%, 2008 425,000 481,313
Caesars Entertainment, Inc.,
8.125%, 2011 2,100,000 2,425,500
Herbst Gaming, Inc., 7%, 2014## 155,000 156,938
Hilton Hotels Corp., 7.625%, 2012 985,000 1,151,883
Host Marriott LP, 7.125%, 2013 1,040,000 1,111,500
Isle Capri Casinos, Inc., 7%, 2014 1,335,000 1,361,700
MGM Mirage, Inc., 8.5%, 2010 1,165,000 1,325,188
MGM Mirage, Inc., 8.375%, 2011 2,225,000 2,508,688
MGM Mirage, Inc., 5.875%, 2014 195,000 191,588
Mandalay Resort Group, 9.375%, 2010 1,085,000 1,264,025
Meristar Hospitality Corp., 10.5%, 2009 375,000 408,750
Pinnacle Entertainment, Inc., 8.25%, 2012 1,500,000 1,593,750
Pinnacle Entertainment, Inc., 8.75%, 2013 335,000 362,638
Royal Caribbean Cruises Ltd.,
6.875%, 2013 1,220,000 1,317,600
Scientific Games Corp., 6.25%, 2012 290,000 295,075
Starwood Hotels & Resorts Worldwide,
Inc., 7.875%, 2012 2,420,000 2,764,850
Station Casinos, Inc., 6.5%, 2014 1,295,000 1,330,613
---------------
$ 22,996,300
---------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.1%
Medcath Holdings Corp., 9.875%, 2012## $ 350,000 $ 379,750
---------------
INDUSTRIAL -- 3.5%
Amsted Industries, Inc., 10.25%, 2011## $ 1,760,000 $ 1,988,800
Da Lite Screen Co., Inc., 9.5%, 2011 1,155,000 1,270,500
General Binding Corp., 9.375%, 2008 1,840,000 1,840,000
JohnsonDiversey Holding, Inc., "B",
9.625%, 2012 1,410,000 1,575,675
JohnsonDiversey Holding, Inc.,
0% to 2007, 10.67% to 2013 2,980,000 2,577,700
Milacron Escrow Corp., 11.5%, 2011## 1,280,000 1,356,800
Rexnord Industries, Inc., 10.125%, 2012 1,000,000 1,130,000
Valmont Industries, Inc., 6.875%, 2014## 1,160,000 1,206,400
Williams Scotsman, Inc., 9.875%, 2007 1,655,000 1,655,000
Williams Scotsman, Inc., 10%, 2008 275,000 305,250
---------------
$ 14,906,125
---------------
MACHINERY & TOOLS -- 2.7%
AGCO Corp., 6.875%, 2014 EUR 500,000 $ 717,885
Case Corp., 7.25%, 2016 $ 120,000 117,900
Case New Holland, Inc., 9.25%, 2011## 1,055,000 1,173,688
JLG Industries, Inc., 8.25%, 2008 1,155,000 1,247,400
Joy Global, Inc., 8.75%, 2012 1,390,000 1,556,800
Manitowoc Co., Inc., 10.375%, 2011 EUR 900,000 1,371,431
Manitowoc Co., Inc., 10.5%, 2012 $ 562,000 646,300
Terex Corp., 10.375%, 2011 760,000 851,200
Terex Corp., 9.25%, 2011 400,000 449,000
Terex Corp., 7.375%, 2014 900,000 965,250
United Rentals, Inc., 6.5%, 2012 915,000 892,125
United Rentals, Inc., 7.75%, 2013 940,000 921,200
United Rentals, Inc., 7%, 2014 925,000 864,875
---------------
$ 11,775,054
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 3.7%
AmerisourceBergen Corp., 7.25%, 2012 $ 1,200,000 $ 1,341,000
Beverly Enterprises, Inc., 7.875%, 2014## 870,000 933,075
</Table>
36
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- continued
CDRV Investors, Inc., 0% to 2010,
9.625% to 2015, $ 980,000 $ 608,825
Extendicare Health Services, Inc.,
6.875%, 2014 730,000 744,600
Fisher Scientific International, Inc.,
8.125%, 2012 1,375,000 1,526,250
HCA, Inc., 7.875%, 2011 2,785,000 3,067,680
HCA, Inc., 6.375%, 2015 1,920,000 1,927,774
InSight Health Services Corp.,
9.875%, 2011 2,095,000 2,115,950
Tenet Healthcare Corp., 6.5%, 2012 1,340,000 1,239,500
Tenet Healthcare Corp., 9.875%, 2014## 1,165,000 1,269,850
U.S. Oncology, Inc., 10.75%, 2014## 995,000 1,151,713
---------------
$ 15,926,217
---------------
METALS & MINING -- 2.4%
Century Aluminum Co., 7.5%, 2014## $ 950,000 $ 1,011,750
Doe Run Resources Corp., 11.75%, 2008# 722,286 613,943
Foundation PA Coal Co., 7.25%, 2014## 1,105,000 1,176,825
IMCO Recycling, Inc., 9%, 2014## 240,000 249,600
Ispat Inland ULC, 9.75%, 2014 897,000 1,107,795
Oregon Steel Mills, Inc., 10%, 2009 945,000 1,051,313
Peabody Energy Corp., 6.875%, 2013 1,280,000 1,385,600
Peabody Energy Corp., 5.875%, 2016 675,000 671,625
Russel Metals, Inc., 6.375%, 2014 1,385,000 1,405,775
SGL Carbon International S.A.,
8.5%, 2012## EUR 480,000 728,179
Steel Dynamics, Inc., 9.5%, 2009 605,000 662,475
U.S. Steel Corp., 9.75%, 2010 $ 396,000 451,440
---------------
$ 10,516,320
---------------
NATURAL GAS - DISTRIBUTION -- 0.4%
AmeriGas Partners LP, 8.875%, 2011 $ 1,340,000 $ 1,460,600
Inergy LP, 6.875%, 2014 415,000 417,075
---------------
$ 1,877,675
---------------
NATURAL GAS - PIPELINE -- 3.4%
ANR Pipeline Co., 9.625%, 2021 $ 1,975,000 $ 2,486,031
El Paso Energy Corp., 7.625%, 2010 1,150,000 1,259,250
El Paso Energy Corp., 7%, 2011 2,975,000 3,008,469
El Paso Energy Corp., 7.75%, 2013 2,190,000 2,294,025
Enterprise Products Partners LP,
6.375%, 2013 578,000 619,515
Enterprise Products Partners LP,
5.6%, 2014## 1,162,000 1,172,307
Markwest Energy Partners LP,
6.875%, 2014## 830,000 842,450
Williams Cos., Inc., 7.125%, 2011 2,713,000 2,963,953
---------------
$ 14,646,000
---------------
OIL SERVICES -- 2.0%
Dresser, Inc., 9.375%, 2011 $ 735,000 $ 804,825
GulfMark Offshore, Inc., 7.75%, 2014## 1,190,000 1,255,450
Hanover Compressor Co., 9%, 2014 1,410,000 1,568,625
Hornbeck Offshore Services, Inc.,
6.125%, 2014## 725,000 728,625
Ocean Rig Norway S.A., 10.25%, 2008 1,060,000 1,091,800
Petroleum Geo-Services A.S.A., 10%, 2010 1,300,000 1,482,000
Pride International, Inc., 7.375%, 2014 755,000 824,838
Sesi LLC, 8.875%, 2011 715,000 782,925
---------------
$ 8,539,088
---------------
OILS -- 0.3%
Premcor Refining Group, Inc., 7.75%, 2012 $ 1,010,000 $ 1,113,525
---------------
POLLUTION CONTROL -- 0.5%
Allied Waste North America, Inc.,
6.5%, 2010 $ 2,010,000 $ 1,969,800
Allied Waste North America, Inc.,
7.875%, 2013 $ 280,000 $ 287,000
---------------
$ 2,256,800
---------------
PRECIOUS METALS & MINERALS -- 0.3%
Freeport-McMoRan Copper & Gold, Inc.,
6.875%, 2014 $ 1,291,000 $ 1,282,931
---------------
PRINTING & PUBLISHING -- 2.7%
Cenveo Corp., 7.875%, 2013 $ 525,000 $ 488,250
Dex Media East LLC, 12.125%, 2012 715,000 871,406
Dex Media West LLC, 9.875%, 2013 840,000 968,100
Dex Media, Inc., 0% to 2008, 9% to 2013 4,130,000 3,236,888
Hollinger, Inc., 12.875%, 2011## 337,000 397,660
Houghton Mifflin Co., 9.875%, 2013 790,000 865,050
Lighthouse International Co. S.A.,
8%, 2014## EUR 960,000 1,339,329
Mail-Well Corp., 9.625%, 2012 $ 770,000 845,075
MediaNews Group, Inc., 6.875%, 2013 1,330,000 1,363,250
WDAC Subsidiary Corp., 8.375%, 2014## 1,385,000 1,365,956
---------------
$ 11,740,964
---------------
RAILROAD & SHIPPING -- 0.4%
Kansas City Southern Railway Co.,
7.5%, 2009 $ 1,795,000 $ 1,884,750
---------------
RESTAURANTS -- 0.1%
Carrols Holdings Corp., 9%, 2013 $ 315,000 $ 326,025
---------------
RETAILERS -- 2.4%
Couche-Tard, Inc., 7.5%, 2013 $ 2,555,000 $ 2,740,238
Dollar General Corp., 8.625%, 2010 1,390,000 1,615,875
Duane Reade, Inc., 9.75%, 2011## 790,000 718,900
Finlay Fine Jewelry Corp., 8.375%, 2012 1,115,000 1,204,200
Rite Aid Corp., 9.5%, 2011 550,000 603,625
Rite Aid Corp., 9.25%, 2013 1,290,000 1,302,900
Rite Aid Corp., 6.875%, 2013 850,000 765,000
Saks, Inc., 7%, 2013 1,130,000 1,154,013
---------------
$ 10,104,751
---------------
SUPERMARKETS -- 0.5%
Roundy's, Inc., 8.875%, 2012 $ 1,940,000 $ 2,119,450
---------------
TELECOMMUNICATIONS - WIRELESS -- 4.5%
Alamosa Holdings, Inc., 11%, 2010 $ 331,000 $ 389,753
Alamosa Holdings, Inc., 0% to 2005,
12% to 2009, 1,167,000 1,266,195
American Tower Corp., 9.375%, 2009 220,000 232,650
American Tower Corp., 7.125%, 2012## 790,000 807,775
Centennial Communications Corp.,
10.125%, 2013 1,475,000 1,655,688
Crown Castle International Corp.,
7.5%, 2013 1,385,000 1,488,875
Dobson Cellular Systems, Inc.,
8.375%, 2011## 310,000 320,075
Dobson Communications Corp.,
8.875%, 2013 555,000 389,888
IWO Escrow Co.,6.32%, 2012 155,000 156,163
Innova S. de R.L., 9.375%, 2013 1,100,000 1,251,250
Nextel Communications, Inc.,
7.375%, 2015 5,180,000 5,698,000
Rogers Wireless, Inc., 8%, 2012## 275,000 290,813
Rogers Wireless, Inc., 6.375%, 2014 795,000 787,050
Rogers Wireless, Inc., 7.5%, 2015## 585,000 617,175
Rural Cellular Corp., 9.875%, 2010 1,125,000 1,144,688
Rural Cellular Corp., 8.25%, 2012 335,000 354,263
U.S. Unwired, Inc., 10%, 2012 1,170,000 1,319,175
Ubiquitel Operating Co., 9.875%, 2011 1,145,000 1,285,263
---------------
$ 19,454,739
---------------
</Table>
37
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
TELECOMMUNICATIONS - WIRELINE -- 6.1%
AT&T Corp., 9.05%, 2011 $ 2,280,000 $ 2,624,850
CincinnatiBell, Inc., 8.375%, 2014 1,395,000 1,412,438
Citizens Communications Co.,
9.25%, 2011 2,136,000 2,499,120
Citizens Communications Co.,
6.25%, 2013 585,000 589,388
Eircom Funding PLC, 8.25%, 2013 1,365,000 1,508,325
GCI, Inc., 7.25%, 2014 1,390,000 1,390,000
MCI, Inc., 6.908%, 2007 925,000 946,969
MCI, Inc., 7.688%, 2009 1,315,000 1,361,025
MCI, Inc., 8.735%, 2014 171,000 183,825
Qwest Capital Funding, Inc., 7.25%, 2011 1,730,000 1,695,400
Qwest Corp., 7.875%, 2011## 1,675,000 1,817,375
Qwest Corp., 9.125%, 2012## 1,635,000 1,888,425
Qwest Services Corp., 14%, 2010## 4,900,000 5,892,250
Time Warner Telecom Holdings, Inc.,
10.125%, 2011 1,015,000 997,238
Time Warner Telecom Holdings, Inc.,
9.25%, 2014 1,340,000 1,366,800
---------------
$ 26,173,428
---------------
TIRE & RUBBER -- 0%
Cooper-Standard Automotive Group,
8.375%, 2014 $ 155,000 $ 154,613
---------------
TOBACCO -- 0.3%
R.J. Reynolds Tobacco Holdings, Inc.,
7.25%, 2012 $ 1,040,000 $ 1,068,600
---------------
TRANSPORTATION -- SERVICES - 0.6%
CHC Helicopter Corp., 7.375%, 2014 $ 785,000 $ 828,175
Stena AB, 9.625%, 2012 435,000 491,550
Stena AB, 7%, 2016## 951,000 941,490
TFM S.A. de C.V., 12.5%, 2012 264,000 308,220
---------------
$ 2,569,435
---------------
UTILITIES - ELECTRIC POWER -- 8.7%
AES Corp., 8.75%, 2013## $ 2,340,000 $ 2,658,825
AES Corp., 9%, 2015## 1,175,000 1,345,375
Allegheny Energy Supply Co. LLC,
8.25%, 2012## 1,610,000 1,799,175
CMS Energy Corp., 8.5%, 2011 1,080,000 1,227,150
Calpine Corp., 8.5%, 2008 815,000 668,300
Calpine Corp., 8.75%, 2013## 3,215,000 2,652,375
CenterPoint Energy, Inc., 7.25%, 2010 1,127,000 1,256,992
DPL, Inc., 6.875%, 2011 1,250,000 1,365,165
Dynegy Holdings, Inc., 9.875%, 2010## 1,220,000 1,363,350
Dynegy Holdings, Inc., 6.875%, 2011 455,000 437,938
Edison Mission Energy, 7.73%, 2009 1,200,000 1,290,000
Empresa Nacional de Electricidad S.A.,
8.35%, 2013 1,310,000 1,517,978
FirstEnergy Corp., 6.45%, 2011 1,818,000 1,975,202
FirstEnergy Corp., 7.375%, 2031 875,000 999,236
MSW Energy Holdings LLC,
7.375%, 2010 850,000 892,500
Midwest Generation LLC, 8.75%, 2034 2,250,000 2,553,750
Mission Energy Holding Co.,
13.5%, 2008 325,000 405,438
NRG Energy, Inc., 8%, 2013## 2,095,000 2,283,550
Nevada Power Co., 6.5%, 2012 270,000 285,525
Nevada Power Co., 5.875%, 2015## 690,000 695,175
NorthWestern Corp., 5.875%, 2014## 965,000 987,167
PSEG Energy Holdings LLC,
8.625%, 2008 1,850,000 2,030,375
Reliant Energy, Inc., 6.75%, 2014 520,000 516,750
Reliant Resources, Inc., 9.25%, 2010 435,000 485,025
Sierra Pacific Power Co., 6.25%, 2012 585,000 610,594
Sierra Pacific Resources, 8.625%, 2014 890,000 1,005,700
TXU Corp., 5.55%, 2014 $ 2,160,000 $ 2,145,766
Teco Energy, Inc., 7%, 2012 480,000 524,400
Texas Genco LLC, 6.875%, 2014 1,140,000 1,178,475
---------------
$ 37,157,251
---------------
Total Bonds
(Identified Cost, $377,751,293) $ 397,018,390
---------------
<Caption>
SHARES
STOCKS -- 1.0%
APPAREL MANUFACTURERS -- 0.1%
Sind Holdings, Inc.* 3,355 $ 280,814
---------------
AUTOMOTIVE -- 0.3%
Magna International, Inc., "A" 16,400 $ 1,353,820
---------------
BROADCAST & CABLE TV -- 0.4%
NTL, Inc.* 12,547 $ 915,429
Telewest Global, Inc.* 57,368 1,008,494
---------------
$ 1,923,923
---------------
PHARMACEUTICALS -- 0.1%
Merck & Co., Inc. 14,800 $ 475,672
---------------
SPECIALTY CHEMICALS -- 0%
Sterling Chemicals, Inc.* 74 $ 2,757
---------------
TELEPHONE SERVICES -- 0.1%
VersaTel Telecom International N.V.* 20,520 $ 59,202
---------------
Total Stocks (Identified Cost, $4,543,774) $ 4,096,188
---------------
CONVERTIBLE PREFERRED STOCKS -- 0.3%
AUTOMOTIVE -- 0.3%
Ford Motor Co. Capital Trust II, 6.5% 24,145 $ 1,274,615
Hayes Lemmerz International,
Inc., "A" *, 8% 155 11,896
---------------
Total Convertible Preferred Stocks
(Identified Cost, $1,286,038) $ 1,286,511
---------------
PREFERRED STOCKS -- 0.5%
PRINTING & PUBLISHING -- 0.5%
PRIMEDIA, Inc., 8.625% 20,165 $ 1,845,098
---------------
REAL ESTATE -- 0%
HRPT Properties Trust, 8.75% 1,225 $ 33,835
---------------
TELEPHONE SERVICES -- 0%
PTV, Inc., "A", 10% 36 $ 144
---------------
Total Preferred Stocks
(Identified Cost, $2,022,305) $ 1,879,077
---------------
WARRANTS -- 0%
<Caption>
STRIKE FIRST
PRICE EXERCISE
Loral Space &
Communications Ltd.
(Business Services)* $ 0.14 1/28/97 1,000 $ 2
Loral Space &
Communications Ltd.
(Business Services)* 0.14 1/28/97 1,100 2
Metronet Communications
Corp. (Broadcast
& Cable TV)*## 0.00 7/18/97 650 7
Pliant Corp.
(Containers)*## 0.01 5/25/00 660 7
Sterling Chemicals, Inc.
(Specialty Chemicals)* 52.00 120 222
Thermadyne Holdings Corp.
(Machinery & Tools)* 20.78 6,594 3,956
XM Satellite Radio, Inc.
(Advertising &
Broadcasting)* 45.24 9/16/00 1,030 87,550
</Table>
38
<Page>
<Table>
<Caption>
STRIKE FIRST
ISSUER PRICE EXERCISE SHARES VALUE
WARRANTS -- continued
XO Communications,
Inc., "A" (Telephone
Services)* $ 6.25 5/27/03 1,302 $ 937
XO Communications,
Inc., "B" (Telephone
Services)* 7.50 5/27/03 976 488
XO Communications,
Inc., "C" (Telephone
Services)* 10.00 5/27/03 976 381
---------------
Total Warrants (Identified Cost, $544,606) $ 93,552
---------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 4.3%
Morgan Stanley, 2.19%, dated 12/31/04,
due 01/03/05, total to be received
$18,601,394 (secured by various U.S.
Treasury and Federal Agency obligations in a
jointly traded account), at Cost $ 18,598,000 $ 18,598,000
---------------
Total Investments~
(Identified Cost, $404,746,016) $ 422,971,718
---------------
OTHER ASSETS, LESS LIABILITIES -- 1.5% 6,595,494
---------------
Net Assets -- 100.0% $ 429,567,212
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
INTERNATIONAL VALUE SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 97.7%
AIRLINES -- 2.8%
Air China Ltd.* 206,000 $ 79,506
easyJet Airline Co. Ltd.* 207,070 745,124
Thai Airways International Public Co. Ltd. 338,500 422,320
TPG N.V. 49,500 1,339,614
---------------
$ 2,586,564
---------------
ALCOHOLIC BEVERAGES -- 0.8%
Diageo PLC 51,258 $ 729,932
---------------
APPAREL MANUFACTURERS -- 1.3%
Impact 21 Co. Ltd.^ 23,400 $ 516,838
Sanyo Shokai Ltd.^ 132,400 718,844
---------------
$ 1,235,682
---------------
AUTOMOTIVE -- 4.9%
Autoliv, Inc.^ 14,700 $ 701,976
Bayerische Motoren Werke AG 16,370 736,149
Compagnie Generale des Etablissements Michelin^ 10,300 658,364
Nissan Motor Co. Ltd.^ 57,300 621,087
PSA Peugeot Citroen S.A.^ 10,900 689,481
Renault S.A.^ 8,400 700,303
Toyota Industries Corp. 14,200 353,705
---------------
$ 4,461,065
---------------
BANKS & CREDIT COMPANIES -- 14.3%
Acom Co. Ltd. 5,960 $ 444,789
Anglo Irish Bank Corp. PLC 16,218 391,677
Chiba Bank Ltd. 39,000 259,937
Close Brothers Group PLC 29,180 410,780
Credit Agricole S.A.^ 35,063 1,054,341
DEPFA Bank PLC 22,100 369,690
DNB Holding A.S.A.^ 47,360 465,004
Erste Bank der oesterreichischen Sparkassen AG 7,160 381,140
Fortis, Inc.^* 23,040 635,700
Grupo Financiero Inbursa S.A. de C.V. 221,800 408,102
Hana Bank 12,400 309,042
Irish Life & Permanent PLC 39,460 737,590
JACCS Co. Ltd. 72,000 431,545
Kookmin Bank 9,650 377,536
Krung Thai Bank PLC 1,523,900 352,809
Krungthai Card PLC 491,000 301,870
LIC Housing Finance Ltd. 93,700 447,919
Mitsubishi Tokyo Financial Group, Inc. 39 394,649
Nordea Bank AB^ 111,600 1,122,838
Promise Co. Ltd. 6,250 445,147
Royal Bank of Scotland Group PLC 51,971 1,745,126
Takefuji Corp. 24,240 1,634,475
---------------
$ 13,121,706
---------------
BROADCAST & CABLE TV -- 2.2%
Findexa Ltd.^ 87,600 $ 339,722
Pages Jaunes* 39,900 964,695
Tokyo Broadcasting System, Inc. 46,700 759,287
---------------
$ 2,063,704
---------------
BROKERAGE & ASSET MANAGERS -- 0.6%
ICAP PLC 83,900 $ 436,982
ING Canada, Inc.## 3,310 80,837
---------------
$ 517,819
---------------
BUSINESS SERVICES -- 0.6%
PHS Group PLC 323,400 $ 508,260
---------------
CHEMICALS -- 1.8%
Syngenta AG 15,537 $ 1,644,574
---------------
CONSTRUCTION -- 3.0%
Corporacion GEO S.A. de C.V.* 164,400 $ 328,888
Italcementi S.p.A.^ 84,900 969,425
Italcementi S.p.A. - Ordinary 28,600 459,053
</Table>
39
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
CONSTRUCTION -- continued
Sekisui Chemical Co. Ltd. 134,000 $ 976,560
---------------
$ 2,733,926
---------------
CONSUMER GOODS & SERVICES -- 0.6%
Reckitt Benckiser PLC 18,188 $ 548,683
---------------
ELECTRICAL EQUIPMENT -- 1.5%
Bodycote International PLC 112,400 $ 352,221
Samsung SDI Co. Ltd. 3,950 431,173
Schneider Electric S.A. 5,616 389,472
Vestas Wind Systems^ 17,200 212,991
---------------
$ 1,385,857
---------------
ELECTRONICS -- 2.4%
Brother Industries Ltd. 35,000 $ 296,619
CANON, Inc.^ 12,000 645,682
Samsung Electronics Co. Ltd. 1,830 796,382
Seiko Epson Corp. 10,400 461,435
---------------
$ 2,200,118
---------------
ENERGY - INDEPENDENT -- 2.5%
CNOOC Ltd. 1,453,500 $ 780,698
EnCana Corp. 17,790 1,013,903
Santos Ltd. 81,414 539,506
---------------
$ 2,334,107
---------------
ENERGY -- INTEGRATED - 8.0%
BP PLC, ADR 31,436 $ 1,835,862
China Petroleum & Chemical Corp. 1,118,000 456,664
MOL Magyar Olaj-es Gazipari Rt., GDR 6,300 453,600
Repsol YPF S.A.^ 28,100 729,257
Statoil A.S.A. 79,300 1,237,953
TOTAL S.A., ADR 23,820 2,616,389
---------------
$ 7,329,725
---------------
FOOD & DRUG STORES -- 1.3%
Lawson, Inc. 16,200 $ 595,826
William Morrison Supermarkets PLC 153,700 609,784
---------------
$ 1,205,610
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 3.5%
CoolBrands International, Inc.* 53,900 $ 409,589
Greencore Group PLC 91,771 375,397
Groupe Danone 1,900 174,873
Nestle S.A. 6,540 1,704,841
Unilever PLC 56,630 555,167
---------------
$ 3,219,867
---------------
FOREST & PAPER PRODUCTS -- 0.3%
Aracruz Celulose S.A., ADR 7,100 $ 267,670
---------------
FURNITURE & APPLIANCES -- 0.3%
Merloni Elettrodomestici S.p.A.^ 16,100 $ 276,518
---------------
GAMING & LODGING -- 0.7%
Star Cruises Ltd.* 1,098,000 $ 252,540
William Hill Organization Ltd. 37,100 401,037
---------------
$ 653,577
---------------
INSURANCE -- 4.4%
Aviva PLC 53,390 $ 642,616
Benfield Group PLC 121,320 685,940
Hiscox PLC 171,250 546,483
Jardine Lloyd Thompson Group PLC 113,300 807,801
Legal & General Group PLC 190,000 400,570
Riunione Adriatica di Sicurta S.p.A. 27,300 615,311
St. James's Place Capital PLC 89,900 365,281
---------------
$ 4,064,002
---------------
LEISURE & TOYS -- 1.9%
Heiwa Corp.^ 35,000 $ 583,021
Nintendo Co. Ltd. 6,500 813,963
Tamron Co. Ltd.^ 13,000 375,043
---------------
$ 1,772,027
---------------
MACHINERY & TOOLS -- 2.2%
Alfa Laval AB 10,300 $ 166,274
Assa Abloy AB^ 41,100 700,512
Hyundai Mobis 7,400 468,219
Neopost S.A.^ 3,900 302,162
Sandvik AB 9,400 378,304
---------------
$ 2,015,471
---------------
METALS & MINING -- 0.9%
Anglo American PLC 35,600 $ 840,606
---------------
NATURAL GAS - DISTRIBUTION -- 1.4%
Tokyo Gas Co. Ltd.^ 324,000 $ 1,324,057
---------------
OIL SERVICES -- 1.1%
Compagnie Generale de
Geophysique S.A.^* 6,100 $ 419,319
Fugro N.V. 4,103 341,231
Tenaris S.A. 6,000 293,400
---------------
$ 1,053,950
---------------
PHARMACEUTICALS -- 5.4%
AstraZeneca PLC 23,330 $ 844,653
Chugai Pharmaceutical Co. Ltd.^ 45,300 746,662
Roche Holdings AG 8,600 986,410
Sanofi-Aventis^ 10,325 822,330
Schering AG 8,940 666,129
Tanabe Seiyaku Co. Ltd. 82,000 842,540
---------------
$ 4,908,724
---------------
PRINTING & PUBLISHING -- 1.9%
Reed Elsevier PLC 49,330 $ 454,293
Yell Group PLC 150,030 1,265,210
---------------
$ 1,719,503
---------------
SPECIALTY CHEMICALS -- 0.3%
British Vita PLC 58,800 $ 304,280
---------------
SPECIALTY STORES -- 2.9%
EDION Corp.^ 49,600 $ 568,512
Grupo Elektra S.A. de C.V. 45,100 418,754
Lindex AB 11,500 459,364
Matalan PLC 202,600 860,092
NEXT PLC 10,300 325,726
---------------
$ 2,632,448
---------------
TELECOMMUNICATIONS - WIRELESS -- 5.0%
KDDI Corp. 216 $ 1,160,126
mm02 PLC* 288,000 677,557
MobilCom AG 26,700 603,958
MobileOne Ltd. 381,300 425,016
Vodafone Group PLC 640,853 1,734,917
---------------
$ 4,601,574
---------------
TELEPHONE SERVICES -- 6.6%
Brasil Telecom Participacoes S.A., ADR 13,600 $ 518,840
Deutsche Telekom AG^ 62,200 1,402,760
Hanaro Telecom, Inc.* 92,100 286,033
KT Freetel Co. Ltd. 19,100 455,728
Royal KPN N.V. 134,850 1,276,753
Telecom Corp. of New Zealand Ltd. 153,788 679,318
Telefonica S.A. 63,431 1,190,813
ZTE Corp.* 83,000 268,551
---------------
$ 6,078,796
---------------
TOBACCO -- 3.3%
Altadis S.A. 14,080 $ 642,705
British American Tobacco PLC 57,300 985,646
Imperial Tobacco Group PLC 25,120 687,029
Swedish Match AB^ 57,700 667,182
---------------
$ 2,982,562
---------------
</Table>
40
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
TRUCKING -- 0.9%
Singapore Post Ltd. 1,501,400 $ 818,377
---------------
UTILITIES - ELECTRIC POWER -- 6.1%
Fortum Corp. 69,000 $ 1,272,932
Iberdrola S.A.^ 24,400 618,031
Kelda Group PLC 47,000 569,758
Severn Trent PLC 29,300 543,032
Suez S.A.^ 41,900 1,113,504
Tohoku Electric Power Co., Inc. 59,100 1,058,078
United Utilities PLC, "A" 46,000 394,532
---------------
$ 5,569,867
---------------
Total Stocks (Identified Cost, $68,513,841) $ 89,711,208
---------------
<Caption>
PAR AMOUNT
SHORT-TERM OBLIGATION -- 2.0%
UBS Finance, Inc., 2.23%, due 1/03/05,
at Amortized Cost@@ $ 1,780,000 $ 1,779,779
---------------
<Caption>
SHARES
COLLATERAL FOR SECURITIES LOANED -- 19.8%
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 18,200,867 $ 18,200,867
Total Investments~
(Identified Cost, $88,494,487) $ 109,691,854
---------------
OTHER ASSETS, LESS LIABILITIES -- (19.5)% (17,891,134)
---------------
Net Assets -- 100.0% $ 91,800,720
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
MONEY MARKET SERIES
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
COMMERCIAL PAPER@@ -- 93.5%
AIG Funding, Inc., 2.265%, due 2/23/05 $ 10,231,000 $ 10,196,881
Alpine Securitization Corp.,
2.36%, due 2/09/05 12,900,000 12,867,019
Blue Ridge Asset Funding,
2.03%, due 1/07/05 11,000,000 10,996,278
CAFCOLLC, 2.12%, due 2/02/05 17,184,000 17,151,618
Ciesco LLC, 2.04%, due 1/07/05 - 1/10/05 17,072,000 17,065,042
Citibank Credit Card Issuance Trust,
2.35%, due 1/20/05 600,000 599,256
Citibank Credit Card Issuance Trust,
2.09%, due 1/26/05 14,339,000 14,318,189
Citicorp, 2.06%, due 1/24/05 17,112,000 17,089,479
COFCOCapital Corp., 2.2%, due 1/11/05 2,383,000 2,381,544
Delaware Funding Co.LLC,
2.35%, due 1/24/05 13,110,000 13,090,317
Dexia Delaware LLC, 2.34%, due 3/02/05 15,293,000 15,233,357
Edison Asset Securitization LLC,
2.27%, due 2/22/05 1,711,000 1,705,390
FCAR Owner Trust,
2.03%, due 1/04/05 11,100,000 11,098,122
Falcon Asset Securitization Corp.,
2.26%, due 1/27/05 15,256,000 15,231,099
General Electric Capital Corp.,
2.19%, due 2/08/05 2,100,000 2,095,146
General Electric Capital Corp.,
2.27%, due 2/17/05 13,405,000 13,365,273
Goldman Sachs Group, Inc.,
2.32%, due 2/22/05 2,000,000 1,993,298
Govco, Inc., 2.15%, due 1/13/05 10,100,000 10,092,762
Govco, Inc., 2.27%, due 2/18/05 4,000,000 3,987,893
HBOS Treasury Services PLC,
2.335%, due 2/09/05 15,124,000 15,085,743
ING America Insurance Holdings, Inc.,
2.47%, due 4/14/05 9,900,000 9,830,037
Jupiter Securitization Corp.,
2.43%, due 3/15/05 9,749,000 9,700,962
Kitty Hawk Funding Corp.,
2.24%, due 2/15/05 14,211,000 14,171,209
MetLife, Inc., 2.2%, due 2/08/05 6,185,000 6,170,637
Morgan Stanley, Inc., 2.34%, due 1/28/05 15,066,000 15,039,559
New Center Asset Trust,
2.25%, due 1/03/05 8,810,000 8,808,899
Old Line Funding LLC,
2.17%, due 1/07/05 10,500,000 10,496,203
Old Line Funding LLC,
2.34%, due 1/21/05 3,914,000 3,908,912
Ranger Funding Co. LLC,
2.335%, due 1/18/05 15,057,000 15,040,398
SBC Communications, Inc.,
2.06%, due 1/18/05 17,082,000 17,065,383
Sheffield Receivables Corp.,
2.17%, due 1/06/05 10,000,000 9,996,986
Sheffield Receivables Corp.,
2.18%, due 1/20/05 5,700,000 5,693,442
Thunder Bay Funding, LLC,
2.08%, due 1/18/05 4,123,000 4,118,950
Thunder Bay Funding, LLC,
2.36%, due 2/07/05 10,790,000 10,763,828
---------------
Total Commercial Paper,
at Amortized Cost and Value $ 346,449,111
---------------
</Table>
41
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
U.S. GOVERNMENT AGENCY OBLIGATIONS@@ -- 6.3%
Fannie Mae, 1.97%, due 1/05/05 $ 4,300,000 $ 4,299,059
Fannie Mae, 2.465%, due 4/20/05 14,000,000 13,895,511
Freddie Mac, 1.96%, due 1/11/05 5,020,000 5,017,267
---------------
Total U.S. Government Agency Obligations,
at Amortized Cost and Value $ 23,211,837
---------------
Total Investments, at Amortized Cost and Value $ 369,660,948
---------------
OTHER ASSETS, LESS LIABILITIES -- 0.2% 718,615
---------------
Net Assets -- 100.0% $ 370,379,563
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENT -- December 31, 2004
STRATEGIC INCOME SERIES
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- 94.2%
ADVERTISING & BROADCASTING -- 2.8%
Allbritton Communications Co.,
7.75%, 2012 $ 300,000 $ 310,500
Echostar DBS Corp., 6.375%, 2011 215,000 219,838
Emmis Operating Co., 6.875%, 2012 110,000 115,088
Granite Broadcasting Corp., 9.75%, 2010 440,000 420,200
Lamar Media Corp., 7.25%, 2013 200,000 216,000
News America Holdings, 8.5%, 2025 125,000 159,076
Paxson Communications Corp.,
0% to 2006, 12.25% to 2009 360,000 336,600
Spanish Broadcasting System, Inc.,
9.625%, 2009 375,000 393,750
Young Broadcasting, Inc., 8.5%, 2008 295,000 315,650
---------------
$ 2,486,702
---------------
AEROSPACE -- 0.6%
Hexcel Corp., 9.875%, 2008 $ 200,000 $ 222,000
Hexcel Corp., 9.75%, 2009 130,000 135,200
K&F Acquisition, Inc., 7.75%, 2014## 15,000 15,488
TransDigm Holding Co., 8.375%, 2011 150,000 160,875
---------------
$ 533,563
---------------
AIRLINES -- 0.2%
Continental Airlines, Inc., 7.568%, 2006 $ 90,000 $ 73,860
Continental Airlines, Inc., 7.566%, 2020 178,842 151,016
---------------
$ 224,876
---------------
ASSET BACKED & SECURITIZED -- 8.1%
ARCap REIT, Inc., 6.0996%, 2045## $ 200,000 $ 166,941
Anthracite CDO Ltd., 6%, 2017## 200,000 169,900
Asset Securitization Corp.,
8.005%, 2029 215,000 225,706
Chase Commercial Mortgage Securities
Corp., 6.6%, 2012 360,000 375,652
Commercial Mortgage Acceptance Corp.,
5.44%, 2013## 630,000 636,697
Credit Suisse First Boston Mortgage,
6.38%, 2035 360,000 396,119
Credit Suisse First Boston Mortgage,
6.78%, 2040 650,000 712,112
Crest Ltd., 7.0%, 2040## 270,000 261,969
DLJ Commercial Mortgage Corp.,
0.9064%, 2005^^ 14,500,000 29,015
DLJ Commercial Mortgage Corp.,
6.04%, 2031 265,000 266,090
DLJ Commercial Mortgage Corp.,
7.6131%, 2032 565,000 640,856
Deutsche Mortgage & Asset Receiving
Corp., 7.5%, 2031 250,000 212,854
Falcon Auto Dealership LLC,
3.83%, 2023^^ 939,999 167,937
Falcon Franchise Loan LLC,
3.0601%, 2023^^## 885,225 114,187
First Union-Lehman Brothers Bank of
America, 0.5393%, 2028^^ 9,812,468 210,355
First Union-Lehman Brothers Commercial
Mortgage Trust, 7%, 2029## 150,000 167,944
GMAC Commercial Mortgage Securities,
Inc., 6.02%, 2033 350,000 335,167
Morgan Stanley Capital I, Inc.,
7.18%, 2009 180,000 195,836
Morgan Stanley Capital I, Inc.,
6.86%, 2010 250,000 263,186
Morgan Stanley Capital I, Inc.,
1.5899%, 2014^^## 2,662,489 209,115
Mortgage Capital Funding, Inc.,
7.214%, 2007 250,000 263,353
Nationslink Funding Corp., 5%, 2009 740,000 749,852
</Table>
42
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
ASSET BACKED & SECURITIZED -- continued
Prudential Securities Secured Financing
Corp., 7.3317%, 2013 $ 411,000 $ 452,356
Residential Accredit Loans, Inc.,
7.75%, 2027 117,130 116,892
---------------
$ 7,340,091
---------------
AUTOMOTIVE -- 1.2%
Affinia Group, Inc., 9%, 2014## $ 25,000 $ 26,062
Ford Motor Co., 7.45%, 2031 271,000 272,555
General Motors Corp., 8.375%, 2033 352,000 364,701
TRW Automotive, Inc., 9.375%, 2013 76,000 88,160
TRW Automotive, Inc., 11%, 2013 52,000 62,660
Tenneco Automotive, Inc., 10.25%, 2013 255,000 300,900
---------------
$ 1,115,038
---------------
BANKS & CREDIT COMPANIES -- 3.0%
BBVA Bancomer Capital Trust I,
10.5%, 2011## $ 25,000 $ 26,875
Banco Mercantil del Norte S.A.,
5.875%, 2014## 568,000 583,620
Kazkommerts International B.V.,
10.125%, 2007## 321,000 346,680
Kazkommerts International B.V.,
8.5%, 2013## 37,000 38,665
Mizuho Financial Group, Inc.,
4.75%, 2014## EUR 236,000 334,613
RBS Capital Trust II, 6.425% to 2034,
4.507% to 2049 $ 128,000 135,176
Turanalem Finance B.V., 8%, 2014## 290,000 284,200
UFJ Finance Aruba AEC, 6.75%, 2013 120,000 133,725
UniCredito Italiano Capital Trust II,
9.2% to 2010, 5.914% to 2049## 440,000 540,515
Woori Bank, 5.75%, 2014## 287,000 300,577
---------------
$ 2,724,646
---------------
BROADCAST & CABLE TV -- 2.5%
CSC Holdings, Inc., 8.125%, 2009 $ 398,000 $ 435,312
Charter Communications, Inc.,
8.625%, 2009 405,000 351,338
Charter Communications, Inc.,
8.375%, 2014## 275,000 290,125
Continental Cablevision, Inc., 9.5%, 2013 322,000 348,607
Mediacom Broadband LLC, 9.5%, 2013 100,000 100,375
Mediacom Broadband LLC, 11%, 2013 105,000 112,875
Rogers Cable, Inc., 5.5%, 2014 297,000 279,923
TCI Communications, Inc., 9.8%, 2012 245,000 315,803
---------------
$ 2,234,358
---------------
BUILDING -- 0.5%
American Standard Cos., Inc.,
7.625%, 2010 $ 225,000 $ 257,237
Building Materials Corp. of America,
7.75%, 2014## 130,000 131,137
Jacuzzi Brands, Inc., 9.625%, 2010 75,000 83,250
---------------
$ 471,624
---------------
BUSINESS SERVICES -- 1.2%
Iron Mountain, Inc., 8.625%, 2013 $ 330,000 $ 350,625
Iron Mountain, Inc., 7.75%, 2015 150,000 152,250
Lucent Technologies, Inc., 5.5%, 2008 280,000 287,700
Xerox Corp., 7.625%, 2013 235,000 257,913
---------------
$ 1,048,488
---------------
CHEMICALS -- 2.4%
Acetex Corp., 10.875%, 2009 $ 250,000 $ 271,875
BCP Caylux Holdings Luxembourg S.A.,
9.625%, 2014## 165,000 186,037
Equistar Chemicals LP, 10.625%, 2011 190,000 220,400
Huntsman International LLC,
10.125%, 2009 118,000 124,195
IMC Global, Inc., 10.875%, 2013 $ 260,000 $ 325,000
Kronos International, Inc., 8.875%, 2009 EUR 15,000 21,892
Lyondell Chemical Co., 9.625%, 2007 $ 200,000 220,000
Lyondell Chemical Co., 11.125%, 2012 140,000 166,250
Nalco Co., 7.75%, 2011 105,000 113,400
Nova Chemicals Corp., 6.5%, 2012 235,000 249,100
Rhodia S.A., 8.875%, 2011 290,000 292,175
---------------
$ 2,190,324
---------------
CONGLOMERATES -- 0.5%
Invensys PLC, 9.875%, 2011## $ 135,000 $ 149,344
Tyco International Group S.A.,
6.75%, 2011 259,000 290,284
---------------
$ 439,628
---------------
CONSTRUCTION -- 0.2%
D.R. Horton, Inc., 8%, 2009 $ 185,000 $ 206,969
---------------
CONSUMER CYCLICAL -- 0.4%
GEO Group, Inc., 8.25%, 2013 $ 165,000 $ 176,550
KinderCare Learning Centers, Inc.,
9.5%, 2009 192,000 192,720
---------------
$ 369,270
---------------
CONSUMER GOODS & SERVICES -- 0.3%
Remington Arms Co., Inc., 10.5%, 2011 $ 250,000 $ 241,250
---------------
CONTAINERS -- 1.4%
Crown European Holdings S.A.,
9.5%, 2011 $ 275,000 $ 313,500
Crown European Holdings S.A.,
10.875%, 2013 200,000 236,500
Owens-Brockway Glass Container, Inc.,
8.875%, 2009 160,000 173,800
Owens-Brockway Glass Container, Inc.,
8.25%, 2013 290,000 319,000
Pliant Corp., 13%, 2010 205,000 199,000
---------------
$ 1,241,800
---------------
DEFENSE ELECTRONICS -- 0.4%
L-3 Communications Holdings, Inc.,
6.125%, 2014 $ 385,000 $ 396,550
---------------
ELECTRONICS -- 0.2%
Flextronics International Ltd., 6.5%, 2013 $ 160,000 $ 164,000
---------------
EMERGING MARKET QUASI-SOVEREIGN -- 2.3%
Gazprom OAO, 9.625%, 2013 $ 130,000 $ 153,725
Gazprom OAO, 8.625%, 2034## 221,000 258,570
Pemex Project Funding Master Trust,
8.625%, 2022 417,000 485,180
Petroleos Mexicanos, 9.5%, 2027 516,000 647,580
Petroliam Nasional Berhad, 7.75%, 2015 190,000 229,760
Petronas Capital Ltd., 7.875%, 2022## 236,000 293,078
---------------
$ 2,067,893
---------------
EMERGING MARKET SOVEREIGN -- 8.6%
Federal Republic of Brazil, 8%, 2014 $ 1,836,086 $ 1,877,398
Federal Republic of Brazil, 8.875%, 2019 805,000 849,275
Federal Republic of Brazil,
3.0625%, 2024 216,000 199,800
Republic of Colombia, 11.75%, 2020 239,000 307,115
Republic of Panama, 9.375%,
2023 - 2029 604,000 704,560
Republic of Panama, 8.875%, 2027 184,000 202,400
Republic of Peru, 9.875%, 2015 263,000 322,175
Republic of South Africa, 8.5%, 2017 513,000 643,815
Russian Federation, 3%, 2008 - 2011 736,000 660,192
Russian Federation, 11%, 2018 653,000 913,025
State of Qatar, 9.75%, 2030 394,000 572,722
United Mexican States, 8%, 2022 141,000 162,644
United Mexican States, 7.5%, 2033 366,000 395,280
---------------
$ 7,810,401
---------------
</Table>
43
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
ENERGY - INDEPENDENT -- 1.0%
Chesapeake Energy Corp.,
8.125%, 2011 $ 215,000 $ 232,738
Chesapeake Energy Corp., 7.5%, 2014 240,000 262,200
Chesapeake Energy Corp.,
6.375%, 2015## 45,000 46,238
Kerr-McGee Corp., 6.95%, 2024 321,000 354,973
---------------
$ 896,149
---------------
ENERGY - INTEGRATED -- 0.5%
Amerada Hess Corp., 7.3%, 2031 $ 205,000 $ 228,698
Siberian Oil Co., 10.75%, 2009 70,000 74,550
Tyumen Oil Co., 11%, 2007 137,000 155,838
---------------
$ 459,086
---------------
ENTERTAINMENT -- 1.1%
AMC Entertainment, Inc., 9.5%, 2011 $ 223,000 $ 230,526
Liberty Media Corp., 5.7%, 2013 180,000 178,606
Loews Cineplex Entertainment Corp.,
9%, 2014## 140,000 151,550
Six Flags, Inc., 9.75%, 2013 235,000 238,525
Turner Broadcasting System, Inc.,
8.375%, 2013 185,000 227,948
---------------
$ 1,027,155
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 1.0%
Burns, Philp & Co. Ltd., 9.75%, 2012 $ 405,000 $ 445,500
Michael Foods, Inc., 8%, 2013 195,000 205,725
Seminis Vegetable Seeds, Inc.,
10.25%, 2013 55,000 61,875
Tyson Foods, Inc., 8.25%, 2011 180,000 213,741
---------------
$ 926,841
---------------
FOREST & PAPER PRODUCTS -- 1.6%
Buckeye Technologies, Inc., 8.5%, 2013 $ 255,000 $ 276,675
Georgia Pacific Corp., 9.375%, 2013 415,000 483,475
Graphic Packaging International, Inc.,
8.5%, 2011 190,000 207,575
MDP Acquisitions PLC, 9.625%, 2012 195,000 217,425
Stone Container Corp., 7.375%, 2014 220,000 234,300
---------------
$ 1,419,450
---------------
GAMING & LODGING -- 1.8%
Host Marriott LP, 7.125%, 2013 $ 220,000 $ 235,125
MGM Mirage, Inc., 8.375%, 2011 400,000 451,000
Pinnacle Entertainment, Inc.,
8.75%, 2013 150,000 162,375
Royal Caribbean Cruises Ltd., 8%, 2010 230,000 259,900
Scientific Games Corp., 6.25%, 2012## 185,000 188,238
Starwood Hotels & Resorts Worldwide,
Inc., 7.875%, 2012 250,000 285,625
---------------
$ 1,582,263
---------------
INDUSTRIAL -- 1.1%
Amsted Industries, Inc., 10.25%, 2011## $ 280,000 $ 316,400
JohnsonDiversey Holding, Inc., "B",
9.625%, 2012 200,000 223,500
JohnsonDiversey Holding, Inc.,
0% to 2007, 10.67% to 2013 225,000 194,625
Williams Scotsman, Inc., 9.875%, 2007 225,000 225,000
Williams Scotsman, Inc., 10%, 2008 30,000 33,300
---------------
$ 992,825
---------------
INSURANCE -- PROPERTY & CASUALTY - 0.3%
Allianz AG, 5.5%, 2049 EUR 211,000 $ 309,526
---------------
INTERNATIONAL MARKET QUASI-SOVEREIGN -- 0.5%
Kreditanstalt fur Wiederaufbau,
3.25%, 2008 EUR 311,000 $ 427,716
---------------
INTERNATIONAL MARKET SOVEREIGN -- 16.7%
Canada Housing Trust, 4.65%, 2009 CAD 90,000 $ 77,750
Federal Republic of Germany, 4%, 2007. EUR 314,000 437,939
Federal Republic of Germany,
3.5%, 2008 $ 995,000 $ 1,377,870
Federal Republic of Germany,
5.25%, 2010 741,000 1,109,315
Federal Republic of Germany,
6.25%, 2030 95,000 167,598
Government of Australia, 8.75%, 2008 AUD 257,000 224,263
Government of Australia, 6.25%, 2015 182,000 152,397
Government of Canada, 5.5%, 2010 CAD 269,000 242,307
Government of Canada, 5.25%, 2012 23,000 20,542
Government of Canada, 8%, 2023 33,000 38,488
Government of New Zealand, 7%, 2009 NZD 204,000 152,119
Government of New Zealand,
6.5%, 2013 1,326,000 983,973
Kingdom of Belgium, 3.75%, 2009 EUR 181,000 252,868
Kingdom of Belgium, 5%, 2012 195,000 291,561
Kingdom of Denmark, 5%, 2013 DKK 318,000 63,842
Kingdom of Netherlands, 5.75%, 2007 EUR 504,000 727,007
Kingdom of Netherlands, 3.75%, 2009 680,000 950,909
Kingdom of Spain, 6%, 2008 342,000 507,348
Kingdom of Spain, 5.35%, 2011 252,000 383,042
Republic of Austria, 5.5%, 2007 420,000 611,002
Republic of Austria, 5%, 2012 168,000 251,083
Republic of Austria, 4.65%, 2018 53,000 77,118
Republic of Finland, 2.75%, 2006 585,000 796,954
Republic of Finland, 3%, 2008 521,000 709,878
Republic of France, 4.75%, 2007 542,000 772,150
Republic of France, 4%, 2009 408,000 576,792
Republic of Ireland, 4.25%, 2007 1,066,000 1,504,546
Republic of Ireland, 4.6%, 2016 112,000 163,541
United Kingdom Treasury, 7.25%, 2007 GBP 104,000 214,376
United Kingdom Treasury, 5.75%, 2009 214,000 432,629
United Kingdom Treasury, 5%, 2012 399,000 787,054
---------------
$ 15,058,261
---------------
MACHINERY & TOOLS -- 1.8%
AGCO Corp., 9.5%, 2008 $ 250,000 $ 266,250
Case New Holland, Inc., 9.25%, 2011## 330,000 367,124
Manitowoc Co., Inc., 10.5%, 2012 120,000 138,000
Terex Corp., 10.375%, 2011 180,000 201,600
Terex Corp., 9.25%, 2011 125,000 140,313
Terex Corp., 7.375%, 2014 140,000 150,150
United Rentals, Inc., 6.5%, 2012 390,000 380,250
---------------
$ 1,643,687
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.4%
Baxter International, Inc., 9.5%, 2008 $ 164,000 $ 190,465
Fisher Scientific International, Inc.,
8.125%, 2012 122,000 135,420
---------------
$ 325,885
---------------
METALS & MINING -- 1.0%
Century Aluminum Co., 7.5%, 2014## $ 35,000 $ 37,275
Foundation PA Coal Co., 7.25%, 2014## 30,000 31,950
International Steel Group, Inc.,
6.5%, 2014 222,000 238,095
Peabody Energy Corp., 6.875%, 2013 210,000 227,325
Phelps Dodge Corp., 8.75%, 2011 181,000 220,689
U.S. Steel Corp., 9.75%, 2010 130,000 148,200
---------------
$ 903,534
---------------
MORTGAGE BACKED -- 5.2%
Fannie Mae, 5.5%, 2018 - 2034 $ 3,192,993 $ 3,276,610
Fannie Mae, 6.5%, 2032 553,997 581,486
Fannie Mae, 5%, 2034 871,501 866,389
---------------
$ 4,724,485
---------------
NATURAL GAS - DISTRIBUTION -- 0.1%
AmeriGas Partners LP, 8.875%, 2011 $ 120,000 $ 130,800
---------------
</Table>
44
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
NATURAL GAS - PIPELINE -- 2.5%
ANR Pipeline Co., 8.875%, 2010 $ 60,000 $ 67,200
CenterPoint Energy Resources Corp.,
7.875%, 2013 448,000 532,488
El Paso Energy Corp., 7%, 2011 140,000 141,575
El Paso Energy Corp., 7.75%, 2013 265,000 277,588
Enterprise Products Partners LP,
6.375%, 2013 200,000 214,365
Magellan Midstream Partners LP,
5.65%, 2016 41,000 41,453
Southern Natural Gas Co., Inc.,
8.875%, 2010 310,000 347,200
Williams Cos., Inc., 7.125%, 2011 440,000 480,700
Williams Cos., Inc., 8.75%, 2032 138,000 158,528
---------------
$ 2,261,097
---------------
OIL SERVICES -- 0.6%
Hornbeck Offshore Services, Inc.,
6.125%, 2014## $ 220,000 $ 221,100
Petroleum Geo-Services A.S.A.,
10%, 2010 250,000 285,000
---------------
$ 506,100
---------------
OILS -- 0.3%
Valero Energy Corp., 6.875%, 2012 $ 205,000 $ 232,520
---------------
POLLUTION CONTROL -- 0.1%
Allied Waste North America, Inc.,
7.875%, 2013 $ 130,000 $ 133,250
---------------
PRINTING & PUBLISHING -- 1.5%
Dex Media East LLC, 9.875%, 2009 $ 200,000 $ 227,750
Dex Media West LLC, 9.875%, 2013 283,000 326,158
Lighthouse International Co. S.A.,
8%, 2014## EUR 155,000 216,246
Mail-Well Corp., 9.625%, 2012 $ 295,000 323,763
MediaNews Group, Inc., 6.875%, 2013 265,000 271,625
---------------
$ 1,365,542
---------------
RESTAURANTS -- 0.3%
YUM! Brands, Inc., 8.875%, 2011 $ 230,000 $ 284,169
---------------
RETAILERS -- 1.3%
Couche-Tard, Inc., 7.5%, 2013 $ 370,000 $ 396,825
Limited Brands, Inc., 5.25%, 2014 276,000 273,472
Rite Aid Corp., 9.5%, 2011 260,000 285,350
Rite Aid Corp., 9.25%, 2013 185,000 186,850
---------------
$ 1,142,497
---------------
SUPERMARKETS -- 0.4%
Roundy's, Inc., 8.875%, 2012 $ 300,000 $ 327,750
---------------
TELECOMMUNICATIONS - WIRELESS -- 2.8%
Alamosa Holdings, Inc., 11%, 2010 $ 184,000 $ 216,660
American Tower Corp., 7.125%, 2012## 165,000 168,712
American Tower Escrow Corp., 0%, 2008 300,000 224,250
Centennial Communications Corp.,
10.125%, 2013 270,000 303,075
Crown Castle International Corp.,
7.5%, 2013 270,000 290,250
Innova S. de R.L., 9.375%, 2013 100,000 113,750
Mobile TeleSystems OJSC,
8.375%, 2010## 58,000 59,160
Nextel Communications, Inc.,
7.375%, 2015 270,000 297,000
Rogers Wireless, Inc., 7.5%, 2015## 45,000 47,475
Rural Cellular Corp., 9.875%, 2010 220,000 223,850
U.S. Unwired, Inc., 10%, 2012 105,000 118,388
Ubiquitel Operating Co., 9.875%, 2011 110,000 123,475
Vimpel-Communications,
10.45%, 2005## 200,000 201,000
Vimpel-Communications, 10%, 2009## 136,000 142,800
---------------
$ 2,529,845
---------------
TELECOMMUNICATIONS - WIRELINE -- 2.3%
Citizens Communications Co.,
9.25%, 2011 $ 287,000 $ 335,790
Deutsche Telekom International
Finance B.V., 8.75%, 2030 264,000 348,601
Eircom Funding PLC, 13.5%, 2013 165,000 182,325
Qwest Services Corp., 14%, 2010## 260,000 312,650
Telecom Italia Capital, 5.25%, 2013 217,000 219,329
Telecom Italia S.p.A., 5.625%, 2007 EUR 235,000 335,490
Time Warner Telecom Holdings, Inc.,
9.25%, 2014 $ 130,000 132,600
Verizon New York, Inc., 7.375%, 2032 203,000 232,853
---------------
$ 2,099,638
---------------
TOBACCO -- 0.3%
R.J. Reynolds Tobacco Holdings, Inc.,
7.25%, 2012 $ 221,000 $ 227,078
---------------
U.S. GOVERNMENT AGENCIES -- 1.6%
Fannie Mae, 2.5%, 2006 $ 267,000 $ 264,643
Small Business Administration,
4.34%, 2024 249,476 243,276
Small Business Administration,
4.77%, 2024 330,726 331,153
Small Business Administration,
5.18%, 2024 617,906 632,118
---------------
$ 1,471,190
---------------
U.S. TREASURY OBLIGATIONS -- 4.0%
U.S. Treasury Notes, 5.75%, 2005### $ 367,000 $ 376,404
U.S. Treasury Notes, 3.625%, 2008 203,208 221,346
U.S. Treasury Notes, 3.25%, 2008 1,700,000 1,692,098
U.S. Treasury Notes, 3%, 2012 208,066 232,180
U.S. Treasury Notes, 2%, 2014 1,087,511 1,122,006
---------------
$ 3,644,034
---------------
UTILITIES - ELECTRIC POWER -- 5.3%
AES Corp., 9%, 2015## $ 360,000 $ 412,200
Allegheny Energy Supply Co. LLC,
8.25%, 2012## 350,000 391,125
Beaver Valley Funding Corp., 9%, 2017 424,000 501,460
CMS Energy Corp., 8.5%, 2011 300,000 340,875
Calpine Corp., 8.5%, 2008## 220,000 180,400
Calpine Corp., 8.75%, 2013 170,000 140,250
DPL, Inc., 6.875%, 2011 113,000 123,411
Duke Capital Corp., 8%, 2019 164,000 200,136
Dynegy Holdings, Inc., 9.875%, 2010## 190,000 212,325
Empresa Nacional de Electricidad S.A.,
8.35%, 2013 167,000 193,513
Enersis S.A., 7.375%, 2014 210,000 228,874
MSW Energy Holdings LLC,
7.375%, 2010 165,000 173,250
Midland Funding II, 13.25%, 2006 75,000 82,732
NRG Energy, Inc., 8%, 2013## 325,000 354,250
NorthWestern Corp., 5.875%, 2014## 105,000 107,412
PSEG Energy Holdings LLC,
7.75%, 2007 82,000 86,715
Reliant Energy, Inc., 8.125%, 2005 87,000 89,291
Reliant Resources, Inc., 9.25%, 2010 180,000 200,700
TXU Corp., 6.375%, 2006 460,000 477,574
TXU Corp., 6.5%, 2024## 132,000 132,220
Texas Genco LLC, 6.875%, 2014## 160,000 165,400
---------------
$ 4,794,113
---------------
Total Bonds
(Identified Cost, $79,569,622) $ 85,153,957
---------------
</Table>
45
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
CONVERTIBLE PREFERRED STOCK -- 0.2%
AUTOMOTIVE -- 0.2%
Ford Motor Co. Capital Trust II
(Identified Cost, $175,786) 3,353 $ 177,005
---------------
PREFERRED STOCK --
REAL ESTATE --
HRPT Properties Trust
(Identified Cost, $17,094) 625 $ 17,263
---------------
<Caption>
PAR AMOUNT
CONVERTIBLE BOND -- 0.1%
TELECOMMUNICATIONS - WIRELESS -- 0.1%
Nextel Communications, Inc., 5.25%, 2010
(Identified Cost, $95,619) $ 100,000 $ 102,375
---------------
REPURCHASE AGREEMENT -- 4.0%
Morgan Stanley, 2.19%, dated 12/31/04,
due 01/03/05, total to be received
$3,617,660 (secured by various U.S.
Treasury and Federal Agency
obligations in a jointly traded account),
at Cost $ 3,617,000 $ 3,617,000
---------------
Total Investments
(Identified Cost, $83,475,121) $ 89,067,600
---------------
OTHER ASSETS, LESS LIABILITIES -- 1.5% 1,364,478
---------------
Net Assets -- 100.0% $ 90,432,078
===============
</Table>
PORTFOLIO FOOTNOTES:
~~ All or a portion of this security is subject to dollar roll transactions.
* Non-income producing security.
^ All or a portion of this security is on loan.
^^ Interest only security.
# Payment-in-kind security.
## SEC Rule 144A restriction.
### Security segregated as collateral for open futures contracts.
@@ The rate shown represents an annualized yield at time of purchase.
~ As of December 31, 2004 two securities representing $344,810 and 0.2% of
Global Total Return Series' net assets were fair valued in accordance with
the policies adopted by the Board of Trustees.
~ As of December 31, 2004 one security representing $280,814 and 0.1% of High
Yield Series' net assets was fair valued in accordance with the policies
adopted by the Board of Trustees.
~ As of December 31, 2004 one security representing $80,837 and 0.1% of
International Value Series' net assets was fair valued in accordance with
the policies adopted by the Board of Trustees.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollar
CAD = Canadian Dollar
CHF = Swiss Franc
CZK = Czech Koruna
DKK = Danish Krone
EUR = Euro
GBP = British Pound
JPY = Japanese Yen
MXN = Mexican Peso
NOK = Norwegian Krone
NZD = New Zealand Dollar
PLN = Polish Zloty
SEK = Swedish Krona
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
TBA = To Be Announced
46
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- at December 31, 2004
<Table>
<Caption>
EMERGING GLOBAL GLOBAL
BOND MARKETS EQUITY GOVERNMENTS TOTAL RETURN
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 224,568,118 $ 48,399,245 $ 60,462,648 $ 152,101,525
Unrealized appreciation (depreciation) 9,915,182 16,969,694 5,788,533 28,587,421
--------------- --------------- --------------- ---------------
Total investments, at value (including
securities loaned of $--, $1,431,736,
$--, and $1,769,303, respectively) $ 234,483,300 $ 65,368,939 $ 66,251,181 $ 180,688,946
Cash 268,162 661 61 5,693
Foreign currency, at value (identified cost,
$--, $283,278, $--, and $--, respectively) -- 290,451 -- --
Receivable for forward foreign currency
exchange contracts -- -- 1,014,109 982,556
Receivable for forward foreign currency
exchange contracts subject to master
netting agreements -- -- 23,026 --
Receivable for investments sold -- -- -- 225,669
Receivable for series shares sold 156,482 35,159 1,277 254,429
Interest and dividends receivable 3,154,735 172,622 1,065,158 1,249,419
Receivable from administrative proceeding
settlement -- -- -- 2,205
Other assets -- 159 -- --
--------------- --------------- --------------- ---------------
Total assets $ 238,062,679 $ 65,867,991 $ 68,354,812 $ 183,408,917
=============== =============== =============== ===============
Liabilities:
Payable for forward foreign currency exchange
contracts $ -- $ -- $ 1,021,349 $ 920,969
Payable for forward foreign currency exchange
contracts subject to master netting agreements -- -- -- 45,153
Payable for daily variation margin on open
futures contracts 6,750 -- 47 47
Payable for investments purchased -- 2,360 313,573 --
Payable for series shares reacquired 185,075 70,797 17,877 49,059
Collateral for securities loaned, at value -- 1,465,603 -- 1,808,123
Payable to affiliates --
Management fee 3,932 1,815 1,415 3,728
Distribution fee (Service Class) 509 44 34 99
Accrued expenses and other liabilities 67,777 132,277 61,102 87,646
--------------- --------------- --------------- ---------------
Total liabilities $ 264,043 $ 1,672,896 $ 1,415,397 $ 2,914,824
--------------- --------------- --------------- ---------------
Net assets $ 237,798,636 $ 64,195,095 $ 66,939,415 $ 180,494,093
=============== =============== =============== ===============
Net assets consist of:
Paid-in capital $ 212,056,648 $ 46,668,358 $ 56,539,629 $ 147,526,043
Unrealized appreciation (depreciation) on
investments and translation of assets and
liabilities in foreign currencies 9,882,933 16,977,132 5,840,534 28,661,594
Accumulated undistributed net realized gain
(loss) on investments and foreign
currency transactions 2,040,132 86,959 33,955 (1,253,388)
Accumulated undistributed net investment income 13,818,923 462,646 4,525,297 5,559,844
--------------- --------------- --------------- ---------------
Total $ 237,798,636 $ 64,195,095 $ 66,939,415 $ 180,494,093
=============== =============== =============== ===============
Net Assets:
Initial Class $ 164,226,868 $ 57,798,521 $ 62,107,015 $ 166,033,598
Service Class 73,571,768 6,396,574 4,832,400 14,460,495
--------------- --------------- --------------- ---------------
Total $ 237,798,636 $ 64,195,095 $ 66,939,415 $ 180,494,093
=============== =============== =============== ===============
Shares of beneficial interest outstanding:
Initial Class 13,521,588 3,575,754 5,006,645 9,268,672
Service Class 6,093,049 397,878 391,893 811,330
--------------- --------------- --------------- ---------------
Total 19,614,637 3,973,632 5,398,538 10,080,002
=============== =============== =============== ===============
Net asset value per share:
Initial Class $ 12.15 $ 16.16 $ 12.40 $ 17.91
=============== =============== =============== ===============
Service Class $ 12.07 $ 16.08 $ 12.33 $ 17.82
=============== =============== =============== ===============
</Table>
See notes to financial statements.
47
<Page>
<Table>
<Caption>
GOVERNMENT INTERNATIONAL
SECURITIES HIGH YIELD VALUE
SERIES SERIES SERIES
--------------- --------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 710,533,668 $ 404,746,016 $ 88,494,487
Unrealized appreciation (depreciation) 12,449,209 18,225,702 21,197,367
--------------- --------------- ---------------
Total investments, at value (including
securities loaned of $--, $--,
$17,326,086, $--, and $--, respectively) $ 722,982,877 $ 422,971,718 $ 109,691,854
Cash 563 87,949 351
Receivable for forward foreign currency
exchange contracts -- 43,713 --
Receivable for forward foreign currency
exchange contracts subject to master netting
agreements -- -- --
Receivable for investments sold -- 647,422 422,533
Receivable for series shares sold 273,460 262,251 100,363
Interest and dividends receivable 5,733,783 7,289,663 181,051
Receivable from administrative proceeding
settlement -- -- 942
Other assets 2,548 1,810 338
--------------- --------------- ---------------
Total assets $ 728,993,231 $ 431,304,526 $ 110,397,432
=============== =============== ===============
Liabilities:
Payable to custodian $ -- $ -- $ 210,722
Payable for forward foreign currency exchange
contracts -- 413,739 --
Payable for daily variation margin on open
futures contracts 38,141 -- --
Payable for investments purchased -- 890,792 64,433
Payable for mortgage dollar roll transactions 30,229,783 -- --
Payable for series shares reacquired 501,818 343,280 37,508
Deferred mortgage dollar roll income 25,492 -- --
Collateral for securities loaned, at value -- -- 18,200,867
Payable to affiliates --
Management fee 10,542 8,853 2,275
Distribution fee (Service Class) 1,401 753 47
Accrued expenses and other liabilities 81,590 79,897 80,860
--------------- --------------- ---------------
Total liabilities $ 30,888,767 $ 1,737,314 $ 18,596,712
--------------- --------------- ---------------
Net assets $ 698,104,464 $ 429,567,212 $ 91,800,720
=============== =============== ===============
Net assets consist of:
Paid-in capital $ 664,291,315 $ 494,118,864 $ 67,936,291
Unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies 12,020,949 17,859,635 21,204,404
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions (9,906,531) (114,086,841) 1,559,815
Accumulated undistributed net investment income 31,698,731 31,675,554 1,100,210
--------------- --------------- ---------------
Total $ 698,104,464 $ 429,567,212 $ 91,800,720
=============== =============== ===============
Net Assets:
Initial Class $ 493,616,286 $ 319,653,150 $ 84,995,961
Service Class 204,488,178 109,914,062 6,804,759
--------------- --------------- ---------------
Total $ 698,104,464 $ 429,567,212 $ 91,800,720
=============== =============== ===============
Shares of beneficial interest outstanding:
Initial Class 37,498,872 43,662,470 5,453,875
Service Class 15,606,817 15,104,426 437,907
--------------- --------------- ---------------
Total 53,105,689 58,766,896 5,891,782
=============== =============== ===============
Net asset value per share:
Initial Class $ 13.16 $ 7.32 $ 15.58
=============== =============== ===============
Service Class $ 13.10 $ 7.28 $ 15.54
=============== =============== ===============
<Caption>
STRATEGIC
MONEY MARKET INCOME
SERIES SERIES
--------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 369,660,948 $ 83,475,121
Unrealized appreciation (depreciation) -- 5,592,479
--------------- ---------------
Total investments, at value (including
securities loaned of $--, $--,
$17,326,086, $--, and $--, respectively) $ 369,660,948 $ 89,067,600
Cash -- 4,438
Receivable for forward foreign currency
exchange contracts -- 109,620
Receivable for forward foreign currency
exchange contracts subject to master netting
agreements -- 70,793
Receivable for investments sold -- 294,619
Receivable for series shares sold 1,914,457 108,605
Interest and dividends receivable -- 1,472,090
Receivable from administrative proceeding
settlement -- --
Other assets 3,240 --
--------------- ---------------
Total assets $ 371,578,645 $ 91,127,765
=============== ===============
Liabilities:
Payable to custodian $ 319 $ --
Payable for forward foreign currency exchange
contracts -- 626,682
Payable for daily variation margin on open
futures contracts -- 14,078
Payable for investments purchased -- --
Payable for mortgage dollar roll transactions -- --
Payable for series shares reacquired 1,129,941 8,367
Deferred mortgage dollar roll income -- --
Collateral for securities loaned, at value -- --
Payable to affiliates --
Management fee 10,112 1,832
Distribution fee (Service Class) 1,200 166
Accrued expenses and other liabilities 57,510 44,562
--------------- ---------------
Total liabilities $ 1,199,082 $ 695,687
--------------- ---------------
Net assets $ 370,379,563 $ 90,432,078
=============== ===============
Net assets consist of:
Paid-in capital $ 370,379,563 $ 80,209,271
Unrealized appreciation (depreciation)
on investments and translation of assets
and liabilities in foreign currencies -- 5,092,294
Accumulated undistributed net realized gain
(loss) on investments and foreign currency
transactions -- 292,142
Accumulated undistributed net investment income -- 4,838,371
--------------- ---------------
Total $ 370,379,563 $ 90,432,078
=============== ===============
Net Assets:
Initial Class $ 282,594,703 $ 66,247,798
Service Class 87,784,860 24,184,280
--------------- ---------------
Total $ 370,379,563 $ 90,432,078
=============== ===============
Shares of beneficial interest outstanding:
Initial Class 282,594,703 5,799,494
Service Class 87,784,860 2,130,436
--------------- ---------------
Total 370,379,563 7,929,930
=============== ===============
Net asset value per share:
Initial Class $ 1.00 $ 11.42
=============== ===============
Service Class $ 1.00 $ 11.35
=============== ===============
</Table>
See notes to financial statements.
48
<Page>
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2004
<Table>
<Caption>
EMERGING GLOBAL GLOBAL
BOND MARKETS EQUITY GOVERNMENTS TOTAL RETURN
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Net investment income
Income --
Interest $ 14,267,882 $ 11,970 $ 2,316,927 $ 2,417,390
Dividends -- 1,648,622 -- 2,524,020
Income on securities loaned -- 1,565 -- 31,935
Foreign taxes withheld -- (182,913) -- (160,604)
--------------- --------------- --------------- ---------------
Total investment income $ 14,267,882 $ 1,479,244 $ 2,316,927 $ 4,812,741
--------------- --------------- --------------- ---------------
Expenses --
Management fee $ 1,492,956 $ 579,126 $ 502,486 $ 1,260,561
Trustees' compensation 29,419 6,561 7,752 18,890
Distribution fee (Service Class) 178,102 13,902 12,366 31,698
Administrative fee 23,236 4,990 6,253 15,252
Custodian fee 85,437 78,316 61,108 130,178
Printing 11,987 7,887 9,389 13,518
Auditing fees 45,233 40,199 46,509 41,090
Legal fees 4,179 6,528 6,614 16,280
Miscellaneous 26,571 22,762 15,534 2,137
--------------- --------------- --------------- ---------------
Total expenses $ 1,897,120 $ 760,271 $ 668,011 $ 1,529,604
Fees paid indirectly (1,179) (550) (25) (713)
--------------- --------------- --------------- ---------------
Net expenses $ 1,895,941 $ 759,721 $ 667,986 $ 1,528,891
--------------- --------------- --------------- ---------------
Net investment income $ 12,371,941 $ 719,523 $ 1,648,941 $ 3,283,850
=============== =============== =============== ===============
Realized and unrealized gain (loss) on
investments and foreign currency transactions:
Realized gain (loss) (Identified cost basis) --
Investment transactions $ 5,307,958 $ 7,633,328 $ 5,621,823 $ 19,068,305
Written options transactions -- -- 14,054 13,092
Futures contracts (108,459) -- 130,602 36,849
Foreign currency transactions 3,985 (113,076) (451,535) (601,005)
--------------- --------------- --------------- ---------------
Net realized gain (loss) on investments
and foreign currency transactions $ 5,203,484 $ 7,520,252 $ 5,314,944 $ 18,517,241
--------------- --------------- --------------- ---------------
Change in unrealized appreciation (depreciation)
Investments $ (3,057,670) $ 5,353,064 $ (1,137,321) $ 4,519,419
Futures contracts (12,375) -- (11,392) (5,417)
Translation of assets and liabilities in
foreign currencies 3,164 9,100 307,732 635,019
--------------- --------------- --------------- ---------------
Net unrealized gain (loss) on investments
and foreign currency translation $ (3,066,881) $ 5,362,164 $ (840,981) $ 5,149,021
--------------- --------------- --------------- ---------------
Net realized and unrealized gain (loss)
on investments and foreign currency $ 2,136,603 $ 12,882,416 $ 4,473,963 $ 23,666,262
--------------- --------------- --------------- ---------------
Change in net assets from operations $ 14,508,544 $ 13,601,939 $ 6,122,904 $ 26,950,112
=============== =============== =============== ===============
</Table>
See notes to financial statements.
49
<Page>
<Table>
<Caption>
GOVERNMENT INTERNATIONAL
SECURITIES HIGH YIELD VALUE
SERIES SERIES SERIES
--------------- --------------- ---------------
Net investment income
Income --
Interest $ 35,060,256 $ 34,055,848 $ 35,998
Dividends -- 274,043 2,084,632
Income on securities loaned -- -- 61,404
Foreign taxes withheld -- (935) (199,180)
--------------- --------------- ---------------
Total investment income $ 35,060,256 $ 34,328,956 $ 1,982,854
--------------- --------------- ---------------
Expenses --
Management fee $ 4,066,207 $ 3,182,821 $ 667,185
Trustees' compensation 83,104 46,879 8,649
Distribution fee (Service Class) 474,122 240,606 13,899
Administrative fee 68,921 39,450 6,423
Custodian fee 206,586 133,615 96,490
Printing 33,936 26,288 7,618
Auditing fees 38,672 42,695 37,278
Legal fees 6,453 6,367 7,087
Miscellaneous 57,558 46,292 23,729
--------------- --------------- ---------------
Total expenses $ 5,035,559 $ 3,765,013 $ 868,358
Fees paid indirectly (2,770) (9,929) (373)
--------------- --------------- ---------------
Net expenses $ 5,032,789 $ 3,755,084 $ 867,985
--------------- --------------- ---------------
Net investment income $ 30,027,467 $ 30,573,872 $ 1,114,869
=============== =============== ===============
Realized and unrealized gain (loss) on
investments and foreign currency transactions:
Realized gain (loss) (Identified cost basis) --
Investment transactions $ 3,911,806 $ 1,766,075 $ 10,143,802
Futures contracts 956,866 -- --
Foreign currency transactions -- (827,202) 138
--------------- --------------- ---------------
Net realized gain (loss) on investments and
foreign currency transactions $ 4,868,672 $ 938,873 $ 10,143,940
--------------- --------------- ---------------
Net increase from payments by affiliates
for losses realized on the disposal of
investments in violation of restrictions $ -- $ -- $ 11,832
--------------- --------------- ---------------
Change in unrealized appreciation (depreciation)
Investments $ (7,438,349) $ 5,399,674 $ 7,941,095
Futures contracts (428,260) -- --
Translation of assets and liabilities in
foreign currencies -- 53,331 3,634
--------------- --------------- ---------------
Net unrealized gain (loss) on investments
and foreign currency translation $ (7,866,609) $ 5,453,005 $ 7,944,729
--------------- --------------- ---------------
Net realized and unrealized gain (loss)
on investments and foreign currency $ (2,997,937) $ 6,391,878 $ 18,100,501
--------------- --------------- ---------------
Change in net assets from operations $ 27,029,530 $ 36,965,750 $ 19,215,370
=============== =============== ===============
<Caption>
STRATEGIC
MONEY MARKET INCOME
SERIES SERIES
--------------- ---------------
Net investment income
Income --
Interest $ 5,969,269 $ 5,879,690
Dividends -- 5,206
Income on securities loaned -- --
Foreign taxes withheld -- --
--------------- ---------------
Total investment income $ 5,969,269 $ 5,884,896
--------------- ---------------
Expenses --
Management fee $ 2,162,693 $ 683,425
Trustees' compensation 44,395 10,011
Distribution fee (Service Class) 207,866 62,240
Administrative fee 40,417 8,381
Custodian fee 133,743 58,863
Printing 33,626 3,575
Auditing fees 22,752 37,023
Legal fees 5,990 5,749
Miscellaneous 41,857 21,143
--------------- ---------------
Total expenses $ 2,693,339 $ 890,410
Fees paid indirectly -- (1,261)
--------------- ---------------
Net expenses $ 2,693,339 $ 889,149
--------------- ---------------
Net investment income $ 3,275,930 $ 4,995,747
=============== ===============
Realized and unrealized gain (loss) on
investments and foreign currency transactions:
Realized gain (loss) (Identified cost basis) --
Investment transactions $ -- $ 3,149,010
Futures contracts -- (157,495)
Foreign currency transactions -- (1,032,921)
--------------- ---------------
Net realized gain (loss) on investments and
foreign currency transactions $ -- $ 1,958,594
--------------- ---------------
Net increase from payments by affiliates
for losses realized on the disposal of
investments in violation of restrictions $ -- $ --
--------------- ---------------
Change in unrealized appreciation (depreciation)
Investments $ -- $ (471,880)
Futures contracts -- (74,336)
Translation of assets and liabilities in
foreign currencies -- 291,707
--------------- ---------------
Net unrealized gain (loss) on investments
and foreign currency translation $ -- $ (254,509)
--------------- ---------------
Net realized and unrealized gain (loss)
on investments and foreign currency $ -- $ 1,704,085
--------------- ---------------
Change in net assets from operations $ 3,275,930 $ 6,699,832
=============== ===============
</Table>
See notes to financial statements.
50
<Page>
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2004
<Table>
<Caption>
EMERGING GLOBAL GLOBAL
MARKETS EQUITY GOVERNMENTS TOTAL RETURN
BOND SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income $ 12,371,941 $ 719,523 $ 1,648,941 $ 3,283,850
Net realized gain (loss) on investments and
foreign currency transactions 5,203,484 7,520,252 5,314,944 18,517,241
Net unrealized gain (loss) on investments and
foreign currency translation (3,066,881) 5,362,164 (840,981) 5,149,021
--------------- --------------- --------------- ---------------
Change in net assets from operations $ 14,508,544 $ 13,601,939 $ 6,122,904 $ 26,950,112
--------------- --------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (10,988,097) $ (506,672) $ (7,801,714) $ (3,877,428)
From net investment income (Service Class) (4,202,427) (46,618) (606,872) (295,362)
From net realized gain on investments and
foreign currency transactions (Initial Class) (2,635,514) -- -- --
From net realized gain on investments and
foreign currency transactions (Service Class) (1,037,911) -- -- --
--------------- --------------- --------------- ---------------
Total distributions declared to shareholders $ (18,863,949) $ (553,290) $ (8,408,586) $ (4,172,790)
--------------- --------------- --------------- ---------------
Change in net assets from series share transactions $ (23,671,454) $ (671,282) $ (3,602,597) $ (10,503,036)
--------------- --------------- --------------- ---------------
Total change in net assets $ (28,026,859) $ 12,377,367 $ (5,888,279) $ 12,274,286
Net Assets:
At beginning of period 265,825,495 51,817,728 72,827,694 168,219,807
--------------- --------------- --------------- ---------------
At end of period $ 237,798,636 $ 64,195,095 $ 66,939,415 $ 180,494,093
=============== =============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 13,818,923 $ 462,646 $ 4,525,297 $ 5,559,844
=============== =============== =============== ===============
<Caption>
GOVERNMENT
SECURITIES HIGH YIELD INTERNATIONAL
SERIES SERIES VALUE SERIES
--------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income $ 30,027,467 $ 30,573,872 $ 1,114,869
Net realized gain (loss) on investments and
foreign currency transactions 4,868,672 938,873 10,143,940
Net increase from payments by affiliates for
losses realized on the disposal of investments
in violation of restrictions -- -- 11,832
Net unrealized gain (loss) on investments and
foreign currency translation (7,866,609) 5,453,005 7,944,729
--------------- --------------- ---------------
Change in net assets from operations $ 27,029,530 $ 36,965,750 $ 19,215,370
--------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (30,916,358) $ (25,517,531) $ (505,289)
From net investment income (Service Class) (9,878,792) (6,394,985) (37,595)
--------------- --------------- ---------------
Total distributions declared to shareholders $ (40,795,150) $ (31,912,516) $ (542,884)
--------------- --------------- ---------------
Change in net assets from series share transactions $ (89,973,097) $ (34,624,125) $ 7,374,782
--------------- --------------- ---------------
Total change in net assets $ (103,738,717) $ (29,570,891) $ 26,047,268
Net Assets:
At beginning of period 801,843,181 459,138,103 65,753,452
--------------- --------------- ---------------
At end of period $ 698,104,464 $ 429,567,212 $ 91,800,720
=============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 31,698,731 $ 31,675,554 $ 1,100,210
=============== =============== ===============
<Caption>
MONEY MARKET STRATEGIC INCOME
SERIES SERIES
--------------- ----------------
Change in net assets:
From operations --
Net investment income $ 3,275,930 $ 4,995,747
Net realized gain (loss) on investments and
foreign currency transactions -- 1,958,594
Net increase from payments by affiliates for
losses realized on the disposal of investments
in violation of restrictions -- --
Net unrealized gain (loss) on investments and
foreign currency translation -- (254,509)
--------------- ----------------
Change in net assets from operations $ 3,275,930 $ 6,699,832
--------------- ----------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (2,750,581) $ (3,174,021)
From net investment income (Service Class) (525,349) (1,403,154)
--------------- ----------------
Total distributions declared to shareholders $ (3,275,930) $ (4,577,175)
--------------- ----------------
Change in net assets from series share transactions $ (105,154,375) $ (245,132)
--------------- ----------------
Total change in net assets $ (105,154,375) $ 1,877,525
Net Assets:
At beginning of period 475,533,938 88,554,553
--------------- ----------------
At end of period $ 370,379,563 $ 90,432,078
=============== ================
Accumulated undistributed net investment income
included in net assets at end of period $ -- $ 4,838,371
=============== ================
</Table>
See notes to financial statements.
51
<Page>
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2003
<Table>
<Caption>
EMERGING GLOBAL
BOND MARKETS EQUITY GOVERNMENTS
SERIES SERIES SERIES
--------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income $ 13,493,842 $ 706,580 $ 2,080,268
Net realized gain (loss) 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
--------------- --------------- ---------------
Change 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)
--------------- --------------- ---------------
Change in net assets from series share transactions $ 6,112,812 $ 3,663,511 $ (8,430,211)
--------------- --------------- ---------------
Total change 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
--------------- ---------------
Change in net assets:
From operations --
Net investment income $ 2,248,216 $ 29,749,090
Net realized gain (loss) 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)
--------------- ---------------
Change 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)
--------------- ---------------
Change in net assets from series share transactions $ 58,423,279 $ (173,754,393)
--------------- ---------------
Total change 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 STRATEGIC
YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Change 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 (loss) on investments and
foreign currency translation 45,104,109 13,862,061 -- 3,179,462
--------------- --------------- --------------- ---------------
Change 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)
--------------- --------------- --------------- ---------------
Change in net assets from series share transactions $ 67,938,029 $ (3,106,318) $ (267,337,186) $ 12,414,309
--------------- --------------- --------------- ---------------
Total change 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.
52
<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. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
BOND SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 12.39 $ 11.85 $ 11.34 $ 10.91 $ 10.36
---------- ---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.61 $ 0.62 $ 0.66 $ 0.65 $ 0.71
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.09 0.51 0.37 0.19 0.30
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 0.70 $ 1.13 $ 1.03 $ 0.84 $ 1.01
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.76) $ (0.59) $ (0.45) $ (0.41) $ (0.46)
From net realized gain on investments and
foreign currency transactions (0.18) -- (0.03) -- --
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.04) -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.94) $ (0.59) $ (0.52) $ (0.41) $ (0.46)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.15 $ 12.39 $ 11.85 $ 11.34 $ 10.91
========== ========== ========== ========== ==========
Total return###^^^ 6.25% 9.72% 9.53% 7.85% 10.18%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.69% 0.69% 0.68% 0.71% 0.72%
Net investment income~ 5.04% 5.10% 5.87% 5.80% 6.85%
Portfolio turnover 50% 96% 130% 236% 252%
Net assets at end of period (000 Omitted) $ 164,227 $ 199,735 $ 211,757 $ 170,392 $ 75,961
<Caption>
BOND SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 12.33 $ 11.81 $ 11.32 $ 11.20^
---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.58 $ 0.57 $ 0.63 $ 0.22
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.08 0.53 0.38 (0.10)
---------- ---------- ---------- ----------
Total from investment operations $ 0.66 $ 1.10 $ 1.01 $ 0.12
---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.74) $ (0.58) $ (0.45) --
From net realized gain on investments and
foreign currency transactions (0.18) -- (0.03) --
In excess of net realized gain on investments
and foreign currency transactions -- -- (0.04) --
---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.92) $ (0.58) $ (0.52) --
========== ========== ========== ==========
Net asset value -- end of period $ 12.07 $ 12.33 $ 11.81 $ 11.32
========== ========== ========== ==========
Total return###^^^ 5.91% 9.43% 9.34% 1.07%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 0.94% 0.94% 0.93% 0.96%+
Net investment income~ 4.80% 4.77% 5.62% 5.52%+
Portfolio turnover 50% 96% 130% 236%
Net assets at end of period (000 Omitted) $ 73,572 $ 66,091 $ 36,960 $ 10,468
</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 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.
^ The net asset value and total return previously reported as $11.19 and
1.16%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements.
53
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
EMERGING MARKETS EQUITY SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 12.85 $ 8.48 $ 8.73 $ 8.82 $ 11.42
Income from investment operations#~ --
Net investment income (loss) $ 0.18 $ 0.20 $ 0.09 $ 0.14 $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 3.27 4.23 (0.24) (0.23) (2.59)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 3.45 $ 4.43 $ (0.15) $ (0.09) $ (2.60)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.14) $ (0.06) $ (0.10) $ -- $ (0.00)+++
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 16.16 $ 12.85 $ 8.48 $ 8.73 $ 8.82
========== ========== ========== ========== ==========
Total return###^^^ 27.18% 52.60% (1.88)% (1.02)% (22.76)%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.35% 1.65% 1.49% 1.62% 1.57%
Net investment income~ 1.33% 1.99% 1.01% 1.63% (0.12)%
Portfolio turnover 109% 125% 246% 179% 149%
Net assets at end of period (000 Omitted) $ 57,799 $ 46,769 $ 30,393 $ 32,175 $ 36,345
<Caption>
EMERGING MARKETS EQUITY SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 12.80 $ 8.45 $ 8.72 $ 8.29^
---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.15 $ 0.17 $ 0.06 0.00+++
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 3.25 4.22 (0.23) 0.43
---------- ---------- ---------- ----------
Total from investment operations $ 3.40 $ 4.39 $ (0.17) $ 0.43
---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.12) $ (0.04) $ (0.10) $ --
---------- ---------- ---------- ----------
Net asset value -- end of period $ 16.08 $ 12.80 $ 8.45 $ 8.72
========== ========== ========== ==========
Total return###^^^ 26.96% 52.12% (2.12)% 5.19%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.60% 1.89% 1.74% 1.87%+
Net investment income~ 1.08% 1.71% 0.70% 0.22%+
Portfolio turnover 109% 125% 246% 179%
Net assets at end of period (000 Omitted) $ 6,397 $ 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.
^ The net asset value and total return previously reported as $8.35 and
4.43%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements.
54
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
GLOBAL GOVERNMENTS SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 12.92 $ 11.75 $ 9.74 $ 9.95 $ 10.27
---------- ---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.30 $ 0.34 $ 0.35 $ 0.38 $ 0.50
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.76 1.45 1.66 (0.59) (0.40)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 1.06 $ 1.79 $ 2.01 $ (0.21) $ 0.10
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (1.58) $ (0.62) $ -- $ -- $ (0.42)
From paid--in capital -- -- -- -- (0.00)+++
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (1.58) $ (0.62) $ -- $ -- $ (0.42)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.40 $ 12.92 $ 11.75 $ 9.74 $ 9.95
========== ========== ========== ========== ==========
Total return###^^^ 10.06% 15.60% 20.64% (2.11)% 1.22%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.98% 0.95% 0.93% 0.98% 0.94%
Net investment income~ 2.48% 2.75% 3.36% 3.81% 5.11%
Portfolio turnover 124% 143% 120% 67% 131%
Net assets at end of period(000 Omitted) $ 62,107 $ 67,472 $ 70,613 $ 50,189 $ 61,441
<Caption>
GLOBAL GOVERNMENTS SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 12.85 $ 11.71 $ 9.73 $ 10.02^
---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.27 $ 0.30 $ 0.33 $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.75 1.45 1.65 (0.41)
---------- ---------- ---------- ----------
Total from investment operations $ 1.02 $ 1.75 $ 1.98 $ (0.29)
---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (1.54) $ (0.61) $ -- $ --
---------- ---------- ---------- ----------
Net asset value -- end of period $ 12.33 $ 12.85 $ 11.71 $ 9.73
========== ========== ========== ==========
Total return###^^^ 9.80% 15.30% 20.35% (2.89)%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.23% 1.20% 1.18% 1.23%+
Net investment income~ 2.23% 2.50% 3.03% 3.34%+
Portfolio turnover 124% 143% 120% 67%
Net assets at end of period(000 Omitted) $ 4,832 $ 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
## 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 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.
^ The net asset value and total return previously reported as $9.98 and
(2.51)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements.
55
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
GLOBAL TOTAL RETURN SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 15.70 $ 13.11 $ 13.28 $ 15.74 $ 16.65
---------- ---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.32 $ 0.29 $ 0.31 $ 0.31 $ 0.50
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.29 2.66 (0.23) (1.24) (0.16)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 2.61 $ 2.95 $ 0.08 $ (0.93) $ 0.34
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.40) $ (0.36) $ (0.25) $ (0.61) $ (0.37)
From net realized gain on investments and
foreign currency transactions -- -- -- (0.92) (0.88)
In excess of net realized gain on investments -- -- -- (0.00)** --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.40) $ (0.36) $ (0.25) $ (1.53) $ (1.25)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 17.91 $ 15.70 $ 13.11 $ 13.28 $ 15.74
========== ========== ========== ========== ==========
Total return###^^^ 17.12% 22.97% 0.58% (6.17)% 2.28%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.89% 0.94% 0.90% 0.91% 0.91%
Net investment income~ 1.97% 2.06% 2.34% 2.19% 3.13%
Portfolio turnover 86% 93% 84% 66% 86%
Net assets at end of period (000 Omitted) $ 166,034 $ 156,675 $ 80,150 $ 88,199 $ 101,692
<Caption>
GLOBAL TOTAL RETURN SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 15.63 $ 13.08 $ 13.28 $ 13.53^
---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.28 $ 0.26 $ 0.27 $ 0.09
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.29 2.63 (0.22) (0.34)+++
---------- ---------- ---------- ----------
Total from investment operations $ 2.57 $ 2.89 $ 0.05 $ (0.25)
---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.38) $ (0.34) $ (0.25) $ --
---------- ---------- ---------- ----------
Net asset value -- end of period $ 17.82 $ 15.63 $ 13.08 $ 13.28
========== ========== ========== ==========
Total return###^^^ 16.88% 22.53% 0.41% (1.92)%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.14% 1.19% 1.15% 1.16%+
Net investment income~ 1.72% 1.83% 2.10% 1.82%+
Portfolio turnover 86% 93% 84% 66%
Net assets at end of period (000 Omitted) $ 14,460 $ 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 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
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, increase 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.
^ The net asset value and total return previously reported as $13.58 and
(2.28)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements
56
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
GOVERNMENT SECURITIES SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 13.44 $ 13.85 $ 13.28 $ 13.11 $ 12.48
---------- ---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.54 $ 0.44 $ 0.58 $ 0.73 $ 0.81
Net realized and unrealized gain (loss) on
investments (0.07) (0.14) 0.67 0.22 0.62
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 0.47 $ 0.30 $ 1.25 $ 0.95 $ 1.43
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.75) $ (0.59) $ (0.68) $ (0.78) $ (0.80)
From net realized gain on investments -- (0.12) -- -- --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.75) $ (0.71) $ (0.68) $ (0.78) $ (0.80)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 13.16 $ 13.44 $ 13.85 $ 13.28 $ 13.11
========== ========== ========== ========== ==========
Total return###^^^ 3.76% 2.15% 9.80% 7.47% 12.11%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.62% 0.62% 0.60% 0.62% 0.62%
Net investment income~ 4.12% 3.22% 4.33% 5.55% 6.47%
Portfolio turnover 85% 144% 157% 97% 70%
Net assets at end of period (000 Omitted) $ 493,616 $ 629,265 $ 877,180 $ 696,167 $ 567,008
<Caption>
GOVERNMENT SECURITIES SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 13.38 $ 13.81 $ 13.27 $ 13.08^
---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.51 $ 0.36 $ 0.51 $ 0.28
Net realized and unrealized gain (loss) on
investments (0.07) (0.10) 0.71 (0.09)
---------- ---------- ---------- ----------
Total from investment operations $ 0.44 $ 0.26 $ 1.22 $ 0.19
---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.72) $ (0.57) $ (0.68) $ --
From net realized gain on investments -- (0.12) -- --
---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.72) $ (0.69) $ (0.68) $ --
---------- ---------- ---------- ----------
Net asset value -- end of period $ 13.10 $ 13.38 $ 13.81 $ 13.27
========== ========== ========== ==========
Total return###^^^ 3.55% 1.87% 9.55% 1.45%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 0.87% 0.87% 0.85% 0.87%+
Net investment income~ 3.90% 2.64% 3.86% 5.52%+
Portfolio turnover 85% 144% 157% 97%
Net assets at end of period (000 Omitted) $ 204,488 $ 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.
^ The net asset value and total return previously reported as $13.06 and
1.61%, respectively have been revised to reflect the net asset value from
the day prior to class' inception date. The net asset value and total
return previously reported were from inception date, the date the share
class was first available to public shareholders.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements.
57
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
HIGH YIELD SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 7.27 $ 6.56 $ 7.05 $ 7.63 $ 9.02
---------- ---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.52 $ 0.54 $ 0.61 $ 0.73 $ 0.84
Net realized and unrealized gain (loss) on
investments and foreign currency 0.11 0.80 (0.42) (0.57) (1.39)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 0.63 $ 1.34 $ 0.19 $ 0.16 $ (0.55)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
from net investment income $ (0.58) $ (0.63) $ (0.68) $ (0.74) $ (0.84)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 7.32 $ 7.27 $ 6.56 $ 7.05 $ 7.63
========== ========== ========== ========== ==========
Total return###^^^ 9.54% 21.44% 2.70% 1.80% (6.79)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.83% 0.83% 0.82% 0.84% 0.83%
Net investment income~ 7.27% 7.89% 9.15% 9.93% 9.96%
Portfolio turnover 68% 92% 75% 58% 56%
Net assets at end of period (000 Omitted) $ 319,653 $ 360,207 $ 305,487 $ 367,973 $ 333,042
<Caption>
HIGH YIELD SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 7.23 $ 6.53 $ 7.04 $ 7.09
---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.49 $ 0.51 $ 0.58 $ 0.25
Net realized and unrealized gain (loss) on
investments and foreign currency $ 0.12 0.81 (0.41) (0.30)
---------- ---------- ---------- ----------
Total from investment operations $ 0.61 $ 1.32 $ 0.17 $ (0.05)
---------- ---------- ---------- ----------
Less distributions declared to shareholders from
net investment income $ (0.56) $ (0.62) $ (0.68) $ --
---------- ---------- ---------- ----------
Net asset value -- end of period $ 7.28 $ 7.23 $ 6.53 $ 7.04
========== ========== ========== ==========
Total return###^^^ 9.37% 21.21% 2.37% (0.71)%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.08% 1.08% 1.07% 1.09%+
Net investment income~ 6.99% 7.59% 8.99% 9.55%+
Portfolio turnover 68% 92% 75% 58%
Net assets at end of period (000 Omitted) $ 109,914 $ 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
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 previously reported as 1.66% has been revised to reflect
the net asset value from the day prior to the class' inception date. The
total return previously reported was from inception date, the date the
share class was first available to public shareholders.
### 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.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements.
58
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
INTERNATIONAL VALUE SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 12.27 $ 9.28 $ 9.93 $ 13.16 $ 14.97
---------- ---------- ---------- ---------- ----------
Income from investment operations# --
Net investment income $ 0.20 $ 0.11 $ 0.09 $ 0.08 $ 0.25
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 3.21 2.98 (0.66) (1.89) (0.58)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 3.41 $ 3.09 $ (0.57) $ (1.81) $ (0.33)
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.10) $ (0.10) $ (0.08) $ (0.24) $ (0.12)
From net realized gain on investments and
foreign currency transactions -- -- -- (1.12) (1.36)
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.06) --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.10) $ (0.10) $ (0.08) $ (1.42) $ (1.48)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 15.58 $ 12.27 $ 9.28 $ 9.93 $ 13.16
========== ========== ========== ========== ==========
Total return###^^^ 28.02%^^ 33.63% (5.86)% (14.63)% (2.33)%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.15% 1.28% 1.24% 1.23% 1.21%
Net investment income 1.52% 1.06% 0.91% 0.76% 1.81%
Portfolio turnover 65% 84% 80% 112% 80%
Net assets at end of period (000 omitted) $ 84,996 $ 61,108 $ 50,609 $ 64,134 $ 82,942
<Caption>
INTERNATIONAL VALUE SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 12.24 $ 9.27 $ 9.93 $ 10.51^
---------- ---------- ---------- ----------
Income from investment operations# --
Net investment income (loss) $ 0.18 $ 0.07 $ 0.04 $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 3.20 2.98 (0.62) (0.57)+++
---------- ---------- ---------- ----------
Total from investment operations $ 3.38 $ 3.05 $ (0.58) $ (0.58)
---------- ---------- ---------- ----------
Less distributions declared to shareholders
From net investment income $ (0.08) $ (0.08) $ (0.08) $ --
---------- ---------- ---------- ----------
Net asset value -- end of period $ 15.54 $ 12.24 $ 9.27 $ 9.93
========== ========== ========== ==========
Total return###^^^ 27.82%^^ 33.20% (5.97)% (5.52)%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.40% 1.53% 1.49% 1.48%+
Net investment income (loss) 1.31% 0.67% 0.44% (0.17)%+
Portfolio turnover 65% 84% 80% 112%
Net assets at end of period (000 omitted) $ 6,805 $ 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 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 net asset value and total return previously reported as $10.57 and
(6.05)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^ During the year ended December 31, 2004, the series received a payment
from the investment adviser to reimburse the series for losses on
investments not meeting the investment guidelines of the series. If the
payment had not been made, the total return would have been 28.01% and
27.81% for Initial and Service Class shares, respectively.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements.
59
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
MONEY MARKET SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
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 $ 0.01 $ 0.04 $ 0.06
Less distributions from net investment income (0.01) (0.01) (0.01) (0.04) (0.06)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ========== ==========
Total return### 0.83% 0.63% 1.27% 3.78% 5.95%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.58% 0.57% 0.57% 0.57% 0.58%
Net investment income 0.79% 0.64% 1.27% 3.56% 5.76%
Net assets at end of period (000 Omitted) $ 282,595 $ 426,154 $ 690,127 $ 702,808 $ 476,370
<Caption>
MONEY MARKET SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 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 $ 1.00
---------- ---------- ---------- ----------
Income from investment operations# --
Net investment income $ 0.01 $ 0.00 $ 0.01 $ 0.01
Less distributions from net investment income (0.01) (0.00) (0.01) (0.01)
---------- ---------- ---------- ----------
Net asset value -- end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
========== ========== ========== ==========
Total return### 0.57% 0.38% 1.02% 0.72%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.82% 0.82% 0.82% 0.82%+
Net investment income 0.63% 0.37% 0.99% 3.31%+
Net assets at end of period (000 Omitted) $ 87,785 $ 49,380 $ 52,745 $ 20,493
</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.
60
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
STRATEGIC INCOME SERIES
----------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
2004 2003 2002 2001 2000
---------- ---------- ---------- ---------- ----------
INITIAL CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 11.12 $ 10.31 $ 10.04 $ 10.10 $ 10.25
---------- ---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.61 $ 0.59 $ 0.57 $ 0.67 $ 0.79
Net realized and unrealized gain (loss) on
investments and foreign currency 0.23 0.71 0.16 (0.34) (0.51)
---------- ---------- ---------- ---------- ----------
Total from investment operations $ 0.84 $ 1.30 $ 0.73 $ 0.33 $ 0.28
---------- ---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.54) $ (0.49) $ (0.46) $ (0.35) $ (0.43)
From net realized gain on investments and
foreign currency transactions -- -- -- (0.03) --
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.01) --
---------- ---------- ---------- ---------- ----------
Total distributions declared to shareholders $ (0.54) $ (0.49) $ (0.46) $ (0.39) $ (0.43)
---------- ---------- ---------- ---------- ----------
Net asset value -- end of period $ 11.42 $ 11.12 $ 10.31 $ 10.04 $ 10.10
========== ========== ========== ========== ==========
Total return###^^^ 8.04% 12.89% 7.52% 3.31% 2.87%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.91% 0.90% 0.86% 1.01% 0.98%
Net investment income~ 5.55% 5.58% 5.74% 6.69% 7.90%
Portfolio turnover 74% 127% 137% 179% 107%
Net assets at end of period (000 Omitted) $ 66,248 $ 67,547 $ 56,980 $ 47,813 $ 33,323
<Caption>
STRATEGIC INCOME SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
---------- ---------- ---------- ------------------
SERVICE CLASS SHARES
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 11.06 $ 10.28 $ 10.03 $ 9.91
---------- ---------- ---------- ----------
Income from investment operations#~ --
Net investment income $ 0.59 $ 0.57 $ 0.53 $ 0.21
Net realized and unrealized loss on investments
and foreign currency 0.22 0.68 0.18 (0.09)
---------- ---------- ---------- ----------
Total from investment operations $ 0.81 $ 1.25 $ 0.71 $ 0.12
---------- ---------- ---------- ----------
Less distributions declared to shareholders --
From net investment income $ (0.52) $ (0.47) $ (0.46) $ --
---------- ---------- ---------- ----------
Net asset value -- end of period $ 11.35 $ 11.06 $ 10.28 $ 10.03
========== ========== ========== ==========
Total return###^^^ 7.83% 12.48% 7.31% 1.21%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.16% 1.15% 1.11% 1.26%+
Net investment income* 5.31% 5.36% 5.41% 6.00%+
Portfolio turnover 74% 127% 137% 179%
Net assets at end of period (000 Omitted) $ 24,184 $ 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 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 toal
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. 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 $0.01, and decrease the ratio of net investment
income to average net assets 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.
^ The total return previously reported as 3.20%, has been revised to
reflect the net asset value from the day prior to the class' inception
date. The total return previously reported was from inception date, the
date the share class was first available to public shareholders.
^^^ From time to time the series may receive proceeds from the settlement of
a class action lawsuit, without which performance would be lower.
See notes to financial statements.
61
<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,
Core Equity Series (formerly Research Growth and Income 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 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 U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. The High
Yield Series can invest up to 100% of its portfolio in high-yield securities
rated below investment grade. Investments in high-yield securities involve
greater degrees of credit and market risk than investments in higher-rated
securities and tend to be more sensitive to economic conditions. 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 -- 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. Bonds and other fixed income securities (other than short-term
obligations) in 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. Foreign
currency options are valued by MFS using an external pricing model approved by
the Board of Trustees that uses market data from an independent pricing source.
Futures contracts are valued at the settlement price as reported by an
independent pricing service on the primary exchange on which they are traded.
Forward foreign currency contracts are valued using spot rates and forward
points as reported by an independent pricing source. Short-term obligations with
a remaining maturity in excess of 60 days will be valued upon dealer-supplied
valuations. All other short-term obligations in the 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 the series' compliance with certain
conditions as specified under Rule 2a-7 of the Investment Company Act of 1940.
Money market mutual funds are valued at net asset value. Investment valuations,
other assets, and liabilities initially expressed in foreign currencies are
converted each business day into U.S. dollars based upon current exchange rates.
When pricing service information or market quotations are not readily available,
securities are priced at fair value as determined under the direction of the
Board of Trustees. For example, significant events (such as movement in the U.S.
securities market, or other regional and local developments) may occur between
the time that foreign markets close (where the security is principally traded)
and the time that the 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, the series may utilize information from an
external vendor or other sources to adjust closing market quotations of foreign
equity securities to reflect what it believes to be the fair value of the
securities as of the series' valuation time. Because the frequency of
significant events is not predictable, fair valuation of foreign equity
securities may occur on a frequent basis.
Repurchase Agreements -- Each series may enter into repurchase agreements with
institutions that the series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each series
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the series to
obtain those securities in the event of a default under the repurchase
agreement. Each series monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the series under each such repurchase agreement. Each series, along with
other affiliated entities of Massachusetts Financial Services Company (MFS), may
utilize a joint trading account for the purpose of entering into one or more
repurchase agreements.
Foreign Currency Translation -- Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Gains
and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Gains and losses attributable to foreign exchange
rate movements on income and expenses are recorded for financial statement
purposes as foreign currency transaction gains and losses. That portion of both
realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed.
62
<Page>
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. The series' investment in futures
contracts is designed to hedge against anticipated future changes in interest or
exchange rates or securities prices. Investments in interest rate futures for
purposes other than hedging may be made to modify the duration of the portfolio
without incurring the additional transaction costs involved in buying and
selling the underlying securities. Investments in currency futures for purposes
other than hedging may be made to change the 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"), as
lending agent, may loan the securities of each series to certain qualified
institutions (the "Borrowers") approved by the series. The loans are
collateralized at all times by cash and/or U.S. Treasury securities in an amount
at least equal to the market value of the securities loaned. State Street
provides the series with indemnification against Borrower default. Each series
bears the risk of loss with respect to the investment of cash collateral. On
loans collateralized by cash, the cash collateral is invested in a money market
fund or short-term securities. A portion of the income generated upon investment
of the collateral is remitted to the Borrowers, and the remainder is allocated
between the series and the lending agent. On loans collateralized by U.S.
Treasury securities, a fee is received from the Borrower, and is allocated
between the series and the lending agent. The dividend and interest income
earned on the securities loaned is accounted for in the same manner as other
dividend and interest income.
Forward Foreign Currency Exchange Contracts -- Each series may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. Each
series may enter into forward foreign currency exchange contracts for hedging
purposes as well as for non-hedging purposes. For hedging purposes, each series
may enter into contracts to deliver or receive foreign currency it will receive
from or require for its normal investment activities. Each series may also use
contracts in a manner intended to protect foreign currency-denominated
securities from declines in value due to unfavorable exchange rate movements.
For non-hedging purposes, each series may enter into contracts with the intent
of changing the relative exposure of the series' portfolio of securities to
different currencies to take advantage of anticipated changes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded as unrealized until
the contract settlement date. On contract settlement date, the gains or losses
are recorded as realized gains or losses on foreign currency transactions.
Dollar Roll Transactions -- Certain series may enter into dollar roll
transactions, with respect to mortgage backed securities issued by Ginnie Mae,
Fannie Mae, and Freddie Mac, in which the series sells mortgage backed
securities to financial institutions and simultaneously agrees to repurchase
substantially similar (same type, coupon, and maturity) securities at a later
date at an agreed-upon price. During the period between the sale and repurchase
in a dollar roll transaction the series will not be entitled to receive interest
and principal payments on the securities sold but is compensated by interest
earned on the proceeds of the initial sale and by a lower purchase price on the
securities to be repurchased which enhances the series' total return. Each
series accounts for dollar roll transactions as purchases and sales. If certain
criteria are met these dollar roll transactions may be considered a financing
transaction whereby the difference in the sales price and the future purchase
price is recorded as an adjustment to interest income.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. For Money Market
Series all premium and discount is amortized and accreted for financial
statement purposes and tax reporting purposes in accordance with generally
accepted accounting principles and federal tax regulations, respectively. 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. 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 0.01%. 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.
63
<Page>
Certain series may enter into "TBA" (to be announced) sale commitments to hedge
its portfolio positions or to sell mortgage-backed securities it owns under
delayed delivery arrangements. Proceeds of TBA sale commitments are not received
until the contractual settlement date. During the time a TBA sale commitment is
outstanding, equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are held as
"cover" for the transaction.
Each series may receive proceeds from the settlement of class action lawsuits
involving its portfolio holdings. Any proceeds received are reflected in
realized gain/loss in the statement of operations, or in unrealized gain/loss if
the security is still held by the series.
Fees Paid Indirectly -- 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, 2004, each series' custodian fees
were reduced under this arrangement. Each series has entered into a commission
recapture agreement, under which certain brokers will credit the series a
portion of the commissions generated, to offset certain expenses of the series.
For the year ended December 31, 2004, 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>
EMERGING MARKETS GLOBAL GLOBAL
BOND EQUITY GOVERNMENTS TOTAL RETURN GOVERNMENT
SERIES SERIES SERIES SERIES SECURITIES SERIES
-----------------------------------------------------------------------------------------------------------
Balance Credits $ 1,179 $ 448 $ 25 $ 621 $ 2,770
Commission recapture credits -- 102 -- 92 --
-------- ---------------- ----------- ------------ -----------------
Total $ 1,179 $ 550 $ 25 $ 713 $ 2,770
-------- ---------------- ----------- ------------ -----------------
<Caption>
INTERNATIONAL MONEY STRATEGIC
HIGH YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
--------------------------------------------------------------------------------
Balance Credits $ 9,929 $ 222 $ -- $ 1,261
Commission recapture credits -- 151 -- --
---------- ------------- -------- ---------
Total $ 9,929 $ 373 $ -- $ 1,261
---------- ------------- -------- ---------
</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. The 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 foreign currency transactions, derivatives, defaulted bonds, wash
sales, foreign taxes, passive foreign investment companies, straddle loss
deferrals, and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended December 31,
2004 and December 31, 2003 was as follows:
<Table>
<Caption>
BOND SERIES EMERGING MARKETS EQUITY SERIES GLOBAL GOVERNMENTS SERIES
------------------------------- ------------------------------- -------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------------- ------------------------------- -------------------------------
2004 2003 2004 2003 2004 2003
------------------------------- ------------------------------- -------------------------------
Distributions declared from:
Ordinary income $ 15,984,702 $ 13,094,391 $ 553,290 $ 207,746 $ 8,408,586 $ 4,089,067
Long-term capital gain 2,879,247 -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
Total distributions declared $ 18,863,949 $ 13,094,391 $ 553,290 $ 207,746 $ 8,408,586 $ 4,089,067
-------------- -------------- -------------- -------------- -------------- --------------
<Caption>
GLOBAL TOTAL RETURN SERIES GOVERNMENT SECURITIES SERIES HIGH YIELD SERIES
------------------------------- ------------------------------- -------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------------- ------------------------------- -------------------------------
2004 2003 2004 2003 2004 2003
------------------------------- ------------------------------- -------------------------------
Distributions declared from:
Ordinary income $ 4,172,790 $ 2,282,887 $ 40,795,150 $ 45,340,898 $ 31,912,516 $ 34,953,137
Long-term capital gain -- -- -- 6,296,006 -- --
-------------- -------------- -------------- -------------- -------------- --------------
Total distributions declared $ 4,172,790 $ 2,282,887 $ 40,795,150 $ 51,636,904 $ 31,912,516 $ 34,953,137
-------------- -------------- -------------- -------------- -------------- --------------
<Caption>
INTERNATIONAL VALUE SERIES MONEY MARKET SERIES STRATEGIC INCOME SERIES
------------------------------- ------------------------------- -------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
------------------------------- ------------------------------- -------------------------------
2004 2003 2004 2003 2004 2003
------------------------------- ------------------------------- -------------------------------
Distributions declared from:
Ordinary income $ 542,884 $ 548,707 $ 3,275,930 $ 3,887,060 $ 4,577,175 $ 3,556,078
Long-term capital gain -- -- -- -- -- --
-------------- -------------- -------------- -------------- -------------- --------------
Total distributions declared $ 542,884 $ 548,707 $ 3,275,930 $ 3,887,060 $ 4,577,175 $ 3,556,078
-------------- -------------- -------------- -------------- -------------- --------------
</Table>
64
<Page>
During the year ended December 31, 2004, the following amounts were reclassified
due to differences between book and tax accounting, which may include foreign
currency transactions, foreign taxes, passive foreign investment companies,
defaulted bonds, and amortization and accretion on debt securities.
<Table>
<Caption>
EMERGING MARKETS GLOBAL GOVERNMENTS GLOBAL TOTAL
BOND SERIES EQUITY SERIES SERIES RETURN SERIES
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease):
Paid-in capital $ 159,136 $ 2 $ -- $ --
Accumulated undistributed net realized gain (loss)
on investments and foreign currency transactions (1,606,273) 157,542 (4,495,219) (3,867,011)
Accumulated undistributed net investment income (loss) 1,447,137 (157,544) 4,495,219 3,867,011
<Caption>
GOVERNMENT
SECURITIES HIGH YIELD INTERNATIONAL STRATEGIC INCOME
SERIES SERIES VALUE SERIES SERIES
- -------------------------------------------------------------------------------------------------------------------------------
Increase (decrease):
Paid-in capital $ 1,186,018 $ 14,730 $ -- $ 187,652
Accumulated undistributed net realized gain (loss)
on investments and foreign currency transactions (2,858,624) (1,485,091) 4,785 (648,401)
Accumulated undistributed net investment income (loss) 1,672,606 1,470,361 (4,785) 460,749
</Table>
As of December 31, 2004, 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 $ 14,156,055 $ 487,008 $ 6,703,471 $ 10,132,156 $ 31,698,736
Undistributed long-term capital gain 3,592,263 271,398 96,874 8,623,155 --
Capital loss carryforward -- -- -- (12,033,502) (7,809,032)
Unrealized appreciation (depreciation) 7,993,670 16,862,162 5,563,401 28,247,410 9,923,450
Other temporary differences -- (93,831) (1,963,960) (2,001,169) (5)
<Caption>
HIGH INTERNATIONAL MONEY STRATEGIC
YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
- -------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 31,882,505 $ 1,165,815 $ 1,784 $ 6,199,820
Undistributed long-term capital gain -- 2,076,145 -- 625,373
Capital loss carryforward (102,702,104) -- (1,113) --
Unrealized appreciation (depreciation) 6,843,919 20,648,231 -- 5,020,772
Other temporary differences (575,972) (25,762) -- (1,623,158)
</Table>
At December 31, 2004, 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>
GLOBAL TOTAL GOVERNMENT
EXPIRATION DATE RETURN SERIES* SECURITIES SERIES
- -------------------------------------------------------------------------
December 31, 2009 $ (6,305,104) $ --
December 31, 2010 (5,728,398) --
December 31, 2011 -- (4,003,424)
December 31, 2012 -- (3,805,608)
-------------- -----------------
Total $ (12,033,502) $ (7,809,032)
============== =================
<Caption>
HIGH MONEY MARKET
EXPIRATION DATE YIELD SERIES SERIES
- -------------------------------------------------------------------------
December 31, 2006 $ (5,629,227) $ --
December 31, 2007 (6,145,967) --
December 31, 2008 (6,617,797) --
December 31, 2009 (37,568,488) (776)
December 31, 2010 (46,740,625) --
December 31, 2011 -- (271)
December 31, 2012 -- (66)
-------------- -----------------
Total $ (102,702,104) $ (1,113)
============== =================
</Table>
*The availability of a portion of these respective capital loss carryforwards,
which were acquired on September 5, 2003, in connection with the Sun Life Global
Asset Allocation Fund acquisition, may be limited in a given year.
For Emerging Markets Equity Series and International Value Series, realized gain
is reported net of any foreign capital gains tax in the Statement of Operations.
65
<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 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 based on
a percentage of each series' average daily net assets. The agreement also
provides that each series will be reimbursed for expenses (excluding taxes,
extraordinary expenses and brokerage and transaction cost) 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
FEE LIMITATION
--------------------------------------------------------------------------------
Bond Series 0.60% N/A
Emerging Markets Equity Series 1.05%# 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 0.90%## N/A
Money Market Series 0.50%#### 0.60*
Strategic Income Series 0.75% N/A
</Table>
# The management fee for the Emerging Markets Equity Series is 1.05% of the
first $500 million of average net assets and 1.00% on average net assets in
excess of $500 million.
## The management fee for the International Value Series is 0.90% of the first
$1 billion of average net assets, 0.80% on average daily net assets in excess of
$1 billion and up to $2 billion, and 0.70% on average 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 net assets of each series
and 0.675% on the average daily net assets of each series in excess of $300
million. The management fee for the High Yield Series is 0.75% of the first $1
billion of average daily net assets. The management fee is reduced to 0.70% of
the average daily net assets in excess of $1 billion.
#### The management fee for the Money Market Series is 0.50% of the first $500
million of average daily net assets. The management fee is reduced to 0.45% of
the average daily net assets in excess of $500 million.
*Total expense limitation is 0.60% and 0.85%, respectively, for the Initial
Class and Service Class Shares.
During the year ended December 31, 2004, International Value Series received a
payment from the investment advisor to reimburse the series for a loss on an
investment not meeting the investment guidelines of the series. The amount of
the payment received was $11,832. This amount is separately disclosed in the
Statement of Operations and the Statement of Changes in Net Assets. The effect
of this payment on the series' total return is disclosed in the Financial
Highlights.
Each series pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to the Board chairperson,
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).
Each series and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
funds and the sole member of Tarantino LLC. MFS has agreed to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
The International Value Series' and Global Total Return Series' investment
adviser, MFS, has been the subject of an administrative proceeding regarding
disclosure of brokerage allocation practices in connection with fund sales, as
described in the Legal Proceedings Footnote. On July 28, 2004, the series
accrued an estimate of the amount to be received pursuant to this matter in the
amount of $942 and $2,205, respectively, which did not have a material impact on
the net asset value per share based on the shares outstanding on the day the
proceeds were recorded.
Administrator -- MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment advisor. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement of
the costs MFS incurs to provide these services, subject to review and approval
by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior to
April 1, 2004, the series paid 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>
66
<Page>
Effective April 1, 2004, the series paid MFS an administrative fee up to the
following annual percentage rates of the series' average daily net assets:
<Table>
First $2 billion 0.01120%
Next $2.5 billion 0.00832%
Next $2.5 billion 0.00032%
In excess of $7 billion 0.00000%
</Table>
For the year ended December 31, 2004, each series paid MFS the following:
<Table>
<Caption>
% OF
ADMINISTRATOR AVERAGE
FEES NET ASSETS
- --------------------------------------------------------------------------------
Bond Series $ 23,236 0.00934%
Emerging Markets Equity Series 4,990 0.00905%
Global Governments Series 6,253 0.00933%
Global Total Return Series 15,252 0.00907%
Government Securities Series 68,921 0.00932%
High Yield Series 39,450 0.00930%
International Value Series 6,423 0.00866%
Money Market Series 40,417 0.00934%
Strategic Income Series 8,381 0.00920%
</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, 2004 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>
EMERGING MARKETS GLOBAL
BOND EQUITY GOVERNMENTS GLOBAL TOTAL
SERIES SERIES SERIES RETURN SERIES
- ----------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities $ 38,659,832 $ -- $ 19,894,439 $ 21,317,729
============== ============== ============== ==============
Investments (non-U.S. government securities) $ 81,538,551 $ 59,848,868 $ 54,033,002 $ 117,541,768
============== ============== ============== ==============
Sales
U.S. government securities $ 42,288,236 $ -- $ 21,684,800 $ 23,966,371
============== ============== ============== ==============
Investments (non-U.S. government securities) $ 97,705,580 $ 59,222,516 $ 59,207,263 $ 130,259,582
============== ============== ============== ==============
<Caption>
GOVERNMENT INTERNATIONAL STRATEGIC
SECURITIES HIGH YIELD VALUE INCOME
SERIES SERIES SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities $ 593,380,143 $ -- $ -- $ 14,353,864
============== ============== ============== ==============
Investments (non-U.S. government securities) $ 14,149,813 $ 277,456,278 $ 53,275,477 $ 49,840,225
============== ============== ============== ==============
Sales
U.S. government securities $ 695,647,373 $ -- -- $ 12,868,987
============== ============== ============== ==============
Investments (non-U.S. government securities) $ 2,264,833 $ 312,856,191 $ 47,290,743 $ 53,418,624
============== ============== ============== ==============
</Table>
Purchases and sales of investments for the Money Market Series, which consist
solely of short-term obligations, amounted to $7,174,868,745 and $7,323,039,440,
respectively, excluding repurchase agreements.
67
<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 $ 226,496,579 $ 48,514,215 $ 60,742,727 $ 152,518,908 $ 713,059,427
============= ============= ============= ============= =============
Gross unrealized appreciation $ 9,427,645 $ 17,050,054 $ 5,558,279 $ 28,608,906 $ 11,956,308
Gross unrealized depreciation (1,440,924) (195,330) (49,825) (438,868) (2,032,858)
------------- ------------- ------------- ------------- -------------
Net unrealized appreciation (depreciation) $ 7,986,721 $ 16,854,724 $ 5,508,454 $ 28,170,038 $ 9,923,450
============= ============= ============= ============= =============
<Caption>
INTERNATIONAL MONEY STRATEGIC
HIGH YIELD VALUE MARKET INCOME
SERIES SERIES SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------
Aggregate cost $ 416,131,758 $ 89,050,660 $ 369,660,948 $ 84,053,804
============== ============== ============== ==============
Gross unrealized appreciation $ 12,212,228 $ 21,488,121 $ -- $ 5,349,005
Gross unrealized depreciation (5,372,268) (846,927) -- (335,209)
-------------- -------------- -------------- --------------
Net unrealized appreciation (depreciation) $ 6,839,960 $ 20,641,194 $ -- $ 5,013,796
============== ============== ============== ==============
</Table>
(5) SHARES OF BENEFICIAL INTEREST
Each series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
<Table>
<Caption>
BOND SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 5,071,162 $ 61,086,732 8,518,314 $ 103,456,069
Shares issued to shareholders
in reinvestment of distributions 1,205,629 13,623,611 913,627 10,972,659
Shares reacquired (8,878,390) (106,999,719) (11,177,186) (135,237,773)
-------------- -------------- -------------- --------------
Net change (2,601,599) $ (32,289,376) (1,745,245) $ (20,809,045)
============== ============== ============== ==============
<Caption>
EMERGING MARKETS EQUITY SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 3,317,958 $ 45,643,027 3,586,252 $ 36,502,780
Shares issued to shareholders
in reinvestment of distributions 41,395 506,672 22,566 196,547
Shares reacquired (3,422,783) (46,843,179) (3,552,667) (34,722,921)
-------------- -------------- -------------- --------------
Net change (63,430) $ (693,480) 56,151 $ 1,976,406
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 11,543,356 $ 138,961,201 6,013,204 $ 72,838,218
Shares issued to shareholders
in reinvestment of distributions 465,808 5,240,338 177,254 2,121,732
Shares reacquired (11,276,829) (135,583,617) (3,959,389) (48,038,093)
-------------- -------------- -------------- --------------
Net change 732,335 $ 8,617,922 2,231,069 $ 26,921,857
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 495,061 $ 6,772,071 661,605 $ 6,730,289
Shares issued to shareholders
in reinvestment of distributions 3,824 46,618 1,290 11,199
Shares reacquired (495,573) (6,796,491) (512,906) (5,054,383)
-------------- -------------- -------------- --------------
Net change 3,312 $ 22,198 149,989 $ 1,687,105
============== ============== ============== ==============
<Caption>
GLOBAL GOVERNMENTS SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 3,105,655 $ 37,822,314 4,426,516 $ 53,689,650
Shares issued in connection with
acquisition of
MFS Sun Life Global Asset
Allocation Fund -- -- -- --
Shares issued to shareholders in
reinvestment of distributions 726,417 7,801,714 314,821 3,796,736
Shares reacquired (4,045,789) (48,878,366) (5,530,631) (66,865,020)
-------------- -------------- -------------- --------------
Net change (213,717) $ (3,254,338) (789,294) $ (9,378,634)
============== ============== ============== ==============
<Caption>
GLOBAL TOTAL RETURN SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 2,848,109 $ 46,670,802 2,379,356 $ 34,051,595
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 257,636 3,877,428 156,949 2,121,952
Shares reacquired (3,818,141) (62,193,006) (3,130,328) (44,587,980)
-------------- -------------- -------------- --------------
Net change (712,396) $ (11,644,776) 3,869,165 $ 54,204,095
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 387,025 $ 4,673,245 586,594 $ 7,085,614
Shares issued in connection with
acquisition of
MFS Sun Life Global Asset
Allocation Fund -- -- -- --
Shares issued to shareholders in
reinvestment of distributions 56,770 606,872 24,341 292,331
Shares reacquired (468,575) (5,628,376) (533,289) (6,429,522)
-------------- -------------- -------------- --------------
Net change (24,780) $ (348,259) 77,646 $ 948,423
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 566,152 $ 9,254,717 531,379 $ 7,586,250
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 19,704 295,362 11,930 160,935
Shares reacquired (512,982) (8,408,339) (403,843) (5,809,244)
-------------- -------------- -------------- --------------
Net change 72,874 $ 1,141,740 302,645 $ 4,219,184
============== ============== ============== ==============
</Table>
68
<Page>
<Table>
<Caption>
GOVERNMENT SECURITIES SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 40,533,635 $ 535,793,081 48,615,846 $ 661,291,502
Shares issued to shareholders in
reinvestment of distributions 2,469,358 30,916,358 3,292,509 44,086,698
Shares reacquired (52,340,280) (691,733,093) (68,425,724) (924,384,825)
-------------- -------------- -------------- --------------
Net change (9,337,287) $ (125,023,654) (16,517,369) $ (219,006,625)
============== ============== ============== ==============
<Caption>
HIGH YIELD SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 32,287,107 $ 230,054,193 40,240,208 $ 275,485,544
Shares issued to shareholders in
reinvestment of distributions 3,895,806 25,517,531 4,525,981 29,599,917
Shares reacquired (42,095,125) (299,588,726) (41,794,394) (284,722,941)
-------------- -------------- -------------- --------------
Net change (5,912,212) $ (44,017,002) 2,971,795 $ 20,362,520
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 36,404,580 $ 478,360,783 19,569,763 $ 263,850,175
Shares issued to shareholders in
reinvestment of distributions 791,570 9,878,792 565,135 7,550,206
Shares reacquired (34,486,780) (453,189,018) (16,802,233) (226,148,149)
-------------- -------------- -------------- --------------
Net change 2,709,370 $ 35,050,557 3,332,665 $ 45,252,232
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 24,759,395 $ 175,223,437 19,509,181 $ 133,457,842
Shares issued to shareholders in
reinvestment of distributions 980,826 6,394,985 821,046 5,353,220
Shares reacquired (24,321,573) (172,225,545) (13,462,615) (91,235,553)
-------------- -------------- -------------- --------------
Net change 1,418,648 $ 9,392,877 6,867,612 $ 47,575,509
============== ============== ============== ==============
<Caption>
INTERNATIONAL VALUE SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 2,841,851 $ 39,146,547 2,114,125 $ 22,031,275
Shares issued to shareholders in
reinvestment of distributions 40,749 505,289 54,814 526,764
Shares reacquired (2,410,210) (33,083,568) (2,643,234) (27,028,162)
-------------- -------------- -------------- --------------
Net change 472,390 $ 6,568,268 (474,295) $ (4,470,123)
============== ============== ============== ==============
<Caption>
MONEY MARKET SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 240,019,262 $ 240,019,262 356,969,984 $ 356,969,984
Shares issued to shareholders in
reinvestment of distributions 2,750,581 2,750,581 3,676,461 3,676,461
Shares reacquired (386,329,180) (386,329,180) (624,618,965) (624,618,965)
-------------- -------------- -------------- --------------
Net change (143,559,337) $ (143,559,337) (263,972,520) $ (263,972,520)
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
--------------------------------------------------------------------
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 489,087 $ 6,684,295 804,308 $ 8,016,668
Shares issued to shareholders in
reinvestment of distributions 3,037 37,595 2,283 21,942
Shares reacquired (433,613) (5,915,376) (669,560) (6,674,805)
-------------- -------------- -------------- --------------
Net change 58,511 $ 806,514 137,031 $ 1,363,805
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
--------------------------------------------------------------------
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 242,738,366 $ 242,738,366 200,981,677 $ 200,981,677
Shares issued to shareholders in
reinvestment of distributions 525,349 525,349 210,600 210,600
Shares reacquired (204,858,753) (204,858,753) (204,556,943) (204,556,943)
-------------- -------------- -------------- --------------
Net change 38,404,962 $ 38,404,962 (3,364,666) $ (3,364,666)
============== ============== ============== ==============
<Caption>
STRATEGIC INCOME SERIES
--------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 3,253,893 $ 36,025,626 4,133,384 $ 44,207,581
Shares issued to shareholders in
reinvestment of distributions 305,783 3,174,021 272,761 2,858,537
Shares reacquired (3,836,156) (42,429,005) (3,856,341) (41,334,838)
-------------- -------------- -------------- --------------
Net change (276,480) $ (3,229,358) 549,804 $ 5,731,280
============== ============== ============== ==============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------------- --------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 2,607,127 $ 28,789,259 2,078,301 $ 22,162,933
Shares issued to shareholders in
reinvestment of distributions 135,833 1,403,154 66,750 697,541
Shares reacquired (2,511,605) (27,208,187) (1,508,887) (16,177,445)
-------------- -------------- -------------- --------------
Net change 231,355 $ 2,984,226 636,164 $ 6,683,029
============== ============== ============== ==============
</Table>
69
<Page>
(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 fund, based on its borrowings, at a rate equal to the Federal
Reserve funds rate plus 0.50%. In addition, a commitment fee, based on the
average daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The interest and
commitment fee allocated to each series, and included in miscellaneous expense
for the year ended December 31, 2004 was as follows.
<Table>
<Caption>
INTEREST EXPENSE AND
COMMITMENT FEE
---------------------------------------------------------------------
Bond Series $ 1,958
Emerging Markets Equity Series 1,216
Global Governments Series 524
Global Total Return Series 1,734
Government Securities Series 5,824
High Yield Series 6,780
International Value Series 397
Money Market Series 1,700
Strategic Income Series 249
</Table>
Each series had no significant borrowings during the year ended December 31,
2004.
(7) FINANCIAL INSTRUMENTS
Certain series trade financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to market
risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency exchange
contracts, and futures contracts. The notional or contractual amounts of these
instruments represent the investment the 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 period -- $ --
Options written 1 14,054
Options expired (1) (14,054)
------------ ------------
Outstanding, end of period -- $ --
============ ============
</Table>
WRITTEN OPTION TRANSACTIONS -- GLOBAL TOTAL RETURN SERIES
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
------------------------------------------------------------------
Outstanding, beginning of period -- $ --
Options written 1 13,092
Options expired (1) (13,092)
------------ ------------
Outstanding, end of period -- $ --
============ ============
</Table>
70
<Page>
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
2/10/2005 AUD 1,235,137 $ 927,662 $ 961,882 $ (34,220)
1/12/2005 CAD 1,616,126 1,348,276 1,346,508 1,768
2/14/2005 DKK 11,364,753 1,975,359 2,070,337 (94,978)
1/19/2005-2/14/2005 EUR 12,006,187 15,672,300 16,266,129 (593,829)
1/12/2005 GBP 1,369,162 2,519,259 2,621,939 (102,680)
1/5/2005 JPY 1,694,972,015 16,372,354 16,497,790 (125,436)
1/3/2005 NOK 1,972,517 324,657 324,151 506
2/10/2005 NZD 4,652,849 3,263,834 3,325,677 (61,843)
2/14/2005 SEK 1,313,220 189,988 197,298 (7,310)
------------ ------------ --------------
$ 42,593,689 $ 43,611,711 $ (1,018,022)
============ ============ ==============
Purchases
2/10/2005 AUD 430,829 $ 328,226 $ 335,514 $ 7,288
1/12/2005 CAD 385,812 322,500 321,447 (1,053)
2/15/2005 CHF 420,000 365,975 368,850 2,875
1/26/2005 CZK 8,080,308 342,400 360,468 18,068
2/14/2005 DKK 13,081,794 2,306,442 2,383,133 76,691
1/19/2005-2/14/2005 EUR 6,653,627 8,723,984 9,015,514 291,530
1/12/2005 GBP 235,000 447,828 450,024 2,196
1/5/2005-3/4/2005 JPY 3,298,559,918 31,584,482 32,171,287 586,805
1/3/2005-2/14/2005 NOK 3,945,034 646,526 648,526 2,000
1/26/2005 PLN 978,196 303,995 322,948 18,953
2/14/2005 SEK 7,529,965 1,125,871 1,131,300 5,429
------------ ------------ --------------
$ 46,498,229 $ 47,509,011 $ 1,010,782
============ ============ ==============
</Table>
At December 31, 2004, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $23,026 with
Merrill Lynch International.
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
2/10/2005 AUD 1,151,176 $ 864,602 $ 896,495 $ (31,893)
1/12/2005 CAD 1,728,748 1,442,232 1,440,341 1,891
2/14/2005 DKK 9,141,893 1,588,513 1,665,395 (76,882)
1/19/2005-2/14/2005 EUR 10,241,230 13,353,632 13,874,643 (521,011)
1/12/2005 GBP 1,391,140 2,559,698 2,664,027 (104,329)
1/5/2005 JPY 1,630,433,099 15,747,978 15,869,609 (121,631)
1/3/2005 NOK 2,095,019 344,819 344,282 537
2/10/2005 NZD 4,743,510 3,327,430 3,390,478 (63,048)
2/14/2005 SEK 151,305 21,686 22,732 (1,046)
------------ ------------ --------------
$ 39,250,590 $ 40,168,002 $ (917,412)
============ ============ ==============
Purchases
2/10/2005 AUD 461,920 $ 351,913 $ 359,727 $ 7,814
1/12/2005 CAD 413,926 346,000 344,871 (1,129)
2/15/2005 CHF 409,192 356,557 359,358 2,801
1/26/2005 CZK 8,433,673 357,374 376,232 18,858
2/14/2005 DKK 9,370,591 1,652,119 1,707,057 54,938
1/19/2005-2/14/2005 EUR 6,581,088 8,624,930 8,917,090 292,160
1/12/2005 GBP 258,000 491,658 494,069 2,411
1/5/2005-3/4/2005 JPY 3,217,214,332 30,803,055 31,377,810 574,755
1/3/2005-2/14/2005 NOK 4,190,038 686,678 688,802 2,124
1/26/2005 PLN 1,172,726 364,450 387,172 22,722
2/14/2005 SEK 7,380,037 1,107,230 1,108,775 1,545
------------ ------------ --------------
$ 45,141,964 $ 46,120,963 $ 978,999
============ ============ ==============
</Table>
At December 31, 2004, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $45,153 with
Merrill Lynch International.
71
<Page>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- HIGH YIELD SERIES
<Table>
<Caption>
NET UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------
Sales
01/19/2005-2/14/2005 EUR 6,943,543 $ 8,996,555 $ 9,408,083 $ (411,528)
2/14/2005 SEK 319,639 45,812 48,023 (2,211)
------------ ------------ --------------
$ 9,042,367 $ 9,456,106 $ (413,739)
============ ============ ==============
Purchases
01/19/2005-02/14/2005 EUR 1,239,673 $ 1,635,880 $ 1,679,593 $ 43,713
============ ============ ==============
</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
2/10/2005 AUD 434,414 $ 325,249 $ 338,307 $ (13,058)
2/14/2005 DKK 4,599,564 799,229 837,911 (38,682)
1/19/2005-2/14/2005 EUR 8,609,294 11,166,630 11,665,010 (498,380)
1/12/2005 GBP 739,726 1,361,096 1,416,572 (55,476)
2/10/2005 NZD 1,566,772 1,098,782 1,119,868 (21,086)
------------ ------------ --------------
$ 14,750,986 $ 15,377,668 $ (626,682)
============ ============ ==============
Purchases
2/14/2005 DKK 4,324,527 $ 762,568 $ 787,807 $ 25,239
1/19/2005-2/14/2005 EUR 1,684,371 2,224,299 2,282,236 57,937
2/14/2005 SEK 5,124,581 743,472 769,916 26,444
------------ ------------ --------------
$ 3,730,339 $ 3,839,959 $ 109,620
============ ============ ==============
</Table>
At December 31, 2004, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $70,793 with
Merrill Lynch International.
At December 31, 2004, each series had sufficient cash and/or securities to cover
any commitments under these contracts.
FUTURES CONTRACTS -- BOND SERIES
<Table>
<Caption>
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------
U.S. 5-Yr. Treasury Notes March 2005 48 Short $ (39,198)
</Table>
FUTURE CONTRACTS -- GLOBAL GOVERNMENTS SERIES
<Table>
<Caption>
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------
Japan Government Bonds 10 Year March 2005 2 Long $ (20,073)
</Table>
FUTURE CONTRACTS -- GLOBAL TOTAL RETURN SERIES
<Table>
<Caption>
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------
Japan Government Bonds 10 Year March 2005 2 Long $ (5,417)
</Table>
FUTURE CONTRACTS -- GOVERNMENT SECURITIES SERIES
<Table>
<Caption>
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------
Euro Dollar June 2005 56 Long $ (10,738)
Euro Dollar June 2006 56 Short 7,721
U.S. 10-Yr. Treasury Notes March 2005 205 Short (287,524)
U.S. 2-Yr. Treasury Notes March 2005 158 Short (40,151)
U.S. 5-Yr. Treasury Notes March 2005 94 Short (17,407)
U.S. Treasury Bonds March 2005 69 Long (80,161)
----------
$ (428,260)
==========
</Table>
FUTURE CONTRACTS -- STRATEGIC INCOME SERIES
<Table>
<Caption>
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------
U.S. 10-Yr. Treasury Notes March 2005 53 Short $ (74,336)
</Table>
At December 31, 2004, each series had sufficient cash and/or securities to cover
any margin requirements under these contracts.
72
<Page>
(8) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under the
terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50 million
in penalty to certain MFS funds, pursuant to a plan developed by an independent
distribution consultant. The brokerage allocation practices which were the
subject of this proceeding were discontinued by MFS in November 2003. The
agreement with the SEC is reflected in an order of the SEC. The SEC settlement
order states that MFS failed to adequately disclose to the Boards of Trustees
and to shareholders of the MFS funds the specifics of its preferred arrangements
with certain brokerage firms selling MFS fund shares. The SEC settlement order
states that MFS had in place policies designed to obtain best execution of all
MFS fund trades. As part of the settlement, MFS retained an independent
compliance consultant to review the completeness of its current policies and
practices regarding disclosure to MFS fund trustees and to MFS fund shareholders
of strategic alliances between MFS or its affiliates and broker-dealers and
other financial intermediaries who support the sale of MFS fund shares. Pursuant
to the SEC order, on July 28, 2004, MFS transferred these settlement amounts to
the SEC, and those MFS funds entitled to these settlement amounts accrued an
estimate of their pro rata portion of these amounts. The final distribution plan
was approved by the SEC on January 21, 2005. It is expected that this
distribution will be made by the SEC to the affected MFS funds on or around
February 14, 2005.
In addition, in February, 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain MFS
retail funds was false and misleading because, although the prospectuses for
those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer
and former President also reached agreement with the SEC in which they agreed
to, among other terms, monetary fines and temporary suspensions from association
with any investment adviser or registered investment company. These individuals
have resigned their positions with, and will not be returning to, MFS and the
MFS funds. Under the terms of the February Settlements, MFS and the executives
neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to increase
certain management fees during this period. MFS has also paid an administrative
fine to NH in the amount of $1 million, which will be used for investor
education purposes (NH retained $250,000 and $750,000 was contributed to the
North American Securities Administrators Association's Investor Protection
Trust). In addition, under the terms of the February Settlements, MFS is in the
process of adopting certain governance changes and reviewing its policies and
procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center, Inc.,
MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS
funds, certain current and/or former Trustees of these MFS funds, and certain
officers of MFS have been named as defendants in multiple lawsuits filed in
federal and state courts. The lawsuits variously have been commenced as class
actions or individual actions on behalf of investors who purchased, held or
redeemed shares of the MFS funds during specified periods, as ERISA actions by
participants in certain retirement plan accounts on behalf of those accounts, or
as derivative actions on behalf of the MFS funds. The lawsuits relating to
market timing and related matters have been transferred to, and consolidated
before, the United States District Court for the District of Maryland, as part
of a multi-district litigation of market timing and related claims involving
several other fund complexes (IN RE MUTUAL FUNDS INVESTMENT LITIGATION (ALGER,
COLUMBIA, JANUS, MFS, ONE GROUP, PUTNAM, ALLIANZ DRESDNER), No. 1:04-md-15863
(transfer began March 19, 2004)). The market timing cases related to the MFS
complex are RIGGS V. MFS ET AL., CASE NO. 04-CV-01162-JFM (direct), HAMMERSLOUGH
V. MFS ET AL., CASE NO. 04-MD-01620 (derivative) and ANITA WALKER V. MFS ET AL.,
CASE NO. 1:04-CV-01758 (ERISA). The plaintiffs in these consolidated lawsuits
generally seek injunctive relief including removal of the named Trustees,
adviser and distributor, rescission of contracts and 12b-1 Plans, disgorgement
of fees and profits, monetary damages, punitive damages, attorney's fees and
costs and other equitable and declaratory relief. Four lawsuits alleging
improper brokerage allocation practices and excessive compensation are pending
in the United States District Court for the District of Massachusetts (FORSYTHE
V. SUN LIFE FINANCIAL INC., ET AL., No. 04cv10584 (GAO) (March 25, 2004);
EDDINGS V. SUN LIFE FINANCIAL INC., ET AL., No. 04cv10764 (GAO) (April 15,
2004); MARCUS DUMOND, ET AL. V. MASSACHUSETTS FINANCIAL SERVS. CO., ET AL., No.
04cv11458 (GAO) (May 4, 2004); and KOSLOW V. SUN LIFE FINANCIAL INC., ET AL.,
No. 04cv11019 (GAO) (May 20, 2004)). The plaintiffs in these lawsuits generally
seek compensatory damages, punitive damages, recovery of fees, rescission of
contracts, an accounting, restitution, declaratory relief, equitable and/or
injunctive relief and attorney's fees and costs. The various lawsuits generally
allege that some or all of the defendants (i) permitted or acquiesced in market
timing and/or late trading in some of the MFS funds, inadequately disclosed MFS'
internal policies concerning market timing and such matters, (ii) received
excessive compensation as fiduciaries to the MFS funds, or (iii) permitted or
acquiesced in the improper use of fund assets by MFS to support the distribution
of MFS fund shares and inadequately disclosed MFS' use of fund assets in this
manner. The actions assert that some or all of the defendants violated the
federal securities laws, including the Securities Act of 1933 and the Securities
Exchange Act of 1934, the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, the Employee Retirement Income Security Act of 1974, as
well as fiduciary duties and other violations of common law. Insofar as any of
the actions is appropriately brought derivatively on behalf of any of the MFS
funds, any recovery will inure to the benefit of the MFS funds. The defendants
are reviewing the allegations of the multiple complaints and will respond
appropriately. Additional lawsuits based on similar allegations may be filed in
the future.
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Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the MFS
retail funds, and transferred $50 million for distribution (which has been
accrued to the affected funds and is expected to be distributed on or around
February 14, 2005) to affected MFS funds to compensate those funds based upon
the amount of brokerage commissions allocated in recognition of MFS fund sales.
It is not clear whether these amounts will be sufficient to compensate
shareholders for all of the damage they allegedly sustained, whether certain
shareholders or putative class members may have additional claims to
compensation, or whether the damages that may be awarded in any of the actions
will exceed these amounts. In the event the MFS funds incur any losses, costs or
expenses in connection with such lawsuits, the Boards of Trustees of the
affected MFS funds may pursue claims on behalf of such funds against any party
that may have liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or other
adverse consequences to the MFS funds.
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<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE TRUSTEES AND THE SHAREHOLDERS OF MFS/SUN LIFE SERIES TRUST:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments of MFS/Sun Life Series Trust (the "Trust"),
comprising Bond Series, Emerging Markets Equity Series, Global Governments
Series, Global Total Return Series, Government Securities Series, High Yield
Series, International Value Series, Money Market Series and Strategic Income
Series as of December 31, 2004, and the related statements of operations for the
year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
of designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Trust's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Bound
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, 2004, 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 24, 2005
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<Page>
MFS/SUN LIFE SERIES TRUST
FEDERAL TAX INFORMATION (Unaudited)
The series below has designated the following as a capital gain dividend for the
year ended December 31, 2004.
<Table>
<Caption>
LONG-TERM
CAPITAL GAINS
--------------------------------------------------------
Bond Series $ 2,879,247
</Table>
For the year ended December 31, 2004, 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 13.56%
High Yield Series 0.97%
International Value Series 0.75%
</Table>
For the year ended December 31, 2004, income from foreign sources and the
foreign tax credit were as follows:
<Table>
<Caption>
INTEREST AND
DIVIDENDS TAXES
--------------------------------------------------------------
Emerging Markets Equity Series $ 1,650,045 $ 369,097
Global Total Return Series 3,638,932 162,198
International Value Series 2,073,607 200,039
</Table>
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<Page>
MFS/SUN LIFE SERIES TRUST
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the trust, as of February 1, 2005, are listed
below, together with their principal occupations during the past five years.
(Their titles may have varied during that period.) The address of each Trustee
and officer is 500 Boylston Street, Boston, Massachusetts 02116.
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEES
C. James Prieur(3) Trustee July 1999 Sun Life Assurance Company of Canada, President and
(born 04/21/51) Chief Operating Officer
David D. Horn(3) Trustee April 1986 Private investor; Retired; Sun Life Assurance Company
(born 06/07/41) of Canada, Former Senior Vice President and General
Manager for the United States (until 1997)
INDEPENDENT TRUSTEES
J. Kermit Birchfield Chairman May 1997 Consultant; Century Partners, Inc. (investments),
(born 01/08/40) Managing Director; Displaytech, Inc. (manufacturer of
liquid crystal display technology), Director
Robert C. Bishop Trustee May 2001 AutoImmune Inc. (pharmaceutical product development),
(born 01/13/43) Chairman, President and Chief Executive Officer;
Caliper Life Sciences Corp. (laboratory analytical
instruments), Director; Millipore Corporation
(purification/filtration products), Director; Quintiles
Transnational Corp. (contract services to the medical
industry), Director
Frederick H. Dulles Trustee May 2001 Ten State Street LLP (law firm), Partner; McFadden,
(born 03/12/42) Pilkington & Ward LLP (solicitors and registered
foreign lawyers), Partner (until June 2003); Jackson &
Nash, LLP (law firm), Of Counsel (January 2000 to
November 2000)
Derwyn F. Phillips Trustee April 1986 Retired
(born 08/31/30)
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
77
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Ronald G. Steinhart Trustee May 2001 Private investor; Bank One, Texas N.A., Vice Chairman
(born 06/15/40) and Director (January 2000 to January 2001); Bank One
Corporation, Officer (until January 2000); Carreker
Corporation (consultant and technology provider to
financial institutions), Director; Prentiss Properties
Trust (real estate investment trust), Director; United
Auto Group, Inc. (automotive retailer), Director
Haviland Wright Trustee May 2001 Hawaii Small Business Development Center, Kaua'i
(born 07/21/48) Center, Center Director (since March 2002);
Displaytech, Inc. (manufacturer of liquid crystal
display technology), Chairman and Chief Executive
Officer (until March 2002)
TRUSTEES EMERITUS
Garth Marston Trustee Emeritus Retired
(born 04/28/26)
Samuel Adams Trustee Emeritus Retired
(born 10/19/25)
OFFICERS
Robert J. Manning(4) President February 2004 Massachusetts Financial Services Company, Chief
(born 10/20/63) Executive Officer, President, Chief Investment Officer
and Director
James R. Bordewick, Jr.(4) Assistant Secretary February 1997 Massachusetts Financial Services Company, Senior Vice
(born 03/06/59) and Assistant Clerk President and Associate General Counsel
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
78
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Jeffrey N. Carp(4) Secretary and Clerk September 2004 Massachusetts Financial Services Company, Executive
(born 12/1/56) Vice President, General Counsel and Secretary (since
April 2004); Hale and Dorr LLP (law firm), Partner
(prior to April 2004)
Stephanie A. DeSisto(4) Assistant Treasurer May 2003 Massachusetts Financial Services Company, Vice
(born 10/01/53) President (since April 2003); Brown Brothers Harriman &
Co., Senior Vice President (November 2002 to April
2003); ING Groep N.V./Aeltus Investment Management,
Senior Vice President (prior to November 2002)
James F. DesMarais(4) Assistant Secretary September 2004 Massachusetts Financial Services Company, Assistant
(born 03/09/61) and Assistant Clerk General Counsel
Richard M. Hisey(4) Treasurer August 2002 Massachusetts Financial Services Company, Senior Vice
(born 08/29/58) President (since July 2002); The Bank of New York,
Senior Vice President (September 2000 to July 2002);
Lexington Global Asset Managers, Inc., Executive Vice
President and Chief Financial Officer (prior to
September 2000); Lexington Funds, Chief Financial
Officer (prior to September 2000)
Brian T. Hourihan(4) Assistant Secretary September 2004 Massachusetts Financial Services Company, Vice
(born 11/11/64) and Assistant Clerk President, Senior Counsel and Assistant Secretary
(since June 2004); Affiliated Managers Group, Inc.,
Chief Legal Officer/Centralized Compliance Program
(January to April 2004); Fidelity Research & Management
Company, Assistant General Counsel (prior to January
2004)
Ellen Moynihan(4) Assistant Treasurer May 1997 Massachusetts Financial Services Company, Vice
(born 11/13/57) President
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
79
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Frank L. Tarantino Independent Chief September 2004 Tarantino LLC (provider of compliance services),
(born 03/07/44) Compliance Officer Principal (since June 2004); CRA Business Strategies
Group (consulting services), Executive Vice President
(April 2003 to June 2004); David L. Babson & Co.
(investment adviser), Managing Director, Chief
Administrative Officer and Director (February 1997 to
March 2003)
James O. Yost(4) Assistant Treasurer April 1992 Massachusetts Financial Services Company, Senior Vice
(born 06/12/60) President
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
The Series Fund does not hold annual meetings for the purpose of electing
Trustees, and Trustees are not elected for fixed terms. Each Trustee and officer
holds office until his or her successor is chosen and qualified, or until his or
her earlier death, resignation, retirement or removal.
All Trustees currently serve as Trustees of the Series Fund and have served in
that capacity 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 Series Fund 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.
80
<Page>
MFS(R)/SUN LIFE SERIES TRUST
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
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.
Information regarding how each series voted proxies relating to portfolio
securities during the most recent twelve month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's website at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
Each series will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. Each series' Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549 0102
Information on the operation of the Public Reference Room any be obtained by
calling the Commission at 1-800-SEC-0330. Each series' Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfor@sec.gov
or by writing the Public Reference Section at the above address.
PORTFOLIO MANAGERS
Margaret W. Adams
William J. Adams
John F. Addeo
S. Irfan Ali
David A. Antonelli
Edward Baldini
T. Kevin Beatty
David M. Calabro
James J. Calmas
Barry P. Dargan
Kenneth J. Enright
Eric B. Fischman
Steven R. Gorham
Robert Henderson
Alan Langsner
John D. Laupheimer, Jr.
Olivier Lebleu
Camille Lee
Gregory Locraft
Kate Mead
Thomas Melendez
Constantinos Mokas
Edward L. O'Dette
Betsy Palmer
Stephen Pesek
Scott B. Richards
Michael W. Roberge
Matthew W. Ryan
Daniel Scherman
David E. Sette-Ducati
Maura A. Shaughnessy
Nicholas Smithie
James T. Swanson
Brooks Taylor
Peter C. Vaream
Terri A. Vitozzi
Barnaby Wiener
Thomas Wetherald
(C) 2005 Sun Life Financial Distributors, Inc.
SUN-A-ANN-2/05 188M
<Page>
MFS(R)/SUN LIFE SERIES TRUST
ANNUAL REPORT - DECEMBER 31, 2004
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 CEO of MFS 1
Management Review 2
Portfolio Composition 7
Performance Summary 16
Expense Table 23
Portfolio of Investments 25
Financial Statements 43
Notes to Financial Statements 58
Report of Independent Registered Public Accounting Firm 68
Federal Tax Information 69
Trustees and Officers 70
Proxy Voting Policies and Information Back Cover
Quarterly Portfolio Disclosure Back Cover
</Table>
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF CONTRACT OWNERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
<Page>
LETTER FROM THE CEO OF MFS
DEAR CONTRACT OWNERS,
For most investors, the main factor in determining long-term success is asset
allocation -- how they spread their money among stocks, bonds, and cash. In
fact, the total returns of investors may be more influenced by their asset
allocation strategy than by their security selection within each asset class.
The principle behind asset allocation is simple: by diversifying across a
variety of types of securities, investors reduce the overall risk of their
portfolio because gains in one area are likely to offset losses in another.
One of the dangers of not having an asset allocation plan is the temptation to
simply chase performance, by moving money into whichever asset class appears to
be outperforming at the moment. The problem with this approach is that by the
time a particular area of the market comes into favor, investors may have
already missed some of the best performance. We would suggest that one way to
benefit from swings in the market is to acquire a diversified portfolio so that
investors hold a range of asset classes BEFORE the market swings in their
direction.
UNDERSTAND YOUR EMOTIONS
It usually takes a bear market for people to appreciate the benefits of
diversification. At MFS, we believe proper asset allocation is important in all
market environments. But we understand that there are emotional components of
investment decisions that sometimes keep investors from achieving their long
term goals. The three common behaviors that negatively impact investment
decisions are overconfidence, looking backwards, and loss aversion.
- - OVERCONFIDENCE. After experiencing gains in the market, particularly during
a bull market, investors have a natural tendency to overestimate their own
abilities. During the global bull market of the late 1990s, for example, a
large number of investors traded their own stocks and made significant
profits. However, most of these same investors later handed back those
profits -- and then some -- because they focused more on short-term blips
in the market and less on the fundamental factors that affect a company's
long-term prospects.
- - LOOKING BACKWARDS. Although security prices are determined by expectations
about the future, many investors make choices based on the recent past.
Investors who have achieved momentary success in the market tend to take on
too much risk, believing that better-than-average returns can be easily
duplicated. On the other hand, those who have had negative experiences tend
to become overly cautious and take on too little risk. Recent historical
experience tends to dictate an investor's frame of reference and may lead
to irrational decisions.
- - LOSS AVERSION. Simply put, investors would rather avoid the immediate pain
of losses than enjoy the future pleasure of gains. As a result, some
investors tend to overreact to short term downturns in the market by
seeking to mitigate their losses, rather than remaining invested to benefit
from the long-term growth potential of the stock and bond markets.
THINK LIKE A PROFESSIONAL INVESTOR
Asset allocation helps reduce the emotional factors that tend to affect the
long-term returns of investors. Professional investors -- those who manage
assets for money management firms, pension funds, and endowments -- have tended
to outperform the average retirement investor because they focus on asset
allocation. For example, the investment performance of the average 401(k)
participant has lagged these professional investors by more than two percentage
points a year, on average, over the past 10 years.(1)
We think asset allocation is one of the most important decisions for investors.
A study of the performance of 91 large U.S. corporate pension plans with assets
of more than $100 million over a 10-year period beginning in 1974 concluded that
asset allocation policies accounted for 93.6% of their returns, while individual
security selection and the timing of their investments accounted for only 6.4%
for their overall performance.(2)
Professional investors target a realistic level of return based on the amount of
risk they are willing to take, then set allocations to meet their goals. On
average, U.S. professional investors allocate 35% to 40% of their assets to
domestic equity stocks; 20% to 30% to fixed income issues; 10% to international
stocks; and between 10% and 20% to other investment classes such as real
estate.(3) And within those categories, they hold a broad range of styles and
asset classes.
In contrast, 401(k) participants who held company stock in their retirement
plans at the end of 2002 had roughly 42% of their retirement assets in company
stock while the rest was allocated to either growth or value stock funds.(4)
These participants virtually ignored the broad range of equity, fixed-income,
and international offerings provided by their retirement plans.
ALLOCATE, DIVERSIFY, REBALANCE
We recommend working with a professional adviser to find an optimal mix of
investments based on your individual goals. In our view, a disciplined asset
allocation strategy is composed of three simple steps: allocate, diversify and
rebalance.
- - ALLOCATE. Investors should work with their financial adviser to specify
their long-term goals and tolerance for risk. Then investors should
allocate their assets across the major asset classes -- stocks, bonds, and
cash -- to help them pursue an investmenT return that is consistent with
their risk tolerance level.
- - DIVERSIFY. By diversifying their assets, investors trade some performance
in the top performing categories for a more predictable and stable
portfolio. At the same time, investors should include different investment
styles and market capitalizations of stocks and a range of fixed-income
investments, as well as U.S. and non-U.S. securities. Because security
subclasses tend to move in and out of favor during various market and
economic environments, a broad portfolio increases the benefits of
diversification.
- - REBALANCE. We suggest that investors consult with their professional
advisers periodically to rebalance their portfolios to maintain the
percentages that they have dedicated to each asset class. Allocations can
shift as markets rise and fall, making for a riskier or more conservative
portfolio than an investor originally intended. For example, a portfolio of
50% stocks and 50% bonds at the start of 2000 would have shifted to 32%
stocks and 68% bonds at the end of 2002 because of the weak stock
market.(5)
In short, these three simple concepts -- allocate, diversify and rebalance --
help take emotion out of the investment process and help prevent investors from
trying to outguess the market. An asset allocation strategy cannot turn a down
market cycle into a good one, but it is an invaluable tool to manage risk and
keep investors on track toward reaching their long term investment goals.
A DISCIPLINED INVESTMENT PROCESS IS PARAMOUNT
Disciplined diversification has helped investors pursue long-term, above-average
results through the years. Since 1924, when we
1
<Page>
invented the mutual fund, MFS(R) has strived to give investors the products and
tools they need to maintain well-diversified portfolios. MFS provides a variety
of products in each asset class as well as a family of asset allocation funds.
These asset allocation portfolios cover a range from conservative to moderate,
growth, and aggressive growth allocations, each with a strategy based on a
distinct level of risk. We recommend developing a comprehensive financial plan
with an investment advisor who is familiar with your risk tolerance, your
individual goals, and your financial situation.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management(R)
Investment Advisor to the MFS(R)/Sun Life Series Trust
January 14, 2005
Asset allocation and diversification can not guarantee a profit or protect
against a loss. The opinions expressed in this letter are those of MFS, and no
forecasts can be guaranteed.
(1) Source: Watson Wyatt
(2) "Determinants of Portfolio Performance," in Financial Analysts Journal,
January/February 1995, by Gary P. Brinson, L. Randolph Hood, and Gilbert L.
Beebower
(3) Source: Greenwich Associates
(4) Source: Hewitt Associates
(5) Source: Lipper Inc.
STOCK MARKET ENVIRONMENT
In 2004, after enduring a somewhat rocky ride, most of the world's major stock
markets posted solid gains. In our view, better-than-expected corporate earnings
and improved economic indicators encouraged investors and drove equity markets,
although, for a time, it seemed that record-high oil prices, rising short-term
interest rates in the U.S., a decline in the U.S. dollar against most major
currencies, as well as geopolitical uncertainty tested equity markets. But, by
the last quarter of 2004, oil prices pulled back from their record levels, and
in our view, investors turned their attention to strong corporate profits and
economic growth, which were up noticeably, if not dramatically, for the year.
BOND MARKET ENVIRONMENT
Bond market returns in 2004 turned out to be a pleasant surprise. At about
mid-year, we believe improving economic fundamentals prompted the U.S. Federal
Reserve Board to raise short-term rates -- marking the first rate increase in
four years. While the Fed followed with four more hikes throughout the year, we
feel that enough uncertainty about the strength of the economic recovery
remained to fuel investor demand in U.S. Treasuries and other high-quality
bonds, both of which are seen as a refuge in times of economic concern.
(Principal and interest of U.S. Treasury securities are guaranteed by the U.S.
government if held to maturity.) Perhaps the biggest surprise of 2004 was that
long-term interest rates -- which we believed were expected to rise -- did not.
In the high yield market, we believe easy access to capital, a declining default
rate, and stronger credit profiles aided returns throughout the year.
From our perspective, the improvement in equity markets going into the last
quarter of 2004 prevented significant advances in most bond markets. Even so,
the slowdown in U.S. GDP and job growth, in the second half of the year, curbed
expectations about the pace of the economic recovery. We believe that such
concerns, combined with geopolitical worries about Iraq and fear of future
terrorist attacks, kept investors focused on bond markets.
MANAGEMENT REVIEW
CAPITAL APPRECIATION SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 11.02%, while Service Class shares provided a total
return of 10.78%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 6.30% over the same period for
the series' benchmark, the Russell 1000 Growth Index. The investment objective
of the series' is to seek to maximize capital appreciation by investing in
securities of all types, with major emphasis on common stocks.
The series invests, under normal market conditions, at least 65% of its net
assets in common stocks and related securities, such as preferred stocks,
convertible securities and depositary receipts, of companies which MFS believes
possess above-average growth opportunities.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the health care, special products and services, and
industrial goods and services sectors boosted relative performance for the
period. Overweighting the industrial goods and services sector also helped
relative results.
In the health care sector, our relative positioning in Pfizer* and not holding
poor performing Merck benefited the series' returns. In the industrial goods and
services area, our holdings of international conglomerate Tyco International
aided relative results. Although special products and services was one of the
series' top performing sectors, no stocks within the sector were among the
series' top individual performers.
Stocks in other sectors that contributed to the series' relative performance
included FedEx Corp., Marvell Technology, and retailer Target. Our relative
positioning in technology giant Intel and not holding poor performing beverage
stock Coca-Cola also helped relative results.
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure and financial services sectors held back relative
performance during the period. In the leisure sector, our position in radio
station owner Clear Channel Communications* detracted from relative results as
did not holding strong performing specialty coffee retailer Starbucks.
Although the financial services sector was one of the series' poorest performing
sectors over the period, no stocks within the sector were among the portfolio's
top individual detractors. Stocks in other sectors that held back relative
performance included health care company AstraZeneca and not holding strong
performing UnitedHealth Group. Our relative positioning in QUALCOMM* and Home
Depot* also detracted from the series' relative results.
2
<Page>
The series' cash position held back relative performance. As with nearly all
portfolios, this series holds some cash to buy new holdings and to provide
liquidity. In a period when growth equity markets -- as measured by the Russell
1000 Growth Index -- rose, holding any cash hurt relative performance. The index
does not have a cash position.
* Stock was not held in the portfolio at period end.
EMERGING GROWTH SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 13.24%, while Service Class shares provided a total
return of 12.96%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 6.93% over the same period for
the benchmark, the Russell 3000 Growth Index (the Russell Index). The investment
objective of the series is to seek long-term growth of capital. The series
invests at least 65% of its net assets in common stocks and related securities
of emerging growth companies.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the health care and technology sectors boosted relative
performance during the period. Overweighting the utilities and communications
sector and, to a lesser extent, stock selection also contributed to the series'
performance.
In the health care sector, avoiding Pfizer and our holdings of medical
diagnostics firm Cytyc Corp., which nearly doubled over the period, aided
relative results.
In the technology sector, our relative positioning in poor performing technology
giant Intel* helped relative results. Our positions in eBay, Apple Computer*,
Marvell Technology Group and Symantec Corp. also had a positive impact on
relative performance. In the utilities and communications sector, the series
benefited from positions in American Tower Corp., wireless communications
company America Movil, and Spectrasite, Inc.
DETRACTORS FROM PERFORMANCE
On the negative side, stock selection in the special products and services and
retailing sectors detracted from relative performance. Underweighting the
industrial goods and services sector also hurt performance.
Within the special products and services sector, post-secondary education firm
Corinthian Colleges* was the largest single detractor. Our avoidance of General
Electric and our relative positioning in retailing giant Home Depot hurt
performance as both securities provided solid returns for the period.
Although health care was one of the series' top performing sectors, not holding
managed care firm United Health Group detracted from relative performance as the
stock performed well during the period.
Some of our holdings within the technology sector proved to be disappointments.
Our positions in Red Hat, Inc*, IAC/InterActive and PMC-Sierra detracted from
relative performance. Our avoidance of strong performing Qualcomm also held back
relative results.
Stocks in other sectors that held back results included Westwood One and Andrew
Corp.* from the leisure and utilities and communications sectors, respectively.
* Stock was not held in the portfolio at period end.
GLOBAL GROWTH SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 15.61%, while Service Class shares provided a total
return of 15.41%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return over the same period of 11.68%
for the MSCI All Country World Growth Index. These returns also compare with
returns of 15.75% and 11.21%, respectively, for the former benchmarks, the MSCI
All Country World Index and the MSCI World Growth Index, which were no longer
benchmarks of the portfolio effective April 5, 2004. The investment objective of
the series is to seek capital appreciation by investing in securities of
companies worldwide growing at rates expected to be well above the growth rate
of the overall U.S. economy. The series invests, under normal market conditions,
at least 65% of its net assets in common stocks and related securities that the
advisor believes have above average growth potential. While the series may
invest in companies of any size, the series generally focuses on foreign
companies with larger market capitalizations.
CONTRIBUTORS TO PERFORMANCE
Over the 12-month period, the series' best performing sectors relative to the
MSCI All Country World Growth Index were technology, financial services, and
retailing. Stock selection played the major role in these sectors' relative
performance.
In technology, a relative underexposure to Intel* helped results as the
semiconductor manufacturer underperformed during the period. Elsewhere in the
sector, Microsoft*, Samsung Electronics, and Research in Motion aided results.
In financial services, Sanlam Group and Erste Bank were among the top overall
contributors. Retailers Nishimatsuya and NEXT were also strong relative
contributors.
In health care, avoiding Pfizer aided results as the stock noticeably
underperformed the benchmark for the period. Also among the top contributors was
telephone directories provider Yell Group, from the leisure sector.
During the reporting period, shifts in currency valuations were a significant
contributor to performance relative to the benchmark. The base currency of the
series is the U.S. dollar and the performance of the series and its benchmark is
presented in terms of this currency. Nevertheless, specific holdings of the
series and benchmark may be denominated in different currencies and, therefore,
present the possibility of currency depreciation or appreciation. Because the
exposures of the series and the benchmark to foreign currency movements may
differ, from time to time, these movements may have a material impact on
relative performance.
DETRACTORS FROM PERFORMANCE
Transportation and utilities and communications were the series' poorest
relative performing sectors. In both cases, it was a mix of stock selection and
allocation that held back results. No stocks from the transportation group were
among the top detractors, and only one utilities and communications stock --
AT&T Wireless -- was a significant detractor. By avoiding AT&T Wireless we
failed to capture the significant price appreciation experienced by this stock
over the period. (AT&T Wireless was purchased by Cingular during the period.)
3
<Page>
In health care, CTI Molecular Imaging* and AstraZeneca detracted from relative
performance. Stocks in other sectors that held back results included Seiko
Epson, Corinthian Colleges*, CoolBrands*, Tamron*, and Total from the
technology, special products and services, consumer staples, leisure, and energy
sectors, respectively. Elsewhere, avoiding QUALCOMM detracted from results as we
missed out on the stock's dramatic run up in price over the period.
The series' cash position also held back relative performance. As with nearly
all portfolios, this series holds some cash to buy new holdings and to provide
liquidity. In a period when global equity markets -- as measured by the MSCI All
Country World Growth Index -- rose, holding any cash hurt relative performance.
The index does not have a cash position.
* Stock was not held in the portfolio at period end.
MANAGED SECTORS SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 6.69%, while Service Class shares provided a total
return of 6.44%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 6.30% over the same period for
the series' benchmark, the Russell 1000 Growth Index. The investment objective
of the series is to seek capital appreciation by varying the weighting of its
portfolio among 13 sectors.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the health care, retailing, and industrial goods and services
sectors boosted the portfolio's performance relative to the Russell 1000 Growth
Index. Stock selection in health care was the strongest contributor in this
regard. Underweighting Pfizer* helped results as the company's stock
significantly underperformed.
Stock selection was likewise supportive in retail. Here, our position in
discount retailer Target was the leading contributor. Our positioning among
industrial goods and services providers was also beneficial, although no single
stock within this group made our top contributors list.
Elsewhere in the portfolio, holdings in anti-virus software concern Symantec
Corp. and on-line auctioneer eBay Inc., together with an underweighted position
in semiconductor giant Intel, helped results. Positions in cruise line operator
Carnival Corp., express delivery concern FedEx Corp. and biotechnology company
Gilead Sciences helped portfolio performance. Avoiding Coca-Cola, which finished
the period lower, added to relative results.
DETRACTORS FROM PERFORMANCE
On the negative side, stock selection in the leisure and financial services
sectors detracted from relative results. In leisure, continued anemic radio
advertising spending weighed on our holdings in Clear Channel Communications*,
Viacom Inc. and Westwood One*. Turning to financials, while our overall
positioning was detrimental to performance, no one stock within the group made
our top detractors list.
Though technology was overall a net positive, individual stocks from that group
proved to be some of our bigger disappointments, including IAC/InterActiveCorp*,
Analog Devices, Texas Instruments, Cisco Systems, and Xilinx.*
Other negative contributors included avoiding managed care provider UnitedHealth
Group and underweighting household products and personal care giant Procter &
Gamble Co. (both index constituents which outperformed).
* Stock was not held in the portfolio at period end.
MASSACHUSETTS INVESTORS TRUST SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 11.99%, while Service Class shares provided a total
return of 11.74%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 10.87% for the series'
benchmark, the Standard & Poor's 500 Stock Index (S&P 500). The investment
objective of the series is to seek to provide long-term growth of capital, with
a secondary objective to seek reasonable current income. The series invests,
under normal market conditions, at least 65% of its net assets in equity
securities, including common stocks and related securities that MFS believes
have sustainable growth prospects and attractive valuations based on current and
expected earnings or cash flow.
CONTRIBUTORS TO PERFORMANCE
The series' best-performing sectors over the 12-month period relative to the S&P
500 were health care, basic materials, and industrial goods and services. Stock
selection played the major role in these sectors' relative performance, while an
overweight in industrial goods and services also helped results.
In health care, our relative positioning in Pfizer*, and our avoidance of Merck,
both poor performers, boosted relative results. Our holdings of strong
performing Johnson & Johnson also helped results. In the basic materials sector,
our positioning in agricultural products firm Monsanto enhanced relative
returns. Monsanto's stock price rose dramatically over the period. In the
industrial goods and services sector, our position in Caterpillar also aided
relative results. In technology, holding strong performing Apple Computer and an
underweighted position in poor performing Intel* aided results.
Securities in other sectors that contributed to the series' relative returns
included retailer Wal-Mart* and oil field services firm Halliburton Co. Our
relative position in poor-performing Coca-Cola Co.* also helped relative results
for the period.
DETRACTORS FROM PERFORMANCE
Stock selection in the financial services, leisure, and technology sectors held
back relative performance for the period. Although leisure was one of the
series' poorest performing sectors overall, no individual leisure stocks were
among the series' top detractors. In the financial services sector, our position
in J.P. Morgan Chase hurt performance. In the technology sector, our positions
in poor performing Nortel Networks*, Cisco Systems, and Analog Devices detracted
from relative results. Not holding strong performing wireless communication
equipment maker QUALCOMM also held back returns.
In the energy sector, our relative position in strong performing Exxon Mobil
Corp* detracted from results. Stocks in other sectors that held back returns
included our relative positioning in tobacco firm Altria* and our holdings of
Tenet Healthcare* from the consumer staples and healthcare sectors,
respectively.
NOTE TO CONTRACT OWNERS: AS OF DECEMBER 31, 2004, THE SERIES NO LONGER HAS A
PRINCIPAL INVESTMENT POLICY TO SEEK TO GENERATE GROSS INCOME EQUAL TO
APPROXIMATELY 90% OF THE DIVIDEND YIELD OF THE S&P 500 INDEX. THE INVESTMENT
ADVISER NOW CONSIDERS THE PORTFOLIO'S OVERALL PROSPECTS FOR APPRECIATION AS WELL
AS INCOME IN MANAGING THE SERIES.
* Stock was not held in the portfolio at period end.
4
<Page>
MID CAP GROWTH SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 14.62%, while Service Class shares provided a total
return of 14.29%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 15.48% over the same period
for the series' benchmark, the Russell MidCap Growth Index. The investment
objective of the series is to seek long-term growth of capital. The series
invests, under normal market conditions, at least 80% of its net dassets in
common stocks and related securities of companies with medium market
capitalizations which the series' investment adviser, MFS, believes have
above-average growth potential.
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure and consumer staples sectors detracted from
performance relative to the Russell MidCap Growth Index. An underweighted
position in the strong performing industrial goods and services sector also held
back results.
In leisure, our positions in several stocks that underperformed the benchmark
held back returns; examples included radio broadcasters Citadel Broadcasting,
Westwood One and Entercom Communications, as well as cable television provider
NTL.
In consumer staples, our holdings of frozen dessert maker CoolBrands
International* detracted from the series' relative performance. While special
products and services was a top performing sector, it contained one of the top
overall detractors at the stock level, post-secondary education provider
Corinthian Colleges*.
Elsewhere, several stocks in the technology sector held back relative results
including PMC-Sierra, Red Hat, and Apple Computer*. PMC-Sierra manufactures
semiconductors primarily for use in broadband networking. Red Hat markets the
open source operating system, Linux. We did not own Apple Computer and thus
failed to participate in its significant price appreciation. In retailing,
holding poor performing Tiffany & Co. held back results.
CONTRIBUTORS TO PERFORMANCE
Stock selection in utilities and communications, health care, and special
products and services contributed to the series' relative performance. An
overweighted position in the strong performing utilities and communications
sector also contributed to relative results.
In health care, our positions in medical testing firm Cytyc, and medical device
manufacturer C.R. Bard aided returns. Elsewhere, our overweight positions in
strong performing communication tower operators American Tower Corp.,
SpectraSite and Crown Castle International (CCI) boosted relative results.
In the special products and services sector, our holdings of job search site
operator, Monster Worldwide, aided results. In technology, Marvell Technology
Group, Comverse Technology, and McAfee were among our better performing
positions. While leisure was a significant detractor from relative performance,
it contained a top overall contributor, Royal Caribbean Cruises Ltd.
* Stock was not held in the portfolio at period end.
RESEARCH SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 15.83%, while Service Class shares provided a total
return of 15.54%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 10.87% for the series'
benchmark, the Standard & Poor's 500 Stock Index (S&P 500). The investment
objective of the series is to seek to provide long-term growth of capital and
future income. The series invests, under normal market conditions, at least 80%
of its net assets in common stocks and related securities that the series'
investment adviser, MFS, believes have favorable prospects for growth,
attractive valuations based on current and expected earnings or cash flow,
dominant or growing market share, and superior management.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the basic materials, utilities and communications, and the
health care sectors contributed to performance relative to the S&P 500.
In basic materials, our holdings in strong performing Monsanto, mining company
Companhia Vale Do Rio Doce*, and Lyondell Chemical aided overall relative
results. In utilities and communications, telecom provider Sprint Corp. proved
positive to relative performance. Avoiding Pfizer and Merck, in the health care
sector, contributed significantly to relative performance over the period, as
those stocks performed poorly.
Stocks in other sectors that contributed to relative performance included
semiconductor manufacturer Intel*, Netscreen Technologies*, and Marvell
Technology all from the technology sector, as well as Franklin Resources, from
the financial services sector.
DETRACTORS FROM PERFORMANCE
On the negative side, stock selection in the special products and services and
the leisure sectors, detracted from relative performance. To a lesser extent
underweighting the strong performing transportation sector also detracted.
In special products and services, post-secondary education providers Corinthian
Colleges* and Career Education held back relative results. While health care was
a strong contributing sector, our holdings of Tenet Healthcare proved
disappointing to relative results. In the leisure sector, our positioning in
Clear Channel Communications* detracted from relative results.
While technology was not a poor performing sector overall, several stocks from
the sector proved disappointing including Veritas Software*, Agere Systems*, and
Ascential Software*. Elsewhere ExxonMobil*, Hot Topic*, and Rite Aid*,
detracted. ExxonMobil* is in the energy sector while both Hot Topic* and Rite
Aid* are in the retailing sector.
* Stock was not held in the portfolio at period end.
TOTAL RETURN SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 11.47%, while Service Class shares provided a total
return of 11.14%. These returns do not reflect any applicable contract or
surrender charges. These compare with returns of 10.87% and 4.34%, respectively,
for the series' benchmarks, the Standard & Poor's 500 Stock Index (S&P 500
Index) and the Lehman Brothers Aggregate Bond Index (the Lehman Aggregate
Index). The main investment objective of the series is to seek to obtain
above-average income (compared to a portfolio entirely invested in equity
securities) consistent with prudent employment of capital; its secondary
objective is to take advantage of opportunities for growth of capital and income
since many securities offering a better than average yield may also possess
growth potential.
5
<Page>
CONTRIBUTORS TO PERFORMANCE
For the equity portion of the portfolio, stock selection in both utilities and
communications, and basic materials contributed significantly to performance
relative to the S&P 500 Index. The utilities and communications and energy
sectors also contributed to results. In utilities and communications, the series
benefited from holding telecommunication providers Sprint Corp. and AT&T
Wireless*, as well as Texas-based electric power generator TXU. Prices for all
three stocks rose measurably over the period. (AT&T Wireless was acquired during
the year by Cingular, a joint venture of SBC Communications and BellSouth.) In
health care, our decision to underweight poor-performing Pfizer contributed to
results. The portfolio also benefited from avoiding Intel and underweighting
Cisco Systems, two technology stocks that declined significantly during the
year. In basic materials, Owens-Illinois and iron ore miner Companhia Vale Do
Rio Doce aided results. In the energy sector, drilling contractors Noble Corp.
and GlobalSanteFe contributed to results.
For the fixed income portion of the portfolio, the series benefited from our
duration positioning relative to the Lehman Aggregate Index. (Duration is a
measure of sensitivity to interest rate changes.) In addition, allocation to
industrial and inflation linked bonds aided results. Exposure to "BBB"-rated and
crossover corporate bonds also helped results relative to the Lehman Aggregate
Index.
DETRACTORS FROM PERFORMANCE
For the equity portion of the portfolio, stock selection in leisure, retailing
and financial services detracted from results relative to the S&P 500 Index.
Overweighting both financial services and leisure also held back relative
returns. In the leisure sector, media company Viacom held back results. Not
owning strong performing technology companies eBAY and QUALCOM held back results
relative to the S&P 500 Index. Elsewhere in the sector, holding poor performing
Nortel Networks detracted from relative results. In the energy sector, an
underweighted position in strong performing Exxon Mobil held back results.
Stocks in other sectors that detracted from relative results included
pharmaceutical chain Rite Aid, Mellon Financial, Tenet Healthcare, and power
producer Calpine, from the retailing, financial services, health care, and the
utilities and communication sectors, respectively.
For the fixed income portion of the portfolio, our underweighted position in
mortgage-backed securities and higher quality supranationals held back results
relative to the Lehman Aggregate Index.
* Stock was not held in the portfolio at period end.
UTILITIES SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 30.37%, while Service Class shares provided a total
return of 30.01%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 24.28% over the same period
for the series' benchmark, the Standard & Poor's 500 Utilities Index (the S&P
Utilities Index).
The investment objective of the series is to seek capital growth and current
income (income above that available from a portfolio invested entirely in equity
securities). The series invests, under normal market conditions, at least 80% of
its net assets in equity and debt securities of both domestic and foreign
companies in the utilities industry.
CONTRIBUTORS TO PERFORMANCE
Stock selection in both electric power generators and natural gas distributors
was a primary contributor to outperformance relative to the series' benchmark,
the S&P Utilities Index. Allocation to the wireless communications group was
also a strong contributor to relative results. Among electric power generators,
our position in Reliant Energy aided results, as the stock rose sharply over the
period. The series also benefited by underweighting Dominion Resources, avoiding
Progress Energy and Consolidated Edison, as well as largely avoiding Southern
Co.* In the natural gas distributors group, exploration and production firm
Equitable Resources was a top overall contributor. In the wireless
communications area, our positions in America Movil, Sprint Corp., and AT&T
Wireless* contributed to relative results. All three stock prices appreciated
sharply over the period. America Movil provides cellular phone services in Latin
America. Our holding in NRG Energy, contributed to relative performance as well.
DETRACTORS FROM PERFORMANCE
From an industry perspective, our allocations in entertainment, as well as
broadcast and cable TV, detracted from performance relative to the S&P Utilities
Index. Returns for both industries lagged the benchmark. In broadcast and cable
TV, our positions in underperformers Comcast, media conglomerate Viacom, and
radio station and music venue operator Clear Channel Communications* held back
relative results. While the electric power generators group was the best
contributor to overall relative performance, some individual stocks in the group
detracted from results including TXU Corp., Edison International, Exelon, and
Duke Energy*. With all four stocks, we held underweighted positions relative to
the benchmark and thus failed to fully participate in their substantial price
increases.
The series' cash position also held back relative performance. As with nearly
all portfolios, this series holds some cash to buy new holdings and to provide
liquidity. In a period when equity markets rose sharply, holding any cash hurt
performance against our benchmark, the S&P Utilities Index, which has no cash
position.
* Stock was not held in the portfolio at period end.
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or an indication of
trading intent on behalf of any MFS/Sun Life series. References to specific
securities are not recommendations of such securities, and may not be
representative of any MFS/Sun Life series' current or future investments.
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.
6
<Page>
PORTFOLIO COMPOSITION -- CAPITAL APPRECIATION SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 96.0%
Cash & Other Net Assets 4.0%
</Table>
TOP TEN HOLDINGS
<Table>
Johnson & Johnson 4.3%
Cisco Systems, Inc. 3.7%
Wyeth 3.0%
Microsoft Corp. 3.0%
Amgen, Inc. 2.8%
IAC/InterActiveCorp. 2.8%
PepsiCo, Inc. 2.5%
Procter & Gamble Co. 2.2%
Dell, Inc. 2.2%
Medtronic, Inc. 2.1%
</Table>
SECTOR WEIGHTINGS
<Table>
Health Care 24.2%
Technology 22.3%
Retailing 9.2%
Leisure 8.1%
Industrial Goods & Services 6.5%
Consumer Staples 5.7%
Financial Services 5.6%
Special Products & Services 4.1%
Transportation 2.6%
Energy 2.3%
Utilities & Communications 2.0%
Basic Materials 1.9%
Autos & Housing 1.5%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
7
<Page>
PORTFOLIO COMPOSITION -- EMERGING GROWTH SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 98.9%
Cash & Other Net Assets 1.1%
</Table>
TOP TEN HOLDINGS
<Table>
Cytyc Corp. 2.6%
Dell, Inc. 2.1%
American Tower Corp., "A" 2.1%
eBay, Inc. 2.0%
Getty Images, Inc. 1.9%
Yahoo!, Inc. 1.8%
Legg Mason, Inc. 1.6%
Genzyme Corp. 1.6%
Amdocs Ltd. 1.6%
Fisher Scientific International, Inc. 1.5%
</Table>
SECTOR WEIGHTINGS
<Table>
Technology 25.4%
Health Care 24.5%
Leisure 13.3%
Special Products & Services 8.8%
Utilities & Communications 7.9%
Retailing 6.2%
Financial Services 4.9%
Energy 2.2%
Industrial Goods & Services 1.9%
Consumer Staples 1.2%
Autos & Housing 1.0%
Transportation 0.8%
Basic Materials 0.8%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
8
<Page>
PORTFOLIO COMPOSITION -- GLOBAL GROWTH SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 98.0%
Preferred Stocks 0.5%
Cash & Other Net Assets 1.5%
</Table>
TOP TEN HOLDINGS
<Table>
Cisco Systems, Inc. 1.9%
Vodafone Group PLC 1.9%
Johnson & Johnson 1.7%
News Corporation, Inc., "B" 1.6%
Dell, Inc. 1.5%
Oracle Corp. 1.5%
Roche Holdings AG 1.4%
Citigroup, Inc. 1.4%
BP PLC, ADR 1.3%
Sanlam Group 1.3%
</Table>
SECTOR WEIGHTINGS
<Table>
Technology 16.1%
Financial Services 14.5%
Health Care 13.1%
Basic Materials 8.8%
Leisure 8.7%
Consumer Staples 7.9%
Retailing 7.3%
Utilities & Communications 6.5%
Industrial Goods & Services 4.6%
Energy 4.3%
Autos & Housing 3.9%
Special Products & Services 2.8%
</Table>
COUNTRY WEIGHTINGS
<Table>
United States 35.8%
Great Britain 13.3%
Japan 12.1%
France 6.5%
Switzerland 5.0%
Spain 3.2%
Canada 3.1%
Sweden 3.0%
South Africa 2.2%
Other 15.8%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
9
<Page>
PORTFOLIO COMPOSITION -- MANAGED SECTORS SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 99.0%
Cash & Other Net Assets 1.0%
</Table>
TOP TEN HOLDINGS
<Table>
Johnson & Johnson 4.9%
Microsoft Corp. 4.0%
Dell, Inc. 3.8%
Cisco Systems, Inc. 3.7%
Wyeth 3.1%
Procter & Gamble Co. 2.9%
Abbott Laboratories 2.8%
eBay, Inc. 2.6%
Yahoo!, Inc. 2.6%
VERITAS Software Corp. 2.4%
</Table>
SECTOR WEIGHTINGS
<Table>
Technology 31.7%
Health Care 25.9%
Retailing 11.3%
Leisure 9.4%
Financial Services 6.4%
Consumer Staples 4.6%
Industrial Goods & Services 3.9%
Special Products & Services 3.3%
Transportation 2.5%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
10
<Page>
PORTFOLIO COMPOSITION -- MASSACHUSETTS INVESTORS TRUST SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 98.5%
Cash & Other Net Assets 1.5%
</Table>
TOP TEN HOLDINGS
<Table>
Johnson & Johnson 3.7%
United Technologies Corp. 3.1%
BP PLC 2.7%
Tyco International Ltd. 2.4%
J.P. Morgan Chase & Co. 2.1%
Cisco Systems, Inc. 2.1%
Bank of America Corp. 2.0%
Oracle Corp. 1.9%
Lockheed Martin Corp. 1.9%
Wells Fargo & Co. 1.8%
</Table>
SECTOR WEIGHTINGS
<Table>
Health Care 15.7%
Financial Services 15.5%
Technology 14.6%
Industrial Goods & Services 11.9%
Consumer Staples 8.1%
Energy 7.8%
Basic Materials 5.3%
Retailing 5.0%
Leisure 5.0%
Utilities & Communications 4.5%
Transportation 2.3%
Autos & Housing 1.8%
Special Products & Services 1.0%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
11
<Page>
PORTFOLIO COMPOSITION -- MID CAP GROWTH SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 98.2%
Cash & Other Net Assets 1.8%
</Table>
TOP TEN HOLDINGS
<Table>
Cytyc Corp. 2.5%
Getty Images, Inc. 2.2%
Legg Mason, Inc. 2.1%
Genzyme Corp. 2.0%
Citadel Broadcasting Corp. 2.0%
Medicis Pharmaceutical Corp. 1.9%
Waters Corp. 1.9%
Comverse Technology, Inc. 1.7%
Amdocs Ltd. 1.7%
American Tower Corp. 1.7%
</Table>
SECTOR WEIGHTINGS
<Table>
Health Care 26.2%
Technology 23.3%
Leisure 16.3%
Special Products & Services 11.0%
Retailing 5.6%
Financial Services 4.4%
Utilities & Communications 4.2%
Energy 2.8%
Industrial Goods & Services 1.8%
Transportation 1.6%
Basic Materials 1.0%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
12
<Page>
PORTFOLIO COMPOSITION -- RESEARCH SERIES
[CHART]
PORTFOLIO STRUCTURE
<Table>
Stocks 98.1%
Cash & Other Net Assets 1.9%
</Table>
TOP TEN HOLDINGS
<Table>
Citigroup, Inc. 2.7%
Franklin Resources, Inc. 2.6%
Total S.A., ADR 2.4%
Wyeth 2.3%
Goldman Sachs Group, Inc. 2.2%
Monsanto Co. 2.2%
Owens-Illinois, Inc. 2.1%
Bank of America Corp. 2.1%
Nalco Holdings Co. 2.1%
PepsiCo, Inc. 2.0%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 20.3%
Technology 14.4%
Health Care 12.2%
Basic Materials 8.7%
Energy 8.0%
Consumer Staples 7.8%
Utilities & Communications 6.0%
Retailing 5.7%
Leisure 5.5%
Special Products & Services 3.2%
Autos & Housing 3.0%
Industrial Goods & Services 2.6%
Transportation 0.7%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
13
<Page>
PORTFOLIO COMPOSITION -- TOTAL RETURN SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Stocks 60.3%
Bonds 38.0%
Cash & Other Net Assets 1.7%
</Table>
TOP TEN HOLDINGS
<Table>
U.S. Treasury Notes 4.75% 11/15/2008 2.6%
Sprint Corp. 2.1%
Bank of America Corp. 1.8%
Verizon Communications, Inc. 1.7%
U.S. Treasury Bonds 6.25% 08/15/2023 1.6%
Citigroup, Inc., 1.5%
J.P. Morgan Chase & Co. 1.5%
Viacom, Inc., "B" 1.5%
U.S. Treasury Notes 7% 07/15/2006 1.4%
Merck & Co., Inc. 1.4%
</Table>
EQUITY SECTOR WEIGHTINGS
<Table>
Financial Services 15.3%
Utilities & Communications 8.4%
Energy 6.2%
Health Care 6.1%
Leisure 5.2%
Basic Materials 5.1%
Industrial Goods & Services 4.4%
Consumer Staples 3.9%
Technology 2.8%
Retailing 1.6%
Autos & Housing 0.5%
Transportation 0.4%
Special Products & Services 0.4%
</Table>
TOP FIVE BOND MARKET SECTORS*
<Table>
Mortgage Backed 13.6%
U.S. Treasuries 8.9%
High Grade Corporates 8.6%
U.S. Government Agencies 4.3%
Commercial Mortgage Backed 1.1%
</Table>
* For purposes of this graphical presentation, the bond component includes both
accrued interest on bonds and the equivalent exposure from any derivative
holdings, if applicable.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
14
<Page>
PORTFOLIO COMPOSITION -- UTILITIES SERIES
[CHART]
PORTFOLIO STRUCTURE*
<Table>
Stocks 87.9%
Bonds 7.7%
Convertible Preferred Stocks 0.9%
Cash & Other Net Assets 3.5%
</Table>
TOP TEN HOLDINGS
<Table>
PPL Corp. 3.2%
Vodafone Group PLC 3.1%
Entergy Corp. 2.8%
Sprint Corp. 2.6%
AES Corp. 2.5%
TXU Corp. 2.5%
Comcast Corp., "Special A" 2.5%
Exelon Corp. 2.3%
Deutsche Telekom AG 2.2%
Sempra Energy 2.1%
</Table>
TOP FIVE EQUITY INDUSTRIES
<Table>
Electric Power 31.9%
Telephone Services 16.4%
Broadcast & Cable TV 15.5%
Natural Gas Distribution 7.5%
Wireless Communications 5.9%
</Table>
COUNTRY WEIGHTINGS
<Table>
United States 64.5%
Great Britain 4.8%
Germany 4.4%
Mexico 4.0%
Spain 4.0%
Canada 3.1%
France 2.7%
Chile 2.4%
South Korea 2.4%
Other 7.7%
</Table>
* For purposes of this graphical representation, the bond component
includes both accrued interest on bonds and the equivalent exposure from any
derivative holdings, if applicable.
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
15
<Page>
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the historical
performance of each series in comparison to its benchmark(s). Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be more than or less than the line
shown. It is not possible to invest directly in an index. (See Notes to
Performance Summary.)
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. ANY HIGH
SHORT-TERM RETURNS MAY BE AND LIKELY WERE ATTRIBUTABLE TO RECENT FAVORABLE
MARKET CONDITIONS, WHICH MAY NOT BE REPEATED.
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. THE
PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY THAT A
CONTRACT HOLDER WOULD PAY ON DISTRIBUTIONS OR REDEMPTIONS OF CONTRACT UNITS.
CAPITAL APPRECIATION SERIES(1),(7),(8),(9),(10)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
CAPITAL APPRECIATION SERIES - INITIAL CLASS RUSSELL 1000 GROWTH INDEX#
Dec-1994 $ 10,000 $ 10,000
Dec-1995 $ 13,446 $ 13,718
Dec-1996 $ 16,334 $ 16,889
Jan-1997 $ 20,113 $ 22,039
Dec-1998 $ 25,885 $ 30,569
Dec-1999 $ 34,333 $ 40,705
Dec-2000 $ 30,413 $ 31,578
Dec-2001 $ 22,711 $ 25,128
Dec-2002 $ 15,354 $ 18,122
Dec-2003 $ 19,762 $ 23,513
Dec-2004 $ 21,940 $ 24,994
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------
Cumulative Total Return +11.02% -3.39% -36.10% +119.40%
Average Annual Total Return +11.02% -1.14% -8.57% +8.17%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +10.78% -4.13% -36.61% +117.62%
Average Annual Total Return +10.78% -1.40% -8.72% +8.09%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Average large-cap growth fund+ +7.18% -0.51% -8.22% +8.55%
Russell 1000 Growth Index# +6.30% -0.18% -9.29% +9.59%
</Table>
+Source: Lipper Inc., an independent firm that reports mutual fund performance.
#Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
For example, the impact on the series' performance for the one-year period
through the date shown would have been lower by approximately 0.11%.
EMERGING GROWTH SERIES(1),(2),(8),(10)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
1, 1995, through December 31, 2004. Index information is from May 1, 1995.)
<Table>
<Caption>
EMERGING GROWTH SERIES - INITIAL CLASS RUSSELL 3000 GROWTH INDEX#
May-1995 $ 10,000 $ 10,000
Dec-1995 $ 12,680 $ 12,256
Dec-1996 $ 14,854 $ 14,937
Dec-1997 $ 18,112 $ 19,230
Dec-1998 $ 24,249 $ 25,964
Dec-1999 $ 42,631 $ 34,747
Dec-2000 $ 34,486 $ 26,958
Dec-2001 $ 22,563 $ 21,667
Dec-2002 $ 14,858 $ 15,593
Dec-2003 $ 19,538 $ 20,442
Dec-2004 $ 22,125 $ 21,837
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- --------------------------------------------------------------------
Cumulative Total Return +13.24% -1.94% -48.10% +121.25%
Average Annual Total Return +13.24% -0.65% -12.29% +8.56%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- --------------------------------------------------------------------
Cumulative Total Return +12.96% -2.70% -48.57% +119.27%
Average Annual Total Return +12.96% -0.91% -12.45% +8.46%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- --------------------------------------------------------------------
Russell 3000 Growth Index# +6.93% +0.26% -8.87% +8.41%
</Table>
* For the period from the commencement of the series' investment operations,
May 1, 1995, through December 31, 2004. Index information is from May 1, 1995.
#Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been
lower.
16
<Page>
GLOBAL GROWTH SERIES(1),(2),(3),(8),(10),(11)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
MSCI ALL COUNTRY WORLD MSCI ALL COUNTRY
GLOBAL GROWTH SERIES - INITIAL CLASS GROWTH INDEX#~ WORLD INDEX# MSCI WORLD GROWTH INDEX#
Dec-94 $ 10,000 - $ 10,000 $ 10,000
Dec-95 $ 11,606 - $ 11,946 $ 12,131
Dec-96 $ 13,117 $ 10,182 $ 13,523 $ 13,722
Dec-97 $ 15,127 $ 11,485 $ 15,551 $ 15,959
Dec-98 $ 17,337 $ 15,000 $ 18,966 $ 21,354
Dec-99 $ 28,996 $ 20,218 $ 24,053 $ 28,402
Dec-00 $ 25,184 $ 14,988 $ 20,701 $ 21,147
Dec-01 $ 20,238 $ 12,207 $ 17,407 $ 17,093
Dec-02 $ 16,320 $ 9,879 $ 14,103 $ 13,742
Dec-03 $ 22,105 $ 12,779 $ 18,988 $ 17,662
Dec-04 $ 25,555 $ 14,272 $ 21,979 $ 19,641
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +15.61% +26.28% -11.87% +155.55%
Average Annual Total Return +15.61% +8.09% -2.49% +9.84%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +15.41% +25.36% -12.68% +153.19%
Average Annual Total Return +15.41% +7.83% -2.68% +9.73%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Average global growth fund+ +15.69% +7.54% -1.81% +9.62%
MSCI All Country World Growth
Index#~ +11.68% +5.35% -6.73% --
MSCI All Country World Index# +15.75% +8.08% -1.79% +8.19%
MSCI World Growth Index# +11.21% +4.74% -7.11% +6.98%
</Table>
+Source: Lipper Inc.
#Source: Standard & Poor's Micropal, Inc.
~Returns for the MSCI All Country World Growth Index are not available for
periods prior to December 31, 1996.
Effective April 5, 2004 we no longer use the MSCI All Country World Free Index
and the MSCI World Growth Index as benchmarks for the portfolio, because we
believe the MSCI All Country World Growth Index better reflects the series'
investment policies and objectives.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
MANAGED SECTORS SERIES(1),(4),(5),(10),(11),(17)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
MANAGED SECTORS SERIES - INITIAL CLASS RUSSELL 1000 GROWTH INDEX#
Dec-94 $ 10,000 $ 10,000
Dec-95 $ 13,229 $ 13,718
Dec-96 $ 15,555 $ 16,889
Dec-97 $ 19,543 $ 22,039
Dec-98 $ 21,937 $ 30,569
Dec-99 $ 40,720 $ 40,705
Dec-00 $ 32,241 $ 31,578
Dec-01 $ 20,792 $ 25,128
Dec-02 $ 15,387 $ 18,122
Dec-03 $ 19,277 $ 23,513
Dec-04 $ 20,567 $ 24,994
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------
Cumulative Total Return +6.69% -1.08% -49.49% +105.67%
Average Annual Total Return +6.69% -0.36% -12.77% +7.48%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------
Cumulative Total Return +6.44% -1.79% -49.91% +103.96%
Average Annual Total Return +6.44% -0.60% -12.91% +7.39%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ----------------------------------------------------------------------
Average large-cap growth fund+ +7.18% -0.51% -8.22% +8.55%
Russell 1000 Growth Index# +6.30% -0.18% -9.29% +9.59%
</Table>
+Source: Lipper Inc.
#Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
For example, the impact on the series' performance for the one-year period
through the date shown would have been lower by approximately 0.15%.
17
<Page>
MASSACHUSETTS INVESTORS TRUST SERIES(1),(9)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES - INITIAL CLASS STANDARD & POOR'S 500 STOCK INDEX#
12/1/94 $ 10,000 $ 10,000
12/1/95 $ 13,741 $ 13,753
12/1/96 $ 17,233 $ 16,909
12/1/97 $ 22,737 $ 22,548
12/1/98 $ 28,160 $ 28,992
12/1/99 $ 30,182 $ 35,092
12/1/2000 $ 30,210 $ 31,900
12/1/2001 $ 25,463 $ 28,111
12/1/2002 $ 20,059 $ 21,901
12/1/2003 $ 24,639 $ 28,179
12/1/2004 $ 27,592 $ 31,243
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +11.99% +8.36% -8.58% +175.92%
Average Annual Total Return +11.99% +2.71% -1.78% +10.68%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +11.74% +7.54% -9.37% +173.53%
Average Annual Total Return +11.74% +2.45% -1.95% +10.59%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Average large cap core fund+ +7.78% +1.27% -3.45% +9.98%
Standard & Poor's 500 Stock
Index# +10.87% +3.58% -2.30% +12.07%
</Table>
+Source: Lipper Inc.
#Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
MID CAP GROWTH SERIES(1),(2),(8),(10),(17)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
August 31, 2000, through December 31, 2004. Index information is from September
1, 2000.)
<Table>
<Caption>
MID CAP
GROWTH SERIES - RUSSELL MIDCAP
INITIAL CLASS GROWTH INDEX#
9/00 $10,000 $10,000
12/00 $ 9,080 $ 7,300
12/01 $ 6,970 $ 5,829
12/02 $ 3,686 $ 4,231
12/03 $ 5,082 $ 6,039
12/04 $ 5,825 $ 6,974
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- ----------------------------------------------------------------------
Cumulative Total Return +14.62% -16.43% -41.75%
Average Annual Total Return +14.62% -5.81% -11.72%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- --------------------------------------------------------------------
Cumulative Total Return +14.29% -17.00% -42.15%
Average Annual Total Return +14.29% -6.02% -11.86%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- ---------------------------------------------------------------------
Average mid-cap growth fund+ +12.78% +3.42% -7.40%
Russell MidCap Growth Index# +15.48% +6.16% -7.98%
</Table>
* For the period from the commencement of the series' investment operations,
August 31, 2000, through December 31, 2004. Index information is from
September 1, 2000.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
18
<Page>
RESEARCH SERIES(1),(8),(10)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
RESEARCH SERIES - INITIAL CLASS STANDARD & POOR'S 500 STOCK INDEX#
12/31/94 $ 10,000 $ 10,000
12/31/95 $ 13,750 $ 13,753
12/31/96 $ 17,017 $ 16,909
12/31/97 $ 20,567 $ 22,548
12/31/98 $ 25,424 $ 28,992
12/31/99 $ 31,562 $ 35,092
12/31/2000 $ 30,269 $ 31,900
12/31/2001 $ 23,790 $ 28,111
12/31/2002 $ 17,817 $ 21,901
12/31/2003 $ 22,328 $ 28,179
12/31/2004 $ 25,862 $ 31,243
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +15.83% +8.71% -18.06% +158.62%
Average Annual Total Return +15.83% +2.82% -3.91% +9.97%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +15.54% +7.81% -18.84% +156.15%
Average Annual Total Return +15.54% +2.54% -4.09% +9.86%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Standard & Poor's 500 Stock
Index# +10.87% +3.58% -2.30% +12.07%
</Table>
#Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
TOTAL RETURN SERIES(1),(6),(10),(11),(12),(13),(15),(16)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
TOTAL RETURN SERIES - INITIAL CLASS LEHMAN BROTHERS AGGREGATE BOND INDEX# STANDARD & POOR'S 500 STOCK INDEX#
12/94 $ 10,000 $ 10,000 $ 10,000
12/95 $ 12,671 $ 11,847 $ 13,753
12/96 $ 14,458 $ 12,278 $ 16,909
12/97 $ 17,636 $ 13,463 $ 22,548
12/98 $ 19,700 $ 14,632 $ 28,992
12/99 $ 20,260 $ 14,512 $ 35,092
12/00 $ 23,658 $ 16,199 $ 31,900
12/2001 $ 23,780 $ 17,567 $ 28,111
12/2002 $ 22,428 $ 19,369 $ 21,901
12/2003 $ 26,275 $ 20,164 $ 28,179
12/2004 $ 29,288 $ 21,038 $ 31,243
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +11.47% +23.16% +44.56% +192.88%
Average Annual Total Return +11.47% +7.19% +7.65% +11.34%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +11.14% +22.22% +43.29% +190.31%
Average Annual Total Return +11.14% +6.92% +7.46% +11.25%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Average balanced fund+ +7.93% +4.32% +2.01% +9.09%
Standard & Poor's 500 Stock
Index# +10.87% +3.58% -2.30% +12.07%
Lehman Brothers Aggregate Bond
Index# +4.34% +6.19% +7.71% +7.72%
</Table>
+Source: Lipper Inc.
#Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been
lower.
19
<Page>
UTILITIES SERIES(1),(4),(5),(6),(10),(13),(15),(16)
[CHART]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended December 31, 2004.)
<Table>
<Caption>
UTILITIES SERIES - INITIAL CLASS STANDARD & POOR'S 500 UTILITIES INDEX#
12/94 $ 10,000 $ 10,000
12/95 $ 13,236 $ 13,274
12/96 $ 15,933 $ 14,028
12/97 $ 21,145 $ 17,487
12/98 $ 24,855 $ 20,081
12/99 $ 32,633 $ 18,237
12/00 $ 34,918 $ 28,667
12/2001 $ 26,420 $ 19,941
12/2002 $ 20,115 $ 13,960
12/2003 $ 27,407 $ 17,626
12/2004 $ 35,732 $ 21,905
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +30.37% +35.24% +9.49% +257.32%
Average Annual Total Return +30.37% +10.59% +1.83% +13.58%
Service Class
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Cumulative Total Return +30.01% +34.26% +8.52% +254.15%
Average Annual Total Return +30.01% +10.32% +1.65% +13.48%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------
Average utility fund+ +23.40% +4.87% +0.47% +9.90%
Standard & Poor's 500 Utilities
Index# +24.28% +3.18% +3.73% +8.16%
</Table>
+Source: Lipper Inc.
#Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been
lower.
20
<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. For performance that reflects the deduction of
fees and charges imposed by insurance company separate accounts, visit
sunlife-usa.com.
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.
From time to time the series may receive proceeds from the settlement of a class
action lawsuit, without which performance would be lower.
INDEX DEFINITIONS
RUSSELL 1000 GROWTH INDEX -- measures large-cap U.S. growth stocks.
RUSSELL 3000 GROWTH INDEX -- measures U.S. growth stocks.
MSCI ALL COUNTRY WORLD GROWTH INDEX -- measures developed and emerging market
stock markets.
MSCI WORLD GROWTH INDEX -- measures global growth stocks.
MSCI ALL COUNTRY WORLD INDEX -- measures developed and emerging market stock
markets.
RUSSELL MIDCAP GROWTH INDEX -- measures U.S. mid-cap growth stocks.
S&P 500 STOCK INDEX -- a capitalization-weighted index of 500 widely held
stocks, designed to measure broad USequity performance.
LEHMAN BROTHERS AGGREGATE BOND INDEX -- measures the U.S. investment grade,
fixed rate bond market, with index components for government and corporate
securities, mortgage pass-through securities, and asset-backed securities.
S&P 500 UTILITIES INDEX -- measures the utilities sector.
It is not possible to invest directly in an index.
KEY RISK CONSIDERATIONS
(1) The portfolio may invest in foreign and/or emerging markets securities,
which are more susceptible to interest rate, currency exchange rate,
economic, and political risks.
(2) The portfolio may invest in small-, mid-sized, or emerging companies, which
are susceptible to greater risk than is customarily associated with
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 or
industries making it more susceptible to adverse economic, political, or
regulatory developments affecting those sectors or industries than a
portfolio that invests more broadly.
(5) The portfolio may invest a relatively high percentage of its assets in a
small number of issuers or even in a single issuer. This makes the
portfolio's value more sensitive to developments associated with the issuer
and the overall market.
(6) The portfolio may invest in high yield or lower-rated securities, which may
provide greater returns but are subject to greater-than-average risk.
(7) Prices of growth company securities held by the portfolio fall to a greater
extent than the overall equity markets (e.g. as represented by the S&P 500
Index) due to changing economic, political or market conditions or
disappointing growth company earnings results.
(8) Over-the-counter (OTC) transactions involve risks in addition to those
associated with transactions in securities traded on exchanges. OTC-listed
companies may have limited product lines, markets or financial resources.
Many OTC stocks trade less frequently and in smaller volume than
exchange-listed stocks. The values of these stocks may be more volatile
than exchange-listed stocks, and the portfolio may experience difficulty in
buying and selling these stocks at prevailing market prices.
(9) Large cap companies tend to go in and out of favor based on market and
economic conditions. Large cap companies tend to be less volatile than
companies with smaller market capitalizations. In exchange for this
potentially lower risk, the portfolio's value may not rise as much as the
value of series that emphasize smaller cap companies.
(10) The portfolio has engaged and may engage in active and frequent trading to
achieve its principal investment strategies. Frequent trading increases
transaction costs, which could detract from the series' performance.
(11) The portfolio will allocate its investments based upon judgments made by
MFS. The portfolio could miss attractive investment opportunities by
underweighting markets where there are significant returns, and could lose
value by overweighting markets where there are significant declines.
(12) Prices of securities react to the economic condition of the company that
issued the security. The portfolio's equity investments in an issuer may
rise and fall based on the issuer's actual and anticipated earnings,
changes in management and the potential for takeovers and acquisitions. MFS
will invest in securities that are undervalued based on its belief that the
market value of these securities will rise due to anticipated events and
investor perceptions. If these events do not occur or are delayed, or if
investor perceptions about the securities do not improve, the market price
of these securities may not rise or may fall.
21
<Page>
(13) Convertible securities, like fixed income securities, tend to increase in
value when interest rates decline and decrease in value when interest rates
rise. The market value of a convertible security also tends to increase as
the market value of the underlying stock rises and decrease as the market
value of the underlying stock declines.
(14) The fixed income securities purchased by the portfolio may be traded in the
over-the-counter market rather than on an organized exchange and are
subject to liquidity risk. This means that they may be harder to purchase
or sell at a fair price. The inability to purchase or sell these fixed
income securities at a fair price could have a negative impact on the
series' performance.
(15) The value of utility company securities may decline because governmental
regulation controlling the utilities industry can change. This regulation
may prevent or delay a utility company from passing along cost increases to
its customers. Furthermore, regulatory authorities may not grant future
rate increases. Any increases granted may not be adequate to permit the
payment of dividends on common stocks. Deregulation in some markets has
resulted in increased costs and competition for utilities companies and
greater volatility in those companies' securities prices.
(16) 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.
(17) The portfolio utilizes short sales as an investment technique and will
suffer a loss if it sells a security short and the value of that security
rises. Because the portfolio must cover its short position subject to
prevailing market rates, the potential loss is unlimited.
The portfolios' values will vary daily in response to issuer, market,
regulatory, economic, or political developments. Because stocks tend to be
more volatile than some other investments, such as bonds, the more assets a
portfolio dedicates to stocks, generally the more volatile the portfolios'
values will be. Bond prices will decline when interest rates rise and will
increase when interest rates fall. Many bonds also carry credit risk, which
is the risk that issuers may fail to make timely principal or interest
payments. In addition, bonds with longer maturity dates will be subject to
greater price fluctuations than those with shorter maturity periods.
However, stocks historically have outperformed bonds over time. Please see
the prospectus for further information regarding these and other risk
considerations.
22
<Page>
EXPENSE TABLE
SERIES EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
JULY 1, 2004 THROUGH DECEMBER 31, 2004
As a shareholder of the series, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other series expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the series and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period, July 1, 2004 through December 31, 2004.
ACTUAL EXPENSES
The first line for each share class in the table below provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table below provides information
about hypothetical account values and hypothetical expenses based on the series'
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the series' actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the series and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the
series ongoing costs only and do not take into account the fees and expenses
imposed under the variable contracts through which your investment in the series
is made. Therefore, the second line for each share class in the table is useful
in comparing ongoing costs associated with an investment in vehicles (such as
the series) which fund benefits under variable annuity and variable life
insurance contracts and to qualified pension and retirement plans only, and will
not help you determine the relative total costs of investing in the series
through variable annuity and variable life insurance contracts. If the fees and
expenses imposed under the variable contracts were included, your costs would
have been higher.
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
CAPITAL EXPENSE VALUE VALUE DURING PERIOD**
APPRECIATION SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.82% $ 1,000 $ 1,072 $ 4.28
Hypothetical* 0.82% $ 1,000 $ 1,021 $ 4.18
Service Class
Actual 1.07% $ 1,000 $ 1,072 $ 5.59
Hypothetical* 1.07% $ 1,000 $ 1,020 $ 5.45
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EMERGING EXPENSE VALUE VALUE DURING PERIOD**
GROWTH SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.80% $ 1,000 $ 1,076 $ 4.19
Hypothetical* 0.80% $ 1,000 $ 1,021 $ 4.08
Service Class
Actual 1.05% $ 1,000 $ 1,075 $ 5.49
Hypothetical* 1.05% $ 1,000 $ 1,020 $ 5.35
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
GLOBAL GROWTH FUND RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 1.07% $ 1,000 $ 1,116 $ 5.71
Hypothetical* 1.07% $ 1,000 $ 1,020 $ 5.45
Service Class
Actual 1.32% $ 1,000 $ 1,115 $ 7.04
Hypothetical* 1.32% $ 1,000 $ 1,019 $ 6.72
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
MANAGED EXPENSE VALUE VALUE DURING PERIOD**
SECTORS SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.86% $ 1,000 $ 1,050 $ 4.44
Hypothetical* 0.86% $ 1,000 $ 1,021 $ 4.38
Service Class
Actual 1.11% $ 1,000 $ 1,049 $ 5.73
Hypothetical* 1.11% $ 1,000 $ 1,020 $ 5.65
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
MASSACHUSETTS EXPENSE VALUE VALUE DURING PERIOD**
INVESTORS TRUST SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.60% $ 1,000 $ 1,093 $ 3.17
Hypothetical* 0.60% $ 1,000 $ 1,022 $ 3.06
Service Class
Actual 0.85% $ 1,000 $ 1,091 $ 4.48
Hypothetical* 0.85% $ 1,000 $ 1,021 $ 4.33
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
MID CAP EXPENSE VALUE VALUE DURING PERIOD**
GROWTH SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.85% $ 1,000 $ 1,058 $ 4.41
Hypothetical* 0.85% $ 1,000 $ 1,021 $ 4.33
Service Class
Actual 1.10% $ 1,000 $ 1,057 $ 5.70
Hypothetical* 1.10% $ 1,000 $ 1,020 $ 5.60
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
RESEARCH SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.80% $ 1,000 $ 1,101 $ 4.24
Hypothetical* 0.80% $ 1,000 $ 1,021 $ 4.08
Service Class
Actual 1.05% $ 1,000 $ 1,100 $ 5.56
Hypothetical* 1.05% $ 1,000 $ 1,020 $ 5.35
</Table>
23
<Page>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
TOTAL EXPENSE VALUE VALUE DURING PERIOD**
RETURN SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.69% $ 1,000 $ 1,086 $ 3.63
Hypothetical* 0.69% $ 1,000 $ 1,022 $ 3.52
Service Class
Actual 0.94% $ 1,000 $ 1,084 $ 4.94
Hypothetical* 0.94% $ 1,000 $ 1,020 $ 4.79
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
UTILITIES SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- --------------------------------------------------------------------------------------------------
Initial Class
Actual 0.82% $ 1,000 $ 1,228 $ 4.60
Hypothetical* 0.82% $ 1,000 $ 1,021 $ 4.18
Service Class
Actual 1.07% $ 1,000 $ 1,228 $ 6.01
Hypothetical* 1.07% $ 1,000 $ 1,020 $ 5.45
</Table>
* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year.
24
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
CAPITAL APPRECIATION SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 96.0%
AEROSPACE-- 0.9%
Lockheed Martin Corp. 119,200 $ 6,621,560
------------
AIRLINES -- 1.1%
Southwest Airlines Co. 461,100 $ 7,506,708
------------
APPAREL MANUFACTURERS -- 0.9%
Nike, Inc., "B" 44,400 $ 4,026,636
Polo Ralph Lauren Corp., "A" 56,700 2,415,420
------------
$ 6,442,056
------------
AUTOMOTIVE -- 1.5%
Harley-Davidson, Inc. 175,600 $ 10,667,700
------------
BANKS & CREDIT COMPANIES -- 2.5%
American Express Co. 94,400 $ 5,321,328
Citigroup, Inc. 263,803 12,710,028
------------
$ 18,031,356
------------
BIOTECHNOLOGY -- 5.2%
Amgen, Inc.* 306,300 $ 19,649,145
Cephalon, Inc.* 14,600 742,848
Genzyme Corp.* 156,000 9,058,920
ImClone Systems, Inc.* 160,700 7,405,056
------------
$ 36,855,969
------------
BROADCAST & CABLE TV -- 4.6%
Citadel Broadcasting Corp.* 367,000 $ 5,938,060
Comcast Corp., "A"* 391,400 13,025,792
EchoStar Communications Corp., "A" 210,295 6,990,206
Time Warner, Inc.* 202,800 3,942,432
Univision Communications, Inc., "A"* 98,700 2,888,949
------------
$ 32,785,439
------------
BROKERAGE & ASSET MANAGERS -- 1.4%
Merrill Lynch & Co., Inc. 137,170 $ 8,198,651
Morgan Stanley 33,000 1,832,160
------------
$ 10,030,811
------------
BUSINESS SERVICES -- 2.5%
Accenture Ltd., "A"* 208,100 $ 5,618,700
Fiserv, Inc.* 90,500 3,637,195
Manpower, Inc. 102,300 4,941,090
SOFTBANK CORP. 76,100 3,694,858
------------
$ 17,891,843
------------
CHEMICALS -- 1.3%
3M Co. 65,200 $ 5,350,964
E.I. du Pont de Nemours & Co. 78,400 3,845,520
------------
$ 9,196,484
------------
COMPUTER SOFTWARE -- 6.3%
Akamai Technologies, Inc.* 53,600 $ 698,408
Amdocs Ltd.* 257,900 6,769,875
Mercury Interactive Corp.* 24,000 1,093,200
Microsoft Corp. 787,300 21,028,783
Oracle Corp.* 515,000 7,065,800
Red Hat, Inc.* 465,300 6,211,755
Symantec Corp.* 68,900 1,774,864
------------
$ 44,642,685
------------
COMPUTER SOFTWARE -- SYSTEMS -- 2.7%
CDW Corp. 53,600 $ 3,556,360
Dell, Inc.* 376,200 15,853,068
------------
$ 19,409,428
------------
CONSUMER GOODS & SERVICES -- 3.8%
Apollo Group, Inc., "A"* 106,400 $ 8,587,544
Career Education Corp.* 58,700 2,348,000
Procter & Gamble Co. 287,900 15,857,532
------------
$ 26,793,076
------------
ELECTRICAL EQUIPMENT -- 2.4%
Emerson Electric Co. 104,700 $ 7,339,470
Hubbell, Inc., "B" 33,400 1,746,820
Tyco International Ltd. 219,500 7,844,930
------------
$ 16,931,220
------------
ELECTRONICS -- 3.5%
Amphenol Corp., "A"* 138,500 $ 5,088,490
Analog Devices, Inc. 173,790 6,416,327
Applied Materials, Inc.* 196,400 3,358,440
Marvell Technology Group Ltd.* 123,300 4,373,451
PMC-Sierra, Inc.* 149,200 1,678,500
Xilinx, Inc. 120,900 3,584,685
------------
$ 24,499,893
------------
FOOD & DRUG STORES -- 1.1%
CVS Corp. 172,800 $ 7,788,096
------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 3.5%
PepsiCo, Inc. 342,100 $ 17,857,620
SYSCO Corp. 190,200 7,259,934
------------
$ 25,117,554
------------
GAMING & LODGING -- 1.4%
Carnival Corp. 76,900 $ 4,431,747
Cendant Corp. 183,600 4,292,568
International Game Technology 30,600 1,052,028
------------
$ 9,776,343
------------
GENERAL MERCHANDISE -- 4.2%
Family Dollar Stores, Inc. 264,500 $ 8,260,335
Kohl's Corp.* 67,200 3,304,224
Target Corp. 209,640 10,886,605
Wal-Mart Stores, Inc. 134,000 7,077,880
------------
$ 29,529,044
------------
INSURANCE -- 1.7%
St. Paul Travelers Cos., Inc. 172,200 $ 6,383,454
XL Capital Ltd., "A" 69,300 5,381,145
------------
$ 11,764,599
------------
INTERNET -- 5.5%
Amazon.com, Inc.* 87,600 $ 3,879,804
eBay, Inc.* 80,100 9,314,028
IAC/InterActiveCorp* 705,800 19,494,196
Yahoo!, Inc.* 172,800 6,511,104
------------
$ 39,199,132
------------
LEISURE & TOYS -- 1.5%
Electronic Arts, Inc.* 166,500 $ 10,269,720
------------
MACHINERY & TOOLS -- 2.7%
Caterpillar, Inc. 124,600 $ 12,149,746
Illinois Tool Works, Inc. 74,400 6,895,392
------------
$ 19,045,138
------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES -- 2.7%
Caremark Rx, Inc.* 178,400 $ 7,034,312
Community Health Systems, Inc.* 190,500 5,311,140
HCA, Inc. 178,000 7,112,880
------------
$ 19,458,332
------------
MEDICAL EQUIPMENT -- 3.9%
Guidant Corp. 49,400 $ 3,561,740
Medtronic, Inc. 305,500 15,174,185
Millipore Corp.* 49,800 2,480,538
Thermo Electron Corp.* 206,100 6,222,159
------------
$ 27,438,622
------------
METALS & MINING -- 0.6%
Companhia Vale do Rio Doce, ADR 140,400 $ 4,073,004
------------
OIL SERVICES -- 2.3%
BJ Services Co. 90,900 $ 4,230,486
GlobalSantaFe Corp. 117,200 3,880,492
Noble Corp.* 83,000 4,128,420
Smith International, Inc.* 73,400 3,993,694
------------
$ 16,233,092
------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.6%
Lexmark International, Inc., "A"* 47,700 $ 4,054,500
------------
</Table>
25
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
PHARMACEUTICALS -- 12.4%
Abbott Laboratories 318,600 $ 14,862,690
Allergan, Inc. 47,300 3,834,611
AstraZeneca PLC 99,800 3,613,219
Eli Lilly & Co. 124,900 7,088,075
Johnson & Johnson 475,400 30,149,868
Roche Holdings AG 62,500 7,168,675
Wyeth 501,500 21,358,885
-------------
$ 88,076,023
-------------
POLLUTION CONTROL -- 0.5%
Waste Management, Inc. 126,300 $ 3,781,422
-------------
RESTAURANTS -- 0.6%
Outback Steakhouse, Inc. 87,600 $ 4,010,328
-------------
SPECIALTY STORES -- 3.0%
Best Buy Co., Inc. 86,300 $ 5,127,946
CarMax, Inc.* 132,100 4,101,705
Lowe's Cos., Inc. 141,000 8,120,190
PETsMART, Inc. 115,900 4,117,927
-------------
$ 21,467,768
-------------
TELECOMMUNICATIONS -- WIRELESS -- 1.0%
Vodafone Group PLC, ADR 246,413 $ 6,746,788
-------------
TELECOMMUNICATIONS -- WIRELINE -- 3.7%
Cisco Systems, Inc.* 1,375,040 $ 26,538,272
-------------
TELEPHONE SERVICES -- 1.0%
Sprint Corp. 282,250 $ 7,013,912
-------------
TRUCKING -- 1.5%
FedEx Corp. 106,600 $ 10,499,033
-------------
Total Stocks (Identified Cost,
$583,985,283) $ 680,186,950
-------------
REPURCHASE AGREEMENT -- 4.2%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04,
due 1/03/05, total to be received
$29,770,432 (secured by various U.S.
Treasury and Federal Agency obligations
in a jointly traded account), at Cost $ 29,765,000 $ 29,765,000
-------------
Total Investments
(Identified Cost, $613,750,283) $ 709,951,950
-------------
OTHER ASSETS,
LESS LIABILITIES -- (0.2)% (1,708,539)
-------------
Net Assets -- 100.0% $ 708,243,411
=============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
EMERGING GROWTH SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 98.9%
AIRLINES -- 0.4%
JetBlue Airways Corp.*^ 80,820 $ 1,876,640
------------
ALCOHOLIC BEVERAGES -- 0.5%
Anheuser-Busch Cos., Inc. 41,670 $ 2,113,919
------------
APPAREL MANUFACTURERS -- 1.1%
Coach, Inc.* 25,440 $ 1,434,816
Nike, Inc., "B" 37,840 3,431,710
------------
$ 4,866,526
------------
BANKS & CREDIT COMPANIES -- 1.8%
American Express Co. 99,460 $ 5,606,560
Investors Financial Services Corp.^ 46,770 2,337,565
------------
$ 7,944,125
------------
BIOTECHNOLOGY -- 6.2%
Amgen, Inc.* 50,870 $ 3,263,310
Celgene Corp.^* 68,400 1,814,652
Gen-Probe, Inc.* 61,500 2,780,415
Genzyme Corp.* 119,390 6,932,977
Gilead Sciences, Inc.* 96,500 3,376,535
ImClone Systems, Inc.* 77,250 3,559,680
MedImmune, Inc.* 119,340 3,235,307
Neurocrine Biosciences, Inc.^* 39,210 1,933,053
------------
$ 26,895,929
------------
BROADCAST & CABLE TV -- 6.5%
Citadel Broadcasting Corp.^* 116,600 $ 1,886,588
EchoStar Communications Corp., "A"^ 142,910 4,750,328
Grupo Televisa S.A., ADR 57,560 3,482,380
News Corp., "A"^ 130,640 2,437,742
NTL, Inc.* 86,080 6,280,397
Publishing & Broadcasting Ltd. 106,300 1,453,693
Telewest Global, Inc.* 94,200 1,656,036
Walt Disney Co. 105,820 2,941,796
Westwood One, Inc.^* 126,760 3,413,647
------------
$ 28,302,607
------------
BROKERAGE & ASSET MANAGERS -- 3.1%
Ameritrade Holding Corp.* 150,280 $ 2,136,982
Goldman Sachs Group, Inc. 20,800 2,164,032
Legg Mason, Inc. 94,800 6,945,048
Lehman Brothers Holdings, Inc. 24,900 2,178,252
------------
$ 13,424,314
------------
BUSINESS SERVICES -- 6.8%
Alliance Data Systems Corp.^* 94,970 $ 4,509,176
Ceridian Corp.* 105,840 1,934,755
Corporate Executive Board Co. 28,280 1,893,063
DST Systems, Inc.* 115,360 6,012,563
Getty Images, Inc.^ 122,050 8,403,143
Hewitt Associates, Inc., "A"* 27,000 864,270
Manpower, Inc. 40,490 1,955,667
Paychex, Inc. 55,710 1,898,597
SOFTBANK CORP. 47,500 2,306,252
------------
$ 29,777,486
------------
CHEMICALS -- 0.2%
Nalco Holding Co.* 35,700 $ 696,864
------------
COMPUTER SOFTWARE -- 7.8%
Akamai Technologies, Inc.^* 92,660 $ 1,207,360
Amdocs Ltd.* 258,110 6,775,388
Business Objects S.A., ADR^* 26,000 658,840
Check Point Software Technologies Ltd.* 105,200 2,591,076
Macromedia, Inc.* 51,100 1,590,232
Mercury Interactive Corp.* 123,800 5,639,090
Oracle Corp.* 422,700 5,799,444
Red Hat, Inc.^* 83,400 1,113,390
Symantec Corp.* 102,720 2,646,067
VERITAS Software Corp.* 213,050 6,082,578
------------
$ 34,103,465
------------
</Table>
26
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
COMPUTER SOFTWARE -- SYSTEMS -- 3.4%
Apple Computer, Inc.* 27,490 $ 1,770,356
Citrix Systems, Inc.* 94,900 2,327,897
Dell, Inc.* 221,140 9,318,840
National Instruments Corp.^ 44,360 1,208,810
------------
$ 14,625,903
------------
CONSUMER GOODS & SERVICES -- 2.0%
Apollo Group, Inc., "A"* 36,730 $ 2,964,478
Career Education Corp.^* 107,530 4,301,200
Strayer Education, Inc. 14,420 1,583,172
------------
$ 8,848,850
------------
ELECTRICAL EQUIPMENT -- 0.8%
Tyco International Ltd. 99,490 $ 3,555,773
------------
ELECTRONICS -- 4.0%
Analog Devices, Inc. 77,300 $ 2,853,916
Integrated Circuit Systems, Inc.^* 36,400 761,488
Marvell Technology Group Ltd.* 72,360 2,566,609
PMC-Sierra, Inc.^* 148,520 1,670,850
Samsung Electronics Co. Ltd., GDR* 13,700 3,000,300
Silicon Laboratories, Inc.^* 78,600 2,775,366
Symbol Technologies, Inc. 68,900 1,191,970
Xilinx, Inc. 84,100 2,493,565
------------
$ 17,314,064
------------
ENTERTAINMENT -- 0.2%
DreamWorks Animation, Inc., "A"* 26,770 $ 1,004,143
------------
FOOD & DRUG STORES -- 1.5%
CVS Corp. 67,650 $ 3,048,985
Walgreen Co. 93,830 3,600,257
------------
$ 6,649,242
------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 0.7%
PepsiCo, Inc. 62,190 $ 3,246,318
------------
FURNITURE & APPLIANCES -- 1.0%
Harman International Industries, Inc. 34,600 $ 4,394,200
------------
GAMING & LODGING -- 3.7%
Carnival Corp. 106,550 $ 6,140,476
Four Seasons Hotels, Inc. 13,880 1,135,245
International Game Technology 49,820 1,712,812
Royal Caribbean Cruises Ltd.^ 105,780 5,758,663
WMS Industries, Inc.^* 48,160 1,615,286
------------
$ 16,362,482
------------
GENERAL MERCHANDISE -- 2.0%
Family Dollar Stores, Inc. 100,440 $ 3,136,741
Target Corp. 88,790 4,610,865
Wal-Mart de Mexico S.A. de C.V. 310,330 1,066,263
------------
$ 8,813,869
------------
INTERNET -- 5.5%
eBay, Inc.* 75,360 $ 8,762,861
Google, Inc.^* 30,600 5,908,860
IAC/InterActiveCorp^* 67,099 1,853,274
Yahoo!, Inc. 204,060 7,688,981
------------
$ 24,213,976
------------
LEISURE & TOYS -- 2.6%
Activision, Inc.* 77,800 $ 1,570,004
Electronic Arts, Inc.* 102,970 6,351,190
Nintendo Co. Ltd. 28,400 3,556,390
------------
$ 11,477,584
------------
MACHINERY & TOOLS -- 1.1%
Caterpillar, Inc. 7,800 $ 760,578
Illinois Tool Works, Inc. 41,480 3,844,366
------------
$ 4,604,944
------------
MEDICAL & HEALTH TECHNOLOGY &
SERVICES -- 1.3%
Community Health Systems, Inc.* 64,350 $ 1,794,078
HCA, Inc. 99,030 3,957,239
------------
$ 5,751,317
------------
MEDICAL EQUIPMENT -- 10.7%
Baxter International, Inc. 99,540 $ 3,438,112
C.R. Bard, Inc. 28,620 1,831,108
Cytyc Corp.* 405,950 11,192,042
DENTSPLY International, Inc. 38,440 2,160,328
Fisher Scientific International, Inc.^* 106,352 6,634,238
Guidant Corp. 60,520 4,363,492
Medtronic, Inc. 125,700 6,243,519
Millipore Corp.* 89,530 4,459,489
Synthes, Inc. 9,700 1,083,680
Waters Corp.* 117,780 5,510,926
------------
$ 46,916,934
------------
METALS & MINING -- 0.6%
Aber Diamond Corp.+* 6,600 $ 233,446
Aber Diamond Corp.* 13,600 481,040
Companhia Vale do Rio Doce, ADR 61,020 1,770,190
------------
$ 2,484,676
------------
OIL SERVICES -- 2.2%
BJ Services Co. 75,320 $ 3,505,393
GlobalSantaFe Corp. 109,220 3,616,274
Smith International, Inc.* 49,220 2,678,060
------------
$ 9,799,727
------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.1%
EMC Corp. 166,700 $ 2,478,829
Lexmark International, Inc., "A"* 27,540 2,340,900
------------
$ 4,819,729
------------
PHARMACEUTICALS -- 6.3%
Allergan, Inc. 62,130 $ 5,036,879
Endo Pharmaceuticals Holdings, Inc.* 56,020 1,177,540
Johnson & Johnson 63,830 4,048,099
Medicis Pharmaceutical Corp., "A" 173,990 6,108,789
Novartis AG 64,220 3,224,365
Roche Holdings AG 36,550 4,192,241
Watson Pharmaceuticals, Inc.^* 27,200 892,432
Wyeth 64,400 2,742,796
------------
$ 27,423,141
------------
PRINTING & PUBLISHING -- 0.2%
Playboy Enterprises, Inc.,"B"* 54,950 $ 675,336
------------
RESTAURANTS -- 0.5%
Cheesecake Factory, Inc.^* 32,220 $ 1,046,183
Starbucks Corp.^* 18,190 1,134,328
------------
$ 2,180,511
------------
SPECIALTY STORES -- 1.6%
Home Depot, Inc. 89,500 $ 3,825,230
Tiffany & Co. 100,670 3,218,420
------------
$ 7,043,650
------------
TELECOMMUNICATIONS -- WIRELESS -- 2.5%
America Movil S.A. de C.V., ADR^ 105,040 $ 5,498,844
Vodafone Group PLC, ADR 190,559 5,217,505
------------
$ 10,716,349
------------
TELECOMMUNICATIONS -- WIRELINE -- 3.6%
AudioCodes Ltd.* 40,200 $ 667,722
Cisco Systems, Inc.* 267,311 5,159,102
Comverse Technology, Inc.* 195,510 4,780,220
Harris Corp. 36,420 2,250,392
Juniper Networks, Inc.^* 107,848 2,932,387
------------
$ 15,789,823
------------
TELEPHONE SERVICES -- 5.0%
American Tower Corp., "A"^* 499,560 $ 9,191,904
Crown Castle International Corp.* 159,360 2,651,750
SpectraSite, Inc.* 113,320 6,561,228
Sprint Corp. 139,600 3,469,060
------------
$ 21,873,942
------------
</Table>
27
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
TRUCKING -- 0.4%
Expeditors International of Washington,
Inc.^ 27,890 $ 1,558,493
-------------
Total Stocks (Identified Cost,
$370,627,438) $ 432,146,851
-------------
COLLATERAL FOR SECURITIES LOANED -- 13.5%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value 59,187,926 $ 59,187,926
-------------
REPURCHASE AGREEMENT -- 1.2%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04,
due 01/03/05, total to be received
$5,038,919 (secured by various U.S.
Treasury and Federal Agency obligations
in a jointly traded account), at Cost $ 5,038,000 $ 5,038,000
-------------
Total Investments
(Identified Cost, $434,853,364) $ 496,372,777
-------------
OTHER ASSETS,
LESS LIABILITIES -- (13.6)% (59,422,672)
-------------
Net Assets -- 100.0% $ 436,950,105
=============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
GLOBAL GROWTH SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 98.0%
AEROSPACE -- 0.5%
Lockheed Martin Corp. 17,190 $ 954,904
------------
ALCOHOLIC BEVERAGES -- 0.8%
Pernod Ricard^ 9,300 $ 1,419,665
------------
APPAREL MANUFACTURERS -- 0.9%
Burberry Group PLC 113,060 $ 868,931
Toray Industries, Inc. 151,000 705,230
------------
$ 1,574,161
------------
AUTOMOTIVE -- 1.9%
Autoliv, Inc.^ 17,650 $ 842,849
Magna International, Inc., "A" 8,730 720,661
Toyota Motor Corp. 44,900 1,821,776
------------
$ 3,385,286
------------
BANKS & CREDIT COMPANIES -- 10.2%
AEON Credit Service Co. Ltd. 12,500 $ 927,998
Aiful Corp. 7,000 767,599
American Express Co. 30,070 1,695,046
Anglo Irish Bank Corp. PLC 43,510 1,050,798
Bank Hapoalim B.M. 542,800 1,830,694
Citigroup, Inc. 53,292 2,567,609
DEPFA Bank PLC 85,980 1,438,279
Erste Bank der oesterreichischen
Sparkassen AG 39,180 2,085,623
Royal Bank of Scotland Group PLC 44,637 1,498,859
Shinsei Bank Ltd.^ 118,000 801,401
Takefuji Corp. 25,930 1,748,430
UBS AG 27,311 2,281,800
------------
$ 18,694,136
------------
BIOTECHNOLOGY -- 2.1%
Amgen, Inc.* 16,860 $ 1,081,569
Genzyme Corp.* 30,160 1,751,391
ImClone Systems, Inc.* 20,280 934,502
------------
$ 3,767,462
------------
BROADCAST & CABLE TV -- 5.0%
Antena 3 de Television S.A.^* 9,391 $ 676,074
News Corp., Inc., "B"^ 156,212 2,991,982
Time Warner, Inc.* 71,120 1,382,573
TV Azteca S.A. de C.V., ADR^ 152,220 1,564,822
Viacom, Inc., "B" 34,800 1,266,372
Walt Disney Co. 46,830 1,301,874
------------
$ 9,183,697
------------
BROKERAGE & ASSET MANAGERS -- 2.1%
Ameritrade Holding Corp.* 60,070 $ 854,195
Franklin Resources, Inc. 25,690 1,789,308
Goldman Sachs Group, Inc. 11,890 1,237,036
MarketAxess Holdings, Inc.* 160 2,722
------------
$ 3,883,261
------------
BUSINESS SERVICES -- 2.8%
Accenture Ltd., "A"* 43,210 $ 1,166,670
Fiserv, Inc.* 22,250 894,227
Getty Images, Inc.* 27,950 1,924,357
Manpower, Inc. 24,480 1,182,384
------------
$ 5,167,638
------------
CHEMICALS -- 2.2%
Monsanto Co. 28,470 $ 1,581,508
Nalco Holding Co.* 44,200 862,784
Sasol Ltd. 77,800 1,667,635
------------
$ 4,111,927
------------
COMPUTER SOFTWARE -- 3.7%
Amdocs Ltd.* 33,690 $ 884,362
Mercury Interactive Corp.* 19,720 898,246
Opsware, Inc.^* 101,500 745,010
Oracle Corp.* 204,740 2,809,033
VERITAS Software Corp.* 47,870 1,366,688
------------
$ 6,703,339
------------
</Table>
28
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
COMPUTER SOFTWARE -- SYSTEMS -- 1.5%
Dell, Inc.* 67,060 $ 2,825,908
------------
CONSTRUCTION -- 1.5%
Italcementi S.p.A. 94,290 $ 1,076,644
Siam Cement Public Co. Ltd. 233,350 1,656,753
------------
$ 2,733,397
------------
CONSUMER GOODS & SERVICES -- 1.8%
Colgate-Palmolive Co. 25,760 $ 1,317,882
Reckitt Benckiser PLC 65,800 1,985,008
------------
$ 3,302,890
------------
ELECTRICAL EQUIPMENT -- 2.0%
MSC Industrial Direct Co., Inc., "A" 16,460 $ 592,231
Nidec Corp. 11,200 1,361,109
Nitto Denko Corp. 32,000 1,749,842
------------
$ 3,703,182
------------
ELECTRONICS -- 5.3%
CANON, Inc.^ 42,000 $ 2,259,888
Funai Electric Co. Ltd. 7,700 952,994
Marvell Technology Group Ltd.* 38,190 1,354,599
Murata Manufacturing Co. Ltd. 23,100 1,287,891
Samsung Electronics Co. Ltd. 3,970 1,727,671
Seiko Epson Corp. 36,700 1,628,334
Stanley Electric Co. Ltd.^ 30,100 514,285
------------
$ 9,725,662
------------
ENERGY -- INDEPENDENT -- 1.9%
EnCana Corp.* 15,820 $ 901,627
Reliance Industries Ltd. 142,310 1,756,418
Talisman Energy, Inc.* 33,280 897,061
------------
$ 3,555,106
------------
ENERGY -- INTEGRATED -- 2.4%
BP PLC, ADR 40,668 $ 2,375,011
TOTAL S.A.^ 9,280 2,019,960
------------
$ 4,394,971
------------
ENGINEERING -- CONSTRUCTION -- 0.3%
InfraSource Services, Inc.^* 42,000 $ 546,000
------------
FOOD & DRUG STORES -- 0.5%
7-Eleven, Inc.* 39,560 $ 947,462
------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 3.8%
Compass Group PLC 353,960 $ 1,670,560
Groupe Danone^ 19,470 1,791,985
Nestle S.A. 6,897 1,797,904
PepsiCo, Inc. 32,110 1,676,142
------------
$ 6,936,591
------------
FOREST & PAPER PRODUCTS -- 0.9%
Aracruz Celulose S.A., ADR^ 41,260 $ 1,555,502
------------
GAMING & LODGING -- 0.5%
Carnival Corp. 16,700 $ 962,421
------------
GENERAL MERCHANDISE -- 0.7%
Target Corp. 23,310 $ 1,210,488
------------
INSURANCE -- 2.2%
Riunione Adriatica di Sicurta S.p.A.^ 79,460 $ 1,790,939
Sanlam Group 1,002,160 2,307,897
------------
$ 4,098,836
------------
INTERNET -- 2.1%
eBay, Inc.* 14,140 $ 1,644,199
Yahoo!, Inc.* 58,460 2,202,773
------------
$ 3,846,972
------------
LEISURE & TOYS -- 1.0%
Electronic Arts, Inc.* 16,640 $ 1,026,355
Nintendo Co. Ltd.* 6,100 763,873
------------
$ 1,790,228
------------
MACHINERY & TOOLS -- 1.8%
Atlas Copco AB, "A" 16,150 $ 727,565
Mitsui Mining & Smelting Co. Ltd. 264,000 1,161,061
Neopost S.A.^ 7,750 600,450
Sandvik AB 18,780 755,802
------------
$ 3,244,878
------------
MEDICAL EQUIPMENT -- 3.0%
Boston Scientific Corp.* 25,200 $ 895,860
Discovery Partners International, Inc.^* 60 285
Fisher Scientific International, Inc.* 12,420 774,760
Medtronic, Inc. 28,180 1,399,701
Straumann Holding AG^ 4,180 864,386
Synthes, Inc.* 14,490 1,618,817
------------
$ 5,553,809
------------
METALS & MINING -- 3.7%
Aber Diamond Corp.+ 31,000 $ 1,096,488
Anglo American PLC 82,210 1,941,186
BHP Billiton Ltd. 140,990 1,690,110
Companhia Vale do Rio Doce, ADR 72,430 2,101,194
------------
$ 6,828,978
------------
PHARMACEUTICALS -- 8.0%
AstraZeneca PLC 47,610 $ 1,723,701
Chugai Pharmaceutical Co. Ltd.^ 62,300 1,026,866
Eli Lilly & Co. 22,400 1,271,200
Johnson & Johnson 48,020 3,045,428
Medicis Pharmaceutical Corp., "A" 19,220 674,814
Roche Holdings AG 22,870 2,623,161
Sanofi-Aventis^ 27,210 2,167,129
Teva Pharmaceutical Industries Ltd., ADR 69,780 2,083,631
------------
$ 14,615,930
------------
PRINTING & PUBLISHING -- 2.2%
Johnston Press PLC 116,408 $ 1,209,244
Meredith Corp. 16,060 870,452
Yell Group PLC 234,260 1,975,525
------------
$ 4,055,221
------------
SPECIALTY CHEMICALS -- 2.0%
Asahi Glass Co. Ltd.^ 122,000 $ 1,341,377
Kaneka Corp. 46,000 519,192
L'Air Liquide S.A.^ 9,685 1,784,093
------------
$ 3,644,662
------------
SPECIALTY STORES -- 5.2%
Esprit Holdings Ltd. 152,000 $ 919,079
Hennes & Mauritz AB, "B" 53,940 1,875,167
Kingfisher PLC 266,522 1,582,254
Matalan PLC 209,070 887,559
NEXT PLC 50,066 1,583,283
Nishimatsuya Chain Co. Ltd. 19,700 743,722
RONA, Inc.* 19,700 669,716
TJX Cos., Inc. 50,930 1,279,871
------------
$ 9,540,651
------------
TELECOMMUNICATIONS -- WIRELESS -- 1.9%
Celular CRT Participacoes S.A. 1 $ 5
Vodafone Group PLC 1,263,240 3,419,842
------------
$ 3,419,847
------------
TELECOMMUNICATIONS -- WIRELINE -- 3.5%
Blue Coat Systems, Inc.^* 41,600 $ 774,176
Cisco Systems, Inc.* 179,780 3,469,754
CSR PLC* 103,280 771,992
Research In Motion Ltd.* 17,010 1,401,964
------------
$ 6,417,886
------------
TELEPHONE SERVICES -- 2.4%
Biscom S.p.A* 15,080 $ 865,648
Sprint Corp. 61,750 1,534,487
Telefonica S.A. 102,769 1,929,320
------------
$ 4,329,455
------------
</Table>
29
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
TOBACCO-- 1.5%
Altadis S.A. 30,550 $ 1,394,505
Swedish Match AB 115,900 1,340,146
-------------
$ 2,734,651
-------------
UTILITIES -- ELECTRIC POWER -- 2.2%
Iberdrola S.A.^ 74,080 $ 1,876,383
Suez S.A.^ 77,670 2,064,102
-------------
$ 3,940,485
-------------
Total Stocks (Identified Cost,
$153,294,775) $ 179,307,545
-------------
PREFERRED STOCKS -- 0.5%
AUTOMOTIVE -- 0.5%
Porsche AG, 8.75%^ 1,336 $ 849,613
-------------
Total Preferred Stocks
(Identified Cost, $642,960) $ 849,613
-------------
WARRANTS -- 0.0%
Lucent Technologies, Inc., Strike price
2.75, 1st exercise 12/10/04
(Telecommunications-- Wireline)* 82 $ 130
-------------
Total Warrants
(Identified Cost, $136) $ 130
-------------
COLLATERAL FOR SECURITIES LOANED -- 14.2%
Navigator Securities Lending Prime
Portfolio, at Cost and Net Asset Value 25,930,918 $ 25,930,918
-------------
REPURCHASE AGREEMENT -- 0.6%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04,
due 01/03/05, total to be received
$1,140,208 (secured by various U.S.
Treasury and Federal Agency obligations
in a jointly traded account), at Cost $ 1,140,000 $ 1,140,000
-------------
Total Investments
(Identified Cost, $181,008,789)~ $ 207,228,206
-------------
OTHER ASSETS,
LESS LIABILITIES -- (13.3)% (24,297,350)
-------------
Net Assets -- 100.0% $ 182,930,856
=============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
MANAGED SECTORS SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 99.0%
APPAREL MANUFACTURERS -- 2.3%
Nike, Inc., "B" 21,700 $ 1,967,973
Reebok International Ltd. 30,200 1,328,800
--------------
$ 3,296,773
--------------
BANKS & CREDIT COMPANIES -- 4.3%
American Express Co. 54,400 $ 3,066,528
Citigroup, Inc. 65,880 3,174,098
--------------
$ 6,240,626
--------------
BIOTECHNOLOGY -- 6.9%
Amgen, Inc.* 43,100 $ 2,764,865
Celgene Corp.* 36,200 960,386
Genentech, Inc.* 19,100 1,039,804
Genzyme Corp.* 54,500 3,164,815
Gilead Sciences, Inc.* 38,100 1,333,119
ImClone Systems, Inc.* 18,900 870,912
--------------
$ 10,133,901
--------------
BROADCAST & CABLE TV -- 6.3%
Comcast Corp., "A"* 64,830 $ 2,157,542
Omnicom Group, Inc. 10,500 885,360
Time Warner, Inc.* 123,170 2,394,425
Univision Communications, Inc., "A"* 33,600 983,472
Viacom, Inc., "B" 23,990 872,996
Walt Disney Co. 67,000 1,862,600
--------------
$ 9,156,395
--------------
BROKERAGE & ASSET MANAGERS -- 2.1%
Goldman Sachs Group, Inc. 20,920 $ 2,176,517
Merrill Lynch & Co., Inc. 14,600 872,642
--------------
$ 3,049,159
--------------
BUSINESS SERVICES -- 3.3%
Fiserv, Inc.* 36,500 $ 1,466,935
Getty Images, Inc.* 26,100 1,796,985
Monster Worldwide, Inc.* 45,700 1,537,348
--------------
$ 4,801,268
--------------
COMPUTER SOFTWARE -- 11.7%
Akamai Technologies, Inc.* 76,800 $ 1,000,704
Mercury Interactive Corp.* 42,400 1,931,320
Microsoft Corp. 219,780 5,870,324
Oracle Corp.* 242,230 3,323,396
Symantec Corp.* 54,900 1,414,224
VERITAS Software Corp.* 122,330 3,492,522
--------------
$ 17,032,490
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 3.8%
Dell, Inc.* 133,360 $ 5,619,790
--------------
CONSUMER GOODS & SERVICES -- 4.1%
Avon Products, Inc. 42,600 $ 1,648,620
Procter & Gamble Co. 78,000 4,296,240
--------------
$ 5,944,860
--------------
ELECTRICAL EQUIPMENT -- 1.6%
Emerson Electric Co. 25,100 $ 1,759,510
W.W. Grainger, Inc. 8,900 592,918
--------------
$ 2,352,428
--------------
ELECTRONICS -- 4.4%
Amphenol Corp., "A"* 33,100 $ 1,216,094
Analog Devices, Inc. 49,710 1,835,293
KLA-Tencor Corp.* 19,800 922,284
Maxim Integrated Products, Inc. 17,680 749,455
Texas Instruments, Inc. 71,000 1,748,020
--------------
$ 6,471,146
--------------
FOOD & DRUG STORES -- 1.5%
CVS Corp. 49,800 $ 2,244,486
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 0.5%
PepsiCo, Inc. 14,300 $ 746,460
--------------
GAMING & LODGING -- 2.1%
Carnival Corp. 53,200 $ 3,065,916
--------------
</Table>
30
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
GENERAL MERCHANDISE -- 2.5%
Kohl's Corp.* 26,650 $ 1,310,381
Target Corp. 46,370 2,407,994
--------------
$ 3,718,375
--------------
HEALTH MAINTENANCE ORGANIZATIONS -- 1.3%
WellPoint, Inc.* 16,000 $ 1,840,000
--------------
INTERNET -- 5.2%
eBay, Inc.* 33,000 $ 3,837,240
Yahoo!, Inc.* 101,600 3,828,288
--------------
$ 7,665,528
--------------
MACHINERY & TOOLS -- 2.3%
Caterpillar, Inc. 34,200 $ 3,334,842
--------------
MEDICAL EQUIPMENT -- 5.5%
Fisher Scientific International, Inc.* 42,100 $ 2,626,198
Medtronic, Inc. 63,900 3,173,913
Waters Corp.* 46,300 2,166,377
--------------
$ 7,966,488
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.1%
EMC Corp.* 112,700 $ 1,675,849
Network Appliance, Inc.* 43,800 1,455,036
--------------
$ 3,130,885
--------------
PHARMACEUTICALS -- 12.2%
Abbott Laboratories 86,980 $ 4,057,617
Eli Lilly & Co. 36,100 2,048,675
Johnson & Johnson 113,440 7,194,365
Wyeth 105,600 4,497,504
--------------
$ 17,798,161
--------------
RESTAURANTS -- 1.0%
YUM! Brands, Inc. 31,000 $ 1,462,580
--------------
SPECIALTY STORES -- 5.0%
Abercrombie & Fitch Co., "A" 19,000 $ 892,050
Best Buy Co., Inc. 37,800 2,246,076
Lowe's Cos., Inc. 19,800 1,140,282
PETsMART, Inc. 30,000 1,065,900
Staples, Inc. 56,400 1,901,244
--------------
$ 7,245,552
--------------
TELECOMMUNICATIONS -- WIRELINE -- 4.5%
ADTRAN, Inc. 22,300 $ 426,822
Cisco Systems, Inc.* 280,260 5,409,018
Research In Motion Ltd.* 8,600 708,812
--------------
$ 6,544,652
--------------
TRUCKING -- 2.5%
FedEx Corp. 21,300 $ 2,097,837
United Parcel Service, Inc., "B" 18,900 1,615,194
--------------
$ 3,713,031
--------------
Total Stocks (Identified Cost,
$122,582,931) $ 144,575,792
--------------
REPURCHASE AGREEMENT -- 0.9%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04, due
1/03/05, total to be received $1,292,236
(secured by various U.S. Treasury and Federal
Agency obligations in a jointly traded
account), at Cost $ 1,292,000 $ 1,292,000
--------------
Total Investments
(Identified Cost, $123,874,931) $ 145,867,792
--------------
OTHER ASSETS,
LESS LIABILITIES -- 0.1% 131,734
--------------
Net Assets -- 100.0% $ 145,999,526
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
MASSACHUSETTS INVESTORS TRUST SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 98.5%
AEROSPACE -- 5.0%
Lockheed Martin Corp. 387,510 $ 21,526,181
United Technologies Corp. 348,800 36,048,480
--------------
$ 57,574,661
--------------
ALCOHOLIC BEVERAGES -- 0.7%
Anheuser-Busch Cos., Inc. 165,800 $ 8,411,034
--------------
AUTOMOTIVE -- 0.9%
Harley-Davidson, Inc. 163,200 $ 9,914,400
--------------
BANKS & CREDIT COMPANIES -- 10.7%
American Express Co. 338,200 $ 19,064,334
Bank of America Corp. 492,700 23,151,973
Citigroup, Inc. 304,780 14,684,300
Freddie Mac 210,300 15,499,110
J.P. Morgan Chase & Co. 623,400 24,318,834
Northern Trust Corp.^ 125,200 6,082,216
Wells Fargo & Co. 328,860 20,438,649
--------------
$ 123,239,416
--------------
BIOTECHNOLOGY -- 2.4%
Amgen, Inc.* 156,100 $ 10,013,815
Biogen Idec, Inc.* 50,000 3,330,500
Genzyme Corp.* 244,800 14,215,536
--------------
$ 27,559,851
--------------
BROADCAST & CABLE TV -- 2.7%
Univision Communications, Inc., "A"* 191,300 $ 5,599,351
Viacom, Inc., "B" 317,250 11,544,728
Walt Disney Co. 485,400 13,494,120
--------------
$ 30,638,199
--------------
BROKERAGE & ASSET MANAGERS -- 3.2%
Goldman Sachs Group, Inc. 170,920 $ 17,782,517
Legg Mason, Inc. 159,300 11,670,318
Lehman Brothers Holdings, Inc. 92,000 8,048,160
--------------
$ 37,500,995
--------------
BUSINESS SERVICES -- 1.0%
Accenture Ltd., "A"* 433,100 $ 11,693,700
--------------
CHEMICALS -- 4.3%
Dow Chemical Co. 359,200 $ 17,783,992
E.I. du Pont de Nemours & Co. 246,300 12,081,015
Monsanto Co. 218,200 12,121,010
PPG Industries, Inc. 104,290 7,108,406
--------------
$ 49,094,423
--------------
COMPUTER SOFTWARE -- 3.6%
Amdocs Ltd.* 278,600 $ 7,313,250
Mercury Interactive Corp.^* 72,800 3,316,040
Oracle Corp.* 1,638,900 22,485,708
VERITAS Software Corp.* 311,690 8,898,750
--------------
$ 42,013,748
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 2.7%
Apple Computer, Inc.* 176,800 $ 11,385,920
Dell, Inc.* 479,500 20,206,130
--------------
$ 31,592,050
--------------
CONSTRUCTION -- 0.9%
Masco Corp. 288,100 $ 10,524,293
--------------
CONSUMER GOODS & SERVICES -- 4.8%
Colgate-Palmolive Co. 375,600 $ 19,215,696
Procter & Gamble Co. 341,200 18,793,296
Reckitt Benckiser PLC 592,120 17,862,662
--------------
$ 55,871,654
--------------
ELECTRICAL EQUIPMENT -- 3.9%
General Electric Co. 481,630 $ 17,579,495
Tyco International Ltd. 783,130 27,989,066
--------------
$ 45,568,561
--------------
</Table>
31
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
ELECTRONICS -- 1.4%
Analog Devices, Inc. 351,100 $ 12,962,612
Xilinx, Inc.^ 92,500 2,742,625
---------------
$ 15,705,237
---------------
ENERGY -- INDEPENDENT -- 0.9%
EnCana Corp. 128,880 $ 7,353,893
EOG Resources, Inc. 45,700 3,261,152
---------------
$ 10,615,045
---------------
ENERGY -- INTEGRATED -- 4.5%
BP PLC, ADR 543,022 $ 31,712,485
TOTAL S.A., ADR^ 184,810 20,299,530
---------------
$ 52,012,015
---------------
FOOD & DRUG STORES -- 1.1%
CVS Corp. 286,060 $ 12,892,724
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.6%
General Mills, Inc. 256,900 $ 12,770,499
PepsiCo, Inc. 333,940 17,431,668
---------------
$ 30,202,167
---------------
GAMING & LODGING -- 1.2%
Carnival Corp. 234,000 $ 13,485,420
---------------
GENERAL MERCHANDISE -- 1.6%
Target Corp. 359,800 $ 18,684,414
---------------
INSURANCE -- 1.6%
American International Group, Inc. 207,597 $ 13,632,895
Hartford Financial Services Group, Inc. 76,630 5,311,225
---------------
$ 18,944,120
---------------
INTERNET -- 1.9%
eBay, Inc.* 98,400 $ 11,441,952
Yahoo!, Inc.* 268,000 10,098,240
---------------
$ 21,540,192
---------------
LEISURE & TOYS -- 1.1%
Electronic Arts, Inc.* 109,700 $ 6,766,296
Nintendo Co. Ltd. 27,800 3,481,255
Nintendo Co. Ltd., ADR^ 174,300 2,736,458
---------------
$ 12,984,009
---------------
MACHINERY & TOOLS -- 3.0%
Caterpillar, Inc. 194,300 $ 18,946,193
Eaton Corp. 142,600 10,318,536
Illinois Tool Works, Inc.^ 57,070 5,289,248
---------------
$ 34,553,977
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.7%
HCA, Inc. 203,600 $ 8,135,856
---------------
MEDICAL EQUIPMENT -- 4.2%
Baxter International, Inc. 368,140 $ 12,715,556
Boston Scientific Corp.* 127,700 4,539,735
Guidant Corp. 156,700 11,298,070
Medtronic, Inc. 285,900 14,200,653
Synthes, Inc.* 53,500 5,976,999
---------------
$ 48,731,013
---------------
OIL SERVICES -- 2.4%
Halliburton Co. 384,750 $ 15,097,590
Noble Corp.* 241,890 12,031,609
---------------
$ 27,129,199
---------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.0%
EMC Corp.* 683,700 $ 10,166,619
Lexmark International, Inc., "A"* 157,600 13,396,000
---------------
$ 23,562,619
---------------
PHARMACEUTICALS -- 8.4%
Abbott Laboratories 392,900 $ 18,328,785
Eli Lilly & Co. 221,100 12,547,425
Johnson & Johnson 674,970 42,806,597
Roche Holdings AG 112,900 12,949,494
Wyeth 255,920 10,899,633
---------------
$ 97,531,934
---------------
SPECIALTY CHEMICALS -- 1.0%
Praxair, Inc. 261,880 $ 11,562,002
---------------
SPECIALTY STORES -- 2.3%
Gap, Inc. 484,900 $ 10,241,088
Tiffany & Co. 103,100 3,296,107
TJX Cos., Inc. 510,120 12,819,316
---------------
$ 26,356,511
---------------
TELECOMMUNICATIONS -- WIRELESS -- 1.4%
Vodafone Group PLC, ADR 600,878 $ 16,452,040
---------------
TELECOMMUNICATIONS -- WIRELINE -- 3.0%
Cisco Systems, Inc.* 1,229,840 $ 23,735,912
Telefonaktiebolaget LM Ericsson, ADR^* 332,900 10,483,021
---------------
$ 34,218,933
---------------
TELEPHONE SERVICES -- 1.3%
Sprint Corp. 588,480 $ 14,623,728
---------------
TRUCKING -- 2.3%
CNF, Inc. 51,900 $ 2,600,190
FedEx Corp. 99,490 9,798,770
United Parcel Service, Inc., "B" 169,150 14,455,556
---------------
$ 26,854,516
---------------
UTILITIES -- ELECTRIC POWER -- 1.8%
Dominion Resources, Inc. 79,670 $ 5,396,846
Entergy Corp. 44,400 3,000,996
Exelon Corp. 246,380 10,857,967
FPL Group, Inc.^ 13,100 979,225
---------------
$ 20,235,034
---------------
Total Stocks (Identified Cost,
$959,846,820) $ 1,138,209,690
---------------
COLLATERAL FOR SECURITIES LOANED -- 3.7%
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 42,672,567 $ 42,672,567
---------------
REPURCHASE AGREEMENT -- 1.4%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04, due
1/3/05, total to be received $16,401,993
(secured by various U.S. Treasury and
Federal Agency obligations in a jointly
traded account), at Cost $ 16,399,000 $ 16,399,000
---------------
Total Investments
(Identified Cost, $1,018,918,387) $ 1,197,281,257
---------------
OTHER ASSETS,
LESS LIABILITIES -- (3.6)% (41,641,416)
---------------
Net Assets -- 100.0% $ 1,155,639,841
===============
</Table>
See portfolio footnotes and notes to financial statements.
32
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
MID CAP GROWTH SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 98.2%
AIRLINES-- 1.0%
JetBlue Airways Corp.^* 53,450 $ 1,241,109
---------------
APPAREL MANUFACTURERS -- 0.9%
Coach, Inc.* 21,210 $ 1,196,244
---------------
BANKS & CREDIT COMPANIES -- 1.3%
Investors Financial Services Corp.^ 22,020 $ 1,100,560
Sovereign Bancorp, Inc. 27,840 627,792
---------------
$ 1,728,352
---------------
BIOTECHNOLOGY -- 7.6%
Celgene Corp.^* 20,220 $ 536,437
Gen-Probe, Inc.^* 24,100 1,089,561
Genzyme Corp.* 45,070 2,617,215
Gilead Sciences, Inc.* 51,490 1,801,635
ImClone Systems, Inc.* 29,940 1,379,635
MedImmune, Inc.* 70,350 1,907,189
Neurocrine Biosciences, Inc.^* 11,250 554,625
---------------
$ 9,886,297
---------------
BROADCAST & CABLE TV -- 8.8%
Citadel Broadcasting Corp.^* 157,110 $ 2,542,040
EchoStar Communications Corp., "A"^ 47,750 1,587,210
Entercom Communications Corp., "A"* 23,390 839,467
Gemstar-TV Guide International, Inc.^* 108,320 641,254
Grupo Televisa S.A., ADR 17,630 1,066,615
Interpublic Group of Cos., Inc.^* 59,210 793,414
NTL, Inc.* 22,939 1,673,629
Radio One, Inc., "A"* 32,810 528,241
Univision Communications, Inc., "A"^* 31,940 934,884
Westwood One, Inc.* 28,130 757,541
---------------
$ 11,364,295
---------------
BROKERAGE & ASSET MANAGERS -- 3.1%
Ameritrade Holding Corp.* 64,270 $ 913,919
E*TRADE Financial Corp.* 25,000 373,750
Legg Mason, Inc.^ 37,434 2,742,415
---------------
$ 4,030,084
---------------
BUSINESS SERVICES -- 8.6%
Alliance Data Systems Corp.* 24,790 $ 1,177,029
Ceridian Corp.* 48,780 891,698
Corporate Executive Board Co.^ 24,760 1,657,434
DST Systems, Inc.* 32,100 1,673,052
Getty Images, Inc.^* 41,710 2,871,734
Manpower, Inc. 14,110 681,513
Monster Worldwide, Inc.^* 43,540 1,464,686
Robert Half International, Inc.^ 22,620 665,707
---------------
$ 11,082,853
---------------
CHEMICALS -- 0.7%
Monsanto Co. 17,440 $ 968,792
---------------
COMPUTER SOFTWARE -- 9.0%
Amdocs Ltd.* 84,750 $ 2,224,688
Check Point Software Technologies Ltd.* 51,760 1,274,849
Intuit, Inc.^* 14,580 641,666
McAfee, Inc.* 35,380 1,023,543
Mercury Interactive Corp.* 46,240 2,106,232
NAVTEQ Corp.* 6,980 323,593
Red Hat, Inc.^* 47,650 636,128
Symantec Corp.* 47,680 1,228,237
VERITAS Software Corp.* 76,200 2,175,510
---------------
$ 11,634,446
---------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.8%
Citrix Systems, Inc.* 43,500 $ 1,067,055
---------------
CONSUMER GOODS & SERVICES -- 2.4%
Apollo Group, Inc., "A"* 23,590 $ 1,903,949
Career Education Corp.* 28,870 1,154,800
---------------
$ 3,058,749
---------------
ELECTRICAL EQUIPMENT -- 0.4%
American Standard Cos., Inc.* 13,480 $ 556,994
---------------
ELECTRONICS -- 6.9%
Analog Devices, Inc. 26,300 $ 970,996
Broadcom Corp.* 23,630 762,776
Integrated Circuit Systems, Inc.* 48,310 1,010,645
KLA-Tencor Corp.* 17,490 814,684
Marvell Technology Group Ltd.* 21,450 760,831
Novellus Systems, Inc.^* 67,150 1,872,814
PMC-Sierra, Inc.* 134,600 1,514,250
Xilinx, Inc. 42,230 1,252,120
---------------
$ 8,959,116
---------------
GAMING & LODGING -- 3.9%
Four Seasons Hotels, Inc. 7,720 $ 631,419
International Game Technology 37,490 1,288,906
Las Vegas Sands Corp.* 3,450 165,600
Royal Caribbean Cruises Ltd.^ 39,130 2,130,237
WMS Industries, Inc.^* 23,430 785,842
---------------
$ 5,002,004
---------------
GENERAL MERCHANDISE -- 1.9%
99 Cents Only Stores^* 85,900 $ 1,388,144
Family Dollar Stores, Inc. 35,940 1,122,406
---------------
$ 2,510,550
---------------
INTERNET -- 1.4%
IAC/InterActiveCorp^* 63,957 $ 1,766,492
---------------
LEISURE & TOYS -- 1.3%
Electronic Arts, Inc.* 26,660 $ 1,644,389
---------------
MACHINERY & TOOLS -- 1.4%
Eaton Corp.^ 11,790 $ 853,124
Roper Industries, Inc. 16,100 978,397
---------------
$ 1,831,521
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES-- 1.4%
Community Health Systems, Inc.* 53,200 $ 1,483,216
Tenet Healthcare Corp.^* 33,190 364,426
---------------
$ 1,847,642
---------------
MEDICAL EQUIPMENT -- 13.3%
C.R. Bard, Inc. 33,000 $ 2,111,340
Cytyc Corp.* 117,900 3,250,503
DENTSPLY International, Inc. 32,340 1,817,508
Fisher Scientific International, Inc.* 33,040 2,061,035
Guidant Corp. 13,330 961,093
Invitrogen Corp.* 10,550 708,222
Millipore Corp.* 36,240 1,805,114
Synthes, Inc.* 3,830 427,886
Thermo Electron Corp.* 33,360 1,007,138
Thoratec Corp.^* 64,570 672,819
Waters Corp.* 51,650 2,416,704
---------------
$ 17,239,362
---------------
METALS & MINING -- 0.3%
Aber Diamond Corp.+ 5,700 $ 201,612
Aber Diamond Corp. 6,540 231,324
---------------
$ 432,936
---------------
OIL SERVICES -- 2.8%
BJ Services Co. 23,750 $ 1,105,325
Cooper Cameron Corp.^* 20,510 1,103,643
GlobalSantaFe Corp.^ 31,110 1,030,052
Halliburton Co. 9,660 379,058
---------------
$ 3,618,078
---------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.2%
Lexmark International, Inc., "A"^* 17,500 $ 1,487,500
---------------
PHARMACEUTICALS -- 3.9%
Allergan, Inc. 19,520 $ 1,582,486
Endo Pharmaceuticals Holdings, Inc.* 43,900 922,778
Medicis Pharmaceutical Corp., "A"^ 70,940 2,490,703
---------------
$ 4,995,967
---------------
</Table>
33
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
PRINTING & PUBLISHING -- 1.2%
Lamar Advertising Co., "A"^* 6,750 $ 288,765
Meredith Corp.^ 22,290 1,208,118
---------------
$ 1,496,883
---------------
RESTAURANTS -- 1.1%
Cheesecake Factory, Inc.^* 41,865 $ 1,359,357
---------------
SPECIALTY STORES -- 2.8%
PETsMART, Inc.^ 36,220 $ 1,286,897
Tiffany & Co.^ 43,940 1,404,762
TJX Cos., Inc. 38,900 977,557
---------------
$ 3,669,216
---------------
TELECOMMUNICATIONS -- WIRELINE -- 4.0%
Comverse Technology, Inc.^* 91,960 $ 2,248,422
F5 Networks, Inc.* 12,850 626,052
Harris Corp. 14,890 920,053
Juniper Networks, Inc.* 50,316 1,368,092
---------------
$ 5,162,619
---------------
TELEPHONE SERVICES -- 4.2%
American Tower Corp., "A"^* 119,330 $ 2,195,672
Covad Communications Group, Inc.* 496 1,066
Crown Castle International Corp.* 78,390 1,304,410
SpectraSite, Inc.* 32,320 1,871,328
---------------
$ 5,372,476
---------------
TRUCKING -- 0.6%
Expeditors International of Washington, Inc. 13,440 $ 751,027
---------------
Total Stocks (Identified Cost,
$107,634,025) $ 126,962,405
---------------
COLLATERAL FOR SECURITIES LOANED -- 22.0%
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 28,520,897 $ 28,520,897
---------------
REPURCHASE AGREEMENT -- 1.9%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04, due
01/03/05, total to be received $2,471,451
(secured by various U.S. Treasury and
Federal Agency obligations in a jointly
traded account), at Cost $ 2,471,000 $ 2,471,000
---------------
Total Investments~
(Identified Cost, $138,625,922) $ 157,954,302
---------------
OTHER ASSETS,
LESS LIABILITIES -- (22.1)% (28,611,967)
---------------
Net Assets -- 100.0% $ 129,342,335
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
RESEARCH SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 98.1%
ALCOHOLIC BEVERAGES -- 0.5%
Diageo PLC 159,940 $ 2,277,601
---------------
APPAREL MANUFACTURERS -- 1.1%
Reebok International Ltd.^ 111,970 $ 4,926,680
---------------
AUTOMOTIVE -- 1.5%
Harley-Davidson, Inc. 116,700 $ 7,089,525
---------------
BANKS & CREDIT COMPANIES -- 10.6%
American Express Co. 115,290 $ 6,498,897
Bank of America Corp. 204,220 9,596,298
Citigroup, Inc. 260,448 12,548,385
Freddie Mac 109,070 8,038,459
Investors Financial Services Corp.^ 84,110 4,203,818
PNC Financial Services Group, Inc. 79,420 4,561,885
SLM Corp. 53,720 2,868,111
---------------
$ 48,315,853
---------------
BIOTECHNOLOGY -- 3.4%
Genzyme Corp.* 80,840 $ 4,694,379
ImClone Systems, Inc.^* 95,100 4,382,208
MedImmune, Inc.* 151,900 4,118,009
Neurocrine Biosciences, Inc.^* 46,300 2,282,590
---------------
$ 15,477,186
---------------
BROADCAST & CABLE TV -- 1.5%
Univision Communications, Inc., "A"* 73,140 $ 2,140,808
Viacom, Inc., "B" 86,020 3,130,268
Walt Disney Co. 53,300 1,481,740
---------------
$ 6,752,816
---------------
BROKERAGE & ASSET MANAGERS -- 7.4%
Ameritrade Holding Corp.* 192,500 $ 2,737,350
Franklin Resources, Inc. 168,750 11,753,437
Goldman Sachs Group, Inc. 98,100 10,206,324
Legg Mason, Inc. 87,715 6,426,001
Mellon Financial Corp. 90,400 2,812,344
---------------
$ 33,935,456
---------------
BUSINESS SERVICES -- 2.6%
Accenture Ltd., "A"* 172,440 $ 4,655,880
Getty Images, Inc.^* 104,480 7,193,448
---------------
$ 11,849,328
---------------
CHEMICALS -- 4.2%
Monsanto Co. 178,820 $ 9,933,451
Nalco Holding Co.* 487,600 9,517,952
---------------
$ 19,451,403
---------------
COMPUTER SOFTWARE -- 5.1%
Amdocs Ltd.* 255,580 $ 6,708,975
Business Objects S.A., ADR^* 89,600 2,270,464
FileNet Corp.* 83,800 2,158,688
Mercury Interactive Corp.* 73,920 3,367,056
Oracle Corp.* 658,450 9,033,934
---------------
$ 23,539,117
---------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.9%
Dell, Inc.* 211,140 $ 8,897,440
---------------
CONSTRUCTION -- 1.5%
Masco Corp. 182,650 $ 6,672,204
---------------
CONSUMER GOODS & SERVICES -- 2.9%
Career Education Corp.^* 70,660 $ 2,826,400
Colgate-Palmolive Co. 90,550 4,632,538
Procter & Gamble Co. 103,260 5,687,561
---------------
$ 13,146,499
---------------
CONTAINERS -- 2.1%
Owens-Illinois, Inc.* 433,100 $ 9,809,715
---------------
ELECTRICAL EQUIPMENT -- 1.7%
A.O. Smith Corp. 25,800 $ 772,452
Tyco International Ltd. 194,010 6,933,917
---------------
$ 7,706,369
---------------
</Table>
34
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
ELECTRONICS -- 2.6%
Analog Devices, Inc. 123,380 $ 4,555,190
Integrated Circuit Systems, Inc.^* 129,490 2,708,931
Marvell Technology Group Ltd.* 62,870 2,229,999
Xilinx, Inc. 73,510 2,179,571
---------------
$ 11,673,691
---------------
ENERGY -- INTEGRATED -- 3.9%
ConocoPhillips 77,730 $ 6,749,296
TOTAL S.A., ADR^ 101,970 11,200,385
---------------
$ 17,949,681
---------------
FOOD & DRUG STORES -- 0.7%
CVS Corp. 47,930 $ 2,160,205
Kroger Co.* 63,040 1,105,722
---------------
$ 3,265,927
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 3.8%
CoolBrands International, Inc.* 239,560 $ 1,820,428
General Mills, Inc. 45,440 2,258,822
Nestle S.A 15,454 4,028,534
PepsiCo, Inc. 177,000 9,239,400
---------------
$ 17,347,184
---------------
FOREST & PAPER PRODUCTS -- 1.1%
Bowater, Inc.^ 111,500 $ 4,902,655
---------------
GAMING & LODGING -- 1.3%
Carnival Corp. 103,660 $ 5,973,926
---------------
GENERAL MERCHANDISE -- 2.9%
Kohl's Corp.* 104,930 $ 5,159,408
Target Corp. 156,180 8,110,427
---------------
$ 13,269,835
---------------
INSURANCE -- 2.3%
American International Group, Inc. 70,130 $ 4,605,437
MetLife, Inc. 145,730 5,903,522
---------------
$ 10,508,959
---------------
INTERNET -- 2.0%
eBay, Inc.* 14,920 $ 1,734,898
Yahoo!, Inc.* 194,830 7,341,194
---------------
$ 9,076,092
---------------
LEISURE & TOYS -- 1.0%
Electronic Arts, Inc.* 71,480 $ 4,408,886
---------------
MACHINERY & TOOLS -- 0.9%
Sandvik AB 108,070 $ 4,349,285
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 2.0%
Apria Healthcare Group, Inc.^* 68,950 $ 2,271,902
HCA, Inc. 115,310 4,607,788
Tenet Healthcare Corp.* 210,680 2,313,266
---------------
$ 9,192,956
---------------
MEDICAL EQUIPMENT -- 0.4%
Cyberonics, Inc.^* 82,430 $ 1,707,950
---------------
NATURAL GAS -- DISTRIBUTION -- 0.7%
AGL Resources, Inc. 34,340 $ 1,141,462
Sempra Energy 56,800 2,083,424
---------------
$ 3,224,886
---------------
OIL SERVICES -- 4.1%
GlobalSantaFe Corp. 227,505 $ 7,532,691
Halliburton Co. 114,020 4,474,145
Noble Corp.* 136,840 6,806,422
---------------
$ 18,813,258
---------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.6%
EMC Corp.* 191,000 $ 2,840,170
---------------
PHARMACEUTICALS -- 6.4%
Abbott Laboratories 73,470 $ 3,427,375
Eli Lilly & Co. 81,610 4,631,367
Endo Pharmaceuticals Holdings, Inc.* 221,706 4,660,260
Johnson & Johnson 53,940 3,420,875
Medicis Pharmaceutical Corp., "A"^ 71,550 $ 2,512,120
Wyeth 249,840 10,640,686
---------------
$ 29,292,683
---------------
PRINTING & PUBLISHING -- 1.2%
Lamar Advertising Co., "A"* 124,300 $ 5,317,554
---------------
RESTAURANTS -- 0.5%
Cheesecake Factory, Inc.* 76,785 $ 2,493,209
---------------
SPECIALTY CHEMICALS -- 1.3%
Lyondell Chemical Co. 206,340 $ 5,967,353
---------------
SPECIALTY STORES -- 1.0%
Gap, Inc. 214,380 $ 4,527,706
---------------
TELECOMMUNICATIONS -- WIRELESS -- 0.9%
Vodafone Group PLC, ADR 156,565 $ 4,286,750
---------------
TELECOMMUNICATIONS -- WIRELINE -- 2.2%
Cisco Systems, Inc.* 460,300 $ 8,883,790
Telefonaktiebolaget LM Ericsson, ADR^* 42,420 1,335,806
---------------
$ 10,219,596
---------------
TELEPHONE SERVICES -- 3.1%
CenturyTel, Inc. 58,220 $ 2,065,063
SpectraSite, Inc.^* 39,040 2,260,416
Sprint Corp. 300,995 7,479,726
Verizon Communications, Inc. 56,420 2,285,574
---------------
$ 14,090,779
---------------
TOBACCO -- 1.2%
Altria Group, Inc. 87,480 $ 5,345,028
---------------
TRUCKING -- 0.7%
CNF, Inc. 65,700 $ 3,291,570
---------------
UTILITIES -- ELECTRIC POWER -- 1.3%
Exelon Corp. 80,000 $ 3,525,600
PG&E Corp.* 49,990 1,663,667
PPL Corp. 12,070 643,090
---------------
$ 5,832,357
---------------
Total Stocks (Identified Cost,
$397,694,881) $ 449,017,118
---------------
COLLATERAL FOR SECURITIES LOANED-- 5.3%
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 24,015,042 $ 24,015,042
---------------
REPURCHASE AGREEMENT -- 2.0%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04, due
01/03/05, total to be received $9,227,684
(secured by various U.S. Treasury and
Federal Agency obligations in a jointly
traded account), at Cost $ 9,226,000 $ 9,226,000
---------------
Total Investments
(Identified Cost, $430,935,923) $ 482,258,160
---------------
OTHER ASSETS,
LESS LIABILITIES -- (5.4)% (24,624,712)
---------------
Net Assets-- 100.0% $ 457,633,448
===============
</Table>
See portfolio footnotes and notes to financial statements.
35
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
TOTAL RETURN SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 60.3%
AEROSPACE -- 1.8%
Lockheed Martin Corp.^ 410,890 $ 22,824,940
Northrop Grumman Corp. 107,200 5,827,392
United Technologies Corp.^ 88,300 9,125,805
---------------
$ 37,778,137
---------------
AIRLINES -- 0.1%
Southwest Airlines Co.^ 160,930 $ 2,619,940
---------------
ALCOHOLIC BEVERAGES -- 0.1%
Diageo PLC 131,200 $ 1,868,333
---------------
AUTOMOTIVE -- 0.1%
Toyota Motor Corp. 67,000 $ 2,718,463
---------------
BANKS & CREDIT COMPANIES -- 8.9%
American Express Co.^ 152,700 $ 8,607,699
Bank of America Corp. 808,886 38,009,553
Citigroup, Inc. 678,733 32,701,356
Fannie Mae^ 133,600 9,513,656
Freddie Mac 233,140 17,182,418
J.P. Morgan Chase & Co. 801,344 31,260,429
MBNA Corp. 241,150 6,798,019
PNC Financial Services Group, Inc.^ 356,160 20,457,830
SunTrust Banks, Inc.^ 215,700 15,935,916
U.S. Bancorp^ 161,209 5,049,066
Wells Fargo & Co.^ 47,500 2,952,125
---------------
$ 188,468,067
---------------
BIOTECHNOLOGY -- 0.2%
MedImmune, Inc.^* 168,300 $ 4,562,613
---------------
BROADCAST & CABLE TV -- 3.8%
Comcast Corp., "Special A"* 726,010 $ 23,842,168
Dex Media, Inc.^ 95,350 2,379,936
Grupo Televisa S.A., ADR 21,100 1,276,550
Interpublic Group of Cos., Inc.^* 257,400 3,449,160
News Corp., "A"^ 227,200 4,239,552
Time Warner, Inc.* 85,400 1,660,176
Viacom, Inc., "B" 857,098 31,189,796
Walt Disney Co.^ 461,410 12,827,198
---------------
$ 80,864,536
---------------
BROKERAGE & ASSET MANAGERS -- 3.2%
Franklin Resources, Inc.^ 56,000 $ 3,900,400
Goldman Sachs Group, Inc.^ 98,500 10,247,940
Lehman Brothers Holdings, Inc. 23,600 2,064,528
Mellon Financial Corp.^ 708,220 22,032,724
Merrill Lynch & Co., Inc.^ 335,390 20,046,260
Morgan Stanley 156,000 8,661,120
---------------
$ 66,952,972
---------------
BUSINESS SERVICES -- 0.4%
Accenture Ltd., "A"^* 306,030 $ 8,262,810
Fiserv, Inc.^* 31,100 1,249,909
---------------
$ 9,512,719
---------------
CHEMICALS -- 2.3%
3M Co. 24,600 $ 2,018,922
Dow Chemical Co.^ 144,800 7,169,048
E.I. du Pont de Nemours & Co. 307,830 15,099,061
Monsanto Co.^ 106,000 5,888,300
Nalco Holding Co.^* 190,200 3,712,704
PPG Industries, Inc.^ 151,200 10,305,792
Syngenta AG 32,900 3,482,427
---------------
$ 47,676,254
---------------
COMPUTER SOFTWARE -- 1.4%
Computer Associates International, Inc.^ 267,310 $ 8,302,649
Microsoft Corp. 639,020 17,068,224
Oracle Corp.^* 248,400 3,408,048
---------------
$ 28,778,921
---------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.4%
Dell, Inc.* 73,100 $ 3,080,434
Hewlett-Packard Co.^ 79,000 1,656,630
International Business Machines Corp.^ 8,100 798,498
Xerox Corp.^* 131,200 2,231,712
---------------
$ 7,767,274
---------------
CONSTRUCTION -- 0.4%
Masco Corp.^ 205,100 $ 7,492,303
---------------
CONSUMER GOODS & SERVICES -- 0.6%
Colgate-Palmolive Co. 45,900 $ 2,348,244
Kimberly-Clark Corp. 149,000 9,805,690
---------------
$ 12,153,934
---------------
CONTAINERS -- 1.1%
Owens-Illinois, Inc.* 801,480 $ 18,153,522
Smurfit-Stone Container Corp.* 258,480 4,828,406
---------------
$ 22,981,928
---------------
ELECTRICAL EQUIPMENT -- 1.7%
Cooper Industries Ltd., "A"^ 38,300 $ 2,600,187
Emerson Electric Co.^ 64,300 4,507,430
General Electric Co. 583,200 21,286,800
Hubbell, Inc., "B"^ 42,400 2,217,520
Tyco International Ltd. 165,900 5,929,266
---------------
$ 36,541,203
---------------
ELECTRONICS -- 0.1%
Analog Devices, Inc. 35,900 $ 1,325,428
---------------
ENERGY -- INDEPENDENT -- 1.3%
Devon Energy Corp. 349,010 $ 13,583,469
EnCana Corp. 90,100 5,141,106
EOG Resources, Inc.^ 28,500 2,033,760
Unocal Corp.^ 133,500 5,772,540
---------------
$ 26,530,875
---------------
ENERGY -- INTEGRATED -- 2.7%
BP PLC, ADR 360,320 $ 21,042,688
ConocoPhillips 100,100 8,691,683
Exxon Mobil Corp. 358,496 18,376,505
TOTAL S.A., ADR^ 84,300 9,259,512
---------------
$ 57,370,388
---------------
FOOD & DRUG STORES -- 0.2%
Rite Aid Corp.* 1,285,680 $ 4,705,589
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.4%
Archer Daniels Midland Co.^ 306,900 $ 6,846,939
General Mills, Inc. 265,580 13,201,982
H.J. Heinz Co. 172,800 6,737,472
Kellogg Co.^ 138,100 6,167,546
Nestle S.A. 7,663 1,997,584
PepsiCo, Inc.^ 213,710 11,155,662
Sara Lee Corp.^ 201,000 4,852,140
---------------
$ 50,959,325
---------------
FOREST & PAPER PRODUCTS -- 0.9%
Bowater, Inc.^ 229,400 $ 10,086,718
International Paper Co.^ 233,200 9,794,400
---------------
$ 19,881,118
---------------
GAMING & LODGING -- 0.4%
Cendant Corp.^ 210,200 $ 4,914,476
Hilton Hotels Corp.^ 110,800 2,519,592
---------------
$ 7,434,068
---------------
GENERAL MERCHANDISE -- 0.1%
Family Dollar Stores, Inc.^ 91,200 $ 2,848,176
---------------
INSURANCE -- 3.2%
AFLAC, Inc.^ 138,400 $ 5,513,856
Allstate Corp. 378,010 19,550,677
Chubb Corp.^ 26,500 2,037,850
Conseco, Inc.^* 543,040 10,833,648
</Table>
36
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
INSURANCE -- continued
Hartford Financial Services Group, Inc.^ 242,610 $ 16,815,299
MetLife, Inc.^ 324,390 13,141,039
---------------
$ 67,892,369
---------------
LEISURE & TOYS -- 0.4%
Hasbro, Inc.^ 58,900 $ 1,141,482
Mattel, Inc.^ 339,440 6,615,686
---------------
$ 7,757,168
---------------
MACHINERY & TOOLS -- 0.9%
Caterpillar, Inc.^ 48,900 $ 4,768,239
Deere & Co. 58,200 4,330,080
Finning International, Inc.##* 4,940 144,024
Illinois Tool Works, Inc.^ 10,900 1,010,212
Ingersoll-Rand Co. Ltd., "A"^ 26,600 2,135,980
Precision Castparts Corp. 47,000 3,086,960
Sandvik AB 79,500 3,199,483
---------------
$ 18,674,978
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.8%
Apria Healthcare Group, Inc.^* 197,140 $ 6,495,763
HCA, Inc.^ 74,200 2,965,032
Tenet Healthcare Corp.^* 692,740 7,606,285
---------------
$ 17,067,080
---------------
MEDICAL EQUIPMENT -- 0.2%
Baxter International, Inc.^ 58,550 $ 2,022,317
Boston Scientific Corp.^* 56,200 1,997,910
---------------
$ 4,020,227
---------------
METALS & MINING -- 0.4%
BHP Billiton PLC 294,500 $ 3,445,900
Companhia Vale do Rio Doce, ADR^ 195,620 5,674,936
---------------
$ 9,120,836
---------------
NATURAL GAS -- DISTRIBUTION -- 0.3%
AGL Resources, Inc.^ 89,690 $ 2,981,296
KeySpan Corp.^ 19,600 773,220
NiSource, Inc.^ 133,419 3,039,285
---------------
$ 6,793,801
---------------
OIL SERVICES -- 2.2%
BJ Services Co.^ 107,920 $ 5,022,597
Cooper Cameron Corp.^* 147,580 7,941,280
GlobalSantaFe Corp.^ 447,470 14,815,732
Noble Corp.^* 355,590 17,687,047
Schlumberger Ltd.^ 15,100 1,010,945
---------------
$ 46,477,601
---------------
PHARMACEUTICALS -- 4.9%
Abbott Laboratories^ 400,040 $ 18,661,866
Eli Lilly & Co.^ 17,300 981,775
Johnson & Johnson^ 371,650 23,570,043
Merck & Co., Inc. 922,800 29,658,792
Novartis AG 39,000 1,958,116
Pfizer, Inc. 52,300 1,406,347
Roche Holdings AG 23,800 2,729,831
Wyeth^ 604,400 25,741,396
---------------
$ 104,708,166
---------------
PRINTING & PUBLISHING -- 0.5%
Reed Elsevier PLC 781,900 $ 7,200,727
Tribune Co.^ 90,600 3,817,884
---------------
$ 11,018,611
---------------
RAILROAD & SHIPPING -- 0.3%
Burlington Northern Santa Fe Corp. 89,500 $ 4,234,245
Union Pacific Corp.^ 29,800 2,004,050
---------------
$ 6,238,295
---------------
RESTAURANTS -- 0.1%
McDonald's Corp.^ 79,700 $ 2,555,182
---------------
SPECIALTY CHEMICALS -- 0.4%
Air Products & Chemicals, Inc.^ 132,250 $ 7,666,532
Praxair, Inc.^ 17,900 790,285
---------------
$ 8,456,817
---------------
SPECIALTY STORES -- 1.3%
Gap, Inc.^ 692,320 $ 14,621,798
Home Depot, Inc.^ 131,690 5,628,431
TJX Cos., Inc.^ 271,000 6,810,230
---------------
$ 27,060,459
---------------
TELECOMMUNICATIONS -- WIRELESS -- 1.8%
Nokia Corp., ADR 1,034,490 $ 16,210,458
Vodafone Group PLC, ADR^ 822,427 22,518,051
---------------
$ 38,728,509
---------------
TELECOMMUNICATIONS -- WIRELINE -- 0.9%
Cisco Systems, Inc.^* 97,500 $ 1,881,750
Nortel Networks Corp.^* 4,793,600 16,729,664
---------------
$ 18,611,414
---------------
TELEPHONE SERVICES -- 4.1%
SBC Communications, Inc.^ 185,146 $ 4,771,212
Sprint Corp.^ 1,756,500 43,649,025
Telus Corp. (Non Voting)* 57,470 1,663,549
Verizon Communications, Inc.^ 907,322 36,755,614
---------------
$ 86,839,400
---------------
TOBACCO -- 0.8%
Altria Group, Inc.^ 293,900 $ 17,957,290
---------------
TRUCKING -- 0%
CNF, Inc. 4,400 $ 220,440
---------------
UTILITIES -- ELECTRIC POWER -- 2.2%
Calpine Corp.* 2,226,920 $ 8,774,065
Cinergy Corp.^ 103,900 4,325,357
Dominion Resources, Inc.^ 135,500 9,178,770
Energy East Corp. 62,500 1,667,500
Entergy Corp.^ 125,900 8,509,581
Exelon Corp.^ 100,380 4,423,747
FirstEnergy Corp. 19,800 782,298
FPL Group, Inc.^ 7,300 545,675
PPL Corp.^ 102,200 5,445,216
Public Service Enterprise Group, Inc.^ 15,800 817,966
TXU Corp.^ 40,100 2,588,856
---------------
$ 47,059,031
---------------
Total Stocks (Identified Cost,
$1,077,939,863) $ 1,277,050,238
---------------
BONDS -- 37.6%
<Caption>
PAR AMOUNT
ADVERTISING & BROADCASTING -- 0.1%
News America Holdings, 8.5%, 2025 $ 994,000 $ 1,264,972
News America, Inc., 6.2%, 2034## 831,000 842,233
---------------
$ 2,107,205
---------------
AEROSPACE -- 0.4%
BAE Systems Holdings, Inc., 6.4%, 2011## $ 1,950,000 $ 2,185,558
Boeing Capital Corp., 6.5%, 2012 3,252,000 3,643,804
Northrop Grumman Corp., 7.75%, 2031 2,738,000 3,505,486
---------------
$ 9,334,848
---------------
AIRLINES -- 0.1%
Continental Airlines, Inc., 6.648%, 2017 $ 2,378,448 $ 2,310,197
---------------
ALCOHOLIC BEVERAGES -- 0.1%
Miller Brewing Co., 5.5%, 2013## $ 2,785,000 $ 2,911,010
---------------
ASSET BACKED & SECURITIZED -- 1.7%
AmeriCredit Automobile Receivables Trust,
2.18%, 2008 $ 2,195,000 $ 2,175,396
Bear Stearns Commercial Mortgage
Securities, Inc., 6.8%, 2008 1,367,144 1,426,875
Beneficial Home Equity Loan Trust,
2.54%, 2037 1,425,871 1,415,545
</Table>
37
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
ASSET BACKED & SECURITIZED -- continued
Blackrock Capital Finance LP,
7.75%, 2026## $ 323,805 $ 323,602
CPS Auto Receivables Trust,
2.89%, 2009## 184,242 182,198
CRIIMI MAE CMBS Corp., 6.701%, 2008## 1,272,000 1,327,863
CRIIMI MAE Commercial Mortgage Trust,
7%, 2033## 1,630,000 1,749,235
Capital One Auto Finance Trust,
4.79%, 2009 1,750,000 1,767,107
Chase Commercial Mortgage Securities
Corp., 6.39%, 2008 2,893,000 3,126,654
Chase Commercial Mortgage Securities
Corp., 7.543%, 2009 774,991 833,808
Citibank Credit Card Issuance Trust,
6.65%, 2008 4,743,000 4,934,810
Credit Suisse First Boston Mortgage,
6.38%, 2035 800,000 880,264
Deutsche Mortgage & Asset Receiving
Corp., 6.538%, 2031 1,948,864 2,072,720
Falcon Franchise Loan LLC,
7.382%, 2010## 571,184 604,324
First Union-Lehman Brothers Bank of
America, 6.56%, 2035 886,538 953,149
First Union-Lehman Brothers Commercial
Mortgage Trust, 7.38%, 2029 595,176 633,299
First Union-Lehman Brothers Commercial
Mortgage Trust, 6.65%, 2029 560,224 596,154
Goldman Sachs Mortgage Securities Corp.,
6.06%, 2030 1,465,478 1,488,432
J.P. Morgan Commercial Mortgage Finance
Corp., 6.613%, 2030 1,179,000 1,259,038
Merrill Lynch Mortgage Investors, Inc.,
6.39%, 2030 685,238 727,280
Morgan Stanley Capital I, Inc.,
0.6197%, 2030^^## 73,971,750 1,694,937
Mortgage Capital Funding, Inc.,
6.337%, 2031 2,846,114 3,042,919
Multi-Family Capital Access One, Inc.,
6.65%, 2024 518,236 566,919
Residential Accredit Loans, Inc., 7%, 2028 315,603 315,019
Residential Asset Mortgage Products, Inc.,
3.8%, 2030 982,466 979,835
Residential Asset Mortgage Products, Inc.,
4.9708%, 2034 931,000 942,697
---------------
$ 36,020,079
---------------
AUTOMOTIVE -- 0.7%
DaimlerChrysler N.A. Holdings Corp.,
8%, 2010 $ 678,000 $ 783,636
DaimlerChrysler N.A. Holdings Corp.,
6.5%, 2013 3,649,000 3,957,760
Ford Motor Co., 7.45%, 2031 2,274,000 2,287,048
Ford Motor Credit Co., 6.5%, 2007 810,000 842,276
Ford Motor Credit Co., 7.875%, 2010 1,726,000 1,901,638
Ford Motor Credit Co., 7.375%, 2011 1,165,000 1,255,580
General Motors Acceptance Corp.,
7.25%, 2011 1,644,000 1,721,206
General Motors Corp., 7.2%, 2011 707,000 725,129
General Motors Corp., 8.375%, 2033 889,000 921,078
---------------
$ 14,395,351
---------------
BANKS & CREDIT COMPANIES -- 1.1%
Abbey National Capital Trust I,
8.963% to 2030, 5.389% to 2049 $ 1,558,000 $ 2,171,448
Bank of America Corp., 7.4%, 2011 2,792,000 3,234,191
Citigroup, Inc., 5%, 2014## 4,439,000 4,460,414
HBOS Capital Funding LP, 6.071% to 2014,
4.464% to 2049## $ 977,000 $ 1,047,108
J.P. Morgan Chase & Co., 5.125%, 2014 689,000 693,520
Mizuho Financial Group, Inc.,
5.79%, 2014## 1,078,000 1,132,330
Natexis AMBS Co. LLC, 8.44% to 2008,
5.846% to 2049## 135,000 152,095
Popular North America, Inc., 4.25%, 2008 1,839,000 1,856,353
RBS Capital Trust II, 6.425% to 2034,
4.507% to 2049 1,490,000 1,573,537
Socgen Real Estate LLC, 7.64% to 2007,
5.343% to 2049## 3,128,000 3,431,097
UniCredito Italiano Capital Trust II,
9.2% to 2010, 5.914% to 2049## 1,509,000 1,853,722
Wachovia Corp., 5.25%, 2014 500,000 512,452
Wells Fargo & Co., 6.45%, 2011 340,000 378,102
---------------
$ 22,496,369
---------------
BROADCAST & CABLE TV -- 0.4%
Cox Communications, Inc., 4.625%, 2013 $ 1,624,000 $ 1,553,544
TCI Communications Financing III,
9.65%, 2027 4,805,000 5,557,204
Time Warner Entertainment Co. LP,
10.15%, 2012 335,000 439,487
---------------
$ 7,550,235
---------------
BROKERAGE & ASSET MANAGERS -- 0.6%
Credit Suisse First Boston (USA), Inc.,
4.625%, 2008 $ 2,447,000 $ 2,507,441
Credit Suisse First Boston (USA), Inc.,
6.5%, 2012 2,125,000 2,365,087
Goldman Sachs Group, Inc.,
5.7%, 2012 2,453,000 2,600,227
Lehman Brothers Holdings, Inc.,
7.75%, 2005 1,583,000 1,585,036
Lehman Brothers Holdings, Inc.,
8.25%, 2007 1,405,000 1,558,651
Merrill Lynch & Co., Inc., 5.45%, 2014 807,000 834,860
Morgan Stanley Group, Inc., 6.75%, 2011 1,530,000 1,716,106
---------------
$ 13,167,408
---------------
BUILDING -- 0.1%
CRH North America, Inc., 6.95%, 2012 $ 1,847,000 $ 2,105,310
---------------
CHEMICALS -- 0.1%
Dow Chemical Co., 5.75%, 2008 $ 1,416,000 $ 1,507,818
---------------
CONGLOMERATES -- 0.1%
Kennametal, Inc., 7.2%, 2012 $ 1,780,000 $ 1,977,998
---------------
CONSUMER CYCLICAL -- 0.1%
Cendant Corp., 6.875%, 2006 $ 1,280,000 $ 1,346,643
Cendant Corp., 6.25%, 2008 818,000 872,984
---------------
$ 2,219,627
---------------
DEFENSE ELECTRONICS -- 0.0%
Raytheon Co., 6.15%, 2008 $ 1,077,000 $ 1,157,915
---------------
EMERGING MARKET QUASI-SOVEREIGN -- 0%
Pemex Project Funding Master Trust,
8.625%, 2022 $ 316,000 $ 367,666
---------------
EMERGING MARKET SOVEREIGN -- 0.2%
State of Israel, 4.625%, 2013 $ 981,000 $ 948,211
United Mexican States, 6.625%, 2015 2,169,000 2,329,506
United Mexican States, 8.125%, 2019 726,000 851,961
United Mexican States, 8%, 2022 513,000 591,746
---------------
$ 4,721,424
---------------
ENERGY -- INDEPENDENT -- 0.2%
Devon Financing Corp. U.L.C.,
6.875%, 2011 $ 1,456,000 $ 1,649,003
EnCana Holdings Finance Corp.,
5.8%, 2014 951,000 1,010,409
</Table>
38
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
ENERGY -- INDEPENDENT -- continued
Kerr-McGee Corp., 6.95%, 2024 $ 761,000 $ 841,541
Pioneer Natural Resource Co.,
5.875%, 2016 915,000 955,911
---------------
$ 4,456,864
---------------
ENERGY -- INTEGRATED -- 0.0%
Amerada Hess Corp., 7.3%, 2031 $ 578,000 $ 644,817
---------------
ENTERTAINMENT -- 0.1%
Walt Disney Co., 6.75%, 2006 $ 643,000 $ 669,951
Walt Disney Co., 6.375%, 2012 1,132,000 1,260,674
---------------
$ 1,930,625
---------------
FINANCIAL INSTITUTIONS -- 0.4%
DBS Capital Funding Corp., 7.657% to 2011,
5.764% to 2049## $ 1,476,000 $ 1,706,781
General Electric Capital Corp., 7.5%, 2005 3,643,000 3,705,743
General Electric Capital Corp., 8.75%, 2007 904,000 1,012,769
SLM Corp., 4%, 2009 1,394,000 1,393,325
SLM Corp., 5.375%, 2013 1,702,000 1,760,605
---------------
$ 9,579,223
---------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 0.2%
Cadbury Schweppes U.S. Finance,
5.125%, 2013## $ 2,689,000 $ 2,737,114
Kraft Foods, Inc., 6.25%, 2012 1,079,000 1,184,488
---------------
$ 3,921,602
---------------
FOREST & PAPER PRODUCTS -- 0.2%
MeadWestvaco Corp., 6.8%, 2032 $ 915,000 $ 1,000,216
Weyerhaeuser Co., 6.75%, 2012 2,123,000 2,392,264
---------------
$ 3,392,480
---------------
INSURANCE -- 0.7%
AIG SunAmerica Institutional Funding II,
5.75%, 2009 $ 2,804,000 $ 2,972,013
AIG SunAmerica, Inc, 7.6%, 2005## 3,135,000 3,199,628
MetLife, Inc., 6.5%, 2032 2,610,000 2,846,289
Prudential Financial, Inc., 5.1%, 2014 3,295,000 3,310,790
Prudential Funding Corp., 6.6%, 2008## 1,544,000 1,671,000
---------------
$ 13,999,720
---------------
INSURANCE -- PROPERTY & CASUALTY -- 0.2%
Allstate Corp., 6.125%, 2032 $ 1,617,000 $ 1,705,710
Fund American Cos., Inc., 5.875%, 2013 1,110,000 1,129,709
Safeco Corp., 4.875%, 2010 283,000 289,764
Travelers Property Casualty Corp.,
6.375%, 2033 736,000 755,960
---------------
$ 3,881,143
---------------
INTERNATIONAL MARKET QUASI-SOVEREIGN -- 0.2%
Hydro-Quebec, 6.3%, 2011 $ 2,256,000 $ 2,515,257
KFW International Finance, Inc.,
4.25%, 2005 1,600,000 1,607,507
---------------
$ 4,122,764
---------------
INTERNATIONAL MARKET SOVEREIGN -- 0.1%
Republic of Italy, 4.625%, 2005 $ 3,119,000 $ 3,150,196
---------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 0.1%
HCA, Inc., 8.75%, 2010 $ 355,000 $ 405,795
HCA, Inc., 6.95%, 2012 1,390,000 1,463,538
---------------
$ 1,869,333
---------------
MORTGAGE BACKED -- 13.5%
Fannie Mae, 5.722%, 2009 $ 5,090,000 $ 5,369,334
Fannie Mae, 4.01%, 2013 198,743 191,768
Fannie Mae, 4.63%, 2014 494,350 494,217
Fannie Mae, 4.518%, 2014 1,773,236 1,763,496
Fannie Mae, 4.846%, 2014 1,001,605 1,017,881
Fannie Mae, 6%, 2016 - 2034 44,473,519 46,208,447
Fannie Mae, 5.5%, 2016 - 2034 85,191,124 86,826,577
Fannie Mae, 5%, 2018 - 2034 17,826,520 18,102,275
Fannie Mae, 4.5%, 2018 - 2019 8,775,094 8,763,402
Fannie Mae, 6.5%, 2028 - 2034 18,332,714 19,247,248
Fannie Mae, 7.5%, 2030 - 2031 $ 852,938 $ 913,958
Freddie Mac, 5%, 2017 - 2033 16,092,907 16,152,376
Freddie Mac, 4.5%, 2018 - 2019 12,355,195 12,343,350
Freddie Mac, 5.5%, 2019 - 2034 20,043,236 20,384,329
Freddie Mac, 6%, 2023 - 2034 13,634,702 14,107,275
Freddie Mac, 6.5%, 2034 5,066,147 5,317,259
Ginnie Mae, 7.5%, 2024 - 2028 13,925 14,995
Ginnie Mae, 6.5%, 2028 - 2034 2,534,074 2,669,718
Ginnie Mae, 6%, 2033 - 2034 10,182,015 10,558,928
Ginnie Mae, 5.5%, 2033 - 2034 14,123,068 14,437,645
Ginnie Mae, 5%, 2034 1,460,264 1,462,060
---------------
$ 286,346,538
---------------
NATURAL GAS -- PIPELINE -- 0.2%
CenterPoint Energy Resources Corp.,
7.875%, 2013 $ 812,000 $ 965,135
Kinder Morgan Energy Partners LP,
6.75%, 2011 740,000 826,158
Kinder Morgan Energy Partners LP,
7.4%, 2031 1,373,000 1,596,770
Kinder Morgan Energy Partners LP,
7.75%, 2032 980,000 1,182,738
---------------
$ 4,570,801
---------------
PHARMACEUTICALS -- 0.1%
Wyeth, 5.25%, 2013 $ 1,226,000 $ 1,274,210
---------------
POLLUTION CONTROL -- 0.1%
Waste Management, Inc., 7.375%, 2010 $ 1,341,000 $ 1,537,125
---------------
PRINTING & PUBLISHING -- 0.1%
Belo Corp., 7.75%, 2027 $ 2,533,000 $ 3,004,761
---------------
RAILROAD & SHIPPING -- 0.0%
Union Pacific Corp., 6.125%, 2012 $ 507,000 $ 557,641
Union Pacific Corp., 5.375%, 2014 487,000 504,474
---------------
$ 1,062,115
---------------
REAL ESTATE -- 0.4%
Boston Properties, Inc., 5%, 2015 $ 369,000 $ 359,836
EOP Operating LP, 6.8%, 2009 1,238,000 1,356,989
HRPT Properties Trust, 6.25%, 2016 1,169,000 1,233,057
Simon Property Group LP, 6.375%, 2007 1,069,000 1,140,510
Vornado Realty Trust, 5.625%, 2007 3,304,000 3,430,309
---------------
$ 7,520,701
---------------
TELECOMMUNICATIONS -- WIRELESS -- 0.1%
AT&T Wireless Services, Inc., 7.35%, 2006 $ 903,000 $ 944,664
Sprint Capital Corp., 6.875%, 2028 1,070,000 1,171,422
---------------
$ 2,116,086
---------------
TELECOMMUNICATIONS -- WIRELINE -- 0.8%
BellSouth Corp., 6.55%, 2034 $ 1,472,000 $ 1,603,957
Deutsche Telekom International Finance B.V.,
8.75%, 2030 1,479,000 1,952,957
France Telecom S.A., 7.75%, 2011 816,000 973,409
PCCW-HKTC Capital II Ltd., 6%, 2013## 1,321,000 1,388,662
SBC Communications, Inc., 5.1%, 2014 1,273,000 1,284,831
Telecom Italia Capital, 5.25%, 2013 1,504,000 1,520,145
Telecom Italia Capital, 6%, 2034## 823,000 804,610
Telecomunicaciones de Puerto Rico, Inc.,
6.65%, 2006 1,716,000 1,779,617
Verizon New York, Inc., 6.875%, 2012 4,213,000 4,729,000
---------------
$ 16,037,188
---------------
U.S. GOVERNMENT AGENCIES -- 4.2%
Fannie Mae, 2.5%, 2006 $ 3,472,000 $ 3,441,349
Fannie Mae, 5.25%, 2007 12,269,000 12,783,513
Fannie Mae, 6.625%, 2009 - 2010 20,829,000 23,364,679
Fannie Mae, 6%, 2011 784,000 862,554
Fannie Mae, 4.125%, 2014 3,113,000 3,017,144
Fannie Mae, 4.625%, 2014 2,516,000 2,517,889
Federal Home Loan Bank, 2.875%, 2006 3,325,000 3,313,216
</Table>
39
<Page>
<Table>
<Caption>
ISSUER PAR AMOUNT VALUE
BONDS -- continued
U.S. GOVERNMENT AGENCIES -- continued
Freddie Mac, 7%, 2005 $ 9,270,000 $ 9,477,370
Freddie Mac, 2.75%, 2006 9,747,000 9,669,891
Freddie Mac, 2.875%, 2006 2,198,000 2,182,579
Freddie Mac, 4.875%, 2013 10,686,000 10,988,649
Small Business Administration, 4.35%, 2023 441,240 432,958
Small Business Administration, 4.77%, 2024 1,149,713 1,151,198
Small Business Administration, 4.99%, 2024 1,561,000 1,578,912
Small Business Administration, 5.18%, 2024 1,883,141 1,926,454
Small Business Administration, 5.52%, 2024 2,728,773 2,839,783
---------------
$ 89,548,138
---------------
U.S. TREASURY OBLIGATIONS -- 8.8%
U.S. Treasury Bonds, 8%, 2021 $ 320,000 $ 439,262
U.S. Treasury Bonds, 6.25%, 2023 28,711,000 33,613,174
U.S. Treasury Bonds, 5.375%, 2031 7,810,000 8,445,172
U.S. Treasury Notes, 6.5%, 2005 3,354,000 3,402,999
U.S. Treasury Notes, 1.25%, 2005 3,404,000 3,387,777
U.S. Treasury Notes, 6.875%, 2006 6,270,000 6,601,871
U.S. Treasury Notes, 7%, 2006 28,864,000 30,602,594
U.S. Treasury Notes, 5.5%, 2008 7,085,000 7,549,400
U.S. Treasury Notes, 4.75%, 2008 - 2014 62,037,000 64,923,469
U.S. Treasury Notes, 4.25%, 2010 6,664,953 7,731,085
U.S. Treasury Notes, 3%, 2012 10,300,317 11,494,103
U.S. Treasury Notes, 4.375%, 2012 1,778,000 1,820,436
U.S. Treasury Notes, 4%, 2012 1,910,000 1,906,791
U.S. Treasury Notes, 3.875%, 2013 4,862,000 4,797,049
---------------
$ 186,715,182
---------------
UTILITIES -- ELECTRIC POWER -- 1.1%
DTE Energy Co., 7.05%, 2011 $ 1,827,000 $ 2,068,802
Duke Capital Corp., 8%, 2019 1,001,000 1,221,559
Exelon Generation Co. LLC, 6.95%, 2011 1,500,000 1,693,101
FirstEnergy Corp., 6.45%, 2011 1,417,000 1,539,528
MidAmerican Energy Holdings Co.,
3.5%, 2008 1,030,000 1,008,939
MidAmerican Energy Holdings Co.,
5.875%, 2012 535,000 566,908
MidAmerican Funding LLC, 6.927%, 2029 2,762,000 3,097,519
Niagara Mohawk Power Corp., 7.75%, 2006 942,000 997,648
Northeast Utilities, 8.58%, 2006 682,709 714,830
Oncor Electric Delivery Co., 7%, 2022 2,032,000 2,317,520
PSEG Power LLC, 6.95%, 2012 697,000 785,407
PSEG Power LLC, 8.625%, 2031 918,000 1,218,901
Pacific Gas & Electric Co., 4.8%, 2014 1,145,000 1,140,988
System Energy Resources, Inc.,
5.129%, 2014## 1,116,000 1,116,915
TXU Energy Co., 7%, 2013 1,019,000 1,138,071
W3A Funding Corp., 8.09%, 2017 2,089,918 2,312,327
---------------
$ 22,938,963
---------------
Total Bonds
(Identified Cost, $781,319,175) $ 797,971,035
---------------
SHORT-TERM OBLIGATION -- ^^^ 2.2%
New Center Asset Trust, 2.25%, due 1/03/05,
at Amortized Cost $ 47,289,000 $ 47,283,089
---------------
COLLATERAL FOR SECURITIES LOANED -- 13.1%
<Caption>
SHARES
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 277,989,607 $ 277,989,607
---------------
Total Investments
(Identified Cost, $2,184,531,734)~ $ 2,400,293,969
---------------
OTHER ASSETS,
LESS LIABILITIES -- (13.2)% (280,674,889)
---------------
Net Assets -- 100.0% $ 2,119,619,080
===============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
UTILITIES SERIES
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- 87.9%
BROADCAST & CABLE TV -- 15.5%
Cablevision Systems Corp., "A"^* 131,800 $ 3,281,820
Citadel Broadcasting Corp.^* 158,700 2,567,766
Comcast Corp., "Special A"* 271,900 8,929,196
Cox Radio, Inc., "A"* 159,600 2,630,208
Dex Media, Inc.^ 69,990 1,746,950
EchoStar Communications Corp., "A"^ 64,600 2,147,304
Grupo Televisa S.A., ADR 82,000 4,961,000
News Corp., "A"^ 331,500 6,185,790
NTL, Inc.* 41,300 3,013,248
R.H. Donnelley Corp.* 28,700 1,694,735
Radio One, Inc., "A"* 62,900 1,012,690
Radio One, Inc., "D"^* 102,900 1,658,748
Time Warner, Inc.* 223,100 4,337,064
TV Azteca S.A. de C.V., ADR 377,700 3,882,756
Viacom, Inc., "B" 165,400 6,018,906
Walt Disney Co. 70,300 1,954,340
---------------
$ 56,022,521
---------------
CONGLOMERATES -- 1.8%
E.ON AG 71,700 $ 6,512,708
---------------
ENERGY -- INDEPENDENT -- 2.0%
EnCana Corp.* 25,600 $ 1,459,018
NRG Energy, Inc.* 139,700 5,036,185
Talisman Energy, Inc.* 25,300 681,961
---------------
$ 7,177,164
---------------
ENERGY -- INTEGRATED -- 0.1%
TOTAL S.A 1,600 $ 348,269
---------------
ENTERTAINMENT -- 0.4%
Fox Entertainment Group, Inc., "A"* 42,100 $ 1,316,046
---------------
NATURAL GAS -- DISTRIBUTION -- 7.2%
AGL Resources, Inc. 189,560 $ 6,300,974
Equitable Resources, Inc.^ 5,500 333,630
MDU Resources Group, Inc.^ 125,550 3,349,674
Northwestern Corp.^* 206,499 5,781,972
ONEOK, Inc. 14,400 409,248
Questar Corp.^ 46,500 2,369,640
Sempra Energy^ 207,400 7,607,432
---------------
$ 26,152,570
---------------
NATURAL GAS -- PIPELINE -- 4.0%
El Paso Corp.^ 248,400 $ 2,583,360
Enagas S.A. 417,274 6,895,409
Kinder Morgan, Inc.^ 66,970 4,897,516
Williams Cos., Inc. 10,300 167,787
---------------
$ 14,544,072
---------------
OIL SERVICES -- 2.8%
GlobalSantaFe Corp. 41,200 $ 1,364,132
Halliburton Co. 124,400 4,881,456
Noble Corp.* 28,100 1,397,694
Pride International, Inc.^* 111,600 2,292,264
---------------
$ 9,935,546
---------------
PRINTING & PUBLISHING -- 0.4%
Lamar Advertising Co., "A"* 31,300 $ 1,339,014
---------------
TELECOMMUNICATIONS -- WIRELESS -- 5.9%
America Movil S.A. de C.V., ADR 109,000 $ 5,706,150
SK Telecom Co. Ltd. 7,730 1,471,030
SK Telecom Co. Ltd., ADR 134,200 2,985,950
Vodafone Group PLC 4,147,160 11,227,187
---------------
$ 21,390,317
---------------
TELEPHONE SERVICES -- 16.4%
Brasil Telecom Participacoes S.A., ADR^ 68,600 $ 2,617,090
CenturyTel, Inc.^ 131,200 4,653,664
Citizens Communications Co.^ 354,600 4,889,934
Compania de Telecomunicaciones de
Chile S.A., ADR^ 94,400 1,061,056
Deutsche Telekom AG 348,600 7,861,773
</Table>
40
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
STOCKS -- continued
TELEPHONE SERVICES -- continued
France Telecom S.A. 41,900 $ 1,382,516
Hanaro Telecom, Inc.* 535,700 1,663,713
Iowa Telecommunications Services, Inc. 44,500 959,865
KT Freetel Co. Ltd. 104,200 2,486,225
SBC Communications, Inc. 114,300 2,945,511
Singapore Telecommunications Ltd. 562,000 819,182
Sprint Corp. 380,750 9,461,638
Telecom Corp. of New Zealand Ltd. 867,321 3,831,163
Telefonica S.A. 313,200 5,879,818
Telus Corp. 104,720 3,160,404
Telus Corp. (Non Voting)* 94,480 2,734,854
Verizon Communications, Inc. 73,450 2,975,460
---------------
$ 59,383,866
---------------
UTILITIES -- ELECTRIC POWER -- 31.4%
AES Corp.* 666,500 $ 9,111,055
AWG PLC 125,600 1,977,557
Cinergy Corp.^ 156,300 6,506,769
Constellation Energy Group, Inc. 122,200 5,341,362
CPFL Energia S.A., ADR^* 144,150 2,862,819
Dominion Resources, Inc. 107,700 7,295,598
DTE Energy Co.^ 113,200 4,882,316
Edison International^ 89,000 2,850,670
Endesa S.A. 42,700 1,000,004
Enel S.p.A. 237,900 2,329,762
Energias de Portugal S.A. 709,500 2,143,069
Enersis S.A., ADR^* 393,300 3,346,983
Entergy Corp. 151,500 10,239,885
Exelon Corp. 187,300 8,254,311
FirstEnergy Corp. 22,900 904,779
International Power PLC* 227,000 672,181
PG&E Corp.^* 217,700 7,245,056
PPL Corp.^ 214,100 11,407,248
Red Electrica de Espana S.A. 29,600 661,538
Reliant Energy, Inc.^* 51,200 698,880
RWE AG 30,000 1,653,844
SCANA Corp.^ 38,000 1,497,200
Severn Trent PLC 125,400 2,324,105
Suez S.A. 133,700 3,553,115
TXU Corp.^ 140,200 9,051,312
United Utilities PLC 26,500 319,977
United Utilities PLC, "A" 94,300 808,791
Veolia Environment 124,733 4,499,160
---------------
$ 113,439,346
---------------
Total Stocks (Identified Cost,
$257,981,264) $ 317,561,439
---------------
BONDS -- 7.7%
<Caption>
PAR AMOUNT
ASSET BACKED & SECURITIZED -- 0%
Falcon Franchise Loan LLC,
2.6827%, 2023^^## $ 1,081,651 $ 139,525
---------------
BROADCAST & CABLE TV -- 0%
Continental Cablevision, Inc., 9.5%, 2013 $ 103,000 $ 111,511
---------------
ENERGY -- INDEPENDENT -- 0.5%
Chesapeake Energy Corp., 7.5%, 2014 $ 280,000 $ 305,900
Chesapeake Energy Corp.,
6.375%, 2015## 1,445,000 1,484,737
---------------
$ 1,790,637
---------------
NATURAL GAS -- PIPELINE -- 0.5%
ANR Pipeline Co., 9.625%, 2021 $ 1,353,000 $ 1,703,089
---------------
TELECOMMUNICATIONS -- WIRELESS -- 1.8%
Alamosa Holdings, Inc., 8.5%, 2012 $ 1,505,000 $ 1,644,212
American Tower, Inc., 7.25%, 2011 1,470,000 1,558,200
Rogers Wireless, Inc., 8%, 2012## 1,030,000 1,089,225
Rogers Wireless, Inc., 6.375%, 2014 2,220,000 2,197,800
---------------
$ 6,489,437
---------------
TELECOMMUNICATIONS -- WIRELINE -- 0.5%
Citizens Communications Co., 9.25%, 2011 $ 1,360,000 $ 1,591,200
---------------
UTILITIES -- ELECTRIC POWER -- 4.4%
AES Corp., 8.875%, 2011 $ 1,792,000 $ 2,047,360
Allegheny Energy Supply Co. LLC,
8.25%, 2012## 2,230,000 2,492,025
Beaver Valley Funding Corp., 9%, 2017 771,000 911,854
Calpine Corp., 8.75%, 2013## 1,415,000 1,167,375
DPL, Inc., 6.875%, 2011 1,487,000 1,624,000
Empresa Nacional de Electricidad S.A.,
8.35%, 2013 2,394,000 2,774,076
Enersis S.A., 7.375%, 2014 1,341,000 1,461,521
NRG Energy, Inc., 8%, 2013## 2,285,000 2,490,650
PSEG Energy Holdings LLC, 7.75%, 2007 79,000 83,542
PSEG Energy Holdings LLC, 8.625%, 2008 647,000 710,082
TXU Eastern Funding Co., 6.75%, 2009* 191,000 24,830
Texas Genco LLC, 6.875%, 2014## 40,000 41,350
---------------
$ 15,828,665
---------------
Total Bonds
(Identified Cost, $26,992,199) $ 27,654,064
---------------
CONVERTIBLE PREFERRED STOCKS -- 0.9%
<Caption>
SHARES
ENERGY -- INDEPENDENT -- 0.1%
NRG Energy, Inc., 4% ## 324 $ 356,251
---------------
NATURAL GAS -- DISTRIBUTION -- 0.3%
Sempra Energy, 8.5% 36,400 $ 1,132,768
---------------
UTILITIES -- ELECTRIC POWER -- 0.5%
AES Trust III, 6.75% 33,500 $ 1,653,225
---------------
Total Convertible Preferred Stocks
(Identified Cost, $2,844,994) $ 3,142,244
---------------
COLLATERAL FOR SECURITIES LOANED-- 16.4%
Navigator Securities Lending Prime Portfolio,
at Cost and Net Asset Value 59,126,817 $ 59,126,817
---------------
REPURCHASE AGREEMENT -- 3.2%
<Caption>
PAR AMOUNT
Morgan Stanley, 2.19%, dated 12/31/04, due
01/03/05, total to be received $11,688,133
(secured by various U.S. Treasury and
Federal Agency obligations in a jointly
traded account),
at Cost $ 11,686,000 $ 11,686,000
---------------
Total Investments
(Identified Cost, $358,631,274) $ 419,170,564
---------------
OTHER ASSETS,
LESS LIABILITIES -- (16.1)% (58,031,185)
---------------
Net Assets -- 100.0% $ 361,139,379
===============
</Table>
See portfolio footnotes and notes to financial statements.
41
<Page>
PORTFOLIO FOOTNOTES:
* Non-income producing security.
+ Restricted security.
^ All or a portion of this security is on loan.
^^ Interest only security.
## SEC Rule 144A restriction.
^^^ The rate shown represents an annualized yield at time of purchase.
~ As of December 31, 2004, Global Growth Series had one security
representing $1,096,488 and 0.6% of net assets that was fair valued in
accordance with the policies adopted by the Board of Trustees.
~ As of December 31, 2004, Mid Cap Growth Series had one security
representing $201,612 and 0.2% of net assets that was fair valued in
accordance with the policies adopted by the Board of Trustees.
~ As of December 31, 2004, Total Return Series had one security
representing $144,024 and 0.01% of net assets that was fair valued in
accordance with the policies adopted by the Board of Trustees.
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.
EUR = Euro
GBP = British Pound
ABBREVIATIONS:
ADR = American Depository Receipt
GDR = Global Depository Receipt
42
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2004
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
---------------- ---------------- ----------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 613,750,283 $ 434,853,364 $ 181,008,789
Unrealized appreciation (depreciation) 96,201,667 61,519,413 26,219,417
---------------- ---------------- ----------------
Total investments, at value (including securities
loaned of $--, $57,799,725, $24,726,242, $-- and
$41,732,178, respectively) $ 709,951,950 $ 496,372,777 $ 207,228,206
Cash 96 575 626
Foreign currency, at value (identified cost,
$--, $--, $14,751, $-- and $--, respectively) -- -- 15,224
Receivable for investments sold 217,208 717,150 1,732,579
Receivable for series shares sold 22,234 78,635 167,783
Interest and dividends receivable 353,463 283,163 181,638
Receivable from administrative proceeding settlement 756,214 374,251 54,374
Other assets 182 3,005 1,780
---------------- ---------------- ----------------
Total assets $ 711,301,347 $ 497,829,556 $ 209,382,210
================ ================ ================
Liabilities:
Payable for investments purchased $ 2,610,458 $ 1,269,108 $ 194,022
Payable for series shares reacquired 352,209 349,290 195,770
Collateral for securities loaned, at value -- 59,187,926 25,930,918
Payable to affiliates --
Management fee 15,592 9,019 4,536
Distribution fee (Service Class) 248 153 54
Accrued expenses and other liabilities 79,429 63,955 126,054
---------------- ---------------- ----------------
Total liabilities $ 3,057,936 $ 60,879,451 $ 26,451,354
---------------- ---------------- ----------------
Net assets $ 708,243,411 $ 436,950,105 $ 182,930,856
================ ================ ================
Net assets consist of:
Paid-in capital $ 1,356,224,522 $ 855,387,325 $ 254,612,839
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities
in foreign currencies 96,210,386 61,522,489 26,226,523
Accumulated net realized gain (loss) on investments
and foreign currency transactions (748,543,510) (479,959,709) (98,662,905)
Accumulated undistributed net investment income 4,352,013 -- 754,399
---------------- ---------------- ----------------
Total $ 708,243,411 $ 436,950,105 $ 182,930,856
================ ================ ================
Net Assets:
Initial Class $ 672,246,437 $ 414,810,731 $ 175,146,104
Service Class 35,996,974 22,139,374 7,784,752
---------------- ---------------- ----------------
Total $ 708,243,411 $ 436,950,105 $ 182,930,856
================ ================ ================
Shares of beneficial interest outstanding:
Initial Class 34,913,337 26,503,527 14,222,320
Service Class 1,884,018 1,427,279 636,054
---------------- ---------------- ----------------
Total 36,797,355 27,930,806 14,858,374
================ ================ ================
Net asset value per share:
Initial Class $ 19.25 $ 15.65 $ 12.31
================ ================ ================
Service Class $ 19.11 $ 15.51 $ 12.24
================ ================ ================
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS TRUST
SERIES SERIES
---------------- ----------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 123,874,931 $ 1,018,918,387
Unrealized appreciation (depreciation) 21,992,861 178,362,870
---------------- ----------------
Total investments, at value (including securities
loaned of $--, $57,799,725, $24,726,242, $-- and
$41,732,178, respectively) $ 145,867,792 $ 1,197,281,257
Cash 607 48
Foreign currency, at value (identified cost,
$--, $--, $14,751, $-- and $--, respectively) -- --
Receivable for investments sold 378 100,265
Receivable for series shares sold 1,690 43,525
Interest and dividends receivable 44,446 1,323,066
Receivable from administrative proceeding settlement 216,578 565,413
Other assets 2,236 7,596
---------------- ----------------
Total assets $ 146,133,727 $ 1,199,321,170
================ ================
Liabilities:
Payable for investments purchased $ -- $ 431,202
Payable for series shares reacquired 82,229 488,644
Collateral for securities loaned, at value -- 42,672,567
Payable to affiliates --
Management fee 3,273 17,526
Distribution fee (Service Class) 21 565
Accrued expenses and other liabilities 48,678 70,825
---------------- ----------------
Total liabilities $ 134,201 $ 43,681,329
---------------- ----------------
Net assets $ 145,999,526 $ 1,155,639,841
================ ================
Net assets consist of:
Paid-in capital $ 324,082,082 $ 1,368,735,127
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities
in foreign currencies 21,992,861 178,369,602
Accumulated net realized gain (loss) on investments
and foreign currency transactions (200,820,055) (402,153,766)
Accumulated undistributed net investment income 744,638 10,688,878
---------------- ----------------
Total $ 145,999,526 $ 1,155,639,841
================ ================
Net Assets:
Initial Class $ 143,047,994 $ 1,073,586,865
Service Class 2,951,532 82,052,976
---------------- ----------------
Total $ 145,999,526 $ 1,155,639,841
================ ================
Shares of beneficial interest outstanding:
Initial Class 8,105,452 37,978,363
Service Class 168,587 2,917,088
---------------- ----------------
Total 8,274,039 40,895,451
================ ================
Net asset value per share:
Initial Class $ 17.65 $ 28.27
================ ================
Service Class $ 17.51 $ 28.13
================ ================
</Table>
See notes to financial statements.
43
<Page>
<Table>
<Caption>
MID CAP
GROWTH RESEARCH TOTAL RETURN UTILITIES
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 138,625,922 $ 430,935,923 $ 2,184,531,734 $ 358,631,274
Unrealized appreciation (depreciation) 19,328,380 51,322,237 215,762,235 60,539,290
--------------- --------------- --------------- ---------------
Total investments, at value (including securities
loaned of $27,857,486, $23,471,443, $271,562,841
and $57,688,036, respectively) $ 157,954,302 $ 482,258,160 $ 2,400,293,969 $ 419,170,564
Cash 410 226 105,651 6,522
Receivable for forward foreign currency exchange
contracts -- -- -- 53,753
Receivable for investments sold -- 3,073,175 956,351 6,244,600
Receivable for series shares sold 15,965 22,661 2,483,291 83,015
Interest and dividends receivable 27,494 312,658 10,354,024 1,313,319
Receivable from administrative proceeding settlement 520 256,213 208,370 67,404
Other assets -- -- 11,136 806
--------------- --------------- --------------- ---------------
Total assets $ 157,998,691 $ 485,923,093 $ 2,414,412,792 $ 426,939,983
=============== =============== =============== ===============
Liabilities:
Payable for forward foreign currency exchange contracts $ -- $ -- $ -- $ 1,563,533
Payable for investments purchased 55,764 3,849,133 15,067,444 4,778,164
Payable for series shares reacquired 36,880 351,796 1,606,538 263,096
Collateral for securities loaned, at value 28,520,897 24,015,042 277,989,607 59,126,817
Payable to affiliates --
Management fee 2,681 9,136 39,016 7,322
Distribution fee (Service Class) 315 174 3,761 224
Accrued expenses and other liabilities 39,819 64,364 87,346 61,448
--------------- --------------- --------------- ---------------
Total liabilities $ 28,656,356 $ 28,289,645 $ 294,793,712 $ 65,800,604
--------------- --------------- --------------- ---------------
Net assets $ 129,342,335 $ 457,633,448 $ 2,119,619,080 $ 361,139,379
=============== =============== =============== ===============
Net assets consist of:
Paid-in capital $ 153,064,624 $ 681,979,459 $ 1,817,454,064 $ 482,161,048
Unrealized appreciation (depreciation) on investments
and translation of assets and liabilities in foreign
currencies 19,328,380 51,322,769 215,768,318 59,030,634
Accumulated net realized gain (loss) on investments
and foreign currency transactions (43,050,669) (278,021,868) 32,069,330 (185,026,292)
Accumulated undistributed net investment income -- 2,353,088 54,327,368 4,973,989
--------------- --------------- --------------- ---------------
Total $ 129,342,335 $ 457,633,448 $ 2,119,619,080 $ 361,139,379
=============== =============== =============== ===============
Net Assets:
Initial Class $ 83,899,124 $ 432,318,491 $ 1,571,549,597 $ 328,540,606
Service Class 45,443,211 25,314,957 548,069,483 32,598,773
--------------- --------------- --------------- ---------------
Total $ 129,342,335 $ 457,633,448 $ 2,119,619,080 $ 361,139,379
=============== =============== =============== ===============
Shares of beneficial interest outstanding:
Initial Class 14,454,805 27,219,653 80,392,812 21,040,355
Service Class 7,883,801 1,603,769 28,202,901 2,098,854
--------------- --------------- --------------- ---------------
Total 22,338,606 28,823,422 108,595,713 23,139,209
=============== =============== =============== ===============
Net asset value per share:
Initial Class $ 5.80 $ 15.88 $ 19.55 $ 15.61
=============== =============== =============== ===============
Service Class $ 5.76 $ 15.78 $ 19.43 $ 15.53
=============== =============== =============== ===============
</Table>
See notes to financial statements.
44
<Page>
STATEMENTS OF OPERATIONS -- Year Ended December 31, 2004
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
Net investment income (loss):
Income --
Dividends $ 9,253,321 $ 2,493,802 $ 2,908,091
Interest 335,425 167,482 25,948
Income on securities loaned -- -- 70,375
Other# 756,214 374,251 54,374
Foreign taxes withheld (52,624) (58,036) (256,618)
--------------- --------------- ---------------
Total investment income $ 10,292,336 $ 2,977,499 $ 2,802,170
--------------- --------------- ---------------
Expenses --
Management fee $ 5,362,143 $ 3,194,219 $ 1,625,448
Trustees' compensation 83,852 53,295 21,126
Distribution fee (Service Class) 83,846 49,314 18,041
Administrative fee 66,939 41,354 16,871
Custodian fee 219,776 150,417 174,669
Printing 29,168 22,335 10,206
Auditing fees 49,810 36,597 44,191
Legal fees 6,633 6,683 6,892
Miscellaneous 44,590 35,961 46,437
--------------- --------------- ---------------
Total expenses $ 5,946,757 $ 3,590,175 $ 1,963,881
Fees paid indirectly (32,560) (11,519) (5,396)
--------------- --------------- ---------------
Net expenses $ 5,914,197 $ 3,578,656 $ 1,958,485
--------------- --------------- ---------------
Net investment income (loss) $ 4,378,139 $ (601,157) $ 843,685
=============== =============== ===============
Realized and unrealized gain (loss) on investments
and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions* $ 38,807,723 $ 39,398,481 $ 17,427,762
Foreign currency transactions (25,951) (3,621) (36,488)
--------------- --------------- ---------------
Net realized gain (loss) on investments and
foreign currency transactions $ 38,781,772 $ 39,394,860 $ 17,391,274
--------------- --------------- ---------------
Change in unrealized appreciation (depreciation) --
Investments $ 29,711,613 $ 13,894,202 $ 7,405,766
Translation of assets and liabilities in foreign
currencies 3,439 1,677 (1,125)
--------------- --------------- ---------------
Net unrealized gain (loss) on investments and
foreign currency translation $ 29,715,052 $ 13,895,879 $ 7,404,641
--------------- --------------- ---------------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 68,496,824 $ 53,290,739 $ 24,795,915
--------------- --------------- ---------------
Change in net assets from operations $ 72,874,963 $ 52,689,582 $ 25,639,600
=============== =============== ===============
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS TRUST
SERIES SERIES
--------------- ---------------
Net investment income (loss):
Income --
Dividends $ 1,830,056 $ 17,414,638
Interest 16,251 245,070
Income on securities loaned -- 71,175
Other# 216,578 565,413
Foreign taxes withheld -- (332,746)
--------------- ---------------
Total investment income $ 2,062,885 $ 17,963,550
--------------- ---------------
Expenses --
Management fee $ 1,137,148 $ 6,354,050
Trustees' compensation 17,546 136,292
Distribution fee (Service Class) 7,165 194,632
Administrative fee 14,341 107,414
Custodian fee 55,933 315,015
Printing 10,098 39,257
Auditing fees 36,007 34,526
Legal fees 6,751 6,225
Miscellaneous 31,214 62,284
--------------- ---------------
Total expenses $ 1,316,203 $ 7,249,695
Fees paid indirectly (2,153) (56,911)
--------------- ---------------
Net expenses $ 1,314,050 $ 7,192,784
--------------- ---------------
Net investment income (loss) $ 748,835 $ 10,770,766
=============== ===============
Realized and unrealized gain (loss) on investments
and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions* $ 12,381,615 $ 56,999,104
Foreign currency transactions -- (80,877)
--------------- ---------------
Net realized gain (loss) on investments and
foreign currency transactions $ 12,381,615 $ 56,918,227
--------------- ---------------
Change in unrealized appreciation (depreciation) --
Investments $ (4,078,235) $ 59,168,543
Translation of assets and liabilities in foreign
currencies -- (1,223)
--------------- ---------------
Net unrealized gain (loss) on investments and
foreign currency translation $ (4,078,235) $ 59,167,320
--------------- ---------------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 8,303,380 $ 116,085,547
--------------- ---------------
Change in net assets from operations $ 9,052,215 $ 126,856,313
=============== ===============
</Table>
# A non-recurring accrual recorded as a result of an administrative
proceeding regarding disclosure of brokerage allocation practices in
connection with fund sales, as described in the Legal Proceedings and
Transactions with Affiliates footnotes.
* Includes the remaining proceeds received from a non-recurring cash
settlement in the amounts of $1,376,372 and $597,471 for the Capital
Appreciation Series and Emerging Growth Series, respectively, from a
class-action lawsuit against Cendant Corporation.
See notes to financial statements.
45
<Page>
<Table>
<Caption>
MID CAP
GROWTH RESEARCH TOTAL RETURN UTILITIES
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Net investment income (loss):
Income --
Dividends $ 289,571 $ 5,698,436 $ 26,932,160 $ 8,144,395
Interest 41,796 150,297 38,639,278 1,930,770
Income on securities loaned 29,687 54,796 97,839 104,030
Other# 520 256,213 208,370 67,404
Foreign taxes withheld (813) (86,318) (297,579) (343,123)
--------------- --------------- --------------- ---------------
Total investment income $ 360,761 $ 6,073,424 $ 65,580,068 $ 9,903,476
--------------- --------------- --------------- ---------------
Expenses --
Management fee $ 923,534 $ 3,310,469 $ 12,860,862 $ 2,386,674
Trustees' compensation 12,403 54,908 217,590 35,160
Distribution fee (Service Class) 104,547 50,717 1,036,798 65,123
Administrative fee 11,240 42,703 178,152 28,669
Custodian fee 42,843 149,924 380,371 170,487
Printing 5,716 14,400 29,814 11,742
Auditing fees 35,483 36,089 45,700 24,565
Legal fees 6,412 6,923 11,441 6,796
Miscellaneous 12,929 35,163 213,602 34,869
--------------- --------------- --------------- ---------------
Total expenses $ 1,155,107 $ 3,701,296 $ 14,974,330 $ 2,764,085
Fees paid indirectly (1,589) (9,052) (53,995) (11,722)
--------------- --------------- --------------- ---------------
Net expenses $ 1,153,518 $ 3,692,244 $ 14,920,335 $ 2,752,363
--------------- --------------- --------------- ---------------
Net investment income (loss) $ (792,757) $ 2,381,180 $ 50,659,733 $ 7,151,113
=============== =============== =============== ===============
Realized and unrealized gain (loss) on investments and
foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions* $ 12,138,657 $ 47,016,347 $ 119,401,027 $ 53,333,089
Foreign currency transactions 3,394 (27,937) 14,097 (2,344,565)
--------------- --------------- --------------- ---------------
Net realized gain (loss) on investments and foreign
currency transactions $ 12,142,051 $ 46,988,410 $ 119,415,124 $ 50,988,524
--------------- --------------- --------------- ---------------
Net increase from gains (losses) realized on the
disposal of investments in violation of
restrictions $ -- $ -- $ -- $ 70,344
--------------- --------------- --------------- ---------------
Change in unrealized appreciation (depreciation) --
Investments $ 4,683,817 $ 16,667,558 $ 47,135,363 $ 30,342,333
Translation of assets and liabilities in foreign
currencies (139) (445) (4,087) (1,515,391)
--------------- --------------- --------------- ---------------
Net unrealized gain (loss) on investments and
foreign currency translation $ 4,683,678 $ 16,667,113 $ 47,131,276 $ 28,826,942
--------------- --------------- --------------- ---------------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 16,825,729 $ 63,655,523 $ 166,546,400 $ 79,885,810
--------------- --------------- --------------- ---------------
Change in net assets from operations $ 16,032,972 $ 66,036,703 $ 217,206,133 $ 87,036,923
=============== =============== =============== ===============
</Table>
# A non-recurring accrual recorded as a result of an administrative
proceeding regarding disclosure of brokerage allocation practices in
connection with fund sales, as described in the Legal Proceedings and
Transactions with Affiliates footnotes.
See notes to financial statements.
46
<Page>
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2004
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income (loss) $ 4,378,139 $ (601,157) $ 843,685
Net realized gain (loss) on investments and foreign currency transactions 38,781,772 39,394,860 17,391,274
Net unrealized gain (loss) on investments and foreign currency translation 29,715,052 13,895,879 7,404,641
--------------- --------------- ---------------
Change in net assets from operations $ 72,874,963 $ 52,689,582 $ 25,639,600
--------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (433,984) $ -- $ (820,549)
From net investment income (Service Class) -- -- (22,543)
--------------- --------------- ---------------
Total distributions declared to shareholders $ (433,984) $ -- $ (843,092)
--------------- --------------- ---------------
Change in net assets from series share transactions $ (119,354,287) $ (84,594,002) $ (34,157,477)
--------------- --------------- ---------------
Total change in net assets $ (46,913,308) $ (31,904,420) $ (9,360,969)
Net Assets --
At beginning of period 755,156,719 468,854,525 192,291,825
--------------- --------------- ---------------
At end of period $ 708,243,411 $ 436,950,105 $ 182,930,856
=============== =============== ===============
Accumulated undistributed net investment income included in net assets
at end of period $ 4,352,013 $ -- $ 754,399
=============== =============== ===============
<Caption>
MANAGED MASSACHUSETTS
SECTORS INVESTORS TRUST
SERIES SERIES
--------------- ---------------
Change in net assets:
From operations --
Net investment income (loss) $ 748,835 $ 10,770,766
Net realized gain (loss) on investments and foreign currency transactions 12,381,615 56,918,227
Net unrealized gain (loss) on investments and foreign currency translation (4,078,235) 59,167,320
--------------- ---------------
Change in net assets from operations $ 9,052,215 $ 126,856,313
--------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (63,676) $ (11,046,879)
From net investment income (Service Class) -- (650,218)
--------------- ---------------
Total distributions declared to shareholders $ (63,676) $ (11,697,097)
--------------- ---------------
Change in net assets from series share transactions $ (30,050,012) $ (189,656,877)
--------------- ---------------
Total change in net assets $ (21,061,473) $ (74,497,661)
Net Assets --
At beginning of period 167,060,999 1,230,137,502
--------------- ---------------
At end of period $ 145,999,526 $ 1,155,639,841
=============== ===============
Accumulated undistributed net investment income included in net assets
at end of period $ 744,638 $ 10,688,878
=============== ===============
<Caption>
MID CAP
GROWTH RESEARCH TOTAL RETURN UTILITIES
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income (loss) $ (792,757) $ 2,381,180 $ 50,659,733 $ 7,151,113
Net realized gain (loss) on investments and foreign
currency transactions 12,142,051 46,988,410 119,415,124 50,988,524
Net increase from gains (losses) realized on the
disposal of investments in violation of restrictions -- -- -- 70,344
Net unrealized gain (loss) on investments and foreign
currency translation 4,683,678 16,667,113 47,131,276 28,826,942
--------------- --------------- --------------- ---------------
Change in net assets from operations $ 16,032,972 $ 66,036,703 $ 217,206,133 $ 87,036,923
--------------- --------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ -- $ (4,047,067) $ (39,255,506) $ (5,749,208)
From net investment income (Service Class) -- (154,606) (9,174,349) (456,442)
--------------- --------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ (4,201,673) $ (48,429,855) $ (6,205,650)
--------------- --------------- --------------- ---------------
Change in net assets from series share transactions $ 69,518 $ (86,351,479) $ 31,639,454 $ (29,894,493)
--------------- --------------- --------------- ---------------
Total change in net assets $ 16,102,490 $ (24,516,449) $ 200,415,732 $ 50,936,780
Net Assets --
At beginning of period 113,239,845 482,149,897 1,919,203,348 310,202,599
--------------- --------------- --------------- ---------------
At end of period $ 129,342,335 $ 457,633,448 $ 2,119,619,080 $ 361,139,379
=============== =============== =============== ===============
Accumulated undistributed net investment income included
in net assets at end of period $ -- $ 2,353,088 $ 54,327,368 $ 4,973,989
=============== =============== =============== ===============
</Table>
See notes to financial statements.
47
<Page>
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2003
<Table>
<Caption>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
Change 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 (loss) on investments and foreign currency translation 198,126,156 94,508,226 35,121,259
--------------- --------------- ---------------
Change 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)
--------------- --------------- ---------------
Change in net assets from series share transactions $ (99,709,511) $ (69,251,035) $ (29,925,274)
--------------- --------------- ---------------
Total change 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 TRUST
SERIES SERIES
--------------- ---------------
Change 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 (loss) on investments and foreign currency translation 28,371,306 229,920,587
--------------- ---------------
Change 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)
--------------- ---------------
Change in net assets from series share transactions $ (29,254,954) $ (151,185,714)
--------------- ---------------
Total change 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 TOTAL RETURN UTILITIES
SERIES SERIES SERIES SERIES
--------------- --------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income (loss) $ (392,682) $ 4,199,875 $ 43,457,130 $ 6,161,922
Net realized gain (loss) on investments and foreign
currency transactions 4,545,637 9,744,427 (769,662) 7,257,569
Net unrealized gain (loss) on investments and foreign
currency translation 18,166,584 88,097,953 236,244,562 71,485,578
--------------- --------------- --------------- ---------------
Change in net assets from operations $ 22,319,539 $ 102,042,255 $ 278,932,030 $ 84,905,069
--------------- --------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ -- $ (3,780,030) $ (51,583,867) $ (8,106,762)
From net investment income (Service Class) -- (53,733) (5,597,210) (450,737)
--------------- --------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ (3,833,763) $ (57,181,077) $ (8,557,499)
--------------- --------------- --------------- ---------------
Change in net assets from series share transactions $ 36,950,927 $ (81,587,261) $ (26,809,020) $ (20,680,059)
--------------- --------------- --------------- ---------------
Total change in net assets $ 59,270,466 $ 16,621,231 $ 194,941,933 $ 55,667,511
Net Assets --
At beginning of period 53,969,379 465,528,666 1,724,261,415 254,535,088
--------------- --------------- --------------- ---------------
At end of period $ 113,239,845 $ 482,149,897 $ 1,919,203,348 $ 310,202,599
=============== =============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ -- $ 4,201,517 $ 48,411,744 $ 6,151,852
=============== =============== =============== ===============
</Table>
See notes to financial statements.
48
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
CAPITAL APPRECIATION SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 17.35 $ 13.48 $ 19.97
------------- ------------- -------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.11 $ 0.01 $ (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.80 3.86 (6.45)
------------- ------------- -------------
Total from investment operations $ 1.91 $ 3.87 $ (6.46)
------------- ------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.01) $ -- $ (0.03)
In excess of net investment income -- -- (0.00)+++
From net realized gain on investments and foreign currency
transactions -- -- --
In excess of net realized gain on investments and foreign
currency transactions -- -- --
------------- ------------- -------------
Total distributions declared to shareholders $ (0.01) $ -- $ (0.03)
------------- ------------- -------------
Net asset value -- end of period $ 19.25 $ 17.35 $ 13.48
============= ============= =============
Total return~~^ 11.02%^^^ 28.71%^^ (32.39)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.82% 0.82% 0.81%
Net investment income (loss) 0.62% 0.07% (0.05)%
Portfolio turnover 64% 100% 77%
Net assets at end of period (000 Omitted) $ 672,246 $ 722,980 $ 657,634
<Caption>
CAPITAL APPRECIATION SERIES
------------------------------
YEAR ENDED DECEMBER 31,
------------------------------
INITIAL CLASS SHARES 2001 2000
------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 41.55 $ 54.12
------------- -------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.03 $ 0.12
Net realized and unrealized gain (loss) on investments and
foreign currency (8.84) (5.73)
------------- -------------
Total from investment operations $ (8.81) $ (5.61)
------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.12) $ --
In excess of net investment income -- --
From net realized gain on investments and foreign currency
transactions (12.19) (6.96)
In excess of net realized gain on investments and foreign
currency transactions (0.46) --
------------- -------------
Total distributions declared to shareholders $ (12.77) $ (6.96)
------------- -------------
Net asset value -- end of period $ 19.97 $ 41.55
============= =============
Total return~~^ (25.33)% (11.42)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.78% 0.75%
Net investment income (loss) 0.12% 0.12%
Portfolio turnover 119% 141%
Net assets at end of period (000 Omitted) $ 1,239,047 $ 1,813,066
<Caption>
CAPITAL APPRECIATION SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001**
SERVICE CLASS SHARES ----------- ----------- ----------- -------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 17.25 $ 13.44 $ 19.95 $ 19.85***
----------- ----------- ----------- -----------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.07 $ (0.03) $ (0.04) $ (0.02)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.79 3.84 (6.45) 0.12
----------- ----------- ----------- -----------
Total from investment operations $ 1.86 $ 3.81 $ (6.49) $ 0.10
----------- ----------- ----------- -----------
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 $ 19.11 $ 17.25 $ 13.44 $ 19.95
=========== =========== =========== ===========
Total return~~^ 10.78%^^^ 28.35%^^ (32.57)% 0.55%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 1.07% 1.07% 1.06% 1.03%+
Net investment income (loss) 0.40% (0.18)% (0.24)% (0.35)%+
Portfolio turnover 64% 100% 77% 119%
Net assets at end of period (000 Omitted) $ 35,997 $ 32,177 $ 21,652 $ 12,183
</Table>
** For the period from the inception of the Service Class shares, August 24,
2001, through December 31, 2001.
*** The net asset value and total return previously reported as $20.45 and
(2.40)%, respectively, has been revised to reflect the net asset value from
the day prior to the class' inception date. The net asset value and total
return previously reported was from the inception date the date, the share
class was first available to public shareholders.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
~~ The 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' net asset value and total return calculation include proceeds
received on March 26, 2003 for the partial payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.28 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the
ending net asset value per share, total return for the year ended December
31, 2003 would have been 2.08% and 2.09% lower for the Initial Class and
the Service Class shares, respectively.
^^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual resulted in an increase in
the net asset value of $0.02 per share based on the day the proceeds were
recorded. Excluding the effect of this accrual from the ending net asset
value per share, total return for the year ended December 31, 2004 would
have been 0.11% lower.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
EMERGING GROWTH SERIES
-------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.82 $ 10.51 $ 15.96
------------- ------------- -------------
Income (loss) from investment operations# --
Net investment income (loss) $ (0.02) $ (0.02) $ (0.02)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.85 3.33 (5.43)
------------- ------------- -------------
Total from investment operations $ 1.83 $ 3.31 $ (5.45)
------------- ------------- -------------
Less distributions declared to shareholders --
From net realized gain on investments and foreign currency
transactions $ -- $ -- $ --
In excess of net realized gain on investments and foreign
currency transactions -- -- --
------------- ------------- -------------
Total distributions declared to shareholders $ -- $ -- $ --
------------- ------------- -------------
Net asset value -- end of period $ 15.65 $ 13.82 $ 10.51
============= ============= =============
Total return~~^ 13.24%^^^ 31.49%^^ (34.15)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.80% 0.81% 0.78%
Net investment income (loss) (0.13)% (0.17)% (0.18)%
Portfolio turnover 94% 100% 105%
Net assets at end of period (000 Omitted) $ 414,811 $ 450,707 $ 409,015
<Caption>
EMERGING GROWTH SERIES
------------------------------
YEAR ENDED DECEMBER 31,
------------------------------
INITIAL CLASS SHARES 2001 2000
------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 29.32 $ 40.28
------------- -------------
Income (loss) from investment operations# --
Net investment income (loss) $ (0.01) $ (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currency (9.51) (7.22)
------------- -------------
Total from investment operations $ (9.52) $ (7.23)
------------- -------------
Less distributions declared to shareholders --
From net realized gain on investments and foreign currency
transactions $ (3.50) $ (3.73)
In excess of net realized gain on investments and foreign
currency transactions (0.34) --
------------- -------------
Total distributions declared to shareholders $ (3.84) $ (3.73)
------------- -------------
Net asset value -- end of period $ 15.96 $ 29.32
============= =============
Total return++^ (34.57)% (19.11)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.76% 0.74%
Net investment income (loss) (0.07)% (0.04)%
Portfolio turnover 230% 201%
Net assets at end of period (000 Omitted) $ 844,779 $ 1,421,753
<Caption>
EMERGING GROWTH SERIES
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- -------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.73 $ 10.47 $ 15.94 $ 15.81***
----------- ----------- ----------- -----------
Income (loss) from investment operations#--
Net investment loss $ (0.05) $ (0.05) $ (0.05) $ (0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.83 3.31 (5.42) 0.16
----------- ----------- ----------- -----------
Total from investment operations $ 1.78 $ 3.26 $ (5.47) $ 0.13
----------- ----------- ----------- -----------
Net asset value -- end of period $ 15.51 $ 13.73 $ 10.47 $ 15.94
=========== =========== =========== ===========
Total return~~^ 12.96%^^^ 31.14%^^ (34.32)% 0.82%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 1.06% 1.06% 1.03% 1.01%+
Net investment income (loss) (0.36)% (0.42)% (0.39)% (0.48)%+
Portfolio turnover 94% 100% 105% 230%
Net assets at end of period (000 Omitted) $ 22,139 $ 18,147 $ 11,009 $ 6,089
</Table>
** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
*** The net asset value and total return previously reported as $16.32 and
(2.33)%, respectively, have been revised to reflect the net asset value
from the day prior to the class inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
+ Annualized.
++ Not annualized.
# 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' net asset value and total return calculation include proceeds
received on March 26, 2003 for the partial payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.16 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the
ending net asset value per share, total return for the year ended December
31, 2003 would have been 1.48% and 1.50% lower for Initial class shares and
Service class shares, respectively.
^^^ The series net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual resulted in an increase in
the net asset value of $0.01 per share based on shares outstanding on the
day the proceeds were recorded.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
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
reinvestment of all distributions) held for the entire period. This information
has been audited by the series' independent registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
GLOBAL GROWTH SERIES
-------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 10.70 $ 7.94 $ 9.87
------------- ------------- -------------
Income from investment operations#* --
Net investment income $ 0.05 $ 0.07 $ 0.04
Net realized and unrealized gain (loss) on investments and
foreign currency 1.61 2.73 (1.95)
------------- ------------- -------------
Total from investment operations $ 1.66 $ 2.80 $ (1.91)
------------- ------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.05) $ (0.04) $ (0.02)
From net realized gain on investments and foreign currency
transactions -- -- --
In excess of net realized gain on investments and foreign
currency transactions -- -- --
------------- ------------- -------------
Total distributions declared to shareholders $ (0.05) $ (0.04) $ (0.02)
------------- ------------- -------------
Net asset value -- end of period $ 12.31 $ 10.70 $ 7.94
============= ============= =============
Total return~~^ 15.61%^^^ 35.44%^^ (19.36)%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.07% 1.11% 1.08%
Net investment income* 0.48% 0.76% 0.49%
Portfolio turnover 115% 147% 118%
Net assets at end of period (000 Omitted) $ 175,146 $ 185,500 $ 167,014
<Caption>
GLOBAL GROWTH SERIES
------------------------------
YEAR ENDED DECEMBER 31,
------------------------------
INITIAL CLASS SHARES 2001 2000
------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 18.47 $ 25.16
------------- -------------
Income from investment operations#^ --
Net investment income $ 0.03 $ 0.13
Net realized and unrealized gain (loss) on investments and
foreign currency (2.97) (3.15)
------------- -------------
Total from investment operations $ (2.94) $ (3.02)
------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.11) $ (0.01)
From net realized gain on investments and foreign currency
transactions (5.45) (3.66)
In excess of net realized gain on investments and foreign
currency transactions (0.10) --
------------- -------------
Total distributions declared to shareholders $ (5.66) $ (3.67)
------------- -------------
Net asset value -- end of period $ 9.87 $ 18.47
============= =============
Total return~~^ (19.64)% (13.15)%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.05% 1.04%
Net investment income^ 0.28% 0.60%
Portfolio turnover 113% 173%
Net assets at end of period (000 Omitted) $ 276,769 $ 412,547
<Caption>
GLOBAL GROWTH SERIES
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- -------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 10.64 $ 7.90 $ 9.85 $ 9.99***
----------- ----------- ----------- -----------
Income from investment operations#* --
Net investment income (loss) $ 0.02 $ 0.04 $ 0.02 $ (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.61 2.73 (1.95) (0.13)
----------- ----------- ----------- -----------
Total from investment operations $ 1.63 $ 2.77 $ (1.93) $ (0.14)
----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.03) $ (0.03) $ (0.02) $ --
----------- ----------- ----------- -----------
Net asset value -- end of period $ 12.24 $ 10.64 $ 7.90 $ 9.85
=========== =========== =========== ===========
Total return~~^ 15.41%^^^ 35.13%^^ (19.62)% (1.40)%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 1.32% 1.36% 1.33% 1.30%+
Net investment income (loss)* 0.23% 0.41% 0.25% (0.39)%+
Portfolio turnover 115% 147% 118% 113%
Net assets at end of period (000 Omitted) $ 7,785 $ 6,792 $ 3,724 $ 1,360
</Table>
** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
*** The net asset value and total return previously reported as $10.14 and
(2.86)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from the inception date, the date the
share class was first available to public shareholders.
+ 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 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 $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' net asset value and total return calculation include proceeds
received on March 26, 2003 for the partial payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.06 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the
ending net asset value per share, total return for the year ended December
31, 2003 would have been 0.79% for Initial Class Shares and 0.80% lower for
Service Class Shares.
^^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have any impact
material impact on the net asset value per share based on shares
outstanding on the day the proceeds were recorded.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
MANAGED SECTORS SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 16.55 $ 13.21 $ 17.85
------------- ------------- -------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.08 $ 0.01 $ (0.03)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.03 3.33 (4.61)
------------- ------------- -------------
Total from investment operations $ 1.11 $ 3.34 $ (4.64)
------------- ------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.01) $ -- $ --
From net realized gain on investments and foreign currency
transactions -- -- --
In excess of net realized gain on investments and foreign
currency transactions -- -- --
------------- ------------- -------------
Total distributions declared to shareholders $ (0.01) $ -- $ --
------------- ------------- -------------
Net asset value -- end of period $ 17.65 $ 16.55 $ 13.21
============= ============= =============
Total return~~^ 6.69%^^^ 25.28%^^ (25.99)%
Ratios (to average net assets)/Supplemental data:
Expenses ## 0.86% 0.84% 0.82%
Net investment income (loss) 0.50% 0.04% (0.17)%
Portfolio turnover 92% 77% 261%
Net assets at end of period (000 Omitted) $ 143,048 $ 164,166 $ 158,349
<Caption>
MANAGED SECTORS SERIES
--------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------
INITIAL CLASS SHARES 2001 2000
------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 33.35 $ 52.42
------------- -------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.00+++ $ (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currency (11.24) (9.80)
------------- -------------
Total from investment operations $ (11.24) $ (9.81)
------------- -------------
Less distributions declared to shareholders --
From net investment income $ -- $ --
From net realized gain on investments and foreign currency
transactions (3.49) (9.26)
In excess of net realized gain on investments and foreign
currency transactions (0.77) --
------------- -------------
Total distributions declared to shareholders $ (4.26) $ (9.26)
------------- -------------
Net asset value -- end of period $ 17.85 $ 33.35
============= =============
Total return~~^ (35.51)% (20.82)%
Ratios (to average net assets)/Supplemental data:
Expenses ## 0.84% 0.76%
Net investment income (loss) 0.00%~ (0.03)%
Portfolio turnover 293% 441%
Net assets at end of period (000 Omitted) $ 286,916 $ 559,586
<Caption>
MANAGED SECTORS SERIES
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- -------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 16.45 $ 13.16 $ 17.83 $ 17.94***
----------- ----------- ----------- -----------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.05 $ (0.03) $ (0.04) $ (0.05)
Net realized and unrealized gain (loss) on investments and
foreign currency 1.01 3.32 (4.63) (0.06)
----------- ----------- ----------- -----------
Total from investment operations $ 1.06 $ 3.29 $ (4.67) $ (0.11)
----------- ----------- ----------- -----------
Net asset value -- end of period $ 17.51 $ 16.45 $ 13.16 $ 17.83
=========== =========== =========== ===========
Total return~~^ 6.44%^^^ 24.91%^^ (26.14)% (0.61)%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 1.11% 1.09% 1.07% 1.09%+
Net investment income (loss) 0.28% (0.20)% (0.31)% (0.74)%+
Portfolio turnover 92% 77% 261% 293%
Net assets at end of period (000 Omitted) $ 2,952 $ 2,895 $ 2,266 $ 759
</Table>
** For the period from the inception of the Service Class shares, August 24,
2001, through December 31, 2001.
*** The net asset value and total return previously reported as $18.40 and
(3.10)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from the inception date, the date the
share class was first available to public shareholders.
+ Annualized.
++ Not Annualized.
+++ Per share amount was less than $0.01.
~ Ratio is 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.
^^ The series' net asset value and total return calculation include proceeds
received on March 26, 2003 for the partial payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.06 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the
series' ending net asset value per share, total return for the year ended
December 31, 2003 would have been 0.45% and 0.46% lower for the Initial
Class shares and the Service Class shares, respectively.
^^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual resulted in an increase in
the net asset value of $0.02 per share based on shares outstanding on the
day the proceeds were recorded. Excluding the effect of this accrual from
the ending net asset value per share, total return for the year ended
December 31, 2004 would have been 0.15% lower.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
52
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
-------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 25.51 $ 21.01 $ 26.92
------------- ------------- -------------
Income from investment operations# --
Net investment income $ 0.25 $ 0.23 $ 0.21
Net realized and unrealized gain (loss) on investments and
foreign currency 2.77 4.52 (5.88)
------------- ------------- -------------
Total from investment operations $ 3.02 $ 4.75 $ (5.67)
------------- ------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.26) $ (0.25) $ (0.24)
From net realized gain on investments and foreign currency
transactions -- -- --
In excess of net realized gain on investments and foreign
currency transactions -- -- --
------------- ------------- -------------
Total distributions declared to shareholders $ (0.26) $ (0.25) $ (0.24)
------------- ------------- -------------
Net asset value -- end of period $ 28.27 $ 25.51 $ 21.01
============= ============= =============
Total return~~^ 11.99%^^^ 22.83%^^ (21.22)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.61% 0.61% 0.60%
Net investment income 0.95% 1.04% 0.88%
Portfolio turnover 78% 78% 57%
Net assets at end of period (000 Omitted) $ 1,073,587 $ 1,153,238 $ 1,107,698
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
INITIAL CLASS SHARES 2001 2000
---------------- ----------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 35.12 $ 37.95
------------- -------------
Income from investment operations#
Net investment income $ 0.25 $ 0.26
Net realized and unrealized gain (loss) on investments and
foreign currency (5.49) (0.28)
------------- -------------
Total from investment operations $ (5.24) $ (0.02)
------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.25) $ (0.28)
From net realized gain on investments and foreign currency
transactions (2.55) (2.53)
In excess of net realized gain on investments and foreign
currency transactions (0.16) --
------------- -------------
Total distributions declared to shareholders $ (2.96) $ (2.81)
------------- -------------
Net asset value end of period $ 26.92 $ 35.12
============= =============
Total return~~^ (15.71)% 0.09%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.60% 0.60%
Net investment income 0.84% 0.73%
Portfolio turnover 83% 76%
Net assets at end of period (000 Omitted) $ 1,798,744 $ 2,263,535
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- --------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 25.39 $ 20.94 $ 26.89 $ 27.40***
----------- ----------- ----------- -----------
Income (loss) from investment operations# --
Net investment income $ 0.18 $ 0.18 $ 0.16 $ 0.05
Net realized and unrealized gain (loss) on investments and
foreign currency 2.77 4.49 (5.88) (0.56)
----------- ----------- ----------- -----------
Total from investment operations $ 2.95 $ 4.67 $ (5.72) $ (0.51)
----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.21) $ (0.22) $ (0.23) $ --
----------- ----------- ----------- -----------
Net asset value -- end of period $ 28.13 $ 25.39 $ 20.94 $ 26.89
=========== =========== =========== ===========
Total return~~^ 11.74%^^^ 22.45%^^ (21.40)% (1.86)%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 0.86% 0.86% 0.85% 0.85%+
Net investment income 0.70% 0.79% 0.70% 0.53%+
Portfolio turnover 78% 78% 57% 83%
Net assets at end of period (000 Omitted) $ 82,053 $ 76,899 $ 51,859 $ 21,616
</Table>
** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
*** The net asset value and total return previously reported as $27.80 and
(3.27)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
+ Annualized.
++ Not annualized.
# 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' net asset value and total return calculation include proceeds
received on March 26, 2003 for the partial payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.002 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the
series' ending net asset value per share, total return for the year ended
December 31, 2003 would have been 0.01% lower.
^^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual resulted in an increase in
the net asset value of $0.01 based on the shares outstanding on the day the
proceeds were recorded.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
53
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
MID CAP GROWTH SERIES
---------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002 2001
------------- ------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 5.06 $ 3.67 $ 6.94 $ 9.08
------------- ------------- ------------- -------------
Income from investment operations# --
Net investment income (loss) $ (0.03) $ (0.02) $ (0.02) $ (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currency 0.77 1.41 (3.25) (2.09)
------------- ------------- ------------- -------------
Total from investment operations $ 0.74 $ 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 $ 5.80 $ 5.06 $ 3.67 $ 6.94
============= ============= ============= =============
Total return~~^ 14.62% 37.87% (47.12)% (23.24)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.85% 0.90% 0.85% 0.84%
Net investment income (loss) (0.56)% (0.46)% (0.39)% (0.16)%
Portfolio turnover 84% 90% 160% 85%
Net assets at end of period (000 Omitted) $ 83,899 $ 76,159 $ 39,941 $ 75,413
<Caption>
MID CAP GROWTH SERIES
---------------------
PERIOD ENDED
INITIAL CLASS SHARES DECEMBER 31, 2000*
---------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 10.00
-------------
Income 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 income (loss) 0.97%+
Portfolio turnover 39%
Net assets at end of period (000 Omitted) $ 26,556
<Caption>
MID CAP GROWTH SERIES
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- -----------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 5.04 $ 3.67 $ 6.94 $ 6.90***
----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income (loss) $ (0.04) $ (0.03) $ (0.03) $ (0.01)
Net realized and unrealized gain (loss) on investments and
foreign currency 0.76 1.40 (3.24) 0.05
----------- ----------- ----------- -----------
Total from investment operations $ 0.72 $ 1.37 $ (3.27) $ 0.04
----------- ----------- ----------- -----------
Net asset value -- end of period $ 5.76 $ 5.04 $ 3.67 $ 6.94
=========== =========== =========== ===========
Total return~~^ 14.29% 37.33% (47.12)% 0.58%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 1.10% 1.15% 1.10% 1.09%+
Net investment loss (0.81)% (0.72)% (0.60)% (0.50)%+
Portfolio turnover 84% 90% 160% 85%
Net assets at end of period (000 Omitted) $ 45,443 $ 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.
*** The net asset value and total return previously reported as $7.09 and
(2.12)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
+ Annualized.
++ Not annualized.
+++ 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.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
54
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
RESEARCH SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.84 $ 11.14 $ 14.93
------------- ------------- -------------
Income from investment operations# --
Net investment income $ 0.08 $ 0.11 $ 0.08
Net realized and unrealized gain (loss) on investments and
foreign currency 2.09 2.69 (3.82)
------------- ------------- -------------
Total from investment operations $ 2.17 $ 2.80 $ (3.74)
------------- ------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.13) $ (0.10) $ (0.05)
From net realized gain on investments and foreign currency
transactions -- -- --
In excess of net realized gain on investments and foreign
currency transactions -- -- --
------------- ------------- -------------
Total distributions declared to shareholders $ (0.13) $ (0.10) $ (0.05)
------------- ------------- -------------
Net asset value -- end of period $ 15.88 $ 13.84 $ 11.14
============= ============= =============
Total return~~^ 15.83%^^^ 25.32%^^ (25.11)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.80% 0.80% 0.78%
Net investment income 0.53% 0.93% 0.61%
Portfolio turnover 118% 124% 98%
Net assets at end of period (000 Omitted) $ 432,318 $ 466,139 $ 458,394
<Caption>
RESEARCH SERIES
-------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
INITIAL CLASS SHARES 2001 2000
------------- --------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 23.65 $ 27.61
------------- --------------
Income from investment operations# --
Net investment income $ 0.05 $ 0.01
Net realized and unrealized gain (loss) on investments and
foreign currency (4.54) (0.99)
------------- --------------
Total from investment operations $ (4.49) $ (0.98)
------------- --------------
Less distributions declared to shareholders --
From net investment income $ (0.01) $ (0.03)
From net realized gain on investments and foreign currency
transactions (4.19) (2.95)
In excess of net realized gain on investments and foreign
currency transactions (0.03) --
------------- --------------
Total distributions declared to shareholders $ (4.23) $ (2.98)
------------- --------------
Net asset value -- end of period $ 14.93 $ 23.65
============= ==============
Total return~~^ (21.40)% (4.10)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.76% 0.74%
Net investment income 0.28% 0.03%
Portfolio turnover 89% 95%
Net assets at end of period (000 Omitted) $ 826,315 $ 1,209,927
<Caption>
RESEARCH SERIES
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 December 31, 2001**
----------- ----------- ----------- -------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 13.77 $ 11.09 $ 14.91 $ 15.10***
----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income $ 0.04 $ 0.08 $ 0.06 $ 0.01
Net realized and unrealized gain (loss) on investments and
foreign currency 2.08 2.68 (3.83) (0.20)
----------- ----------- ----------- -----------
Total from investment operations $ 2.12 $ 2.76 $ (3.77) $ (0.19)
----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.11) $ (0.08) $ (0.05) $ --
----------- ----------- ----------- -----------
Net asset value -- end of period $ 15.78 $ 13.77 $ 11.09 $ 14.91
=========== =========== =========== ===========
Total return~~^ 15.54%^^^ 25.01%^^ (25.36)% (1.26)%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 1.05% 1.05% 1.03% 1.01%+
Net investment income 0.30% 0.67% 0.48% 0.17%+
Portfolio turnover 118% 124% 98% 89%
Net assets at end of period (000 Omitted) $ 25,315 $ 16,010 $ 7,134 $ 3,109
</Table>
** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
*** The net asset value and total return previously reported as $15.42 and
(3.31)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from the inception date, the date the
share class was first available to public shareholders.
+ 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' net asset value and total return calculation include proceeds
received on March 26, 2003 for the partial payment of a non-recurring
litigation settlement from Cendant Corporation, recorded as a realized gain
on investment transactions. The proceeds resulted in an increase in the net
asset value of $0.06 per share based on shares outstanding on the day the
proceeds were received. Excluding the effect of this payment from the
ending net asset value per share, total return for the year ended December
31, 2003 would have been 0.52% lower.
^^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual resulted in an increase in
the net asset value of $0.01 per share based on shares outstanding on the
day the proceeds were recorded.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
55
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
TOTAL RETURN SERIES
------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 18.00 $ 15.90 $ 17.95
------------- ------------- -------------
Income from investment operations#~ --
Net investment income $ 0.48 $ 0.42 $ 0.50
Net realized and unrealized gain (loss) on investments and
foreign currency 1.53 2.24 (1.44)
------------- ------------- -------------
Total from investment operations $ 2.01 $ 2.66 $ (0.94)
------------- ------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.46) $ (0.56) $ (0.55)
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 $ (0.46) $ (0.56) $ (1.11)
------------- ------------- -------------
Net asset value -- end of period $ 19.55 $ 18.00 $ 15.90
============= ============= =============
Total return~~^ 11.47%^^^ 17.15% (5.69)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.70% 0.71% 0.70%
Net investment income (loss)~ 2.60% 2.52% 2.95%
Portfolio turnover 67% 65% 82%
Net assets at end of period (000 Omitted) $ 1,571,550 $ 1,618,983 $ 1,571,494
<Caption>
TOTAL RETURN SERIES
------------------------------
YEAR ENDED DECEMBER 31,
------------------------------
INITIAL CLASS SHARES 2001 2000
------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 19.69 $ 18.76
------------- -------------
Income from investment operations#~ --
Net investment income $ 0.57 $ 0.66
Net realized and unrealized gain (loss) on investments and
foreign currency (0.46) 2.20
------------- -------------
Total from investment operations $ 0.11 $ 2.86
------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.66) $ (0.71)
From net realized gain on investments and foreign currency
transactions (1.19) (1.22)
In excess of net realized gain on investments and foreign
currency transactions -- --
------------- -------------
Total distributions declared to shareholders $ (1.85) $ (1.93)
------------- -------------
Net asset value -- end of period $ 17.95 $ 19.69
============= =============
Total return~~^ 0.52% 16.77%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.70% 0.70%
Net investment income (loss)~ 3.13% 3.60%
Portfolio turnover 101% 94%
Net assets at end of period (000 Omitted) $ 1,872,185 $ 1,841,586
<Caption>
TOTAL RETURN SERIES
-----------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------ PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- -------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 17.92 $ 15.85 $ 17.93 $ 17.85***
----------- ----------- ----------- -----------
Income from investment operations#~~~ --
Net investment income $ 0.43 $ 0.36 $ 0.45 $ 0.33
Net realized and unrealized gain (loss) on investments and
foreign currency 1.51 2.24 (1.43) (0.25)
----------- ----------- ----------- -----------
Total from investment operations $ 1.94 $ 2.60 $ (0.98) $ 0.08
----------- ----------- ----------- -----------
Less distributions declared to shareholders from net investment
income --
From net investment income $ (0.43) $ (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 $ (0.43) $ (0.53) $ (1.10) $ --
----------- ----------- ----------- -----------
Net asset value -- end of period $ 19.43 $ 17.92 $ 15.85 $ 17.93
=========== =========== =========== ===========
Total return~~^ 11.14%^^^ 16.83% (5.88)% 0.45%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 0.95% 0.95% 0.95% 0.97%+
Net investment income~~~ 2.39% 2.20% 2.77% 2.35%+
Portfolio turnover 67% 65% 82% 101%
Net assets at end of period (000 Omitted) $ 548,069 $ 300,220 $ 152,768 $ 39,015
</Table>
** For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
*** The net asset value and total return previously reported as $17.94 and
(0.06)% respectively, have been revised to reflect the net asset value from
the day prior to the class' inception date. The net asset value and total
return previously reported were from the inception date, the date the share
class was first available to public shareholders.
+ 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.
^^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the shares outstanding the
day the proceeds were recorded.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
56
<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 registered public accounting firm,
whose report, together with the series' financial statements, are included in
this report.
<Table>
<Caption>
UTILITIES SERIES
--------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------------------
INITIAL CLASS SHARES 2004 2003 2002
------------- ------------- -------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 12.23 $ 9.28 $ 12.61
------------- ------------- -------------
Income (loss) from investment operations#~ --
Net investment income $ 0.30 $ 0.24 $ 0.26
Net realized and unrealized gain (loss) on investments and
foreign currency 3.34 3.05 (3.22)
------------- ------------- -------------
Total from investment operations $ 3.64 $ 3.29 $ (2.96)
------------- ------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.26) $ (0.34) $ (0.37)
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 $ (0.26) $ (0.34) $ (0.37)
------------- ------------- -------------
Net asset value -- end of period $ 15.61 $ 12.23 $ 9.28
============= ============= =============
Total return~~^ 30.37%^^^* 36.26% (23.87)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.84% 0.84% 0.82%
Net investment income^ 2.25% 2.28% 2.55%
Portfolio turnover 103% 134% 79%
Net assets at end of period (000 Omitted) $ 328,541 $ 287,648 $ 241,772
<Caption>
TOTAL RETURN SERIES
-------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------
INITIAL CLASS SHARES 2001 2000
------------- ------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 19.08 $ 19.84
------------- -------------
Income (loss) from investment operations#~ --
Net investment income $ 0.35 $ 0.80
Net realized and unrealized gain (loss) on investments and
foreign currency (4.46) 0.49
------------- -------------
Total from investment operations $ (4.11) $ 1.29
------------- -------------
Less distributions declared to shareholders --
From net investment income $ (0.63) $ (0.24)
From net realized gain on investments and foreign currency
transactions (1.71) (1.81)
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 $ (2.36) $ (2.05)
------------- -------------
Net asset value -- end of period $ 12.61 $ 19.08
============= =============
Total return~~^ (24.34)% 7.00%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.78% 0.80%
Net investment income~ 2.25% 4.11%
Portfolio turnover 104% 118%
Net assets at end of period (000 Omitted) $ 467,632 $ 622,564
<Caption>
UTILITIES SERIES
------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
SERVICE CLASS SHARES 2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- -------------------
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period $ 12.18 $ 9.24 $ 12.59 $ 13.87***
----------- ----------- ----------- -----------
Income (loss) from investment operations#~~~ --
Net investment income $ 0.26 $ 0.20 $ 0.24 $ 0.08
Net realized and unrealized gain (loss) on investments and
foreign currency 3.32 3.06 (3.22) (1.36)
----------- ----------- ----------- -----------
Total from investment operations $ 3.58 $ 3.26 $ (2.98) $ (1.28)
----------- ----------- ----------- -----------
Less distributions declared to shareholders from net investment
income $ (0.23) $ (0.32) $ (0.37) $ --
----------- ----------- ----------- -----------
Net asset value -- end of period $ 15.53 $ 12.18 $ 9.24 $ 12.59
=========== =========== =========== ===========
Total return~~^ 30.01%^^^* 36.03% (24.09)% (9.23)%++***
Ratios (to average net assets)/Supplemental data:
Expenses## 1.09% 1.09% 1.07% 1.05%+
Net investment income ~~~ 2.01% 1.95% 2.41% 1.60%+
Portfolio turnover 103% 134% 79% 104%
Net assets at end of period (000 Omitted) $ 32,599 $ 22,555 $ 12,763 $ 7,919
</Table>
** For the period from the inception of the Service Class shares, August 24,
2001, through December 31, 2001.
*** The net asset value and total return previously reported as $14.01 and
(10.14)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were as of, the date the share class was
first available to public shareholders.
+ Annualized.
++ Not annualized.
+++ Per share amount was less than $0.01.
# Per share data are based on average shares outstanding.
## Ratios do not reflect reductions from fees paid indirectly.
~~ The 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 a net increase from gains
realized on the disposal of investments in violation of restrictions. The
gains resulted in an increase in net asset value of $0.00278 per share
based on shares outstanding on the day the gains were realized. Excluding
the offset of these gains from the series' ending net asset value per
share, the total returns for the year ended December 31, 2004 would have
been approximately 30.35% and 29.99% for the Initial Class shares and the
Service Class shares, respectively.
~ 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.
^^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the shares outstanding the
day the proceeds were recorded.
^ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
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, 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, Core Equity Series (formerly Research Growth and Income
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 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 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 U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Each 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 -- 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. 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. Forward
foreign currency contracts are valued using spot rates and forward points as
reported by an independent pricing source. Short-term obligations with a
remaining maturity in excess of 60 days will be valued upon dealer-supplied
valuations. All other short-term obligations in the series' portfolio are valued
at amortized cost, which constitutes market value as determined by the Board of
Trustees. Money market mutual funds are valued at net asset value. Investment
valuations, other assets, and liabilities initially expressed in foreign
currencies are converted each business day into U.S. dollars based upon current
exchange rates. When pricing service information or market quotations are not
readily available, securities are priced at fair value as determined under the
direction of the Board of Trustees. For example, significant events (such as
movement in the U.S. securities market, or other regional and local
developments) may occur between the time that foreign markets close (where the
security is principally traded) and the time that the 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, the series may
utilize information from an external vendor or other sources to adjust closing
market quotations of foreign equity securities to reflect what it believes to be
the fair value of the securities as of the series' valuation time. Because the
frequency of significant events is not predictable, fair valuation of foreign
equity securities may occur on a frequent basis.
Repurchase Agreements -- Each series may enter into repurchase agreements with
institutions that the series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each series
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the series to
obtain those securities in the event of a default under the repurchase
agreement. Each series monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the series under each such repurchase agreement. Each series, along with
other affiliated entities of Massachusetts Financial Services Company (MFS), may
utilize a joint trading account for the purpose of entering into one or more
repurchase agreements.
Foreign Currency Translation -- Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Gains
and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Gains and losses attributable to foreign exchange
rate movements on income and expenses are recorded for financial statement
purposes as foreign currency transaction gains and losses. That portion of both
realized and unrealized gains and losses on investments that results from
fluctuations in foreign currency exchange rates is not separately disclosed.
Security Loans -- State Street Bank and Trust Company ("State Street") 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 the series with indemnification against
Borrower default. Each series bears the risk of loss with respect to the
investment of cash collateral. On loans collateralized by cash, the cash
collateral is invested in a money market fund or short-term securities. A
portion of the income generated upon investment of the collateral is remitted to
the Borrowers, and the remainder is allocated between the series and the lending
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.
The dividend and interest income earned on the securities loaned is accounted
for in the same manner as other dividend and interest income.
58
<Page>
Forward Foreign Currency Exchange Contracts -- Each series may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. Each
series may enter into forward foreign currency exchange contracts for hedging
purposes as well as for non-hedging purposes. For hedging purposes, each series
may enter into contracts to deliver or receive foreign currency it will receive
from or require for its normal investment activities. Each series may also use
contracts in a manner intended to protect foreign currency-denominated
securities from declines in value due to unfavorable exchange rate movements.
For non-hedging purposes, 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 U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Dividend and interest payments received in additional securities are recorded on
the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date.
The following series were participants in a class-action lawsuit against Cendant
Corporation. On March 26, 2003, the series received a partial cash settlement,
recorded as a realized gain on investment transactions. The partial 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 the proceeds
were received as follows:
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS TRUST RESEARCH
SERIES SERIES SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------------------------
Cash Settlement $ 13,278,304 $ 5,764,504 $ 1,246,578 $ 635,017 $ 106,672 $ 2,202,987
Increase in net asset value per share $ 0.28 $ 0.16 $ 0.06 $ 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 receive proceeds from the settlement of class action lawsuits
involving its portfolio holdings. Any proceeds received are reflected in
realized gain/loss in the Statement of Operations, or in unrealized gain/loss if
the security is still held by the series. The Capital Appreciation Series and
Emerging Growth Series were participants in a class action lawsuit against
Cendent Corporation. On March 19, 2004, the series' received a cash settlement
in the amount of $1,376,372 and $597,471, respectively.
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.
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, 2004, each series' custodian fees
were reduced under this arrangement. Each series has entered into a commission
recapture agreement, under which certain brokers will credit the series a
portion of the commissions generated, to offset certain expenses of the series.
For the year ended December 31, 2004, 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 EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS
SERIES SERIES SERIES SERIES TRUST SERIES
----------------------------------------------------------------------------------------------------
Balance credits $ 1,076 $ 383 $ 753 $ -- $ 281
Commission recapture credits 31,484 11,136 4,643 2,153 56,630
------------ ------------ ------------ ------------ --------------
Total $ 32,560 $ 11,519 $ 5,396 $ 2,153 $ 56,911
------------ ------------ ------------ ------------ --------------
<Caption>
MID CAP
GROWTH RESEARCH TOTAL RETURN UTILITIES
SERIES SERIES SERIES SERIES
------------------------------------------------------------------------------------
Balance credits $ 92 $ 233 $ 3,650 $ 2,361
Commission recapture credits 1,497 8,819 50,345 9,361
------------ ------------ ------------ ------------
Total $ 1,589 $ 9,052 $ 53,995 $ 11,722
------------ ------------ ------------ ------------
</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.
59
<Page>
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 foreign currency transactions, real estate investment trusts,
defaulted bonds, wash sales, foreign taxes, non-taxable distributions, net
operating losses, and amortization and accretion on debt securities.
The tax character of distributions declared for the years ended December 31,
2004 and December 31, 2003 was as follows:
<Table>
<Caption>
CAPITAL APPRECIATION SERIES EMERGING GROWTH SERIES GLOBAL GROWTH SERIES
--------------------------- -------------------------- --------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
--------------------------- -------------------------- --------------------------
2004 2003 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 433,984 $ -- $ -- $ -- $ 843,092 $ 815,119
<Caption>
MASSACHUSETTS
MANAGED SECTORS SERIES INVESTORS TRUST SERIES MID CAP GROWTH SERIES
-------------------------- -------------------------- --------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------- --------------------------
2004 2003 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 63,676 $ -- $ 11,697,097 $ 12,846,153 $ -- $ --
<Caption>
RESEARCH SERIES TOTAL RETURN SERIES UTILITIES SERIES
-------------------------- -------------------------- --------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
-------------------------- -------------------------- --------------------------
2004 2003 2004 2003 2004 2003
- ----------------------------------------------------------------------------------------------------------------
Distributions declared from:
Ordinary income $ 4,201,673 $ 3,833,763 $ 48,429,855 $ 57,181,077 $ 6,205,650 $ 8,557,499
</Table>
During the year ended December 31, 2004, the following amounts were reclassified
due to differences between book and tax accounting, which may include foreign
currency transactions, foreign taxes, real estate investment trusts, non-taxable
distributions, net operating losses, and amortization and accretion on debt
securities.
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS
SERIES SERIES SERIES SERIES TRUST SERIES
-------------------------------------------------------------------------------------------------------------------------
Increase (decrease)
Paid-in-capital $ -- $ (604,779) $ -- $ -- $ --
Accumulated undistributed net
realized gain (loss) 25,950 3,622 54,771 4,109 80,877
Accumulated undistributed net investment income (25,950) 601,157 (54,771) (4,109) (80,877)
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
SERIES SERIES SERIES SERIES
----------------------------------------------------------------------------------------------------------
Increase (decrease)
Paid-in-capital $ (789,363) $ -- $ 664,165 $ --
Accumulated undistributed net
realized gain (loss) (3,394) 27,936 (4,349,911) 2,123,326
Accumulated undistributed net investment income 792,757 (27,936) 3,685,746 (2,123,326)
</Table>
At December 31, 2004, 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 $ 4,352,013 $ -- $ 770,053 $ 744,638 $ 10,688,878
Capital loss carryforward (744,869,099) (473,784,865) (98,310,346) (200,618,771) (387,636,643)
Unrealized gain (loss) 92,535,975 55,347,645 25,915,451 21,791,577 163,852,479
Other temporary differences -- -- (57,141) -- --
</Table>
60
<Page>
<Table>
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
SERIES SERIES SERIES SERIES
-------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ -- $ 2,353,088 $ 54,341,859 $ 3,640,244
Undistributed long-term capital gain -- -- 53,278,874 --
Capital loss carryforward (42,793,486) (276,462,094) -- (183,417,068)
Unrealized gain (loss) 19,077,352 49,762,995 195,023,570 58,931,190
Other temporary differences (6,155) -- (479,287) (176,035)
</Table>
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 as follows:
<Table>
<Caption>
CAPITAL EMERGING GLOBAL MANAGED MASSACHUSETTS
APPRECIATION GROWTH GROWTH SECTORS INVESTORS
EXPIRATION DATE SERIES SERIES SERIES SERIES TRUST SERIES
------------------------------------------------------------------------------------------------------------------
December 31, 2009 $ (364,513,863) $ (244,556,998) $ (52,563,049) $ (143,561,763) $ (163,278,388)
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 $ (744,869,099) $ (473,784,865) $ (98,310,346) $ (200,618,771) $ (387,636,643)
=============== =============== =============== =============== ===============
<Caption>
MID CAP
GROWTH RESEARCH UTILITIES
EXPIRATION DATE SERIES SERIES SERIES
------------------------------------------------------------------------------------------------------------------
December 31, 2009 $ -- $ (114,599,350) $ (60,374,245)
December 31, 2010 (42,793,486) (161,862,744) (123,042,823)
--------------- --------------- ---------------
Total $ (42,793,486) $ (276,462,094) $ (183,417,068)
=============== =============== ===============
</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.
(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 the series' average daily net assets. The
agreement also provides that each series will be reimbursed for expenses
(excluding taxes, extraordinary expenses and brokerage and transaction cost) 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 0.73%* 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 0.72%* N/A
Total Return Series 0.65%* 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 average net assets of the next $500
million and 0.65% of average net assets in excess of $1.5 billion. The
management fee for the Global Growth Series is 0.90% of 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.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.
During the year ended December 31, 2004, the Utilities Series realized a gain on
disposition of a security in violation of the series' investment restrictions.
The amount of the gain was $70,344. This amount is separately disclosed in the
Statements of Operations and the Statements of Changes in Net Assets. The effect
of this gain on series' total return is disclosed in the Financial Highlights.
Each series pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to the Board chairperson,
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).
61
<Page>
Each series and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
funds and the sole member of Tarantino LLC. MFS has agreed to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
The series' investment advisor, MFS, has been the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in connection
with fund sales, as described in the Legal Proceedings Footnote. On July 28,
2004, the series accrued an estimate of the amount to be received pursuant to
this matter in these amounts based on the shares outstanding on the day the
proceeds were recorded as follows:
<Table>
<Caption>
SETTLEMENT AMOUNT PER SHARE IMPACT
----------------------------------------------------------------------------------------------
Capital Appreciation Series $ 756,214 $ 0.02
Emerging Growth Series $ 374,251 $ 0.01
Global Growth Series $ 54,374 --*
Managed Sectors Series $ 216,578 $ 0.02
Massachusetts Investors Trust Series $ 565,413 $ 0.01
Mid Cap Growth Series $ 520 --*
Research Series $ 256,213 $ 0.01
Total Return Series $ 208,370 --*
Utilities Series $ 67,404 --*
</Table>
* The per share impact was less than $0.01.
Administrator -- MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to each series for
which MFS acts as investment adviser. Under an administrative services agreement
between each series and MFS, MFS is entitled to partial reimbursement of the
costs MFS incurs to provide these services, subject to review and approval by
the Board of Trustees. Each series is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior to
April 1, 2004, each series paid 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>
Effective April 1, 2004, each series paid MFS an administrative fee up to the
following annual percentage rates of each series' average daily net assets:
<Table>
First $2 billion 0.01120%
Next $2.5 billion 0.00832%
Next $2.5 billion 0.00032%
In excess of $7 billion 0.00000%
</Table>
For the year ended December 31, 2004, each series paid MFS the following amounts
equivalent to the following annual percentage rates of average daily net assets,
to partially reimburse MFS for the costs of providing administrative services.
<Table>
<Caption>
PERCENT OF
ADMINISTRATOR AVERAGE NET
FEES ASSETS
-----------------------------------------------------------------------------------------------
Capital Appreciation Series $ 66,939 0.00936%
Emerging Growth Series 41,354 0.00940%
Global Growth Series 16,871 0.00934%
Managed Sectors Series 14,341 0.00946%
Massachusetts Investors Trust Series 107,414 0.00930%
Mid Cap Growth Series 11,240 0.00913%
Research Series 42,703 0.00934%
Total Return Series 178,152 0.00899%
Utilities Series 28,669 0.00895%
</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, 2004 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>
CAPITAL EMERGING GLOBAL
APPRECIATION GROWTH GROWTH
SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) $ 437,815,285 $ 406,578,627 $ 204,425,058
=============== =============== ===============
Sales
Investments (non-U.S. government securities) $ 548,765,682 $ 490,971,871 $ 237,194,315
=============== =============== ===============
<Caption>
MANAGED MASSACHUSETTS MID CAP
SECTORS INVESTORS GROWTH
SERIES TRUST SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government securities) $ 137,660,086 $ 880,651,479 $ 102,605,148
=============== =============== ===============
Sales
Investments (non-U.S. government securities) $ 167,904,164 $ 1,053,687,116 $ 101,617,936
=============== =============== ===============
<Caption>
TOTAL
RESEARCH RETURN UTILITIES
SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------
Purchases
U.S. government securities $ -- $ 387,417,245 $ 809,862
=============== =============== ===============
Investments (non-U.S. government securities) $ 529,839,300 $ 967,590,631 $ 323,050,179
=============== =============== ===============
Sales
U.S. government securities $ -- $ 264,926,326 $ 803,067
=============== =============== ===============
Investments (non-U.S. government securities) $ 615,735,956 $ 1,039,967,463 $ 357,880,587
=============== =============== ===============
</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 $ 617,424,694 $ 441,028,208 $ 181,319,861 $ 124,076,215 $ 1,033,435,510
=============== =============== =============== =============== ===============
Gross unrealized appreciation $ 96,468,600 $ 63,581,992 $ 27,725,384 $ 23,133,402 $ 172,099,806
Gross unrealized depreciation (3,941,344) (8,237,423) (1,817,039) (1,341,825) (8,254,059)
--------------- --------------- --------------- --------------- ---------------
Net unrealized appreciation
(depreciation) $ 92,527,256 $ 55,344,569 $ 25,908,345 $ 21,791,577 $ 163,845,747
=============== =============== =============== =============== ===============
<Caption>
MID CAP TOTAL
GROWTH RESEARCH RETURN UTILITIES
SERIES SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------
Aggregate cost $ 138,876,950 $ 432,495,697 $ 2,205,276,482 $ 360,240,498
=============== =============== =============== ===============
Gross unrealized appreciation $ 22,229,135 $ 54,932,292 $ 210,069,089 $ 60,979,657
Gross unrealized depreciation (3,151,783) (5,169,829) (15,051,602) (2,049,591)
--------------- --------------- --------------- ---------------
Net unrealized appreciation
(depreciation) $ 19,077,352 $ 49,762,463 $ 195,017,487 $ 58,930,066
=============== =============== =============== ===============
</Table>
(5) SHARES OF BENEFICIAL INTEREST
Each series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
<Table>
<Caption>
CAPITAL APPRECIATION SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 29,855,744 $ 527,622,763 36,430,830 $ 555,737,786
Shares issued to shareholders in
reinvestment of distributions 24,899 433,984 -- --
Shares redeemed (36,638,282) (647,766,495) (43,541,461) (659,490,318)
--------------- --------------- --------------- ---------------
Net change (6,757,639) $ (119,709,748) (7,110,631) $ (103,752,532)
=============== =============== =============== ===============
<Caption>
EMERGING GROWTH SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 14,662,402 $ 209,951,352 17,237,076 $ 211,585,016
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (20,768,397) (296,052,618) (23,555,654) (284,330,504)
--------------- --------------- --------------- ---------------
Net change (6,105,995) $ (86,101,266) (6,318,578) $ (72,745,488)
=============== =============== =============== ===============
</Table>
63
<Page>
<Table>
<Caption>
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003 DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------------- -------------------------- -------------------------- --------------------------
SERVICE CLASS
SHARES SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------------------
Shares sold 3,311,227 $ 58,277,694 3,463,604 $ 53,156,979 2,269,316 $ 32,147,936 2,393,685 $ 29,186,780
Shares redeemed (3,292,724) (57,922,233) (3,209,643) (49,113,958) (2,163,522) (30,640,672) (2,124,183) (25,692,327)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net change 18,503 $ 355,461 253,961 $ 4,043,021 105,794 $ 1,507,264 269,502 $ 3,494,453
============ ============ ============ ============ ============ ============ ============ ============
<Caption>
GLOBAL GROWTH SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 2,933,259 $ 33,026,863 3,261,710 $ 30,596,849
Shares issued to shareholders in
reinvestment of distributions 79,127 820,549 95,459 802,813
Shares redeemed (6,130,268) (67,996,829) (7,049,798) (62,881,388)
--------------- --------------- --------------- ---------------
Net change (3,117,882) $ (34,149,417) (3,692,629) $ (31,481,726)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 572,855 $ 6,392,765 1,530,109 $ 13,660,385
Shares issued to shareholders in
reinvestment of distributions 2,184 22,543 1,468 12,306
Shares redeemed (577,264) (6,423,368) (1,364,494) (12,116,239)
--------------- --------------- --------------- ---------------
Net change (2,225) $ (8,060) 167,083 $ 1,556,452
=============== =============== =============== ===============
<Caption>
MANAGED SECTORS SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 1,098,921 $ 18,401,125 1,470,625 $ 22,495,048
Shares issued to shareholders in
reinvestment of distributions 3,916 63,676 -- --
Shares redeemed (2,915,786) (48,393,981) (3,539,753) (51,788,451)
--------------- --------------- --------------- ---------------
Net change (1,812,949) $ (29,929,180) (2,069,128) $ (29,293,403)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 97,850 $ 1,637,632 135,985 $ 2,044,987
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (105,208) (1,758,464) (132,155) (2,006,538)
--------------- --------------- --------------- ---------------
Net change (7,358) $ (120,832) 3,830 $ 38,449
=============== =============== =============== ===============
<Caption>
MASSACHUSETTS INVESTORS TRUST SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 15,931,068 $ 413,328,761 18,119,817 $ 415,204,427
Shares issued to shareholders in
reinvestment of distributions 447,605 11,046,879 562,444 12,283,774
Shares redeemed (23,613,999) (611,327,874) (26,183,745) (591,212,146)
--------------- --------------- --------------- ---------------
Net change (7,235,326) $ (186,952,234) (7,501,484) $ (163,723,945)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 3,878,532 $ 100,002,868 4,191,568 $ 95,283,815
Shares issued to shareholders in
reinvestment of distributions 26,442 650,218 25,821 562,379
Shares redeemed (4,016,175) (103,357,729) (3,666,249) (83,307,963)
--------------- --------------- --------------- ---------------
Net change (111,201) $ (2,704,643) 551,140 $ 12,538,231
=============== =============== =============== ===============
<Caption>
MID CAP GROWTH SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 8,438,139 $ 45,399,824 11,902,265 $ 54,284,348
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (9,031,635) (48,195,215) (7,727,781) (33,796,739)
--------------- --------------- --------------- ---------------
Net change (593,496) $ (2,795,391) 4,174,484 $ 20,487,609
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 13,933,712 $ 73,709,460 8,520,907 $ 40,749,200
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares redeemed (13,409,067) (70,844,551) (4,988,390) (24,285,882)
--------------- --------------- --------------- ---------------
Net change 524,645 $ 2,864,909 3,532,517 $ 16,463,318
=============== =============== =============== ===============
<Caption>
RESEARCH SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 4,615,570 $ 67,842,460 5,919,002 $ 74,898,604
Shares issued to shareholders in
reinvestment of distributions 295,191 4,047,067 323,079 3,780,030
Shares redeemed (11,365,545) (164,521,821) (13,727,969) (166,837,306)
--------------- --------------- --------------- ---------------
Net change (6,454,784) $ (92,632,294) (7,485,888) $ (88,158,672)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 3,465,271 $ 49,297,955 1,398,843 $ 17,711,972
Shares issued to shareholders in
reinvestment of distributions 11,335 154,606 4,608 53,733
Shares redeemed (3,035,209) (43,171,746) (884,403) (11,194,294)
--------------- --------------- --------------- ---------------
Net change 441,397 $ 6,280,815 519,048 $ 6,571,411
=============== =============== =============== ===============
<Caption>
TOTAL RETURN SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 13,093,000 $ 242,061,403 17,626,716 $ 294,494,534
Shares issued to shareholders in
reinvestment of distributions 2,259,960 39,255,506 3,226,008 51,583,867
Shares redeemed (24,886,578) (457,889,210) (29,751,984) (491,830,115)
--------------- --------------- --------------- ---------------
Net change (9,533,618) $ (176,572,301) (8,899,260) $ (145,751,714)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 21,445,623 $ 392,791,148 13,709,379 $ 230,394,938
Shares issued to shareholders in
reinvestment of distributions 530,616 9,174,349 351,142 5,597,210
Shares redeemed (10,526,829) (193,753,742) (6,948,290) (117,049,454)
--------------- --------------- --------------- ---------------
Net change 11,449,410 $ 208,211,755 7,112,231 $ 118,942,694
=============== =============== =============== ===============
</Table>
64
<Page>
<Table>
<Caption>
UTILITIES SERIES
---------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
INITIAL CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 5,382,059 $ 73,371,201 7,142,580 $ 77,482,205
Shares issued to shareholders in
reinvestment of distributions 480,703 5,749,208 812,301 8,106,762
Shares redeemed (8,334,628) (112,180,633) (10,500,562) (111,187,382)
--------------- --------------- --------------- ---------------
Net change (2,471,866) $ (33,060,224) (2,545,681) $ (25,598,415)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
--------------------------------- ---------------------------------
SERVICE CLASS SHARES SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------
Shares sold 1,375,213 $ 18,510,218 1,652,995 $ 17,674,211
Shares issued to shareholders in
reinvestment of distributions 38,292 456,442 45,300 450,737
Shares redeemed (1,166,654) (15,800,929) (1,227,397) (13,206,592)
--------------- --------------- --------------- ---------------
Net change 246,851 $ 3,165,731 470,898 $ 4,918,356
=============== =============== =============== ===============
</Table>
(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 fund, based on its borrowings, at a rate equal to the Federal
Reserve funds rate plus 0.50%. In addition, a commitment fee, based on the
average daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The interest and
commitment fee allocated to each series and included in miscellaneous expense
for the year ended December 31, 2004 and included in miscellaneous expense was
as follows:
<Table>
<Caption>
COMMITMENT
FEE & INTEREST
EXPENSE
------------------------------------------------------------------------------
Capital Appreciation Series $ 5,934
Emerging Growth Series 3,822
Global Growth Series 5,435
Managed Sectors Series 1,212
Massachusetts Investors Trust Series 9,254
Mid Cap Growth Series 642
Research Series 2,119
Total Return Series 9,705
Utilities Series 1,617
</Table>
Each series had no significant borrowings during the period.
(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 forward foreign currency exchange 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.
Forward Foreign Currency Exchange Contracts
Utilities Series
<Table>
<Caption>
Net Unrealized
Contracts to Contracts Appreciation
Settlement Date Deliver/Receive In Exchange For at Value (Depreciation)
-------------------------------------------------------------------------------------------------------------
Sales
1/19/2005-2/14/2005 EUR 22,419,905 $ 29,110,435 $ 30,374,924 $ (1,264,489)
1/12/2005-2/14/2005 GBP 5,620,692 10,464,555 10,763,599 (299,044)
--------------- --------------- ---------------
$ 39,574,990 $ 41,138,523 $ (1,563,533)
=============== =============== ===============
Purchases
1/19/2005-2/14/2005 EUR 2,901,199 $ 3,876,188 $ 3,930,524 $ 54,336
1/12/2005 GBP 122,603 235,367 234,784 (583)
--------------- --------------- ---------------
$ 4,111,555 $ 4,165,308 $ 53,753
=============== =============== ===============
</Table>
At December 31, 2004, the Utilities Series had sufficient cash and/or securities
to cover any commitments under these contracts.
65
<Page>
(8) RESTRICTED SECURITIES
At December 31, 2004, each series owned the following securities which are
subject to legal or contractual restrictions on resale, excluding securities
issued under Rule 144A, constituting less then 0.2% of net assets which may not
be publicly sold without registration under the Securities Act of 1933. Each
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
DESCRIPTION ACQUISITION SHARES COST VALUE
-------------------------------------------------------------------------------------------------------------
Global Growth Series Aber Diamond Corp. 12/7/2004 31,000 $ 1,078,830 $ 1,096,488
Mid Cap Growth Series Aber Diamond Corp. 1/14/2004 5,700 $ 220,441 $ 201,612
Emerging Growth Series Aber Diamond Corp. 1/14/2004 6,600 $ 255,247 $ 233,446
</Table>
(9) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under the
terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50 million
in penalty to certain MFS funds, pursuant to a plan developed by an independent
distribution consultant. The brokerage allocation practices which were the
subject of this proceeding were discontinued by MFS in November 2003. The
agreement with the SEC is reflected in an order of the SEC. The SEC settlement
order states that MFS failed to adequately disclose to the Boards of Trustees
and to shareholders of the MFS funds the specifics of its preferred arrangements
with certain brokerage firms selling MFS fund shares. The SEC settlement order
states that MFS had in place policies designed to obtain best execution of all
MFS fund trades. As part of the settlement, MFS retained an independent
compliance consultant to review the completeness of its current policies and
practices regarding disclosure to MFS fund trustees and to MFS fund shareholders
of strategic alliances between MFS or its affiliates and broker-dealers and
other financial intermediaries who support the sale of MFS fund shares. Pursuant
to the SEC order, on July 28, 2004, MFS transferred these settlement amounts to
the SEC, and those MFS funds entitled to these settlement amounts accrued an
estimate of their pro rata portion of these amounts. The final distribution plan
was approved by the SEC on January 21, 2005. It is expected that this
distribution will be made by the SEC to the affected MFS funds on or around
February 14, 2005.
In addition, in February, 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain MFS
retail funds was false and misleading because, although the prospectuses for
those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer
and former President also reached agreement with the SEC in which they agreed
to, among other terms, monetary fines and temporary suspensions from association
with any investment adviser or registered investment company. These individuals
have resigned their positions with, and will not be returning to, MFS and the
MFS funds. Under the terms of the February Settlements, MFS and the executives
neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to increase
certain management fees during this period. MFS has also paid an administrative
fine to NH in the amount of $1 million, which will be used for investor
education purposes (NH retained $250,000 and $750,000 was contributed to the
North American Securities Administrators Association's Investor Protection
Trust). In addition, under the terms of the February Settlements, MFS is in the
process of adopting certain governance changes and reviewing its policies and
procedures.
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center, Inc.,
MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS
funds, certain current and/or former Trustees of these MFS funds, and certain
officers of MFS have been named as defendants in multiple lawsuits filed in
federal and state courts. The lawsuits variously have been commenced as class
actions or individual actions on behalf of investors who purchased, held or
redeemed shares of the MFS funds during specified periods, as ERISA actions by
participants in certain retirement plan accounts on behalf of those accounts, or
as derivative actions on behalf of the MFS funds. The lawsuits relating to
market timing and related matters have been transferred to, and consolidated
before, the United States District Court for the District of Maryland, as part
of a multi-district litigation of market timing and related claims involving
several other fund complexes (IN RE MUTUAL FUNDS INVESTMENT LITIGATION (ALGER,
COLUMBIA, JANUS, MFS, ONE GROUP, PUTNAM, ALLIANZ DRESDNER), No. 1:04-md-15863
(transfer began March 19, 2004)). The market timing cases related to the MFS
complex are RIGGS V. MFS ET AL., CASE NO. 04-CV-01162-JFM (direct), HAMMERSLOUGH
V. MFS ET AL., CASE NO. 04-MD-01620 (derivative) AND ANITA WALKER V. MFS ET AL.,
CASE NO. 1:04-CV-01758 (ERISA). The plaintiffs in these consolidated lawsuits
generally seek injunctive relief including removal of the named Trustees,
adviser and distributor, rescission of contracts and 12b-1 Plans, disgorgement
of fees and profits, monetary damages, punitive damages, attorney's fees and
costs and other equitable and declaratory relief. Four lawsuits alleging
improper brokerage allocation practices and excessive compensation are pending
in the United States District Court for the District of Massachusetts (FORSYTHE
V. SUN LIFE FINANCIAL INC., ET AL., No. 04cv10584 (GAO) (March 25, 2004);
EDDINGS V. SUN LIFE FINANCIAL INC., ET AL., No. 04cv10764 (GAO) (April 15,
2004); MARCUS DUMOND, ET AL. V. MASSACHUSETTS FINANCIAL SERVS. CO., ET al., No.
04cv11458 (GAO) (May 4, 2004); and KOSLOW V. SUN LIFE FINANCIAL INC., ET AL.,
No. 04cv11019 (GAO) (May 20, 2004)). The plaintiffs in these lawsuits generally
seek compensatory damages, punitive damages, recovery of fees, rescission
66
<Page>
of contracts, an accounting, restitution, declaratory relief, equitable and/or
injunctive relief and attorney's fees and costs. The various lawsuits generally
allege that some or all of the defendants (i) permitted or acquiesced in market
timing and/or late trading in some of the MFS funds, inadequately disclosed MFS'
internal policies concerning market timing and such matters, (ii) received
excessive compensation as fiduciaries to the MFS funds, or (iii) permitted or
acquiesced in the improper use of fund assets by MFS to support the distribution
of MFS fund shares and inadequately disclosed MFS' use of fund assets in this
manner. The actions assert that some or all of the defendants violated the
federal securities laws, including the Securities Act of 1933 and the Securities
Exchange Act of 1934, the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, the Employee Retirement Income Security Act of 1974, as
well as fiduciary duties and other violations of common law. Insofar as any of
the actions is appropriately brought derivatively on behalf of any of the MFS
funds, any recovery will inure to the benefit of the MFS funds. The defendants
are reviewing the allegations of the multiple complaints and will respond
appropriately. Additional lawsuits based on similar allegations may be filed in
the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the MFS
retail funds, and transferred $50 million for distribution (which has been
accrued to the affected funds and is expected to be distributed on or around
February 14, 2005) to affected MFS funds to compensate those funds based upon
the amount of brokerage commissions allocated in recognition of MFS fund sales.
It is not clear whether these amounts will be sufficient to compensate
shareholders for all of the damage they allegedly sustained, whether certain
shareholders or putative class members may have additional claims to
compensation, or whether the damages that may be awarded in any of the actions
will exceed these amounts. In the event the MFS funds incur any losses, costs or
expenses in connection with such lawsuits, the Boards of Trustees of the
affected MFS funds may pursue claims on behalf of such funds against any party
that may have liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or other
adverse consequences to the MFS funds.
(10) SUBSEQUENT EVENT
On March 15, 2005 the fund expects to mail a proxy statement/prospectus to
shareholders of record at March 1, 2005 requesting a vote on an Agreement and
Plan of Reorganization, whereby Managed Sectors Series would be reorganized in
Capital Appreciation Series. The Agreement and Plan of Reorganization provides
for the transfer of the assets of the Managed Sectors Series to the Capital
Appreciation Series and the assumption by the Capital Appreciation Series of the
liabilities of the Managed Sectors Series in exchange solely for shares of
beneficial interest in the Capital Appreciation Series. Immediately following
the transfer, the Capital Appreciation Series shares received by the Managed
Sectors Series will be distributed to shareholders, pro rata, and the Managed
Sectors Series will be liquidated and terminated. Votes will be cast at a
shareholder meeting scheduled for April 18, 2005. If approved, it is expected
that the reorganization will occur on or around April 25, 2005.
67
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE TRUSTEES AND THE SHAREHOLDERS OF MFS/SUN LIFE SERIES TRUST:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of MFS/Sun Life Series Trust (the "Trust")
comprising Capital Appreciation Series, Emerging Growth Series, Global Growth
Series, Managed Sector Series, Massachusetts Investors Trust Series, Mid Cap
Growth Series, Research Series, Total Return Series, and Utilities Series as of
December 31, 2004, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Trust's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Appreciation Series, Emerging Growth Series, Global Growth Series,
Managed Sector Series, Massachusetts Investors Trust Series, Mid Cap Growth
Series, Research Series, Total Return Series and Utilities Series as of December
31, 2004, 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 24, 2005
68
<Page>
MFS/SUN LIFE SERIES TRUST
FEDERAL TAX INFORMATION (Unaudited)
For the year ended December 31, 2004, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations were as
follows:
<Table>
<Caption>
DIVIDENDS RECEIVED
DEDUCTIONS
------------------------------------------------------------------------
Capital Appreciation Series 100%
Global Growth Series 30.62%
Managed Sectors Series 100%
Massachusetts Investors Trust Series 100%
Research Series 100%
Total Return Series 35.59%
Utilities Series 67.20%
</Table>
For the year ended December 31, 2004, income from foreign sources for the Global
Growth Series was $2,445,536, and the series designated a foreign tax credit of
$292,778.
69
<Page>
MFS/SUN LIFE SERIES TRUST
TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the trust, as of February 1, 2005, are
listed below, together with their principal occupations during the past five
years. (Their titles may have varied during that period.) The address of each
Trustee and officer is 500 Boylston Street, Boston, Massachusetts 02116.
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------- ---------------------- -------------------- --------------------------------------------------------
INTERESTED TRUSTEES
C. James Prieur(3) Trustee July 1999 Sun Life Assurance Company of Canada, President and
(born 04/21/51) Chief Operating Officer
David D. Horn(3) Trustee April 1986 Private investor; Retired; Sun Life Assurance Company
(born 06/07/41) of Canada, Former Senior Vice President and General
Manager for the United States (until 1997)
INDEPENDENT TRUSTEES
J. Kermit Birchfield Chairman May 1997 Consultant; Century Partners, Inc. (investments),
(born 01/08/40) Managing Director; Displaytech, Inc. (manufacturer of
liquid crystal display technology), Director
Robert C. Bishop Trustee May 2001 AutoImmune Inc. (pharmaceutical product development),
(born 01/13/43) Chairman, President and Chief Executive Officer;
Caliper Life Sciences Corp. (laboratory analytical
instruments), Director; Millipore Corporation
(purification/filtration products), Director; Quintiles
Transnational Corp. (contract services to the medical
industry), Director
Frederick H. Dulles Trustee May 2001 Ten State Street LLP (law firm), Partner; McFadden,
(born 03/12/42) Pilkington & Ward LLP (solicitors and registered
foreign lawyers), Partner (until June 2003); Jackson &
Nash, LLP (law firm), Of Counsel (January 2000 to
November 2000)
Derwyn F. Phillips Trustee April 1986 Retired
(born 08/31/30)
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
70
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------- ---------------------- -------------------- --------------------------------------------------------
Ronald G. Steinhart Trustee May 2001 Private investor; Bank One, Texas N.A., Vice Chairman
(born 06/15/40) and Director (January 2000 to January 2001); Bank One
Corporation, Officer (until January 2000); Carreker
Corporation (consultant and technology provider to
financial institutions), Director; Prentiss Properties
Trust (real estate investment trust), Director; United
Auto Group, Inc. (automotive retailer), Director
Haviland Wright Trustee May 2001 Hawaii Small Business Development Center, Kaua'i
(born 07/21/48) Center, Center Director (since March 2002);
Displaytech, Inc. (manufacturer of liquid crystal
display technology), Chairman and Chief Executive
Officer (until March 2002)
TRUSTEES EMERITUS
Garth Marston Trustee Emeritus Retired
(born 04/28/26)
Samuel Adams Trustee Emeritus Retired
(born 10/19/25)
OFFICERS
Robert J. Manning(4) President February 2004 Massachusetts Financial Services Company, Chief
(born 10/20/63) Executive Officer, President, Chief Investment Officer
and Director
James R. Bordewick, Jr.(4) Assistant Secretary February 1997 Massachusetts Financial Services Company, Senior Vice
(born 03/06/59) and Assistant Clerk President and Associate General Counsel
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
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<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------- ---------------------- -------------------- --------------------------------------------------------
Jeffrey N. Carp(4) Secretary and Clerk September 2004 Massachusetts Financial Services Company, Executive
(born 12/1/56) Vice President, General Counsel and Secretary (since
April 2004); Hale and Dorr LLP (law firm), Partner
(prior to April 2004)
Stephanie A. DeSisto(4) Assistant Treasurer May 2003 Massachusetts Financial Services Company, Vice
(born 10/01/53) President (since April 2003); Brown Brothers Harriman &
Co., Senior Vice President (November 2002 to April
2003); ING Groep N.V./Aeltus Investment Management,
Senior Vice President (prior to November 2002)
James F. DesMarais(4) Assistant Secretary September 2004 Massachusetts Financial Services Company, Assistant
(born 03/09/61) and Assistant Clerk General Counsel
Richard M. Hisey(4) Treasurer August 2002 Massachusetts Financial Services Company, Senior Vice
(born 08/29/58) President (since July 2002); The Bank of New York,
Senior Vice President (September 2000 to July 2002);
Lexington Global Asset Managers, Inc., Executive Vice
President and Chief Financial Officer (prior to
September 2000); Lexington Funds, Chief Financial
Officer (prior to September 2000)
Brian T. Hourihan(4) Assistant Secretary September 2004 Massachusetts Financial Services Company, Vice
(born 11/11/64) and Assistant Clerk President, Senior Counsel and Assistant Secretary
(since June 2004); Affiliated Managers Group, Inc.,
Chief Legal Officer/Centralized Compliance Program
(January to April 2004); Fidelity Research & Management
Company, Assistant General Counsel (prior to January
2004)
Ellen Moynihan(4) Assistant Treasurer May 1997 Massachusetts Financial Services Company, Vice
(born 11/13/57) President
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
72
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------- ---------------------- -------------------- --------------------------------------------------------
Frank L. Tarantino Independent Chief September 2004 Tarantino LLC (provider of compliance services),
(born 03/07/44) Compliance Officer Principal (since June 2004); CRA Business Strategies
Group (consulting services), Executive Vice President
(April 2003 to June 2004); David L. Babson & Co.
(investment adviser), Managing Director, Chief
Administrative Officer and Director (February 1997 to
March 2003)
James O. Yost(4) Assistant Treasurer April 1992 Massachusetts Financial Services Company, Senior Vice
(born 06/12/60) President
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
The Series does not hold annual meetings for the purpose of electing Trustees,
and Trustees are not elected for fixed terms. Each Trustee and officer holds
office until his or her successor is chosen and qualified, or until his or her
earlier death, resignation, retirement or removal.
All Trustees currently serve as Trustees of the Series and have served in that
capacity since originally elected or appointed. All of the Trustees are also
Managers of the Compass Variable Accounts, separate accounts registered as
investment companies. The executive officers of the Series 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.
73
<Page>
MFS(R)/SUN LIFE SERIES TRUST
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
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.
Information regarding how each series voted proxies relating to portfolio
securities during the most recent twelve month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's website at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
Each series will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. Each series' Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549 0102
Information on the operation of the Public Reference Room any be obtained by
calling the Commission at 1-800-SEC-0330. Each series' Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfor@sec.gov
or by writing the Public Reference Section at the above address.
PORTFOLIO MANAGERS++
Margaret W. Adams
William J. Adams
John F. Addeo
S. Irfan Ali
David A. Antonelli
Edward Baldini
T. Kevin Beatty
David M. Calabro
James J. Calmas
Barry P. Dargan
Kenneth J. Enright
Eric B. Fischman
Steven R. Gorham
Robert Henderson
Alan Langsner
John D. Laupheimer, Jr.
Olivier Lebleu
Camille Lee
Gregory Locraft
Kate Mead
Thomas Melendez
Constantinos Mokas
Edward L. O'Dette
Betsy Palmer
Stephen Pesek
Scott B. Richards
Michael W. Roberge
Matthew W. Ryan
Daniel Scherman
David E. Sette-Ducati
Maura A. Shaughnessy
Nicholas Smithie
James T. Swanson
Brooks Taylor
Peter C. Vaream
Terri A. Vitozzi
Barnaby Wiener
Thomas Wetherald
++MFS Investment Management(R)
(C) 2005 Sun Life Financial Distributors, Inc.
SUN-B-ANN-2/05 196M
<Page>
[MFS(R)/SUN LIFE SERIES TRUST LOGO]
ANNUAL REPORT - DECEMBER 31, 2004
CAPITAL OPPORTUNITIES SERIES
CORE EQUITY SERIES
INTERNATIONAL GROWTH SERIES
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
MID CAP VALUE SERIES
NEW DISCOVERY SERIES
RESEARCH INTERNATIONAL SERIES
STRATEGIC GROWTH SERIES
STRATEGIC VALUE SERIES
TECHNOLOGY SERIES
VALUE SERIES
<Page>
TABLE OF CONTENTS
<Table>
Letter from the CEO of MFS 1
Management Review 2
Portfolio Composition 8
Performance Summary 19
Expense Table 27
Portfolio of Investments 29
Financial Statements 48
Notes to Financial Statements 65
Report of Independent Registered Public Accounting Firm 75
Federal Tax Information 76
Trustees and Officers 77
Proxy Voting Policies and Information Back Cover
Quarterly Portfolio Disclosure Back Cover
</Table>
THE REPORT IS PREPARED FOR THE GENERAL INFORMATION OF CONTRACT OWNERS. IT IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY WHEN PRECEDED OR
ACCOMPANIED BY A CURRENT PROSPECTUS.
NOT FDIC INSURED MAY LOSE VALUE NO BANK OR CREDIT UNION GUARANTEE
NOT A DEPOSIT NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY OR NCUA/NCUSIF
<Page>
LETTER FROM THE CEO OF MFS
DEAR CONTRACT OWNERS,
For most investors, the main factor in determining long-term success is asset
allocation -- how they spread their money among stocks, bonds, and cash. In
fact, the total returns of investors may be more influenced by their asset
allocation strategy than by their security selection within each asset class.
The principle behind asset allocation is simple: by diversifying across a
variety of types of securities, investors reduce the overall risk of their
portfolio because gains in one area are likely to offset losses in another.
One of the dangers of not having an asset allocation plan is the temptation to
simply chase performance, by moving money into whichever asset class appears to
be outperforming at the moment. The problem with this approach is that by the
time a particular area of the market comes into favor, investors may have
already missed some of the best performance. We would suggest that one way to
benefit from swings in the market is to acquire a diversified portfolio so that
investors hold a range of asset classes BEFORE the market swings in their
direction.
UNDERSTAND YOUR EMOTIONS
It usually takes a bear market for people to appreciate the benefits of
diversification. At MFS, we believe proper asset allocation is important in all
market environments. But we understand that there are emotional components of
investment decisions that sometimes keep investors from achieving their long
term goals. The three common behaviors that negatively impact investment
decisions are overconfidence, looking backwards, and loss aversion.
- - OVERCONFIDENCE. After experiencing gains in the market, particularly during a
bull market, investors have a natural tendency to overestimate their own
abilities. During the global bull market of the late 1990s, for example, a
large number of investors traded their own stocks and made significant
profits. However, most of these same investors later handed back those
profits -- and then some -- because they focused more on short-term blips in
the market and less on the fundamental factors that affect a company's
long-term prospects.
- - LOOKING BACKWARDS. Although security prices are determined by expectations
about the future, many investors make choices based on the recent past.
Investors who have achieved momentary success in the market tend to take on
too much risk, believing that better-than-average returns can be easily
duplicated. On the other hand, those who have had negative experiences tend
to become overly cautious and take on too little risk. Recent historical
experience tends to dictate an investor's frame of reference and may lead to
irrational decisions.
- - LOSS AVERSION. Simply put, investors would rather avoid the immediate pain of
losses than enjoy the future pleasure of gains. As a result, some investors
tend to overreact to short-term downturns in the market by seeking to
mitigate their losses, rather than remaining invested to benefit from the
long-term growth potential of the stock and bond markets.
THINK LIKE A PROFESSIONAL INVESTOR
Asset allocation helps reduce the emotional factors that tend to affect the
long-term returns of investors. Professional investors -- those who manage
assets for money management firms, pension funds, and endowments -- have tended
to outperform the average retirement investor because they focus on asset
allocation. For example, the investment performance of the average 401(k)
participant has lagged these professional investors by more than two percentage
points a year, on average, over the past 10 years.(1)
We think asset allocation is one of the most important decisions for investors.
A study of the performance of 91 large U.S. corporate pension plans with assets
of more than $100 million over a 10-year period beginning in 1974 concluded that
asset allocation policies accounted for 93.6% of their returns, while individual
security selection and the timing of their investments accounted for only 6.4%
for their overall performance.(2)
Professional investors target a realistic level of return based on the amount of
risk they are willing to take, then set allocations to meet their goals. On
average, U.S. professional investors allocate 35% to 40% of their assets to
domestic equity stocks; 20% to 30% to fixed income issues; 10% to international
stocks; and between 10% and 20% to other investment classes such as real
estate.(3) And within those categories, they hold a broad range of styles and
asset classes.
In contrast, 401(k) participants who held company stock in their retirement
plans at the end of 2002 had roughly 42% of their retirement assets in company
stock while the rest was allocated to either growth or value stock funds.(4)
These participants virtually ignored the broad range of equity, fixed-income,
and international offerings provided by their retirement plans.
ALLOCATE, DIVERSIFY, REBALANCE
We recommend working with a professional adviser to find an optimal mix of
investments based on your individual goals. In our view, a disciplined asset
allocation strategy is composed of three simple steps: allocate, diversify and
rebalance.
- - ALLOCATE. Investors should work with their financial adviser to specify their
long-term goals and tolerance for risk. Then investors should allocate their
assets across the major asset classes -- stocks, bonds, and cash -- to help
them pursue an investmenT return that is consistent with their risk tolerance
level.
- - DIVERSIFY. By diversifying their assets, investors trade some performance in
the top performing categories for a more predictable and stable portfolio. At
the same time, investors should include different investment styles and
market capitalizations of stocks and a range of fixed-income investments, as
well as U.S. and non-U.S. securities. Because security subclasses tend to
move in and out of favor during various market and economic environments, a
broad portfolio increases the benefits of diversification.
- - REBALANCE. We suggest that investors consult with their professional advisers
periodically to rebalance their portfolios to maintain the percentages that
they have dedicated to each asset class. Allocations can shift as markets
rise and fall, making for a riskier or more conservative portfolio than an
investor originally intended. For example, a portfolio of 50% stocks and 50%
bonds at the start of 2000 would have shifted to 32% stocks and 68% bonds at
the end of 2002 because of the weak stock market.(5)
In short, these three simple concepts -- allocate, diversify and rebalance --
help take emotion out of the investment process and help prevent investors from
trying to outguess the market. An asset allocation strategy cannot turn a down
market cycle into a good one, but it is an invaluable tool to manage risk and
keep investors on track toward reaching their long-term investment goals.
A DISCIPLINED INVESTMENT PROCESS IS PARAMOUNT
Disciplined diversification has helped investors pursue long-term, above-average
results through the years. Since 1924, when we
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invented the mutual fund, MFS(R) has strived to give investors the products and
tools they need to maintain well-diversified portfolios. MFS provides a variety
of products in each asset class as well as a family of asset allocation funds.
These asset allocation portfolios cover a range from conservative to moderate,
growth, and aggressive growth allocations, each with a strategy based on a
distinct level of risk. We recommend developing a comprehensive financial plan
with an investment advisor who is familiar with your risk tolerance, your
individual goals, and your financial situation.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Robert J. Manning
Robert J. Manning
Chief Executive Officer and Chief Investment Officer
MFS Investment Management
Investment Advisor to the MFS(R)/Sun Life Series Trust
January 14, 2005
Asset allocation and diversification can not guarantee a profit or protect
against a loss. The opinions expressed in this letter are those of MFS, and no
forecasts can be guaranteed.
(1) Source: Watson Wyatt
(2) "Determinants of Portfolio Performance," in Financial Analysts Journal,
January/February 1995, by Gary P. Brinson, L. Randolph Hood, and Gilbert L.
Beebower
(3) Source: Greenwich Associates
(4) Source: Hewitt Associates
(5) Source: Lipper Inc.
MARKET ENVIRONMENT
In 2004, many measures of global economic growth, including employment and
corporate spending, continued to improve, although we feel that record high oil
prices, rising short-term interest rates in the U.S., a decline in the value of
the U.S. dollar against most major currencies, as well as geopolitical
uncertainty impacted markets. Going into the last quarter of 2004, oil prices
pulled back from their record levels, and in our view, investors seemed to
recognize that corporate profits and economic growth were up considerably for
the year.
MANAGEMENT REVIEW
CAPITAL OPPORTUNITIES SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 12.80%, while Service Class shares provided a total
return of 12.52%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 10.87% over the same period
for the series' benchmark, the Standard & Poor's 500 Stock Index (the S&P 500).
The series seeks capital appreciation. The series invests, under normal market
conditions, at least 65% of its net assets in common stocks and related
securities, such as preferred stocks, convertible securities and depositary
receipts for those securities of companies which the series' investment advisor,
MFS, believes possess favorable growth opportunities and attractive valuations
based on current and expected cash flow.
CONTRIBUTORS TO PERFORMANCE
The series' best performing sectors over the period were utilities and
communications, basic materials, and health care. Stock selection played the
major role in these sectors' relative performance. Our overweighted position in
the utilities and communications sector also helped relative results. Our
holdings in telecom service providers AT&T Wireless* and Sprint Corp. were
strong drivers of the series' relative returns for the period. AT&T Wireless*
was acquired by Cingular* during the period.
In the basic materials sector, our positions in packaging company Owens-Illinois
and Brazilian mining firm Companhia Vale do Rio Doce, both not held in the S&P
500 Index, aided relative returns for the period. Our underweighted position in
weak performing health care company Pfizer also boosted relative returns. In the
technology sector our avoidance of semiconductor giant Intel Corp. positively
impacted series performance relative to the index.
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure, technology, and retailing sectors negatively
impacted relative performance for the period. Our overweighted positions in the
weak performing technology and leisure sectors also held back results.
In the leisure sector, our position in media company Viacom hurt relative
performance. Our holdings in retail drug store Rite Aid Corp. also detracted
from the series' performance. Maintaining positions in PMC-Sierra and Nortel
Networks, both technology companies, also held back performance relative to the
index. Elsewhere in the portfolio, our position in weak performing Tenet
Healthcare Corp. and not holding Exxon Mobil Corp. hampered relative results.
* Stock was not held in the portfolio at period end.
CORE EQUITY SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 14.63%, while Service Class shares provided a total
return of 14.29%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 10.87% over the same period
for the series' benchmark, the Standard & Poor's 500 Stock Index (the S&P 500
Index). The series seeks to provide long-term growth of capital. The series
invests, under normal market conditions, at least 80% of its net assets in
common stocks and related securities, such as preferred stocks, convertible
securities and depositary receipts for those securities of companies which the
series' investment adviser, MFS, believes to have sustainable growth prospects
and attractive valuations based on current and expected earnings or cash flow,
with emphasis on companies with market capitalizations in excess of $2 Billion.
CONTRIBUTORS TO PERFORMANCE
The series' best performing sectors over the period were basic materials,
utilities and communications, and technology. Stock selection in all three
sectors was the major contributor to relative performance.
Our positions in basic materials companies Lyondell Chemical Co., and Companhia
Vale do Rio Doce, both not held in the S&P 500 Index, were strong drivers of
relative outperformance. In utilities and communications our position in telecom
giant Sprint Corp. also aided relative returns. In the technology sector our
underweighted position in poor performing Intel Corp* positively impacted
performance relative to the index. Holding Marvell Technology Group, a data
storage and communications provider, benefited
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relative performance as well. The single largest contributor to out-performance
was our avoidance of poor performing pharmaceutical company Pfizer.
DETRACTORS FROM PERFORMANCE
On the negative side, stock selection in the special products and services, and
financial services sectors negatively impacted performance relative to the index
for the year.
Although the financial services sector was our top detracting sector overall no
individual securities made our list of top detractors.
Within the special products and services sector, our overweighted position in
post-secondary education firm Corinthian Colleges* was the largest single
detractor within the sector. Elsewhere in the series, notable underperformers
included positions in health care companies Cyberonics Inc., and Tenet
Healthcare Corp, as well as retail chains Rite Aid Corp.* and Hot Topic Inc*.
Our position in the poor-performing media company Clear Channel Communications*,
also held back relative results.
The series' cash position held back relative performance. As with nearly all
portfolios, this series holds some cash to buy new holdings and to provide
liquidity. In a period when equity markets -- as measured by the S&P 500 Index
- -- rose, holding any cash hurt relative performance. The index does not have a
cash position.
* Stock was not held in the portfolio at period end.
INTERNATIONAL GROWTH SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 18.94%, while Service Class shares provided a total
return of 18.58%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 16.48% over the same period
for the series' benchmark, the Morgan Stanley Capital International (MSCI) EAFE
(Europe, Australasia, Far East) Growth Index (the MSCI Growth Index). These
returns also compare with a return of 20.70% for the Morgan Stanley Capital
International (MSCI) EAFE (Europe, Australasia, Far East) Index, the former
benchmark of the series. The series seeks capital appreciation. The series
invests, under normal market conditions, at least 65% of its net assets in
common stocks and related securities, such as preferred stock, convertible
securities and depositary receipts for those securities, of foreign, including
emerging market, issuers.
CONTRIBUTORS TO PERFORMANCE
Stock selection and, to a lesser extent, our overweight position in the
financial services sector boosted relative results for the period. OTP Bank and
Bank Rakyat, two companies not held in the MSCI EAFE Growth Index, were among
the series' overall top contributors to relative performance. Stock selection in
the retail and consumer staples sectors also positively impacted relative
returns.
Elsewhere in the series, our positions in Latin American wireless company
America Movil, and in media giant Grupo Televisa boosted relative returns. Our
relative positioning in integrated oil concern, BP, proved beneficial as the
stock outperformed for the year.
DETRACTORS FROM PERFORMANCE
Stock selection in the health care, industrial goods and services, and
transportation sectors was the major factor holding back relative performance
for the period. Our avoidance of strong performing pharmaceutical company
Aventis hurt relative results. In the technology sector, our holdings in Seiko
Epson and Wolfson Microelectronics* detracted from performance as well.
Stocks in other sectors that hampered relative performance included optical lens
maker Tamron Co.* and our underweighted position in strong performing Total
S.A., an integrated oil company.
* Stock was not held in the portfolio at period end.
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 9.61%, while Service Class shares provided a total
return of 9.36%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 6.30% over the same period for
the series' benchmark, the Russell 1000 Growth Index (the Russell Index). The
series seeks to provide long-term growth of capital and future income rather
than current income. The series invests, under normal market conditions, at
least 80% of its net assets in common stocks and related securities, such as
preferred stocks, convertible securities and depository receipts for those
securities, of companies which MFS believes offer better than average prospects
for long term-growth. The series may invest in foreign securities through which
it may have exposure to foreign currencies.
CONTRIBUTORS TO PERFORMANCE
Positioning in the health care, technology, and industrial goods and services
sectors boosted the portfolio's performance relative to its benchmark. Stock
selection in health care was the strongest contributor in this regard.
Underweighting Pfizer and avoiding Merck significantly helped results as both
stocks underperformed.
Stock selection was likewise supportive in technology. Here, underweighting
semiconductor giant Intel* while focusing on anti-virus software concern
Symantec and digital and mixed-signal integrated circuit maker Marvell
Technology (not an index constituent) helped portfolio performance. Among
industrial goods and services, Tyco International (not an index constituent) was
a particularly strong contributor.
Elsewhere in the portfolio, holdings in cruise line operator Carnival
Corporation, agricultural biotech company Monsanto, and discount retailer Target
Corp. helped portfolio performance. Largely avoiding Coca-Cola, which finished
the period lower, also added to relative results.
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure and financial services sectors detracted from
relative results. In leisure, continued anemic radio advertising spending
weighed on our holdings in Viacom, Inc. and Clear Channel Communications. At the
same time, we failed to participate in coffee purveyor Starbucks Corp's strong
appreciation. Although our positioning in the financial services sector was
detrimental to performance, no stocks within the group were among the series'
overall top detractors.
Although our technology positioning was a net positive, our decision to
underweight Qualcomm* was the largest single headwind to performance. Other
names in this group which disappointed during the period include IAC/InterActive
Corp, VERITAS Software, and Red Hat, Inc.
Other negative contributors included our decision not to own strong performing
managed care provider UnitedHealth Group and home improvement retailer Home
Depot (both index constituents which outperformed).
The series' cash position also held back relative performance. As with nearly
all portfolios, this series holds some cash to buy new holdings and provide
liquidity. In a period when the growth equity markets -- as
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measured by the Russell 1000 Growth Index -- rose measurably, the series' cash
position hurt results.
* Stock was not held in the portfolio at period end.
MID CAP VALUE SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 22.10%, while Service Class shares provided a total
return of 21.75%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 23.71% over the same period
for the series' benchmark, the Russell Mid Cap Value Index (the Russell Index).
The series seeks capital appreciation. The series invests, under normal market
conditions, at least 80% of its net assets in equity securities of all types, on
companies with medium market capitalizations that the series' advisor, MFS,
believes are undervalued in the market relative to their long-term potential.
CONTRIBUTORS TO PERFORMANCE
The series' best performing sectors over the period were energy, utilities and
communication, and health care. Stock selection in all three sectors was the
major contributor to relative performance. An overweighted position in energy
was also a strong contributor to the series' relative performance. Energy stocks
Smith International*, EOG Resources*, and Range Resources boosted the series'
results as these stocks posted strong absolute and relative returns for the
period.
In the utilities and communications sector, our positions in Sprint Corp.*,
Spectrasite*, and America Tower* contributed to relative performance. Our
holdings of strong performing health care company Fisher Scientific* also aided
results.
Stocks in other sectors that contributed to the series' relative returns for the
period include Lyondell Chemical and packaging company Owens-Illinois.
DETRACTORS FROM PERFORMANCE
A combination of stock selection and an overweighted position in the technology
sector detracted from the series' performance relative to the index. Holdings of
Agere Systems* and Ascential Software* held back relative returns. Not owning
strong performing Apple Computer also dampened results.
Stock selection in the retailing sector also hurt relative performance for the
period. Our position in drug store chain Rite Aid detracted from the series'
relative returns. Stocks in other sectors that hampered results during the
period included utilities and communications companies IDT Corp. and our
significantly underweighted position in TXU. Our holdings in auto parts company
Hayes Lemmerz International*, broadcasting firm Cox Radio, Netbank Inc.*, and
Furniture Brands International* also detracted from the series' results.
* Stock was not held in the portfolio at period end.
NEW DISCOVERY SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 7.49%, while Service Class shares provided a total
return of 7.22%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 14.31% over the same period
for the series' benchmark, the Russell 2000 Growth Index (the Russell Index).
The series seeks capital appreciation. The series invests, under normal market
conditions, at least 65% of its net assets in common stocks and related
securities, such as preferred stock, convertible securities and depositary
receipts for those securities, of emerging growth companies.
DETRACTORS FROM PERFORMANCE
Over the 12-month period, stocks in the health care, energy, industrial goods
and services, and special products and services sectors were the largest
detractors relative to the series' benchmark, the Russell 2000 Growth Index.
In health care, stock selection and, to a lesser extent, a slightly overweighted
position in the sector held back results. Not holding strong performer OSI
Pharmaceuticals, and holding lackluster performers Medicis Pharmaceuticals and
CTI Molecular Imaging* detracted from relative results.
In both industrials goods and services and special products and services, stock
selection detracted from relative results. Post-secondary education firm Career
Education and internet-based job skills training provider SkillSoft*, were among
the portfolio's top overall detractors. Our underweighted position in the
strong-performing energy sector also held back relative results, although no
individual energy companies were among the series' top detractors.
Securities in other sectors that detracted from relative performance included
our relative positions in technology stocks PMC-Sierra, Powerwave Technologies*,
At Road Inc.*, and Applied Films. All four stocks underperformed the Russell
2000 Growth Index.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the utilities and communications, autos and housing, and
retailing sectors boosted relative results for the period. All three sectors
contained some of the series' better performing positions.
In the utilities and communications sector, communications equipment
manufacturer Andrew Corp.*, and communications signal tower provider SpectraSite
were among the series' top contributors. In the autos and housing sector, our
relative positioning in Eagle Materials aided relative returns. Our holdings in
strong-performing retailer PETsMART* also contributed to the series' relative
performance.
In the technology sector, software developer Open Text*, e-commerce outsourcing
solutions provider Digital River*, and antivirus software developer McAfee*
contributed to relative performance. While health care was one of the largest
detractors from relative performance, Aspect Medical Systems was a top overall
contributor.
* Stock was not held in the portfolio at period end.
RESEARCH INTERNATIONAL SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 21.20%, while Service Class shares provided a total
return of 20.96%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 20.70% over the same period
for the series' benchmark, the MSCI EAFE Index. The series seeks capital
appreciation. The series invests, under normal market conditions, at least 65%
of its net assets in common stocks and related securities, such as preferred
stocks, convertible securities and depositary receipts of those securities, of
foreign companies which the series' investment adviser, MFS, believes have
favorable growth prospects and attractive valuations based on current and
expected earnings or cash flow.
4
<Page>
CONTRIBUTORS TO PERFORMANCE
Stock selection in the financial services, energy, and consumer staples sectors
boosted relative performance for the period. Several of our financial services
positions, such as OTP Bank and Erste Bank, posted strong absolute returns and
were among the leading individual contributors to relative performance.
In the energy sector, our overweighted positions in strong-performing Hungarian
oil and gas company MOL Magyar and Tenaris S.A.*, a global manufacturer of
seamless steel pipes used in the oil and gas industry, aided relative returns.
Our relative positioning in global tobacco company Altadis S.A. also contributed
to strong results.
Stocks in other sectors that contributed to the series' relative results
included Brazilian mining company Companhia Vale Do Rio Doce, utilities
companies America Movil S.A., Bharti Tele-Ventur, and Suez, as well as special
products and services company Softbank Corp.
DETRACTORS FROM PERFORMANCE
Stock selection in the health care and leisure sectors held back relative
performance for the period. Our positions in poor-performing pharmaceutical
company AstraZeneca detracted from the series' relative results. In the leisure
sector, our positions in Japan-based Tamron*, Round One*, and Star Cruises, none
of which are held in the index, hurt relative returns.
Stocks in other sectors that detracted from the portfolio's relative performance
included financial services companies Kookmin Bank*, Leopalace 21 Corp., and
Takefuji Corp. Our relative holdings in Funai Electric and easyJet also hurt
results during the period.
During the reporting period, the total impact of currency movements was a
detractor to performance relative to the benchmark. The base currency of the
series is the U.S. dollar and the performance of the series and its benchmark is
presented in terms of this currency. Nevertheless, specific holdings of the
series and benchmark may be denominated in different currencies and, therefore,
present the possibility of currency depreciation or appreciation. Because the
exposures of the series and the benchmark to foreign currency movements may
differ, from time to time, these movements may have a material impact on
relative performance.
The series' cash position detracted from relative performance over the period.
As with nearly all portfolios, this series holds some cash to buy new holdings
and to provide liquidity. In a period when international equity markets -- as
measured by the MSCI EAFE Index -- rose, holding any cash hurt relative
performance. The index does not have a cash position.
* Stock was not held in the portfolio at period end.
STRATEGIC GROWTH SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 6.82%, while Service Class shares provided a total
return of 6.58%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 6.30% over the same period for
the series' benchmark, the Russell 1000 Growth Index (the Russell Index). The
series seeks capital appreciation. The series invests, under normal market
conditions, at least 65% of its net assets in common stocks and related
securities, such as preferred stocks, bonds, warrants, or rights convertible
into stock and depositary receipts for these securities, of companies which the
series' investment adviser, MFS, believes offer superior prospects for growth.
CONTRIBUTORS TO PERFORMANCE
Health care, industrial goods and services, and utilities and communications
were the top performing sectors over the period. Stock selection in the health
care sector contributed strongly to relative performance. In industrial goods
and services and utilities and communications, a combination of stock selection
and our overweighted positions contributed to relative results.
In health care our underweighted position in poor performing Pfizer and not
holding Merck were the major contributors to relative performance within the
sector.
In industrial goods and services our position in Tyco International added to
relative results as that stock posted solid gains over the period.
Although the technology sector as a whole did not contribute significantly to
performance, several holdings within the sector were top contributors. Not
holding poor performing semiconductor manufacturer Intel was the largest overall
contributor to relative results. Our holdings of Marvell Technology and Symantec
Corp.* added to relative results as did our overweighted position in Network
Appliance, Inc.
Stocks in other areas that aided relative results included our holdings of
cruise lines operator Carnival Corporation and America Movil, the largest
provider of wireless communications in Latin America. Also, not holding
Coca-Cola contributed to relative results as that stock performed poorly over
the period.
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure sector and not participating in the strong
performing energy sector detracted from relative results.
In the leisure sector our holdings of Clear Channel Communications and global
entertainment conglomerate Viacom were detractors from performance.
In technology the series' overweighted positions in PMC Sierra, Red Hat Inc.*,
ADTRAN Inc., Foundry Networks*, and Analog Devices detracted from relative
results as those stocks performed poorly over the period. Not holding Qualcomm
Inc., also in the technology sector, hurt relative results.
While health care was a strong contributing sector, not holding managed care
provider UnitedHealth Group detracted from relative performance as the firm
posted solid gains during the period.
The series' cash position also detracted from relative performance. As with
nearly all portfolios, this series holds some cash to buy new holdings and
provide liquidity. In a period when growth equity markets, as represented by the
Russell 1000 Growth Index, rose measurably, holding any cash hurt performance
against our benchmark, which has no cash position.
* Stock was not held in the portfolio at period end.
STRATEGIC VALUE SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 18.05%, while Service Class shares provided a total
return of 17.77%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 16.49% over the same period
for the series' benchmark, the Russell 1000 Value Index (the Russell Index). The
series seeks capital appreciation. The series invests, under normal market
conditions, at least 65% of its net assets in common stocks and related
securities, such as preferred stock, convertible securities and depositary
receipts of those companies, which the series' investment adviser, MFS, believes
are undervalued in the market relative to their long-term potential.
5
<Page>
CONTRIBUTORS TO PERFORMANCE
The series' best relative performing sectors over the period were utilities and
communications, basic materials, and energy. All three sectors contained some of
our better performing positions.
In both utilities and communications, and basic materials, stock selection aided
results. AT&T Wireless*, Sprint Corp., and electric power provider TXU* were
among the series' top overall contributors. In basic materials, glass container
manufacturer Owens-Illinois, and Brazilian iron ore miner Companhia Vale Do Rio
Doce, were top overall contributors. In the energy sector, Noble Corporation,
GlobalSantaFe, and BJ Services aided relative results. All three companies are
involved in various aspects of the oil drilling process.
In the industrial goods and services sector, overweighting manufacturing
conglomerate Tyco International contributed to relative results. Not holding
poor performing technology company Hewlett-Packard also aided results.
DETRACTORS FROM PERFORMANCE
Stock selection in the leisure and retailing sectors detracted from performance
relative to the Russell 1000 Value Index, the series' benchmark. In the leisure
sector our position in media conglomerate Viacom held back results. In
retailing, drugstore chain operator Rite Aid was among the series' top overall
detractors.
Elsewhere, an overweighted position in the poor-performing healthcare sector
held back results. At the stock level, Merck and Tenet Healthcare were among the
top overall detractors.
In the energy group, not holding Exxon Mobil, held back results. The series
missed the significant run up in the stock's price over the period. Stocks in
other sectors that detracted from relative results included Nortel Networks,
Calpine, and Mellon Financial, from the technology, utilities and
communications, and financial services sectors, respectively.
* Stock was not held in the portfolio at period end.
TECHNOLOGY SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 2.44%, while Service Class shares provided a total
return of 1.97%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 2.91% over the same period for
the series' benchmark, the Goldman Sachs Technology Index (the Technology
Index). The series seeks capital appreciation. The series invests, under normal
market conditions, at least 80% of its net assets in common stocks and related
securities, such as preferred stocks, convertible securities and depositary
receipts of those companies, that the series' investment adviser, MFS, believes
have above average growth potential and will benefit from technological advances
and improvements.
DETRACTORS FROM PERFORMANCE
Over the 12-month period, stocks in the computer software, and personal
computers and peripherals industries were the largest detractors relative to the
series' benchmark, the Goldman Sachs Technology Index. Stock selection within
each industry was the major detractor to relative performance.
In computer software our positions in Veritas Software* and Red Hat, Inc.*
detracted from relative results as those stocks performed poorly.
In the personal computer and peripherals industry Lexmark International Inc. was
a drag on performance relative to the benchmark.
Though the electronics industry was our top performing industry several
companies within it were disappointments. Vishay Intertechnology*, Integrated
Circuit Systems, Agere Systems* and Applied Films Corporation* (not a
constituent of the index) detracted from relative results as their stock prices
decreased in value over the period.
In network and telecommunications, results were held back by our holdings in
underperforming Nortel Networks. Conversely, our underexposure to strong
performer Yahoo detracted from results.
CONTRIBUTORS TO PERFORMANCE
Stock selection in the electronics, internet and business services industries
added to relative performance.
In electronics our underweighted position in Intel aided results as that stock
performed poorly over the period. Our relative positioning in Marvell Technology
added to results as that stock nearly doubled over the period.
In the internet industry our position in Digital River* aided relative results
as that stock performed well over the period.
In the business services industry our position in Alliance Data Systems also
helped.
Stocks in other industries that helped performance relative to the benchmark
included F5 Networks*, Akamai Technologies*, Netscreen Technologies* and America
Movil* the largest provider of wireless communications in Latin America. An
underweight position in Cisco Systems also aided results, as the stock lagged
the benchmark over the period.
* Stock was not held in the portfolio at period end.
VALUE SERIES
For the year ended December 31, 2004, Initial Class shares of the series
provided a total return of 15.52%, while Service Class shares provided a total
return of 15.18%. These returns do not reflect any applicable contract or
surrender charges. These compare with a return of 16.49% over the same period
for the series' benchmark, the Russell 1000 Value Index (the Russell Index). The
series seeks capital appreciation and reasonable income. The series invests,
under normal market conditions, at least 65% of its net assets in income
producing equity securities of companies which the series' investment adviser,
MFS, believes are undervalued in the market relative to their long term
potential.
DETRACTORS FROM PERFORMANCE
Stock selection in the financial services, leisure and retailing sectors
detracted from relative performance.
In financial services, Fannie Mae, Mellon Financial and Saint Paul Travelers
Inc.* held back results during the period.
In the leisure sector our positions in poor performing media conglomerate Viacom
and newspaper publisher Tribune dampened relative results.
The retailing sector as a whole detracted from relative returns, but no
individual securities from the sector were among the series' top detractors.
6
<Page>
Stocks in other sectors that hurt performance included our underweight position
in relative outperformer Exxon Mobil, and our holding of poor performing global
pharmaceutical firm Pfizer. We also chose to overweight International Paper and
Union Pacific Corp. Both stocks performed poorly during the period.
The series' cash position also detracted from relative performance. As with
nearly all portfolios, this series holds some cash to buy new holdings and
provide liquidity. In a period when value equity markets -- as represented by
the Russell 1000 Value Index -- rose measurably, holding any cash hurt
performance against our benchmark, which has no cash position.
CONTRIBUTORS TO PERFORMANCE
The series' most significant contributors to relative performance over the
period were utilities and communications, technology and basic materials. Stock
selection in the utilities and communications sector was a major contributor to
relative performance. In the technology and basic materials sectors a
combination of allocation and selection added to the series' results.
In the utilities and communications sector, our holdings in power producer TXU
aided relative performance as the stock more than doubled over the period. Our
position in global communications provider Sprint Corp. also contributed to
relative results.
In the technology sector our underweighting of Hewlett-Packard helped the
series' performance, as the stock underperformed the benchmark.
In the basic materials sector Monsanto and Swiss agricultural firm Syngenta
boosted relative results.
Elsewhere, our underexposure to Merck contributed to results. Our position in
consumer staples stock Archer Daniels Midland was also helpful to relative
performance as the stock performed well over the period.
* Stock was not held in the portfolio at period end.
The views expressed in this report are those of the portfolio managers only
through the end of the period of the report as stated on the cover and do not
necessarily reflect the views of MFS or any other person in the MFS
organization. These views are subject to change at any time based on market and
other conditions, and MFS disclaims any responsibility to update such views.
These views may not be relied upon as investment advice or an indication of
trading intent on behalf of any MFS/Sun Life series. References to specific
securities are not recommendations of such securities, and may not be
representative of any MFS/Sun Life series' current or future investments.
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.
7
<Page>
[CHART]
PORTFOLIO COMPOSITION -- CAPITAL OPPORTUNITIES SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 98.7%
Cash & Other Net Assets 1.3%
</Table>
TOP TEN HOLDINGS
<Table>
Microsoft Corp. 3.0%
Johnson & Johnson 3.0%
Wyeth 2.9%
Viacom Inc. 2.9%
Sprint Corp. (FON Group) 2.6%
Verizon Communications 2.3%
Comcast Corp. 2.2%
Merck & Co. Inc. 1.9%
Nokia Corp. 1.8%
J.P. Morgan Chase & Co. 1.8%
</Table>
SECTOR WEIGHTINGS
<Table>
Technology 19.0%
Health Care 17.7%
Financial Services 13.9%
Leisure 11.8%
Utilities & Communications 9.5%
Retailing 6.3%
Industrial Goods & Services 4.6%
Energy 4.3%
Consumer Staples 4.1%
Basic Materials 4.1%
Special Products & Services 1.8%
Transportation 1.6%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
8
<Page>
[CHART]
PORTFOLIO COMPOSITION -- CORE EQUITY SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 98.4%
Cash & Other Net Assets 1.6%
</Table>
TOP TEN HOLDINGS
<Table>
General Electric Co. 3.3%
Exxon Mobil Corp. 3.2%
Freddie Mac 3.1%
Wyeth 2.7%
Bank of America Corp. 2.4%
Target Corp. 2.1%
American International Group, Inc. 2.0%
Kohl's Corp. 2.0%
Lockheed Martin Corp. 1.9%
PepsiCo, Inc. 1.9%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 19.4%
Technology 14.5%
Health Care 12.5%
Industrial Goods & Services 7.5%
Consumer Staples 7.3%
Energy 7.0%
Retailing 7.0%
Utilities & Communications 6.6%
Basic Materials 5.7%
Leisure 4.8%
Special Products & Services 2.9%
Transportation 1.8%
Autos & Housing 1.4%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
9
<Page>
[CHART]
PORTFOLIO COMPOSITION -- INTERNATIONAL GROWTH SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 98.4%
Cash & Other Net Assets 1.1%
Preferred Stock 0.5%
</Table>
TOP TEN HOLDINGS
<Table>
Vodafone Group PLC 4.4%
Roche Holdings AG 2.4%
Sanofi-Aventis S.A 2.0%
TOTAL S.A 1.9%
Nestle S.A 1.8%
UBS AG 1.7%
AstraZeneca PLC 1.6%
News Corp., Inc. 1.6%
America Movil S.A. de C.V 1.6%
Housing Development Finance Corp. Ltd. 1.5%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 21.0%
Utilities & Communications 13.0%
Consumer Staples 9.5%
Health Care 9.0%
Technology 8.5%
Leisure 8.2%
Retailing 7.6%
Basic Materials 5.4%
Energy 4.9%
Industrial Goods & Services 4.6%
Autos & Housing 3.5%
Special Products & Services 3.4%
Transportation 0.3%
</Table>
COUNTRY WEIGHTINGS
<Table>
Great Britain 23.3%
Japan 17.5%
France 8.9%
Switzerland 7.4%
Mexico 5.7%
Sweden 4.0%
Spain 3.7%
Canada 3.2%
South Korea 3.2%
Other 23.1%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
10
<Page>
[CHART]
PORTFOLIO COMPOSITION -- MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 97.1%
Cash & Other Net Assets 2.9%
</Table>
TOP TEN HOLDINGS
<Table>
Johnson & Johnson 3.9%
Cisco Systems, Inc. 2.9%
Dell, Inc. 2.9%
Microsoft Corp. 2.7%
Wyeth 2.4%
Procter & Gamble Co. 2.2%
Tyco International Ltd. 2.0%
Target Corp. 2.0%
Abbott Laboratories 1.9%
Genzyme Corp. 1.9%
</Table>
SECTOR WEIGHTINGS
<Table>
Technology 25.7%
Health Care 22.7%
Leisure 10.2%
Retailing 9.5%
Financial Services 6.6%
Consumer Staples 5.9%
Industrial Goods & Services 5.1%
Special Products & Services 3.3%
Transportation 2.2%
Basic Materials 1.8%
Utilities & Communications 1.7%
Energy 1.4%
Autos & Housing 1.0%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
11
<Page>
[CHART]
PORTFOLIO COMPOSITION -- MID CAP VALUE SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 98.7%
Cash & Other Net Assets 1.3%
</Table>
TOP TEN HOLDINGS
<Table>
Owens-Illinois, Inc. 2.3%
Ameritrade Holding Corp. 2.1%
Bowater Inc. 2.0%
Media General Inc. 1.9%
GlobalSantaFe Corp. 1.7%
Devon Energy Corp. 1.6%
Hasbro Inc. 1.6%
Legg Mason Inc. 1.5%
Endo Pharmaceuticals Holdings Inc. 1.5%
Conseco Inc. 1.5%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 22.9%
Leisure 10.8%
Basic Materials 10.1%
Health Care 9.7%
Energy 9.5%
Retailing 9.3%
Utilities & Communications 6.4%
Technology 6.4%
Industrial Goods & Services 4.2%
Autos & Housing 3.6%
Special Products & Services 2.9%
Consumer Staples 1.9%
Transportation 1.0%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
12
<Page>
[CHART]
PORTFOLIO COMPOSITION -- NEW DISCOVERY SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 98.5%
Cash & Other Net Assets 1.5%
</Table>
TOP TEN HOLDINGS
<Table>
Silicon Laboratories, Inc. 2.7%
DSP Group, Inc. 1.5%
Gen-Probe, Inc. 1.5%
Cytyc Corp. 1.5%
Aspect Medical Systems, Inc. 1.4%
Ariba, Inc. 1.3%
Ventana Medical Systems, Inc. 1.3%
Medicis Pharmaceutical Corp. 1.3%
Universal Technical Institute, Inc. 1.3%
WMS Industries, Inc. 1.2%
</Table>
SECTOR WEIGHTINGS
<Table>
Health Care 22.8%
Technology 21.6%
Special Products & Services 14.2%
Leisure 8.8%
Financial Services 8.4%
Industrial Goods & Services 6.2%
Retailing 6.2%
Energy 2.7%
Autos & Housing 2.4%
Transportation 1.7%
Basic Materials 1.6%
Consumer Staples 1.0%
Utilities & Communications 0.9%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
13
<Page>
[CHART]
PORTFOLIO COMPOSITION -- RESEARCH INTERNATIONAL SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 99.2%
Cash & Other Net Assets 0.8%
</Table>
TOP TEN HOLDINGS
<Table>
Vodafone Group PLC 2.3%
Seiko Epson Corp. 2.3%
BP PLC, ADR 2.2%
Royal Bank of Scotland Group PLC 2.2%
Suez S.A 2.1%
Roche Holdings AG 2.0%
SOFTBANK CORP 1.8%
UBS AG 1.8%
TOTAL S.A 1.8%
Deutsche Telekom AG 1.7%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 27.7%
Utilities & Communications 12.9%
Health Care 8.2%
Energy 8.0%
Consumer Staples 6.5%
Autos & Housing 6.4%
Technology 6.1%
Leisure 5.6%
Industrial Goods & Services 5.5%
Basic Materials 5.5%
Retailing 3.5%
Special Products & Services 2.4%
Transportation 0.9%
</Table>
COUNTRY WEIGHTINGS
<Table>
Japan 23.2%
Great Britain 20.5%
France 11.5%
Switzerland 6.7%
Germany 4.2%
South Korea 3.8%
Mexico 3.7%
Sweden 3.3%
Brazil 2.8%
Other 20.3%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
14
<Page>
[CHART]
PORTFOLIO COMPOSITION -- STRATEGIC GROWTH SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 97.9%
Cash & Other Net Assets 2.1%
</Table>
TOP TEN HOLDINGS
<Table>
Microsoft Corp. 3.6%
Johnson & Johnson 3.6%
Cisco Systems, Inc. 3.2%
Dell, Inc. 3.0%
Wyeth 2.6%
Abbott Laboratories 2.1%
Pepsico, Inc. 2.0%
Genzyme Corp. 2.0%
Procter & Gamble Co. 2.0%
Medtronic, Inc. 1.9%
</Table>
SECTOR WEIGHTINGS
<Table>
Technology 31.5%
Health Care 21.0%
Leisure 12.3%
Retailing 8.9%
Financial Services 6.3%
Consumer Staples 5.7%
Industrial Goods & Services 4.0%
Special Products & Services 3.7%
Transportation 2.7%
Utilities & Communications 1.8%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
15
<Page>
[CHART]
PORTFOLIO COMPOSITION -- STRATEGIC VALUE SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 97.8%
Cash & Other Net Assets 2.2%
</Table>
TOP TEN HOLDINGS
<Table>
Sprint Corp. 4.9%
Verizon Communications, Inc. 4.3%
Viacom Inc., "B" 3.7%
Merck & Co., Inc. 3.6%
J.P. Morgan Chase & Co. 3.5%
Nokia Corp., ADR 3.3%
Comcast Corp., "Special A" 3.2%
Wyeth 3.2%
Nortel Networks Corp. 3.2%
Owens-Illinois, Inc. 3.1%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 20.6%
Utilities & Communications 16.4%
Health Care 14.6%
Leisure 11.2%
Energy 8.1%
Basic Materials 7.7%
Technology 7.2%
Industrial Goods & Services 5.1%
Retailing 3.7%
Consumer Staples 2.7%
Transportation 0.5%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
16
<Page>
[CHART]
PORTFOLIO COMPOSITION -- TECHNOLOGY SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 99.1%
Cash & Other Net Assets 0.9%
</Table>
TOP TEN HOLDINGS
<Table>
Dell, Inc. 6.5%
Oracle Corp. 6.1%
eBay, Inc. 5.0%
Cisco Systems, Inc. 4.7%
Yahoo!, Inc. 4.0%
Microsoft Corp. 3.3%
Intel Corp. 3.2%
Apple Computer, Inc. 2.4%
QUALCOMM, Inc. 2.3%
Accenture Ltd., "A" 2.2%
</Table>
TOP FIVE EQUITY INDUSTRIES
<Table>
Electronics 22.7%
Computer Software 19.8%
Computer Systems 14.3%
Network & Telecom 14.1%
Business Services 10.6%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
17
<Page>
[CHART]
PORTFOLIO COMPOSITION -- VALUE SERIES
PORTFOLIO STRUCTURE
<Table>
Stocks 98.7%
Cash & Other Net Assets 1.3%
</Table>
TOP TEN HOLDINGS
<Table>
Bank of America Corp. 3.9%
Citigroup, Inc. 3.7%
Altria Group, Inc. 2.7%
Goldman Sachs Group, Inc. 2.6%
Fannie Mae 2.4%
Sun Trust Banks, Inc. 2.3%
MetLife, Inc. 2.2%
Sprint Corp. 2.2%
ConocoPhillips 2.2%
Johnson & Johnson 1.9%
</Table>
SECTOR WEIGHTINGS
<Table>
Financial Services 28.9%
Energy 10.8%
Consumer Staples 10.7%
Utilities & Communications 10.6%
Basic Materials 9.6%
Health Care 7.8%
Industrial Goods & Services 7.5%
Leisure 6.6%
Retailing 1.9%
Transportation 1.6%
Special Products & Services 1.3%
Autos & Housing 0.8%
Technology 0.6%
</Table>
Percentages are based on net assets as of 12/31/2004.
The portfolio is actively managed and current holdings may be different.
18
<Page>
PERFORMANCE SUMMARY
The information below and on the following pages illustrates the historical
performance of each series in comparison to its benchmark(s). Benchmark
comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be more than or less than the line
shown. (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. ANY HIGH
SHORT-TERM RETURNS MAY BE AND LIKELY WERE ACHIEVED DURING FAVORABLE MARKET
CONDITIONS, WHICH MAY NOT BE REPEATED.
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. THE
PERFORMANCE SHOWN DOES NOT REFLECT THE DEDUCTION OF TAXES, IF ANY, THAT A
CONTRACT HOLDER WOULD PAY ON DISTRIBUTIONS OR REDEMPTION OF CONTRACT UNITS.
[CHART]
CAPITAL OPPORTUNITIES SERIES(1), (8), (10)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, June
3, 1996, through December 31, 2004. Index information is from June 1, 1996.)
<Table>
<Caption>
CAPITAL OPPORTUNITIES STANDARD & POOR'S 500
SERIES - INITIAL CLASS STOCK INDEX#
Jun-96 $ 10,000 $ 10,000
Dec-96 $ 11,010 $ 11,210
Dec-97 $ 14,046 $ 14,949
Dec-98 $ 17,834 $ 19,221
Dec-99 $ 26,333 $ 23,265
Dec-00 $ 25,047 $ 21,149
Dec-01 $ 18,803 $ 18,637
Dec-02 $ 13,086 $ 14,520
Dec-03 $ 16,789 $ 18,682
Dec-04 $ 18,938 $ 20,714
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------------
Cumulative Total Return +12.80% +0.72% -28.08% +89.38%
Average Annual Total Return +12.80% +0.24% -6.38% +7.73%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------------
Cumulative Total Return +12.52% +0.04% -28.67% +87.82%
Average Annual Total Return +12.52% +0.01% -6.54% +7.62%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------------
Average multi-cap core fund+ +11.05% +4.25% +0.38% +8.03%
Standard & Poor's 500 Stock Index# +10.87% +3.58% -2.30% +8.85%
</Table>
* For the period from the commencement of the series' investment operations,
June 3, 1996, through December 31, 2004. Index information is from June 1,
1996.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
[CHART]
CORE EQUITY SERIES(1), (7), (8), (9), (10)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
12, 1997, through December 31, 2004. Index information is from May 1, 1997.)
<Table>
<Caption>
CORE EQUITY SERIES - STANDARD & POOR'S 500
INITIAL CLASS STOCK INDEX#
May-97 $ 10,000 $ 10,000
Dec-97 $ 11,020 $ 12,255
Dec-98 $ 13,459 $ 15,757
Dec-99 $ 14,564 $ 19,073
Dec-00 $ 15,015 $ 17,338
Dec-01 $ 13,377 $ 15,279
Dec-02 $ 10,514 $ 11,903
Dec-03 $ 13,443 $ 15,316
Dec-04 $ 15,410 $ 16,981
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------------
Cumulative Total Return +14.63% +15.20% +5.81% +54.10%
Average Annual Total Return +14.63% +4.83% +1.14% +5.82%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------------
Cumulative Total Return +14.29% +14.25% +4.85% +52.71%
Average Annual Total Return +14.29% +4.54% +0.95% +5.70%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- -------------------------------------------------------------------------------------
Average multi-cap core fund+ +11.05% +4.25% +0.38% +7.81%
Standard & Poor's 500 Stock Index# +10.87% +3.58% -2.30% +7.15%
</Table>
* For the period from the commencement of the series' investment operations, May
12, 1997, through December 31, 2004. Index information is from May 1, 1997.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
19
<Page>
[CHART]
INTERNATIONAL GROWTH SERIES(1), (3), (7), (8), (9), (10)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, June
3, 1996, through December 31, 2004. Index information is from June 1, 1996.)
<Table>
<Caption>
INTERNATIONAL GROWTH
SERIES - INITIAL CLASS MSCI EAFE GROWTH INDEX# MSCI EAFE INDEX#
Jun-1996 $ 10,000 $ 10,000 $ 10,000
Dec-1996 $ 9,830 $ 10,048 $ 10,221
Dec-1997 $ 9,668 $ 10,282 $ 10,432
Dec-1998 $ 9,856 $ 12,591 $ 12,553
Dec-1999 $ 13,329 $ 16,332 $ 15,979
Dec-2000 $ 12,290 $ 12,348 $ 13,749
Dec-2001 $ 10,335 $ 9,334 $ 10,833
Dec-2002 $ 9,107 $ 7,863 $ 9,137
Dec-2003 $ 12,628 $ 10,417 $ 12,716
Dec-2004 $ 15,019 $ 12,133 $ 15,348
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +18.94% +45.33% +12.68% +50.19%
Average Annual Total Return +18.94% +13.27% +2.42% +4.86%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +18.58% +44.36% +11.81% +49.03%
Average Annual Total Return +18.58% +13.02% +2.26% +4.76%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
MSCI EAFE Growth Index# +16.48% +9.14% -5.77% +2.28%
MSCI EAFE Index# +20.70% +12.31% -0.80% +5.12%
</Table>
* For the period from the commencement of the series' investment operations,
June 3, 1996, through Decemeber 31, 2004. Index information is from June 1,
1996.
# Source: Standard & Poor's Micropal, Inc.
Note to Contract Owners: Effective April 5, 2004, we no longer use the MSCIEAFE
Index as a benchmark because we believe the MSCIEAFE Growth Index better
reflects the series' investment policies and objectives.
[CHART]
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES(1), (7), (10)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2004. Index information is from May 1, 1998.)
<Table>
<Caption>
MASSACHUSETTS INVESTORS
GROWTH STOCK SERIES - RUSSELL 1000 GROWTH
INITIAL CLASS INDEX#
5/98 $ 10,000 $ 10,000
12/98 $ 12,070 $ 11,881
12/99 $ 16,391 $ 15,821
12/00 $ 15,393 $ 12,278
12/01 $ 11,559 $ 9,766
12/02 $ 8,317 $ 7,043
12/03 $ 10,262 $ 9,138
12/04 $ 11,248 $ 9,714
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +9.61% -2.69% -31.38% +12.48%
Average Annual Total Return +9.61% -0.91% -7.25% +1.78%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +9.36% -3.50% -31.95% +11.55%
Average Annual Total Return +9.36% -1.18% -7.41% +1.66%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Average large-cap growth fund+ +7.18% -0.51% -8.22% +0.35%
Russell 1000 Growth Index# +6.30% -0.18% -9.29% -0.43%
</Table>
* For the period from the commencement of the series' investment operations, May
6, 1998 through December 31, 2004. Index information is from May 1, 1998.
+ Source: Lipper, Inc.
# Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004 relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission without which the performance would have been lower by
approximately 0.13%.
20
<Page>
[CHART]
MID CAP VALUE SERIES(1), (8), (10), (11), (12), (13), (14)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
1, 2002, through December 31, 2004. Index information is from May 1, 2002.)
<Table>
<Caption>
MID CAP VALUE SERIES - RUSSELL MIDCAP VALUE
INITIAL CLASS INDEX#
5/1/2002 $ 10,000 $ 10,000
1/12/2002 $ 7,920 $ 8,380
1/12/2003 $ 10,474 $ 11,570
1/12/2004 $ 12,789 $ 14,312
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +22.10% +27.89%
Average Annual Total Return +22.10% +9.65%
</Table>
Service Class
<Table>
<Caption>
1 YEAR LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +21.75% +27.35%
Average Annual Total Return +21.75% +9.47%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR LIFE*
- ------------------------------------------------------------------------------------
Average mid cap core fund+ +15.52% +8.95%
Russell Mid Cap Value Index# +23.71% +14.39%
</Table>
* For the period from the commencement of the series' investment operations, May
1, 2002, through December 31, 2004. Index information is from May 1, 2002.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
[CHART]
NEW DISCOVERY SERIES(1), (2), (8), (10), (15)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2004. Index information is from May 1, 1998.)
<Table>
<Caption>
NEW DISCOVERY SERIES - RUSSELL 2000 GROWTH
INITIAL CLASS INDEX
May-98 $ 10,000 $ 10,000
Dec-98 $ 10,620 $ 8,993
Dec-99 $ 17,019 $ 12,868
Dec-00 $ 17,077 $ 9,982
Dec-01 $ 16,203 $ 9,061
Dec-02 $ 10,786 $ 6,319
Dec-03 $ 14,593 $ 9,386
Dec-04 $ 15,685 $ 10,729
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +7.49% -3.19% -7.84% +56.85%
Average Annual Total Return +7.49% -1.08% -1.62% +7.00%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +7.22% -3.98% -8.65% +55.47%
Average Annual Total Return +7.22% -1.34% -1.79% +6.86%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Average small-cap growth fund+ +10.65% +3.85% -1.82% +3.98%
Russell 2000 Growth Index# +14.31% +5.79% -3.57% +1.06%
</Table>
* For the period from the commencement of the series' investment operations, May
6, 1998 through December 31, 2004. Index information is from May 1, 1998.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been
lower.
21
<Page>
[CHART]
RESEARCH INTERNATIONAL SERIES(1), (3), (8), (10)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2004. Index information is from May 1, 1998.)
<Table>
<Caption>
RESEARCH INTERNATIONAL
SERIES - INITIAL CLASS MSCI EAFE INDEX
5/1/98 $ 10,000 $ 10,000
12/1/98 $ 9,420 $ 10,399
12/1/99 $ 14,595 $ 13,237
12/1/2000 $ 13,434 $ 11,390
12/1/2001 $ 11,049 $ 8,974
12/1/2002 $ 9,785 $ 7,569
12/1/2003 $ 13,098 $ 10,534
12/1/2004 $ 15,874 $ 12,714
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +21.20% +43.67% +8.77% +58.74%
Average Annual Total Return +21.20% +12.84% +1.69% +7.19%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +20.96% +42.55% +7.81% +57.35%
Average Annual Total Return +20.96% +12.54% +1.52% +7.05%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Average international core+ +17.94% +10.10% -2.32% +3.09%
MSCI EAFE Index# +20.70% +12.31% -0.80% +3.67%
</Table>
* For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2004. Index information is from May 1, 1998.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
[CHART]
STRATEGIC GROWTH SERIES(1), (7), (8), (10), (15)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations,
October 29, 1999, through December 31, 2004. Index information is from November
1, 1999.)
<Table>
<Caption>
STRATEGIC GROWTH SERIES RUSSELL 1000 GROWTH
- INITIAL CLASS INDEX#
Oct-99 $ 10,000 $ 10,000
Dec-99 $ 12,130 $ 11,636
Dec-00 $ 10,918 $ 9,027
Dec-01 $ 8,227 $ 7,183
Dec-02 $ 5,754 $ 5,180
Dec-03 $ 7,338 $ 6,721
Dec-04 $ 7,839 $ 7,145
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +6.82% -4.72% -35.38% -21.61%
Average Annual Total Return +6.82% -1.60% -8.36% -4.60%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +6.58% -5.47% -35.88% -22.23%
Average Annual Total Return +6.58% -1.86% -8.51% -4.74%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Average large-cap growth fund+ +7.18% -0.51% -8.22% -4.83%
Russell 1000 Growth Index# +6.30% -0.18% -9.29% -6.30%
</Table>
* For the period from the commencement of the series' investment operations,
October 29, 1999, through December 31, 2004. Index information is from
November 1, 1999.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
22
<Page>
[CHART]
STRATEGIC VALUE SERIES(1), (6), (8), (10), (11), (12), (15)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
1, 2002, through December 31, 2004. Index information is from May 1, 2002.)
<Table>
<Caption>
STRATEGIC VALUE SERIES -
INITIAL CLASS RUSSELL 1000 VALUE INDEX
5/2002 $ 10,000 $ 10,000
12/2002 $ 7,900 $ 8,404
12/2003 $ 10,068 $ 10,928
12/2004 $ 11,884 $ 12,730
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +18.05% +18.84%
Average Annual Total Return +18.05% +6.68%
</Table>
Service Class
<Table>
<Caption>
1 YEAR LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +17.77% +18.17%
Average Annual Total Return +17.77% +6.45%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR LIFE*
- ------------------------------------------------------------------------------------
Average multi-cap value funds+ +14.39% +7.85%
Russell 1000 Value Index# +16.49% +9.47%
</Table>
* For the period from the commencement of the series' investment operations, May
1, 2002 through December 31, 2004. Index information is from May 1, 2002.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
[CHART]
TECHNOLOGY SERIES(1), (2), (4), (5), (7), (8), (10), (14), (15)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, June
16, 2000, through December 31, 2004. Index information is from July 1, 2000.)
<Table>
<Caption>
TECHNOLOGY SERIES - GOLDMAN SACHS TECHNOLOGY
INITIAL CLASS INDEX
06/2000 $ 10,000 $ 10,000
12/2000 $ 8,540 $ 5,884
12/2001 $ 5,221 $ 4,204
12/2002 $ 2,820 $ 2,511
12/2003 $ 4,101 $ 3,872
12/2004 $ 4,201 $ 3,985
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +2.44% -19.54% -57.99%
Average Annual Total Return +2.44% -6.99% -17.37%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +1.97% -20.50% -58.49%
Average Annual Total Return +1.97% -7.36% -17.59%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS LIFE*
- ------------------------------------------------------------------------------------
Average specialty/miscellaneous fund+ +15.47% +8.38% +6.33%
Goldman Sachs Technology Index# +2.91% -1.77% -18.49%
</Table>
* For the period from the commencement of the series' investment operations,
June 16, 2000, through December 31, 2004. Index information is from July 1,
2000.
+ Source: Lipper Inc.
# Source: Bloomberg L.P.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
23
<Page>
[CHART]
VALUE SERIES(1), (8), (9), (11)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2004. Index information is from May 1, 1998.)
<Table>
<Caption>
VALUE SERIES - INITIAL RUSSELL 1000 VALUE
CLASS INDEX#
May-98 $ 10,000 $ 10,000
Dec-98 $ 10,500 $ 10,287
Dec-99 $ 11,239 $ 11,043
Dec-00 $ 14,640 $ 11,817
Dec-01 $ 13,548 $ 11,157
Dec-02 $ 11,707 $ 9,425
Dec-03 $ 14,671 $ 12,255
Dec-04 $ 16,948 $ 14,277
</Table>
TOTAL RATES OF RETURN THROUGH DECEMBER 31, 2004
Initial Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +15.52% +25.10% +50.79% +69.48%
Average Annual Total Return +15.52% +7.75% +8.56% +8.25%
</Table>
Service Class
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Cumulative Total Return +15.18% +24.23% +49.50% +68.04%
Average Annual Total Return +15.18% +7.50% +8.38% +8.11%
</Table>
COMPARATIVE BENCHMARKS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS LIFE*
- ------------------------------------------------------------------------------------
Average equity income fund+ +12.81% +6.06% +4.17% +4.31%
Russell 1000 Value Index# +16.49% +8.57% +5.27% +5.49%
</Table>
* For the period from the commencement of the series' investment operations, May
6, 1998, through December 31, 2004. Index information is from May 1, 1998
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
The performance shown reflects a non-recurring accrual made to the series on
July 28, 2004, relating to MFS' revenue sharing settlement with the Securities
and Exchange Commission, without which the performance would have been lower.
24
<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.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. For performance that reflects the deduction of
fees and charges imposed by insurance company separate accounts, visit
sunlife-usa.com.
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.
From time to time the series may receive proceeds from the settlement of a class
action lawsuit, without which performance would be lower.
INDEX DEFINITIONS
GOLDMAN SACHS TECHNOLOGY INDEX--measures technology stocks.
MSCI EAFE GROWTH INDEX--a free float-adjusted market capitalization index that
is designed to measure developed market growth equity performance, excluding the
U.S. and Canada.
MSCI EAFE INDEX--a free float-adjusted market capitalization index that is
designed to measure developed market equity performance, excluding the U.S. and
Canada.
RUSSELL 1000 GROWTH INDEX--measures large-cap U.S. growth stocks.
RUSSELL 1000 VALUE INDEX--measures large-cap U.S. value stocks.
RUSSELL 2000 GROWTH INDEX--measures U.S. small-cap growth stocks.
RUSSELL MIDCAP VALUE INDEX--measures U.S. mid-cap value stocks.
S&P 500 STOCK INDEX--a capitalization-weighted index of 500 widely held stocks
designed to measure broad U.S. equity performance.
It is not possible to invest directly in an index.
KEY RISK CONSIDERATIONS
(1) The portfolio may invest in foreign and/or emerging markets securities,
which are more susceptible to interest rate, currency exchange rate,
economic, and political risks.
(2) The portfolio may invest in small-, mid-sized, or emerging companies, which
are susceptible to greater risk than is customarily associated with
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 or
industries making it more susceptible to adverse economic, political, or
regulatory developments affecting those sectors or industries than a
portfolio that invests more broadly.
(5) The portfolio may invest a relatively high percentage of its assets in a
small number of issuers or even in a single issuer. This makes the
portfolio's value more sensitive to developments associated with the issuer
and the overall market.
(6) The portfolio may invest in high yield or lower-rated securities, which may
provide greater returns but are subject to greater-than-average risk.
(7) Prices of growth company securities held by the portfolio may fall to a
greater extent than the overall equity markets (e.g. as represented by the
S&P 500 Index) due to changing economic, political or market conditions or
disappointing growth company earnings results.
(8) Over-the-counter (OTC) transactions involve risks in addition to those
associated with transactions in securities traded on exchanges. OTC-listed
companies may have limited product lines, markets or financial resources.
Many OTC stocks trade less frequently and in smaller volume than
exchange-listed stocks. The values of these stocks may be more volatile
than exchange-listed stocks, and the portfolio may experience difficulty in
buying and selling these stocks at prevailing market prices.
25
<Page>
(9) Large cap companies tend to go in and out of favor based on market and
economic conditions. Large cap companies tend to be less volatile than
companies with smaller market capitalizations. In exchange for this
potentially lower risk, the portfolio's value may not rise as much as the
value of portfolio that emphasize smaller cap companies.
(10) The portfolio has engaged and may engage in active and frequent trading to
achieve its principal investment strategies. Frequent trading increases
transaction costs, which could detract from the portfolio's performance.
(11) Prices of securities react to the economic condition of the company that
issued the security. The portfolio's equity investments in an issuer may
rise and fall based on the issuer's actual and anticipated earnings,
changes in management and the potential for takeovers and acquisitions. MFS
will invest in securities that are undervalued based on itsbelief that the
market value of these securities will rise due to anticipated events and
investor perceptions. If these events do not occur or are delayed, or if
investor perceptions about the securities do not improve, the market price
of these securities may not rise or may fall.
(12) The fixed income securities purchased by the portfolio may be traded in the
over-the-counter market rather than on an organized exchange and are
subject to liquidity risk. This means that they may be harder to purchase
or sell at a fair price. The inability to purchase or sell these fixed
income securities at a fair price could have a negative impact on the
portfolio's performance.
(13) Prices of value company securities held by the portfolio may decline due to
changing economic, political or market conditions, or due to the financial
condition of the company which issued the security. If anticipated events
do not occur or are delayed, or if investor perceptions about the
securities do not improve, the market price of value company securities may
not rise as expected or may fall. Investments in medium-capitalization
companies can be riskier and more volatile than investments in companies
with larger market capitalizations.
(14) The portfolio may participate in the initial public offering (IPO) market,
and a significant portion of the portfolio's returns may be attributable to
investment in IPOs, which may have greater impact on performance of a
portfolio while its asset base is small. There is no guarantee the
portfolio will experience similar performance as its assets grow.
(15) The portfolio utilizes short sales as an investment technique and will
suffer a loss if it sells a security short and the value of that security
rises. Because the series must cover its short position subject to
prevailing market rates, the potential loss is unlimited.
The portfolios' values will vary daily in response to issuer, market,
regulatory, economic, or political developments. Because stocks tend to be
more volatile than some other investments, such as bonds, the more assets a
portfolio dedicates to stocks, generally the more volatile the portfolios'
values will be. Bond prices will decline when interest rates rise and will
increase when interest rates fall. Many bonds also carry credit risk, which
is the risk that issuers may fail to make timely principal or interest
payments. In addition, bonds with longer maturity dates will be subject to
greater price fluctuations than those with shorter maturity periods.
However, stocks historically have outperformed bonds over time. Please see
the prospectus for further information regarding these and other risk
considerations.
26
<Page>
EXPENSE TABLE
SERIES EXPENSES BORNE BY THE SHAREHOLDERS DURING THE PERIOD,
JULY 1, 2004 THROUGH DECEMBER 31, 2004
As a shareholder of the series, you incur ongoing costs, including management
fees; distribution and service (12b-1) fees; and other series expenses. This
example is intended to help you understand your ongoing costs (in dollars) of
investing in the series and to compare these costs with the ongoing costs of
investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the
period and held for the entire period, July 1, 2004 through December 31, 2004.
ACTUAL EXPENSES
The first line for each share class in the table below provides information
about actual account values and actual expenses. You may use the information in
this line, together with the amount you invested, to estimate the expenses that
you paid over the period. Simply divided your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the first line under the heading entitled "Expenses Paid
During Period" to estimate the expenses you paid on your account during this
period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line for each share class in the table below provides information
about hypothetical account values and hypothetical expenses based on the series'
actual expense ratio and an assumed rate of return of 5% per year before
expenses, which is not the series' actual return. The hypothetical account
values and expenses may not be used to estimate the actual ending account
balance or expenses you paid for the period. You may use this information to
compare the ongoing costs of investing in the series and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight the
series' ongoing costs only and do not take into account the fees and expenses
imposed under the variable contracts through which your investment in the series
is made. Therefore, the second line for each share class in the table is useful
in comparing ongoing costs associated with an investment in vehicles (such as
the series) which fund benefits under variable annuity and variable life
insurance contracts and to qualified pension and retirement plans only, and will
not help you determine the relative total costs of investing in the series
through variable annuity and variable life insurance contracts. If the fees and
expenses imposed under the variable contracts were included, your costs would
have been higher.
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
CAPITAL EXPENSE VALUE VALUE DURING PERIOD**
OPPORTUNITIES SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 0.84% $ 1,000 $ 1,088 $ 4.42
Hypothetical* 0.84% $ 1,000 $ 1,021 $ 4.28
Service Class
Actual 1.08% $ 1,000 $ 1,088 $ 5.68
Hypothetical* 1.08% $ 1,000 $ 1,020 $ 5.50
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
CORE EQUITY SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 0.88% $ 1,000 $ 1,099 $ 4.66
Hypothetical* 0.88% $ 1,000 $ 1,021 $ 4.48
Service Class
Actual 1.13% $ 1,000 $ 1,098 $ 5.98
Hypothetical* 1.13% $ 1,000 $ 1,020 $ 5.75
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
INTERNATIONAL EXPENSE VALUE VALUE DURING PERIOD**
GROWTH SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 1.09% $ 1,000 $ 1,139 $ 5.88
Hypothetical* 1.09% $ 1,000 $ 1,020 $ 5.55
Service Class
Actual 1.34% $ 1,000 $ 1,137 $ 7.22
Hypothetical* 1.34% $ 1,000 $ 1,018 $ 6.82
</Table>
<Table>
<Caption>
BEGINNING ENDING
MASSACHUSETTS ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
INVESTORS GROWTH EXPENSE VALUE VALUE DURING PERIOD**
STOCK SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 0.83% $ 1,000 $ 1,067 $ 4.32
Hypothetical* 0.83% $ 1,000 $ 1,021 $ 4.23
Service Class
Actual 1.08% $ 1,000 $ 1,065 $ 5.62
Hypothetical* 1.08% $ 1,000 $ 1,020 $ 5.50
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
MID CAP VALUE SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 0.99% $ 1,000 $ 1,116 $ 5.28
Hypothetical* 0.99% $ 1,000 $ 1,020 $ 5.04
Service Class
Actual 1.24% $ 1,000 $ 1,114 $ 6.61
Hypothetical* 1.24% $ 1,000 $ 1,019 $ 6.31
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
NEW DISCOVERY SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 0.99% $ 1,000 $ 1,062 $ 5.15
Hypothetical* 0.99% $ 1,000 $ 1,020 $ 5.04
Service Class
Actual 1.24% $ 1,000 $ 1,060 $ 6.44
Hypothetical* 1.24% $ 1,000 $ 1,019 $ 6.31
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
RESEARCH EXPENSE VALUE VALUE DURING PERIOD**
INTERNATIONAL SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 1.08% $ 1,000 $ 1,153 $ 5.86
Hypothetical* 1.08% $ 1,000 $ 1,020 $ 5.50
Service Class
Actual 1.33% $ 1,000 $ 1,151 $ 7.21
Hypothetical* 1.33% $ 1,000 $ 1,019 $ 6.77
</Table>
27
<Page>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
STRATEGIC EXPENSE VALUE VALUE DURING PERIOD**
GROWTH SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 0.88% $ 1,000 $ 1,058 $ 4.56
Hypothetical* 0.88% $ 1,000 $ 1,021 $ 4.48
Service Class
Actual 1.13% $ 1,000 $ 1,057 $ 5.86
Hypothetical* 1.13% $ 1,000 $ 1,020 $ 5.75
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
STRATEGIC VALUE SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 1.00% $ 1,000 $ 1,115 $ 5.33
Hypothetical* 1.00% $ 1,000 $ 1,020 $ 5.09
Service Class
Actual 1.25% $ 1,000 $ 1,113 $ 6.66
Hypothetical* 1.25% $ 1,000 $ 1,019 $ 6.36
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
TECHNOLOGY SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 1.00% $ 1,000 $ 1,015 $ 5.08
Hypothetical* 1.00% $ 1,000 $ 1,020 $ 5.09
Service Class
Actual 1.25% $ 1,000 $ 1,012 $ 6.34
Hypothetical* 1.25% $ 1,000 $ 1,019 $ 6.36
</Table>
<Table>
<Caption>
BEGINNING ENDING
ANNUALIZED ACCOUNT ACCOUNT EXPENSES PAID
EXPENSE VALUE VALUE DURING PERIOD**
VALUE SERIES RATIO 7/1/2004 12/31/2004 7/1/2004-12/31/2004
- ----------------------------------------------------------------------------------------
Initial Class
Actual 0.82% $ 1,000 $ 1,115 $ 4.37
Hypothetical* 0.82% $ 1,000 $ 1,021 $ 4.18
Service Class
Actual 1.07% $ 1,000 $ 1,113 $ 5.70
Hypothetical* 1.07% $ 1,000 $ 1,020 $ 5.45
</Table>
* 5% class return per year before expenses.
** Expenses paid is equal to each class' annualized expense ratio for the most
recent six month period, as shown above, multiplied by the average account
value over the period, multiplied by the number of days in the period,
divided by the number of days in the year.
28
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
CAPITAL OPPORTUNITIES SERIES
STOCKS -- 98.7%
<Table>
<Caption>
ISSUER SHARES VALUE
AEROSPACE -- 1.3%
Lockheed Martin Corp. 63,940 $ 3,551,867
--------------
AIRLINES -- 0.3%
Southwest Airlines Co. 45,500 $ 740,740
--------------
APPAREL MANUFACTURERS -- 0.6%
Reebok International Ltd. 33,600 $ 1,478,400
--------------
BANKS & CREDIT COMPANIES -- 7.1%
American Express Co. 37,800 $ 2,130,786
Bank of America Corp. 39,998 1,879,506
Citigroup, Inc. 47,876 2,306,666
Freddie Mac 44,320 3,266,384
J.P. Morgan Chase & Co. 123,810 4,829,828
MBNA Corp. 27,410 772,688
Northern Trust Corp.^ 19,000 923,020
PNC Financial Services Group, Inc. 48,760 2,800,774
--------------
$ 18,909,652
--------------
BIOTECHNOLOGY -- 3.5%
Amgen, Inc.* 27,250 $ 1,748,087
Genentech, Inc.* 12,800 696,832
Genzyme Corp.* 42,691 2,479,066
Gilead Sciences, Inc.* 26,060 911,839
ImClone Systems, Inc.^* 26,100 1,202,688
MedImmune, Inc.* 81,300 2,204,043
--------------
$ 9,242,555
--------------
BROADCAST & CABLE TV -- 9.3%
Clear Channel Communications, Inc. 7,560 $ 253,184
Comcast Corp., "Special A"* 178,720 5,869,165
Cox Radio, Inc., "A"* 15,600 257,088
Entercom Communications Corp., "A"* 8,940 320,857
Grupo Televisa S.A., ADR 12,000 726,000
Interpublic Group of Cos., Inc.* 70,400 943,360
News Corp., "A"^ 84,400 1,574,904
Time Warner, Inc.* 62,130 1,207,807
Univision Communications, Inc., "A"* 28,330 829,219
Viacom, Inc., "B" 208,680 7,593,865
Walt Disney Co. 154,290 4,289,262
Westwood One, Inc.* 36,180 974,327
--------------
$ 24,839,038
--------------
BROKERAGE & ASSET MANAGERS -- 3.0%
Goldman Sachs Group, Inc. 3,900 $ 405,756
Mellon Financial Corp. 128,210 3,988,613
Merrill Lynch & Co., Inc. 61,880 3,698,568
--------------
$ 8,092,937
--------------
BUSINESS SERVICES -- 1.7%
Accenture Ltd., "A"* 77,800 $ 2,100,600
Fiserv, Inc.* 31,600 1,270,004
Getty Images, Inc.* 6,410 441,329
Monster Worldwide, Inc.^* 22,000 740,080
--------------
$ 4,552,013
--------------
CHEMICALS -- 0.6%
E.I. du Pont de Nemours & Co. 32,170 $ 1,577,939
--------------
COMPUTER SOFTWARE -- 7.0%
Akamai Technologies, Inc.^* 47,650 $ 620,879
Amdocs Ltd.* 33,100 868,875
Ascential Software Corp.* 8,500 138,635
Check Point Software Technologies Ltd.* 23,300 573,879
Computer Associates International, Inc.^ 75,990 2,360,249
Mercury Interactive Corp.* 44,170 2,011,944
Microsoft Corp. 296,690 7,924,590
Oracle Corp.* 149,666 2,053,418
VERITAS Software Corp.* 75,800 2,164,090
--------------
$ 18,716,559
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 2.3%
Citrix Systems, Inc.* 37,400 $ 917,422
Dell, Inc.* 90,710 3,822,519
International Business Machines Corp. 13,380 1,319,000
--------------
$ 6,058,941
--------------
CONSUMER GOODS & SERVICES -- 1.4%
Avon Products, Inc. 29,340 $ 1,135,458
Career Education Corp.^* 4,800 192,000
Procter & Gamble Co. 44,900 2,473,092
--------------
$ 3,800,550
--------------
CONTAINERS -- 2.0%
Owens-Illinois, Inc.* 193,170 $ 4,375,301
Smurfit-Stone Container Corp.* 48,770 911,024
--------------
$ 5,286,325
--------------
ELECTRICAL EQUIPMENT -- 3.1%
Cooper Industries Ltd., "A" 15,100 $ 1,025,139
Emerson Electric Co. 9,180 643,518
General Electric Co. 116,080 4,236,920
Tyco International Ltd. 63,525 2,270,384
--------------
$ 8,175,961
--------------
ELECTRONICS -- 3.1%
Amphenol Corp., "A"^ 10,600 $ 389,444
Analog Devices, Inc. 38,700 1,428,804
Applied Materials, Inc.* 37,500 641,250
KLA-Tencor Corp.^* 10,300 479,774
Linear Technology Corp. 12,490 484,112
Marvell Technology Group Ltd.^* 20,100 712,947
Maxim Integrated Products, Inc. 11,400 483,246
Novellus Systems, Inc.^* 24,190 674,659
PMC-Sierra, Inc.^* 87,450 983,813
Texas Instruments, Inc. 27,710 682,220
Xilinx, Inc. 39,480 1,170,582
--------------
$ 8,130,851
--------------
ENERGY -- INDEPENDENT -- 0.7%
Devon Energy Corp. 49,540 $ 1,928,097
--------------
FOOD & DRUG STORES -- 1.0%
CVS Corp. 29,900 $ 1,347,593
Rite Aid Corp.* 356,190 1,303,655
--------------
$ 2,651,248
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.8%
General Mills, Inc. 48,990 $ 2,435,293
PepsiCo, Inc. 72,280 3,773,016
SYSCO Corp. 28,700 1,095,479
--------------
$ 7,303,788
--------------
FOREST & PAPER PRODUCTS -- 0.9%
Bowater, Inc.^ 53,440 $ 2,349,757
--------------
GAMING & LODGING -- 0.9%
Carnival Corp. 27,800 $ 1,602,114
Royal Caribbean Cruises Ltd.^ 14,900 811,156
--------------
$ 2,413,270
--------------
GENERAL MERCHANDISE -- 1.8%
Kohl's Corp.* 31,040 $ 1,526,237
Target Corp. 46,310 2,404,878
Wal-Mart Stores, Inc. 17,050 900,581
--------------
$ 4,831,696
--------------
INSURANCE -- 3.8%
Allstate Corp. 65,600 $ 3,392,832
American International Group, Inc. 17,850 1,172,209
Conseco, Inc.^* 153,580 3,063,921
Hartford Financial Services Group, Inc. 35,394 2,453,158
--------------
$ 10,082,120
--------------
</Table>
29
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
INTERNET -- 1.8%
eBay, Inc.^* 11,700 $ 1,360,476
IAC/InterActiveCorp*^ 46,470 1,283,501
Yahoo!, Inc.* 57,500 2,166,600
--------------
$ 4,810,577
--------------
LEISURE & TOYS -- 1.3%
Activision, Inc.* 15,500 $ 312,790
Electronic Arts, Inc.* 20,800 1,282,944
Mattel, Inc. 96,560 1,881,954
--------------
$ 3,477,688
--------------
MACHINERY & TOOLS -- 0.2%
Illinois Tool Works, Inc. 5,260 $ 487,497
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.9%
Apria Healthcare Group, Inc.* 55,700 $ 1,835,315
HCA, Inc. 25,900 1,034,964
Tenet Healthcare Corp.* 201,710 2,214,776
--------------
$ 5,085,055
--------------
MEDICAL EQUIPMENT -- 1.8%
Fisher Scientific International, Inc.* 13,400 $ 835,892
Guidant Corp. 12,000 865,200
Medtronic, Inc. 48,570 2,412,472
Waters Corp.* 13,800 645,702
--------------
$ 4,759,266
--------------
METALS & MINING -- 0.6%
Companhia Vale do Rio Doce, ADR 54,480 $ 1,580,465
--------------
OIL SERVICES -- 3.6%
BJ Services Co. 30,120 $ 1,401,785
Cooper Cameron Corp.^* 41,880 2,253,563
GlobalSantaFe Corp. 93,098 3,082,475
Noble Corp.* 54,100 2,690,934
--------------
$ 9,428,757
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.1%
EMC Corp.* 120,000 $ 1,784,400
Network Appliance, Inc.^* 36,900 1,225,818
--------------
$ 3,010,218
--------------
PHARMACEUTICALS -- 10.5%
Abbott Laboratories 101,450 $ 4,732,642
Allergan, Inc. 10,300 835,021
Elan Corp. PLC, ADR^* 7,000 190,750
Eli Lilly & Co. 20,700 1,174,725
Johnson & Johnson 124,950 7,924,329
Merck & Co., Inc. 154,570 4,967,880
Pfizer, Inc. 11,075 297,807
Wyeth 179,571 7,647,929
--------------
$ 27,771,083
--------------
PRINTING & PUBLISHING -- 0.2%
Lamar Advertising Co., "A"* 10,500 $ 449,190
--------------
RESTAURANTS -- 0.1%
Cheesecake Factory, Inc.* 11,100 $ 360,417
--------------
SPECIALTY STORES -- 2.9%
Best Buy Co., Inc. 18,200 $ 1,081,444
Gap, Inc. 103,010 2,175,571
Home Depot, Inc. 36,630 1,565,566
Hot Topic, Inc.^* 10,600 182,214
Lowe's Cos., Inc.^ 22,200 1,278,498
Nordstrom, Inc.^ 7,500 350,475
Staples, Inc. 19,520 658,019
Tiffany & Co. 12,300 393,231
--------------
$ 7,685,018
--------------
TELECOMMUNICATIONS -- WIRELESS -- 3.8%
America Movil S.A. de C.V., ADR 26,100 $ 1,366,335
Nokia Corp., ADR 309,540 4,850,492
Vodafone Group PLC, ADR 137,105 3,753,935
--------------
$ 9,970,762
--------------
TELECOMMUNICATIONS -- WIRELINE -- 3.7%
ADTRAN, Inc.^ 22,500 $ 430,650
Cisco Systems, Inc.* 211,010 4,072,493
Comverse Technology, Inc.* 16,800 410,760
Nortel Networks Corp.* 1,299,260 4,534,417
Telefonaktiebolaget LM Ericsson, ADR^* 15,000 472,350
--------------
$ 9,920,670
--------------
TELEPHONE SERVICES -- 4.8%
Sprint Corp. 273,840 $ 6,804,924
Verizon Communications, Inc. 148,580 6,018,976
--------------
$ 12,823,900
--------------
TRUCKING -- 1.3%
Expeditors International of Washington, Inc.^ 9,800 $ 547,624
FedEx Corp. 13,250 1,304,993
United Parcel Service, Inc., "B" 19,000 1,623,740
--------------
$ 3,476,357
--------------
UTILITIES -- ELECTRIC POWER -- 0.9%
Calpine Corp.* 632,890 $ 2,493,587
--------------
Total Stocks (Identified Cost, $229,314,824) $ 262,304,811
--------------
WARRANTS -- 0.0%
TELECOMMUNICATIONS -- WIRELINE -- 0.0%
Lucent Technologies, Inc.^*, Strike 2.75,
1st exercise 12/10/04
(Identified Cost, $10,675) 6,431 $ 10,161
--------------
COLLATERAL FOR SECURITIES LOANED -- 6.1%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 16,236,027 $ 16,236,027
--------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 1.3%
Morgan Stanley, 2.19%, dated 12/31/04, due 01/03/05, total
to be received $3,413,623 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account),at Cost $ 3,413,000 $ 3,413,000
--------------
Total Investments
(Identified Cost, $248,974,526) $ 281,963,999
--------------
OTHER ASSETS,
LESS LIABILITIES -- (6.1)% (16,116,760)
--------------
Net Assets -- 100.0% $ 265,847,239
==============
</Table>
See portfolio footnotes and notes to financial statements.
30
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
CORE EQUITY SERIES
STOCKS -- 98.4%
<Table>
<Caption>
ISSUER SHARES VALUE
AEROSPACE -- 2.2%
KVH Industries, Inc.^* 29,810 $ 292,138
Lockheed Martin Corp. 32,550 1,808,153
--------------
$ 2,100,291
--------------
ALCOHOLIC BEVERAGES -- 0.6%
Anheuser-Busch Cos., Inc. 10,980 $ 557,015
--------------
APPAREL MANUFACTURERS -- 0.2%
Polo Ralph Lauren Corp., "A" 4,500 $ 191,700
--------------
AUTOMOTIVE -- 0.8%
Harley-Davidson, Inc. 6,380 $ 387,585
Magna International, Inc., "A" 4,920 406,146
--------------
$ 793,731
--------------
BANKS & CREDIT COMPANIES -- 12.4%
Bank of America Corp. 48,508 $ 2,279,391
Citigroup, Inc. 34,372 1,656,043
Countrywide Financial Corp. 23,580 872,696
Freddie Mac 38,900 2,866,930
J.P. Morgan Chase & Co. 40,246 1,569,996
PNC Financial Services Group, Inc. 16,890 970,162
SunTrust Banks, Inc. 18,310 1,352,743
--------------
$ 11,567,961
--------------
BIOTECHNOLOGY -- 1.3%
Genzyme Corp.* 13,070 $ 758,975
MedImmune, Inc.* 16,820 455,990
--------------
$ 1,214,965
--------------
BROADCAST & CABLE TV -- 2.9%
ADVO, Inc. 4,320 $ 154,008
Citadel Broadcasting Corp.* 8,650 139,957
Comcast Corp., "A"* 19,180 638,310
EchoStar Communications Corp., "A" 24,420 811,721
R.H. Donnelley Corp.* 3,640 214,942
Radio One, Inc.^* 16,700 269,204
Walt Disney Co. 18,000 500,400
--------------
$ 2,728,542
--------------
BROKERAGE & ASSET MANAGERS -- 2.4%
Ameritrade Holding Corp.* 44,400 $ 631,368
Franklin Resources, Inc. 2,160 150,444
Goldman Sachs Group, Inc. 6,230 648,169
Legg Mason, Inc. 7,620 558,241
Mellon Financial Corp. 7,160 222,748
--------------
$ 2,210,970
--------------
BUSINESS SERVICES -- 2.5%
Accenture Ltd., "A"* 18,100 $ 488,700
Fiserv, Inc.* 12,660 508,805
Getty Images, Inc.^* 6,450 444,082
Hewitt Associates, Inc., "A"* 5,800 185,658
SIRVA, Inc.* 18,200 349,804
Universal Technical Institute, Inc.* 8,900 339,268
--------------
$ 2,316,317
--------------
CHEMICALS -- 2.6%
E.I. du Pont de Nemours & Co. 27,030 $ 1,325,821
Monsanto Co. 20,040 1,113,222
--------------
$ 2,439,043
--------------
COMPUTER SOFTWARE -- 3.0%
Business Objects S.A., ADR^* 15,300 $ 387,702
FileNet Corp.* 11,500 296,240
Mercury Interactive Corp.* 15,450 703,747
MicroStrategy, Inc., "A"^* 10,810 651,303
Oracle Corp.* 57,500 788,900
--------------
$ 2,827,892
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 2.8%
Apple Computer, Inc.* 13,650 $ 879,060
Dell, Inc.* 40,080 1,688,971
--------------
$ 2,568,031
--------------
CONSTRUCTION -- 0.4%
Eagle Materials, Inc.^ 4,910 $ 423,979
--------------
CONSUMER GOODS & SERVICES -- 3.0%
Career Education Corp.* 8,760 $ 350,400
Colgate-Palmolive Co. 17,800 910,648
Procter & Gamble Co. 27,600 1,520,208
--------------
$ 2,781,256
--------------
CONTAINERS -- 0.7%
Smurfit-Stone Container Corp.* 32,670 $ 610,276
--------------
ELECTRICAL EQUIPMENT -- 4.5%
American Standard Cos., Inc.* 5,280 $ 218,170
General Electric Co. 84,020 3,066,730
Tyco International Ltd. 24,200 864,908
--------------
$ 4,149,808
--------------
ELECTRONICS -- 2.9%
Analog Devices, Inc. 16,100 $ 594,412
ATMI, Inc.^* 4,900 110,397
DSP Group, Inc.* 8,200 183,106
FormFactor, Inc.^* 4,900 132,986
Integrated Circuit Systems, Inc.* 15,060 315,055
KLA-Tencor Corp.* 5,120 238,490
Marvell Technology Group Ltd.* 5,330 189,055
PMC-Sierra, Inc.* 35,350 397,688
PowerDsine Ltd.* 18,380 252,174
Silicon Laboratories, Inc.^* 8,700 307,197
--------------
$ 2,720,560
--------------
ENERGY -- INDEPENDENT -- 0.7%
Devon Energy Corp. 8,200 $ 319,144
Noble Energy, Inc.^ 5,100 314,466
--------------
$ 633,610
--------------
ENERGY -- INTEGRATED -- 5.0%
ConocoPhillips 9,800 $ 850,934
Exxon Mobil Corp. 58,806 3,014,396
TOTAL S.A., ADR^ 7,400 812,816
--------------
$ 4,678,146
--------------
FOOD & DRUG STORES -- 1.0%
CVS Corp. 14,930 $ 672,895
Kroger Co.* 17,000 298,180
--------------
$ 971,075
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.7%
Chiquita Brands International, Inc.^ 7,410 $ 163,465
General Mills, Inc. 11,520 572,659
PepsiCo, Inc. 33,957 1,772,555
--------------
$ 2,508,679
--------------
FURNITURE & APPLIANCES -- 0.2%
Mohawk Industries, Inc.* 1,970 $ 179,763
--------------
GAMING & LODGING -- 0.8%
Carnival Corp. 5,510 $ 317,541
WMS Industries, Inc.^* 12,000 402,480
--------------
$ 720,021
--------------
GENERAL MERCHANDISE -- 4.1%
Kohl's Corp.* 37,510 $ 1,844,367
Target Corp. 37,540 1,949,452
--------------
$ 3,793,819
--------------
INSURANCE -- 4.2%
Ace Ltd. 12,490 $ 533,948
American International Group, Inc. 28,290 1,857,804
Conseco, Inc.^* 11,900 237,405
Genworth Financial, Inc. 8,800 237,600
Hartford Financial Services Group, Inc. 5,700 395,067
MetLife, Inc. 16,700 676,517
--------------
$ 3,938,341
--------------
</Table>
31
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
INTERNET -- 1.7%
Ariba, Inc.* 40,000 $ 664,000
eBay, Inc.* 2,450 284,886
Yahoo!, Inc.* 15,900 599,112
--------------
$ 1,547,998
--------------
LEISURE & TOYS -- 0.3%
Electronic Arts, Inc.* 1,770 $ 109,174
Hasbro, Inc. 3,450 66,861
Mattel, Inc. 4,090 79,714
--------------
$ 255,749
--------------
MACHINERY & TOOLS -- 0.6%
Caterpillar, Inc. 3,140 $ 306,181
Illinois Tool Works, Inc. 880 81,558
Roper Industries, Inc. 2,900 176,233
--------------
$ 563,972
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 2.0%
Apria Healthcare Group, Inc.* 8,460 $ 278,757
HCA, Inc. 17,460 697,702
Tenet Healthcare Corp.* 62,960 691,301
VistaCare, Inc., "A"^* 11,400 189,582
--------------
$ 1,857,342
--------------
MEDICAL EQUIPMENT -- 2.3%
Aspect Medical Systems, Inc.^* 12,670 $ 309,908
Cyberonics, Inc.^* 13,160 272,675
Guidant Corp. 15,930 1,148,553
Medtronic, Inc. 8,360 415,241
--------------
$ 2,146,377
--------------
METALS & MINING -- 1.0%
Companhia Vale do Rio Doce, ADR 31,720 $ 920,197
--------------
NATURAL GAS -- DISTRIBUTION -- 0.5%
AGL Resources, Inc. 13,300 $ 442,092
--------------
OIL SERVICES -- 1.0%
Halliburton Co. 7,180 $ 281,743
Noble Corp.* 3,930 195,478
Pride International, Inc.* 13,500 277,290
Smith International, Inc.* 2,600 141,466
--------------
$ 895,977
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.1%
EMC Corp.* 27,300 $ 405,951
Flextronics International Ltd.* 30,360 419,575
Lexmark International, Inc., "A"* 9,240 785,400
Solectron Corp.* 72,100 384,293
--------------
$ 1,995,219
--------------
PHARMACEUTICALS -- 6.9%
Abbott Laboratories 29,080 $ 1,356,582
Eli Lilly & Co. 22,600 1,282,550
Johnson & Johnson 20,790 1,318,502
Wyeth 58,920 2,509,403
--------------
$ 6,467,037
--------------
POLLUTION CONTROL -- 0.2%
Waste Management, Inc. 5,330 $ 159,580
--------------
PRINTING & PUBLISHING -- 0.1%
Lamar Advertising Co., "A"* 1,910 $ 81,710
--------------
REAL ESTATE -- 0.4%
American Financial Realty Trust 9,860 $ 159,535
Boston Properties, Inc. 3,050 197,243
--------------
$ 356,778
--------------
RESTAURANTS -- 0.7%
Wendy's International, Inc. 4,020 $ 157,825
YUM! Brands, Inc. 10,600 500,108
--------------
$ 657,933
--------------
SPECIALTY CHEMICALS -- 1.4%
Lyondell Chemical Co. 44,220 $ 1,278,842
--------------
SPECIALTY STORES -- 1.7%
Circuit City Stores, Inc. 40,210 $ 628,884
Finish Line, Inc., "A"^ 20,080 367,464
Gap, Inc. 7,460 157,555
Regis Corp. 2,760 127,374
West Marine, Inc.^* 10,610 262,598
--------------
$ 1,543,875
--------------
TELECOMMUNICATIONS -- WIRELESS -- 0.7%
Vodafone Group PLC, ADR 24,052 $ 658,544
--------------
TELECOMMUNICATIONS -- WIRELINE -- 2.0%
Cisco Systems, Inc.* 83,310 $ 1,607,883
Harmonic, Inc.^* 27,950 233,103
--------------
$ 1,840,986
--------------
TELEPHONE SERVICES -- 3.0%
CenturyTel, Inc. 12,100 $ 429,187
Citizens Communications Co. 29,090 401,151
IDT Corp., "B"^* 17,310 267,959
SpectraSite, Inc.* 7,800 451,620
Sprint Corp. 50,670 1,259,150
--------------
$ 2,809,067
--------------
TOBACCO -- 1.4%
Altria Group, Inc. 20,980 $ 1,281,878
--------------
TRUCKING -- 1.8%
CNF, Inc. 7,800 $ 390,780
United Parcel Service, Inc., "B" 10,490 896,475
Werner Enterprises, Inc. 18,900 427,896
--------------
$ 1,715,151
--------------
UTILITIES -- ELECTRIC POWER -- 2.7%
Cinergy Corp. 8,400 $ 349,692
Entergy Corp. 5,700 385,263
NRG Energy, Inc.* 9,200 331,660
PG&E Corp.* 15,130 503,526
PPL Corp. 9,300 495,504
TXU Corp.^ 7,330 473,225
--------------
$ 2,538,870
--------------
Total Stocks (Identified Cost, $76,882,846) $ 91,640,965
--------------
COLLATERAL FOR SECURITIES LOANED -- 7.4%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 6,840,222 $ 6,840,222
--------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 1.3%
Morgan Stanley, 2.19%, dated 12/31/04, due 01/03/05, total
to be received $1,222,223 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost $ 1,222,000 $ 1,222,000
--------------
Total Investments
(Identified Cost, $84,945,068) $ 99,703,187
--------------
OTHER ASSETS,
LESS LIABILITIES -- (7.1)% (6,568,512)
--------------
Net Assets -- 100.0% $ 93,134,675
==============
</Table>
See portfolio footnotes and notes to financial statements.
32
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
INTERNATIONAL GROWTH SERIES
STOCKS -- 98.4%
<Table>
<Caption>
ISSUER SHARES VALUE
AIRLINES -- 0.3%
easyJet Airline Co. Ltd.* 118,060 $ 424,829
--------------
ALCOHOLIC BEVERAGES -- 1.7%
Grupo Modelo S.A. de C.V 342,560 $ 942,217
Pernod Ricard^ 9,450 1,442,562
--------------
$ 2,384,779
--------------
APPAREL MANUFACTURERS -- 1.4%
Burberry Group PLC 88,100 $ 677,099
Sanyo Shokai Ltd.^ 76,000 412,630
Toray Industries, Inc. 181,000 845,342
--------------
$ 1,935,071
--------------
AUTOMOTIVE -- 1.5%
Autoliv, Inc.^ 15,020 $ 717,257
Toyota Motor Corp. 35,300 1,432,265
--------------
$ 2,149,522
--------------
BANKS & CREDIT COMPANIES -- 18.2%
AEON Credit Service Co. Ltd.^ 19,500 $ 1,447,677
Aiful Corp. 8,750 959,499
Anglo Irish Bank Corp. PLC 67,120 1,620,997
Bank of Queensland Ltd. 80,759 698,618
Bank Rakyat Indonesia 5,932,000 1,837,274
Close Brothers Group PLC 83,180 1,170,961
DEPFA Bank PLC 65,660 1,098,365
Erste Bank der oesterreichischen Sparkassen AG 34,010 1,810,415
Grupo Financiero Inbursa S.A. de C.V 474,230 872,563
Hana Bank 25,900 645,498
Housing Development Finance Corp. Ltd. 120,060 2,126,658
OTP Bank Ltd., GDR 28,440 1,734,840
Powszechna Kasa Oszczednosci Bank Polski S.A.* 129,280 1,190,061
Royal Bank of Scotland Group PLC 57,135 1,918,528
Shinsei Bank Ltd.^ 100,000 679,153
Standard Chartered PLC 57,080 1,059,535
Taishin Financial Holdings Co. Ltd. 752,000 704,926
Takefuji Corp. 20,190 1,361,388
UBS AG 27,999 2,339,281
--------------
$ 25,276,237
--------------
BROADCAST & CABLE TV -- 4.9%
Antena 3 de Television S.A.* 13,824 $ 995,213
Grupo Televisa S.A., ADR 34,900 2,111,450
News Corp., Inc., "B"^ 117,308 2,246,841
WPP Group PLC 130,820 1,436,681
--------------
$ 6,790,185
--------------
BROKERAGE & ASSET MANAGERS -- 1.1%
Schroders PLC 104,560 $ 1,505,003
--------------
BUSINESS SERVICES -- 2.9%
Manpower, Inc. 24,070 $ 1,162,581
PHS Group PLC 486,270 764,228
SOFTBANK CORP.^ 42,300 2,053,778
--------------
$ 3,980,587
--------------
COMPUTER SOFTWARE -- 0.5%
Check Point Software Technologies Ltd.* 28,100 $ 692,103
--------------
CONSTRUCTION -- 1.5%
Italcementi S.p.A 77,180 $ 881,275
Siam Cement Public Co. Ltd. 102,980 731,144
Urbi Desarrollos Urbanos S.A. de C.V.* 116,200 507,665
--------------
$ 2,120,084
--------------
CONSUMER GOODS & SERVICES -- 2.5%
Accord Customer Care Solutions Ltd.* 1,303,000 $ 682,303
AmorePacific, Inc. 3,790 950,063
Reckitt Benckiser PLC 62,590 1,888,171
--------------
$ 3,520,537
--------------
ELECTRICAL EQUIPMENT -- 1.8%
Nidec Corp. 8,600 $ 1,045,137
Nitto Denko Corp. 27,600 1,509,239
--------------
$ 2,554,376
--------------
ELECTRONICS -- 5.8%
CANON, Inc.^ 38,000 $ 2,044,661
Cookson Group PLC* 108,400 73,755
Funai Electric Co. Ltd.^ 5,800 717,840
Murata Manufacturing Co. Ltd. 27,500 1,533,204
Samsung Electronics Co. Ltd. 3,440 1,497,025
Seiko Epson Corp. 29,900 1,326,626
Stanley Electric Co. Ltd.^ 51,400 878,214
--------------
$ 8,071,325
--------------
ENERGY -- INDEPENDENT -- 1.4%
EnCana Corp. 19,550 $ 1,114,211
Talisman Energy, Inc. 31,930 860,672
--------------
$ 1,974,883
--------------
ENERGY -- INTEGRATED -- 3.5%
BP PLC 165,207 $ 1,608,510
China Petroleum & Chemical Corp. 1,538,000 628,219
TOTAL S.A.^ 12,200 2,655,551
--------------
$ 4,892,280
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 4.2%
China Mengniu Dairy Co. Ltd.* 721,000 $ 565,818
Compass Group PLC 298,160 1,407,205
Groupe Danone^ 15,100 1,389,778
Nestle S.A 9,436 2,459,768
--------------
$ 5,822,569
--------------
FOREST & PAPER PRODUCTS -- 1.0%
Aracruz Celulose S.A., ADR 36,820 $ 1,388,114
--------------
INSURANCE -- 1.7%
Riunione Adriatica di Sicurta S.p.A 68,590 $ 1,545,941
St. James's Place Capital PLC 186,690 758,558
--------------
$ 2,304,499
--------------
LEISURE & TOYS -- 0.7%
Heiwa Corp.^ 21,800 $ 363,139
Nintendo Co. Ltd. 5,200 651,170
--------------
$ 1,014,309
--------------
MACHINERY & TOOLS -- 2.8%
Atlas Copco AB, "A"^ 17,210 $ 775,318
Mitsui Mining & Smelting Co. Ltd. 235,000 1,033,520
Neopost S.A.^ 10,580 819,711
Sandvik AB 32,840 1,321,648
--------------
$ 3,950,197
--------------
MEDICAL EQUIPMENT -- 1.6%
Straumann Holding AG 3,980 $ 823,027
Synthes, Inc.* 12,590 1,406,550
--------------
$ 2,229,577
--------------
METALS & MINING -- 2.3%
Aber Diamond Corp.+ 23,500 $ 831,209
BHP Billiton Ltd.^ 128,990 1,546,261
Companhia Vale do Rio Doce, ADR 28,010 812,570
--------------
$ 3,190,040
--------------
PHARMACEUTICALS -- 7.4%
AstraZeneca PLC 62,870 $ 2,276,183
Chugai Pharmaceutical Co. Ltd.^ 73,000 1,203,230
Roche Holdings AG 28,700 3,291,855
Sanofi-Aventis^ 34,230 2,726,234
Tanabe Seiyaku Co. Ltd. 72,000 739,791
--------------
$ 10,237,293
--------------
PRINTING & PUBLISHING -- 2.6%
Daily Mail & General Trust PLC, "A" 50,710 $ 721,156
Johnston Press PLC 105,460 1,095,516
Yell Group PLC 216,740 1,827,778
--------------
$ 3,644,450
--------------
</Table>
33
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
SPECIALTY CHEMICALS -- 2.1%
Asahi Glass Co. Ltd.^ 98,000 $ 1,077,499
Kaneka Corp. 34,000 383,751
L'Air Liquide S.A.^ 7,943 1,463,196
--------------
$ 2,924,446
--------------
SPECIALTY STORES -- 6.2%
Esprit Holdings Ltd. 118,500 $ 716,519
Grupo Elektra S.A. de C.V 138,320 1,284,303
Hennes & Mauritz AB, "B" 46,900 1,630,429
Kingfisher PLC 241,444 1,433,374
Matalan PLC 229,310 973,483
NEXT PLC 47,700 1,508,461
Nishimatsuya Chain Co. Ltd.^ 16,200 611,588
RONA, Inc.* 14,900 506,537
--------------
$ 8,664,694
--------------
TELECOMMUNICATIONS -- WIRELESS -- 6.6%
America Movil S.A. de C.V., ADR 42,310 $ 2,214,929
Mobile TeleSystems OJSC, ADR 6,720 930,787
Vodafone Group PLC 2,239,400 6,062,501
--------------
$ 9,208,217
--------------
TELECOMMUNICATIONS -- WIRELINE -- 2.2%
CSR PLC* 135,500 $ 1,012,828
Research In Motion Ltd.* 14,430 1,189,321
Spirent PLC 598,910 846,555
--------------
$ 3,048,704
--------------
TELEPHONE SERVICES -- 4.0%
Bharti Tele-Ventures Ltd.* 224,260 $ 1,117,925
Biscom S.p.A*^ 15,000 861,055
Hanaro Telecom, Inc.* 418,000 1,298,174
Telefonica S.A 84,536 1,587,025
ZTE Corp.* 213,800 691,763
--------------
$ 5,555,942
--------------
TOBACCO -- 1.6%
Altadis S.A 23,620 $ 1,078,174
Swedish Match AB^ 94,880 1,097,093
--------------
$ 2,175,267
--------------
UTILITIES -- ELECTRIC POWER -- 2.4%
Iberdrola S.A.^ 57,900 $ 1,466,557
Suez S.A.^ 69,230 1,839,807
--------------
$ 3,306,364
--------------
Total Stocks (Identified Cost, $106,881,458) $ 136,936,483
--------------
PREFERRED STOCKS -- 0.5%
AUTOMOTIVE -- 0.5%
Porsche AG^ 1,206 $ 766,941
--------------
Total Preferred Stocks
(Identified Cost, $506,938) $ 766,941
--------------
COLLATERAL FOR SECURITIES LOANED -- 20.1%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 27,961,998 $ 27,961,998
--------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 1.1%
Morgan Stanley, 2.19%, dated 12/31/04, due 01/03/05, total
to be received $1,536,280 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost $ 1,536,000 $ 1,536,000
--------------
Total Investments~
(Identified Cost, $136,886,394) $ 167,201,422
--------------
OTHER ASSETS,
LESS LIABILITIES -- (20.1)% (28,006,597)
--------------
Net Assets -- 100.0% $ 139,194,825
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
STOCKS -- 97.1%
<Table>
<Caption>
ISSUER SHARES VALUE
AEROSPACE -- 0.3%
Lockheed Martin Corp. 18,690 $ 1,038,230
Northrop Grumman Corp. 12,080 656,669
--------------
$ 1,694,899
--------------
AIRLINES -- 0.2%
Southwest Airlines Co. 72,470 $ 1,179,812
--------------
APPAREL MANUFACTURERS -- 1.0%
Nike, Inc., "B" 36,900 $ 3,346,461
Polo Ralph Lauren Corp., "A" 6,710 285,846
Reebok International Ltd. 46,200 2,032,800
--------------
$ 5,665,107
--------------
AUTOMOTIVE -- 1.0%
Harley-Davidson, Inc. 94,830 $ 5,760,922
--------------
BANKS & CREDIT COMPANIES -- 3.6%
American Express Co. 133,750 $ 7,539,487
Citigroup, Inc. 107,630 5,185,613
Countrywide Financial Corp. 38,740 1,433,767
Northern Trust Corp. 26,300 1,277,654
SLM Corp. 86,660 4,626,777
--------------
$ 20,063,298
--------------
BIOTECHNOLOGY -- 5.4%
Amgen, Inc.* 160,030 $ 10,265,924
Celgene Corp.^* 51,200 1,358,336
Cephalon, Inc.^* 2,300 117,024
Genentech, Inc.* 17,700 963,588
Genzyme Corp.* 176,980 10,277,229
Gilead Sciences, Inc.* 36,300 1,270,137
ImClone Systems, Inc.^* 102,190 4,708,915
MedImmune, Inc.* 46,900 1,271,459
--------------
$ 30,232,612
--------------
BROADCAST & CABLE TV -- 5.7%
Citadel Broadcasting Corp.* 57,280 $ 926,790
Clear Channel Communications, Inc. 10,500 351,645
Comcast Corp., "A"* 219,499 7,304,927
Cox Radio, Inc., "A"* 21,600 355,968
EchoStar Communications Corp., "A" 33,000 1,096,920
Entercom Communications Corp., "A"* 11,800 423,502
Grupo Televisa S.A., ADR 56,260 3,403,730
News Corp., "A"^ 142,960 2,667,634
Omnicom Group, Inc. 8,570 722,622
Time Warner, Inc.* 173,270 3,368,369
Univision Communications, Inc., "A"* 68,340 2,000,312
Viacom, Inc., "B" 92,400 3,362,436
Walt Disney Co. 157,220 4,370,716
Westwood One, Inc.* 49,400 1,330,342
--------------
$ 31,685,913
--------------
BROKERAGE & ASSET MANAGERS -- 1.5%
Goldman Sachs Group, Inc. 39,400 $ 4,099,176
Legg Mason, Inc. 14,810 1,084,981
Mellon Financial Corp. 28,200 877,302
Merrill Lynch & Co., Inc. 34,500 2,062,065
Morgan Stanley 5,100 283,152
--------------
$ 8,406,676
--------------
BUSINESS SERVICES -- 2.5%
Accenture Ltd., "A"* 278,380 $ 7,516,260
Fiserv, Inc.* 88,560 3,559,226
Getty Images, Inc.^ 8,900 612,765
Manpower, Inc. 9,980 482,034
Monster Worldwide, Inc.* 30,000 1,009,200
SOFTBANK CORP.^ 11,800 572,921
--------------
$ 13,752,406
--------------
CHEMICALS -- 1.7%
3M Co. 43,700 $ 3,586,459
Dow Chemical Co. 27,130 1,343,206
</Table>
34
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
CHEMICALS -- continued
E.I. du Pont de Nemours & Co. 12,240 $ 600,372
Monsanto Co. 74,610 4,144,586
--------------
$ 9,674,623
--------------
COMPUTER SOFTWARE -- 8.2%
Akamai Technologies, Inc.^* 74,800 $ 974,644
Amdocs Ltd.* 167,240 4,390,050
Ascential Software Corp.* 11,800 192,458
Check Point Software Technologies Ltd.* 91,610 2,256,354
Mercury Interactive Corp.* 148,320 6,755,976
Microsoft Corp. 555,454 14,836,176
Oracle Corp.* 629,020 8,630,154
Red Hat, Inc.^* 72,490 967,742
Symantec Corp.* 91,300 2,351,888
VERITAS Software Corp.* 139,043 3,969,678
--------------
$ 45,325,120
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 3.9%
CDW Corp. 8,400 $ 557,340
Citrix Systems, Inc.* 52,200 1,280,466
Dell, Inc.* 378,814 15,963,222
International Business Machines Corp. 41,740 4,114,729
--------------
$ 21,915,757
--------------
CONSUMER GOODS & SERVICES -- 4.0%
Apollo Group, Inc., "A"* 38,600 $ 3,115,406
Avon Products, Inc. 61,170 2,367,279
Career Education Corp.* 31,890 1,275,600
Gillette Co. 29,910 1,339,370
Procter & Gamble Co. 217,970 12,005,788
Reckitt Benckiser PLC 69,610 2,099,946
--------------
$ 22,203,389
--------------
ELECTRICAL EQUIPMENT -- 3.5%
Cooper Industries Ltd., "A" 21,100 $ 1,432,479
Danaher Corp.^ 22,780 1,307,800
Emerson Electric Co. 29,210 2,047,621
General Electric Co. 55,876 2,039,474
Hubbell, Inc., "B"^ 5,100 266,730
Tyco International Ltd. 305,790 10,928,935
W.W. Grainger, Inc. 20,860 1,389,693
--------------
$ 19,412,732
--------------
ELECTRONICS -- 4.3%
Amphenol Corp., "A"^ 36,420 $ 1,338,071
Analog Devices, Inc. 120,170 4,436,676
Applied Materials, Inc.* 82,240 1,406,304
KLA-Tencor Corp.* 42,660 1,987,103
Linear Technology Corp. 17,200 666,672
Marvell Technology Group Ltd.* 77,690 2,755,664
Maxim Integrated Products, Inc. 46,390 1,966,472
Novellus Systems, Inc.* 33,400 931,526
PMC-Sierra, Inc.^* 142,000 1,597,500
Taiwan Semiconductor Manufacturing Co. Ltd., ADR 191,960 1,629,740
Texas Instruments, Inc. 70,260 1,729,801
Xilinx, Inc. 120,120 3,561,558
--------------
$ 24,007,087
--------------
FOOD & DRUG STORES -- 1.2%
CVS Corp. 141,630 $ 6,383,264
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.7%
PepsiCo, Inc. 196,540 $ 10,259,388
SYSCO Corp. 121,150 4,624,296
--------------
$ 14,883,684
--------------
GAMING & LODGING -- 1.9%
Carnival Corp. 132,060 $ 7,610,618
Cendant Corp. 23,550 550,599
International Game Technology 4,800 165,024
Royal Caribbean Cruises Ltd.^ 20,800 $ 1,132,352
Starwood Hotels & Resorts Worldwide, Inc. 16,920 988,128
--------------
$ 10,446,721
--------------
GENERAL MERCHANDISE -- 3.3%
Family Dollar Stores, Inc. 41,470 $ 1,295,108
J. C. Penney Co., Inc. 16,950 701,730
Kohl's Corp.* 63,970 3,145,405
Target Corp. 209,470 10,877,777
Wal-Mart Stores, Inc. 44,500 2,350,490
--------------
$ 18,370,510
--------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.6%
WellPoint, Inc.* 29,550 $ 3,398,250
--------------
INSURANCE -- 1.5%
AFLAC, Inc. 46,580 $ 1,855,747
American International Group, Inc. 67,140 4,409,084
St. Paul Travelers Cos., Inc. 26,900 997,183
XL Capital Ltd., "A" 10,800 838,620
--------------
$ 8,100,634
--------------
INTERNET -- 3.8%
Amazon.com, Inc.* 13,600 $ 602,344
eBay, Inc.* 69,010 8,024,483
Google, Inc.* 7,360 1,421,216
IAC/InterActiveCorp* 172,650 4,768,593
Yahoo!, Inc. 162,100 6,107,928
--------------
$ 20,924,564
--------------
LEISURE & TOYS -- 1.6%
Activision, Inc.* 21,700 $ 437,906
Electronic Arts, Inc.* 126,160 7,781,549
Nintendo Co. Ltd. 5,700 713,783
--------------
$ 8,933,238
--------------
MACHINERY & TOOLS -- 1.2%
Caterpillar, Inc. 52,330 $ 5,102,698
Illinois Tool Works, Inc. 18,850 1,747,018
--------------
$ 6,849,716
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 1.7%
Caremark Rx, Inc.* 116,890 $ 4,608,973
Cerner Corp.^* 14,940 794,360
Community Health Systems, Inc.* 29,700 828,036
HCA, Inc. 73,810 2,949,448
--------------
$ 9,180,817
--------------
MEDICAL EQUIPMENT -- 4.5%
Boston Scientific Corp.* 26,720 $ 949,896
Fisher Scientific International, Inc.^* 78,510 4,897,454
Guidant Corp. 46,090 3,323,089
Kinetic Concepts, Inc.* 9,880 753,844
Medtronic, Inc. 187,330 9,304,681
Millipore Corp.* 7,800 388,518
Thermo Electron Corp.* 31,990 965,778
Waters Corp.* 40,480 1,894,059
Zimmer Holdings, Inc.* 34,600 2,772,152
--------------
$ 25,249,471
--------------
METALS & MINING -- 0.1%
Companhia Vale do Rio Doce, ADR 21,990 $ 637,930
--------------
OIL SERVICES -- 1.4%
BJ Services Co. 55,030 $ 2,561,096
GlobalSantaFe Corp. 18,290 605,582
Halliburton Co. 86,450 3,392,298
Noble Corp.* 12,910 642,143
Smith International, Inc.* 11,450 622,995
--------------
$ 7,824,114
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 1.8%
EMC Corp. 514,630 $ 7,652,548
Lexmark International, Inc., "A"* 7,450 633,250
Network Appliance, Inc.* 51,800 1,720,796
--------------
$ 10,006,594
--------------
</Table>
35
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
PHARMACEUTICALS -- 10.5%
Abbott Laboratories 226,160 $ 10,550,364
Allergan, Inc. 28,380 2,300,767
AstraZeneca PLC 15,560 563,343
Elan Corp. PLC, ADR^* 9,700 264,325
Eli Lilly & Co. 101,230 5,744,802
Johnson & Johnson 338,800 21,486,696
Pfizer, Inc. 15,400 414,106
Roche Holdings AG 28,350 3,251,711
Wyeth 316,780 13,491,660
--------------
$ 58,067,774
--------------
POLLUTION CONTROL -- 0.1%
Waste Management, Inc. 19,450 $ 582,333
--------------
PRINTING & PUBLISHING -- 0.6%
Lamar Advertising Co., "A"* 14,700 $ 628,866
McGraw-Hill Cos., Inc. 30,960 2,834,078
--------------
$ 3,462,944
--------------
RAILROAD & SHIPPING -- 0.2%
Burlington Northern Santa Fe Corp. 22,900 $ 1,083,399
--------------
RESTAURANTS -- 0.4%
Cheesecake Factory, Inc.^* 15,300 $ 496,791
Outback Steakhouse, Inc. 12,010 549,818
YUM! Brands, Inc. 29,420 1,388,036
--------------
$ 2,434,645
--------------
SPECIALTY STORES -- 4.0%
Abercrombie & Fitch Co., "A" 24,020 $ 1,127,739
Bed Bath & Beyond, Inc.* 20,080 799,786
Best Buy Co., Inc. 94,050 5,588,451
CarMax, Inc.^* 20,580 639,009
Hot Topic, Inc.^* 14,700 252,693
Lowe's Cos., Inc. 122,340 7,045,561
Nordstrom, Inc. 10,400 485,992
PETsMART, Inc. 29,010 1,030,725
Staples, Inc. 77,670 2,618,256
Tiffany & Co. 37,500 1,198,875
TJX Cos., Inc. 53,950 1,355,764
--------------
$ 22,142,851
--------------
TELECOMMUNICATIONS -- WIRELESS -- 1.5%
America Movil S.A. de C.V., ADR 76,990 $ 4,030,426
Nokia Corp., ADR 10,600 166,102
Vodafone Group PLC 582,940 1,578,135
Vodafone Group PLC, ADR 83,953 2,298,633
--------------
$ 8,073,296
--------------
TELECOMMUNICATIONS -- WIRELINE -- 3.7%
ADTRAN, Inc. 30,900 $ 591,426
Cisco Systems, Inc.* 841,717 16,245,138
Comverse Technology, Inc.* 23,100 564,795
Corning, Inc.* 34,580 407,007
QUALCOMM, Inc. 21,270 901,848
Research In Motion Ltd.^* 11,990 988,216
Telefonaktiebolaget LM Ericsson, ADR^* 20,900 658,141
--------------
$ 20,356,571
--------------
TELEPHONE SERVICES -- 0.2%
Sprint Corp. 43,880 $ 1,090,418
--------------
TRUCKING -- 1.8%
Expeditors International of Washington, Inc.^ 13,600 $ 759,968
FedEx Corp. 35,070 3,454,044
United Parcel Service, Inc., "B" 65,450 5,593,357
--------------
$ 9,807,369
--------------
Total Stocks (Identified Cost, $500,652,756) $ 539,271,460
--------------
COLLATERAL FOR SECURITIES LOANED -- 2.9%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 16,181,295 $ 16,181,295
--------------
<Caption>
ISSUER PAR AMOUNT VALUE
REPURCHASE AGREEMENT -- 2.6%
Morgan Stanley Repurchase Agreement, 2.19%, dated 12/31/04,
due 01/03/05, total to be received $14,364,621 (secured by
various U.S. Treasury and Federal Agency obligations in a
jointly traded account), at Cost $ 14,362,000 $ 14,362,000
--------------
Total Investments
(Identified Cost, $531,196,051) $ 569,814,755
--------------
OTHER ASSETS,
LESS LIABILITIES -- (2.6)% (14,390,511)
--------------
Net Assets -- 100.0% $ 555,424,244
==============
See portfolio footnotes and notes to financial statements.
</Table>
36
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
MID CAP VALUE SERIES
STOCKS -- 98.7%
<Table>
<Caption>
ISSUER SHARES VALUE
AEROSPACE -- 1.1%
Alliant Techsystems, Inc.* 4,000 $ 261,520
--------------
APPAREL MANUFACTURERS -- 3.0%
Kellwood Co. 7,000 $ 241,500
Polo Ralph Lauren Corp., "A" 7,000 298,200
Reebok International Ltd. 4,500 198,000
--------------
$ 737,700
--------------
AUTOMOTIVE -- 1.5%
Autoliv, Inc. 4,000 $ 193,200
TRW Automotive Holdings Corp.* 8,000 165,600
--------------
$ 358,800
--------------
BANKS & CREDIT COMPANIES -- 8.9%
Astoria Financial Corp. 3,000 $ 119,910
City National Corp. 3,000 211,950
Countrywide Financial Corp. 8,000 296,080
First Horizon National Corp. 7,000 301,770
Mercantile Bankshares Corp. 4,000 208,800
New York Community Bancorp, Inc. 6,000 123,420
NewAlliance Bancshares, Inc. 12,000 183,600
North Fork Bancorporation, Inc. 10,000 288,500
Sovereign Bancorp, Inc. 14,000 315,700
TCF Financial Corp. 4,200 134,988
--------------
$ 2,184,718
--------------
BIOTECHNOLOGY -- 2.3%
MedImmune, Inc.* 12,000 $ 325,320
Neurocrine Biosciences, Inc.* 4,700 231,710
--------------
$ 557,030
--------------
BROADCAST & CABLE TV -- 5.1%
ADVO, Inc. 6,000 $ 213,900
Citadel Broadcasting Corp.* 20,000 323,600
Cox Radio, Inc., "A"* 15,000 247,200
Dex Media, Inc. 8,000 199,680
Interpublic Group of Cos., Inc.* 6,400 85,760
R.H. Donnelley Corp.* 3,000 177,150
--------------
$ 1,247,290
--------------
BROKERAGE & ASSET MANAGERS -- 7.9%
A.G. Edwards, Inc. 5,000 $ 216,050
Ameritrade Holding Corp.* 35,800 509,076
Federated Investors, Inc., "B" 5,000 152,000
Friedman, Billings, Ramsey Group, Inc., "A" 12,000 232,680
Janus Capital Group, Inc. 13,000 218,530
Legg Mason, Inc. 5,000 366,300
Waddell & Reed Financial, Inc., "A" 10,000 238,900
--------------
$ 1,933,536
--------------
BUSINESS SERVICES -- 2.9%
Ceridian Corp.* 15,000 $ 274,200
Fiserv, Inc.* 7,000 281,330
WESCO International, Inc.* 5,000 148,200
--------------
$ 703,730
--------------
CHEMICALS -- 2.7%
Monsanto Co. 2,000 $ 111,100
Nalco Holding Co.* 10,860 211,987
PPG Industries, Inc. 5,000 340,800
--------------
$ 663,887
--------------
COMPUTER SOFTWARE -- 1.0%
Check Point Software Technologies Ltd.* 10,000 $ 246,300
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.1%
Citrix Systems, Inc.* 11,000 $ 269,830
--------------
CONSTRUCTION -- 2.1%
Eagle Materials, Inc. 3,000 $ 259,050
Pulte Homes, Inc. 4,000 255,200
--------------
$ 514,250
--------------
CONTAINERS -- 3.4%
Owens-Illinois, Inc.* 25,000 $ 566,250
Smurfit-Stone Container Corp.* 15,000 280,200
--------------
$ 846,450
--------------
ELECTRICAL EQUIPMENT -- 3.1%
A.O. Smith Corp. 3,900 $ 116,766
Hubbell, Inc., "B" 5,000 261,500
MSC Industrial Direct Co., Inc., "A" 5,000 179,900
W.W. Grainger, Inc. 3,000 199,860
--------------
$ 758,026
--------------
ELECTRONICS -- 1.2%
Silicon Laboratories, Inc.* 8,000 $ 282,480
--------------
ENERGY -- INDEPENDENT -- 4.6%
Devon Energy Corp. 10,000 $ 389,200
Newfield Exploration Co.* 4,000 236,200
Noble Energy, Inc. 4,000 246,640
Range Resources Corp. 12,000 245,520
--------------
$ 1,117,560
--------------
FOOD & DRUG STORES -- 2.5%
Kroger Co.* 20,000 $ 350,800
Rite Aid Corp.* 72,900 266,814
--------------
$ 617,614
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 1.9%
Dean Foods Co.* 8,000 $ 263,600
Smithfield Foods, Inc.* 7,000 207,130
--------------
$ 470,730
--------------
FOREST & PAPER PRODUCTS -- 2.0%
Bowater, Inc. 11,000 $ 483,670
--------------
GENERAL MERCHANDISE -- 2.1%
Big Lots, Inc.* 16,700 $ 202,571
Family Dollar Stores, Inc. 10,000 312,300
--------------
$ 514,871
--------------
HEALTH MAINTENANCE ORGANIZATIONS -- 1.0%
CIGNA Corp. 3,000 $ 244,710
--------------
INSURANCE -- 4.7%
Conseco, Inc.* 18,000 $ 359,100
Endurance Specialty Holdings Ltd. 7,000 239,400
PMI Group, Inc. 7,000 292,250
Safeco Corp. 5,000 261,200
--------------
$ 1,151,950
--------------
LEISURE & Toys -- 1.6%
Hasbro, Inc. 20,000 $ 387,600
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 4.4%
Apria Healthcare Group, Inc.* 10,000 $ 329,500
Community Health Systems, Inc.* 10,000 278,800
Healthsouth Corp.* 45,000 282,600
Tenet Healthcare Corp.* 16,800 184,464
--------------
$ 1,075,364
--------------
MEDICAL EQUIPMENT -- 0.5%
Invitrogen Corp.* 2,000 $ 134,260
--------------
METALS & Mining -- 1.0%
Aber Diamond Corp. 7,000 $ 247,594
--------------
NATURAL GAS -- DISTRIBUTION -- 2.4%
AGL Resources, Inc. 6,380 $ 212,071
Northwestern Corp.* 5,000 140,000
Sempra Energy 6,400 234,752
--------------
$ 586,823
--------------
OIL SERVICES -- 4.9%
Cooper Cameron Corp.* 5,300 $ 285,193
GlobalSantaFe Corp. 12,800 423,808
Noble Corp.* 5,700 283,518
Pride International, Inc.* 10,000 205,400
--------------
$ 1,197,919
--------------
</Table>
37
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
PERSONAL COMPUTERS & PERIPHERALS -- 1.1%
Solectron Corp.* 51,000 $ 271,830
--------------
PHARMACEUTICALS -- 1.5%
Endo Pharmaceuticals Holdings, Inc.* 17,200 $ 361,544
--------------
PRINTING & Publishing -- 3.0%
Lamar Advertising Co., "A"* 6,700 $ 286,626
Media General, Inc., "A" 7,000 453,670
--------------
$ 740,296
--------------
RAILROAD & SHIPPING -- 0.5%
CSX Corp. 3,000 $ 120,240
--------------
REAL ESTATE -- 1.4%
Crescent Real Estate Equities Co. 9,600 $ 175,296
SL Green Realty Corp. 3,000 181,650
--------------
$ 356,946
--------------
RESTAURANTS -- 1.1%
Wendy's International, Inc. 7,000 $ 274,820
--------------
SPECIALTY CHEMICALS -- 1.0%
Lyondell Chemical Co. 8,500 $ 245,820
--------------
SPECIALTY STORES -- 1.7%
OfficeMax, Inc. 5,000 $ 156,900
Sports Authority, Inc.* 10,000 257,500
--------------
$ 414,400
--------------
TELECOMMUNICATIONS -- WIRELINE -- 2.0%
ADC Telecommunications, Inc.* 125,000 $ 335,000
Scientific-Atlanta, Inc. 5,000 165,050
--------------
$ 500,050
--------------
TELEPHONE SERVICES -- 2.3%
CenturyTel, Inc. 6,000 $ 212,820
IDT Corp., "B"* 17,000 263,160
Telus Corp. (Non Voting) 2,910 84,234
--------------
$ 560,214
--------------
TRUCKING -- 0.5%
CNF, Inc. 2,600 $ 130,260
--------------
UTILITIES -- ELECTRIC POWER -- 1.7%
Calpine Corp.* 38,700 $ 152,478
FPL Group, Inc. 1,800 134,550
PPL Corp. 2,600 138,528
--------------
$ 425,556
--------------
Total Stocks (Identified Cost, $21,417,360) $ 24,198,188
--------------
OTHER ASSETS,
LESS LIABILITIES -- 1.3% 309,495
--------------
Net Assets -- 100.0% $ 24,507,683
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
NEW DISCOVERY SERIES
STOCKS -- 98.5%
<Table>
<Caption>
ISSUER SHARES VALUE
AEROSPACE -- 1.2%
Engineered Support Systems, Inc. 20,600 $ 1,219,932
Esterline Technologies Corp.* 16,600 541,990
Hexcel Corp.^* 32,100 465,450
KVH Industries, Inc.^* 119,460 1,170,708
Teledyne Technologies, Inc.^* 17,200 506,196
--------------
$ 3,904,276
--------------
AIRLINES -- 0.5%
AirTran Holdings, Inc.^* 57,420 $ 614,394
easyJet Airline Co. Ltd.* 230,820 830,587
--------------
$ 1,444,981
--------------
APPAREL MANUFACTURERS -- 1.0%
Carter's, Inc.* 18,350 $ 623,716
Reebok International Ltd. 27,930 1,228,920
Timberland Co., "A"* 22,630 1,418,222
--------------
$ 3,270,858
--------------
AUTOMOTIVE -- 0.5%
CLARCOR, Inc. 28,700 $ 1,571,899
--------------
BANKS & CREDIT COMPANIES -- 7.4%
Advance America, Cash Advance Centers, Inc.* 49,140 $ 1,125,306
Alabama National BanCorp 6,800 438,600
Bank Mutual Corp.^ 12,100 147,257
BankUnited Financial Corp., "A"* 41,200 1,316,340
Cathay General Bancorp, Inc. 28,400 1,065,000
Collegiate Funding Services, Inc.^* 59,100 832,719
East West Bancorp, Inc. 29,200 1,225,232
Education Lending Group, Inc.^* 119,170 1,848,327
First BanCorp Puerto Rico 12,900 819,279
Glacier Bancorp, Inc. 12,600 428,904
Hanmi Financial Corp.^ 26,400 948,816
Harbor Florida Bancshares, Inc. 27,700 958,697
Investors Financial Services Corp.^ 29,100 1,454,418
MetroCorp Bancshares, Inc. 15,800 351,708
Nara Bancorp, Inc.^ 49,400 1,050,738
NewAlliance Bancshares, Inc.^ 152,400 2,331,720
Partners Trust Financial Group, Inc. 98,545 1,148,049
Provident Financial Services, Inc. 33,700 652,769
QC Holdings, Inc.^* 26,300 503,908
Southwest Bancorp, Inc.^ 32,700 761,583
Sterling Bancshares, Inc. 54,160 772,863
UCBH Holdings, Inc.^ 31,400 1,438,748
W Holding Co., Inc. 37,332 856,396
Wintrust Financial Corp.^ 14,900 848,704
--------------
$ 23,326,081
--------------
BIOTECHNOLOGY -- 6.2%
Affymetrix, Inc.^* 45,060 $ 1,646,943
CV Therapeutics, Inc.^* 34,200 786,600
Cypress Bioscience, Inc.* 94,640 1,330,638
Encysive Pharmaceuticals, Inc.* 171,150 1,699,520
Gen-Probe, Inc.* 102,970 4,655,274
Incyte Corp.^* 47,600 475,524
Keryx Biopharmaceuticals, Inc.^* 83,340 964,244
MannKind Corp.^* 64,150 1,010,363
Martek Biosciences Corp.^* 15,100 773,120
Neurochem, Inc.^* 85,860 1,505,126
Neurocrine Biosciences, Inc.^* 23,610 1,163,973
Onyx Pharmaceuticals, Inc.^* 6,400 207,296
Vasogen, Inc.^* 280,780 1,431,978
Vicuron Pharmaceuticals, Inc.^* 103,730 1,805,939
--------------
$ 19,456,538
--------------
BROADCAST & CABLE TV -- 3.6%
ADVO, Inc.^ 41,950 $ 1,495,517
Citadel Broadcasting Corp.^* 90,110 1,457,980
Gemstar-TV Guide International, Inc.* 188,520 1,116,038
</Table>
38
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
BROADCAST & CABLE TV -- continued
R.H. Donnelley Corp.* 63,251 $ 3,734,972
Radio One, Inc., "A"* 142,310 2,291,191
Saga Communications, Inc., "A"^* 35,500 598,175
Salem Communications Corp., "A"* 22,330 557,134
--------------
$ 11,251,007
--------------
BROKERAGE & ASSET MANAGERS -- 0.5%
MarketAxess Holdings, Inc.* 91,730 $ 1,560,327
--------------
BUSINESS SERVICES -- 10.8%
Alliance Data Systems Corp.* 40,200 $ 1,908,696
BlueLinx Holdings, Inc.^* 106,570 1,542,068
Bright Horizons Family Solutions, Inc.^* 28,300 1,832,708
CACI International, Inc., "A"^* 25,800 1,757,754
Charles River Associates, Inc.^* 9,410 440,106
Concur Technologies, Inc.* 82,940 738,995
Corporate Executive Board Co.^ 28,270 1,892,394
CoStar Group, Inc.^* 54,650 2,523,737
Digitas, Inc.^* 111,930 1,068,931
Euronet Worldwide, Inc.* 20,000 520,400
Getty Images, Inc.^* 18,300 1,259,955
Global Payments, Inc.^ 32,863 1,923,800
Harris Interactive, Inc.* 372,540 2,943,066
Labor Ready, Inc.^* 59,200 1,001,664
Laureate Education, Inc.^* 11,400 502,626
SCP Pool Corp.^ 17,950 572,605
SIRVA, Inc.* 129,350 2,486,107
Stamps.com, Inc. 37,900 600,336
UAP Holding Corp.* 53,700 927,399
Ultimate Software Group, Inc.^* 158,390 2,008,385
Universal Technical Institute, Inc.* 104,880 3,998,026
ValueClick, Inc.* 48,800 650,504
WESCO International, Inc.* 30,900 915,876
--------------
$ 34,016,138
--------------
CHEMICALS -- 0.1%
Terra Industries, Inc.^* 44,400 $ 394,272
--------------
COMPUTER SOFTWARE -- 4.7%
Altiris, Inc.^* 21,600 $ 765,288
ANSYS, Inc.* 22,600 724,556
Business Objects S.A., ADR^* 121,650 3,082,611
FileNet Corp.^* 30,700 790,832
Kronos, Inc.* 14,200 726,046
Macromedia, Inc.* 38,000 1,182,560
MicroStrategy, Inc., "A"* 49,650 2,991,413
Open Solutions, Inc.* 52,440 1,361,342
Opsware, Inc.^* 115,760 849,678
Retalix Ltd.^* 37,730 824,778
SERENA Software, Inc.^* 67,080 1,451,611
--------------
$ 14,750,715
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 1.1%
MICROS Systems, Inc.* 10,900 $ 850,854
National Instruments Corp.^ 78,650 2,143,213
SS&C Technologies, Inc. 17,270 356,626
--------------
$ 3,350,693
--------------
CONSTRUCTION -- 1.3%
Eagle Materials, Inc.^ 36,800 $ 3,177,680
Simpson Manufacturing, Inc. 24,300 848,070
--------------
$ 4,025,750
--------------
CONSUMER GOODS & SERVICES -- 3.6%
Ace Cash Express, Inc.* 26,000 $ 771,160
Career Education Corp.* 36,540 1,461,600
Corinthian Colleges, Inc.^* 69,926 1,317,755
First Marblehead Corp.^* 20,160 1,134,000
Nu Skin Enterprises, Inc., "A"^ 22,700 576,126
PlanetOut, Inc.* 56,460 767,856
RC2 Corp.^* 13,700 $ 446,620
Strayer Education, Inc.^ 31,110 3,415,567
Yankee Candle Co., Inc.* 37,200 1,234,296
--------------
$ 11,124,980
--------------
ELECTRICAL EQUIPMENT -- 1.8%
A.O. Smith Corp.^ 22,120 $ 662,273
CUNO, Inc.* 11,300 671,220
Littelfuse, Inc.^* 41,300 1,410,808
MSC Industrial Direct Co., Inc., "A" 84,140 3,027,357
--------------
$ 5,771,658
--------------
ELECTRONICS -- 11.5%
American Superconductor Corp.^* 162,410 $ 2,418,285
Amphenol Corp., "A" 32,600 1,197,724
Applied Films Corp.^* 98,330 2,119,995
ATMI, Inc.^* 62,780 1,414,433
DSP Group, Inc.* 210,160 4,692,873
Exar Corp.* 27,000 383,130
Excel Technology, Inc.^* 25,400 660,400
Hutchinson Technology, Inc.^* 4,000 138,280
Integrated Circuit Systems, Inc.^* 124,460 2,603,703
Integrated Device Technology, Inc.* 30,700 354,892
Micrel, Inc.^* 91,700 1,010,534
Microsemi Corp.* 900 15,624
MKS Instruments, Inc.* 51,860 962,003
OmniVision Technologies, Inc.^* 82,350 1,511,123
Photon Dynamics, Inc.^* 51,400 1,247,992
PMC-Sierra, Inc.^* 246,540 2,773,575
PowerDsine Ltd.* 134,480 1,845,066
Silicon Image, Inc.^* 41,075 676,095
Silicon Laboratories, Inc.^* 243,540 8,599,397
Zarlink Semiconductor, Inc.* 573,620 1,451,259
--------------
$ 36,076,383
--------------
ENERGY -- INDEPENDENT -- 1.1%
Edge Petroleum Corp.* 20,160 $ 293,933
Gasco Energy, Inc.^* 102,100 434,946
Houston Exploration Co.* 11,300 636,303
Quicksilver Resources, Inc.^* 24,800 912,144
Stone Energy Corp.^* 12,900 581,661
Unit Corp.* 12,100 462,341
--------------
$ 3,321,328
--------------
ENGINEERING -- CONSTRUCTION -- 0.4%
InfraSource Services, Inc.^* 100,050 $ 1,300,650
--------------
FOOD & DRUG STORES -- 0.5%
Wild Oats Markets, Inc.^* 170,240 $ 1,499,814
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 0.3%
United Natural Foods, Inc.* 27,500 $ 855,250
--------------
FOREST & PAPER PRODUCTS -- 0.2%
Bowater, Inc.^ 16,040 $ 705,279
--------------
FURNITURE & APPLIANCES -- 0.6%
Select Comfort Corp.^* 20,500 $ 367,770
Tempur-Pedic International, Inc.^* 41,700 884,040
Toro Co. 9,200 748,420
--------------
$ 2,000,230
--------------
GAMING & LODGING -- 1.9%
Aztar Corp.* 42,400 $ 1,480,608
Fairmont Hotels Resorts, Inc.^ 16,100 557,704
WMS Industries, Inc.^* 111,810 3,750,107
--------------
$ 5,788,419
--------------
GENERAL MERCHANDISE -- 0.5%
99 Cents Only Stores^* 89,570 $ 1,447,451
--------------
HEALTH MAINTENANCE ORGANIZATIONS -- 0.7%
AMERIGROUP Corp.* 5,300 $ 400,998
Molina Healthcare, Inc.* 9,100 422,058
</Table>
39
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
HEALTH MAINTENANCE ORGANIZATIONS -- continued
Sierra Health Services, Inc.^* 10,600 $ 584,166
WellCare Health Plans, Inc.* 22,500 731,250
--------------
$ 2,138,472
--------------
INTERNET -- 2.2%
Ariba, Inc.^* 255,070 $ 4,234,162
InfoSpace, Inc.^* 47,200 2,244,360
Ninetowns Digital World Trade Holdings Ltd., ADR* 47,800 513,850
--------------
$ 6,992,372
--------------
LEISURE & TOYS -- 2.0%
Activision, Inc.* 95,390 $ 1,924,970
Take-Two Interactive Software, Inc.^* 48,600 1,690,794
THQ, Inc.^* 116,900 2,681,686
--------------
$ 6,297,450
--------------
MACHINERY & TOOLS -- 2.5%
Actuant Corp., "A"* 16,000 $ 834,400
Bucyrus International, Inc. 15,100 613,664
Cognex Corp.^ 105,650 2,947,635
IDEX Corp. 19,700 797,850
Lincoln Electric Holdings, Inc. 23,200 801,328
RTI International Metals, Inc.^* 44,100 905,814
Terex Corp.* 17,600 838,640
--------------
$ 7,739,331
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 2.0%
Advisory Board Co.^* 18,310 $ 675,273
Cerner Corp.^* 2,700 143,559
LifePoint Hospitals, Inc.^* 47,000 1,636,540
Omnicell, Inc.^* 173,030 1,903,330
TriZetto Group, Inc.* 79,290 753,255
VistaCare, Inc., "A"^* 65,990 1,097,414
--------------
$ 6,209,371
--------------
MEDICAL EQUIPMENT -- 11.2%
Align Technology, Inc.^* 71,200 $ 765,400
AngioDynamics, Inc.* 9,600 212,640
Aspect Medical Systems, Inc.* 178,300 4,361,218
Closure Medical Corp.* 20,890 407,355
Conceptus, Inc.^* 169,710 1,377,197
Cyberonics, Inc.^* 18,000 372,960
Cytyc Corp.* 168,246 4,638,542
DJ Orthopedics, Inc.^* 78,250 1,676,115
EPIX Pharmaceuticals, Inc.^* 30,800 551,628
Fisher Scientific International, Inc.^* 23,650 1,475,287
FoxHollow Technologies, Inc.^* 57,790 1,421,056
Hogy Medical Co. Ltd. 35,300 1,655,519
IDEXX Laboratories, Inc.^* 57,993 3,165,838
Integra LifeSciences Holdings Corp.^* 23,400 864,162
Mentor Corp.^ 24,100 813,134
Millipore Corp.* 30,830 1,535,642
Penwest Pharmaceuticals Co.^* 62,030 741,879
PolyMedica Corp.^ 24,100 898,689
Sybron Dental Specialties, Inc.* 18,100 640,378
Thoratec Corp.^* 234,260 2,440,989
Ventana Medical Systems, Inc.^* 64,950 4,156,151
Viasys Healthcare, Inc.* 10,220 194,180
VNUS Medical Technologies, Inc.^* 52,630 711,558
--------------
$ 35,077,517
--------------
METALS & MINING -- 0.5%
Aber Diamond Corp.^ 47,430 $ 1,673,283
--------------
OIL SERVICES -- 1.6%
Atwood Oceanics, Inc.* 12,700 $ 661,670
Cal Dive International, Inc.^* 26,500 1,079,875
Grey Wolf, Inc.^* 166,000 874,820
Lone Star Technologies, Inc.* 28,000 936,880
Maverick Tube Corp.^* 29,000 $ 878,700
Superior Energy Services, Inc.^* 33,400 514,694
--------------
$ 4,946,639
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 0.3%
Maxtor Corp.^* 154,900 $ 820,970
--------------
PHARMACEUTICALS -- 2.7%
Auxilium Pharmaceuticals, Inc.* 141,000 $ 1,233,750
Connetics Corp.^* 17,600 427,504
Corcept Therapeutics, Inc.* 34,350 214,687
Inspire Pharmaceuticals, Inc.* 87,530 1,467,878
Medicis Pharmaceutical Corp., "A"^ 114,830 4,031,681
PRA International* 37,850 937,923
--------------
$ 8,313,423
--------------
POLLUTION CONTROL -- 0.3%
Waste Connections, Inc.^* 24,300 $ 832,275
--------------
PRINTING & PUBLISHING -- 0.2%
Playboy Enterprises, Inc.,"B"^* 59,320 $ 729,043
--------------
RAILROAD & SHIPPING -- 0.3%
Arlington Tankers Ltd.* 17,700 $ 406,215
Tidewater, Inc.^ 13,800 491,418
--------------
$ 897,633
--------------
REAL ESTATE -- 0.5%
CB Richard Ellis Group, Inc.* 26,800 $ 899,140
Saxon Capital, Inc. 31,700 760,483
--------------
$ 1,659,623
--------------
RESTAURANTS -- 1.1%
P.F. Chang's China Bistro, Inc.^* 30,200 $ 1,701,770
Rare Hospitality International, Inc.^* 27,200 866,592
Sonic Corp.* 32,000 976,000
--------------
$ 3,544,362
--------------
SPECIAL PRODUCTS & Services -- 0.5%
Ceradyne, Inc.^* 7,485 $ 428,217
Headwaters, Inc.^* 18,700 532,950
Mine Safety Appliances Co.^ 11,700 593,190
--------------
$ 1,554,357
--------------
SPECIALTY CHEMICALS -- 0.8%
Airgas, Inc. 32,000 $ 848,320
Cytec Industries, Inc. 19,500 1,002,690
Georgia Gulf Corp. 15,400 766,920
--------------
$ 2,617,930
--------------
SPECIALTY STORES -- 4.2%
1-800-Flowers.com, Inc., "A"* 40,000 $ 336,400
A.C. Moore Arts & Crafts, Inc.^* 16,400 472,484
Audible, Inc.* 42,070 1,095,923
Celebrate Express, Inc.* 36,170 687,230
Coldwater Creek, Inc.* 27,050 835,033
Finish Line, Inc., "A"^ 80,400 1,471,320
GameStop Corp.^* 33,500 749,060
Grupo Elektra S.A. de C.V 82,000 761,371
Regis Corp. 47,400 2,187,510
Tractor Supply Co.^* 46,540 1,731,753
Tuesday Morning Corp.^* 38,600 1,182,318
West Marine, Inc.^* 66,510 1,646,123
--------------
$ 13,156,525
--------------
TELECOMMUNICATIONS -- WIRELINE -- 1.8%
ADTRAN, Inc. 13,900 $ 266,046
AudioCodes Ltd.* 100,910 1,676,115
Blue Coat Systems, Inc.^* 77,830 1,448,416
Tekelec^* 49,600 1,013,824
ViaSat, Inc.* 52,600 1,276,602
--------------
$ 5,681,003
--------------
</Table>
40
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
TELEPHONE SERVICES -- 0.9%
Arbinet-thexchange, Inc.* 6,960 $ 172,956
SpectraSite, Inc.^* 47,200 2,732,880
--------------
$ 2,905,836
--------------
TRUCKING -- 0.9%
Arkansas Best Corp.^ 8,800 $ 395,032
CNF, Inc. 9,400 470,940
EGL, Inc.^* 13,100 391,559
Landstar Systems, Inc.^* 13,200 972,048
UTI Worldwide, Inc.^ 10,700 727,814
--------------
$ 2,957,393
--------------
Total Stocks (Identified Cost, $264,666,937) $ 308,959,785
--------------
COLLATERAL FOR SECURITIES LOANED -- 23.0%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 72,361,907 $ 72,361,907
--------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 1.1%
Morgan Stanley, 2.19%, dated 12/31/04, due 01/03/05, total
to be received $3,344,610 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost $ 3,344,000 $ 3,344,000
--------------
Total Investments
(Identified Cost, $340,372,844) $ 384,665,692
--------------
OTHER ASSETS,
LESS LIABILITIES -- (22.6)% (70,907,145)
--------------
Net Assets -- 100.0% $ 313,758,547
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
RESEARCH INTERNATIONAL SERIES
STOCKS -- 99.2%
<Table>
<Caption>
ISSUER SHARES VALUE
AIRLINES -- 0.9%
Air China Ltd.* 1,370,000 $ 528,750
easyJet Airline Co. Ltd.* 229,280 825,045
--------------
$ 1,353,795
--------------
ALCOHOLIC BEVERAGES -- 1.6%
Diageo PLC 170,370 $ 2,426,128
--------------
APPAREL MANUFACTURERS -- 0.7%
Burberry Group PLC 135,770 $ 1,043,470
--------------
AUTOMOTIVE -- 3.3%
Aisin Seiki Co. Ltd. 28,000 $ 706,981
Bayerische Motoren Werke AG^ 32,470 1,460,156
Compagnie Generale des Etablissements Michelin^ 18,500 1,182,499
PSA Peugeot Citroen S.A.^ 23,990 1,517,491
--------------
$ 4,867,127
--------------
BANKS & CREDIT COMPANIES -- 21.4%
Aiful Corp. 20,100 $ 2,204,106
Anglo Irish Bank Corp. PLC 64,258 1,551,878
Banco Bilbao Vizcaya Argentaria S.A.^ 113,550 2,007,135
Barclays PLC 170,900 1,919,426
BNP Paribas^ 31,280 2,258,254
Credit Agricole S.A.^ 63,067 1,896,418
DBS Group Holdings Ltd. 124,000 1,222,685
DEPFA Bank PLC 53,510 895,119
Erste Bank der oesterreichischen Sparkassen AG 33,730 1,795,510
Grupo Financiero Inbursa S.A. de C.V. 420,280 773,297
Hana Bank 28,330 706,061
Housing Development Finance Corp. Ltd. 39,790 704,812
Mitsubishi Tokyo Financial Group, Inc. 120 1,214,303
OTP Bank Ltd., GDR 31,720 1,934,920
Powszechna Kasa Oszczednosci Bank Polski S.A.* 116,350 1,071,036
Royal Bank of Scotland Group PLC 95,180 3,196,035
Takefuji Corp. 35,790 2,413,279
UBS AG 31,691 2,647,743
UFJ Holdings, Inc. 197 1,190,338
--------------
$ 31,602,355
--------------
BROADCAST & CABLE TV -- 1.4%
Grupo Televisa S.A., ADR 34,350 $ 2,078,175
News Corp., Inc., "B"^ 1,120 21,452
--------------
$ 2,099,627
--------------
BUSINESS SERVICES -- 2.4%
Manpower, Inc. 17,490 $ 844,767
SOFTBANK CORP.^ 55,100 2,675,252
--------------
$ 3,520,019
--------------
CHEMICALS -- 0.8%
Syngenta AG 11,722 $ 1,240,760
--------------
CONSTRUCTION -- 3.1%
Italcementi S.p.A.^ 34,870 $ 398,161
Italcementi S.p.A. -- Ordinary 21,230 340,759
Sekisui Chemical Co. Ltd. 314,000 2,288,358
Siam Cement Public Co. Ltd. 212,700 1,510,140
--------------
$ 4,537,418
--------------
CONSUMER GOODS & SERVICES -- 1.5%
Reckitt Benckiser PLC 72,910 $ 2,199,498
--------------
ELECTRONICS -- 6.1%
CANON, Inc.^ 39,000 $ 2,098,468
Funai Electric Co. Ltd. 9,400 1,163,396
Samsung Electronics Co. Ltd. 5,390 2,345,629
Seiko Epson Corp.^ 75,600 3,354,279
--------------
$ 8,961,772
--------------
ENERGY -- INDEPENDENT -- 1.0%
EnCana Corp.* 25,910 $ 1,476,685
--------------
</Table>
41
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
ENERGY -- INTEGRATED -- 6.2%
BP PLC, ADR 55,521 $ 3,242,426
China Petroleum & Chemical Corp. 2,138,000 873,299
MOL Magyar Olaj-es Gazipari Rt., GDR 15,150 1,090,800
Statoil A.S.A. 87,100 1,359,719
TOTAL S.A.^ 12,100 2,633,784
--------------
$ 9,200,028
--------------
FOOD & DRUG STORES -- 0.5%
Lawson, Inc. 20,500 $ 753,977
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.2%
China Mengniu Dairy Co. Ltd.* 1,199,000 $ 940,937
CoolBrands International, Inc.* 17,780 135,111
Nestle S.A. 8,287 2,160,248
--------------
$ 3,236,296
--------------
FOREST & PAPER PRODUCTS -- 1.1%
Aracruz Celulose S.A., ADR 40,790 $ 1,537,783
--------------
GAMING & LODGING -- 0%
Star Cruises Ltd. 213,000 $ 48,990
--------------
INSURANCE -- 4.3%
Aviva PLC 194,039 $ 2,335,503
AXA^ 103,820 2,556,547
Riunione Adriatica di Sicurta S.p.A. 67,270 1,516,190
--------------
$ 6,408,240
--------------
LEISURE & TOYS -- 1.6%
Nintendo Co. Ltd. 18,900 $ 2,366,753
--------------
MACHINERY & TOOLS -- 5.5%
Atlas Copco AB, "A" 35,160 $ 1,583,974
Hyundai Mobis 27,300 1,727,347
Mitsui Mining & Smelting Co. Ltd. 508,000 2,234,162
Sandvik AB^ 62,070 2,498,012
--------------
$ 8,043,495
--------------
MEDICAL EQUIPMENT -- 0.6%
Synthes, Inc. 7,240 $ 808,850
--------------
METALS & MINING -- 2.4%
Aber Diamond Corp.* 11,300 $ 399,688
Anglo American PLC 62,990 1,487,353
Companhia Vale do Rio Doce, ADR 54,830 1,590,618
--------------
$ 3,477,659
--------------
NATURAL GAS -- DISTRIBUTION -- 1.5%
Tokyo Gas Co. Ltd.^ 550,000 $ 2,247,628
--------------
OIL SERVICES -- 0.8%
Thai Oil PLC* 922,070 $ 1,209,692
--------------
PHARMACEUTICALS -- 7.6%
AstraZeneca PLC 65,150 $ 2,358,729
Chugai Pharmaceutical Co. Ltd.^ 82,300 1,356,519
Roche Holdings AG 26,000 2,982,169
Sanofi-Aventis^ 24,450 1,947,310
Tanabe Seiyaku Co. Ltd. 161,000 1,654,254
Yamanouchi Pharma Ltd.^ 23,200 900,686
--------------
$ 11,199,667
--------------
PRINTING & PUBLISHING -- 2.6%
Reed Elsevier PLC 150,580 $ 1,386,732
Yell Group PLC 296,870 2,503,518
--------------
$ 3,890,250
--------------
REAL ESTATE -- 2.0%
Hypo Real Estate Holding AG* 31,200 $ 1,288,942
Leopalace21 Corp.^ 97,800 1,716,674
--------------
$ 3,005,616
--------------
SPECIALTY CHEMICALS -- 1.2%
Asahi Glass Co. Ltd.^ 132,000 $ 1,451,326
Kaneka Corp. 29,000 327,317
--------------
$ 1,778,643
--------------
SPECIALTY STORES -- 2.3%
Esprit Holdings Ltd. 106,000 $ 640,937
Grupo Elektra S.A. de C.V. 90,590 841,129
Kingfisher PLC 309,773 1,839,021
--------------
$ 3,321,087
--------------
TELECOMMUNICATIONS -- WIRELESS -- 3.5%
America Movil S.A. de C.V., ADR 33,120 $ 1,733,832
Vodafone Group PLC 1,281,320 3,468,788
--------------
$ 5,202,620
--------------
TELEPHONE SERVICES -- 5.8%
Bharti Tele-Ventures Ltd.* 248,170 $ 1,237,120
Brasil Telecom Participacoes S.A., ADR 27,280 1,040,732
Deutsche Telekom AG^ 113,460 2,558,797
Hanaro Telecom, Inc.* 270,930 841,422
Royal KPN N.V. 259,650 2,458,354
ZTE Corp.* 136,200 440,683
--------------
$ 8,577,108
--------------
TOBACCO -- 1.2%
Altadis S.A.^ 20,950 $ 956,297
Swedish Match AB 67,900 785,124
--------------
$ 1,741,421
--------------
UTILITIES -- ELECTRIC POWER -- 2.1%
Suez S.A.^ 114,740 $ 3,049,248
--------------
Total Stocks (Identified Cost, $121,952,803) $ 146,433,705
--------------
<Caption>
PAR AMOUNT
SHORT-TERM OBLIGATION -- 1.1%
UBS Finance, Inc., 2.23%, due 1/03/05, at Amortized Cost++ $ 1,590,000 $ 1,589,803
--------------
<Caption>
SHARES
COLLATERAL FOR SECURITIES LOANED -- 20.5%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 30,298,038 $ 30,298,038
--------------
Total Investments
(Identified Cost, $153,840,644) $ 178,321,546
--------------
OTHER ASSETS,
LESS LIABILITIES -- (20.8)% (30,708,739)
--------------
Net Assets -- 100.0% $ 147,612,807
==============
</Table>
See portfolio footnotes and notes to financial statements.
42
<Page>
PORTFOLIO OF INVESTMENTS -- December 31, 2004
STRATEGIC GROWTH SERIES
STOCKS -- 97.9%
<Table>
<Caption>
ISSUER SHARES VALUE
APPAREL MANUFACTURERS -- 1.1%
Reebok International Ltd. 22,290 $ 980,760
--------------
BANKS & CREDIT COMPANIES -- 4.2%
American Express Co. 26,040 $ 1,467,875
Citigroup, Inc. 32,240 1,553,323
Northern Trust Corp. 13,150 638,827
--------------
$ 3,660,025
--------------
BIOTECHNOLOGY -- 6.3%
Amgen, Inc.* 18,670 $ 1,197,680
Genentech, Inc.* 8,840 481,250
Genzyme Corp.* 29,750 1,727,582
Gilead Sciences, Inc.* 18,040 631,220
ImClone Systems, Inc.^* 18,050 831,744
MedImmune, Inc.* 23,230 629,765
--------------
$ 5,499,241
--------------
BROADCAST & CABLE TV -- 8.4%
Clear Channel Communications, Inc. 5,210 $ 174,483
Comcast Corp., "Special A"* 29,400 965,496
Cox Radio, Inc., "A"* 10,410 171,557
Entercom Communications Corp., "A"* 5,170 185,551
Grupo Televisa S.A., ADR 8,440 510,620
News Corp., "A" 54,930 1,024,994
Time Warner, Inc.* 43,110 838,058
Univision Communications, Inc., "A"* 16,960 496,419
Viacom, Inc., "B" 43,733 1,591,444
Walt Disney Co. 30,030 834,834
Westwood One, Inc.* 23,290 627,200
--------------
$ 7,420,656
--------------
BROKERAGE & ASSET MANAGERS -- 1.2%
Goldman Sachs Group, Inc. 2,680 $ 278,827
Mellon Financial Corp. 12,260 381,409
Merrill Lynch & Co., Inc. 6,410 383,126
--------------
$ 1,043,362
--------------
BUSINESS SERVICES -- 3.6%
Accenture Ltd., "A"* 53,820 $ 1,453,140
Fiserv, Inc.* 21,670 870,917
Getty Images, Inc.* 4,320 297,432
Monster Worldwide, Inc.* 14,950 502,918
--------------
$ 3,124,407
--------------
COMPUTER SOFTWARE -- 10.2%
Akamai Technologies, Inc.^* 33,100 $ 431,293
Amdocs Ltd.* 22,570 592,463
Ascential Software Corp.* 5,840 95,250
Check Point Software Technologies Ltd.* 16,150 397,775
Mercury Interactive Corp.* 30,260 1,378,343
Microsoft Corp. 117,410 3,136,021
Oracle Corp.* 103,450 1,419,334
VERITAS Software Corp.* 52,389 1,495,706
--------------
$ 8,946,185
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 4.8%
Citrix Systems, Inc.* 25,930 $ 636,063
Dell, Inc.* 63,350 2,669,569
International Business Machines Corp. 9,110 898,064
--------------
$ 4,203,696
--------------
CONSUMER GOODS & SERVICES -- 3.0%
Avon Products, Inc. 20,490 $ 792,963
Career Education Corp.* 3,230 129,200
Procter & Gamble Co. 31,340 1,726,207
--------------
$ 2,648,370
--------------
ELECTRICAL EQUIPMENT -- 3.6%
Cooper Industries Ltd., "A" 10,490 $ 712,166
Emerson Electric Co. 6,370 446,537
General Electric Co. 16,480 601,520
Tyco International Ltd. 39,550 1,413,517
--------------
$ 3,173,740
--------------
ELECTRONICS -- 6.3%
Amphenol Corp., "A"^* 7,290 $ 267,835
Analog Devices, Inc. 27,400 1,011,608
Applied Materials, Inc.* 25,640 438,444
KLA-Tencor Corp.* 7,070 329,321
Linear Technology Corp. 8,380 324,809
Marvell Technology Group Ltd.* 13,960 495,161
Maxim Integrated Products, Inc. 7,500 317,925
Novellus Systems, Inc.* 15,210 424,207
PMC-Sierra, Inc.* 58,240 655,200
Texas Instruments, Inc. 19,100 470,242
Xilinx, Inc. 27,450 813,892
--------------
$ 5,548,644
--------------
FOOD & DRUG STORES -- 1.0%
CVS Corp. 20,390 $ 918,977
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.8%
PepsiCo, Inc. 33,350 $ 1,740,870
SYSCO Corp. 19,870 758,438
--------------
$ 2,499,308
--------------
GAMING & LODGING -- 1.9%
Carnival Corp. 19,200 $ 1,106,496
Royal Caribbean Cruises Ltd.^ 10,350 563,454
--------------
$ 1,669,950
--------------
GENERAL MERCHANDISE -- 3.7%
Kohl's Corp.* 21,480 $ 1,056,172
Target Corp. 30,760 1,597,367
Wal-Mart Stores, Inc. 11,760 621,163
--------------
$ 3,274,702
--------------
INSURANCE -- 0.9%
American International Group, Inc. 12,385 $ 813,323
--------------
INTERNET -- 3.6%
eBay, Inc.* 7,900 $ 918,612
IAC/InterActiveCorp* 29,430 812,857
Yahoo!, Inc.* 39,050 1,471,404
--------------
$ 3,202,873
--------------
LEISURE & TOYS -- 1.3%
Activision, Inc.* 10,870 $ 219,357
Electronic Arts, Inc.* 14,440 890,659
--------------
$ 1,110,016
--------------
MACHINERY & TOOLS -- 0.4%
Illinois Tool Works, Inc. 3,540 $ 328,087
--------------
MEDICAL & HEALTH TECHNOLOGY & Services -- 0.8%
HCA, Inc. 17,870 $ 714,085
--------------
MEDICAL EQUIPMENT -- 3.7%
Fisher Scientific International, Inc.* 9,270 $ 578,263
Guidant Corp. 8,260 595,546
Medtronic, Inc. 33,210 1,649,541
Waters Corp.* 9,560 447,312
--------------
$ 3,270,662
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 2.4%
EMC Corp.* 83,040 $ 1,234,805
Network Appliance, Inc.* 25,830 858,073
--------------
$ 2,092,878
--------------
PHARMACEUTICALS -- 10.2%
Abbott Laboratories 39,030 $ 1,820,750
Allergan, Inc. 7,120 577,218
Elan Corp. PLC, ADR^* 4,860 132,435
Eli Lilly & Co. 14,300 811,525
Johnson & Johnson 49,320 3,127,874
Pfizer, Inc. 7,632 205,224
Wyeth 53,265 2,268,556
--------------
$ 8,943,582
--------------
</Table>
43
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
PRINTING & PUBLISHING -- 0.4%
Lamar Advertising Co., "A"* 7,160 $ 306,305
--------------
RESTAURANTS -- 0.3%
Cheesecake Factory, Inc.^* 7,585 $ 246,285
--------------
SPECIALTY STORES -- 3.1%
Best Buy Co., Inc. 12,160 $ 722,547
Hot Topic, Inc.^* 7,350 126,346
Lowe's Cos., Inc. 15,320 882,279
Nordstrom, Inc. 5,210 243,463
Staples, Inc. 13,320 449,017
Tiffany & Co. 8,450 270,146
--------------
$ 2,693,798
--------------
TELECOMMUNICATIONS -- WIRELESS -- 1.8%
America Movil S.A. de C.V., ADR 17,830 $ 933,401
Nokia Corp., ADR 5,240 82,111
Vodafone Group PLC, ADR 21,902 599,677
--------------
$ 1,615,189
--------------
TELECOMMUNICATIONS -- WIRELINE -- 4.2%
ADTRAN, Inc. 15,330 $ 293,416
Cisco Systems, Inc.* 144,370 2,786,341
Comverse Technology, Inc.* 11,340 277,263
Telefonaktiebolaget LM Ericsson, ADR^* 10,400 327,496
--------------
$ 3,684,516
--------------
TRUCKING -- 2.7%
Expeditors International of Washington, Inc. 6,750 $ 377,190
FedEx Corp. 9,050 891,334
United Parcel Service, Inc., "B" 13,090 1,118,671
--------------
$ 2,387,195
--------------
Total Stocks (Identified Cost, $77,164,742) $ 86,020,817
--------------
COLLATERAL FOR SECURITIES LOANED -- 2.5%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 2,142,797 $ 2,142,797
--------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 2.1%
Morgan Stanley, 2.19%, dated 12/31/04, due 1/3/05, total to
be received $1,875,342 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account), at Cost $ 1,875,000 $ 1,875,000
--------------
Total Investments
(Identified Cost, $81,182,539) $ 90,038,614
--------------
OTHER ASSETS,
LESS LIABILITIES -- (2.5)% (2,164,644)
--------------
Net Assets -- 100.0% $ 87,873,970
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
STRATEGIC VALUE SERIES
STOCKS -- 97.8%
<Table>
<Caption>
ISSUER SHARES VALUE
AEROSPACE -- 2.5%
Lockheed Martin Corp. 5,320 $ 295,524
--------------
AIRLINES -- 0.5%
Southwest Airlines Co. 3,850 $ 62,678
--------------
BANKS & CREDIT COMPANIES -- 9.7%
Bank of America Corp. 3,386 $ 159,108
Freddie Mac 3,685 271,585
J.P. Morgan Chase & Co. 10,290 401,413
MBNA Corp. 2,260 63,709
PNC Financial Services Group, Inc. 3,960 227,462
--------------
$ 1,123,277
--------------
BIOTECHNOLOGY -- 0.9%
MedImmune, Inc.* 3,800 $ 103,018
--------------
BROADCAST & CABLE TV -- 9.8%
Comcast Corp., "Special A"* 11,440 $ 375,690
Interpublic Group of Cos., Inc.* 5,820 77,988
Viacom, Inc., "B" 11,740 427,219
Walt Disney Co. 9,320 259,096
--------------
$ 1,139,993
--------------
BROKERAGE & ASSET MANAGERS -- 4.6%
Mellon Financial Corp. 8,905 $ 277,035
Merrill Lynch & Co., Inc. 4,385 262,091
--------------
$ 539,126
--------------
CHEMICALS -- 1.1%
E.I. du Pont de Nemours & Co. 2,670 $ 130,964
--------------
COMPUTER SOFTWARE -- 4.0%
Computer Associates International, Inc. 6,250 $ 194,125
Microsoft Corp. 10,220 272,976
--------------
$ 467,101
--------------
CONTAINERS -- 3.8%
Owens-Illinois, Inc.* 16,030 $ 363,080
Smurfit-Stone Container Corp.* 4,060 75,841
--------------
$ 438,921
--------------
ELECTRICAL EQUIPMENT -- 2.6%
General Electric Co. 7,850 $ 286,525
Tyco International Ltd. 440 15,726
--------------
$ 302,251
--------------
ENERGY -- INDEPENDENT -- 1.4%
Devon Energy Corp. 4,220 $ 164,242
--------------
FOOD & DRUG STORES -- 1.0%
Rite Aid Corp.* 30,290 $ 110,861
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 2.7%
General Mills, Inc. 4,110 $ 204,308
PepsiCo, Inc. 2,000 104,400
--------------
$ 308,708
--------------
FOREST & PAPER PRODUCTS -- 1.7%
Bowater, Inc. 4,492 $ 197,513
--------------
INSURANCE -- 6.3%
Allstate Corp. 5,270 $ 272,564
Conseco, Inc.* 12,820 255,759
Hartford Financial Services Group, Inc. 2,995 207,583
--------------
$ 735,906
--------------
LEISURE & TOYS -- 1.4%
Mattel, Inc. 8,090 $ 157,674
--------------
MEDICAL & HEALTH TECHNOLOGY & SERVICES -- 2.9%
Apria Healthcare Group, Inc.* 4,640 $ 152,888
Tenet Healthcare Corp.* 16,340 179,413
--------------
$ 332,301
--------------
METALS & MINING -- 1.1%
Companhia Vale do Rio Doce, ADR 4,540 $ 131,705
--------------
OIL SERVICES -- 6.7%
BJ Services Co. 2,540 $ 118,212
Cooper Cameron Corp.* 3,500 188,335
</Table>
44
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
OIL SERVICES -- continued
GlobalSantaFe Corp. 7,545 $ 249,815
Noble Corp.* 4,400 218,856
--------------
$ 775,218
--------------
PHARMACEUTICALS -- 10.8%
Abbott Laboratories 3,750 $ 174,938
Johnson & Johnson 4,500 285,390
Merck & Co., Inc. 13,005 417,981
Wyeth 8,740 372,237
--------------
$ 1,250,546
--------------
SPECIALTY STORES -- 2.7%
Gap, Inc. 8,560 $ 180,787
Home Depot, Inc. 3,080 131,639
--------------
$ 312,426
--------------
TELECOMMUNICATIONS -- WIRELESS -- 5.4%
Nokia Corp., ADR 24,300 $ 380,781
Vodafone Group PLC, ADR 9,024 247,077
--------------
$ 627,858
--------------
TELECOMMUNICATIONS -- WIRELINE -- 3.2%
Nortel Networks Corp.* 104,920 $ 366,171
--------------
TELEPHONE SERVICES -- 9.2%
Sprint Corp. 22,880 $ 568,568
Verizon Communications, Inc. 12,415 502,932
--------------
$ 1,071,500
--------------
UTILITIES -- ELECTRIC POWER -- 1.8%
Calpine Corp.* 52,525 $ 206,949
--------------
Total Stocks (Identified Cost, $9,975,215) $ 11,352,431
--------------
<Caption>
PAR AMOUNT
SHORT-TERM OBLIGATION -- 3.5%
UBS Finance, Inc., 2.23%, due 1/03/05, at Amortized Cost++ $ 405,000 $ 404,950
--------------
Total Investments
(Identified Cost, $10,380,165) $ 11,757,381
--------------
OTHER ASSETS,
LESS LIABILITIES -- (1.3)% (151,842)
--------------
Net Assets -- 100.0% $ 11,605,539
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
TECHNOLOGY SERIES
STOCKS -- 99.1%
<Table>
<Caption>
ISSUER SHARES VALUE
BUSINESS SERVICES -- 10.6%
Accenture Ltd., "A"* 21,990 $ 593,727
Alliance Data Systems Corp.* 11,960 567,861
CACI International, Inc., "A"^* 2,600 177,138
Digitas, Inc.^* 30,620 292,421
DST Systems, Inc.* 11,140 580,617
Fiserv, Inc.* 2,450 98,466
Getty Images, Inc.^ 1,510 103,964
Hewitt Associates, Inc., "A"* 1,300 41,613
Monster Worldwide, Inc.* 7,300 245,572
Perot Systems Corp., "A"^* 8,490 136,095
--------------
$ 2,837,474
--------------
COMPUTER SOFTWARE -- 19.8%
Amdocs Ltd.* 21,810 $ 572,513
FileNet Corp.* 5,660 145,802
Hyperion Solutions Corp.^ 2,120 98,834
Kronos, Inc.^* 6,390 326,721
Macrovision Corp.* 9,200 236,624
McAfee, Inc.^* 7,200 208,296
Mercury Interactive Corp.* 4,950 225,473
Microsoft Corp. 32,500 868,075
MicroStrategy, Inc., "A"* 5,900 355,475
Oracle Corp.* 119,520 1,639,814
SAP AG, ADR^ 4,840 213,976
Symantec Corp.* 15,640 402,886
--------------
$ 5,294,489
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 14.3%
Anteon International Corp.* 3,800 $ 159,068
Apple Computer, Inc.* 9,900 637,560
Arrow Electronics, Inc.^ 2,080 50,544
Avnet, Inc.^ 2,180 39,763
Black Box Corp.^ 3,540 169,991
CDW Corp. 2,380 157,913
Citrix Systems, Inc.* 12,200 299,266
Dell, Inc.* 41,180 1,735,325
International Business Machines Corp. 4,350 428,823
Tech Data Corp.^* 3,150 143,010
--------------
$ 3,821,263
--------------
ELECTRONICS -- 22.7%
Advanced Micro Devices, Inc.^ 11,100 $ 244,422
Amphenol Corp., "A"^ 8,980 329,925
Analog Devices, Inc. 11,800 435,656
Applied Materials, Inc.* 27,040 462,384
Canon, Inc., ADR^ 7,120 386,331
Cree, Inc.^* 4,450 178,356
Integrated Circuit Systems, Inc.^* 23,630 494,340
Intel Corp. 36,660 857,477
KLA-Tencor Corp.* 1,500 69,870
Marvell Technology Group Ltd.* 16,410 582,063
PerkinElmer, Inc. 3,940 88,611
PowerDsine Ltd.* 11,900 163,268
Samsung Electronics Co. Ltd., GDR* 1,790 392,010
Seiko Epson Corp. 6,600 292,834
Silicon Laboratories, Inc.^* 6,870 242,580
Texas Instruments, Inc. 23,950 589,649
Xilinx, Inc. 8,700 257,955
--------------
$ 6,067,731
--------------
INTERNET -- 10.5%
Ariba, Inc.^* 4,100 $ 68,060
EarthLink, Inc.* 14,100 162,432
eBay, Inc.* 11,500 1,337,220
InfoSpace, Inc.^* 3,320 157,866
Versata, Inc. 2 6
Yahoo!, Inc. 28,660 1,079,909
--------------
$ 2,805,493
--------------
</Table>
45
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
LEISURE & TOYS -- 0.6%
Nintendo Co. Ltd. 1,200 $ 150,270
--------------
PERSONAL COMPUTERS & PERIPHERALS -- 6.5%
EMC Corp. 29,200 $ 434,204
Ingram Micro, Inc., "A"* 17,800 370,240
Lexmark International, Inc., "A"* 5,510 468,350
Network Appliance, Inc.* 10,850 360,437
Zebra Technologies Corp.* 1,775 99,897
--------------
$ 1,733,128
--------------
TELECOMMUNICATIONS -- WIRELINE -- 14.1%
ADTRAN, Inc.^ 6,200 $ 118,668
Cisco Systems, Inc.* 65,120 1,256,816
Ericsson, Inc., "B"* 74,450 237,016
Juniper Networks, Inc.* 12,240 332,806
Lucent Technologies, Inc.^* 96,420 362,539
Motorola, Inc. 28,330 487,276
QUALCOMM, Inc. 14,740 624,976
Research In Motion Ltd.* 4,090 337,098
--------------
$ 3,757,195
--------------
Total Stocks (Identified Cost, $23,273,280) $ 26,467,043
--------------
COLLATERAL FOR SECURITIES LOANED -- 15.4%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 4,100,113 $ 4,100,113
--------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 0.9%
Morgan Stanley, 2.19%, dated 12/31/04, due 01/03/05, total
to be received $243,044 (secured by various U.S. Treasury
and Federal Agency obligations in a jointly traded
account), at Cost $ 243,000 $ 243,000
--------------
Total Investments
(Identified Cost, $27,616,393) $ 30,810,156
--------------
OTHER ASSETS,
LESS LIABILITIES -- (15.4)% (4,105,659)
--------------
Net Assets -- 100.0% $ 26,704,497
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO OF INVESTMENTS -- December 31, 2004
VALUE SERIES
STOCKS -- 98.7%
<Table>
<Caption>
ISSUER SHARES VALUE
AEROSPACE -- 4.0%
Lockheed Martin Corp. 134,700 $ 7,482,585
Northrop Grumman Corp. 122,600 6,664,536
United Technologies Corp. 39,300 4,061,655
--------------
$ 18,208,776
--------------
ALCOHOLIC BEVERAGES -- 0.5%
Diageo PLC 149,403 $ 2,127,550
--------------
BANKS & CREDIT COMPANIES -- 17.7%
American Express Co. 102,100 $ 5,755,377
Bank of America Corp. 381,776 17,939,654
Citigroup, Inc. 348,300 16,781,094
Fannie Mae 153,000 10,895,130
Freddie Mac 39,100 2,881,670
J.P. Morgan Chase & Co. 127,760 4,983,918
MBNA Corp. 83,200 2,345,408
PNC Financial Services Group, Inc. 98,300 5,646,352
SunTrust Banks, Inc. 142,400 10,520,512
Wells Fargo & Co. 54,400 3,380,960
--------------
$ 81,130,075
--------------
BROADCAST & CABLE TV -- 3.8%
Comcast Corp., "Special A"* 170,600 $ 5,602,504
Time Warner, Inc.* 97,300 1,891,512
Viacom, Inc., "B" 211,718 7,704,418
Walt Disney Co. 82,300 2,287,940
--------------
$ 17,486,374
--------------
BROKERAGE & ASSET MANAGERS -- 5.3%
Franklin Resources, Inc. 25,400 $ 1,769,110
Goldman Sachs Group, Inc. 112,800 11,735,712
Lehman Brothers Holdings, Inc. 27,100 2,370,708
Mellon Financial Corp. 159,800 4,971,378
Merrill Lynch & Co., Inc. 59,780 3,573,051
--------------
$ 24,419,959
--------------
BUSINESS SERVICES -- 1.3%
Accenture Ltd., "A"* 173,400 $ 4,681,800
Fiserv, Inc.* 35,700 1,434,783
--------------
$ 6,116,583
--------------
CHEMICALS -- 6.1%
Dow Chemical Co. 95,000 $ 4,703,450
E.I. du Pont de Nemours & Co. 123,300 6,047,865
Monsanto Co. 86,600 4,810,630
Nalco Holding Co.* 40,670 793,878
PPG Industries, Inc. 113,800 7,756,608
Syngenta AG 37,520 3,971,449
--------------
$ 28,083,880
--------------
COMPUTER SOFTWARE -- SYSTEMS -- 0.6%
Hewlett-Packard Co. 90,500 $ 1,897,785
International Business Machines Corp. 9,200 906,936
--------------
$ 2,804,721
--------------
CONSTRUCTION -- 0.8%
Masco Corp. 99,400 $ 3,631,082
--------------
CONSUMER GOODS & SERVICES -- 1.4%
Kimberly-Clark Corp. 99,800 $ 6,567,838
--------------
CONTAINERS -- 0.4%
Smurfit-Stone Container Corp.* 97,100 $ 1,813,828
--------------
ELECTRICAL EQUIPMENT -- 1.8%
Cooper Industries Ltd., "A" 43,400 $ 2,946,426
Emerson Electric Co. 73,700 5,166,370
Tyco International Ltd. 4,400 157,256
--------------
$ 8,270,052
--------------
ENERGY -- INDEPENDENT -- 2.4%
Devon Energy Corp. 52,560 $ 2,045,635
EOG Resources, Inc. 32,500 2,319,200
Unocal Corp. 151,252 6,540,136
--------------
$ 10,904,971
--------------
</Table>
46
<Page>
<Table>
<Caption>
ISSUER SHARES VALUE
ENERGY -- INTEGRATED -- 7.0%
BP PLC, ADR 142,800 $ 8,339,520
ConocoPhillips 113,800 9,881,254
Exxon Mobil Corp. 164,072 8,410,331
TOTAL S.A., ADR^ 50,400 5,535,936
--------------
$ 32,167,041
--------------
FOOD & NON-ALCOHOLIC BEVERAGES -- 6.1%
Archer Daniels Midland Co. 351,165 $ 7,834,491
H.J. Heinz Co. 96,500 3,762,535
Kellogg Co. 155,500 6,944,630
Nestle S.A. 8,791 2,291,630
PepsiCo, Inc. 52,198 2,724,736
Sara Lee Corp. 175,500 4,236,570
--------------
$ 27,794,592
--------------
FOREST & PAPER PRODUCTS -- 1.8%
Bowater, Inc. 36,600 $ 1,609,302
International Paper Co. 154,800 6,501,600
--------------
$ 8,110,902
--------------
INSURANCE -- 5.9%
AFLAC, Inc. 62,700 $ 2,497,968
Allstate Corp. 162,860 8,423,119
Chubb Corp. 28,380 2,182,422
Hartford Financial Services Group, Inc. 56,640 3,925,718
MetLife, Inc. 253,080 10,252,271
--------------
$ 27,281,498
--------------
LEISURE & TOYS -- 0.3%
Hasbro, Inc. 67,000 $ 1,298,460
--------------
MACHINERY & TOOLS -- 1.7%
Deere & Co. 66,610 $ 4,955,784
Finning International, Inc. 16,900 492,714
Illinois Tool Works, Inc. 12,400 1,149,232
Sandvik AB 34,300 1,380,406
--------------
$ 7,978,136
--------------
MEDICAL EQUIPMENT -- 0.5%
Baxter International, Inc. 66,600 $ 2,300,364
--------------
NATURAL GAS -- DISTRIBUTION -- 0.2%
KeySpan Corp.^ 22,400 $ 883,680
--------------
OIL SERVICES -- 1.4%
GlobalSantaFe Corp. 32,900 $ 1,089,319
Noble Corp.* 86,510 4,303,007
Schlumberger Ltd. 17,200 1,151,540
--------------
$ 6,543,866
--------------
PHARMACEUTICALS -- 7.3%
Abbott Laboratories 124,500 $ 5,807,925
Eli Lilly & Co. 19,600 1,112,300
Johnson & Johnson 136,600 8,663,172
Merck & Co., Inc. 221,000 7,102,940
Novartis AG 44,300 2,224,219
Pfizer, Inc. 59,300 1,594,577
Roche Holdings AG 27,300 3,131,277
Wyeth 95,500 4,067,345
--------------
$ 33,703,755
--------------
PRINTING & PUBLISHING -- 1.9%
Reed Elsevier PLC 490,600 $ 4,518,067
Tribune Co. 103,817 4,374,848
--------------
$ 8,892,915
--------------
RAILROAD & SHIPPING -- 1.5%
Burlington Northern Santa Fe Corp. 101,500 $ 4,801,965
Union Pacific Corp. 34,100 2,293,225
--------------
$ 7,095,190
--------------
RESTAURANTS -- 0.6%
McDonald's Corp. 91,800 $ 2,943,108
--------------
SPECIALTY CHEMICALS -- 1.3%
Air Products & Chemicals, Inc. 89,347 $ 5,179,446
Praxair, Inc. 20,400 900,660
--------------
$ 6,080,106
--------------
SPECIALTY STORES -- 1.9%
Gap, Inc. 225,200 $ 4,756,224
TJX Cos., Inc. 157,000 3,945,410
--------------
$ 8,701,634
--------------
TELECOMMUNICATIONS -- WIRELESS -- 1.4%
Vodafone Group PLC 2,290,700 $ 6,201,381
--------------
TELEPHONE SERVICES -- 4.1%
Sprint Corp. 409,300 $ 10,171,105
Verizon Communications, Inc. 209,600 8,490,896
--------------
$ 18,662,001
--------------
TOBACCO -- 2.7%
Altria Group, Inc. 201,270 $ 12,297,597
--------------
TRUCKING -- 0.1%
CNF, Inc. 4,900 $ 245,490
--------------
UTILITIES -- ELECTRIC POWER -- 4.9%
Cinergy Corp. 53,800 $ 2,239,694
Dominion Resources, Inc. 108,500 7,349,790
Energy East Corp. 70,900 1,891,612
Entergy Corp. 33,400 2,257,506
Exelon Corp. 30,900 1,361,763
FirstEnergy Corp. 20,140 795,731
FPL Group, Inc.^ 8,400 627,900
PPL Corp. 40,550 2,160,504
Public Service Enterprise Group, Inc.^ 18,000 931,860
TXU Corp.^ 45,900 2,963,304
--------------
$ 22,579,664
--------------
Total Stocks (Identified Cost, $373,898,651) $ 453,327,069
--------------
COLLATERAL FOR SECURITIES LOANED -- 2.4%
Navigator Securities Lending Prime Portfolio, at Cost and
Net Asset Value 11,029,300 $ 11,029,300
--------------
<Caption>
PAR AMOUNT
REPURCHASE AGREEMENT -- 1.2%
Morgan Stanley, 2.19%, dated 12/31/04, due 01/03/05, total
to be received $5,422,990 (secured by various U.S.
Treasury and Federal Agency obligations in a jointly
traded account), at Cost $ 5,422,000 $ 5,422,000
--------------
Total Investments
(Identified Cost, $390,349,951) $ 469,778,369
--------------
OTHER ASSETS,
LESS LIABILITIES -- (2.3)% (10,578,110)
--------------
Net Assets -- 100.0% $ 459,200,259
==============
</Table>
See portfolio footnotes and notes to financial statements.
PORTFOLIO FOOTNOTES
* Non-income producing security.
+ Restricted security.
^ All or a portion of this security is on loan.
++ The rate shown represents an annualized yield at time of purchase.
~ As of December 31, 2004, the International Growth Series had one security
representing $831,209 and 0.6% of net assets that was fair valued in
accordance with the policies adopted by the Board of Trustees.
ADR = American Depositary Receipt
GDR = Global Depositary Receipt
47
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF ASSETS AND LIABILITIES -- December 31, 2004
<Table>
<Caption>
CAPITAL CORE INTERNATIONAL MASSACHUSETTS MID
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH CAP VALUE
SERIES SERIES SERIES STOCK SERIES SERIES
-------------- -------------- -------------- ---------------- --------------
Assets:
Investments --
Unaffiliated issuers, at identified
cost $ 248,974,526 $ 84,945,068 $ 136,886,394 $ 531,196,051 $ 21,417,360
Unrealized appreciation (depreciation) 32,989,473 14,758,119 30,315,028 38,618,704 2,780,828
-------------- -------------- -------------- ---------------- --------------
Total investments, at value
(including securities loaned of
$15,834,092, $6,677,871,
$26,604,935, $15,761,070,
and $--, respectively) $ 281,963,999 $ 99,703,187 $ 167,201,422 $ 569,814,755 $ 24,198,188
Cash 995 620 738 808 --
Foreign currency, at value
(identified cost, $--, $--, $75,610,
$--, and $104,394, respectively) -- -- 76,978 -- 105,112
Receivable for investments sold 165,937 928,314 -- 3,900,200 629,473
Receivable for series shares sold 10,878 36,675 42,717 123,903 8,757
Interest and dividends receivable 286,033 86,449 182,266 308,334 24,377
Receivable from administrative
proceeding settlement 164,749 25,093 -- 745,769 17
Receivable from investment adviser -- -- -- -- 536
Other assets 574 42 347 7,420 --
-------------- -------------- -------------- ---------------- --------------
Total assets $ 282,593,165 $ 100,780,380 $ 167,504,468 $ 574,901,189 $ 24,966,460
============== ============== ============== ================ ==============
Liabilities:
Payable for investments purchased $ 201,219 $ 730,947 $ 100,322 $ 2,819,107 $ 192,907
Payable to custodian -- -- -- -- 216,848
Payable for series shares reacquired 234,123 28,901 94,287 376,819 7,230
Collateral for securities loaned,
at value 16,236,027 6,840,222 27,961,998 16,181,295 --
Payable to affiliates --
Management fees 5,491 1,926 3,455 11,478 504
Distribution fee (Service Class) 117 69 126 600 168
Accrued expenses and other liabilities 68,949 43,640 149,455 87,646 41,120
-------------- -------------- -------------- ---------------- --------------
Total liabilities $ 16,745,926 $ 7,645,705 $ 28,309,643 $ 19,476,945 $ 458,777
-------------- -------------- -------------- ---------------- --------------
Net assets $ 265,847,239 $ 93,134,675 $ 139,194,825 $ 555,424,244 $ 24,507,683
============== ============== ============== ================ ==============
Net assets consist of:
Paid-in capital $ 551,550,779 $ 89,359,602 $ 116,738,082 $ 967,077,345 $ 18,899,501
Unrealized appreciation (depreciation)
on investments and translation of
assets and liabilities in foreign
currencies 32,989,473 14,758,119 30,319,792 38,620,492 2,780,914
Accumulated undistributed net realized
gain (loss) on investments and
foreign currency transactions (320,849,465) (11,582,185) (9,073,987) (452,681,223) 2,827,268
Accumulated undistributed net
investment income 2,156,452 599,139 1,210,938 2,407,630 --
-------------- -------------- -------------- ---------------- --------------
Total $ 265,847,239 $ 93,134,675 $ 139,194,825 $ 555,424,244 $ 24,507,683
============== ============== ============== ================ ==============
Net assets
Initial Class $ 248,925,284 $ 83,218,990 $ 120,912,886 $ 468,180,801 $ 28,789
Service Class 16,921,955 9,915,685 18,281,939 87,243,443 24,478,894
-------------- -------------- -------------- ---------------- --------------
Total $ 265,847,239 $ 93,134,675 $ 139,194,825 $ 555,424,244 $ 24,507,683
============== ============== ============== ================ ==============
Shares of beneficial interest
outstanding
Initial Class 18,714,118 5,812,802 8,924,480 49,713,002 2,310
Service Class 1,277,478 695,658 1,354,343 9,328,492 1,970,220
-------------- -------------- -------------- ---------------- --------------
Total 19,991,596 6,508,460 10,278,823 59,041,494 1,972,530
============== ============== ============== ================ ==============
Net asset value per share:
Initial Class $ 13.30 $ 14.32 $ 13.55 $ 9.42 $ 12.46
Service Class $ 13.25 $ 14.25 $ 13.50 $ 9.35 $ 12.42
============== ============== ============== ================ ==============
</Table>
See notes to financial statements.
48
<Page>
<Table>
<Caption>
NEW RESEARCH STRATEGIC
DISCOVERY INTERNATIONAL GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 340,372,844 $ 153,840,644 $ 81,182,539
Unrealized appreciation (depreciation) 44,292,848 24,480,902 8,856,075
--------------- --------------- ---------------
Total investments, at value (including
securities loaned of $70,631,083,
$28,816,700, $2,086,762, $--,
$3,988,881, and $10,792,608,
respectively) $ 384,665,692 $ 178,321,546 $ 90,038,614
Cash 594 409 482
Foreign currency, at value
(identified cost, $--, $--, $--, $--, $--, and
$37, respectively) -- -- --
Receivable for investments sold 4,298,647 270,652 61,098
Receivable for series shares sold 106,717 166,711 42,478
Interest and dividends receivable 69,185 128,023 49,311
Receivable from administrative proceeding settlement 17,321 1,393 2,248
Receivable from investment adviser -- -- --
Other assets 727 -- --
--------------- --------------- ---------------
Total assets $ 389,158,883 $ 178,888,734 $ 90,194,231
=============== =============== ===============
Liabilities:
Payable for investments purchased 2,639,467 693,924 19,044
Payable to custodian -- 110 --
Payable for series shares reacquired 331,561 125,160 115,227
Collateral for securities loaned, at value 72,361,907 30,298,038 2,142,797
Payable to affiliates--
Management fees 7,969 3,615 1,816
Distribution fee (Service Class) 954 417 292
Accrued expenses and other liabilities 58,478 154,663 41,085
--------------- --------------- ---------------
Total liabilities $ 75,400,336 $ 31,275,927 $ 2,320,261
--------------- --------------- ---------------
Net assets $ 313,758,547 $ 147,612,807 $ 87,873,970
=============== =============== ===============
Net assets consist of:
Paid-in capital $ 341,462,731 $ 129,436,072 $ 131,046,349
Unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
in foreign currencies 44,292,965 24,482,372 8,856,211
Accumulated undistributed net realized gain (loss)
on investments and foreign currency transactions (71,997,149) (7,417,670) (52,212,046)
Accumulated undistributed net investment income -- 1,112,033 183,456
--------------- --------------- ---------------
Total $ 313,758,547 $ 147,612,807 $ 87,873,970
=============== =============== ===============
Net assets
Initial Class $ 209,502,495 $ 86,525,882 $ 45,471,339
Service Class 104,256,052 61,086,925 42,402,631
--------------- --------------- ---------------
Total $ 313,758,547 $ 147,612,807 $ 87,873,970
=============== =============== ===============
Shares of beneficial interest outstanding*
Initial Class 15,363,739 5,975,496 5,925,855
Service Class 7,711,676 4,246,324 5,569,225
--------------- --------------- ---------------
Total 23,075,415 10,221,820 11,495,080
=============== =============== ===============
Net asset value price per share:
Initial Class $ 13.64 $ 14.48 $ 7.67
Service Class $ 13.52 $ 14.39 $ 7.61
=============== =============== ===============
<Caption>
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
--------------- --------------- ---------------
Assets:
Investments --
Unaffiliated issuers, at identified cost $ 10,380,165 $ 27,616,393 $ 390,349,951
Unrealized appreciation (depreciation) 1,377,216 3,193,763 79,428,418
--------------- --------------- ---------------
Total investments, at value (including
securities loaned of $70,631,083,
$28,816,700, $2,086,762, $--,
$3,988,881, and $10,792,608,
respectively) $ 11,757,381 $ 30,810,156 $ 469,778,369
Cash 644 804 785
Foreign currency, at value
(identified cost, $--, $--, $--, $--, $--, and
$37, respectively) -- -- 38
Receivable for investments sold 6,709 -- --
Receivable for series shares sold 230 2,114 202,779
Interest and dividends receivable 17,451 5,492 764,709
Receivable from administrative proceeding settlement 12 5,845 75,992
Receivable from investment adviser 1,935 48,590 --
Other assets -- -- --
--------------- --------------- ---------------
Total assets $ 11,784,362 $ 30,873,001 $ 470,822,672
=============== =============== ===============
Liabilities:
Payable for investments purchased 140,469 6,345 265,264
Payable to custodian -- -- --
Payable for series shares reacquired 557 22,972 250,982
Collateral for securities loaned, at value -- 4,100,113 11,029,300
Payable to affiliates --
Management fees 261 552 9,534
Distribution fee (Service Class) 186 25 827
Accrued expenses and other liabilities 37,350 38,497 66,506
--------------- --------------- ---------------
Total liabilities $ 178,823 $ 4,168,504 $ 11,622,413
--------------- --------------- ---------------
Net assets $ 11,605,539 $ 26,704,497 $ 459,200,259
=============== =============== ===============
Net assets consist of:
Paid-in capital $ 9,077,926 $ 62,774,376 $ 385,990,505
Unrealized appreciation (depreciation) on
investments and translation of assets and liabilities
in foreign currencies 1,377,216 3,193,763 79,430,185
Accumulated undistributed net realized gain (loss)
on investments and foreign currency transactions 1,069,419 (39,265,690) (12,308,612)
Accumulated undistributed net investment income 80,978 2,048 6,088,181
--------------- --------------- ---------------
Total $ 11,605,539 $ 26,704,497 $ 459,200,259
=============== =============== ===============
Net assets
Initial Class $ 8,927 $ 23,068,956 $ 339,704,747
Service Class 11,596,612 3,635,541 119,495,512
--------------- --------------- ---------------
Total $ 11,605,539 $ 26,704,497 $ 459,200,259
=============== =============== ===============
Shares of beneficial interest outstanding*
Initial Class 771 5,494,263 21,902,825
Service Class 1,006,627 875,521 7,743,983
--------------- --------------- ---------------
Total 1,007,398 6,369,784 29,646,808
=============== =============== ===============
Net asset value price per share:
Initial Class $ 11.57 $ 4.20 $ 15.51
Service Class $ 11.52 $ 4.15 $ 15.43
=============== =============== ===============
</Table>
* Shares outstanding are rounded for presentation purposes.
See notes to financial statements.
49
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENT OF OPERATIONS -- Year Ended December 31, 2004
<Table>
<Caption>
CAPITAL CORE INTERNATIONAL MASSACHUSETTS MID CAP
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH VALUE
SERIES SERIES SERIES STOCK SERIES SERIES
-------------- -------------- -------------- ---------------- --------------
Net investment income (loss):
Income --
Dividends $ 4,243,310 $ 1,341,610 $ 2,916,148 $ 6,134,872 $ 210,148
Interest 62,715 27,528 27,097 302,418 14,983
Income on securities loaned 18,600 9,583 76,716 31,206 --
Other# 164,749 25,093 -- 745,769 17
Foreign taxes withheld (18,779) (10,744) (253,887) (28,248) (819)
-------------- -------------- -------------- ---------------- --------------
Total investment income $ 4,470,595 $ 1,393,070 $ 2,766,074 $ 7,186,017 $ 224,329
-------------- -------------- -------------- ---------------- --------------
Expenses --
Management fees $ 2,016,144 $ 661,917 $ 1,130,189 $ 4,152,929 $ 152,499
Trustees' compensation 31,246 9,862 13,568 65,469 1,751
Distribution fee (Service Class) 38,771 22,924 39,831 197,794 50,700
Administrative fee 25,145 8,077 11,319 51,522 1,762
Custodian fee 88,892 29,951 155,632 170,011 8,153
Printing 35,155 9,064 17,323 51,711 313
Auditing fees 34,802 35,778 45,705 35,538 39,576
Legal fees 6,686 6,365 6,267 5,906 6,914
Miscellaneous 31,812 17,969 15,365 56,940 13,036
-------------- -------------- -------------- ---------------- --------------
Total expenses $ 2,308,653 $ 801,907 $ 1,435,199 $ 4,787,820 $ 274,704
Fees paid indirectly (4,612) (3,613) (4,166) (12,301) (404)
Reduction of expenses by investment
adviser -- -- -- -- (20,417)
-------------- -------------- -------------- ---------------- --------------
Net expenses $ 2,304,041 $ 798,294 $ 1,431,033 $ 4,775,519 $ 253,883
-------------- -------------- -------------- ---------------- --------------
Net investment income (loss) $ 2,166,554 $ 594,776 $ 1,335,041 $ 2,410,498 $ (29,554)
-------------- -------------- -------------- ---------------- --------------
Realized and unrealized gain (loss) on
investments and foreign currency
transactions:
Realized gain (loss) (identified
cost basis) --
Investment transactions $ 30,618,682 $ 6,747,334 $ 18,280,811 $ 34,429,112 $ 2,863,716
Foreign currency transactions -- 1,958 (64,393) 2,742 1,180
-------------- -------------- -------------- ---------------- --------------
Net realized gain (loss) on
investments and foreign currency
transactions $ 30,618,682 $ 6,749,292 $ 18,216,418 $ 34,431,854 $ 2,864,896
-------------- -------------- -------------- ---------------- --------------
Change in unrealized appreciation
(depreciation)
Investments $ (1,410,542) $ 4,644,918 $ 2,788,600 $ 11,792,051 $ 1,320,931
Translation of assets and liabilities
in foreign currencies -- (94) (1,826) 741 83
-------------- -------------- -------------- ---------------- --------------
Net unrealized gain (loss) on
investments and foreign currency
translation $ (1,410,542) $ 4,644,824 $ 2,786,774 $ 11,792,792 $ 1,321,014
-------------- -------------- -------------- ---------------- --------------
Net realized and unrealized gain
(loss) on investments and
foreign currency $ 29,208,140 $ 11,394,116 $ 21,003,192 $ 46,224,646 $ 4,185,910
-------------- -------------- -------------- ---------------- --------------
Change in net assets from
operations $ 31,374,694 $ 11,988,892 $ 22,338,233 $ 48,635,144 $ 4,156,356
============== ============== ============== ================ ==============
</Table>
# A non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes.
See notes to financial statements.
50
<Page>
<Table>
<Caption>
NEW RESEARCH STRATEGIC
DISCOVERY INTERNATIONAL GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
Net investment income (loss):
Income --
Dividends $ 736,086 $ 2,697,902 $ 958,219
Interest 110,533 44,379 46,988
Income on securities loaned 135,820 85,306 4,297
Other# 17,321 1,393 2,248
Foreign taxes withheld (1,561) (247,186) (3,787)
--------------- --------------- ---------------
Total investment income $ 998,199 $ 2,581,794 $ 1,007,965
--------------- --------------- ---------------
Expenses --
Management fees $ 2,647,960 $ 1,065,802 $ 623,021
Trustees' compensation 32,938 10,865 9,621
Distribution fee (Service Class) 211,339 104,658 92,827
Administrative fee 27,121 10,174 7,559
Custodian fee 91,143 153,675 29,849
Printing 21,262 10,857 7,345
Auditing fees 50,505 34,985 34,078
Legal fees 6,315 6,289 6,982
Miscellaneous 32,914 15,389 14,142
--------------- --------------- ---------------
Total expenses $ 3,121,497 $ 1,412,694 $ 825,424
Fees paid indirectly (8,218) (6,874) (1,182)
Reduction of expenses by investment adviser -- -- --
--------------- --------------- ---------------
Net expenses $ 3,113,279 $ 1,405,820 $ 824,242
--------------- --------------- ---------------
Net investment income (loss) $ (2,115,080) $ 1,175,974 $ 183,723
--------------- --------------- ---------------
Realized and unrealized gain (loss) on investments
and foreign currency transactions:
Realized gain (loss) (identified cost basis)--
Investment transactions $ 29,524,327 $ 16,453,586 $ 3,034,075
Written options transactions -- -- --
Foreign currency transactions 483 (47,635) --
--------------- --------------- ---------------
Net realized gain on investments and foreign
currency transactions $ 29,524,810 $ 16,405,951 $ 3,034,075
--------------- --------------- ---------------
Change in unrealized appreciation (depreciation)
Investments $ (6,158,775) $ 6,811,657 $ 2,082,480
Translation of assets and liabilities in
foreign currencies 117 (2,554) 30
--------------- --------------- ---------------
Net unrealized gain (loss) on investments and
foreign currency translation $ (6,158,658) $ 6,809,103 $ 2,082,510
--------------- --------------- ---------------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 23,366,152 $ 23,215,054 $ 5,116,585
--------------- --------------- ---------------
Change in net assets from operations $ 21,251,072 $ 24,391,028 $ 5,300,308
=============== =============== ===============
<Caption>
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
--------------- --------------- ---------------
Net investment income (loss):
Income --
Dividends $ 203,174 $ 211,964 $ 9,639,878
Interest 2,436 13,401 157,211
Income on securities loaned -- -- 18,220
Other# 12 5,845 75,992
Foreign taxes withheld (972) (3,258) (105,772)
--------------- --------------- ---------------
Total investment income $ 204,650 $ 227,952 $ 9,785,529
--------------- --------------- ---------------
Expenses --
Management fees $ 74,155 $ 216,594 $ 3,114,897
Trustees' compensation 884 3,562 43,611
Distribution fee (Service Class) 24,698 9,609 250,810
Administrative fee 858 2,812 37,054
Custodian fee 5,473 13,960 157,712
Printing 428 5,577 21,762
Auditing fees 36,467 36,865 35,525
Legal fees 6,065 14,461 5,015
Miscellaneous 4,255 25,545 31,584
--------------- --------------- ---------------
Total expenses $ 153,283 $ 328,985 $ 3,697,970
Fees paid indirectly (142) (2,028) (7,504)
Reduction of expenses by investment adviser (29,765) (28,908) --
--------------- --------------- ---------------
Net expenses $ 123,376 $ 298,049 $ 3,690,466
--------------- --------------- ---------------
Net investment income (loss) $ 81,274 $ (70,097) $ 6,095,063
--------------- --------------- ---------------
Realized and unrealized gain (loss) on investments
and foreign currency transactions:
Realized gain (loss) (identified cost basis)--
Investment transactions $ 1,111,025 $ 1,045,397 $ 17,477,939
Written options transactions -- 237 --
Foreign currency transactions -- (533) (6,715)
--------------- --------------- ---------------
Net realized gain on investments and foreign
currency transactions $ 1,111,025 $ 1,045,101 $ 17,471,224
--------------- --------------- ---------------
Change in unrealized appreciation (depreciation)
Investments $ 499,217 $ (832,951) $ 37,766,698
Translation of assets and liabilities in
foreign currencies -- (95) 831
--------------- --------------- ---------------
Net unrealized gain (loss) on investments and
foreign currency translation $ 499,217 $ (833,046) $ 37,767,529
--------------- --------------- ---------------
Net realized and unrealized gain (loss) on
investments and foreign currency $ 1,610,242 $ 212,055 $ 55,238,753
--------------- --------------- ---------------
Change in net assets from operations $ 1,691,516 $ 141,958 $ 61,333,816
=============== =============== ===============
</Table>
# A non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes.
See notes to financial statements.
51
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2004
<Table>
<Caption>
CAPITAL CORE INTERNATIONAL MASSACHUSETTS MID
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH CAP VALUE
SERIES SERIES SERIES STOCK SERIES SERIES
-------------- -------------- -------------- ---------------- --------------
Change in net assets:
From operations --
Net investment income (loss) $ 2,166,554 $ 594,776 $ 1,335,041 $ 2,410,498 $ (29,554)
Net realized gain (loss) on
investments and foreign currency
transactions 30,618,682 6,749,292 18,216,418 34,431,854 2,864,896
Net unrealized gain (loss) on
investments and foreign currency
translation (1,410,542) 4,644,824 2,786,774 11,792,792 1,321,014
-------------- -------------- -------------- ---------------- --------------
Change in net assets from operations $ 31,374,694 $ 11,988,892 $ 22,338,233 $ 48,635,144 $ 4,156,356
-------------- -------------- -------------- ---------------- --------------
Distributions declared to shareholders --
From net investment income
(Initial Class) $ (1,240,566) $ (526,207) $ (610,662) $ (320,560) $ (16)
From net investment income
(Service Class) (44,137) (43,091) (60,666) -- (785)
From net realized gain on investments
and foreign currency transactions
(Initial Class) -- -- -- -- (565)
From net realized gain on investments
and foreign currency transactions
(Service Class) -- -- -- -- (457,174)
-------------- -------------- -------------- ---------------- --------------
Total distributions declared to
shareholders $ (1,284,703) $ (569,298) $ (671,328) $ (320,560) $ (458,540)
-------------- -------------- -------------- ---------------- --------------
Change in net assets from series share
transactions $ (48,988,200) $ (7,263,742) $ (5,757,292) $ (70,710,128) $ 4,832,063
-------------- -------------- -------------- ---------------- --------------
Total change in net assets $ (18,898,209) $ 4,155,852 $ 15,909,613 $ (22,395,544) $ 8,529,879
Net Assets --
At beginning of period 284,745,448 88,978,823 123,285,212 577,819,788 15,977,804
-------------- -------------- -------------- ---------------- --------------
At end of period $ 265,847,239 $ 93,134,675 $ 139,194,825 $ 555,424,244 $ 24,507,683
============== ============== ============== ================ ==============
Accumulated undistributed net investment
income included in net assets at end
of period $ 2,156,452 $ 599,139 $ 1,210,938 $ 2,407,630 $ --
============== ============== ============== ================ ==============
</Table>
<Table>
<Caption>
NEW RESEARCH STRATEGIC
DISCOVERY INTERNATIONAL GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
Change in net assets:
From operations--
Net investment income (loss) $ (2,115,080) $ 1,175,974 $ 183,723
Net realized gain (loss) on investments and foreign
currency transactions 29,524,810 16,405,951 3,034,075
Net unrealized gain (loss) on investments and foreign
currency translation (6,158,658) 6,809,103 2,082,510
--------------- --------------- ---------------
Change in net assets from operations $ 21,251,072 $ 24,391,028 $ 5,300,308
--------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ -- $ (370,243) $ --
From net investment income (Service Class) -- (159,924) --
From net realized gain on investments and
foreign currency transactions (Initial Class) -- -- --
From net realized gain on investments and
foreign currency transactions (Service Class) -- -- --
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ (530,167) $ --
--------------- --------------- ---------------
Change in net assets from series share transactions $ 1,180,343 $ 22,207,541 $ 4,260,454
--------------- --------------- ---------------
Total change in net assets $ 22,431,415 $ 46,068,402 $ 9,560,762
Net Assets --
At beginning of period 291,327,132 101,544,405 78,313,208
--------------- --------------- ---------------
At end of period $ 313,758,547 $ 147,612,807 $ 87,873,970
=============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ -- $ 1,112,033 $ 183,456
=============== =============== ===============
<Caption>
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
--------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income (loss) $ 81,274 $ (70,097) $ 6,095,063
Net realized gain (loss) on investments and foreign
currency transactions 1,111,025 1,045,101 17,471,224
Net unrealized gain (loss) on investments and foreign
currency translation 499,217 (833,046) 37,767,529
--------------- --------------- ---------------
Change in net assets from operations $ 1,691,516 $ 141,958 $ 61,333,816
--------------- --------------- ---------------
Distributions declared to shareholders--
From net investment income (Initial Class) $ (26) $ -- $ (4,095,008)
From net investment income (Service Class) (22,948) -- (1,140,200)
From net realized gain on investments and
foreign currency transactions (Initial Class) (160) -- --
From net realized gain on investments and
foreign currency transactions (Service Class) (200,516) -- --
--------------- --------------- ---------------
Total distributions declared to shareholders $ (223,650) $ -- $ (5,235,208)
--------------- --------------- ---------------
Change in net assets from series share transactions $ 1,931,598 $ (5,907,098) $ 8,503,289
--------------- --------------- ---------------
Total change in net assets $ 3,399,464 $ (5,765,140) $ 64,601,897
Net Assets --
At beginning of period 8,206,075 32,469,637 394,598,362
--------------- --------------- ---------------
At end of period $ 11,605,539 $ 26,704,497 $ 459,200,259
=============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 80,978 $ 2,048 $ 6,088,181
=============== =============== ===============
</Table>
See notes to financial statements.
52
<Page>
MFS/SUN LIFE SERIES TRUST
STATEMENTS OF CHANGES IN NET ASSETS -- Year Ended December 31, 2003
<Table>
<Caption>
CAPITAL CORE INTERNATIONAL MASSACHUSETTS MID
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH CAP VALUE
SERIES SERIES SERIES STOCK SERIES SERIES
---------------- ---------------- ---------------- ---------------- --------------
Change in net assets:
From operations --
Net investment income (loss) $ 1,284,846 $ 565,142 $ 651,604 $ 335,626 $ 2,166
Net realized gain (loss) on
investments and foreign currency
transactions 1,173,764 2,247,114 3,577,950 44,614,666 472,183
Net unrealized gain (loss) on
investments and foreign currency
translation 62,172,600 15,763,842 30,703,130 61,153,115 1,483,719
---------------- ---------------- ----------------- ---------------- --------------
Change in net assets from operations $ 64,631,210 $ 18,576,098 $ 34,932,684 $ 106,103,407 $ 1,958,068
---------------- ---------------- ----------------- ---------------- --------------
Distributions declared to shareholders --
From net investment income
(Initial Class) $ (890,293) $ (518,633)$ (673,301) $ -- $ (24)
From net investment income
(Service Class) (17,096) (43,208) (64,825) -- (1,627)
---------------- ---------------- ----------------- ---------------- --------------
Total distributions declared to
shareholders $ (907,389) $ (561,841)$ (738,126) $ -- $ (1,651)
---------------- ---------------- ----------------- ---------------- --------------
Change in net assets from series share
transactions $ (41,864,815) $ 410,319 $ (9,894,881) $ (13,628,110) $ 13,296,335
---------------- ---------------- ----------------- ---------------- --------------
Total change in net assets $ 21,859,006 $ 18,424,576 $ 24,299,677 $ 92,475,297 $ 15,252,752
Net Assets --
At beginning of period 262,886,442 70,554,247 98,985,535 485,344,491 725,052
---------------- ---------------- ----------------- ---------------- --------------
At end of period $ 284,745,448 $ 88,978,823 $ 123,285,212 $ 577,819,788 $ 15,977,804
================ ================ ================= ================ ==============
Accumulated undistributed net investment
income included in net assets at end
of period $ 1,274,601 $ 571,876 $ 652,566 $ 320,382 $ 1,820
================ ================ ================= ================ ==============
</Table>
<Table>
<Caption>
NEW RESEARCH STRATEGIC
DISCOVERY INTERNATIONAL GROWTH
SERIES SERIES SERIES
--------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income (loss) $ (1,523,073) $ 555,839 $ (30,930)
Net realized gain (loss) on investments and
foreign currency transactions 6,566,791 3,371,539 (2,297,959)
Net unrealized gain (loss) on investments and
foreign currency translation 66,461,094 19,200,401 15,030,042
--------------- --------------- ---------------
Change in net assets from operations $ 71,504,812 $ 23,127,779 $ 12,701,153
--------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ -- $ (380,627) $ --
From net investment income (Service Class) -- (30,347) --
--------------- --------------- ---------------
Total distributions declared to shareholders $ -- $ (410,974) $ --
--------------- --------------- ---------------
Change in net assets from series share transactions $ 8,103,150 $ 10,489,671 $ 22,129,203
--------------- --------------- ---------------
Total Change in net assets $ 79,607,962 $ 33,206,476 $ 34,830,356
Net Assets --
At beginning of period 211,719,170 68,337,929 43,482,852
--------------- --------------- ---------------
At end of period $ 291,327,132 $ 101,544,405 $ 78,313,208
=============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 6,938 $ 513,860 $ --
=============== =============== ===============
<Caption>
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
--------------- --------------- ---------------
Change in net assets:
From operations --
Net investment income (loss) $ 22,882 $ (152,371) $ 5,224,351
Net realized gain (loss) on investments and
foreign currency transactions 214,204 2,169,659 (4,049,833)
Net unrealized gain (loss) on investments and
foreign currency translation 896,916 5,854,952 75,048,972
--------------- --------------- ---------------
Change in net assets from operations $ 1,134,002 $ 7,872,240 $ 76,223,490
--------------- --------------- ---------------
Distributions declared to shareholders --
From net investment income (Initial Class) $ (11) $ -- $ (4,371,388)
From net investment income (Service Class) (3,639) -- (779,643)
--------------- --------------- ---------------
Total distributions declared to shareholders $ (3,650) $ -- $ (5,151,031)
--------------- --------------- ---------------
Change in net assets from series share transactions $ 5,997,580 $ 9,068,879 $ 9,988,016
--------------- --------------- ---------------
Total Change in net assets $ 7,127,932 $ 16,941,119 $ 81,060,475
Net Assets --
At beginning of period 1,078,143 15,528,518 313,537,887
--------------- --------------- ---------------
At end of period $ 8,206,075 $ 32,469,637 $ 394,598,362
=============== =============== ===============
Accumulated undistributed net investment income
included in net assets at end of period $ 22,678 $ -- $ 5,235,041
=============== =============== ===============
</Table>
See notes to financial statements.
53
<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. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
CAPITAL OPPORTUNITIES SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 11.85 $ 9.27 $ 13.33 $ 20.71 $ 24.51
----------- ----------- ----------- ----------- -----------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.10 $ 0.05 $ 0.03 $ 0.01 $ 0.00+++
Net realized and unrealized gain (loss)
on investments and foreign currency 1.41 2.57 (4.08) (4.66) (0.96)
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 1.51 $ 2.62 $ (4.05) $ (4.65) $ (0.96)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.06) $ (0.04) $ (0.01) $ -- $ --
From net realized gain on investments and
foreign currency transactions -- -- -- (2.64) (2.84)
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.09) --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (0.06) $ (0.04) $ (0.01) $ (2.73) $ (2.84)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 13.30 $ 11.85 $ 9.27 $ 13.33 $ 20.71
=========== =========== =========== =========== ===========
Total return***~ 12.80%^^ 28.30% (30.41)% (24.93)% (4.88)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.84% 0.84% 0.82% 0.79% 0.79%
Net investment income (loss) 0.82% 0.50% 0.26% 0.05% (0.01)%
Portfolio turnover 73% 64% 93% 109% 117%
Net assets at end of period (000 Omitted) $ 248,925 $ 269,630 $ 251,974 $ 501,269 $ 688,432
</Table>
<Table>
<Caption>
CAPITAL OPPORTUNITIES SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.81 $ 9.24 $ 13.31 $ 13.60^
----------- ----------- ----------- ------------------
Income (loss) from investment operations# --
Net investment income (loss) $ 0.07 $ 0.03 $ 0.01 $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.40 2.55 (4.07) (0.28)
----------- ----------- ----------- ------------------
Total from investment operations $ 1.47 $ 2.58 $ (4.06) $ (0.29)
----------- ----------- ----------- ------------------
Less distributions declared to shareholders --
From net investment income $ (0.03) $ (0.01) $ (0.01) $ --
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 13.25 $ 11.81 $ 9.24 $ 13.31
=========== =========== =========== ==================
Total return***~ 12.52%^^ 28.00% (30.54)% (2.13)%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.09% 1.09% 1.07% 1.04%+
Net investment income (loss) 0.60% 0.26% 0.09% (0.24)%+
Portfolio turnover 73% 64% 93% 109%
Net assets at end of period (000 Omitted) $ 16,922 $ 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.
^ The net asset value and total return previously reported as $13.93 and
(4.45)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^ The series' net asset value and total return calcualtion include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the day the proceeds were
recorded.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
54
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
CORE EQUITY SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 12.58 $ 9.92 $ 12.70 $ 14.62 $ 14.44
----------- ----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income $ 0.09 $ 0.08 $ 0.08 $ 0.09 $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency 1.74 2.67 (2.78) (1.67) 0.37
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 1.83 $ 2.75 $ (2.70) $ (1.58) $ 0.44
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.09) $ (0.09) $ (0.08) $ (0.06) $ (0.07)
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) $ (0.09) $ (0.08) $ (0.34) $ (0.26)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 14.32 $ 12.58 $ 9.92 $ 12.70 $ 14.62
=========== =========== =========== =========== ===========
Total return***~ 14.63%^^ 27.86% (21.40)% (10.91)% 3.09%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.88% 0.90% 0.86% 0.87% 0.88%
Net investment income 0.70% 0.78% 0.67% 0.66% 0.50%
Portfolio turnover 97% 147% 96% 84% 75%
Net assets at end of period (000 Omitted) $ 83,219 $ 80,059 $ 64,126 $ 95,414 $ 92,961
</Table>
<Table>
<Caption>
CORE EQUITY SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------------ PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 12.53 $ 9.89 $ 12.69 $ 12.59^
----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment income $ 0.06 $ 0.06 $ 0.05 $ 0.01
Net realized and unrealized gain (loss) on
investments and foreign currency 1.72 2.65 (2.78) 0.09+++
----------- ----------- ----------- ------------------
Total from investment operations $ 1.78 $ 2.71 $ (2.73) $ 0.10
----------- ----------- ----------- ------------------
Less distributions declared to shareholders
from net investment income -- $ (0.06) $ (0.07) $ (0.07) $ --
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 14.25 $ 12.53 $ 9.89 $ 12.69
=========== =========== =========== ==================
Total return***~ 14.29%^^ 27.49% (21.59)% 0.79%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.13% 1.15% 1.11% 1.12%+
Net investment income 0.45% 0.53% 0.49% 0.19%+
Portfolio turnover 97% 147% 96% 84%
Net assets at end of period (000 Omitted) $ 9,916 $ 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.
^ The net asset value and total return previously reported as $12.79 and
(0.78)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the shares outstanding on
the day the proceeds were recorded.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
55
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
INTERNATIONAL GROWTH SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.46 $ 8.33 $ 9.50 $ 11.84 $ 13.10
----------- ----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income $ 0.13 $ 0.06 $ 0.06 $ 0.06 $ 0.12
Net realized and unrealized gain (loss) on
investments and foreign currency 2.03 3.14 (1.18) (1.89) (1.13)
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 2.16 $ 3.20 $ (1.12) $ (1.83) $ (1.01)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.07) $ (0.07) $ (0.05) $ (0.07) $ (0.04)
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) $ (0.07) $ (0.05) $ (0.51) $ (0.25)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 13.55 $ 11.46 $ 8.33 $ 9.50 $ 11.84
=========== =========== =========== =========== ===========
Total return***~ 18.94% 38.67% (11.88)% (15.91)% (7.80)%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.11% 1.24% 1.23% 1.23% 1.24%
Net investment income 1.09% 0.67% 0.70% 0.58% 0.94%
Portfolio turnover 93% 89% 119% 108% 71%
Net assets at end of period (000 Omitted) $ 120,913 $ 108,114 $ 88,537 $ 118,286 $ 117,486
</Table>
<Table>
<Caption>
INTERNATIONAL GROWTH SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.43 $ 8.31 $ 9.49 $ 9.87^
----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment income (loss) $ 0.10 $ 0.04 $ 0.04 $ (0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.01 3.13 (1.17) (0.36)
----------- ----------- ----------- ------------------
Total from investment operations $ 2.11 $ 3.17 $ (1.13) $ (0.38)
----------- ----------- ----------- ------------------
Less distributions declared to shareholders --
From net investment income $ (0.04) $ (0.05) $ (0.05) $ --
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 13.50 $ 11.43 $ 8.31 $ 9.49
=========== =========== =========== ==================
Total return***~ 18.58% 38.35% (12.01)% (3.85)%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.36% 1.49% 1.48% 1.49%+
Net investment income (loss) 0.86% 0.39% 0.46% (0.59)%+
Portfolio turnover 93% 89% 119% 108%
Net assets at end of period (000 Omitted) $ 18,282 $ 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.
^ The net asset value and total return previously reported as $9.94 and
(4.53)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
56
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 8.60 $ 6.97 $ 9.70 $ 14.51 $ 16.13
----------- ----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income $ 0.04 $ 0.01 $ (0.00)+++ $ 0.01 $ 0.02
Net realized and unrealized gain (loss) on
investments and foreign currency 0.79 1.62 (2.72) (3.46) (0.97)
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 0.83 $ 1.63 $ (2.72) $ (3.45) $ (0.95)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.01) $ -- $ (0.01) $ (0.01) $ (0.01)
From net realized gain on investments and
foreign currency transactions -- -- -- (0.15) (0.66)
In excess of net investment income -- -- (0.00)+++ -- --
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (1.20) --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (0.01) $ -- $ (0.01) $ (1.36) $ (0.67)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 9.42 $ 8.60 $ 6.97 $ 9.70 $ 14.51
=========== =========== =========== =========== ===========
Total return***~ 9.61%^ 23.39% (28.05)% (24.91)% (6.09)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.83% 0.83% 0.82% 0.82% 0.81%
Net investment income (loss) 0.47% 0.09% (0.01)% 0.12% 0.14%
Portfolio turnover 139% 265% 207% 289% 250%
Net assets at end of period (000 Omitted) $ 468,181 $ 504,123 $ 448,235 $ 797,118 $ 974,508
<Caption>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 8.55 $ 6.96 $ 9.70 $ 9.65^^
----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment income (loss) $ 0.02 $ (0.01) $ (0.02) $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.78 1.60 (2.71) 0.06
----------- ----------- ----------- ------------------
Total from investment operations $ 0.80 $ 1.59 $ (2.73) $ 0.05
----------- ----------- ----------- ------------------
Less distributions declared to shareholders
From net investment income $ -- $ -- $ (0.01) $ --
In excess of net investment income -- -- (0.00)+++ --
----------- ----------- ----------- ------------------
Total distributions declared to shareholders -- $ -- $ (0.01) $ --
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 9.35 $ 8.55 $ 6.96 $ 9.70
=========== =========== =========== ==================
Total return***~ 9.36%^ 22.84% (28.17)% 0.52%++^^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.08% 1.08% 1.07% 1.07%+
Net investment income (loss) 0.25% (0.16)% (0.21)% (0.24)%+
Portfolio turnover 139% 265% 207% 289%
Net assets at end of period (000 Omitted) $ 87,243 $ 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 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 net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual resulted in an increase in
the net asset value of $0.01 per share based on shares outstanding on the
day the proceeds were recorded, without which performance would have been
lower by approximately 0.13%.
^^ The net asset value and total return previously reported as $9.89 and
(1.92)%, respectively, have been revised to reflect the net asset value
from the day prior to the class inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
57
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
MID CAP VALUE SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------ PERIOD ENDED
2004 2003 DECEMBER 31, 2002*
------------ ------------ ------------------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 10.46 $ 7.92 $ 10.00
------------ ------------ ------------------
Income from investment operations# --
Net investment income~~ $ 0.01 $ 0.02 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency 2.25 2.53 (2.12)
------------ ------------ ------------------
Total from investment operations $ 2.26 $ 2.55 $ (2.08)
------------ ------------ ------------------
Less distributions declared to shareholders --
From net investment income $ (0.01) $ (0.01) $ --
From net realized gain on investments and
foreign currency transactions (0.25) -- --
------------ ------------ ------------------
Total distributions declared to shareholders $ (0.26) $ (0.01) --
------------ ------------ ------------------
Net asset value -- end of period $ 12.46 $ 10.46 $ 7.92
============ ============ ==================
Total return***~ 22.10% 32.24% (20.80)%++
Ratios (to average net assets)/Supplemental
data~~
Expenses## 1.00% 0.99% 1.02%+
Net investment income (loss) 0.10% 0.26% 0.54%+
Portfolio turnover 147% 109% 82%
Net assets at end of period (000 Omitted) $ 29 $ 24 $ 18
~~ 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 loss per share
and the ratios would have been:
Net investment loss $ (0.00)+++ $ (0.05) $ (0.53)
Ratios (to average net assets):
Expenses## 1.10% 1.81% 8.05%+
Net investment income (loss) (0.00)%+++ (0.56)% (6.49)%+
<Caption>
MID CAP VALUE SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------ PERIOD ENDED
2004 2003 DECEMBER 31, 2002*
------------ ------------ ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 10.44 $ 7.93 $ 10.00
------------ ------------ ------------------
Income from investment operations# --
Net investment income (loss)~~ $ (0.02) $ 0.00+++ $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency 2.25 2.52 (2.11)
------------ ------------ ------------------
Total from investment operations $ 2.23 $ 2.52 $ (2.07)
------------ ------------ ------------------
Less distributions declared to shareholders from
net investment income --
From net investment income $ (0.00)+++ $ (0.01) --
From net realized gain on investments and
foreign currency transactions (0.25) -- --
------------ ------------ ------------------
Total distributions declared to shareholders $ (0.25) $ (0.01) $ --
------------ ------------ ------------------
Net asset value -- end of period $ 12.42 $ 10.44 $ 7.93
============ ============ ==================
Total return***~ 21.75% 31.90% (20.70)%++
Ratios (to average net assets)/Supplemental
data~~ :
Expenses## 1.25% 1.25% 1.27%+
Net investment income (loss) (0.15)% 0.04% 0.53%+
Portfolio turnover 147% 109% 82%
Net assets at end of period (000 Omitted) $ 24,479 $ 15,954 $ 707
~~ 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:
Net investment loss $ (0.03) $ (0.07) $ (0.50)
Ratios (to average net assets):
Expenses## 1.35% 2.07% 8.30%+
Net investment loss (0.25)% (0.78)% (6.50)%+
</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 or 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.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
58
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
NEW DISCOVERY SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 12.69 $ 9.38 $ 14.10 $ 15.98 $ 16.89
----------- ----------- ----------- ----------- -----------
Income from investment operations# --
Net investment loss $ (0.08) $ (0.06) $ (0.07) $ (0.07) $ (0.07)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.03 3.37 (4.65) (0.71) 0.15
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 0.95 $ 3.31 $ (4.72) $ (0.78) $ 0.08
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net realized gain on investments and
foreign currency transactions $ -- $ -- $ -- $ (0.97) $ (0.99)
In excess of net realized gain on investments
and foreign currency transactions -- -- -- (0.13) --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ -- $ -- $ -- $ (1.10) $ (0.99)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 13.64 $ 12.69 $ 9.38 $ 14.10 $ 15.98
=========== =========== =========== =========== ===========
Total return***~ 7.49%^ 35.29% (33.43)% (5.12)% 0.34%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.99% 1.00% 0.98% 0.97% 0.99%
Net investment loss (0.65)% (0.59)% (0.59)% (0.49)% (0.43)%
Portfolio turnover 139% 100% 97% 64% 74%
Net assets at end of period (000 Omitted) $ 209,503 $ 220,278 $ 177,028 $ 277,090 $ 233,297
<Caption>
NEW DISCOVERY SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 12.61 $ 9.34 $ 14.08 $ 13.36^^
----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment loss $ (0.11) $ (0.09) $ (0.08) $ (0.04)
Net realized and unrealized gain (loss) on
investments and foreign currency 1.02 3.36 (4.66) 0.76
----------- ----------- ----------- ------------------
Total from investment operations $ 0.91 $ 3.27 $ (4.74) $ 0.72
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 13.52 $ 12.61 $ 9.34 $ 14.08
=========== =========== =========== ==================
Total return***~ 7.22%^ 35.01% (33.66)% 5.39%^^++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.24% 1.24% 1.23% 1.22%+
Net investment loss (0.89)% (0.84)% (0.78)% (0.90)%+
Portfolio turnover 139% 100% 97% 64%
Net assets at end of period (000 Omitted) $ 104,256 $ 71,049 $ 34,691 $ 10,085
</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' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transaction with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the day the proceeds were
recorded.
^^ The net asset value and total return previously reported as $13.55 and
3.91%, respectively, have been revised to reflect the net asset value from
the day prior to the class' inception date. The net asset value and total
return previously reported were from inception date, the date the share
class was first available to public shareholders.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
59
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
RESEARCH INTERNATIONAL SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 12.01 $ 9.03 $ 10.22 $ 12.70 $ 14.59
----------- ----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income $ 0.14 $ 0.08 $ 0.06 $ 0.04 $ 0.19
Net realized and unrealized gain (loss) on
investments and foreign currency 2.39 2.96 (1.23) (2.27) (1.30)
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 2.53 $ 3.04 $ (1.17) $ (2.23) $ (1.11)
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.06) $ (0.06) $ (0.02) $ (0.09) $ (0.00)+++
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) $ (0.06) $ (0.02) $ (0.25) $ (0.78)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 14.48 $ 12.01 $ 9.03 $ 10.22 $ 12.70
=========== =========== =========== =========== ===========
Total return***~ 21.20% 33.86% (11.44)% (17.76)% (7.95)%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.10% 1.30% 1.26% 1.26% 1.28%
Net investment income 1.11% 0.83% 0.61% 0.36% 1.43%
Portfolio turnover 102% 97% 136% 145% 110%
Net assets at end of period (000 Omitted) $ 86,526 $ 74,262 $ 62,555 $ 80,738 $ 82,945
<Caption>
RESEARCH INTERNATIONAL SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 11.95 $ 9.00 $ 10.21 $ 10.76**
----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment income (loss) $ 0.10 $ 0.03 $ 0.03 $ (0.03)
Net realized and unrealized gain (loss) on
investments and foreign currency 2.39 2.96 (1.22) (0.52)
----------- ----------- ----------- ------------------
Total from investment operations $ 2.49 $ 2.99 $ (1.19) $ (0.55)
----------- ----------- ----------- ------------------
Less distributions declared to shareholders from
net investment income -- $ (0.05) $ (0.04) $ (0.02) $ --
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 14.39 $ 11.95 $ 9.00 $ 10.21
=========== =========== =========== ==================
Total return***~ 20.96% 33.40% (11.66)% (5.11)%++**
Ratios (to average net assets)/Supplemental data:
Expenses## 1.36% 1.57% 1.51% 1.51%+
Net investment income (loss) 0.78% 0.33% 0.35% (0.81)%+
Portfolio turnover 102% 97% 136% 145%
Net assets at end of period (000 Omitted) $ 61,087 $ 27,282 $ 5,783 $ 2,537
</Table>
* For the period from the inception of Service Class shares, August 24, 2001,
through December 31, 2001.
** The net asset value and total return previously reported as $10.81 and
(5.55)%, respectively, have been revised to reflect the net asset value
from the day prior to the class inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
+ Annualized.
++ Not annualized.
+++ 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.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
60
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
STRATEGIC GROWTH SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 7.18 $ 5.63 $ 8.05 $ 10.91 $ 12.13
----------- ----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income (loss) $ 0.02 $ (0.00)+++ $ (0.01) $ (0.01) $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.47 1.55 (2.41) (2.65) (1.20)
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 0.49 $ 1.55 $ (2.42) $ (2.66) $ (1.21)
----------- ----------- ----------- ----------- -----------
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)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 7.67 $ 7.18 $ 5.63 $ 8.05 $ 10.91
=========== =========== =========== =========== ===========
Total return***~ 6.82% 27.53% (30.06)% (24.65)% (9.99)%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.88% 0.91% 0.88% 0.86% 0.94%
Net investment income (loss) 0.31% (0.01)% (0.18)% (0.11)% (0.06)%
Portfolio turnover 74% 74% 98% 123% 86%
Net assets at end of period (000 Omitted) $ 45,471 $ 47,910 $ 38,486 $ 74,471 $ 86,823
<Caption>
STRATEGIC GROWTH SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 7.14 $ 5.62 $ 8.05 $ 7.95^
----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment income (loss) $ 0.01 $ (0.01) $ (0.02) $ (0.01)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.46 1.53 (2.41) 0.11++++
----------- ----------- ----------- ------------------
Total from investment operations $ 0.47 $ 1.52 $ (2.43) $ 0.10
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 7.61 $ 7.14 $ 5.62 $ 8.05
=========== =========== =========== ==================
Total return***~ 6.58% 27.05% (30.19)% 1.26%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.13% 1.16% 1.13% 1.11%+
Net investment income (loss) 0.12% (0.23)% (0.38)% (0.27)%+
Portfolio turnover 74% 74% 98% 123%
Net assets at end of period (000 Omitted) $ 42,403 $ 30,403 $ 4,997 $ 1,989
</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.
++++ 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.
^ The net asset value and total return previously reported as $8.21 and
(1.95)%, respectively, have been revised to reflect the net asset value
from the day prior prior to the class' inception date. The net asset value
and total return previously reported were from inception date, the date the
share class was first available to public shareholders.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
61
<Page>
The financial highlights table is intended to help you
understand the series' financial performance for the past 5 years. Certain
information reflects financial results for a single series share. The total
returns in the table represent the rate by which an investor would have earned
(or lost) on an investment in the series (assuming reinvestment of all
distributions) held for the entire period. This information has been audited by
the series' independent registered public accounting firm, whose report,
together with the series' financial statements, are included in this report.
<Table>
<Caption>
STRATEGIC VALUE SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------ PERIOD ENDED
2004 2003 DECEMBER 31, 2002*
------------ ------------ ------------------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 10.05 $ 7.90 $ 10.00
------------ ------------ ------------------
Income from investment operations# --
Net investment income~~ $ 0.11 $ 0.07 $ 0.07
Net realized and unrealized gain (loss) on
investments and foreign currency 1.63 2.09 (2.17)
------------ ------------ ------------------
Total from investment operations $ 1.74 $ 2.16 $ (2.10)
------------ ------------ ------------------
Less distributions declared to shareholders
From net investment income $ (0.04) $ (0.01) $ --
From net realized gain on investments and
foreign currency transactions (0.18) -- --
------------ ------------ ------------------
Total distributions declared to shareholders (0.22) (0.01) --
------------ ------------ ------------------
Net asset value -- end of period $ 11.57 $ 10.05 $ 7.90
============ ============ ==================
Total return***~ 18.05% 27.44% (21.00)%++
Ratios (to average net assets)/Supplemental
data~~ :
Expenses## 0.99% 1.00% 1.01%+
Net investment income 1.05% 0.80% 0.89%+
Portfolio turnover 70% 38% 53%
Net assets at end of period (000 Omitted) $ 9 $ 8 $ 6
~~ 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 per
share and the ratios would have been:
Net investment income (loss) $ 0.08 $ 0.02 $ (0.35)
Ratios (to average net assets):
Expenses## 1.29% 1.59% 6.20%+
Net investment income (loss) 0.75% 0.21% (4.30)%+
<Caption>
STRATEGIC VALUE SERIES
------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------ PERIOD ENDED
2004 2003 DECEMBER 31, 2002*
------------ ------------ ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 10.02 $ 7.90 $ 10.00
------------ ------------ ------------------
Income from investment operations# --
Net investment income~~ $ 0.09 $ 0.05 $ 0.06
Net realized and unrealized gain (loss) on
investments and foreign currency 1.61 2.08 (2.16)
------------ ------------ ------------------
Total from investment operations $ 1.70 $ 2.13 $ (2.10)
------------ ------------ ------------------
Less distributions declared to shareholders
From net investment income $ (0.02) $ (0.01) $ --
From net realized gain on investments and
foreign currency transactions (0.18) -- --
------------ ------------ ------------------
Total distributions declared to shareholders (0.20) (0.01) --
------------ ------------ ------------------
Net asset value -- end of period $ 11.52 $ 10.02 $ 7.90
============ ============ ==================
Total return***~ 17.77% 27.01% (21.00)%++
Ratios (to average net assets)/Supplemental
data~~ :
Expenses## 1.25% 1.25% 1.26%+
Net investment income 0.82% 0.56% 0.81%+
Portfolio turnover 70% 38% 53%
Net assets at end of period (000 Omitted) $ 11,597 $ 8,199 $ 1,072
~~ 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 income
per share and the ratios would have been:
Net investment income $ 0.05 $ 0.00+++ $ (0.33)
Ratios (to average net assets):
Expenses## 1.55% 1.84% 6.45%+
Net investment income (loss) 0.52% (0.03)% (4.38)%+
</Table>
* For the period from the commencement of the series' investment operations,
May 1, 2002, through December 31, 1999.
+ 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.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
62
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
TECHNOLOGY SERIES
----------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
----------------------------------------------------------- PERIOD ENDED
2004 2003 2002 2001 DECEMBER 31, 2000*
----------- ----------- ----------- ----------- ------------------
INITIAL CLASS
Per share data (for a share outstanding
throughout each period):
Net asset value -- beginning of period $ 4.10 $ 2.82 $ 5.22 $ 8.52 $ 10.00
----------- ----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment income (loss)~~ $ (0.01) $ (0.02) $ (0.02) $ (0.02) $ 0.01
Net realized and unrealized gain
(loss) on investments and foreign
currency 0.11 1.30 (2.38) (3.28) (1.49)
----------- ----------- ----------- ----------- ------------------
Total from investment operations $ 0.10 $ 1.28 $ (2.40) $ (3.30) $ (1.48)
----------- ----------- ----------- ----------- ------------------
Less distributions declared to
shareholders --
From net investment income $ -- $ -- $ -- $ (0.00)+++ $ --
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- --
----------- ----------- ----------- ----------- ------------------
Total distributions declared to
shareholders $ -- $ -- $ -- $ (0.00)+++ $ --
----------- ----------- ----------- ----------- ------------------
Net asset value -- end of period $ 4.20 $ 4.10 $ 2.82 $ 5.22 $ 8.52
=========== =========== =========== =========== ==================
Total return***~ 2.44%^^ 45.39% (45.98)% (38.87)% (14.60)%++
Ratios (to average net
assets)/Supplemental data~~ :
Expenses## 1.01% 1.06% 0.91% 0.90% 1.02%+
Net investment income (loss) (0.21)% (0.65)% (0.61)% (0.39)% 0.09%+
Portfolio turnover 110% 191% 210% 310% 271%
Net assets at end of period
(000 Omitted) $ 23,069 $ 28,376 $ 14,020 $ 33,855 $ 31,907
~~ 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:
Net investment loss $ (0.01) $ (0.02) $ -- $ -- $ (0.00)+++
Ratios (to average net assets):
Expenses## 1.11% 1.09% -- -- 1.16%+
Net investment loss (0.31)% (0.68)% -- -- (0.05)%+
</Table>
<Table>
<Caption>
TECHNOLOGY SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001**
----------- ----------- ----------- -------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 4.07 $ 2.80 $ 5.22 $ 5.00^^^
----------- ----------- ----------- -------------------
Income from investment operations# --
Net investment loss~~ $ (0.02) $ (0.03) $ (0.03) $ (0.02)
Net realized and unrealized gain (loss) on
investments and foreign currency 0.10 1.30 (2.39) 0.24
----------- ----------- ----------- -------------------
Total from investment operations $ 0.08 $ 1.27 $ (2.42) $ 0.22
----------- ----------- ----------- -------------------
Net asset value -- end of period $ 4.15 $ 4.07 $ 2.80 $ 5.22
=========== =========== =========== ===================
Total return***~ 1.97%^^ 45.36% (46.36)% 4.40%++^^^
Ratios (to average net assets)/Supplemental
data~~ :
Expenses## 1.26% 1.30% 1.16% 1.15%+
Net investment loss (0.45)% (0.91)% (0.85)% (0.90)%+
Portfolio turnover 110% 191% 210% 310%
Net assets at end of period (000 Omitted) $ 3,636 $ 4,094 $ 1,509 $ 947
~~ The investment adviser contractually agreed
under a temporary expense agreement to pay
all of the series' operating expenses,
exclusive of management and distribution and
service fees, in excess of 0.25% of average
daily net assets. To the extent actual
expenses were over this limitation, the net
investment loss per share and the ratios
would have been:
Net investment loss $ (0.02) $ (0.03) $ -- $ --
Ratios (to average net assets):
Expenses## 1.36% 1.33% -- --
Net investment loss (0.55)% (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.
^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on the net asset value per share based on the shares outstanding on
the day the proceeds were recorded.
^^^ The net asset value and total return previously reported as $5.32 and
(1.88)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
63
<Page>
The financial highlights table is intended to help you understand the series'
financial performance for the past 5 years. Certain information reflects
financial results for a single series share. The total returns in the table
represent the rate by which an investor would have earned (or lost) on an
investment in the series (assuming reinvestment of all distributions) held for
the entire period. This information has been audited by the series' independent
registered public accounting firm, whose report, together with the series'
financial statements, are included in this report.
<Table>
<Caption>
VALUE SERIES
---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------
2004 2003 2002 2001 2000
----------- ----------- ----------- ----------- -----------
INITIAL CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 13.61 $ 11.05 $ 12.88 $ 14.45 $ 11.21
----------- ----------- ----------- ----------- -----------
Income from investment operations# --
Net investment income (loss) $ 0.21 $ 0.19 $ 0.19 $ 0.17 $ 0.20
Net realized and unrealized gain (loss) on
investments and foreign currency 1.87 2.56 (1.93) (0.55) 3.16
----------- ----------- ----------- ----------- -----------
Total from investment operations $ 2.08 $ 2.75 $ (1.74) $ (0.38) $ 3.36
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders --
From net investment income $ (0.18) $ (0.19) $ (0.09) $ (0.75) $ (0.07)
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 $ (0.18) $ (0.19) $ (0.09) $ (1.19) $ (0.12)
----------- ----------- ----------- ----------- -----------
Net asset value -- end of period $ 15.51 $ 13.61 $ 11.05 $ 12.88 $ 14.45
=========== =========== =========== =========== ===========
Total return***~ 15.52%^^ 25.31% (13.58)% (7.46)% 30.25%
Ratios (to average net assets)/Supplemental data:
Expenses## 0.83% 0.84% 0.83% 0.85% 0.87%
Net investment income (loss) 1.53% 1.65% 1.57% 1.31% 1.66%
Portfolio turnover 36% 57% 51% 63% 85%
Net assets at end of period (000 Omitted) $ 339,705 $ 310,818 $ 266,892 $ 288,239 $ 124,221
<Caption>
VALUE SERIES
------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------------- PERIOD ENDED
2004 2003 2002 DECEMBER 31, 2001*
----------- ----------- ----------- ------------------
SERVICE CLASS
Per share data (for a share outstanding throughout
each period):
Net asset value -- beginning of period $ 13.56 $ 11.01 $ 12.86 $ 13.00^
----------- ----------- ----------- ------------------
Income from investment operations# --
Net investment income (loss) $ 0.18 $ 0.16 $ 0.17 $ 0.05
Net realized and unrealized gain (loss) on
investments and foreign currency 1.85 2.56 (1.93) (0.19)
----------- ----------- ----------- ------------------
Total from investment operations $ 2.03 $ 2.72 $ (1.76) $ (0.14)
----------- ----------- ----------- ------------------
Less distributions declared to shareholders --
From net investment income $ (0.16) $ (0.17) $ (0.09) $ --
----------- ----------- ----------- ------------------
Net asset value -- end of period $ 15.43 $ 13.56 $ 11.01 $ 12.86
=========== =========== =========== ==================
Total return***~ 15.18%^^ 25.09% (13.77)% (1.08)%++^
Ratios (to average net assets)/Supplemental data:
Expenses## 1.08% 1.09% 1.08% 1.11%+
Net investment income (loss) 1.28% 1.39% 1.41% 1.00%+
Portfolio turnover 36% 57% 51% 63%
Net assets at end of period (000 Omitted) $ 119,496 $ 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.
^ The net asset value and total return previously reported as $13.12 and
(1.98)%, respectively, have been revised to reflect the net asset value
from the day prior to the class' inception date. The net asset value and
total return previously reported were from inception date, the date the
share class was first available to public shareholders.
^^ The series' net asset value and total return calculation include a
non-recurring accrual recorded as a result of an administrative proceeding
regarding disclosure of brokerage allocation practices in connection with
fund sales, as described in the Legal Proceedings and Transactions with
Affiliates footnotes. The non-recurring accrual did not have a material
impact on net asset value per share based on the shares outstanding on the
day the proceeds were recorded.
~ From time to time the series may receive proceeds from the settlement of a
class action lawsuit, without which performance would be lower.
See notes to financial statements.
64
<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*,
Core Equity Series* (formerly Research Growth and Income 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 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, Mid Cap Growth 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 U.S.
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Certain
series can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations -- Equity securities in 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. 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. 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 mutual funds are valued at net asset value. Investment valuations, other
assets, and liabilities initially expressed in foreign currencies are converted
each business day into U.S. dollars based upon current exchange rates. When
pricing service information or market quotations are not readily available,
securities are priced at fair value as determined under the direction of the
Board of Trustees. For example, significant events (such as movement in the U.S.
securities market, or other regional and local developments) may occur between
the time that foreign markets close (where the security is principally traded)
and the time that the 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, the series may utilize information from an
external vendor or other sources to adjust closing market quotations of foreign
equity securities to reflect what it believes to be the fair value of the
securities as of the series' valuation time. Because the frequency of
significant events is not predictable, fair valuation of foreign equity
securities may occur on a frequent basis.
Repurchase Agreements -- Each series may enter into repurchase agreements with
institutions that the series' investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. Each series
requires that the securities collateral in a repurchase transaction be
transferred to the custodian in a manner sufficient to enable the series to
obtain those securities in the event of a default under the repurchase
agreement. Each series monitors, on a daily basis, the value of the collateral
to ensure that its value, including accrued interest, is greater than amounts
owed to the series under each such repurchase agreement. Each series, along with
other affiliated entities of Massachusetts Financial Services Company (MFS), may
utilize a joint trading account for the purpose of entering into one or more
repurchase agreements.
Foreign Currency Translation -- Purchases and sales of foreign investments,
income, and expenses are converted into U.S. dollars based upon currency
exchange rates prevailing on the respective dates of such transactions. Gains
and losses attributable to foreign currency exchange rates on sales of
securities are recorded for financial statement purposes as net realized gains
and losses on investments. Gains #Notes to Financial Statements -- continuedand
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
65
<Page>
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.
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 each series with indemnification against Borrower default. Each series
bears the risk of loss with respect to the investment of cash collateral. On
loans collateralized by cash, the cash collateral is invested in a money market
fund or short-term securities. A portion of the income generated upon investment
of the collateral is remitted to the Borrowers, and the remainder is allocated
between the series and the lending agent. On loans collateralized by U.S.
Treasury securities, a fee is received from the Borrower, and is allocated
between the series and the lending agent. The dividend and interest income
earned on the securities loaned is accounted for in the same manner as other
dividend and interest income.
At December 31, 2004, the value of securities loaned for the New Discovery
Series was $70,631,083. These loans were collateralized by cash of $72,361,907
and non-cash US Treasury obligations of $19,761.
Investment Transactions and Income -- Investment transactions are recorded on
the trade date. Interest income is recorded on the accrual basis. All premium
and discount is amortized or accreted for financial statement purposes in
accordance with U.S. generally accepted accounting principles. All discount is
accreted for tax reporting purposes as required by federal income tax
regulations. Dividends received in cash are recorded on the ex-dividend date.
Dividend and interest payments received in additional securities are recorded on
the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date. 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.
Each series may receive proceeds from the settlement of class action lawsuits
involving its portfolio holdings. Any proceeds received are reflected in
realized gain/loss in the Statement of Operations, or in unrealized gain/loss if
the security is still held by the series.
Fees Paid Indirectly -- 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, 2004, the series' custodian fees were
reduced under this arrangement as noted below. Each series has entered into a
commission recapture agreement, under which certain brokers will credit the
series a portion of the commissions generated, to offset certain expenses of the
series. For the year ended December 31, 2004, 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 CORE INTERNATIONAL MASSACHUSETTS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH VALUE DISCOVERY
SERIES SERIES SERIES STOCK SERIES SERIES SERIES
--------------------------------------------------------------------------------------------------------------------------
Balance credits $ -- $ 205 $ 259 $ 1,215 $ -- $ 1,279
Commission recapture credits 4,612 3,408 3,907 11,086 404 6,939
------------- --------- ------------- ---------------- --------- ---------
Total $ 4,612 $ 3,613 $ 4,166 $ 12,301 $ 404 $ 8,218
------------- --------- ------------- ---------------- --------- ---------
<Caption>
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOLGY VALUE
SERIES SERIES SERIES SERIES SERIES
-------------------------------------------------------------------------------------------------------------
Balance credits $ 361 $ 64 $ 61 $ -- $ 627
Commission recapture credits 6,513 1,118 81 2,028 6,877
------------- --------- ------------- ---------------- ---------
Total $ 6,874 $ 1,182 $ 142 $ 2,028 $ 7,504
------------- --------- ------------- ---------------- ---------
</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 Notes to Financial Statements --
continueddistributions from paid-in capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits, which result in temporary over-distributions for financial statement
purposes, are classified as distributions in excess of net investment income or
net realized gains.
Common types of book and tax differences that could occur include differences in
accounting for foreign currency transactions, wash sales, foreign taxes, real
estate investment trusts, net operating losses and non-taxable distributions.
The tax character of distributions declared for the years ended December 31,
2004 and December 31, 2003 was as follows:
<Table>
<Caption>
CAPITAL OPPORTUNITIES SERIES CORE EQUITY SERIES INTERNATIONAL GROWTH SERIES
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- ----------------------------- -----------------------------
2004 2003 2004 2003 2004 2003
----------------------------- ----------------------------- -----------------------------
Distributions declared from:
Ordinary income $ 1,284,703 $ 907,389 $ 569,298 $ 561,841 $ 671,328 $ 738,126
------------- ------------- ------------- ------------- ------------- -------------
</Table>
66
<Page>
<Table>
<Caption>
MASSACHUSETTS INVESTORS
GROWTH STOCK SERIES MID CAP VALUE SERIES
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- -----------------------------
2004 2003 2004 2003
----------------------------- -----------------------------
Distributions declared from:
Ordinary income $ 320,560 $ -- $ 432,782 $ 1,651
Long-term Capital Gain -- -- 25,758 --
------------- ------------- ------------- -------------
Total distributions declared $ 320,560 $ -- $ 458,540 $ 1,651
------------- ------------- ------------- -------------
<Caption>
RESEARCH INTERNATIONAL SERIES STRATEGIC VALUE SERIES
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- -----------------------------
2004 2003 2004 2003
----------------------------- -----------------------------
Distributions declared from:
Ordinary income $ 530,167 $ 410,974 $ 194,355 $ 3,650
Long-term Capital Gain -- -- $ 29,295 --
------------- ------------- ------------- -------------
Total distributions declared $ 530,167 $ 410,974 $ 223,650 $ 3,650
------------- ------------- ------------- -------------
<Caption>
VALUE SERIES
YEAR ENDED DECEMBER 31,
-----------------------------
2004 2003
-----------------------------
Distributions declared from:
Ordinary income $ 5,235,208 $ 5,151,031
------------- -------------
</Table>
During the year ended December 31, 2004, the following amounts were reclassified
due to differences between book and tax accounting, which may include foreign
currency transactions, real estate investment trusts, non-taxable distributions,
and net operating losses.
<Table>
<Caption>
CAPITAL CORE INTERNATIONAL MASSACHUSETTS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH VALUE DISCOVERY
INCREASE (DECREASE): SERIES SERIES SERIES STOCK SERIES SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------------------------
Paid-in capital $ -- $ -- $ -- $ -- $ 1 $ (2,114,597)
Accumulated undistributed net
realized gain (loss) on investments
and foreign currency transactions -- (1,785) 105,341 2,690 (28,536) 6,455
Accumulated undistributed net
investment income (loss) -- 1,785 (105,341) (2,690) 28,535 2,108,142
<Caption>
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOGY VALUE
INCREASE (DECREASE): SERIES SERIES SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------------------
Paid-in capital $ (2) $ 2 $ -- $ 38,886 $ --
Accumulated undistributed net
realized gain (loss) on investments
and foreign currency transactions 47,636 265 -- (111,031) 6,715
Accumulated undistributed net
investment income (loss) (47,634) (267) -- 72,145 (6,715)
</Table>
As of December 31, 2004, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
<Table>
<Caption>
CAPITAL CORE INTERNATIONAL MASSACHUSETTS
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH
SERIES SERIES SERIES STOCK SERIES
- -------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 2,156,452 $ 596,669 $ 1,225,614 $ 2,407,630
Undistributed long-term capital gain -- -- -- --
Capital loss carryforward (316,798,046) (11,190,665) (8,861,512) (438,050,114)
Unrealized appreciation (depreciation) 28,943,419 14,369,069 30,181,344 23,989,383
Other temporary differences (5,365) -- (88,703) --
<Caption>
MID CAP NEW RESEARCH STRATEGIC
VALUE DISCOVERY INTERNATIONAL GROWTH
SERIES SERIES SERIES SERIES
- -------------------------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 2,449,101 $ -- $ 1,119,299 $ 183,456
Undistributed long-term capital gain 412,228 -- -- --
Capital loss carryforward -- (69,036,964) (6,700,046) (51,167,926)
Unrealized appreciation (depreciation) 2,746,853 41,335,096 23,849,010 7,812,091
Other temporary differences -- (2,316) (91,528) --
<Caption>
STRATEGIC
VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES
- ------------------------------------------------------------------------------------------------------
Undistributed ordinary income $ 597,381 $ -- $ 6,088,181
Undistributed long-term capital gain 601,191 -- --
Capital loss carryforward -- (38,956,283) (11,539,417)
Unrealized appreciation (depreciation) 1,329,356 2,886,404 78,660,990
Other temporary differences (315) -- --
</Table>
67
<Page>
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 CORE INTERNATIONAL MASSACHUSETTS NEW
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH DISCOVERY
EXPIRATION DATE SERIES SERIES SERIES STOCK SERIES SERIES
- ----------------------------------------------------------------------------------------------------------------------------
December 31, 2009 $ (170,437,494) $ -- $ -- $ (262,542,165) $ --
December 31, 2010 (146,360,552) (11,190,665) (8,861,512) (175,507,949) (69,036,964)
---------------- ---------------- ---------------- ---------------- ----------------
Total $ (316,798,046) $ (11,190,665) $ (8,861,512) $ (438,050,114) $ (69,036,964)
================ ================ ================ ================ ================
</Table>
<Table>
<Caption>
RESEARCH STRATEGIC
INTERNATIONAL GROWTH TECHNOLOGY VALUE
EXPIRATION DATE SERIES SERIES SERIES SERIES
- --------------------------------------------------------------------------------------------------------
December 31, 2008 $ -- $ -- $ (1,395,914) $ --
December 31, 2009 -- (31,278,712) (21,058,299) --
December 31, 2010 (6,700,046) (17,626,481) (16,502,070) (7,579,049)
December 31, 2011 -- (2,262,733) -- (3,960,368)
---------------- ---------------- ---------------- ----------------
Total $ (6,700,046) $ (51,167,926) $ (38,956,283) $ (11,539,417)
================ ================ ================ ================
</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.
Multiple Classes of Shares of Beneficial Interest -- Each series offers multiple
classes of shares, which differ in their respective distribution fees. All
shareholders bear the common expenses of the series based on daily net assets of
each class, without distinction between share classes. Dividends are declared
separately for each class. Differences in per share dividend rates are generally
due to differences in separate class expenses.
(3) TRANSACTIONS WITH AFFILIATES
Investment Adviser -- Each series has an investment advisory agreement with
Massachusetts Financial Services Company (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 "OTHER"
MANAGEMENT EXPENSE
FEE LIMITATION
-----------------------------------------------------------------------------------
Capital Opportunities Series 0.75%* N/A
Core Equity Series 0.75% N/A
International Growth Series 0.90%* 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 International Series 0.90%* 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. The management fee for International Growth Series and Research
International Series is 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.
** 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 has contractually agreed to pay each series' operating
expenses exclusive of management and distribution fees such that the series'
other expenses do not exceed 0.25% of its average daily net assets. This is
reflected as a reduction of expenses in the Statement of Operations.
Each series pays compensation to its Independent Trustees in the form of a
retainer, attendance fees, and additional compensation to the Board chairperson,
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).
This series and certain other MFS funds (the "funds") have entered into a
services agreement (the "Agreement") which provides for payment of fees by the
funds to Tarantino LLC in return for the provision of services of an Independent
Chief Compliance Officer (ICCO) for the funds. The ICCO is an officer of the
68
<Page>
funds and the sole member of Tarantino LLC. MFS has agreed to provide office
space and other administrative support and supplies to the ICCO. The funds can
terminate the Agreement with Tarantino LLC at any time under the terms of the
Agreement.
The series' investment adviser, MFS, has been the subject of an administrative
proceeding regarding disclosure of brokerage allocation practices in connection
with fund sales, as described in the Legal Proceedings Footnote. On July 28,
2004, the following funds accrued an estimate of the amount to be received
pursuant to this matter:
<Table>
<Caption>
ESTIMATE OF THE
AMOUNT TO BE RECEIVED
-----------------------------------------------------------------------
Capital Opportunities Series $ 164,749
Core Equity Series 25,093
International Growth Series --
Massachusetts Investors Growth Stock Series 745,769
Mid Cap Value Series 17
New Discovery Series 17,321
Research International Series 1,393
Strategic Growth Series 2,248
Strategic Value Series 12
Technology Series 5,845
Value Series 75,992
</Table>
Massachusetts Investors Growth Stock Series' accrual resulted in an increase in
net asset value of $0.01 per share based on the shares outstanding the day the
proceeds were recorded. The remaining funds in the series had accruals which did
not have a material impact on the net asset value per share on the day they were
recorded.
Administrator -- MFS provides certain financial, legal, shareholder
communications, compliance, and other administrative services to certain funds
for which MFS acts as investment advisor. Under an administrative services
agreement between the funds and MFS, MFS is entitled to partial reimbursement of
the costs MFS incurs to provide these services, subject to review and approval
by the Board of Trustees. Each fund is allocated a portion of these
administrative costs based on its size and relative average net assets. Prior to
April 1, 2004, each series paid 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>
Effective April 1, 2004, each series paid MFS an administrative fee up to the
following annual percentage rates of the series' average daily net assets:
<Table>
First $2 billion 0.01120%
Next $2.5 billion 0.00832%
Next $2.5 billion 0.00032%
In excess of $7 billion 0.00000%
</Table>
For the year ended December 31, 2004, each series paid MFS the following amounts
to partially reimburse MFS for the costs of providing administrative services.
<Table>
<Caption>
% OF
ADMINSTRATIVE AVERAGE
FEE NET ASSETS
-----------------------------------------------------------------------------
Capital Opportunities Series $ 25,145 0.0094%
Core Equity Series 8,077 0.0092%
International Growth Series 11,319 0.0090%
Massachusetts Investors Growth Stock Series 51,522 0.0093%
Mid Cap Value Series 1,762 0.0087%
New Discovery Series 27,121 0.0092%
Research International Series 10,174 0.0086%
Strategic Growth Series 7,559 0.0091%
Strategic Value Series 858 0.0087%
Technology Series 2,812 0.0097%
Value Series 37,054 0.0089%
</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:
Each 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, 2004 were 0.25% of average daily net assets attributable to
Service Class shares on an annualized basis.
69
<Page>
(4) PORTFOLIO SECURITIES
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
<Table>
<Caption>
CAPITAL CORE INTERNATIONAL MASSACHUSETTS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH VALUE DISCOVERY
SERIES SERIES SERIES STOCK SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government
securities) $ 194,490,818 $ 85,534,330 $ 115,171,436 $ 746,663,984 $ 34,092,773 $ 400,363,872
============= ============= ============= ================ ============= =============
Sales
Investments (non-U.S. government
securities) $ 242,215,981 $ 89,281,562 $ 121,592,714 $ 812,741,669 $ 29,718,449 $ 401,256,547
============= ============= ============= ================ ============= =============
</Table>
<Table>
<Caption>
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Purchases
Investments (non-U.S. government
securities) $ 143,477,938 $ 66,252,822 $ 8,599,080 $ 31,199,720 $ 166,574,744
============= ============= ================ ============= =============
Sales
Investments (non-U.S. government
securities) $ 118,840,095 $ 59,454,622 $ 6,768,259 $ 36,775,304 $ 145,781,708
============= ============= ================ ============= =============
</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 CORE INTERNATIONAL MASSACHUSETTS MID CAP NEW
OPPORTUNITIES EQUITY GROWTH INVESTORS GROWTH VALUE DISCOVERY
SERIES SERIES SERIES STOCK SERIES SERIES SERIES
- -----------------------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 253,020,580 $ 85,334,118 $ 137,024,842 $ 545,827,160 $ 21,451,421 $ 343,330,713
============= ============= ============= ================ ============= =============
Gross unrealized appreciation $ 34,103,473 $ 14,796,412 $ 31,187,370 $ 35,474,202 $ 3,091,992 $ 46,426,508
Gross unrealized depreciation (5,160,054) (427,343) (1,010,790) (11,486,607) (345,225) (5,091,529)
------------- ------------- ------------- ---------------- ------------- -------------
Net unrealized appreciation
(depreciation) $ 28,943,419 $ 14,369,069 $ 30,176,580 $ 23,987,595 $ 2,746,767 $ 41,334,979
============= ============= ============= ================ ============= =============
<Caption>
RESEARCH STRATEGIC STRATEGIC
INTERNATIONAL GROWTH VALUE TECHNOLOGY VALUE
SERIES SERIES SERIES SERIES SERIES
- -------------------------------------------------------------------------------------------------------------------
Aggregate cost $ 154,474,006 $ 82,226,659 $ 10,428,025 $ 27,923,752 $ 391,119,146
============= ============= ============= ================ =============
Gross unrealized appreciation $ 24,725,662 $ 9,884,163 $ 1,508,841 $ 3,340,579 $ 81,781,475
Gross unrealized depreciation (878,122) (2,072,208) (179,485) (454,175) (3,122,252)
------------- ------------- ------------- ---------------- -------------
Net unrealized appreciation
(depreciation) $ 23,847,540 $ 7,811,955 $ 1,329,356 $ 2,886,404 $ 78,659,223
============= ============= ============= ================ =============
</Table>
(5) SHARES OF BENEFICIAL INTEREST
Each series' Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
series shares were as follows:
<Table>
<Caption>
CAPITAL OPPORTUNITIES SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 4,415,712 $ 54,806,074 5,731,529 $ 62,261,227
Shares issued to shareholders in
reinvestment of distributions 106,761 1,240,566 90,020 890,293
Shares reacquired (8,556,292) (105,046,939) (10,2,242,917) (106,123,750)
--------------- --------------- --------------- ---------------
Net change (4,033,819) $ (49,000,299) (4,421,368) $ (42,972,230)
=============== =============== =============== ===============
<Caption>
CORE EQUITY SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 2,029,961 $ 26,702,688 2,988,914 $ 33,507,139
Shares issued to shareholders in
reinvestment of distributions 42,539 526,207 49,630 518,633
Shares reacquired (2,622,663) (34,280,105) (3,140,709) (34,316,777)
--------------- --------------- --------------- ---------------
Net change (550,163) $ (7,051,210) (102,165) $ (291,005)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 1,026,549 $ 12,653,823 1,050,333 $ 11,275,332
Shares issued to shareholders in
reinvestment of distributions 3,808 44,137 1,732 17,096
Shares reacquired (1,032,924) (12,685,861) (952,712) (10,185,013)
--------------- --------------- --------------- ---------------
Net change (2,567 $ 12,099 99,353 $ 1,107,415
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 337,382 $ 4,444,074 400,134 $ 4,534,610
Shares issued to shareholders in
reinvestment of distributions 3,492 43,091 4,147 43,208
Shares reacquired (356,981) (4,699,697) (342,681) (3,876,494)
--------------- --------------- --------------- ---------------
Net change (16,107) $ (212,532) 61,600 $ 701,324
=============== =============== =============== ===============
</Table>
70
<Page>
<Table>
<Caption>
INTERNATIONAL GROWTH SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 15,225,467 $ 183,137,894 17,427,446 $ 158,475,766
Shares issued to shareholders in
reinvestment of distributions 54,523 610,662 78,473 673,301
Shares reacquired (15,787,547) (189,853,978) (18,699,087) (169,539,648)
--------------- --------------- --------------- ---------------
Net change (507,557) $ (6,105,422) (1,193,168) $ (10,390,581)
=============== =============== =============== ===============
<Caption>
MASSACHUSETTS INVESTORS GROWTH STOCK SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 15,612,964 $ 138,577,171 20,408,527 $ 163,430,484
Shares issued to shareholders in
reinvestment of distributions 37,669 320,560 -- --
Shares reacquired (24,566,996) (215,967,207) (26,056,445) (203,246,211)
--------------- --------------- --------------- ---------------
Net change (8,916,363) $ (77,069,476) (5,647,918) $ (39,815,727)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 3,342,928 $ 40,124,457 4,889,389 $ 43,375,201
Shares issued to shareholders in
reinvestment of distributions 5,426 60,666 7,564 64,825
Shares reacquired (3,321,710) (39,836,993) (4,826,366) (42,944,326)
--------------- --------------- --------------- ---------------
Net change 26,644 $ 348,130 70,587 $ 495,700
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 13,231,942 $ 115,112,187 8,700,962 $ 69,795,492
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares reacquired (12,518,366) (108,752,839) (5,421,405) (43,607,875)
--------------- --------------- --------------- ---------------
Net change 713,576 $ 6,359,348 3,279,557 $ 26,187,617
=============== =============== =============== ===============
<Caption>
MID CAP VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- -- $ --
Shares issued to shareholders in
reinvestment of distributions 56 581 3 24
Shares reacquired -- -- --
--------------- --------------- --------------- ---------------
Net change 56 $ 581 3 $ 24
=============== =============== =============== ===============
<Caption>
NEW DISCOVERY SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 21,123,534 $ 268,637,935 22,713,040 $ 247,375,353
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares reacquired (23,123,423) (293,395,522) (24,228,090) (260,743,048)
--------------- --------------- --------------- ---------------
Net change (1,999,889) $ (24,757,587) (1,515,050) $ (13,367,695)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 5,380,740 $ 59,003,133 2,401,174 $ 22,364,748
Shares issued to shareholders
in reinvestment of distributions 44,505 457,959 197 1,626
Shares reacquired (4,982,556) (54,629,610) (963,044) (9,070,063)
--------------- --------------- --------------- ---------------
Net change 442,689 $ 4,831,482 1,438,327 $ 13,296,311
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 19,422,740 $ 242,942,770 12,808,961 $ 142,295,303
Shares issued to shareholders
in reinvestment of distributions -- -- -- --
Shares reacquired (17,345,955) (217,004,840) (10,887,079) (120,824,458)
--------------- --------------- --------------- ---------------
Net change 2,076,785 $ 25,937,930 1,921,882 $ 21,470,845
=============== =============== =============== ===============
<Caption>
RESEARCH INTERNATIONAL SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 3,026,313 $ 39,423,839 2,906,178 $ 30,361,049
Shares issued to shareholders
in reinvestment of distributions 31,672 370,243 40,840 380,627
Shares reacquired (3,267,193) (42,326,114) (3,691,524) (37,365,238)
--------------- --------------- --------------- ---------------
Net change (209,208) $ (2,532,032) (744,506) $ (6,623,562)
=============== =============== =============== ===============
<Caption>
STRATEGIC GROWTH SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 2,453,820 $ 17,830,753 3,236,703 $ 21,208,639
Shares issued to shareholders
in reinvestment of distributions -- -- -- --
Shares reacquired (3,198,009) (23,034,225) (3,400,634) (21,655,558)
--------------- --------------- --------------- ---------------
Net change (744,189) $ (5,203,472) (163,931) $ (446,919)
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 11,674,749 $ 147,609,314 5,228,152 $ 53,171,179
Shares issued to shareholders
in reinvestment of distributions 13,751 159,924 3,267 30,347
Shares reacquired (9,725,264) (123,029,665) (3,591,239) (36,088,293)
--------------- --------------- --------------- ---------------
Net change 1,963,236 $ 24,739,573 1,640,180 $ 17,113,233
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 16,633,518 $ 118,094,241 6,207,143 $ 41,658,338
Shares issued to shareholders
in reinvestment of distributions -- -- -- --
Shares reacquired (15,319,716) (108,630,315) (2,841,608) (19,082,216)
--------------- --------------- --------------- ---------------
Net change 1,313,802 $ 9,463,926 3,365,535 $ 22,576,122
=============== =============== =============== ===============
</Table>
71
<Page>
<Table>
<Caption>
STRATEGIC VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold -- $ -- -- $ --
Shares issued in connection with
acquisition of MFS/Sun Life Global
Telecommunications Series -- -- -- --
Shares issued to shareholders in
reinvestment of distributions 19 186 1 11
Shares reacquired -- -- -- --
--------------- --------------- --------------- ---------------
Net change 19 $ 186 1 $ 11
=============== =============== =============== ===============
<Caption>
TECHNOLOGY SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 2,538,284 $ 10,318,941 5,647,401 $ 19,930,088
Shares issued in connection with
acquisition of MFS/Sun Life Global
Telecommunications Series -- -- 414,189 1,619,479
Shares issued to shareholders in
reinvestment of distributions -- -- -- --
Shares reacquired (3,959,500) (15,745,302) (4,120,441) (14,463,021)
--------------- --------------- --------------- ---------------
Net change (1,421,216) $ (5,426,361) 1,941,149 $ 7,086,546
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 903,807 $ 9,567,466 1,245,004 $ 11,220,828
Shares issued in connection with
acquisition of MFS/Sun Life Global
Telecommunications Series -- -- -- --
Shares issued to shareholders
in reinvestment of distributions 22,943 223,464 438 3,639
Shares reacquired (738,361) (7,859,518) (562,914) (5,226,898)
--------------- --------------- --------------- ---------------
Net change 188,389 $ 1,931,412 682,528 $ 5,997,569
=============== =============== =============== ===============
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 651,183 $ 2,612,867 874,566 $ 3,202,873
Shares issued in connection with
acquisition of MFS/Sun Life Global
Telecommunications Series -- -- 149,18 578,825
Shares issued to shareholders
in reinvestment of distributions -- -- -- --
Shares reacquired (781,899) (3,093,604) (556,004) (2,070,145)
--------------- --------------- --------------- ---------------
Net change (130,716) $ (480,737) 467,744 $ 1,711,553
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
VALUE SERIES
------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
INITIAL CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 8,964,734 $ 128,059,784 10,095,874 $ 121,420,880
Shares issued to shareholders
in reinvestment of distributions 306,054 4,095,008 392,757 4,371,388
Shares reacquired (10,199,972) (145,395,836) (11,813,004) (139,315,973)
--------------- --------------- --------------- ---------------
Net change (929,184) $ (13,241,044) (1,324,373) $ (13,523,705)
=============== =============== =============== ===============
</Table>
<Table>
<Caption>
YEAR ENDED YEAR ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
---------------------------------- ----------------------------------
SERVICE CLASS SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------------------------------------------
Shares sold 11,935,955 $ 166,920,642 5,856,038 $ 71,134,766
Shares issued to shareholders
in reinvestment of distributions 85,536 1,140,200 70,238 779,643
Shares reacquired (10,456,942) (146,316,509) (3,982,922) (48,402,688)
--------------- --------------- --------------- ---------------
Net change 1,564,549 $ 21,744,333 1,943,354 $ 23,511,721
=============== =============== =============== ===============
</Table>
(6) LINE OF CREDIT
The 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 fund, based on its borrowings, at a rate equal to the Federal
Reserve funds rate plus 0.50%. In addition, a commitment fee, based on the
average daily, unused portion of the line of credit, is allocated among the
participating funds at the end of each calendar quarter. The commitment fee
allocated to each series, and included in miscellaneous expense for the year
ended December 31, 2004 was as follows:
<Table>
<Caption>
COMMITMENT
FEE
-----------------------------------------------------------------
Capital Opportunities Series $ 2,148
Core Equity Series 439
International Growth Series 1,042
Massachusetts Investors Growth Stock Series 4,414
Mid Cap Value Series 123
New Discovery Series 1,505
Research International Series 681
Strategic Growth Series 452
Strategic Value Series 55
Technology Series 153
Value Series 3,325
</Table>
Each series had no significant borrowings during the year ended December 31,
2004.
72
<Page>
(7) FINANCIAL INSTRUMENTS
The Technology 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.
<Table>
<Caption>
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
----------------------------------------------------------------------------------
Outstanding, beginning of period -- $ --
Options written 6 151,142
Options terminated in closing transactions (6) (151,142)
--------- ----------
Outstanding, end of period -- $ --
========= ==========
</Table>
At December 31, 2004, the fund had sufficient cash and/or securities at least
equal to the value of the written options.
(8) RESTRICTED SECURITIES
At December 31, 2004, the International Growth Series owned the following
security which is subject to legal or contractual restrictions on resale,
excluding securities issued under Rule 144A, constituting 0.1% 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>
DESCRIPTION DATE OF ACQUISITION SHARE AMOUNT COST VALUE
- -------------------------------------------------------------------------------------------------
Aber Diamond Corp 12/7/2004 23,500 $ 817,823 $ 831,209
========== ==========
</Table>
(9) LEGAL PROCEEDINGS
On March 31, 2004, MFS settled an administrative proceeding with the Securities
and Exchange Commission ("SEC") regarding disclosure of brokerage allocation
practices in connection with MFS fund sales (the term "MFS funds" means the
open-end registered management investment companies sponsored by MFS). Under the
terms of the settlement, in which MFS neither admitted nor denied any
wrongdoing, MFS agreed to pay (one dollar) $1.00 in disgorgement and $50 million
in penalty to certain MFS funds, pursuant to a plan developed by an independent
distribution consultant. The brokerage allocation practices which were the
subject of this proceeding were discontinued by MFS in November 2003. The
agreement with the SEC is reflected in an order of the SEC. The SEC settlement
order states that MFS failed to adequately disclose to the Boards of Trustees
and to shareholders of the MFS funds the specifics of its preferred arrangements
with certain brokerage firms selling MFS fund shares. The SEC settlement order
states that MFS had in place policies designed to obtain best execution of all
MFS fund trades. As part of the settlement, MFS retained an independent
compliance consultant to review the completeness of its current policies and
practices regarding disclosure to MFS fund trustees and to MFS fund shareholders
of strategic alliances between MFS or its affiliates and broker-dealers and
other financial intermediaries who support the sale of MFS fund shares. Pursuant
to the SEC order, on July 28, 2004, MFS transferred these settlement amounts to
the SEC, and those MFS funds entitled to these settlement amounts accrued an
estimate of their pro rata portion of these amounts. The final distribution plan
was approved by the SEC on January 21, 2005. It is expected that this
distribution will be made by the SEC to the affected MFS funds on or around
February 14, 2005.
In addition, in February, 2004, MFS reached agreement with the SEC, the New York
Attorney General ("NYAG") and the Bureau of Securities Regulation of the State
of New Hampshire ("NH") to settle administrative proceedings alleging false and
misleading information in certain MFS open-end retail fund ("MFS retail funds")
prospectuses regarding market timing and related matters (the "February
Settlements"). These regulators alleged that prospectus language for certain MFS
retail funds was false and misleading because, although the prospectuses for
those funds in the regulators' view indicated that they prohibited market
timing, MFS did not limit trading activity in 11 domestic large cap stock, high
grade bond and money market retail funds. MFS' former Chief Executive Officer
and former President also reached agreement with the SEC in which they agreed
to, among other terms, monetary fines and temporary suspensions from association
with any investment adviser or registered investment company. These individuals
have resigned their positions with, and will not be returning to, MFS and the
MFS funds. Under the terms of the February Settlements, MFS and the executives
neither admit nor deny wrongdoing.
Under the terms of the February Settlements, a $225 million pool has been
established for distribution to shareholders in certain MFS retail funds, which
has been funded by MFS and of which $50 million is characterized as a penalty.
This pool will be distributed in accordance with a methodology developed by an
independent distribution consultant in consultation with MFS and the Board of
Trustees of the MFS retail funds, and acceptable to the SEC. MFS has further
agreed with NYAG to reduce its management fees in the aggregate amount of
approximately $25 million annually over the next five years, and not to increase
certain management fees during this period. MFS has also paid an administrative
fine to NH in the amount of $1 million, which will be used for investor
education purposes (NH retained $250,000 and $750,000 was contributed to the
North American Securities Administrators Association's Investor Protection
Trust). In addition, under the terms of the February Settlements, MFS is in the
process of adopting certain governance changes and reviewing its policies and
procedures.
73
<Page>
Since December 2003, MFS, MFS Fund Distributors, Inc., MFS Service Center, Inc.,
MFS Corporation Retirement Committee, Sun Life Financial Inc., various MFS
funds, certain current and/or former Trustees of these MFS funds, and certain
officers of MFS have been named as defendants in multiple lawsuits filed in
federal and state courts. The lawsuits variously have been commenced as class
actions or individual actions on behalf of investors who purchased, held or
redeemed shares of the MFS funds during specified periods, as ERISA actions by
participants in certain retirement plan accounts on behalf of those accounts, or
as derivative actions on behalf of the MFS funds. The lawsuits relating to
market timing and related matters have been transferred to, and consolidated
before, the United States District Court for the District of Maryland, as part
of a multi-district litigation of market timing and related claims involving
several other fund complexes (IN RE MUTUAL FUNDS INVESTMENT LITIGATION (ALGER,
COLUMBIA, JANUS, MFS, ONE GROUP, PUTNAM, ALLIANZ DRESDNER), No. 1:04-md-15863
(transfer began March 19, 2004)). The market timing cases related to the MFS
complex are RIGGS V. MFS ET AL., CASE NO. 04-CV-01162-JFM (direct), HAMMERSLOUGH
V. MFS ET AL., CASE NO. 04-MD-01620 (derivative) AND ANITA WALKER V. MFS ET AL.,
CASE NO. 1:04-CV-01758 (ERISA) . The plaintiffs in these consolidated lawsuits
generally seek injunctive relief including removal of the named Trustees,
adviser and distributor, rescission of contracts and 12b-1 Plans, disgorgement
of fees and profits, monetary damages, punitive damages, attorney's fees and
costs and other equitable and declaratory relief. Four lawsuits alleging
improper brokerage allocation practices and excessive compensation are pending
in the United States District Court for the District of Massachusetts (FORSYTHE
V. SUN LIFE FINANCIAL INC., ET AL., No. 04cv10584 (GAO) (March 25, 2004);
EDDINGS V. SUN LIFE FINANCIAL INC., ET AL., No. 04cv10764 (GAO) (April 15,
2004); MARCUS DUMOND, ET AL. V. MASSACHUSETTS FINANCIAL SERVS. CO., ET al., No.
04cv11458 (GAO) (May 4, 2004); and KOSLOW V. SUN LIFE FINANCIAL INC., ET AL.,
No. 04cv11019 (GAO) (May 20, 2004)). The plaintiffs in these lawsuits generally
seek compensatory damages, punitive damages, recovery of fees, rescission of
contracts, an accounting, restitution, declaratory relief, equitable and/or
injunctive relief and attorney's fees and costs. The various lawsuits generally
allege that some or all of the defendants (i) permitted or acquiesced in market
timing and/or late trading in some of the MFS funds, inadequately disclosed MFS'
internal policies concerning market timing and such matters, (ii) received
excessive compensation as fiduciaries to the MFS funds, or (iii) permitted or
acquiesced in the improper use of fund assets by MFS to support the distribution
of MFS fund shares and inadequately disclosed MFS' use of fund assets in this
manner. The actions assert that some or all of the defendants violated the
federal securities laws, including the Securities Act of 1933 and the Securities
Exchange Act of 1934, the Investment Company Act of 1940 and the Investment
Advisers Act of 1940, the Employee Retirement Income Security Act of 1974, as
well as fiduciary duties and other violations of common law. Insofar as any of
the actions is appropriately brought derivatively on behalf of any of the MFS
funds, any recovery will inure to the benefit of the MFS funds. The defendants
are reviewing the allegations of the multiple complaints and will respond
appropriately. Additional lawsuits based on similar allegations may be filed in
the future.
Any potential resolution of these matters may include, but not be limited to,
judgments or settlements for damages against MFS, the MFS funds, or any other
named defendant. As noted above, as part of the regulatory settlements, MFS has
established a restitution pool in the amount of $225 million to compensate
certain shareholders of certain MFS retail funds for damages that they allegedly
sustained as a result of market timing or late trading in certain of the MFS
retail funds, and transferred $50 million for distribution (which has been
accrued to the affected funds and is expected to be distributed on or around
February 14, 2005) to affected MFS funds to compensate those funds based upon
the amount of brokerage commissions allocated in recognition of MFS fund sales.
It is not clear whether these amounts will be sufficient to compensate
shareholders for all of the damage they allegedly sustained, whether certain
shareholders or putative class members may have additional claims to
compensation, or whether the damages that may be awarded in any of the actions
will exceed these amounts. In the event the MFS funds incur any losses, costs or
expenses in connection with such lawsuits, the Boards of Trustees of the
affected MFS funds may pursue claims on behalf of such funds against any party
that may have liability to the funds in respect thereof.
Review of these matters by the independent Trustees of the MFS funds and their
counsel is continuing. There can be no assurance that these regulatory actions
and lawsuits, or the adverse publicity associated with these developments, will
not result in increased fund redemptions, reduced sales of fund shares, or other
adverse consequences to the MFS funds.
74
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE TRUSTEES AND THE SHAREHOLDERS OF MFS/SUN LIFE SERIES TRUST:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments of MFS/Sun Life Series Trust (the "Trust"),
comprising Capital Opportunities Series, Core Equity Series, International
Growth Series, Massachusetts Investors Growth Stock Series, Mid Cap Value
Series, New Discovery Series, Research International Series, Strategic Growth
Series, Strategic Value Series, Technology Series, and Value Series as of
December 31, 2004, and the related statements of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the Trust's
internal control over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2004, by
correspondence with the custodian and brokers; where replies were not received
from brokers, we performed other auditing procedures. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Capital Opportunities Series, Core Equity Series, International Growth Series,
Massachusetts Investors Growth Stock Series, Mid Cap Value Series, New Discovery
Series, Research International Series, Strategic Growth Series, Strategic Value
Series, Technology Series and Value Series as of December 31, 2004, 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 24, 2005
75
<Page>
MFS/SUN LIFE SERIES TRUST
FEDERAL TAX INFORMATION (UNAUDITED)
Each series designated the following amounts as a capital gain dividend for the
year ended December 31, 2004:
<Table>
<Caption>
CAPITAL GAIN
DIVIDEND
----------------------------------------------------------------------------
Mid Cap Value Series $ 25,758
Strategic Value Series 29,295
</Table>
For the year ended December 31, 2004, 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%
Core Equity Series 100%
International Growth Series 0.50%
Massachusetts Investors Growth Stock Series 100%
Mid Cap Value Series 11.30%
Research International Series 1.03%
Strategic Value Series 100%
Value Series 100%
</Table>
For the year ended December 31, 2004, income from foreign sources and the
foreign tax credit were as follows:-
<Table>
<Caption>
FOREIGN SOURCE
INCOME AND DIVIDENDS FOREIGN TAX CREDIT
----------------------------------------------------------------------------------------------
International Growth Series $ 2,953,404 $ 288,941
Research International Series 2,683,630 251,222
</Table>
76
<Page>
MFS/SUN LIFE SERIES TRUST
TRUST TRUSTEES AND OFFICERS -- IDENTIFICATION AND BACKGROUND
The Trustees and officers of the trust, as of February 1, 2005, are listed
below, together with their principal occupations during the past five years.
(Their titles may have varied during that period.) The address of each Trustee
and officer is 500 Boylston Street, Boston, Massachusetts 02116.
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------------- ------------------- --------------- ---------------------------------------------------
INTERESTED TRUSTEES
C. James Prieur(3) Trustee July 1999 Sun Life Assurance Company of Canada, President and
(born 04/21/51) Chief Operating Officer
David D. Horn(3) Trustee April 1986 Private investor; Retired; Sun Life Assurance
(born 06/07/41) Company of Canada, Former Senior Vice President
and General Manager for the United States (until
1997)
INDEPENDENT TRUSTEES
J. Kermit Birchfield Chairman May 1997 Consultant; Century Partners, Inc. (investments),
(born 01/08/40) Managing Director; Displaytech, Inc. (manufacturer
of liquid crystal display technology), Director
Robert C. Bishop Trustee May 2001 AutoImmune Inc. (pharmaceutical product
(born 01/13/43) development), Chairman, President and Chief
Executive Officer; Caliper Life Sciences Corp.
(laboratory analytical instruments), Director;
Millipore Corporation (purification/filtration
products), Director; Quintiles Transnational Corp.
(contract services to the medical industry),
Director
Frederick H. Dulles Trustee May 2001 Ten State Street LLP (law firm), Partner;
(born 03/12/42) McFadden, Pilkington & Ward LLP (solicitors and
registered foreign lawyers), Partner (until June
2003); Jackson & Nash, LLP (law firm), Of Counsel
(January 2000 to November 2000)
Derwyn F. Phillips Trustee April 1986 Retired
(born 08/31/30)
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
77
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------------- ------------------- --------------- ---------------------------------------------------
Ronald G. Steinhart Trustee May 2001 Private investor; Bank One, Texas N.A., Vice
(born 06/15/40) Chairman and Director (January 2000 to January
2001); Bank One Corporation, Officer (until
January 2000); Carreker Corporation (consultant
and technology provider to financial
institutions), Director; Prentiss Properties Trust
(real estate investment trust), Director; United
Auto Group, Inc. (automotive retailer), Director
Haviland Wright Trustee May 2001 Hawaii Small Business Development Center, Kaua'i
(born 07/21/48) Center, Center Director (since March 2002);
Displaytech, Inc. (manufacturer of liquid crystal
display technology), Chairman and Chief Executive
Officer (until March 2002)
TRUSTEES EMERITUS
Garth Marston Trustee Emeritus Retired
(born 04/28/26)
Samuel Adams Trustee Emeritus Retired
(born 10/19/25)
OFFICERS
Robert J. Manning(4) President February 2004 Massachusetts Financial Services Company, Chief
(born 10/20/63) Executive Officer, President, Chief Investment
Officer and Director
James R. Bordewick, Jr.(4) Assistant Secretary February 1997 Massachusetts Financial Services Company, Senior
(born 03/06/59) and Assistant Clerk Vice President and Associate General Counsel
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
78
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------------- ------------------- --------------- ---------------------------------------------------
Jeffrey N. Carp(4) Secretary and September 2004 Massachusetts Financial Services Company,
(born 12/1/56) Clerk Executive Vice President, General Counsel and
Secretary (since April 2004); Hale and Dorr LLP
(law firm), Partner (prior to April 2004)
Stephanie A. DeSisto(4) Assistant Treasurer May 2003 Massachusetts Financial Services Company, Vice
(born 10/01/53) President (since April 2003); Brown Brothers
Harriman & Co., Senior Vice President (November
2002 to April 2003); ING Groep N.V./Aeltus
Investment Management, Senior Vice President
(prior to November 2002)
James F. DesMarais(4) Assistant Secretary September 2004 Massachusetts Financial Services Company,
(born 03/09/61) and Assistant Clerk Assistant General Counsel
Richard M. Hisey(4) Treasurer August 2002 Massachusetts Financial Services Company, Senior
(born 08/29/58) Vice President (since July 2002); The Bank of New
York, Senior Vice President (September 2000 to
July 2002); Lexington Global Asset Managers, Inc.,
Executive Vice President and Chief Financial
Officer (prior to September 2000); Lexington
Funds, Chief Financial Officer (prior to September
2000)
Brian T. Hourihan(4) Assistant Secretary September 2004 Massachusetts Financial Services Company, Vice
(born 11/11/64) and Assistant Clerk President, Senior Counsel and Assistant Secretary
(since June 2004); Affiliated Managers Group,
Inc., Chief Legal Officer/Centralized Compliance
Program (January to April 2004); Fidelity Research
& Management Company, Assistant General Counsel
(prior to January 2004)
Ellen Moynihan(4) Assistant Treasurer May 1997 Massachusetts Financial Services Company, Vice
(born 11/13/57) President
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
79
<Page>
<Table>
<Caption>
POSITION(S) HELD TRUSTEE/OFFICER PRINCIPAL OCCUPATION DURING THE PAST
NAME, DATE OF BIRTH WITH FUND SINCE(1) FIVE YEARS AND OTHER DIRECTORSHIPS(2)
- --------------------------------- ------------------- --------------- ---------------------------------------------------
Frank L. Tarantino Independent Chief September 2004 Tarantino LLC (provider of compliance services),
(born 03/07/44) Compliance Officer Principal (since June 2004); CRA Business
Strategies Group (consulting services), Executive
Vice President (April 2003 to June 2004); David L.
Babson & Co. (investment adviser), Managing
Director, Chief Administrative Officer and
Director (February 1997 to March 2003)
James O. Yost(4) Assistant Treasurer April 1992 Massachusetts Financial Services Company, Senior
(born 06/12/60) Vice President
</Table>
- ----------
(1) Date first appointed to serve as Trustee/Officer of a MFS/Sun Life Product.
Each Trustee has served continuously since appointment.
(2) Directorships or trusteeships of companies required to report to the
Securities and Exchange Commission (i.e., "public companies").
(3) "Interested person" of Sun Life of Canada (U.S.), within the meaning of the
Investment Company Act of 1940 (referred to as the 1940 Act), which is the
principal federal law governing investment companies like the Series. The
address of Sun Life of Canada (U.S.) is One Sun Life Executive Park,
Wellesley Hills, Massachusetts 02481.
(4) "Interested person" of MFS within the meaning of the 1940 Act. The address
of MFS is 500 Boylston Street, Boston, Massachusetts 02116.
The Series does not hold annual meetings for the purpose of electing Trustees,
and Trustees are not elected for fixed terms. Each Trustee and officer holds
office until his or her successor is chosen and qualified, or until his or her
earlier death, resignation, retirement or removal.
All Trustees currently serve as Trustees of the Series and have served in that
capacity since originally elected or appointed. All of the Trustees are also
Managers of the Compass Variable Accounts, separate accounts registered as
investment companies. The executive officers of the Series Fund 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.
80
<Page>
MFS(R)/SUN LIFE SERIES TRUST
INVESTMENT ADVISER
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
CUSTODIAN AND DIVIDEND DISBURSING AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
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.
Information regarding how each series voted proxies relating to portfolio
securities during the most recent twelve month period ended June 30 is available
without charge by visiting the Proxy Voting section of mfs.com or by visiting
the SEC's website at http://www.sec.gov.
QUARTERLY PORTFOLIO DISCLOSURE
Each series will file a complete schedule of portfolio holdings with the
Securities and Exchange Commission (the Commission) for the first and third
quarters of each fiscal year on Form N-Q. Each series' Form N-Q may be reviewed
and copied at the:
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-0102
Information on the operation of the Public Reference Room any be obtained by
calling the Commission at 1-800-SEC-0330. Each series' Form N-Q is available on
the EDGAR database on the Commission's Internet website at http://www.sec.gov,
and copies of this information may be obtained, upon payment of a duplicating
fee, by electronic request at the following e-mail address: publicinfor@sec.gov
or by writing the Public Reference Section at the above address.
PORTFOLIO MANAGERS++
Margaret W. Adams
William J. Adams
John F. Addeo
S. Irfan Ali
David A. Antonelli
Edward Baldini
T. Kevin Beatty
David M. Calabro
James J. Calmas
Barry P. Dargan
Kenneth J. Enright
Eric B. Fischman
Steven R. Gorham
Robert Henderson
Alan Langsner
John D. Laupheimer, Jr.
Olivier Lebleu
Camille Lee
Gregory Locraft
Kate Mead
Thomas Melendez
Constantinos Mokas
Edward L. O'Dette
Betsy Palmer
Stephen Pesek
Scott B. Richards
Michael W. Roberge
Matthew W. Ryan
Daniel Scherman
David E. Sette-Ducati
Maura A. Shaughnessy
Nicholas Smithie
James T. Swanson
Brooks Taylor
Peter C. Vaream
Terri A. Vitozzi
Barnaby Wiener
Thomas Wetherald
++MFS Investment Management(R)
(C)2005 Sun Life Financial Distributors, Inc.
SUN-C-ANN-2/05 189M
<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 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. J. Kermit Birchfield, Robert C. Bishop, Ronald G. Steinhart and Haviland
Wright, members of the Audit Committee, have been determined by the Board of
Trustees in their reasonable business judgment to meet the definition of "audit
committee financial expert" as such term is defined in Form N-CSR. In addition,
Messrs. J. Kermit Birchfield, Robert C. Bishop, Ronald G. Steinhart and Haviland
Wright are "independent" members of the Audit Committee as defined in Form
N-CSR.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
ITEMS 4(a) THROUGH 4(d) AND 4(g):
The Board of Trustees has appointed Deloitte & Touche LLP ("Deloitte") to serve
as independent accountants to the series of the Registrant ("Funds"). The tables
below set forth the audit fees billed to the Funds as well as fees for non-audit
services provided to the Funds and/or to the Funds' investment adviser,
Massachusetts Financial Services Company ("MFS") and to various entities either
controlling, controlled by, or under common control with MFS that provide
ongoing services to the Funds ("MFS Related Entities").
For the fiscal years ended December 31, 2004 and 2003, audit fees billed to the
Funds by Deloitte were as follows:
<Table>
<Caption>
AUDIT FEES
FEES BILLED BY DELOITTE: 2004 2003
---- ----
Bond Series $ 40,850 $ 39,150
Capital Appreciation Series 29,925 28,700
Capital Opportunities Series 29,925 28,700
Core Equity Series 29,925 28,700
Emerging Growth Series 30,500 29,250
Emerging Markets Equity Series 31,650 30,350
Global Governments Series 40,850 39,150
Global Growth Series 39,125 37,500
Global Total Return Series 39,125 37,500
Government Securities Series 34,525 33,100
High Yield Series 39,125 37,500
International Growth Series 31,650 30,350
International Value Series 32,225 30,900
Managed Sectors Series 30,500 29,250
Massachusetts Investors Growth Stock Series 29,925 28,700
</Table>
<Page>
<Table>
Massachusetts Investors Trust Series 29,925 28,700
Mid Cap Growth Series 29,925 28,400
Mid Cap Value Series 32,225 11,550
Money Market Series 17,850 17,150
New Discovery Series 29,925 28,700
Research International Series 29,925 28,700
Research Series 30,500 29,250
Strategic Growth Series 29,925 28,400
Strategic Income Series 29,925 28,700
Strategic Value Series 32,225 11,550
Technology Series 29,925 28,400
Total Return Series 40,850 39,150
Utilities Series 29,925 28,700
Value Series 29,925 28,700
--------- ---------
TOTAL $ 932,800 $ 854,850
</Table>
For the fiscal years ended December 31, 2004 and 2003, fees billed by Deloitte
for audit-related, tax and other services provided to the Funds and for
audit-related, tax and other services provided to MFS and MFS Related Entities
that relate directly to the operations and financial reporting of each of the
Funds were as follows:
<Table>
<Caption>
AUDIT-RELATED FEES(1) TAX FEES(2) ALL OTHER FEES(3)
FEES BILLED BY DELOITTE: 2004 2003 2004 2003 2004 2003
---- ---- ---- ---- ---- ----
To Bond Series $ 0 $ 0 $ 6,350 $ 4,050 $ 0 $ 0
To Capital Appreciation Series 0 0 6,350 4,050 0 0
To Capital Opportunities Series 0 0 6,350 4,050 0 0
To Core Equity Series 0 0 6,350 4,050 0 0
To Emerging Growth Series 0 0 6,350 4,050 0 0
To Emerging Markets Equity Series 0 0 6,350 4,050 0 0
To Global Governments Series 0 0 6,350 4,050 0 0
To Global Growth Series 0 0 6,350 4,050 0 0
To Global Total Return Series 0 0 6,350 4,050 0 0
To Government Securities Series 0 0 6,350 4,050 0 0
To High Yield Series 0 0 6,350 4,050 0 0
To International Growth Series 0 0 6,350 4,050 0 0
To International Value Series 0 0 6,350 4,050 0 0
To Managed Sectors Series 0 0 6,350 4,050 0 0
To Massachusetts Investors Growth
Stock Series 0 0 6,350 4,050 0 0
To Massachusetts Investors Trust Series 0 0 6,350 4,050 0 0
To Mid Cap Growth Series 0 0 6,350 4,050 0 0
To Mid Cap Value Series 0 0 6,350 4,050 0 0
To Money Market Series 0 0 6,350 4,050 0 0
To New Discovery Series 0 0 6,350 4,050 0 0
</Table>
<Page>
<Table>
To Research International Series 0 0 6,350 4,050 0 0
To Research Series 0 0 6,350 4,050 0 0
To Strategic Growth Series 0 0 6,350 4,050 0 0
To Strategic Income Series 0 0 6,350 4,050 0 0
To Strategic Value Series 0 0 6,350 4,050 0 0
To Technology Series 0 0 6,350 4,050 0 0
To Total Return Series 0 0 6,350 4,050 0 0
To Utilities Series 0 0 6,350 4,050 0 0
To Value Series 0 0 6,350 4,050 0 0
------------ ------------ ---------- ---------- -------- --------
TOTAL FEES BILLED BY DELOITTE TO
ABOVE FUNDS $ 0 $ 0 $ 184,150 $ 117,450 $ 0 $ 0
To MFS and MFS Related
Entities of Bond Series* $ 1,046,170 $ 356,150 $ 67,000 $ 50,000 $ 32,500 $ 0
To MFS and MFS Related
Entities of Capital
Appreciation Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Capital
Opportunities Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Core Equity
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Emerging
Growth Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Emerging
Markets Equity Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Global
Governments Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Global
Growth Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Global
Total Return Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Governments
Securities Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of High Yield
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of International
Growth Series* 1,046,170 356,150 67,000 50,000 32,500 0
</Table>
<Page>
<Table>
To MFS and MFS Related
Entities of International
Value Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Managed Sectors
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Massachusetts
Investors Growth Stock Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Massachusetts
Investors Trust Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Mid Cap Growth
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Mid Cap Value
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Money
Market Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of New
Discovery Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Research
International Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Research
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Strategic
Growth Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Strategic
Income Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Strategic
Value Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Technology
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Total Return
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Utilities
Series* 1,046,170 356,150 67,000 50,000 32,500 0
To MFS and MFS Related
Entities of Value Series* 1,046,170 356,150 67,000 50,000 32,500 0
</Table>
<Page>
AGGREGATE FEES FOR NON-AUDIT SERVICES:
<Table>
<Caption>
2004 2003
---- ----
To Bond Series, MFS and
MFS Related Entities# $ 1,180,470 $ 506,395
To Capital Appreciation Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Capital Opportunities
Series, MFS and MFS Related
Entities# 1,180,470 506,395
To Core Equity Series, MFS
and MFS Related Entities # 1,180,470 506,395
To Emerging Growth Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Emerging Markets
Equity Series, MFS and
MFS Related
Entities# 1,180,470 506,395
To Global Governments
Series, MFS and MFS Related
Entities of Global
Governments Series# 1,180,470 506,395
To Global Growth Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Global Total Return Series,
MFS and MFS Related
Entities # 1,180,470 506,395
To Governments Securities
Series, MFS and MFS Related
Entities# 1,180,470 506,395
To High Yield Series, MFS
and MFS Related Entities# 1,180,470 506,395
To International Growth Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To International Value Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Managed Sectors
Series, MFS and MFS Related
Entities# 1,180,470 506,395
To Massachusetts Investors
Growth Stock Series, MFS and
MFS Related Entities# 1,180,470 506,395
To Massachusetts Investors
Trust Series, MFS and MFS
Related Entities# 1,180,470 506,395
To Mid Cap Growth Series,
MFS and MFS Related
Entities Series# 1,180,470 506,395
</Table>
<Page>
<Table>
To Mid Cap Value Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Money Market Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To New Discovery, MFS and
MFS Related Entities# 1,180,470 506,395
To Research International
Series, MFS and MFS Related
Entities# 1,180,470 506,395
To Research Series, MFS and
MFS Related Entities# 1,180,470 506,395
To Strategic Growth Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Strategic Income Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Strategic Value Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Technology Series, MFS
and MFS Related Entities# 1,180,470 506,395
To Total Return Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Utilities Series,
MFS and MFS Related
Entities# 1,180,470 506,395
To Value Series,
MFS and MFS Related
Entities# 1,180,470 506,395
</Table>
* This amount reflects the fees billed to MFS and MFS Related Entities for
non-audit services relating directly to the operations and financial reporting
of the Funds (portions of which services also related to the operations and
financial reporting of other funds within the MFS Funds complex).
# This amount reflects the aggregate fees billed by Deloitte for non-audit
services rendered to the Funds and for non-audit services rendered to MFS and
the MFS Related Entities.
(1) The fees included under "Audit-Related Fees" are fees related to assurance
and related services that are reasonably related to the performance of the audit
or review of financial statements, but not reported under "Audit Fees,"
including accounting consultations, agreed-upon procedure reports, attestation
reports, comfort letters and internal control reviews.
(2) The fees included under "Tax Fees" are fees associated with tax compliance,
tax advice and tax planning, including services relating to the filing or
amendment of federal, state or local income tax returns, regulated investment
company qualification reviews and tax distribution and analysis.
<Page>
(3) The fees included under "All Other Fees" are fees for products and services
provided by Deloitte other than those reported under "Audit Fees,"
"Audit-Related Fees" and "Tax Fees."
For periods prior to May 6, 2003, the amounts shown above under "Audit-Related
Fees," "Tax Fees" and "All Other Fees" relate to permitted non-audit services
that would have been subject to pre-approval if the Securities and Exchange
Commission's rules relating to pre-approval of non-audit services had been in
effect.
ITEM 4(e)(1):
Set forth below are the policies and procedures established by the Audit
Committee of the Board of Trustees relating to the pre-approval of audit and
non-audit related services: To the extent required by applicable law,
pre-approval by the Audit Committee of the Board is needed for all audit and
permissible non-audit services rendered to the Funds and all permissible
non-audit services rendered to MFS or MFS Related Entities if the services
relate directly to the operations and financial reporting of the Registrant.
Pre-approval is currently on an engagement-by-engagement basis. In the event
pre-approval of such services is necessary between regular meetings of the Audit
Committee and it is not practical to wait to seek pre-approval at the next
regular meeting of the Audit Committee, pre-approval of such services may be
referred to the Chair of the Audit Committee for approval; provided that the
Chair may not pre-approve any individual engagement for such services exceeding
$50,000 or multiple engagements for such services in the aggregate exceeding
$100,000 between such regular meetings of the Audit Committee. Any engagement
pre-approved by the Chair between regular meetings of the Audit Committee shall
be presented for ratification by the entire Audit Committee at its next
regularly scheduled meeting.
ITEM 4(e)(2):
None, or 0%, of the services relating to the Audit-Related Fees, Tax Fees and
All Other Fees paid by the Funds and MFS and MFS Related Entities relating
directly to the operations and financial reporting of the Registrant disclosed
above were approved by the audit committee pursuant to paragraphs (c)(7)(i)(C)
of Rule 2-01 of Regulation S-X (which permits audit committee approval after the
start of the engagement with respect to services other than audit review or
attest services, if certain conditions are satisfied).
ITEM 4(f): Not applicable.
ITEM 4(h): The Registrant's Audit Committee has considered whether the provision
by a Registrant's independent registered public accounting firm of non-audit
services to MFS and MFS Related Entities that were not pre-approved by the
Committee (because such services were provided prior to the effectiveness of SEC
rules requiring pre-approval or because such services did not relate directly to
the operations and financial reporting of the Registrant) was compatible with
maintaining the independence of the independent registered public accounting
firm as the Registrant's principal auditors.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
<Page>
Not applicable to the Registrant.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the Registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable to the Registrant.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable to the Registrant.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to the procedures by which shareholders may send
recommendations to the Board for nominees to the Registrant's Board since the
Registrant last provided disclosure as to such procedures in response to the
requirements of Item 7(d)(2)(ii)(G) of Schedule 14A or this Item.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act) as conducted within
90 days of the filing date of this Form N-CSR, the registrant's principal
financial officer and principal executive officer have concluded that those
disclosure controls and procedures provide reasonable assurance that the
material information required to be disclosed by the registrant on this
report is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and
forms.
(b) There were no changes in the registrant's internal controls over financial
reporting (as defined in Rule 30a-3(d) under the Act) that occurred during
the second fiscal quarter covered by the report that has materially
affected, or is reasonably likely to materially affect, the registrant's
internal control over financial reporting.
ITEM 12. EXHIBITS.
<Page>
(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 25, 2005
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<Table>
By (Signature and Title)* ROBERT J. MANNING
---------------------------------------------------------------
Robert J. Manning, President (Principal Executive Officer)
Date: February 25, 2005
------------------
By (Signature and Title)* RICHARD M. HISEY
---------------------------------------------------------------
Richard M. Hisey, Treasurer (Principal Financial Officer and
Accounting Officer)
Date: February 25, 2005
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</Table>
* Print name and title of each signing officer under his or her signature.