[FRONT COVER]
[MFS LOGO]
Semiannual Report
March 31, 1996
MFS(R) TOTAL RETURN FUND
<PAGE>
MFS(R) TOTAL RETURN FUND
Trustees
A. Keith Brodkin* - Chairman and President
Richard B. Bailey* - Private Investor; Former Chairman and Director (until
1991), Massachusetts Financial Services Company; Director, Cambridge Bancorp;
Director, Cambridge Trust Company
Peter G. Harwood - Private Investor
J. Atwood Ives - Chairman and Chief Executive Officer, Eastern Enterprises
Lawrence T. Perera - Partner,
Hemenway & Barnes
William J. Poorvu - Adjunct Professor, Harvard University Graduate School of
Business Administration
Charles W. Schmidt - Private Investor
Arnold D. Scott* - Senior Executive Vice President, Director and Secretary,
Massachusetts Financial Services Company
Jeffrey L. Shames* - President and Director, Massachusetts Financial Services
Company
Elaine R. Smith - Independent Consultant
David B. Stone - Chairman, North American Management Corp. (investment
adviser)
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street
Boston, MA 02116-3741
Distributor
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
Head of the Portfolio Team
David M. Calabro*
Treasurer
W. Thomas London*
Assistant Treasurer
James O. Yost*
Secretary
Stephen E. Cavan*
*Affiliated with the Investment Adviser
Assistant Secretary
James R. Bordewick, Jr.*
Custodian
Investors Bank & Trust Company
Investor Information
For MFS stock and bond market outlooks, call toll free: 1-800-637-4458 anytime
from a touch-tone telephone.
For information on MFS mutual funds, call your financial adviser or, for an
information kit, call toll free: 1-800-637-2929 any business day from 9 a.m.
to 5 p.m. Eastern time (or leave a message anytime).
Investor Service
MFS Service Center, Inc.
P.O. Box 2281
Boston, MA 02107-9906
For general information, call toll free:
1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
For service to speech- or hearing-impaired,
call toll free: 1-800-637-6576 any business
day from 9 a.m. to 5 p.m. Eastern time.
(To use this service, your phone must be
equipped with a Telecommunications Device
for the Deaf.)
For share prices, account balances and exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone telephone.
[DALBAR MFS #1 logo]
Top-Rated Service
For the second year in a row, MFS earned a #1 ranking in DALBAR, Inc.'s
Broker/Dealer Survey, Main Office Operations Service Quality category. The firm
achieved a 3.49 overall score--on a scale of 1 to 4--in the 1995 survey. A total
of 71 firms responded, offering input on the quality of service they received
from 36 mutual fund companies nationwide. The survey contained questions about
service quality in 17 categories, including "knowledge of phone service
contacts," "accuracy of transaction processing," and "overall ease of doing
business with the firm."
<PAGE>
Letter to Shareholders
Dear Shareholders:
As we have communicated in the past several reports, we are managing the Fund in
a relatively conservative manner due to high stock market valuations. As of
March 31, 1996, 49.3% of the Fund's assets were invested in common stocks, 34.7%
in bonds, 8.8% in preferred and convertible securities, and 7.2% in cash or cash
equivalents. These asset weightings are not materially different from those in
the Fund at the end of September. The Fund's average dividend for Class A shares
for the first half of fiscal 1996 was $0.0518 per share, versus $0.0487 in the
first half of fiscal 1995. For the six months ended March 31, 1996, Class A
shares of the Fund provided a total return of 8.76%, Class B shares returned
8.26%, and Class C shares 8.27%. All these returns assume the reinvestment of
distributions but exclude the effects of any sales charges. A discussion of our
strategy for the Fund may be found in the Portfolio Performance and Strategy
section of this letter.
Economic Environment
We believe the U.S. economy will continue to show moderate growth in 1996,
although this growth may be somewhat uneven as we move from quarter to quarter.
Thus, while one quarter may experience an annualized rate of growth in Gross
Domestic Product (GDP) of less than 1%, another quarter may see annualized
growth in excess of 3% - but, for the year, we believe growth could stay within
our expected range of 2% to 2-1/2%. While some increase in consumer spending has
taken place in the early months of this year, consumers, who represent
two-thirds of the economy, remain in a somewhat weakened position, due in part
to an increase in consumer installment debt in excess of 30% over the past two
years. Meanwhile, growth is also being constrained by ongoing economic doldrums
in Europe and Japan, important markets for U.S. exports. Here again, we are
seeing a few tentative signs, particularly in Japan, of modest recoveries that
could lead to improved prospects for U.S. exporters. Also, the "lag effect" of
increases in short-term interest rates by the Federal Reserve Board in 1994 and
into 1995 is helping to keep growth in check. This lag effect can last up to two
years, and although the Fed did reduce short-term rates late last year and
earlier this year, we believe it will continue its diligent anti-inflationary
policies. Finally, it appears that inflation is likely to remain under control
this year, due in part to a continued moderation in wage pressures and the
subdued level of economic growth. At the same time, we believe the current
upward pressure on energy prices bears close scrutiny, as energy is an important
component of the inflation outlook.
Interest Rates
Persistent signs of economic weakness led to decreases in short-term interest
rates by the Federal Reserve in late 1995 and early 1996. However, should signs
of economic growth and, particularly, of higher inflation continue, we would
1
<PAGE>
Letter to Shareholders - continued
anticipate the Fed to maintain its anti-inflationary stance. This could likely
mean no further reductions in short-term interest rates and perhaps could lead
to some modest increases. In the beginning of the year, bond markets were
trading in a narrow range, as investors shifted between concern about the lack
of a budget resolution in Washington and hopes that sluggish economic reports
and low inflation might lead to lower interest rates. Later, fixed-income
markets began reacting to conflicting signals regarding the strength of the
economy with more volatile trading patterns marked by an upward bias in interest
rates. However, we believe the fundamentals of moderate economic growth and low
inflation will continue to benefit long-term fixed-income investors. To be sure,
interest rates may move even higher over the coming months, but we believe the
current rise in bond yields is reaching a point where fixed-income markets are
becoming attractively valued.
Stock Market
While we do not expect the U.S. stock market to match the extraordinary
performance of 1995, we continue to be positive about the equity markets this
year. Although we believe the equity markets represent fair value at current
levels, the expected slowdown in the growth of corporate earnings and the
increases in interest rates experienced so far this year raise near-term
concerns. Further increases in interest rates, and an acceleration of inflation
coupled with an additional slowdown in corporate earnings growth, would have a
negative effect on the stock markets. However, to the extent that some earnings
disappointments can be taken as a sign that the economy is not overheating, this
may prove beneficial for the longer-term health of the equity markets. We
continue to believe that many of the technology-driven productivity gains that
U.S. companies have made in recent years will continue to enhance corporate
America's competitiveness and profitability. Therefore, we remain quite positive
on the long-term viability of the equity markets.
Portfolio Performance and Strategy
The U.S. equity market has risen steadily over the past six months. Equity
valuations remain above historical averages, and the dividend yield on the S&P
500 continues to provide an all-time low of 2.3%. While we continue to have a
positive long-term view on the equity market, our near-term outlook is somewhat
cautious.
We continue to seek companies with solid fundamentals and attractive valuations,
including energy, chemical, defense/aerospace, telephone, and railroad
companies. The chemical industry, for example, has been enjoying a period of
slow but steady growth, with productivity becoming as important as capacity
growth. And while railroads do tend to be cyclical, they have become less so in
recent years and have benefited from a variety of productivity enhancements.
2
<PAGE>
Letter to Shareholders - continued
In the area of commercial aviation, an improving outlook for airlines is leading
to orders for new aircraft, which not only benefits major aircraft manufacturers
but also the companies that supply those manufacturers, including holdings such
as United Technologies, General Electric, B.F. Goodrich, and Honeywell.
In addition, the performance of the Fund over the past six months has benefited
from large holdings in the oil and gas industry, as well as from several bank
stocks.
The Fund's bond portfolio, meanwhile, continues to favor corporate issues over
Treasury securities. Approximately two-thirds of the bond portfolio is invested
in corporate issues. For much of the reporting period, the bond portion of the
Fund had a duration (a measure of interest rate sensitivity) of approximately
six years, but it was reduced to approximately five years at the beginning of
March, in part because of recent government data pointing to a strengthening
economy. In addition, prices of some major commodities such as oil, gold, and
grain have surged, causing fears of renewed inflation. As a result, yields have
been moving higher, causing bond prices to move downward.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ A. Keith Brodkin
A. Keith Brodkin
Chairman and President
/s/ of David Calabro
David Calabro
(on behalf of the
MFS Portfolio Management Team)
April 12, 1996
3
<PAGE>
Portfolio Managers' Profiles
David Calabro, Vice President; Geoffrey L. Kurinsky, Senior Vice President;
Judith N. Lamb, Vice President; Lisa B. Nurme, Vice President; and Maura A.
Shaughnessy, Vice President, are the Fund's portfolio managers. Mr. Calabro
is the head of this portfolio management team and a manager of the common
stock portion of the Fund's portfolio. Mr. Calabro has been employed by MFS
since 1992. Mr. Kurinsky, the manager of the Fund's fixed-income securities,
has been employed by MFS since 1987. Ms. Lamb, the manager of the Fund's
convertible securities, has been employed by MFS since 1992. Ms. Nurme, a
manager of the common stock portion of the Fund's portfolio, has been
employed by MFS since 1987. Ms. Shaughnessy, also a manager of the common
stock portion of the Fund's portfolio, has been employed by MFS since 1991.
Objectives and Policies
The Fund seeks to provide above-average current income (compared to a portfolio
entirely invested in equity securities) consistent with prudent employment of
capital. As a secondary objective, the Fund seeks opportunities for growth of
capital and income because many securities that offer a better- than-average
yield may possess growth potential.
The Fund's investment policies are to vary its investments in debt and equity
securities in accordance with its interpretation of economic and money market
conditions, fiscal and monetary policies and underlying security values.
Generally, at least 40% of the Fund's assets are invested in equity securities
and 25% in fixed-income securities. The Fund's debt securities include both
investment and non-investment grade bonds. The Fund may also invest in foreign
securities.
Performance Summary
Because mutual funds like MFS Total Return Fund are designed for investors with
long-term goals, we have provided cumulative results as well as the average
annual total returns for Class A, Class B and Class C shares for the applicable
time periods.
Average Annual and Cumulative Total Rates of Return
Class A Investment Results
(net asset value change including reinvested distributions)
6 Months 1 Year 5 Years 10 Years
- -------------------------- -------- -------- -------- --------
Cumulative Total Return* +8.76% +23.29% +79.38% +194.66%
Average Annual Total
Return* -- +23.29% +12.39% + 11.41%
========================= ======== ======== ======== =========
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the Securities and Exchange Commission
(the SEC), with all distributions reinvested and reflecting the maximum sales
4
<PAGE>
Average Annual and Cumulative Total Rates of Return - continued
charge of 4.75% on the initial investment for the 1-, 5- and 10-year periods
ended March 31, 1996, were +17.44%, +11.30% and +10.87%, respectively.
Class B Investment Results
(net asset value change including reinvested distributions)
8/23/93+-
6 Months 1 Year 3/31/96
- ---------------------------- -------- ------- ---------
Cumulative Total Return+++ +8.26% +22.29% +26.74%
Average Annual Total
Return+++ -- +22.29% + 9.52%
========================== ======== ======== =========
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested and reflecting the contingent deferred sales charge (CDSC) of 4% for
the 1-year period ended March 31, 1996, and 3% for the period from August 23,
1993+ to March 31, 1996, were +18.29% and +8.51%, respectively.
Class C Investment Results
(net asset value change including reinvested distributions)
8/01/94+-
6 Months 1 Year 3/31/96
- --------------------------- --------- --------- ---------
Cumulative Total Return& +8.27% +22.31% +26.87%
Average Annual Total
Return& -- +22.31% +15.36%
========================= ======== ======== =========
The average annual total returns, calculated for the period ended as of the most
recent calendar quarter as required by the SEC, with all distributions
reinvested for the 1-year period ended March 31, 1996 and for the period from
August 1, 1994+ to March 31, 1996, were +22.31% and +15.36%, respectively.
All results represent past performance and are not necessarily an indication of
future results. Investment return and principal value will fluctuate, and
shares, when redeemed, may be worth more or less than their original cost.
+Commencement of offering of this class of shares.
*These results do not include the sales charge. If the charge had been
included, the results would have been lower.
++These results do not include any CDSC. If the charge had been included, the
results would have been lower.
&Class C shares have no initial sales charge or CDSC but, along with Class B
shares, have higher annual fees and expenses than Class A shares. Class C
share purchases made on or after April 1, 1996, will be subject to a 1% CDSC
if redeemed within 12 months of purchase.
5
<PAGE>
Portfolio of Investments (Unaudited) - March 31, 1996
Non-Convertible Bonds - 34.7%
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer Omitted) Value
- -------------------------------------------------------------- --------- --------------
<S> <C> <C>
Banks and Credit Companies - 1.1%
ABN Amro Bank Global, 7s, 2008 $ 5,000 $ 4,985,050
Banco Santander S.A., 7s, 2006 1,300 1,290,354
Bankers Trust of New York Co., 7.5s, 2015 7,890 7,657,561
Banponce Financial Corp., 7.72s, 2000 1,500 1,543,080
Export-Import Bank of Korea, 6.375s, 2006 3,000 2,835,000
Riggs National Corp., 8.5s, 2006 11,350 11,577,000
Santander Financial Issuances, 6.375s, 2011+ 7,260 6,659,671
Sovereign Bancorp, 6.75s, 2000 2,590 2,502,588
--------------
$ 39,050,304
- -------------------------------------------------------------- --------- --------------
Corporate Asset Backed - 0.6%
First Union Master Credit Card, 5.482s, 2003 $12,500 $ 12,492,125
Merrill Lynch Home Equity Loan, 91-1, "B", 9.3s, 2016+ 2,263 2,312,469
Merrill Lynch Mortgage Investors, Inc., 9.7s, 2010 372 382,170
Merrill Lynch Mortgage Investors, Inc., 8.9s, 2011 2,160 2,187,011
Merrill Lynch Mortgage Investors, Inc., 9s, 2011 852 878,253
Merrill Lynch Mortgage Investors, Inc., 9.25s, 2011 302 311,138
Merrill Lynch Mortgage Investors, Inc., 8.08s, 2021+ 4,000 3,013,750
--------------
$ 21,576,916
- -------------------------------------------------------------- --------- --------------
Financial Institutions - 1.8%
Alex Brown, Inc., 7.625s, 2005 $ 6,640 $ 6,822,534
Case Credit Corp., 6.125s, 2003 5,000 4,771,350
Countrywide Funding, 6.28s, 2003 7,085 6,854,738
Goldman Sachs Group, 6.25s, 2003## 2,620 2,505,375
Goldman Sachs Group, 7.25s, 2005## 2,530 2,536,851
Lehman Brothers Holdings, Inc., 8.5s, 2007 9,000 9,712,980
Lehman Brothers, Inc., 6.125s, 2001 5,250 5,092,500
Nationwide Mutual Life, Inc., 7.5s, 2024 6,000 5,480,040
Navistar Financial Corp., 9.5s, 1996 4,935 4,959,675
Phoenix RE Corp., 9.75s, 2003 1,000 1,065,000
Salton Sea Funding Corp., 7.37s, 2005 5,250 5,198,970
Salton Sea Funding Corp., 7.84s, 2010 5,250 5,317,988
Tenneco, Inc., 7.25s, 2025 5,000 4,591,100
--------------
$ 64,909,101
- -------------------------------------------------------------- --------- --------------
Foreign - U.S. Dollar Denominated - 0.9%
Financiera Energetica Nacional S.A., 6.625s, 1996## $ 5,360 $ 5,360,000
Hanson Overseas, 6.75s, 2005 7,715 7,508,161
Ocensa, 9.35s, 2005## 3,500 3,473,750
Province of Quebec, Canada, 6.5s, 2006 3,125 2,993,153
Province of Saskatchewan, Canada, 9.375s, 2020 500 597,605
Republic of Argentina, 9.25s, 2001 3,000 2,763,750
Republic of Colombia, 8.75s, 1999 3,640 3,767,400
Republic of Colombia, 7.25s, 2004 1,600 1,472,000
Republic of Colombia, 8.7s, 2016 7,610 7,134,375
--------------
$ 35,070,194
- -------------------------------------------------------------- --------- --------------
</TABLE>
6
<PAGE>
Portfolio of Investments (Unaudited) - continued
Non-Convertible Bonds - continued
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer Omitted) Value
- -------------------------------------------------------------- --------- --------------
<S> <C> <C>
Industrials - 8.3%
Automotive - 0.1%
Ford Motor Co., 7.75s, 2043 $ 4,770 $ 4,789,557
- -------------------------------------------------------------- --------- --------------
Building - 0.3%
Black & Decker Corp., 8.44s, 1999 $ 1,690 $ 1,791,839
Owens Corning Fiberglass Corp., 8.875s, 2002 5,390 5,802,012
Owens Corning Fiberglass Corp., 9.9s, 2015## 2,500 2,715,625
--------------
$ 10,309,476
- -------------------------------------------------------------- --------- --------------
Consumer Goods and Services - 0.1%
Philip Morris Cos., Inc., 6.375s, 2006 $ 2,500 $ 2,353,125
- -------------------------------------------------------------- --------- --------------
Entertainment - 1.5%
Disney (Walt) Co., 6.75s, 2006 $10,500 $ 10,450,792
Paramount Communications, 5.875s, 2000 3,558 3,423,970
Time Warner, Inc., 7.45s, 1998 17,875 18,173,334
Time Warner, Inc., 8.11s, 2006 12,232 12,543,060
Time Warner, Inc., 9.15s, 2023 10,500 11,302,830
--------------
$ 55,893,986
- -------------------------------------------------------------- --------- --------------
Food and Beverage Products - 0.5%
Borden, Inc., 9.875s, 1997 $ 4,500 $ 4,697,415
Nabisco, Inc., 7.55s, 2015 9,160 8,837,934
RJR Nabisco, Inc., 8.75s, 2007 6,075 5,828,173
--------------
$ 19,363,522
- -------------------------------------------------------------- --------- --------------
Forest and Paper Products - 0.7%
Canadian Pacific Forest, 9.25s, 2002 $11,840 $ 12,752,272
Georgia Pacific Corp., 9.875s, 2021 8,215 9,149,128
Georgia Pacific Corp., 8.125s, 2023 1,550 1,481,924
Georgia Pacific Corp., 8.625s, 2025 3,190 3,229,875
--------------
$ 26,613,199
- -------------------------------------------------------------- --------- --------------
Machinery - 0.2%
Case Corp., 7.25s, 2016 $ 6,000 $ 5,699,778
- -------------------------------------------------------------- --------- --------------
Medical and Health Products - 0.1%
Fisher Scientific International, 7.125s, 2005 $ 4,595 $ 4,435,967
- -------------------------------------------------------------- --------- --------------
Metals and Minerals - 0.3%
Asarco, Inc., 8.5s, 2025 $ 7,000 $ 7,345,170
Cominco, 6.875s, 2006 3,000 2,863,650
--------------
$ 10,208,820
- -------------------------------------------------------------- --------- --------------
Oils - 1.6%
Louisiana Land & Exploration Co., 7.625s, 2013 $ 3,000 $ 2,968,620
Louisiana Land & Exploration Co., 7.65s, 2023 14,090 13,769,593
Mitchell Energy & Development, 6.75s, 2004 2,875 2,602,421
Oryx Energy Co., 9.3s, 1996 14,650 14,681,498
Oryx Energy Co., 10s, 1999 4,000 4,278,440
Oryx Energy Co., 10s, 2001 9,960 10,876,918
Pennzoil Co., 10.25s, 2005 2,860 3,360,958
USX-Marathon Group, 8.875s, 1997 5,000 5,178,000
</TABLE>
7
<PAGE>
Portfolio of Investments (Unaudited) - continued
Non-Convertible Bonds - continued
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer Omitted) Value
- -------------------------------------------------------------- --------- --------------
<S> <C> <C>
Industrials - continued
Oils - continued
USX-Marathon Group, 7.2s, 2004 $ 2,500 $ 2,487,225
--------------
$ 60,203,673
- -------------------------------------------------------------- --------- --------------
Pollution Control - 0.1%
Laidlaw, Inc., 8.75s, 2025 $ 3,040 $ 3,307,915
- -------------------------------------------------------------- --------- --------------
Printing and Publishing - 0.7%
News America Holdings, Inc., 7.45s, 2000 $ 3,400 $ 3,439,202
News America Holdings, Inc., 7.5s, 2000 1,700 1,745,934
News America Holdings, Inc., 10.125s, 2012 10,000 11,427,500
News America Holdings, Inc., 7.6s, 2015 7,000 6,689,130
Valassis Inserts, 9.375s, 1999 2,850 2,888,276
--------------
$ 26,190,042
- -------------------------------------------------------------- --------- --------------
Restaurants and Lodging - 0.2%
RHG Finance Corp., 8.875s, 2005 $ 5,000 $ 5,233,850
- -------------------------------------------------------------- --------- --------------
Special Products and Services - 0.6%
IMC Fertilizer Group, 9.25s, 2000 $ 4,000 $ 4,200,000
Mark IV Industries, 7.75s, 2006## 8,725 8,441,438
News Corp., 7.75s, 2045 4,309 3,938,702
Olsten Corp., 7s, 2006 4,080 4,073,056
Rouse Co., 8.5s, 2003 1,500 1,571,340
--------------
$ 22,224,536
- -------------------------------------------------------------- --------- --------------
Telecommunications - 1.3%
Continental Cablevision, Inc., 8.5s, 2001 $ 5,500 $ 5,775,000
Continental Cablevision, Inc., 8.875s, 2005 3,915 4,228,200
Tele-Communications, 7.38s, 2001 5,250 5,328,750
Tele-Communications, 10.125s, 2022 3,525 4,139,443
Tele-Communications, 9.25s, 2023 15,741 16,354,112
Tele-Communications, 7.875s, 2026 8,500 7,958,125
Viacom, Inc., 7.75s, 2005 3,540 3,526,513
--------------
$ 47,310,143
- -------------------------------------------------------------- --------- --------------
Total Industrials $ 304,137,589
- -------------------------------------------------------------- --------- --------------
Insurance - 0.3%
Metropolitan Life Insurance, 7.7s, 2015## $ 4,750 $ 4,646,422
Travelers Group, Inc., 7.875s, 2025 7,635 7,817,706
--------------
$ 12,464,128
- -------------------------------------------------------------- --------- --------------
Transportation - 1.3%
Burlington Northern, 7s, 2025 $ 1,000 $ 906,103
Delta Air Lines, Inc., 9.75s, 2021 700 810,593
Delta Air Lines, Inc., 10.375s, 2022 5,000 6,103,150
Jet Equipment Trust, 9.41s, 2010## 3,365 3,837,379
Jet Equipment Trust, 8.64s, 2012## 3,380 3,636,996
Jet Equipment Trust, 11.44s, 2014## 4,700 5,114,023
Jet Equipment Trust, 10.69s, 2015## 1,250 1,401,388
NWA Trust, 9.25s, 2014 3,853 4,393,428
Qantas Airways Ltd., 7.5s, 2003## 5,000 5,084,150
</TABLE>
8
<PAGE>
Portfolio of Investments (Unaudited) - continued
Non-Convertible Bonds - continued
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer Omitted) Value
- -------------------------------------------------------------- --------- --------------
<S> <C> <C>
Transportation - continued
United Airlines, Inc., 9.125s, 2012 $ 2,500 $ 2,723,750
United Airlines, Inc., 7.27s, 2013 5,000 4,811,650
United Airlines, Inc., 9.75s, 2021 4,995 5,751,493
US Air, 6.76s, 2008 3,000 2,859,330
--------------
$ 47,433,433
- -------------------------------------------------------------- --------- --------------
U.S. Government Agencies - 2.3%
Federal Home Loan Mortgage Corporation - 0.3%
FHLMC, 8.5s, 2025 $12,314 $ 12,741,456
- -------------------------------------------------------------- --------- --------------
Federal National Mortgage Association - 1.7%
FNMA, 7.5s, 2010 - 2011 $54,247 $ 55,009,486
FNMA, 8.5s, 2003 - 2007 1,459 1,518,031
FNMA, 9s, 2001 - 2006 1,604 1,688,488
FNMA, REMIC, 6.5s, 2017 5,000 4,976,367
--------------
$ 63,192,372
- -------------------------------------------------------------- --------- --------------
Other - 0.3%
State of Israel, 5.89s, 2005 $10,000 $ 9,455,490
- -------------------------------------------------------------- --------- --------------
Total U.S. Government Agencies $ 85,389,318
- -------------------------------------------------------------- --------- --------------
U.S. Government Guaranteed - 12.4%
Government National Mortgage Association - 0.5%
GNMA, 7.5s, 2025 $16,699 $ 16,933,984
GNMA, 9s, 2017 202 212,769
GNMA, 9s, 2017 294 310,199
--------------
$ 17,456,952
- -------------------------------------------------------------- --------- --------------
Small Business Administration
SBA, 8.8s, 2000 $ 549 $ 598,642
- -------------------------------------------------------------- --------- --------------
U.S. Treasury Obligations - 11.9%
U.S. Treasury Notes, 7.25s, 1996 $37,000 $ 37,422,170
U.S. Treasury Notes, 8.5s, 1997 65,000 67,020,850
U.S. Treasury Notes, 8.75s, 1997 50,000 52,203,000
U.S. Treasury Notes, 7.125s, 1999 48,000 49,665,120
U.S. Treasury Notes, 9.125s, 1999 20,860 22,691,717
U.S. Treasury Notes, 5.625s, 2000 5,000 4,901,550
U.S. Treasury Notes, 8.5s, 2000 23,500 25,471,885
U.S. Treasury Notes, 5.625s, 2001 10,000 9,803,100
U.S. Treasury Notes, 7.875s, 2004 3,000 3,291,090
U.S. Treasury Bonds, 12s, 2005 4,175 5,766,051
U.S. Treasury Bonds, 12s, 2013 67,400 97,297,966
U.S. Treasury Bonds, 8.875s, 2017 35,000 42,847,700
U.S. Treasury Bonds, 6.875s, 2025 17,231 17,500,148
U.S. Treasury Bonds, 7.625s, 2025 3,149 3,465,380
--------------
$ 439,347,727
- -------------------------------------------------------------- --------- --------------
Total U.S. Government Guaranteed $ 457,403,321
- -------------------------------------------------------------- --------- --------------
</TABLE>
9
<PAGE>
Portfolio of Investments (Unaudited) - continued
Non-Convertible Bonds - continued
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer Omitted) Value
- -------------------------------------------------------------- --------- --------------
<S> <C> <C>
- -------------------------------------------------------------- --------- --------------
Utilities - Electric - 4.2%
Arkansas Power & Light, 8.75s, 2026 $ 2,150 $ 2,151,354
Central Maine Power Co., 7.98s, 1996 5,000 5,053,400
Central Maine Power Co., 7.5s, 1997 1,000 1,009,500
Central Maine Power Co., 7.45s, 1999 2,500 2,459,725
Cleveland Electric Illumination, 8.68s, 2001 3,500 3,399,515
Commonwealth Edison Co., 8.5s, 2022 3,000 3,113,010
Commonwealth Edison Co., 8.375s, 2023 14,630 14,795,173
Edelnor S.A., 7.75s, 2006## 1,915 1,904,487
First PV Funding Corp., 10.3s, 2014 7,810 8,200,500
First PV Funding Corp., 10.15s, 2016 8,993 9,397,685
Hidroelectrica Alicura, 8.375s, 1999## 6,244 5,845,945
Illinois Power Co., 8.75s, 2021 6,519 7,070,964
Korea Electric Power Corp., 7.75s, 2013 10,175 10,274,613
Long Island Lighting Co., 8.75s, 1997 8,000 8,163,760
Long Island Lighting Co., 7.625s, 1998 5,400 5,431,428
Long Island Lighting Co., 8.9s, 2019 10,975 10,248,126
Long Island Lighting Co., 9.75s, 2021 7,000 7,189,280
Long Island Lighting Co., 9.625s, 2024 16,390 16,708,130
Louisiana Power & Light Co., 10.67s, 2017 3,065 3,296,386
Louisiana Power & Light Co., 8.75s, 2026 2,150 2,146,560
Midland Cogeneration Venture Corp., 10.33s, 2002 3,317 3,495,804
Midland Funding Corp. II, "A", 11.75s, 2005 6,140 6,480,095
Ohio Edison Co., 7.375s, 2002 1,855 1,879,041
PNPP II Funding Corp., 8.51s, 2006 4,294 4,255,826
Pacificorp Holdings, 7.2s, 2006## 8,500 8,451,550
Texas & New Mexico Power Corp., 12.5s, 1999 1,423 1,558,185
--------------
$ 153,980,042
- -------------------------------------------------------------- --------- --------------
Utilities - Gas - 1.4%
ANR Pipeline Co., 7.375s, 2024 $ 1,580 $ 1,503,702
Arkla, Inc., 8.6s, 1998 3,000 3,119,700
Arkla, Inc., 9.39s, 2000 4,000 4,304,720
California Energy Co., 0s, 2004 4,400 4,180,000
Coastal Bancorp, Inc., 10s, 2002 920 914,250
Coastal Corp., 10.375s, 2000 6,645 7,565,465
Coastal Corp., 10.25s, 2004 6,000 7,128,960
Coastal Corp., 7.75s, 2035 14,170 13,780,325
Panhandle Eastern Corp., 8.625s, 2025 3,765 3,895,231
Parker & Parsley Petroleum, 8.25s, 2007 3,070 3,230,561
Texas Eastern Corp., 9s, 1997 1,000 1,033,750
--------------
$ 50,656,664
- -------------------------------------------------------------- --------- --------------
Utilities - Telephone - 0.1%
Century Telephone Enterprises, 8.25s, 2024 $ 4,400 $ 4,561,436
- -------------------------------------------------------------- --------- --------------
Total Non-Convertible Bonds (Identified Cost,
$1,373,165,781) $ 1,276,632,446
- -------------------------------------------------------------- --------- --------------
</TABLE>
10
<PAGE>
Portfolio of Investments (Unaudited) - continued
Convertible Bonds - 3.2%
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer Omitted) Value
- -------------------------------------------------------------- --------- --------------
<S> <C> <C>
Automotive
Exide Corp., 2.9s, 2005## $ 2,000 $ 1,180,000
- -------------------------------------------------------------- --------- --------------
Building
Continental Homes, 6.875s, 2002 $ 500 $ 567,500
- -------------------------------------------------------------- --------- --------------
Business Services
U.S. Office Products Co., 5.5s, 2001 $ 500 $ 606,250
- -------------------------------------------------------------- --------- --------------
Chemicals - 0.2%
Sandoz, 2s, 2002## $ 1,450 $ 1,620,375
Valhi, Inc., 0s, 2007 16,719 7,377,259
--------------
$ 8,997,634
- -------------------------------------------------------------- --------- --------------
Computer Software - Personal Computers
Altera Corp., 5.75s, 2002## $ 400 $ 506,000
Softkey International, Inc., 5.5s, 2000## 250 202,500
Synoptics Communications, 5.25s, 2003## 750 753,750
--------------
$ 1,462,250
- ------------------------------------------------------------- --------- --------------
Computer Software - Systems - 0.1%
3Com Corp., 10.25s, 2001## $ 250 $ 353,125
Safeguard Scientific, 6s, 2006## 1,000 1,127,500
Solectron, 6s, 2006## 1,000 985,000
--------------
$ 2,465,625
- -------------------------------------------------------------- --------- --------------
Conglomerates - 0.2%
Cooper Industries, 7.05s, 2015 $ 8,000 $ 8,340,000
- -------------------------------------------------------------- --------- --------------
Consumer Goods and Services - 0.1%
Coleman Worldwide Corp., 0s, 1998 $ 6,250 $ 2,273,438
Fieldcrest Cannon Industries, 6s, 2012 3,000 2,400,000
--------------
$ 4,673,438
- -------------------------------------------------------------- --------- --------------
Electrical Equipment - 0.1%
National Semiconductor, 6.5s, 2002## $ 2,000 $ 1,847,500
- -------------------------------------------------------------- --------- --------------
Electronics - 0.4%
ADT Operations, Inc., 0s, 2010 $14,675 $ 7,667,688
Analog Devices, Inc., 3.5s, 2000 1,250 1,475,000
Dovatron International, Inc., 6s, 2002## 1,000 995,000
Thermo-Electron, 4.25s, 2003## 1,250 1,556,250
VLSI Technology, Inc., 8.25s, 2005 3,000 2,782,500
--------------
$ 14,476,438
- -------------------------------------------------------------- --------- --------------
Food and Beverage Products - 0.1%
Grand Metropolitan, 6.5s, 2000## $ 2,000 $ 2,202,500
- -------------------------------------------------------------- --------- --------------
Insurance - 0.3%
Equitable Cos., Inc., 6.125s, 2024 $10,750 $ 12,093,750
- -------------------------------------------------------------- --------- --------------
Medical and Health Products - 0.7%
Alza Corp., 0s, 1999 $10,000 $ 4,612,500
Ciba-Geigy, 6.25s, 2016## 2,000 2,065,000
Roche Holdings, Inc., 0s, 2008## 13,500 11,205,000
</TABLE>
11
<PAGE>
Portfolio of Investments (Unaudited) - continued
Convertible Bonds - continued
<TABLE>
<CAPTION>
Principal
Amount
(000
Issuer Omitted) Value
- -------------------------------------------------------------- --------- --------------
<S> <C> <C>
Medical and Health Products - continued
Roche Holdings, Inc., 0s, 2010## $13,520 $ 6,100,900
--------------
$ 23,983,400
- -------------------------------------------------------------- --------- --------------
Medical and Health Technology and Services - 0.1%
Integrated Health Services, 5.75s, 2001 $ 1,000 $ 930,000
National Health Investors, 7.75s, 2001 500 513,125
Omega Healthcare Investors, 8.5s, 2001 500 512,500
--------------
$ 1,955,625
- -------------------------------------------------------------- --------- --------------
Pollution Control - 0.1%
U.S. Filter Corp., 6s, 2005## $ 3,000 $ 3,641,250
- -------------------------------------------------------------- --------- --------------
Real Estate Investment Trusts - 0.2%
Liberty Property Trust, 8s, 2001 $ 6,000 $ 6,247,500
- -------------------------------------------------------------- --------- --------------
Restaurants and Lodging - 0.2%
HFS, 4.75s, 2003 $ 1,250 $ 1,279,688
Marriott International, 0s, 2011 8,000 4,260,000
--------------
$ 5,539,688
- -------------------------------------------------------------- --------- --------------
Special Products and Services - 0.2%
Cemex S.A., 4.25s, 1997## $ 5,500 $ 4,970,625
Checkpoint Systems, 5.25s, 2005 1,750 2,535,312
--------------
$ 7,505,937
- -------------------------------------------------------------- --------- --------------
Stores
Federated Department Stores, 5s, 2003 $ 1,000 $ 1,120,000
Staples, Inc., 4.5s, 2000## 500 547,500
--------------
$ 1,667,500
- -------------------------------------------------------------- --------- --------------
Telecommunications - 0.2%
LDDS Communications, Inc., 5s, 2003 $ 1,250 $ 1,556,250
Tele-Communications, 4.5s, 2006 6,170 6,000,325
Turner Broadcasting Systems, Inc., 0s, 2007## 3,000 1,413,750
--------------
$ 8,970,325
- -------------------------------------------------------------- --------- --------------
Total Convertible Bonds (Identified Cost, $107,994,090) $ 118,424,110
- -------------------------------------------------------------- --------- --------------
</TABLE>
Preferred Stocks - 0.6%
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
- -------------------------------------------------------------- --------- --------------
Banks and Credit Companies - 0.1%
Bank United of Texas, "B", 9.6% 200,000 $ 5,125,000
- -------------------------------------------------------------- --------- --------------
Insurance - 0.1%
Aetna Capital LLC, 9.5% 200,000 $ 5,525,000
- -------------------------------------------------------------- --------- --------------
Metals and Minerals - 0.1%
Conagra Capital, "A", 9% 153,600 $ 3,974,400
- -------------------------------------------------------------- --------- --------------
Steel - 0.2%
USX Capital LLC, 8.75% 280,600 $ 7,015,000
- -------------------------------------------------------------- --------- --------------
Utilities - Electric - 0.1%
Nevada Power Co., 9.9% 20,000 $ 2,120,000
- -------------------------------------------------------------- --------- --------------
Total Preferred Stocks (Identified Cost, $22,679,330) $ 23,759,400
- -------------------------------------------------------------- --------- --------------
</TABLE>
12
<PAGE>
Portfolio of Investments (Unaudited) - continued
Common Stocks - 49.3%
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
U.S. Stocks - 48.0%
Aerospace - 2.3%
Allied Signal, Inc. 154,000 $ 9,105,250
General Dynamics Corp. 75,000 4,387,500
Lockheed Martin Corp. 126,000 9,560,250
McDonnell Douglas Co. 70,000 6,413,750
Raytheon Co. 261,000 13,376,250
United Technologies Corp. 361,824 40,614,744
--------------
$ 83,457,744
- --------------------------------------------------------------- --------- --------------
Agricultural Products - 0.2%
AGCO Corp. 200,000 $ 4,825,000
Case Corp. 30,000 1,526,250
--------------
$ 6,351,250
- --------------------------------------------------------------- --------- --------------
Airlines - 0.2%
America West Airlines, "B"* 274,800 $ 5,873,850
- --------------------------------------------------------------- --------- --------------
Apparel and Textiles - 0.2%
Springs Industries, Inc. 45,000 $ 2,070,000
VF Corp. 73,000 4,033,250
--------------
$ 6,103,250
- --------------------------------------------------------------- --------- --------------
Automotive - 2.0%
Dana Corp. 200,000 $ 6,675,000
Ford Motor Co. 520,677 17,898,271
General Motors Corp. 613,269 32,656,574
Goodrich (B.F.) Co. 131,200 10,430,400
Goodyear Tire & Rubber Co. 61,600 3,141,600
Volvo Aktiebolaget, ADR, "B" 165,000 3,815,625
--------------
$ 74,617,470
- --------------------------------------------------------------- --------- --------------
Business Machines - 0.7%
International Business Machines Corp. 49,000 $ 5,443,725
Texas Instruments, Inc. 34,500 1,755,187
Xerox Corp. 140,000 17,570,000
--------------
$ 24,768,912
- --------------------------------------------------------------- --------- --------------
Chemicals - 2.0%
Air Products & Chemicals, Inc. 114,500 $ 6,254,562
Betz Labs, Inc. 50,000 2,325,000
Dexter Corp. 100,000 2,650,000
Dow Chemical Co. 199,000 17,288,125
du Pont (E. I.) de Nemours & Co. 304,000 25,232,000
Hanna (M.A.) Co. 203,500 7,071,625
James River Corp. 96,100 2,474,575
Olin Corp. 55,000 4,785,000
Praxair, Inc. 113,100 4,509,862
Witco Corp. 68,010 2,397,352
--------------
$ 74,988,101
- --------------------------------------------------------------- --------- --------------
Conglomerates - 0.3%
Eastern Enterprises 360,000 $ 12,780,000
- --------------------------------------------------------------- --------- --------------
</TABLE>
13
<PAGE>
Portfolio of Investments (Unaudited) - continued
Common Stocks - continued
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
U.S. Stocks - continued
Consumer Goods and Services - 1.6%
Colgate-Palmolive Co. 94,300 $ 7,343,612
Gillette Co. 85,600 4,429,800
Philip Morris Cos., Inc. 485,400 42,593,850
Rubbermaid, Inc. 101,300 2,874,387
--------------
$ 57,241,649
- --------------------------------------------------------------- --------- --------------
Defense Electronics - 0.2%
Loral Corp. 168,100 $ 8,236,900
- --------------------------------------------------------------- --------- --------------
Electrical Equipment - 2.1%
Alcatel Alsthom Compagnie, ADR 330,000 $ 6,105,000
Cooper Industries* 50,000 1,950,000
Emerson Electric Co. 100,000 8,075,000
General Electric Co. 371,372 28,920,594
Honeywell, Inc. 587,000 32,431,750
--------------
$ 77,482,344
- --------------------------------------------------------------- --------- --------------
Electronics
Tektronix, Inc. 40,550 $ 1,317,875
- --------------------------------------------------------------- --------- --------------
Financial Institutions - 5.5%
American Express Co. 55,000 $ 2,715,625
Bank of Boston Corp. 324,300 16,093,387
Bank of New York, Inc. 430,253 22,158,013
Barnett Banks, Inc. 60,000 3,735,000
Baybanks, Inc. 50,000 5,375,000
Bear Stearns Cos., Inc. 1 25
Chase Manhattan Corp. 416,200 30,590,700
Chemical Banking Corp. 50,000 3,529,350
Comerica, Inc. 50,000 2,087,500
Corestates Financial Corp. 176,000 7,458,000
Federal Home Loan Mortgage Corp. 283,700 24,185,425
First Interstate Bancorp 25,000 4,337,500
Fleet/Norstar Financial Group, Inc. 248,900 10,080,450
Integra Financial Corp. 90,000 6,311,250
Meridian Bancorp, Inc. 2,300 120,175
National City Corp. 729,000 25,606,125
NationsBank Corp. 310,000 24,838,750
Northern Trust Co. 123,000 6,642,000
Southern National Corp. 200,000 5,550,000
--------------
$ 201,414,275
- --------------------------------------------------------------- --------- --------------
Food and Beverage Products - 1.7%
Anheuser-Busch Cos., Inc. 75,000 $ 5,053,125
CPC International, Inc. 13,800 957,375
Earthgrains Co.* 3,000 89,625
General Mills, Inc. 504,000 29,421,000
Heinz (H.J.) Co. 25,000 828,125
Kellogg Co. 35,500 2,689,125
</TABLE>
14
<PAGE>
Portfolio of Investments (Unaudited) - continued
Common Stocks - continued
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
U.S. Stocks - continued
Food and Beverage Products - continued
McCormick & Co., Inc. 63,700 $ 1,401,400
Nabisco Holdings Corp. 220,000 7,205,000
PepsiCo, Inc. 167,000 10,562,750
Ralston-Ralston Purina 45,000 3,009,375
--------------
$ 61,216,900
- --------------------------------------------------------------- --------- --------------
Forest and Paper Products - 0.6%
Champion International Corp. 125,000 $ 5,656,250
Fort Howard Corp.* 69,500 1,563,750
International Paper Co. 60,000 2,362,500
Kimberly Clark Corp. 88,500 6,593,250
Weyerhaeuser Co. 135,700 6,259,162
--------------
$ 22,434,912
- --------------------------------------------------------------- --------- --------------
Insurance - 2.5%
Aetna Life & Casualty Co. 174,300 $ 13,159,650
Allstate Corp. 30,779 1,296,565
American General Corp. 75,000 2,587,500
CIGNA Corp. 195,800 22,370,150
GCR Holdings Ltd. 233,200 5,830,000
MBIA, Inc. 140,000 10,500,000
Prudential Reinsurance Holdings 347,200 8,202,600
St. Paul Cos., Inc. 163,000 9,046,500
Torchmark Corp. 222,000 9,990,000
Travelers, Inc. 52,569 3,469,554
UNUM Corp. 77,000 4,581,500
--------------
$ 91,034,019
- --------------------------------------------------------------- --------- --------------
Machinery - 1.0%
Deere & Co., Inc. 275,000 $ 11,481,250
Ingersoll Rand Co. 431,400 17,579,550
Sundstrand Corp. 75,400 3,072,550
York International Corp. 123,000 6,024,516
--------------
$ 38,157,866
- --------------------------------------------------------------- --------- --------------
Medical and Health Products - 2.7%
Abbott Laboratories 60,000 $ 2,445,000
American Home Products Corp. 275,000 29,803,125
Baxter International, Inc. 391,800 17,728,950
Lilly (Eli) & Co. 367,000 23,855,000
Pharmacia & Upjohn 10,000 398,750
Schering Plough Corp. 30,000 1,743,750
SmithKline Beecham PLC, ADR 416,100 21,429,150
Warner Lambert Co. 30,000 3,097,500
--------------
$ 100,501,225
- --------------------------------------------------------------- --------- --------------
Metals and Minerals - 0.6%
Aluminum Co. of America 47,800 $ 2,993,475
Cyprus Amax Minerals 163,800 4,627,350
Phelps Dodge Corp. 192,560 13,214,430
--------------
$ 20,835,255
- --------------------------------------------------------------- --------- --------------
</TABLE>
15
<PAGE>
Portfolio of Investments (Unaudited) - continued
Common Stocks - continued
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
U.S. Stocks - continued
Oil Services - 0.4%
Dresser Industries, Inc. 5,000 $ 152,500
Schlumberger Ltd. 186,112 14,726,112
--------------
$ 14,878,612
- --------------------------------------------------------------- --------- --------------
Oils - 5.6%
Amoco Corp. 286,300 $ 20,685,175
Atlantic Richfield Co. 71,500 8,508,500
British Petroleum PLC, ADR 304,922 32,398,013
Chevron Corp. 160,400 9,002,450
Exxon Corp. 190,936 15,585,151
Mobil Corp. 242,000 28,041,750
Occidental Petroleum Corp. 455,600 12,187,300
Repsol S.A., ADR 110,580 4,132,928
Royal Dutch Petroleum Co., ADR 272,000 38,420,000
Sun Co., Inc. 204,582 5,907,305
TOTAL S.A., ADR 31,000 1,054,000
USX-Marathon Group 1,268,400 24,416,700
Ultramar Corp. 169,000 4,879,875
Union Pacific Resources Group 82,000 2,173,000
--------------
$ 207,392,147
- --------------------------------------------------------------- --------- --------------
Photographic Products - 0.7%
Eastman Kodak Co. 368,500 $ 26,163,500
- --------------------------------------------------------------- --------- --------------
Pollution Control - 0.1%
WMX Technologies, Inc. 97,400 $ 3,092,450
- --------------------------------------------------------------- --------- --------------
Precious Metals and Minerals - 0.1%
Freeport-McMoRan Copper & Gold, Inc. 156,483 $ 4,811,852
- --------------------------------------------------------------- --------- --------------
Printing and Publishing - 0.4%
Dun & Bradstreet 119,000 $ 7,214,375
Tribune Co., Inc. 117,350 7,730,431
--------------
$ 14,944,806
- -------------------------------------------------------------- --------- --------------
Railroads - 1.6%
Burlington Northern 148,000 $ 12,154,500
CSX Corp. 569,000 25,960,625
Canadian National Railway 325,600 5,616,600
Conrail, Inc. 5,000 358,125
Illinois Central Corp. 515,550 14,693,175
Transport Holdings, Inc. 1 29
--------------
$ 58,783,054
- -------------------------------------------------------------- --------- --------------
Real Estate Investment Trusts - 1.7%
Beacon Properties Corp. 93,100 $ 2,455,512
Felcor Suite Hotels, Inc. 390,600 12,108,600
First Industrial Realty Trust 181,800 4,158,675
Health Care Property Investors, Inc. 53,600 1,688,400
Hospitality Properties Trust 380,000 10,165,000
Meditrust Corp. 254,800 8,631,350
</TABLE>
16
<PAGE>
Portfolio of Investments (Unaudited) - continued
Common Stocks - continued
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
U.S. Stocks - continued
Real Estate Investment Trusts - continued
National Health Investors, Inc. 244,400 $ 7,943,000
Omega Healthcare Investors 80,000 2,290,000
Public Storage, Inc. 349,200 7,114,950
Trinet Corporate Realty Trust 250,100 7,190,375
--------------
$ 63,745,862
- -------------------------------------------------------------- --------- --------------
Special Products and Services - 0.2%
Stanley Works 155,000 $ 8,525,000
- -------------------------------------------------------------- --------- --------------
Stores - 1.7%
May Department Stores Co. 589,760 $ 28,455,920
Office Depot, Inc.* 126,200 2,476,675
Sears, Roebuck & Co. 604,400 29,464,500
Wal-Mart Stores, Inc. 73,700 1,704,312
--------------
$ 62,101,407
- -------------------------------------------------------------- --------- --------------
Utilities - Electric - 2.8%
CMS Energy Corp. 300,000 $ 8,850,000
Carolina Power & Light Co. 63,800 2,376,550
Cinergy Corp. 76,700 2,301,420
DPL, Inc. 158,000 3,772,250
Duke Power Co. 60,000 3,030,000
Edison International 199,800 3,421,575
Enersis S.A., ADR 50,400 1,423,800
FPL Group, Inc. 420,000 19,005,000
PECO Energy Co. 301,300 8,022,112
Pacific Gas & Electric Co. 273,400 6,185,675
Pinnacle West Capital Corp. 330,000 9,528,750
Portland General Electric 649,000 19,956,750
Rochester Gas & Electric Corp. 71,800 1,552,675
Texas Utilities Co. 257,800 10,666,475
Unicom Corp. 104,000 2,808,000
--------------
$ 102,901,032
- --------------------------------------------------------------- --------- --------------
Utilities - Gas - 3.1%
Coastal Corp. 385,000 $ 15,207,500
Columbia Gas System, Inc. 100,000 4,587,500
Enron Corp. 169,500 6,250,312
Pacific Enterprises 385,600 9,977,400
Panhandle Eastern Corp. 475,000 14,784,375
Pennsylvania Enterprises, Inc. 105,000 4,055,625
Questar Corp. 120,000 3,960,000
Sonat, Inc. 335,800 12,088,800
Tenneco, Inc. 147,400 8,235,975
UGI Corp. 410,000 8,712,500
Westcoast Energy, Inc. 200,000 3,025,000
Williams Cos., Inc. 440,012 22,165,604
--------------
$ 113,050,591
- --------------------------------------------------------------- --------- --------------
</TABLE>
17
<PAGE>
Portfolio of Investments (Unaudited) - continued
Common Stocks - continued
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
- --------------------------------------------------------------- --------- --------------
U.S. Stocks - continued
Utilities - Telephone - 3.2%
Ameritech Corp. 284,416 $ 15,500,672
AT&T Corp. 420,300 25,743,375
Frontier Corp. 253,600 7,988,400
GTE Corp. 459,000 20,138,625
MCI Communications Corp. 592,400 17,920,100
NYNEX Corp. 185,800 9,266,775
SBC Communications, Inc. 176,600 9,293,575
Sprint Corp. 183,300 6,965,400
Tele Danmark, ADR 175,000 4,528,125
360 Communications Co. 1 16
--------------
$ 117,345,063
- --------------------------------------------------------------- --------- --------------
Total U.S. Stocks $1,766,549,173
- -------------------------------------------------------------- --------- --------------
Foreign Stocks - 1.3%
Spain - 0.2%
Iberdrola (Utilities - Electric) 775,000 $ 7,152,785
- -------------------------------------------------------------- --------- --------------
Switzerland - 0.6%
Ciba-Geigy AG (Medical and Health Products) 17,500 $ 21,911,788
- -------------------------------------------------------------- --------- --------------
United Kingdom - 0.5%
National Power (Utilities - Electric) 1,132,000 $ 5,808,292
PowerGen PLC (Utilities - Electric) 500,000 4,077,350
PowerGen PLC, 380 P/P (Utilities - Electric) 1,629,000 9,801,204
--------------
$ 19,686,842
- -------------------------------------------------------------- --------- --------------
Total Foreign Stocks $ 48,751,419
- -------------------------------------------------------------- --------- --------------
Total Common Stocks (Identified Cost, $1,229,755,757) $1,815,300,596
- -------------------------------------------------------------- --------- --------------
</TABLE>
Convertible Preferred Stocks - 5.0%
<TABLE>
<CAPTION>
<S> <C> <C>
Agricultural Products - 0.4%
Case Corp., $4.50 110,000 $ 14,300,000
- -------------------------------------------------------------- --------- --------------
Airlines - 0.2%
Continental Air Finance, 8.5%## 100,000 $ 6,400,000
- -------------------------------------------------------------- --------- --------------
Apparel and Textiles - 0.1%
Owens Corning Capital LLC, 6.5%## 55,000 $ 3,114,375
- -------------------------------------------------------------- --------- --------------
Banks and Credit Companies - 0.4%
First Chicago Corp., "B", 5.75% 176,100 $ 12,459,075
Washington Mutual, Inc., "D", $6.00 12,800 1,523,200
--------------
$ 13,982,275
- -------------------------------------------------------------- --------- --------------
Business Services - 0.1%
ALCO Standard Corp., $5.04 25,000 $ 2,350,000
- -------------------------------------------------------------- --------- --------------
Computer Software - Systems
Wang Labs, Inc., "B", 6.5%## 10,000 $ 536,250
- -------------------------------------------------------------- --------- --------------
Consumer Goods and Services - 0.1%
Corning Delaware LP, 6% 50,000 $ 2,718,750
- -------------------------------------------------------------- --------- --------------
</TABLE>
18
<PAGE>
Portfolio of Investments (Unaudited) - continued
Convertible Preferred Stocks - continued
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
Electronics - 0.1%
Elsag Bailey Financing Trust, 5.5%## 85,000 $ 3,803,750
- -------------------------------------------------------------- --------- --------------
Entertainment
Bally Entertainment Corp., 8% 25,000 $ 434,375
Triathlon Broadcasting, 9% 10,000 105,000
--------------
$ 539,375
- -------------------------------------------------------------- --------- --------------
Financial Institutions - 0.2%
Advanta Corp., 6.75% 30,000 $ 1,395,000
American Expresss Co., DECS 15,000 885,000
First USA, Inc., 6.25% 5,000 242,175
Jefferson Pilot Co., 7.25% 35,000 2,940,000
Merrill Lynch & Co., 6.5% 66,600 3,546,450
--------------
$ 9,008,625
- -------------------------------------------------------------- --------- --------------
Food and Beverage Products - 0.1%
RJR Nabisco Holdings, "C", 9.25% 777,400 $ 4,761,575
- -------------------------------------------------------------- --------- --------------
Forest and Paper Products
International Paper, 5.25% 10,000 $ 460,000
International Paper, 5.25%## 5,000 230,000
--------------
$ 690,000
- -------------------------------------------------------------- --------- --------------
Insurance - 0.5%
Conseco, Inc., 7% 121,000 $ 8,621,250
St. Paul Capital LLC, 6% 101,700 5,746,050
Sunamerica, Inc., $3.10 62,800 4,254,700
--------------
$ 18,622,000
- -------------------------------------------------------------- --------- --------------
Machinery - 0.1%
Cooper Industries, Inc., 6% 160,000 $ 2,580,000
- -------------------------------------------------------------- --------- --------------
Medical and Health Technology and Services - 0.1%
SCI Finance LLC, "A", $3.125 35,000 $ 2,931,250
- -------------------------------------------------------------- --------- --------------
Metals and Minerals
Reynolds Metals Co., $3.31 10,000 $ 515,000
- -------------------------------------------------------------- --------- --------------
Oil Services - 0.2%
Reading & Bates Corp., $1.625 95,200 $ 5,497,800
- -------------------------------------------------------------- --------- --------------
Oils - 0.5%
Atlantic Richfield Co., 9% 529,551 $ 15,224,591
Occidental Petroleum Corp., 7.75%## 10,800 681,750
Occidental Petroleum Corp., $3.00 20,000 1,252,500
--------------
$ 17,158,841
- -------------------------------------------------------------- --------- --------------
Pollution Control - 0.1%
Browning-Ferris Industries, 7.25% 160,000 $ 5,360,000
- -------------------------------------------------------------- --------- --------------
Precious Metals and Minerals - 0.3%
Freeport-McMoRan Copper & Gold, Inc., 7% 120,000 $ 3,795,000
Freeport-McMoRan Copper & Gold, Inc., 5% 200,000 5,600,000
--------------
$ 9,395,000
- -------------------------------------------------------------- --------- --------------
</TABLE>
19
<PAGE>
Portfolio of Investments (Unaudited) - continued
Convertible Preferred Stocks - continued
<TABLE>
<CAPTION>
Issuer Shares Value
- ---------------------------------------------------------------- -------- -------------
<S> <C> <C>
Real Estate Investment Trusts - 0.1%
Oasis Residential, "A", 9% 33,100 $ 881,288
Security Capital Pacific, "A", $1.75 124,000 3,301,500
--------------
$ 4,182,788
- -------------------------------------------------------------- --------- --------------
Special Products and Services - 0.1%
Ceridian Corp., 5.5% 48,000 $ 4,632,000
- -------------------------------------------------------------- --------- --------------
Steel - 0.2%
AK Steel Holdings Corp., 7% 191,500 $ 7,300,937
- -------------------------------------------------------------- --------- --------------
Telecommunications
Cablevision System Corp., 8.5% 20,000 $ 565,000
- -------------------------------------------------------------- --------- --------------
Utilities - Electric - 0.1%
Williams Cos., Inc., 7%## 38,000 $ 3,097,000
- -------------------------------------------------------------- --------- --------------
Utilities - Gas - 0.6%
Enron Corp., 6.25% 391,200 $ 9,926,700
Unocal Corp., 7%## 215,000 12,201,250
--------------
$ 22,127,950
- -------------------------------------------------------------- --------- --------------
Utilities - Telephone - 0.4%
Cointel, 7%## 299,800 $ 15,814,450
Philippine Long Distance Telephone, GDS 7,000 362,250
--------------
$ 16,176,700
- -------------------------------------------------------------- --------- --------------
Total Convertible Preferred Stocks (Ident ified Cost,
$162,233,977) $ 182,347,241
- -------------------------------------------------------------- --------- --------------
</TABLE>
Short-Term Obligations - 6.8%
<TABLE>
<CAPTION>
Principal
Amount
(000
Omitted)
- ------------------------------------------------------------ ---------- -----------
<S> <C> <C>
American Express Co., due 4/19/96 $ 10,000 $ 9,969,959
du Pont (E.I.) de Nemours, due 4/09/96 8,150 8,136,752
Federal Farm Credit Bank, due 4/12/96 - 5/02/96 13,000 12,957,239
Federal Home Loan Mortgage Corp., due 4/04/96 - 5/22/96 58,621 58,432,376
Federal National Mortgage Assn., due 4/05/96 - 6/17/96 81,523 81,084,680
General Motors Corp., due 4/02/96 - 4/25/96 14,600 14,574,316
Heinz (H.J.) Co., due 4/03/96 13,800 13,790,014
Pacific Gas & Electric, due 4/01/96 10,000 9,995,667
Tennessee Valley Authority, due 4/22/96 - 5/08/96 18,625 18,537,992
Toys R Us, due 4/26/96 6,000 5,975,454
Transamerica Corp., due 4/08/96 7,710 7,698,820
Wal Mart Stores, due 4/10/96 11,100 11,080,020
---------------------------------------------------------- ---------- -----------
Total Short-Term Obligations, at Amortized Cost $ 252,233,289
---------------------------------------------------------- ---------- -----------
Total Investments (Identified Cost, $3,148,062,224) $3,668,697,078
Other Assets, Less Liabilities - 0.4% 15,426,636
---------------------------------------------------------- ---------- -----------
Net Assets - 100.0% $3,684,123,714
---------------------------------------------------------- ---------- -----------
</TABLE>
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
See notes to financial statements
20
<PAGE>
Financial Statements
Statement of Assets and Liabilities (Unaudited)
<TABLE>
<CAPTION>
March 31, 1996
- ---------------------------------------------------------------- -----------
<S> <C>
Assets:
Investments, at value (identified cost, $3,148,062,224) $3,668,697,078
Cash 14,261
Receivable for Fund shares sold 7,178,067
Receivable for investments sold 16,978,088
Interest and dividends receivable 33,409,871
Other assets 58,151
-----------
Total assets $3,726,335,516
===========
Liabilities:
Distributions payable $ 1,575,631
Payable for investments purchased 34,001,184
Payable for Fund shares reacquired 3,844,220
Payable for daily variation margin on open futures contracts 341,219
Payable to affiliates -
Management fee 504,381
Shareholder servicing agent fee 82,002
Distribution fee 1,533,638
Accrued expenses and other liabilities 329,527
-----------
Total liabilities $ 42,211,802
===========
Net assets $3,684,123,714
===========
Net assets consist of:
Paid-in capital $3,000,899,259
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 520,438,490
Accumulated undistributed net realized gain on investments 161,102,011
Accumulated undistributed net investment income 1,683,954
-----------
Total $3,684,123,714
===========
Shares of beneficial interest outstanding 250,514,828
===========
Class A shares:
Net asset value and redemption price per share
(net assets of $2,470,229,256 / 167,977,952 shares of
beneficial interest outstanding) $14.71
===========
Offering price per share (100/95.25) $15.44
===========
Class B shares:
Net asset value and offering price per share
(net assets of $1,167,059,986 / 79,358,064 shares of
beneficial interest outstanding) $14.71
===========
Class C shares:
Net asset value offering price and redemption price per share
(net assets of $46,834,472 / 3,178,812 shares of beneficial
interest outstanding) $14.73
===========
</TABLE>
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A and
Class B shares.
See notes to financial statements
21
<PAGE>
Financial Statements - continued
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended March 31, 1996
- ----------------------------------------------------------------- -----------
<S> <C>
Net investment income:
Income -
Interest $ 57,674,298
Dividends 32,018,740
Foreign taxes withheld (152,152)
-----------
Total investment income $ 89,540,886
-----------
Expenses -
Management fee $ 6,493,330
Trustees' compensation 53,187
Shareholder servicing agent fee (Class A) 1,284,988
Shareholder servicing agent fee (Class B) 1,047,900
Shareholder servicing agent fee (Class C) 24,772
Distribution and service fee (Class A) 3,542,988
Distribution and service fee (Class B) 5,399,919
Distribution and service fee (Class C) 165,152
Postage 330,998
Custodian fee 298,410
Printing 128,988
Auditing fees 21,575
Legal fees 5,817
Miscellaneous 1,072,220
-----------
Total expenses $ 19,870,244
Fees paid indirectly (137,683)
-----------
Net expenses $ 19,732,561
-----------
Net investment income $ 69,808,325
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $215,569,921
Foreign currency transactions 62,994
-----------
Net realized gain on investments $215,632,915
-----------
Change in unrealized appreciation (depreciation) -
Investments $ (2,079,802)
Translation of assets and liabilities in foreign currencies (391)
Futures contracts (196,700)
-----------
Net unrealized loss on investments $ (2,276,893)
-----------
Net realized and unrealized gain on investments and foreign
currency $213,356,022
-----------
Increase in net assets from operations $283,164,347
===========
</TABLE>
See notes to financial statements
22
<PAGE>
Financial Statements - continued
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
March 31, Year Ended
1996 September 30,
(Unaudited) 1995
- -------------------------------------------------- ------------ -----------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 69,808,325 $ 131,402,134
Net realized gain on investments and foreign
currency transactions 215,632,915 120,786,908
Net unrealized gain (loss) on investments and
foreign currency (2,276,893) 242,624,905
---------- ---------------
Increase in net assets from operations $ 283,164,347 $ 494,813,947
---------- ---------------
Distributions declared to shareholders -
From net investment income (Class A) $ (50,239,203) $ (91,296,492)
From net investment income (Class B) (18,827,580) (33,884,609)
From net investment income (Class C) (579,939) (302,945)
From net realized gain on investments and
foreign currency transactions (Class A) (104,066,545) (1,471,111)
From net realized gain on investments and
foreign currency transactions (Class B) (47,187,153) (672,401)
From net realized gain on investments and
foreign currency transactions (Class C) (1,294,217) (2,050)
---------- ---------------
Total distributions declared to shareholders $ (222,194,637) $ (127,629,608)
---------- ---------------
Fund share (principal) transactions -
Net proceeds from sale of shares $ 588,196,480 $ 620,581,586
Net asset value of shares issued to shareholders
in reinvestment of distributions 59,499,519 108,185,007
Cost of shares reacquired (295,250,841) (526,677,345)
---------- ---------------
Increase in net assets from Fund share
transactions $ 352,445,158 $ 202,089,248
---------- ---------------
Total increase in net assets $ 413,414,868 $ 569,273,587
Net assets:
At beginning of period 3,270,708,846 2,701,435,259
---------- ---------------
At end of period (including accumulated
undistributed net investment income of
$1,683,954 and $1,522,351, respectively) $3,684,123,714 $3,270,708,846
========== ===============
</TABLE>
See notes to financial statements
23
<PAGE>
Financial Statements - continued
Financial Highlights
<TABLE>
<CAPTION>
Six
Months
Ended Year Ended
March September 30,
31, 1996 ---------------------------------------
(Unaudited) 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
Class A
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 14.46 $12.80 $13.70 $12.42 $11.82
------- ---- ---- ---- ------
Income from investment operations+++ -
Net investment income& $ 0.31 $ 0.64 $ 0.54 $ 0.45 $ 0.65
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 0.91 1.64 (0.69) 1.74 0.75
------- ---- ---- ---- ------
Total from investment operations $ 1.22 $ 2.28 $(0.15) $ 2.19 $ 1.40
------- ---- ---- ---- ------
Less distributions declared to shareholders -
From net investment income&& $ (0.31) $(0.61) $(0.54) $(0.59) $(0.66)
In excess of net investment income++ -- -- -- -- --
From net realized gain on investments
and foreign currency transactions (0.66) (0.01) (0.10) (0.32) (0.14)
In excess of net realized gain on
investments and foreign currency
transactions -- -- (0.11) -- --
------- ---- ---- ---- ------
Total distributions
declared to shareholders $ (0.97) $(0.62) $(0.75) $(0.91) $(0.80)
------- ---- ---- ---- ------
Net asset value - end of period $ 14.71 $14.46 $12.80 $13.70 $12.42
------- ---- ---- ---- ------
Total return# 8.76%++++ 18.36% (1.07)% 18.32% 12.26%
Ratios (to average net assets)/Supplemental data&.:
Expenses## 0.90%+ 0.87% 0.85% 0.84% 0.84%
Net investment income 4.28%+ 4.82% 4.26% 4.51% 5.40%
Portfolio turnover 72% 102% 91% 95% 84%
Average commission rate### $0.0569 -- -- -- --
Net assets at end of period (000,000 omitted) $ 2,470 $2,242 $1,857 $1,702 $1,198
</TABLE>
+Annualized.
+++Per share data for the periods subsequent to September 30, 1993 is based on
average shares outstanding.
++++Not annualized.
++For the year ended September 30, 1993, the per share distribution in excess
of net investment income on Class A shares was $0.0035.
#Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to October 1, 1989). If the charge
had been included, the results would have been lower.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years
beginning on or after September 1, 1995.
&The distributor did not impose a portion of its distribution fee for the
periods indicated. If this fee had been incurred by the Fund, the net
investment income per share and ratios would have been:
<TABLE>
<S> <C> <C> <C> <C> <C>
Net investment income -- $ 0.63 $ 0.52 -- --
Ratios (to average net assets):
Expenses## -- 0.97% 0.95% -- --
Net investment income -- 4.72% 4.16% -- --
</TABLE>
&&For the year ended September 30, 1992, $0.0508 per share distributions from
net income have been redesignated as distributions from capital gains.
See notes to financial statements
24
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Year Ended
September 30,
----------------------------------------------------------
1991 1990 1989 1988 1987 1986
- ---------------------------------------------------------------------------------------------------------
Class A
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.25 $11.58 $10.13 $11.47 $ 9.77 $ 8.73
---- ---- ---- ---- ---- ------
Income from investment operations -
Net investment income $ 0.67 $ 0.64 $ 0.65 $ 0.62 $ 0.56 $ 0.60
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 1.57 (1.25) 1.71 (1.07) 2.07 1.91
---- ---- ---- ---- ---- ------
Total from investment operations $ 2.24 $(0.61) $ 2.36 $(0.45) $ 2.63 $ 2.51
---- ---- ---- ---- ---- ------
Less distributions declared to
shareholders -
From net investment income&& $(0.61) $(0.66) $(0.63) $(0.60) $(0.56) $(0.59)
From net realized gain on investments
and foreign currency transactions (0.06) (0.06) (0.28) (0.08) (0.36) (0.88)
From paid-in capital -- -- -- (0.21) (0.01) --
---- ---- ---- ---- ---- ------
Total distributions declared to
shareholders $(0.67) $(0.72) $(0.91) $(0.89) $(0.93) $(1.47)
---- ---- ---- ---- ---- ------
Net asset value - end of period $11.82 $10.25 $11.58 $10.13 $11.47 $ 9.77
---- ---- ---- ---- ---- ------
Total return# 22.25% (5.59)% 23.46% (3.93)% 26.81% 28.45%
Ratios (to average net assets)/Supplemental data:
Expenses 0.87% 0.85% 0.72% 0.71% 0.63% 0.67%
Net investment income 5.89% 5.71% 5.97% 6.06% 5.05% 5.67%
Portfolio turnover 74% 50% 53% 52% 58% 94%
Net assets at end of period (000,000
omitted) $ 909 $ 707 $ 628 $ 508 $ 551 $ 309
</TABLE>
#Total returns for Class A shares do not include the applicable sales charge
(except for reinvested dividends prior to October 1, 1989). If the charge had
been included, the results would have been lower.
&&For the year ended September 30, 1991, $0.0596 per share distributions from
net income have been redesignated as distributions from capital gains.
See notes to financial statements
25
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Six Months Year Ended
Ended March September 30,
31, 1996 ------------------------------
(Unaudited) 1995 1994 1993*
- -----------------------------------------------------------------------------------------
Class B
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 14.46 $12.80 $13.70 $13.53
------- ---- ---- ------
Income from investment operations+++ -
Net investment income $ 0.25 $ 0.53 $ 0.39 $ 0.06
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 0.91 1.64 (0.65) 0.16
------- ---- ---- ------
Total from investment operations $ 1.16 $ 2.17 $(0.26) $ 0.22
------- ---- ---- ------
Less distributions declared to
shareholders -
From net investment income $ (0.25) $(0.50) $(0.43) $(0.05)
From net realized gain on investments
and foreign currency transactions (0.66) (0.01) (0.10) --
In excess of net realized gain on
investments and foreign currency
transactions -- -- (0.11) --
------- ---- ---- ------
Total distributions declared to
shareholders $ (0.91) $(0.51) $(0.64) $(0.05)
------- ---- ---- ------
Net asset value - end of period $ 14.71 $14.46 $12.80 $13.70
------- ---- ---- ------
Total return 8.26%++++ 17.46% (1.93)% 15.24%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.68%+ 1.71% 1.70% 1.75%+
Net investment income 3.50%+ 3.97% 3.45% 3.98%+
Portfolio turnover 72% 102% 91% 95%
Average commission rate### $0.0569 -- -- --
Net assets at end of period (000,000
omitted) $ 1,167 $1,005 $ 843 $ 532
</TABLE>
*For the period from the commencement of offering of Class B shares,
August 23, 1993 to September 30, 1993.
+Annualized.
+++Per share data for the periods subsequent to September 30, 1993 is based on
average shares outstanding.
++++Not annualized.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
See notes to financial statements
26
<PAGE>
Financial Statements - continued
Financial Highlights - continued
<TABLE>
<CAPTION>
Six Months Year Ended
Ended March September 30,
31, 1996 -------------------
(Unaudited) 1995 1994**
- -----------------------------------------------------------------------------------
Class C
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $ 14.49 $12.80 $12.92
------- ---- ------
Income from investment operations+++ -
Net investment income $ 0.26 $ 0.54 $ 0.08
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 0.90 1.66 (0.13)
------- ---- ------
Total from investment operations $ 1.16 $ 2.20 $(0.05)
------- ---- ------
Less distributions declared to shareholders -
From net investment income $ (0.26) $(0.50) $(0.07)
From net realized gain on investments
and foreign currency transactions (0.66) (0.01) --
------- ---- ------
Total distributions declared to shareholders $ (0.92) $(0.51) $(0.07)
------- ---- ------
Net asset value - end of period $ 14.73 $14.49 $12.80
------- ---- ------
Total return 8.27%++++ 17.66% (0.41)%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.64%+ 1.67% 1.76%+
Net investment income 3.53%+ 4.14% 4.08%+
Portfolio turnover 72% 102% 91%
Average commission rate### $0.0569 -- --
Net assets at end of period (000,000 omitted) $ 47 $ 23 $ 1
</TABLE>
**For the period from the commencement of offering of Class C shares,
August 1, 1994 to September 30, 1994.
+Annualized.
+++Per share data for the periods subsequent to September 30, 1993 is based on
average shares outstanding.
++++Not annualized.
##For fiscal years ending after September 1, 1995, the Fund's expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for funds with fiscal years beginning
on or after September 1, 1995.
See notes to financial statements
27
<PAGE>
Notes to Financial Statements (Unaudited)
(1) Business and Organization
MFS Total Return Fund (the Fund) is a diversified series of MFS Series Trust
V (the Trust). The Trust is organized as a Massachusetts business trust and
is registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with 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.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are valued at last sale prices. Unlisted
equity securities or listed equity securities for which last sale prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations which mature in 60 days or less), including listed issues
and forward contracts, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to 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 exchange or over-the-counter prices.
Short-term obligations, which mature in 60 days or less, are valued at amortized
cost, which approximates market value. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments and 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.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividend
income is recorded on the ex-dividend date for dividends received in cash.
Dividend and interest payments
28
<PAGE>
Notes to Financial Statements (Unaudited) - continued
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.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities, currency or contracts based on financial indices at a
fixed price on a future date. In entering into such contracts, the Fund is
required to deposit either in cash or securities an amount equal to a certain
percentage of the contract amount. Subsequent payments are made or received by
the Fund each day, depending on the daily fluctuations in the value of the
underlying security, and are recorded for financial statement purposes as
unrealized gains or losses by the Fund. The Fund's 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 Fund's relative position in one or
more currencies without buying and selling portfolio assets. Investments in
equity-indexed contracts, or contracts on related options, for purposes other
than hedging may be made when the Fund 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
Fund may not achieve the anticipated benefits of the futures contracts and may
realize a loss.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its net income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is provided. The Fund files a tax return annually
using tax accounting methods required under provisions of the Code which may
differ from generally accepted accounting principles, the basis on which these
financial statements are prepared. Accordingly, the amount of net investment
income and net realized gain reported on these financial statements may differ
from that reported on the Fund's tax return, and consequently, the character of
distributions to shareholders reported in the financial highlights may differ
from that reported to shareholders on Form 1099-DIV. Distributions to
shareholders are recorded on the ex-dividend date.
Foreign taxes have been provided for on interest and dividend income earned on
foreign investments in accordance with the applicable country's tax rates and to
the extent unrecoverable are recorded as a reduction of investment income.
The Fund distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-
29
<PAGE>
Notes to Financial Statements (Unaudited) - continued
distributions for financial statement purposes, are classified as distributions
in excess of net investment income or accumulated net realized gains.
Multiple Classes of Shares of Beneficial Interest - The Fund offers Class A,
Class B and Class C shares. The three classes of shares differ in their
respective shareholder servicing agent, distribution and service fees. All
shareholders bear the common expenses of the Fund pro rata based on the average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at effective annual rates of
0.21% of average daily net assets and 3.08% of investment income.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain of the officers and Trustees of
the Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD) and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $16,512 for the six months
ended March 31, 1996.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$540,291 for the six months ended March 31, 1996 as its portion of the sales
charge on sales of Class A shares of the Fund.
The Trustees have adopted separate distribution plans for Class A, Class B and
Class C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Class A distribution plan provides that the Fund will pay MFD up to 0.35%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
to each securities dealer that enters into a sales agreement with MFD of up to
0.25% per annum of the Fund's average daily net assets attributable to Class A
shares which are attributable to that securities dealer, a distribution fee to
MFD of up to 0.10% per annum of the Fund's average daily net assets attributable
to Class A shares, commissions to dealers and payments to MFD wholesalers for
sales at or above a certain dollar level, and other such distribution- related
expenses that are approved by the Fund. MFD retains the service fee for accounts
not attributable to a securities dealer which amounted to $374,234 for the six
months ended March 31, 1996. Effective January 1, 1996, MFD is imposing the
0.10% distribution fee. Fees incurred under the distribution plan during the six
months ended March 31, 1996 were 0.30% of average daily net assets attributable
to Class A shares on an annualized basis.
30
<PAGE>
Notes to Financial Statements (Unaudited) - continued
The Class B and Class C distribution plans provide that the Fund will pay MFD a
distribution fee, equal to 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and Class
C shares. MFD will pay to securities dealers that enter into a sales agreement
with MFD all or a portion of the service fee attributable to Class B and Class C
shares, and will pay to such securities dealers all of the distribution fee
attributable to Class C shares. The service fee is intended to be an additional
consideration for services rendered by the dealer with respect to Class B and
Class C shares. MFD retains the service fee for accounts not attributable to a
securities dealer, which amounted to $49,880 and $2,279 for Class B and Class C
shares, respectively, for the six months ended March 31, 1996. Fees incurred
under the distribution plans during the six months ended March 31, 1996 were
1.00% of average daily net assets attributable to Class B and Class C shares,
respectively, on an annualized basis.
A contingent deferred sales charge is imposed on shareholder redemptions of
Class A shares, on purchases of $1 million or more, in the event of a
shareholder redemption within 12 months following the share purchase. A
contingent deferred sales charge is imposed on shareholder redemptions of Class
B shares in the event of a shareholder redemption within six years of purchase.
MFD receives all contingent deferred sales charges. Contingent deferred sales
charges imposed during the six months ended March 31, 1996 were $3,597 and
$700,894 for Class A and Class B shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the average daily net assets of each class of shares at an
effective annual rate of up to 0.15%, up to 0.22%, and up to 0.15% attributable
to Class A, Class B, and Class C shares, respectively.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
Purchases Sales
- ------------------------------------------- ----------- --------------
U.S. government securities $1,037,760,284 $ 750,016,534
============== ==============
Investments (non-U.S. government
securities) $1,470,744,065 $1,361,205,578
============== ==============
The cost and unrealized appreciation or depreciation in value of the
investments owned by the Fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $3,148,062,224
==============
Gross unrealized
appreciation $ 562,305,798
Gross unrealized
depreciation (41,670,944)
--------------
Net unrealized
appreciation $ 520,634,854
==============
31
<PAGE>
Notes to Financial Statements (Unaudited) - continued
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Six Months Ended March 31, 1996 Year Ended September 30, 1995
------------------------------- -----------------------------
Class A Shares
Shares Amount Shares Amount
- ---------------------------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Shares sold 23,841,276 $ 344,503,278 27,571,191 $ 366,257,248
Shares issued to
shareholders
in reinvestment of
distributions 2,892,578 42,154,527 5,805,766 77,216,013
Shares reacquired (13,786,842) (200,022,398) (23,436,000) (309,567,243)
----------- ------------ --------- ------------
Net increase 12,947,012 $ 186,635,407 9,940,957 $ 133,906,018
========== ============= ========= =============
Six Months Ended March 31, 1996 Year Ended September 30, 1995
------------------------------- -----------------------------
Class B Shares
Shares Amount Shares Amount
- ---------------------------- ------------- -------------- ----------- --------------
Shares sold 15,017,994 $ 217,396,583 17,488,663 $ 232,234,181
Shares issued to
shareholders in
reinvestment of
distributions 1,152,134 16,796,754 2,308,539 30,683,046
Shares reacquired (6,319,330) (91,696,106) (16,113,302) (214,915,122)
----------- ------------ --------- ------------
Net increase 9,850,798 $ 142,497,231 3,683,900 $ 48,002,105
========== ============= ========= =============
Six Months Ended March 31, 1996 Year Ended September 30, 1995
------------------------------- -----------------------------
Class C Shares
Shares Amount Shares Amount
- ---------------------------- ------------- -------------- ----------- --------------
Shares sold 1,807,364 $ 26,296,619 1,619,700 $ 22,090,157
Shares issued to
shareholders in
reinvestment of
distributions 37,515 548,238 20,825 285,948
Shares reacquired (243,319) (3,532,337) (163,091) (2,194,980)
----------- ------------ --------- ------------
Net increase 1,601,560 $ 23,312,520 1,477,434 $ 20,181,125
========== ============= ========= =============
</TABLE>
(6) Line of Credit
The Fund entered into an agreement which enables it to participate with other
funds managed by MFS in an unsecured line of credit with a bank which permits
borrowings up to $350 million, collectively. Borrowings may be made to
temporarily finance the repurchase of Fund shares. Interest is charged to each
fund, based on its borrowings, at a rate equal to the bank's base rate. In
addition, a commitment fee, based on the average daily unused portion of the
line of credit, is allocated among the participating funds at the end of each
quarter. The commitment fee allocated to the Fund for the six months ended March
31, 1996 was $20,139.
(7) Financial Instruments
The Fund regularly 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 futures contracts.
32
<PAGE>
Notes to Financial Statements (Unaudited) - continued
The notional or contractual amounts of these instruments represent the
investment the Fund 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. A summary of
obligations under these financial instruments at March 31, 1996, is as follows:
Futures Contracts
Unrealized
Appreciation
Description Expiration Contracts Position (Depreciation)
- -------------- --------- -------- ------- -------------
U.S.
Treasury 6/19/96 76 Short $ 39,858
U.S.
Treasury 6/19/96 50 Short 27,003
U.S.
Treasury 6/28/96 72 Short 16,385
U.S.
Treasury 6/28/96 82 Short (6,964)
U.S.
Treasury 6/28/96 30 Short 8,702
U.S.
Treasury 6/28/96 67 Short (5,690)
U.S.
Treasury 6/28/96 333 Short 117,406
--------
$196,700
========
At March 31, 1996, the Fund had sufficient cash and securities to cover margin
requirements on open futures contracts.
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At March 31, 1996, the
Fund owned the following restricted securities (constituting 4.51% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933 (the 1933 Act). The Fund does not have the right to demand that such
securities be registered. The value of these securities is determined by
valuations supplied by a pricing service or brokers or, if not available, in
good faith by or at the direction of the Trustees. Certain of these securities
may be offered and sold to "qualified institutional buyers" under Rule 144A of
the 1933 Act.
33
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
Shares/
Date of Par
Description Acquisition Amount Cost Value
- --------------------------------- ---------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Altera Corp., 5.75s, 2002## 6/16/95 400,000 $ 400,000 $ 506,000
Cemex S.A., 4.25s, 1997## 9/28/94 5,500,000 5,500,000 4,970,625
Ciba-Geigy, 6.25s, 2016## 11/21/91-
11/25/95 2,000,000 2,618,000 2,065,000
Cointel, 7%## 2/24/94 299,800 20,773,304 15,814,450
Continental Air Finance, 11/21/95-
8.5%## 3/28/96 100,000 6,039,375 6,400,000
Dovatron International, Inc.,
6s, 2002## 10/06/95 1,000,000 1,000,000 995,000
Edelnor S.A., 7.75s, 2006## 3/22/96 1,915,000 1,904,487 1,904,487
Elsag Bailey Financing Trust,
5.5%## 12/14/95 85,000 4,250,000 3,803,750
Exide Corp., 2.9s, 2005## 12/12/95-
1/09/96 2,000,000 1,459,468 1,180,000
Financiera Energetica Nacional
S.A., 6.625s, 1996## 3/22/95 5,360,000 5,145,600 5,360,000
Goldman Sachs Group, 6.25s,
2003## 1/30/96 2,620,000 2,613,109 2,505,375
Goldman Sachs Group, 7.25s,
2005## 12/08/95 2,530,000 2,527,647 2,536,851
Grand Metropolitan, 6.5s,
2000## 4/19/95 2,000,000 2,000,000 2,202,500
Hidroelectrica Alicura, 8.375s,
1999## 4/08/95 6,244,000 5,845,140 5,845,945
International Paper, 5.25%## 11/08/95 5,000 216,875 230,000
Jet Equipment Trust, 9.41s,
2010## 1/12/96 3,365,000 3,969,926 3,837,379
Jet Equipment Trust, 8.64s,
2012## 2/02/96 3,379,699 3,843,664 3,636,996
Jet Equipment Trust, 11.44s,
2014## 2/09/96 4,700,000 5,440,767 5,114,023
Jet Equipment Trust, 10.69s,
2015## 4/07/95 1,250,000 1,250,000 1,401,388
Mark IV Industries, 7.75s,
2006## 3/05/96 8,725,000 8,669,160 8,441,438
Merrill Lynch Home Equity Loan,
91-1, "B", 9.3s, 2016 12/16/92 2,262,978 2,271,464 2,312,469
Merrill Lynch Mortgage
Investors, Inc., 8.08s, 2021 6/22/94 4,000,000 2,772,500 3,013,750
Metropolitan Life Insurance,
7.7s, 2015## 11/08/95 4,750,000 4,733,470 4,646,422
National Semiconductor, 6.5s,
2002## 9/22/95 2,000,000 2,000,000 1,847,500
Occidental Petroleum Corp., 11/03/95-
7.75%## 11/30/95 10,800 540,000 681,750
Ocensa, 9.35s, 2005## 6/21/95 3,500,000 3,500,000 3,473,750
</TABLE>
34
<PAGE>
Notes to Financial Statements (Unaudited) - continued
<TABLE>
<CAPTION>
Shares/
Date of Par
Description Acquisition Amount Cost Value
- --------------------------------- ---------------- --------- --------- -----------
<S> <C> <C> <C> <C>
Owens Corning Capital LLC, 10/10/95-
6.5%## 11/13/95 55,000 $ 3,180,622 $ 3,114,375
Owens Corning Fiberglass Corp.,
9.9s, 2015## 9/06/95 2,500,000 2,500,000 2,715,625
Pacificorp Holdings, 7.2s,
2006## 3/28/96 8,500,000 8,452,230 8,451,550
Qantas Airways Ltd., 7.5s,
2003## 6/24/93 5,000,000 4,998,820 5,084,150
Roche Holdings, Inc., 0s,
2008## 9/16/93 13,500,000 6,676,020 11,205,000
Roche Holdings, Inc., 0s,
2010## 4/12/95 13,520,000 4,817,476 6,100,900
Safeguard Scientific, 6s, 2/01/96-
2006## 3/21/96 1,000,000 1,023,750 1,127,500
Sandoz, 2s, 2002## 9/28/95 1,450,000 1,176,965 1,620,375
Santander Financial Issuances,
6.375s, 2011 2/13/96 7,260,000 7,197,201 6,659,671
Softkey International, Inc.,
5.5s, 2000## 3/29/96 250,000 217,187 202,500
Solectron, 6s, 2006## 2/15/96-
3/18/96 1,000,000 993,125 985,000
Staples, Inc., 4.5s, 2000## 9/12/95 500,000 500,000 547,500
Synoptics Communications, 10/27/95-
5.25s, 2003## 11/15/95 750,000 872,187 753,750
Thermo-Electron, 4.25s, 11/28/95-
2003## 2/21/96 1,250,000 1,291,875 1,556,250
3Com Corp., 10.25s, 2001## 10/04/95 250,000 370,000 353,125
Turner Broadcasting Systems,
Inc., 0s, 2007## 12/18/92 3,000,000 1,046,400 1,413,750
U.S. Filter Corp., 6s,
2005## 9/13/95 3,000,000 3,065,000 3,641,250
Unocal Corp., 7%## 2/02/96-
2/23/96 215,000 11,613,248 12,201,250
Wang Labs, Inc., "B", 6.5%## 2/21/96 10,000 500,000 536,250
Williams Cos., Inc., 7%## 10/26/95-
10/27/95 38,000 1,900,000 3,097,000
---------
$166,093,619
=========
</TABLE>
## SEC Rule 144A restriction.
----------
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus.
35
<PAGE>
A Word About MFS Products and Services
Making Additional Investments at Your Convenience
There are several easy ways to make additional single investments of at least
$50:
(bullet) send a check with the lower portion of your account statement
(bullet) contact your financial adviser to purchase shares on your behalf
(bullet) wire additional investments through your bank; call us first for
instructions
Making Additional Investments Automatically
By investing a set amount at regular intervals, over time you will buy more
shares when prices are low, and fewer shares when prices are high. Because
dollar cost averaging involves periodic purchases regardless of fluctuating
share prices, you should consider your financial ability to continue investing
in periods of low prices. MFS offers two dollar-cost-averaging programs. See the
prospectus for further details. Dollar cost averaging does not assure a profit
or avoid a loss.
The Automatic Investment Plan offers a simple way to make regular investments of
at least $50 through automatic withdrawals from your checking account.
The Automatic Exchange Plan automatically exchanges shares from any MFS fund
with $5,000 or more into the same class of shares in up to four other MFS funds.
You choose the amounts of the exchanges (as little as $50) and their frequency.
A Hypothetical Example of Automatic Monthly Investing Compounding at 8% a Year
Amount 5 Years 10 15 20 25
- ------- ------ ----- ----- ------ -------
$50 3,671 9,064 16,989 28,633 45,742
$75 5,506 13,596 25,483 42,950 68,613
$100 7,341 18,128 33,978 57,266 91,484
$200 14,683 36,257 67,956 114,532 182,968
For illustration only. Not indicative of future performance of any MFS fund.
For applications or further information call 1-800-225-2606 any business day
from 8 a.m. to 8 p.m. Eastern time.
If you are a participant in a retirement plan, check with your plan sponsor
regarding the availability of these options.
36
<PAGE>
The MFS Family of Funds(R)
America's Oldest Mutual Fund Group
The members of the MFS Family of Funds are grouped below according to the types
of securities in their portfolios. For free prospectuses containing more
complete information, including the exchange privilege and all charges and
expenses, please contact your financial adviser or call MFS at 1-800-637-2929
any business day from 9 a.m. to 5 p.m. Eastern time (or, leave a message
anytime). This material should be read carefully before investing or sending
money.
Stock
------------------------------------------
Massachusetts Investors Trust
Massachusetts Investors Growth Stock Fund
MFS(R) Capital Growth Fund
MFS(R) Emerging Growth Fund
MFS(R) Gold & Natural Resources Fund
MFS(R) Growth Opportunities Fund
MFS(R) Managed Sectors Fund
MFS(R) OTC Fund
MFS(R) Research Fund
MFS(R) Value Fund
------------------------------------------
Stock and Bond
------------------------------------------
MFS(R) Total Return Fund
MFS(R) Utilities Fund
------------------------------------------
Bond
------------------------------------------
MFS(R) Bond Fund
MFS(R) Government Mortgage Fund
MFS(R) Government Securities Fund
MFS(R) High Income Fund
MFS(R) Intermediate Income Fund
MFS(R) Strategic Income Fund
------------------------------------------
Limited Maturity Bond
------------------------------------------
MFS(R) Government Limited Maturity Fund
MFS(R) Limited Maturity Fund
MFS(R) Municipal Limited Maturity Fund
------------------------------------------
World
--------------------------------------------
MFS(R)/Foreign & Colonial Emerging Markets Equity Fund
MFS(R)/Foreign & Colonial International Growth Fund
MFS(R)/Foreign & Colonial International Growth and Income Fund
MFS(R) World Asset Allocation Fund(SM)
MFS(R) World Equity Fund
MFS(R) World Governments Fund
MFS(R) World Growth Fund
MFS(R) World Total Return Fund
------------------------------------------
National Tax-Free Bond
--------------------------------------------
MFS(R) Municipal Bond Fund
MFS(R) Municipal High Income Fund
(closed to new investors)
MFS(R) Municipal Income Fund
------------------------------------------
State Tax-Free Bond
--------------------------------------------
Alabama, Arkansas, California, Florida,
Georgia, Louisiana, Maryland, Massachusetts,
Mississippi, New York, North Carolina,
Pennsylvania, South Carolina, Tennessee, Texas,
Virginia, Washington, West Virginia
------------------------------------------
Money Market
--------------------------------------------
MFS(R) Cash Reserve Fund
MFS(R) Government Money Market Fund
MFS(R) Money Market Fund
--------------------------------------------
<PAGE>
[BACK COVER]
MFS(R) TOTAL RETURN FUND
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Boston, MA 02116
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