<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) GLOBAL
GOVERNMENTS FUND
ANNUAL REPORT o NOVEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
Independent Auditors' Report .............................................. 33
MFS' Year 2000 Readiness Disclosure ....................................... 35
Trustees and Officers ..................................................... 37
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no doubt
that Internet-delivered information and brokerage services enable individual
investors to be well-informed and to trade at bargain prices. But we believe the
numbers and facts argue that, for most of us, mutual funds purchased through a
financial professional will continue to be one of the best products for
long-term investing in this new millennium.
According to a survey by the Investment Company Institute, a national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of course
that doesn't tell us how well they did owning those funds or stocks, but another
statistic gives us a clue. In the third quarter of 1999, during a period of
volatility in the greatest bull market in history, a quarter of the 7,500 stocks
tracked by Morningstar, a popular rating service, lost more than 20% of their
value. But during the same period, less than 1% of the mutual funds tracked by
Morningstar -- 6 out of 10,000 funds -- were down by a similar amount.(2) So,
with all things being equal, an investor's chance of picking one of those losing
stocks was about 25 times greater than his or her chance of picking an equally
losing fund.
The numbers also show that a majority of Americans seek professional advice when
buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through a financial professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful
investors -- those whose lives are enriched by the fruits of their investing
-- share two characteristics. They have a plan for reaching their monetary
goals, and they stick with that plan through up markets and down ones. And
for many investors, working with a financial professional may be the best
way to develop a plan. Although the Internet abounds with calculators for
developing all sorts of investment plans, none has your broker or
consultant's high level of experience and an understanding of your unique
situation. And no calculator can counsel you during a down market, when you
may be tempted to abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns
dozens or even hundreds of holdings is better positioned to survive a
disappointment in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull
market in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few mutual funds, of course, are going to be
up when the overall market is down. But as the numbers above from the third
quarter of 1999 demonstrate, mutual funds may be less likely to suffer the
extreme downturns experienced by a large number of individual holdings when
the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights.
The diversification and professional management of mutual funds help make
them inherently less risky than individual stock picking, and funds are
available in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
December 15, 1999
(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore Sun's
Dollars and Sense Conference, 10/99. In the period 7/1/99 through 9/ 30/99,
of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more; of the
10,000 mutual funds tracked by Morningstar, six lost 20% or more. Mutual
fund results are at net asset value; if sales charges had been reflected,
results would have been lower.
Investments in mutual funds will fluctuate and may be worth more or less upon
redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
For the 12 months ended November 30, 1999, Class A shares of the Fund provided a
total return of -3.01%, Class B shares -3.74%, Class C shares -3.70%, and Class
I shares -2.74%. These returns assume the reinvestment of any distributions but
exclude the effects of any sales charges.
During the same period, the average global income fund tracked by Lipper
Analytical Services, Inc., an independent firm that reports mutual fund
performance, returned -2.17%. The Fund's returns also compare to a -3.01% return
for the J.P. Morgan Global Government Bond Index (the Morgan Index), an
aggregate index of actively traded government bonds issued by 13 countries,
including the United States, with remaining maturities of at least one year.
Q. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE DURING THE PAST 12
MONTHS?
A. Our investments in the emerging markets, mortgages, and corporate bonds
served us very well, though corporate bonds had hurt us a bit earlier in the
year. After performing well during the first four to five months of the
year, corporate bond yields increased (and prices dropped) from June to
September. That hurt the Fund's holdings in high-yield and investment-grade
corporate bonds. During the past few months, though, yields came back down
again and prices went up. Mortgages went through a similar cycle, helping us
earlier in the year, suffering a setback in the summer, and then coming back
nicely in the fall.
Our exposure to European currency hurt us a bit when the euro collapsed.
What helped us was the fact that we changed the Fund's currency exposure to
75% dollar and 25% foreign currency during the year, from our previous
neutral position of about 40% dollar and 60% foreign currency. The fact that
more of the Fund's assets were denominated in dollars than in foreign
currency meant it was less susceptible to the volatility in the currency
markets during the year.
Q. IN WHICH SECTORS OR MARKETS HAVE YOU FOUND THE BEST INVESTMENTS?
A. Because corporate bond yields have come down again, we have been and
continue to be optimistic about this sector. We started the year heavily
invested in high-yield corporates but we've since balanced that out with
high-grade corporate bonds. While we have a positive outlook on corporates
in general, we're a little cautious on high yields specifically, since we've
seen a rise in defaults in these bonds at a time when the economy is still
pretty robust. We do have a positive outlook for mortgages, given that we
expect these yields to come down further. One new area in which we've
started investing is municipal bonds, whose yields have become almost even
with Treasuries. We think municipal bonds have been so badly beaten up that
they now present attractive investment opportunities. We also favor European
corporate bonds, because that market is just developing, and there seems to
be a strong appetite for them. We think the demand for these bonds will
continue, and we plan to add to our investments in Europe. Finally, we still
like the emerging markets, although their yields have now dropped to a lower
range.
Q. WHERE HAVE YOU FOUND GOOD VALUE AND COMPELLING OPPORTUNITIES?
A. We have overweighted our holdings in dollar-bloc countries, such as
Australia, versus the index. In government bonds only, we've been somewhat
tilted toward Europe, favoring non-EMU (European monetary union) countries
like Sweden, Denmark, Greece, and the United Kingdom.
I think Greece has been and will continue to be a very interesting market.
It is expected to join EMU at the end of next year. Greece is the last of
the high-yield markets projected to drop its bond yields toward those of
current EMU countries. That makes it an attractive market. We've been
investing all year in Drachma-denominated paper and Greek government paper
issued in euros. We also have been overweighted in Sweden and Denmark.
Sweden has been a bit of a rollercoaster ride, performing very well in the
first few months of the year, selling off sharply in March and April based
on changing sentiment as to whether or not they would join EMU, and now
coming back most of the way.
Q. HOW DO YOU FEEL ABOUT INVESTING IN JAPAN, GIVEN THE COUNTRY'S CONTINUED
ECONOMIC DIFFICULTIES?
A. We have invested in some Japanese bonds this year, currently at 2%. Because
of weakness in the Japanese economy and lack of inflation, it doesn't suffer
from the same cycles and yield pressures as the United States and Europe.
So, Japan has longer-term secular prospects of a substantial rise in yield
as the recovery takes hold.
Q. DO YOU THINK THE EMERGING MARKETS RECOVERY IS SUSTAINABLE, AND IF SO, HOW
DOES THAT IMPACT YOUR INVESTMENTS IN THEM?
A. We are fairly optimistic that the emerging markets will continue to recover.
Still, though some of these markets have bounced back very vigorously, we
tend to treat that with a grain of salt. They dropped off so sharply that a
similar bounce back seems natural. Barring another crisis, we believe most
of the recovery in markets like Latin America and Asia is probably
sustainable for the next few years. The tough question is whether they've
made enough progress on restructuring to avoid a similar crisis five years
from now. Although emerging market yields have come down quite a bit, we
feel there are positive developments that could help move them down to a
lower range. That could provide opportunities from these markets going
forward. During the period, we have invested from 5% to 15% in the emerging
markets, and we're currently at about 6.7%. We may add to that a bit,
perhaps going up to 10%, but we're not likely to invest a lot more in these
markets at this point.
Q. WHAT'S YOUR OUTLOOK?
A. Because global growth and the threat of a pickup in inflation is keeping
upward pressure on yields, we're most cautious on duration (an indicator of
interest-rate sensitivity). We're a bit defensive and concerned that rates
may be rising here, but we're not expecting a huge sell-off. We think that
ultimately the inflation threat will be modest -- particularly with the
central banks trying to keep rates down. So, we're not basing our
investments on the idea that inflation will get out of control.
/s/ Christopher D. Piros /s/ James T. Swanson
Christopher D. Piros James T. Swanson
Portfolio Manager Portfolio Manager
The opinions expressed in this report are those of the portfolio managers and
are current only through the end of the period of the report as stated on the
cover. The managers' views are subject to change at any time based on market and
other conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
- --------------------------------------------------------------------------------
CHRISTOPHER D. PIROS IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND A PORTFOLIO MANAGER OF MFS(R) GLOBAL GOVERNMENTS FUND. HE ALSO MANAGES THE
NOMURA GLOBAL BALANCED OPEN FUND UNDER SUBADVISORY AGREEMENTS WITH NOMURA ASSET
MANAGEMENT CO. OF JAPAN. MR. PIROS JOINED MFS IN 1989 AS VICE PRESIDENT IN THE
FIXED INCOME DEPARTMENT AND WORKED IN THE INTERNATIONAL FIXED INCOME AREA BEFORE
BEING NAMED A PORTFOLIO MANAGER IN 1992. HE WAS NAMED SENIOR VICE PRESIDENT IN
1997. PRIOR TO JOINING MFS, HE HAD BEEN A VICE PRESIDENT AND SENIOR ECONOMIST IN
THE QUANTITATIVE ASSET MANAGEMENT AREA AT A MAJOR CHICAGO-BASED SECURITIES FIRM
AND AN ASSISTANT PROFESSOR AT THE FUQUA SCHOOL OF BUSINESS AT DUKE UNIVERSITY.
HE IS A GRADUATE OF NORTHWESTERN UNIVERSITY AND HOLDS A PH.D. FROM HARVARD
UNIVERSITY.
JAMES T. SWANSON IS SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R). HE IS
PORTFOLIO MANAGER OF MFS(R) STRATEGIC INCOME FUND, MFS(R) GLOBAL GOVERNMENTS
FUND, MFS(R) CHARTER INCOME FUND, MFS(R) GLOBAL GOVERNMENTS SERIES (PART OF
MFS(R) VARIABLE INSURANCE TRUST(SM)), THE STRATEGIC INCOME SERIES OFFERED
THROUGH MFS(R)/SUN LIFE ANNUITY PRODUCTS, AND TWO CLOSED-END FUNDS, MFS(R)
CHARTER INCOME TRUST AND MFS(R) MULTIMARKET INCOME TRUST. MR. SWANSON JOINED MFS
IN 1985 AS VICE PRESIDENT AND WAS NAMED SENIOR VICE PRESIDENT IN 1989. HE IS A
GRADUATE OF COLGATE UNIVERSITY AND THE HARVARD UNIVERSITY GRADUATE SCHOOL OF
BUSINESS ADMINISTRATION. MR. SWANSON IS A CHARTERED FINANCIAL ANALYST.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
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. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial consultant, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
- --------------------------------------------------------------------------------
OBJECTIVE: SEEKS INCOME AND CAPITAL APPRECIATION.
COMMENCEMENT OF
INVESTMENT OPERATIONS: FEBRUARY 26, 1981
CLASS INCEPTION: CLASS A FEBRUARY 26, 1981
CLASS B SEPTEMBER 7, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $142.4 MILLION NET ASSETS AS OF NOVEMBER 30, 1999
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including reinvestment of dividends.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be greater than or less than the line
shown. (See Notes to Performance Summary.) It is not possible to invest directly
in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the 10-year period ended November 30, 1999)
MFS Global Governments J.P. Morgan Global
Fund - Class A Government Bond Index
- --------------------------------------------------------------------------------
11/89 $ 9,525 $10,000
11/91 12,209 12,424
11/93 15,379 15,166
11/95 16,711 18,287
11/97 17,888 19,261
11/99 17,915 21,514
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH NOVEMBER 30, 1999
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -3.01% -0.14% +22.14% +88.09%
- ------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -3.01% -0.05% + 4.08% + 6.52%
- ------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -7.62% -1.65% + 3.07% + 6.00%
- ------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -3.74% -2.44% +17.30% +78.93%
- ------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -3.74% -0.82% + 3.24% + 5.99%
- ------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -7.36% -1.71% + 2.93% + 5.99%
- ------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -3.70% -2.42% +17.62% +79.84%
- ------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -3.70% -0.81% + 3.30% + 6.04%
- ------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge -4.61% -0.81% + 3.30% + 6.04%
- ------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge -2.74% +0.54% +22.96% +89.36%
- ------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge -2.74% +0.18% + 4.22% + 6.59%
- ------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Average global income fund+(+) -2.17% +1.69% + 5.88% + 6.77%
- ------------------------------------------------------------------------------------------
J.P. Morgan Global Government Bond Index#(+) -3.01% +3.40% + 6.80% + 7.96%
- ------------------------------------------------------------------------------------------
+ Source: Lipper Analytical Services, Inc.
(+) Average annual rates of return.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class B, C, and I share performance include the performance of the Fund's Class
A shares for periods prior to their inception (blended performance). Class B and
C blended performance has been adjusted to take into account the CDSC applicable
to Class B and C shares rather than the initial sales charge (load) applicable
to Class A shares. Class I share blended performance has been adjusted to
account for the fact that Class I shares have no sales charge. These blended
performance figures have not been adjusted to take into account differences in
class-specific operating expenses. Because operating expenses of Class B and C
shares are higher than those of Class A, the blended Class B and C share
performance is higher than it would have been had Class B and C shares been
offered for the entire period. Conversely, because operating expenses of Class I
shares are lower than those of Class A, the blended Class I share performance is
lower than it would have been had Class I shares been offered for the entire
period.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably affected
by changes in interest rates and currency exchange rates, market conditions, and
the economic and political conditions of the countries where investments are
made. These risks may increase share price volatility. See the prospectus for
details.
Lower-rated securities may provide greater returns, but they are also associated
with greater-than-average risk. These risks may increase share price volatility.
See the prospectus for details.
PORTFOLIO CONCENTRATION AS OF NOVEMBER 30, 1999
PORTFOLIO STRUCTURE
International 50.5%
Yankee 4.4%
Emerging Markets 6.7%
U.S. Treasuries 14.1%
Other Government Agencies 1.4%
Mortgage Backed 6.2%
Municipal 1.5%
High Yield Corporates 4.6%
High Grade Corporates 10.6%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- November 30, 1999
Bonds - 94.1%
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PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- -----------------------------------------------------------------------------
Foreign Bonds - 56.1%
Argentina - 0.4%
Republic of Argentina, 11.786s, 2005 $ 285 $ 259,350
Republic of Argentina, 0.01s, 2001 325 287,235
------------
$ 546,585
- -----------------------------------------------------------------------------
Australia - 0.9%
Commonwealth of Australia, 9s, 2004 AUD 1,900 $ 1,335,282
- -----------------------------------------------------------------------------
Brazil - 1.7%
Federal Republic of Brazil, 5s, 2014 $ 2,846 $ 1,942,525
Federal Republic of Brazil, 6.938s, 2024 550 385,000
Federal Republic of Brazil, 14.5s, 2009 70 72,891
------------
$ 2,400,416
- -----------------------------------------------------------------------------
Bulgaria - 0.4%
National Republic of Bulgaria, 6.5s, 2024 $ 730 $ 569,400
- -----------------------------------------------------------------------------
Canada - 2.8%
Government of Canada, 5s, 2004 CAD 5,281 $ 3,427,696
Gulf Canada Resources Ltd., 9.25s, 2004
(Oil Services) $ 625 622,344
------------
$ 4,050,040
- -----------------------------------------------------------------------------
Denmark - 4.4%
Kingdom of Denmark, 6s, 2009 DKK 24,918 $ 3,485,413
Kingdom of Denmark, 7s, 2007 18,360 2,736,083
------------
$ 6,221,496
- -----------------------------------------------------------------------------
France - 3.0%
Republic of France, 3.5s, 2004 EUR 1,722 $ 1,653,211
Republic of France, 4s, 2009 2,885 2,633,153
------------
$ 4,286,364
- -----------------------------------------------------------------------------
Germany - 9.4%
Depfa Pfandbriefbank, 5.5s, 2010
(Banks and Credit Cos.) EUR 880 $ 884,739
Treuhandanstalt, 6.625s, 2003 1,865 2,003,742
Allgemeine Hypothekenbank AG, 5s, 2009
(Banks & Credit Cos.) 850 825,036
Deutschland Republic, 6.5s, 2027 377 413,401
Deutschland Republic, 6.875s, 2005 656 723,966
Federal Republic of Germany, 4.5s, 2009 5,174 4,964,706
Federal Republic of Germany, 4.75s, 2008 2,926 2,871,014
Federal Republic of Germany, 6s, 2007 644 685,746
------------
$ 13,372,350
- -----------------------------------------------------------------------------
Grand Cayman Islands - 0.6%
Enersis S A, 7.4s, 2016 (Electric) $ 500 $ 431,250
Pemex Finance Ltd, 9.69s, 2009
(Financial) 350 357,595
------------
$ 788,845
- -----------------------------------------------------------------------------
Greece - 3.4%
Hellenic Republic, 5.75s, 2008 EUR 1,331 $ 1,345,543
Hellenic Republic, 8.7s, 2005 GRD 414,000 1,380,677
Republic of Greece, 8.9s, 2003 653,000 2,120,838
------------
$ 4,847,058
- -----------------------------------------------------------------------------
Italy - 5.4%
Republic of Italy, 5s, 2008 EUR 7,066 $ 6,998,704
Republic of Italy, 3.25s, 2004 696 659,081
------------
$ 7,657,785
- -----------------------------------------------------------------------------
Japan - 2.0%
Toyota Motor Credit Corporation,
1s, 2004 (Financial Services) JPY 294,000 $ 2,855,051
- -----------------------------------------------------------------------------
Luxemburg - 0.2%
PTC International Finance II S A,
11.25s, 2009 EUR 325 322,969
- -----------------------------------------------------------------------------
Malaysia - 0.3%
Government of Malaysia, 8.75s, 2009 $ 350 $ 367,080
- -----------------------------------------------------------------------------
Mexico - 1.3%
Petroleos Mexicanos, 9.5s, 2027
(Oil Services) $ 745 $ 704,025
United Mexican States, 6.933s, 2019 545 493,933
United Mexican States, 6.943s, 2019 450 407,835
United Mexican States, 11.375s, 2016 280 307,664
------------
$ 1,913,457
- -----------------------------------------------------------------------------
Morocco - 0.7%
Morroco Restructuring & Consolidating
Agreement, 5.906s, 2009+ $ 1,100 $ 973,447
- -----------------------------------------------------------------------------
Netherlands - 0.5%
Netia Holdings B.V., 10.25s, 2007
(Telecommunications) $ 800 $ 680,000
- -----------------------------------------------------------------------------
Norway - 0.9%
Union Bank Norway, 7.35s, 2049
(Banks and Credit Cos.)## $ 1,400 $ 1,355,382
- -----------------------------------------------------------------------------
Panama - 0.4%
Republic of Panama, 4.25s, 2014 $ 720 $ 532,800
- -----------------------------------------------------------------------------
Philippines - 0.4%
Republic of Philippines, 9.875s, 2019 $ 515 $ 524,013
- -----------------------------------------------------------------------------
Spain - 4.2%
Government of Spain, 6s, 2008 EUR 5,636 $ 5,936,390
- -----------------------------------------------------------------------------
Sweden - 3.2%
Kingdom of Sweden, 6s, 2005 SEK 4,100 $ 495,298
Kingdom of Sweden, 9s, 2009 9,000 1,310,573
Kingdom of Sweden, 13s, 2001 8,400 1,108,014
AB Spintab, 6.8s, 2049
(Banks & Credit Cos.)## 1,700 1,638,256
------------
$ 4,552,141
- -----------------------------------------------------------------------------
Switzerland - 0.4%
Halifax Group Euro Finance, 7.627s, 2049
(Financial) EUR 610 $ 614,514
- -----------------------------------------------------------------------------
United Kingdom - 7.5%
Halifax Building Society PLC,
6.25s, 2012 (Banks and Credit Cos.) GBP 1,700 $ 2,653,019
Lloyds Bank PLC, 7.375s, 2004
(Banks and Credit Cos.) 1,500 2,411,929
Polestar Corp., 10.5s, 2008 (Industrial) 575 870,941
U.K. Treasury, 7s, 2002 1,341 2,170,162
Woolwich Building Society PLC,
6.129s, 2012 (Banks and Credit Cos.) 1,700 2,615,614
------------
$ 10,721,665
- -----------------------------------------------------------------------------
Venezuela - 1.7%
Corporacion Andina De Fomento,
4.75s, 2004 (Industrial)## EUR 1,300 $ 1,247,413
Corporacion Andina De Fomento,
7.75s, 2004 (Industrial) $ 1,200 1,202,460
------------
$ 2,449,873
- -----------------------------------------------------------------------------
Total Foreign Bonds $ 79,874,403
- -----------------------------------------------------------------------------
U.S. Bonds - 38.0%
Banks and Credit Companies - 1.3%
Bayerische Landesbank NY, 5.875s, 2008 $ 2,000 $ 1,826,160
- -----------------------------------------------------------------------------
Building Materials - 0.8%
Building Materials Corp., 8.625s, 2006 $ 1,250 $ 1,187,500
- -----------------------------------------------------------------------------
Business Services - 1.0%
Unisystem Corp., 7.875s, 2008 $ 1,400 $ 1,358,000
- -----------------------------------------------------------------------------
Consumer Goods and Services - 0.7%
Revlon Consumer Products Corp.,
8.125s, 2006 $ 1,350 $ 1,056,375
- -----------------------------------------------------------------------------
Entertainment - 1.3%
Time Warner Entertainment Co. LP,
8.375s, 2033 $ 1,754 $ 1,861,363
- -----------------------------------------------------------------------------
Financial Services - 1.1%
Chase Manhattan Corporation New, 7s, 2009 $ 1,500 $ 1,471,035
- -----------------------------------------------------------------------------
Gaming and Hotels - 1.0%
Red Roof Inns, Inc., 9.625s, 2003 $ 1,400 $ 1,442,000
- -----------------------------------------------------------------------------
Insurance - 0.6%
Conseco, Inc., 6.4s, 2001 $ 859 $ 829,841
- -----------------------------------------------------------------------------
Medical and Health Technology and Services - 1.0%
Tenet Healthcare Corp., 8.625s, 2003 $ 1,370 $ 1,356,300
- -----------------------------------------------------------------------------
Metal Fabrication - 0.4%
Ryerson Tull Incorporated New,
9.125s, 2006 $ 500 $ 534,767
- -----------------------------------------------------------------------------
Municipal Bonds - 1.5%
Minneapolis+ St. Paul Minnesota
Metropolitan, 5s, 2030 $ 650 $ 563,167
Massachusetts Turnpike Authority,
5s, 2037 1,020 857,157
New York, New York City Municipal
Water Finance, 5.5s, 2024 750 709,477
------------
$ 2,129,801
- -----------------------------------------------------------------------------
Supermarkets - 0.6%
Marsh Supermarkets, Inc., 8.875s, 2007 $ 900 $ 866,250
- -----------------------------------------------------------------------------
U.S. Federal Agencies - 7.5%
FNMA, 1.75s, 2008 JPY 200,000 $ 1,968,550
GNMA, 7s, 2027 - 2028 $ 8,988 8,777,080
------------
$ 10,745,630
- -----------------------------------------------------------------------------
U.S. Treasury Obligations - 18.5%
U.S. Treasury Bonds, 3.875s, 2029 $ 1,098 $ 1,051,462
U.S. Treasury Bonds, 5.25s, 2028 1,101 929,310
U.S. Treasury Bonds, 5.25s, 2029 286 242,788
U.S. Treasury Notes, 5.875s, 2004 8,675 8,590,939
U.S. Treasury Notes, 6s, 2009 11,122 10,981,196
U.S. Treasury Notes, 7.875s, 2004 4,310 4,611,700
------------
$ 26,407,395
- -----------------------------------------------------------------------------
Utilities - Electric - 0.7%
El Paso Electric Co., 8.9s, 2006 $ 1,000 $ 1,049,700
- -----------------------------------------------------------------------------
Total U.S. Bonds $ 54,122,177
- -----------------------------------------------------------------------------
Total Bonds (Identified Cost, $140,682,245) $133,996,520
- -----------------------------------------------------------------------------
Call Options Purchased - 0.3%
- -----------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- -----------------------------------------------------------------------------
Japan Government Bonds/February/130.2 JPY 520,000 $ 100,167
Japan Government Bonds/February/128 460,000 158,683
Canadian Dollar/September/1.4518 CAD 10,722 120,911
- -----------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $336,927) $ 379,761
- -----------------------------------------------------------------------------
Put Options Purchased - 0.1%
- -----------------------------------------------------------------------------
Euro/December/1.05 EUR 10,638 $ 45,590
Euro/March/0.991 7,319 99,689
Euro/December/1.045 4,735 0
Japanese Yen/February/109.75 JPY 1,033,830 39,286
- -----------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $190,058) $ 184,565
- -----------------------------------------------------------------------------
Short-Term Obligations - 4.4%
- -----------------------------------------------------------------------------
Federal National Mortgage Assn.,
due 12/01/99, at Amortized Cost $ 6,300 $ 6,300,000
- -----------------------------------------------------------------------------
Total Investments (Identified Cost, $147,509,230) $140,860,846
- -----------------------------------------------------------------------------
Call Options Written (0.2)%
- -----------------------------------------------------------------------------
Australian Dollar/April/0.625 AUD (10,088) $ (136,415)
Canadian Dollar/September/1.4 CAD (10,339) (40,851)
Euro/December/1.03 EUR (4,667) (100,286)
British Pound/February/1.585 GBP (10,659) (130,548)
- -----------------------------------------------------------------------------
Total Call Options Written (Premiums received, $267,062) $ (408,100)
- -----------------------------------------------------------------------------
Put Options Written (0.1)%
- -----------------------------------------------------------------------------
Japan Government Bonds/February/130.2 JPY (520,000) $ (61,838)
Japan Government Bonds/February/128 (460,000) (25,317)
Canadian Dollar/September/1.55 CAD (11,447) (28,274)
Euro/December/1.075 EUR (4,871) 0
- -----------------------------------------------------------------------------
Total Put Options Written (Premiums received, $300,519) $ (115,429)
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.4% 2,030,663
- -----------------------------------------------------------------------------
Net Assets - 100.0% $142,367,980
- -----------------------------------------------------------------------------
## SEC Rule 144A restriction.
+ Restricted security.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars GBP = British Pounds
CAD = Canadian Dollars GRD = Greek Drachma
DKK = Danish Kroner JPY = Japanese Yen
EUR = Euro SEK = Swedish Krone
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- ------------------------------------------------------------------------------
NOVEMBER 30, 1999
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $147,509,230) $ 140,860,846
Cash 5,926
Net receivable for forward foreign currency exchange
contracts sold 689,765
Receivable for investments sold 150
Receivable for Fund shares sold 79,473
Interest receivable 2,936,132
Other assets 2,556
--------------
Total assets $ 144,574,848
--------------
Liabilities:
Payable for investments purchased $ 660,105
Payable for Fund shares reacquired 402,285
Net payable for forward foreign currency exchange
contracts purchased 342,015
Net payable for forward currency exchange contracts
subject to master netting agreements 17,688
Written options outstanding, at value
(premiums received, $567,581) 523,529
Payable to affiliates -
Management fee 9,305
Distribution and service fee 27,671
Shareholder servicing agent fee 1,240
Payable for swap agreement 34,574
Accrued expenses and other liabilities 188,456
--------------
Total liabilities $ 2,206,868
--------------
Net assets $ 142,367,980
==============
Net assets consist of:
Paid-in capital $ 159,303,125
Unrealized depreciation on investments and
translation of asset and liabilities in
foreign currencies (6,383,802)
Accumulated net realized loss on investments
and foreign currency transactions (20,577,203)
Accumulated undistributed net investment income 10,025,860
--------------
Total $ 142,367,980
==============
Shares of beneficial interest outstanding 14,085,456
==========
Class A shares:
Net asset value per share
(net assets of $95,887,776 / 9,429,018 shares of
beneficial interest outstanding) $10.17
======
Offering price per share (100 / 95.25 of net asset value
per share) $10.68
======
Class B shares:
Net asset value and offering price per share
(net assets of $41,865,308 / 4,198,298 shares of
beneficial interest outstanding) $ 9.97
======
Class C shares:
Net asset value and offering price per share
(net assets of $3,059,232 / 305,285 shares of
beneficial interest outstanding) $10.02
======
Class I shares:
Net asset value and offering price per share
(net assets of $1,555,664 / 152,855 shares of
beneficial interest outstanding) $10.18
======
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, Class
B, and Class C shares.
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- ------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999
- ------------------------------------------------------------------------------
Net investment income:
Interest income $ 11,594,303
------------
Expenses -
Management fee $ 1,337,913
Trustees' compensation 35,219
Shareholder servicing agent fee 186,636
Distribution and service fee (Class A) 271,130
Distribution and service fee (Class B) 559,679
Distribution and service fee (Class C) 45,865
Administration 22,973
Custodian fee 130,554
Printing 32,086
Postage 36,733
Auditing 40,223
Legal 7,590
Miscellaneous 154,544
------------
Total expenses $ 2,861,145
Fees paid indirectly (56,679)
------------
Net expenses $ 2,804,466
------------
Net investment income $ 8,789,837
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $(15,744,851)
Written option transactions 1,230,202
Foreign currency transactions 6,340,378
Futures contracts (122,059)
------------
Net realized loss on investments and foreign
currency transactions $ (8,296,330)
------------
Change in unrealized appreciation (depreciation) -
Investments $ (6,107,223)
Written options (412,397)
Translation of assets and liabilities in
foreign currencies 196,936
Swap agreement (34,574)
------------
Net unrealized loss on investments and
foreign currency transactions $ (6,357,258)
------------
Net realized and unrealized loss on
investments and foreign currency $(14,653,588)
------------
Decrease in net assets from operations $ (5,863,751)
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- ----------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 8,789,837 $ 14,176,452
Net realized loss on investments and foreign
currency transactions (8,296,330) (9,004,817)
Net unrealized gain (loss) on investments and foreign
currency translation (6,357,258) 2,068,038
------------- -------------
Increase (decrease) in net assets from operations $ (5,863,751) $ 7,239,673
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (8,915,136) $ (6,952,221)
From net investment income (Class B) (3,474,564) (2,402,143)
From net investment income (Class C) (333,062) (224,741)
From net investment income (Class I) (132,660) (84,491)
From net realized gain on investments and foreign
currency transactions (Class A)
-- (900,629)
From net realized gain on investments and foreign
currency transactions (Class B)
-- (392,688)
From net realized gain on investments and foreign
currency transactions (Class C)
-- (41,406)
From net realized gain on investments and foreign
currency transactions (Class I)
-- (10,151)
------------- -------------
Total distributions declared to shareholders $ (12,855,422) $ (11,008,470)
------------- -------------
Net decrease in net assets from Fund share transactions $ (45,170,204) $ (66,644,760)
------------- -------------
Total decrease in net assets $ (63,889,377) $ (70,413,557)
Net assets:
At beginning of year 206,257,357 276,670,914
------------- -------------
At end of year (including accumulated undistributed net
investment income of $10,025,860 and $10,838,925,
respectively) $ 142,367,980 $ 206,257,357
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
CLASS A
- --------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each year):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of year $ 11.20 $ 11.34 $ 11.70 $ 12.46 $ 11.39
----------- ----------- ----------- ----------- -----------
Income from investment operations# -
Net investment income $ 0.54 $ 0.70 $ 0.64 $ 0.65 $ 0.76
Net realized and unrealized gain (loss) on
investments and foreign currency (0.84) (0.34) (0.68) 0.17 0.76
----------- ----------- ----------- ----------- -----------
Total from investment operations $ (0.30) $ 0.36 $ (0.04) $ 0.82 $ 1.52
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders -
From net investment income $ (0.73) $ (0.44) $ (0.25) $ (1.58) $ --
From net realized gain on investments and foreign
currency transactions -- (0.06) (0.06) -- (0.45)
From paid-in capital -- -- (0.01) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (0.73) $ (0.50) $ (0.32) $ (1.58) $ (0.45)
----------- ----------- ----------- ----------- -----------
Net asset value - end of year $ 10.17 $ 11.20 $ 11.34 $ 11.70 $ 12.46
=========== =========== =========== =========== ===========
Total return(+) (3.01)% 3.27% (0.29)% 7.36% 13.93%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.34% 1.35% 1.35% 1.42% 1.51%
Net investment income 5.19% 6.28% 5.75% 5.70% 6.42%
Portfolio turnover 217% 334% 335% 370% 277%
Net assets at end of year (000 Omitted) $ 95,888 $ 139,648 $ 187,152 $ 283,770 $ 343,188
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A do not include the applicable sales charge. If the charge had been included, the results would have
been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
CLASS B
- --------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each year):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of year $ 10.99 $ 11.13 $ 11.50 $ 12.28 $ 11.32
----------- ----------- ----------- ----------- -----------
Income from investment operations# -
Net investment income $ 0.46 $ 0.60 $ 0.55 $ 0.54 $ 0.65
Net realized and unrealized gain (loss) on
investments and foreign currency (0.84) (0.33) (0.68) 0.17 0.76
----------- ----------- ----------- ----------- -----------
Total from investment operations $ (0.38) $ 0.27 $ (0.13) $ 0.71 $ 1.41
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders -
From net investment income $
$ (0.64) $ (0.35) $ (0.17) $ (1.49) --
From net realized gain on investments and foreign
currency transactions -- (0.06) (0.06) -- (0.45)
From paid-in capital -- -- (0.01) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (0.64) $ (0.41) $ (0.24) $ (1.49) $ (0.45)
----------- ----------- ----------- ----------- -----------
Net asset value - end of year $ 9.97 $ 10.99 $ 11.13 $ 11.50 $ 12.28
=========== =========== =========== =========== ===========
Total return (3.74)% 2.46% (1.08)% 6.39% 13.01%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.12% 2.12% 2.10% 2.27% 2.33%
Net investment income 4.41% 5.53% 5.03% 4.89% 5.59%
Portfolio turnover 217% 334% 335% 370% 277%
Net assets at end of year (000 Omitted) $ 41,865 $ 58,646 $ 77,962 $ 102,717 $ 90,978
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- --------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED NOVEMBER 30, 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
CLASS C
- --------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each year):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of year $ 11.03 $ 11.13 $ 11.51 $ 12.29 $ 11.31
----------- ----------- ----------- ----------- -----------
Income from investment operations# -
Net investment income $ 0.45 $ 0.60 $ 0.55 $ 0.55 $ 0.66
Net realized and unrealized gain (loss) on
investments and foreign currency (0.83) (0.33) (0.68) 0.17 0.77
----------- ----------- ----------- ----------- -----------
Total from investment operations $ (0.38) $ 0.27 $ (0.13) $ 0.72 $ 1.43
----------- ----------- ----------- ----------- -----------
Less distributions declared to shareholders -
From net investment income $ (0.63) $ (0.31) $ (0.18) $ (1.50) $ --
From net realized gain on investments and foreign
currency transactions -- (0.06) (0.06) -- (0.45)
From paid-in capital -- -- (0.01) -- --
----------- ----------- ----------- ----------- -----------
Total distributions declared to shareholders $ (0.63) $ (0.37) $ (0.25) $ (1.50) $ (0.45)
----------- ----------- ----------- ----------- -----------
Net asset value - end of year $ 10.02 $ 11.03 $ 11.13 $ 11.51 $ 12.29
=========== =========== =========== =========== ===========
Total return (3.70)% 2.46% (1.10)% 6.56% 13.11%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.12% 2.12% 2.10% 2.20% 2.26%
Net investment income 4.41% 5.52% 5.02% 4.97% 5.67%
Portfolio turnover 217% 334% 335% 370% 277%
Net assets at end of year (000 Omitted) $ 3,059 $ 5,953 $ 9,534 $ 14,487 $ 11,813
#Per share data are based on average shares outstanding.
##Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------
PERIOD ENDED NOVEMBER 30, 1999 1998 1997*
- ------------------------------------------------------------------------------------------------------
CLASS I
- ------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each year):
<S> <C> <C> <C>
Net asset value - beginning of year $ 11.22 $ 11.37 $ 11.24
--------- --------- ---------
Income from investment operations# -
Net investment income $ 0.57 $ 0.73 $ 0.61
Net realized and unrealized gain (loss) on investments and
foreign currency (0.85) (0.35) (0.48)
--------- --------- ---------
Total from investment operations $ (0.28) $ 0.38 $ 0.13
--------- --------- ---------
Less distributions declared to shareholders -
From net investment income $ (0.76) $ (0.47) $ --
From net realized gain on investments and foreign currency
transactions -- (0.06) --
--------- --------- ---------
Total distributions declared to shareholders $ (0.76) $ (0.53) $ --
--------- --------- ---------
Net asset value - end of year $ 10.18 $ 11.22 $ 11.37
========= ========= =========
Total return (2.74)% 3.49% 1.16%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.11% 1.12% 0.99%+
Net investment income 5.42% 6.58% 5.54%+
Portfolio turnover 217% 334% 335%
Net assets at end of year (000 Omitted) $ 1,556 $ 2,010 $ 2,023
* For the period from the inception of Class I, January 2, 1997 to November 30, 1997.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
+ Annualized
++ Not annualized.
</TABLE>
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Global Governments Fund (the Fund) is a nondiversified series of MFS Series
Trust VII (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.
The Fund can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations which
mature in 60 days or less), including listed issues, forward contracts, and swap
agreements, 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. Futures contracts, options, and options on futures contracts
listed on commodities exchanges are reported at market value using closing
settlement prices. Over-the-counter options on securities are valued by brokers.
Over-the-counter currency options are valued through the use of a pricing model
which takes into account foreign currency exchange spot and forward rates,
implied volatility, and short-term repurchase rates.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are creditworthy.
Each repurchase agreement is recorded at cost. The Fund requires that the
securities collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Fund to obtain those securities
in the event of a default under the repurchase agreement. The Fund monitors, on
a daily basis, the value of the collateral to ensure that its value, including
accrued interest, is greater than amounts owed to the Fund under each such
repurchase agreement. The Fund, along with other affiliated entities of
Massachusetts Financial Services Company (MFS), may utilize a joint trading
account for the purpose of entering into one or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - The Fund may write call or put options in exchange for a
premium. The premium is initially recorded as a liability which is subsequently
adjusted to the current value of the options contract. When a written option
expires, the Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of the
Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the Fund. 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
index 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.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund may enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Swap Agreements - The Fund may enter into swap agreements. A swap is an exchange
of cash payments between the Fund and another party which is based on a specific
financial index. Cash payments are exchanged at specified intervals and the
expected income or expense is recorded on the accrual basis. The value of the
swap is adjusted daily and the change in value is recorded as unrealized
appreciation or depreciation. Risks may arise upon entering into these
agreements from the potential inability of counterparties to meet the terms of
their contract and from unanticipated changes in the value of the financial
index on which the swap agreement is based. The Fund uses swaps for both hedging
and non-hedging purposes. For hedging purposes, the Fund may use swaps to reduce
its exposure to interest and foreign exchange rate fluctuations. For non-hedging
purposes, the Fund may use swaps to take a position on anticipated changes in
the underlying financial index.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All discount is
accreted for financial statement and tax reporting purposes as required by
federal income tax regulations. Interest payments received in additional
securities are recorded on the ex-dividend or ex-interest date in an amount
equal to the value of the security on such date. Some securities may be
purchased on a "when-issued" or "forward delivery" basis, which means that the
securities will be delivered to the Fund at a future date, usually beyond
customary settlement time.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
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 taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The 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 be reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended November 30, 1999, $3,252,520 was reclassified from accumulated
undistributed net realized loss on investments and foreign currency transactions
to accumulated undistributed net investment income due to differences between
book and tax accounting for currency transactions. This change had no effect on
the net assets or net asset value per share. At November 30, 1999, accumulated
undistributed net investment income (realized gain on investments and foreign
currency transactions) under book accounting were different from tax accounting
due to temporary differences in accounting for currency transactions.
At November 30, 1999, the Fund, for federal income tax purposes, had a capital
loss carryforward of $20,266,813 which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration on November 30, 2006, ($8,420,466) and November 30, 2007,
($11,846,347).
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates are
generally due to differences in separate class expenses. Class B shares will
convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at the following annual rates:
First $500 million of average net assets 0.75%
Average net assets in excess of $500 million 0.70%
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 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 $21,722 for the year ended
November 30, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$10,928 for the year ended November 30, 1999, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's 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 paid to each
securities dealer that enters into a sales agreement with MFD of up to 0.25% per
annum (reduced to 0.15% per annum for assets sold prior to October 1, 1989) of
the Fund's average daily net assets attributable to Class A shares which are
attributable to that securities dealer and 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. Payment of the 0.10% per annum distribution fee will be implemented on
such date as the Trustees may determine. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $68,397 for
the year ended November 30, 1999. Fees incurred under the distribution plan
during the year ended November 30, 1999, were 0.25% of average daily net assets
attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a distribution
fee of 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 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 $11,054 and $5,544 for Class B and Class C shares, respectively, for
the year ended November 30, 1999. Fees incurred under the distribution plan
during the year ended November 30, 1999, were 1.00% of average daily net assets
attributable to Class B and Class C shares, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
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 year ended November 30,
1999, were $118, $130,650, and $1,487 for Class A, Class B, and Class C 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 Fund's average daily net assets at an annual rate of 0.10%.
Prior to April 1, 1999, the fee was calculated as a percentage of the Fund's
average daily net assets at an annual rate of 0.1125%.
(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 $113,305,223 $ 93,510,316
------------ ------------
Investments (non-U.S. government securities) $249,880,211 $309,589,049
------------ ------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the Fund, as computed on a federal income tax basis, are as
follows:
Aggregate cost $147,726,046
------------
Gross unrealized depreciation $ (7,868,605)
Gross unrealized appreciation 1,003,405
------------
Net unrealized depreciation $ (6,865,200)
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
---------------------------- -----------------------------
SHARE AMOUNT SHARE AMOUNT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 938,320 $ 9,861,513 1,693,765 $ 18,654,349
Shares issued to shareholders in
reinvestment of distributions 719,917 7,573,533 598,017 6,524,492
Shares reacquired (4,693,959) (48,876,378) (6,327,946) (70,140,851)
------------ ------------ ------------ ------------
Net decrease (3,035,722) $(31,441,332) (4,036,164) $(44,962,010)
============ ============ ============ ============
<CAPTION>
Class B Shares
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
---------------------------- -----------------------------
SHARE AMOUNT SHARE AMOUNT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,467,521 $ 15,288,826 1,120,857 $ 12,158,372
Shares issued to shareholders in
reinvestment of distributions 271,877 2,824,800 207,895 2,241,109
Shares reacquired (2,876,790) (29,178,969) (2,996,797) (32,622,270)
------------ ------------ ------------ ------------
Net decrease (1,137,392) $(11,065,343) (1,668,045) $(18,222,789)
============ ============ ============ ============
<CAPTION>
Class C Shares
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
---------------------------- -----------------------------
SHARE AMOUNT SHARE AMOUNT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 156,777 $ 1,604,155 92,283 $ 1,004,163
Shares issued to shareholders in
reinvestment of distributions 20,707 216,178 15,866 171,670
Shares reacquired (411,801) (4,211,857) (425,019) (4,649,784)
------------ ------------ ------------ ------------
Net decrease (234,317) $ (2,391,524) (316,870) $ (3,473,951)
============ ============ ============ ============
<CAPTION>
Class I Shares
YEAR ENDED NOVEMBER 30, 1999 YEAR ENDED NOVEMBER 30, 1998
---------------------------- -----------------------------
SHARE AMOUNT SHARE AMOUNT
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,059 $ 94,041 16,150 $ 178,874
Shares issued to shareholders in
reinvestment of distributions 12,634 132,656 8,683 94,640
Shares reacquired (48,089) (498,702) (23,573) (259,524)
------------ ------------ ------------ ------------
Net increase (decrease) (26,396) $ (272,005) 1,260 $ 13,990
============ ============ ============ ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. 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 year ended November 30, 1999, was $1,200. The Fund had no
borrowings during the year.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange
contracts, swap agreements, and futures contracts. The notional or contractual
amounts of these instruments represent the investment the 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.
Written Option Transactions
NUMBER OF
CONTRACTS PREMIUMS
- -------------------------------------------------------------------------------
Outstanding, beginning of period 6 $ 729,218
Options written 47 3,273,659
Options terminated in closing transactions (20) (1,548,550)
Options exercised (1) (71,499)
Options expired (24) (1,814,247)
-----------
Outstanding, end of period 8 $ (567,581)
===========
At November 30, 1999, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 3/15/00 AUD $ 2,805,995 $ 2,784,108 $ 21,887
12/01/99 CHF 14,617,945 14,297,631 320,314
3/15/00 DKK 15,999,394 15,546,747 452,647
12/01/99 EUR 7,626,055 7,287,342 338,713
4/25/00 HKD 18,747,654 18,898,903 (151,249)
12/01/99 JPY 13,646,867 13,972,999 (326,132)
3/15/00 NZD 801,434 782,342 19,092
12/01/99 SEK 847,285 832,792 14,493
------------ ----------- -----------
$ 75,092,629 $74,402,864 $ 689,765
============ =========== ===========
Purchases 12/01/99 AUD 2,071,464 $ 2,068,212 $ (3,252)
3/15/00 CHF 7,073,932 6,935,832 (138,100)
12/01/99 DKK 7,231,552 7,098,251 (133,301)
12/01/99 EUR 18,754,311 17,636,586 (1,117,725)
4/25/00 HKD 9,091,674 9,154,247 62,573
3/15/00 JPY 22,139,382 23,128,092 988,710
12/01/99 NZD 391,766 390,846 (920)
------------ ----------- -----------
$ 66,754,081 $66,412,066 $ (342,015)
============ =========== ===========
</TABLE>
At November 30, 1999, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $13,099 with
Deutsche Bank and $273,914 with Merrill Lynch and a net recievable of $269,325
with CS First Boston.
At November 30, 1999, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
Swap Agreements
Interest Rate Swaps
<TABLE>
<CAPTION>
CASH FLOWS CASH FLOWS UNREALIZED
NOTIONAL PRINCIPAL PAID BY RECEIVED BY APPRECIATION
EXPIRATION AMOUNT OF CONTRACT THE FUND THE FUND (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/22/03 SEK 30,300,000 Floating - 3.247% Fixed - 4.38% $(120,697)
3/22/03 EUR 3,290,000 Fixed - 3.76% Floating - 3.01% 86,123
---------
$ (34,574)
=========
</TABLE>
At November 30, 1999, the Fund had sufficient cash and/or securities to cover
any commitments under these 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 November 30, 1999,
the Fund owned the following restricted securities, excluding securities issued
under Rule 144A, constituting 0.68% of net assets which may not be publicly sold
without registration under the Securities Act of 1933. The Fund does not have
the right to demand that such securities be registered. The value of these
securities is determined by valuations furnished by dealers or by a pricing
service, or if not available, in good faith by the Trustees.
<TABLE>
<CAPTION>
DATE OF SHARE/PAR
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Morocco Restructuring & Consolidating
Agreement, 6.063s, 2009 11/19/1998 1,099,940 $898,147 $973,447
--------
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust VII and Shareholders of MFS Global
Governments Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Global Governments Fund, including the schedule of portfolio investments as of
November 30, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of November 30, 1999, by correspondence with the custodian
and brokers or by other appropriate auditing procedures where replies from
brokers were not received. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Global Governments Fund at November 30, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
January 6, 2000
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE FEDERAL
TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 1999.
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and
on behalf of the MFS funds, is committed to the effective
use of technology in managing our portfolio investments,
delivering high-quality service to MFS fund shareholders, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
<TABLE>
MFS(R) GLOBAL GOVERNMENTS FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Richard B. Bailey - Private Investor; Mark E. Bradley*
Former Chairman and Director (until Ellen Moynihan*
1991), MFS Investment Management(R) James O. Yost*
J. Atwood Ives+ - Chairman and Chief SECRETARY
Executive Officer, Eastern Enterprises Stephen E. Cavan*
(diversified services company)
ASSISTANT SECRETARY
Lawrence T. Perera+ - Partner, James R. Bordewick, Jr.*
Hemenway & Barnes (attorneys)
CUSTODIAN
William J. Poorvu+ - Adjunct State Street Bank and Trust Company
Professor, Harvard University Graduate
School of Business Administration AUDITORS
Ernst & Young LLP
Charles W. Schmidt+ - Private Investor
INVESTOR INFORMATION
Arnold D. Scott* - Senior Executive For information on MFS mutual funds,
Vice President, Director, and call your financial consultant or, for
Secretary, MFS Investment Management an information kit, call toll free:
1-800-637-2929 any business day from 9
Jeffrey L. Shames* - Chairman and a.m. to 5 p.m. Eastern time (or leave
Chief Executive Officer, MFS a message anytime).
Investment Management
INVESTOR SERVICE
Elaine R. Smith+ - Independent MFS Service Center, Inc.
Consultant P.O. Box 2281
Boston, MA 02107-9906
David B. Stone+ - Chairman, North
American Management Corp. (investment For general information, call toll free:
adviser) 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
INVESTMENT ADVISER
Massachusetts Financial Services Company For service to speech- or
500 Boylston Street hearing-impaired, call toll free:
Boston, MA 02116-3741 1-800-637-6576 any business day from 9
a.m. to 5 p.m. Eastern time. (To use
DISTRIBUTOR this service, your phone must be
MFS Fund Distributors, Inc. equipped with a Telecommunications
500 Boylston Street Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances,
CHAIRMAN AND PRESIDENT exchanges, or stock and bond outlooks,
Jeffrey L. Shames* call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a
PORTFOLIO MANAGERS touch-tone telephone.
Christopher D. Piros*
James T. Swanson* WORLD WIDE WEB
www.mfs.com
TREASURER
W. Thomas London*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) GLOBAL GOVERNMENTS FUND ------------
BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MWG-2 01/00 23.5M 20/220/320/820
