MFS/Sun Life Series Trust [arrow right]
ANNUAL REPORT [bullet] December 31, 1996
Capital Appreciation Series
Conservative Growth Series
Emerging Growth Series
MFS/Foreign & Colonial Emerging
Markets Equity Series
MFS/Foreign & Colonial International
Growth Series
MFS/Foreign & Colonial International
Growth and Income Series
Government Securities Series
High Yield Series
Managed Sectors Series
Money Market Series
Research Series
Total Return Series
Utilities Series
Value Series
World Asset Allocation Series
World Governments Series
World Growth Series
World Total Return Series
Zero Coupon Series 2000 Portfolio
<PAGE>
Dear Contract Owners:
The pattern of slow but sustainable growth seen in most of the world in 1996
seems likely to continue in 1997. While it appears that U.S. growth in 1997
will slow modestly relative to 1996, there is evidence that the European
economies and, to a lesser degree, Japan are continuing to recover from
recession. At the same time, companies in many emerging markets are reporting
robust increases in earnings as these economies benefit from
higher-than-average growth and open market reforms, which should continue to
provide more opportunities for development and trade.
U.S. Outlook
After more than six years of expansion, the U.S. economy appears headed
toward another year of at least moderate growth in 1997, although a few signs
point to the possibility of a modest rise in inflation during the year. On
the positive side, the pattern of moderate growth and subdued inflation
experienced over the past few years now seems fairly well entrenched and
appears to have enough momentum to continue on track for some time. Also,
recent gains in such important sectors as housing, automobiles, industrial
production, and exports indicate a fair amount of underlying strength in the
economy. However, some reason for caution can be seen in the continuing high
levels of consumer debt and the attendant rise in personal bankruptcies, as
well as the modestly disappointing levels of holiday sales. Furthermore, the
ongoing tightness in labor markets, and price rises in such important sectors
as energy, could add some inflationary pressures to the economy. Given these
somewhat conflicting indicators, we expect real (inflation-adjusted) growth
to revolve around 2% in 1997, which would represent a modest decline from
1996.
Global Outlook
Internationally, the environment of moderate growth, benign inflation, and
fairly steady interest rates is also providing support for investment markets
and should help sustain valuation levels in the coming year. Throughout the
world, the key to stock market performance in 1997 will be corporate earnings
growth. While U.S. earnings growth is slowing but still expected to be fairly
healthy, we anticipate that a number of European countries will see an
acceleration in earnings growth and improved valuations in 1997. Despite this
environment, many European stock markets trade at discounts to the United
States. In particular, we see opportunities in some of the multinationals and
businesses with the ability to generate steady earnings growth. In Japan, a
recovery appears to be taking place, but at a very modest rate, with
valuations still at high levels. In the emerging markets, the long-term
economic growth story remains intact and, although selectivity is even more
critical in these markets, an increasing number of companies is benefiting
from this economic expansion while trading at below-average global
valuations.
Bond Markets
Conflicting signals over the strength of the economy have created near-term
volatility in U.S. bond markets. Comments by Federal Reserve Chairman Alan
Greenspan in late 1996 have created some uncertainty over the Federal Reserve
Board's next move. However, we expect the Fed to maintain its
anti-inflationary stance should signs of more rapid economic growth and,
particularly, higher inflation resurface. While inflationary forces largely
remained in check in 1996, the continued strength in labor markets and rising
energy prices mean that some pickup in inflation is still possible. However,
the U.S. budget deficit continues to decline and, as a percentage of gross
domestic product, is now less than 2%, which we consider a positive
development for the bond markets. Although interest rates may move higher
over the coming months, we believe that, at current levels, fixed-income
markets remain fairly valued.
Stock Market
While U.S. equity returns of the past two years have been impressive, we
would anticipate returns in 1997 to be closer to historical levels. Just as
the slowdown in corporate earnings growth and increases in interest rates in
1996 raised some near-term concerns, further interest rate increases coupled
with an acceleration of inflation could negatively affect the stock market in
1997. However, to the extent that some slowdown in earnings means that the
economy is not overheating, this may be beneficial for the equity market in
the long run. Also, we believe 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, while we
have some near-term concerns, we remain reasonably positive that the equity
market will produce satisfactory long-term returns.
A discussion of the performance and current investment strategy for each of
the series is presented here and on the following pages. The performance
figures provided in the discussion do not reflect the deduction of any
separate account charges. The results would have been lower had these charges
been deducted. We appreciate your support and welcome any questions or
comments you may have.
On behalf of the Board of Trustees,
/s/John D. McNeil
John D. McNeil
Chairman
January 15, 1997
Capital Appreciation Series
For the year ended December 31, 1996, the Series provided a total return of
21.48%, modestly below the 22.64% return of the Standard & Poor's 500
Composite Index (the S&P 500), an unmanaged index of common stock
performance. The Series' performance benefited from a significant weighting
in the technology sector and in particular Intel and Microsoft which have
strong market positions, related to the personal computer business. Lodging
stocks, such as HFS Inc., a franchiser of hotels and residential real estate
brokerage companies, also contributed significantly to performance. Other
significant contributors include Tyco International, a fire control and
health care products manufacturer and Wisconsin Central, a railroad company.
Performance was negatively impacted by the underweighting in oil and oil
services which benefited from rising oil prices, and financial services which
performed well despite generally flat interest rates since these sectors
outperformed the S&P 500 during the year.
The Series continues to seek companies possessing five key factors: earnings
momentum, reasonable valuations, good management, a strong balance sheet and
positive secular trends. Given that current price/earnings multiples appear
reasonable, the Series will focus on earnings momentum to seek further stock
price appreciation.
Our largest concentration remains in the technology area, which is seeing
strong spending by corporations that are focused on improving their
productivity. Other large weightings are in lodging and industrial goods such
as agricultural equipment that will benefit from a continuing strong farm
economy.
1
<PAGE>
Conservative Growth Series
For the year ended December 31, 1996, the Series provided a total return of
25.41%, outperforming the 22.64% return of the S&P 500. The past year proved
to be a fairly benign investment environment, with growth continuing, but at
a reasonably slow rate, which allowed interest rates to stay low, and
therefore improved valuations. At the same time, many companies continued to
report significant gains in earnings. The Series benefited from this
favorable investment environment, as the low interest rates led to improved
valuations, and corporate earnings continue to improve. The Series was also
helped by being overweighted in sectors that outperformed the market, while
being underweighted in those that lagged the market. For example, the Series
was overweighted in financial services stocks and industrial goods and
services, particularly aerospace and defense stocks, both of which
outperformed the market, while being underweighted in sectors like utilities
and leisure, both of which underperformed. Financial services stocks
benefited from a number of favorable developments. First, some companies,
such as First Bank Systems and Norwest, have been selling at significant
discounts to the market -- discounts which we feel are not warranted given
the underlying strength of these companies. Second, the ongoing and necessary
consolidation of the banking industry benefits the acquiring companies which
are able to reach broader markets and realize economies of scales, as well as
the stocks of companies being taken over, as they have been bought at
significant premiums.
Meanwhile, the defense and aerospace industry is also going through a massive
consolidation as the defense industry shrinks. In most cases, the resulting
acquisitions and mergers are enhancing, not diluting, earnings as these
companies also enjoy increased economies of scale, as well as increased
purchasing power and global strength. We think there will be more mergers in
the future.
Looking ahead, we have some concerns about the ability of the S&P 500 to
continue to grow earnings at the same pace as the last couple of years. While
the economy slows, the ability of companies to make their earnings estimates
will become more and more significant. As a result, stock selection will
become even more important. In this environment, we believe that our emphasis
on original research, combined with our bottom-up approach to stock
selection, should continue to benefit the Series over the long term.
Emerging Growth Series
For the year ended December 31, 1996, the Series provided a total return of
17.15%. This compares to a 22.64% return for the S&P 500, and a 16.35% return
for the Russell 2000 Total Return Index, an index comprised of 2,000 of the
smallest U.S. domiciled company common stocks, which are traded on the New
York Stock Exchange, the American Stock Exchange, and the NASDAQ. The Series'
performance benefited from strong price appreciation in the stock prices of
some of our holdings in the technology sector. BMC Software (systems
software), Cadence Design Systems (electronic design automation software),
and Oracle Systems (database software) were up 94%, 41%, and 48%,
respectively. Taking a major position in the depressed semiconductor stocks
during the month of August also contributed to the performance of the Series.
We believe that the semiconductor industry has resolved the problem of excess
inventory in the system and that orders and shipments are picking up. This
has been confirmed by the industry's improving "book-to-bill" ratio. Looking
ahead, the semiconductor companies should continue to benefit from robust
growth in PCs, data processing, and telecommunications. Adobe Systems
(electronic printing and publishing software) reported disappointing earnings
early in the year and has been a disappointing stock. We maintain a positive
position in Adobe, as we believe the stock price will rebound from its
currently depressed level.
For the second year in a row, the performance of our leisure stocks was
particularly enhanced by the large weighting in HFS. HFS, the nation's
largest franchiser of hotels and residential real estate brokerage companies,
saw its stock price increase 46% last year. Strong earnings gains and a few
acquisitions such as Coldwell Banker, Avis, Resort Condominiums
International, and PHH Group, have increased the possibility of future growth
prospects for investors. We believe HFS has one of the most astute management
teams, and the position remains the Series' largest.
The Series' positions in radio and television broadcasting stocks performed
very well as a result of the 1996 Telecommunications Act, which relaxed
ownership restrictions. Rapid industry consolidation is already occurring,
with the strong companies getting stronger. Clear Channel Communications and
LIN Television were up 64% and 42%, respectively.
Although the healthcare stocks had a mixed performance over the past year
(especially the health maintenance organizations), two of the Series' major
positions produced superior earnings growth and good stock performance.
Cardinal Health (wholesale distributor of medical products) and Health
Management Associates (hospital management company) appreciated 60% and 29%,
respectively.
In 1996, the stock market and the Series' investments moved higher despite a
rise in interest rates and a slowdown in overall corporate earnings. Although
the large-capitalization stocks outperformed the small-capitalization stocks
over the past six months and the year as a whole, we believe the small fast-
growing companies will resume their outperformance in 1997 as the economy and
corporate earnings continue to slow. As we have mentioned in previous
reports, we are living through an unprecedented era of productivity gains for
corporate America. We believe smaller companies are providing the technology
and resources to drive this productivity to the bottom line, and that the
stock market will continue to reward these companies.
Government Securities Series
For the year ended December 31, 1996, the Series experienced a total return
of 1.65%. This compares to a 2.77% return for the Lehman Brothers Government
Bond Index (the Lehman Index), an unmanaged index comprised of debt issued by
the U.S. Treasury, U.S. government agencies, and corporate debt guaranteed by
the U.S. government. The portfolio is currently positioned for stable to
rising yields. The portfolio is 10% less sensitive to market price movements
than the Lehman Index and is focused on securities which add incremental
yield to the Series. Cash positions are less than 5%.
Nearly half of the portfolio is held in U.S. Treasury, U.S. agency
debentures, and Small Business Association Loans. These issues currently
yield between 6.0% and 7.4%. Issue maturities are distributed across the
entire maturity spectrum but vary from the Lehman Index from an overweighting
in shorter maturities and an underweighting in longer maturities. The agency
issues add between 0.20% and 1.10% incremental yield above comparable U.S.
Treasury issues. Government guarantees apply to individual securities and not
to prices and yields in a managed portfolio.
The other 53% of the portfolio is held in U.S. agency mortgage pass-through
certificates. Issues held in the portfolio are held for both their yield
characteristics and extension risk protection. Both 30-year and 15-year
issues are currently represented, with yields that average 1.00% greater than
comparable Treasury issues. The issues have stable prepayment rates, which
should make the certificates move in a predictable fashion with their
Treasury counterparts.
2
<PAGE>
Should we become more constructive on the market, the portfolio will decrease
its allocation to mortgage securities, and increase its allocation to five-
and ten-year Treasury issues.
High Yield Series
For the 12 months ended December 31, 1996, the Series provided a total return
of 12.12%, compared to a return of 11.4% for the Lehman Brothers High Yield
Bond Index. The Series benefited as the credit quality of its typical
high-yield investment improved throughout the year. In addition, a number of
companies in the portfolio were acquired and their high-yield debt retired at
premiums to secondary market prices. Performance was negatively impacted by
the overweighting of defensive industries such as supermarkets and media
earlier in the year.
The high-yield market was the best performing domestic fixed-income market
in 1996. The economy was stronger than generally forecasted, and most
high-yield issuers fared well. The improvement in credit quality more than
compensated for the rise in interest rates. Favorable technical factors
reinforced these positive credit fundamentals. The demand for high-yield
bonds outpaced supply due to strong cash inflows into high-yield mutual funds
and increased buying interest from traditional investment-grade accounts.
These favorable credit and technical factors caused the spread between the
yield on high-yield bonds and Treasury securities to narrow which led to
higher bond prices. (Principal value and interest on Treasury securities are
guaranteed by the U.S. government, if held to maturity). The high-yield
market currently offers approximately 3.25 percentage points more yield than
the Treasury bond market. We would not expect this spread to widen
significantly given our outlook for continued modest economic growth and the
prospects for further credit improvements. While this spread is near the
lower end of its historic range, it represents a 50% premium to the yields
currently available on Treasury securities, and we believe it is adequate
compensation for the credit risk associated with the high-yield market.
Recently, we have selectively added to the metals sector by buying bonds of
specialty steel manufacturers. Despite longer-term concerns regarding
capacity additions, steel prices have been firm, reflecting continued strong
demand. We have balanced this cyclical exposure with an overweighted position
in such name-brand consumer products companies as Westpoint Stevens, Sealy,
Samsonite, and Revlon Cosmetics. The Series continues to emphasize
telecommunication credits in such high growth areas as wireless personal
communication services. The Series is underweighted in the cable television
sector due to increased competition from alternative media sources. We
continue to seek companies which have improving credit quality and whose
high-yield bonds offer attractive expected returns.
Managed Sectors Series
For the year ended December 31, 1996, the Series provided a total return of
17.58%, which compares to a 22.64% return for the S&P 500. Consistent with
the Series' charter to be non-diversified, the Series was overweighted in a
number of industries, particularly technology. Weakness in this sector
hindered performance in the first several months of 1996. Also, weakness in
the Series' gaming positions and continued softness in stocks of health
maintenance organizations, recent additions to the Series, have also hurt
results. This was offset to some degree by good performances in the Series'
energy holdings as well as strong individual performance in names such as
First Interstate, Freddie Mac, Intel, BMC Software, Promus Hotels, Tyco
International, and ADT Ltd.
The Series has recently narrowed its sector focus to four areas. The
technology weighting has been increased as dramatic price corrections in many
of that industry's segments have presented what we believe is an opportunity
to buy high-quality companies at relative valuations well below both the
market and historic averages, despite our expectations of above average
earnings growth. Energy weightings (primarily oil services companies) have
been modestly increased as the prospect for consolidation-driven cost-savings
and enhanced operating leverage in a favorable overall environment for energy
continues to bode well for superior earnings growth in natural gas and oil.
The Series' allocation to the leisure sector, primarily gaming and cellular,
has remained approximately the same. The health care sector was added during
the year and consists primarily of health maintenance organizations (HMOs).
Stocks in this area suffered major corrections as earnings growth slowed,
primarily due to weaker-than-expected pricing. We still believe the prospects
for unit growth are very positive and pricing expectations have improved, and
we expect earnings for the HMOs to reaccelerate in 1997 and beyond, well
above current consensus. Finally, the "other" category, which consists of
prospective future sectors and/or individual ideas where we believe the
Series is better off owning than not, has been concentrated to reduce the
number of holdings and increase weightings in stocks we believe represent
attractive values. Names such as Tyco International, ADT Limited, Wisconsin
Central, Loral Space & Communications, Office Depot, McDonnell-Douglas, Sears
and Equitable of Iowa are a few examples.
Looking ahead, we still believe the economy will continue to grow, albeit at
a moderate rate. In addition, this subdued level of growth should help
inflation remain modest. We believe this environment will put a premium on
the visibility and growth of earnings, and that the market is likely to keep
trading in a narrow range marked by volatile sector rotations. In this
environment, we believe the best course of action for the Series is to
concentrate holdings in companies led by strong management teams and which
have visible earnings growth and attractive relative valuations.
MFS/Foreign & Colonial Emerging Markets
Equity Series
The Series, which commenced operations on June 5, 1996 seeks capital
appreciation through investing primarily in companies whose principal
activities are located in emerging markets countries. The Series has the
ability to invest up to 35% of its assets in lower-rated or unrated
fixed-income securities. Emerging markets have generally made little progress
over the past year as international investors have preferred to concentrate
their attention on more developed markets, which have continued to perform
well. The Series has benefited from being overweighted in India, Pakistan,
Colombia, Peru, and China and being lower weighted in Hong Kong and the
Philippines.
The Series remains very well-diversified at the country level, with major
industry weightings in telecommunications, banking, electric utilities, food
and beverage, and oil and gas. The largest country weightings are Brazil,
Mexico, India, Malaysia, and Hong Kong. Within Asia, we have continued to
build positions in China and Hong Kong, which we believe will be re-rated
upwards as the handover approaches, in mid 1997. We also remain positive
about India (which has been a disappointing performer over the last six
months), due to improving liquidity and falling real interest rates. The
small position we currently have in Pakistan has not as yet performed due to
political instability in the country, but we are hopeful of an improvement in
the situation in the next 12 months in what remains, in our view, the
cheapest market in Asia.
Our largest position in Latin America remains with Brazil. Interest rates
have been steadily easing and reforms are continuing while
3
<PAGE>
the stock market has continued to perform well. We also remain positive on
the smaller Latin American markets of Colombia and Peru. In Colombia,
political worries have continued to overshadow exceptional valuation levels.
In Peru, the medium-term outlook remains positive despite short-term
political concerns and weakness in the economy.
In other emerging markets, Poland and Russia remain attractive. The Polish
economy is growing strongly, led by exporters. Even though it has been one of
the best performing markets in the world in 1996, shares of single-digit
price earnings multiples are still available. In Russia, despite the apparent
political risks, economic liberalization is expected to continue and
valuations remain compelling in comparison with Western companies. Exposure
to Hungary has been eliminated while the South Africa weighting has been
reduced significantly. In the former, valuations are no longer attractive
following a near doubling of the market in 1996, while in the latter, a poor
economic outlook and political instability are likely to continue for a
period of time. Two markets where we have increased positions are Morocco and
Egypt. In the former, a healthy economy, continued liberalization, and better
stock market liquidity are likely to lead to a further re-rating upward of
the market. In the latter, the privatization program has accelerated and
dividend yields on many companies are now higher than inflation.
MFS/Foreign & Colonial International
Growth Series
The Series, which commenced operations on June 3, 1996, seeks capital
appreciation through investing, under normal market conditions, at least 65%
of its assets in equity securities companies whose principal activities are
located outside the United States and which we believe offer growth potential
well above the growth rate of the overall U.S. economy. Emerging markets made
little progress during the period as international investors preferred to
focus on the more developed markets. The Series is as yet uninvested in this
area, although the intention remains to build up an exposure of approximately
20% in emerging markets, which we believe offer the potential for
above-average long-term growth. With the exception of Japanese equities, all
major international equity markets posted healthy positive returns over the
period. Evidence of a moderation in economic growth in seven of the largest
industrial countries (the G7), excluding the United Kingdom, has caused
inflationary fears to subside with falling interest rates providing support
for equity markets. After a good first quarter in 1996, smaller companies
underperformed blue chips in most markets. We continue to believe that with
careful stock selection this asset class provides excellent opportunities for
growth.
Hopes for a robust economic recovery in Japan were severely dampened in the
summer months leading to a setback in the equity market during the second
half of the year. However, the current signs of an economic recovery, albeit
modest, and a pick-up in consumer demand lend support to our positive stance
on the outlook for Japanese equities. Japan is at an early stage in its
business cycle with corporate earnings likely to rebound strongly next year.
Elsewhere, equity markets in the United Kingdom performed very strongly, with
major market indices up over 10% in local currency terms, and sterling
strength boosting this to a gain of 22%. The Series benefited from well-timed
purchases of BAT Industries and British Telecom during the period. While
continued strong economic recovery is expected to lead to further interest
rate rises in the United Kingdom, we believe this is already largely
discounted by the market and should not prevent equities making further
progress. The prospect of a general election in the first half of 1997 is
likely to lead to increased volatility in the market.
In Europe, currency weakness detracted somewhat from an otherwise reasonably
strong performance, with the strongest country performances coming from
non-core Europe such as the Scandinavian countries and Spain. Exposure to
Sweden and Spain and the Netherlands in particular have had a positive impact
on the portfolio. After recent strength linked to low interest rates and
optimism on EMU (European Monetary Union) convergence, we believe the outlook
for European markets is relatively dull supporting our underweighted stance
on the region.
Hong Kong was a strong performer during the period, with the unmanaged Hang
Seng Index up 22% in both local currency and U.S. dollar terms. The Series
benefited from its exposure to the property stock Cheung Kong. We expect to
maintain our exposure to the Far East generally, as growth prospects in the
region remain high in relative terms.
In the small-cap portion of the portfolio, Japanese small companies, where
the Series has a significant exposure, experienced a more severe downturn
than the larger stocks due to their greater sensitivity to domestic economic
conditions. However, Japanese small-caps now appear poised for a strong
recovery as the domestic economy regains momentum. Strong performers among
the small-caps generally were United Kingdom niche operators Serco and
Independent Insurance as well as French stationery supplier Guilbert.
MFS/Foreign & Colonial International Growth
and Income Series
For the year ended December 31, 1996, the Series experienced a total return
of 4.84%. This compares to a 14.43% return for the Lipper International Funds
Index, as measured by Lipper Analytical Services, an independent firm that
reports mutual fund performance. The Series' return also compares to a 6.14%
return for a blend (70% and 30%) of the Morgan Stanley Capital EAFE Index and
the J.P. Morgan Global Bond Index. The EAFE Index is an unmanaged index of
international stocks, while the Morgan Index is an unmanaged index of bonds
issued from 13 countries with remaining maturities of at least one year. With
the exception of Japanese equities, all major international bond and equity
markets posted healthy positive returns over the period. Evidence of a
moderation in economic growth in seven of the largest industrial countries
(the G7), excluding the United Kingdom, has provided support for declining
bond yields as inflationary fears have subsided. At present the Series looks
to maintain an exposure of about 20% in international bonds.
In the United Kingdom, equity markets performed very strongly, and the Series
benefited from its holding in British Gas during the period as regulatory
concerns diminished. While continued strong economic recovery is expected to
lead to further interest rate rises in the United Kingdom, we believe this is
already largely discounted by the market and should not prevent equities
making further progress.
In Europe, currency weakness detracted somewhat from an otherwise reasonably
strong performance, with the strongest country performances coming from
non-core Europe such as the Scandinavian countries and Spain. Holdings in
large industrial companies such as Bayer and Mannesman have had a positive
impact on the portfolio, as have exposure to Sweden and Spain. After recent
strength linked to low interest rates and optimism on EMU (European Monetary
Union) convergence, we believe the outlook for European markets is relatively
dull supporting our underweighted stance on the region.
Hong Kong was a strong performer during the period, with the Hang Seng Index
up 22% in both local currency and U.S. dollar terms. The Series benefited
particularly from its exposure to
4
<PAGE>
property stocks such as Wharf, Cheung Kong and New World Developments. We
expect to maintain our exposure to the Far East generally, as growth
prospects in the region remain high in relative terms.
The fixed-income portion of the Series reflects our expectations of stronger
growth in Europe and Japan in 1997, as well as a continuation of the current
U.S. expansion, which implies some upward pressure on interest rates next
year. On the other hand, low inflation and excess industrial capacity
probably suggest that any rise in rates may be muted. Meanwhile, the bond
market recovery of the second half of 1996 has reduced the cushion, or risk
premium, in bond valuations from their mid-year levels.
In Japan, for example, the market no longer prices in any rise in official
rates over the next couple of years. While we see little chance of a rate
rise over the next several months, the optimistic scenario held by market
participants leaves little room for error. Likewise, the U.S. bond market
reflects a positive scenario of moderate growth, low inflation, and possible
budget reform. Any further price gains would appear to require a significant
slowdown in U.S. economic growth, which we deem unlikely given the strong
income growth of households. Our strategy, therefore, emphasizes markets like
Australia and Canada, where fundamental trends remain more favorable. Within
Europe, we remain optimistic about currency union, which favors markets like
Ireland. Less likely participants in monetary union, such as Spain and Italy,
still offer opportunities for further gains, but a degree of caution seems
appropriate.
Money Market Series
Interest rates on short-term (30 days and less) debt instruments remained
relatively stable during the past 12 months. The Federal Reserve Board
lowered short-term interest rates on January 31, 1996 by 25 basis points
(0.25%) from 5.50% to 5.25%. The Fed Funds rate remained at 5.25% for the
rest of 1996. Because of this, we maintained average maturities between 40
and 50 days.
We continue to limit the Series' investments to securities issued or
guaranteed by the U.S. Treasury or agencies or instrumentality's of the U.S.
government, as well as the highest-quality corporate and bank issues, in an
effort to provide the maximum security against credit risk. At the present
time, approximately 62% of the portfolio is invested in U.S. government or
government guaranteed issues and the balance is in corporate and bank issues.
The Series is neither insured nor guaranteed by the U.S. Government.
Research Series
For the year ended December 31, 1996, the Series provided a total return of
23.77% compared to the S&P 500, which returned 22.64%. The Series remains
overweighted compared to the S&P 500 in several sectors, including
technology, industrial goods and services, consumer staples, and business
services. Relatively neutral weightings to the S&P 500 include: financial
services, health care, retailing, and leisure. The Series continues to be
underweighted in energy, and utilities and communications.
Within the technology sector, there were several stocks which contributed to
the Series' performance over the past six months. Some software names
include: Microsoft, Compuware, BMC Software, and Cisco Systems. These
companies have developed solid competitive positions within their industry
which have translated into successful stock performances.
Several companies within the financial services sector also performed well
over the latter half of 1996. Life insurance companies such as Conseco,
Allstate, and ITT Hartford have implemented several cost savings initiatives
which have contributed to earnings recently. In addition, several banks have
benefited from the consolidation craze. Both Chase Manhattan and BankBoston
have proven that a successful merger or acquisition, coupled with a strong
management team, can contribute to earnings much sooner than anticipated.
While the Series was underweighted in both energy and utilities and
communications, three companies have provided strong returns over the period.
Both Newfield Exploration and PanEnergy Corporation have been excellent
additions. MCI Communications' stock price appreciated following the
announced planned acquisition by British Telecommunications PLC.
Total Return Series
For the year ended December 31, 1996, the Series provided a total return of
14.10%. As a balanced Series, a large portion of the Series' total assets are
invested in both stocks and bonds. In addition, the Series' purchases
preferred stocks and convertible bonds, which in many cases can provide
similar returns to common stocks with less risk. Over the past year, the
Series held about 55% of its assets in common stocks, preferred stocks, and
convertible bonds. This allocation provides the bulk of the return for the
Series as a whole, as the U.S. stock market continues its trend of 1995,
posting spectacular gains. The S&P 500 gained 22.64% over the 12-month period
covered by this report. The remainder of the Series was invested in a blend
of corporate bonds and U.S. Treasury bonds, with an overall duration of five
and six years. The fixed income sector also provided positive returns;
however, the magnitude was far less than that of the Series' stock portion.
For example, the Lehman Brothers Government Corporate Bond Index (the Lehman
Index), which is fairly representative of the Series' bond allocation, gained
2.88% over the same 12-month period. (The Lehman Index is an unmanaged,
market-value weighted index of U.S. Treasury and government agency
securities, excluding mortgage-backed securities.)
The Series' stock investment strategy has focused on companies that, in our
view, have earnings prospects or asset values equal to or higher than the
overall market as measured by the S&P 500. Two sectors that we believe fit
our investment criteria are the energy and financial service sectors. Bank
stocks have done particularly well because earnings have risen steadily and
an increase in merger activity has made nearly all banks more valuable. We
also favor the health care sector, where strong earnings and industry
consolidation has improved the outlook for the stocks of many of these
companies. In addition, we currently favor the aerospace industry, which we
believe will benefit from a cyclical increase in the number of aircraft being
built over the next three years. During the period covered by this report, we
avoided the technology sector, because in our view, many of these stocks have
high growth prospects but also have high valuations, which means they often
carry greater risk. The Series is also underweighted in consumer companies
because of their inability to raise prices as the U.S. consumer continues to
demand more value at lower prices.
Given where equity valuations are today, we feel comfortable with our current
asset allocation. However, should the stock market experience a meaningful
correction, we would be looking to increase our stock allocation.
Looking forward, we believe the U.S. economy will continue to experience
modest growth over the next 12 months. However, over the near term, we
believe the Federal Reserve Board will keep a close watch on wage inflation
and general economic activity, and may raise interest rates should future
economic numbers suggest inflationary growth.
Utilities Series
For the year ended December 31, 1996, the Series provided a total return of
20.37%. This compares to a 22.64% return for the S&P 500 and a 9.26% return
for the average utility fund as measured by
5
<PAGE>
Lipper Analytical Services, an independent firm that reports mutual fund
performance. The Series' performance has benefited from its overweighting in
natural gas stocks, which were terrific performers in 1996. Also, two of the
Series' top 10 holdings, Portland General and MCI Communications, were bought
out, by Enron and British Telecommunications, respectively. Electric utility
stocks also comprise a large portion of the Series' equity position, and
although electric utilities are facing a period of deregulation, the pace of
change is slower than had been anticipated. This is favorable for electric
utility stocks since certain companies are preparing themselves to thrive in
the new environment. Meanwhile, natural gas companies are benefiting from
stronger-than-expected earnings growth due to robust earnings from
nonregulated businesses.
In general, the Series' assets are more interest-rate sensitive than the
overall market, and while the weak bond market in the first half of the
Series' fiscal year hurt utility stocks, the recent strengthening in the bond
market has helped these stocks.
The Series was underweighted in telecommunications stocks for the entire
year. The passage of the federal Telecommunications Act placed an overhanging
of uncertainty over these stocks, as we expect it will be several years
before we understand who are the winners and losers from this legislation.
For the large-capitalization stocks in this sector, we expect earnings per
share growth to decline.
About 20% of the Series is invested internationally. Typically, international
markets can offer much higher growth and, at times, a more constructive
regulatory environment than the United States. However, there are more risks
associated with international investing. Powergen, a U.K. electric generating
company, is one of the cheapest utilities in the world based on growth
relative to its earnings and cash flow generation. Telefonica del Peru,
meanwhile, enjoys an excellent combination of robust growth and rational
regulation.
Another 10% of assets is invested in REITs (real estate investment trusts),
which we believe often offer higher yields and stronger dividend growth than
the typical utility. Our strategy is to hold a diversified group of REITs,
including health care, self-storage, hotel, apartment, office, and
industrial.
Value Series
The Value Series commenced operations on June 3, 1996, and, through December
31, 1996, provided a six-month total return of 10.10%, while the S&P 500
returned 12.06% over the same period. Over this period, the three best
performing sectors of the S&P 500 were technology, financial services, and
industrial goods and services, while the worst performing sectors were
utilities and communications. The Series was slightly underweighted in
technology versus the S&P 500, slightly underweighted in financial services,
and slightly overweighted in industrial goods and services. Our overweighting
in the utility and communication sector is primarily concentrated in the
cellular industry with a large holding in Cellular Communications
International, a member of the Italian licensee Omnitel.
Leisure, our largest sector, is a diverse mix of companies and industries.
The Series' primary focus is on the gaming and lodging industry as well as
the broadcasting industry. We believe the lodging industry will continue to
exhibit favorable trends over the near term. Supply continues to be tight,
especially for the high-end, full-service hotels and demand remains robust.
Key metrics of performance and occupancy and rate should show positive
development throughout 1997. While the gaming industry's expansion slowed in
1996, we continue to be enthusiastic about the long-term prospects. Harrah's
Entertainment is currently one of the more attractively valued companies in
this industry and results should turn more favorable in the second half of
1997. In the broadcasting industry our holdings range across television and
radio which should both benefit from recent deregulation. We believe ongoing
consolidation should aid revenue and costs as pricing flexibility increases
and programming expenses diminish. Our favorite holdings in this industry are
American Radio and Lin Television.
Industrial goods holdings are focused on the aerospace industry, which we
expect to show a strong run-up in profits as the commercial aircraft cycle
evolves over the next several years. BE Aerospace and B.F. Goodrich are
expected to show strong earnings momentum over this period.
International holdings are currently 16% of equities and range across
European and Asian markets. In addition to Cellular Communications
International, other large holdings include Tranz Rail (New Zealand railway)
and Korea Mobile Telecom (South Korea cellular franchise).
World Asset Allocation Series
For the year ended December 31, 1996, the Series provided a total return of
16.04%. This compares to 12-month returns for the following unmanaged
indices: 22.64% for the S&P 500; 6.31% for the Morgan Stanley Capital
International EAFE Index, an index of common stocks; 3.60% for the Lehman
Brothers Aggregate Bond Index, an index of government and corporate bonds
including Treasury, agency, and corporate bond issues and mortgage-backed
securities; and 5.34% for the J.P. Morgan Non-Dollar Index, an index of
international bonds. We have steered the Series' assets on a course favoring
international equities above all over securities. This reflects our
fundamental view that corporate earnings outside the United States will
accelerate while earnings from the U.S. are on a slower track. Valuations
reflect our belief that better stock buys are available outside the Untied
States and our risk model further suggests that long-term out-performance may
be more likely from equity markets in Asia, Europe, and South America.
On the bond side, we favor international sovereign bonds over U.S. Treasury
bonds, as we see the risks rising for higher inflation in the U.S. as the
recovery continues and wage pressures build within a full-employment economy.
However, in the United States we have favored high-yield (below investment
grade) bonds, which are reaping the rewards of broad economic growth, and
consequently better balance sheets and operating ratios.
Looking ahead, we will continue with our international strategy,
re-allocating assets to either the U.S. stock or bond markets until a shift
in relative values asserts itself, or until our internal views change. This
allows us to hold 17% of the Series in reserve temporarily for re-deployment
in an opportunistic manner. Below are the specific reports of our individual
managers:
Our holdings in U.S. equities range across a variety of industries and
incorporate both value and growth strategies. Recent additions to the
portfolio include PepsiCo (soft drinks), MCI Communications
(telecommunications), Host Marriott (hotels), and Rhone-Poulenc Rorer
(pharmaceuticals). Currently, our top three sectors are leisure (with 16.0%
of the portfolio), technology (14.4%), and financial services (13.4%). Our
current outlook continues to be cautious. While the mid-year rise in interest
rates has subsided, equity valuations are rich and leave no margin for error.
We continue to take a conservative, low-risk approach to our stock selection.
Internationally, we emphasize stock selection as opposed to country or
industry selection. Priority is placed on companies which we believe will
generate above-average earnings growth and which are trading at attractive
valuations, regardless of their home country.
6
<PAGE>
Toward the end of the year, the Series' weighting in Asia/Pacific was reduced
by roughly 5%, due to reductions in positions in Australia and New Zealand,
where several holdings reached what we viewed as fair valuation targets, and
the relative underperformance of Japanese holdings. There have been
offsetting increases in Europe and the Americas, where more attractive
companies were found. The largest individual country exposures are Japan,
United Kingdom, and Sweden. The Series' international holdings continue to
contain few cyclical stocks due to the relatively unattractive valuations.
Instead, we are finding better values in companies that we believe will
sustain steady above-average earnings growth. Companies that fit this
description and have been recently added to the Series or had their positions
increased include: Canadian National Railway; Adidas, a German footwear
company; British Aerospace, a U.K. aerospace and defense company; and Henkel,
a German specialty chemicals company.
In the U.S. government bond market, yields declined as the pace of economic
growth slowed in the third quarter and inflationary pressure continued to
recede. After growing at 4.7% in the second quarter, GDP growth in the third
quarter receded to 2.0%. Inflation, as measured by either the Employment Cost
Index or the GDP Deflator, eased during the period. As a result, yields on
10-year Treasury notes declined from 7% to 6% during the period as the U.S.
market adjusted to the view that economic growth will continue at a moderate
pace.
Global bond markets continued to rally, with the higher yielding markets
leading the way again. In Europe the main story remains the anticipation of
the European Monetary Union to be formed in 1999. While it remains to be seen
whether the latest round of fiscal austerity will allow Spain and Italy to
join the EMU at the outset, the market has cast an aggressive vote for the
affirmative. On the other hand, the market seems to believe that the new
"Euro" currency must be weak in order to make EMU viable. Hence, the dollar
has appreciated sharply versus European currencies. An increased flow of
capital out of Japan allowed the dollar to rise sharply against the Yen. In
the dollar-block, Canada and Australia continued to outperform the U.S.
market. The portfolio benefited from our emphasis on the high yielding
markets. We have adopted a more cautious stance with regard to further
spread-tightening within Europe since the market no longer offers generous
compensation for the risk that the EMU process may founder. Australia and
Canada remain attractive based upon improving fundamentals. In Japan, the
fragile nature of the recovery should support the bond market in the near
term, but it may also hamper plans to reduce fiscal stimulus. Over time, we
expect improved growth and/or fiscal pressure to push yields higher.
World Governments Series
For the year ended December 31, 1996, the Series experienced a total return
of 4.66%. This compares to a 3.62% return for the Salomon Brothers World
Government Bond Index (the Salomon Index) measured in local currency terms
for the same period. The Salomon Index is unmanaged and consists of complete
universes of government bonds with remaining maturities of at least five
years. The first half of 1996 witnessed concerns about accelerating U.S.
growth, and its potential boost to other major economies, which set off a
rise in interest rates based on fears of higher inflation and potential rate
hikes by the Federal Reserve Board. However, in the second half, these
concerns proved unwarranted as the U.S. economy slowed, inflation fears
receded and rates aggressively declined. During this second half, most of
central banks with the exception of the U.S., lowered official interest
rates.
By the end of the year, as measured by the Salomon Index, all markets
registered positive returns but with significant differences. For example,
the core markets -- the United States, Japan, and Germany -- were the worst
performers, while the higher yielding markets of Australia, Canada, Japan,
and Italy were among the better performers. The Series benefited by being
overweighted in these higher yielding markets for most of the year.
In preparation for monetary union due to commence in January 1999, almost all
European countries announced tight fiscal budgets, while at the same time
cutting interest rates due to slow growth and low inflation. Within Europe, a
dramatic narrowing of yield spread differentials, or overperformance, began
in earnest during the third quarter with Spain, Italy and Sweden being the
main beneficiaries. Although a good part of this convergence has now taken
place, we anticipate these markets will continue to outperform as the
European monetary union approaches.
Meanwhile, looking at the dollar bloc, both Canada and Australia continue to
benefit from low inflation, slow growth, and tight fiscal budgets. The Series
benefited by being overweighted in both these markets for most of the year.
Looking ahead, while there still is no immediate threat of higher inflation
in Canada, economic growth is finally picking up, and therefore we expect the
Bank of Canada to be accommodative in 1997. While an underweighted position
in U.S. bonds has been beneficial for the year, the Series' performance was
hindered during the third quarter as the U.S. position's duration (a measure
of interest rate sensitivity) was low in anticipation of a pickup in U.S.
economic growth that never materialized.
In regards to the Japanese bond market, the Series was underweighted for most
of the year because we felt other markets offered better value. However, the
Japanese bond market was helped by continued depressed real estate and
banking sectors as well as weak consumer spending. Our outlook calls for a
continuation of slow, choppy growth with a modest increase in inflation.
For the year, the overall rise in U.S. interest rates, coinciding with
reductions in short-term rates in Europe, has enabled the dollar to
appreciate against the German mark. In addition, the dollar also benefited
from yield convergence within Europe. The dollar has continued to strengthen
versus the Japanese yen, based primarily on Japan's low interest rates and
the government's policy of engineering a weaker currency in order to
stimulate its beleaguered economy. Looking forward, we anticipate modest but
further central bank lowering of interest rates in many European countries as
well as in Australia and New Zealand, an environment that we believe could
continue to be positive for bonds. However, some caution is warranted as
ultimately the effect of lower rates in these countries will result in a
pickup in economic growth and, possibly, inflation. Furthermore, with the
U.S. currency benefiting from positive interest rate differentials, renewed
hope for a balanced budget, and movement toward an inclusive, single European
currency, the prospects for a stable dollar remain favorable.
World Growth Series
For the year ended December 31, 1996, the Series provided a total return of
13.02%, as compared to returns of 22.64% for the S&P 500 and 14.00% for the
MSCI World Index, an unmanaged index of international stocks. The Series
performance over the past year reflected our decision to continue
overweighting stocks in the U.S. and emerging markets.
The Series has pursued a strategy of investing in companies worldwide that
are expected to grow much faster than the overall U.S. economy, in what we
consider the most attractive markets with the best long-term growth
potential. We have identified three
7
<PAGE>
of these markets: U.S. small-capitalization and emerging growth stocks, which
represent 44% of the Series' assets; growth stocks in mature foreign markets
such as Europe and Japan, representing 37%; and stock in emerging markets,
representing 19%.
Overweighting the U.S., one of the best performing world markets over the
past year, helped the Series' performance, as did our overweighting in two
strong sectors, technology and leisure. The U.S. sector of the portfolio
focuses on companies with dynamic earnings growth driven by leadership
positions in rapidly growing markets. Thus our holdings include software
companies such as Oracle, BMC Software, and Cisco in networking, where
earnings growth is being driven by corporations' focus on increasing
productivity. In the consumer area, lodging companies such as HFS and Promus
Hotel significantly outperformed the market due to strong demand and
favorable pricing. Performance was also helped by an underweighting in health
maintenance organizations where pricing and utilization have continued to
deteriorate.
The Series' performance was further helped by its overweighting in emerging
markets, especially Latin American countries such as Brazil, Mexico, and
Peru, whose economies appear to be coming out of recession faster than
expected. Performance was also helped by overweighting Hong Kong and China
where solid GDP growth prevailed in the face of slowing inflation and an
underweighting in the rest of emerging Asia, where economic growth rates are
slowing from the accelerated levels of the early 1990s. We also identified
many companies in Eastern Europe where strong export growth drove earnings
acceleration and contributed to performance.
On the negative side, performance was hurt by holdings in Japan, a lackluster
market. There, economic recovery was disappointing despite low interest
rates. The continued economic slowdown in Europe also hurt some of our more
cyclical growth stock holdings. However, we believe buying opportunities have
been created by this slower than anticipated recovery. Our favorite area now
in developed foreign markets is Continental Europe where the focus is on
restructuring, turnaround, and unit growth stories which we expect to do well
in the anticipated slow economic recovery. Reflecting this strategy, major
holdings include ASDA, a U.K. retailer; Walters Kluwer, a Dutch publisher;
and Novartis, a Scandinavian pharmaceutical company.
Looking forward, we are closely following three important economic trends.
First, our view is that U.S. growth in 1997 will slow relative to 1996,
making the higher earnings rates of U.S. emerging growth companies even more
valuable. Second, we expect Europe and Japan to continue their recoveries
from recession, with an accompanying acceleration in earnings growth. Third,
we anticipate robust earnings increases from companies in emerging markets,
where market reforms will enhance trade and open up further opportunities for
development. Recognizing these pervasive trends, we are constantly searching
for the fastest growing companies at the most attractive valuations.
World Total Return Series
For the year ended December 31, 1996, the Series provided a total return of
14.33%. This compares to a 14.00% return for the MSCI World Index and a
14.69% return for the Lipper Global Flexible Fund Index as determined by
Lipper Analytical Services, an independent firm that reports mutual fund
performance. The strength of the U.S. equity market in 1996, relative to
other markets, was somewhat surprising after its powerful surge in 1995. Thus
the Series' approximately 15% reduction in U.S. equities was not as
beneficial as expected. On the other hand, despite our intentions at the
beginning of the year to build up Japanese and other Far East holdings, we
drew back from this strategy, and the Series benefited, since most of these
markets were significant underperformers. The Series' holdings in Japanese
stocks are just one-half of the MSCI World Index. Large overweightings in
some smaller markets such as Sweden and Netherlands were very successful. By
industry category, financial services companies were the best performers,
while growth stocks generally outperformed value-oriented stocks. Almost
without regard to these categories, Japanese stocks were underperformers.
Despite the fact that the United States economy weakened significantly during
the third quarter, most international fixed income markets continued to
outperform the U.S. bond market, and the Series generally benefited by
maintaining overweighted positions in the better performing European markets
while being underweighted in the U.S. bond market.
More specifically, in preparation for monetary union commencing in January
1999, almost all European countries have announced tight fiscal budgets,
while at the same time cutting interest rates due to slow growth and low
inflation. Within Europe, a dramatic narrowing of yield spread differentials,
or outperformance, began in earnest during the third quarter with such
high-yield countries as Spain, Italy, and Sweden being the main
beneficiaries. Although a good part of this convergence has now taken place,
we anticipate these markets will continue to outperform as European Monetary
Union approaches.
Meanwhile, within the dollar bloc, both Canada and Australia continue to
benefit from low inflation, slow growth, and tight fiscal budgets. For most
of the year, the Fund has benefited by being overweighted in both these
markets. While an underweighted position in U.S. bonds has been beneficial
for the year, the Fund's performance was hindered during the third quarter as
the U.S. position's duration (a measure of interest rate sensitivity) was low
in anticipation of a pickup in U.S. economic growth that never materialized.
For the year, the overall rise in U.S. interest rates, coinciding with
reductions in short-term rates in Europe, has enabled the dollar to
appreciate against the German mark. In addition, the dollar has also
benefited from yield convergences with Europe. The U.S. dollar has continued
to strengthen versus the Japanese yen, based primarily on Japan's low
interest rates and the government's policy of engineering a weaker currency
in order to stimulate their beleaguered economy.
Looking forward, we would anticipate modest but further central bank
reductions in interest rates in many European countries as well as in Canada,
Australia, and New Zealand, an environment that we believe would be positive
for bonds. However, some caution is warranted as ultimately the effect of
lower rates in these countries could result in the pickup of economic growth
and possibly inflation. Likewise, with the U.S. currency benefiting from
positive interest rate differentials, renewed hopes for a balanced budget,
and the movement toward an inclusive, single European currency, the prospects
remain for a stable dollar.
Zero Coupon Series 2000 Portfolio
The total return for the portfolio was 1.91% for the 12 months ended December
31, 1996, as intermediate-term Treasury notes moved higher during the period,
with yields on five-year Treasuries rising from 5.50% to 6.25%. The portfolio
consists of discounted coupon or principal payments, which are stripped from
U.S. Treasury securities in order to provide a predictable and compounded
rate of return. With no interest payments prior to maturity, these portfolios
are more sensitive to interest rate changes than are comparable bond funds
with similar maturities. While there will be fluctuations within the
portfolio subject to interest rate moves, all portfolio holdings are
guaranteed by the U.S. Treasury at maturity. (While the guarantees do not
apply to the individual units of the Series, they assure a specified return
to contract owners who hold their units to the maturity of the Series.)
8
<PAGE>
Performance Summary
The following information illustrates the growth of a hypothetical $10,000
investment for each Series during the period indicated. Past performance is
no guarantee of future results. These results do not reflect the deduction of
separate account charges. For returns which reflect the deduction of separate
account charges, please refer to the annual report for the product being
offered.
Capital Appreciation Series
For the 10-year period through December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Capital Consumer
Appreciation S&P 500 Price
Series Composite Index--U.S.
------ --------- -----------
12/86 10000 10000 10000
12/88 10983 12225 10899
12/90 14573 15622 12102
12/92 23336 21922 12831
12/94 26544 24432 13541
12/96 43358 41254 14373
- --------------------------------------------------------------------------------
Average Annual Total Returns
1 Year 3 Years 5 Years 10 Years
----------------------------- --------- --------- --------- -----------
Capital Appreciation Series +21.48% +16.34% +16.12% +15.80%
S&P 500 Composite+ +22.64% +19.58% +15.15% +15.23%
Consumer Price Index*+ + 3.56% + 2.91% + 2.88% + 3.69%
*The Consumer Price Index is a popular measure of change in price.
+Source: CDA/Wiesenberger.
Conservative Growth Series
For the 10-year period through December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Conservative Consumer
Growth Price S&P 500
Series Index--U.S. Composite
------ ----------- ---------
12/86 10000 10018 9982
12/88 10524 10919 12233
12/90 13811 12124 15593
12/92 19963 12854 21881
12/94 21408 13565 24387
12/96 36893 14399 41179
- --------------------------------------------------------------------------------
Average Annual Total Returns
11/14/86**
1 Year 3 Years 5 Years -12/31/96
---------------------------- --------- --------- --------- ------------
Conservative Growth Series +25.41% +19.45% +14.33% +13.94%
S&P 500 Composite+ +22.64% +19.58% +15.15% +15.23%
Consumer Price Index*+ + 3.56% + 2.91% + 2.88% + 3.69%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger.
9
<PAGE>
Performance Summary -- continued
Emerging Growth Series
For the period from May 1, 1995 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Emerging Consumer
Growth Price S&P 500 Russell
Series Index Composite 2000
------ ----- --------- ----
5/95 10000 10000 10000 10000
12/95 12680 10098 12155 12011
6/96 14563 10312 13379 13255
12/96 14854 10461 14932 13992
- --------------------------------------------------------------------------------
Average Annual Total Returns
5/01/95+
1 Year -12/31/96
- ------------------------ --------- ------------
Emerging Growth Series +17.15% +26.72%
Russell 2000 Index+ +16.35% +22.26%
S&P 500+ +22.64% +27.11%
Consumer Price Index*+ + 3.56% + 2.62%
*The Consumer Price Index is a popular measure of change in prices.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on May 1, 1995.
Government Securities Series
For the 10-year period through December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Government Consumer Lehman Brothers
Securities Price Govt./Mortgage
Series Index--U.S. Bond Index
------ ----------- ----------
12/86 10000 10000 10000
12/88 11074 10899 11065
12/90 13609 12102 13875
12/92 16835 12831 17165
12/94 17894 13541 18241
12/96 21401 14346 22281
- --------------------------------------------------------------------------------
Average Annual Total Returns
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ---------------------------------------- -------- --------- --------------------
<S> <C> <C> <C> <C>
Government Securities Series +1.65% +5.36% +6.31% +7.91%
Lehman Brothers Govt/Mortgage Index+++ +3.68% +5.91% +6.82% +8.34%
Consumer Price Index*+ +3.56% +2.91% +2.88% +3.69%
</TABLE>
*The Consumer Price Index is a popular measure of change in prices.
+Source: CDA/Wiesenberger.
+++Source: AIM
10
<PAGE>
Performance Summary -- continued
MFS/Foreign & Colonial
International Growth Series
For the period from June 1, 1996 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Lipper International
International MSCI Growth
Funds Index (EAFE) Series
----------- ------ ------
6/96 10091 10059 10000
9/96 10100 10054 9890
12/96 10624 10221 9830
- --------------------------------------------------------------------------------
Aggregate Total Returns
6/3/96+
-12/31/96
- --------------------------------------- ------------
MFS/F&C International Growth Series -1.70%
Lipper International Funds Index* +6.24%
Morgan Stanley Capital Index (EAFE)* +2.21%
+Commencement of investment operations. Benchmark comparisons begin on
June 1, 1996.
*Source: Lipper Analytical Services
MFS/Foreign & Colonial
International Growth and Income Series
For the period from October 1, 1995 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Lipper
International 70% Morgan Stanley Capital EAFE/ International
Fund Index 30% JP Morgan Global Bond Index Growth & Income
---------- ------------------------------- ---------------
10/95 9792 10000 10000
3/96 10630 10536 10420
6/96 11065 10681 10570
9/96 11075 10794 10540
12/96 11650 11011 10620
- --------------------------------------------------------------------------------
Average Annual Total Returns
10/2/95+
1 Year -12/31/96
----------------------------------------------- ---------------------
MFS/F&C International Growth & Income Series + 4.84% + 4.93%
Lipper International Funds Index* +14.43% +16.50%
70% Morgan Stanley Capital EAFE/
30% JP Morgan Global Bond Index** + 6.14% + 7.88%
+Commencement of investment operations. Benchmark comparisons begin on
October 1, 1995.
*Source: Lipper Analytical Services
**Source: AIM
11
<PAGE>
Performance Summary -- continued
MFS/Foreign & Colonial
Emerging Markets Equity Series
For the period from June 1, 1996 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Lipper Morgan International
Emerging Stanley Emerging
Markets Captial Markets
Fund Index International Series
---------- ------------- ------
6/96 10019 10062 10000
9/96 9792 9697 9870
12/96 9869 9640 10000
- --------------------------------------------------------------------------------
Aggregate Total Returns
6/5/96+
-12/31/96
----------------------------------------------------- ------------
MFS/F&C Emerging Markets Equity Series 0.00%
Lipper Emerging Markets Funds Index* +6.24%
Morgan Stanley Capital International Index (MSCI) EMF* +6.59%
+Commencement of investment operations. Benchmark comparisons begin on
June 1, 1996.
*Source: CDA/Wiesenberger
High Yield Series
For the 10-year period through December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
High Consumer Lehman Brothers
Yield Price Corporate
Series Index--U.S. Bond Index
------ ----------- ----------
12/86 10000 10000 10000
12/88 11611 10899 11202
12/90 9851 12102 13681
12/92 16705 12831 17622
12/94 19232 13541 18987
12/96 25215 14373 23974
- --------------------------------------------------------------------------------
Average Annual Total Returns
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------------------------------------------ --------- --------- --------- -----------
<S> <C> <C> <C> <C>
High Yield Series +12.12% +8.65% +11.66% + 9.69%
Lehman Brothers Corp. Bond Index+ + 3.26% +6.65% + 8.14% + 9.14%
Lehman Brothers High Yield Bond Index** +11.35% +9.51% +12.23% +10.86%
Consumer Price Index*+ + 3.56% +2.91% + 2.88% + 3.69%
</TABLE>
*The Consumer Price Index is a popular measure of change in prices.
**Source: Lipper Analytical Services.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on December 1, 1988.
12
<PAGE>
Performance Summary -- continued
Managed Sectors Series
For the period from June 1, 1988 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Managed Consumer
Sector Price S&P 500
Series Index--U.S. Composite
------ ----------- ---------
6/88 10000 10000 10000
12/90 13627 11387 13789
12/92 23530 12073 19350
12/94 24014 12740 21565
12/96 37354 13523 36414
- --------------------------------------------------------------------------------
Average Annual Total Returns
5/27/88**
1 Year 3 Years 5 Years -12/31/96
- ------------------------ --------- --------- --------- ------------
Managed Sectors Series +17.58% +15.11% +11.07% +16.56%
S&P 500 Composite+ +22.64% +19.58% +15.15% +15.23%
Consumer Price Index*+ + 3.56% + 2.91% + 2.88% + 3.69%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on June 1, 1988.
Research Series
For the period from November 1, 1994 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Consumer
Research Price S&P 500
Series Index--U.S. Composite
------ ----------- ---------
11/94 10000 10000 10000
12/95 13819 10261 13429
12/96 17103 10609 16496
- --------------------------------------------------------------------------------
Average Annual Total Returns
11/07/94**
1 Year -12/31/96
- ------------------------ --------- ------------
Research Series +23.77% +27.33%
S&P 500 Composite+ +22.64% +25.98%
Consumer Price Index*+ + 3.56% + 2.76%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on November 1, 1994.
13
<PAGE>
Performance Summary -- continued
Total Return Series
For the period from June 1, 1988 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Total Consumer Lehman Brothers
Return Price S&P 500 Govt./Corporate
Series Index--U.S. Composite Bond Index
------ ----------- --------- ----------
6/88 10000 10000 10000 10000
12/90 12719 11387 13789 13009
12/92 16792 12073 19350 16252
12/94 18614 12740 21565 17412
12/96 26913 13523 36414 21365
- --------------------------------------------------------------------------------
Average Annual Total Returns
<TABLE>
<CAPTION>
5/11/88**
1 Year 3 Years 5 Years -12/31/96
- ---------------------------------------- --------- --------- --------- ------------
<S> <C> <C> <C> <C>
Total Return Series +14.10% +12.23% +11.72% +12.17%
Lehman Brothers Govt/Corp Bond Index+ + 2.88% + 5.79% + 7.18% + 8.38%
S&P 500 Composite+ +22.64% +19.58% +15.15% +15.23%
Consumer Price Index*+ + 3.56% + 2.91% + 2.88% + 3.69%
</TABLE>
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on June 1, 1988.
Utilities Series
For the period from December 1, 1993 through
December 31, 1995.
- -------------------------------- LINE CHART -----------------------------------
Consumer
Utilities Price S&P
Series Index--U.S. Utility Index
------ ----------- -------------
12/93 10000 10000 9127
6/94 9409 10151 9125
12/94 9590 10268 9158
6/95 10778 10460 10517
12/95 12694 10521 12924
6/96 13401 10744 12930
12/96 15280 10899 13328
- --------------------------------------------------------------------------------
Average Annual Total Returns
11/16/93**
1 Year 3 Years -12/31/96
-------------------------------- --------- --------- ------------
Utilities Series +20.37% +14.83% +14.27%
S&P Utility Index+++ + 3.12% +10.24% + 9.77%
Consumer Price Index*+ + 3.56% + 2.91% + 2.77%
S&P 500 Composite Index+ +22.64% +19.58% +19.47%
Lehman Brothers Corporate Bond
Utility Total Return Index+++ + 3.04% + 6.44% + 6.43%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on December 1, 1993.
+++Source: Lipper Analytical Services.
14
<PAGE>
Performance Summary -- continued
Value Series
For the period from June 1, 1996 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Consumer
Value Price S&P 500
Series Index--U.S. Composite Index
------ ----------- ---------------
5/96 10000 10000 10000
6/96 10030 10010 10040
9/96 10590 10084 10346
12/96 11010 10135 11206
- --------------------------------------------------------------------------------
Aggregate Total Returns
6/3/96**
-12/31/96
- -------------------------- ------------
Value Series +10.10%
Consumer Price Index*+ + 1.35%
S&P 500 Composite Index+ +12.06%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on June 1, 1996.
World Asset Allocation Series
For the period from November 1, 1994 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
World
Asset Consumer
Allocation Price S&P 500 MSCI
Series Index--U.S. Composite EAFE
---------- ----------- --------- ----
11/94 10000 10000 10000 10000
12/94 10049 10000 10147 10065
6/95 11086 10187 12196 10343
12/95 12216 10247 13948 11228
6/96 13445 10464 15352 11752
12/96 14175 10615 17134 11942
- --------------------------------------------------------------------------------
Average Annual Total Returns
11/07/94**
1 Year -12/31/96
------------------------------------------- --------- ------------
World Asset Allocation Series +16.04% +17.67%
S&P 500 Composite+ +22.64% +25.98%
J.P. Morgan Non-U.S. Global Bond Index+++ + 5.34% +10.85%
Lehman Brothers Aggregate Bond Index+ + 3.60% +10.17%
MSCI EAFE Index+ + 6.31% + 6.11%
Consumer Price Index*+ + 3.56% + 2.76%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on November 1, 1994.
+++Source: AIM
15
<PAGE>
Performance Summary -- continued
World Governments Series
For the period from June 1, 1988 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
World Consumer Salomon Brothers J.P. Morgan
Governments Price World Govt. Global Govt.
Series Index--U.S. Bond Index Bond Index
----------- ----------- ---------------- ------------
6/88 10000 10000 10000 9804
12/90 12971 11387 14073 12317
12/92 14976 12073 16641 14867
12/94 17005 12740 19970 16900
12/96 20588 13523 21168 21049
- --------------------------------------------------------------------------------
Average Annual Total Returns
<TABLE>
<CAPTION>
5/16/88**
1 Year 3 Years 5 Years -12/31/96
------------------------------------------- -------- --------- --------- ------------
<S> <C> <C> <C> <C>
World Governments Series +4.66% +4.97% +6.69% +8.74%
J.P. Morgan Global Govt Bond Index+++ +4.39% +8.04% +8.16% +8.78%
Consumer Price Index*+ +3.56% +2.91% +2.88% +3.69%
Salomon Brothers World Govt. Bond Index+ +3.62% +8.08% +8.58% +9.13%
</TABLE>
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on June 1, 1988.
+++Source: AIM
World Growth Series
For the period from December 1, 1993 through
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
World Consumer MSCI Russell
Growth Price World 2000 S&P 500
Series Index--U.S. Index Index Composite
------ ----------- ----- ------- ---------
12/93 10000 10000 10000 10000 10000
6/94 10542 10151 10898 9675 9778
12/94 10921 10268 11077 10153 10251
6/95 11495 10460 12120 11617 12321
12/95 12675 10521 13438 13041 14091
6/96 14216 10744 14423 14392 15510
12/96 14326 10899 15319 15192 17310
- --------------------------------------------------------------------------------
Average Annual Total Returns
11/16/93**
1 Year 3 Years -12/31/96
- ------------------------ --------- --------- ------------
World Growth Series +13.02% +10.50% +12.26%
MSCI World Index+ +13.87% +13.45% +14.83%
Russell 2000 Index+ +16.35% +13.68% +14.52%
S&P 500+ +22.64% +19.58% +19.47%
Consumer Price Index*+ + 3.56% + 2.91% + 2.77%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on December 1, 1993.
Results of Shareholder Meeting
At the meeting of shareholders in the World Growth Series of MFS/Sun Life
Series Trust which was held on April 29, 1996 the following action was taken:
Item 1: Proposal to approve two new Sub-Investment Advisory Agreements, one
between Massachusetts Financial Services Company ("MFS") and Foreign
& Colonial Management Limited ("FCM"), and the other between FCM and
its subsidiary, Foreign & Colonial Emerging Markets Limited ("FCEM"),
containing substantially the same terms and conditions as the current
Sub-Investment Advisory Agreement between MFS and Batterymarch
Financial Management, Inc. to become effective on or about May 1,
1996.
Number of Shares
----------------
For 11,942,286
Against 210,915
Abstain 604,984
Total Shares Outstanding on March 25, 1996 12,758,190
16
<PAGE>
Performance Summary -- continued
World Total Return Series
For the period from December 1, 1994 to
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
60% MSCI World
Consumer S&P 500 Index/40% J.P.
World Total Price Composite Morgan Global Govt.
Return Series Index--U.S. Index Bond Index
------------- ----------- --------- -------------------
12/94 10000 10000 10000 9756
6/95 10965 10187 12196 10914
12/95 11824 10247 13948 11765
6/96 12459 10464 15352 12221
12/96 13519 10615 17134 12961
Average Annual Total Returns
- --------------------------------------------------------------------------------
11/07/94**
1 Year -12/31/96
-------------------------------------------- --------- ------------
World Total Return Series +14.33% +15.10%
S&P 500 Composite+ +22.64% +25.98%
60% MSCI World Index/
40% J.P. Morgan Global Govt Bond Index+++ +10.16% +12.23%
Consumer Price Index* + 3.56% + 2.76%
*The Consumer Price Index is a popular measure of change in prices.
**Commencement of investment operations.
+Source: CDA/Wiesenberger. Benchmark comparisons begin on December 1, 1994.
+++Source: AIM
Zero Coupon Series 2000
For the period from December 1, 1986 to
December 31, 1996.
- -------------------------------- LINE CHART -----------------------------------
Consumer Merrill Lynch
Zero Coupon Price 7-10 Yr. Treasury
Series 2000 Index--U.S. Index
----------- ----------- -----------------
12/86 10000 10000 10000
12/87 8771 10450 9940
12/89 11909 11416 12386
12/91 15205 12484 15760
12/93 18923 13200 19146
12/95 21099 13887 22222
12/96 21503 14386 22524
- --------------------------------------------------------------------------------
Average Annual Total Returns
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
-------------------------------------------- -------- --------- --------- -----------
<S> <C> <C> <C> <C>
Zero Coupon Series - 2000 Portfolio +1.91% +13.72% +41.53% +8.25%
Merrill Lynch 7 - 10 Year Treasury Index* +0.84% +5.02% +8.02% +8.32%
Consumer Price Index* +3.56% + 2.91% + 2.88% +3.65%
</TABLE>
*The Consumer Price Index is a popular measure of change in prices.
Source: CDA/Wiesenberger. Benchmark comparisons begin on December 1, 1986.
17
<PAGE>
Portfolio of Investments -- December 31, 1996
Capital Appreciation Series
Stocks -- 97.7%
Issuer Shares Value
U.S. Stocks -- 91.8%
Advertising -- 0.2%
TMP Worldwide, Inc. 35,200 $ 448,800
Universal Outdoor Holdings, Inc.* 67,100 1,576,850
---------------
$ 2,025,650
---------------
Aerospace -- 3.5%
Lockheed Martin Corp. 107,754 $ 9,859,491
McDonnell-Douglas Corp. 274,500 17,568,000
United Technologies Corp. 154,400 10,190,400
---------------
$ 37,617,891
---------------
Agricultural Products -- 2.3%
AGCO Corp. 284,700 $ 8,149,537
Case Corp. 297,600 16,219,200
---------------
$ 24,368,737
---------------
Airlines -- 0.9%
America West Airlines, "B"* 174,700 $ 2,773,363
Southwest Airlines Co. 308,700 6,829,987
---------------
$ 9,603,350
---------------
Automotive -- 0.6%
APS Holding Corp., "A"* 107,800 $ 1,670,900
Goodrich (B.F.) Co. 117,300 4,750,650
---------------
$ 6,421,550
---------------
Banks and Credit Companies -- 0.7%
Fleet/Norstar Financial Group, Inc. 146,800 $ 7,321,650
---------------
Business Machines -- 0.7%
Sun Microsystems, Inc.* 303,200 $ 7,788,450
---------------
Business Services -- 5.9%
AccuStaff, Inc.* 126,000 $ 2,661,750
ADT Ltd.* 642,500 14,697,188
ALCO Standard Corp. 310,200 16,014,075
Ceridian Corp.* 192,300 7,788,150
Corestaff, Inc.* 107,625 2,549,367
DST Systems, Inc.* 320,300 10,049,412
Loewen Group, Inc. 148,900 5,825,712
Sabre Group Holding, Inc., "A"* 94,500 2,634,188
---------------
$ 62,219,842
---------------
Chemicals -- 0.6%
Betzdearborn, Inc. 28,100 $ 1,643,850
Praxair, Inc. 104,100 4,801,613
---------------
$ 6,445,463
---------------
Computer Software -- Personal Computers -- 4.2%
Electronic Arts, Inc.* 222,600 $ 6,664,087
First Data Corp. 191,400 6,986,100
Microsoft Corp.* 377,600 31,199,200
---------------
$ 44,849,387
---------------
Computer Software -- Systems -- 8.7%
Adobe Systems, Inc. 377,500 $ 14,109,062
BMC Software, Inc.* 47,500 1,965,313
Cadence Design Systems, Inc.* 680,700 27,057,825
Computer Associates International, Inc. 227,300 11,308,175
Micro Systems, Inc.* 199,200 6,125,400
Oracle Systems Corp.* 565,300 23,601,275
Sybase, Inc.* 224,700 3,749,681
Synopsys, Inc.* 85,500 3,954,375
---------------
$ 91,871,106
---------------
Consumer Goods and Services -- 7.7%
Colgate-Palmolive Co. 98,500 $ 9,086,625
Gillette Co. 35,300 2,744,575
Philip Morris Cos., Inc. 313,700 35,330,462
Issuer Shares Value
U.S. Stocks -- continued
Consumer Goods and Services -- continued
Tyco International Ltd. 652,300 $ 34,490,363
---------------
$ 81,652,025
---------------
Defense Electronics -- 1.7%
Loral Space & Communications Corp.* 962,700 $ 17,689,613
---------------
Electrical Equipment -- 1.0%
General Electric Co. 110,900 $ 10,965,238
---------------
Electronics -- 8.8%
Altera Corp.* 225,600 $ 16,398,300
Analog Devices, Inc.* 363,300 12,306,787
Intel Corp. 364,000 47,661,250
LSI Logic Corp.* 296,600 7,934,050
Maxim Integrated Products, Inc.* 81,900 3,542,175
Xilinx, Inc.* 160,700 5,915,769
---------------
$ 93,758,331
---------------
Entertainment -- 4.3%
Clear Channel Communications, Inc.* 107,800 $ 3,894,275
Cox Radio, Inc., "A"* 9,000 157,500
Harrah's Entertainment, Inc.* 725,300 14,415,337
Infinity Broadcasting Corp., "A"* 84,750 2,849,719
Jacor Communications, Inc., "A"* 292,000 7,993,500
LIN Television Corp.* 163,700 6,916,325
Mirage Resorts, Inc.* 410,000 8,866,250
Univision Communications, Inc., "A"* 6,100 225,700
---------------
$ 45,318,606
---------------
Financial Institutions -- 5.8%
Associates First Capital Corp., "A" 41,400 $ 1,826,775
Federal Home Loan Mortgage
Corp. 120,100 13,226,012
Financial Federal Corp.* 175,400 2,937,950
Finova Group, Inc. 153,000 9,830,250
Franklin ReSources, Inc. 74,900 5,121,288
Green Tree Financial Corp. 254,700 9,837,787
Schwab (Charles) Corp. 588,300 18,825,600
---------------
$ 61,605,662
---------------
Food and Beverage Products -- 0.8%
PepsiCo, Inc. 272,800 $ 7,979,400
---------------
Insurance -- 0.7%
Amerin Corp.* 69,500 $ 1,789,625
Chubb Corp. 98,000 5,267,500
---------------
$ 7,057,125
---------------
Machinery -- 1.4%
Deere & Co., Inc. 216,800 $ 8,807,500
IDEX Corp. 156,700 6,248,413
---------------
$ 15,055,913
---------------
Medical and Health Products -- 1.6%
Johnson & Johnson 303,600 $ 15,104,100
Omnicare, Inc. 70,000 2,248,750
---------------
$ 17,352,850
---------------
Medical and Health Technology and Services -- 4.1%
HealthSource, Inc.* 523,300 $ 6,868,313
HealthSouth Corp.* 271,700 10,494,412
Oxford Health Plans, Inc.* 141,900 8,310,019
United Healthcare Corp. 399,000 17,955,000
---------------
$ 43,627,744
---------------
Metals and Minerals -- 0.5%
Minerals Technologies, Inc. 124,700 $ 5,112,700
---------------
18
<PAGE>
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- continued
Oils -- 1.0%
Mobil Corp. 88,200 $ 10,782,450
Titan Exploration, Inc.* 29,000 348,000
---------------
$ 11,130,450
---------------
Photographic Products -- 1.5%
Eastman Kodak Co. 192,700 $ 15,464,175
---------------
Railroads -- 3.0%
Burlington Northern Santa Fe Railway
Co. 51,500 $ 4,448,313
Wisconsin Central Transportation Corp.* 682,900 27,059,912
---------------
$ 31,508,225
---------------
Restaurants and Lodging -- 6.3%
HFS, Inc.* 722,700 $ 43,181,325
Promus Hotel Corp.* 642,850 19,044,431
Renaissance Hotel Group N.V.* 179,100 4,208,850
---------------
$ 66,434,606
---------------
Stores -- 5.1%
Ann Taylor Stores Corp.* 214,200 $ 3,748,500
Corporate Express, Inc.* 71,200 2,095,950
Duty Free International, Inc. 30,600 443,700
Federated Department Stores, Inc.* 323,200 11,029,200
General Nutrition Cos., Inc.* 499,800 8,434,125
Linens N Things, Inc.* 39,900 783,038
Micro Warehouse, Inc.* 291,000 3,419,250
Office Depot, Inc.* 593,200 10,529,300
Officemax, Inc.* 282,650 3,003,156
Sears, Roebuck & Co. 135,100 6,231,487
Staples, Inc.* 247,100 4,463,244
---------------
$ 54,180,950
---------------
Supermarkets -- 1.4%
Safeway, Inc.* 356,200 $ 15,227,550
---------------
Telecommunications -- 6.8%
Ascend Communications, Inc.* 77,100 $ 4,789,838
Cisco Systems, Inc.* 334,000 21,250,750
Glenayre Technologies, Inc.* 680,525 14,673,820
Lucent Technologies, Inc. 58,300 2,696,375
MFS Communications Co., Inc.* 36,700 2,000,150
Tel-Save Holdings, Inc.* 71,700 2,079,300
Telco Communications Group* 48,400 847,000
Teleport Communications Group, Inc.,
"A"* 137,800 4,202,900
Tellabs, Inc.* 131,800 4,958,975
WorldCom, Inc.* 566,700 14,769,619
---------------
$ 72,268,727
---------------
Total U.S. Stocks $ 973,922,966
---------------
Foreign Stocks -- 5.9%
Canada -- 0.8%
Loewen Group, Inc.
(Business Services)## 123,200 $ 4,810,041
Canadian National Railway Co.
(Railroads) 89,100 3,385,800
---------------
$ 8,195,841
---------------
Issuer Shares Value
Foreign Stocks -- continued
Germany -- 0.7%
Sap AG (Computer Software -- Systems) 53,955 $ 7,540,023
---------------
Hong Kong -- 0.3%
Peregrine Investment Holdings
(Finance) 2,047,000 $ 3,506,950
---------------
Italy -- 1.5%
Gucci Group Designs N.V.,
(Apparel and Textiles) 48,100 $ 3,072,388
Telecom Italia S.p.A.,
(Telecommunications)* 6,197,200 8,837,107
Telecom Italia S.p.A., Saving Shares,
(Telecommunications) 1,445,300 3,650,733
---------------
$ 15,560,228
---------------
Singapore -- 0.3%
Mandarin Oriental International, Ltd.
(Restaurant & Lodgings) 2,447,530 $ 3,451,017
---------------
South Korea -- 0.7%
Korea Mobile Telecom, ADR
(Telecommunications) 583,083 $ 7,507,194
---------------
Sweden -- 1.6%
Astra AB, "B" (Pharmaceuticals) 311,900 $ 15,057,241
Nobel Biocare AB
(Medical and Health Products) 118,900 2,093,617
---------------
$ 17,150,858
---------------
Total Foreign Stocks $ 62,912,111
---------------
Total Stocks
(Identified Cost, $817,322,989) $1,036,835,077
---------------
Warrants
Finance
Peregrine Investment Holdings
(Identified Cost, $38,572) 311 $ 99,525
---------------
Short-Term Obligations -- 2.0%
Federal National Mortgage Assn., due
1/06/97 7,600 $ 7,594,195
Ford Motor Credit Corp.,
due 1/02/97 13,710 13,707,429
---------------
Total Short-Term Obligations, at Amortized Cost $ 21,301,624
---------------
Total Investments
(Identified Cost, $838,663,185) $1,058,236,226
Other Assets,
Less Liabilities -- 0.3% 3,395,205
---------------
Net Assets -- 100.0% $1,061,631,431
===============
See portfolio footnotes and notes to financial statements
19
<PAGE>
Portfolio of Investments -- December 31, 1996
Conservative Growth Series
Stocks -- 91.6%
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- 87.6%
Aerospace -- 7.6%
AlliedSignal, Inc. 92,700 $ 6,210,900
General Dynamics Corp. 64,000 4,512,000
Lockheed Martin Corp. 105,748 9,675,942
McDonnell-Douglas Corp. 147,600 9,446,400
Raytheon Co. 118,500 5,702,812
United Technologies Corp. 119,400 7,880,400
---------------
$ 43,428,454
---------------
Agricultural Products -- 0.5%
Case Corp. 48,500 $ 2,643,250
---------------
Apparel and Textiles -- 1.6%
Nike, Inc., "B" 82,700 $ 4,941,325
Reebok International Ltd. 31,000 1,302,000
VF Corp. 42,500 2,868,750
---------------
$ 9,112,075
---------------
Automotive -- 0.9%
Goodrich (B.F.) Co. 122,600 $ 4,965,300
---------------
Banks and Credit Companies -- 8.8%
Bank of Boston Corp. 40,200 $ 2,582,850
Chase Manhattan Corp. 22,068 1,969,569
Comerica, Inc. 67,600 3,540,550
Corestates Financial Corp. 6,467 335,476
Crestar Financial Corp. 48,300 3,592,312
First Bank Systems, Inc. 126,400 8,626,800
First Chicago NBD Corp. 30,300 1,628,625
Firstar Corp. 55,600 2,919,000
Household International, Inc. 3,200 295,200
National City Corp. 76,100 3,414,987
Northern Trust Co. 106,000 3,842,500
Norwest Corp. 245,400 10,674,900
SunTrust Banks, Inc. 89,300 4,398,025
U.S. Bancorp 57,300 2,574,919
---------------
$ 50,395,713
---------------
Business Machines -- 0.5%
International Business Machines Corp. 18,000 $ 2,718,000
Xerox Corp. 5,300 278,913
---------------
$ 2,996,913
---------------
Business Services -- 1.9%
Alco Standard Corp. 90,100 $ 4,651,413
Ceridian Corp.* 6,100 247,050
Computer Sciences, Inc.* 51,000 4,188,375
DST Systems, Inc.* 10,800 338,850
Sabre Group Holding, Inc.* 48,400 1,349,150
---------------
$ 10,774,838
---------------
Cellular Telephones
AirTouch Communications, Inc.* 9,500 $ 239,875
---------------
Chemicals -- 2.8%
Air Products & Chemicals, Inc. 79,600 $ 5,502,350
Betzdearborn, Inc. 3,600 210,600
du Pont (E. I.) de Nemours & Co. 51,000 4,813,125
Monsanto Corp. 68,800 2,674,600
Praxair, Inc. 60,600 2,795,175
---------------
$ 15,995,850
---------------
Computer Software -- Personal Computers -- 1.4%
First Data Corp. 82,000 $ 2,993,000
Microsoft Corp.* 60,600 5,007,075
---------------
$ 8,000,075
---------------
Issuer Shares Value
U.S. Stocks -- continued
Computer Software -- Systems -- 1.5%
Computer Associates International,
Inc. 114,750 $ 5,708,813
Electronic Data Systems Corp. 5,000 216,250
Oracle Systems Corp.* 67,000 2,797,250
---------------
$ 8,722,313
---------------
Consumer Goods and Services -- 8.4%
Colgate-Palmolive Co. 106,900 $ 9,861,525
Gillette Co. 154,400 12,004,600
Philip Morris Cos., Inc. 137,500 15,485,937
Procter & Gamble Co. 46,100 4,955,750
RJR Nabisco Holdings Corp. 60 2,040
Service Corp. International 9,200 257,600
Sherwin-Williams Co. 51,300 2,872,800
Tyco International Ltd. 43,100 2,278,913
---------------
$ 47,719,165
---------------
Defense Electronics -- 0.3%
Loral Space & Communications Corp.* 83,000 $ 1,525,125
---------------
Electrical Equipment -- 3.3%
General Electric Co. 121,300 $ 11,993,537
Honeywell, Inc. 108,400 7,127,300
---------------
$ 19,120,837
---------------
Electronics -- 0.9%
Intel Corp. 38,100 $ 4,988,719
---------------
Entertainment -- 0.3%
Comcast Corp., "A" 9,500 $ 169,219
Viacom, Inc., "B"* 39,400 1,374,075
---------------
$ 1,543,294
---------------
Financial Institutions -- 4.5%
American Express Co. 35,900 $ 2,028,350
Beneficial Corp. 152,300 9,652,012
Federal Home Loan Mortgage Corp. 26,700 2,940,338
MBNA Corp. 11,100 460,650
Merrill Lynch & Co., Inc. 17,500 1,426,250
State Street Boston Corp. 121,200 7,817,400
Union Planters Corp. 35,000 1,365,000
---------------
$ 25,690,000
---------------
Food and Beverage Products -- 4.9%
Archer-Daniels-Midland Co. 109,121 $ 2,400,662
Coca-Cola Co. 36,300 1,910,287
CPC International, Inc. 53,800 4,169,500
General Mills, Inc. 92,200 5,843,175
PepsiCo, Inc. 195,500 5,718,375
Ralston-Purina Co. 42,600 3,125,775
Tyson Foods, Inc. 70,800 2,424,900
Wrigley (Wm) Junior Co. 47,700 2,683,125
---------------
$ 28,275,799
---------------
Forest and Paper Products -- 1.4%
Kimberly-Clark Corp. 82,048 $ 7,815,072
---------------
Insurance -- 6.7%
AFLAC, Inc. 90,100 $ 3,851,775
Allstate Corp. 74,700 4,323,263
Chubb Corp. 18,500 994,375
CIGNA Corp. 47,300 6,462,362
ITT Hartford Group, Inc. 55,300 3,732,750
MBIA, Inc. 5,300 536,625
Progressive Corp. 104,500 7,040,687
20
<PAGE>
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- continued
Insurance -- continued
St. Paul Cos., Inc. 53,400 $ 3,130,575
Torchmark Corp. 64,300 3,247,150
Transamerica Corp. 42,300 3,341,700
Travelers Group, Inc. 34,000 1,542,750
---------------
$ 38,204,012
---------------
Machinery -- 1.7%
Deere & Co., Inc. 53,500 $ 2,173,438
Ingersoll Rand Co. 85,300 3,795,850
York International Corp. 63,100 3,525,712
---------------
$ 9,495,000
---------------
Medical and Health Products -- 5.9%
American Home Products Corp. 40,600 $ 2,380,175
Johnson & Johnson 168,300 8,372,925
Lilly (Eli) & Co. 40,836 2,981,028
Pfizer, Inc. 43,600 3,613,350
Pharmacia & Upjohn, Inc. 43,000 1,703,875
Rhone-Poulenc Rorer, Inc. 92,000 7,187,500
Warner-Lambert Co. 99,600 7,470,000
---------------
$ 33,708,853
---------------
Medical and Health Technology and Services -- 2.2%
Medtronic Inc. 26,600 $ 1,808,800
Pacificare Health Systems, Inc., "B"* 39,100 3,333,275
St. Jude Medical, Inc.* 124,500 5,306,812
United Healthcare Corp. 43,300 1,948,500
---------------
$ 12,397,387
---------------
Metals and Minerals -- 0.5%
Phelps Dodge Corp. 42,700 $ 2,882,250
---------------
Oil Services -- 0.3%
Schlumberger Ltd. 16,500 $ 1,647,938
---------------
Oils -- 5.2%
Amoco Corp. 21,400 $ 1,722,700
Chevron Corp. 48,300 3,139,500
Exxon Corp. 72,100 7,065,800
Mobil Corp. 79,200 9,682,200
Texaco, Inc. 83,100 8,154,187
---------------
$ 29,764,387
---------------
Photographic Products -- 0.8%
Eastman Kodak Co. 57,400 $ 4,606,350
---------------
Printing and Publishing -- 1.7%
Gannett Co., Inc. 78,500 $ 5,877,687
Tribune Co. 51,700 4,077,838
---------------
$ 9,955,525
---------------
Railroads -- 1.9%
Burlington Northern Santa Fe 35,200 $ 3,040,400
Conrail, Inc. 19,548 1,947,470
CSX Corp. 87,800 3,709,550
Illinois Central Corp. 65,200 2,086,400
---------------
$ 10,783,820
---------------
Special Products and Services -- 0.3%
McDonalds Corp. 13,100 $ 592,775
Stanley Works 46,400 1,252,800
---------------
$ 1,845,575
---------------
Stores -- 2.3%
Circuit City Stores, Inc. 37,100 $ 1,117,637
CVS Corp. 27,600 1,141,950
Home Depot, Inc. 48,600 2,436,075
Lowes Co., Inc. 71,000 2,520,500
Penney (J.C.), Inc. 64,500 3,144,375
Issuer Shares Value
U.S. Stocks -- continued
Stores -- continued
Sears, Roebuck & Co. 39,800 $ 1,835,775
Talbots, Inc. 33,700 964,663
---------------
$ 13,160,975
---------------
Supermarkets -- 0.8%
Kroger Co.* 7,100 $ 330,150
Safeway, Inc.* 61,200 2,616,300
Vons Cos., Inc.* 32,000 1,916,000
---------------
$ 4,862,450
---------------
Telecommunications -- 0.4%
Cox Communications Inc. 39 $ 902
Lucent Technologies, Inc. 52,800 2,442,000
---------------
$ 2,442,902
---------------
Utilities -- Electric -- 1.6%
Allegheny Power Systems, Inc. 35,900 $ 1,090,463
Cinergy Corp. 35,900 1,198,162
CMS Energy Corp. 6,700 225,288
DPL, Inc. 35,200 862,400
FPL Group, Inc. 62,400 2,870,400
Illinova Corp. 7,100 195,250
Pinnacle West Capital Corp. 8,200 260,350
Portland General Corp. 52,600 2,209,200
---------------
$ 8,911,513
---------------
Utilities -- Gas -- 0.8%
Consolidated Natural Gas Co. 31,500 $ 1,740,375
Pacific Enterprises 31,400 953,775
Panenergy Corp. 44,600 2,007,000
---------------
$ 4,701,150
---------------
Utilities -- Telephone -- 3.0%
Ameritech Corp. 4,500 $ 272,813
BellSouth Corp. 8,300 335,112
GTE Corp. 117,100 5,328,050
MCI Communications Corp. 243,600 7,962,675
Pacific Telesis Group 35,000 1,286,250
SBC Communications, Inc. 33,600 1,738,800
---------------
$ 16,923,700
---------------
Total U.S. Stocks $500,246,454
---------------
Foreign Stocks -- 4.0%
Germany -- 0.1%
Hoechst AG (Chemicals) 16,000 $ 756,061
---------------
Hong Kong -- 0.5%
Hong Kong Land Holdings Ltd. (Real
Estate) 341,000 $ 947,980
Swire Pacific Air Ltd., "A"
(Transportation) 100,000 953,581
Wharf Holdings Ltd. (Real Estate) 239,000 1,192,837
---------------
$ 3,094,398
---------------
Italy -- 0.1%
Telecom Italia S.p.A.
(Telecommunications) 125,000 $ 315,742
---------------
Japan -- 0.2%
Canon, Inc. (Consumer Goods and
Services) 58,000 $ 1,283,319
---------------
Netherlands -- 0.2%
Royal Dutch Petroleum Co., ADR (Oils) 7,400 $ 1,263,550
---------------
New Zealand -- 0.2%
Lion Nathan Ltd. (Food and Beverage
Products) 356,700 $ 854,309
---------------
21
<PAGE>
Stocks -- continued
Issuer Shares Value
Foreign Stocks -- continued
Singapore -- 0.1%
Mandarin Oriental International, Ltd.
(Restaurants and Lodging) 374,000 $ 527,340
------------
South Korea -- 0.2%
Korea Mobile Telecom
(Telecommunications) 87,035 $ 1,120,576
------------
Sweden -- 0.9%
Astra AB, Free Shares, "B"
(Pharmaceuticals) 77,100 $ 3,722,069
Sparbanken Sverige AB (Banks and
Credit Companies) 74,500 1,279,017
------------
$ 5,001,086
------------
Switzerland -- 0.3%
Novartis AG (Pharmaceuticals)* 1,387 $ 1,588,660
------------
United Kingdom -- 1.2%
British Petroleum PLC, ADR (Oils) 20,752 $ 2,933,814
PowerGen PLC (Utilities-Electric) 381,977 3,743,185
SmithKline Beecham PLC, ADR (Medical
and Health Products) 4,000 272,000
------------
$ 6,948,999
------------
Total Foreign Stocks $ 22,754,040
------------
Total Stocks (Identified Cost, $412,784,810) $523,000,494
------------
Preferred Stock -- 0.1%
Chemicals -- 0.1%
Henkel KGaA
(Identified Cost, $765,482) 15,000 $ 753,656
------------
Convertible Preferred Stock -- 0.1%
Financial Institutions
Tosco Financing Trust ## 3,500 $ 179,813
------------
Oils -- 0.1%
Atlantic Richfield Co. 20,300 $ 436,450
------------
Total Convertible Preferred Stocks
(Identified Cost, $686,836) $ 616,263
------------
Principal Amount
(000 Omitted)
Convertible Bond -- 0.2%
Chemicals -- 0.2%
Sandoz Capital BVI Ltd., 2s, 2002
## (Identified Cost, $714,174) $ 803 $ 863,225
------------
Short-Term Obligations -- 7.9%
Federal Farm Credit Bank due 1/7/97 $ 2,280 $ 2,278,008
Federal Home Loan Bank, due 1/2/97 15,960 15,957,665
Federal Home Loan Mortgage Corp.,
due 1/7/97-1/21/97 18,290 18,257,266
Federal National Mortgage Assn.,
due 1/13/97 7,800 7,786,272
Tennessee Valley Authority, due
1/21/97 1,000 997,094
------------
Total Short-Term Obligations, at Amortized Cost $ 45,276,305
------------
Total Investments
(Identified Cost, $460,227,607) $570,509,943
Other Assets,
Less Liabilities -- 0.1% 498,092
------------
Net Assets -- 100.0% $571,008,035
============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
Emerging Growth Series
Stocks -- 86.4%
Issuer Shares Value
U.S. Stocks -- 80.8%
Apparel and Textiles -- 0.1%
Nine West Group, Inc.* 7,200 $ 333,900
-----------
Automotive -- 0.2%
APS Holding Corp., "A"* 23,000 $ 356,500
-----------
Business Machines -- 2.6%
Affiliated Computer Services, Inc., "A"* 101,000 $ 3,004,750
Sun Microsystems, Inc.* 134,300 3,449,831
-----------
$ 6,454,581
-----------
Business Services -- 11.2%
AccuStaff, Inc.* 36,100 $ 762,612
ADT Ltd.* 95,400 2,182,275
ALCO Standard Corp. 17,800 918,925
Computer Sciences Corp.* 36,200 2,972,925
CUC International, Inc.* 177,525 4,216,219
DST Systems, Inc.* 75,300 2,362,537
Employee Solutions, Inc.* 86,200 1,767,100
Equity Corp. International* 7,200 144,000
Forrester Research, Inc.* 900 23,175
International Network Services* 600 18,113
Learning Tree International, Inc.* 123,000 3,628,500
Loewen Group, Inc. 5,200 203,450
Sabre Group Holding, Inc., "A"* 11,800 328,925
Superior Consultant, Inc.* 2,700 66,825
Technology Solutions Co.* 195,400 8,109,100
Thermo Fibergen, Inc.* 19,800 207,900
Transaction System Architects, Inc.* 5,000 166,250
-----------
$28,078,831
-----------
Chemicals -- 0.3%
Betzdearborn, Inc. 12,900 $ 754,650
-----------
Computer Software -- Personal Computers -- 3.7%
Autodesk, Inc. 985 $ 27,580
First Data Corp. 108,000 3,942,000
Microsoft Corp.* 63,700 5,263,212
Spectrum Holobyte, Inc.* 11,100 83,250
-----------
$ 9,316,042
-----------
Computer Software -- Systems -- 20.5%
Adobe Systems, Inc. 6,300 $ 235,463
BMC Software, Inc.* 284,000 11,750,500
Cadence Design Systems, Inc.* 216,700 8,613,825
Computer Associates International, Inc. 183,050 9,106,737
Compuware Corp.* 66,500 3,333,312
Information Management Resources, Inc.* 1,400 29,575
Ingram Micro, Inc.* 4,700 108,100
Oracle Systems Corp.* 287,700 12,011,475
Parametric Technology Corp.* 47,900 2,460,863
Sterling Software, Inc.* 7,800 246,675
Sybase, Inc.* 50,900 849,394
Synopsys, Inc.* 23,600 1,091,500
USCS International, Inc.* 18,400 310,500
Viasoft, Inc.* 17,200 812,700
Xionics Document Technologies* 43,200 540,000
-----------
$51,500,619
-----------
Construction Services -- 0.8%
Shaw Group, Inc. 90,000 $ 2,103,750
-----------
Consumer Goods and Services -- 2.6%
Actel Corp.* 22,600 $ 536,750
Carson, Inc.* 120,300 1,669,163
Nu Skin Asia Pacific, Inc.* 1,400 43,225
22
<PAGE>
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- continued
Consumer Goods and Services -- continued
Service Corp. International 8,800 $ 246,400
Tyco International Ltd. 74,100 3,918,037
-----------
$ 6,413,575
-----------
Electronics -- 6.6%
Altera Corp.* 55,300 $ 4,019,619
Analog Devices, Inc.* 56,400 1,910,550
Atmel Corp.* 31,700 1,050,063
Intel Corp. 15,400 2,016,437
Lattice Semiconductor Corp.* 32,600 1,499,600
Linear Technology Corp. 38,700 1,697,962
LSI Logic Corp.* 40,000 1,070,000
Novellus Systems, Inc.* 1,100 59,606
Teradyne, Inc.* 40,000 975,000
Ultratech Stepper, Inc.* 16,900 401,375
VLSI Technology, Inc.* 54,100 1,291,638
Xilinx, Inc.* 18,300 673,669
-----------
$16,665,519
-----------
Entertainment -- 2.6%
Cox Radio, Inc., "A"* 59,800 $ 1,046,500
Harrah's Entertainment, Inc.* 82,900 1,647,638
Heritage Media Corp.* 43,000 483,750
Hollywood Entertainment Corp.* 24,100 445,850
International Speedway Corp.* 1,400 28,700
Jacor Communications, Inc., "A"* 7,000 191,625
LIN Television Corp.* 43,200 1,825,200
Sinclair Broadcast Group, Inc.* 9,100 236,600
Univision Communications, Inc., "A"* 15,300 566,100
-----------
$ 6,471,963
-----------
Financial Institutions -- 0.6%
Associates First Capital Corp., "A" 5,000 $ 220,625
Dean Witter Discover & Co., Inc. 9,600 636,000
Franklin Resources, Inc. 3,000 205,125
MBNA Corp. 12,500 518,750
-----------
$ 1,580,500
-----------
Food and Beverage Products -- 0.3%
Earthgrains Co. 13,300 $ 694,925
-----------
Machinery -- 0.1%
SI Handling Systems, Inc. 15,000 $ 225,938
-----------
Medical and Health Products -- 0.1%
Ventritex, Inc.* 11,400 $ 280,725
-----------
Medical and Health Technology
and Services -- 6.9%
Columbia Healthcare Corp. 600 $ 24,450
Foundation Health Corp.* 600 19,050
HealthSource, Inc.* 41,100 539,438
HealthSouth Corp.* 116,100 4,484,362
Pacificare Health Systems, Inc., "B"* 35,500 3,026,375
St. Jude Medical, Inc.* 22,700 967,587
United Healthcare Corp. 184,800 8,316,000
-----------
$17,377,262
-----------
Oils -- 0.3%
Barrett Resources Corp.* 14,200 $ 605,275
National Oilwell, Inc.* 1,400 43,050
Offshore Energy Development Corp.* 200 3,050
Titan Exploration, Inc.* 6,800 81,600
-----------
$ 732,975
-----------
U.S. Stocks -- continued
Pollution Control -- 0.8%
Republic Industries, Inc.* 700 $ 21,831
USA Waste Services, Inc.* 63,020 2,008,763
------------
$ 2,030,594
------------
Railroads -- 0.5%
Kansas City Southern Industries, Inc. 5,100 $ 229,500
Wisconsin Central Transportation Corp.* 22,200 879,675
------------
$ 1,109,175
------------
Restaurants and Lodging -- 6.0%
Applebee's International, Inc. 71,100 $ 1,955,250
HFS, Inc.* 204,200 12,200,950
Promus Hotel Corp.* 12,250 362,906
Renaissance Hotel Group N.V.* 26,000 611,000
U.S. Franchise Systems, Inc.* 1,400 14,175
------------
$ 15,144,281
------------
Stores -- 3.4%
BT Office Products International, Inc.* 10,700 $ 94,963
Corporate Express, Inc.* 77,900 2,293,181
General Nutrition Cos., Inc.* 67,300 1,135,688
Linens 'N Things, Inc.* 9,000 176,625
Mazel Stores, Inc.* 1,000 22,500
Micro Warehouse, Inc.* 4,600 54,050
Office Depot, Inc.* 55,400 983,350
Staples, Inc.* 204,200 3,688,362
------------
$ 8,448,719
------------
Telecommunications -- 10.6%
3Com Corp.* 48,700 $ 3,573,362
Bay Networks, Inc.* 800 16,700
Cabletron Systems, Inc.* 110,900 3,687,425
Cisco Systems, Inc.* 148,200 9,429,225
Glenayre Technologies, Inc.* 85,600 1,845,750
Lucent Technologies, Inc. 40,300 1,863,875
Tel-Save Holdings, Inc.* 1,050 30,450
WorldCom, Inc.* 233,100 6,075,169
------------
$ 26,521,956
------------
Total U.S. Stocks $202,596,980
------------
Foreign Stocks -- 5.6%
Canada -- 1.5%
BioChem Pharma, Inc. (Biotechnology)* 58,900 $ 2,959,725
Loewen Group, Inc. (Special Products and
Services)## 20,200 788,659
------------
$ 3,748,384
------------
Germany -- 1.5%
Sap AG (Computer Software -- Systems) 23,200 $ 3,242,119
Sap AG, ADR (Computer Software --
Systems)## 14,700 678,038
------------
$ 3,920,157
------------
Italy -- 0.7%
Fila Holdings S.p.A., ADR
(Apparel and Textiles) 27,400 $ 1,592,625
Gucci Group Designs N.V., ADR (Apparel
and Textiles) 3,600 229,950
------------
$ 1,822,575
------------
23
<PAGE>
Foreign Stocks -- continued
Issuer Shares Value
United Kingdom -- 1.9%
Danka Business Systems, ADR (Business
Machines) 79,200 $ 2,801,700
Pace Micro Technology PLC (Electronics) 500,900 1,973,726
------------
$ 4,775,426
------------
Total Foreign Stocks $ 14,266,542
------------
Total Stocks
(Identified Cost, $196,117,907) $216,863,522
------------
Warrants -- 2.0%
Intel Corp. 53,400 $ 4,926,150
Thermo Fibergen, Inc. 19,800 49,500
------------
Total Warrants
(Identified Cost, $3,387,894) $ 4,975,650
------------
Convertible Bond -- 0.1%
Principal Amount
(000 Omitted)
Ventritex, Inc., 5.75s, 2001
(Medical and Health Products)
(Identified Cost, $70,000) $ 70 $ 110,425
------------
Short Term Obligations -- 11.3%
Federal Farm Credit Bank, due
2/3/97 $ 495 $ 492,627
Federal Home Loan Mortgage Corp.,
due 1/3/97-1/21/97 13,900 13,873,956
Federal National Mortgage Assn.,
due 1/14/97-1/15/97 7,880 7,863,950
Ford Motor Credit Corp.,
due 1/2/97 6,095 6,093,798
------------
Total Short Term Obligations,
at Amortized Cost $ 28,324,331
------------
Total Investments
(Identified Cost, $227,900,132) $250,273,928
Other Assets,
Less Liabilities -- 0.2% 552,297
------------
Net Assets -- 100.0% $250,826,225
============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
Government Securities Series
U.S. Federal Agencies -- 32.1%
Principal Amount
Issuer (000 Omitted) Value
AID Israel, 8s, 2001 $ 5,000 $ 5,331,200
AID Israel, 5.625s, 2003 2,000 1,907,400
AID Israel, 5.89s, 2005 3,000 2,847,600
American Heavy Lift Shipping, 7.18s,
1999 4,850 4,825,750
Farm Credit Systems Financial
Assistance, 9.375s, 2003 3,950 4,546,213
Federal Agricultural Mortgage Corp.,
7.02s, 1998 1,000 1,012,030
Federal Agricultural Mortgage Corp.,
7.25s, 1999 2,000 2,046,240
Federal Agricultural Mortgage Corp.,
7.63s, 2001 6,000 6,280,320
Federal Agricultural Mortgage Corp.,
6.417s, 2003 2,986 2,942,129
Federal Agricultural Mortgage Corp.,
8.07s, 2006 1,000 1,092,340
Federal Home Loan Bank,
4.25s, 1997 7,000 6,959,540
Federal Home Loan Mortgage Corp.,
8.5s, 2022 32 32,786
Federal Home Loan Mortgage Corp.,
9s, 2001 - 2021 2,160 2,260,277
Federal National Mortgage
Association, 7s, 2026 8,080 7,900,319
Federal National Mortgage
Association, 7.268s, 2020 1,301 1,303,090
Federal National Mortgage
Association, 7.27s, 2005 6,124 6,078,217
Federal National Mortgage
Association, 8s, 2005 - 2023 8,810 9,131,165
Federal National Mortgage
Association, 8.25s, 2001 3,945 3,958,507
Federal National Mortgage
Association, 8.5s, 2001 - 2006 1,266 1,317,041
Federal National Mortgage
Association, 9s, 2006 - 2007 2,938 3,064,255
Financing Corp., 9.4s, 2018 4,845 6,086,531
Financing Corp., 9.8s, 2018 5,600 7,275,632
North Pacific Fishing, 5.9s, 2006 3,650 3,572,681
Private Export Funding Corp.,
8.4s, 2001 3,000 3,234,480
Private Export Funding Corp.,
6.24s, 2002 8,000 7,916,480
Resolution Funding Corp.,
8.875s, 2020 6,000 7,303,140
U.S. Department of Housing & Urban
Development, 6.83s, 2003 8,025 8,148,505
U.S. Department of Housing & Urban
Development, 6.92s, 2004 4,525 4,605,092
------------
Total U.S. Federal Agencies (Identified Cost,
$122,425,781) $122,978,960
------------
U.S. Government Guaranteed -- 65.0%
Government National Mortgage Association -- 31.3%
GNMA, 6.5s, 2023 - 2026 $ 13,614 $ 12,984,216
GNMA, 7s, 2022 - 2026 27,081 26,488,705
GNMA, 7.5s, 2008 - 2026 48,485 48,589,592
GNMA, 8s, 2022 - 2026 24,489 24,979,158
GNMA, 9s, 2017 - 2023 6,706 6,936,998
GNMA, 12.25s, 2015 16 18,180
------------
$119,996,849
------------
24
<PAGE>
U.S. Government Guaranteed -- continued
Principal Amount
Issuer (000 Omitted) Value
Small Business Administration -- 3.0%
SBA, 8.2s, 2005 $ 1,636 $ 1,722,462
SBA, 8.4s, 2007 636 670,685
SBA, 8.7s, 2009 3,765 4,038,953
SBA, 9.05s, 2009 618 666,806
SBA, 9.65s, 2007 - 2010 1,876 2,066,734
SBA, 10.05s, 2009 861 960,886
SBA, 10.1s, 2009 1,301 1,443,563
------------
$ 11,570,089
------------
U.S. Treasury Obligations -- 29.0%
U.S. Treasury Notes, 5.375s, 1998 $ 3,700 $ 3,680,908
U.S. Treasury Notes, 6.125s, 1998 6,000 6,029,040
U.S. Treasury Notes, 9.25s, 1998 19,250 20,251,577
U.S. Treasury Notes, 5.875s, 1999 9,200 9,191,352
U.S. Treasury Notes, 6.75s, 1999 -
2000 24,750 25,193,647
U.S. Treasury Notes, 9.125s, 1999 10,950 11,701,061
U.S. Treasury Bonds, 12s, 2013 6,500 9,298,055
U.S. Treasury Bonds, 9s, 2018 4,000 5,019,360
U.S. Treasury Bonds, 8.125s, 2019 7,175 8,299,466
U.S. Treasury Bonds, 8.75s, 2020 10,000 12,310,900
------------
$110,975,366
------------
Other -- 1.7%
Bay Transportation Corp., 7.3s, 2021 $ 5,345 $ 5,438,538
U.S. Department of Veterans Affairs,
7.75s, 2014 1,000 995,620
------------
$ 6,434,158
------------
Total U.S. Government Guaranteed (Identified
Cost, $247,827,741) $248,976,462
------------
Repurchase Agreement -- 1.7%
Investments in repurchase agreements
with Goldman Sachs, in a joint
trading account ($6,399,000 par)
dated 12/31/96, total to be
received by the Fund, $6,401,346,
collateralized by various U.S.
Treasury and Federal Agency
Obligations (with $64,464,000 par
and valued at $65,488,003), at
cost $ 6,399,000 $ 6,399,000
------------
Total Investments
(Identified Cost, $376,652,522) $378,354,422
Other Assets,
Less Liabilities -- 1.2% 4,752,488
------------
Net Assets -- 100.0% $383,106,910
============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
High Yield Series
Non-Convertible Bonds -- 90.1%
Principal Amount
Issuer (000 Omitted) Value
Aerospace -- 0.8%
BE Aerospace, Inc., 9.875s, 2006 $ 975 $1,023,750
CHC Helicopter Corp., 11.5s, 2002 550 561,000
----------
$1,584,750
----------
Airlines -- 2.0%
Airplane Pass-Thru Trust,
10.875s, 2019 $ 700 $ 768,250
Continental Airlines, Inc.,
11.75s, 1995** 700 70
K & F Industries, Inc.,
10.375s, 2004 1,350 1,424,250
MOOG, Inc., 10s, 2006 1,700 1,785,000
----------
$3,977,570
----------
Automotive -- 2.5%
Exide Corp., 10s, 2005 $1,200 $1,245,000
Harvard Industries, Inc., 12s, 2004 275 237,875
Harvard Industries, Inc., 11.125s, 2005 925 767,750
Hayes Wheels International, Inc.,
11s, 2006 1,850 2,018,813
Motors & Gears, Inc., 10.75s,
2006## 675 695,250
----------
$4,964,688
----------
Building -- 4.4%
American Standard, Inc., 10.5s, 2005 $2,275 $2,115,750
Building Materials Corp., 11.75s, 2004 2,250 1,946,250
Building Materials Corp.,
8.625s, 2006## 200 199,500
Lone Star Industries, Inc., 10s, 2003 850 863,812
Nortek, Inc., 9.875s, 2004 1,700 1,717,000
UDC Homes, Inc., 12.5s, 2000 7 3,644
USG Corp., 9.25s, 2001 1,700 1,810,500
----------
$8,656,456
----------
Cellular Telephones -- 0.9%
Millicom International Cellular
Communications, 13.5s, 2006 $1,800 $1,116,000
Rogers Cantel, Inc., 9.375s, 2008 600 630,000
----------
$1,746,000
----------
Chemicals -- 2.9%
Harris Chemical North America, Inc.,
10.25s, 2001 $ 1,000 $1,038,750
Indspec Chemical Corp., 11.5s, 2003 800 722,000
NL Industries, Inc., 11.75s, 2003 1,855 1,966,300
UCC Investors Holdings, Inc.,
10.5s, 2002 1,350 1,471,500
UCC Investors Holdings, Inc.,
12s, 2005 500 430,000
----------
$5,628,550
----------
Consumer Goods and Services -- 9.9%
Consolidated Cigar Corp.,
10.5s, 2003 $ 250 $ 261,250
E & S Holdings Corp., 10.375s,
2006## 1,775 1,841,562
25
<PAGE>
Non-Convertible Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Consumer Goods and Services -- continued
FoodBrands America, Inc.,
10.75s, 2006 $1,600 $ 1,680,000
Genmar Holdings, Inc., 13.5s, 2001 500 485,000
International Semi-Tech
Microelectronics, Inc., 11.5s, 2003 1,050 677,250
Iron Mountain, Inc., 10.125s, 2006 1,300 1,378,000
Pierce Leahy Corp., 11.125s, 2006 1,450 1,584,125
Reeves Industries, Inc., 11s, 2002 1,580 1,508,900
Remington Arms, Inc., 9.5s, 2003## 850 716,125
Revlon, Inc., 10.5s, 2003 1,780 1,869,000
Samsonite Corp., 11.125s, 2005 2,050 2,244,750
Sealy Corp., 9.5s, 2003 2,050 2,070,500
Westpoint Stevens, Inc.,
9.375s, 2005 3,075 3,167,250
------------
$ 19,483,712
------------
Containers -- 4.6%
Atlantis Group, Inc., 11s, 2003 $ 900 $ 913,500
Calmar, Inc., 11.5s, 2005 1,300 1,347,125
Ivex Packaging Corp., 12.5s, 2002 1,430 1,547,975
Owens-Illinois, Inc., 11s, 2003 450 500,625
Owens-Illinois, Inc., 9.95s, 2004 1,800 1,908,000
Silgan Corp., 11.75s, 2002 1,570 1,672,050
U.S. Can Corp., 10.125s, 2006## 1,000 1,051,250
------------
$ 8,940,525
------------
Corporate Asset Backed -- 0.2%
Merrill Lynch Mortgage Investors,
Inc., 8.1421s, 2022+ $ 500 $ 420,313
------------
Electronics -- 0.4%
Clark Schwebel, Inc., 10.5s, 2006 $ 800 $ 848,000
------------
Entertainment -- 0.9%
Albritton Communications Corp.,
11.5s, 2004 $ 600 $ 636,000
Cinemark USA, Inc., 9.625s, 2008 1,000 1,000,000
Marvel Holdings, Inc., 9.125s, 1998 1,425 213,750
------------
$ 1,849,750
------------
Food and Beverage Products -- 2.8%
Coca Cola Bottling Group Southwest,
Inc., 9s, 2003 $ 250 $ 254,375
Delta Beverage Group, Inc.,
9.75s, 2003## 550 563,750
Keebler Corp., 10.75s, 2006## 700 764,750
PMI Acquisition Corp., 10.25s, 2003 1,250 1,275,000
Specialty Foods Corp., 10.25s, 2001 1,550 1,433,750
Texas Bottling Group, Inc., 9s, 2003 1,250 1,265,625
------------
$ 5,557,250
------------
Forest and Paper Products -- 3.3%
Gaylord Container Corp., 12.75s, 2005 $3,025 $ 3,342,625
Pacific Lumber Co., 10.5s, 2003 1,400 1,421,000
Specialty Paperboard, Inc., 9.375s,
2006## 400 401,000
Stone Container Corp., 10.75s, 2002 1,195 1,259,231
------------
$ 6,423,856
------------
Machinery -- 0.4%
AGCO Corp., 8.5s, 2006 $ 700 $ 718,375
------------
Medical and Health Products -- 0.3%
Quest Diagnostics, Inc.,
10.75s, 2006 $ 500 $ 525,000
------------
Medical and Health Technology and Services -- 3.7%
Beverly Enterprises, Inc., 9s, 2006 $1,900 $ 1,909,500
Genesis Health Ventures, Inc., 9.75s,
2005 1,500 1,575,000
Quorum Health Group, 8.75s, 2005 1,500 1,537,500
Tenet Healthcare Corp.,
10.125s, 2005 1,750 1,938,125
Unilab Corp., 11s, 2006 325 219,375
------------
$ 7,179,500
------------
Oil Services -- 4.9%
AmeriGas Partners, LP,
10.125s, 2007 $1,600 $ 1,686,000
Clark USA, Inc., 10.875s, 2005 1,300 1,345,500
Falcon Drilling, Inc., 8.875s, 2003 950 969,000
Ferrell Gas LP, 10s, 2001 1,200 1,254,000
Giant Industries, Inc., 9.75s, 2003 1,950 2,018,250
Mesa Operating Co., 10.625s, 2006 2,200 2,387,000
------------
$ 9,659,750
------------
Oils -- 0.6%
Gulf Canada, 9.25s, 2004 $1,150 $ 1,216,125
------------
Printing and Publishing -- 0.7%
Day International Group, Inc.,
11.125s, 2005 $ 90 $ 949,500
Golden Books Publishing, Inc., 7.65s,
2002 400 348,000
------------
$ 1,297,500
------------
Restaurants and Lodging -- 6.1%
Aztar Corp., 11s, 2002 $ 800 $ 774,000
Boomtown, Inc., 11.5s, 2003 375 394,687
Coast Hotels & Casinos, Inc.,
13s, 2002 600 662,250
Eldorado Resorts LLC, 10.5s,
2006## 1,700 1,795,625
Four Seasons Hotels, Inc., 9.125s,
2000## 1,100 1,130,250
Grand Casinos, Inc., 10.125s, 2003 1,800 1,809,000
Griffin Gaming & Entertainment, Inc.,
0s, 2000 300 294,000
Harrah's Jazz Co., 14.25s, 2001 650 319,313
Harvey's Casinos Resorts,
10.625s, 2006 650 695,500
26
<PAGE>
Non-Convertible Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Restaurants and Lodging -- continued
Red Roof Inns, Inc., 9.625s, 2003 $1,400 $ 1,400,000
Sam Houston Race Park, Inc.,
11s, 2001** 168 67,317
Santa Fe Hotel, Inc., 11s, 2000 745 547,575
Station Casinos, Inc., 9.625s, 2003 2,000 1,990,000
-----------
$11,879,517
-----------
Special Products and Services -- 8.4%
AAF-Mcquay, Inc., 8.875s, 2003 $1,400 $ 1,396,500
Buckeye Cellulose Corp., 8.5s, 2005 850 850,000
Central Transport Rental Finance
Corp., 9.5s, 2003 700 661,773
Fairfield Manufacturing Corp.,
11.375s, 2001 450 470,250
Haynes International, Inc., 11.625s,
2004 1,700 1,793,500
Howmet Corp., 10s, 2003 1,000 1,100,000
IMO Industries, Inc., 11.75s, 2006 1,825 1,697,250
Interlake Corp., 12s, 2001 600 642,000
Interlake Corp., 12.125s, 2002 1,950 2,018,250
Interlake Revolver, "B", 8.375s,
1997## 194 191,591
International Knife & Saw, Inc.,
11.375s, 2006## 1,000 1,032,500
Mettler Toledo Inc., 9.75s, 2006 300 315,000
Polymer Group, Inc., 12.25s, 2002 1,084 1,184,270
Synthetic Industries, Inc., 12.75s,
2002 1,850 2,039,625
Thermadyne Industries Holdings Corp.,
10.25s, 2002 350 358,750
Thermadyne Industries Holdings Corp.,
10.75s, 2003 800 824,000
-----------
$16,575,259
-----------
Steel -- 4.7%
AK Steel Corp., 9.125s, 2006## $ 475 $ 488,062
Algoma Steel, Inc., 12.375s, 2005 1,200 1,296,000
Armco, Inc., 11.375s, 1999 700 724,500
Carbide/Graphite Group, Inc., 11.5s,
2003 250 271,250
Commonwealth Aluminum Corp., 10.75s,
2006 1,175 1,210,250
Gulf States Steel, Inc., 13.5s, 2003 225 213,750
Jorgensen (Earle M.) Co., 10.75s,
2000 1,025 1,045,500
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 1,400 1,435,000
Kaiser Aluminum & Chemical Corp.,
12.75s, 2003 450 483,750
WCI Steel, Inc., 10s, 2004## 2,000 2,040,000
-----------
$ 9,208,062
-----------
Stores -- 3.2%
Finlay Enterprises, Inc., 12s, 2005 $1,200 $ 1,026,000
Finlay Fine Jewelry, 10.625s, 2003 1,400 1,407,000
Jitney Jungle Stores America Inc.,
12s, 2006 1,950 2,062,125
Lear Corp., 9.5s, 2006 800 864,000
Parisian, Inc., 9.875s, 2003 1,000 1,010,000
-----------
$ 6,369,125
-----------
Supermarkets -- 4.1%
Carr-Gottstein Foods Co., 12s, 2005 $ 400 $ 427,000
Dominick's Finer Foods Co., 10.875s,
2005 1,300 1,439,750
Fleming Cos., Inc., 10.625s, 2001 300 304,500
Grand Union Co., 12s, 2004 1,400 1,477,000
Pathmark Stores, Inc., 9.625s, 2003 1,400 1,340,500
Ralph's Grocery Co., 10.45s, 2004 1,350 1,436,063
Smiths Food & Drug Centers, 11.25s,
2007 1,200 1,326,000
Star Market, Inc., 13s, 2004 200 225,000
-----------
$ 7,975,813
-----------
Telecommunications -- 17.2%
American Radio Systems Corp., 9s,
2006 $1,950 $ 1,911,000
Bell Cablemedia PLC, 11.875s, 2005 1,250 1,003,125
Brooks Fiber Properties, Inc.,
10.875s, 2006 550 352,000
Brooks Fiber Properties, Inc.,
11.875s, 2006## 1,250 796,875
Cablevision Systems Corp.,
9.25s, 2005 1,100 1,089,000
Charter Communications Southeast LP,
11.25s, 2006 1,000 1,045,000
Colt Telecom Group PLC, 12s, 2006 1,300 770,250
Comcast Corp., 9.375s, 2005 1,400 1,452,500
Diamond Cable Communications Corp.,
11.75s, 2005 1,200 864,000
EchoStar Communications Corp.,
12.875s, 2004 575 472,937
EchoStar Satellite Broadcasting
Corp., 13.125s, 2004 1,200 909,000
Falcon Holdings Group, Inc.,
11s, 2003 1,074 961,055
Granite Broadcasting Corp., 10.375s,
2005 850 871,250
ICG Holdings Inc., 12.5s, 2006 1,700 1,100,750
Intermedia Capital Partners LP,
11.25s, 2006## 175 182,875
Jones Intercable, Inc., 9.625s, 2002 550 577,500
Jones Intercable, Inc., 11.5s, 2004 100 108,625
Jones Intercable, Inc., 10.5s, 2008 1,000 1,080,000
27
<PAGE>
Non-Convertible Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Telecommunications -- continued
Lodgenet Entertainment Corp., 10.25s,
2006## $ 475 $ 475,000
Marcus Cable Operating Co., 13.5s, 2004 875 717,500
MFS Communications, Inc., 8.875s, 2006 2,700 1,964,250
Mobile Telecommunication Technologies
Corp., 13.5s, 2002 550 550,000
Mobilemedia Communications, Inc.,
10.5s, 2003 850 178,500
Newsquest Capital PLC, 11s, 2006## 1,150 1,190,250
Newsquest Capital PLC, 11s, 2006## 225 232,875
Paging Network, Inc., 8.875s, 2006 1,900 1,809,750
Park Broadcasting, Inc., 11.75s, 2004 800 940,000
Rifkin Acquisition Partners LP,
11.125s, 2006 300 312,750
Rogers Cablesystems Ltd., 9.625s, 2002 250 260,625
Rogers Cablesystems Ltd., 10.125s, 2012 1,150 1,193,125
Sprint Spectrum LP, 11s, 2006 950 1,028,375
Sprint Spectrum LP, 12.5s, 2006 2,050 1,399,125
Sygnet Wireless Inc, 11.5s, 2006 1,000 1,025,000
Teleport Communications Group, Inc.,
11.125s, 2007 3,450 2,363,250
USA Mobil Communication, Inc., 9.5s, 2004 250 237,500
Videotron Holdings PLC, 11s, 2005 1,500 1,207,500
Western Wireless Corp., "A", 10.5s, 2007 900 943,875
------------
$ 33,576,992
------------
Transportation -- 0.2%
Moran Transportation Co.,
11.75s, 2004 $ 300 $ 324,000
------------
Total Non-Convertible Bonds
(Identified Cost, $171,838,663) $176,586,438
------------
Stocks -- 0.5% Shares
U.S. Stocks -- 0.4%
Apparel and Textiles -- 0.2%
Ithaca Industries, Inc.* 60,000 $ 480,000
Building ------------
Atlantic Gulf Communities Corp.+* 30 $ 129
Consumer Goods and Services ------------
Ranger Industries, Inc.* 8,952 $ 2,507
Entertainment -- 0.2% ------------
Gillett Holdings, Inc.+* 9,414 $ 357,732
Sam Houston Race Park, Inc.* 45 225
------------
$ 357,957
------------
Total U.S. Stocks $ 840,593
Foreign Stocks -- 0.1% ------------
United Kingdom -- 0.1%
Central Transport Rental Group PLC,
ADR (Special Products and
Services)* 343,751 $ 128,907
------------
Total Stocks
(Identified Cost, $1,154,691) $ 969,500
------------
Preferred Stock -- 2.9%
Issuer Shares Value
Consumer Goods and Services -- 0.3%
Renaissance Cosmetics, Inc., 14s+ 525 $ 530,250
------------
Entertainment -- 1.2%
Time Warner, Inc., "K", 10.25s#,
## 2,290 $ 2,484,650
------------
Special Products and Services -- 0.8%
K-III Communications Corp., "B",
11.625s#* 15,271 $ 1,542,366
------------
Telecommunications -- 0.6%
Cablevision Systems Corp., 11.125s* 13,130 $ 1,178,418
------------
Total Preferred Stock
(Identified Cost, $5,193,807) $ 5,735,684
------------
Warrants
Oil Services
Crystal Oil Co., $0.10,* 36,780 $ --
Crystal Oil Co., $0.125, 1999* 36,779 --
ICO, Inc.* 25,000 16,250
------------
Total Warrants
(Identified Cost, $1,011) $ 16,250
------------
Short-Term Obligations -- 5.0%
Principal Amount
(000 Omitted)
Federal Home Loan Bank, due
1/02/97 $ 5,875 $ 5,874,143
Federal National Mortgage
Association, due 1/13/97 3,900 3,893,136
------------
Total Short-Term Obligations, at Amortized
Cost $ 9,767,279
------------
Total Investments
(Identified Cost, $187,955,451) $193,075,151
Other Assets,
Less Liabilities -- 1.5% 3,423,106
------------
Net Assets -- 100.0% $196,498,257
============
See portfolio footnotes and notes to financial statements
28
<PAGE>
Portfolio of Investments -- December 31, 1996
Managed Sectors Series
Stocks -- 97.0%
Issuer Shares Value
Energy -- 9.7%
BJ Services Co.* 74,800 $ 3,814,800
Camco International, Inc. 75,000 3,459,375
Cooper Cameron Corp.* 71,000 5,431,500
Occidental Petroleum Corp. 270,000 6,311,250
Tidewater, Inc. 85,000 3,846,250
Weatherford International, Inc.* 97,300 2,919,000
-----------
$25,782,175
-----------
Financial Services -- 3.7%
Advanta Corp., "B" 85,000 $ 3,474,375
Equitable of Iowa Cos 136,000 6,239,000
-----------
$ 9,713,375
-----------
Leisure -- 18.4%
American Radio Systems Corp., "A"* 38,600 $ 1,051,850
Argosy Gaming Corp.* 91,900 425,037
Harrah's Entertainment, Inc.* 416,200 8,271,975
HFS, Inc.* 35,000 2,091,250
Host Marriott Corp.* 239,700 3,835,200
LIN Television Corp.* 53,600 2,264,600
Louisiana Quinta Inns, Inc. 100,000 1,912,500
MGM Grand, Inc.* 68,000 2,371,500
Promus Hotel Corp.* 124,900 3,700,162
Showboat, Inc. 98,900 1,706,025
Telephone & Data Systems, Inc. 588,000 21,315,000
-----------
$48,945,099
-----------
Retail -- 4.0%
Gymboree Corp.* 4,000 $ 91,500
Office Depot, Inc.* 300,000 5,325,000
Sears, Roebuck & Co. 106,300 4,903,088
Staples, Inc.* 18,400 332,350
-----------
$10,651,938
-----------
Technology -- 34.8%
ADT Ltd.* 396,500 $ 9,069,937
Aerial Communications, Inc.* 200,000 1,625,000
AirTouch Communications, Inc.* 76,400 1,929,100
Analog Devices, Inc.* 86,400 2,926,800
Atmel Corp.* 160,000 5,300,000
Cabletron Systems, Inc.* 150,700 5,010,775
Cisco Systems, Inc.* 20,000 1,272,500
Computer Associates International, Inc. 85,000 4,228,750
Digital Equipment Corp.* 180,000 6,547,500
Electronic Arts, Inc.* 173,400 5,191,162
Glenayre Technologies, Inc.* 161,800 3,488,813
Intel Corp. 116,200 15,214,937
Loral Space & Communications Corp.* 215,000 3,950,625
MCI Communications Corp. 87,000 2,843,813
Microsoft Corp.* 39,000 3,222,375
National Semiconductor Corp.* 222,600 5,425,875
Oracle Systems Corp.* 45,000 1,878,750
Sun Microsystems, Inc.* 325,000 8,348,437
Sybase, Inc.* 117,000 1,952,438
VLSI Technology, Inc.* 138,000 3,294,750
-----------
$92,722,337
-----------
Other -- 26.4%
AGCO Corp. 165,000 $ 4,723,125
Colgate-Palmolive Co. 38,000 3,505,500
Coventry Corp.* 475,000 4,401,172
Genesis Health Ventures, Inc.* 70,000 2,178,750
HBO & Co. 23,000 1,365,625
HealthSource, Inc.* 335,000 4,396,875
Issuer Shares Value
Other -- continued
HealthSouth Corp.* 98,000 $ 3,785,250
McDonnell-Douglas Corp. 63,000 4,032,000
Pacificare Health Systems, Inc.,
"B"* 56,000 4,774,000
Pharmacia & Upjohn, Inc. 101,000 4,002,125
PowerGen PLC (United Kingdom) 449,024 4,400,213
Rhone-Poulenc Rorer, Inc. (France) 28,000 2,187,500
Spectrum Holobyte, Inc.* 570,000 4,275,000
St. Jude Medical, Inc.* 78,500 3,346,062
Tyco International Ltd. 140,000 7,402,500
United Healthcare Corp. 163,300 7,348,500
Ventritex, Inc.* 34,600 852,025
Wisconsin Central Transportation
Corp.* 86,300 3,419,637
------------
$ 70,395,859
------------
Total Stocks
(Identified Cost, $237,479,035) $258,210,783
Principal Amount ------------
(000 Omitted)
Convertible Bonds -- 0.1%
Ventritex, Inc., 5.75s, 2001 $ 80 $ 126,200
Spectrum Holobyte, Inc., 6.5s,
2002## 270 174,488
------------
Total Convertible Bonds
(Identified Cost, $350,000) $ 300,688
------------
Short-Term Obligations -- 3.2%
Federal National Mortgage Assn.,
due 1/13/97 $ 3,000 $ 2,994,720
Ford Motor Credit Corp., due
1/02/97 5,685 5,683,879
------------
Total Short-Term Obligations, at Amortized
Cost $ 8,678,599
------------
Total Investments
(Identified Cost, $246,507,634) $267,190,070
Other Assets,
Less Liabilities -- (0.3)% (822,156)
------------
Net Assets -- 100.0% $266,367,914
============
See portfolio notes and notes to financial statements
29
<PAGE>
Portfolio of Investments -- December 31, 1996
MFS/Foreign & Colonial Emerging Markets
Equity Series
Stocks -- 82.9%
Issuer Shares Value
Argentina -- 3.0%
Banco de Galicia y Buenos Aires S.A
de C.V., ADR (Banks and Credit Cos.) 500 $ 12,125
Perez Companc S.A. (Oil and Gas) 3,000 21,094
Telefonica de Argentina, ADR
(Utilities -- Telephone) 700 18,113
YPF Sociedad Anonima, ADR (Oil and
Gas) 1,900 47,975
---------
$ 99,307
---------
Brazil -- 11.4%
CEMIG (Utilities -- Electric) 1,180,000 $ 40,208
Centrais Eletricas Brasileiras S.A. --
Eletrobras, Preferred, "B"
(Utilities -- Electric) 125,000 46,443
Itausa Investimentos Itau S.A
(Conglomerate)* 38,000 28,530
Petroleo Brasileiro S.A., Preferred
(Oils) 670,000 106,733
Telecomunicacoes Braileiras S.A
(Utilities--Telephone) 2,081,000 149,230
---------
$ 371,144
---------
Chile -- 2.4%
Cia de Telecomunicaciones de Chile
S.A., ADR (Telecommunications) 400 $ 40,450
Enersis S.A., ADR (Utilities --
Electric) 1,400 38,850
---------
$ 79,300
---------
China -- 2.1%
Huaneng Power International, Inc., ADR
(Utilities -- Electric)* 1,100 $ 24,750
Qingling Motors Co., "H" (Automotive)* 40,000 22,110
Yizheng Chemical Fibre Co. Ltd.
(Textiles) 92,000 22,364
---------
$ 69,224
---------
Colombia -- 1.5%
Banco Ganadero S.A., ADR (Financial
Institutions) 1,800 $ 47,475
---------
Egypt -- 3.7%
Commercial International Bank of Egypt
(Banks and Credit Cos.)* 4,200 $ 59,220
Suez Cement Co. S A E, GDR (Building
Materials)##* 4,000 62,400
---------
$ 121,620
---------
Hong Kong -- 5.3%
Cheung Kong Holdings Ltd. (Real
Estate) 7,000 $ 62,225
HSBC Holdings PLC (Finance) 2,800 59,917
Swire Pacific Air Ltd., "A"
(Transportation)* 5,500 52,447
---------
$ 174,589
---------
India -- 6.6%
Bajaj Auto Ltd., GDR (Automotive) 1,400 $ 46,550
East India Hotels (Lodging) 2,500 58,750
Industrial Credit & Investment Corp.
of India Ltd. (Financial
Institutions)* 3,300 32,175
State Bank of India, GDR (Banks and
Credit Cos.)* 3,000 52,110
Issuer Shares Value
India -- continued
Tata Engineering & Locomotive Co.
Ltd. (Autos and Trucks) 2,600 $ 27,625
--------
$217,210
--------
Israel -- 0.7%
Koors Industries Ltd., ADR
(Conglomerate) 600 $ 10,200
Teva Pharmaceutical Industries
Ltd., ADR (Pharmaceuticals) 250 12,562
--------
$ 22,762
--------
Malaysia -- 6.9%
Genting Berhad (Entertainment) 5,000 $ 34,456
Malayan Banking Berhad (Finance) 4,000 44,356
Sime Darby Berhad (Holding Company) 12,000 47,287
Sungei Way Holdings Berhad
(Diversified Operations) 14,000 41,584
Tenaga Nasional Berhad (Utilities
-- Electric) 12,000 57,505
--------
$225,188
--------
Mexico -- 7.6%
Apasco S.A. (Building Materials) 1,500 $ 10,294
Cemex S.A., "B" (Construction) 10,000 36,027
Empresas ICA Sociedad Controladora
S.A., ADR
(Engineering/Construction)* 1,300 19,013
Gruma S.A.,"B" (Food)* 3,000 18,300
Grupo Carso, "A1" (Conglomerate) 9,000 47,693
Grupo Financiero Banamex, "B"
(Finance) 6,000 12,673
Kimberly-Clark de Mexico S.A. de
C.V. (Forest and Paper Products) 2,000 39,522
Telefonos de Mexico S.A. (Utilities
-- Telephone) 40,000 65,980
--------
$249,502
--------
Morocco -- 4.0%
ONA S.A. (Conglomerate)* 1,125 $ 67,072
Societe Nationale Dinvestiss
(Conglomerate) 1,000 62,480
--------
$129,552
--------
Pakistan -- 2.0%
Hub Power Co. Ltd., GDR (Utilities
-- Electric)* 2,100 $ 41,474
Pakistan Telecommunications Corp.,
GDR (Utilities-- Telephone)* 400 24,000
--------
$ 65,474
--------
Peru -- 2.5%
Compania de Minas Buenaventura, ADR
(Mining) 1,500 $ 25,311
Credicorp Ltd. (Holding Company) 1,500 27,750
Telefonica del Peru S.A., ADR
(Telecommunications) 1,500 28,313
--------
$ 81,374
--------
Philippines -- 1.7%
Philippine National Bank (Banks and
Credit Cos.)* 2,800 $ 33,321
30
<PAGE>
Stocks -- continued
Issuer Shares Value
Philippines -- continued
Pilipino Telegraph & Telephone Corp.
(Telecommunications)* 27,000 $ 22,876
-----------
$ 56,197
-----------
Portugal -- 5.8%
Banco Espirito Santo e Comercial de
Lisboa S.A. (Banks and Credit Cos.) 1,743 $ 30,677
Banco Totta e Acores (Finance)## 588 11,092
Cimentos de Portugal S.A. (Building
Materials) 600 12,920
Portugal Telecom S.A
(Telecommunications)* 1,500 42,774
Telecel -- Comunicacaoes Pessoais
S.A. (Cellular Telecommunications)* 1,431 91,400
-----------
$ 188,863
-----------
Russia -- 4.1%
Lukoil Oil Co., ADR (Oil and Gas) 1,100 $ 50,050
Mosenergo, ADR (Utilities --
Electric)## 1,200 36,360
Rostelecom, RDC (Telecommunications)* 248,000
-----------
$ 134,410
-----------
South Africa -- 3.7%
Liberty Life Association of Africa
Ltd. (Insurance) 1,500 $ 37,612
Sasol Ltd. (Oils)* 3,900 46,290
South African Breweries Ltd.
(Brewery) 1,500 38,012
-----------
$ 121,914
-----------
South Korea -- 1.3%
New Korea Trust (Finance)* 4,000 $ 41,000
-----------
Taiwan -- 2.2%
Taipei Fund (Financial Services)* 8 $ 72,000
-----------
Thailand -- 2.2%
Siam Cement Public Co. Ltd. (Building
Materials) 900 $ 28,213
TelecomAsia Corp. Ltd. (Utilities --
Telephone)* 21,000 43,806
-----------
$ 72,019
-----------
Venezuela -- 2.2%
Compania Anonima Nacional Telefonos
de Venezuela, ADR
(Telecommunications)* 2,600 $ 73,124
-----------
Total Stocks
(Identified Cost, $2,670,502) $ 2,713,248
Warrants -----------
Sungei Way Holdings Berhad
(Diversified Operations)* 1,400 $ 1,491
-----------
Short-Term Obligation -- 19.9%
Principal Amount
(000 Omitted)
Federal Home Loan Bank, due
1/02/97, at Amortized Cost $650 $ 649,906
-----------
Total Investments (Identified Cost, $ 3,320,408) $ 3,364,645
Other Assets,
Less Liabilities -- (2.8)% (93,208)
-----------
Net Assets -- 100.0% $ 3,271,437
===========
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
MFS/Foreign & Colonial International Growth Series
Stocks -- 84.9%
Issuer Shares Value
Broken Hill Proprietary (Mining) 3,528 $ 50,185
Futuris Corp. Ltd. (Commercial
Services) 45,798 62,530
--------
$112,715
--------
Austria -- 1.0%
Boehler-Uddeholm AG (Steel) 440 $ 31,495
OMV AG (Oil and Gas) 200 22,555
--------
$ 54,050
--------
Belgium -- 0.6%
Generale de Banque (Finance) 100 $ 35,865
--------
Denmark -- 0.3%
Tele Danmark A/S (Telecommunications) 300 $ 16,558
--------
Finland -- 0.3%
Oy Tamro AB (Pharmaceuticals)## 2,460 $ 16,410
--------
France -- 5.2%
Accor (Lodging) 140 $ 17,736
Compagnie de St. Gobain (Building
Materials) 200 28,307
Credit Local de France (Finance) 300 26,147
Filipacchi Medias (Publishing) 100 22,271
Guilbert S.A. (Distributing) 140 27,401
IMETAL (Building Materials) 120 17,725
Lafarge-Coppee, Bearer Shares
(Building Materials) 300 18,008
Legrand, Preference Shares
(Electrical Equipment) 100 11,068
SEB S.A. (Household Goods) 100 19,610
Societe Nationale Elf Aquitaine
(Oils) 300 27,322
Strafor-Facom S.A. (Office Equipment) 260 19,252
TOTAL S.A., "B" (Oils) 200 16,275
Union des Assurances Federales S.A
(Insurance) 300 37,023
--------
$288,145
--------
Germany -- 5.2%
Bayer AG (Chemicals) 600 $ 24,491
Berentzen Gruppe AG (Beverages) 888 33,477
Buderus AG (Manufacturing) 60 29,639
Deutsche Telekom AG (Utilities --
Telephone)* 2,375 50,094
Fresenius AG (Medical Supplies) 160 33,071
Mannesmann AG (Diversified Machinery) 50 21,677
Siemens AG (Electrical Equipment) 500 23,562
VEBA AG (Oil and Gas) 500 28,924
Volkswagen AG (Automobiles) 100 41,599
--------
$286,534
--------
Hong Kong -- 4.2%
Associated International Hotels
(Lodging) 60,000 $ 44,996
Cheung Kong Holdings Ltd. (Real
Estate) 5,000 44,447
Dah Sing Financial Group (Banks) 12,000 48,720
Li & Fung Ltd. (Toys) 52,000 46,056
Swire Pacific Air Ltd., "A"
(Transportation) 5,000 47,679
--------
$231,898
--------
31
<PAGE>
Stocks -- 84.9%
Issuer Shares Value
Italy -- 1.5%
Industrie Natuzzi S.p.A., ADR
(Furniture) 1,400 $ 32,200
Italgas (Utilities -- Gas) 5,300 22,115
Telecom Italia S.p.A
(Telecommunications) 10,000 25,951
--------
$ 80,266
--------
Japan -- 34.1%
Aeon Credit Service Co. Ltd.
(Financial Services) 1,000 $ 62,230
Aiphone Co. Ltd. (Telecommunications) 2,000 39,758
ALBIS Co. Ltd. (Food) 3,000 35,782
Ariake Japan Co. Ltd. (Food) 1,000 32,152
Canon, Inc. (Consumer Goods) 3,000 66,379
Chofu Seisakusho Co. (Machines) 1,100 22,818
Dai-Ichi Kangyo Bank Ltd. (Banks) 2,000 28,868
Daimei Telecom Engineer Corp.
(Telecommunications) 3,000 22,688
Daiwa Industries Co. Ltd.
(Distributor) 2,000 15,212
DDI Corp. (Telecommunications) 8 52,965
Diamond Computer Service Co.
(Computers -- Software) 2,000 31,806
Exedy Corp. (Automotive Parts) 3,000 37,338
Fujisawa Pharmaceuticals
(Pharmaceuticals) 11,000 98,877
Fukuda Denshi (Electronics) 2,000 44,079
Hitachi Zosen Tomioka (Automotive) 9,000 35,004
Homac Corp. (Retail) 1,000 18,150
Industrial Bank of Japan (Finance) 3,000 52,118
Itariyard Co. Ltd. (Textiles) 1,000 27,053
Ito-Yokado Co. Ltd. (Retail) 1,000 43,561
Kasumi Convenience Networks (Retail) 1,000 8,479
Kato Denki (Retail) 1,000 10,977
Kyocera Corp. (Electronics) 2,000 124,806
Mandom (Cosmetics) 2,000 30,078
Marubeni Corp. (Distribution/
Wholesale) 14,000 60,259
Matsuda Sangyo Co. Ltd. (Food) 1,000 25,843
Mitsubishi Estate Co. Ltd. (Real
Estate) 4,000 41,141
Mitsubishi Heavy Industries Ltd.
(Aerospace/Defense) 6,000 47,710
Miura Co. (Machines) 2,000 25,410
NAC Co. Ltd. (Commercial Services) 2,000 43,215
Nichiha (Building and Construction) 2,000 35,436
Nippon Yusen Kabushiki Kaish
(Transportation -- Marine) 11,000 49,818
Nissha Printing Co. (Manufacturing) 2,000 19,015
NKK Corp. (Steel) 19,000 42,861
Nomura Securities Co. Ltd. (Finance) 2,000 30,078
Oi Electric Co. (Electronics) 3,000 38,634
Oji Paper Co. Ltd. (Paper Products) 7,333 46,457
Omron Corp. (Electronics) 3,000 56,525
Japan -- continued
Pioneer Electronic Corp.
(Electronics)* 3,000 $ 57,303
Ricoh Co. Ltd. (Office/Business
Equipment) 8,000 91,962
Sanshin Electronics Co. Ltd.
(Electronics) 2,000 27,139
Sato Corp. (Machines) 2,000 39,067
Sawai Pharmaceutical Co. Ltd.
(Pharmaceuticals) 1,000 11,927
Sawako Corp. (Engineering/
Construction) 1,000 19,879
Seiyo Food Systems (Restaurants) 3,000 26,707
Sodick Co. (Electrical Equipment)* 2,000 16,595
Sundrug Co. Ltd. (Retail) 1,000 33,276
TKC Corp. (Computer Software and
Services) 1,100 26,145
Tsukishima Kikai (Machines) 1,000 16,508
Yaoko Co. (Retail) 1,000 15,990
----------
$1,886,078
----------
Malaysia -- 1.7%
Malayan Banking Berhad (Finance) 4,600 $ 51,010
Malaysian Industrial Development
Finance Berhad (Finance) 24,000 44,673
----------
$ 95,683
----------
Netherlands -- 4.0%
ABN Amro Holdings N.V. (Finance) 400 $ 26,040
Ahrend Groep N.V. (Furniture) 540 30,118
Akzo Nobel (Chemicals)* 100 13,668
Grolsch N.V. (Brewery) 540 20,955
Hagemeyer N.V. (Distributing) 300 23,995
Royal Dutch Petroleum Co. (Oils) 200 35,085
Stork N.V. (Machinery) 980 34,566
Vendex International N.V. (Retail) 700 29,961
----------
$ 214,388
----------
Singapore -- 1.7%
Overseas-Chinese Banking Corp. Ltd.
(Finance) 4,000 $ 49,757
Wing Tai Holdings Ltd. (Holding
Company) 16,000 45,753
----------
$ 95,510
----------
Spain -- 0.7%
Repsol S.A. (Oils) 400 $ 15,339
Telefonica de Espana (Utilities --
Telephone) 1,100 25,537
----------
$ 40,876
----------
Sweden -- 3.5%
Autoliv AB (Automotive) 660 $ 28,957
Enator AB (Computer Services)* 1,400 35,848
Ericsson LM, "B" (Telecommunications) 1,000 30,961
Munksjo AB (Forest and Paper
Products) 2,380 24,097
Nobel Biocare AB (Medical Supplies) 1,020 17,960
PLM AB (Packaging and Containers) 1,160 20,085
Sparbanken Sverige AB (Banks) 1,000 17,168
Volvo AB, "B" (Automobiles) 900 19,875
----------
$ 194,951
----------
Switzerland -- 3.6%
Fotolabo S.A. (Leisure) 120 $ 46,637
32
<PAGE>
Stocks -- continued
Issuer Shares Value
Switzerland -- continued
Kuoni Reisen Holdings AG (Travel
Services) 14 $ 34,006
Lindt & Spruengli AG (Food) 2 36,173
Nestle AG, Registered Shares (Food
and Beverage Products) 20 21,480
Novartis AG (Pharmaceuticals)* 30 34,372
Roche Holdings AG (Pharmaceuticals) 3 23,352
----------
$ 196,020
----------
United Kingdom -- 15.3%
Allied Domecq PLC (Food and Beverage
Products) 2,800 $ 21,970
Asda Property Holdings PLC (Real
Estate) 8,240 22,869
BAT Industries PLC (Tobacco) 3,500 29,022
Blick PLC (Electrical) 2,480 14,955
British Gas PLC (Utilities -- Gas)* 6,800 26,095
British Telecommunications PLC
(Telecommunications) 4,000 27,069
BTR PLC (Holding Company) 5,000 24,413
Bullough PLC (Manufacturing) 10,620 13,282
Caradon PLC (Holding Company) 5,200 21,381
Carlton Communicatons PLC
(Broadcasting) 1,900 16,653
Courtaulds Textiles PLC (Textiles) 2,300 8,748
Dalgety PLC (Food Products) 3,900 24,254
David Brown Group PLC
(Engineering/Construction) 4,720 17,871
Devro International PLC (Food) 5,060 23,319
Forth Ports PLC (Harbor
Transportation Services) 5,100 53,997
General Accident PLC (Insurance) 2,000 26,178
Glaxo Wellcome PLC (Pharmaceuticals) 1,600 26,041
Hazlewood Foods PLC (Food) 8,220 14,998
Inchcape PLC (Commercial Services) 4,600 21,357
Independent Insurance Group PLC
(Insurance) 2,720 27,820
Johnson Matthey PLC (Metals) 2,300 21,751
Land Securities PLC (Real Estate) 2,000 25,561
London Electricity PLC (Utilities --
Electric) 2,100 24,482
Marley PLC (Building Materials) 7,820 16,813
Meggitt Holdings PLC (Engineering) 10,200 17,824
National Westminster (Finance) 1,700 19,979
Nelson Hurst PLC (Insurance) 5,240 13,555
Peninsular & Oriental Steam
Navigation Co. (Transportation --
Marine) 1,600 16,200
RJB Mining PLC (Mining) 2,640 19,303
Roxboro Group PLC (Manufacturing) 4,100 13,697
Sainsbury (J.) PLC (Retail) 3,400 22,542
Scapa Group PLC (Building Materials) 4,800 20,188
Serco Group PLC (Commercial Services) 2,100 24,213
Shell Transport & Trading Co. PLC
(Oil and Gas) 1,500 26,006
SIG PLC (Building Materials) 5,900 24,360
Smith (W.H.) Group PLC (Retail) 1,500 10,999
T & S Stores PLC (Retail) 5,760 18,256
United Kingdom -- continued
Wagon Industrial Holdings PLC
(Maufacturing) 3,640 $ 18,770
Walker Greenbank PLC (Maufacturing) 11,880 10,990
Wimpey (George) PLC (Construction) 7,600 16,275
----------
$ 844,056
----------
Total Stocks
(Identified Cost, $4,604,164) $4,690,003
----------
Short-Term Obligation -- 38.2%
Principal Amount
(000 Omitted)
Federal Home Loan Bank, due
1/02/97, at Amortized Cost $2,110 $ 2,109,692
-----------
Total Investments
(Identified Cost, $6,713,856) $ 6,799,695
Other Assets,
Less Liabilities -- (23.1)% (1,274,472)
-----------
Net Assets -- 100.0% $ 5,525,223
===========
See portfolio footnotes and notes to financial statements
33
<PAGE>
Portfolio of Investments -- December 31, 1996
MFS/Foreign & Colonial International Growth
and Income Series
Stocks -- 73.7%
Issuer Shares Value
Australia -- 1.5%
Broken Hill Proprietary (Mining) 23,276 $ 331,099
Westpac Bank Corp. (Finance) 37,400 212,567
----------
$ 543,666
----------
Austria -- 0.4%
OMV AG (Oil and Gas) 1,195 $ 134,764
----------
Belgium -- 0.7%
Generale de Banque (Finance) 500 $ 179,326
Solvay et Cie (Chemicals) 100 61,247
----------
$ 240,573
----------
France -- 5.0%
Accor (Lodging) 1,480 $ 187,497
Compagnie de St. Gobain (Building
Materials) 1,600 226,456
Credit Local de France (Finance) 2,100 183,031
Credit Local de France (Finance) 570 49,680
Eaux (Cie Generale) (Utilities --
Water) 660 81,832
Lafarge-Coppee, Bearer Shares
(Building Materials) 3,120 187,284
Legrand, Preference Shares
(Electrical Equipment) 1,820 201,442
Michelin (C.G.D.E.), "B" (Tire and
Rubber) 4,100 221,444
Societe Nationale Elf Aquitaine
(Oils) 2,200 200,359
TOTAL S.A., "B" (Oils) 3,220 262,021
----------
$1,801,046
----------
Germany -- 5.6%
Bayer AG (Chemicals) 12,200 $ 497,992
Deutsche Bank AG (Banks) 320 14,955
Deutsche Telekom AG (Utilities --
Telephone) 4,745 100,081
Dresdner Bank AG (Banks) 5,100 152,818
Mannesmann AG (Diversified Machinery) 700 303,477
Preussag AG (Metals/Hardware) 200 45,304
Siemens AG (Electrical Equipment) 5,600 263,893
VEBA AG (Oil and Gas) 6,190 358,083
Volkswagen AG (Stores) 640 266,233
----------
$2,002,836
----------
Hong Kong -- 4.0%
Cheung Kong Holdings Ltd. (Real
Estate) 38,000 $ 337,794
Hong Kong Electric Holdings Ltd.
(Utilities -- Electric) 61,500 204,364
HSBC Holdings PLC (Finance) 8,800 188,311
New World Development Co. (Real
Estate) 25,000 168,897
Swire Pacific Air Ltd., "A"
(Transportation) 21,000 200,252
Wharf Holdings Ltd. (Real Estate) 67,000 334,394
----------
$1,434,012
----------
Italy -- 0.8%
Fiat S.p.A. (Automobiles) 21,340 $ 64,515
Italgas (Utilities -- Gas) 36,710 153,175
Telecom Italia S.p.A
(Telecommunications) 20,450 53,070
----------
$ 270,760
----------
Issuer Shares Value
Japan -- 28.7%
Asahi Chemical Industry Co. Ltd.
(Chemicals) 54,000 $ 306,171
Canon, Inc. (Consumer Goods and
Services) 27,000 597,407
Dai-Ichi Kangyo Bank Ltd. (Banks) 37,000 534,054
DDI Corp. (Telecommunications) 82 542,887
Fujisawa Pharmaceuticals
(Pharmaceuticals) 40,000 359,550
Hitachi (Electronics) 6,000 56,007
Hitachi Zosen Tomioka (Automotive) 79,000 307,260
Industrial Bank of Japan (Finance) 23,000 399,568
Isetan Co. (Retail) 23,000 298,185
Ito-Yokado Co. Ltd. (Retail) 9,000 392,048
Kajima Corp. (Engineering/
Construction) 44,000 314,883
Kyocera Corp. (Electronics) 9,000 436,819
Marubeni Corp. (Distribution/
Wholesale) 116,000 499,291
Matsushita Electric Industrial Co.
(Electrical Equipment) 16,000 261,366
Mitsubishi Estate Co. Ltd. (Real
Estate) 32,000 329,127
Mitsubishi Heavy Industries Ltd.
(Aerospace/Defense) 51,000 405,532
Mitsubishi Trust & Banking (Banks) 14,000 187,554
Nippon Yusen Kabushiki Kaish
(Transportation -- Marine) 88,000 398,548
NKK Corp. (Steel) 149,000 336,119
Nomura Securities Co. Ltd. (Finance) 23,000 345,895
Oji Paper Co. Ltd. (Paper Products) 50,000 316,767
Omron Corp. (Electronics) 39,000 734,831
Pioneer Electronic Corp.
(Electronics) 33,000 630,337
Ricoh Co. Ltd. (Office/Business
Equipment) 49,000 563,267
Sakura Bank Ltd. (Banks) 8,000 57,252
Tokyo Broadcasting System
(Broadcasting) 3,000 45,895
Toyo Trust & Banking (Banks) 54,000 436,387
-----------
$10,093,007
-----------
Malaysia -- 1.4%
Genting Berhad (Entertainment) 18,000 $ 124,040
Malayan Banking Berhad (Finance) 11,000 121,980
Petronas Gas Berhad (Oil and
Gas)## 33,000 137,228
Sime Darby Berhad (Holding Company) 29,000 114,277
-----------
$ 497,525
-----------
Netherlands -- 4.3%
ABN Amro Holdings N.V. (Finance) 3,340 $ 217,431
Ahold Kon N.V. (Food -- Retail) 2,100 131,356
Akzo Nobel (Chemicals) 1,460 199,560
Philips Electronics N.V
(Manufacturing) 3,950 160,141
Royal Dutch Petroleum Co. (Oils) 400 70,173
Vendex International N.V. (Retail) 7,300 312,447
34
<PAGE>
Stocks -- continued
Issuer Shares Value
Netherlands -- continued
Verenigde Nederlandse
Uitgeversbedrijven Verenigd Bezit
(Publishing) 20,920 $ 437,398
$1,528,506
----------
Singapore -- 1.8%
City Developments Ltd. (Real Estate) 22,000 $ 198,170
Development Bank of Singapore Ltd.
(Banks) 9,000 121,604
Keppel Corp. Ltd. (Transportation --
Marine) 22,000 171,432
Overseas-Chinese Banking Corp. Ltd.
(Finance) 12,100 150,515
----------
$ 641,721
----------
Spain -- 1.6%
Repsol S.A. (Oils) 5,490 $ 210,520
Telefonica de Espana (Utilities --
Telephone) 15,700 364,483
----------
$ 575,003
----------
Sweden -- 2.0%
Ericsson LM, "B" (Telecommunications) 8,900 $ 275,554
Sparbanken Sverige AB (Banks) 10,200 175,114
Swedish Match AB (Tobacco) 3,480 12,255
Volvo AB, "B" (Automobiles) 11,980 264,562
----------
$ 727,485
----------
Switzerland -- 2.8%
Nestle AG, Registered Shares (Food
and Beverage Products) 250 $ 268,498
Novartis AG (Pharmaceuticals)* 150 171,861
Roche Holdings AG (Pharmaceuticals) 45 350,280
Winterthur (Insurance) 340 196,682
----------
$ 987,321
----------
United Kingdom -- 13.1%
Allied Domecq PLC (Food and Beverage
Products) 31,400 $ 246,379
Bass PLC (Brewery) 2,970 41,825
BAT Industries PLC (Tobacco) 25,800 213,931
British Gas PLC (Utilities -- Gas) 39,300 150,816
British Petroleum PLC (Oils) 11,900 142,710
British Telecommunications PLC
(Telecommunications) 35,070 237,324
BTR PLC (Holding Company) 58,740 286,805
Caradon PLC (Holding Company) 47,600 195,716
Carlton Communicatons PLC
(Broadcasting) 21,500 188,442
Dalgety PLC (Food Products) 36,350 226,058
General Accident PLC (Insurance) 13,490 176,568
General Electric Co. PLC
(Electronics) 18,650 122,373
Glaxo Wellcome PLC (Pharmaceuticals) 12,100 196,932
Granada Group PLC (Leisure) 10,410 153,911
Inchcape PLC (Commercial Services) 81,800 379,779
Johnson Matthey PLC (Metals) 11,200 105,917
Kingfisher PLC (Retail) 8,800 94,980
Stocks -- continued
United Kingdom -- continued
Land Securities PLC (Real Estate) 14,130 $180,588
London Electricity PLC (Utilities --
Electric) 8,800 102,593
National Westminster (Finance) 14,200 166,886
NFC PLC (Transportation) 58,270 184,682
Peninsular & Oriental Steam
Navigation Co. (Transportation --
Marine) 19,670 199,159
Sainsbury (J.) PLC (Retail) 28,380 188,162
Shell Transport & Trading Co. PLC
(Oil and Gas) 3,800 65,883
Smith (W.H.) Group PLC (Retail) 50,900 373,224
Wimpey (George) PLC (Construction) 35,600 76,237
-----------
$ 4,697,880
-----------
Total Stocks
(Identified Cost, $25,671,468) $26,176,105
-----------
Bonds -- 18.1%
Principal
Amount
(000 Omitted)
Australia -- 2.4%
Commonwealth of Australia,
9.75s, 2002 AUD 700 $ 619,561
Commonwealth of Australia,
9.5s, 2003 250 221,272
----------
$ 840,833
----------
Belgium -- 1.2%
Kingdom of Belgium, 8.75s, 2002 BEF 2,222 $ 82,656
Kingdom of Belgium, 7.25s, 2004 10,010 348,595
----------
$ 431,251
----------
Canada -- 3.2%
Government of Canada, 7.5s,
2003 CAD 1,165 $ 919,468
Government of Canada, 7s, 2006 300 228,344
----------
$1,147,812
----------
Denmark -- 1.5%
Kingdom of Denmark, 6s, 1999 DKK 1,098 $ 193,831
Kingdom of Denmark, 8s, 2001 935 176,282
Kingdom of Denmark, 7s, 2007 967 167,010
----------
$ 537,123
----------
France -- 0.6%
Government of France, 7s, 2000 FRF 965 $ 203,848
----------
Germany -- 2.8%
Federal Republic of Germany,
7.125s, 2002 DEM 472 $ 336,705
Federal Republic of Germany,
6.5s, 2005 504 343,316
Treuhandanstalt Obligationen,
6.375s, 1999 491 338,450
----------
$1,018,471
----------
35
<PAGE>
Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Ireland -- 1.2%
Republic of Ireland, 6.25s, 1999 IEP 40 $ 68,161
Republic of Ireland, 8s, 2000 55 99,314
Republic of Ireland, 6.5s, 2001 160 275,490
----------
$ 442,965
----------
Italy -- 2.0%
Republic of Italy, 8.313s, 1999 ITL 485,000 $ 338,805
Republic of Italy, 8.313s, 2001 510,000 369,337
----------
$ 708,142
----------
Spain -- 1.1%
Government of Spain, 8.4s, 2001 ESP 23,020 $ 193,828
Government of Spain, 10.5s, 2003 21,510 201,270
----------
$ 395,098
----------
Sweden -- 0.8%
Kingdom of Sweden, 10.25s, 2000 SEK 1,600 $ 270,814
----------
United Kingdom -- 1.3%
United Kingdom Treasury, 7s, 2001 GBP 200 $ 339,108
United Kingdom Treasury, 9.75s, 2002 70 132,891
----------
$ 471,999
----------
Total Bonds
(Identified Cost, $6,397,204) $6,468,356
----------
Short-Term Obligation -- 7.0%
Federal Home Loan Bank, due
1/02/97, at Amortized Cost $ 2,500 $2,499,635
----------
Call Options Purchased -- 2.7%
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
Italian Lire/Deutsche Marks
January/995 ITL 213,734 $ 1,069
Japanese Government Bonds
January/104.076 JPY 42,000 3,360
February/116.80 37,000 2,701
March/114.25 39,000 1,560
March/115.106 38,000 1,862
-----------
Total Call Options Purchased
(Premiums Paid, $20,452) $ 10,552
-----------
Put Options Purchased -- 0.2%
Deutsche Marks/British Pounds
January/2.45 DEM 566 $ 27,234
January/2.56 592 11,267
Swiss Francs/Deutsche Marks
January/0.829 CHF 222 7,955
February/0.84 225 5,749
February/0.84 377 9,627
Put Options Purchased -- continued
March/0.86 616 6,684
-----------
Total Put Options Purchased
(Premiums Paid, $14,609) $ 68,516
------------
Total Investments
(Identified Cost, $34,603,368) $ 35,223,164
------------
Principal
Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
Put Options Purchased -- continued
Call Options Written
Deutsche Marks/British Pounds
January/2.3682 DEM 547 $ --
Swiss Francs/Deutsche Marks
February/0.8265 CHF 371 (3)
------------
Total Call Options Written
(Premiums Received, $3,222) $ (3)
------------
Put Options Written
Deutsche Marks/British Pounds
January/2.45 DEM 566 $ (27,122)
Japanese Government Bonds
January/104.076 JPY 42,000 (1,302)
February/116.8 37,000 (1,295)
March/114.25 39,000 (6,084)
March/115.106 38,000 (6,156)
Swiss Francs/Deutsche Marks
January/0.829 CHF 222 (7,960)
February/0.84 602 (15,383)
--------------
Total Put Options Written
(Premiums Received, $27,895) $ (65,302)
--------------
Other Assets,
Less Liabilities -- (1.7)% $ 551,724
------------
Net Assets -- 100.0% $ 35,709,583
============
See portfolio footnotes and notes to financial statements
36
<PAGE>
Portfolio of Investments -- December 31, 1996
Money Market Series
Commercial Paper -- 37.8%
Principal Amount
Issuer (000 Omitted) Value
Abbott Labs, due 1/03/97 $ 6,000 $ 5,998,223
American Express Credit Corp., due
1/21/97 5,000 4,985,222
Associates Corp. of North America,
due 1/28/97 - 2/26/97 15,000 14,904,862
AT&T Corp., due 2/27/97 10,000 9,914,658
Bank of America, due 3/27/97 7,000 6,911,577
BankAmerica Corp., due 3/05/97 5,100 5,052,876
Bankers Trust of New York Corp., due
6/13/97 6,000 5,855,473
Beneficial Corp., due 2/20/97 6,000 5,955,083
Carolina Power & Light Co., due
3/07/97 6,000 5,942,583
Coca-Cola Co., due 2/28/97 6,000 5,949,250
du Pont (E. I.) de Nemours & Co.,
due 1/22/97 6,400 6,380,363
Ford Motor Credit Corp., due 1/24/97 11,650 11,610,478
General Motors Acceptance Corp., due
2/03/97 5,000 4,975,021
Kellogg Co., due 3/26/97 10,000 9,875,167
Knight-Ridder, Inc., due 3/12/97 9,300 9,202,350
Pacific Gas & Electric Co., due
1/15/97 8,000 7,982,982
Raytheon Co., due 1/07/97 6,000 5,994,710
TransAmerica Co., due 1/10/97 10,000 9,986,500
Weyerhaeuser Co., due
1/14/97 - 2/14/97 17,500 17,429,317
------------
$154,906,695
------------
U.S. Government and Agency
Obligations -- 61.4%
Federal Farm Credit Bank, due
1/27/97 - 2/13/97 $21,705 $ 21,598,292
Federal Home Loan Bank, due 1/02/97
- 5/05/97 69,470 69,103,059
Federal Home Loan Mortgage Corp.,
due 1/07/97 - 3/03/97 37,225 37,028,855
Federal National Mortgage Assn., due
1/09/97 - 6/10/97 88,494 87,492,031
Student Loan Marketing Assn., due
1/02/97 30,000 29,994,792
Tennessee Valley Authority, due
2/19/97 6,000 5,957,534
------------
$251,174,563
------------
Total Investments, at Amortized Cost $406,081,258
Other Assets,
Less Liabilities -- 0.8% 3,084,068
------------
Net Assets -- 100.0% $409,165,326
============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
Research Series
Stocks -- 97.1%
Issuer Shares Value
U.S. Stocks -- 87.0%
Aerospace -- 5.7%
General Dynamics Corp. 37,700 $ 2,657,850
Lockheed Martin Corp. 51,900 4,748,850
McDonnell-Douglas Corp. 80,900 5,177,600
United Technologies Corp. 89,900 5,933,400
-----------
$18,517,700
-----------
Agricultural Products -- 1.7%
Case Corp. 100,200 $ 5,460,900
-----------
Apparel and Textiles -- 0.7%
Nike, Inc., "B" 24,000 $ 1,434,000
Reebok International Ltd. 22,600 949,200
-----------
$ 2,383,200
-----------
Automotive -- 0.5%
Goodrich (B.F.) Co. 39,200 $ 1,587,600
-----------
Banks and Credit Companies -- 3.2%
Bank of Boston Corp. 38,400 $ 2,467,200
Chase Manhattan Corp. 52,312 4,668,846
Compass Bancshares Incorporated 6,900 274,275
Crestar Financial Corp. 14,700 1,093,313
Fleet/Norstar Financial Group, Inc. 40,200 2,004,975
-----------
$10,508,609
-----------
Building -- 0.7%
Newport News Shipbuilding Inc. 155,100 $ 2,326,500
-----------
Business Machines -- 0.9%
Affiliated Computer Services, Inc.,
"A"* 9,700 $ 288,575
Sun Microsystems, Inc.* 107,600 2,763,975
-----------
$ 3,052,550
-----------
Business Services -- 3.4%
AccuStaff, Inc.* 179,200 $ 3,785,600
ALCO Standard Corp. 62,600 3,231,725
DST Systems, Inc.* 73,700 2,312,338
Technology Solutions Co.* 38,800 1,610,200
-----------
$10,939,863
-----------
Chemicals -- 4.1%
Air Products & Chemicals, Inc. 81,900 $ 5,661,338
Betzdearborn, Inc. 11,700 684,450
Praxair, Inc. 154,200 7,112,475
-----------
$13,458,263
-----------
Computer Software -- Personal Computers -- 3.2%
Electronic Arts, Inc.* 79,400 $ 2,377,038
First Data Corp. 70,500 2,573,250
Microsoft Corp.* 67,200 5,552,400
-----------
$10,502,688
-----------
Computer Software -- Systems -- 6.3%
Adobe Systems, Inc. 56,600 $ 2,115,425
BMC Software, Inc.* 74,100 3,065,887
Cadence Design Systems, Inc.* 75,200 2,989,200
Computer Associates International, Inc. 42,700 2,124,325
Compuware Corp.* 22,200 1,112,775
Oracle Systems Corp.* 146,250 6,105,937
Sybase, Inc.* 43,400 724,238
Synopsys, Inc.* 49,200 2,275,500
-----------
$20,513,287
-----------
Consumer Goods and Services -- 9.9%
Colgate-Palmolive Co. 60,300 $ 5,562,675
Estee Lauder Cos., "A" 34,100 1,734,837
Gillette Co. 67,800 5,271,450
37
<PAGE>
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- continued
Consumer Goods and Services -- continued
Philip Morris Cos., Inc. 57,600 $ 6,487,200
Procter & Gamble Co. 51,700 5,557,750
Revlon, Inc., "A"* 48,100 1,436,988
Sherwin Williams Co. 51,800 2,900,800
Tyco International Ltd. 61,500 3,251,812
-----------
$32,203,512
-----------
Defense Electronics -- 0.7%
Loral Space & Communications Corp.* 128,400 $ 2,359,350
-----------
Electronics -- 1.1%
Analog Devices, Inc.* 43,600 $ 1,476,950
Lattice Semiconductor Corporation 13,200 607,200
Xilinx, Inc.* 44,100 1,623,431
-----------
$ 3,707,581
-----------
Entertainment -- 2.3%
Clear Channel Communications, Inc.* 18,100 $ 653,863
Hollywood Entertainment Corp. 37,700 697,450
Jacor Communications, Inc., "A"* 81,500 2,231,062
Showboat, Inc. 59,700 1,029,825
Viacom, Inc., "B"* 77,000 2,685,375
-----------
$ 7,297,575
-----------
Financial Institutions -- 2.0%
Advanta Corp., "B" 83,800 $ 3,425,325
Union Planters Corp. 80,610 3,143,790
-----------
$ 6,569,115
-----------
Food and Beverage Products -- 2.7%
Earthgrains Co. 36,200 $ 1,891,450
McCormick & Co., Inc. 79,300 1,868,506
PepsiCo, Inc. 57,800 1,690,650
Tyson Foods , Inc. 94,800 3,246,900
-----------
$ 8,697,506
-----------
Forest and Paper Products -- 1.8%
Kimberly-Clark Corp. 60,600 $ 5,772,150
-----------
Insurance -- 6.9%
Allstate Corp. 56,300 $ 3,258,362
Amerin Corp.* 31,400 808,550
Chubb Corp. 37,900 2,037,125
Cigna Corp. 38,800 5,301,050
Conseco, Inc. 27,100 1,727,625
Equitable of Iowa Cos 37,500 1,720,313
ITT Hartford Group, Inc. 41,400 2,794,500
PennCorp Financial Group, Inc. 129,500 4,662,000
-----------
$22,309,525
-----------
Medical and Health Products -- 3.4%
Pfizer, Inc. 29,600 $ 2,453,100
Pharmacia & Upjohn, Inc. 55,400 2,195,225
Rhone-Poulenc Rorer, Inc. 21,600 1,687,500
Uromed Corp. 165,000 1,608,750
Ventritex, Inc.* 111,000 2,733,375
Zoll Medical Corp. 21,000 225,750
-----------
$10,903,700
-----------
Medical and Health Technology and Services -- 4.6%
Coventry Corp.* 64,200 $ 594,853
Pacificare Health Systems, Inc., "A"* 30,100 2,445,625
Pacificare Health Systems, Inc., "B"* 22,800 1,943,700
Riscorp, Inc., "A" 23,900 86,638
St. Jude Medical, Inc.* 122,800 5,234,350
United Healthcare Corp. 100,100 4,504,500
-----------
$14,809,666
-----------
Issuer Shares Value
U.S. Stocks -- continued
Oils -- 2.6%
Barrett Resouces Corp.* 47,400 $ 2,020,425
Mobil Corp. 28,200 3,447,450
Newfield Exploration Co. 42,600 1,107,600
Transocean Offshore, Inc. 32,100 2,010,263
------------
$ 8,585,738
------------
Railroads -- 3.2%
Burlington Northern Santa Fe Railway Co. 34,600 $ 2,988,575
Conrail, Inc. 20,676 2,059,847
Wisconsin Central Transportation
Corp.* 135,500 5,369,187
------------
$ 10,417,609
------------
Restaurants and Lodging -- 3.5%
HFS, Inc.* 89,900 $ 5,371,525
Host Marriott Corp. 222,000 3,552,000
MGM Grand, Inc.* 59,900 2,089,013
Promus Hotel Corp.* 16,850 499,181
------------
$ 11,511,719
------------
Special Products and Services -- 0.9%
Stanley Works 101,400 $ 2,737,800
------------
Stores -- 3.3%
Ann Taylor Stores Corp.* 89,800 $ 1,571,500
CompUSA, Inc. 119,600 2,466,750
Gymboree Corp.* 83,600 1,912,350
Home Depot, Inc. 38,800 1,944,850
Lowes Co., Inc. 45,300 1,608,150
Staples, Inc.* 73,650 1,330,303
------------
$ 10,833,903
------------
Supermarkets -- 1.3%
Safeway, Inc.* 97,200 $ 4,155,300
------------
Telecommunications -- 4.2%
Ascend Communications , Inc.* 13,500 $ 838,687
Cabletron Systems, Inc.* 54,200 1,802,150
Cisco Systems, Inc.* 46,600 2,964,925
Glenayre Technologies, Inc.* 101,100 2,179,969
Lucent Technologies, Inc. 47,500 2,196,875
MCI Communications Corp. 115,100 3,762,331
------------
$ 13,744,937
------------
Utilities -- Gas -- 2.2%
Coastal Corp. 73,800 $ 3,606,975
PanEnergy Corp. 76,600 3,447,000
------------
$ 7,053,975
------------
Total U.S. Stocks $282,921,821
------------
Foreign Stocks -- 10.1%
Denmark -- 0.3%
ISS International Service System, "B"
(Commercial Services) 32,400 $ 852,849
------------
Finland -- 0.8%
Huhtamaki OY (Conglomerates) 45,300 $ 2,106,473
TT Tieto OY (Computer Software --
Systems) 7,100 599,985
------------
$ 2,706,458
------------
France -- 0.5%
Union des Assurances Federales S.A
(Insurance) 12,700 $ 1,567,297
------------
Germany -- 0.2%
Sap AG, Preferred (Computer Software
-- Systems) 3,800 $ 531,037
------------
38
<PAGE>
Stocks -- continued
Foreign Stocks -- continued
Issuer Shares Value
Greece -- 0.3%
Hellenic Telecom (Telecommunications) 52,100 $ 891,023
-------------
Hong Kong -- 2.1%
Giordano International Ltd. (Stores) 1,776,000 $ 1,515,593
Wharf Holdings Ltd. (Real Estate) 901,000 4,496,845
Wing Hang Bank Ltd. (Banks and Credit
Companies) 191,000 866,835
-------------
$ 6,879,273
-------------
Italy -- 0.6%
Telecom Italia S.p.A
(Telecommunications) 1,469,600 $ 2,095,625
-------------
Philippines -- 0.2%
Pilipino Telegraph & Telephone Corp.
(Telecommunications) 797,800 $ 675,973
-------------
South Korea -- 0.4%
Korea Mobile Telecom, ADR
(Telecommunications) 100,857 $ 1,298,534
-------------
Sweden -- 2.1%
Astra AB, Free Shares, "B"
(Pharmaceuticals) 90,700 $ 4,378,621
Enator AB (Computer Software --
Systems) 5,540 139,821
Enator AB (Computer Software --
Systems)* 33,000 844,974
Nobel Biocare AB (Medical and Health
Products) 77,250 1,360,235
-------------
$ 6,723,651
-------------
Switzerland -- 0.3%
Novartis AG (Pharmaceuticals)* 927 $ 1,061,688
-------------
United Kingdom -- 2.3%
British Petroleum PLC, ADR (Oils) 27,160 $ 3,839,745
Jarvis Hotels PLC (Restaurants and
Lodging)*+ 627,700 1,731,355
Kwik-Fit Holdings PLC (Retail) 418,000 1,557,556
Storehouse PLC (Retail) 91,900 406,990
-------------
$ 7,535,646
-------------
Total Foreign Stocks $ 32,819,054
-------------
Total Stocks
(Identified Cost, $283,393,336) $ 315,740,875
-------------
Short-Term Obligations -- 7.3%
Principal Amount
(000 Omitted)
Federal Home Loan Bank, due 1/02/97 $10,382 $ 10,380,486
Federal Home Loan Mortgage Corp.,
due 1/07/97 - 1/17/97 6,880 6,863,650
Federal National Mortgage Assn.,
due 1/14/97 6,580 6,566,931
-------------
Total Short-Term Obligations, at Amortized
Cost $ 23,811,067
-------------
Total Investments
(Identified Cost, $307,204,403) $ 339,551,942
Other Assets,
Less Liabilities -- (4.4)% (14,162,729)
-------------
Net Assets -- 100.0% $ 325,389,213
-------------
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
Total Return Series
Non-Convertible Bonds -- 34.7%
Principal Amount
Issuer (000 Omitted) Value
Aerospace -- 0.1%
Northrop Grumman Corp., 9.375s, 2024 $1,145 $ 1,265,809
-----------
Airlines -- 1.2%
Continental Airlines Pass-Thru Trust,
9.5s, 2013 $ 850 $ 955,188
Continental Airlines Pass-Thru Trust,
10.22s, 2014 2,000 2,342,019
Delta Air Lines, Inc., 8.5s, 2002 1,600 1,694,096
Delta Air Lines, Inc., 10.375s, 2022 1,625 2,045,664
Jet Equipment Trust, 9.41s, 2010## 1,000 1,153,850
Jet Equipment Trust, 8.64s, 2012## 972 1,061,924
Jet Equipment Trust, 11.44s, 2014## 1,200 1,422,288
Jet Equipment Trust, 10.69s, 2015## 1,000 1,216,910
Qantas Airways, Ltd., 7.5s, 2003## 1,405 1,436,922
United Airlines Pass-Thru Trust,
7.27s, 2013 1,500 1,452,465
United Airlines, Inc., 9.125s, 2012 800 893,344
-----------
$15,674,670
-----------
Banks and Credit Companies -- 1.8%
Advanta Capital Trust, 8.99s,
2026## $1,650 $ 1,652,558
Advanta Corp., 7.47s, 2001 1,500 1,525,860
BankAmerica Corp., 8s, 2026 2,125 2,154,113
BT Institutional Capital Trust, 8.09s, 2026 1,600 1,608,000
Capital One Bank, 6.75s, 2000 4,800 4,794,000
Capital One Financial Corp., 7.25s, 2003 1,500 1,481,250
First Chicago NBD Institutional
Capital, 7.95s, 2026## 850 835,125
First USA Capital Trust, 9.33s, 2027 2,500 2,497,425
MBNA Capital, 8.278s, 2026 1,700 1,706,375
Mellon Capital II, 7.995s, 2027 2,200 2,200,000
NationsBank Capital Trust, 7.83s, 2026 1,860 1,854,327
Peoples Bank of Bridgeport, 7.2s, 2006 500 488,830
State Street Institutional Capital,
7.94s, 2026 1,700 1,659,625
-----------
$24,457,488
-----------
Building -- 0.1%
Owens Corning Fiberglass Corp.,
8.875s, 2002 $ 800 $ 867,512
Owens Corning Fiberglass Corp., 9.9s,
2015## 800 882,000
-----------
$ 1,749,512
-----------
Business Machines -- 0.1%
International Business Machines Corp.,
7.125s, 2096 $1,400 $ 1,331,162
-----------
Business Services -- 0.4%
Loewen Group International, Inc.,
7.5s, 2001 $4,100 $ 4,105,125
Loewen Group International, Inc.,
7.75s, 2001## 1,800 1,831,500
-----------
$ 5,936,625
-----------
39
<PAGE>
Non-Convertible Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Cellular Telephones -- 0.1%
360 Communications, 7.5s, 2006 $ 800 $ 793,528
-----------
Construction Services -- 0.2%
Georgia Pacific Corp., 9.875s, 2021 $ 2,825 $ 3,157,813
-----------
Consumer Goods and Services -- 0.2%
Philip Morris Cos., Inc., 7.65s, 2008 $ 2,800 $ 2,859,556
-----------
Corporate Asset Backed -- 1.7%
AT&T Universal Card Master Trust,
5.6508s, 2003 $18,000 $17,994,240
BCF LLC, 7.75s, 2026## 797 779,518
Continental Airlines, Inc., 9.5s, 2001## 2,375 2,422,500
Merrill Lynch Mortgage Investors,
Inc., 8.1421s, 2022+ 514 432,081
Merrill Lynch Mortgage Investors,
Inc., 91-C, "B", 8.9s, 2011 347 366,340
-----------
$21,994,679
-----------
Entertainment -- 0.9%
Circus Circus Enterprises, Inc., 6.7s, 2096 $ 1,700 $ 1,671,984
Time Warner Entertainment, Inc., 8.375s, 2023 3,175 3,219,037
Time Warner, Inc., 7.45s, 1998 4,025 4,069,315
Time Warner, Inc., 7.95s, 2000 1,600 1,652,304
Time Warner, Inc., 9.15s, 2023 1,396 1,513,250
-----------
$12,125,890
-----------
Financial Institutions -- 2.1%
ABN Amro Bank, 7.3s, 2026 $ 3,200 $ 3,042,560
Alex Brown, Inc., 7.625s, 2005 1,300 1,326,325
Auburn Hills Trust, 12s, 2020 2,935 4,449,284
Contifinancial Corp., 8.375s, 2003 1,275 1,313,250
First Merchants Acceptance Corp., 9.5s, 2006 800 784,000
Humpuss Funding Corp., 7.72s, 2009## 800 789,704
Lehman Brothers, Inc., 7.5s, 2026 4,830 4,897,089
Lehman Brothers Holdings, Inc., 6.4s, 1999 3,000 2,984,400
Lehman Brothers Holdings, Inc.,
7.125s, 2003 1,600 1,598,768
Salton Sea Funding Corp., 7.37s, 2005 1,575 1,572,748
Salton Sea Funding Corp., 7.84s, 2010 1,575 1,583,615
Salton Sea Funding Corp., 8.3s, 2011 800 828,520
Tosco Corp., 7.625s, 2006 1,900 1,961,598
United Cos. Financial Corp., 7.7s, 2004 850 854,250
-----------
$27,986,111
-----------
Food and Beverage Products -- 0.5%
Nabisco, Inc., 7.55s, 2015 $ 3,345 $ 3,317,471
RJR Nabisco, Inc., 8.75s, 2004 1,000 1,009,260
RJR Nabisco, Inc., 8.75s, 2007 1,800 1,797,228
-----------
$ 6,123,959
-----------
Foreign - U.S. Dollar Denominated -- 2.0%
Canadian Pacific Forest Products Ltd.,
9.25s, 2002 $ 3,200 $ 3,251,136
City of Naples, 7.52s, 2006 1,415 1,459,318
Principal Amount
Issuer (000 Omitted) Value
Foreign -- U.S. Dollar Denominated -- continued
Crown Cork & Seal Finance PLC, 7s, 2006 $ 825 $ 817,872
Empresa Electric del Norts, 7.75s, 2006## 575 586,500
Enersis S.A., 6.9s, 2006 750 731,993
Fairfax Financial Holdings Ltd., 8.3s, 2026 1,500 1,562,400
Financiera Energetica Nacional
Colombia, 9.375s, 2006## 550 584,375
Gulf Canada Resources Ltd., 8.35s, 2006 1,400 1,440,250
Hidroelectrica Alicura, 8.375s, 1999## 2,200 2,178,000
Oleoducto Central S.A., 9.35s, 2005## 1,200 1,212,000
Petroliam Nasional Berhad, 7.625s, 2026## 1,600 1,612,912
Province of Quebec, Canada, 6.5s, 2006 938 905,020
Republic of Argentina, 9.25s, 2001 910 923,650
Republic of Colombia, 8.75s, 1999 1,000 1,045,000
Republic of Colombia, 8.66s, 2016## 600 630,000
Republic of Colombia, 8.7s, 2016 2,340 2,256,953
Republic of South Africa, 8.375s, 2006 3,100 3,099,938
Total Access Communication, 8.375s, 2006## 1,600 1,605,296
-----------
$25,902,613
-----------
Forest and Paper Products -- 0.5%
Boise Cascade Corp., 9.85s, 2002 $2,440 $ 2,759,323
Boise Cascade Corp., 7.35s, 2004 1,500 1,520,625
Boise Cascade Corp., 7.43s, 2005 1,000 1,015,000
Champion International Corp., 6.4s, 2026 1,600 1,527,504
-----------
$ 6,822,452
-----------
Insurance -- 1.6%
American Realty Corp., 7.45s, 2026## $1,600 $ 1,598,000
Equitable Life Assurance Society, 7.7s, 2015 3,800 3,798,404
Liberty Mutual Insurance Co., 7.875s, 2026## 800 802,792
Liberty Mutual Insurance Co., 8.2s, 2007## 4,007 4,255,194
Metropolitan Life Insurance Co., 7.7s, 2015## 1,600 1,603,984
Nationwide Mutual Life Insurance Co.,
7.5s, 2024## 3,200 2,982,464
New York Life Insurance Co., 7.5s, 2023 1,200 1,162,704
Travelers Capital, 7.75s, 2036 4,065 3,908,741
Travelers Group, Inc., 7.875s, 2025 1,075 1,122,827
-----------
$21,235,110
-----------
Oil Services -- 0.1%
Transcontinental Gas Pipe Line, 7.25s, 2026 $1,500 $ 1,477,500
-----------
Oils -- 0.8%
CITGO Petroleum, 7.875s, 2006 $ 800 $ 815,680
40
<PAGE>
Non-Convertible Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Oils -- continued
Enserch Exploration, Inc., 7.54s, 2009## $ 1,500 $ 1,477,500
Husky Oil Ltd., 7.125s, 2006 1,600 1,600,064
Mitchell Energy & Development Corp.,
5.1s, 1997 1,750 1,747,935
Mitchell Energy & Development Corp.,
6.75s, 2004 800 747,120
Oryx Energy Co., 10s, 2001 900 987,921
Oryx Energy Co., 8s, 2003 1,000 1,011,750
Oryx Energy Co., 8.375s, 2004 2,300 2,376,774
------------
$ 10,764,744
------------
Real Estate -- 0.2%
Taubman Realty Group Ltd., 8s, 2001 $ 2,300 $ 2,373,899
------------
Special Products and Services -- 0.2%
Mark IV Industries, Inc., 7.75s, 2006 $ 2,100 $ 2,063,250
Stewart Enterprises, Inc., 6.7s, 2003 1,225 1,212,983
------------
$ 3,276,233
------------
Stores -- 0.1%
Price/Costco, Inc., 7.125s, 2005 $ 1,000 $ 1,000,120
------------
Telecommunications -- 1.8%
American Portable Telecom, Inc., 0s,
2006## $ 3,850 $ 1,733,116
Continental Cablevision, Inc., 8.3s, 2006 1,350 1,452,938
Tele-Communications, Inc., 7.375s, 2000 6,790 6,753,470
Tele-Communications, Inc., 7.38s, 2001 1,500 1,514,550
Tele-Communications, Inc., 6.185s, 2003 2,730 2,716,350
Tele-Communications, Inc., 7.49s, 2003 3,400 3,431,586
Tele-Communications, Inc., 10.125s, 2022 5,000 5,490,100
Viacom, Inc., 7.625s, 2016 1,200 1,102,500
------------
$ 24,194,610
------------
U.S. Government Agencies
Federal National Mortgage Association -- 4.7%
FNMA, 7s, 2026 $ 5,957 $ 5,824,443
FNMA, 7.5s, 2010 - 2011 5,511 5,586,930
FNMA, 8s, 2026 50,498 51,445,261
------------
$ 62,856,634
------------
U.S. Government Guaranteed
U.S. Treasury Obligations -- 9.2%
U.S. Treasury Notes, 9.125s, 1999 $17,950 $ 19,181,191
U.S. Treasury Notes, 6.5s, 2001 5,200 5,256,888
U.S. Treasury Notes, 6.625s, 2001 9,600 9,754,464
U.S. Treasury Notes, 7.5s, 2001 24,900 26,211,234
U.S. Treasury Notes, 6.5s, 2006 13,762 13,837,278
U.S. Treasury Bonds, 12s, 2005 7,980 10,835,324
U.S. Treasury Bonds, 12s, 2013 5,697 8,149,388
U.S. Treasury Bonds, 6.5s, 2026 2,050 2,011,891
U.S. Treasury Bonds, 6.75s, 2026 27,054 27,256,905
------------
$122,494,563
Utilities -- Electric -- 3.4% ------------
Arkansas Power & Light Co., 8.75s, 2026 $ 300 $ 309,060
Principal Amount
Issuer (000 Omitted) Value
Utilities -- Electric -- continued
Central Maine Power Co., 7.45s, 1999 $ 800 $ 796,048
Cleveland Electric Illuminating Co.,
9.25s, 1999 4,000 4,175,840
Cleveland Electric Illuminating Co.,
9.375s, 2017 2,700 2,769,147
Cleveland Electric Illuminating Co.,
9s, 2023 1,550 1,554,154
Coastal Corp., 7.75s, 2035 2,600 2,646,982
Edison Mission Energy Funding Corp.,
7.33s, 2008 ## 475 481,522
El Paso Electric Co., 8.9s, 2006 2,175 2,267,742
First PV Funding Corp., 10.3s, 2014 1,120 1,192,800
First PV Funding Corp., 10.15s, 2016 1,448 1,538,500
Long Island Lighting Co., 8.75s, 1997 2,000 2,005,220
Long Island Lighting Co., 7.5s, 2007 1,000 931,300
Long Island Lighting Co., 8.9s, 2019 4,370 4,458,493
Long Island Lighting Co., 9s, 2022 3,370 3,546,925
Long Island Lighting Co., 8.2s, 2023 400 395,964
Long Island Lighting Co., 9.625s, 2024 2,950 3,137,355
Louisiana Power & Light Co., 10.67s, 2017 400 428,120
Louisiana Power & Light Co., 10.67s, 2017 1,075 1,150,540
Louisiana Power & Light Co., 8.75s, 2026 325 327,031
Midland Cogeneration Venture Corp.,
10.33s, 2002 648 688,975
Midland Funding Corp. II, "A", 11.75s, 2005 1,750 1,937,530
Montana Power Co., 7.875s, 2026 200 201,750
Niagara Mohawk Power Corp., 8s, 2004 2,200 2,113,496
Pacificorp Holdings, 7.2s, 2006## 2,850 2,835,750
System Energy Resources, 7.38s, 2000 1,800 1,794,690
Texas & New Mexico Power Co., 12.5s, 1999 1,400 1,520,890
------------
$ 45,205,824
------------
Utilities -- Gas -- 0.7%
California Energy, Inc., 10.25s, 2004 $1,900 $ 2,002,125
Louis Dreyfus Natural Gas Corp.,
9.25s, 2004 850 893,886
NGC Corp., 7.625s, 2026 875 888,081
Ras Laffan Liquefied Natural Gas,
8.294s, 2014## 1,350 1,353,375
UtiliCorp. United, Inc., 8.45s, 1999 3,790 3,964,833
------------
$ 9,102,300
------------
Total Non-Convertible Bonds
(Identified Cost, $460,504,152) $462,163,404
------------
41
<PAGE>
Convertible Bonds -- 0.7%
Principal Amount
Issuer (000 Omitted) Value
Advertising -- 0.1%
Omnicom Group, Inc., 4.25s, 2007## $ 640 $ 656,800
-----------
Electronics -- 0.2%
ADT Operations, Inc., 0s, 2010 $4,385 $ 2,850,250
-----------
Insurance -- 0.1%
Equitable Cos., Inc., 6.125s, 2024 $1,300 $ 1,503,125
-----------
Medical and Health Technology and Services -- 0.1%
Ciba-Geigy AG, 6.25s, 2016## $ 500 $ 504,375
Roche Holdings, Inc., 0s, 2010## 3,127 1,414,968
-----------
$ 1,919,343
-----------
Special Products and Services -- 0.1%
Cemex, 4.25s, 1997## $2,000 $ 1,932,500
-----------
Steel -- 0.1%
USX-Marathon Group, 0s, 2005 $2,400 $ 1,122,000
-----------
Total Convertible Bonds
(Identified Cost, $9,051,997) $ 9,984,018
-----------
U.S. Stocks -- continued
U.S. Stocks -- 50.0%
Shares
Aerospace -- 3.7%
Allied Signal, Inc. 163,500 $10,954,500
General Dynamics Corp. 63,450 4,473,225
Lockheed Martin Corp. 47,000 4,300,500
Raytheon Co. 189,400 9,114,875
United Technologies Corp. 308,800 20,380,800
-----------
$49,223,900
-----------
Apparel and Textiles -- 0.5%
VF Corp. 97,000 $ 6,547,500
-----------
Automotive -- 1.9%
Dana Corp. 147,000 $ 4,795,875
Ford Motor Co. 198,289 6,320,462
General Motors Corp. 44,236 2,466,157
Goodrich (B.F.) Co. 286,100 11,587,050
-----------
$25,169,544
-----------
Banks and Credit Companies -- 5.5%
Bank of Boston Corp. 123,800 $ 7,954,150
Bank of New York, Inc. 263,760 8,901,900
Chase Manhattan Corp. 159,032 14,193,606
Comerica, Inc. 22,000 1,152,250
Fleet Financial Group, Inc. 173,000 8,628,375
National City Corp. 234,200 10,509,725
NationsBank Corp. 121,000 11,827,750
Northern Trust Corp. 57,000 2,066,250
Norwest Corp. 142,000 6,177,000
Washington Mutual, Inc. 38,708 1,676,540
-----------
$73,087,546
-----------
Building
Newport News Shipbuilding Inc. 7,200 $ 108,000
-----------
Business Machines -- 0.9%
Digital Equipment Corp. 150,500 $ 5,474,438
International Business Machines
Corp 39,500 5,964,500
-----------
$11,438,938
-----------
Cellular Telephones -- 0.2%
Telephone & Data Systems, Inc. 72,900 $ 2,642,625
-----------
Chemicals -- 2.2%
Air Products & Chemicals, Inc. 20,000 $ 1,382,500
Dow Chemical Co. 56,000 4,389,000
du Pont (E. I.) de Nemours & Co.,
Inc 87,000 8,210,625
Issuer Shares Value
Chemicals -- continued
Praxair, Inc. 89,200 $ 4,114,350
Rohm & Haas Co. 95,400 7,787,025
Witco Corp. 127,000 3,873,500
-----------
$29,757,000
-----------
Consumer Goods and Services -- 3.4%
American Brands, Inc. 102,700 $ 5,096,488
Colgate-Palmolive Co. 69,000 6,365,250
Dow-Corning LP 42,500 2,704,063
Olin Corp. 112,000 4,214,000
Philip Morris Cos., Inc. 157,000 17,682,125
Rubbermaid, Inc. 119,300 2,714,075
Sherwin Williams Co. 117,400 6,574,400
-----------
$45,350,401
-----------
Electrical Equipment -- 1.8%
Cooper Industries, Inc. 84,000 $ 3,538,500
General Electric Co. 158,000 15,622,250
Honeywell, Inc. 66,400 4,365,800
-----------
$23,526,550
-----------
Electronics -- 0.1%
Analog Devices, Inc. 44,900 $ 1,520,988
-----------
Financial Institutions -- 1.9%
American Express Co. 163,000 $ 9,209,500
Federal Home Loan Mortgage Corp. 64,800 7,136,100
Southern National Corp. 264,000 9,570,000
-----------
$25,915,600
-----------
Food and Beverage Products -- 1.3%
Anheuser Busch Cos., Inc. 47,000 $ 1,880,000
Dimon, Inc. 124,100 2,869,813
General Mills, Inc. 122,000 7,731,750
McCormick & Co., Inc. 77,500 1,826,094
PepsiCo, Inc. 98,600 2,884,050
-----------
$17,191,707
-----------
Forest and Paper Products -- 0.3%
Weyerhaeuser Co. 95,000 $ 4,500,625
-----------
Insurance -- 3.5%
Allstate Corp. 148,100 $ 8,571,288
Chubb Corp. 96,700 5,197,625
Cigna Corp. 72,500 9,905,313
St. Paul Cos., Inc. 134,000 7,855,750
Torchmark Corp. 155,000 7,827,500
Travelers Group, Inc. 149,236 6,771,584
-----------
$46,129,060
-----------
Machinery -- 0.9%
Deere & Co., Inc. 213,500 $ 8,673,438
York International Corp. 69,300 3,872,138
-----------
$12,545,576
-----------
Medical and Health Products -- 1.9%
American Home Products Corp. 146,400 $ 8,582,700
Baxter International, Inc. 100,700 4,128,700
Pharmacia & Upjohn, Inc. 153,000 6,062,625
Rhone-Poulenc Rorer, Inc. 84,800 6,625,000
-----------
$25,399,025
-----------
Medical and Health Technology and Services -- 0.9%
Columbia Healthcare Corp. 108,000 $ 4,401,000
St. Jude Medical, Inc. 51,800 2,207,975
United Healthcare Corp. 133,400 6,003,000
-----------
$12,611,975
-----------
Metals and Minerals -- 0.6%
Aluminum Cos. of America 99,000 $ 6,311,250
42
<PAGE>
U.S. Stocks -- continued
Issuer Shares Value
Metals and Minerals -- continued
Phelps Dodge Corp. 26,800 $ 1,809,000
-----------
$ 8,120,250
-----------
Oil Services -- 0.8%
Schlumberger Ltd. 87,000 $ 8,689,125
Tenneco, Inc. 36,000 1,624,500
-----------
$10,313,625
-----------
Oils -- 4.8%
Amoco Corp. 107,000 $ 8,613,500
Atlantic Richfield Co. 59,500 7,883,750
Exxon Corp. 94,000 9,212,000
Mobil Corp. 71,800 8,777,550
Occidental Petroleum Corp. 343,000 8,017,625
Sun Co., Inc. 25,558 622,976
Texaco, Inc. 86,000 8,438,750
Ultramar Diamond Shamrock Corp. 63,700 2,014,513
USX-Marathon Group 437,000 10,433,375
-----------
$64,014,039
-----------
Photographic Products -- 0.9%
Eastman Kodak Co. 149,000 $11,957,250
-----------
Pollution Control -- 0.5%
Browning-Ferris Industries, Inc. 126,800 $ 3,328,500
WMX Technologies, Inc. 109,000 3,556,125
-----------
$ 6,884,625
-----------
Railroads -- 1.4%
Burlington Northern Santa Fe 98,000 $ 8,464,750
CSX Corp. 75,300 3,181,425
Illinois Central Corp. 237,500 7,600,000
-----------
$19,246,175
-----------
Real Estate -- 1.0%
Arden Realty, Inc. 58,200 $ 1,615,050
Hospitality Properties Trust 175,000 5,075,000
Meditrust Corp. 108,200 4,328,000
National Health Investors, Inc. 51,600 1,954,350
-----------
$12,972,400
-----------
Special Products and Services -- 0.4%
Stanley Works 188,300 $ 5,084,100
-----------
Stores -- 1.2%
May Department Stores Co. 91,000 $ 4,254,250
Rite Aid Corp. 39,400 1,566,150
Sears, Roebuck & Co. 153,000 7,057,125
Wal-Mart Stores, Inc. 142,000 3,248,250
-----------
$16,125,775
-----------
Telecommunications
Tele-Communications, Inc. 20,625 $ 589,102
-----------
Utilities -- Electric -- 3.0%
Allegheny Power Systems, Inc. 93,600 $ 2,843,100
Carolina Power & Light Co. 140,000 5,110,000
CMS Energy Corp. 85,000 2,858,125
Coastal Corp. 165,000 8,064,375
DPL, Inc. 72,000 1,764,000
FPL Group, Inc. 159,000 7,314,000
Peco Energy Co. 89,100 2,249,775
Pinnacle West Capital Corp. 120,000 3,810,000
Portland General Corp. 88,700 3,725,400
Texas Utilities Co. 55,500 2,261,625
-----------
$40,000,400
-----------
Utilities -- Gas -- 2.0%
Eastern Enterprises 91,700 $ 3,243,888
El Paso Natural Gas Co. 3,348 169,074
Enron Corp. 30,000 720,000
Pacific Enterprises 80,000 2,430,000
Issuer Shares Value
U.S. Stocks -- continued
Utilities -- Gas -- continued
PanEnergy Corp. 187,000 $ 8,415,000
Sonat, Inc. 70,000 3,605,000
UGI Corp. 75,000 1,678,125
Williams Cos., Inc. 187,500 7,031,250
------------
$ 27,292,337
------------
Utilities -- Telephone -- 2.5%
Ameritech Corp. 76,800 $ 4,656,000
AT&T Corp. 33,200 1,444,200
BellSouth Corp. 160,100 6,464,038
GTE Corp. 200,600 9,127,300
MCI Communications Corp. 360,000 11,767,500
------------
$ 33,459,038
------------
Total U.S. Stocks $668,725,676
------------
Foreign Stocks -- 5.1%
Canada -- 0.1%
Canadian National Railway Co. (Railroads) 28,100 $ 1,067,800
------------
Germany -- 0.4%
Henkel Kgaa, Preferred (Consumer Goods and
Services) 96,200 $ 4,833,448
------------
Netherlands -- 0.9%
Royal Dutch Petroleum Co., ADR (Oils) 71,100 $ 12,140,325
------------
New Zealand
Lion Nathan Ltd. (Food and Beverage Products) 235,500 $ 564,031
------------
Spain -- 0.3%
Repsol S.A., ADR (Oils) 122,000 $ 4,651,250
------------
Sweden -- 0.5%
Astra AB, "A", ADR (Pharmaceuticals) 91,200 $ 4,468,800
Volvo AB, ADR (Automotive) 111,000 2,414,250
------------
$ 6,883,050
------------
Switzerland -- 0.8%
Novartis AG (Pharmaceuticals) 9,533 $ 10,922,109
------------
United Kingdom -- 2.1%
British Petroleum PLC, ADR (Oils) 114,337 $ 16,164,393
SmithKline Beecham PLC, ADR (Medical and Health
Products) 165,000 11,220,000
------------
$ 27,384,393
------------
Total Foreign Stocks $ 68,446,406
------------
Total Stocks
(Identified Cost, $584,145,577) $737,172,082
------------
Preferred Stocks -- 0.4%
Financial Institutions
Salomon, Inc. 6,800 $ 409,700
------------
Oils -- 0.1%
USX-Marathon Capital, LLC, 8.75s 63,100 $ 1,601,163
------------
Utilities - Electric -- 0.2%
Long Island Lighting Co., 7.95s 80,000 $ 2,030,000
------------
Utilities - Gas -- 0.1%
El Paso Tennessee Gas Pipeline Co., 8.25s 16,000 $ 818,000
------------
Total Preferred Stock
(Identified Cost, $4,712,200) $ 4,858,863
------------
Convertible Preferred Stocks - 1.8%
Agricultural Products - 0.4%
Case Corp., $4.50 35,300 $ 4,686,075
------------
43
<PAGE>
Convertible Preferred Stocks -- continued
Issuer Shares Value
Defense Electronics - 0.3%
Loral Space & Communications## 68,600 $ 3,875,900
--------------
Financial Institutions - 0.1%
Finova Finance Trust 21,200 $ 1,113,000
Tosco Financing Trust## 6,000 308,250
--------------
$ 1,421,250
--------------
Medical and Health Technology and Services - 0.1%
Service Corp. International Finance, LLC 15,000 $ 1,411,875
--------------
Metals and Minerals - 0.2%
Timet Capital Trust I## 43,600 $ 2,354,400
--------------
Precious Metals and Minerals
Freeport-McMoRan Copper & Gold 25,000 $ 693,750
--------------
Real Estate Investment Trusts
Security Capital Pacific Trust 25,000 $ 765,625
--------------
Restaurants and Lodging - 0.5%
Host Marriott Financial Trust## 116,700 $ 6,199,688
--------------
Utilities - Gas - 0.2%
Unocal Corp. 47,900 $ 2,754,250
--------------
Total Convertible Preferred Stocks
(Identified Cost, $21,787,479) $ 24,162,813
--------------
Short-Term Obligations -- 6.9%
Principal Amount
(000 Omitted)
Federal Farm Credit Bank,
due 1/07/97 - 1/29/97 $ 6,260 $ 6,254,404
Federal Home Loan Bank,
due 1/2/97 - 2/14/97 29,545 29,471,854
Federal Home Loan Mortgage Corp.,
due 1/6/97 - 2/13/97 38,900 38,755,170
Federal National Mortgage Assn.,
due 1/14/97 - 2/14/97 16,940 16,880,212
--------------
Total Short-Term Obligations,
at Amortized Cost $ 91,361,640
--------------
Total Investments
(Identified Cost $1,171,563,058) $1,329,702,820
Other Assets,
Less Liabilities -- 0.4% 5,319,343
--------------
Net Assets -- 100.0% $1,335,022,163
==============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
Utilities Series
Stocks -- 79.0%
Issuer Shares Value
Foreign Stocks -- 18.4%
Argentina -- 1.0%
Central Costanera, ADR (Utilities --
Electric)## 22,100 $ 679,575
-----------
Brazil -- 1.9%
Centrais Eletricas Brasileiras, ADR,
(Utilities -- Electric) 27,000 $ 499,500
Telecomunicacoes Brasileiras S.A., ADR,
(Telecommunications) 11,100 851,925
-----------
$ 1,351,425
-----------
Canada -- 1.1%
TransCanada Pipelines Ltd., (Oils) 22,000 $ 385,000
BCE, Inc., (Telecommunications) 8,000 382,000
-----------
$ 767,000
-----------
Chile -- 2.0%
Chilectra S.A., ADR, (Utilities --
Electric) 15,000 $ 798,750
Chilgener S.A., ADR, (Utilities --
Electric) 17,000 354,875
Empresa Nacional de Electricidad, ADR,
(Utilities -- Electric) 14,700 227,850
-----------
$ 1,381,475
-----------
Italy -- 1.2%
Telecom Italia S.p.A.,
(Telecommunications) 596,100 $ 850,029
-----------
Peru -- 2.0%
CPT Telefonica del Peru S.A., "B",
(Utilities -- Telephone) 139,200 $ 259,997
Telefonica del Peru S.A., ADR,
(Telecommunications) 61,250 1,156,094
-----------
$ 1,416,091
-----------
Philippines -- 0.3%
Pilipino Telegraph & Telephone Corp.,
(Telecommunications) 255,000 $ 216,060
-----------
Portugal -- 1.1%
Portugal Telecom S.A.,
(Telecommunications) 13,200 $ 376,413
Portugal Telecom S.A., ADR,
(Telecommunications) 14,900 420,925
-----------
$ 797,338
-----------
South Korea -- 1.0%
Korea Mobile Telecom, ADR,
(Telecommunications) 54,899 $ 706,825
-----------
Spain -- 2.4%
Iberdrola S.A., (Telecommunications) 46,000 $ 651,729
Empresa Nacional de Electricidad, ADR,
(Utilities -- Electric) 10,500 735,000
Telefonica de Espana S.A., ADR,
(Utilities -- Telephone) 4,600 318,550
-----------
$ 1,705,279
-----------
United Kingdom -- 4.4%
National Grid Group, (Utilities --
Electric) 195,000 $ 651,444
National Power, (Utilities -- Electric) 87,300 729,865
PowerGen PLC, (Utilities -- Electric) 179,000 1,754,111
-----------
$ 3,135,420
-----------
Total Foreign Stocks $13,006,517
-----------
44
<PAGE>
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- 60.6%
Business Services -- 1.6%
Storage Trust Realty 41,000 $ 1,107,000
-----------
Cellular Telephones -- 1.1%
Telephone & Data Systems, Inc. 21,000 $ 761,250
-----------
Consumer Goods and Services -- 1.4%
Philip Morris Cos., Inc. 8,800 $ 991,100
-----------
Oils -- 1.2%
Noble Affiliates, Inc. 7,000 $ 335,125
Union Pacific Resources Group, Inc. 18,000 526,500
-----------
$ 861,625
-----------
Real Estate Investment Trusts -- 5.0%
Brandywine Realty Trust 39,900 $ 778,050
First Industrial Realty Trust, Inc. 5,900 179,213
Hospitality Properties Trust 28,850 836,650
National Health Investors, Inc. 15,600 590,850
Oasis Residential, Inc. 22,000 500,500
Prentiss Properties Trust* 25,600 640,000
-----------
$ 3,525,263
-----------
Restaurants and Lodging -- 3.9%
American General Hospitality Corp. 40,700 $ 966,625
Boykin Lodging Co.* 23,700 568,800
Innkeepers USA Trust 50,900 706,237
Winston Hotels, Inc. 39,100 532,738
-----------
$ 2,774,400
-----------
Special Products and Services -- 0.9%
Shurgard Storage Centers Inc. 6,000 $ 177,750
Sovran Self Storage, Inc. 15,000 468,750
-----------
$ 646,500
-----------
Telecommunications -- 3.1%
ICG Communications, Inc.* 36,000 $ 634,500
MFS Communications Co., Inc.* 28,300 1,542,350
-----------
$ 2,176,850
-----------
Utilities -- Electric -- 21.9%
Allegheny Power Systems, Inc. 14,500 $ 440,438
Boston Edison Co. 31,300 841,187
Cinergy Corp. 22,016 734,784
CMS Energy Corp. 45,700 1,536,662
Edison International 36,300 721,463
FPL Group, Inc. 9,500 437,000
GPU, Inc. 35,300 1,186,962
Illinova Corp. 43,950 1,208,625
Nipsco Industries, Inc. 18,100 717,213
Pacific Gas & Electric Co. 27,800 583,800
Pinnacle West Capital Corp. 20,850 661,988
Portland General Corp. 23,800 999,600
Public Service Company of Colorado 20,300 789,162
Public Service Company of New Mexico* 89,800 1,762,325
Sierra Pacific Resources 71,100 2,044,125
Texas Utilities Co. 11,300 460,475
Unicom Corp. 13,000 352,625
-----------
$15,478,434
-----------
Utilities -- Gas -- 12.6%
Atmos Energy Corp. 6,000 $ 143,250
Coastal Corp. 13,100 640,262
Columbia Gas Systems, Inc. 17,600 1,119,800
El Paso Natural Gas Co. 15,200 767,600
Energen Corp. 4,500 136,125
KN Energy, Inc. 23,000 902,750
Issuer Shares Value
U.S. Stocks -- continued
Utilities -- Gas -- continued
PanEnergy Corp. 27,400 $ 1,233,000
Sonat, Inc. 13,000 669,500
Tejas Gas Corp.* 6,000 285,750
Utilicorp United, Inc. 33,700 909,900
Westcoast Energy, Inc. 26,900 450,575
Western Gas Resources, Inc. 41,800 804,650
Williams Cos., Inc. 22,950 860,625
-----------
$ 8,923,787
-----------
Utilities -- Telephone -- 7.9%
BellSouth Corp. 7,900 $ 318,963
Frontier Corp. 17,100 386,887
GTE Corp. 28,500 1,296,750
MCI Communications Corp. 46,000 1,503,625
NYNEX Corp. 16,000 770,000
Pacific Telesis Group 25,100 922,425
SBC Communications, Inc. 7,400 382,950
-----------
$ 5,581,600
-----------
Total U.S. Stocks $42,827,809
-----------
Total Common Stocks
(Identified Cost, $48,966,770) $55,834,326
-----------
Convertible Preferred Stocks -- 0.3%
Argentina
Compania Inversiones Telephone, 7%,
(Utilities -- Telephone)##
(Identified Cost, $202,450) 3,800 $ 197,600
-----------
Non-Convertible Bonds -- 18.0%
Principal Amount
(000 Omitted)
Airlines -- 0.4%
Delta Air Lines, Inc., 8.5s, 2002 $ 250 $ 264,703
-----------
Business Services -- 0.3%
Loewen Group International, Inc.,
7.75s, 2001## $ 250 $ 254,375
-----------
Foreign -- U.S. Dollar Denominated -- 1.2%
Empresa Electric Del Norte, 7.75s, 2006## $ 300 $ 306,000
Empresa Electric Guacolda S.A., 7.6s, 2001## 250 253,443
Enersis S.A., 6.9s, 2006 250 243,997
Hidroelectrica Alicura, 8.375s, 1999## 25 24,750
-----------
$ 828,190
-----------
Forest and Paper Products -- 0.3%
Boise Cascade Co., 7.43s, 2005 $ 225 $ 228,375
-----------
Oils -- 1.8%
Husky Oil Ltd., 7.125s, 2006 $ 500 $ 500,020
Tosco Corp., 7.625s, 2006 750 774,315
-----------
$ 1,274,335
-----------
Telecommunications -- 0.4%
Continental Cablevision, Inc., 8.3s, 2006 $ 250 $ 269,062
-----------
U.S. Treasury Obligations -- 9.5%
U.S. Treasury Notes, 9.125s, 1999 $ 900 $ 961,731
U.S. Treasury Notes, 7.5s, 2001 1,615 1,700,046
U.S. Treasury Notes, 7.875s, 2004 1,500 1,636,875
U.S. Treasury Notes, 6.5s, 2006 400 402,188
U.S. Treasury Notes, 7s, 2006 100 103,891
45
<PAGE>
Non-Convertible Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
U.S. Treasury Obligations -- continued
U.S. Treasury Bonds, 12s, 2005 $180 $ 244,406
U.S. Treasury Bonds, 12s, 2013 830 1,187,290
U.S. Treasury Bonds, 6.75s, 2026 474 477,555
-----------
$ 6,713,982
-----------
Utilities -- Electric -- 3.4%
Arkansas Power & Light Co., 8.75s, 2026 $250 $ 257,550
Coastal Corp., 7.75s, 2035 250 254,517
First PV Funding Corp., 10.3s, 2014 224 238,560
First PV Funding Corp., 10.15s, 2016 270 286,875
Long Island Lighting Co., 9s, 2022 250 263,125
Louisiana Power & Light Co., 8.75s, 2026 125 125,781
Montana Power Co., 7.875s, 2026 250 252,188
Oryx Energy Co., 10s, 2001 250 274,422
System Energy Resources, 7.38s, 2000 250 249,263
Texas & New Mexico Power Co., 12.5s, 1999 50 54,318
UtiliCorp. United, Inc., 8.45s, 1999 100 104,613
-----------
$ 2,361,212
-----------
Utilities -- Gas -- 0.7%
Louis Dreyfus Natural Gas Corp.,
9.25s, 2004 $250 $ 262,907
Transcontinental Gas Pipe Line,
7.25s, 2026 250 246,250
-----------
$ 509,157
-----------
Total Non-Convertible Bonds
(Identified Cost, $13,045,365) $12,703,391
-----------
Short-Term Obligation -- 0.3%
Ford Motor Credit Corp., due
1/2/97, at Amortized Cost $230 $ 229,955
-----------
Total Investments
(Identified Cost, $62,444,540) $68,965,272
Other Assets,
Less Liabilities -- 2.4% 1,714,906
-----------
Net Assets -- 100.0% $70,680,178
===========
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
Value Series
Stocks -- 75.0%
Issuer Shares Value
U.S. Stocks -- 66.3%
Aerospace -- 3.0%
AlliedSignal, Inc. 2,000 $134,000
B.E. Aerospace, Inc.* 11,100 301,087
Raytheon Co. 1,500 72,188
--------
$507,275
--------
Advertising -- 0.8%
Outdoor Systems, Inc. 4,550 $127,969
--------
Agricultural Products -- 1.4%
AGCO Corp. 4,500 $128,813
Case Corp. 1,800 98,100
--------
$226,913
--------
Airlines
Midwest Express Holdings, Inc. 200 $ 7,200
--------
Automotive -- 2.3%
Ford Motor Co. 4,400 $140,250
Goodrich (B.F.) Co. 3,500 141,750
Harvard Industries, Inc., "B"* 22,800 102,600
--------
$384,600
--------
Banks and Credit Companies -- 1.3%
Wells Fargo & Co. 800 $215,800
--------
Building -- 0.6%
Newport News Shipbuilding Inc. 7,100 $106,500
--------
Business Machines -- 0.8%
Sun Microsystems, Inc.* 4,900 $125,869
--------
Business Services -- 3.2%
ADT Ltd.* 15,700 $359,137
ALCO Standard Corp. 3,300 170,362
Sabre Group Holding, Inc., "A"* 100 2,788
--------
$532,287
--------
Cellular Telephones -- 0.7%
Telephone & Data Systems, Inc. 3,200 $116,000
--------
Chemicals -- 1.2%
Betzdearborn, Inc. 300 $ 17,550
Dexter Corp. 4,500 143,438
NL Industries, Inc. 3,600 39,150
--------
$200,138
--------
Computer Software -- Systems -- 2.6%
Adobe Systems, Inc. 2,600 $ 97,175
Cerner Corp. 4,800 74,400
Sybase, Inc.* 15,600 260,325
--------
$431,900
--------
Consumer Goods and Services -- 3.3%
Philip Morris Cos., Inc. 1,620 $182,452
Tyco International Ltd. 6,200 327,825
UST, Inc. 1,200 38,850
--------
$549,127
--------
Containers -- 0.3%
Stone Container Corp. 3,800 $ 56,525
--------
Defense Electronics -- 0.1%
Loral Space & Communications Corp.* 900 $ 16,538
--------
Electrical Equipment -- 0.2%
Honeywell, Inc. 200 $ 13,150
Rofin-Sinar Technologies Inc. 2,000 23,500
--------
$ 36,650
--------
Electronics -- 2.4%
Analog Devices, Inc.* 1,300 $ 44,037
Atmel Corp.* 5,400 178,875
Intel Corp. 900 117,844
46
<PAGE>
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- continued
Electronics -- continued
Kulicke & Soffa Industries Inc. 1,200 $ 22,800
LTX Corp. 6,200 36,425
--------
$399,981
--------
Entertainment -- 4.6%
American Radio Systems Corp., "A"* 3,700 $100,825
Casino America, Inc. 5,200 16,575
Central European Media Enterprises Ltd. 4,500 142,875
Chancellor Broadcast Corp., "A"* 2,100 49,875
Cox Radio, Inc., "A"* 1,500 26,250
EZ Communications, Inc., "A" 2,000 73,250
Golden Bear Golf, Inc.* 300 3,375
Harrah's Entertainment, Inc.* 7,900 157,012
Harveys Casino Resorts 1,300 21,938
LIN Television Corp.* 3,400 143,650
Showboat, Inc. 1,700 29,325
Univision Communications, Inc., "A"* 100 3,700
--------
$768,650
--------
Financial Institutions -- 3.2%
Beneficial Corp. 2,500 $158,438
Federal Home Loan Mortgage Corp. 2,100 231,262
Union Planters Corp. 3,600 140,400
--------
$530,100
--------
Food and Beverage Products -- 0.9%
Earthgrains Co. 600 $ 31,350
Interstate Bakeries Corp. 2,400 117,900
--------
$149,250
--------
Forest and Paper Products -- 1.1%
Kimberly-Clark Corp. 2,000 $190,500
--------
Insurance -- 3.5%
Chubb Corp. 2,300 $123,625
Cigna Corp. 700 95,637
ITT Hartford Group, Inc. 1,900 128,250
PennCorp Financial Group, Inc. 6,400 230,400
--------
$577,912
--------
Machinery -- 0.7%
Greenfield Industries Inc. 500 $ 15,313
Stewart & Stevenson Services, Inc. 3,700 107,762
--------
$123,075
--------
Medical and Health Products -- 2.4%
Lilly (Eli) & Co. 400 $ 29,200
Pharmacia & Upjohn, Inc. 4,200 166,425
Rhone-Poulenc Rorer, Inc. 2,200 171,875
Uromed Corp. 3,400 33,150
--------
$400,650
--------
Medical and Health Technology and Services -- 2.8%
Beverly Enterprises, Inc. 1,000 $ 12,750
Pacificare Health Systems, Inc., "A"* 800 65,000
Regency Health Services, Inc. 3,500 33,687
St. Jude Medical, Inc.* 5,600 238,700
United Healthcare Corp. 2,700 121,500
--------
$471,637
--------
Oil Services -- 0.3%
Tidewater, Inc. 1,000 $ 45,250
--------
Oils -- 2.2%
Atlantic Richfield Co. 200 $ 26,500
Occidental Petroleum Corp. 5,500 128,563
Issuer Shares Value
U.S. Stocks -- continued
Oils -- continued
SEACOR Holdings, Inc. 1,200 $ 75,600
Texaco, Inc. 1,400 137,375
-----------
$ 368,038
-----------
Photographic Products -- 0.5%
Eastman Kodak Co. 1,000 $ 80,250
-----------
Printing and Publishing -- 1.7%
Gannett Co., Inc. 1,700 $ 127,287
Pulitzer Publishing Co. 2,066 95,811
Scripps (E.W.) Howard, Inc. 1,900 66,500
-----------
$ 289,598
-----------
Railroads -- 1.8%
Burlington Northern Santa Fe Railway
Co 1,600 $ 138,200
Wisconsin Central Transportation Corp.* 3,900 154,538
-----------
$ 292,738
-----------
Restaurants and Lodging -- 5.2%
FelCor Suite Hotels, Inc. 1,200 $ 42,450
Host Marriott Corp. 25,000 400,000
Prime Hospitality Corp. 12,100 195,112
Promus Hotel Corp.* 4,400 130,350
Renaissance Hotel Group N.V.* 1,300 30,550
Servico, Inc. 4,000 64,500
-----------
$ 862,962
-----------
Stores -- 2.8%
Ann Taylor Stores Corp.* 4,500 $ 78,750
Gymboree Corp.* 3,100 70,912
Rite Aid Corp. 4,300 170,925
Sears, Roebuck & Co. 2,800 129,150
Talbots, Inc. 800 22,900
-----------
$ 472,637
-----------
Supermarkets -- 1.1%
Vons Cos., Inc.* 3,200 $ 191,600
-----------
Telecommunications -- 7.1%
Cabletron Systems, Inc.* 3,700 $ 123,025
Cellular Communications International 24,200 701,800
MCI Communications Corp. 9,300 303,994
U.S. Robotics Corp.* 700 50,400
-----------
$ 1,179,219
-----------
Utilities -- Electric -- 0.2%
CMS Energy Corp. 800 $ 26,900
Illinova Corp. 400 11,000
-----------
$ 37,900
-----------
Total U.S. Stocks $11,073,238
-----------
Foreign Stocks -- 8.7%
Finland -- 0.2%
Huhtamaki OY (Conglomerates) 800 $ 37,200
-----------
France -- 0.8%
Union des Assurances Federales S.A
(Insurance) 1,100 $ 135,750
-----------
Hong Kong -- 1.2%
Cafe De Coral Holding (Electrical
Equipment) 166,000 $ 44,537
Giordano International Ltd. (Stores) 30,000 25,601
Wharf Holdings Ltd. (Real Estate) 12,000 59,891
Wing Hang Bank Ltd. (Banks and Credit
Companies) 13,500 61,269
-----------
$ 191,298
-----------
47
<PAGE>
Stocks -- continued
Issuer Shares Value
Foreign Stocks -- continued
Italy -- 0.3%
Fila Holdings S.p.A., ADR (Apparel and
Textiles) 500 $ 29,063
Olivetti Group (Office Equipment) 61,100 21,530
-----------
$ 50,593
-----------
New Zealand -- 1.9%
Lion Nathan Ltd. (Food and Beverage
Products) 19,200 $ 45,985
Liu Chong Hing Bank (Financial
Institutions) 16,000 26,687
Sky City Ltd. (Entertainment) 5,700 31,049
Tranz Rail Holdings Ltd. ADR,
(Railroads) 11,800 208,712
-----------
$ 312,433
-----------
Philippines -- 0.1%
Pilipino Telegraph & Telephone Corp.
(Telecommunications) 27,000 $ 22,877
-----------
Portugal -- 0.1%
Banco Totta e Acores (Financial
Institutions)## 800 $ 15,092
-----------
South Korea -- 1.1%
Korea Electric Power Corp., ADR
(Utilities -- Electric) 4,700 $ 96,350
Korea Mobile Telecom, ADR
(Telecommunications) 6,180 79,568
-----------
$ 175,918
-----------
Sweden -- 0.9%
Enator AB (Computer Software --
Systems) 580 $ 14,638
Enator AB (Computer Software --
Systems)* 3,500 89,619
Nobel Biocare AB (Medical and Health
Products) 2,800 49,303
-----------
$ 153,560
-----------
United Kingdom -- 2.1%
British Petroleum PLC, ADR (Oils) 1,050 $ 148,444
Jarvis Hotels PLC (Restaurants and
Lodging)*+ 27,600 76,128
Kwik-Fit Holdings PLC (Retail) 9,400 35,026
Storehouse PLC (Retail) 8,200 36,315
PowerGen PLC (Utilities -- Electric) 5,663 55,494
-----------
$ 351,407
-----------
Total Foreign Stocks $ 1,446,128
-----------
Total Stocks
(Identified Cost, $12,036,837) $12,519,366
-----------
Bonds -- 1.4%
Entertainment
Principal Amount
(000 Omitted)
Harrah's Jazz Co., 14.25s, 2001
(Identified Cost, $257,020) $ 494 $ 242,677
-----------
Equity Put Options Purchased -- 1.1%
Description/Expiration Month/Strike Price
Standard & Poor's 500 Index/
September/800 $ 2 $ 93,750
Standard & Poor's 500 Index/
September/775 2 83,513
-----------
Total Equity Put Options Purchased
(Premiums Paid, $171,447) $ 177,263
-----------
Principal Amount
Issuer (000 Omitted) Value
Short-Term Obligation -- 20.9%
Federal Home Loan Bank, due
1/02/97, at Amortized Cost 3,500 $ 3,499,490
-----------
Total Investments
(Identified Cost, $15,964,794) $16,438,796
Other Assets,
Less Liabilities -- 1.6% 261,059
-----------
Net Assets -- 100.0% $16,699,855
===========
See portfolio footnotes and notes to financial statements
48
<PAGE>
Portfolio of Investments -- December 31, 1996
World Asset Allocation Series
Stocks -- 59.2%
Issuer Shares Value
Foreign Stocks -- 43.7%
Australia -- 1.6%
Q.B.E. Insurance Group Ltd.
(Insurance) 132,245 $ 695,991
Seven Network Ltd. (Entertainment) 156,000 531,243
----------
$1,227,234
----------
Canada -- 1.3%
Canadian National Railway Co.
(Railroads) 27,000 $1,026,000
----------
Chile -- 0.4%
Chilectra S.A., ADR (Utilities --
Electric) 6,500 $ 346,125
----------
Finland -- 1.4%
Aamulehti Yhtymae OY II (Publishing) 8,500 $ 258,578
Huhtamaki OY (Conglomerates) 7,000 325,503
TT Tieto OY (Computer Software --
Systems) 5,700 481,678
----------
$1,065,759
----------
France -- 2.9%
Michelin (C.G.D.E.), "B" (Tire and
Rubber) 7,600 $ 410,482
Rhone-Poulenc Rorer, Inc. (Medical
and Health Products) 10,300 804,688
TOTAL S.A., "B" (Oils) 4,200 341,766
Union des Assurances Federales S.A
(Insurance) 5,500 678,750
----------
$2,235,686
----------
Germany -- 2.0%
Adidas AG (Apparel and Textiles) 9,300 $ 803,965
Henkel Kgaa, Preferred (Consumer
Goods and Services) 8,150 409,487
Volkswagen AG (Automotive) 825 343,191
----------
$1,556,643
----------
Greece -- 0.3%
Hellenic Telecom (Telecommunications) 14,600 $ 249,692
----------
Hong Kong -- 2.4%
Asia Satellite Telecommunications
(Telecommunications) 11,800 $ 275,825
Giordano International Ltd. (Stores) 361,000 308,068
Hong Kong Electric Holdings Ltd.
(Utilities -- Electric) 78,000 259,193
Hong Kong Land Holdings Ltd. (Real
Estate) 112,515 312,792
Peregrine Investment Holdings
(Finance) 131,000 224,431
Wing Hang Bank Ltd. (Banks and Credit
Companies) 111,000 503,763
----------
$1,884,072
----------
Indonesia -- 0.2%
Semen Gresik (Building Materials) 36,500 $ 117,493
----------
Italy -- 1.0%
Telecom Italia S.p.A
(Telecommunications) 432,000 $ 616,025
Telecom Italia S.p.A., Saving Shares
(Telecommunications) 57,000 143,978
----------
$ 760,003
----------
Issuer Shares Value
Foreign Stocks -- continued
Japan -- 8.6%
Bridgestone Corp. (Tire and Rubber) 23,000 $ 437,338
Canon, Inc. (Consumer Goods and
Services) 32,000 708,038
DDI Corp. (Telecommunications) 137 907,018
East Japan Railway Co. (Railroads) 70 315,212
Eisai Co., Ltd. (Pharmaceuticals) 14,000 275,886
Kinki Coca-Cola Bottling (Beverages) 15,000 177,615
Kirin Beverage Corp. (Beverages) 24,000 323,595
Matsushita Electric Industrial Co.
(Electrical Equipment) 18,000 294,036
Murata Manufacturing Co., Ltd.
(Electrical Equipment) 8,000 266,206
Nitto Denko Corp. (Industrials) 33,000 484,875
Omron Corp. (Electronics) 19,000 357,995
Osaka Sanso Kogyo Ltd. (Chemicals) 77,000 226,275
Takeda Chemical Industries
(Chemicals) 36,000 756,093
TDK Corp. (Special Products and
Services) 8,000 522,040
Ushio, Inc. (Electronics) 49,000 533,621
----------
$6,585,843
----------
Malaysia -- 0.5%
New Straits Times Press Berhad
(Printing and Publishing) 67,500 $ 390,297
----------
Netherlands -- 1.1%
IHC Caland NV (Transportation) 5,700 $ 325,837
Royal Dutch Petroleum Co. (Oils) 3,000 526,294
----------
$ 852,131
----------
New Zealand -- 1.4%
Lion Nathan Ltd. (Food and Beverage
Products) 66,700 $ 159,749
Liu Chong Hing Bank (Financial
Institutions) 221,000 368,619
Sky City Ltd. (Entertainment) 98,300 535,451
----------
$1,063,819
----------
Peru -- 0.4%
Telefonica del Peru S.A., ADR
(Telecommunications) 14,350 $ 270,856
----------
Philippines -- 0.5%
Alsons Cement Corp. (Construction
Services)## 498,000 $ 194,383
Pilipino Telegraph & Telephone Corp.
(Telecommunications) 242,000 205,046
----------
$ 399,429
----------
Portugal -- 0.4%
Banco Totta e Acores (Financial
Institutions)## 17,000 $ 320,697
----------
Singapore -- 0.9%
Hong Leong Finance Ltd. (Financial
Institutions)+ 5,000 $ 17,372
Mandarin Oriental International, Ltd.
(Restaurants and Lodging) 176,000 248,160
Singapore Finance (Financial
Institutions) 268,000 431,084
----------
$ 696,616
----------
49
<PAGE>
Stocks -- continued
Issuer Shares Value
Foreign Stocks -- continued
South Korea -- 1.1%
Korea Electric Power Corp. (Utilities
-- Electric) 13,500 $ 394,184
Korea Mobile Telecommunications
(Telecommunications) 450 450,588
-----------
$ 844,772
-----------
Spain -- 2.0%
Acerinox S.A. (Iron and Steel) 4,430 $ 639,923
Cubiertas y Mzov S.A. (Consumer Goods
and Services) 4,600 354,200
Repsol S.A. (Oils) 13,700 525,341
-----------
$ 1,519,464
-----------
Sweden -- 4.0%
ABB AB, "B", (Electrical Equipment) 8,200 $ 928,892
Astra AB, Free Shares, "B"
(Pharmaceuticals) 18,100 873,793
Enator AB (Computer Software --
Systems) 3,260 82,278
Enator AB (Computer Software --
Systems)* 16,300 417,366
Nobel Biocare AB (Medical and Health
Products) 11,400 200,734
Sparbanken Sverige AB (Banks) 32,000 549,376
-----------
$ 3,052,439
-----------
Switzerland -- 0.7%
Novartis AG (Pharmaceuticals)* 469 $ 537,700
-----------
Thailand -- 0.4%
Siam City Cement Co. Ltd. (Building
Materials) 13,400 $ 70,012
Total Access Communications Public
Co., Ltd. (Telecommunications) 35,000 241,500
-----------
$ 311,512
-----------
United Kingdom -- 8.0%
ASDA Group PLC (Retail) 382,000 $ 804,964
British Aerospace PLC (Aerospace) 32,700 715,957
British Petroleum PLC (Oils) 48,373 580,108
British Petroleum PLC, ADR (Oils) 1,700 240,338
Capital Radio PLC (Broadcasting) 19,200 178,611
Jarvis Hotels PLC (Restaurants and
Lodging)*+ 96,500 266,171
Kwik-Fit Holdings PLC (Retail) 117,000 435,967
Lloyds TSB Group PLC (Banks and
Credit Companies) 62,676 462,793
PowerGen PLC (Utilities -- Electric) 194,544 1,906,435
Storehouse PLC (Retail) 127,750 565,756
-----------
$ 6,157,100
-----------
Venezuela -- 0.2%
Compania Anonima Nacional Telefonos
de Venezuela, ADR
(Telecommunications)* 5,900 $ 165,937
-----------
Total Foreign Stocks $33,637,319
-----------
Issuer Shares Value
U.S. Stocks -- 15.5%
Aerospace -- 0.5%
AlliedSignal, Inc. 2,000 $134,000
Boeing Co. 1,700 180,837
Raytheon Co. 1,500 72,188
--------
$387,025
--------
Apparel and Textiles -- 0.2%
Nike, Inc., "B" 2,600 $155,350
--------
Automotive -- 0.5%
Ford Motor Co. 4,600 $146,625
Goodrich (B.F.) Co. 5,100 206,550
--------
$353,175
--------
Banks and Credit Companies -- 0.3%
Wells Fargo & Co. 800 $215,800
--------
Building -- 0.2%
Newport News Shipbuilding Inc. 8,300 $124,500
--------
Business Machines -- 0.1%
Sun Microsystems, Inc.* 4,600 $118,163
--------
Business Services -- 0.5%
ADT Ltd.* 10,200 $233,325
ALCO Standard Corp. 3,200 165,200
--------
$398,525
--------
Cellular Telephones -- 0.3%
Telephone & Data Systems, Inc. 5,400 $195,750
--------
Chemicals -- 0.3%
Betzdearborn, Inc. 600 $ 35,100
du Pont (E. I.) de Nemours & Co.,
Inc 2,100 198,188
--------
$233,288
--------
Computer Software -- Systems -- 0.9%
Adobe Systems, Inc. 800 $ 29,900
Oracle Systems Corp.* 7,400 308,950
Sybase, Inc.* 20,600 343,762
--------
$682,612
--------
Consumer Goods and Services -- 1.1%
Colgate-Palmolive Co. 1,300 $119,925
Philip Morris Cos., Inc. 2,600 292,825
Tyco International Ltd. 6,900 364,837
UST, Inc. 2,400 77,700
--------
$855,287
--------
Containers -- 0.1%
Stone Container Corp. 4,200 $ 62,475
--------
Electronics -- 0.5%
Atmel Corp.* 7,900 $261,687
Intel Corp. 900 117,844
--------
$379,531
--------
Entertainment -- 1.2%
Casino America, Inc. 1,931 $ 6,155
Chancellor Broadcast Corp., "A"* 100 2,375
Clear Channel Communications, Inc.* 3,600 130,050
Harrah's Entertainment, Inc.* 24,300 482,963
LIN Television Corp.* 6,300 266,175
Showboat, Inc. 4,100 70,725
--------
$958,443
--------
Financial Institutions -- 0.8%
Beneficial Corp. 3,300 $209,138
Federal Home Loan Mortgage Corp. 1,650 181,706
Union Planters Corp. 6,700 261,300
--------
$652,144
--------
50
<PAGE>
Issuer Shares Value
U.S. Stocks -- continued
Food and Beverage Products -- 0.5%
Interstate Bakeries Corp. 1,500 $ 73,687
PepsiCo, Inc. 9,500 277,875
--------
$351,562
--------
Forest and Paper Products -- 0.2%
Kimberly-Clark Corp. 1,400 $133,350
--------
Insurance -- 0.8%
Chubb Corp. 2,700 $145,125
Cigna Corp. 900 122,962
ITT Hartford Group, Inc. 1,600 108,000
Highlands Insurance Group, Inc. 200 4,050
PennCorp Financial Group, Inc. 7,600 273,600
--------
$653,737
--------
Leisure
Argosy Gaming Corp.* 1,900 $ 8,788
--------
Machinery -- 0.2%
Stewart & Stevenson Services, Inc. 4,800 $139,800
--------
Medical and Health Products -- 0.7%
Pharmacia & Upjohn, Inc. 14,400 $570,600
--------
Medical and Health Technology and Services -- 1.0%
Pacificare Health Systems, Inc., "B"* 1,400 $119,350
St. Jude Medical, Inc.* 11,600 494,450
United Healthcare Corp. 2,900 130,500
--------
$744,300
--------
Oil Services -- 0.2%
Tidewater, Inc. 3,200 $144,800
--------
Oils -- 0.6%
Mobil Corp. 1,300 $158,925
Occidental Petroleum Corp. 6,200 144,925
Texaco, Inc. 1,700 166,812
--------
$470,662
--------
Photographic Products -- 0.3%
Eastman Kodak Co. 2,700 $216,675
--------
Printing and Publishing -- 0.3%
Gannett Co., Inc. 1,900 $142,263
Scripps (E.W.) Howard, Inc. 1,700 59,500
--------
$201,763
--------
Railroads -- 0.5%
Burlington Northern Santa Fe Railway Co 2,300 $198,662
Wisconsin Central Transportation Corp.* 3,800 150,575
--------
$349,237
--------
Restaurants and Lodging -- 0.8%
FelCor Suite Hotels, Inc. 400 $ 14,150
Host Marriott Corp. 26,400 422,400
Promus Hotel Corp.* 7,400 219,225
--------
$655,775
--------
Stores -- 0.4%
Rite Aid Corp. 5,100 $202,725
Sears, Roebuck & Co. 2,800 129,150
--------
$331,875
--------
Supermarkets -- 0.4%
Vons Cos., Inc.* 4,900 $293,388
--------
Telecommunications -- 0.3%
Cabletron Systems, Inc.* 4,900 $162,925
Cellular Communications International 1,700 49,300
--------
$212,225
--------
Issuer Shares Value
Stocks -- continued
U.S. Stocks -- continued
Utilities -- Electric -- 0.3%
CMS Energy Corp. 2,600 $ 87,425
Illinova Corp. 6,700 184,250
--------
$271,675
--------
Utilities -- Telephone -- 0.5%
MCI Communications Corp. 12,800 $418,400
-----------
Total U.S. Stocks $11,940,680
-----------
Total Stocks
(Identified Cost, $42,313,677) $45,577,999
-----------
Bonds -- 16.8%
Principal
Amount
(000 Omitted)
Foreign Bonds -- 7.7%
Australia -- 0.9%
Commonwealth of Australia, 9.75s, 2002 AUD 650 $575,307
Commonwealth of Australia, 9.5s, 2003 150 132,763
--------
$708,070
--------
Belgium -- 0.5%
Kingdom of Belgium, 8.75s, 2002 BEF 1,495 $ 55,612
Kingdom of Belgium, 7.25s, 2004 8,910 310,288
--------
$365,900
--------
Canada -- 1.2%
Government of Canada, 7.5s, 2003 CAD 715 $564,309
Government of Canada, 7s, 2006 500 380,573
--------
$944,882
--------
Denmark -- 0.6%
Kingdom of Denmark, 6s, 1999 DKK 719 $126,925
Kingdom of Denmark, 9s, 2000 444 85,882
Kingdom of Denmark, 8s, 2001 725 136,689
Kingdom of Denmark, 7s, 2007 614 106,044
--------
$455,540
--------
France -- 0.5%
Government of France, 7s, 2000 FRF 1,649 $348,338
--------
Germany -- 1.1%
Federal Republic of Germany, 7.125s, 2002 DEM 401 $286,056
Federal Republic of Germany, 6.5s, 2005 428 291,547
Treuhandanstalt Obligationen, 6.375s, 1999 417 287,441
--------
$865,044
--------
Ireland -- 0.5%
Republic of Ireland, 6.25s, 1999 IEP 50 $ 85,201
Republic of Ireland, 8s, 2000 150 270,856
Republic of Ireland, 6.5s, 2001 10 17,218
--------
$373,275
--------
51
<PAGE>
Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Foreign Bonds -- continued
Italy -- 0.8%
Republic of Italy, 9.5s, 2001 ITL 825,000 $ 597,456
Republic of Italy, 9.5s, 2006 5,000 3,732
----------
$ 601,188
----------
Mexico -- 0.3%
United Mexican States, 7.563s, 2001## $ 250 $ 250,575
----------
Spain -- 0.5%
Government of Spain, 8.4s, 2001 ESP 19,610 $ 165,115
Government of Spain, 10.5s, 2003 18,330 171,515
----------
$ 336,630
----------
Sweden -- 0.3%
Kingdom of Sweden, 10.25s, 2000 SEK 1,400 $ 236,963
----------
United Kingdom -- 0.5%
United Kingdom Treasury, 7s, 2001 GBP 110 $ 186,509
United Kingdom Treasury, 9.75s, 2002 115 218,322
----------
$ 404,831
----------
Total Foreign Bonds $5,891,236
----------
U.S. Bonds -- 9.1%
Aerospace -- 0.3%
BE Aerospace, Inc., 9.875s, 2006 $250 $ 262,500
----------
Automotive -- 0.7%
Exide Corp., 10s, 2005 $250 $ 259,375
SPX Corp., 11.75s, 2002 250 279,375
----------
$ 538,750
----------
Building -- 1.0%
American Standard, Inc., 1s, 2005 $250 $ 232,500
Building Materials Corp., 1s, 2004 300 259,500
Nortek, Inc., 9.875s, 2004 250 252,500
----------
$ 744,500
----------
Chemicals -- 0.3%
NL Industries, Inc., 11.75s, 2003 $250 $ 265,000
----------
Conglomerates -- 0.3%
E & S Holdings Corp., 10.375s, 2006## $200 $ 207,500
----------
Consumer Goods and Services -- 1.6%
FoodBrands America, Inc., 10.75s, 2006 $400 $ 420,000
Revlon, Inc., 10.5s, 2003 200 210,000
Sealy Corp., 9.5s, 2003 350 353,500
Westpoint Stevens, Inc., 9.375s, 2005 250 257,500
----------
$1,241,000
----------
Containers -- 1.0%
Owens-Illinois, Inc., 11s, 2003 $200 $ 222,500
Silgan Corp., 11.75s, 2002 250 266,250
Stone Container Corp., 10.75s, 2002 250 263,437
----------
$ 752,187
----------
Principal Amount
Issuer (000 Omitted) Value
U.S. Bonds -- continued
Entertainment -- 0.3%
Cinemark USA, Inc., 9.625s, 2008 $250 $ 250,000
-----------
Machinery -- 0.3%
AGCO Corp., 8.5s, 2006 $250 $ 256,563
-----------
Medical and Health Technology and Services -- 0.3%
Tenet Healthcare Corp., 10.125s, 2005 $200 $ 221,500
-----------
Oil Services -- 0.4%
Mesa Operating Co., 10.625s, 2006 $250 $ 271,250
-----------
Oils -- 0.3%
Gulf Canada, 9.25s, 2004 $250 $ 264,375
-----------
Special Products and Services -- 0.7%
IMO Industries, Inc., 11.75s, 2006 $250 $ 232,500
Synthetic Industries, Inc., 12.75s, 2002 $250 275,625
-----------
$ 508,125
-----------
Steel -- 0.7%
Kaiser Aluminum & Chemical Corp., 9.875s, 2002 $500 $ 512,500
-----------
Stores -- 0.3%
Jitney Jungle Stores of America, Inc., 12s, 2006 $250 $ 264,375
Supermarkets -- 0.6% -----------
Grand Union Co., 12s, 2004 $250 $ 263,750
Ralph's Grocery Co., 10.45s, 2004 200 212,750
$ 476,500
-----------
Total U.S. Bonds $ 7,036,625
-----------
Total Bonds
(Identified Cost, $12,166,060) $12,927,861
-----------
Preferred Stock -- 0.3%
Shares
Entertainment
Time Warner, Inc., "K", 10.25%
(Identified Cost, $267,187) 250 $ 271,250
-----------
Warrants
Finance --
Peregrine Investment Holdings
(Identified Cost, $1,215) 9,800 $ 3,136
-----------
Short-Term Obligations -- 23.1%
Federal Home Loan Bank, due 1/02/97 3,475 $ 3,474,493
Federal Home Loan Mortgage Corp.,
due 1/03/97-1/07/97 9,670 9,663,074
Federal National Mortgage Assn.,
due 1/14/97 4,650 4,640,765
-----------
Total Short-Term Obligations, at
Amortized Cost $17,778,332
-----------
52
<PAGE>
Call Options Purchased
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
Italian Lire/Deutsche Marks January/995 ITL 373,127 $ 1,866
Japanese Government Bonds January/104.076 JPY 35,000 2,800
February/116.8 32,000 2,336
March/114.25 33,000 1,320
March/115.106 32,000 1,568
-----------
Total Call Options
Purchased (Premiums Paid, $13,566) $ 9,890
-----------
Total Investments
(Identified Cost, $72,540,037) $ 76,568,468
-----------
Put Options Written
Japanese Government Bonds
January/104.076 JPY 35,000 $ (1,085)
February/116.8 32,000 (1,120)
March/114.25 33,000 (5,148)
March/115.106 32,000 (5,184)
-----------
Total Put Options Written
(Premiums Received, $12,640) $ (12,537)
-----------
Other Assets,
Less Liabilities -- 0.6% $ 459,854
-----------
Net Assets -- 100.0% $ 77,015,785
============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1996
World Governments Series
Bonds -- 96.6%
Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Foreign Bonds -- 78.2%
Australia -- 6.3%
Commonwealth of Australia,
8.75s, 2001 AUD 3,985 $ 3,370,489
Commonwealth of Australia,
9.75s, 2002 6,350 5,620,303
-----------
$ 8,990,792
-----------
Belgium -- 2.8%
Kingdom of Belgium, 9s, 1998 BEF 35,000 $ 1,197,897
Kingdom of Belgium, 8.75s, 2002 25,000 929,972
Kingdom of Belgium, 7.25s, 2004 30,000 1,044,741
Kingdom of Belgium, 8.5s, 2007 20,000 751,986
-----------
$ 3,924,596
-----------
Canada -- 3.2%
Government of Canada, 9s, 2004 CAD 5,300 $ 4,538,050
-----------
Denmark -- 5.1%
Kingdom of Denmark, 6s, 1999 DKK 8,313 $ 1,467,498
Kingdom of Denmark, 8s, 2001 27,332 5,153,093
Kingdom of Denmark, 7s, 2007 4,038 697,401
-----------
$ 7,317,992
-----------
Germany -- 12.9%
Federal Republic of Germany,
6.875s, 1999 DEM 5,350 $ 3,708,661
Federal Republic of Germany,
7.125s, 2002 6,143 4,382,153
German Unity Fund, 8.75s, 2000 1,334 990,637
Treuhandanstalt Obligationen,
6.375s, 1999 13,288 9,159,522
-----------
$18,240,973
-----------
Ireland -- 9.3%
Republic of Ireland, 6.25s, 1999 IEP 3,800 $ 6,475,279
Republic of Ireland, 9.25s, 2003 3,400 6,671,796
-----------
$13,147,075
-----------
Italy -- 10.7%
Republic of Italy, 8.313s, 1999 ITL 8,275,000 $ 5,780,645
Republic of Italy, 8.313s, 1999 2,595,000 1,823,209
Republic of Italy, 8.313s, 2006 10,095,000 7,536,093
-----------
$15,139,947
-----------
Japan -- 10.1%
Export Import Bank of Japan,
4.375s, 2003 JPY 710,000 $ 6,915,903
International Bank of
Reconstruction &
Development, 4.5s, 2000 481,000 4,620,843
53
<PAGE>
Foreign Bonds -- continued
Japan -- continued
International Bank of
Recontruction &
Developement, 5.25s, 2002 JPY 270,000 $ 2,731,504
------------
$14,268,250
------------
New Zealand -- 2.7%
Government of New Zealand,
8s, 2004 NZD 5,200 $ 3,829,937
------------
Spain -- 7.2%
Government of Spain, 8.4s, 2001 ESP 9,600 $ 80,832
Government of Spain, 10.1s, 2001 650,000 5,760,260
Government of Spain, 7.9s, 2002 526,700 4,332,185
------------
$10,173,277
------------
Sweden -- 3.0%
Kingdom of Sweden, 11s, 1999 SEK 16,000 $ 2,636,302
Kingdom of Sweden, 10.25s, 2000 9,600 1,624,886
------------
$ 4,261,188
------------
United Kingdom -- 4.9%
United Kingdom Treasury, 9s, 2000 GBP 1,900 $ 3,425,972
United Kingdom Treasury,
9.75s, 2002 1,900 3,607,052
------------
$ 7,033,024
------------
Total Foreign Bonds $110,865,101
------------
U.S. Bonds -- 18.4%
U.S. Treasury Notes, 6.625s, 2001 $ 12,200 $ 12,394,468
U.S. Treasury Notes, 6.25s, 2003 13,700 13,682,875
------------
Total U.S. Bonds $ 26,077,343
Total Bonds
(Identified Cost, $136,113,933) $136,942,444
------------
Short Term Obligation -- 0.8%
Federal Home Loan Bank, due
1/02/97, at Amortized Cost $ 1,155 $ 1,154,832
------------
Call Options Purchased
Principal
Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
Italian Lire/Deutsche Marks
January/995
(Premium Paid, $18,078) ITL 7,284,975 $ 36,425
------------
Put Options Purchased -- continued
Put Options Purchased -- 2.1%
Deutsche Marks/British Pounds
January/2.45 DEM 19,370 $ 931,710
January/2.56 20,240 385,470
January/2.51 19,845 623,540
Swiss Francs/Deutsche Marks
January/0.829 CHF 7,578 271,658
February/0.84 7,678 196,337
February/0.84 12,984 331,776
Put Options Purchased-continued
Principal
Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
March/0.86 CHF 21,155 $ 229,571
---------------
Total Put Options Purchased
(Premiums Paid, $658,940) $ 2,970,062
---------------
Total Investments
(Identified Cost, $137,945,784) $ 141,103,763
---------------
Call Options Written
Deutsche Marks/British Pounds
January/2.3682 DEM 18,724 $ --
Swiss Francs/Deutsche Marks
February/0.8265 CHF 12,776 (77)
---------------
Total Call Options Written
(Premiums Received, $110,515) $ (77)
---------------
Put Options Written -- (1.6)%
Deutsche Marks/British Pounds
January/2.45 DEM 19,370 $ (927,874)
January/2.5105 19,849 (621,043)
Swiss Francs/Deutsche Marks
January/0.829 CHF 7,578 (271,848)
February/0.84 20,663 (528,346)
---------------
Total Put Options Written
(Premiums Received, $957,278) $ (2,349,111)
---------------
Other Assets,
Less Liabilities -- 2.1% $ 3,009,857
---------------
Net Assets -- 100.0% $ 141,764,432
===============
See portfolio footnotes and notes to financial statements
54
<PAGE>
Portfolio of Investments -- December 31, 1996
World Growth Series
Stocks -- 92.4%
Stocks -- continued
Issuer Shares Value
Foreign Stocks -- 58.4%
Argentina -- 0.7%
Banco de Galicia y Buenos Aires S.A. de
C.V., ADR (Banks and Credit Cos.) 10,822 $ 262,433
Mirgor Sacifia, ADR (Auto Parts)*## 46,000 89,700
Perez Companc S.A. (Oils) 31,215 219,485
Siderar S.A.I.C. (Steel)* 7,200 167,400
Telefonica de Argentina, ADR (Utilities
-- Telephone) 7,700 199,238
YPF Sociedad Anonima, ADR (Oils) 17,120 432,280
----------
$1,370,536
----------
Australia -- 0.4%
Q.B.E. Insurance Group Ltd. (Insurance) 157,000 $ 826,274
----------
Brazil -- 3.4%
Centrais Eletricas Brasile, ADR
(Utilities -- Electric) 41,600 $ 769,598
Cia Siderurgica de Tubarao (Steel) 10,146 181,358
Companhia Energetica S.A., ADR
(Utilities -- Electric) 10,400 348,398
Companhia Vale do Rio Doce, Preferred
(Iron and Steel) 19,400 371,023
Itausa Investimentos Itau S.A
(Conglomerate) 600,000 450,474
Petroleo Brasileiro S.A., Preferred
(Oils) 8,500,000 1,354,074
Refrigeracao Parana S.A., ADR (Home
Appliances) 31,000 348,748
Rhodia-Ster S.A., GDR (Chemicals)## 24,300 69,861
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 31,850 2,444,486
Usinas Siderurgicas de Minas Gerais
S.A., ADR (Steel)## 48,400 494,888
----------
$6,832,908
----------
Canada -- 0.9%
BioChem Pharma, Inc. (Biotechnology)* 15,900 $ 798,975
Canadian National Railway Co.
(Railroads) 18,810 714,780
Loewen Group, Inc. (Business
Services)## 6,900 269,394
----------
$1,783,149
----------
Chile -- 0.2%
Chilectra S.A., ADR (Utilities-
Electric) 7,690 $ 409,493
----------
China -- 0.4%
Huaneng Power International, Inc., ADR
(Utilities -- Electric) * 10,000 $ 225,000
Qingling Motors Co., "H" (Automotive)* 368,000 203,413
Shanghai Petrochemical Co. Ltd.
(Chemicals)* 646,000 196,289
Yizheng Chemical Fibre Co. Ltd.
(Textiles) 552,000 134,182
----------
$ 758,884
----------
Colombia -- 0.5%
Banco Ganadero S.A., ADR (Financial
Institutions) 8,800 $ 232,100
Foreign Stocks -- continued
Colombia -- continued
Banco Industrial Colombiano, ADR (Banks
and Credit Cos.) 22,900 $ 475,175
Cementos Diamante S.A., ADR
(Construction)## 26,800 335,000
----------
$1,042,275
----------
Denmark -- 0.4%
ISS International Service System, "B"
(Commercial Services) 29,300 $ 771,249
----------
Egypt -- 0.2%
Suez Cement Co. S A E, GDR (Building
Materials)## 26,000 $ 405,600
----------
Finland -- 0.7%
Huhtamaki Oy (Conglomerates) 28,400 $1,320,615
TT Tieto Oy (Computer Software --
Systems) 2,100 177,460
----------
$1,498,075
----------
France -- 2.3%
Assurance General de France
(Insurance)## 14,100 $ 455,407
Michelin (C.G.D.E.), "B" (Tire and
Rubber) 8,500 459,090
Rhone-Poulenc Rorer, Inc.
(Pharmaceuticals) 4,600 359,374
Rhone Poulenc SA (Pharmaceuticals) 27,870 950,673
Societe Nationale Elf Aquitaine (Oils) 9,900 901,612
TOTAL S.A., "B" (Oils) 10,500 854,413
Union des Assurances Federales S.A
(Insurance) 5,300 654,067
----------
$4,634,636
----------
Germany -- 2.8%
Adidas AG (Apparel and Textiles) 14,138 $1,222,195
Henkel Kgaa, Preferred (Consumer Goods
and Services) 26,870 1,350,044
Hoechst AG (Chemicals) 10,822 511,376
SAP AG, Preferred (Computer Software --
Systems) 12,600 1,760,801
SAP AG, ADR (Computer Software --
Systems)## 7,900 364,387
Volkswagen AG (Automotive) 1,054 438,453
----------
$5,647,256
----------
Greece -- 0.3%
Hellenic Telecom (Telecommunications) 18,200 $ 311,260
Papastratos Cigarettes S.A. (Tobacco
Products) 18,500 339,284
----------
$ 650,544
----------
Hong Kong -- 4.9%
Asia Satellite Telecommunications
Holdings Ltd., ADR
(Telecommunications) 352,500 $ 818,124
Bank of East Asia Ltd. (Banks and Credit Cos.) 72,480 322,382
Cheung Kong Holdings Ltd. (Real Estate) 68,000 604,473
Citic Pacific Ltd. (Conglomerate) 56,000 325,109
Dah Sing Financial Group (Banks) 189,600 769,774
Giordano International Ltd. (Stores) 398,000 339,642
55
<PAGE>
Stocks -- continued
Issuer Shares Value
Foreign Stocks -- continued
Hong Kong -- continued
Great Eagle Holdings (Real Estate) 221,000 $ 911,544
Hong Kong Electric Holdings Ltd.
(Utilities -- Electric) 258,000 857,330
Hysan Development (Real Estate) 210,000 836,306
Li & Fung Ltd. (Toys) 141,000 124,883
Liu Chong Hing Bank (Finance) 283,000 472,032
New World Development Co. (Real Estate) 77,000 520,202
Nu Skin Asia Pacific, Inc. (Consumer Goods) 500 15,436
Peregrine Investment Holdings (Finance) 63,000 107,931
Swire Pacific Air Ltd., "A"
(Transportation) 51,000 486,326
Wharf Holdings Ltd. (Real Estate) 401,000 2,001,369
Wing Hang Bank Ltd. (Banks and Credit
Companies) 70,000 317,687
Zhenhai Refining and Chemical Co., Ltd.,
"H" (Oils) 240,000 88,440
----------
$9,918,990
----------
India -- 1.9%
Bajaj Auto Ltd., GDR (Automotive)* 20,000 $ 665,000
East India Hotels (Lodging) 13,000 305,500
India Gateway Fund Ltd. (Finance)+ 34,925 157,162
India Gateway Fund Ltd., Warrants
(Finance)+ 4,000 --
Industrial Credit & Investment Corp. of
India Ltd. (Financial Institutions) 58,000 565,500
ITC Ltd. (Conglomerate) 90,000 933,750
State Bank of India, GDR (Banks and
Credit Cos.) 39,000 677,430
Tata Engineering & Locomotive Co. Ltd.
(Autos and Trucks) 56,000 595,000
----------
$3,899,342
----------
Indonesia -- 0.5%
Bank International Indonesia (Finance) 176,390$ 173,700
Indocement Tunggal Prakar (Retail) 117,000 178,399
Mayora Indah (Food Processing) 99,000 46,125
PT Gudang Garam (Tobacco) 64,000 276,493
PT Indofoods Suksesi Makmur (Food
Processing)* 65,000 129,394
Semen Gresik (Building Materials) 64,500 207,624
----------
$1,011,735
----------
Ireland -- 0.4%
Allied Irish Banks (Banks and Credit
Companies) 117,200$ 787,085
----------
Israel -- 0.1%
Koor Industries Ltd., ADR (Conglomerate) 4,600$ 78,200
Teva Pharmaceutical Industries Ltd., ADR
(Pharmaceuticals) 1,700 85,425
----------
$ 163,625
----------
Italy -- 1.6%
Fila Holdings S.p.A., ADR (Apparel and
Textiles) 9,700 $ 563,812
Issuer Shares Value
Foreign Stocks -- continued
Italy -- continued
Gucci Group Designs N.V
(Retail--Apparel)* 11,000 $ 702,625
Industrie Natuzzi S.p.A., ADR
(Furniture) 17,600 404,800
Instituto Nazionale delle Assicurazioni
(Insurance) 270,200 351,665
Telecom Italia S.p.A
(Telecommunications) 829,000 1,182,141
----------
$3,205,043
----------
Japan -- 8.6%
Bank of Tokyo Mits (Banks and Credit
Companies) 40,000 $ 743,302
Bridgestone Corp. (Tire and Rubber) 47,000 893,689
Canon, Inc. (Consumer Goods and
Services) 63,000 1,393,948
Daikin Industries (Special Products) 81,000 721,087
DDI Corp. (Telecommunications) 150 993,084
East Japan Railway Co. (Railroads) 164 738,494
Hirose Electric (Utilities Electric) 6,600 382,763
Jusco Company (Consumer Goods) 26,000 883,144
Keyence Corp. (Electronics) 6,700 828,088
Kinki Coca-Cola Bottling (Beverages) 33,000 390,750
Kirin Beverage Corp. (Beverages) 53,000 714,605
Matsushita Electric Industrial Co.
(Electrical Equipment) 50,000 816,765
Mitsubishi Heavy Industries Ltd.
(Aerospace/Defense) 105,000 834,916
Nippon Telephone & Telegraph Co.
(Telecommunications) 29 220,066
Nitto Denko Corp. (Industrials) 54,000 793,430
Omron Corp., (Electronics) 47,000 885,564
Osaka Sanso Kogyo Ltd. (Chemicals) 107,000 314,432
Rohm Co. (Electronics) 8,000 525,495
Secom Co. (Electronics) 14,000 848,225
Sony Corp. (Electronics) 14,100 924,970
Takeda Chemical Industries (Chemicals) 47,000 987,121
TDK Corp. (Special Products and
Services) 14,000 913,568
Ushio, Inc. (Electronics) 75,000 816,767
----------
$17,564,273
----------
Malaysia -- 1.7%
DCB Holdings Berhad (Finance) 129,000 $ 441,921
Genting Berhad (Entertainment) 111,200 766,289
Malayan Banking Berhad (Finance) 12,000 133,069
Petronas Gas Berhad (Oil and Gas)## 57,000 237,030
Rothmans of Pall Mall (Tobacco Products) 24,000 251,881
Sime Darby Berhad (Holding Company) 180,000 709,307
Sungei Way Holdings Berhad (Diversified
Operations) 42,000 124,752
Tenaga Nasional Berhad (Utilities --
Electric) 120,000 575,050
56
<PAGE>
Stocks -- continued
Issuer Shares Value
Foreign Stocks -- continued
Malaysia -- continued
United Engineers Berhad (Construction
and Engineering) 27,000 $ 243,802
----------
$3,483,101
----------
Mexico -- 2.4%
Cemex S.A., "B" (Construction) 105,687 $ 380,762
Cifra S.A. de C.V. (Retail) 152,300 185,802
Control Common Mex (Retail) 242,000 224,500
Corporacion GEO S.A. de C.V. (Home
Builders)## 24,500 495,928
Desc S.A. de C.V. (Conglomerate) 19,000 103,824
Empresas ICA Sociedad Controladora S.A.,
ADR (Engineering/Construction)* 20,000 292,499
Fomento Economico Mexicano S.A., "B"
(Brewery) 148,400 509,186
Gruma S.A.,"B" (Food)* 68,000 414,791
Grupo Carso S.A. de C.V. (Conglomerate) 49,700 118,107
Grupo Carso, "A1" (Conglomerate)* 78,700 417,052
Grupo Financiero Banamex (Finance)## 8,255 16,259
Grupo Financiero Banamex, "B" (Finance) 101,300 213,953
Grupo Financiero Inbursa S.A. de C.V
(Finance) 1,734 5,927
Kimberly-Clark de Mexico S.A. de C.V
(Forest and Paper Products) 22,000 434,742
Telefonos de Mexico S.A. (Utilities --
Telephone) 438,460 723,242
Tubos de Acero de Mexico S.A. (Steel)* 23,500 373,061
----------
$4,909,635
----------
Netherlands -- 0.8%
IHC Caland NV (Transportation) 7,220 $ 412,727
Royal Dutch Petroleum Co. (Oils) 4,800 842,071
Stork N.V. (Machinery) 10,800 380,933
----------
$1,635,731
----------
New Zealand -- 0.1%
Lion Nathan Ltd. (Food and Beverage
Products) 62,700 $ 150,169
----------
Norway -- 0.2%
Orkla Asa (Food Products) 6,385 $ 440,939
----------
Pakistan -- 0.5%
Hub Power Co. Ltd., GDR (Utilities --
Electric)* 33,800 $ 667,550
Pakistan Telecommunications Corp., GDR
(Utilities -- Telephone)* 7,290 437,400
----------
$1,104,950
----------
Peru -- 1.2%
Compania de Minas Buenaventura S.A
(Mining) 60,000 $ 438,125
CPT Telefonica del Peru S.A., "B"
(Utilities -- Telephone) 332,374 620,806
Credicorp Ltd. (Holding Company)* 26,446 489,251
Minsur S.A. (Metals) 22,165 77,092
Telefonica del Peru S.A., ADR
(Telecommunications) 38,000 717,250
----------
$2,342,524
----------
Foreign Stocks -- continued
Philippines -- 0.2%
Alsons Cement Corp. (Construction
Services)## 969,100 $ 378,266
----------
Poland -- 0.9%
Bank Rozwoju Eksportu S.A. (Banks and
Credit Cos.) 12,000 $ 359,582
Bank Slaski S.A. w Katowicach (Banks and
Credit Cos.) 3,800 386,620
Bydgoska Fabryka Kabli S.A. (Electrical
Equipment) 57,500 350,610
Elektrim Spolka Akcyjna S.A. (Electrical
Equipment) 49,500 448,432
Stomil Olsztyn S.A. (Tires and Rubber)* 27,000 348,084
----------
$1,893,328
----------
Portugal -- 1.4%
Banco Espirito Santo e Comercial de
Lisboa S.A. (Banks and Credit Cos.) 12,586 $ 221,514
Banco Totta e Acores (Financial
Institutions)## 41,500 782,878
Cimentos de Portugal S.A. (Building
Materials) 12,746 274,491
Engil SGPS (Engineering and
Construction) 9,079 104,379
Jeronimo Martins & Filho S.A. (Retail) 1,640 84,613
Portugal Telecom S.A
(Telecommunications) 16,200 457,650
Portugal Telecom S.A
(Telecommunications) 22,710 647,601
Sonae Investimentos-Sociedade Gestora de
Participacoes Sociais, S.A. (Retail) 2,400 76,026
Telecel -- Comunicacaoes Pessoais S.A
(Cellular Telecommunications) 2,250 143,710
----------
$2,792,862
----------
Russia -- 0.6%
Irkutskenergo (Utilities -- Electric) 4 $114,000
Lukoil Oil Co., ADR (Oil and Gas) 10,600 482,300
Mosenergo, ADR (Utilities --
Electric)## 12,000 363,600
Rostelecom, RDC (Telecommunications) 7 168,000
----------
$1,127,900
----------
Singapore -- 0.7%
City Developments Ltd. (Real Estate) 110,000 $ 990,849
Hong Leong Finance Ltd. (Financial
Institutions)+ 51,000 177,195
Mandarin Oriental International, Ltd.
(Restaurants and Lodging) 218,000 307,380
----------
$1,475,424
----------
South Africa -- 0.6%
Anglo American Corp. of South Africa
Ltd. (Mining) 4,000 $ 220,274
De Beers Centenary AG (Diamonds --
Precious Stones) 7,500 214,927
Iscor Ltd. (Steel) 183,984 131,417
Liberty Life Association of Africa Ltd.
(Insurance) 12,633 316,771
57
<PAGE>
Foreign Stocks -- continued
South Africa -- continued
Sasol Ltd. (Oils) 20,000 $ 237,382
South African Breweries Ltd. (Brewery) 7,500 190,066
----------
$ 1,310,837
----------
South Korea -- 1.2%
Korea Electric Power Corp. (Utilities --
Electric) 1,000 $ 29,199
Korea Electric Power Corp., ADR
(Utilities -- Electric) 26,500 543,250
Korea Mobile Telecom, ADR
(Telecommunications) 96,099 1,237,275
New Korea Trust (Finance) 39,000 399,750
Samsung Display Devices Co. (Electrical
Equipment) 2,330 133,577
Samsung Electronics Co.
(Electronics)## 4,887 88,455
Samsung Electronics Co.
(Electronics)## 1,472 23,552
Samsung Electronics Co.
(Electronics)## 65 2,340
Samsung Electronics Co.
(Electronics)## 216 8,802
----------
$ 2,466,200
----------
Spain -- 1.5%
Cubiertas y Mzov S.A. (Consumer Goods
and Services) 8,700 $ 669,901
Telefonica de Espana (Utilities --
Telephone) 20,500 475,918
Acerinox S.A. (Iron and Steel) 6,947 1,003,509
Repsol S.A. (Oils) 24,900 954,816
----------
$ 3,104,144
----------
Sweden -- 2.3%
ABB AB, "B" (Electrical Equipment) 11,096 $ 1,256,947
Astra AB (Pharmaceuticals) 18,100 895,037
Astra AB, Free Shares, "B"
(Pharmaceuticals) 2,038 98,383
Enator AB (Computer Software -- Systems) 400 10,093
Enator AB (Computer Software --
Systems)* 34,500 883,380
Nobel Biocare AB (Medical and Health
Products) 39,400 693,761
Sparbanken Sverige AB (Banks) 46,200 793,159
----------
$ 4,630,760
----------
Switzerland -- 1.0%
Logitech International (Computer
Software) 2,800 $ 398,655
Nestle AG, Registered Shares (Food and
Beverage Products) 395 424,226
Novartis AG (Pharmaceuticals)* 1,087 1,244,962
----------
$2,067,843
----------
Taiwan -- 0.7%
Taipei Fund (Financial Services)* 147 $1,323,000
Yageo Corp. (Electronics)* 10,749 104,803
----------
$1,427,803
----------
Thailand -- 0.7%
Phatra Thanakit Co. (Finance) 9,300 $ 26,471
Siam Cement Public Co. Ltd. (Building
Materials) 1,800 56,428
Foreign Stocks -- continued
Thailand -- continued
Siam City Cement Co. Ltd. (Building
Materials) 50,000 $ 261,239
TelecomAsia Corp. Ltd. (Utilities --
Telephone)* 115,000 239,891
Thai Euro Fund (Finance)+ 27,000 803,790
----------
$ 1,387,819
----------
Turkey -- 0.4%
Alarko Holding A.S. (Diversified Holding
Company) 358,800 $ 57,150
Altinyildiz Men (Apparel and Textiles) 712,800 97,080
Ege Biracilik ve Malt Sanayii A.S
(Beverages) 287,150 61,646
Eregli Demir Celik (Manufacturing --
Metals) 676,900 81,253
Kaplamin Ambalaj (Forest and Paper
Products) 417,000 42,355
Migros Turk (Retail) 211,080 258,246
Netas Telekomunik (Telecommunications) 323,000 73,070
Turkiye Garanti Bankasi (Finance) 1,800,000 81,440
Yapi ve Kredi Bankasi (Finance) 4,030,000 100,471
----------
$ 852,711
----------
United Kingdom -- 7.4%
ASDA Group PLC (Retail) 447,500 $ 942,985
British Aerospace PLC (Aerospace) 65,080 1,424,904
British Petroleum PLC (Oils) 76,650 919,215
Capital Radio PLC (Broadcasting) 40,330 375,175
Danka Business Systems, ADR (Business
Services) 23,400 827,773
Dr. Solomons Group PLC (Computer
Software -- Systems) 23,900 409,286
Inchcape PLC (Commercial Services) 86,300 400,669
Jarvis Hotels PLC (Restaurants and
Lodging)*+ 477,600 1,317,338
Kwik-Fit Holdings PLC (Retail) 338,400 1,260,946
Lloyds TSB Group PLC (Banks and Credit
Companies) 104,757 773,512
Pace Micro Technology (Electronics) 507,100 1,998,154
PowerGen PLC (Utilities -- Electric) 153,400 1,503,241
Reuters Holdings, PLC, ADR (Broadcast
Media) 11,100 849,148
Smith (W.H.) Group PLC (Retail) 55,300 405,485
Storehouse PLC (Retail) 270,100 1,196,168
Wimpey (George) PLC (Construction) 198,100 424,229
-----------
$ 15,028,228
-----------
Venezuela -- 0.7%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications)* 48,900 $ 1,375,313
------------
Total Foreign Stocks
(Identified Cost, $113,644,249) $118,567,459
------------
U.S. Stocks -- 34.0%
Apparel and Textiles -- 0.1%
Nine West Group, Inc.* 2,400 $ 111,300
Automotive -- 0.1% ----------
APS Holding Corp., "A"* 12,300 $ 190,650
----------
58
<PAGE>
Stocks -- continued
U.S. Stocks -- continued
Business Machines -- 1.1%
Affiliated Computer Services, Inc., "A"* 40,800 $ 1,213,800
Sun Microsystems, Inc.* 40,000 1,027,500
-----------
$ 2,241,300
-----------
Business Services -- 5.2%
AccuStaff, Inc.* 11,900 $ 251,387
ADT Ltd.* 35,100 802,912
ALCO Standard Corp. 5,100 263,286
Computer Sciences Corp.* 10,700 878,735
CUC International, Inc.* 52,700 1,251,623
DST Systems, Inc.* 26,100 818,886
Employee Solutions, Inc.* 27,600 565,799
Equity Corp. International* 2,700 54,000
Forrester Research, Inc. 300 7,724
International Network Services* 200 6,037
Learning Tree International, Inc.* 65,850 1,942,573
Loewen Group, Inc. 4,000 156,498
Sabre Group Holding, Inc., "A"* 4,200 117,074
Superior Consultant, Inc. 1,000 24,749
Technology Solutions Co.* 81,900 3,398,848
Thermo Fibergen Incorporated 7,900 82,949
-----------
$10,623,080
-----------
Chemicals -- 0.1%
Betzdearborn, Inc. 3,000 $ 175,500
Computer Software -- Personal Computers -- 0.7% ----------
Autodesk, Inc. 300 $ 8,400
First Data Corp. 31,802 1,160,773
Microsoft Corp.* 3,800 313,975
-----------
$ 1,483,148
-----------
Computer Software -- Systems -- 8.7%
Adobe Systems, Inc. 2,400 $ 89,698
BMC Software, Inc.* 85,400 3,533,419
Cadence Design Systems, Inc.* 97,150 3,861,706
Computer Associates International, Inc. 58,500 2,910,373
Compuware Corp.* 20,500 1,027,560
Information Management Resources, Inc. 500 10,561
Ingram Micro, Inc. 1,500 34,498
Oracle Systems Corp.* 102,250 4,268,931
Parametric Technology Corp.* 16,400 842,548
Sybase, Inc.* 19,800 330,411
Synopsys, Inc.* 4,400 203,498
USCS International, Inc.* 7,800 131,623
Viasoft, Inc.* 5,700 269,323
Xionics Document Technologies* 16,400 204,998
-----------
$17,719,147
-----------
Construction Services -- 0.4%
Shaw Group, Inc. 35,000 $ 818,125
Consumer Goods and Services -- 0.9% ----------
Carson, Inc. 37,100 $ 514,763
Service Corp. International 3,000 84,000
Tyco International Ltd. 24,300 1,284,862
----------
$ 1,883,625
-----------
Electronics -- 2.8%
Actel Corp. 7,800 $ 185,250
Altera Corp.* 16,000 1,163,000
Analog Devices, Inc.* 18,500 626,687
Atmel Corp.* 10,300 341,188
Intel Corp. 4,600 602,313
U.S. Stocks -- continued
Electronics -- continued
Lattice Semiconductor Corp. 10,600 $ 487,600
Linear Technology Corp. 12,700 557,212
LSI Logic Corp.* 11,000 294,250
Teradyne, Inc. 24,400 594,750
Ultratech Stepper, Inc. 5,400 128,250
VLSI Technology, Inc.* 16,500 393,938
Xilinx, Inc.* 6,100 224,556
-----------
$ 5,598,994
-----------
Entertainment -- 1.3%
Cox Radio, Inc., "A"* 22,800 $ 399,000
Harrah's Entertainment, Inc.* 42,700 848,663
Hollywood Entertainment Corp. 23,800 440,300
International Speedway Corp. 500 10,250
Jacor Communications, Inc., "A"* 3,000 82,125
LIN Television Corp.* 13,700 578,825
Sinclair Broadcast Group, Inc. 3,300 85,800
Univision Communications, Inc., "A"* 5,300 196,100
-----------
$2,641,063
----------
Financial Institutions -- 0.3%
Associates First Capital Corp., "A" 1,800 $ 79,425
Dean Witter Discover & Co., Inc. 3,100 205,375
Franklin ReSources, Inc. 2,200 150,425
MBNA Corp. 4,200 174,300
----------
$ 609,525
----------
Food and Beverage Products -- 0.1%
Earthgrains Co. 4,900 $ 256,025
Machinery -- 0.1% ----------
S I Handling Systems, Inc. 10,000 $ 150,625
Medical and Health Products -- 0.5% ----------
Pharmacia & Upjohn, Inc. 21,700 $ 859,863
Ventritex, Inc.* 4,200 103,425
-----------
$ 963,288
----------
Medical and Health Technology
and Services -- 1.7%
Columbia Healthcare Corp. 150 $ 6,113
Foundation Health Corp. 200 6,350
HealthSource, Inc.* 8,900 116,813
HealthSouth Corp.* 29,100 1,123,987
Pacificare Health Systems, Inc., "B"* 4,100 349,525
St. Jude Medical, Inc.* 3,700 157,712
United Healthcare Corp. 37,400 1,683,000
-----------
$3,443,500
----------
Oil Services
National Oilwell, Inc. 500 $ 15,375
Offshore Energy Development Corp. 100 1,525
-----------
$ 16,900
----------
Oils -- 0.1%
Barrett Resouces Corp.* 5,200 $ 221,650
Titan Exploration, Inc.* 2,000 24,000
-----------
$ 245,650
----------
Pollution Control -- 0.3%
Republic Industries, Inc. 300 $ 9,356
USA Waste Services, Inc.* 19,730 628,894
-----------
$ 638,250
----------
Printing and Publishing
Pulitzer Publishing Co. 1 $ 46
----------
59
<PAGE>
Stocks -- continued
U.S. Stocks -- continued
Railroads -- 0.3%
Kansas City Southern Industries, Inc. 4,900 $ 220,500
Wisconsin Central Transportation Corp.* 6,800 269,450
----------
$ 489,950
------------
Restaurants and Lodging -- 3.5%
Applebee's International, Inc. 17,500 $ 481,250
HFS, Inc.* 86,600 5,174,350
Promus Hotel Corp.* 31,300 927,262
Renaissance Hotel Group N.V.* 25,400 596,900
United States Franchise Services, Inc. 500 5,063
----------
$ 7,184,825
------------
Stores -- 1.1%
BT Office Products International, Inc. 6,000 $ 53,250
Corporate Express, Inc.* 19,400 571,087
General Nutrition Cos., Inc.* 19,500 329,062
Linens N Things, Inc.* 3,100 60,838
Mazel Stores, Inc. 300 6,750
Micro Warehouse, Inc.* 2,800 32,900
Office Depot, Inc.* 16,200 287,550
Staples, Inc.* 50,600 913,963
------------
$ 2,255,400
------------
Technology
Spectrum Holobyte, Inc.* 5,900 $ 44,250
Telecommunications -- 4.2% ----------
Bay Networks, Inc.* 300 $ 6,261
Cabletron Systems, Inc.* 31,000 1,030,748
Cisco Systems, Inc.* 45,900 2,920,385
Glenayre Technologies, Inc.* 34,100 735,279
Hertiage Media Corp. 15,800 177,748
International Business Communications
Systems, Inc.*+ 12,600 124,990
Lucent Technologies, Inc. 8,000 369,998
Tel-Save Holdings, Inc.* 300 8,698
3Com Corp.* 16,100 1,181,336
WorldCom, Inc.* 72,200 1,881,710
------------
$ 8,437,153
------------
Transportation -- 0.2%
Transaction System Architects, Inc.* 10,900 $ 362,425
------------
Utilities -- Telephone -- 0.2%
MCI Communications Corp. 14,650 $ 478,872
------------
Total U.S. Stocks $ 69,062,616
------------
Total Stocks
(Identified Cost, $168,069,375) $187,630,075
------------
Rights
Jeronimo Martins 1,640 $ 28,039
Thermo Fibergen, Inc. 7,900 19,750
------------
Total Rights
(Identified Cost, $15,589) $ 47,789
------------
Warrants -- 0.8%
Intel Corp. 17,000 $ 1,568,523
Sungei Way Holdings Berhad 4,200 4,449
Thai Farmers Bank 1,588 1,254
------------
Total Warrants
(Identified Cost, $996,000) $ 1,574,226
------------
Principal Amount
Issuer (000 Omitted) Value
Convertible Bonds -- 0.1%
Republic of Italy, 5s, 2001 $ 135 $ 132,300
Ventritex, Inc., 5.75s, 2001 30 47,325
Total Convertible Bonds ------------
(Identified Cost, $165,000) 179,625
Short-Term Obligations -- 6.5% ------------
Federal Home Loan Mortgage Corp.,
due 1/21/97-2/04/97 $3,890 $ 3,876,387
Ford Motor Credit Corp., due 1/02/97 9,325 9,323,161
------------
Total Short-Term Obligations,
at Amortized Cost $ 13,199,548
Total Investments ------------
(Identified Cost, $182,445,512) $202,631,263
------------
Other Assets,
Less Liabilities -- 0.2% 474,243
------------
Net Assets -- 100.0% $203,105,506
============
See portfolio footnotes and notes to financial statements
60
<PAGE>
Portfolio of Investments -- December 31, 1996
World Total Return Series
Stocks -- 57.6%
Issuer Shares Value
Foreign Stocks -- 37.6%
Australia -- 1.4%
Australia & New Zealand Banking Group
(Banks and Credit Cos.) 11,000 $ 69,243
Q.B.E. Insurance Group Ltd. (Insurance) 69,289 364,661
Seven Network Ltd. (Entertainment) 28,900 98,416
----------
$ 532,320
----------
Canada -- 1.6%
Canadian National Railway Co.
(Railroads) 10,400 $ 395,200
Westcoast Energy, Inc. (Utilities --
Gas) 11,750 196,813
----------
$ 592,013
----------
Chile -- 0.2%
Chilectra S.A., ADR (Utilities --
Electric) 800 $ 42,600
Enersis S.A., ADR (Utilities --
Electric) 1,300 36,075
----------
$ 78,675
----------
Finland -- 0.9%
Huhtamaki OY (Conglomerates) 6,000 $ 279,003
OY Tamro AB (Pharmaceuticals)## 8,000 53,367
----------
$ 332,370
----------
France -- 3.9%
Pin Printemps Redo (Real Estate
Investment Trusts) 860 $ 341,280
Rhone-Poulenc Rorer, Inc.
(Pharmaceuticals) 3,900 304,687
Societe Nationale Elf Aquitaine (Oils) 2,500 227,680
TOTAL S.A., ADR, (Oils) 5,545 223,186
TV Francaise (Entertainment) 2,460 235,280
Union des Assurances Federales S.A
(Insurance) 1,200 148,091
----------
$1,480,204
----------
Germany -- 1.1%
Adidas AG (Apparel and Textiles) 3,300 $ 285,278
Henkel Kgaa, Preferred (Consumer Goods
and Services) 2,400 120,585
----------
$ 405,863
----------
Greece -- 0.2%
Hellenic Telecom (Telecommunications) 5,300 $ 90,641
----------
Hong Kong -- 2.7%
Asia Satellite Telecommunications
(Telecommunications) 1,400 $ 32,725
Cafe de Coral Holding (Electrical
Equipment) 50,000 13,415
Hong Kong Electric Holdings Ltd.
(Utilities -- Electric) 32,000 106,335
Hong Kong Land Holdings Ltd. (Real
Estate) 77,000 214,060
Li & Fung Ltd. (Retail) 14,000 12,400
Swire Pacific Air Ltd., "A"
(Transportation) 21,000 200,252
Wharf Holdings Ltd. (Real Estate) 82,000 409,258
Wing Hang Bank Ltd. (Banks and Credit) 8,000 36,307
----------
$1,024,752
----------
Foreign Stocks -- continued
Italy -- 1.2%
Gucci Group Designs N.V. (Apparel and
Textiles) 1,600 $ 102,200
Instituto Nazionale delle Assicurazioni
(Insurance) 44,000 57,266
Luxottica Group S.p.A., ADR (Consumer
Goods and Services) 1,500 78,000
Telecom Italia S.p.A
(Telecommunications) 51,500 73,438
Telecom Italia S.p.A. (Utilities --
Telephone) 64,500 125,750
----------
$ 436,654
----------
Japan -- 5.9%
Canon, Inc. (Consumer Goods and
Services) 7,000 $ 154,883
DDI Corp. (Telecommunications) 20 132,411
East Japan Railway Co. (Railroads) 21 94,564
Eisai Co., Ltd. (Pharmaceuticals) 5,000 98,531
Hirose Electric (Electrical Equipment) 3,000 173,985
Kirin Beverage Corp. (Beverages) 17,000 229,214
Matsushita Electric Industrial Co.
(Electrical Equipment) 19,000 310,371
Murata Manufacturing Co., Ltd.
(Electrical Equipment) 6,000 199,654
Osaka Sanso Kogyo Ltd. (Chemicals) 18,000 52,895
Sony Corp. (Electronics) 5,000 328,003
Takeda Chemical Industries (Chemicals) 10,000 210,026
Toyota Motor Corp. (Automotive) 5,000 143,907
Ushio, Inc. (Electronics) 7,000 76,232
----------
$2,204,676
----------
Netherlands -- 2.0%
IHC Caland NV (Transportation) 3,400 $ 194,359
Koninklijke Ahold NV, ADR (Real Estate
Investment Trusts) 5,038 311,097
Royal Dutch Petroleum Co., ADR (Oils) 950 162,212
Wolters Kluwer (Publishing) 704 93,576
----------
$ 761,244
----------
New Zealand -- 1.4%
Lion Nathan Ltd. (Food and Beverage
Products) 98,200 $ 235,192
Sky City Ltd. (Entertainment) 19,900 108,398
Telecom Corporation of New Zealand
(Telecommunications) 2,415 195,615
----------
$ 539,205
----------
Peru -- 0.4%
Telefonica del Peru S.A., ADR
(Telecommunications) 6,900 $ 130,238
----------
Singapore -- 0.5%
Hong Leong Finance Ltd. (Financial
Services)+ 3,000 $ 10,423
Mandarin Oriental International, Ltd.
(Restaurants and Lodging) 29,000 40,890
Singapore Press Holdings (Publishing) 8,000 157,850
----------
$ 209,163
----------
61
<PAGE>
Stocks -- continued
Foreign Stocks -- continued
South Korea -- 0.6%
Korea Electric Power Corp., ADR
(Utilities -- Electric) 8,290 $ 169,945
Korea Mobile Telecom, ADR
(Telecommunications) 5,665 72,937
-----------
$ 242,882
-----------
Spain -- 1.9%
Acerinox S.A. (Iron and Steel) 900 $ 130,007
Iberdrola S.A. (Utilities -- Electric) 26,600 376,869
Repsol S.A. (Oils) 5,550 212,821
-----------
$ 719,697
-----------
Sweden -- 3.4%
ABB AB, "B" (Electrical Equipment) 3,480 $ 394,212
Astra AB, Free Shares, "B"
(Pharmaceuticals) 8,860 427,724
Enator AB (Computer Software -- Systems) 1,600 40,382
Enator AB (Computer Software --
Systems)* 8,000 204,842
Ericsson L M Telephone Co.
(Telecommunications) 5,600 169,050
Hennes & Mauritz, "B", Free Shares
(Retail) 405 56,100
-----------
$ 1,292,310
-----------
Switzerland -- 0.5%
Novartis AG (Pharmaceuticals)* 160 $ 183,318
-----------
United Kingdom -- 7.4%
ASDA Group PLC (Retail) 143,000 $ 301,335
British Aerospace PLC (Aerospace) 12,000 262,736
British Petroleum PLC, ADR (Oils) 2,844 402,070
Jarvis Hotels PLC (Restaurants and
Lodging)*+ 65,900 181,769
Kwik-Fit Holdings PLC (Retail) 40,500 150,911
Lloyds TSB Group PLC (Banks and Credit
Companies) 31,000 228,901
PowerGen PLC (Utilities -- Electric) 55,305 541,962
Reuters Holdings, PLC, ADR (Publishing) 2,350 179,775
Storehouse PLC (Retail) 69,600 308,232
Tomkins (Conglomerates) 45,600 210,929
-----------
$ 2,768,620
-----------
Venezuela -- 0.4%
Compania Anonima Nacional Telefonos de
Venezuela, ADR (Telecommunications)* 4,800 $ 135,000
-----------
Total Foreign Stocks $14,159,845
-----------
U.S. Stocks -- 20.0%
Aerospace -- 1.0%
General Dynamics Corp. 3,100 $ 218,550
Lockheed Martin Corp. 1,313 120,139
Martin Marietta, Inc. 1,354 31,481
-----------
$ 370,170
-----------
Banks and Credit Companies -- 1.4%
Barnett Banks, Inc. 8,180 $ 336,403
Norwest Corp. 4,800 208,800
-----------
$ 545,203
-----------
U.S. Stocks -- continued
Business Machines -- 0.7%
Digital Equipment Corp.* 2,200 $ 80,025
International Business Machines Corp. 1,125 169,875
-----------
$ 249,900
-----------
Chemicals -- 0.5%
Air Products & Chemicals, Inc. 1,600 $ 110,600
Praxair, Inc. 1,800 83,025
-----------
$ 193,625
-----------
Consumer Goods and Services -- 2.7%
Philip Morris Cos., Inc. 5,190 $ 584,524
Tyco International Ltd. 7,900 417,712
-----------
$ 1,002,236
-----------
Electrical Equipment -- 1.1%
General Electric Co. 4,350 $ 430,106
-----------
Financial Institutions -- 1.1%
American Express Co. 3,900 $ 220,350
Associates First Capital Corp., "A" 800 35,300
Federal Home Loan Mortgage Corp. 1,400 154,175
-----------
$ 409,825
-----------
Food and Beverage Products -- 0.3%
McCormick & Co., Inc. 4,500 $ 106,031
-----------
Insurance -- 1.9%
Allstate Corp. 4,400 $ 254,650
Cigna Corp. 2,300 314,238
Transamerica Corp. 1,800 142,200
-----------
$ 711,088
-----------
Machinery -- 0.3%
Deere & Co., Inc. 2,900 $ 117,813
-----------
Medical and Health Products -- 2.4%
Lilly (Eli) & Co. 2,996 $ 218,708
Pharmacia & Upjohn, Inc. 5,500 217,938
Schering Plough Corp. 4,600 297,850
Warner-Lambert Co. 2,280 171,000
-----------
$ 905,496
-----------
Oils -- 2.0%
Exxon Corp. 2,600 $ 254,800
Mobil Corp. 2,150 262,837
USX-Marathon Group 10,000 238,750
-----------
$ 756,387
-----------
Photographic Products -- 1.2%
Eastman Kodak Co. 5,480 $ 439,770
-----------
Printing and Publishing -- 0.7%
Gannett Co., Inc. 3,600 $ 269,550
-----------
Utilities -- Electric -- 2.7%
Coastal Corp. 5,600 $ 273,700
FPL Group, Inc. 4,400 202,400
Illinova Corp. 6,200 170,500
Portland General Corp. 3,400 142,800
Sierra Pacific Resources 8,200 235,750
-----------
$ 1,025,150
-----------
Total U.S. Stocks $ 7,532,350
-----------
Total Stocks
(Identified Cost, $20,191,385) $21,692,195
-----------
62
<PAGE>
Bonds -- 33.8%
Principal Amount
Issuer (000 Omitted) Value
Foreign Bonds -- 22.2%
Australia -- 3.6%
Commonwealth of Australia,
9.75s, 2002 AUD 450 $ 398,289
Commonwealth of Australia,
10s, 2002 550 494,656
Commonwealth of Australia,
9.5s, 2003 500 442,544
----------
$1,335,489
----------
Belgium -- 1.2%
Kingdom of Belgium, 8.75s, 2002 BEF 5,000 $ 185,995
Kingdom of Belgium, 7.25s, 2004 7,780 270,936
----------
$ 456,931
----------
Canada -- 4.3%
Government of Canada, 7.5s, 2003 CAD 1,105 $ 872,114
Government of Canada, 7s, 2006 1,000 761,147
----------
$1,633,261
----------
Denmark -- 1.9%
Kingdom of Denmark, 6s, 1999 DKK 1,625 $ 286,862
Kingdom of Denmark, 8s, 2001 985 185,709
Kingdom of Denmark, 7s, 2007 1,494 258,028
----------
$ 730,599
----------
Germany -- 4.7%
Federal Republic of Germany,
7.125s, 2002 DEM 793 $ 565,692
Federal Republic of Germany,
6.5s, 2005 872 593,992
Treuhandanstalt Obligationen,
6.375s, 1999 873 601,766
----------
$1,761,450
----------
Ireland -- 1.2%
Republic of Ireland, 6.25s, 1999 IEP 200 $ 340,804
Republic of Ireland, 8s, 2000 55 99,314
----------
$ 440,118
----------
Italy -- 2.0%
Republic of Italy, 8.313s, 1999 ITL 800,000 $ 558,854
Republic of Italy, 8.313s, 2001 35,000 25,346
Republic of Italy, 8.313s, 2006 220,000 164,234
----------
$ 748,434
----------
Spain -- 1.1%
Government of Spain, 8.4s, 2001 ESP 25,090 $ 211,257
Government of Spain, 10.5s, 2003 23,450 219,423
----------
$ 430,680
----------
Sweden -- 0.8%
Kingdom of Sweden, 10.25s, 2000 SEK 1,700 $ 287,740
----------
United Kingdom -- 1.4%
United Kingdom Treasury, 7s, 2001 GBP 300 $ 508,661
----------
Total Foreign Bonds $8,333,363
U.S. Bonds -- 11.6% ----------
U.S. Federal Agencies -- 3.2%
FNMA, 8s, 2026 $1,188 $1,210,275
----------
U.S. Treasury Obligations -- 8.4%
U.S. Treasury Notes, 5.875s, 1998 $1,700 $1,699,728
U.S. Treasury Notes, 6.25s, 2001 945 945,888
U.S. Treasury Notes, 6.875s, 2006 500 515,235
----------
$3,160,851
----------
Total U.S. Bonds $4,371,126
----------
Total Bonds (Identified Cost, $11,017,449) $12,704,489
----------
Short Term Obligations -- 8.3%
Federal Home Loan Bank, due
1/02/97, at Amortized Cost $3,135 $ 3,134,543
----------
Call Options Purchased
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
Italian Lire/Deutsche Marks/
January/995 ITL 738,607 $ 3,693
Japanese Government Bonds/
January/104.076 JPY 32,000 2,560
February/116.8 29,000 2,117
March/114.25 28,000 1,120
March/115.106 29,000 1,421
----------
Total Call Options Purchased
(Premiums Paid, $16,200) $ 10,911
----------
Put Options Purchased -- 0.6%
Deutsche Marks/British Pounds/
January/2.45 DEM 1,807 $ 86,932
January/2.56 1,888 35,966
Swiss Francs/Deutsche Marks/
January/0.829 CHF 708 25,376
February/0.84 717 18,340
February/0.84 1,213 31,003
March/0.86 1,977 21,449
----------
Total Put Options Purchased
(Premiums Paid, $46,737) $ 219,066
----------
Total Investments
(Identified Cost, $34,406,314) $37,761,204
----------
Call Options Written
Deutsche Marks/British Pounds/
January/2.3682 DEM 1,747 $ --
Swiss Francs/Deutsche Marks/
February/0.8265 CHF 1,194 (8)
----------
Total Call Options Written
(Premiums Received, $10,317) $ (8)
----------
Put Options Written -- (0.4)%
Deutsche Marks/British Pounds/
January/2.45 DEM 1,807 $ (86,574)
Japanese Government Bonds
January/104.076 JPY 32,000 (992)
February/116.8 29,000 (1,015)
March/114.25 28,000 (4,368)
March/115.106 29,000 (4,698)
Swiss Francs/Deutsche Marks
January/0.829 CHF 708 (25,394)
February/0.84 1,931 (49,364)
----------
Total Put Options Written
(Premiums Received, $64,875) $ (172,405)
----------
Other Assets, Less Liabilities -- 0.1% 49,101
----------
Net Assets -- 100.0% $37,637,892
===========
See portfolio footnotes and notes to financial statements
63
<PAGE>
Portfolio of Investments -- December 31, 1996
Zero Coupon Series 2000 Portfolio
U.S. Government Guaranteed -- 99.8%
Principal Amount
Issuer (000 Omitted) Value
Treasury Investment Growth Receipts -- 3.7%
Series 18, due 2/15/01 $ 97 $ 75,552
Series 12, due 5/15/01 22 16,869
Series 15, due 8/15/01 88 66,371
----------
Total Treasury Investment Growth
Receipts (Identified Cost, $139,574) $ 158,792
U.S. Treasury Securities Stripped Interest Payments -- ----------
96.1%
Generic Coupons, due
5/15/00 $ 742 $ 606,177
Generic Coupons, due
8/15/00 115 92,473
Generic Coupons, due
11/15/00 4,256 3,369,688
Generic Coupons, due
5/15/01 131 100,507
----------
Total U.S. Treasury Securities Stripped
Interest Payments (Identified Cost, $4,071,962) $4,168,845
----------
Total Investments
(Identified Cost, $4,211,536) $4,327,637
----------
Other Assets,
Less Liabilities -- 0.2% 9,405
----------
Net Assets -- 100.0% $4,337,042
==========
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
*Non-income producing security.
**Non-income producing security - in default.
#Payment-in-kind security.
##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
BEF = Belgian Francs IEP = Irish Punts
CAD = Canadian Dollars ITL = Italian Lire
CHF = Swiss Francs JPY = Japanese Yen
DEM = Deutsche Marks NLG = Dutch Guilders
DKK = Danish Kroner NZD = New Zealand Dollars
ESP = Spanish Pesetas SEK = Swedish Kronor
FRF = French Francs
64
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1996
<TABLE>
<CAPTION>
Capital Conservative
Assets: Appreciation Growth
Investments -- Series Series
----------------- ---------------
<S> <C> <C>
Unaffiliated issuers, at cost ........................ $ 838,663,185 $460,227,607
Unrealized appreciation .............................. 219,573,041 110,282,336
-------------- -------------
Total investments, at value ........................... $1,058,236,226 $570,509,943
Cash ................................................... 6,497 5,569
Receivable for investments sold ........................... 2,681,753 --
Receivable for Trust shares sold ........................ 445,494 449,879
Interest and dividends receivable ........................ 905,638 866,311
Other assets ............................................. 8,435 11,992
-------------- -------------
Total assets .......................................... $1,062,284,043 $571,843,694
============== =============
Liabilities:
Payable for investments purchased ........................ $ 325,298 $ 172,718
Payable for Trust shares reacquired ..................... 151,338 572,349
Payable to investment adviser ........................... 65,402 25,944
Accrued expenses and other liabilities .................. 110,574 64,648
-------------- -------------
Total liabilities .................................... $ 652,612 $ 835,659
-------------- -------------
Net assets .......................................... $1,061,631,431 $571,008,035
============== =============
Net assets consist of:
Paid-in capital .......................................... $ 738,885,344 $422,442,883
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies ............ 219,573,041 110,282,160
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions ............ 103,173,046 31,094,901
Accumulated undistributed net investment income ......... -- 7,188,091
-------------- -------------
Net assets .......................................... $1,061,631,431 $571,008,035
============== =============
Shares of beneficial interest outstanding ............... 29,628,372 21,549,255
============== =============
Net asset value, offering price and redemption price
per share (net assets [dividedby] shares of beneficial
interest outstanding) ................................. $35.83 $26.50
========== ========== .
<CAPTION>
Emerging Government High
Assets: Growth Securities Yield
Investments -- Series Series Series
--------------- --------------- --------------
<S> <C> <C> <C>
Unaffiliated issuers, at cost ........................ $227,900,132 $376,652,522 $187,955,451
Unrealized appreciation .............................. 22,373,796 1,701,900 5,119,700
------------- ------------ ------------
Total investments, at value ........................... $250,273,928 $378,354,422 $193,075,151
Cash ................................................... 906,051 455 7,678
Receivable for investments sold ........................... 66,852 574 --
Receivable for Trust shares sold ........................ 507,218 64,849 87,906
Interest and dividends receivable ........................ 32,586 4,793,032 3,917,489
Other assets ............................................. 4,180 3,982 1,646
------------- ------------ ------------
Total assets .......................................... $251,790,815 $383,217,314 $197,089,870
============= ============ ============
Liabilities:
Payable for investments purchased ........................ $ 900,100 $ -- $ --
Payable for Trust shares reacquired ..................... 5 28,868 529,019
Payable to investment adviser ........................... 15,284 17,347 12,035
Accrued expenses and other liabilities .................. 49,201 64,189 50,559
------------- ------------ ------------
Total liabilities .................................... $ 964,590 $ 110,404 $ 591,613
------------- ------------ ------------
Net assets .......................................... $250,826,225 $383,106,910 $196,498,257
============= ============ ============
Net assets consist of:
Paid-in capital .......................................... $228,002,771 $365,852,204 $185,308,581
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies ............ 22,373,796 1,701,900 5,119,700
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions ............ 260,974 (9,743,917) (8,935,904)
Accumulated undistributed net investment income ......... 188,684 25,296,723 15,005,880
------------- ------------ ------------
Net assets .......................................... $250,826,225 $383,106,910 $196,498,257
============= ============ ============
Shares of beneficial interest outstanding ............... 16,912,918 29,773,965 21,328,113
============= ============ ============
Net asset value, offering price and redemption price
per share (net assets [dividedby] shares of beneficial
interest outstanding) ................................. $14.83 $12.87 $9.21
========== ========== =========
</TABLE>
See notes to financial statements
65
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1996 -- continued
<TABLE>
<CAPTION>
MFS/Foreign &
Colonial
Emerging
Managed Markets
Assets: Sectors Equity
Investments -- Series Series
--------------- ----------------
<S> <C> <C>
Unaffiliated issuers, at cost ........................ $246,507,634 $3,320,408
Unrealized appreciation (depreciation) .................. 20,682,436 44,237
------------- ----------
Total investments, at value ........................... $267,190,070 $3,364,645
Cash ................................................... 5,467 257
Foreign currency, at value
(identified cost, $193, $1,906 and $77,973, respectively) -- 193
Net receivable for forward foreign
currency exchange contracts sold ........................ -- --
Net receivable for closed forward foreign currency
exchange contracts .................................... -- --
Receivable for investments sold ........................... 2,361,097 --
Receivable for Trust shares sold ........................ 401,665 4,463
Interest and dividends receivable ........................ 121,331 815
Receivable from investment adviser ..................... -- 3,970
Other assets ............................................. 2,095 1,792
------------- ----------
Total assets .......................................... $270,081,725 $3,376,135
============= ==========
Liabilities:
Payable for investments purchased ........................ $ 3,554,638 $ 81,719
Payable for Trust shares reacquired ..................... 93,985 8,930
Written options outstanding, at value
(premiums received, $31,117) ........................... -- --
Net payable for open forward foreign currency exchange
contracts purchased .................................... -- --
Payable to investment adviser ........................... 16,424 --
Accrued expenses and other liabilities .................. 48,764 14,049
------------- ----------
Total liabilities .................................... $ 3,713,811 $ 104,698
------------- ----------
Net assets .......................................... $266,367,914 $3,271,437
============= ==========
Net assets consist of:
Paid-in capital .......................................... $214,079,577 $3,229,761
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign 20,682,436 44,230
currencies
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions ......... 31,409,315 (5,296)
Accumulated undistributed net investment income ......... 196,586 2,742
------------- ----------
Net assets .......................................... $266,367,914 $3,271,437
============= ==========
Shares of beneficial interest outstanding ............... 10,147,218 327,100
============= ==========
Net asset value, offering price and redemption price
per share (net assets [dividedby] shares of beneficial
interest outstanding) .................................... $26.25 $10.00
========== ==========
<CAPTION>
MFS/Foreign &
MFS/Foreign & Colonial
Colonial International
International Growth and Money
Assets: Growth Income Market
Investments -- Series Series Series
---------------- ---------------- --------------
<S> <C> <C> <C>
Unaffiliated issuers, at cost ........................ $6,713,856 $34,603,368 $406,081,258
Unrealized appreciation (depreciation) .................. 85,839 619,796 --
---------- ------------ -------------
Total investments, at value ........................... $6,799,695 $35,223,164 $406,081,258
Cash ................................................... 3,629 84,878 407,003
Foreign currency, at value
(identified cost, $193, $1,906 and $77,973, respectively) 1,871 77,482 --
Net receivable for forward foreign
currency exchange contracts sold ........................ -- 31,447 --
Net receivable for closed forward foreign currency
exchange contracts .................................... -- 9,922 --
Receivable for investments sold ........................... -- 162,061 --
Receivable for Trust shares sold ........................ 49,843 48,732 3,290,387
Interest and dividends receivable ........................ 4,501 188,194 --
Receivable from investment adviser ..................... -- -- --
Other assets ............................................. 502 26,211 4,083
---------- ------------ -------------
Total assets .......................................... $6,860,041 $35,852,091 $409,782,731
========== ============ =============
Liabilities:
Payable for investments purchased ........................ $1,319,143 $ -- $ --
Payable for Trust shares reacquired ..................... -- 5,820 523,555
Written options outstanding, at value
(premiums received, $31,117) ........................... -- 65,305 --
Net payable for open forward foreign currency exchange
contracts purchased .................................... -- 50,408 --
Payable to investment adviser ........................... -- 2,805 16,652
Accrued expenses and other liabilities .................. 15,675 18,170 77,198
---------- ------------ -------------
Total liabilities .................................... $1,334,818 $ 142,508 $ 617,405
---------- ------------ -------------
Net assets .......................................... $5,525,223 $35,709,583 $409,165,326
========== ============ =============
Net assets consist of:
Paid-in capital .......................................... $5,594,093 $34,644,825 $409,165,326
Unrealized appreciation (depreciation) on investments and
translation of assets and liabilities in foreign (77,930) 577,956 --
currencies
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions ......... (7,804) 95,605 --
Accumulated undistributed net investment income ......... 16,864 391,197 --
---------- ------------ -------------
Net assets .......................................... $5,525,223 $35,709,583 $409,165,326
========== ============ =============
Shares of beneficial interest outstanding ............... 562,577 3,361,010 409,165,326
========== ============ =============
Net asset value, offering price and redemption price
per share (net assets [dividedby] shares of beneficial
interest outstanding) .................................... $9.82 $10.62 $1.00
========== =========== =========
</TABLE>
See notes to financial statements
66
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1996 -- continued
<TABLE>
<CAPTION>
Total
Assets: Research Return
Investments -- Series Series
--------------- -----------------
<S> <C> <C>
Unaffiliated issuers, at cost ........................... $307,204,403 $1,171,563,058
Unrealized appreciation ................................. 32,347,539 158,139,762
------------- ---------------
Total investments, at value ........................... $339,551,942 $1,329,702,820
Cash ...................................................... 10,955 62,384
Foreign currency, at value
(identified cost, $5, $178 and $63,002, respectively) ...... 5 --
Net receivable for forward foreign currency
exchange contracts purchased .............................. -- --
Receivable for investments sold ........................... 88,017 2,677,205
Receivable for Trust shares sold ........................... 544,394 222,350
Interest and dividends receivable ........................ 313,483 8,866,955
Other assets ............................................. 23,389 11,866
------------- ---------------
Total assets .......................................... $340,532,185 $1,341,543,580
============= ===============
Liabilities:
Payable for investments purchased ........................ $ 15,062,380 $ 5,917,697
Payable for Trust shares reacquired ........................ 5 440,031
Written options outstanding, at value
(premiums received, $12,640) .............................. -- --
Net payable for open forward foreign currency exchange
contracts sold ............................................. -- --
Net payable for closed forward foreign currency exchange
contracts ................................................ -- --
Payable to investment adviser ........................... 19,761 74,122
Accrued expenses and other liabilities ..................... 60,826 89,567
------------- ---------------
Total liabilities ....................................... $ 15,142,972 $ 6,521,417
------------- ---------------
Net assets .......................................... $325,389,213 $1,335,022,163
============= ===============
Net assets consist of:
Paid-in capital .......................................... $280,202,945 $1,030,730,042
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies ............ 32,347,316 158,138,193
Accumulated undistributed net realized gain on investments
and foreign currency transactions ........................ 11,885,207 96,073,810
Accumulated undistributed net investment income ......... 953,745 50,080,118
------------- ---------------
Net assets .......................................... $325,389,213 $1,335,022,163
============= ===============
Shares of beneficial interest outstanding .................. 19,633,104 68,675,042
============= ===============
Net asset value, offering price and redemption price
per share (net assets [dividedby] shares of beneficial
interest outstanding) .................................... $16.57 $19.44
============= ===============
<CAPTION>
World
Asset
Assets: Utilities Value Allocation
Investments -- Series Series Series
-------------- -------------- -------------
<S> <C> <C> <C>
Unaffiliated issuers, at cost ........................... $62,444,540 $15,964,794 $72,540,037
Unrealized appreciation ................................. 6,520,732 474,002 4,028,431
------------ ------------ ------------
Total investments, at value ........................... $68,965,272 $16,438,796 $76,568,468
Cash ...................................................... 1,633 1,395 2,784
Foreign currency, at value
(identified cost, $5, $178 and $63,002, respectively) ...... -- 187 62,447
Net receivable for forward foreign currency
exchange contracts purchased .............................. -- -- 55,093
Receivable for investments sold ........................... 1,840,050 -- 347,202
Receivable for Trust shares sold ........................... 80,723 266,446 42,209
Interest and dividends receivable ........................ 449,865 11,459 339,903
Other assets ............................................. 464 35 278
------------ ------------ ------------
Total assets .......................................... $71,338,007 $16,718,318 $77,418,384
============ ============ ============
Liabilities:
Payable for investments purchased ........................ $ 626,764 $ 1,595 $ 258,088
Payable for Trust shares reacquired ........................ 128 3 34
Written options outstanding, at value
(premiums received, $12,640) .............................. -- -- 12,537
Net payable for open forward foreign currency exchange
contracts sold ............................................. -- -- 41,111
Net payable for closed forward foreign currency exchange
contracts ................................................ -- -- 59,691
Payable to investment adviser ........................... 4,318 -- 4,699
Accrued expenses and other liabilities ..................... 26,619 16,865 26,439
------------ ------------ ------------
Total liabilities ....................................... $ 657,829 $ 18,463 $ 402,599
------------ ------------ ------------
Net assets .......................................... $70,680,178 $16,699,855 $77,015,785
============ ============ ============
Net assets consist of:
Paid-in capital .......................................... $54,896,571 $15,940,946 $68,247,960
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies ............ 6,521,071 474,019 3,983,459
Accumulated undistributed net realized gain on investments
and foreign currency transactions ........................ 6,952,226 219,157 3,191,446
Accumulated undistributed net investment income ......... 2,310,310 65,733 1,592,920
------------ ------------ ------------
Net assets .......................................... $70,680,178 $16,699,855 $77,015,785
============ ============ ============
Shares of beneficial interest outstanding .................. 5,053,114 1,517,402 5,589,209
============ ============ ============
Net asset value, offering price and redemption price
per share (net assets [dividedby] shares of beneficial
interest outstanding) .................................... $13.99 $11.01 $13.78
============ ============ ============
</TABLE>
See notes to financial statements
67
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1996 -- continued
<TABLE>
<CAPTION>
Zero
World Coupon
World World Total Series
Assets: Governments Growth Return 2000
Investments -- Series Series Series Portfolio
--------------- --------------- -------------- ------------
<S> <C> <C> <C> <C>
Unaffiliated issuers, at cost ........................ $137,945,784 $182,445,512 $34,406,314 $4,211,536
Unrealized appreciation .............................. 3,157,979 20,185,751 3,354,890 116,101
------------- ------------- ------------ ----------
Total investments, at value ........................... $141,103,763 $202,631,263 $37,761,204 $4,327,637
Cash ................................................... 1,411 17,568 6,640 12,957
Foreign currency, at value
(identified cost, $110,090 and $2, respectively) ......... -- 109,817 2 --
Net receivable for forward foreign currency
exchange contracts sold ................................. 1,196,207 -- 18,569 --
Receivable for investments sold ........................ -- 122,694 12,732 --
Receivable for Trust shares sold ........................ 58,459 179,643 47,356 --
Interest and dividends receivable ..................... 4,363,298 205,166 275,200 --
Receivable from investment adviser ..................... -- -- -- 4,099
Other assets ............................................. 1,643 1,579 147 50
------------- ------------- ------------ ----------
Total assets ....................................... $146,724,781 $203,267,730 $38,121,850 $4,344,743
============= ============= ============ ==========
Liabilities:
Payable for investments purchased ........................ $ -- $ 71,732 $ 123,395 $ --
Payable for Trust shares reacquired ..................... 216,584 1,769 4,454 1,070
Written options outstanding, at value
(premiums received, $1,067,793 and $75,192,
respectively) .......................................... 2,349,188 -- 172,413 --
Net payable for forward foreign currency exchange
contracts purchased .................................... 1,238,597 -- 77,759 --
Net payable for closed forward foreign currency exchange
contracts ............................................. 1,096,013 -- 87,421 --
Payable to investment adviser ........................... 8,684 14,825 2,304 89
Accrued expenses and other liabilities .................. 51,283 73,898 16,212 6,542
------------- ------------- ------------ ----------
Total liabilities .................................... $ 4,960,349 $ 162,224 $ 483,958 $ 7,701
------------- ------------- ------------ ----------
Net assets .......................................... $141,764,432 $203,105,506 $37,637,892 $4,337,042
============= ============= ============ ==========
Net assets consist of:
Paid-in capital .......................................... $135,421,697 $178,745,334 $33,148,403 $4,052,012
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies ............ 733,317 20,184,826 3,111,350 116,101
Accumulated undistributed net realized gain (loss) on
investments and foreign currency transactions ......... 632,661 3,337,240 609,127 (61,962)
Accumulated undistributed net investment income ......... 4,976,757 838,106 769,012 230,891
------------- ------------- ------------ ----------
Net assets .......................................... $141,764,432 $203,105,506 $37,637,892 $4,337,042
============= ============= ============ ==========
Shares of beneficial interest outstanding ............... 12,592,121 15,583,012 2,837,231 488,282
============= ============= ============ ==========
Net asset value, offering price and redemption price
per share (net assets [dividedby] shares of beneficial
interest outstanding) ................................. $11.26 $13.03 $13.27 $8.88
============= ============= ============ ==========
</TABLE>
See notes to financial statements
68
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Year Ended December 31, 1996
<TABLE>
<CAPTION>
Net investment income: Capital Conservative
Appreciation Growth
Income -- Series Series
--------------- ---------------
<S> <C> <C>
Interest ................................................... $ 1,058,532 $1,360,788
Dividends ................................................... 5,967,048 8,465,393
Foreign taxes withheld .................................... (61,346) (78,356)
----------- ----------
Total investment income .................................... $ 6,964,234 $9,747,825
----------- ----------
Expenses --
Investment advisory fees .................................... $ 7,006,502 $2,320,310
Trustees' fees ............................................. 647 647
Custodian fees ............................................. 362,382 184,882
Printing expenses .......................................... 56,499 16,556
Auditing fees ................................................ 36,908 33,958
Legal fees ................................................... 1,844 2,339
Miscellaneous ................................................ -- --
----------- ----------
Total expenses ............................................. $ 7,464,782 $2,558,692
Waiver of expenses by investment adviser .................. -- --
Fees paid indirectly ....................................... (5,846) (7,397)
----------- ----------
Net expenses ............................................. $ 7,458,936 $2,551,295
----------- ----------
Net investment income (loss) .............................. $ (494,702) $7,196,530
----------- ----------
Realized and unrealized gain (loss)
on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ....................................... $103,790,117 $31,422,180
Foreign currency transactions .............................. 19,482 (8,340)
Futures contracts .......................................... -- --
----------- ----------
Net realized gain (loss)
on investments and foreign currency
transactions ............................................. $103,809,599 $31,413,840
----------- ----------
Change in unrealized appreciation (depreciation) on --
Investments ................................................ $78,724,258 $58,921,678
Translation of assets and liabilities in foreign currencies (43,558) (1,086)
----------- ----------
Net unrealized gain (loss) on investments and
foreign currency translation .............................. $78,680,700 $58,920,592
----------- ----------
Net realized and unrealized gain (loss)
on investments and foreign currency ..................... $182,490,299 $90,334,432
----------- ----------
Increase in net assets
from operations .......................................... $181,995,597 $97,530,962
=========== ==========
<CAPTION>
Net investment income: Emerging Government High
Growth Securities Yield
Income -- Series Series Series
-------------- --------------- -------------
<S> <C> <C> <C>
Interest ................................................... $1,152,386 $ 27,854,463 $16,450,477
Dividends ................................................... 135,759 -- --
Foreign taxes withheld .................................... (6,164) -- --
---------- ------------ -----------
Total investment income .................................... $1,281,981 $ 27,854,463 $16,450,477
---------- ------------ -----------
Expenses --
Investment advisory fees .................................... $1,182,281 $ 2,121,808 $ 1,252,812
Trustees' fees ............................................. 647 647 647
Custodian fees ............................................. 68,612 202,457 86,709
Printing expenses .......................................... 8,882 41,731 17,927
Auditing fees ................................................ 63,408 43,208 51,483
Legal fees ................................................... 2,139 2,120 2,359
Miscellaneous ................................................ -- 6,190 516
---------- ------------ -----------
Total expenses ............................................. $1,325,969 $ 2,418,161 $ 1,412,453
Waiver of expenses by investment adviser .................. (225,349) -- --
Fees paid indirectly ....................................... (10,268) (1,920) (8,132)
---------- ------------ -----------
Net expenses ............................................. $1,090,352 $ 2,416,241 $ 1,404,321
---------- ------------ -----------
Net investment income (loss) .............................. $ 191,629 $ 25,438,222 $15,046,156
---------- ------------ -----------
Realized and unrealized gain (loss)
on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ....................................... $ 281,508 $ (1,039,669) $ 1,384,999
Foreign currency transactions .............................. (2,841) -- --
Futures contracts .......................................... -- (1,464,071) --
---------- ------------ -----------
Net realized gain (loss)
on investments and foreign currency
transactions ............................................. $ 278,667 $ (2,503,740) $ 1,384,999
---------- ------------ -----------
Change in unrealized appreciation (depreciation) on --
Investments ................................................ $16,792,021 $(16,642,829) $ 3,497,778
Translation of assets and liabilities in foreign currencies -- -- --
---------- ------------ -----------
Net unrealized gain (loss) on investments and
foreign currency translation .............................. $16,792,021 $(16,642,829) $ 3,497,778
---------- ------------ -----------
Net realized and unrealized gain (loss)
on investments and foreign currency ..................... $17,070,688 $(19,146,569) $ 4,882,777
---------- ------------ -----------
Increase in net assets
from operations .......................................... $17,262,317 $ 6,291,653 $19,928,933
========== ============ ===========
</TABLE>
See notes to financial statements
69
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Year Ended December 31, 1996 -- continued
<TABLE>
<CAPTION>
MFS/Foreign &
Colonial
Emerging
Net investment income: Managed Markets
Sectors Equity
Income -- Series Series++
-------------- ----------------
<S> <C> <C>
Interest ................................................... $ 499,802 $ 15,225
Dividends ................................................... 1,624,629 5,860
Foreign taxes withheld .................................... (16,642) (157)
---------- --------
Total investment income .................................... $2,107,789 $ 20,928
---------- --------
Expenses --
Investment advisory fees .................................... $1,729,822 $ 11,151
Trustees' fees ............................................. 647 647
Custodian fees ............................................. 110,846 707
Printing expenses .......................................... 23,142 125
Auditing fees ................................................ 34,333 15,915
Legal fees ................................................... 1,310 2,321
Miscellaneous ................................................ 884 382
---------- --------
Total expenses ............................................. $1,900,984 $ 31,248
Waiver of expenses by investment adviser .................. -- (11,151)
Assumption of expenses by investment adviser ............... -- (5,761)
Fees paid indirectly ....................................... -- (508)
---------- --------
Net expenses ............................................. $1,900,984 $ 13,828
---------- --------
Net investment income .................................... $ 206,805 $ 7,100
---------- --------
Realized and unrealized gain (loss)
on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ....................................... $31,514,301 $ (5,296)
Written option transactions ................................. -- --
Foreign currency transactions .............................. (10,219) (4,358)
---------- --------
Net realized gain (loss)
on investments and foreign currency
transactions ............................................. $31,504,082 $ (9,654)
---------- --------
Change in unrealized appreciation (depreciation) on --
Investments ................................................ $5,998,655 $ 44,237
Written options ............................................. -- --
Translation of assets and liabilities in foreign currencies 3,394 (7)
---------- --------
Net unrealized gain (loss) on investments and
foreign currency translation .............................. $6,002,049 $ 44,230
---------- --------
Net realized and unrealized gain (loss)
on investments and foreign currency ..................... $37,506,131 $ 34,576
---------- --------
Increase (decrease) in net assets
from operations .......................................... $37,712,936 $ 41,676
========== ========
+From June 3, 1996 (commencement of investment operations) to December 31, 1996.
++From June 5, 1996 (commencement of investment operations) to December 31, 1996.
See notes to financial statements
<CAPTION>
MFS/Foreign &
MFS/Foreign & Colonial
Colonial International
Net investment income: International Growth and Money
Growth Income Market
Income -- Series+ Series Series
---------------- --------------- -------------
<S> <C> <C> <C>
Interest ................................................... $ 31,675 $ 412,874 $17,863,613
Dividends ................................................... 15,807 384,846 --
Foreign taxes withheld .................................... (2,128) (49,559) --
-------- --------- -----------
Total investment income .................................... $ 45,354 $ 748,161 $17,863,613
-------- --------- -----------
Expenses --
Investment advisory fees .................................... $ 14,479 $ 230,054 $ 1,658,426
Trustees' fees ............................................. 647 647 647
Custodian fees ............................................. 1,488 26,333 140,498
Printing expenses .......................................... 135 2,315 43,459
Auditing fees ................................................ 18,365 11,958 28,633
Legal fees ................................................... 2,296 2,338 2,320
Miscellaneous ................................................ 924 342 4,034
-------- --------- -----------
Total expenses ............................................. $ 38,334 $ 273,987 $ 1,878,017
Waiver of expenses by investment adviser .................. (14,479) (44,482) --
Assumption of expenses by investment adviser ............... -- -- --
Fees paid indirectly ....................................... (921) (2,364) (4,957)
-------- --------- -----------
Net expenses ............................................. $ 22,934 $ 227,141 $ 1,873,060
-------- --------- -----------
Net investment income .................................... $ 22,420 $ 521,020 $15,990,553
-------- --------- -----------
Realized and unrealized gain (loss)
on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ....................................... $ (7,804) $ 92,414 $ --
Written option transactions ................................. -- 20,285 --
Foreign currency transactions .............................. (5,556) (146,917) --
-------- --------- -----------
Net realized gain (loss)
on investments and foreign currency
transactions ............................................. $(13,360) $ (34,218) $ --
-------- --------- -----------
Change in unrealized appreciation (depreciation) on --
Investments ................................................ $(76,222) $ 497,605 --
Written options ............................................. -- (34,187) --
Translation of assets and liabilities in foreign currencies (1,708) (1,108) --
-------- --------- -----------
Net unrealized gain (loss) on investments and
foreign currency translation .............................. $(77,930) $ 462,310 $ --
-------- --------- -----------
Net realized and unrealized gain (loss)
on investments and foreign currency ..................... $(91,290) $ 428,092 $ --
-------- --------- -----------
Increase (decrease) in net assets
from operations .......................................... $(68,870) $ 949,112 $15,990,553
======== ========= ===========
</TABLE>
+From June 3, 1996 (commencement of investment operations) to
December 31, 1996.
++From June 5, 1996 (commencement of investment operations) to
December 31, 1996.
See notes to financial statements
70
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Year Ended December 31, 1996 -- continued
<TABLE>
<CAPTION>
Net investment income: Total
Research Return
Income -- Series Series
-------------- ---------------
<S> <C> <C>
Interest ................................................... $ 587,600 $37,520,040
Dividends ................................................... 2,002,469 21,544,307
Foreign taxes withheld .................................... (45,949) (257,151)
---------- -----------
Total investment income .................................... $2,544,120 $58,807,196
---------- -----------
Expenses --
Investment advisory fees .................................... $1,401,185 $ 8,228,127
Trustees' fees ............................................. 647 647
Custodian fees ............................................. 97,823 391,689
Printing expenses .......................................... 12,767 41,029
Auditing fees ................................................ 66,759 39,108
Legal fees ................................................... 2,339 2,339
Miscellaneous ................................................ -- --
---------- -----------
Total expenses ............................................. $1,581,520 $ 8,702,939
Waiver of expenses by investment adviser .................. -- --
Fees paid indirectly ....................................... (9,634) (29,644)
---------- -----------
Net expenses ............................................. $1,571,886 $ 8,673,295
---------- -----------
Net investment income .................................... $ 972,234 $50,133,901
---------- -----------
Realized and unrealized gain (loss)
on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions .................................... $11,942,236 $96,355,250
Written option transactions ................................. -- --
Foreign currency transactions .............................. (18,442) (14,291)
---------- -----------
Net realized gain
on investments and foreign currency transactions . $11,923,794 $96,340,959
---------- -----------
Change in unrealized appreciation (depreciation) on --
Investments ................................................ $25,455,597 $15,775,795
Written options ............................................. -- --
Translation of assets and liabilities in foreign currencies (23) (2,012)
---------- -----------
Net unrealized gain on investments and foreign
currency translation ....................................... $25,455,574 $15,773,783
---------- -----------
Net realized and unrealized gain on investments
and foreign currency .................................... $37,379,368 $112,114,742
---------- -----------
Increase in net assets
from operations .......................................... $38,351,602 $162,248,643
========== ===========
+From June 3, 1996 (commencement of investment operations) to December 31, 1996.
See notes to financial statements
<CAPTION>
World
Net investment income: Asset
Utilities Value Allocation
Income -- Series Series+ Series
------------- ----------- ------------
<S> <C> <C> <C>
Interest ................................................... $ 860,056 $ 53,412 $1,372,805
Dividends ................................................... 2,111,852 36,159 660,414
Foreign taxes withheld .................................... (121,326) (604) (71,642)
---------- -------- ----------
Total investment income .................................... $2,850,582 $ 88,967 $1,961,577
---------- -------- ----------
Expenses --
Investment advisory fees .................................... $ 418,966 $ 27,382 $ 390,024
Trustees' fees ............................................. 647 647 647
Custodian fees ............................................. 30,393 2,436 49,878
Printing expenses .......................................... 7,305 236 2,240
Auditing fees ................................................ 32,158 15,915 44,568
Legal fees ................................................... 2,339 2,496 2,139
Miscellaneous ................................................ -- 2,240 --
---------- -------- ----------
Total expenses ............................................. $ 491,808 $ 51,352 $ 489,496
Waiver of expenses by investment adviser .................. -- (27,382) --
Fees paid indirectly ....................................... (2,703) (1,133) (4,994)
---------- -------- ----------
Net expenses ............................................. $ 489,105 $ 22,837 $ 484,502
---------- -------- ----------
Net investment income .................................... $2,361,477 $ 66,130 $1,477,075
---------- -------- ----------
Realized and unrealized gain (loss)
on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions .................................... $6,985,037 $219,157 $3,482,635
Written option transactions ................................. -- -- 41,961
Foreign currency transactions .............................. (8,318) (397) (179,182)
---------- -------- ----------
Net realized gain
on investments and foreign currency transactions . $6,976,719 $218,760 $3,345,414
---------- -------- ----------
Change in unrealized appreciation (depreciation) on --
Investments ................................................ $1,889,069 $474,002 $2,615,713
Written options ............................................. -- -- 2,621
Translation of assets and liabilities in foreign currencies 1,652 17 (49,232)
---------- -------- ----------
Net unrealized gain on investments and foreign
currency translation ....................................... $1,890,721 $474,019 $2,569,102
---------- -------- ----------
Net realized and unrealized gain on investments
and foreign currency .................................... $8,867,440 $692,779 $5,914,516
---------- -------- ----------
Increase in net assets
from operations .......................................... $11,228,917 $758,909 $7,391,591
========== ======== ==========
</TABLE>
+From June 3, 1996 (commencement of investment operations) to December 31, 1996.
See notes to financial statements
71
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Year Ended December 31, 1996 -- continued
<TABLE>
<CAPTION>
Zero
World Coupon
Net investment income: World World Total Series
Governments Growth Return 2000
Income -- Series Series Series Portfolio
--------------- -------------- ------------- -----------
<S> <C> <C> <C> <C>
Interest ................................................... $ 10,054,540 $ 577,764 $ 761,476 $ 253,107
Dividends ................................................... -- 1,794,294 383,942 --
Foreign taxes withheld .................................... -- (177,022) (33,077) --
------------ ---------- --------- ---------
Total investment income .................................... $ 10,054,540 $2,195,036 $1,112,341 $ 253,107
------------ ---------- --------- ---------
Expenses --
Investment advisory fees .................................... $ 1,091,953 $1,633,811 $ 194,413 $ 11,094
Trustees' fees ............................................. 647 647 647 647
Custodian fees ............................................. 156,973 160,731 24,919 1,919
Printing expenses .......................................... 17,624 25,690 3,227 251
Auditing fees ............................................. 39,409 70,008 24,408 11,108
Legal fees ................................................... 2,320 2,374 2,339 2,320
Miscellaneous ................................................ 3,042 -- -- 359
------------ ---------- --------- ---------
Total expenses ............................................. $ 1,311,968 $1,893,261 $ 249,953 $ 27,698
Waiver of expenses by investment adviser .................. -- -- -- --
Assumption of expenses by investment adviser ............... -- -- -- (4,099)
Fees paid indirectly ....................................... (260) (25,551) (1,216) (1,411)
------------ ---------- --------- ---------
Net expenses ............................................. $ 1,311,708 $1,867,710 $ 248,737 $ 22,188
------------ ---------- --------- ---------
Net investment income .................................... $ 8,742,832 $ 327,326 $ 863,604 $ 230,919
------------ ---------- --------- ---------
Realized and unrealized gain (loss)
on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions .................................... $ 1,990,362 $3,804,715 $ 871,568 $ (3,785)
Written option transactions ................................. 835,023 -- 60,641 --
Foreign currency transactions .............................. (10,600,477) 426,136 (418,166) --
------------ ---------- --------- ---------
Net realized gain (loss)
on investments and foreign currency transactions . $ (7,775,092) $4,230,851 $ 514,043 $ (3,785)
------------ ---------- --------- ---------
Change in unrealized appreciation (depreciation) on --
Investments ................................................ $ 539,904 $15,707,948 $2,627,607 $(145,491)
Written options ............................................. (1,401,705) -- (99,596) --
Translation of assets and liabilities in foreign currencies 6,393,306 (23,804) (73,461) --
------------ ---------- --------- ---------
Net unrealized gain (loss)
on investments and foreign currency translation ............ $ 5,531,505 $15,684,144 $2,454,550 $(145,491)
------------ ---------- --------- ---------
Net realized and unrealized gain (loss)
on investments and foreign currency ..................... $ (2,243,587) $19,914,995 $2,968,593 $(149,276)
------------ ---------- --------- ---------
Increase in net assets from operations .................. $ 6,499,245 $20,242,321 $3,832,197 $ 81,643
============ ========== ========= =========
</TABLE>
See notes to financial statements
72
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1996
<TABLE>
<CAPTION>
Capital Conservative
Increase (decrease) in net assets: Appreciation Growth
From operations -- Series Series
---------------- ---------------
<S> <C> <C>
Net investment income (loss) ........................ $ (494,702) $ 7,196,530
Net realized gain (loss) on investments and foreign
currency transactions .............................. 103,809,599 31,413,840
Net unrealized gain (loss) on investments and foreign
currency translation ................................. 78,680,700 58,920,592
------------- ------------
Increase in net assets from operations ............ $ 181,995,597 $ 97,530,962
------------- ------------
Distributions declared to shareholders --
From net investment income ........................... $ (850,749) $ (4,723,151)
From net realized gain on investments and foreign
currency transactions .............................. (75,199,375) (10,911,137)
------------- ------------
Total distributions declared to shareholders ...... $ (76,050,124) $(15,634,288)
------------- ------------
Trust share transactions --
Net proceeds from sale of shares ..................... $ 385,162,405 $190,035,383
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................ 76,050,124 15,634,288
Cost of shares reacquired ........................... (302,628,263) (18,581,922)
------------- ------------
Increase in net assets from
Trust share transactions ........................... $ 158,584,266 $187,087,749
------------- ------------
Total increase in net assets ..................... $ 264,529,739 $268,984,423
Net assets:
At beginning of year ................................. 797,101,692 302,023,612
------------- ------------
At end of year ....................................... $1,061,631,431 $571,008,035
============= ============
Accumulated undistributed net investment income
included in net assets at end of year ............... $ -- $ 7,188,091
============= ============
<CAPTION>
Emerging Government High
Increase (decrease) in net assets: Growth Securities Yield
From operations -- Series Series Series
--------------- --------------- ----------------
<S> <C> <C> <C>
Net investment income (loss) ........................ $ 191,629 $ 25,438,222 $ 15,046,156
Net realized gain (loss) on investments and foreign
currency transactions .............................. 278,667 (2,503,740) 1,384,999
Net unrealized gain (loss) on investments and foreign
currency translation ................................. 16,792,021 (16,642,829) 3,497,778
------------ ------------- -------------
Increase in net assets from operations ............ $ 17,262,317 $ 6,291,653 $ 19,928,933
------------ ------------- -------------
Distributions declared to shareholders --
From net investment income ........................... $ (223,677) $ (22,253,356) $ (12,135,750)
From net realized gain on investments and foreign
currency transactions .............................. -- -- --
------------ ------------- -------------
Total distributions declared to shareholders ...... $ (223,677) $ (22,253,356) $ (12,135,750)
------------ ------------- -------------
Trust share transactions --
Net proceeds from sale of shares ..................... $196,450,554 $ 112,083,996 $ 125,642,522
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................ 223,677 22,253,356 12,135,750
Cost of shares reacquired ........................... (30,141,433) (104,116,699) (102,873,353)
------------ ------------- -------------
Increase in net assets from
Trust share transactions ........................... $166,532,798 $ 30,220,653 $ 34,904,919
------------ ------------- -------------
Total increase in net assets ..................... $183,571,438 $ 14,258,950 $ 42,698,102
Net assets:
At beginning of year ................................. 67,254,787 368,847,960 153,800,155
------------ ------------- -------------
At end of year ....................................... $250,826,225 $ 383,106,910 $ 196,498,257
============ ============= =============
Accumulated undistributed net investment income
included in net assets at end of year ............... $ 188,684 $ 25,296,723 $ 15,005,880
============ ============= =============
</TABLE>
<TABLE>
<CAPTION>
MFS/Foreign &
Colonial
Managed Emerging
Increase (decrease) in net assets: Sectors Markets
From operations -- Series Equity Series++
--------------- ------------------
<S> <C> <C>
Net investment income .............................. $ 206,805 $ 7,100
Net realized gain (loss) on investments and foreign
currency transactions .............................. 31,504,082 (9,654)
Net unrealized gain (loss) on investments and foreign
currency translation .............................. 6,002,049 44,230
------------ ---------
Increase (decrease) in net assets from operations $ 37,712,936 $ 41,676
------------ ---------
Distributions declared to shareholders --
From net investment income ........................... $ (637,050) $ --
From net realized gain on investments and foreign
currency transactions .............................. (28,755,283) --
------------ ---------
Total distributions declared to shareholders ...... $(29,392,333) $ --
------------ ---------
Trust share transactions --
Net proceeds from sale of shares ..................... $ 71,069,036 $3,745,777
Issued in connection with the acquisition of the Sun
Growth Variable Annuity Fund ........................ -- --
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................ 29,392,333 --
Cost of shares reacquired ........................... (36,764,837) (516,016)
------------ ---------
Increase in net assets from
Trust share transactions ........................... $ 63,696,532 $3,229,761
------------ ---------
Total increase in net assets ..................... $ 72,017,135 $3,271,437
Net assets:
At beginning of year .............................. 194,350,779 --
------------ ---------
At end of year .................................... $266,367,914 $3,271,437
============ =========
Accumulated undistributed net investment income
included in net assets at end of year ............... $ 196,586 $ 2,742
============ =========
+From June 3, 1996 (commencement of investment operations) to December 31, 1996.
++From June 5, 1996 (commencement of investment operations) to December 31, 1996.
See notes to financial statements
<CAPTION>
MFS/Foreign &
MFS/Foreign & Colonial
Colonial International Money
Increase (decrease) in net assets: International Growth and Market
From operations -- Growth Series+ Income Series Series
----------------- ---------------- ----------------
<S> <C> <C> <C>
Net investment income .............................. $ 22,420 $ 521,020 $ 15,990,553
Net realized gain (loss) on investments and foreign
currency transactions .............................. (13,360) (34,218) --
Net unrealized gain (loss) on investments and foreign
currency translation .............................. (77,930) 462,310 --
----------- ----------- -------------
Increase (decrease) in net assets from operations $ (68,870) $ 949,112 $ 15,990,553
----------- ----------- -------------
Distributions declared to shareholders --
From net investment income ........................... $ -- $ -- $ (15,990,553)
From net realized gain on investments and foreign
currency transactions .............................. -- -- --
----------- ----------- -------------
Total distributions declared to shareholders ...... $ -- $ -- $ (15,990,553)
----------- ----------- -------------
Trust share transactions --
Net proceeds from sale of shares ..................... $ 7,169,348 $33,877,812 $ 753,646,599
Issued in connection with the acquisition of the Sun
Growth Variable Annuity Fund ........................ -- -- 666,549
Net asset value of shares issued to shareholders in
reinvestment of distributions ........................ -- -- 15,990,553
Cost of shares reacquired ........................... (1,575,255) (6,296,169) (643,892,483)
----------- ----------- -------------
Increase in net assets from
Trust share transactions ........................... $ 5,594,093 $27,581,643 $ 126,411,218
----------- ----------- -------------
Total increase in net assets ..................... $ 5,525,223 $28,530,755 $ 126,411,218
Net assets:
At beginning of year .............................. -- 7,178,828 282,754,108
----------- ----------- -------------
At end of year .................................... $ 5,525,223 $35,709,583 $ 409,165,326
=========== =========== =============
Accumulated undistributed net investment income
included in net assets at end of year ............... $ 16,864 $ 391,197 $ --
=========== =========== =============
</TABLE>
+From June 3, 1996 (commencement of investment operations) to
December 31, 1996.
++From June 5, 1996 (commencement of investment operations) to
December 31, 1996.
See notes to financial statements
73
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1996 -- continued
<TABLE>
<CAPTION>
World
Total Asset
Increase (decrease) in net assets: Research Return Utilities Value Allocation
From operations -- Series Series Series Series+ Series
--------------- ---------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net investment income ........................... $ 972,234 $ 50,133,901 $ 2,361,477 $ 66,130 $ 1,477,075
Net realized gain on investments and foreign
currency transactions ........................... 11,923,794 96,340,959 6,976,719 218,760 3,345,414
Net unrealized gain on investments and foreign
currency translation ........................... 25,455,574 15,773,783 1,890,721 474,019 2,569,102
----------- ------------- ----------- ---------- -----------
Increase in net assets from operations ......... $38,351,602 $ 162,248,643 $11,228,917 $ 758,909 $ 7,391,591
----------- ------------- ----------- ---------- -----------
Distributions declared to shareholders --
From net investment income ..................... $ (328,089) $ (44,516,908) $(1,325,715) $ -- $ (458,860)
From net realized gain on investments and foreign
currency transactions ........................... (1,843,286) (41,696,365) (1,440,891) -- (864,253)
----------- ------------- ----------- ---------- -----------
Total distributions declared to shareholders ... $(2,171,375) $ (86,213,273) $(2,766,606) $ -- $(1,323,113)
----------- ------------- ----------- ---------- -----------
Trust share transactions --
Net proceeds from sale of shares ............... $220,770,984 $ 164,902,813 $23,567,505 $16,436,287 $51,249,975
Net asset value of shares issued to shareholders
in reinvestment of distributions ............... 2,171,375 86,213,273 2,766,606 -- 1,323,113
Cost of shares reacquired ........................ (5,561,486) (92,016,690) (7,250,604) (495,341) (7,489,174)
----------- ------------- ----------- ---------- -----------
Increase in net assets from Trust share
transactions .................................... $217,380,873 $ 159,099,396 $19,083,507 $15,940,946 $45,083,914
----------- ------------- ----------- ---------- -----------
Total increase in net assets .................. $253,561,100 $ 235,134,766 $27,545,818 $16,699,855 $51,152,392
Net assets:
At beginning of year ........................... 71,828,113 1,099,887,397 43,134,360 -- 25,863,393
----------- ------------- ----------- ---------- -----------
At end of year ................................. $325,389,213 $1,335,022,163 $70,680,178 $16,699,855 $77,015,785
=========== ============= =========== ========== ===========
Accumulated undistributed net investment income
included in net assets at end of year ............ $ 953,745 $ 50,080,118 $ 2,310,310 $ 65,733 $ 1,592,920
=========== ============= =========== ========== ===========
</TABLE>
+From June 3, 1996 (commencement of investment operations) to December 31, 1996.
<TABLE>
<CAPTION>
Zero
World Coupon
World World Total Series
Increase (decrease) in net assets: Governments Growth Return 2000
From operations -- Series Series Series Portfolio
--------------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
Net investment income .................................... $ 8,742,832 $ 327,326 $ 863,604 $ 230,919
Net realized gain (loss) on investments and foreign
currency transactions .................................... (7,775,092) 4,230,851 514,043 (3,785)
Net unrealized gain (loss) on investments and foreign
currency translation .................................... 5,531,505 15,684,144 2,454,550 (145,491)
------------ ------------ ----------- ---------
Increase in net assets from operations .................. $ 6,499,245 $ 20,242,321 $ 3,832,197 $ 81,643
------------ ------------ ----------- ---------
Distributions declared to shareholders --
From net investment income ................................. $(20,261,198) $ (1,196,882) $ (432,723) $(168,674)
From net realized gain on investments and foreign currency
transactions ............................................. -- (11,275,915) -- --
------------ ------------ ----------- ---------
Total distributions declared to shareholders ............ $(20,261,198) $(12,472,797) $ (432,723) $(168,674)
------------ ------------ ----------- ---------
Trust share transactions --
Net proceeds from sale of shares ........................... $ 13,862,543 $ 81,483,550 $23,046,802 $ 188,206
Net asset value of shares issued to shareholders
in reinvestment of distributions ........................... 20,261,198 12,472,797 432,723 168,674
Cost of shares reacquired ................................. (31,084,548) (45,008,598) (3,027,045) (548,663)
------------ ------------ ----------- ---------
Increase (decrease) in net assets from Trust share
transactions ............................................. $ 3,039,193 $ 48,947,749 $20,452,480 $(191,783)
------------ ------------ ----------- ---------
Total increase (decrease) in net assets .................. $(10,722,760) $ 56,717,273 $23,851,954 $(278,814)
Net assets:
At beginning of year ....................................... 152,487,192 146,388,233 13,785,938 4,615,856
------------ ------------ ----------- ---------
At end of year .......................................... $141,764,432 $203,105,506 $37,637,892 $4,337,042
============ ============ =========== =========
Accumulated undistributed net investment income
included in net assets at end of year ..................... $ 4,976,757 $ 838,106 $ 769,012 $ 230,891
============ ============ =========== =========
</TABLE>
See notes to financial statements
74
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1995
<TABLE>
<CAPTION>
Increase (decrease) in net assets from: Capital
Operations -- Appreciation Series
----------------------
<S> <C>
Net investment income .......................................... $ 2,104,622
Net realized gain (loss) on investments and foreign currency
transactions ................................................... 74,291,934
Net unrealized gain on investments and foreign currency
translation ................................................... 109,290,728
-------------
Increase in net assets from operations ........................ $ 185,687,284
-------------
Distributions declared to shareholders --
From net investment income ....................................... $ (1,257,607)
From net realized gain on investments and foreign currency
transactions ................................................... (13,684,251)
-------------
Total distributions declared to shareholders .................. $ (14,941,858)
-------------
Trust share transactions --
Net proceeds from sale of shares ................................. $ 329,318,353
Net asset value of shares issued to shareholders in reinvestment
of distributions ................................................ 14,941,858
Cost of shares reacquired ....................................... (194,411,727)
-------------
Increase (decrease) in net assets from Trust share transactions $ 149,848,484
-------------
Total increase in net assets ................................. $ 320,593,910
Net assets:
Beginning of year ............................................. 476,507,782
-------------
End of year ................................................... $ 797,101,692
=============
Accumulated undistributed net investment income included in
net assets at end of year ....................................... $ 850,657
=============
<CAPTION>
Increase (decrease) in net assets from: Conservative Emerging Government
Operations -- Growth Series Growth Series+ Securities Series
---------------- ----------------- -------------------
<S> <C> <C> <C>
Net investment income .......................................... $ 4,732,099 $ 223,573 $ 22,449,604
Net realized gain (loss) on investments and foreign currency
transactions ................................................... 11,000,468 (20,534) (440,209)
Net unrealized gain on investments and foreign currency
translation ................................................... 50,605,952 5,581,775 33,522,922
------------ ------------ -------------
Increase in net assets from operations ........................ $ 66,338,519 $ 5,784,814 $ 55,532,317
------------ ------------ -------------
Distributions declared to shareholders --
From net investment income ....................................... $ (2,990,858) $ -- $ (19,677,831)
From net realized gain on investments and foreign currency
transactions ................................................... (1,805,444) -- --
------------ ------------ -------------
Total distributions declared to shareholders .................. $ (4,796,302) $ -- $ (19,677,831)
------------ -------------
------------
Trust share transactions --
Net proceeds from sale of shares ................................. $ 97,358,437 $ 78,579,346 $ 69,483,965
Net asset value of shares issued to shareholders in reinvestment
of distributions ................................................ 4,796,302 -- 19,677,831
Cost of shares reacquired ....................................... (11,991,144) (17,109,373) (103,318,428)
------------ ------------ -------------
Increase (decrease) in net assets from Trust share transactions $ 90,163,595 $ 61,469,973 $ (14,156,632)
------------ ------------ -------------
Total increase in net assets ................................. $151,705,812 $ 67,254,787 $ 21,697,854
Net assets:
Beginning of year ............................................. 150,317,800 -- 347,150,106
------------ ------------ -------------
End of year ................................................... $302,023,612 $ 67,254,787 $ 368,847,960
============ ============ =============
Accumulated undistributed net investment income included in
net assets at end of year ....................................... $ 4,723,052 $ 223,573 $ 22,253,104
============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
Increase (decrease) in net assets from:
High Yield
Operations -- Series
----------------------------
<S> <C>
Net investment income .......................................... $ 12,087,771
Net realized gain (loss) on investments and foreign currency
transactions ................................................... (1,843,888)
Net unrealized gain on investments and foreign currency
translation ................................................... 9,954,655
-------------
Increase in net assets from operations ........................ $ 20,198,538
-------------
Distributions declared to shareholders --
From net investment income .................................... $ (8,657,037)
From net realized gain on investments and foreign currency
transactions ................................................... --
-------------
Total distributions declared to shareholders .................. $ (8,657,037)
-------------
Trust share transactions --
Net proceeds from sale of shares .............................. $ 97,407,906
Net asset value of shares issued to shareholders in reinvestment
of distributions ................................................ 8,657,037
Cost of shares reacquired ....................................... (66,000,142)
-------------
Increase in net assets from Trust share transactions ......... $ 40,064,801
-------------
Total increase in net assets ................................. $ 51,606,302
Net assets:
Beginning of year ............................................. 102,193,853
-------------
End of year ................................................... $ 153,800,155
=============
Accumulated undistributed net investment income included in
net assets at end of year ....................................... $ 12,049,652
=============
+From May 1, 1995 (commencement of investment operations) to December 31, 1995.
++From October 2, 1995 (commencement of investment operations) to December 31, 1995.
See notes to financial statements
<CAPTION>
MFS/Foreign &
Colonial
International
Increase (decrease) in net assets from: Managed Sectors Growth and Money Market
Operations -- Series Income Series++ Series
------------------ ----------------- -----------------
<S> <C> <C> <C>
Net investment income .......................................... $ 666,775 $ 12,903 $ 12,727,293
Net realized gain (loss) on investments and foreign currency
transactions ................................................... 29,542,920 (17,271) --
Net unrealized gain on investments and foreign currency
translation ................................................... 11,155,881 115,646 --
------------ ----------- -------------
Increase in net assets from operations ........................ $ 41,365,576 $ 111,278 $ 12,727,293
------------ ----------- -------------
Distributions declared to shareholders --
From net investment income .................................... $ (342,457) $ -- $(12,727,293)
From net realized gain on investments and foreign currency
transactions ................................................... (4,215,692) -- --
------------ ----------- -------------
Total distributions declared to shareholders .................. $ (4,558,149) $ -- $(12,727,293)
------------ ----------- -------------
Trust share transactions --
Net proceeds from sale of shares .............................. $ 66,280,056 $ 7,079,388 $450,493,345
Net asset value of shares issued to shareholders in reinvestment
of distributions ................................................ 4,558,149 -- 12,727,293
Cost of shares reacquired ....................................... (32,281,926) (11,838) (432,641,522)
------------ ----------- -------------
Increase in net assets from Trust share transactions ......... $ 38,556,279 $ 7,067,550 $ 30,579,116
------------ ----------- -------------
Total increase in net assets ................................. $ 75,363,706 $ 7,178,828 $ 30,579,116
Net assets:
Beginning of year ............................................. 118,987,073 -- 252,174,992
------------ ----------- -------------
End of year ................................................... $194,350,779 $ 7,178,828 $282,754,108
============ =========== =============
Accumulated undistributed net investment income included in
net assets at end of year ....................................... $ 637,060 $ -- $ --
============ =========== =============
</TABLE>
+From May 1, 1995 (commencement of investment operations) to December 31, 1995.
++From October 2, 1995 (commencement of investment operations) to
December 31, 1995.
See notes to financial statements
75
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1995 -- continued
<TABLE>
<CAPTION>
Research Total Return
Series Series
-------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations --
Net investment income ............................................. $ 330,174 $ 44,770,957
Net realized gain on investments and foreign currency transactions 1,799,538 45,877,957
Net unrealized gain on investments and foreign currency translation 6,876,576 133,970,269
----------- -------------
Increase in net assets from operations .............................. $ 9,006,288 $ 224,619,183
----------- -------------
Distributions declared to shareholders --
From net investment income .......................................... $ (5,213) $ (34,941,362)
From net realized gain on investments and foreign currency
transactions ...................................................... -- --
----------- -------------
Total distributions declared to shareholders ..................... $ (5,213) $ (34,941,362)
----------- -------------
Trust share transactions --
Net proceeds from sale of shares .................................... $62,420,583 $ 136,422,449
Net asset value of shares issued to shareholders in reinvestment of
distributions ...................................................... 5,213 34,941,362
Cost of shares reacquired .......................................... (3,467,672) (100,768,585)
----------- -------------
Increase (decrease) in net assets from Trust share transactions ... $58,958,124 $ 70,595,226
----------- -------------
Total increase in net assets .................................... $67,959,199 $ 260,273,047
Net assets:
Beginning of year ................................................... 3,868,914 839,614,350
----------- -------------
End of year ......................................................... $71,828,113 $1,099,887,397
=========== =============
Accumulated undistributed net investment income included in
net assets at end of year .......................................... $ 328,042 $ 44,654,745
=========== =============
<CAPTION>
Utilities World Asset
Series Allocation Series
-------------- -------------------
<S> <C> <C>
Increase (decrease) in net assets from:
Operations --
Net investment income ............................................. $ 1,349,687 $ 488,885
Net realized gain on investments and foreign currency transactions 1,964,180 800,505
Net unrealized gain on investments and foreign currency translation 5,215,776 1,398,356
----------- -----------
Increase in net assets from operations .............................. $ 8,529,643 $ 2,687,746
----------- -----------
Distributions declared to shareholders --
From net investment income .......................................... $ (673,961) $ (6,089)
From net realized gain on investments and foreign currency
transactions ...................................................... -- --
----------- -----------
Total distributions declared to shareholders ..................... $ (673,961) $ (6,089)
----------- -----------
Trust share transactions --
Net proceeds from sale of shares .................................... $21,368,373 $21,306,554
Net asset value of shares issued to shareholders in reinvestment of
distributions ...................................................... 673,961 6,089
Cost of shares reacquired .......................................... (8,212,008) (1,134,082)
----------- -----------
Increase (decrease) in net assets from Trust share transactions ... $13,830,326 $20,178,561
----------- -----------
Total increase in net assets .................................... $21,686,008 $22,860,218
Net assets:
Beginning of year ................................................... 21,448,352 3,003,175
----------- -----------
End of year ......................................................... $43,134,360 $25,863,393
=========== ===========
Accumulated undistributed net investment income included in
net assets at end of year .......................................... $ 1,347,427 $ 443,797
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
World
Governments Series
---------------------
<S> <C>
Increase (decrease) in net assets from:
Operations --
Net investment income ............................................. $ 10,077,304
Net realized gain (loss) on investments and foreign currency
transactions ...................................................... 14,107,660
Net unrealized gain (loss) on investments and foreign currency
translation ...................................................... (2,587,887)
------------
Increase in net assets from operations ........................... $ 21,597,077
------------
Distributions declared to shareholders --
From net investment income ....................................... $ (70,904)
From net realized gain on investments and foreign currency
transactions ...................................................... (7,889,471)
------------
Total distributions declared to shareholders ..................... $ (7,960,375)
------------
Trust share transactions --
Net proceeds from sale of shares ................................. $ 36,410,013
Net asset value of shares issued to shareholders in reinvestment of
distributions ...................................................... 7,960,375
Cost of shares reacquired .......................................... (44,674,805)
------------
Increase (decrease) in net assets from Trust share transactions $ (304,417)
------------
Total increase in net assets .................................... $ 13,332,285
Net assets:
Beginning of year ................................................ 139,154,907
------------
End of year ...................................................... $152,487,192
============
Accumulated undistributed net investment income included in
net assets at end of year .......................................... $ 25,666,880
============
<CAPTION>
Zero Coupon
World World Total Series
Growth Series Return Series 2000 Portfolio
---------------- ---------------- ----------------
<S> <C> <C> <C>
Increase (decrease) in net assets from:
Operations --
Net investment income ............................................. $ 728,568 $ 261,133 $ 168,649
Net realized gain (loss) on investments and foreign currency
transactions ...................................................... 11,783,396 174,347 (20,451)
Net unrealized gain (loss) on investments and foreign currency
translation ...................................................... 6,613,757 652,694 461,824
------------- ---------- ---------
Increase in net assets from operations ........................... $ 19,125,721 $1,088,174 $ 610,022
------------- ---------- ---------
Distributions declared to shareholders --
From net investment income ....................................... $ (1,411,794) $ (2,399) $(173,697)
From net realized gain on investments and foreign currency
transactions ...................................................... (1,739,413) -- --
------------- ---------- ---------
Total distributions declared to shareholders ..................... $ (3,151,207) $ (2,399) $(173,697)
------------- ---------- ---------
Trust share transactions --
Net proceeds from sale of shares ................................. $ 52,969,836 $12,285,163 $1,609,509
Net asset value of shares issued to shareholders in reinvestment of
distributions ...................................................... 3,151,207 2,399 173,697
Cost of shares reacquired .......................................... (25,751,488) (971,428) (883,928)
------------- ---------- ---------
Increase (decrease) in net assets from Trust share transactions $ 30,369,555 $11,316,134 $ 899,278
------------- ---------- ---------
Total increase in net assets .................................... $ 46,344,069 $12,401,909 $1,335,603
Net assets:
Beginning of year ................................................ 100,044,164 1,384,029 3,280,253
------------- ---------- ---------
End of year ...................................................... $ 146,388,233 $13,785,938 $4,615,856
============= ========== =========
Accumulated undistributed net investment income included in
net assets at end of year .......................................... $ 1,148,560 $ 486,991 $ 168,949
============= ========== =========
</TABLE>
See notes to financial statements
76
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights
<TABLE>
<CAPTION>
Capital Appreciation
Series
------------------------
Year Ended December 31,
------------------------
Per share data (for a share outstanding throughout each year): 1996 1995
------------ -----------
<S> <C> <C>
Net asset value -- beginning of year ....................................... $ 31.9878 $24.4076
--------- --------
Income from investment operations# --
Net investment income (loss) ............................................. $ (0.0200) $ 0.0933
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................... 6.7422 8.1619
--------- --------
Total from investment operations ....................................... $ 6.7222 $ 8.2552
--------- --------
Less distributions --
From net investment income ................................................ $ (0.0322) $(0.0568)
From net realized gain on investments and foreign currency transactions ... (2.8462) (0.6182)
--------- --------
Total distributions ................................................... $ (2.8784) $(0.6750)
--------- --------
Net asset value -- end of year ............................................. $ 35.8316 $31.9878
========= ========
Total return[dbldag] ...................................................... 21.48% 34.46%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.80% 0.83%
Net investment income (loss) ............................................. (0.05)% 0.32%
Portfolio turnover ......................................................... 67% 89%
Average commission rate### ................................................ $ 0.0463 --
Net assets, end of year (000 omitted) .................................... $1,061,631 $797,102
<CAPTION>
Capital Appreciation Series
----------------------------------
Year Ended December 31,
----------------------------------
Per share data (for a share outstanding throughout each year): 1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Net asset value -- beginning of year ....................................... $28.1892 $24.8989 $23.0886
-------- -------- --------
Income from investment operations# --
Net investment income (loss) ............................................. $ 0.0523 $ 0.1036 $ 0.0909
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................... (1.1104) 4.2197 2.9238
-------- -------- --------
Total from investment operations ....................................... $(1.0581) $ 4.3233 $ 3.0147
-------- -------- --------
Less distributions --
From net investment income ................................................ $(0.1306) $(0.1095) $(0.1831)
From net realized gain on investments and foreign currency transactions ... (2.5929) (0.9235) (1.0213)
-------- -------- --------
Total distributions ................................................... $(2.7235) $(1.0330) $(1.2044)
-------- -------- --------
Net asset value -- end of year ............................................. $24.4076 $28.1892 $24.8989
======== ======== ========
Total return[dbldag] ...................................................... (3.60)% 18.00% 13.61%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.83% 0.83% 0.87%
Net investment income (loss) ............................................. 0.24% 0.48% 0.50%
Portfolio turnover ......................................................... 52% 70% 69%
Average commission rate### ................................................ -- -- --
Net assets, end of year (000 omitted) .................................... $476,508 $420,552 $262,645
</TABLE>
<TABLE>
<CAPTION>
Conservative Growth Series
-----------------------------------------------------------
Year Ended December 31,
-----------------------------------------------------------
Per share data
(for a share outstanding throughout each year): 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value -- beginning of year .................. $22.0182 $16.4563 $16.9289 $16.0717 $16.8547
-------- -------- -------- -------- --------
Income from investment operations# --
Net investment income[sec] ........................... $ 0.4100 $ 0.4318 $ 0.2942 $ 0.2041 $ 0.1810
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ..................... 5.0415 5.6172 (0.4790) 1.1280 0.6747
-------- -------- -------- -------- --------
Total from investment operations .................. $ 5.4515 $ 6.0490 $(0.1848) $ 1.3321 $ 0.8557
-------- -------- -------- -------- --------
Less distributions --
From net investment income ........................... $(0.2936) $(0.3037) $(0.1996) $(0.1509) $(0.1387)
From net realized gain on investments and foreign
currency transactions ................................. (0.6783) (0.1834) (0.0882) (0.3240) (1.5000)
-------- -------- -------- -------- --------
Total distributions ................................. $(0.9719) $(0.4871) $(0.2878) $(0.4749) $(1.6387)
-------- -------- -------- -------- --------
Net asset value -- end of year ........................ $26.4978 $22.0182 $16.4563 $16.9289 $16.0717
======== ======== ======== ======== ========
Total return[dbldag] ................................. 25.41% 37.41% (1.10)% 8.43% 5.71%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .......................................... 0.61% 0.64% 0.64% 0.66% 0.80%
Net investment income ................................. 1.71% 2.25% 2.42% 2.05% 1.84%
Portfolio turnover .................................... 51% 60% 146% 19% 40%
Average commission rate### ........................... $ 0.0502 -- -- -- --
Net assets, end of year (000 omitted) .................. $571,008 $302,024 $150,318 $95,770 $44,455
<CAPTION>
Emerging Growth Series
-------------------------------
Year Period
Ended Ended
December 31, December 31,
Per share data
(for a share outstanding throughout each year): 1996 1995*
--------------- --------------
<S> <C> <C>
Net asset value -- beginning of year .................. $12.6867 $10.0000**
-------- -----------
Income from investment operations# --
Net investment income[sec] ........................... $ 0.0175 $ 0.0788
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ..................... 2.1506 2.6079
-------- -----------
Total from investment operations .................. $ 2.1681 $ 2.6867
-------- -----------
Less distributions --
From net investment income ........................... $(0.0243) $ --
From net realized gain on investments and foreign
currency transactions ................................. -- --
-------- -----------
Total distributions ................................. $(0.0243) $ --
-------- -----------
Net asset value -- end of year ........................ $14.8305 $ 12.6867
======== ===========
Total return[dbldag] ................................. 17.15% 26.80%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .......................................... 0.70% 0.24%+
Net investment income ................................. 0.12% 1.13%+
Portfolio turnover .................................... 88% 28%
Average commission rate### ........................... $ 0.0346 --
Net assets, end of year (000 omitted) .................. $250,826 $67,255
</TABLE>
*From May 1, 1995 (commencement of investment operations) to December 31,
1995.
**Net asset value on date of commencement of operations.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to December 31, 1992 is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, expenses are calculated
without reduction for fees paid indirectly.
###Average commission rate is calculated for Series with fiscal years beginning
on or after September 1, 1995.
[dbldag]The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and Sun
Life (N.Y.). Inclusion of these charges would reduce the total return figures
for all periods shown.
[sec]The investment adviser voluntarily waived all or a portion of its advisory
fee for the Emerging Growth Series for the periods indicated. If the waiver had
not been in place, the net investment income (loss) per share and the ratios
would have been:
<TABLE>
<CAPTION>
Emerging Growth Series
-------------------------------------------
Year Ended Period Ended
December 31, 1996 December 31, 1995*
-------------------- --------------------
<S> <C> <C>
Net investment income (loss) ...... $(0.0406) $0.0265
Ratios (to average net assets):
Expenses## ........................ 0.84% 1.00%+
Net investment income (loss) ...... (0.02)% 0.38%+
</TABLE>
See notes to financial statements
77
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Government Securities
Series
-----------------------
Year Ended December 31,
-----------------------
Per share data (for a share outstanding throughout each year): 1996 1995
----------- -----------
<S> <C> <C>
Net asset value -- beginning of year ....................................... $13.3900 $12.1219
-------- --------
Income from investment operations# --
Net investment income ................................................... $ 0.8445 $ 0.8311
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (0.6620) 1.2183
-------- --------
Total from investment operations ....................................... $ 0.1825 $ 2.0494
-------- --------
Less distributions --
From net investment income ................................................ $(0.7053) $(0.7813)
From net realized gain on investments and foreign currency transactions ... -- --
-------- --------
Total distributions ...................................................... $(0.7053) $(0.7813)
-------- --------
Net asset value -- end of year ............................................. $12.8672 $13.3900
======== ========
Total return[dbldag] ...................................................... 1.65% 17.66%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.63% 0.63%
Net investment income ................................................... 6.60% 6.59%
Portfolio turnover ......................................................... 57% 80%
Net assets, end of year (000 omitted) .................................... $383,107 $368,848
<CAPTION>
Government Securities Series
----------------------------------
Year Ended December 31,
----------------------------------
Per share data (for a share outstanding throughout each year): 1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Net asset value -- beginning of year ....................................... $13.0951 $13.0059 $13.0369
-------- -------- --------
Income from investment operations# --
Net investment income ................................................... $ 0.6366 $ 0.5742 $ 0.7170
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (0.9238) 0.5220 0.0976
-------- -------- --------
Total from investment operations ....................................... $(0.2872) $ 1.0962 $ 0.8146
-------- -------- --------
Less distributions --
From net investment income ................................................ $(0.4959) $(0.6603) $(0.8027)
From net realized gain on investments and foreign currency transactions ... (0.1901) (0.3467) (0.0429)
-------- -------- --------
Total distributions ...................................................... $(0.6860) $(1.0070) $(0.8456)
-------- -------- --------
Net asset value -- end of year ............................................. $12.1219 $13.0951 $13.0059
======== ======== ========
Total return[dbldag] ...................................................... (2.21)% 8.70% 6.81%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.62% 0.63% 0.66%
Net investment income ................................................... 6.01% 5.92% 6.56%
Portfolio turnover ......................................................... 90% 96% 304%
Net assets, end of year (000 omitted) .................................... $347,150 $310,521 $203,739
</TABLE>
<TABLE>
<CAPTION>
High Yield Series
-----------------------
Year Ended December 31,
-----------------------
Per share data (for a share outstanding throughout each year): 1996 1995
----------- -----------
<S> <C> <C>
Net asset value -- beginning of year ....................................... $ 8.9222 $ 8.1860
-------- --------
Income from investment operations# --
Net investment income ................................................... $ 0.8012 $ 0.7891
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ 0.2131 0.5494
-------- --------
Total from investment operations ....................................... $ 1.0143 $ 1.3385
-------- --------
Less distributions from net investment income .............................. $(0.7234) $(0.6023)
-------- --------
Net asset value -- end of year ............................................. $ 9.2131 $ 8.9222
======== ========
Total return[dbldag] ...................................................... 12.12% 16.93%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.84% 0.87%
Net investment income ................................................... 9.01% 9.17%
Portfolio turnover ......................................................... 88% 66%
Net assets, end of year (000 omitted) .................................... $196,498 $153,800
<CAPTION>
High Yield Series
------------------------------------
Year Ended December 31,
------------------------------------
Per share data (for a share outstanding throughout each year): 1994 1993 1992
----------- ----------- ------------
<S> <C> <C> <C>
Net asset value -- beginning of year ....................................... $ 9.1120 $ 8.3279 $ 8.1299
-------- -------- --------
Income from investment operations# --
Net investment income ................................................... $ 0.8226 $ 0.5915 $ 0.7314
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (1.0387) 0.8242 0.3823
-------- -------- --------
Total from investment operations ....................................... $(0.2161) $ 1.4157 $ 1.1137
-------- -------- --------
Less distributions from net investment income .............................. $(0.7099) $(0.6316) $(0.9157)
-------- -------- --------
Net asset value -- end of year ............................................. $ 8.1860 $ 9.1120 $ 8.3279
======== ======== ========
Total return[dbldag] ...................................................... (2.16)% 17.68% 14.99%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.86% 0.88% 0.97%
Net investment income ................................................... 8.94% 8.76% 9.07%
Portfolio turnover ......................................................... 82% 53% 73%
Net assets, end of year (000 omitted) .................................... $102,194 $97,884 $54,564
</TABLE>
# Per share data for the periods subsequent to December 31, 1992 is based
on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses are calculated
without reduction for fees paid indirectly.
[dbldag]The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.)
and Sun Life (N.Y.). Inclusion of these charges would reduce the total
return figures for all periods shown.
See notes to financial statements
78
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Managed Sectors Series
-----------------------
Year Ended December 31,
-----------------------
Per share data (for a share outstanding throughout each year): 1996 1995
----------- -----------
<S> <C> <C>
Net asset value -- beginning of year ....................................... $25.4468 $19.8823
-------- --------
Income from investment operations# --
Net investment income (loss) ............................................. $ 0.0200 $ 0.0979
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ 4.2817 6.1880
-------- --------
Total from investment operations ....................................... $ 4.3017 $ 6.2859
-------- --------
Less distributions --
From net investment income ................................................ $(0.0758) $(0.0542)
From net realized gain on investments and foreign currency transactions ... (3.4224) (0.6672)
-------- --------
Total distributions ...................................................... $(3.4982) $(0.7214)
-------- --------
Net asset value -- end of year ............................................. $26.2503 $25.4468
======== ========
Total return[dbldag] ...................................................... 17.58% 32.29%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.82% 0.84%
Net investment income (loss) ............................................. 0.09% 0.42%
Portfolio turnover ......................................................... 121% 113%
Average commission rate### ................................................ $ 0.0475 --
Net assets, end of year (000 omitted) .................................... $266,368 $194,351
<CAPTION>
Managed Sectors Series
-------------------------------------
Year Ended December 31,
-------------------------------------
Per share data (for a share outstanding throughout each year): 1994 1993 1992
----------- ----------- -------------
<S> <C> <C> <C>
Net asset value -- beginning of year ....................................... $23.2419 $22.3342 $ 21.0115
-------- -------- ---------
Income from investment operations# --
Net investment income (loss) ............................................. $ 0.0982 $ 0.0027 $ (0.0565)
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (0.6610) 0.9050 1.4184
-------- -------- ---------
Total from investment operations ....................................... $(0.5628) $ 0.9077 $ 1.3619
-------- -------- ---------
Less distributions --
From net investment income ................................................ $(0.0239) $ -- $ (0.0392)
From net realized gain on investments and foreign currency transactions ... (2.7729) -- --
-------- -------- ---------
Total distributions ...................................................... $(2.7968) $ -- $ (0.0392)
-------- -------- ---------
Net asset value -- end of year ............................................. $19.8823 $23.2419 $ 22.3342
======== ======== =========
Total return[dbldag] ...................................................... (1.94)% 4.08% 6.48%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.87% 0.84% 0.93%
Net investment income (loss) ............................................. 0.53% 0.01% (0.35)%
Portfolio turnover ......................................................... 103% 116% 22%
Average commission rate### ................................................ -- -- --
Net assets, end of year (000 omitted) .................................... $118,987 $104,964 $ 83,413
</TABLE>
<TABLE>
<CAPTION>
MFS/Foreign
& Colonial
Emerging
Markets
Equity Series
-----------------
Period Ended
December 31,
1996***
-----------------
<S> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $10.0000****
------------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.0706
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (0.0693)
------------
Total from investment operations ....................................... $ 0.0013
------------
Net asset value -- end of year ............................................. $10.0013
============
Total return[dbldag] ...................................................... 0.00%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................................... 1.50%+
Net investment income ................................................... 0.77%+
Portfolio turnover ......................................................... 4%
Average commission rate### ................................................ $ 0.0011
Net assets, end of year (000 omitted) .................................... $ 3,271
<CAPTION>
MFS/Foreign
& Colonial
International
Growth Series
-
Period Ended
December 31,
1996*
-
<S> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $10.0000****
------------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.0748
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (0.2535)
--------
Total from investment operations ....................................... $(0.1787)
--------
Net asset value -- end of year ............................................. $ 9.8213
========
Total return[dbldag] ...................................................... (1.70)%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................................... 1.50%+
Net investment income ................................................... 1.47%+
Portfolio turnover ......................................................... 3%
Average commission rate### ................................................ $ 0.0252
Net assets, end of year (000 omitted) .................................... $5,525
<CAPTION>
MFS/Foreign & Colonial
International Growth and
Income Series
Year Ended Period E
December 31, December
1996 1995**
<S> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $10.1282 $10.0000****
-------- --------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.2326 $ 0.0295
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ 0.2639 0.0987
-------- ---------
Total from investment operations ....................................... $ 0.4965 $ 0.1282
-------- ---------
Net asset value -- end of year ............................................. $10.6247 $10.1282
======== ========
Total return[dbldag] ...................................................... 4.84% 1.30%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................................... 0.97% 1.50%+
Net investment income ................................................... 2.21% 1.64%+
Portfolio turnover ......................................................... 51% --
Average commission rate### ................................................ $ 0.0173 --
Net assets, end of year (000 omitted) .................................... $ 35,710 $7,179
</TABLE>
*From June 3, 1996 (commencement of investment operations) to December 31,
1996.
**From October 2, 1995 (commencement of investment operations) to December 31,
1995.
***From June 5, 1996 (commencement of investment operations) to December 31,
1996.
****Net asset value on date of commencement of operations.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to December 31, 1992 is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, expenses are calculated
without reduction for fees paid indirectly.
###Average commission rate is calculated for Series with fiscal years beginning
on or after September 1, 1995.
[dbldag]The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and Sun
Life (N.Y.). Inclusion of these charges would reduce the total return figures
for all periods shown.
[sec]The investment adviser voluntarily agreed to maintain the expenses of the
MFS/Foreign & Colonial Emerging Markets Equity Series, MFS/Foreign & Colonial
International Growth Series and MFS/Foreign & Colonial International Growth and
Income Series at not more than 1.50% of average daily net assets. In addition,
the investment adviser voluntarily waived all or a portion of its advisory fee
for the periods indicated. To the extent actual expenses were over these
limitations, the net investment income (loss) per share and the ratios would
have been:
<TABLE>
<CAPTION>
MFS/Foreign
& Colonial MFS/Foreign
Emerging & Colonial MFS/Foreign & Colonial
Markets International International Growth and
Equity Series Growth Series Income Series
--------------- ---------------- --------------------------------
Period Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1996*** 1996* 1996 1995**
--------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
Net investment income (loss) ...... $(0.0975) $0.0265 $0.2101 $0.0119
Ratios (to average net assets):
Expenses## ........................ 3.38%+ 2.50%+ 1.16% 2.48%+
Net investment income (loss) ...... (1.12)%+ 0.46%+ 2.02% 0.66%+
</TABLE>
See notes to financial statements
79
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Money Market Series
-------------------------------------------------------------
Year Ended December 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ........................ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Income from investment operations ........................... $ 0.0483 $ 0.0520 $ 0.0363 $ 0.0256 $ 0.0325
-------- -------- -------- -------- --------
Less distributions from net investment income .................. $(0.0483) $(0.0520) $(0.0363) $(0.0256) $(0.0325)
-------- -------- -------- -------- --------
Net asset value -- end of year .............................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total return[dbldag] .......................................... 4.95% 5.44% 3.69% 2.59% 3.30%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................... 0.56% 0.59% 0.58% 0.58% 0.60%
Net investment income ....................................... 4.82% 5.30% 3.74% 2.60% 3.29%
Net assets, end of year (000 omitted) ........................ $409,165 $282,754 $252,175 $142,464 $134,799
</TABLE>
<TABLE>
<CAPTION>
Research Series
------------------------------------------
Period Ended
Year Ended December 31, December 31,
-----------------------
1996 1995 1994*
----------- ----------- -----------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each year):
Net asset value -- beginning of year ...... $13.5777 $ 9.8761 $10.0000**
-------- -------- ----------
Income from investment operations# --
Net investment income[sec] ............... $ 0.0797 $ 0.1401 $ 0.0131
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .............................. 3.1330 3.5651 (0.1370)
-------- -------- ----------
Total from investment operations ...... $ 3.2127 $ 3.7052 $ (0.1239)
-------- -------- ----------
Less distributions --
From net investment income ............... $(0.0328) $(0.0036) $ --
From net realized gain on investments and
foreign currency transactions ............ (0.1841) -- --
-------- -------- ----------
Total distributions ..................... $(0.2169) $(0.0036) $ --
-------- -------- ----------
Net asset value -- end of year ............ $16.5735 $13.5777 $ 9.8761
======== ======== ==========
Total return[dbldag] ..................... 23.76% 37.50% (1.20)%++
Ratios (to average net assets)/Supplemental
data[sec]:
Expenses## .............................. 0.84% 0.58% 1.50%+
Net investment income ..................... 0.52% 1.16% 1.80%+
Portfolio turnover ........................ 70% 81% 3%
Average commission rate### ............... $ 0.0280 -- --
Net assets, end of year (000 omitted) ...... $325,389 $ 71,828 $ 3,869
<CAPTION>
Total Return Series
---------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each year):
Net asset value -- beginning of year ...... $18.3848 $15.0862 $16.0946 $14.7219 $14.2209
--------- --------- ---------- -------- --------
Income from investment operations# --
Net investment income[sec] ............... $ 0.7677 $ 0.7824 $ 0.5639 $ 0.4319 $ 0.5389
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions .............................. 1.6795 3.1527 (0.9310) 1.5044 0.6247
--------- --------- ---------- -------- --------
Total from investment operations ...... $ 2.4472 $ 3.9351 $(0.3671) $ 1.9363 $ 1.1636
--------- --------- ---------- -------- --------
Less distributions --
From net investment income ............... (0.7189) $(0.6365) (0.4344) (0.4798) (0.5673)
From net realized gain on investments and
foreign currency transactions ............ (0.6734) -- (0.2069) (0.0838) (0.0953)
--------- --------- ---------- -------- --------
Total distributions ..................... $(1.3923) $(0.6365) $(0.6413) $(0.5636) $(0.6626)
--------- --------- ---------- -------- --------
Net asset value -- end of year ............ $19.4397 $18.3848 $15.0862 $16.0946 $14.7219
========= ========= ========== ======== ========
Total return[dbldag] ..................... 14.10% 26.71% (2.22)% 13.37% 8.57%
Ratios (to average net assets)/Supplemental
data[sec]:
Expenses## .............................. 0.72% 0.76% 0.76% 0.78% 0.85%
Net investment income ..................... 4.15% 4.70% 4.34% 4.06% 4.96%
Portfolio turnover ........................ 134% 108% 66% 102% 71%
Average commission rate### ............... $ 0.0539 -- -- -- --
Net assets, end of year (000 omitted) ...... $1,335,022 $1,099,887 $839,614 $696,496 $397,385
</TABLE>
*From November 7, 1994 (commencement of investment operations) to December 31,
1994.
**Net asset value on date of commencement of operations.
+Annualized.
++Not annualized.
#Per share data for the periods subsequent to December 31, 1992 is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, expenses are calculated
without reduction for fees paid indirectly.
###Average commission rate is calculated for Series with fiscal years beginning
on or after September 1, 1995.
[dbldag]The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and Sun
Life (N.Y.). Inclusion of these charges would reduce the total return figures
for all periods shown.
[sec]The investment adviser voluntarily waived a portion of its advisory fee
for the Research Series for the period indicated. If the waiver had not been in
place, the net investment income per share and the ratios would have been:
Research Series
------------------------------
Year Ended Period Ended
December 31, December 31,
1995 1994*
------------- -------------
Net investment income ......... $0.0954 $(0.0145)
Ratios (to average net assets):
Expenses## .................. 0.95% 3.49%+
Net investment income ...... 0.79% (0.19)%+
See notes to financial statements
80
<PAGE>
<TABLE>
<CAPTION>
Utilities Series
---------------------------------------------
Period Ended
Year Ended December 31, December 31,
------------------------------- -------------
Per share data (for a share outstanding
throughout each year): 1996 1995 1994 1993*
--------- --------- --------- -------------
<S> <C> <C> <C> <C>
Net asset value -- beginning of year $12.2598 $ 9.5209 $10.0164 $10.0000****
--------- --------- --------- -------------
Income from investment operations# --
Net investment incomeS. $ 0.5322 $ 0.4918 $ 0.2899 $ 0.0128
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 1.8548 2.5197 (0.7817) 0.0036
--------- --------- --------- -------------
Total from investment operations $ 2.3870 $ 3.0115 $(0.4918) $ 0.0164
--------- --------- --------- -------------
Less distributions --
From net investment income $(0.3160) $(0.2726) $(0.0037) $ --
From net realized gain on investments and
foreign currency transactions (0.3434) -- -- --
--------- --------- --------- -------------
Total distributions $(0.6594) $(0.2726) $(0.0037) $ --
--------- --------- --------- -------------
Net asset value -- end of year $13.9874 $12.2598 $ 9.5209 $10.0164
========= ========= ========= =============
Total return++ 20.37% 32.36% (4.96)% 1.59%+
Ratios (to average net assets)/Supplemental
dataS.:
Expenses## 0.88% 0.44% 0.39% 1.50%+
Net investment income 4.23% 4.62% 4.59% 2.58%+
Portfolio turnover 131% 119% 103% --
Average commission rate### $0.0435 -- -- --
Net assets, end of year (000 omitted) $70,680 $43,134 $21,448 $2,798
</TABLE>
<TABLE>
<CAPTION>
Value Series World Asset Allocation Series
------------- -----------------------------------
Period Ended Year Ended December Period Ended
December 31, 31, December 31,
------------- -------------------- -------------
Per share data (for a share outstanding
throughout each year): 1996*** 1996 1995 1994**
------------- --------- --------- -------------
<S> <C> <C> <C> <C>
Net asset value -- beginning of year $10.0000**** $12.2250 $10.0579 $10.0000****
------------- --------- --------- -------------
Income from investment operations# --
Net investment incomeS. $ 0.0916 $ 0.3731 $ 0.4205 $ 0.0220
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 0.9139 1.5563 1.7540 0.0359
------------- --------- --------- -------------
Total from investment operations $ 1.0055 $ 1.9294 $ 2.1745 $ 0.0579
------------- --------- --------- -------------
Less distributions --
From net investment income $ -- $(0.1300) $(0.0074) $ --
From net realized gain on investments and
foreign currency transactions -- (0.2450) -- --
------------- --------- --------- -------------
Total distributions $ -- $(0.3750) $(0.0074) $ --
------------- --------- --------- -------------
Net asset value -- end of year $11.0055 $13.7794 $12.2250 $10.0579
============= ========= ========= =============
Total return++ 10.10%+++ 16.04% 21.56% 0.60%+++
Ratios (to average net assets)/Supplemental
dataS.:
Expenses## 0.60%+ 0.94% 0.67% 1.50%+
Net investment income 1.75%+ 2.84% 3.70% 3.13%+
Portfolio turnover 52% 154% 146% 2%
Average commission rate### $0.0228 $0.0233 -- --
Net assets, end of year (000 omitted) $16,700 $77,016 $25,863 $3,003
</TABLE>
*From November 16, 1993 (commencement of investment operations) to
December 31, 1993.
**From November 7, 1994 (commencement of investment operations) to
December 31, 1994.
***From June 3, 1996 (commencement of investment operations) to
December 31, 1996.
****Net asset value on date of commencement of operations.
+Annualized.
+++Not annualized.
#Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, expenses are calculated
without reduction for fees paid indirectly.
###Average commission rate is calculated for Series with fiscal years beginning
on or after September 1, 1995.
++The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
Sec.The investment adviser voluntarily waived all or a portion of its advisory
fee for the Utilities Series, Value Series and World Asset Allocation Series
for the periods indicated. In addition, the investment adviser voluntarily
agreed to maintain the expenses of the Value Series at not more than 1.00% of
average daily net assets. If the waivers had not been in place and, with
respect to the Value Series, to the extent actual expenses were over these
limitations, the net investment income per share and the ratios would have
been:
<TABLE>
<CAPTION>
World Asset
Utilities Series Value Series Allocation Series
-------------------------------------- --------------- -------------------------
Year Ended Period Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31, December 31,
-------------------
1995 1994 1993* 1996*** 1995 1994**
----------- ----------------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income $0.4375 $0.2412 $(0.0407) $0.0537 $0.3716 $0.0041
Ratios (to average net assets):
Expenses## 0.95% 1.14% 9.71%+ 1.35%+ 1.11% 4.05%+
Net investment income 4.12% 3.84% (5.63)%+ 1.02%+ 3.27% 0.58%+
</TABLE>
81
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Governments
Series
-----------------------
Year Ended December 31,
-----------------------
Per share data (for a share outstanding throughout each year): 1996 1995
----------- -----------
<S> <C> <C>
Net asset value -- beginning of year ....................................... $12.4866 $11.3769
-------- --------
Income from investment operations# --
Net investment income ...................................................... $ 0.6882 $ 0.8031
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (0.2081) 0.9511
-------- --------
Total from investment operations ....................................... $ 0.4801 $ 1.7542
-------- --------
Less distributions --
From net investment income ................................................ $(1.7085) $(0.0058)
From net realized gain on investments and foreign currency transactions ... -- (0.6387)
-------- --------
Total distributions ................................................... $(1.7085) $(0.6445)
-------- --------
Net asset value -- end of year ............................................. $11.2582 $12.4866
======== ========
Total return[dbldag] ...................................................... 4.66% 15.69%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.90% 0.89%
Net investment income ................................................... 6.00% 6.67%
Portfolio turnover ......................................................... 390% 329%
Net assets, end of year (000 omitted) .................................... $141,764 $152,487
<CAPTION>
World Governments Series
----------------------------------
Year Ended December 31,
----------------------------------
Per share data (for a share outstanding throughout each year): 1994 1993 1992
----------- ----------- ----------
<S> <C> <C> <C>
Net asset value -- beginning of year ....................................... $13.0212 $11.7966 $12.7397
-------- -------- --------
Income from investment operations# --
Net investment income ...................................................... $ 0.6095 $ 0.5352 $ 0.6429
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (1.2295) 1.5819 (0.6141)
-------- -------- --------
Total from investment operations ....................................... $(0.6200) $ 2.1171 $ 0.0288
-------- -------- --------
Less distributions --
From net investment income ................................................ $(0.8823) $(0.8925) $(0.6581)
From net realized gain on investments and foreign currency transactions ... (0.1420) -- (0.3138)
-------- -------- --------
Total distributions ................................................... $(1.0243) $(0.8925) $(0.9719)
-------- -------- --------
Net asset value -- end of year ............................................. $11.3769 $13.0212 $11.7966
======== ======== ========
Total return[dbldag] ...................................................... (4.46)% 18.84% 0.54%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................................... 0.90% 0.95% 1.03%
Net investment income ................................................... 6.06% 6.01% 7.02%
Portfolio turnover ......................................................... 269% 173% 147%
Net assets, end of year (000 omitted) .................................... $139,155 $135,085 $73,540
</TABLE>
#Per share data for the periods subsequent to December 31, 1992 is based on
average shares outstanding.
##For fiscal years ending after September 1, 1995, expenses are calculated
without reduction for fees paid indirectly.
[dbldag]The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and Sun
Life (N.Y.). Inclusion of these charges would reduce the total return figures
for all periods shown.
See notes to financial statements
82
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Growth Series Period Ended
----------------------------------- ---------------
Per share data Year Ended December 31, December 31,
----------------------------------- ---------------
<S> <C> <C> <C> <C>
(for a share outstanding throughout each year): 1996 1995 1994 1993*
-------- -------- -------- ------------
Net asset value -- beginning of year ............ $12.3464 $10.9425 $10.6366 $ 10.0000***
-------- -------- -------- ------------
Income from investment operations# --
Net investment income[sec] ........................ $ 0.0232 $ 0.0689 $ 0.1506 $ 0.0088
Net realized and unrealized gain on
investments and foreign currency transactions ... 1.5878 1.6388 0.1590 0.6278
-------- -------- -------- ------------
Total from investment operations ............... $ 1.6110 $ 1.7077 $ 0.3096 $ 0.6366
-------- -------- -------- ------------
Less distributions --
From net investment income ..................... $(0.0886) $(0.1361) $(0.0037) $ --
From net realized gain on investments and foreign
currency transactions ........................... (0.8350) (0.1677) -- --
-------- -------- -------- -------------
Total distributions ........................... $(0.9236) $(0.3038) $(0.0037) $ --
-------- -------- -------- -------------
Net asset value -- end of year .................. $13.0338 $12.3464 $10.9425 $ 10.6366
======== ======== ======== =============
Total return[dbldag] .............................. 13.02% 16.06% 2.86% 50.78%+
Ratios (to average net assets)/Supplemental
data[sec]:
Expenses## ....................................... 1.04% 1.07% 0.47% 1.02%+
Net investment income ........................... 0.18% 0.60% 2.20% 1.23%+
Portfolio turnover .............................. 81% 162% 231% 2%
Average commission rate### ........................ $ 0.0142 -- -- --
Net assets, end of year (000 omitted) ............ $203,106 $146,388 $100,045 $ 18,879
<CAPTION>
World Total Return Series
-----------------------------------------
Per share data Year Ended Period Ended
December 31, December 31,
(for a share outstanding throughout each year): 1996 1995 1994**
-------- --------- ------------
<S> <C> <C> <C>
Net asset value -- beginning of year ............ $11.8346 $10.0405 $10.0000***
-------- --------- ------------
Income from investment operations# --
Net investment income[sec] ........................ $ 0.4131 $ 0.4437 $ 0.0247
Net realized and unrealized gain on
investments and foreign currency transactions ... 1.2480 1.3564 0.0158
-------- --------- ------------
Total from investment operations ............... $ 1.6611 $ 1.8001 $ 0.0405
-------- --------- ------------
Less distributions --
From net investment income ..................... $(0.2300) $(0.0060) $ --
From net realized gain on investments and foreign
currency transactions ........................... -- -- --
-------- --------- ------------
Total distributions ........................... $(0.2300) $(0.0060) $ --
-------- --------- ------------
Net asset value -- end of year .................. $13.2657 $11.8346 $ 10.0405
======== ========= ============
Total return[dbldag] .............................. 14.33% 17.89% 0.40%++
Ratios (to average net assets)/Supplemental
data[sec]:
Expenses## ....................................... 0.96% 0.77% 1.50%+
Net investment income ........................... 3.33% 4.01% 3.31%+
Portfolio turnover .............................. 148% 146% 1%
Average commission rate### ........................ $ 0.0229 -- --
Net assets, end of year (000 omitted) ............ $ 37,638 $13,786 $1,384
</TABLE>
*From November 16, 1993 (commencement of investment operations) to
December 31, 1993.
**From November 7, 1994 (commencement of investment operations) to
December 31, 1994.
***Net asset value on date of commencement of operations.
+Annualized.
++Not annualized.
#Per share data is based on average shares outstanding.
##For fiscal years ending after September 1, 1995, expenses are
calculated without reduction for fees paid indirectly.
###Average commission rate is calculated for Series with fiscal years
beginning on or after September 1, 1995.
[dbldag] The total return information shown above does not reflect expenses that
apply to the separate accounts established charges would reduce the
total return figures for all periods shown.
[sec] The investment adviser voluntarily waived all or a portion of its
advisory fee for the World Growth Series and World been in place, the
net investment income per share and the ratios would have been:
<TABLE>
<CAPTION>
World Total
World Growth Series Return Series
----------------------------------- -- ----------------------------------
Year Ended Period Ended Year Ended Period Ended
December 31, December 31, December 31, December 31,
1994 1993* 1995 1994**
------------- --------------- -- ------------- -------------
<S> <C> <C> <C> <C>
Net investment income ......... $0.0989 $0.0022 $0.3972 $(0.0405)
Ratios (to average net assets):
Expenses## .................. 1.20% 1.92%+ 1.19% 6.93%+
Net investment income ...... 1.47% 0.33%+ 3.59% (2.12)%+
</TABLE>
See notes to financial statements
83
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Zero Coupon Series
2000 Portfolio
-----------------------
Year Ended December 31,
-----------------------
Per share data (for a share outstanding throughout each year): 1996 1995
----------- -----------
<S> <C> <C>
Net asset value -- beginning of year ....................................... $ 9.0619 $ 7.9573
-------- --------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.2094 $ 0.4340
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (0.0528) 1.1038
-------- --------
Total from investment operations ....................................... $ 0.1566 $ 1.5378
-------- --------
Less distributions --
From net investment income ................................................ $(0.3363) $(0.4332)
From net realized gain on investments .................................... -- --
-------- --------
Total distributions ...................................................... $(0.3363) $(0.4332)
-------- --------
Net asset value -- end of year ............................................. $ 8.8822 $ 9.0619
======== ========
Total return[dbldag] ...................................................... 1.91% 19.88%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................................... 0.50% 0.50%
Net investment income ................................................... 5.20% 5.16%
Portfolio turnover ......................................................... 2% 27%
Net assets, end of year (000 omitted) .................................... $ 4,337 $ 4,616
<CAPTION>
Zero Coupon Series
2000 Portfolio
--------------------------------------
Year Ended December 31,
--------------------------------------
Per share data (for a share outstanding throughout each year): 1994 1993 1992
----------- ----------- --------------
<S> <C> <C> <C>
Net asset value -- beginning of year ....................................... $11.1167 $11.0966 $ 11.3060
-------- -------- -----------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.3807 $ 0.6921 $ 0.8970
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................ (1.1094) 0.8997 (0.0904)*
-------- -------- -----------
Total from investment operations ....................................... $(0.7287) $ 1.5918 $ 0.8066
-------- -------- -----------
Less distributions --
From net investment income ................................................ $(0.6250) $(0.8915) $ (0.8539)
From net realized gain on investments .................................... (1.8057) (0.6802) (0.1621)
-------- -------- -----------
Total distributions ...................................................... $(2.4307) $(1.5717) $ (1.0160)
-------- -------- -----------
Net asset value -- end of year ............................................. $ 7.9573 $11.1167 $ 11.0966
======== ======== ===========
Total return[dbldag] ...................................................... (6.99)% 15.03% 8.18%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ............................................................... 0.50% 0.50% 0.50%
Net investment income ................................................... 4.93% 5.48% 7.08%
Portfolio turnover ......................................................... 12% 65% 16%
Net assets, end of year (000 omitted) .................................... $ 3,280 $ 3,547 $ 3,713
</TABLE>
* The per share amount is not in accord with the net realized and
unrealized loss for the period because of the timing of sales of Trust
shares and the amount of per share realized and unrealized gains and
losses at such time.
# Per share data for the periods subsequent to December 31, 1992 is based
on average shares outstanding.
## For fiscal years ending after September 1, 1995, expenses should be
calculated without the reduction of fees paid indirectly, however, the
investment adviser has voluntarily agreed to maintain the net expenses
of the Zero Coupon Series 2000 Portfolio at not more than 0.50% of
average daily net assets.
[dbldag] The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.
and Sun Lfe (N.Y.). Inclusion of these charges would reduce the total
return figures for all periods shown.
[sec] The investment adviser voluntarily waived all or a portion of its
advisory fee for the Zero Coupon Series 2000 Portfolio for the period
indicated. If the waiver had not beein in place, the net investment
income per share and the ratios would have been:
Year Ended
December 31,
1996
-------------
Net investment income ......... $ 0.2045
Ratios (to average net assets):
Expenses## .................. 0.62%
Net investment income ...... 5.08%
See notes to financial statements
84
<PAGE>
MFS/Sun Life Series Trust
Notes to Financial Statements
(1) Organization
The Trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end, management
investment company consisting of nineteen separate Series (the Series) of
shares: Capital Appreciation Series, Conservative Growth Series, Emerging Growth
Series, Government Securities Series, High Yield Series, Managed Sectors Series,
MFS/Foreign & Colonial Emerging Markets Equity Series, MFS/Foreign & Colonial
International Growth Series, MFS/Foreign & Colonial International Growth and
Income Series, Money Market Series, Research Series, Total Return Series,
Utilities Series, Value Series, World Asset Allocation Series, World Governments
Series, World Growth Series, World Total Return Series and Zero Coupon Series
2000 Portfolio. The High Yield Series, Managed Sectors Series, Utilities Series,
World Asset Allocation Series, World Governments Series, World Growth Series and
World Total Return Series are non-diversified as that term is defined in the
Investment Company Act of 1940, as amended. The shares of each Series are sold
only to variable accounts established by Sun Life Assurance Company of Canada
(U.S.) and Sun Life Insurance and Annuity Company of New York to Trust benefits
under variable contracts issued by such companies.
(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. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political and economic environment.
Investment Valuations - Equity securities 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. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency and
translated into U.S. dollars at the closing daily exchange rate. Money market
instruments are valued at amortized cost, which the Trustees have determined in
good faith constitutes fair value. The Trust's use of amortized cost is subject
to the Trust's compliance with certain conditions as specified under Rule 2a-7
of the Investment Company Act of 1940. Futures contracts, options and options on
futures contracts listed on commodities exchanges are valued at closing
settlement prices. Over-the-counter options are valued by brokers through the
use of a pricing model which takes into account closing bond valuations, implied
volatility and short-term repurchase rates. 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.
Repurchase Agreements - Certain Series of the Trust may enter into repurchase
agreements with institutions that the Trust's investment adviser has determined
are creditworthy. Each repurchase agreement is recorded at cost. Such Series
require that the securities purchased in a repurchase transaction be transferred
to the custodian in a manner sufficient to enable the Trust to obtain those
securities in the event of a default under the repurchase agreement. The
investment adviser monitors, on a daily basis, the value of the securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is greater than amounts owed to the
Series under each such repurchase agreement. Certain Series of the Trust, along
with other affiliated entities of Massachusetts Financial Services Company
(MFS), may utilize a joint trading account for the purpose of entering into one
or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - Certain Series of the Trust may write covered call or put
options for which premiums are received and are recorded as liabilities, and are
subsequently adjusted to the current value of the options written. Premiums
received from writing options which expire are treated as realized gains.
Premiums received from writing options which are exercised or are closed are
offset against the proceeds or amount paid on the transaction to determine the
realized gain or loss. If a put option is exercised, the premium reduces the
cost basis of the security purchased. The Series, as writer of an option, may
have no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable change
in the price of the securities underlying the written option. In general,
written call options may serve as a partial hedge against decreases in value in
the underlying securities to the extent of the premium received. Written options
may also be used as part of an income-producing strategy reflecting the view of
the Series' management on the direction of interest rates.
Futures Contracts - Certain Series of the Trust 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. Upon entering such contracts, the
Series are 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 Series each day, depending on the
85
<PAGE>
Notes to Financial Statements -- continued
daily fluctuations in the value of the underlying security, and are recorded for
financial statement purposes as unrealized gains or losses by the Series. The
Series' investment in futures contracts is designed to hedge against anticipated
future changes in interest or exchange rates or securities prices. Investments
in interest rate futures for purposes other than hedging may be made to modify
the duration of the portfolio without incurring the additional transaction costs
involved in buying and selling the underlying securities. Investments in
currency futures for purposes other than hedging may be made to change the
Series' relative position in one or more currencies without buying and selling
portfolio assets. Investments in equity index contracts, or contracts on related
options, for purposes other than hedging may be made when the Series has cash on
hand and wishes to participate in anticipated market appreciation while the cash
is being invested. Should interest or exchange rates or securities prices move
unexpectedly, the Series may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
Forward Foreign Currency Exchange Contracts - Certain Series of the Trust may
enter into forward foreign currency exchange contracts for the purchase or sale
of a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
Series will enter into forward contracts for hedging purposes as well as for
non-hedging purposes. For hedging purposes, the Series may enter into contracts
to deliver or receive foreign currency it will receive from or require for its
normal investment activities. It may also use contracts in a manner intended to
protect foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-
hedging purposes, the Series may enter into contracts with the intent of
changing the relative exposure of the Series' portfolio of securities to
different currencies to take advantage of anticipated changes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until the contract settlement date.
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 received in additional securities are recorded on
the ex-dividend or ex-interest date in an amount equal to the value of the
security on such date.
The High Yield Series can invest up to 100% of its portfolio in high-yield
securities rated below investment grade. Investments in high-yield securities
involve greater degrees of credit and market risk than investments in
higher-rated securities, and tend to be more sensitive to economic conditions.
As appropriate based on its investments, certain Series of the Trust use the
effective interest method for reporting interest income on payment-in-kind (PIK)
bonds, whereby interest income on PIK bonds is recorded ratably by the Series at
a constant yield to maturity. Legal fees and other related expenses incurred to
preserve and protect the value of a security owned are added to the cost of the
security; other legal fees are expensed. Capital infusions, which are generally
non-recurring, incurred to protect or enhance the value of high-yield debt
securities, are reported as an addition to the cost basis of the security. Costs
that are incurred to negotiate the terms or conditions of capital infusions or
that are expected to result in a plan of reorganization are reported as realized
losses. Ongoing costs incurred to protect or enhance an investment, or costs
incurred to pursue other claims or legal actions, are reported as operating
expenses.
Fees Paid Indirectly - The Series' custodian bank calculates its fee based on
the Series' average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Series. This amount is shown as a reduction of expenses on the Statement of
Operations.
Tax Matters and Distributions - Each Series or portfolio of the Trust intends 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 necessary. 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. Distributions to
shareholders are recorded on the ex-dividend date.
The Trust 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 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-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains. For the year ended December 31, 1996, the following amounts were
reclassified due to permanent differences between book and tax accounting for
currency transactions and paydown securities. These changes had no effect on the
net assets or net asset value per share.
<TABLE>
<CAPTION>
Capital Conservative Emerging
Appreciation Growth Growth
Series Series Series
--------------- --------------- -----------
<S> <C> <C> <C>
Increase (decrease):
Paid-in capital .......................................... $ -- $ -- $ --
Accumulated undistributed net realized gain on investments
and foreign currency transactions ........................ (494,794) 8,340 2,841
Accumulated undistributed net investment income ......... 494,794 (8,340) (2,841)
<CAPTION>
Government High Managed
Securities Yield Sectors
Series Series Series
------------- ------------ ----------
<S> <C> <C> <C>
Increase (decrease):
Paid-in capital .......................................... $ -- $ 9,864 $ --
Accumulated undistributed net realized gain on investments
and foreign currency transactions ........................ 141,247 (55,686) 10,229
Accumulated undistributed net investment income ......... (141,247) 45,822 (10,229)
<CAPTION>
MFS/Foreign MFS/Foreign MFS/Foreign
& Colonial & Colonial & Colonial
Emerging International International
Markets Growth Growth and Research
Equity Series Series Income Series Series
---------------- ---------------- ---------------- ----------
<S> <C> <C> <C> <C>
Increase (decrease):
Paid-in capital .......................................... $ -- $ -- $ -- $ --
Accumulated undistributed net realized gain on investments
and foreign currency transactions ........................ 4,358 5,556 129,823 18,442
Accumulated undistributed net investment income ......... (4,358) (5,556) (129,823) (18,442)
</TABLE>
86
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Total World Asset
Return Utilities Value Allocation
Series Series Series Series
------------- ------------ --------- --------------
<S> <C> <C> <C> <C>
Increase (decrease):
Paid-in capital ...................................................... $ -- $ -- $ -- $ --
Accumulated undistributed net realized gain on investments and foreign
currency transactions ................................................ 191,620 72,879 397 (130,908)
Accumulated undistributed net investment income ..................... (191,620) (72,879) (397) 130,908
<CAPTION>
World World
Governments Growth
Series Series
-------------- -------------
<S> <C> <C>
Increase (decrease):
Paid-in capital ...................................................... $ -- $ --
Accumulated undistributed net realized gain on investments and foreign
currency transactions ................................................ 9,171,757 (559,102)
Accumulated undistributed net investment income ..................... (9,171,757) 559,102
<CAPTION>
World Zero Coupon
Total Return Series
Series 2000 Portfolio
--------------- ----------------
<S> <C> <C>
Increase (decrease):
Paid-in capital ...................................................... $ -- $ (19)
Accumulated undistributed net realized gain on investments and foreign
currency transactions ................................................ 148,860 322
Accumulated undistributed net investment income ..................... (148,860) (303)
</TABLE>
At December 31, 1996, the following Series had capital loss carryforwards for
federal income tax purposes which may be applied against any net taxable
realized gains of each succeeding year until the earlier of their utilization or
expiration.
<TABLE>
<CAPTION>
Portion Expiring December 31,
----------------------------------------------------
Total Carryover 1997 1998 1999
- ------------------------------------------------------ --------------- ------ ------- -------
<S> <C> <C> <C> <C>
Government Securities Series ........................ $ 8,934,869 $ -- $ -- $ --
============== ======== ========== ==========
High Yield Series .................................... 8,682,830 553,314 2,535,112 1,654,123
============== ======== ========== ==========
MFS/Foreign & Colonial Emerging Markets Equity Series 5,296 -- -- --
============== ======== ========== ==========
MFS/Foreign & Colonial International Growth Series ... 7,804 -- -- --
============== ======== ========== ==========
Zero Coupon Series 2000 Portfolio .................. 46,129 -- -- --
============== ======== ========== ==========
<CAPTION>
Portion Expiring December 31,
------------------------------------------------------------
2000 2001 2002 2003 2004
- ------------------------------------------------------ -------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Government Securities Series ........................ $ -- $ -- $7,137,094 $ 76,697 $1,721,078
======== ========= =========== ========== ===========
High Yield Series .................................... 786,156 -- 960,740 2,193,385 --
======== ========= =========== ========== ===========
MFS/Foreign & Colonial Emerging Markets Equity Series -- -- -- -- 5,296
======== ========= =========== ========== ===========
MFS/Foreign & Colonial International Growth Series ... -- -- -- -- 7,804
======== ========= =========== ========== ===========
Zero Coupon Series 2000 Portfolio .................. -- -- 21,892 20,451 3,786
======== ========= =========== ========== ===========
</TABLE>
3. Transactions with Affiliates
The Trust has investment advisory agreements with Massachusetts Financial
Services Company (MFS), a wholly-owned subsidiary
of Sun Life Assurance Company of Canada (U.S.), to provide overall investment
advisory and administrative services, and general office facilities. Investment
advisory fees are computed daily and paid monthly at an effective annual rate
based on a percentage of each Series' average daily net assets. The agreements
also provide that each Series will be reimbursed for expenses in excess of the
expense limitation indicated below, calculated based on the average daily net
assets of each Series for the fiscal year. Investment advisory fees and expense
limitations are as follows:
<TABLE>
<CAPTION>
Investment Expense
Advisory Fees Limitations
---------------- -------------
<S> <C> <C>
Capital Appreciation Series ....................................... 0.75% 1.25%
Conservative Growth Series .......................................... 0.55% 1.25%
Emerging Growth Series ............................................. 0.75%* 1.50%
Government Securities Series ....................................... 0.55% 1.25%
High Yield Series ................................................... 0.75% 1.25%
Managed Sectors Series ............................................. 0.75%* 1.25%
MFS/Foreign & Colonial Emerging Markets Equity Series ............... 1.25% 1.50%
MFS/Foreign & Colonial International Growth Series .................. 0.975%* 1.50%
MFS/Foreign & Colonial International Growth and Income Series ...... 0.975%* 1.50%
Money Market Series ................................................ 0.50% 0.60%
Research Series ................................................... 0.75%* 1.50%
Total Return Series ................................................ 0.75%* 1.25%
Utilities Series ................................................... 0.75%* 1.00%
Value Series ...................................................... 0.75%* 1.00%
World Asset Allocation Series ....................................... 0.75%* 1.50%
World Governments Series .......................................... 0.75%* 1.00%
World Growth Series ................................................ 0.90% 1.50%
World Total Return Series .......................................... 0.75%* 1.50%
Zero Coupon Series 2000 Portfolio ................................. 0.25% 0.50%
</TABLE>
* The advisory fee for the Emerging Growth Series, Managed Sectors Series,
Research Series, Total Return Series, Utilities Series, Value Series, World
Asset Allocation Series, World Governments Series and World Total Return Series
is 0.75% of the first $300 million of average daily net assets of each of the
Series and 0.675% of the average daily net assets of each Series in excess of
$300 million. The advisory fee for the Total Return Series is reduced to 0.60%
of the average daily net assets in excess of $1 billion. The advisory fee for
the MFS/Foreign & Colonial International Growth Series and MFS/Foreign &
Colonial International Growth and Income Series is reduced to 0.925% of the
average daily net assets in excess of $500 million.
The investment advisory agreements with respect to the MFS/Foreign & Colonial
Emerging Markets Equity Series, MFS/Foreign & Colonial International Growth
Series and MFS/Foreign & Colonial International Growth and Income Series permit
MFS to engage one or more sub-advisers and MFS has engaged Foreign & Colonial
Management Limited (FCM), an England and Wales Company, and its subsidiary
Foreign & Colonial Emerging Markets Limited (FCEM) to assist in the performance
of its services. In addition, the investment advisory agreement with respect to
the World Growth Series permits MFS to engage one or more sub-advisers and MFS
has engaged Oechsle International Advisors, L.P. (Oechsle), a Delaware limited
partnership, and Batterymarch Financial Management, Inc. (Batterymarch), a
Maryland corporation, to assist in the performance of its services. Effective
May 1, 1996, FCM and FCEM replaced Batterymarch as sub-advisers to the World
Growth Series. Effective November 1, 1996, Oechsle was terminated as a
sub-adviser to the World Growth Series.
MFS has agreed to waive its advisory fee for an indefinite period for the
MFS/Foreign & Colonial Emerging Markets Equity Series, MFS/Foreign & Colonial
International Growth Series and Value Series. The amounts waived under this
agreement for the period ended December 31, 1996 were $11,151, $14,479 and
$27,382, respectively. MFS waived a portion of its advisory fee for the Emerging
Growth Series and MFS/Foreign & Colonial
87
<PAGE>
Notes to Financial Statements -- continued
International Growth and Income Series. The amounts waived under this agreement
for the year ended December 31, 1996 were $225,349 and $44,482, respectively. In
addition, under an expense limitation agreement, MFS has assumed expenses for
the period ended December 31, 1996 amounting to $5,761 for the MFS/Foreign &
Colonial Emerging Markets Equity Series and $4,099 for the Zero Coupon Series
2000 Portfolio.
The Trust pays no compensation directly to its Trustees or officers who are
affiliated with MFS or Sun Life Assurance Company of Canada (U.S.), all of whom
receive remuneration for their services to the Trust from MFS or Sun Life
Assurance Company of Canada. Certain of the officers and Trustees of the Trust
are officers or directors of MFS or Sun Life Assurance Company of Canada.
4. Portfolio Securities
For the year ended December 31, 1996, purchases and sales of investments, other
than purchased option transactions and short-term obligations, were as follows:
<TABLE>
<CAPTION>
Capital Conservative
Appreciation Growth
Series Series
----------------- ---------------
<S> <C> <C>
Purchases
U.S. government securities ........................ $ -- $ 244,997
============ ============
Investments (non-U.S. government securities) ...... $689,235,186 $354,300,779
============ ============
Sales
U.S. government securities ........................ $ -- $ 56,980
============ ============
Investments (non-U.S. government securities) ...... $609,317,757 $201,876,350
============ ============
<CAPTION>
Emerging Government High
Growth Securities Yield
Series Series Series
----------------
<S> <C> <C> <C>
Purchases
U.S. government securities ........................ $ -- $248,143,005 $ --
============ ============= ============
Investments (non-U.S. government securities) ...... $267,487,133 $ -- $171,858,169
============ ============= ============
Sales
U.S. government securities ........................ $ -- $211,789,638 $ --
============ ============= ============
Investments (non-U.S. government securities) ...... $121,492,861 $ -- $137,950,996
============ ============= ============
</TABLE>
<TABLE>
<CAPTION>
MFS/Foreign &
Managed Colonial
Sectors Emerging Markets
Series Equity Series
--------------- ---------------
<S> <C> <C>
Purchases
U.S. government securities ........................ $ -- $ --
============ ==========
Investments (non-U.S. government securities) ...... $299,144,790 $2,878,200
============ ==========
Sales
U.S. government securities ........................ $ -- $ --
============ ==========
Investments (non-U.S. government securities) ...... $235,245,660 $ 207,698
============ ==========
</TABLE>
+Purchases and sales of investments for the Money Market Series consist
solely of short-term obligations
<TABLE>
<CAPTION>
MFS/Foreign &
MFS/Foreign & Colonial
Colonial International Money
International Growth and Market
Growth Series Income Series Series+
------------- ------------- ---------------
<S> <C> <C> <C>
Purchases
U.S. government securities ........................ $ -- $ -- $10,227,586,362
========== =========== ================
Investments (non-U.S. government securities) ...... $4,828,516 $37,603,559 $ 3,072,400,736
========== =========== ================
Sales
U.S. government securities ........................ $ -- $ -- $10,158,750,900
========== =========== ================
Investments (non-U.S. government securities) ...... $ 54,487 $ 10,547,564 $ 3,037,318,000
========== =========== ================
</TABLE>
+Purchases and sales of investments for the Money Market Series consist solely
of short-term obligations
<TABLE>
<CAPTION>
Total
Research Return
Series Series
------ ------
<S> <C> <C>
Purchases
U.S. government securities ........................ $ -- $602,720,907
============ =============
Investments (non-U.S. government securities) ...... $773,170,804 $986,622,896
============ =============
Sales
U.S. government securities ........................ $ -- $573,936,810
============ =============
Investments (non-U.S. government securities) ...... $ 125,146,464 $900,955,376
============ =============
<CAPTION>
World Asset
Utilities Value Allocation
Series Series Series
------ ------ ------
<S> <C> <C> <C>
Purchases
U.S. government securities ........................ $7,398,784 $ -- $16,296,111
=========== =========== ============
Investments (non-U.S. government securities) ...... $82,738,536 $15,072,202 $75,667,779
=========== =========== ============
Sales
U.S. government securities ........................ $5,872,979 $ -- $14,720,153
=========== =========== ============
Investments (non-U.S. government securities) ...... $65,224,143 $3,026,129 $47,399,476
=========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Zero Coupon
World World World Series
Governments Growth Total Return 2000
Series Series Series Portfolio
--------------- ----------------- --------------- -------------
<S> <C> <C> <C> <C>
Purchases
U.S. government securities ........................ $215,628,790 $ -- $12,192,963 $100,217
============= ============ ============ =========
Investments (non-U.S. government securities) ...... $327,501,308 $225,502,745 $41,093,686 $ --
============= ============ ============ =========
Sales
U.S. government securities ........................ $215,725,059 $ -- $ 7,599,324 $463,909
============= ============ ============ =========
Investments (non-U.S. government securities) ...... $319,062,753 $190,481,331 $23,921,588 $ --
============= ============ ============ =========
</TABLE>
88
<PAGE>
Notes to Financial Statements -- continued
At December 31, 1996, the cost and unrealized appreciation or depreciation in
value of the investment securities owned by each series of the Trust, as
computed on the federal income tax basis, are as follows:
<TABLE>
<CAPTION>
Capital
Appreciation
Series
-----------------------------
<S> <C>
Aggregate cost ..................... $ 839,863,374
=============
Gross unrealized appreciation ...... $ 259,056,444
Gross unrealized depreciation ...... (40,683,592)
-------------
Net unrealized appreciation ...... $ 218,372,852
=============
<CAPTION>
Conservative Emerging Government High
Growth Growth Securities Yield
Series Series Series Series
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost ..................... $460,628,661 $228,788,293 $376,652,522 $188,137,143
============ ============ ============ ============
Gross unrealized appreciation ...... $111,572,298 $ 30,446,955 $ 5,611,898 $ 8,383,049
Gross unrealized depreciation ...... (1,691,016) (8,961,320) (3,909,998) (3,445,041)
------------ ------------ ------------ ------------
Net unrealized appreciation ...... $109,881,282 $ 21,485,635 $ 1,701,900 $ 4,938,008
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MFS/Foreign &
MFS/Foreign & MFS/Foreign & Colonial
Managed Colonial Colonial International Money
Sectors Emerging Markets International Growth and Market
Series Equity Series Growth Series Income Series Series
--------------- ------------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Aggregate cost ..................... $246,745,573 $3,325,408 $6,720,455 $34,648,458 $406,081,258
============ ========== ========== =========== =============
Gross unrealized appreciation ...... $ 38,284,074 $ 183,370 $ 299,654 $ 2,394,644 $ --
Gross unrealized depreciation ...... (17,839,577) (144,133) (220,414) (1,819,938) --
------------ ---------- ---------- ----------- -------------
Net unrealized appreciation ...... $ 20,444,497 $ 39,237 $ 79,240 $ 574,706 $ --
============ ========== ========== =========== =============
</TABLE>
<TABLE>
<CAPTION>
World
Total Asset
Research Return Utilities Value Allocation
Series Series Series Series Series
--------------- ----------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Aggregate cost ..................... $307,329,608 $1,171,661,432 $62,503,660 $15,967,564 $72,588,680
============ ============== =========== =========== ===========
Gross unrealized appreciation ...... $ 38,294,967 $ 167,241,763 $ 7,502,995 $ 798,923 $ 5,536,127
Gross unrealized depreciation ...... (6,072,633) (9,200,375) (1,041,383) (327,691) (1,556,339)
------------ -------------- ----------- ----------- -----------
Net unrealized appreciation ...... $ 32,222,334 $ 158,041,388 $ 6,461,612 $ 471,232 $ 3,979,788
============ ============== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Zero Coupon
World World World Series
Governments Growth Total Return 2000
Series Series Series Portfolio
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Aggregate cost ..................... $138,014,615 $183,378,105 $34,422,082 $4,227,371
============ ============ =========== ===========
Gross unrealized appreciation ...... $ 4,303,198 $ 27,319,394 $ 3,730,894 $ 100,266
Gross unrealized depreciation ...... (1,214,050) (8,066,236) (391,772) --
------------ ------------ ----------- -----------
Net unrealized appreciation ...... $ 3,089,148 $ 253,158 $ 3,339,122 $ 100,266
============ ============ =========== ===========
</TABLE>
5. Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Trust shares during the year ended December 31, 1996 are
presented below and on the following page.
<TABLE>
<CAPTION>
Capital Conservative
Appreciation Growth
Series Series
--------------- ---------------
<S> <C> <C>
Shares sold ................................................... 11,443,621 7,921,733
Shares issued to shareholders in reinvestment of distributions 2,235,453 677,102
Shares reacquired ............................................. (8,969,620) (766,565)
----------- ----------
Net increase ................................................ 4,709,454 7,832,270
=========== ==========
<CAPTION>
Emerging Government High
Growth Securities Yield
Series Series Series
------ ------ ------
<S> <C> <C> <C>
Shares sold ................................................... 13,818,601 8,676,674 14,159,075
Shares issued to shareholders in reinvestment of distributions 15,052 1,815,119 1,441,300
Shares reacquired ............................................. (2,221,950) (8,264,354) (11,510,196)
----------- ----------- ------------
Net increase ................................................ 11,611,703 2,227,439 4,090,179
=========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
MFS/Foreign &
Managed Colonial
Sectors Emerging Markets
Series Equity Series
--------------- -------------------
<S> <C> <C>
Shares sold ............................................................... 2,818,152 379,243
Shares issued in connection with the acquisition of the Sun Growth Variable
Annuity Fund ............................................................ -- --
Shares issued to shareholders in reinvestment of distributions ............ 1,176,164 --
Shares reacquired ......................................................... (1,484,629) (52,143)
----------- --------
Net increase ............................................................ 2,509,687 327,100
=========== ========
<CAPTION>
MFS/Foreign & MFS/Foreign &
Colonial International Money
International Growth and Market
Growth Series Income Series Series
---------------
<S> <C> <C> <C>
Shares sold ............................................................... 720,467 3,257,415 753,646,599
Shares issued in connection with the acquisition of the Sun Growth Variable
Annuity Fund ............................................................ -- -- 666,549
Shares issued to shareholders in reinvestment of distributions ............ -- -- 15,990,553
Shares reacquired ......................................................... (157,890) (605,202) (643,892,483)
--------- ---------- -------------
Net increase ............................................................ 562,577 2,652,213 126,411,218
========= ========== =============
</TABLE>
<TABLE>
<CAPTION>
Total
Research Return
Series Series
------------- ---------------
<S> <C> <C>
Shares sold ................................................... 14,559,925 8,956,855
Shares issued to shareholders in reinvestment of distributions 143,325 4,879,076
Shares reacquired ............................................. (360,295) (4,986,660)
----------- -----------
Net increase ................................................ 14,342,955 8,849,271
=========== ===========
<CAPTION>
World Asset
Utilities Value Allocation
Series Series Series
------ ------ ------
<S> <C> <C> <C>
Shares sold ................................................... 1,883,446 1,564,290 3,944,274
Shares issued to shareholders in reinvestment of distributions 230,167 -- 102,487
Shares reacquired ............................................. (578,846) (46,888) (573,164)
---------- ---------- ----------
Net increase ................................................ 1,534,767 1,517,402 3,473,597
========== ========== ==========
</TABLE>
89
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Zero Coupon
World World World Series
Governments Growth Total Return 2000
Series Series Series Portfolio
-------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Shares sold ................................................... 1,205,318 6,357,585 1,881,285 21,232
Shares issued to shareholders in reinvestment of distributions 1,907,834 961,665 36,211 19,961
Shares reacquired ............................................. (2,733,139) (3,593,022) (245,154) (62,281)
----------- ----------- ---------- --------
Net increase (decrease) ....................................... 380,013 3,726,228 1,672,342 (21,088)
=========== =========== ========== ========
</TABLE>
Transactions in Trust shares during the year ended December 31, 1995 are
presented below.
<TABLE>
<CAPTION>
Capital Conservative Emerging Government
Appreciation Growth Growth Securities
Series Series Series Series
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Shares sold ..................... 11,620,628 4,959,971 6,726,769 5,453,675
Shares issued to shareholders in
reinvestment of distributions ... 575,351 267,502 -- 1,637,090
Shares reacquired ............... (6,799,964) (644,875) (1,425,554) (8,182,612)
----------- ---------- ----------- -----------
Net increase (decrease) ...... 5,396,015 4,582,598 5,301,215 (1,091,847)
=========== ========== =========== ===========
<CAPTION>
MFS/Foreign
& Colonial
High Managed International Money
Yield Sectors Growth and Market
Series Series Income Series Series
------ ------ ------------- ------
<S> <C> <C> <C> <C>
Shares sold ..................... 11,405,259 2,814,579 710,005 450,493,345
Shares issued to shareholders in
reinvestment of distributions ... 1,058,317 211,025 -- 12,727,293
Shares reacquired ............... (7,709,622) (1,372,643) (1,208) (432,641,522)
----------- ----------- -------- -------------
Net increase (decrease) ...... 4,753,954 1,652,961 708,797 30,579,116
=========== =========== ======== =============
</TABLE>
<TABLE>
<CAPTION>
Total World Asset
Research Return Utilities Allocation
Series Series Series Series
------------ --------------- ------------ --------------
<S> <C> <C> <C> <C>
Shares sold ..................... 5,208,741 8,109,408 1,993,567 1,917,796
Shares issued to shareholders in
reinvestment of distributions 485 2,212,879 68,772 573
Shares reacquired ............... (310,821) (6,150,918) (796,757) (101,344)
---------- ----------- ---------- ----------
Net increase (decrease) ...... 4,898,405 4,171,369 1,265,582 1,817,025
========== =========== ========== ==========
<CAPTION>
Zero Coupon
World World World Series
Governments Growth Total Return 2000
Series Series Series Portfolio
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Shares sold ..................... 3,031,637 4,670,829 1,117,597 180,804
Shares issued to shareholders in
reinvestment of distributions 667,817 291,239 222 21,339
Shares reacquired ............... (3,718,715) (2,248,059) (90,774) (105,004)
----------- ----------- ---------- ---------
Net increase (decrease) ...... (19,261) 2,714,009 1,027,045 97,139
=========== =========== ========== =========
</TABLE>
6. Financial Instruments
Certain Series of the Trust may trade financial instruments with off-balance
sheet risk in the normal course of their investing activities and to assist in
managing exposure to market risks such as interest rates and foreign currency
exchange rates. These financial instruments include indexed securities, written
options, forward foreign currency exchange contracts and futures contracts.
The notional or contractual amounts of these instruments represent the
investment the series have in particular classes of financial instruments and do
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 December 31, 1996, is shown on
the following pages.
90
<PAGE>
Notes to Financial Statements -- continued
Written Option Transactions -- MFS/Foreign & Colonial International Growth and
Income Series
<TABLE>
<CAPTION>
1996 Calls 1996 Puts
------------------------------------ --------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
-------------------- ----------- ------------------- ----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Options written --
Australian Dollars ........................... 91 $ 491 -- $ --
Canadian Dollars .............................. -- -- 1,137 2,984
Deutsche Marks .............................. 1,922 9,062 402 1,103
Deutsche Marks/British Pounds ............... 2,514 8,938 566 7,297
Italian Lire/Deutsche Marks .................. 2,361,708 18,547 -- --
Japanese Yen ................................. 132,077 3,666 258,307 16,505
New Zealand Dollars ........................... -- -- 432 643
Spanish Pesetas/Deutsche Marks ............... -- -- 45,589 1,134
Swiss Francs/Deutsche Marks .................. 371 1,125 824 10,166
Options terminated in closing transactions --
Australian Dollars ........................... (91) (491) -- --
Deutsche Marks .............................. (1,922) (9,062) (402) (1,103)
Deutsche Marks/British Pounds ............... (1,099) (3,336) -- --
Italian Lire/Deutsche Marks .................. (2,361,708) (18,547) -- --
Japanese Yen ................................. (132,077) (3,666) -- --
New Zealand Dollars ........................... -- -- (432) (643)
Options expired --
Canadian Dollars .............................. -- -- (1,137) (2,984)
Deutsche Marks/British Pounds ............... (868) (3,505) -- --
Japanese Yen ................................. -- -- (102,307) (6,073)
Spanish Pesetas/Deutsche Marks ............... -- -- (45,589) (1,134)
----------- -------- --------- -------
Outstanding, end of period ..................... 918 $ 3,222 157,390 $27,895
=========== ======== ========= =======
Options outstanding at end of period consist of:
Deutsche Marks/British Pounds ............... 547 $ 2,097 566 $ 7,297
Japanese Yen ................................. -- -- 156,000 10,432
Swiss Francs/Deutsche Marks .................. 371 1,125 824 10,166
----------- -------- --------- -------
Outstanding, end of period 918 $ 3,222 157,390 $27,895
=========== ======== ========= =======
</TABLE>
At December 31, 1996, the MFS/Foreign & Colonial International Growth and Income
Series had sufficient cash and/or securities at least equal to the value of the
written options.
<TABLE>
<CAPTION>
1996 Calls 1996 Puts
------------------------------------ --------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
-------------------- ----------- ------------------- ----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Japanese Yen ................................. -- $ -- 30,700 $ 4,002
Options written --
Japanese Yen ................................. 49,000 3,532 798,000 67,599
Options terminated in closing transactions --
Japanese Yen ................................. (49,000) (3,532) (696,700) (58,961)
-------- ------- --------- --------
Outstanding, end of period ..................... -- $ -- 132,000 $ 12,640
======== ======= ========= ========
Options outstanding at end of period consist of:
Japanese Yen ................................. -- $ -- 132,000 $ 12,640
-------- ------- --------- --------
Outstanding, end of period -- $ -- 132,000 $ 12,640
======== ======= ========= ========
</TABLE>
At December 31, 1996, the World Asset Allocation Series had sufficient cash
and/or securities at least equal to the value of the written options.
91
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
1996 Calls 1996 Puts
---------------------------------- -----------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
-------------------- ----------- ------------------- -------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Australian Dollars .............................. -- $ -- 4,117 $ 52,769
Deutsche Marks, British Pounds .................. 14,174 63,018 -- --
Italian Lire/Deutsche Marks ..................... 20,486,289 339,510 20,486,289 754,328
Japanese Yen .................................... -- -- 637,300 83,116
Options written --
Australian Dollars .............................. 3,924 21,265 -- --
Canadian Dollars .............................. 12,942 13,284 19,523 58,977
Deutsche Marks ................................. 122,098 638,525 13,706 37,624
Deutsche Marks/British Pounds .................. 70,415 258,724 39,219 608,589
Italian Lire/Deutsche Marks ..................... 17,955,515 141,008 -- --
Japanese Yen .................................... 1,931,684 93,742 1,821,128 118,425
New Zealand Dollars ........................... -- -- 10,198 15,165
Spanish Pesetas/Deutsche Marks .................. -- -- 1,486,488 36,755
Swiss Francs/Deutsche Marks ..................... 12,776 38,771 28,241 348,689
Options terminated in closing transactions --
Australian Dollars .............................. (3,924) (21,265) -- --
Deutsche Marks ................................. (122,098) (638,525) (13,706) (37,624)
Deutsche Marks/British Pounds .................. (28,837) (97,552) -- --
Italian Lire/Deutsche Marks ..................... (38,441,804) (480,518) (20,486,289) (754,328)
Japanese Yen .................................... (1,931,684) (93,742) (1,656,300) (153,926)
New Zealand Dollars ........................... -- -- (10,198) (15,165)
Options expired --
Australian Dollars .............................. -- -- (4,117) (52,769)
Canadian Dollars .............................. (12,942) (13,284) (19,523) (58,977)
Deutsche Marks/British Pounds .................. (37,028) (152,446) -- --
Japanese Yen .................................... -- -- (802,128) (47,615)
Spanish Pesetas/Deutsche Marks .................. -- -- (1,486,488) (36,755)
------------ --------- ------------ ---------
Outstanding, end of period ..................... 31,500 $ 110,515 67,460 $ 957,278
============ ========= ============ =========
Options outstanding at end of period consist of --
Deutsche Marks/British Pounds .................. 18,724 $ 71,744 39,219 $ 608,589
Swiss Francs/Deutsche Marks ..................... 12,776 38,771 28,241 348,689
------------ --------- ------------ ---------
31,500 $ 110,515 67,460 $ 957,278
============ ========= ============ =========
</TABLE>
At December 31, 1996, the World Governments Series had sufficient cash and/or
securities at least equal to the value of the written options.
92
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
1996 Calls 1996 Puts
---------------------------------- -----------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
-------------------- ----------- ------------------- ----------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Australian Dollars ........................... -- $ -- 105 $ 1,350
Deutsche Marks/British Pounds ............... 479 2,129 -- --
Italian Lire/Deutsche Marks .................. 423,930 7,026 423,930 15,610
Japanese Yen ................................. -- -- 19,450 2,538
Options written --
Australian Dollars ........................... 200 1,084 -- --
Canadian Dollars .............................. 517 530 1,140 3,480
Deutsche Marks .............................. 5,616 28,629 1,030 2,827
Deutsche Marks/British Pounds ............... 5,186 19,391 1,807 23,292
Italian Lire/Deutsche Marks .................. 1,066,605 8,376 -- --
Japanese Yen ................................. 187,623 11,402 565,251 44,373
New Zealand Dollars ........................... -- -- 842 1,252
Spanish Pesetas/Deutsche Marks ............... -- -- 90,296 2,238
Swiss Francs/Deutsche Marks .................. 1,194 3,623 2,639 32,577
Options terminated in closing transactions --
Australian Dollars ........................... (200) (1,084) -- --
Deutsche Marks .............................. (5,616) (28,629) (1,030) (2,827)
Deutsche Marks/British Pounds ............... (1,426) (4,665) -- --
Italian Lire/Deutsche Marks .................. (1,490,535) (15,402) (423,930) (15,610)
Japanese Yen ................................. (187,623) (11,402) (420,450) (35,159)
New Zealand Dollars ........................... -- -- (842) (1,252)
Options expired --
Australian Dollars ........................... -- -- (105) (1,350)
Canadian Dollars .............................. (517) (530) (1,140) (3,480)
Deutsche Marks/British Pounds ............... (2,492) (10,161) -- --
Japanese Yen ................................. -- -- (46,251) (2,746)
Spanish Pesetas/Deutsche Marks ............... -- -- (90,296) (2,238)
----------- -------- --------- --------
Outstanding, end of period ..................... 2,941 $ 10,317 122,446 $ 64,875
=========== ======== ========= ========
Options outstanding at end of period consist of:
Deutsche Marks/British Pounds ............... 1,747 $ 6,694 1,807 $ 23,292
Japanese Yen ................................. -- -- 118,000 9,006
Swiss Francs/Deutsche Marks .................. 1,194 3,623 2,639 32,577
----------- -------- --------- --------
Outstanding, end of period 2,941 $ 10,317 122,446 $ 64,875
=========== ======== ========= ========
</TABLE>
At December 31, 1996, the World Total Return Series had sufficient cash and/or
securities at least equal to the value of the written options.
93
<PAGE>
Notes to Financial Statements -- continued
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Contracts to
Series Transaction Settlement Date Deliver/Receive
- ------------------------- -------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
MFS/Foreign & Colonial Sales 2/24/97 BEF 3,898,838
International Growth and
2/07/97 CHF 216,153
Income Series
1/10/97 - 4/21/97 DEM 1,039,234
4/21/97 GBP 157,020
2/24/97 IEP 53,110
2/07/97 ITL 1,818,239,356
1/29/97 JPY 22,289,957
2/03/97 NLG 149,185
2/03/97 - 2/07/97 SEK 2,448,653
-----------
Purchases 2/07/97 - 4/21/97 CHF 450,493
2/07/97 - 4/21/97 DEM 2,326,982
1/10/97 ITL 108,452,787
1/21/97 - 1/29/97 JPY 80,456,122
2/03/97 NLG 157,605
2/03/97 SEK 1,983,228
<CAPTION>
Net Unrealized
Contracts at Appreciation
Series In Exchange for Value (Depreciation)
- ------ --------------- ----- --------------
<S> <C> <C> <C>
MFS/Foreign & Colonial $ 127,110 $ 123,414 $ 3,696
International Growth and
182,621 162,137 20,484
Income Series
680,794 679,202 1,592
261,757 268,257 (6,500)
85,060 89,967 (4,907)
1,191,913 1,194,583 (2,670)
201,537 193,365 8,172
91,111 86,583 4,528
366,889 359,837 7,052
---------- ---------- --------
$3,188,792 $3,157,345 $ 31,447
========== ========== ========
$ 347,034 $ 339,470 $ (7,564)
1,534,823 1,522,298 (12,525)
70,724 71,362 638
717,696 697,433 (20,263)
92,582 91,469 (1,113)
300,983 291,402 (9,581)
---------- ---------- --------
$3,063,842 $3,013,434 $(50,408)
========== ========== ========
</TABLE>
At December 31, 1996, forward foreign currency exchange contract purchases and
sales under master netting arrangements and closed forward foreign currency
exchange contracts, excluded above for the MFS/Foreign & Colonial International
Growth and Income Series amounted to a net payable of $11,503 with Bankers
Trust, $2,772 with Deutsche Bank, $80,464 with Swiss Bank Corporation
International, and a net receivable of $6,354 with Chase Manhattan Bank, $65,179
with First Boston and $33,128 with Merrill Lynch.
<TABLE>
<CAPTION>
Contracts to
Series Transaction Settlement Date Deliver/Receive
- ------------------------------- -------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
World Asset Allocation Series Sales 2/24/97 BEF 9,434,506
1/10/97 - 4/21/97 DEM 2,781,453
4/21/97 GBP 1,343,005
2/07/97 ITL 1,597,590,182
2/03/97 - 2/07/97 SEK 23,190,459
-----------
Purchases 4/21/97 CHF 2,330,657
2/03/97 - 4/21/97 DEM 9,262,010
1/10/97 ITL 92,860,658
2/03/97 NLG 21,331
2/03/97 SEK 2,144,458
<CAPTION>
Net Unrealized
Contracts at Appreciation
Series In Exchange for Value (Depreciation)
- ------ --------------- ------------ --------------
<S> <C> <C> <C>
World Asset Allocation Series $ 307,583 $ 298,640 $ 8,943
1,817,911 1,820,581 (2,670)
2,238,824 2,294,415 (55,591)
1,049,037 1,049,617 (580)
3,512,476 3,407,485 104,991
---------- ---------- --------
$8,925,831 $8,870,738 $ 55,093
========== ========== ========
$1,757,355 $1,761,743 $ 4,388
6,093,692 6,058,700 (34,992)
60,556 61,102 546
12,530 12,380 (150)
325,995 315,092 (10,903)
---------- ---------- --------
$8,250,128 $8,209,017 $(41,111)
========== ========== ========
</TABLE>
At December 31, 1996, forward foreign currency exchange contract purchases and
sales under master netting arrangements and closed forward foreign currency
exchange contracts excluded above for the World Asset Allocation Series amounted
to a net payable of $15,355 with Bankers Trust, $112,985 with Deutsche Bank,
$1,635 with First Boston, $421 with Morgan Stanley Company, $6,225 with Swiss
Bank Corporation International, and a net receivable of $9,962 with Chase
Manhattan Bank, $8,803 with JP Morgan Securities, and $58,165 with Merrill
Lynch.
94
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Contracts to
Series Transaction Settlement Date Deliver/Receive
- -------------------------- -------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
World Governments Series Sales 2/07/97 CHF 15,482,518
1/10/97 - 4/21/97 DEM 25,660,160
4/21/97 GBP 5,333,071
2/24/97 IEP 2,447,725
2/07/97 ITL 21,931,152,804
1/29/97 JPY 769,333,019
2/03/97 NLG 5,082,236
4/21/97 NZD 5,759,224
2/03/97 - 2/07/97 SEK 29,963,745
-----------
Purchases 4/21/97 AUD 4,607,000
2/07/97 - 4/21/97 CHF 10,517,835
1/21/97 - 4/21/97 DEM 58,378,209
2/07/97 DKK 12,192,180
1/10/97 - 2/07/97 ITL 6,942,634,462
1/21/97 - 1/29/97 JPY 1,755,366,199
2/03/97 NLG 5,369,077
2/03/97 SEK 9,946,344
<CAPTION>
Net Unrealized
Contracts at Appreciation
Series In Exchange for Value (Depreciation)
- ------ --------------- ------------ --------------
<S> <C> <C> <C>
World Governments Series $12,669,493 $11,613,468 $ 1,056,025
16,783,007 16,722,724 60,283
8,847,576 9,111,120 (263,544)
3,922,731 4,146,379 (223,648)
14,403,184 14,408,767 (5,583)
6,955,995 6,673,964 282,031
3,103,845 2,949,577 154,268
4,060,849 4,043,868 16,981
4,522,533 4,403,139 119,394
------------ ------------ ------------
$75,269,213 $74,073,006 $ 1,196,207
============ ============ ============
$ 3,661,537 $ 3,653,001 $ (8,536)
8,181,373 7,914,374 (266,999)
38,545,334 38,152,054 (393,280)
2,057,370 2,074,451 17,081
4,517,081 4,563,110 46,029
15,771,254 15,220,563 (550,691)
3,153,967 3,116,051 (37,916)
1,505,731 1,461,446 (44,285)
------------ ------------ ------------
$77,393,647 $76,155,050 $ (1,238,597)
============ ============ ============
</TABLE>
At December 31, 1996, forward foreign currency exchange contract purchases and
sales under master netting arrangements and closed forward foreign currency
exchange contracts excluded above for the World Governments Series amounted to a
net receivable of $181,698 with Chase Manhattan Bank, $67,369 with Deutsche
Bank, $738,258 with First Boston, $409,811 with Merrill Lynch, and a net payable
of $806,463 with Bankers Trust and $1,686,686 with Swiss Bank Corporation
International.
<TABLE>
<CAPTION>
Contracts to
Series Transaction Settlement Date Deliver/Receive
- --------------------------- -------------- -------------------- -----------------------
<S> <C> <C> <C> <C>
World Total Return Series Sales 2/07/97 CHF 1,020,885
1/10/97 - 4/21/97 DEM 711,577
4/21/97 GBP 261,050
2/24/97 IEP 159,449
2/07/97 ITL 1,259,857,851
1/29/97 JPY 72,704,403
2/03/97 - 2/07/97 SEK 3,615,741
-----------
Purchases 4/21/97 CHF 456,731
2/07/97 - 4/21/97 DEM 4,133,046
1/10/97 ITL 182,806,209
1/21/97 - 1/29/97 JPY 147,753,054
2/03/97 NLG 20,769
2/03/97 SEK 4,815,877
<CAPTION>
Net Unrealized
Contracts at Appreciation
Series In Exchange for Value (Depreciation)
- ------ --------------- ------------ --------------
<S> <C> <C> <C>
World Total Return Series $ 769,328 $ 765,768 $ 3,560
463,594 465,054 (1,460)
435,177 445,982 (10,805)
255,381 270,103 (14,722)
827,255 827,727 (472)
657,364 630,711 26,653
547,176 531,361 15,815
----------- ----------- ----------
$3,955,275 $3,936,706 $18,569
=========== =========== ==========
$ 344,383 $ 345,243 $ 860
2,699,126 2,691,637 (7,489)
119,211 120,286 1,075
1,330,045 1,281,085 (48,960)
12,201 12,054 (147)
730,709 707,611 (23,098)
----------- ----------- ----------
$5,235,675 $5,157,916 $ (77,759)
=========== =========== ==========
</TABLE>
At December 31, 1996, forward foreign currency exchange contract purchases and
sales under master netting arrangements and closed forward foreign currency
exchange contracts excluded above for the World Total Return Series amounted to
a net payable of $50,153 with Bankers Trust, $170,168 with Swiss Bank
Corporation International, a net receivable of $219 with Chase Manhattan Bank,
$27,682 with Deutsche Bank, $27,950 with First Boston, $18,329 with Goldman
Sachs, $8,572 with JP Morgan Securities, and $50,148 with Merrill Lynch.
95
<PAGE>
Notes to Financial Statements -- continued
At December 31, 1996, each Series had sufficient cash and/or securities to cover
any commitments under these contracts. See page 64 for an explanation of
abbreviations used to indicate amounts shown in currencies other than the U.S.
dollar.
7. Restricted Securities
Each Series of the Trust is restricted from investing more than a certain amount
in securities which are subject to legal or contractual restrictions on resale.
Such restrictions range from between 0% and 15% of the Series' net assets. At
December 31, 1996, High Yield Series, Research Series, Total Return Series,
Utilities Series, Value Series, World Asset Allocation Series, World Growth
Series and World Total Return Series owned the following restricted securities
(consisting of 0.67%, 0.53%, 0.03%, 0.46%, 0.37%, 1.27%, and 0.51%, of the net
assets of each Series, respectively) which may not be publicly sold without
registration under the Securities Act of 1933 (the 1933 Act). The Trust 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.
<TABLE>
<CAPTION>
Series Description
- ------------------------------- -----------------------------------------------
<S> <C>
High Yield Series Atlantic Gulf Communities Corp. ............
Gillett Holdings ...........................
Merrill Lynch Mortgage Investors, Inc. ......
Renaissance Cosmetic ........................
Research Series Jarvis Hotels PLC ...........................
Total Return Series Merrill Lynch Mortgage Investors, Inc. ......
Value Series Jarvis Hotels PLC ...........................
World Asset Allocation Series Hong Leong Finance ........................
Jarvis Hotels PLC ...........................
World Growth Series Hong Leong Finance ........................
India Gateway Fund Ltd. .....................
India Gateway Fund Ltd., Warrants ............
International Business Communications
Systems, Inc. ..............................
Jarvis Hotels PLC ...........................
Thai Euro Fund ..............................
World Total Return Series Hong Leong Finance ...........................
Jarvis Hotels PLC ...........................
<CAPTION>
Date of Shares/
Series Acquisition Par Amount Cost Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Yield Series 9/25/95 30 $ -- $ 129
10/09/92 9,414 89,600 357,732
6/22/94 500,000 346,562 420,313
525 525,000 530,250
---------- ----------
$ 961,162 $1,308,424
========== ==========
Research Series 6/21/96 627,700 $1,682,337 $1,731,355
========== ==========
Total Return Series 6/22/94 514,000 $ 356,266 $ 432,081
========== ==========
Value Series 7/23/96 27,600 $ 71,640 $ 76,128
========== ==========
World Asset Allocation Series 12/23/96 5,000 $ 17,654 $ 17,372
7/02/96 96,500 248,255 266,171
---------- ----------
$ 265,909 $ 283,543
========== ==========
World Growth Series 11/01/96 51,000 $ 158,754 $ 177,195
6/02/94 34,925 286,668 157,162
6/02/94 4,000 -- --
8/29/95 12,600 124,992 124,990
6/21/96 477,600 1,262,376 1,317,338
10/18/96 27,000 704,500 803,790
---------- ----------
$2,537,290 $2,580,475
========== ==========
World Total Return Series 9/19/95 3,000 9,172 10,423
6/21/96 65,900 $ 173,898 $ 181,769
---------- ----------
$ 183,070 $ 192,192
========== ==========
</TABLE>
8. Acquisition
At the close of business on December 18, 1996, the Money Market Series acquired
all of the assets and liabilities of Sun Growth Variable Annuity Fund, Inc. The
acquisition was accomplished by a tax free exchange of 666,549 shares of the
Money Market Series (valued at $666,549) for 172,642 shares of Sun Growth
Variable Annuity Fund's net assets on that date ($666,549), which were combined
with those of the Money Market Series. The aggregate net assets of the Money
Market Series after the acquisition were $409,110,729.
96
<PAGE>
Independent Auditors' Report
To the Trustees and Shareholders of MFS/Sun Life Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of MFS/Sun Life Series Trust as of December 31,
1996, the related statements of operations for the year then ended, the
statements of changes in net assets for the years ended December 31, 1996 and
1995, and the financial highlights for each of the years in the five-year period
ended December 31, 1996. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with 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. Our procedures included confirmation of the securities owned at
December 31, 1996 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Trust at
December 31, 1996, the results of its operations, the changes in its net assets,
and its financial highlights for the respective stated periods in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 7, 1997
---------------------------------------------
The MFS/Sun Life Series Trust Annual Report is prepared for the general
information of contract owners. It is authorized for distribution to prospective
purchasers only when preceded or accompanied by the current prospectus for the
MFS/Sun Life Series Trust and any product being offered.
97
<PAGE>
MFS/Sun Life Series Trust
500 Boylston Street, Boston, MA 02116-3741
Trustees
JOHN D. McNEIL*, Chairman and Trustee
Chairman, Sun Life Assurance Company of Canada,
Toronto, Ontario, Canada
SAMUEL ADAMS, Trustee
Partner, Warner & Stackpole,
Boston, Massachusetts
GEOFFREY CROFTS, Trustee
Professor Emeritus, University of Hartford,
Hartford, Connecticut
DAVID D. HORN*, Trustee
Senior Vice President and General Manager,
Sun Life Assurance Company of Canada,
Wellesley Hills, Massachusetts
GARTH MARSTON, Trustee
Chairman, Retired, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS, Trustee
Vice Chairman, Retired, The Gillette Company,
Boston, Massachusetts
Officers
W. THOMAS LONDON+, Treasurer
JAMES O. YOST+, Assistant Treasurer
STEPHEN E. CAVAN+, Secretary and Clerk
JAMES R. BORDEWICK+, Assistant Secretary
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
Custodian and Dividend Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110-1617
Portfolio Managers+
JOHN W. BALLEN
ARNAB K. BANERJI
STEPHEN C. BRYANT
DAVID M. CALABRO
JAMES J. CALMAS
MITCHELL D. DYNAN
KENNETH J. ENRIGHT
RICHARD O. HAWKINS
GEOFFREY L. KURINSKY
JOHN D. LAUPHEIMER, JR.
DAVID R. MANNHEIM
PAUL M. McMAHON
KEVIN R. PARKE
ATUL PATEL
JUNE SCOTT
BERNARD SCOZZAFAVA
MAURA S. SHAUGHNESSY
TONI Y. SHIMURA
FREDERICK J. SIMMONS
JAMES T. SWANSON
(on behalf of the MFS World
Asset Allocation Committee)
TONY THOMSON
The Research Committee
IAN K. WRIGHT
*Affiliated with the Sponsor.
+Affiliated with the Investment Adviser. SUN-2 2/97 185M
