MFS(R)/Sun Life Series Trust
SEMIANNUAL REPORT [bullet] June 30, 1998
Bond Series
Government Securities Series
High Yield Series
International Growth and
Income Series
(formerly MFS(R)/Foreign & Colonial International Growth and Income Series)
MFS(R)/Foreign & Colonial Emerging
Markets Equity Series
Money Market Series
Strategic Income Series
World Asset Allocation(SM) Series
World Governments Series
World Total Return Series
Zero Coupon Series, Portfolio 2000
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Letter from the Chairman
Dear Contract Owners:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly accepted
measures, equity valuations appear to have risen to a point at which the stock
market has become more vulnerable to changes in the investment environment such
as rising inflation and interest rates or a slowing economy. As a result, while
we continue to hold a favorable long-term outlook for the equity markets, we
also believe that a significant market correction is possible and that such a
correction would be a healthy near-term event.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive than
most fixed-income investments, while low inflation helps control companies'
costs, such as for raw materials, wages, and benefits. The near-term outlook for
a continuation of this environment appears relatively favorable. However, this
year has seen a marked slowdown in corporate earnings. This means that as equity
prices continue to rise, price-to-earnings (P/E) ratios, or the amount an
investor pays for a stock in relation to the company's earnings per share, also
go up. A year ago, the average P/E ratio for stocks in the unmanaged Standard &
Poor's 500 Composite Index stood at approximately 22; this summer, the average
P/E ratio was 32% higher, at about 29. In some cases, such as with some of the
newer companies associated with the Internet, P/E ratios have soared to levels
that are unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 4% to 6% this year. However, just as no one can predict market
cycles, so too no one can predict economic cycles -- except to say that these
cycles do exist and that an economic slowdown at some point is inevitable.
Internationally, the economic turmoil in Asia continues to be a concern to us,
and we believe the United States has yet to see the full impact of this crisis.
There have been brief periods when some Asian economies appeared to improve, but
the situation remains quite dynamic and could turn worse before getting better.
While the crisis has affected all countries in Asia, Japan was a major factor
behind the turmoil as excesses in its banking and real estate sectors have led
to severe currency problems. In the long run, Japan will be the engine that
drives the region's eventual recovery, thus it warrants closer investor
scrutiny. At the same time, the Asian turmoil has had the beneficial effect of
moderating U.S. growth and keeping inflation in check, which has helped
establish a favorable interest-rate environment.
Countering the situation in Asia has been the greater-than-expected strength of
European economies. As Europe moves toward economic union, these countries have
benefited from a convergence of interest rates to lower levels, a rapid
expansion of manufacturing and service businesses, and an increasingly strong
consumer sector. This has helped American exporters offset some of their Asian
losses, while providing numerous investment opportunities in developed and
emerging European markets.
Given the uncertainty arising from these conflicting developments, we believe it
is prudent to remind investors of the need to take a long-term view and to
diversify their investments across a range of asset classes. This includes
portfolios that focus on bonds and international investments as well as on the
U.S. stock market. The likelihood of an eventual market correction also makes it
important for us to use original, bottom-up research to find companies that we
think can keep growing or gain market share in the face of the occasional
downturn. To help achieve this, and to provide the broadest possible coverage of
industry sectors and individual companies, MFS continues to increase its number
of full-time research analysts. These analysts thoroughly investigate each
company's earnings potential and position in its industry as well as the overall
prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation. Every
year, both fixed-income and equity managers meet with thousands of credit
issuers and companies. They also attend many presentations, closely follow
sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to both
the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders -- regardless of changes in the
overall market environment.
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 those 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
July 13, 1998
Management Review and Outlook
Bond Series
The Series commenced operations on May 6, 1998, and from that date through June
30, 1998, provided a total return of 2.00%.
The Series currently is overweighted in investment-grade corporate bonds and
high-yield securities. We expect to have, on average, a 50% weighting in
investment-grade corporates and roughly 20% in the high-yield market, which is
the Series' maximum allocation. The Series has almost no allocation to
international government bonds, based on our view that yields have converged
among the United States, Germany, and the other European countries at 6%. Thus,
we think the United States is the most attractive market. Inflation in the
United States is low, its economy is strong, and it has the market leaders in
many major industries, most notably in technology and telecommunications.
Currently, the Series' duration, or sensitivity to changes in interest rates, is
about seven years, which is its usual maximum. This reflects our view that, with
inflation at about 1.5%, and 10-year U.S. Treasuries at around 5.5% and perhaps
moving down a little, the environment for fixed-income securities is very
attractive.
Looking ahead, the biggest risks to the bond market are the possibility of the
U.S. economy growing too fast and the Asian slowdown that people are counting
on not developing. If economic
1
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Management Review and Outlook -- continued
growth continues at a 4% to 5% annual rate, there's no Asian-induced slowdown,
and we start to see some early signs of inflation, the Federal Reserve Board
(the Fed) could be forced to raise short-term interest rates, even if there
still are no inflation pressures. However, if interest rates and inflation
remain steady and the U.S. economy continues to grow at a moderate pace, which
is what we expect, it will be a positive environment for investment-grade
corporate and high-yield bonds, as well as for some of the emerging markets,
which are very sensitive to changes in short-term interest rates.
Government Securities Series
For the six months ended June 30, 1998, the Series provided a total return of
3.91%. This compares to a 3.87% return for the Lehman Brothers
Government/Mortgage Index (the Lehman Index), an unmanaged index of U.S.
Treasury, government-agency, and mortgage-backed securities.
To most investors, the surprise of this year has been that robust economic
growth, especially this late in the economic cycle, has coincided with a
dramatic improvement in inflation trends and an overall decline in interest
rates. Even though economic activity for much of the year exceeded a level that
the Fed would consider noninflationary, and in spite of the fact that the Fed
increased the federal funds rate to 5.50% in March of 1997, two trends have
worked in favor of the market and helped lower rates. The first was the sharp
decline in the U.S. government's borrowing needs. In fact, for the 12-month
period ended June 1998, the government was running a surplus of about $56.2
billion, and for the fiscal year ending this October the surplus may be somewhat
higher. The second favorable trend was the decline in inflation. Much to the
surprise of most economists, inflation fell significantly over the course of the
year, with the Consumer Price Index, for example, declining to 1.70% in 1997
from 3.30% in 1996.
The fixed-income environment, although at times volatile, was generally positive
over the past six months. With the general decline in interest rates, coupon
income was augmented by opportunities for capital appreciation, particularly in
longer-maturity securities. For example, an investment in the two-year sector
would have returned 2.90%, whereas the total return in the 10-year sector was
4.27%. With household income, job growth, and consumer confidence quite strong,
the rally in shorter maturities was somewhat limited by concerns that the Fed
would again find it necessary to raise short-term interest rates. The very
favorable performance on the inflation and fiscal fronts, however, provided a
very positive underpinning for Treasuries, one from which longer maturities were
able to benefit. This environment benefited the Series, given our overweighting
in longer-maturity Treasury and agency securities.
For most of this year, the Series' duration, or sensitivity to changes in
interest rates, has been 5% to 10% longer than those of the appropriate
benchmarks. Strength in employment and overall economic activity, along with the
risk that the Fed might raise interest rates, argued for caution. Thus, we have
not positioned duration more aggressively. The many positive underpinnings to
the market, however, did suggest that we should position the portfolio to
benefit from opportunities for capital appreciation as fears of Fed action
receded.
Looking ahead, the economic environment, especially prospects for the
fixed-income market, should be especially positive. The supply-side nature of
the economic expansion (with growth in supply outstripping that of demand) and
the boom in global production capacity have helped suppress inflation. Declining
inflation at this stage of the economic expansion is remarkable, and any
slowdown in economic growth could quickly trigger even lower inflation
expectations. Investors, however, have yet to embrace the idea that the economy
is at or close to price stability. Although the economy shows few signs of
weakening, interest rates will have considerable room to fall after economic
activity cools and the view that we are indeed close to the long-term objective
of price stability becomes more broadly accepted.
High Yield Series
For the six months ended June 30, 1998, the Series provided a total return of
5.30%. This compares to a 4.50% return for the Lehman Brothers High Yield Bond
Index. The high-yield market is experiencing an unprecedented period of growth
and strong performance and continues to be the best-performing domestic
fixed-income asset class. So far this year, a record $97 billion of high-yield
bonds has been issued by 422 companies, and the market has surpassed $570
billion in bonds outstanding. Healthy economic growth has contributed to the
market's performance as companies have continued to post improved operating
results.
The spread, or difference, between yields on high-yield bonds and U.S. Treasury
notes has widened recently as some global equity investors have sought the
security of the Treasury market following renewed concerns about economic
problems in Asia. (Principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity.) As a result of this
flight to quality, the yield on Treasury notes fell slightly, to 5.4%, while the
yield on the Salomon Brothers High-Yield Bond Index, an unmanaged index of
noninvestment-grade U.S. corporate debt, remained at 9.2%. Given the low level
of interest rates, we believe the high-yield market remains attractively valued,
with the spread to Treasuries at 3.8%, its widest level in two-and-a-half years.
While the economic slowdown in Asia could adversely affect the U.S. economy, we
do not think it will materially impact the credit quality of the high-yield
companies owned by the Series. The Series is primarily invested in the bonds of
domestic companies, and when the crisis in Southeast Asia developed last fall we
reduced our holdings in companies with high exports to that area.
We believe that many high-yield telecommunications issues continue to represent
good value, given their growth opportunities and the higher yields available in
this sector. The telecommunications sector is our largest industry overweighting
and has been one of the best-performing sectors in the high-yield market over
the past 12 months. The Series is also overweighted in the aerospace sector, in
which equipment suppliers such as BE Aerospace are benefiting from strong orders
for new commercial aircraft. Our portfolio is underweighted in the energy
sector, but we will look for investment opportunities in this area because
recently yields have risen in response to oil prices sinking to their lowest
levels in 12 years.
International Growth and Income Series
For the six months ended June 30, 1998, the Series provided a total return of
19.65%. This compares to a 15.81% return for the unmanaged Lipper International
Funds Index and to a 16.08% return for the Morgan Stanley Capital International
(MSCI) Europe, Australia, Far East (EAFE) Index, an unmanaged, market-
capitalization-weighted total return index of developed-country global stock
markets, excluding the United States, Canada, and the South African mining
component.
The Series is managed on a bottom-up basis; that is, we approach each stock as a
potential purchase candidate, as
2
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Management Review and Outlook -- continued
opposed to a top-down approach that develops an overview of broad economies and
markets, then picks stocks based on that overview. Although both approaches
borrow from each other, we feel the difference in emphasis is important, and we
believe in the long-term benefits of our bottom-up approach.
The Series has benefited from its heavy weighting in stocks in Europe. Europe
looks relatively good due to strong earnings growth in several countries there.
The Series also benefited from its light weighting in the Far East, especially
in Japan, and minimal exposure to emerging markets. The better-performing
countries include some of the smaller ones such as Sweden, the Netherlands,
Italy, and Portugal. International companies in Sweden and the Netherlands are
doing particularly well. Favorable individual company performance has come from
Pinault-Printemps-Redoute, a French department store chain; Compass Group, a
British food caterer; Henkel, a German chemical company; British Aerospace;
Skandia, a Swedish insurance company; Banco Totta, a Portuguese bank; INA, an
Italian insurance company; and TF-1, a French television company.
The companies in the Series tend to have steady earnings. This applies to
consumer staples, financial services, and telecommunications companies. The only
sector with a heavy weighting that doesn't fit this pattern is technology. Even
there, the technology companies in the Series tend to be manufacturers such as
Canon, as opposed to the more volatile industries such as semiconductors.
While there is some risk that investors will decide that the European markets
have gone up about as far as they can for the time being and that they're too
expensive, Europe and the United States still appear to be the most attractive
places to invest right now.
Looking ahead, we think the companies in the Series are going to continue to
benefit from low inflation and low interest rates. The rippling effect of the
economic crisis in the Far East is causing a slowdown in many other countries
and will have to be monitored carefully.
MFS(R)/Foreign & Colonial Emerging Markets Equity Series
For the six months ended June 30, 1998, the Series provided a total return of
- -17.54%. This compares to a -17.00% return for the Lipper Emerging Markets Funds
Index and to a -18.86% return for the MSCI Emerging Markets Free (EMF) Index, a
broad, unmanaged, market-capitalization-weighted index of equities in emerging
markets.
The emerging markets have continued to be quite volatile due to the Asian
crisis, which has led to worries over its spreading to other regions. Among the
primary causes for this crisis were high levels of foreign borrowing by both the
government and corporate sectors, poor returns on investments, overvalued
currencies pegged to the U.S. dollar, and high equity prices. This has caused
some roller-coaster stock market performances in countries such as Brazil,
Turkey, and Russia. The Asian crisis and the economic health of Japan led to
tightening liquidity in the region, although in recent months the situation has
eased due to financial assistance from international aid agencies such as the
International Monetary Fund (the IMF).
Although we believe the crisis will take several years to be resolved fully, we
are seeing the first signs of a recovery in the willingness of governments in
the region to undertake structural reform with the help of the IMF. The next
stage will be to recapitalize the banking sector and encourage corporate
bankruptcies. Foreign capital will then begin to move back into the region,
although we also expect significant political change following the precedent set
by the resignations of President Suharto in Indonesia and Prime Minister
Hashimoto in Japan.
Given this environment, we have kept a low weighting in Southeast Asia (taking
positions down to nearly zero in Thailand, Indonesia, the Philippines, and
Malaysia), preferring to overweight Eastern Europe, the Middle East, and Latin
America. Specifically, our exposure to Brazil, Mexico, Egypt, and Morocco has
helped performance, while our exposure to markets in Hong Kong, China, and
Poland has hindered performance. However, we are still finding what we believe
are interesting companies in Hong Kong, China, and India. For example, we
believe Qingling Motors, the leading pickup truck manufacturer in China, will
benefit from cheaper parts imported from Japan. The compound annual growth rate
for these companies' earnings over the past two years has been approximately 75%
and, with new launches expected over the next year plus superior product
quality, we believe this growth level will be maintained.
Turning to other markets, Latin America initially benefited from the Asian
crisis as international investors turned toward the region. More recently, the
currency crisis in Asia has led to worries about the Mexican peso and the
privatization program in Brazil. The medium-term outlook for the region looks
encouraging because economies have reduced their structural imbalances and the
banking sector has recapitalized.
Among other emerging markets, the European, Middle Eastern, and African regions,
or the EMEA, remain our favorite areas. Although Portugal looks expensive
following its spectacular rise, Egypt remains an excellent value, and we have
added significantly to our positions in South Africa because we expect inflation
and interest rates there to gradually decline during the year.
Looking ahead, we believe that at current levels emerging markets are very
attractive compared with developed markets, although we remain cautious on Asia,
neutral on Latin America, and positive on the EMEA region.
Money Market Series
Interest rates on short-term (90-day) securities remained stable during the past
six months. The Fed did not adjust monetary policy, thus the federal funds rate
remained at 5.50% for the entire period. At the present time, approximately 54%
of assets are invested in U.S. government or government-guaranteed issues, with
the balance in corporate and bank issues. The average maturity of the Series on
June 30, 1998, was 39 days, versus 42 days on December 31, 1997. We continue to
limit the Series' investments to securities issued or guaranteed by the U.S.
Treasury or agencies or instrumentalities of the U.S. government, as well as to
the highest-quality corporate and bank issues, in order to provide maximum
security against credit risk.
We expect short-term interest rates to be flat over the next several months.
Strategic Income Series
The Series commenced operations on May 6, 1998, and from that date through June
30, 1998, provided a total return of 1.10%.
It's been a mixed environment for bonds so far this year. However, the portfolio
invests across several types of credit, so when one type of bond is under
pressure, often another type will perform well. The U.S. high-yield corporate
sector is benefiting from
3
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Management Review and Outlook -- continued
a strong U.S. economy, a strong stock market, and a worldwide shortage of
investments with good yields. Additionally, a number of high-quality companies
have acquired high-yielding companies, which has boosted the quality of the
acquired bonds. As a result, people looking for higher yield have put more money
into high-yield investments.
Regarding Asia, we feel the economic problems there have a way to go before they
are resolved, so we have limited our Asian exposure until the markets present a
more attractive buying opportunity. In the future, perhaps six months or more,
there will be opportunities to invest in Asian corporate and government debt.
Europe is showing economic strength right now, which is improving European
credit ratings but pushing interest rates down, and the convergence of countries
into a single economic bloc is reducing the difference between each country's
yield, diminishing the value of government debt and limiting investment
opportunities.
We had been concerned that, due to the extreme inflation of the value of U.S.
assets, particularly stock and real estate prices, the Fed would raise interest
rates. The turmoil in Asia seems to have dissuaded it from taking action at this
time. Further inaction should preserve bond prices at higher levels.
We are optimistic about the worldwide environment for bonds. If we have a major
concern, it is that the world may have excess liquidity at the moment, which has
been a factor in the run-up in the equity markets. There is a possibility that
some of this liquidity will be withdrawn from world markets to combat the
troubles in Asia. If this happens, it will negatively impact the stock market,
which could be favorable for the bond market.
World Asset Allocation Series
For the six months ended June 30, 1998, the Series provided a total return of
9.84%. This compares to six-month returns for the following unmanaged indices:
17.71% for the Standard & Poor's 500 Composite Index (the S&P 500), a popular
index of common stock total return performance; 17.12% for the MSCI EAFE Index;
3.93% for the Lehman Brothers Aggregate Bond Index, an index of government and
corporate bonds including U.S. Treasury, agency, and corporate bond issues and
mortgage-backed securities; and 2.66% for the J.P. Morgan Non-Dollar Government
Bond Index, an index of international bonds.
Except for Asia, the world's equity markets have performed extremely well since
1991. As a result, people are investing heavily in equities, sometimes to the
detriment of the diversity of their portfolios. To better balance this
situation, the Series seeks to maintain a diverse global portfolio that will
provide investors with a number of nonlinked investment vehicles.
As a result of the dynamic worldwide investment environment, the Series is
overweighted in international equities, at a targeted allocation of 50% of
assets. We've doubled the targeted U.S. equity allocation to 20%, but that is
still an underweighting. Our bond position is focused on U.S. high-yield
corporate issues because we feel that we can take advantage of the continuing
consolidation between high-yield and investment-grade companies. This trend has
been buoyed by a resilient U.S. economy, and we remain optimistic about the
sector even though U.S. economic growth is slowing. We've devoted 8% of our
allocation to long-duration U.S. Treasury securities to take advantage of better
prices stemming from the low-inflation scenario and federal budget surpluses.
We remain committed to meeting the Series' objective of providing competitive
total returns with relatively low volatility over a reasonable business cycle,
while seeking to mitigate market risks through research and broad
diversification.
World Governments Series
For the six months ended June 30, 1998, the Series provided a total return of
1.58%. This compares to a 2.78% return for the Salomon Brothers World Government
Bond Index (the Salomon Index), an unmanaged index of complete universes of
government bonds with remaining maturities of at least five years. The Series is
replacing the JP Morgan Global Government Bond Index (an aggregate of actively
traded government bonds issued by 13 countries including the United States, with
remaining maturities of less than one year) with the Salomon Index because we
feel the Salomon Index better reflects the universe in which the Series invests.
For the past six months, the Asian economic crisis has been the largest factor
in determining the global environment for bond investing. The slowdown in growth
that has resulted from the Asian problem, combined with a lack of inflation, has
resulted in a very positive environment for almost all bond markets in developed
countries. Given these conditions, we had expected that the three major central
banks -- those in the United States, Germany, and Japan -- would leave interest
rates unchanged. This expectation has proven accurate and we believe that,
absent inflationary signs, the Fed will continue to put off raising rates as
long as economic turmoil exists in Southeast Asia.
By the end of June, the Japanese appeared to be getting closer to addressing
their severe banking problems as well as offering badly needed income tax cuts
in order to stimulate their depressed economy. However, markets will remain
skeptical until firm policies are put into place and acted upon. Meanwhile,
Western Europe continues to prepare itself for the initial phase of European
monetary union, which is set to begin in January 1999. This will be a huge and
significant undertaking that will take years to fully implement.
Year-to-date returns for all bond markets in the Salomon Index registered
positive returns when measured in local terms (not adjusted for currency
differences). The better performers have been Sweden and the United Kingdom, and
Japan has been the worst. The Series has benefited from being overweighted in
the United Kingdom and underweighted in Japan. Performance relative to the index
was hurt by overweighting the United States, which underperformed at the
beginning of the year.
Our views have not dramatically changed from the beginning of the year. The
inflation outlook, fiscal progress in several regions of the world in lowering
budget deficits, and increasing global competition are some of the very
favorable factors that we believe will continue to lower global interest rates.
Many bond markets have already discounted these positive developments. For
interest rates to drop significantly from their current low levels, the
Southeast Asian economies would have to continue unraveling, thereby causing
central banks to ease monetary policy and put more currency into their
respective economies. However, we do not foresee this scenario coming to pass in
the near future.
Meanwhile, the direction of both the Japanese economy and the yen will be
critical for most fixed-income markets in the months ahead. We continue to
believe the bond markets with the highest real and nominal interest rates will
perform well. Consequently, we expect to maintain our overweighted position in
the U.S. bloc, with underweightings in both the European and Japanese blocs.
4
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Management Review and Outlook -- continued
World Total Return Series
For the six months ended June 30, 1998, the Series provided a total return of
11.03%. This compares to that of a benchmark made up of a combination of the
MSCI World Index (60%) and the J.P. Morgan Global Government Bond Index (40%),
which returned 11.31% for the same period. The MSCI World Index is an unmanaged
index of global equities, while the J.P. Morgan Global Government Bond Index is
an aggregate of actively traded government bonds issued by 13 countries,
including the United States, with remaining maturities of at least one year.
Over the same period, the Lipper Global Flexible Fund Index returned 8.21%.
The Series has benefited from this year's improved performance of several
foreign stock markets relative to U.S. markets. While the U.S. markets have
performed well, some European markets have done even better, not only in local
currency terms but also in dollar terms. At the same time, the Series has been
helped by the fact that the weighting in the Far East, including in Japan, has
been relatively light.
While Europe has been the strongest region in the world, even there it has been
a stock-picker's market, one that stresses individual company selection over
country selection, which is how the Series is managed. The list of holdings that
were key contributors includes stocks from Portugal, Canada, the United Kingdom,
Germany, Sweden, France, and the Netherlands. Stocks include Scandia,
Mannesmann, Compass Group, Pinault Printemps Redoute, and Williams.
The Series' biggest industry weighting is in financial services, which includes
banks, insurance companies, and miscellaneous financial companies. While it has
been an area of very strong performance for a very long time, we believe we
might be approaching the end of the period of strong performance for some of
these companies. These stocks benefit from declining interest rates, and it
appears that most of that phenomenon has taken place.
Another large sector is consumer staples. Here, we look for companies with
stable and growing earnings. That includes companies like Wella, a cosmetics
company in Germany; Foster's Brewing, a beer company in Australia; and Kirin
Beverage in Japan.
In the Series' bond portion, we recently began switching assets back to the U.S.
and German markets after concentrating on the higher-yielding European bond
markets for the past 18 months, which had enabled us to benefit from the
convergence of yields leading up to European monetary union. We believe most of
the European convergence is behind us and that the U.S. bond market offers
better relative value based on both real (inflation-adjusted) and nominal rates.
While most economies in Europe are recovering, the United Kingdom is beginning
to falter due to an overvalued currency and relatively high interest rates. As a
result, we have increased our bond holdings in the United Kingdom. Globally,
inflation remains quite benign and, in some countries, is actually falling. We
feel this will help maintain the constructive tone in most bond markets.
Zero Coupon Series, Portfolio 2000
The total return for the Series was 2.97% for the six months ended June 30,
1998, as intermediate-term U.S. Treasury notes moved lower during the period,
with yields on two-year Treasuries ranging from 5.30% to 5.70%. The portfolio
consists of discounted coupon or principal payments that 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.)
-----------------------------------
The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover. The
managers' views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
5
<PAGE>
Performance Summary
Because MFS(R)/Sun Life Series Trust is designed for investors with long-term
goals, we have provided cumulative results as well as the average annual total
returns for the applicable time periods.
Average Annual and Cumulative Total Rates of Return through June 30, 1998
Bond Series
<TABLE>
<CAPTION>
10 Years/Life*
- --------------------------------------------------------------------------------
<S> <C>
Cumulative Total Return +2.00%
- --------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
Government Securities Series(1)
<TABLE>
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +3.91% +10.16% +22.13% +34.77% +123.61%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return -- +10.16% + 6.89% + 6.15% + 8.38%
- ----------------------------------------------------------------------------------------------
</TABLE>
High Yield Series(2)
<TABLE>
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +5.30% +12.36% +42.16% +61.49% +171.65%
- ----------------------------------------------------------------------------------------------
Average Annual Total Return -- +12.36% +12.44% +10.06% + 10.51%
- ----------------------------------------------------------------------------------------------
</TABLE>
International Growth and Income Series(3)
<TABLE>
<CAPTION>
6 Months 1 Year 10 Years/Life*
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +19.65% +20.30% +35.36%
- --------------------------------------------------------------------------------
Average Annual Total Return -- +20.30% +11.66%
- --------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
October 2, 1995, through June 30, 1998.
MFS(R)/Foreign & Colonial Emerging Markets
Equity Series(3)
<TABLE>
<CAPTION>
6 Months 1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return -17.54% -25.32% - 8.91%
- -----------------------------------------------------------------------------
Average Annual Total Return -- -25.32% - 4.41%
- -----------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
June 5, 1996, through June 30, 1998.
Strategic Income Series
<TABLE>
<CAPTION>
10 Years/Life*
- --------------------------------------------------------------------------------
<S> <C>
Cumulative Total Return +1.10%
- --------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1988, through June 30, 1998.
World Asset Allocation(SM) Series(3)
<TABLE>
<CAPTION>
6 Months 1 Year 3 Years 10 Years/Life*
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +9.84% +11.69% +55.73% +72.89%
- ----------------------------------------------------------------------------------
Average Annual Total Return -- +11.69% +15.91% +16.20%
- ----------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
November 7, 1994, through June 30, 1998.
World Governments Series(3)
<TABLE>
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +1.58% +2.63% +8.54% +27.08% +106.49%
- --------------------------------------------------------------------------------------------
Average Annual Total Return -- +2.63% +2.77% + 4.91% + 7.52%
- --------------------------------------------------------------------------------------------
</TABLE>
World Total Return Series(3)
<TABLE>
<CAPTION>
6 Months 1 Year 3 Years 10 Years/Life*
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return +11.03% +16.92% +55.53% +70.79%
- ------------------------------------------------------------------------------------
Average Annual Total Return -- +16.92% +15.86% +15.81%
- ------------------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
November 7, 1994, through June 30, 1998.
Zero Coupon Series, Portfolio 2000
<TABLE>
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return +2.97% +7.69% +18.26% +28.54% +151.24%
- ---------------------------------------------------------------------------------------------
Average Annual Total Return -- +7.69% + 5.75% + 5.15% + 9.65%
- ---------------------------------------------------------------------------------------------
</TABLE>
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results. Performance results reflect any applicable
expense subsidies and waivers, without which the results would have been less
favorable. Subsidies and waivers may be rescinded at any time. See the
prospectus for details.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the annuity product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
1 Government guarantees apply to individual securities only and not to prices
and yields of shares in a managed portfolio.
2 Lower-rated securities may provide greater returns, but they are also
associated with greater-than-average risk. These risks may increase share
price volatility.
3 Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility.
6
<PAGE>
Portfolio of Investments -- June 30, 1998
Bond Series
Bonds -- 55.7%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 55.7%
Airlines -- 0.1%
Northwest Airlines, Inc., 8.7s, 2007 ..... $ 2 $ 2,100
--------------
Automotive -- 0.2%
Federal Mogul Corp., 7.5s, 2004 .......... $ 5 $ 4,990
--------------
Building -- 0.6%
McDermott, Inc., 9.375s, 2002 ............ $ 15 $ 16,061
--------------
Electrical Equipment -- 0.2%
Honeywell, Inc., 6.625s, 2028 ............ $ 5 $ 5,063
--------------
Entertainment -- 0.7%
News America Holdings, Inc.,
6.625s, 2008 ........................... $ 5 $ 4,992
Time Warner, Inc., 0s to 2016, 8.3s,
2036 ................................... 40 13,015
--------------
$ 18,007
--------------
Financial Institutions -- 0.2%
Donaldson Lufkin & Jenrette, 6.5s,
2008 ................................... $ 5 $ 5,000
--------------
Government National Mortgage
Association -- 15.6%
GNMA, 7s, 2099 ........................... $400 $ 406,372
--------------
Insurance -- 0.1%
Conseco, Inc., 6.4s, 2001 ................ $ 3 $ 2,998
--------------
Medical and Health Technology
and Services -- 0.6%
Columbia/HCA Healthcare Corp.,
7.69s, 2025 ............................ $ 17 $ 16,425
--------------
U.S. Treasury Obligations -- 31.6%
U.S. Treasury Bonds, 6.125s, 2027 ........ $765 $ 819,743
--------------
Utilities -- Electric -- 4.4%
Cleveland Electric Illuminating Co.,
9s, 2023 ............................... $ 40 $ 44,208
GG1B Funding Corp., 7.43s, 2011 .......... 25 25,274
Salton Sea Funding Corp., 7.84s,
2010 ................................... 40 43,537
Waterford 3 Funding Corp., 8.09s,
2017 ................................... 2 2,073
--------------
$ 115,092
--------------
Utilities -- Gas -- 1.4%
Coastal Corp., 6.95s, 2028 ............... $ 15 $ 14,491
Coastal Corp., 7.42s, 2037 ............... 20 20,910
--------------
$ 35,401
--------------
Total U.S. Bonds
(Identified Cost, $1,425,957) ............................ $ 1,447,252
--------------
</TABLE>
Short-Term Obligations -- 54.5%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Farm Credit Bank
Consolidated Disc Note, due
7/06/98 ................................ $200 $ 199,847
Federal Home Loan Mortgage,
Discount Notes due 8/06/98 ............. 170 169,077
Federal Home Loan Mortgage,
Discount Notes, due 7/14/98 ............ 200 199,605
Federal National Mortgage Assn.,
due 7/01/98 ............................ 100 100,000
Student Loan Marketing,
Discount Notes due 7/01/98 ............. 550 550,000
Tennessee Valley Authority Discount
Notes, due 7/24/98 ..................... 200 199,310
--------------
Total Short-Term Obligations, at Amortized Cost .............. $ 1,417,839
--------------
Total Investments
(Identified Cost, $2,843,796) .............................. $ 2,865,091
Other Assets,
Less Liabilities -- (10.2)% .................................. (265,863)
--------------
Net Assets -- 100.0% ......................................... $ 2,599,228
==============
</TABLE>
See portfolio footnotes and notes to financial statements
7-BDS
<PAGE>
Portfolio of Investments -- June 30, 1998
Government Securities Series
Bonds -- 96.6%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Government Guaranteed -- 69.4%
U.S. Treasury Obligations -- 45.8%
U.S. Treasury Bonds, 10.375s, 2012 $11,300 $ 15,131,378
U.S. Treasury Bonds, 9.875s, 2015 ........ 13,945 20,311,729
U.S. Treasury Bonds, 8s, 2021 ............ 3,657 4,714,093
U.S. Treasury Bonds, 6.125s, 2027 ........ 27,650 29,628,634
U.S. Treasury Notes, 8.5s, 2000 .......... 22,600 23,627,622
U.S. Treasury Notes, 8s, 2001 ............ 37,600 40,032,344
U.S. Treasury Notes, 6.5s,
2002 - 2006 ............................ 43,450 45,716,549
U.S. Treasury Notes, 5.5s, 2003 .......... 13,600 13,590,142
U.S. Treasury Notes, 5.625s, 2008 ........ 4,700 4,763,873
------------
$197,516,364
------------
Government National Mortgage
Association -- 22.1%
GNMA, 6.5s, 2003 -- 2028 ................. $14,778 $ 14,745,431
GNMA, 7s, 2008 -- 2012 ................... 7,342 7,507,449
GNMA, 7.5s, 2008 -- 2027 ................. 45,758 47,048,096
GNMA, 8s, 2024 -- 2028 ................... 25,052 25,959,838
GNMA, 12.25s, 2015 ....................... 8 9,284
------------
$ 95,270,098
------------
Small Business Administration -- 1.5%
SBA, 8.2s, 2005 .......................... $ 869 $ 908,066
SBA, 8.4s, 2007 .......................... 453 475,711
SBA, 8.7s, 2009 .......................... 3,015 3,250,542
SBA, 9.05s, 2009 ......................... 507 547,759
SBA, 9.65s, 2007 ......................... 303 325,320
SBA, 10.05s, 2009 ........................ 643 712,065
------------
$ 6,219,463
------------
Total U.S. Government Guaranteed ........................... $299,005,925
------------
U.S. Federal Agencies -- 27.2%
Aid to Israel, 5.625s, 2003 .............. $ 2,000 $ 1,997,820
Federal Home Loan Mortgage
Corp., 6.288s, 2027 .................... 8,538 8,617,978
Federal Home Loan Mortgage
Corp., 6.5s, 2028 ...................... 21,285 21,224,976
Federal Home Loan Mortgage
Corp., 7.5s, 2001 ...................... 3,787 3,836,369
Federal National Mortgage Assn.,
6.5s, 2012 -- 2013 ..................... 7,758 7,801,408
Federal National Mortgage Assn.,
6.882s, 2020 ........................... 308 306,321
Federal National Mortgage Assn.,
7.27s, 2005 ............................ 6,038 6,179,898
Federal National Mortgage Assn.,
7.5s, 2000 ............................. 4,072 4,092,905
Federal National Mortgage Assn.,
8s, 2005 ............................... 8,495 9,055,068
Federal National Mortgage Assn.,
8.25s, 2001 ............................ 3,897 4,000,111
Financing Corp., 9.4s, 2018 .............. 4,845 6,759,550
Financing Corp., 9.8s, 2018 .............. 5,600 8,054,368
Resolution Funding Corp., 8.875s,
2020 ................................... 6,000 8,247,180
Tennessee Valley Authority, 8.25s,
2042 ................................... 12,500 5,744,625
U.S. Department of Housing &
Urban Development, 6.83s, 2003 8,025 8,399,607
U.S. Department of Housing &
Urban Development, 6.92s, 2004 4,525 4,775,368
U.S. Department of Veterans Affairs,
7.5s, 2009 ............................. 6,812 7,369,698
</TABLE>
U.S. Federal Agencies -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Department of Veterans Affairs,
7.75s, 2014 ............................ $ 915 $ 922,640
------------
Total U.S. Federal Agencies .................................. $117,385,890
------------
Total Bonds
(Identified Cost, $403,832,128) ............................ $416,391,815
------------
Repurchase Agreement -- 2.4%
Goldman Sachs, dated 6/30/98, due
7/01/98, total to be received
$10,335,626 (secured by various
U.S. Treasury and Federal
Agency obligations in a jointly
traded account), at cost ............... $10,334 $ 10,334,000
------------
Total Investments
(Identified Cost, $414,166,128) ............................ $426,725,815
------------
Other Assets,
Less Liabilities -- 1.0% ..................................... 4,306,200
------------
Net Assets -- 100.0% ......................................... $431,032,015
============
</TABLE>
See portfolio footnotes and notes to financial statements
8-GSS
<PAGE>
Portfolio of Investments -- June 30, 1998
High Yield Series
Bonds -- 92.9%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 81.0%
Aerospace -- 2.9%
Airplane Pass-Through Trust,
10.875s, 2019[dagger] .................. $ 700 $ 790,685
Argo Tech Corp., 8.625s, 2007 ............ 1,500 1,522,500
BE Aerospace, Inc., 9.875s, 2006 ......... 1,150 1,219,000
BE Aerospace, 8s, 2008## ................. 850 847,875
K & F Industries, Inc., 9.25s, 2007 ...... 1,800 1,818,000
MOOG, Inc., 10s, 2006 .................... 2,475 2,648,250
United Defense Industries, Inc.,
8.75s, 2007 ............................ 1,140 1,154,250
-----------
$10,000,560
-----------
Building -- 2.4%
AAF- McQuay, Inc., 8.875s, 2003 .......... $1,125 $ 1,109,531
Building Materials Corp., 8.625s,
2006 ................................... 400 412,000
Building Materials Corp., 8s, 2007 ....... 1,750 1,750,000
Nortek, Inc., 9.875s, 2004 ............... 775 802,125
Nortek, Inc., 9.25s, 2007 ................ 2,370 2,417,400
UDC Homes, Inc., 0s, 2000 ................ 7 3,644
Williams Scotsman, Inc., 9.875s,
2007 ................................... 1,650 1,716,000
-----------
$ 8,210,700
-----------
Business Services -- 3.1%
Anacomp, Inc., 10.875s, 2004 ............. $1,700 $ 1,785,000
Convergent Communications, Inc.,
13s, 2008## ............................ 1,350 1,309,500
Iron Mountain, Inc., 10.125s, 2006 ....... 2,400 2,604,000
Pierce Leahy Corp., 11.125s, 2006 ........ 943 1,056,160
Pierce Leahy Corp., 9.125s, 2007 ......... 675 691,875
Unisys Corp., 12s, 2003 .................. 1,975 2,241,625
Zilog, Inc., 9.5s, 2005## ................ 1,125 798,750
-----------
$10,486,910
-----------
Chemicals -- 0.4%
Sterling Chemicals, Inc., 11.25s,
2007 ................................... $1,400 $ 1,372,000
-----------
Coal -- 0.5%
P & L Coal Holdings Corp., 9.625s,
2008## ................................. $1,525 $ 1,566,938
-----------
Consumer Goods and
Services -- 5.1%
American Safety Razor Co., 9.875s,
2005 ................................... $1,000 $ 1,070,000
Boyds Collection Ltd., 9s, 2008## ........ 800 800,000
Galey & Lord, Inc., 9.125s, 2008 ......... 935 899,938
General Binding Corp., 9.375s,
2008## ................................. 1,075 1,091,125
Kindercare Learning Centers, Inc.,
9.5s, 2009 ............................. 1,775 1,783,875
Polymer Group, Inc., 9s, 2007 ............ 2,550 2,594,625
Polymer Group, Inc., 8.75s, 2008## 500 505,000
Reeves Industries, Inc., 11s, 2002 ....... 333 332,936
Reeves, Inc., 13s, 2004 .................. 324 162,075
Remington Products Co. LLC, 11s,
2006 ................................... 1,025 940,437
Revlon Consumer Products Corp.,
8.125s, 2006 ........................... 925 918,062
Revlon Consumer Products Corp.,
8.625s, 2008 ........................... 2,000 2,000,000
Samsonite, Inc., 10.75s, 2008## .......... 1,050 1,039,500
Synthetic Industries, Inc., 9.25s,
2007 ................................... 3,100 3,208,500
-----------
$17,346,073
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Containers -- 2.5%
Gaylord Container Corp., 9.75s, 2007 $1,850 $ 1,822,250
Gaylord Container Corp., 9.875s,
2008 ................................... 1,850 1,794,500
Graham Packaging Co./GPC
Capital, 8.75s, 2008## ................. 920 915,400
Silgan Holdings, Inc., 9s, 2009 .......... 3,000 3,105,000
U.S. Can Corp., 10.125s, 2006 ............ 1,000 1,052,500
-----------
$ 8,689,650
-----------
Corporate Asset Backed -- 0.1%
Merrill Lynch Mortgage Investors,
Inc., 8.161s, 2022[dagger]## ........... $ 500 $ 483,828
-----------
Defense Electronics -- 0.9%
L3 Communications Corp., 10.375s,
2007 ................................... $ 625 $ 690,625
L3 Communications Corp., 8.5s,
2008 ................................... 975 978,656
Stellex Industries, Inc., 9.5s, 2007 ..... 1,400 1,375,500
-----------
$ 3,044,781
-----------
Energy -- 3.0%
AmeriGas Partners LP, 10.125s,
2007 ................................... $1,600 $ 1,710,000
Chesapeake Energy Corp., 9.625s,
2005## ................................. 1,300 1,303,250
Clark USA, Inc., 10.875s, 2005 ........... 1,740 1,914,000
Giant Industries, Inc., 9s, 2007 ......... 1,005 1,030,125
Gulfmark Offshore, 8.75s, 2008## ......... 1,450 1,406,500
Petsec Energy, Inc., 9.5s, 2007 .......... 1,550 1,565,500
Pool Energy Services Co., 8.625s,
2008## ................................. 1,475 1,416,000
-----------
$10,345,375
-----------
Entertainment -- 1.1%
AMC Entertainment, Inc., 9.5s, 2009 $2,050 $ 2,070,500
Cinemark USA, Inc., 9.625s, 2008 ......... 1,400 1,442,000
Hollywood Theaters, Inc., 10.625s,
2007 ................................... 400 433,500
-----------
$ 3,946,000
-----------
Food and Beverage Products -- 1.8%
Delta Beverage Group, Inc., 9.75s,
2003 ................................... $1,025 $ 1,073,687
Friendly Ice Cream Corp., 10.5s,
2007 ................................... 1,050 1,107,750
Planet Hollywood, 12s, 2005## ............ 1,300 1,170,000
Purina Mills, Inc., 9s, 2010## ........... 750 770,625
Specialty Foods Corp., 10.25s, 2001 ...... 2,050 1,988,500
-----------
$ 6,110,562
-----------
Forest and Paper Products -- 3.2%
Atlantis Group, Inc., 11s, 2003 .......... $ 900 $ 949,500
Buckeye Cellulose Corp., 8.5s, 2005 1,175 1,189,688
Florida Coast Paper Co. LLC,
12.75s, 2003 ........................... 1,975 2,212,000
Pacific Lumber Co., 10.5s, 2003 .......... 1,400 1,442,000
Repap New Brunswick, Inc., 9s,
2004## ................................. 900 904,500
Speciality Paperboard, Inc., 9.375s,
2006 ................................... 1,800 1,890,000
U.S. Timberlands, 9.625s, 2007 ........... 2,140 2,166,750
Uniforet, Inc., 11.125s, 2006 ............ 325 312,000
-----------
$11,066,438
-----------
</TABLE>
9-HYS
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Gaming -- 3.5%
Boyd Gaming Corp., 9.5s, 2007[dbldag][dbldag] . $2,950 $ 3,068,000
Casino America, Inc., 12.5s, 2003 ............. 1,025 1,158,250
Coast Hotels & Casinos, Inc., 13s,
2002 ........................................ 600 694,500
Eldorado Resorts LLC, 10.5s, 2006 ............. 1,700 1,870,000
Grand Casinos, Inc., 10.125s, 2003 1,805 1,967,450
HorseShoe Gaming LLC, 9.375s,
2007 ........................................ 425 449,969
Prime Hospitality Corp., 9.75s, 2007 2,700 2,868,750
-----------
$12,076,919
-----------
Industrial -- 8.5%
AGCO Corp., 8.5s, 2006 ........................ $ 900 $ 927,000
Clark-Schwebel, Inc., 10.5s, 2006 ............. 800 885,000
Columbus Mckinnon Corp., 8.5s,
2008## ...................................... 1,750 1,719,375
Day International Group, Inc.,
11.125s, 2005 ............................... 900 981,000
Envirosource, Inc., 9.75s, 2003 ............... 1,107 1,115,303
ESI Tractebel, 7.99s, 2011## .................. 525 520,406
Furon Co., 8.125s, 2008## ..................... 1,150 1,148,562
Grove Worldwide LLC, 9.25s,
2008## ...................................... 525 514,500
Hayes Wheels International, Inc.,
11s, 2006 ................................... 1,050 1,178,625
Hayes Wheels International, Inc.,
9.125s, 2007 ................................ 1,200 1,254,000
Haynes International, Inc., 11.625s,
2004 ........................................ 1,500 1,687,500
IMO Industries, Inc., 11.75s, 2006 ............ 1,585 1,783,125
Interlake Corp., 12s, 2001 .................... 2,175 2,370,750
Interlake Corp., 12.125s, 2002 ................ 350 357,000
International Knife & Saw, Inc.,
11.375s, 2006 ............................... 1,325 1,417,750
Johnstown America Industries, Inc.,
11.75s, 2005 ................................ 1,175 1,301,312
Newcor, Inc., 9.875s, 2008## .................. 1,525 1,540,250
Numatics, Inc., 9.625s, 2008## ................ 955 965,744
Oxford Automotive, Inc., 10.125s,
2007 ........................................ 1,350 1,390,500
Simonds Industries, Inc., 10.25s,
2008 ........................................ 400 400,000
Standyne Automotive Corp., 10.25s,
2007## ...................................... 375 383,438
Talon Automotive Group, Inc.,
9.625s, 2008## .............................. 825 816,750
Thermadyne Holdings, 0s to 2003,
12.5s to 2008## ............................. 2,600 1,443,000
Thermadyne Manufacturing, 9.875s,
2008## ...................................... 1,950 1,964,625
Titan Wheel International, Inc.,
8.75s, 2007 ................................. 150 154,500
Venture Holdings Trust, 9.75s, 2004 975 984,750
-----------
$29,204,765
-----------
Media -- 10.1%
Acme Television LLC, 0s to 2000,
10.875s to 2004 ............................. $1,150 $ 940,125
Albritton Communications Co.,
9.75s, 2007 ................................. 1,900 2,090,000
Chancellor Media Corp., 8.75s, 2007 650 677,625
Charter Communications Southeast
LP, 11.25s, 2006 ............................ 1,420 1,565,550
Comcast Corp., 10.625s, 2012 .................. 200 254,746
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Media -- continued
CSC Holdings, Inc., 8.125s, 2009 .............. $1,900 $ 2,037,750
Cumulus Media, Inc., 10.375s, 2008 475 481,531
Digital Television Services, Inc.,
12.5s, 2007 ................................. 1,450 1,656,625
EchoStar Communications Corp., 0s
to 1999, 12.875s to 2004 .................... 700 680,750
EchoStar Satellite Broadcasting
Corp., Principal Stripped, 0s to
2000, 13.125s to 2004 ....................... 2,325 2,136,094
Fox/Liberty Networks LLC, Inc.,
8.875s, 2007 ................................ 2,475 2,524,500
FrontierVision Holding LP, 0s to
2001, 11.87s to 2007 ........................ 800 632,000
Frontiervision Operating Partnership
LP, 11s, 2006 ............................... 575 636,813
Golden Books Publishing, Inc.,
7.65s, 2002 ................................. 625 487,500
Granite Broadcasting Corp.,
10.375s, 2005 ............................... 2,050 2,152,500
Granite Broadcasting Corp., 8.875s,
2008## ...................................... 940 950,575
Hollinger International Publishing,
Inc., 9.25s, 2007 ........................... 2,300 2,426,500
Intermedia Capital Partners IV, LP,
11.25s, 2006 ................................ 1,375 1,536,562
Jacor Communications Co., 8s,
2010 ........................................ 825 825,000
Lenfest Communications, Inc.,
10.5s, 2006 ................................. 1,095 1,275,675
LIN Holdings Corp., 0s to 2003, 10s
to 2008## ................................... 300 201,000
LIN Television Corp., 8.375s,
2008## ...................................... 1,450 1,479,000
Marvel Holdings, Inc., 0s, 1998 ............... 1,165 43,688
NTL, Inc., 0s to 2003, 9.75s to
2008## ...................................... 2,650 1,722,500
Outdoor Systems, Inc., 8.875s,
2007 ........................................ 1,500 1,561,875
Renaissance Media Louisiana LLC,
0s to 2003, 10s to 2008## ................... 725 427,750
Transwestern Publishing Co.,
9.625s, 2007 ................................ 700 715,750
United International Holdings, Inc.,
0s to 2003, 10.75s to 2008 .................. 2,050 1,265,875
Young Broadcasting, Inc., 8.75s,
2007 ........................................ 1,235 1,290,575
-----------
$34,676,434
-----------
Medical and Health Products -- 0.3%
Mediq, Inc., 11s, 2008## ...................... $1,100 $ 1,127,500
-----------
Medical and Health Technology
and Services -- 4.7%
Abbey Healthcare Group, Inc., 9.5s,
2002 ........................................ $1,500 $ 1,485,000
Alaris Medical Systems, Inc., 9.75s,
2006 ........................................ 1,500 1,548,750
Beverly Enterprises, Inc., 9s, 2006 ........... 1,700 1,772,250
Fresenius Medical Care Capital
Trust, 7.875s, 2008## ....................... 1,100 1,080,750
Insight Health Services Corp.,
9.625s, 2008## .............................. 650 645,938
Oxford Health Plans, Inc., 11s,
2005## ...................................... 650 660,562
</TABLE>
10-HYS
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Medical and Health Technology
and Services -- continued
Physician Sales & Service, Inc.,
8.5s, 2007 ............................. $1,445 $ 1,484,737
Prime Medical Services, Inc., 8.75s,
2008## ................................. 1,725 1,707,750
Quorum Health Group, Inc., 8.75s,
2005 ................................... 1,400 1,449,000
Tenet Healthcare Corp., 8.625s,
2007## ................................. 1,750 1,793,750
Tenet Healthcare Corp., 7.625s,
2008## ................................. 740 748,325
Tenet Healthcare Corp., 8.125s,
2008 ................................... 1,750 1,754,375
-----------
$16,131,187
-----------
Metals and Minerals -- 6.2%
Acme Metals, Inc., 10.875s,
2007## ................................. $ 700 $ 588,000
Alaska Steel Holdings Corp.,
9.125s, 2006 ........................... 1,625 1,698,125
Commonwealth Aluminum Corp.,
10.75s, 2006 ........................... 2,450 2,523,500
Doe Run Resources Corp., 11.25s,
2005## ................................. 1,000 1,010,000
GS Technologies Operating, Inc.,
12.25s, 2005 ........................... 700 798,000
Jorgensen (Earle M.) Co., 9.5s,
2005## ................................. 1,500 1,466,250
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 ........................... 1,400 1,438,500
Kaiser Aluminum & Chemical Corp.,
10.875s, 2006 .......................... 1,025 1,101,875
Keystone Consolidated Industries,
Inc., 9.625s, 2007 ..................... 1,620 1,664,550
Metal Management, Inc., 10s,
2008## ................................. 1,600 1,572,000
Metals USA, Inc., 8.625s, 2008## ......... 1,175 1,139,750
Schuff Steel Co., 10.5s, 2008## .......... 1,500 1,492,500
WCI Steel, Inc., 10s, 2004 ............... 2,400 2,466,000
Wheeling Pittsburgh Corp., 9.25s,
2007 ................................... 1,475 1,504,500
WHX Corp., 10.5s, 2005## ................. 800 802,000
-----------
$21,265,550
-----------
Mining -- 0.5%
AEI Holdings, Inc., 10s, 2007## .......... $1,675 $ 1,654,063
-----------
Pharmaceuticals -- 0.5%
Pharmerica, Inc., 8.375s, 2008## ......... $1,600 $ 1,604,000
-----------
Printing and Publishing -- 0.7%
Big Flower Press Holdings, Inc.,
8.875s, 2007 ........................... $1,100 $ 1,119,250
Liberty Group Operating, Inc.,
9.375s, 2008## ......................... 1,145 1,173,625
-----------
$ 2,292,875
-----------
Restaurants and Lodging -- 0.8%
Red Roof Inns, Inc., 9.625s, 2003 ........ $1,700 $ 1,751,000
Santa Fe Hotel, Inc., 11s, 2000 .......... 1,045 1,034,550
-----------
$ 2,785,550
-----------
Retail -- 2.4%
Affinity Group Holding, Inc., 11s,
2007 ................................... $1,000 $ 1,063,750
Cole National Group, Inc., 9.875s,
2006 ................................... 500 540,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Retail -- continued
Cole National Group, Inc., 8.625s,
2007 ................................... $2,400 $ 2,424,000
Finlay Enterprises, Inc., 9s, 2008 ....... 900 904,500
Finlay Fine Jewelry Corp., 8.375s,
2008 ................................... 875 879,375
J Crew Operating Corp., 10.375s,
2007 ................................... 525 501,375
Musicland Group, Inc., 9.875s,
2008## ................................. 2,050 2,039,750
-----------
$ 8,352,750
-----------
Supermarkets -- 0.2%
Jitney-Jungle Stores of America,
Inc., 12s, 2006 ........................ $ 485 $ 545,625
-----------
Telecommunications -- 15.3%
Allegiance Telecom, Inc., 0s to
2003, 11.75s to 2008## ................. $1,550 $ 825,375
American Mobile Satellite Corp.,
12.25s, 2008## ......................... 1,425 1,325,250
American Cellular Corp., 10.5s,
2008## ................................. 1,300 1,300,000
Bell Technology Group Ltd., 13s,
2005## ................................. 425 430,313
Crown Castle International Corp., 0s
to 2002, 10.625s to 2007## ............. 950 648,375
Digital Teleport Holdings, Inc., 0s to
2003, 12.5s to 2008 .................... 2,400 1,296,000
Esat Holdings Ltd., 0s to 2002,
12.5s to 2007 .......................... 550 404,250
Exodus Communications, Inc.,
11.25s, 2008## ......................... 2,500 2,509,375
Flag Ltd., 8.25s, 2008## ................. 2,255 2,271,912
GCI, Inc., 9.75s, 2007 ................... 925 966,625
Global Crossing Holdings Ltd.,
9.625s, 2008## ......................... 1,900 1,980,750
GlobalStar LP / Capital, 11.375s,
2004 ................................... 1,300 1,261,000
ICG Holdings, Inc., 0s to 2001,
12.5s to 2006 .......................... 2,525 2,007,375
Intermedia Communications, Inc.,
0s to 2002, 11.125s to 2007 ............ 365 266,450
Intermedia Communications, Inc.,
8.875s, 2007 ........................... 800 818,000
ITC Deltacom, Inc., 11s, 2007 ............ 682 763,840
ITC Deltacom, Inc., 8.875s, 2008## 700 712,250
Level 3 Commerce, Inc., 9.125s,
2008## ................................. 2,075 2,017,938
MJD Communications, Inc., 9.5s,
2008## ................................. 1,000 1,022,500
NEXTEL Communications, Inc., 0s
to 1999, 9.75s, 2004 ................... 5,170 3,503,625
NEXTEL International, Inc., 0s to
2003, 12.125s to 2008## ................ 3,025 1,739,375
NEXTEL International Inc., 0s to
2002, 13s to 2007 ...................... 850 563,125
Nextlink Communications, Inc., 0s to
2003, 9.45s to 2008## .................. 1,600 984,000
Nextlink Communications, Inc.,
9.625s, 2007 ........................... 1,225 1,249,500
Onepoint Communications Corp.,
14.5s, 2008## .......................... 400 376,000
Orbital Imaging Corp., 11.625s,
2005## ................................. 600 612,000
</TABLE>
11-HYS
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Telecommunications -- continued
Pagemart Wireless, Inc., 0s to 2003,
11.25s to 2008## ...................... $1,500 $ 900,000
Paging Network, Inc., 8.875s, 2006 ...... 190 186,200
Pathnet, Inc., 12.25s, 2008## ........... 1,350 1,431,000
Pinnacle Holdings, Inc., 0s to 2003,
10s to 2008## ......................... 1,925 1,260,875
Psinet, Inc., 10s, 2005## ............... 1,000 1,020,000
Qwest Communications
International, Inc., 0s to 2002,
9.47s to 2007 ......................... 1,150 862,500
Qwest Communications
International, Inc., 10.875s, 2007 .... 1,125 1,296,562
RCN Corp., 0s to 2002, 11.125s to
2007 .................................. 2,950 1,895,375
Rhythms Netconnections, Inc., 0s to
2003, 13.5s to 2008## ................. 950 465,500
Rural Cellular Corp., 9.625s, 2008## 800 800,000
Spectrasite Holdings, Inc., 12s, 2008##. 3,150 1,748,250
Sprint Spectrum LP, 11s, 2006 ........... 850 983,875
Telesystem International Wireless,
Inc., 0s to 2002, 10.5s to 2007 ....... 1,325 796,656
Telesystem International Wireless,
Inc., 0s to 2002, 13.25s to 2007 ...... 1,625 1,080,625
Triton PCS, Inc., 0s to 2003, 11s to
2008## ................................ 2,750 1,608,750
Verio, Inc., 10.375s, 2005## ............ 625 643,750
Viatel, Inc., 11.25s, 2008## ............ 1,200 1,260,000
Viatel, Inc., 12.5s, 2008## ............. 1,325 801,625
Western Wireless Corp., 10.5s, 2007 1,665 1,789,875
------------
$ 52,686,621
------------
Transportation -- 0.1%
Moran Transportation Co., 11.75s,
2004 .................................. $ 300 $ 333,750
------------
Utilities -- Electric -- 0.2%
El Paso Electric Co., 8.9s, 2006 ........ $ 500 $ 563,990
------------
Total U.S. Bonds .......................................... $277,971,394
------------
Foreign Bonds -- 11.9%
Bulgaria -- 0.3%
Bulgaria National Republic, 2.25s,
2012 .................................. $1,500 $ 905,700
------------
Canada -- 3.9%
Acetex, Inc., 9.75s, 2003 (Chemicals) $ 875 $ 900,156
CHC Helicopter Corp., 11.5s, 2002
(Aerospace) ........................... 550 584,375
Clearnet Communications, Inc., 0s
to 2000, 14.75s to 2005
(Telecommunuications) ................. 1,650 1,377,750
International Utility Structures, Inc.,
10.75s, 2008 (Utilities-Electric)## ... 500 511,875
Metronet Communications Corp., 0s
to 2002, 10.75s to 2007
(Telecommunications) .................. 1,500 997,500
Metronet Communications Corp.,
12s, 2007 (Telecommunications) ........ 650 747,500
Metronet Communications Corp., 0s
to 2003, 9.95s to 2008
(Telecommunications)## ................ 3,345 2,069,719
PCI Chemicals Canada Inc., 9.25s,
2007 (Industrial) ..................... 1,305 1,291,950
Repap New Brunswick, Inc., 10.625s,
2005 (Forest and Paper Products) ...... 2,375 2,398,750
Rogers Cablesystems, Inc., 9.625s,
2002 (Telecommunications) ............. 250 267,500
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
Canada -- continued
Rogers Cablesystems, Inc.,
10.125s, 2012
(Telecommunications) .................. $2,030 $ 2,207,625
------------
$ 13,354,700
------------
China -- 0.2%
Dao Heng Bank Ltd., 7.75s, 2007
(Financial Services)## ................ $ 825 $ 701,143
------------
Greece -- 0.2%
Fage Dairy Industries SA, 9s, 2007
(Food and Beverage Products) .......... $ 675 $ 656,438
------------
Luxembourg -- 0.5%
Millicom International Cellular
Communications Corp., 0s to
2001, 13.25s to 2006
(Telecommunications) .................. $2,360 $ 1,840,800
------------
Mexico -- 0.4%
Satelites Mexicanos SA de C V,
10.125s, 2004
(Telecommunications)## ................ $1,250 $ 1,221,875
------------
Netherlands -- 0.6%
Versatel Telecom B V, 13.25s, 2008
(Telecommunications)## ................ $2,000 $ 2,100,000
------------
Poland -- 0.1%
PTC International Finance BV, 0s,
2007 (Information, Paging and
Technology) ........................... $ 525 $ 357,000
------------
Russia -- 0.8%
Ministry of Finance, Russia, 10s, 2007 .. $1,200 $ 900,000
Ministry of Finance, Russia, 12.75s,
2028## ................................ 520 465,400
Vnesheconombank, 6.625s, 2015## ......... 2,500 1,384,375
------------
$ 2,749,775
------------
South Korea -- 0.3%
Republic of Korea, 8.875s, 2008 ......... $1,150 $ 1,040,117
------------
Thailand -- 0.2%
Jasmine Submarine Telecom Ltd.,
8.483s, 2011 (Industrial)## ........... $ 833 $ 747,891
------------
United Kingdom -- 4.4%
Colt Telecom Group PLC, 0s to
2001, 12s to 2006
(Telecommunications) .................. $ 650 $ 513,500
Colt Telecom Group PLC, 0s to
2001, 12s to 2006
(Telecommunications) .................. 3,150 3,150,000
Dialog Corp. PLC, 11s, 2007
(Telecommunications) .................. 1,900 2,099,500
Diamond Cable Communications
Corp. PLC, 0s to 2000, 11.75s to
2005 (Media) .......................... 150 124,500
Dolphin Telecom PLC, 0s to 2003,
11.5s to 2008
(Telecommunications)## ................ 2,750 1,553,750
Esat Telecom Group PLC, 0s to
2002, 12.5s to 2007
(Telecommunications) .................. 1,200 885,000
Esprit Telecom Group PLC, 10.875s,
2008 (Telecommunications)## ........... 1,700 1,683,000
HMV Media Group PLC, 10.25s,
2008 (Retail)## ....................... 1,400 1,421,000
Middleweb PLC Bankers Trust Lux,
10.5s, 2008 (Media)## ................. 750 1,247,873
</TABLE>
12-HYS
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
United Kingdom -- continued
Newsquest Capital PLC, 11s, 2006
(Printing and Publishing) ............. $ 825 $ 932,250
Telewest PLC, 9.625s, 2006
(Telecommunications) .................. 1,475 1,556,125
------------
$ 15,166,498
------------
Total Foreign Bonds ............................... $ 40,841,937
------------
Total Bonds
(Identified Cost, $313,508,514) ................. $318,813,331
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
Stocks
Consumer Goods and Services
Ithaca Industries, Inc.* ................ 9,000 $ 30,942
Ranger Industries, Inc.* ................ 8,952 5,040
------------
Total Stocks
(Identified Cost, $451,710) ..................... $ 35,982
------------
Preferred Stock -- 2.8%
Consumer Goods and Services
Renaissance Cosmetics, Inc., 14s # 850 $ 8,500
------------
Entertainment -- 0.4%
Time Warner, Inc., 10.25 ................ 1,297 $ 1,452,640
------------
Media -- 1.2%
CSC Holdings, Inc. ...................... 14,851 $ 1,681,876
Primedia, Inc. .......................... 4,000 408,000
Primedia, Inc.##* ....................... 19,750 1,915,750
------------
$ 4,005,626
------------
Oils -- 0.2%
Clark USA, Inc.* ........................ 687 $ 724,785
------------
Telecommunications -- 1.0%
E Spire Communications, Inc.* ........... 478 $ 519,825
ICG Funding LLC* ........................ 6,500 481,000
ICG Funding LLC, 6.75%##* ............... 8,000 648,000
NEXTEL Communications, Inc.,
13s * ................................. 218 244,160
Rural Cellular Corp.##* ................. 1,625 1,633,125
------------
$ 3,526,110
------------
Total Preferred Stock
(Identified Cost, $9,208,566) ................... $ 9,717,661
------------
Warrants* -- 0.1%
Allegiance Telecom, Inc.
(Telecommunications)* ................. 1,550 $ 388
Atlantic Gulf Communities Corp.[dagger] . 30 62
Crystal Oil Co., $0.10 (Oil & Gas) ...... 36,780 --
Crystal Oil Co., $0.125 (Oil & Gas) ..... 36,779 --
</TABLE>
Warrants -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Esat Holdings Ltd.
(Telecommunications)## ................ 550 $ 19,250
GlobalStar Telecommunications,
(Telecommunications)## ................ 1,300 143,000
ICO, Inc. (Telecommunications) .......... 25,000 15,250
Knology Holdings, Inc.
(Telecommunications)## ................ 525 1,312
Metronet Communications Corp.
(Telecommunications)## ................ 650 26,000
NEXTEL International Inc.
(Telecommunications) .................. 850 1,062
Orbital Imaging Corp.
(Telecommunications)## ................ 600 27,000
Orion Network Systems, Inc.
(Telecommunications) .................. 1,000 10,000
Orion Network Systems, Inc.
(Telecommunications) .................. 1,100 22,000
Renaissance Cosmetics, Inc.
(Consumer Goods and Services) 689 7
------------
Total Warrants
(Identified Cost, $219,599) ..................... $ 265,331
------------
Short-Term Obligations -- 3.4%
Principal Amount
(000 Omitted)
Federal National Mortgage Assn.,
due 7/01/98 ........................... $5,000 $ 5,000,000
Federal National Mortgage Assn.,
due 7/06/98 ........................... 3,725 3,722,191
Federal National Mortgage Assn.,
due 7/07/98 ........................... 2,990 2,987,289
------------
Total Short-Term Obligations, at Amortized Cost ... $ 11,709,480
------------
Total Investments
(Identified Cost, $335,097,869) ................. $340,541,785
Other Assets,
Less Liabilities -- 0.8% ............................ 2,893,160
------------
Net Assets -- 100.0% .............................. $343,434,945
============
</TABLE>
See portfolio footnotes and notes to financial statements
13-HYS
<PAGE>
Portfolio of Investments -- June 30, 1998
International Growth and Income Series
Stocks -- 93.3%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- 89.8%
Australia -- 2.0%
QBE Insurance Group Ltd.
(Insurance) ........................... 203,994 $ 720,101
Seven Network Ltd. (Entertainment) 203,980 613,939
Tab Limited (Gaming)* ................... 112,120 165,257
----------
$1,499,297
----------
Austria -- 0.5%
Austria Tabak AG (Tobacco)* ............. 6,040 $ 336,295
----------
Brazil -- 0.3%
Companhia Paranaense de Energia,
ADR (Utilities - Electric) ............ 25,630 $ 237,078
----------
Canada -- 2.8%
Canadian National Railway Co.
(Railroads) ........................... 33,610 $1,785,531
T. Eaton Limited (Retail)* .............. 27,950 284,331
----------
$2,069,862
----------
Chile -- 0.5%
Enersis S.A., ADR
(Utilities - Electric) ................ 14,770 $ 360,942
----------
Finland -- 1.3%
Helsingin Puhelin Oyj
(Telecommunications) .................. 9,530 $ 442,868
Huhtamaki Oy Group
(Conglomerate) ........................ 8,920 510,430
----------
$ 953,298
----------
France -- 10.9%
Elf Aquitaine S.A. (Oils) ............... 3,800 $ 533,487
Pinault - Printemps Redoute (Retail) 2,650 2,214,716
Sanofi S.A. (Medical and Health
Products) ............................. 7,310 858,438
Television Francaise (Broadcasting) 8,890 1,375,825
Thomson CSF (Electronics) ............... 9,530 362,028
Total S.A., ADR (Oils) .................. 22,680 1,482,705
Union des Assurances Federales
S.A. (Insurance) ...................... 7,400 1,164,787
----------
$7,991,986
----------
Germany -- 9.0%
Adidas-Salomon AG (Apparel and
Textiles) ............................. 4,920 $ 856,540
Henkel KgAA (Chemicals) ................. 23,460 2,318,079
Mannesmann AG (Diversified
Manufacturing Operations) ............. 12,690 1,303,070
Volkswagen AG (Automotive) .............. 1,300 1,254,304
Wella AG (Cosmetics)* ................... 760 849,820
----------
$6,581,813
----------
Greece -- 1.0%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) .................. 28,858 $ 739,535
----------
Hong Kong -- 0.9%
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) ................ 138,000 $ 427,548
Wharf Holdings Ltd. (Real Estate) ....... 68,000 67,153
Wing Hang Bank Ltd. (Banks and
Credit Cos.) .......................... 103,000 137,617
----------
$ 632,318
----------
Italy -- 5.1%
Eni S.P.A, ADR (Oils) ................... 10,120 $ 657,800
Instituto Nazionale delle
Assicurazioni (Insurance) ............. 376,410 1,068,505
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- continued
Italy -- continued
Telecom Italia S.P.A.
(Telecommunications)* ................. 196,390 $ 949,936
Telecom Italia S.P.A., Saving Shares
(Telecommunications) .................. 324,060 1,092,951
----------
$3,769,192
----------
Japan -- 9.6%
Canon, Inc. (Office Equipment) .......... 61,000 $1,390,678
Eisai Co. Ltd. (Pharmaceuticals) ........ 20,000 273,576
Kirin Beverage Corp. (Beverages) ........ 64,000 1,206,630
Osaka Sanso Kogyo Ltd.
(Chemicals) ........................... 56,000 115,510
Rohm Co. (Electronics) .................. 6,000 618,803
Sony Corp. (Electronics) ................ 14,800 1,280,017
Takeda Chemical Industries
(Pharmaceuticals) ..................... 47,000 1,255,193
Terumo Corp. (Pharmaceuticals) .......... 27,000 429,905
Tokyo Broadcasting System, Inc.
(Broadcasting) ........................ 18,000 201,925
Ushio, Inc. (Electronics) ............... 35,000 278,642
----------
$7,050,879
----------
Netherlands -- 12.5%
Akzo Nobel N.V. (Chemicals) ............. 5,740 $1,274,553
Benckiser N.V. (Consumer Goods
and Services)* ........................ 13,680 840,348
Hunter Douglas N.V., ADR
(Consumer Goods and Services)* 18,000 976,676
IHC Caland N.V. (Marine
Equipment)* ........................... 20,421 1,148,149
ING Groep N.V. (Financial
Services)* ............................ 10,800 706,388
Koninklijke Ahold N.V., ADR
(Food/Retail) ......................... 31,091 994,912
Koninklijke Ahrend Groep N.V.
(Consumer Goods and Services) ......... 11,450 373,327
Philips Electronics N.V.
(Manufacturing) ....................... 8,670 727,999
Royal Dutch Petroleum Co., ADR
(Oils) ................................ 25,610 1,403,748
Wolters Kluwer N.V. (Publishing)* ....... 5,588 766,103
----------
$9,212,203
----------
New Zealand -- 0.1%
Telecom Corp. of New Zealand
(Telecommunications) .................. 29,860 $ 63,849
----------
Portugal -- 1.3%
Banco Pinto & Sotto Mayor, S.A.
(Banks and Credit Cos.)* .............. 30,976 $ 639,181
Elec De Portugal (Utilities - Electric) 15,200 352,976
----------
$ 992,157
----------
Singapore -- 0.3%
Singapore Press Holdings Ltd.
(Printing and Publishing) ............. 37,900 $ 254,619
----------
South Korea -- 0.2%
Korea Electric Power Corp.
(Utilities - Electric) ................ 10,320 $ 110,356
----------
Spain -- 4.5%
Acerinox S.A. (Iron and Steel) .......... 4,050 $ 538,663
Iberdrola S.A. (Utilities - Electric) ... 109,780 1,780,448
Telefonica de Espana
(Utilities - Telephone) ............... 21,060 972,549
----------
$3,291,660
----------
</TABLE>
14-FCG
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Sweden -- 6.9%
Astra AB (Pharmaceuticals) .............. 63,720 $ 1,268,814
Saab AB (Aerospace and Defense)* 72,080 758,262
Securitas AB (Security Services) ........ 10,370 507,137
Skandia Forsakrings AB (Insurance)....... 119,700 1,708,929
Telefonaktiebolaget LM Ericsson,
ADR (Telecommunications Equipment) .... 12,720 364,110
Volvo AB (Automobiles) .................. 15,740 468,159
-----------
$ 5,075,411
-----------
Switzerland -- 2.8%
Ciba Specialty AG (Chemicals)* .......... 6,580 $ 845,287
Clariant AG (Chemicals) ................. 674 444,147
Nestle AG, Registered Shares
(Food and Beverage Products) .......... 355 760,112
-----------
$ 2,049,546
-----------
United Kingdom -- 17.3%
ASDA Group PLC (Supermarkets) ........... 213,320 $ 732,096
Avis Europe PLC (Auto Rental)## ......... 217,160 982,820
BAT Industries PLC (Tobacco) ............ 40,130 401,621
Booker PLC (Food - Wholesale) ........... 71,030 292,641
British Aerospace
(Aerospace and Defense)* .............. 189,300 1,449,304
British Petroleum PLC, ADR (Oils) ....... 19,530 1,723,522
Compass Group (Food/Catering)*##......... 229,560 2,638,225
Diageo PLC (Food & Beverage
Products) ............................. 68,580 812,180
Lloyds TSB Group PLC
(Banks and Credit Cos.)* .............. 43,580 609,518
LucasVarity PLC (Automotive) ............ 234,450 930,730
Tomkins PLC (Conglomerate) .............. 237,990 1,291,137
Williams PLC (Diversified
Manufacturing Operations) ............. 132,720 852,302
-----------
$12,716,096
-----------
Total Foreign Stocks ................................ $65,988,392
-----------
U.S. Stocks -- 3.5%
Business Machines -- 0.9%
Xerox Corp. ............................. 6,600 $ 670,725
-----------
Insurance -- 0.9%
Transamerica Corp. ...................... 6,030 $ 694,204
-----------
Restaurants and Lodging -- 1.1%
McDonalds Corp. ......................... 12,060 $ 832,140
-----------
Stores -- 0.6%
Rite Aid Corp. .......................... 11,520 $ 432,720
-----------
Total U.S. Stocks ................................... $ 2,629,789
-----------
Total Stocks
Identified Cost, $58,424,728) ..................... $68,618,181
-----------
Preferred Stock -- 0.7%
Prosieben Media AG
(Entertainment) (Germany)*
(Identified Cost, $457,531) .......... 9,530 $ 493,249
-----------
Warrants*
Foreign Stocks
Eaux (Cie General)
(Utilities - Water) (France) .......... 2,160 $ 4,246
Wharf Holdings (Real Estate)
(Hong Kong) ........................... 3,200 148
-----------
Total Warrants
(Identified Cost, $0) ............................. $ 4,394
-----------
</TABLE>
Short-Term Obligations -- 4.8%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Mortgage,
due 8/06/98 ....................................... $2,000 $ 1,989,140
Student Loan Marketing,
due 7/01/98 ....................................... 1,540 1,540,000
-----------
Total Short-Term Obligations, at Amortized Cost ............... $ 3,529,140
-----------
Total Investments
(Identified Cost, $62,411,399) .............................. $72,644,964
Other Assets,
Less Liabilities -- 1.2% ...................................... 852,384
-----------
Net Assets -- 100.0% .......................................... $73,497,348
===========
</TABLE>
See portfolio footnotes and notes to financial statements
15-FCG
<PAGE>
Portfolio of Investments -- June 30, 1998
MFS(R)/Foreign & Colonial Emerging Markets Equity Series
Stocks -- 94.4%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- 94.4%
Argentina -- 3.5%
Banco de Galicia y Buenos Aires
S.A. de C.V., ADR
(Banks and Credit Cos.) .................. 3,171 $ 57,871
Perez Companc S.A. (Oils) .................. 22,728 114,112
Siderca S.A. (Steel) ....................... 33,000 56,108
Telecom S.A., ADR
(Telecommunications) ..................... 1,250 37,266
Telefonica de Argentina, ADR
(Utilities - Telephone) .................. 5,220 169,324
YPF Sociedad Anonima, ADR (Oils) ........... 9,300 279,581
----------
$ 714,262
----------
Brazil -- 8.4%
CEMIG, Preferred
(Utilities - Electric) ................... 2,685,013 $ 83,580
Centrais Eletricas Brasileiras S.A.,
Preferred, "B" (Utilities - Electric)*.... 7,889,000 237,386
Companhia Cervejaria Brahma,
Preferred (Beverages) .................... 104,000 64,747
Companhia Energetica de Sao
Paulo, Preferred
(Utilities - Electric) ................... 1,168,000 32,419
Companhia Paranaense de Energia,
Preferred "B" (Utilities - Electric) ..... 4,022,000 37,560
Companhia Vale do Rio Doce,
Preferred (Mining) ....................... 5,700 113,359
Gerasul Centrais G (Utilities -
Electric) ................................ 7,889,000 11,392
Itausa Investimentos Itau S.A.,
Preferred (Conglomerate) ................. 67,000 42,291
ITC Ltd. (Conglomerate)## .................. 3,200 56,640
ITC Ltd., GDR (Conglomerate) ............... 6,000 103,500
Petroleo Brasileiro S.A., Preferred
(Oils) ................................... 1,257,000 233,683
Telebras, ADR
(Telecommunications) ..................... 3,684,000 400,733
Telecomunicacoes Braileiras S.A.
(Utilities-Telephone) .................... 2,038,000 162,124
Telecomunicacoes do Rio de Janero
S.A. (Telecommunications) ................ 796,000 59,881
Telerj Tel Rio de Janero S.A.,
Preferred "B"
(Telecommunications)* .................... 796,000 47,347
Unibanco (Banks and Credit Cos.) ........... 793,000 46,901
----------
$1,733,543
----------
China -- 0.4%
Huaneng Power International Inc.,
ADR (Utilities - Electric)* .............. 4,000 $ 53,750
Qingling Motors Co. (Automotive) ........... 80,000 22,204
----------
$ 75,954
----------
Egypt -- 5.9%
Ahram Beverage Co., GDR
(Beverages)## ............................ 5,072 $ 158,754
Commercial International Bank,
GDR (Banks and Credit Cos.)## ............ 26,761 283,667
Egypt Gas (Utilities - Gas) ................ 1,500 144,110
Egyptian International
Pharmaceutical Industries Co.
(Pharmaceuticals) ........................ 2,800 179,397
Madinet Nasar City (Housing) ............... 1,900 91,161
Misr Elgadida for Housing &
Recreation (Housing) ..................... 790 79,174
North Cairo Mills (Food Products) .......... 1,955 33,142
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Egypt -- continued
South Cairo Flour Mills
(Food Products) .......................... 1,575 $ 9,767
Suez Cement Co., GDR
(Construction)## ......................... 12,198 221,394
Torra for Cement (Construction) ............ 1,100 18,993
----------
$1,219,559
----------
Hong Kong -- 2.4%
Cheung Kong Holdings Ltd.
(Real Estate) ............................ 29,000 $ 142,632
China Resources Enterprises Ltd.
(Real Estate) ............................ 54,000 55,767
Citic Pacific Ltd. (Conglomerate) .......... 34,000 60,130
Hong Kong Telecommunications
(Telecommunications)* .................... 62,800 117,955
New World Development Co.
(Real Estate) ............................ 39,000 75,518
Wharf Holdings Ltd. (Real Estate)* ......... 25,000 24,689
Zhenhai Refining and Chemical Co.,
Ltd. (Oils) .............................. 76,000 9,811
----------
$ 486,502
----------
Hungary -- 6.0%
Magyar Olaj Es Gazipari KT.
(Utilities - Gas)* ....................... 5,590 $ 150,543
Magyar Tavkozlesi Rt. ADR
(Telecommunications) ..................... 14,434 424,901
Mol Magyar Olaj Es Gazipari KT,
GDR (Oils)*## ............................ 10,000 268,000
Otp Bank (Banks and Credit Cos.) ........... 3,185 156,284
Richter Gedeon Rt. (Pharmaceuticals) 2,419 194,333
Richter Gedeon Rt. GDR
(Pharmaceuticals)* ....................... 627 49,533
----------
$1,243,594
----------
India -- 4.1%
Bajaj Auto Ltd., GDR (Automotive) .......... 700 $ 9,135
Bajaj Auto Ltd., GDR
(Automotive)## ........................... 1,150 15,008
EIH Ltd., GDR
(Restaurants and Lodging) ................ 1,250 6,250
EIH Ltd., GDR
(Restaurants and Lodging)## .............. 6,450 32,250
Formula System (1985) Ltd.
(Computer Software - Systems)* ........... 3,306 115,734
Industrial Credit & Investment Corp.
of India Ltd. (Finance)## ................ 7,620 75,248
Mahanagar Telephone Nigam Ltd.,
GDR (Telecommunications)*## .............. 13,500 141,412
Reliance Industries, GDS
(Diversified Operations)## ............... 27,250 174,400
State Bank of India, GDR (Banks
and Credit Cos.)## ....................... 18,950 217,925
Videsh Sanchar Nigam Ltd., GDR
(Telecommunications)## ................... 5,580 56,916
----------
$ 844,278
----------
Israel -- 4.6%
Bank Hapoalim
(Banks and Credit Cos.)* ................. 79,221 $ 239,750
Discount Inv Corp (Finance) ................ 3,507 112,827
ECI Telecom Ltd.
(Telecommunications) ..................... 5,998 227,174
Makhteshim-Agam Industries Ltd.
(Chemicals)* ............................. 67,348 214,467
Super Sol Ltd. (Supermarkets) .............. 23,687 78,078
Tecnomatix Technologies Ltd.
(Computer Software)* ..................... 4,359 87,180
----------
$ 959,476
----------
</TABLE>
16-FCE
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Malaysia -- 0.2%
Malayan Bank
(Banks and Credit Cos.)* ............. 21,000 $ 21,303
Petronas Gas Berhad
(Oil and Gas)## ...................... 14,000 26,162
----------
$ 47,465
----------
Mauritius -- 5.9%
Mauritius Commercial Bank Ltd.
(Banks and Credit Cos.) .............. 57,640 $ 269,145
New Mauritius Hotels Ltd.
(Restaurants and Lodging) ............ 82,360 178,673
Rogers & Co. Ltd. (Conglomerate) ....... 54,000 345,868
State Bank of Mauritius Ltd. (Banks
and Credit Cos.) ..................... 619,990 415,035
----------
$1,208,721
----------
Mexico -- 7.3%
Cemex S.A. (Construction) .............. 22,840 $ 85,869
Cifra S.A. de C.V. (Retail) ............ 111,180 167,197
Corporacion GEO S.A. de C.V.
(Housing)*## ......................... 3,400 72,733
Desc S.A. de C.V., "B"
(Conglomerate) ....................... 15,000 76,028
Fomento Economico Mexicano
(Beverages)* ......................... 4,000 126,000
Grupo Carso, "A1" (Conglomerate) ....... 17,000 70,447
Grupo Financiero Banamex, "B"
(Finance)* ........................... 42,000 81,876
Grupo Modelo S.A. de C.V.
(Brewery) ............................ 10,500 89,245
Grupo Television S.A. de C.V., GDR
(Entertainment)* ..................... 5,800 218,225
Kimberly-Clark de Mexico SA de
C.V. (Forest and Paper Products) ..... 48,000 169,767
Organiz Soriana, "B" (Real Estate) ..... 25,000 71,293
Telefonos de Mexico S.A.
(Utilities - Telephone) .............. 119,000 285,669
----------
$1,514,349
----------
Morocco -- 6.2%
Banque Marocaine Commerce
(Banks and Credit Cos.) .............. 4,100 $ 305,420
Brasseries Maroc (Consumer Goods
and Services) ........................ 750 254,688
Credit Eqdom (Finance) ................. 700 103,571
Ona Omnium Nord Africain S.A
(Conglomerate) ....................... 1,975 239,252
Societe Nationale d' Investissement
(Conglomerate)* ...................... 200 19,235
Societe Nationale d'Investissement
(Conglomerate) ....................... 2,000 192,345
Wafabank (Banks and Credit Cos.) ....... 1,411 169,624
----------
$1,284,135
----------
Pakistan -- 0.2%
Hub Power Co. Ltd., GDR
(Utilities - Electric) ............... 5,000 $ 34,850
----------
Peru -- 3.3%
Alicorp S.A. (Consumer Goods
and Services) ........................ 215,352 $ 48,493
Compania de Minas Buenaventura,
ADR (Mining) ......................... 7,100 93,187
Credicorp Ltd. Holdings Co.
(Banks and Credit Cos.) .............. 13,332 195,814
Telefonica del Peru S.A., ADR
(Telecommunications) ................. 17,150 350,503
----------
$ 687,997
----------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Poland -- 5.1%
Bank Handlowy w Warszawie
(Banks and Credit Cos.)[dagger] ...... 2,118 $ 40,421
Bank Handlowy w Warszawie, GDR
(Banks and Credit Cos.)## ............ 5,780 110,398
Bank Rozwoju Eksportu S.A. (Banks
and Credit Cos.)* .................... 5,400 146,449
Bydgoska Fabryka Kabli S.A.
(Electrical Equipment)* .............. 14,000 80,356
Elektrim Spolka Akcyjna S.A.
(Electrical Equipment)* .............. 16,106 196,443
Exbud S.A. (Construction) .............. 18,290 220,456
KGHM Polska Miedz S.A., GDR
(Metals and Minerals)## .............. 18,380 148,419
Orbis (Restaurants and Lodging)* ....... 5,419 48,210
Polifarb Cieszyn (Consumer Goods
and Services)* ....................... 24,000 61,989
Zaklady Piwowarske w Zywcu
(Beverages) .......................... 40 4,821
----------
$1,057,962
----------
Portugal -- 2.6%
Banco Espirito Santo e Comercial
de Lisboa S.A.
(Banks and Credit Cos.) .............. 5,843 $ 175,281
Cimentos de Portugal S.A.
(Building Materials) ................. 1,812 63,598
Mota and Companhia S.A.
(Construction) ....................... 1,785 30,118
Portugal Telecom S.A.
(Utilities - Telephone) .............. 2,978 157,669
Sonae Investimentos-Sociedade
Gestora de Participacoes Sociais
S.A. (Conglomerate) .................. 1,950 106,395
----------
$ 533,061
----------
Russia -- 4.6%
Lukoil Oil Co., ADR (Oils) ............. 10,500 $ 352,800
Rostelecom ADR
(Telecommunications) ................. 11,285 150,937
Unified Energy Systems, GDR
(Utilities - Electric) ............... 19,715 254,323
Vimpel-Communications, ADR
(Telecommunications)* ................ 4,100 183,475
----------
$ 941,535
----------
South Africa -- 10.9%
Anglo American Corp. of South
Africa Ltd. (Mining) ................. 11,793 $ 393,100
DeBeers Centenary AG
(Diamonds - Precious Stones) ......... 6,924 120,247
Dimension Data Holdings Ltd.
(Finance) ............................ 43,489 231,941
Imperial Holdings Ltd.
(Conglomerate)* ...................... 15,934 154,029
JD Group Ltd. (Retail)* ................ 13,508 89,828
Liberty Life Association of Africa
Ltd. (Insurance) ..................... 13,716 264,262
Nedcor Ltd. (Banks and Credit Cos.)* 17,035 363,413
Real Africa Holdings Ltd.
(Conglomerate) ....................... 50,799 174,410
Real Africa Holdings Ltd., ADR
(Conglomerate)* ...................... 5,017 9,281
Sasol Ltd. (Oils) ...................... 12,640 72,364
South African Breweries Ltd.
(Brewery) ............................ 18,293 371,958
----------
$2,244,833
----------
</TABLE>
17-FCE
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
South Korea -- 3.1%
Pohang Iron & Steel Co. Ltd., ADR
(Steel) ............................ 27,720 $ 332,640
Samsung Electronics Co.
(Electronics)## .................... 10,780 170,863
SK Telecom Ltd, ADR
(Telecommunications) ............... 23,900 132,944
-----------
$ 636,447
-----------
Taiwan -- 2.4%
Taipei Fund (Finance)* ............... 59 $ 501,500
-----------
Thailand -- 0.5%
Thai Farmers Bank
(Banks and Credit Cos.) ............ 105,000 $ 93,125
-----------
Turkey -- 6.3%
Akbank (Banks and Credit Cos.)* ...... 4,622,590 $ 149,334
Akbank Bonus Shares
(Banks and Credit Cos.) ............ 3,413,546 110,276
Arcelik A.S. (Consumer Goods
and Services) ...................... 2,812,124 132,044
Ardem Pisirici ve Isitici Cihazlar
Sanayii A.S. (Conglomerate) ........ 1,011,009 41,776
Cimsa Cimento Sanayi Ve Ticaret
A.S. (Building Materials) .......... 2,026,678 102,777
Haci Omer Sabanci Holdings A.S.,
ADR (Conglomerate)## ............... 8,008 124,725
Trakya Cam Sanayii (Housewares) ...... 3,156,607 130,433
Vestel Electronic (Electronics)* ..... 1,139,100 151,903
Yapi ve Kredi Bankasi
(Banks and Credit Cos.) ............ 9,454,606 241,506
Yapi ve Kredi Bankasi Receipts
(Banks and Credit Cos.)* ........... 4,841,120 123,660
-----------
$ 1,308,434
-----------
United Kingdom -- 0.5%
HSBC Holdings PLC (Finance)* ......... 4,073 $ 99,636
-----------
Total Foreign Stocks
(Identified Cost, $22,460,639) ................ $19,471,218
-----------
Rights
Companhia Vale Rio Doce,
Preferred Exp. 12/31/98 (Mining)
(Brazil) ........................... 4,600 $ --
Telecomunicacoes do Rio de
Janero, Exp. 07/13/98
(Telecommunications) (Brazil)* ..... 7,179 --
Bank Rozwoju Eksportu S.A., Exp.
07/10/98 (Banks and Credit Cos.)
(Poland) ........................... 5,400 1,550
-----------
Total Rights
(Identified Cost, $0) ......................... $ 1,550
-----------
Warrants*
Foreign Stocks
Hong Kong and China Gas, (Utilities
- Gas) (Hong Kong) ................. 1,500 $ --
Hysan Development Company,
(Real Estate) (Hong Kong) .......... 2,200 18
Wharf Holdings,
(Real Estate) (Hong Kong) .......... 1,250 58
-----------
Total Warrants
(Identified Cost, $0) ......................... $ 76
-----------
</TABLE>
Short-Term Obligations -- 4.5%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Student Loan Marketing,
due 7/01/98 ............................... $430 $ 430,000
Federal National Mortgage Assn.,
due 7/07/98 ............................... 500 499,537
-----------
Total Short-Term Obligations, at Amortized Cost .... $ 929,537
-----------
Total Investments
(Identified Cost, $23,390,176) ................... $20,402,381
Other Assets,
Less Liabilities -- 1.1% ........................... 233,682
-----------
Net Assets -- 100.0% ............................... $20,636,063
===========
</TABLE>
See portfolio footnotes and notes to financial statements
18-FCE
<PAGE>
Portfolio of Investments -- June 30, 1998
Money Market Series
Commercial Paper -- 45.2%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Archer-Daniels-Midland Co.,
due 8/05/98 ........................ $ 7,000 $ 6,962,706
Bank of America, FSB, due 7/13/98..... 7,200 7,186,824
Coca-Cola Co.,
due 7/17/98 - 7/24/98 .............. 14,000 13,958,612
Duke Power Co.,
due 7/20/98 - 7/22/98 .............. 13,000 12,960,921
General Electric Capital Corp.,
due 8/03/98 ........................ 10,100 10,049,079
General RE Corp., due 8/19/98 ........ 10,000 9,925,139
Goldman Sachs Group LP, due
8/10/98 - 8/11/98 .................. 12,500 12,422,389
Hershey Foods Corp., due 7/16/98...... 7,000 6,983,987
Lucent Tech, Inc.,
due 7/31/98 - 8/27/98 .............. 12,000 11,916,541
Merrill Lynch & Co., Inc.,
due 7/08/98 - 7/28/98 .............. 11,800 11,769,551
Morgan (J.P.) & Co., Inc.,
due 8/13/98 ........................ 8,000 7,947,349
National Rural Utilities Cooperative
Finance, due 8/21/98 - 8/24/98 ..... 15,300 15,177,442
Nationsbank Corp.,
due 8/06/98 - 9/09/98 .............. 15,000 14,876,100
Shell Oil Co., due 7/30/98 ........... 10,700 10,652,852
Southern California Edison Co.,
due 7/14/98 ........................ 10,000 9,980,139
------------
Total Commercial Paper, at Amortized Cost ............ $162,769,631
------------
U.S. Government and Agency
Obligations -- 53.8%
Federal Farm Credit Bank, due
8/12/98 - 8/17/98 .................. $11,202 $ 11,127,119
Federal Home Loan Bank, due
7/01/98 - 9/25/98 .................. 46,200 45,999,880
Federal Home Loan Mortgage
Corp., due 7/02/98 - 8/25/98 ....... 65,922 65,732,422
Federal National Mortgage Assn.,
due 7/01/98 - 12/23/98 ............. 49,500 53,807,150
Student Loan Marketing Assn.,
due 7/01/98 ........................ 7,510 7,510,000
Tennessee Valley Authority,
due 8/26/98 ........................ 10,000 9,916,404
------------
Total U.S. Government and Agency Obligations,
at Amortized Cost .................................. $194,092,975
------------
Total Investments, at Amortized Cost ................. $356,862,606
Other Assets,
Less Liabilities -- 1.0% ............................. 3,611,276
------------
Net Assets -- 100.0% ................................. $360,473,882
============
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- June 30, 1998
Strategic Income Series
Bonds -- 67.8%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 53.6%
Computer Software --
Services -- 3.7%
Unisystem Corp., 7.875s, 2008 .......... $ 50 $ 51,000
----------
Consumer Goods
and Services -- 3.6%
Revlon Consumer Products Corp.,
8.625s, 2008 ......................... $ 50 $ 50,000
----------
Containers -- 3.5%
Gaylord Container Corp.,
9.75s, 2007"B" ....................... $ 50 $ 49,250
----------
Telecommunications -- 3.3%
Metronet Communications Corp., 0s
to 2003, 9.95s to 2008## ............. $ 75 $ 46,406
----------
U.S. Treasury Obligations -- 32.3%
U.S. Treasury Notes, 7.875s, 2004 $400 $ 449,247
----------
Utilities -- Electric -- 7.2%
Niagara Mohawk Power
Corporation, 7.25s, 2002 "D" ......... $100 $ 99,932
----------
Total U.S. Bonds ...................................... $ 745,835
----------
Foreign Bonds -- 14.2%
Greece -- 7.2%
Antenna TV SA (Broadcasting),
9s, 2007 ............................. $100 $ 101,125
----------
Mexico -- 7.0%
United Mexican States,
8.625s, 2008 ......................... $100 $ 97,125
----------
Total Foreign Bonds ................................... $ 198,250
----------
Total Bonds
(Identified Cost, $942,493) ......................... $ 944,085
----------
Short-Term Obligations -- 40.8%
Federal National Mortgage
Association, due 7/01/98 ............. $100 $ 100,000
Federal Farm Credit Bank,
due 7/06/98 .......................... 100 99,924
Federal Home Loan Mortgage,
due 7/14/98 .......................... 133 132,737
Student Loan Marketing Discount
Notes, due 7/01/98 ................... 135 135,000
Tennessee Valley Authority,
due 7/24/98 .......................... 100 99,649
----------
Total Short-Term Obligations, at Amortized Cost ....... $ 567,310
----------
Total Investments
(Identified Cost, $1,509,803) ....................... $1,511,395
Other Assets,
Less Liabilities -- (8.6)% ............................ (119,889)
----------
Net Assets -- 100.0% .................................. $1,391,506
==========
</TABLE>
See portfolio footnotes and notes to financial statements
19-MMS
<PAGE>
Portfolio of Investments -- June 30, 1998
World Asset Allocation(SM) Series
Stocks -- 64.7%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 20.1%
Aerospace -- 0.2%
General Dynamics Corp. ....................... 1,700 $ 79,050
Gulfstream Aerospace Corp.* .................. 5,300 246,450
----------
$ 325,500
----------
Airlines -- 0.1%
US Airways Group, Inc. ....................... 2,000 $ 158,500
----------
Apparel and Textiles -- 0.1%
Nordstrom, Inc. .............................. 2,700 $ 208,575
----------
Automotive -- 0.1%
Magna International Inc ...................... 1,100 $ 75,488
----------
Business Machines -- 0.2%
Dell Computer Corp.* ......................... 2,500 $ 232,031
----------
Business Services -- 1.4%
AccuStaff, Inc.* ............................. 5,000 $ 156,250
Ace Ltd. ..................................... 5,800 226,200
Affiliated Computer Services, Inc.,
"A"* ....................................... 12,600 485,100
Ceridian Corp.* .............................. 6,000 352,500
Computer Sciences Corp. ...................... 6,500 416,000
Policy Management Systems Corp.* 5,000 196,250
Renaissance Worldwide, Inc. .................. 6,900 150,075
----------
$1,982,375
----------
Cellular Telephones -- 0.2%
Century Telephone Enterprises, Inc............ 7,650 $ 350,944
----------
Computer Software --
Personal Computers -- 0.9%
Compaq Computer Corp. ........................ 3,900 $ 110,663
Microsoft Corp.* ............................. 8,800 953,700
Network Associates, Inc.* .................... 2,900 138,837
----------
$1,203,200
----------
Computer Software -- Services -- 0.3%
Compuware Corp.* ............................. 8,900 $ 455,013
----------
Computer Software --
Systems -- 1.9%
BMC Software, Inc.* .......................... 10,820 $ 561,963
Cadence Design Systems, Inc.* ................ 10,200 318,750
Computer Associates International,
Inc. ....................................... 15,250 847,328
EMC Corp.* ................................... 8,700 389,869
Keane, Inc.* ................................. 2,900 162,400
Oracle Corp.* ................................ 7,550 185,447
Synopsys, Inc.* .............................. 2,600 118,950
----------
$2,584,707
----------
Consumer Goods and
Services -- 1.8%
Black & Decker Corp. ......................... 4,900 $ 298,900
Dial Corp. ................................... 2,700 70,031
Philip Morris Cos., Inc. ..................... 4,000 157,500
Revlon, Inc., "A" ............................ 7,000 359,625
Service Corp. International .................. 5,800 248,675
Tyco International Ltd. ...................... 22,758 1,433,754
----------
$2,568,485
----------
Electrical Equipment -- 0.3%
General Electric Co. ......................... 4,300 $ 391,300
----------
Entertainment -- 1.7%
CBS Corp. .................................... 2,400 $ 76,200
Harrah's Entertainment, Inc.* ................ 9,200 213,900
HBO & Co. .................................... 9,000 317,250
Heftel Broadcasting Corp., "A"* .............. 4,300 192,425
Jacor Communications, Inc.* .................. 1,900 112,100
Mediaone Group, Inc.* ........................ 4,900 215,294
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Entertainment -- continued
Mirage Resorts, Inc.* ........................ 6,800 $ 144,925
Time Warner, Inc. ............................ 4,500 384,468
Univision Communications, Inc., "A"........... 6,300 234,675
Viacom, Inc., "B" ............................ 7,300 425,225
----------
$2,316,462
----------
Financial Institutions -- 0.8%
Associates First Capital Corp., "A" .......... 3,700 $ 284,438
Freddie Mac .................................. 6,100 287,081
Green Tree Financial Corp. ................... 6,000 256,875
Morgan Stanley, Dean Witter,
Discover & Co. ............................. 3,600 328,950
----------
$1,157,344
----------
Food and Beverage Products -- 0.3%
Giant Food Inc., "A" ......................... 3,700 $ 159,331
McCormick & Co., Inc. ........................ 1,300 46,434
Ralston-Ralston Purina Co. ................... 1,500 175,219
----------
$ 380,984
----------
Insurance -- 1.4%
Annuity and Life Re Holdings Ltd.* ........... 4,500 $ 99,563
Chubb Corp. .................................. 2,200 176,825
Conseco, Inc. ................................ 3,000 140,250
Equitable Cos., Inc. ......................... 4,000 299,750
Lincoln National Corp. ....................... 3,100 283,262
Progressive Corp. ............................ 1,500 211,500
Reliastar Financial Corp. .................... 7,200 345,600
Torchmark Corp. .............................. 4,400 201,300
Travelers Group, Inc. ........................ 2,500 151,562
----------
$1,909,612
----------
Medical and Health Products -- 1.1%
American Home Products Corp. ................. 3,800 $ 196,650
Bristol-Myers Squibb Co. ..................... 3,200 367,800
Pfizer, Inc. ................................. 1,400 152,163
Schering Plough Corp. ........................ 4,500 412,312
Warner-Lambert Co. ........................... 5,200 360,750
----------
$1,489,675
----------
Medical and Health Technology
and Services -- 1.6%
Cardinal Health, Inc. ........................ 2,200 $ 206,250
Columbia/HCA Healthcare Corp. ................ 8,700 253,387
HealthSouth Corp.* ........................... 13,800 368,287
Humana, Inc.* ................................ 2,000 62,375
Life Re Corp. ................................ 1,900 157,463
Tenet Healthcare Corp. ....................... 100 3,125
Total Renal Care Holdings, Inc. .............. 10,900 376,050
United Healthcare Corp. ...................... 8,900 565,150
Wellpoint Health Networks, Inc., "A".......... 4,000 296,000
----------
$2,288,087
----------
Oil Services -- 0.2%
Cooper Cameron Corp.* ........................ 1,800 $ 91,800
Diamond Offshore Drilling, Inc. .............. 2,000 80,000
EVI Weatherford, Inc.* ....................... 4,830 179,314
----------
$ 351,114
----------
Oils -- 0.1%
Texaco, Inc. ................................. 2,100 $ 125,344
----------
Printing and Publishing -- 0.1%
Scholastic Corp. ............................. 3,900 $ 155,513
----------
Restaurants and Lodging -- 0.4%
Cendant Corp.* ............................... 17,900 $ 373,663
CKE Restaurants, Inc. ........................ 5,200 214,500
----------
$ 588,163
----------
</TABLE>
20-AAS
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Special Products and Services -- 0.2%
McDonalds Corp. ........................ 2,600 $ 179,400
Xerox Corp. ............................ 1,300 132,113
-----------
$ 311,513
-----------
Stores -- 2.1%
BJ's Wholesale Club, Inc.* ............. 6,000 $ 243,750
CVS Corp. .............................. 13,000 506,187
Linens 'N Things, Inc.* ................ 2,000 61,125
Lowes Co., Inc. ........................ 8,400 340,725
Office Depot, Inc.* .................... 9,300 293,531
Rite Aid Corp. ......................... 27,900 1,047,994
Sears, Roebuck & Co. ................... 6,700 409,119
-----------
$ 2,902,431
-----------
Supermarkets -- 0.6%
Meyer (Fred), Inc.* .................... 7,900 $ 335,750
Safeway, Inc. .......................... 11,200 455,700
-----------
$ 791,450
-----------
Telecommunications -- 1.4%
Ascend Communications, Inc.* ........... 7,800 $ 386,587
Cisco Systems, Inc.* ................... 4,800 441,900
Lucent Technologies, Inc. .............. 4,000 332,750
Tellabs, Inc. .......................... 1,700 121,763
United States West Inc. ................ 122 5,734
WorldCom, Inc. ......................... 12,400 600,625
-----------
$ 1,889,359
-----------
Utilities -- Electric -- 0.1%
AES Corp.* ............................. 3,200 $ 168,200
-----------
Utilities -- Gas -- 0.1%
KN Energy, Inc. ........................ 1,500 $ 81,281
-----------
Utilities -- Telephone -- 0.4%
Global TeleSystems Group, Inc.* ........ 3,900 $ 190,125
Intermedia Communications, Inc.* ....... 3,400 142,587
Sprint Corp. ........................... 3,900 274,950
-----------
$ 607,662
-----------
Total U.S. Stocks .......................................... $28,050,312
-----------
Foreign Stocks -- 44.6%
Australia -- 1.3%
QBE Insurance Group Ltd.
(Insurance) .......................... 334,761 $ 1,181,710
Seven Network Ltd. (Entertainment)...... 215,900 649,815
-----------
$ 1,831,525
-----------
Brazil -- 0.8%
Companhia Electrict est Rio de
Janeiro (Utilities - Electric)* ...... 734,600 $ 362,060
Companhia Paranaense de Energia,
ADR (Utilities - Electric) ........... 43,500 402,375
Telecomunicacoes Brasileiras S.A.,
ADR (Telecommunications) ............. 3,600 393,075
-----------
$ 1,157,510
-----------
Canada -- 2.1%
Canadian National Railway Co.
(Railroads) .......................... 46,500 $ 2,470,313
T. Eaton Co., LTD. (Consumer
Goods and Services) .................. 47,000 478,123
-----------
$ 2,948,436
-----------
Chile -- 0.6%
Chilectra S.A., ADR
(Utilities - Electric) ............... 40,000 $ 856,000
-----------
Finland -- 2.2%
Helsingin Puhelin Oyj
(Telecommunications) ................. 11,700 $ 543,710
Huhtamaki Oy Group
(Conglomerate) ....................... 9,000 515,007
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Finland -- continued
Pohjola Insurance Group
(Insurance) .......................... 20,000 $ 995,025
TT Tieto Oy
(Computer Software - Systems) ........ 13,800 1,048,713
-----------
$ 3,102,455
-----------
France -- 3.7%
Alcatel Alsthom Compagnie, ADR
(Telecommunications) ................. 8,700 $ 353,981
Television Francaise (Broadcasting)..... 8,400 1,299,992
Thomson CSF (Electronics) .............. 20,000 759,765
TOTAL S.A., "B" (Oils) ................. 9,700 1,259,262
Union des Assurances Federales
S.A. (Insurance) ..................... 9,100 1,432,373
-----------
$ 5,105,373
-----------
Germany -- 3.6%
Adidas-Salomon AG
(Apparel and Textiles) ............... 4,500 $ 783,421
Henkel KGAA (Chemicals) ................ 25,300 2,499,889
Skw Trostberg Ag (Chemicals) ........... 13,500 485,746
Wella AG (Cosmetics)* .................. 1,150 1,285,912
-----------
$ 5,054,968
-----------
Greece -- 0.4%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................. 22,888 $ 586,544
-----------
Hong Kong -- 0.6%
Li & Fung Ltd. (Wholesale) ............. 211,000 $ 340,476
Liu Chong Hing Bank
(Banks and Credit Cos.) .............. 157,000 133,764
Peregrine Investment Holdings,
(Finance)* ........................... 169,000 --
Wing Hang Bank Ltd.
(Banks and Credit Cos.) .............. 261,000 348,719
-----------
$ 822,959
-----------
Italy -- 0.7%
ERG S.p.A. (Oils) ...................... 120,000 $ 480,270
Telecom Italia S.p.A., Saving Shares
(Telecommunications) ................. 134,000 451,939
-----------
$ 932,209
-----------
Japan -- 6.2%
Canon, Inc. (Office Equipment) ......... 44,000 $ 1,003,112
Eisai Co. Ltd. (Pharmaceuticals) ....... 34,000 465,079
Kinki Coca-Cola Bottling Co.
(Beverages) .......................... 20,000 243,179
Kirin Beverage Corp. (Beverages) ....... 44,000 829,558
Nitto Denko Corp. (Industrial Goods
and Services) ........................ 4,000 60,360
NTT Data Corp.
(Telecommunications) ................. 18 652,674
Osaka Sanso Kogyo Ltd.
(Chemicals) .......................... 97,000 200,080
Rohm Co., (Electronics) ................ 6,000 618,803
Sankyo Co. Ltd. (Pharmaceuticals) ...... 18,000 411,667
Sony Corp. (Electronics) ............... 20,000 1,729,753
Takeda Chemical Industries
(Pharmaceuticals) .................... 27,000 721,068
TDK Corp. (Special Products and
Services) ............................ 7,000 519,288
Tokyo Broadcasting System, Inc.
(Broadcasting) ....................... 38,000 426,287
Ushio, Inc. (Electronics) .............. 89,000 708,547
-----------
$ 8,589,455
-----------
</TABLE>
21-AAS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Malaysia
New Straits Times Press Berhad
(Printing and Publishing) ...................... 126,500 $ 47,278
-----------
Netherlands -- 6.1%
Akzo Nobel N.V. (Chemicals) ...................... 13,300 $ 2,953,234
Benckiser N.V. (Consumer Goods
and Services)* ................................. 32,500 1,996,440
IHC Caland N.V.
(Marine Equipment)* ............................ 7,972 448,217
ING Groep N.V.
(Financial Services)* .......................... 21,712 1,420,102
Koninklijke Ahrend Groep N.V.
(Consumer Goods and Services)*.................. 27,030 881,312
Royal Dutch Petroleum Co., (Oils) ................ 14,200 786,526
-----------
$ 8,485,831
-----------
Peru -- 0.4%
Telefonica del Peru S.A., ADR
(Telecommunications) ........................... 23,800 $ 486,412
-----------
Portugal -- 1.6%
Banco Espitor Santo e Comercial de
Lisboa S.A. (Banks and
Credit Cos.) ................................... 3,575 $ 107,244
Banco Pinto & Sotto Mayor, S.A.
(Banks and Credit Cos.) ........................ 56,640 1,168,751
Portugal Telecom SA
(Utilities - Telephone) ........................ 16,500 873,587
-----------
$ 2,149,582
-----------
Singapore -- 0.7%
Hong Leong Finance Ltd.
(Finance)[dagger] .............................. 159,000 $ 130,452
Overseas Union Bank (Finance) .................... 353,000 776,516
-----------
$ 906,968
-----------
Spain -- 1.1%
Acerinox S.A. (Iron and Steel) ................... 4,800 $ 638,416
Repsol S.A. (Oils) ............................... 17,000 935,648
-----------
$ 1,574,064
-----------
Sweden -- 2.6%
Astra AB (Pharmaceuticals) ....................... 57,433 $ 1,143,625
Saab AB, "B" (Aerospace)* ........................ 105,500 1,109,831
Skandia Forsakrings AB (Insurance) 44,900 641,027
Volvo AB (Automobiles) ........................... 26,500 788,197
-----------
$ 3,682,680
-----------
Switzerland -- 2.3%
Barry Callebaut AG,
(Food Products)* ............................... 1,100 $ 237,269
Ciba Specialty AG (Chemicals) .................... 9,258 1,189,311
Clariant AG (Chemicals) .......................... 1,570 1,034,584
Novartis AG (Pharmaceuticals) .................... 434 722,570
-----------
$ 3,183,734
-----------
United Kingdom -- 7.3%
ASDA Group PLC (Supermarkets) .................... 333,000 $ 1,142,827
Avis Europe PLC (Auto Rental)## .................. 179,000 810,116
British Aerospace (Aerospace and
Defense)* ...................................... 202,796 1,552,632
British Petroleum PLC (Oils)* .................... 91,237 1,330,083
British Petroleum PLC, ADR (Oils) ................ 824 72,718
Capital Radio PLC (Broadcasting) ................. 19,800 234,735
Danka Business Systems, ADR
(Business Services) ............................ 2,600 30,713
Jarvis Hotels PLC
(Restaurants and Lodging)[dagger] .............. 119,000 341,406
<CAPTION>
Issuer Shares Value
<S> <C> <C>
United Kingdom -- continued
Kwik-Fit Holdings PLC
(Automotive Repair Centers) .................... 70,500 $ 571,507
Lloyds TSB Group PLC
(Banks and Credit Cos.)* ....................... 59,954 838,528
LucasVarity PLC (Automotive) ..................... 327,400 1,299,726
Next PLC (Retail) ................................ 86,800 745,630
Tomkins PLC (Conglomerate) ....................... 230,000 1,247,790
-----------
$10,218,411
-----------
Venezuela -- 0.3%
Compania Anonima Nacional
Telefonos de Venezuela, ADR
(Telecommunications) ........................... 14,100 $ 352,500
-----------
Total Foreign Stocks ............................................. $62,074,894
-----------
Total Stocks
(Identified Cost, $78,396,158) ................................. $90,125,206
-----------
Bonds -- 25.9%
Principal Amount
(000 Omitted)
U.S. Bonds -- 16.5%
Aerospace -- 0.4%
BE Aerospace, 8s, 2008## ......................... $ 500 $ 498,750
-----------
Building -- 0.3%
Nortek, Inc., 9.25s, 2007 ........................ $ 60 $ 61,200
Building Materials Corp., 8s, 2007 ............... 300 300,000
-----------
$ 361,200
-----------
Consumer Goods and Services -- 0.8%
Kindercare Learning Centers, Inc.,
9.5s, 2009 ..................................... $ 100 $ 100,500
Revlon Consumer Products Corp.,
8.625s, 2008 ................................... 1,000 1,000,000
-----------
$ 1,100,500
-----------
Containers -- 0.3%
Gaylord Container Corp.,
9.75s, 2007 .................................... $ 500 $ 492,500
-----------
Electrical Equipment -- 0.5%
Williams Scotsman, Inc.,
9.875s, 2007 ................................... $ 700 $ 728,000
-----------
Entertainment -- 0.2%
AMC Entertainment, Inc., 9.5s, 2009 .............. $ 50 $ 50,500
Cinemark USA, Inc., 9.625s, 2008 ................. 250 257,500
-----------
$ 308,000
-----------
Finance -- 0.3%
APP International Finance Co.,
11.75s, 2005 ................................... $ 500 $ 440,000
-----------
Food and Beverage Products -- 0.6%
Specialty Foods Corp., 10.25s, 2001 $ 300 $ 291,000
Borden, Inc., 9.25s, 2019 ........................ 530 553,664
-----------
$ 844,664
-----------
Forest and Paper Products -- 0.4%
Silgan Holdings, Inc., 9s, 2009 .................. $ 500 $ 517,500
-----------
Industrial -- 0.4%
Hayes Wheels International, Inc.,
9.125s, 2007 ................................... $ 500 $ 522,500
-----------
Medical and Health Technology
and Services
Tenet Healthcare Corp.,
8.625s, 2007 ................................... $ 60 $ 61,500
-----------
Printing and Publishing -- 0.5%
Hollinger International Publishing,
Inc., 9.25s, 2007 .............................. $ 700 $ 738,500
-----------
</TABLE>
22-AAS
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Special Products and
Services -- 0.2%
IMO Industries, Inc., 11.75s, 2006 ............ $ 250 $ 281,250
-----------
Stores -- 0.2%
Musicland Group, Inc., 9.875s,
2008## ...................................... $ 250 $ 248,750
-----------
Supermarkets -- 0.2%
Pathmark Stores, Inc., 9.625s, 2003............ $ 250 $ 252,500
-----------
Telecommunications -- 2.6%
CSC Holdings, Inc., 9.25s, 2005 ............... $ 250 $ 267,500
Flag Ltd., 8.25s, 2008 ## ..................... 900 906,750
Fox/Liberty Networks LLC, Inc.,
8.875s, 2007 ................................ 300 306,000
Jacor Communications Co., 8s,
2010 ........................................ 1,000 1,000,000
Level 3 Commerce, Inc., 9.125s,
2008 ## ..................................... 500 486,250
Nextel Communications, Inc., 0s to
2002, 9.25s to 2007## ....................... 150 97,875
Pagemart Wireless, Inc., 0s to 2003,
11.25s to 2008## ............................ 400 240,000
Western Wireless Corp., 10.5s,
2007 ........................................ 250 268,750
-----------
$ 3,573,125
-----------
U.S. Treasury Obligations -- 8.4%
U.S. Treasury Bonds, 6.125s, 2027.............. $11,000 $11,787,160
-----------
Utilities -- Electric -- 0.2%
Esi Tractebel, 7.99s, 2011## .................. $ 300 $ 297,375
-----------
Total U.S. Bonds .............................................. $23,053,774
-----------
Foreign Bonds -- 9.4%
Canada -- 0.6%
Rogers Cablesystems, Inc., 9.625s,
2002 (Telecommunications) ................... $ 700 $ 749,000
-----------
Mexico -- 2.7%
Satelites Mexicanos S A De C V,
10.125s, 2004
(Telecommunications)## ...................... $ 800 $ 782,000
United Mexican States, 8.625s,
2008 ........................................ 3,000 2,913,750
-----------
$ 3,695,750
-----------
Philippines -- 0.6%
Bangko Sentral NG Philipinas, 8.6s,
2027 (Bank) ................................. $ 1,000 $ 877,500
-----------
Russia -- 5.1%
Ministry of Finance, Russia, 10s,
2007 ........................................ $ 680 $ 510,000
Ministry of Finance, Russia, 12.75s,
2028 ........................................ 270 241,650
Russia Principal Loans, 3.313s,
2020[dagger] ................................ 6,250 2,953,125
Vnesheconombank, 6.719s, 2015
(Bank) ...................................... 6,249 3,460,604
-----------
$ 7,165,379
-----------
United Kingdom -- 0.4%
Colt Telecom Group PLC, 8.875s,
2007 (Telecommunications) ............. DEM 300 $ 179,352
Middleweb PLC Bankers Trust Lux,
10.5s, 2008 (Telecommunications)....... GBP 250 415,958
-----------
$ 595,310
-----------
Total Foreign Bonds ........................................... $13,082,939
-----------
Total Bonds
(Identified Cost, $37,450,879) .............................. $36,136,713
-----------
Preferred Stock -- 0.5%
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Primedia, Inc. (Printing and
Publishing) (Identified Cost,
$742,500)## ........................ 7,500 $ 727,500
----------
Rights
Kroger Co. Exp. 12/31/98 (Identified
Cost, $51,799)* .................... 1,500 $ 64,313
----------
Contingent Promisory Notes -- 3.9%
Principal Amount
(000 Omitted)
Cargill COLT (Commodity Option
Linked Trading), (Identified Cost,
$5,820,375)[dagger] ................ $5,500 $5,373,655
----------
Short-Term Obligations -- 3.1%
Ford Motor Credit Corp., due
7/01/98, at Amortized Cost ......... $4,300 $4,300,000
----------
Call Options Purchased --
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Japanese Yen/New Zealand
Dollar/October/75
(Premiums Paid, $27,958) ......... 809,607 $ 27,958
------------
Put Options Purchased -- 0.1%
Australian Dollar/December/0.71 .... 7,220 $ 4,231
Japanese Yen/July/132 .............. 4,097,539 54,323
Japanese Yen/New Zealand
Dollar/October/69 ................ 809,607 $ 27,958
------------
Total Put Options Purchased
(Premiums Paid, $100,819) ........................... $ 86,512
------------
Total Investments
(Identified Cost, $126,890,488) ..................... $136,841,857
------------
Call Options Written -- (0.1)%
Japanese Yen/New Zealand
Dollar/October/70 (Premiums
Received, $292,133) .............. JPY 929,511 $ (131,991)
------------
Put Options Written -- (0.2)%
Canadian Dollars/July/1.43 ......... CAD 10,001 $ (188,694)
Japanese Yen/March/170 ............. JPY 2,630,005 (26,300)
------------
Total Put Options Written
(Premiums Received, $82,280) ..................... $ (214,994)
------------
Other Assets,
Less Liabilities -- 2.1% ........................... 2,882,651
------------
Net Assets -- 100.0% ............................... $139,377,523
============
</TABLE>
See portfolio footnotes and notes to financial statements
23-AAS
<PAGE>
Portfolio of Investments -- June 30, 1998
World Governments Series
Bonds -- 98.9%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 62.8%
Federal National Mortgage
Association -- 7.3%
FNMA, 2.125s, 2007 ............................ JPY 950,000 $ 7,157,487
-----------
Government National Mortgage
Association -- 15.0%
GNMA, 6.5s, 2027 .............................. $ 14,787 $14,755,040
-----------
U.S. Treasury Obligations -- 40.5%
U.S. Treasury Notes, 5.5s, 2003 ............... $ 12,010 $12,000,632
U.S. Treasury Notes, 6.5s, 2005 ............... 13,240 13,974,423
U.S. Treasury Notes, 6.625s, 2002 ............. 13,370 13,860,946
-----------
$39,836,001
-----------
Total U.S. Bonds .............................................. $61,748,528
-----------
Foreign Bonds -- 36.1%
Germany -- 12.8%
Federal Republic of Germany, 6s,
2007 ........................................ DEM 16,008 $ 9,610,116
Federal Republic of Germany,
6.25s, 2006 ................................. 4,796 2,916,361
-----------
$12,526,477
-----------
Italy -- 6.8%
Republic of Italy, 5.75s, 2002 ................ ITL 5,810,000 $ 3,400,761
Republic of Italy, 6.75s, 2007 ................ 5,170,000 3,267,649
-----------
$ 6,668,410
-----------
New Zealand -- 2.1%
Government of New Zealand, 8s,
2004 ........................................ NZD 3,750 $ 2,065,945
-----------
Sweden -- 2.3%
Kingdom of Sweden, 6s, 2005 ................... SEK 16,900 $ 2,257,637
-----------
United Kingdom -- 12.1%
U. K. Treasury, 7.25s, 2007 ................... GBP 6,499 $11,918,952
-----------
Total Foreign Bonds ........................................... $35,437,421
-----------
Total Bonds
(Identified Cost, $96,654,833) .............................. $97,185,949
-----------
Short-Term Obligations -- 2.5%
General Electric Corp., due 7/01/98,
at Amortized Cost and Value ................. $ 2,460 $ 2,460,000
-----------
</TABLE>
Put Options Purchased
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Issuer/Expiration Month/Strike Price (000 Omitted) Value
<S> <C> <C>
Australian Dollars/December/0.71
(Premiums Paid, $16,806) .................... AUD 6,546 $ 3,835
-----------
Total Investments
(Identified Cost, $99,131,639) ........................ $99,649,784
-----------
Call Options Written
Japanese Yen/Deutsche Marks/
August/66.52 (Premiums
Received, $303,356) ......................... JPY 1,304,443 $ (1,304)
-----------
Put Options Written -- (0.1)%
Canadian Dollars/July/1.43
(Premiums Received, $27,260) ................ CAD 7,287 $ (137,482)
-----------
Other Assets,
Less Liabilities -- (1.3)% .............................. (1,269,250)
-----------
Net Assets -- 100.0% .................................... $98,241,748
===========
</TABLE>
See portfolio footnotes and notes to financial statements
24-WGS
<PAGE>
Portfolio of Investments -- June 30, 1998
World Total Return Series
Stocks -- 60.3%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- 42.4%
Australia -- 1.0%
QBE Insurance Group Ltd.
(Insurance) ............................. 163,151 $ 575,925
Seven Network Ltd. (Entertainment) 63,720 191,784
TAB Ltd. (Entertainment)* ................. 85,200 125,579
----------
$ 893,288
----------
Austria -- 0.3%
Austria Tabak AG (Tobacco) ................ 4,900 $ 272,823
----------
Brazil -- 0.2%
Companhia Paranaense de Energia,
ADR (Utilities - Electric) .............. 19,400 $ 179,450
----------
Canada -- 1.3%
Canadian National Railway Co.
(Railroads) ............................. 18,657 $ 991,153
T. Eaton Co., Ltd. (Consumer Goods
and Services)* .......................... 21,000 213,630
----------
$1,204,783
----------
Chile -- 0.3%
Enersis S.A., ADR
(Utilities - Electric) .................. 11,443 $ 279,638
----------
Finland -- 0.6%
Helsingin Puhelin Oyj
(Telecommunications) .................... 5,500 $ 255,590
Huhtamaki OY (Conglomerate) ............... 4,522 258,763
----------
$ 514,353
----------
France -- 4.9%
Elf Aquitaine S.A. (Oils) ................. 3,342 $ 469,188
Pinault - Printemps Redonte (Retail) 1,343 1,122,402
Sanofi S.A. (Medical and Health
Products) ............................... 4,900 575,423
Television Francaise (Broadcasting) 4,696 726,757
Thomson CSF (Electronics) ................. 7,200 273,516
Total S.A., ADR (Oils) .................... 10,952 715,987
Union des Assurances Federales
S.A. (Insurance) ........................ 3,854 606,633
----------
$4,489,906
----------
Germany -- 4.7%
Adidas-Salomon AG (Apparel and
Textiles) ............................... 3,594 $ 625,692
Henkel KgAA (Chemicals) ................... 10,832 1,070,308
Mannesmann AG (Conglomerate) .............. 9,000 924,163
ProSieben Media AG
(Entertainment)* ........................ 4,684 242,432
Volkswagen AG (Automotive) ................ 700 675,395
Wella AG (Cosmetics) ...................... 700 782,729
----------
$4,320,719
----------
Greece -- 0.4%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications)* ................... 13,683 $ 350,650
----------
Hong Kong -- 0.3%
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) .................. 69,500 $ 215,323
Wharf Holdings Ltd. (Real Estate) ......... 71,000 70,115
Wing Hang Bank Ltd. (Banks and
Credit Cos.) ............................ 18,000 24,050
----------
$ 309,488
----------
Italy -- 1.3%
ENI S.P.A, ADR (Oils) ..................... 4,359 $ 283,335
Instituto Nazionale delle
Assicurazioni (Insurance) ............... 85,891 243,817
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Italy -- continued
Telecom Italia S.P.A.
(Telecommunications) .................... 82,913 $ 401,049
Telecom Italia S.P.A., Saving Shares
(Telecommunications) .................... 85,250 287,521
----------
$1,215,722
----------
Japan -- 4.5%
Canon, Inc. (Office Equipment) ............ 32,000 $ 729,536
Eisai Co. Ltd. (Pharmaceuticals) .......... 13,000 177,824
Kirin Beverage Corp. (Beverages) .......... 37,000 697,583
Osaka Sanso Kogyo Ltd.
(Chemicals) ............................. 21,000 43,316
Rohm Co. (Electronics) .................... 2,000 206,268
Sony Corp. (Electronics) .................. 12,600 1,089,744
Takeda Chemical Industries
(Pharmaceuticals) ....................... 21,000 560,831
Terumo Corp. (Pharmaceuticals) ............ 14,000 222,914
Tokyo Broadcasting System, Inc.
(Broadcasting) .......................... 13,000 145,835
Ushio, Inc. (Electronics) ................. 29,000 230,875
----------
$4,104,726
----------
Netherlands -- 6.1%
Akzo Nobel N.V. (Chemicals) ............... 3,814 $ 846,890
Benckiser N.V. "B" (Consumer
Goods and Services)* .................... 10,500 645,004
Hunter Douglas N.V., ADR
(Consumer Goods and Services)* 12,400 672,821
IHC Caland N.V. (Marine
Equipment)* ............................. 14,980 842,234
ING Groep N.V. (Financial
Services)* .............................. 8,900 582,116
Koninklijke Ahold N.V., ADR
(Food/Retail) ........................... 15,608 499,456
Koninklijke Ahrend N.V. (Office
Furnishings)* ........................... 8,400 273,882
Royal Dutch Petroleum Co., ADR
(Oils) .................................. 12,089 662,628
Wolters Kluwer N.V. (Publishing)* ......... 4,046 554,698
----------
$5,579,729
----------
New Zealand
Telecom Corp. of New Zealand
(Telecommunications) .................... 22,600 $ 48,325
----------
Portugal -- 0.8%
Banco Pinto & Sotto Mayor, S.A.
(Banks and Credit Cos.)* ................ 21,440 $ 442,409
Elec De Portugal (Utilities - Electric) 12,300 285,632
----------
$ 728,041
----------
Singapore -- 0.2%
Singapore Press Holdings Ltd.
(Printing & Publishing) ................. 20,864 $ 140,168
----------
South Korea -- 0.1%
Korea Electric Power Corp., ADR
(Utilities - Electric) .................. 7,652 $ 54,521
----------
Spain -- 2.1%
Iberdrola S.A. (Utilities - Electric) ..... 58,865 $ 954,692
Acerinox S.A. (Iron and Steel) ............ 2,022 268,933
Telefonica de Espana
(Utilities - Telephone) ................. 15,600 720,406
----------
$1,944,031
----------
Sweden -- 3.1%
Astra AB (Pharmaceuticals) ................ 23,927 $ 476,442
Saab AB, "B" (Aerospace)* ................. 54,425 572,536
Securitas AB (Security Services) .......... 8,600 420,576
</TABLE>
25-WTRS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Sweden -- continued
Skandia Forsakrings AB (Insurance) 54,495 $ 778,013
Telefonaktiebolaget LM Ericsson,
ADR (Telecommunications
Equipment) ........................................ 10,144 290,372
Volvo AB (Automobiles) .............................. 10,200 303,381
-----------
$ 2,841,320
-----------
Switzerland -- 1.6%
Ciba Specialty Chemicals AG
(Chemicals) ....................................... 4,070 $ 522,845
Clariant AG (Chemicals) ............................. 400 263,588
Nestle AG (Food and Beverage
Products) ......................................... 300 642,348
-----------
$ 1,428,781
-----------
United Kingdom -- 8.6%
ASDA Group PLC (Retail) ............................. 161,024 $ 552,620
Avis Europe PLC (Auto Rental)## ..................... 172,525 780,811
B.A.T. Industries PLC (Tobacco) ..................... 29,900 299,239
Booker PLC (Food - Wholesale) ....................... 54,913 226,240
British Aerospace (Aerospace and
Defense) .......................................... 90,628 693,859
British Petroleum PLC, ADR (Oils) ................... 12,812 1,130,659
Compass Group PLC
(Food - Catering)* ................................ 107,592 1,236,504
Diageo PLC (Food and Beverage
Products) ......................................... 37,403 442,957
Lloyds TSB Group PLC (Banks and
Credit Cos.)* ..................................... 32,858 459,558
LucasVarity PLC (Automotive) ........................ 155,700 618,105
Tomkins PLC (Conglomerate) .......................... 137,890 748,077
Williams PLC (Diversified
Manufacturing Operations) ......................... 98,649 633,505
-----------
$ 7,822,134
-----------
Total Foreign Stocks ........................................ $38,722,596
-----------
U.S. Stocks -- 17.9%
Aerospace -- 0.3%
Lockheed-Martin Corp. ............................... 2,481 $ 262,676
-----------
Banks and Credit Companies -- 0.7%
Norwest Corp. ....................................... 16,378 $ 612,128
-----------
Business Machines -- 1.4%
International Business Machines
Corp. ............................................. 6,025 $ 691,745
Xerox Corp. ......................................... 5,300 538,613
-----------
$ 1,230,358
-----------
Construction Services -- 0.3%
Martin Marietta Materials, Inc. ..................... 6,358 $ 286,110
-----------
Consumer Goods and Services -- 2.4%
Philip Morris Cos., Inc. ............................ 21,126 $ 831,836
Tyco International Ltd. ............................. 21,520 1,355,760
-----------
$ 2,187,596
-----------
Electrical Equipment -- 1.1%
General Electric Co. ................................ 10,900 $ 991,900
-----------
Financial Institutions -- 1.9%
American Express Co. ................................ 10,259 $ 1,169,526
Federal Home Loan Mortgage Corp. 12,193 573,833
-----------
$ 1,743,359
-----------
Food and Beverage Products -- 0.3%
McCormick & Co., Inc. ............................... 8,299 $ 296,430
-----------
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Insurance -- 1.7%
Allstate Corp. ...................................... 6,418 $ 587,648
ReliaStar Financial Corp. ........................... 8,758 420,384
Transamerica Corp. .................................. 4,800 552,600
-----------
$ 1,560,632
-----------
Medical and Health Products -- 2.2%
Bristol-Myers Squibb Co. ............................ 8,656 $ 994,899
Schering Plough Corp. ............................... 8,664 793,839
Warner-Lambert Co. .................................. 3,240 224,775
-----------
$ 2,013,513
-----------
Oils -- 1.4%
Exxon Corp. ......................................... 7,981 $ 569,145
USX-Marathon Group .................................. 21,590 740,807
-----------
$ 1,309,952
-----------
Printing and Publishing -- 0.6%
Gannett Co., Inc. ................................... 7,336 $ 521,314
-----------
Restaurants and Lodging -- 0.7%
McDonalds Corp. ..................................... 9,000 $ 621,000
-----------
Stores -- 0.3%
Rite Aid Corp. ...................................... 8,300 $ 311,769
-----------
Utilities -- Electric -- 0.6%
Sierra Pacific Resources ............................ 15,100 $ 548,319
-----------
Utilities -- Gas -- 1.1%
Coastal Corp. ....................................... 11,200 $ 781,900
K N Energy, Inc. .................................... 4,300 233,006
-----------
$ 1,014,906
-----------
Utilities -- Telephone -- 0.9%
Sprint Corp. ........................................ 11,900 $ 838,950
-----------
Total U.S. Stocks ........................................... $16,350,912
-----------
Total Stocks
(Identified Cost, $42,736,015) ............................ $55,073,508
-----------
Bonds -- 37.4%
<CAPTION>
Principal Amount
(000 Omitted)
<S> <C> <C>
U.S. Bonds -- 23.5%
Federal National Mortgage Association -- 2.0%
FNMA 2.125s, 2007 ....................... JPY 240,000 $ 1,808,207
-----------
Government National Mortgage
Association -- 5.7%
GNMA, 6.5s, 2027, TBA ................... $ 5,269 $ 5,257,167
-----------
U.S. Treasury Obligations -- 15.8%
U.S. Treasury Notes, 5.5s, 2003 ......... $ 4,340 $ 4,336,615
U.S. Treasury Notes, 6.5s, 2005 ......... 4,790 5,055,701
U.S. Treasury Notes, 6.625s, 2002 ....... 4,840 5,017,725
-----------
$14,410,041
-----------
Total U.S. Bonds ............................................ $21,475,415
-----------
Foreign Bonds -- 13.9%
Germany -- 5.9%
Federal Republic of Germany,
6s, 2007 .............................. DEM 4,926 $ 2,957,236
Federal Republic of Germany,
6.25s, 2006 ........................... 4,091 2,487,663
-----------
$ 5,444,899
-----------
Italy -- 2.0%
Republic of Italy, 5.75s, 2002 .......... ITL 1,585,000 $ 927,746
Republic of Italy, 6.75s, 2007 .......... 1,410,000 891,177
-----------
$ 1,818,923
-----------
</TABLE>
26-WTRS
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
New Zealand -- 0.8%
Government of New Zealand,
8s, 2004 ............................ NZD 1,310 $ 721,704
-----------
Sweden -- 0.6%
Kingdom of Sweden, 6s, 2005 ........... SEK 2,100 $ 280,535
Kingdom of Sweden, 13s, 2001 .......... 1,700 262,419
-----------
$ 542,954
-----------
United Kingdom -- 4.6%
United Kingdom Treasury,
7.25s, 2007 ......................... GBP 2,291 $ 4,201,619
-----------
Total Foreign Bonds .................................... $12,730,099
-----------
Total Bonds
(Identified Cost, $33,980,244) ....................... $34,205,514
-----------
Warrants*
Shares
Wharf Holdings (Real Estate), (Hong
Kong) (Identified Cost, $0) ......... 3,550 $ 165
-----------
Short-Term Obligations -- 2.1%
Principal Amount
(000 Omitted)
Ford Motor Credit Corp., due
7/01/98, at Amortized Cost .......... $1,880 $ 1,880,000
-----------
Total Investments
(Identified Cost, $78,596,259) ....................... $91,159,187
-----------
</TABLE>
Call Options Written
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Japanese Yen/Deutsche Marks/
August/66.52 (Premiums
Received, $85,224) .................. JPY 366,467 (366)
-----------
Put Options Written
Canadian Dollars/1.43 (Premiums
Received $9,343) ................... CAD 2,497 $ (47,119)
-----------
Other Assets,
Less Liabilities -- 0.2% ................................... 211,128
-----------
Net Assets -- 100.0% ....................................... $91,322,830
===========
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- June 30, 1998
Zero Coupon Series, Portfolio 2000
U.S. Government Guaranteed -- 99.8%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Treasury Investment
Growth Receipts -- 5.1%
Series 18, due 2/15/01 ............................. $ 97 $ 84,157
Series 12, due 5/15/01 ............................. 22 18,821
Series 15, due 8/15/01 ............................. 88 74,244
----------
Total Treasury Investment Growth
Receipts (Identified Cost, $159,831) ...................... $ 177,222
----------
U.S. Treasury Securities Stripped
Interest Payments -- 94.7%
Generic Coupons, due 5/15/00 ....................... $ 742 $ 670,694
Generic Coupons, due 8/15/00 ....................... 93 82,901
Generic Coupons, due 11/15/00 ...................... 2,798 2,460,365
Generic Coupons, due 5/15/01 ....................... 81 69,301
----------
Total U.S. Treasury Securities Stripped
Interest Payments (Identified Cost, $3,170,559) ........... $3,283,261
----------
Total Investments
(Identified Cost, $3,330,390) ............................. $3,460,483
----------
Other Assets
Less Liabilities -- 0.2% .................................... 5,832
----------
Net Assets -- 100.0% ........................................ $3,466,315
==========
</TABLE>
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.
###Security segregated as collateral for open futures contracts.
[dagger]Restricted security.
[dbldag]Security valued by or at the direction of the Trustees.
[dbldag][dbldag]Inverse floating rate 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 FRF=French Francs JPY=Japanese Yen
CAD=Canadian Dollars GBP=British Pounds NLG=Dutch Guilders
CHF=Swiss Francs HKD=Hong Kong Dollars NZD=New Zealand Dollars
DEM=Deutsche Marks ITL=Italian Lire SEK=Swedish Kronar
ESP=Spanish Pesetas
27-ZCS
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- June 30, 1998
<TABLE>
<CAPTION>
Government High
Bond Securities Yield
Assets: Series Series Series
Investments -- ---------- ------------ --------------
<S> <C> <C> <C>
Unaffiliated issuers, at cost ................................................. $2,843,796 $414,166,128 $ 335,097,869
Unrealized appreciation (depreciation) ........................................ 21,295 12,559,687 5,443,916
---------- ------------ -------------
Total investments, at value ................................................. $2,865,091 $426,725,815 $ 340,541,785
Cash ........................................................................... 38,418 1,043 85,053
Foreign currency, at value (identified cost, $90,038, $28,359) ................. -- -- --
Net receivable for forward foreign currency exchange contracts closed or subject
to master netting agreements .................................................. -- -- --
Receivable for investments sold ................................................ -- -- 663,434
Receivable for Series shares sold .............................................. 94,463 207,167 364,658
Interest and dividends receivable .............................................. 10,363 4,470,753 6,058,618
Receivable from investment advisor ............................................. 2,291 -- --
Other assets ................................................................... -- 2,547 1,810
---------- ------------ -------------
Total assets ................................................................ $3,010,626 $431,407,325 $ 347,715,358
---------- ------------ -------------
Liabilities:
Payable for investments purchased .............................................. $ 411,147 $ -- $ 4,009,381
Payable for Series shares reacquired ........................................... 46 299,747 205,880
Net payable for forward foreign currency exchange contracts to purchase ........ -- -- --
Payable to affiliates --
Investment advisory fee ....................................................... 123 19,465 21,205
Administrative fee ............................................................ 3 531 424
Accrued expenses and other liabilities ......................................... 79 55,567 43,523
---------- ------------- -------------
Total liabilities ........................................................... $ 411,398 $ 375,310 $ 4,280,413
---------- ------------- -------------
Net assets ...................................................................... $2,599,228 $431,032,015 $ 343,434,945
========== ============= =============
Net assets consist of:
Paid-in capital ................................................................ $2,568,954 $415,145,710 $ 323,394,917
Unrealized appreciation/(depreciation) on investments and translation of assets
and liabilities in foreign currencies ......................................... 21,295 12,559,687 5,443,916
Accumulated undistributed net realized gain (loss) on investments and foreign
currency transactions ......................................................... (859) (8,684,076) 1,146,985
Accumulated undistributed net investment income ................................ 9,838 12,010,694 13,449,127
---------- ------------- -------------
Total ...................................................................... $2,599,228 $431,032,015 $ 343,434,945
========== ============= =============
Shares of beneficial interest outstanding ...................................... 254,830 33,679,268 35,815,941
========== ============= =============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) ........... $ 10.20 $ 12.80 $ 9.59
========== ============= =============
<CAPTION>
MFS(R)/Foreign
& Colonial
International Emerging
Growth and Markets Money
Income Equities Market
Assets: Series Series Series
Investments -- ------------- ----------------------------
<S> <C> <C> <C>
Unaffiliated issuers, at cost ................................................. $ 62,411,399 $ 23,390,176 $ 356,862,606
Unrealized appreciation (depreciation) ........................................ 10,233,565 (2,987,795) --
------------ ------------ -------------
Total investments, at value ................................................. $ 72,644,964 $ 20,402,381 $ 356,862,606
Cash ........................................................................... 18,408 52,384 7,202
Foreign currency, at value (identified cost, $90,038, $28,359) ................. 90,109 28,143 --
Net receivable for forward foreign currency exchange contracts closed or subject
to master netting agreements .................................................. 8,926 -- --
Receivable for investments sold ................................................ 1,122,771 244,457 --
Receivable for Series shares sold .............................................. 205,619 11,982 4,058,381
Interest and dividends receivable .............................................. 172,460 96,039 --
Receivable from investment advisor ............................................. -- -- --
Other assets ................................................................... 338 159 3,240
------------ ------------ -------------
Total assets ................................................................ $ 74,263,595 $ 20,835,545 $ 360,931,429
------------ ------------ -------------
Liabilities:
Payable for investments purchased .............................................. $ 737,666 $ 158,539 $ --
Payable for Series shares reacquired ........................................... 47 4,282 366,624
Net payable for forward foreign currency exchange contracts to purchase ........ 8,688 -- --
Payable to affiliates --
Investment advisory fee ....................................................... 5,664 2,127 14,776
Administrative fee ............................................................ 87 31 443
Accrued expenses and other liabilities ......................................... 14,095 34,503 75,704
------------ ------------ -------------
Total liabilities ........................................................... $ 766,247 $ 199,482 $ 457,547
------------ ------------ -------------
Net assets ...................................................................... $ 73,497,348 $ 20,636,063 $ 360,473,882
============ ============ =============
Net assets consist of:
Paid-in capital ................................................................ $ 61,493,165 $ 26,538,387 $ 360,473,882
Unrealized appreciation/(depreciation) on investments and translation of assets
and liabilities in foreign currencies ......................................... 10,231,024 (2,993,931) --
Accumulated undistributed net realized gain (loss) on investments and foreign
currency transactions ......................................................... 1,640,109 (3,043,556) --
Accumulated undistributed net investment income ................................ 133,050 135,163 --
------------ ------------ -------------
Total ...................................................................... $ 73,497,348 $ 20,636,063 $ 360,473,882
============ ============ =============
Shares of beneficial interest outstanding ...................................... 5,662,830 2,338,618 360,473,882
============ ============ =============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) ........... $ 12.98 $ 8.82 $ 1.00
============ ============ =============
</TABLE>
See notes to financial statements
28
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- June 30, 1998 -- continued
<TABLE>
<CAPTION>
World
Strategic Asset
Income Allocation(SM)
Assets: Series Series
Investments -- --------------- ---------------
<S> <C> <C>
Unaffiliated issuers, at cost .......................................................... $ 1,509,803 $ 126,890,488
Unrealized appreciation ................................................................ 1,592 9,951,369
----------- -------------
Total investments, at value .......................................................... $ 1,511,395 $ 136,841,857
Cash .................................................................................... 11,830 351,426
Net receivable for forward foreign currency exchange contracts to sell .................. -- 1,464,678
Receivable for investments sold ......................................................... -- 2,224,928
Receivable for Series shares sold ....................................................... 58,250 104,929
Interest and dividends receivable ....................................................... 13,416 881,520
Receivable from investment advisor ...................................................... 2,290 --
Other assets ............................................................................ -- 2,142
----------- -------------
Total assets ......................................................................... $ 1,597,181 $ 141,871,480
----------- -------------
Liabilities:
Payable for investments purchased ....................................................... $ 205,138 $ 1,073,177
Payable for foreign currency, at value (identified cost $1,035) ......................... -- 1,030
Payable for swap agreements ............................................................. -- 13,513
Payable for Series shares reacquired .................................................... -- 41,591
Net payable for forward foreign currency exchange contracts to purchase ................. -- 631,479
Net payable for foreign currency exchange contracts closed or subject to master netting
agreements ............................................................................. -- 304,906
Written options outstanding, at value (premiums received $0, $374,413, $330,616, -- 346,985
$94,567, $0)
Payable to affiliates --
Investment advisory fee ................................................................ 78 8,583
Administrative fee ..................................................................... -- 199
Accrued expenses and other liabilities .................................................. 459 72,494
----------- -------------
Total liabilities .................................................................... $ 205,675 $ 2,493,957
----------- -------------
Net assets ............................................................................... $ 1,391,506 $ 139,377,523
=========== =============
Net assets consist of:
Paid-in capital ......................................................................... $ 1,382,998 $ 122,787,909
Unrealized appreciation/(depreciation) on investments and translation of assets and
liabilities in foreign currencies ...................................................... 1,592 10,491,640
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... 2,112 4,931,870
Accumulated undistributed net investment income ......................................... 4,804 1,166,104
----------- -------------
Total ............................................................................... $ 1,391,506 $ 139,377,523
=========== =============
Shares of beneficial interest outstanding ............................................... 137,630 9,361,314
=========== =============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 10.11 $ 14.89
=========== =============
<CAPTION>
World Zero
World Total Coupon
Governments Return Series,
Assets: Series Series Portfolio 2000
<S> <C> <C> <C>
Unaffiliated issuers, at cost ......................................... $ 99,131,639 $ 78,596,259 $3,330,390
Unrealized appreciation ............................................... 518,145 12,562,928 130,093
------------ ------------ ----------
Total investments, at value ......................................... $ 99,649,784 $ 91,159,187 $3,460,483
Cash ................................................................... 4,827 7,196 2,254
Net receivable for forward foreign currency exchange contracts to sell . 436,526 -- --
Receivable for investments sold ........................................ -- 968,292 --
Receivable for Series shares sold ...................................... 1,410 111,432 --
Interest and dividends receivable ...................................... 1,170,425 537,348 --
Receivable from investment advisor ..................................... -- -- --
Other assets ........................................................... 726 472 8,173
------------ ------------ ----------
Total assets ........................................................ $101,263,698 $ 92,783,927 $3,470,910
------------ ------------ ----------
Liabilities:
Payable for investments purchased ...................................... $ -- $ 599,473 $ --
Payable for foreign currency, at value (identified cost $1,035) ........ -- -- --
Payable for swap agreements ............................................ -- -- --
Payable for Series shares reacquired ................................... 142,644 2,184 85
Net payable for forward foreign currency exchange contracts to purchase 1,927,131 427,097 --
Net payable for foreign currency exchange contracts closed or subject
to master netting agreements .......................................... 755,932 327,461 --
Written options outstanding, at value (premiums received $0, $374,413,
$330,616, $94,567, $0)................................................. 138,786 47,485 --
Payable to affiliates --
Investment advisory fee ............................................... 6,026 5,579 71
Administrative fee .................................................... 151 112 --
Accrued expenses and other liabilities ................................. 51,280 51,706 4,439
------------- ------------ ----------
Total liabilities ................................................... $ 3,021,950 $ 1,461,097 $ 4,595
------------- ------------ ----------
Net assets .............................................................. $ 98,241,748 $ 91,322,830 $3,466,315
============= ============ ==========
Net assets consist of:
Paid-in capital ........................................................ $ 98,025,609 $ 76,359,937 $3,267,069
Unrealized appreciation/(depreciation) on investments and translation
of assets and liabilities in foreign currencies ....................... (1,537,246) 11,853,228 130,093
Accumulated undistributed net realized gain (loss) on investments
and foreign currency transactions ..................................... (107,185) 2,167,445 (35,089)
Accumulated undistributed net investment income ........................ 1,860,570 942,220 104,242
------------- ------------ ----------
Total .............................................................. $ 98,241,748 $ 91,322,830 $3,466,315
============= ============ ==========
Shares of beneficial interest outstanding .............................. 9,131,510 5,860,386 402,415
============= ============ ==========
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) ... $ 10.76 $ 15.58 $ 8.61
============= ============ ==========
</TABLE>
See notes to financial statements
29
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Period Ended June 30, 1998
<TABLE>
<CAPTION>
Government High
Bond Securities Yield
Net investment income: Series* Series Series
Income -- ----------- ------------- -----------
<S> <C> <C> <C>
Interest ................................................................ $ 11,910 $12,507,041 $ 14,524,126
Dividends ............................................................... -- -- 276,791
Foreign taxes withheld .................................................. -- -- --
-------- ----------- ------------
Total investment income ................................................ $ 11,910 $12,507,041 $ 14,800,917
-------- ----------- ------------
Expenses --
Investment advisory fees ................................................ $ 1,243 $ 1,095,058 $ 1,166,458
Trustees' fees .......................................................... 1,696 4,373 3,473
Administrative fee ...................................................... 24 29,771 23,271
Custodian fees .......................................................... 111 56,370 47,710
Auditing fees ........................................................... 720 25,815 26,845
Legal fees .............................................................. 5 314 398
Printing fees ........................................................... 151 17,009 13,399
Interest expense ........................................................ -- -- --
Miscellaneous ........................................................... 246 2,320 --
-------- ----------- ------------
Total expenses ......................................................... $ 4,196 $ 1,231,030 $ 1,281,554
Preliminary reduction of expenses by investment adviser ................. (2,092) -- --
Fees paid indirectly .................................................... (32) (1,413) (37,904)
-------- ----------- ------------
Net expenses ........................................................... $ 2,072 $ 1,229,617 $ 1,243,650
-------- ----------- ------------
Net investment income ................................................. $ 9,838 $11,277,424 $ 13,557,267
-------- ----------- ------------
Realized and unrealized gain (loss) on investments and foreign currency
transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ................................................. $ (859) $ 2,968,535 $ 4,231,097
Foreign currency transactions ........................................... -- -- 524
Futures contracts ....................................................... -- (309,471) --
Written options transactions ............................................ -- -- --
-------- ----------- ------------
Net realized gain (loss) on investments
and foreign currency transactions .................................... $ (859) $ 2,659,064 $ 4,231,621
-------- ----------- ------------
Change in unrealized appreciation (depreciation) --
Investments ............................................................. $ 21,295 $ 1,551,903 $ (2,468,405)
Translation of assets and liabilities in foreign currencies ............. -- -- --
Futures contracts ....................................................... -- 49,736 --
-------- ----------- ------------
Net unrealized gain (loss) on investments and
foreign currency translation .......................................... $ 21,295 $ 1,601,639 $ (2,468,405)
-------- ----------- ------------
Net realized and unrealized gain (loss) on
investments and foreign currency ..................................... $ 20,436 $ 4,260,703 $ 1,763,216
-------- ----------- ------------
Increase (decrease) in net assets from
operations .......................................................... $ 30,274 $15,538,127 $ 15,320,483
======== =========== ============
<CAPTION>
MFS(R)/Foreign
& Colonial
International Emerging
Growth and Markets Money
Income Equity Market
Net investment income: Series Series Series
Income -- --------------- ---------------- -----------
<S> <C> <C> <C>
Interest ............................................................. $ 95,696 $ 26,552 $9,970,159
Dividends ............................................................ 790,506 299,385 --
Foreign taxes withheld ............................................... (89,368) (14,220) --
----------- ------------ ----------
Total investment income ............................................. $ 796,834 $ 311,717 $9,970,159
----------- ------------ ----------
Expenses --
Investment advisory fees ............................................. $ 300,681 $ 148,165 $ 896,764
Trustees' fees ....................................................... 2,958 3,473 3,473
Administrative fee ................................................... 4,636 1,778 26,804
Custodian fees ....................................................... 29,048 12,982 55,608
Auditing fees ........................................................ 10,273 12,738 18,065
Legal fees ........................................................... 180 562 479
Printing fees ........................................................ 3,287 1,757 43,817
Interest expense ..................................................... -- 3,061 --
Miscellaneous ........................................................ 1,505 -- --
----------- ------------ ----------
Total expenses ...................................................... $ 352,568 $ 184,516 $1,045,010
Preliminary reduction of expenses by investment adviser .............. -- -- --
Fees paid indirectly ................................................. (1,318) (8,760) (8,829)
----------- ------------ ----------
Net expenses ........................................................ $ 351,250 $ 175,756 $1,036,181
----------- ------------ ----------
Net investment income .............................................. $ 445,584 $ 135,961 $8,933,978
----------- ------------ ----------
Realized and unrealized gain (loss) on investments and foreign currency
transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions .............................................. $ 1,394,835 $ (2,709,263) $ --
Foreign currency transactions ........................................ 252,032 (92,329) --
Futures contracts .................................................... -- -- --
Written options transactions ......................................... -- -- --
----------- ------------ ----------
Net realized gain (loss) on investments
and foreign currency transactions ................................. $ 1,646,867 $ (2,801,592) $ --
----------- ------------ ----------
Change in unrealized appreciation (depreciation) --
Investments .......................................................... $ 8,846,201 $ (1,714,050) $ --
Translation of assets and liabilities in foreign currencies .......... (257,876) (5,590) --
Futures contracts .................................................... -- -- --
----------- ------------ ----------
Net unrealized gain (loss) on investments and
foreign currency translation ....................................... $ 8,588,325 $ (1,719,640) $ --
----------- ------------ ----------
Net realized and unrealized gain (loss) on
investments and foreign currency .................................. $10,235,192 $ (4,521,232) $ --
----------- ------------ ----------
Increase (decrease) in net assets from
operations ....................................................... $10,680,776 $ (4,385,271) $8,933,978
=========== ============ ==========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
See notes to financial statements
30
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Period Ended June 30, 1998 -- continued
<TABLE>
<CAPTION>
World
Strategic Asset World
Income Allocation Governments
Net investment income: Series** Series Series
Income -- ----------- -------------- --------------
<S> <C> <C> <C>
Interest ............................................................................ $ 5,952 $ 2,008,449 $ 3,005,320
Dividends ........................................................................... -- 787,218 --
Foreign taxes withheld .............................................................. -- (85,039) --
--------- ----------- ------------
Total investment income ............................................................ $ 5,952 $ 2,710,628 $ 3,005,320
--------- ----------- ------------
Expenses --
Investment advisory fee ............................................................. $ 689 $ 499,704 $ 387,334
Trustees' fees ...................................................................... 1,673 2,473 --
Administrative fee .................................................................. 13 9,994 7,747
Custodian fee ....................................................................... 661 46,134 32,464
Auditing fees ....................................................................... 1,500 21,665 24,515
Legal fees .......................................................................... -- 2,810 251
Printing fees ....................................................................... 2,000 11,071 7,278
Miscellaneous ....................................................................... 204 3,903 2,116
--------- ----------- ------------
Total expenses ..................................................................... $ 6,740 $ 597,754 $ 461,705
Preliminary reduction of expenses by investment adviser ............................. (5,592) -- --
Fees paid indirectly ................................................................ -- (3,600) (2,069)
--------- ----------- ------------
Net expenses ....................................................................... $ 1,148 $ 594,154 $ 459,636
--------- ----------- ------------
Net investment income ............................................................. $ 4,804 $ 2,116,474 $ 2,545,684
--------- ----------- ------------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................. $ 2,112 $ 2,102,381 $ 1,341,296
Foreign currency transactions ....................................................... -- 2,656,239 (622,083)
Futures contracts ................................................................... -- (136,421) --
Written options transactions ........................................................ -- 433,985 247,175
--------- ----------- ------------
Net realized gain on investments and foreign currency transactions ................. $ 2,112 $ 5,056,184 $ 966,388
--------- ----------- ------------
Change in unrealized appreciation (depreciation) --
Investments ......................................................................... $ 1,592 $ 4,884,730 $ 832,942
Translation of assets and liabilities in foreign currencies ......................... -- (279,271) (2,719,444)
Written options ..................................................................... -- 368,906 86,816
Futures ............................................................................. -- 4,429 --
Swaps ............................................................................... -- (13,513) --
--------- ----------- ------------
Net unrealized gain (loss) on investments and foreign
currency translation .............................................................. $ 1,592 $ 4,965,281 $ (1,799,686)
--------- ----------- ------------
Net realized and unrealized gain (loss) on investments and foreign currency $ 3,704 $10,021,465 $ (833,298)
--------- ----------- ------------
Increase in net assets from operations ........................................... $ 8,508 $12,137,939 $ 1,712,386
========= =========== ============
<CAPTION>
World Zero
Total Coupon
Return Series,
Net investment income: Series Portfolio 2000
Income -- ----------- ---------------
<S> <C> <C>
Interest .............................................................................. $ 986,542 $ 113,062
Dividends ............................................................................. 587,735 --
Foreign taxes withheld ................................................................ (55,962) --
---------- ---------
Total investment income .............................................................. $1,518,315 $ 113,062
---------- ---------
Expenses --
Investment advisory fee ............................................................... $ 306,774 $ 4,409
Trustees' fees ........................................................................ 2,211 3,473
Administrative fee .................................................................... 6,121 260
Custodian fee ......................................................................... 31,949 1,178
Auditing fees ......................................................................... 22,540 6,565
Legal fees ............................................................................ 82 550
Printing fees ......................................................................... 4,754 149
Miscellaneous ......................................................................... 1,257 933
---------- ---------
Total expenses ....................................................................... $ 375,688 $ 17,517
Preliminary reduction of expenses by investment adviser ............................... -- (8,149)
Fees paid indirectly .................................................................. (2,110) (548)
---------- ---------
Net expenses ......................................................................... $ 373,578 $ 8,820
---------- ---------
Net investment income ............................................................... $1,144,737 $ 104,242
---------- ---------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................... $2,633,831 $ 11,383
Foreign currency transactions ......................................................... (181,433) --
Futures contracts ..................................................................... -- --
Written options transactions .......................................................... 59,284 --
---------- ---------
Net realized gain on investments and foreign currency transactions ................... $2,511,682 $ 11,383
---------- ---------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................... $5,582,575 $ (10,144)
Translation of assets and liabilities in foreign currencies ........................... (826,985) --
Written options ....................................................................... 23,151 --
Futures ............................................................................... -- --
Swaps ................................................................................. -- --
---------- ---------
Net unrealized gain (loss) on investments and foreign
currency translation ................................................................ $4,778,741 $ (10,144)
---------- ---------
Net realized and unrealized gain (loss) on investments and foreign currency ......... $7,290,423 $ 1,239
---------- ---------
Increase in net assets from operations ............................................. $8,435,160 $ 105,481
========== =========
</TABLE>
**For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
See notes to financial statements
31
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Period Ended June 30, 1998
<TABLE>
<CAPTION>
Government High
Bond Securities Yield
Increase (decrease) in net assets: Series* Series Series
From operations -- ---------- ------------- -------------
<S> <C> <C> <C>
Net investment income ........................................................... $ 9,838 $ 11,277,424 $ 13,557,267
Net realized gain (loss) on investments and foreign currency transactions ....... (859) 2,659,064 4,231,621
Net unrealized gain (loss) on investments and foreign currency translation ...... 21,295 1,601,639 (2,468,405)
---------- ------------- -------------
Increase (decrease) in net assets from operations .............................. $ 30,274 $ 15,538,127 $ 15,320,483
---------- ------------- -------------
Distributions declared to shareholders --
From net investment income ...................................................... $ -- $ (23,191,736) $ (20,130,545)
From net realized gain on investments and foreign currency transactions ......... -- -- --
In excess of net realized gain on investments and foreign currency transactions . -- -- --
------------ ------------- -------------
Total distributions declared to shareholders ................................... $ -- $ (23,191,736) $ (20,130,545)
------------ ------------- -------------
Net increase in net assets from Series share transactions ........................ $2,568,954 $ 50,953,738 $ 73,038,016
------------ ------------- -------------
Total increase (decrease) in net assets ....................................... $2,599,228 $ 43,300,129 $ 68,227,954
Net assets:
At beginning of period .......................................................... -- 387,731,886 275,206,991
------------ ------------- -------------
At end of period ................................................................ $2,599,228 $ 431,032,015 $ 343,434,945
============ ============= =============
Accumulated undistributed net investment income included in net assets at
end of period ................................................................... $ 9,838 $ 12,010,694 $ 13,449,127
============ ============= =============
<CAPTION>
MFS(R)/Foreign
& Colonial
International Emerging Money
Growth and Markets Market
Increase (decrease) in net assets: Income Series Equity Series Series
From operations -- --------------- ---------------- ------------
<S> <C> <C> <C>
Net investment income ......................................................... $ 445,584 $ 135,961 $ 8,933,978
Net realized gain (loss) on investments and foreign currency transactions ..... 1,646,867 (2,801,592) --
Net unrealized gain (loss) on investments and foreign currency translation .... 8,588,325 (1,719,640) --
------------ ------------ ------------
Increase (decrease) in net assets from operations ............................ $ 10,680,776 $ (4,385,271) $ 8,933,978
------------ ------------ ------------
Distributions declared to shareholders --
From net investment income .................................................... $ (586,185) $ (302,908) $ (8,933,978)
From net realized gain on investments and foreign currency transactions ....... (1,412,404) (215,066) --
In excess of net realized gain on investments and foreign currency transactions -- (241,964) --
------------ ------------ ------------
Total distributions declared to shareholders ................................. $ (1,998,589) $ (759,938) $ (8,933,978)
------------ ------------ ------------
Net increase in net assets from Series share transactions ...................... $ 13,447,058 $ 1,599,821 $ 20,413,648
------------ ------------ ------------
Total increase (decrease) in net assets ..................................... $ 22,129,245 $ (3,545,388) $ 20,413,648
Net assets:
At beginning of period ........................................................ 51,368,103 24,181,451 340,060,234
------------ ------------ ------------
At end of period .............................................................. $ 73,497,348 $ 20,636,063 $360,473,882
============ ============ ============
Accumulated undistributed net investment income included in net assets at
end of period ................................................................. $ 133,050 $ 135,163 $ --
============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
World
Strategic Asset
Income Allocation
Increase (decrease) in net assets: Series* Series
From operations -- ----------- ------------
<S> <C> <C>
Net investment income .............................................................. $ 4,804 $ 2,116,474
Net realized gain on investments and foreign currency transactions ................. 2,112 5,056,184
Net unrealized gain (loss) on investments and foreign currency translation ......... 1,592 4,965,281
---------- ------------
Increase in net assets from operations ............................................ $ 8,508 $ 12,137,939
---------- ------------
Distributions declared to shareholders --
From net investment income ......................................................... $ -- $ (4,297,027)
From net realized gain (loss) on investments and foreign currency transactions ..... -- (5,162,478)
----------- ------------
Total distributions declared to shareholders ...................................... $ -- $ (9,459,505)
----------- ------------
Net increase (decrease) in net assets from Series share transactions ................ $1,382,998 $ 13,786,685
----------- ------------
Total increase (decrease) in net assets .......................................... $1,391,506 $ 16,465,119
Net assets:
At beginning of period ............................................................. -- 122,912,404
----------- ------------
At end of period ................................................................... $1,391,506 $139,377,523
=========== ============
Accumulated undistributed net investment income included in net assets at
end of period ...................................................................... $ 4,804 $ 1,166,104
=========== ============
<CAPTION>
World Zero
World Total Coupon
Governments Return Series,
Increase (decrease) in net assets: Series Series Portfolio 2000
From operations -- ------------ ------------ --------------
<S> <C> <C> <C>
Net investment income ........................................................... $ 2,545,684 $ 1,144,737 $ 104,242
Net realized gain on investments and foreign currency transactions .............. 966,388 2,511,682 11,383
Net unrealized gain (loss) on investments and foreign currency translation ...... (1,799,686) 4,778,741 (10,144)
------------ ------------ ----------
Increase in net assets from operations ......................................... $ 1,712,386 $ 8,435,160 $ 105,481
------------ ------------ ----------
Distributions declared to shareholders --
From net investment income ...................................................... $ (1,288,659) $ (1,714,056) $ (212,590)
From net realized gain (loss) on investments and foreign currency transactions .. -- (2,223,292) --
------------ ------------ ----------
Total distributions declared to shareholders ................................... $ (1,288,659) $ (3,937,348) $ (212,590)
------------ ------------ ----------
Net increase (decrease) in net assets from Series share transactions ............. $(12,568,070) $ 15,001,825 $ (40,664)
------------ ------------ ----------
Total increase (decrease) in net assets ....................................... $(12,144,343) $ 19,499,637 $ (147,773)
Net assets:
At beginning of period .......................................................... 110,386,091 71,823,193 3,614,088
------------ ------------ ----------
At end of period ................................................................ $ 98,241,748 $ 91,322,830 $3,466,315
============ ============ ==========
Accumulated undistributed net investment income included in net assets at
end of period ................................................................... $ 1,860,570 $ 942,220 $ 104,242
============ ============ ==========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
See notes to financial statements
32
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1997
<TABLE>
<CAPTION>
Government High
Securities Yield
Increase (decrease) in net assets: Series Series
From operations -- ------------- -------------
<S> <C> <C>
Net investment income ..................................................... $ 24,084,636 $ 20,068,788
Net realized gain (loss) on investments and foreign currency transactions . (1,758,853) 6,027,894
Net unrealized gain (loss) on investments and foreign currency translation 9,256,148 2,792,621
------------- -------------
Increase (decrease) in net assets from operations ........................ $ 31,581,931 $ 28,889,303
------------- -------------
Distributions declared to shareholders --
From net investment income ................................................ $ (25,293,515) $ (15,079,993)
From net realized gain on investments and foreign currency transactions ... -- --
------------- -------------
Total distributions declared to shareholders ............................ $ (25,293,515) $ (15,079,993)
------------- -------------
Net increase (decrease) in net assets from Series share transactions ....... $ (1,663,440) $ 64,899,424
------------- -------------
Total increase (decrease) in net assets ................................. $ 4,624,976 $ 78,708,734
Net assets:
At beginning of year ...................................................... 383,106,910 196,498,257
------------- -------------
At end of year ............................................................ $ 387,731,886 $ 275,206,991
============= =============
Accumulated undistributed net investment income included in net assets at
end of year ............................................................... $ 23,925,006 $ 20,022,405
============= =============
<CAPTION>
MFS(R)/Foreign
& Colonial
International Emerging Money
Growth and Markets Market
Increase (decrease) in net assets: Income Series Equity Series Series
From operations -- -------------- ------------------ -----------
<S> <C> <C> <C>
Net investment income ..................................................... $ 546,178 $ 237,924 $ 19,348,059
Net realized gain (loss) on investments and foreign currency transactions . 1,166,181 289,612 --
Net unrealized gain (loss) on investments and foreign currency translation 1,064,743 (1,318,521) --
----------- ------------ ------------
Increase (decrease) in net assets from operations ........................ $ 2,777,102 $ (790,985) $ 19,348,059
----------- ------------ ------------
Distributions declared to shareholders --
From net investment income ................................................ $ (423,484) $ (7,806) $(19,348,059)
From net realized gain on investments and foreign currency transactions ... (95,794) -- --
----------- ------------ ------------
Total distributions declared to shareholders ............................ $ (519,278) $ (7,806) $(19,348,059)
----------- ------------ ------------
Net increase (decrease) in net assets from Series share transactions ....... $13,400,696 $ 21,708,805 $(69,105,092)
----------- ------------ ------------
Total increase (decrease) in net assets ................................. $15,658,520 $ 20,910,014 $(69,105,092)
Net assets:
At beginning of year ...................................................... 35,709,583 3,271,437 409,165,326
----------- ------------ ------------
At end of year ............................................................ $51,368,103 $ 24,181,451 $340,060,234
=========== ============ ============
Accumulated undistributed net investment income included in net assets at
end of year ............................................................... $ 273,651 $ 302,110 $ --
=========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
World
Asset World
Allocation Governments
Increase (decrease) in net assets: Series Series
From operations -- ---------------- --------------
<S> <C> <C>
Net investment income ................................................................... $ 3,224,007 $ 6,670,091
Net realized gain (loss) on investments and foreign currency transactions ............... 5,144,568 (7,731,267)
Net unrealized gain (loss) on investments and foreign currency translation .............. 1,542,900 (470,877)
------------ -------------
Increase (decrease) in net assets from operations ...................................... $ 9,911,475 $ (1,532,053)
------------ -------------
Distributions declared to shareholders --
From net investment income .............................................................. $ (1,525,728) $ (4,315,610)
From net realized gain on investments and foreign currency transactions ................. (3,242,392) (632,661)
In excess of net realized gain on investments and foreign currency transactions ......... -- (69,979)
------------ -------------
Total distributions declared to shareholders .......................................... $ (4,768,120) $ (5,018,250)
------------ -------------
Net increase (decrease) in net assets from Series share transactions ..................... $ 40,753,264 $ (24,828,038)
------------ -------------
Total increase (decrease) in net assets ............................................... $ 45,896,619 $ (31,378,341)
Net assets:
At beginning of year .................................................................... 77,015,785 141,764,432
------------ -------------
At end of year .......................................................................... $122,912,404 $ 110,386,091
============ =============
Accumulated undistributed net investment income included in net assets at end of year .... $ 3,346,657 $ 603,545
============ =============
<CAPTION>
World Zero
Total Coupon
Return Series,
Increase (decrease) in net assets: Series Portfolio 2000
From operations -- ------------ --------------
<S> <C> <C>
Net investment income ................................................................... $ 1,563,242 $ 212,609
Net realized gain (loss) on investments and foreign currency transactions ............... 1,730,289 15,490
Net unrealized gain (loss) on investments and foreign currency translation .............. 3,963,137 24,136
------------ ----------
Increase (decrease) in net assets from operations ...................................... $ 7,256,668 $ 252,235
------------ ----------
Distributions declared to shareholders --
From net investment income .............................................................. $ (657,055) $ (230,910)
From net realized gain on investments and foreign currency transactions ................. (624,021) --
In excess of net realized gain on investments and foreign currency transactions ......... -- --
------------ ----------
Total distributions declared to shareholders .......................................... $ (1,281,076) $ (230,910)
------------ ----------
Net increase (decrease) in net assets from Series share transactions ..................... $ 28,209,709 $ (744,279)
------------ ----------
Total increase (decrease) in net assets ............................................... $ 34,185,301 $ (722,954)
Net assets:
At beginning of year .................................................................... 37,637,892 4,337,042
------------ ----------
At end of year .......................................................................... $ 71,823,193 $3,614,088
============ ==========
Accumulated undistributed net investment income included in net assets at end of year .... $ 1,511,539 $ 212,590
============ ==========
</TABLE>
See notes to financial statements
33
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights
<TABLE>
<CAPTION>
Bond Series
------------------
Period ended
June 30, 1998***
------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $10.0000****
---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0715
Net realized and unrealized gain on investments and foreign currency transactions 0.1284
---------
Total from investment operations ............................................... $ 0.1999
---------
Net asset value -- end of period .................................................. $10.1999
=========
Total return[dbldag] .............................................................. 2.00%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ......................................................................... 1.00%+
Net investment income ............................................................ 4.75%+
Portfolio turnover ................................................................ 75%
Net assets at end of period (000 omitted) ......................................... $ 2,599
</TABLE>
<TABLE>
<CAPTION>
Government Securities Series
--------------------------------
Year Ended
December 31,
Six months ended -------------
June 30, 1998 1997
------------------ -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ................. $13.0406 $ 12.8672
-------- ---------
Income from investment operations# --
Net investment income ................................. $ 0.3665 $ 0.8109
Net realized and unrealized gain (loss) on investments
and foreign currency transactions .................... 0.1244 0.2490
-------- ---------
Total from investment operations .................... $ 0.4909 $ 1.0599
-------- ---------
Less distributions declared to shareholders --
From net investment income ............................ $(0.7334) $ (0.8865)
From net realized gain on investments and foreign
currency transactions ................................ -- --
-------- ---------
Total distributions declared to shareholders ........ $(0.7334) $ (0.8865)
-------- ---------
Net asset value -- end of period ....................... $12.7981 $ 13.0406
======== =========
Total return[dbldag] ................................... 3.91%++ 8.72%
Ratios (to average net assets)/Supplemental data:
Expenses## ............................................ 0.62%+ 0.63%
Net investment income ................................. 5.67%+ 6.38%
Portfolio turnover ..................................... 61% 182%
Net assets at end of period (000 omitted) .............. $431,032 $ 387,732
<CAPTION>
Government Securities Series
---------------------------------------------------
Year Ended December 31,
--------------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ..................................... $ 13.3900 $ 12.1219 $ 13.0951 $ 13.0059
--------- --------- --------- ---------
Income from investment operations# --
Net investment income ..................................................... $ 0.8445 $ 0.8311 $ 0.6366 $ 0.5742
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. (0.6620) 1.2183 (0.9238) 0.5220
--------- --------- --------- ---------
Total from investment operations ........................................ $ 0.1825 $ 2.0494 $ (0.2872) $ 1.0962
--------- --------- --------- ---------
Less distributions declared to shareholders --
From net investment income ................................................ $ (0.7053) $ (0.7813) $ (0.4959) $ (0.6603)
From net realized gain on investments and foreign currency transactions ... -- -- (0.1901) (0.3467)
--------- --------- --------- ---------
Total distributions declared to shareholders ............................ $ (0.7053) $ (0.7813) $ (0.6860) $ (1.0070)
--------- --------- --------- ---------
Net asset value -- end of period ........................................... $ 12.8672 $ 13.3900 $ 12.1219 $ 13.0951
========= ========= ========= =========
Total return[dbldag] ....................................................... 1.65% 17.66% (2.21)% 8.70%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................................ 0.63% 0.63% 0.62% 0.63%
Net investment income ..................................................... 6.60% 6.59% 6.01% 5.92%
Portfolio turnover ......................................................... 57% 80% 90% 96%
Net assets at end of period (000 omitted) .................................. $ 383,107 $ 368,848 $347,150 $ 310,521
</TABLE>
<TABLE>
<CAPTION>
High Yield Series
--------------------------------
Year Ended
December 31,
Six months ended --------------
June 30, 1998 1997
---------------- --------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ..................................... $ 9.7108 $ 9.2131
----------- ---------
Income from investment operations# --
Net investment income ..................................................... $ 0.4292 $ 0.8206
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. 0.0816 0.3319
----------- ---------
Total from investment operations ........................................ $ 0.5108 $ 1.1525
----------- ---------
Less distributions from net investment income .............................. $ (0.6327) $ (0.6548)
----------- ---------
Net asset value -- end of period ........................................... $ 9.5889 $ 9.7108
=========== =========
Total return[dbldag] ....................................................... 5.30%++ 13.24%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................................ 0.82%+ 0.84%
Net investment income ..................................................... 8.72%+ 8.70%
Portfolio turnover ......................................................... 70% 130%
Net assets at end of period (000 omitted) .................................. $ 343,435 $ 275,207
<CAPTION>
High Yield Series
----------------------------------------------------
Year Ended December 31,
----------------------------------------------------
1996 1995 1994 1993
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ..................................... $ 8.9222 $ 8.1860 $ 9.1120 $ 8.3279
--------- --------- -------- --------
Income from investment operations# --
Net investment income ..................................................... $ 0.8012 $ 0.7891 $ 0.8226 $ 0.5915
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. 0.2131 0.5494 (1.0387) 0.8242
--------- --------- -------- --------
Total from investment operations ........................................ $ 1.0143 $ 1.3385 $(0.2161) $ 1.4157
--------- --------- -------- --------
Less distributions from net investment income .............................. $ (0.7234) $ (0.6023) $(0.7099) $(0.6316)
--------- --------- -------- --------
Net asset value -- end of period ........................................... $ 9.2131 $ 8.9222 $ 8.1860 $ 9.1120
========= ========= ======== ========
Total return[dbldag] ....................................................... 12.12% 16.93% (2.16)% 17.68%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................................ 0.84% 0.87% 0.86% 0.88%
Net investment income ..................................................... 9.01% 9.17% 8.94% 8.76%
Portfolio turnover ......................................................... 88% 66% 82% 53%
Net assets at end of period (000 omitted) .................................. $ 196,498 $ 153,800 $102,194 $ 97,884
</TABLE>
+Annualized.
++Not annualized.
***For the period from commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
****Net asset value on date of commencement of operations.
#Per share data are 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.
[sec]The investment adviser voluntarily waived all or a portion of its
advisory fee for the Bond Series for the period indicated. If these
fees had been incurred by the Series, the net investment income per
share and the ratios would have been:
<TABLE>
<CAPTION>
Bond Series
Six Months
ended
June 30, 1998
--------------
<S> <C>
Net investment income .......... $0.0563
Ratios (to average net assets):
Expenses## .................... 2.02%+
Net investment income ......... 3.74%+
</TABLE>
See notes to financial statements
34
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
International Growth and Income Series
----------------------------------------------------------------
Year Ended December 31,
-------------------------
Six months ended Period Ended
June 30, 1998 1997 1996 December 31, 1995**
------------------ ------------- ---------- -------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ....................... $11.1722 $10.6247 $10.1282 $10.0000****
-------- -------- -------- ---------
Income from investment operations# --
Net investment income[sec] .................................. $ 0.0886 $ 0.1356 $ 0.2326 $ 0.0295
Net realized and unrealized gain on investments and foreign
currency transactions ...................................... 2.1136 0.5497 0.2639 0.0987
-------- -------- -------- ---------
Total from investment operations .......................... $ 2.2022 $ 0.6853 $ 0.4965 $ 0.1282
-------- -------- -------- ---------
Less distributions declared to shareholders --
From net investment income .................................. $(0.1160) $(0.1124) $ -- $ --
From net realized gain on investments and foreign currency
transactions ............................................... (0.2795) (0.0254) -- --
-------- -------- -------- ---------
Total distributions declared to shareholders ............... $(0.3955) $(0.1378) $ -- $ --
-------- -------- -------- ---------
Net asset value -- end of period ............................. $12.9789 $11.1722 $10.6247 $10.1282
======== ======== ======== ========
Total return[dbldag] ......................................... 19.65%++ 6.53% 4.84% 1.30%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .................................................. 1.14%+ 1.22% 0.97% 1.50%+
Net investment income ....................................... 1.45%+ 1.24% 2.21% 1.64%+
Portfolio turnover ........................................... 27% 194% 51% --
Net assets at end of period (000 omitted) .................... $ 73,497 $ 51,368 $ 35,710 $ 7,179
</TABLE>
<TABLE>
<CAPTION>
MFS(R)/Foreign & Colonial Emerging Markets
Equity Series
--------------------------------------------------
Year Ended Period Ended
December 31, December 31, 1996*
Six months ended ------------ -----------------
June 30, 1998 1997 1996*
---------------- --------- ----------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 11.0359 $ 10.0013 $10.0000****
---------- --------- ---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0599 $ 0.1638 $ 0.0706
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ........................................................... (1.9301) 0.8773 (0.0693)
---------- --------- ---------
Total from investment operations ............................................... $ (1.8702) $ 1.0411 $ 0.0013
---------- --------- ---------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.1362) $ (0.0065) $ --
From net realized gain on investments and foreign currency transactions .......... (0.0967) -- --
In excess of net realized gain on investments and foreign currency transactions . (0.1088) -- --
Total distributions declared to shareholders .................................... $ (0.3417) $ (0.0065) $ --
---------- --------- --------
Net asset value -- end of period .................................................. $ 8.8240 $ 11.0359 $10.0013
========== ========= ========
Total return[dbldag] .............................................................. (17.54)%++ 10.46% 0.00%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.56%+ 1.07% 1.50%+
Net investment income ............................................................ 1.15%+ 1.38% 0.77%+
Portfolio turnover ................................................................ 52% 69% 4%
Net assets at end of period (000 omitted) ......................................... $ 20,636 $ 24,181 $ 3,271
</TABLE>
+Annualized.
++Not annualized.
*For the period from the commencement of the Series' investment
operations, June 5, 1996, through December 31, 1996.
**For the period from the commencement of the Series' investment
operations, October 2, 1995, through December 31, 1995.
****Net asset value on date of commencement of operations.
#Per share data are based on average shares outstanding.
##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.
[sec]The investment adviser voluntarily waived all or a portion of its
advisory fee for the International Growth and Income Series and
MFS[RegTM]/Foreign & Colonial Emerging Markets Equity Series for the
periods indicated. If these fees had been incurred by the Series, the
net investment income per share and the ratios would have been:
<TABLE>
<CAPTION>
International Growth MFS(R)/Foreign & Colonial
and Income Series Emerging Markets Equity Series
----------------------------------------- ---------------------------------------
Year ended Period ended Year ended Period ended
December 31, 1996 December 31, 1995** December 31, 1997 December 31, 1996*
------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net investment income (loss) .......... $0.2101 $0.0119 $0.1552 $(0.0975)
Ratios (to average net assets):
Expenses## ........................... 1.16% 2.48%+ 1.55% 3.38%+
Net investment income (loss) ......... 2.02% 0.66%+ 0.90% (1.12%)+
</TABLE>
See notes to financial statements
35
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Money Market Series
---------------------------------
Year Ended
December 31,
Six months ended --------------
June 30, 1998 1997
------------------ --------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ......................... $ 1.0000 $ 1.0000
-------- --------
Income from investment operations# -- .......................... $ 0.0248 $ 0.0495
-------- --------
Less distributions from net investment income .................. $(0.0248) $(0.0495)
-------- --------
Net asset value -- end of period ............................... $ 1.0000 $ 1.0000
======== ========
Total return[dbldag] ........................................... 2.50%++ 5.06%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................... 0.58%+ 0.57%
Net investment income ......................................... 4.96%+ 4.94%
Net assets at end of period (000 omitted) ...................... $360,474 $340,060
<CAPTION>
Money Market Series
--------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------
1996 1995 1994 1993
-------------- -------------- -------------- -----------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- --------
Income from investment operations# -- .......................... $ 0.0483 $ 0.0520 $ 0.0363 $ 0.0256
-------- -------- -------- --------
Less distributions from net investment income .................. $(0.0483) $(0.0520) $(0.0363) $(0.0256)
-------- -------- -------- --------
Net asset value -- end of period ............................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ========
Total return[dbldag] ........................................... 4.95% 5.44% 3.69% 2.59%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................... 0.56% 0.59% 0.58% 0.58%
Net investment income ......................................... 4.82% 5.30% 3.74% 2.60%
Net assets at end of period (000 omitted) ...................... $409,165 $282,754 $252,175 $142,464
</TABLE>
<TABLE>
<CAPTION>
Strategic Income Series
------------------------
Period ended
June 30, 1998***
------------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ................................................... $10.0000****
---------
Income from investment operations# --
Net investment income[sec] .............................................................. $ 0.0673
Net realized and unrealized gain (loss) on investments and foreign currency transactions 0.0432
---------
Total from investment operations ....................................................... $ 0.1105
---------
Net asset value -- end of period ......................................................... $10.1105
=========
Total return[dbldag] ..................................................................... 1.10%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................................................. 1.25%+
Net investment income ................................................................... 5.23%+
Portfolio turnover ....................................................................... 414%
Net assets at end of period (000 omitted) ................................................ $ 1,392
</TABLE>
<TABLE>
<CAPTION>
World Asset Allocation(SM) Series
---------------------------------
Year Ended
December 31,
-------------
Six months ended
June 30, 1998 1997
----------------- -----------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $14.5377 $13.7794
-------- --------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.2413 $ 0.4412
Net realized and unrealized gain on investments and foreign currency transactions 1.2049 1.0178
-------- --------
Total from investment operations ............................................... $ 1.4462 $ 1.4590
-------- --------
Less distributions declared to shareholders --
From net investment income ....................................................... $(0.4975) $(0.2242)
From net realized gain on investments and foreign currency transactions .......... (0.5977) (0.4765)
-------- --------
Total distributions declared to shareholders ................................... $(1.0952) $(0.7007)
-------- --------
Net asset value -- end of period .................................................. $14.8887 $14.5377
======== ========
Total return[dbldag] .............................................................. 9.84%++ 10.87%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.90%+ 0.92%
Net investment income ............................................................ 3.18%+ 3.06%
Portfolio turnover ................................................................ 73% 162%
Net assets at end of period (000 omitted) ......................................... $139,378 $122,912
<CAPTION>
World Asset Allocation(SM) Series
----------------------------------------------
Year Ended December 31,
------------------------- Period Ended
1996 1995 December 31, 1994**
----------- ---------- -------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 12.2250 $10.0579 $10.0000****
--------- -------- --------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.3731 $ 0.4205 $ 0.0220
Net realized and unrealized gain on investments and foreign currency transactions 1.5563 1.7540 0.0359
--------- -------- --------
Total from investment operations ............................................... $ 1.9294 $ 2.1745 $ 0.0579
--------- -------- --------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.1300) $(0.0074) $ --
From net realized gain on investments and foreign currency transactions .......... (0.2450) -- --
--------- -------- --------
Total distributions declared to shareholders ................................... $ (0.3750) $(0.0074) $ --
--------- -------- --------
Net asset value -- end of period .................................................. $ 13.7794 $12.2250 $10.0579
========= ======== ========
Total return[dbldag] .............................................................. 16.04% 21.56% 0.60%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.94% 0.67% 1.50%+
Net investment income ............................................................ 2.84% 3.70% 3.13%+
Portfolio turnover ................................................................ 154% 146% 2%
Net assets at end of period (000 omitted) ......................................... $ 77,016 $ 25,863 $ 3,003
</TABLE>
+Annualized.
++Not annualized.
**For the period from the commencement of the Series' investment
operations, November 7, 1994, through December 31, 1994.
***For the period from the commencement of the Series' investment
operations, May 6, 1998, through June 30, 1998.
****Net asset value on date of commencement of operations.
#Per share data are 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.
[sec]The investment adviser voluntarily waived all or a portion of its
advisory fee for the World Asset Allocation Series and Strategic
Income Series for the periods indicated.
If these fees had been incurred by the Series, the net investment
income per share and the ratios would have been:
<TABLE>
<CAPTION>
Strategic Income Series World Asset Allocation(SM) Series
------------------------- ----------------------------------------
Period Ended Year Ended Period Ended
June 30, 1998*** December 31, 1995 December 31, 1994**
------------------------- ------------------- --------------------
<S> <C> <C> <C>
Net investment income (loss) .......... $(0.0110) $0.3716 $0.0041
Ratios (to average net assets):
Expenses## ........................... 7.34%+ 1.11% 4.05%+
Net investment income (loss) ......... (0.86)%+ 3.27% 0.58%+
</TABLE>
See notes to financial statements
36
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Governments Series
---------------------------------
Year Ended
December 31,
Six months ended -------------
June 30, 1998 1997
---------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ......................................... $10.7247 $ 11.2582
-------- ---------
Income from investment operations# --
Net investment income ......................................................... $ 0.2642 $ 0.5770
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ................................................................. (0.0908) (0.6754)
-------- ---------
Total from investment operations ............................................ $ 0.1734 $ (0.0984)
-------- ---------
Less distributions declared to shareholders --
From net investment income .................................................... $(0.1396) $ (0.3742)
From net realized gain on investments and foreign currency transactions ....... -- (0.0548)
In excess of net realized gain on investments and foreign currency transactions -- (0.0061)
-------- ---------
Total distributions declared to shareholders ................................ $(0.1396) $ (0.4351)
-------- ---------
Net asset value -- end of period ............................................... $10.7585 $ 10.7247
======== =========
Total return[dbldag] ........................................................... 1.58%++ (0.76)%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................................... 0.89%+ 0.91%
Net investment income ......................................................... 4.93%+ 5.43%
Portfolio turnover ............................................................. 199% 344%
Net assets at end of period (000 omitted) ...................................... $ 98,242 $110,386
<CAPTION>
World Governments Series
------------------------------------------------
Year Ended December 31,
------------------------------------------------
1996 1995 1994 1993
---------- --------- --------- --------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ......................................... $12.4866 $ 11.3769 $ 13.0212 $11.7966
-------- --------- --------- --------
Income from investment operations# --
Net investment income ......................................................... $ 0.6882 $ 0.8031 $ 0.6095 $ 0.5352
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ................................................................. (0.2081) 0.9511 (1.2295) 1.5819
-------- --------- --------- --------
Total from investment operations ............................................ $ 0.4801 $ 1.7542 $ (0.6200) $ 2.1171
-------- --------- --------- --------
Less distributions declared to shareholders --
From net investment income .................................................... $(1.7085) $ (0.0058) $ (0.8823) $(0.8925)
From net realized gain on investments and foreign currency transactions ....... -- (0.6387) (0.1420) --
In excess of net realized gain on investments and foreign currency transactions -- -- -- --
-------- --------- --------- --------
Total distributions declared to shareholders ................................ $(1.7085) $ (0.6445) $ (1.0243) $(0.8925)
-------- --------- --------- --------
Net asset value -- end of period ............................................... $11.2582 $ 12.4866 $ 11.3769 $13.0212
======== ========= ========= ========
Total return[dbldag] ........................................................... 4.66% 15.69% (4.46)% 18.84%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................................... 0.90% 0.89% 0.90% 0.95%
Net investment income ......................................................... 6.00% 6.67% 6.06% 6.01%
Portfolio turnover ............................................................. 390% 329% 269% 173%
Net assets at end of period (000 omitted) ...................................... $141,764 $ 152,487 $139,155 $135,085
</TABLE>
+Annualized.
++Not annualized.
#Per share data are 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
37
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Total Return Series
--------------------------------
Year Ended
December 31,
-------------
Six months ended
June 30, 1998 1997
---------------- ----------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $14.6971 $ 13.2657
-------- ---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.2160 $ 0.3979
Net realized and unrealized gain on investments and foreign currency transactions 1.4053 1.3759
-------- ---------
Total from investment operations ............................................... $ 1.6213 $ 1.7738
-------- ---------
Less distributions declared to shareholders --
From net investment income ....................................................... $(0.3201) $ (0.1756)
From net realized gain on investments and foreign currency transactions .......... (0.4152) (0.1668)
-------- ---------
Total distributions declared to shareholders .................................... $(0.7353) $ (0.3424)
-------- ---------
Net asset value -- end of period .................................................. $15.5831 $ 14.6971
======== =========
Total return[dbldag] .............................................................. 11.03%++ 13.61%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.92%+ 1.04%
Net investment income ............................................................ 2.80%+ 2.85%
Portfolio turnover ................................................................ 76% 171%
Net assets at end of period (000 omitted) ......................................... $ 91,323 $ 71,823
<CAPTION>
World Total Return Series
----------------------------------------------
Year Ended December 31,
--------------------------- Period Ended
1996 1995 December 31, 1994**
----------- ----------- -------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 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 declared to shareholders --
From net investment income ....................................................... $ (0.2300) $ (0.0060) $ --
From net realized gain on investments and foreign currency transactions .......... -- -- --
--------- --------- --------
Total distributions declared to shareholders .................................... $ (0.2300) $ (0.0060) $ --
--------- --------- --------
Net asset value -- end of period .................................................. $ 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%
Net assets at end of period (000 omitted) ......................................... $ 37,638 $ 13,786 $ 1,384
</TABLE>
+Annualized.
++Not annualized.
**For the period from the commencement of the Series' investment
operations, November 7, 1994, through December 31, 1994.
****Net asset value on date of commencement of operations.
#Per share data are 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.
[sec]The investment adviser voluntarily waived all or a portion of its
advisory fee for the World Total Return Series for the periods
indicated.
If these fees had been incurred by the Series, the net investment
income per share and the ratios would have been:
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1995 December 31, 1994**
------------------- --------------------
<S> <C> <C>
Net investment income (loss) .......... $0.3972 $(0.0405)
Ratios (to average net assets):
Expenses## ........................... 1.19% 6.93%+
Net investment income (loss) ......... 3.59% (2.12)%+
</TABLE>
See notes to financial statements
38
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Zero Coupon Series, Portfolio 2000
----------------------------------
Year Ended
December 31,
Six months ended --------------
June 30, 1998 1997
------------------ --------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ..................................... $ 8.9096 $ 8.8822
-------- --------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.2613 $ 0.4949
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. 0.0018 0.0896
-------- --------
Total from investment operations ........................................ $ 0.2631 $ 0.5845
-------- --------
Less distributions --
From net investment income ................................................ $(0.5589) $(0.5571)
From net realized gain on investments ..................................... -- --
-------- --------
Total distributions ..................................................... $(0.5589) $(0.5571)
-------- --------
Net asset value -- end of period ........................................... $ 8.6138 $ 8.9096
======== ========
Total return[dbldag] ....................................................... 2.97%++ 6.98%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses .................................................................. 0.50%+ 0.50%
Net investment income ..................................................... 5.91%+ 5.67%
Portfolio turnover ......................................................... --% 0%
Net assets at end of period (000 omitted) .................................. $ 3,466 $ 3,614
<CAPTION>
Zero Coupon Series, Portfolio 2000
------------------------------------------------------
Year Ended December 31,
------------------------------------------------------
1996 1995 1994 1993
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ................................. $ 9.0619 $ 7.9573 $ 11.1167 $11.0966
-------- --------- --------- --------
Income from investment operations# --
Net investment income[sec] ............................................ $ 0.2094 $ 0.4340 $ 0.3807 $ 0.6921
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ................................................ (0.0528) 1.1038 (1.1094) 0.8997
-------- --------- --------- --------
Total from investment operations .................................... $ 0.1566 $ 1.5378 $ (0.7287) $ 1.5918
-------- --------- --------- --------
Less distributions --
From net investment income ............................................ $(0.3363) $ (0.4332) $ (0.6250) $(0.8915)
From net realized gain on investments ................................. -- -- (1.8057) (0.6802)
-------- --------- --------- --------
Total distributions ................................................. $(0.3363) $ (0.4332) $ (2.4307) $(1.5717)
-------- --------- --------- --------
Net asset value -- end of period ....................................... $ 8.8822 $ 9.0619 $ 7.9573 $11.1167
======== ========= ========= ========
Total return[dbldag] ................................................... 1.91% 19.88% (6.99)% 15.03%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses .............................................................. 0.50% 0.50% 0.50% 0.50%
Net investment income ................................................. 5.20% 5.16% 4.93% 5.48%
Portfolio turnover ..................................................... 2% 27% 12% 65%
Net assets at end of period (000 omitted) .............................. $ 4,337 $ 4,616 $ 3,280 $ 3,547
</TABLE>
+Annualized.
++Not annualized.
#Per share data are based on average shares outstanding.
##For fiscal years ending after September 1, 1995, expenses are
calculated without the 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.
[sec]The investment adviser voluntarily agreed to maintain expenses of the
Zero Coupon Series, Portfolio 2000 at not more than 0.50% of average
daily net assets for the periods indicated.
To the extent actual expenses were over/under this limitation, the net
investment income per share and the ratios would have been:
<TABLE>
<CAPTION>
Six months ended Year Ended Year Ended
June 30, 1998 December 31, 1997 December 31, 1996
------------- ----------------- -----------------
<S> <C> <C> <C>
Net investment income .......... $0.2396 $0.4728 $0.2045
Ratios (to average net assets):
Expenses## .................... 0.99%+ 0.80% 0.62%
Net investment income ......... 5.42%+ 5.38% 5.08%
</TABLE>
See notes to financial statements
39
<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 twenty-six separate Series (the Series) of
shares: Bond Series*, Capital Appreciation Series, Capital Opportunities Series
(formerly known as Value Series), Conservative Growth Series, Emerging Growth
Series, Equity Income Series, Government Securities Series*, High Yield Series*,
International Growth Series, International Growth and Income Series*, Managed
Sectors Series, MFS[RegTM]/Foreign & Colonial Emerging Markets Equity Series*,
Money Market Series*, Massachusetts Investors Growth Stock Series, New Discovery
Series, Research Series, Research Growth and Income Series, Research
International Series, Strategic Income Series*, Total Return Series, Utilities
Series, World Asset Allocation(SM) Series*, World Governments Series*, World
Growth Series, World Total Return Series*, and Zero Coupon Series, Portfolio
2000*. The High Yield Series, Managed Sector Series, Strategic Income Series,
Utilities Series, World Asset Allocation(SM) Series, World Governments Series,
World Growth Series, and World Total Return Series are nondiversified as that
term is defined in the Investment Company Act of 1940, as amended. The shares of
each Series are sold only to variable accounts established by Sun Life Assurance
Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York
to fund benefits under variable annuity contracts issued by such companies.
The Series' denoted with an asterisk above are included within these financial
statements.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with 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 reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, forward contracts, and swap agreements,
are valued on the basis of valuations furnished by dealers or by a pricing
service with consideration to factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon exchange or over-the-counter prices. Short-term obligations, which
mature in 60 days or less, are valued at amortized cost, which approximates
market value. Money market instruments are valued at amortized cost, which the
Trustees have determined in good faith approximates 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 reported at market value using closing settlement prices.
Over-the-counter options on securities are valued by brokers. Over-the-counter
currency options are valued through the use of a pricing model which takes into
account foreign currency exchange spot and forward rates, implied volatility,
and short-term repurchase rates. 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 collateral 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 advisor
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the Series
under each such repurchase agreement. 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 call or put options in
exchange for a premium. The premium is initially recorded as a liability which
is subsequently adjusted to the current value of the options contract. When a
written option expires, the Series realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the premium
received is offset against the proceeds to determine the realized gain or loss.
When a written put option is exercised, the premium reduces the cost basis of
the security purchased by the Series. The Series, as writer of an option, may
have no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable change
in the price of the securities underlying the written option. In general,
written call options may serve as a partial hedge against decreases in value in
the underlying securities to the extent of the premium received. Written options
may also be used as part of an income producing strategy reflecting the view of
the Series' management on the direction of interest rates.
40
<PAGE>
Notes to Financial Statements -- continued
Futures Contracts - Certain Series of the Trust may enter into futures contracts
for the delayed delivery of securities or currency, or contracts based on
financial indices at a fixed price on a future date. In entering such contracts,
the Series is required to deposit with the broker, either in cash or securities
an amount equal to a certain percentage of the contract amount. Subsequent
payments are made or received by the Series each day, depending on the daily
fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Series. The Series'
investment in futures contracts is designed to hedge against anticipated future
changes in interest or exchange rates or securities prices. Investments in
interest rate futures for purposes other than hedging may be made to modify the
duration of the portfolio without incurring the additional transaction costs
involved in buying and selling the underlying securities. Investments in
currency futures for purposes other than hedging may be made to change the
Series' relative position in one or more currencies without buying and selling
portfolio assets. Investments in equity index contracts or contracts on related
options for purposes other than hedging may be made when the Series has cash on
hand and wishes to participate in anticipated market appreciation while the cash
is being invested. Should interest or exchange rates or securities prices move
unexpectedly, the Series may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
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
nonhedging purposes. For hedging purposes, the Series may enter into contracts
to deliver or receive foreign currency it will receive from or require for its
normal investment activities. The Series may also use contracts in a manner
intended to protect foreign currency-denominated securities from declines in
value due to unfavorable exchange rate movements. For nonhedging purposes, the
Series may enter into contracts with the intent of changing the relative
exposure of the Series' portfolio of securities to different currencies to take
advantage of anticipated changes. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded as unrealized until the contract settlement
date. On contractual settlement date, the gains or losses are recorded as
realized gains or losses on foreign currency transactions.
Swap Agreements - Certain Series of the Trust may enter into swap agreements. A
swap is an exchange of cash payments between a Series and another party which is
based on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual basis.
The value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation. Risks may arise upon entering into
these agreements from the potential inability of counterparties to meet the
terms of their contract and from unanticipated changes in the value of the
financial index on which the swap agreement is based. The Series uses swaps for
both hedging and non-hedging purposes. For hedging purposes, the Series may use
swaps to reduce its exposure to interest and foreign exchange rate fluctuations.
For non-hedging purposes, the Series may use swaps to take a position on
anticipated changes in the underlying financial index.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discount is amortized or accreted for financial statement and tax
reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Dividend and interest
payments received in additional securities are recorded on the ex-dividend or
ex-interest date in an amount equal to the value of the security on such date.
The High Yield Series can invest up to 100% of its portfolio in high-yield
securities rated below investment grade. Investments in high-yield securities
involve greater degrees of credit and market risk than investments in
higher-rated securities, and tend to be more sensitive to economic conditions.
Certain Series of the Trust use the effective interest method for reporting
interest income on payment-in-kind (PIK) bonds. 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 nonrecurring or 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 expensed.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage of
the Series' month end net assets. The fee is reduced according to an arrangement
that measures 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' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series' file tax
returns annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Series' tax returns. Foreign taxes have
been provided for on interest and dividend income earned on foreign investments
in accordance with the applicable country's tax rates and to the extent
unrecoverable, are recorded as a reduction of investment income.
The 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 tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains.
41
<PAGE>
Notes to Financial Statements -- continued
At December 31, 1997, the following Series had a capital loss carryforward for
federal income tax purposes which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration.
<TABLE>
<CAPTION>
Portion Expiring December 31,
--------------------------------------------
Total Carryover 1998 1999 2000
----------------- -------- -------- --------
<S> <C> <C> <C> <C>
Government Securities Series .......................... $11,390,846 $ -- $ -- $ --
High Yield Series ..................................... 2,859,465 -- -- --
MFS(R)/Foreign & Colonial Emerging Markets Equity
Series ............................................... 5,296 -- -- --
Money Market Series ................................... 1,285 -- -- --
World Government Series ............................... 1,073,573 -- -- --
Zero Coupon Series, Portfolio 2000 .................... 31,191 -- -- --
<CAPTION>
Portion Expiring December 31,
-------------------------------------------------------------
2001 2002 2003 2004 2005
-------- ------------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Government Securities Series .......................... $ -- $7,137,094 $78,697 $1,721,078 $2,453,977
High Yield Series ..................................... -- -- -- 701,562 2,157,903
MFS(R)/Foreign & Colonial Emerging Markets Equity
Series ............................................... -- -- -- 5,296 --
Money Market Series ................................... -- 755 -- 530 --
World Government Series ............................... -- -- -- -- 1,073,573
Zero Coupon Series, Portfolio 2000 .................... -- 6,954 20,451 3,786 --
</TABLE>
(3) Transactions with Affiliates
The Trust has an investment advisory agreement with Massachusetts Financial
Services Company (MFS), an indirect subsidiary of Sun Life Assurance Company of
Canada, 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 operating expenses and other expenses, exclusive of investment
advisory fees, 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 respectively, are as follows:
<TABLE>
<CAPTION>
Other
Investment Expenses
Advisory Fees Limitations
----------------------------------------------------------------------------------------------
<S> <C> <C>
Government Securities Series ................................ 0.55% 1.25%
High Yield Series ........................................... 0.75% 1.25%
International Growth and Income Series ...................... 0.975%* N/A
MFS(R)/Foreign & Colonial Emerging Markets Equity Series 1.25% N/A
Money Market Series ......................................... 0.50% 0.60%
World Asset Allocation(SM) Series ........................... 0.75%* N/A
World Governments Series .................................... 0.75%* 1.25%
World Total Return Series ................................... 0.75%* N/A
Zero Coupon Series, Portfolio 2000 .......................... 0.25% 1.25%
Bond Series ................................................. 0.60% 0.40%
Strategic Income Series ..................................... 0.75% 0.50%
</TABLE>
*The advisory fee for the World Asset Allocation(SM) Series, World Government
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
International Growth and Income Series is reduced to 0.925% of the average
daily net assets in excess of $500 million.
Under an expense limitation agreement, MFS has preliminarily assumed expenses
for the period ended June 30, 1998, amounting to $2,092, $5,592, and $8,149 for
the Bond Series, Strategic Income Series, and the Zero Coupon Series, Portfolio
2000.
Administrator - Each Series has an administrative services agreement with MFS to
provide the Series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Series pays MFS an administrative fee
at the following annual percentages of the Series' average daily net assets,
provided that the administrative fee is not assessed on Series assets that
exceed $3 billion:
<TABLE>
<S> <C>
First $1 billion................ 0.0150%
Next $1 billion................. 0.0125%
Next $1 billion................. 0.0100%
In excess of $3 billion......... 0.0000%
</TABLE>
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 renumeration for their services to the Trust from MFS or Sun Life
Assurance Company of Canada. Certain officers and Trustees of the Trust are
officers or directors of MFS or Sun Life Assurance Company of Canada.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations were as follows:
<TABLE>
<CAPTION>
Government
Securities High Yield
Bond Series Series Series
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases
U.S. government securities .................. $1,768,228 $274,962,974 $ --
========== ============ ============
Investments (non-U.S. government securities) $ 225,217 $ -- $274,964,837
========== ============ ============
Sales
U.S. government securities .................. $ 549,277 $232,088,345 $ --
========== ============ ============
Investments (non-U.S. government securities) $ 12,353 $ -- $211,153,446
========== ============ ============
<CAPTION>
MFS(R)/Foreign &
Colonial
International Emerging
Growth and Markets Equity Money Market
Income Series Series Series+
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases
U.S. government securities .................. $ -- $ -- $3,873,115,803
=========== =========== ==============
Investments (non-U.S. government securities) $25,842,615 $12,351,801 $1,058,626,297
=========== =========== ==============
Sales
U.S. government securities .................. $ -- $ -- $3,898,193,000
=========== =========== ==============
Investments (non-U.S. government securities) $16,289,313 $11,719,070 $1,024,585,000
=========== =========== ==============
</TABLE>
+Purchases and sales of investments for Money Market Series consist solely of
short-term obligations.
42
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
World Asset World Zero Coupon
Strategic Income Allocation(SM) Governments World Total Series,
Series Series Series Return Series Portfolio 2000
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Purchases
U.S. government securities ..................... $ 223,594 $30,926,826 $114,701,713 $28,550,823 $ --
========== =========== ============ =========== ========
Investments (non-U.S. government securities) ... $1,334,867 $86,516,226 $ 80,842,683 $44,389,815 $ --
========== =========== ============ =========== ========
Sales
U.S. government securities ..................... $ -- $19,564,976 $107,395,596 $21,986,579 $260,893
========== =========== ============ =========== ========
Investments (non-U.S. government securities) ... $ 618,145 $63,844,171 $ 94,755,563 $38,335,948 $ --
========== =========== ============ =========== ========
</TABLE>
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
<TABLE>
<CAPTION>
MFS(R)/Foreign &
Colonial
International Emerging
Government High Yield Growth and Markets Equity Money Market
Bond Series Securities Series Series Income Series Series Series
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Aggregate cost ............... $2,843,796 $414,166,128 $335,097,869 $ 62,411,399 $ 23,390,176 $356,862,606
========== ============ ============ ============ ============ ============
Gross unrealized appreciation $ 21,618 $ 13,526,674 $ 10,391,679 $ 12,600,257 $ 1,479,609 $ --
Gross unrealized depreciation $ (323) $ (966,987) $ (4,947,763) $ (2,366,692) $ (4,467,404) $ --
---------- ------------ ------------ ------------ ------------ ------------
Net unrealized appreciation
(depreciation) ............. $ 21,295 $ 12,559,687 $ 5,443,916 $ 10,233,565 $ (2,987,795) $ --
========== ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
World
World Asset World Total Zero Coupon
Strategic Income Allocation(SM) Governments Return Series,
Series Series Series Series Portfolio 2000
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Aggregate cost ..................... $1,509,803 $126,890,488 $99,131,639 $ 78,596,259 $3,330,390
========== ============ =========== ============ ==========
Gross unrealized appreciation ...... $ 4,468 $ 17,019,064 $ 612,325 $ 13,716,021 $ 130,093
Gross unrealized depreciation ...... $ (2,876) $ (7,067,695) $ (94,180) $ (1,153,093) $ --
---------- ------------ ----------- ------------ ----------
Net unrealized appreciation
(depreciation) ................... $ 1,592 $ 9,951,369 $ 518,145 $ 12,562,928 $ 130,093
========== ============ =========== ============ ==========
</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 periods ended June 30, 1998, and
December 31, 1997, are presented below.
<TABLE>
<CAPTION>
Bond Series
Period ended June 30,
1998***
---------------------------
<S> <C> <C>
Shares sold ............................................................ 262,446 $2,646,398
Shares issued to shareholders in reinvestment of distributions ......... -- --
Shares reacquired ...................................................... (7,616) (77,444)
------- ----------
Net increase .......................................................... 254,830 $2,568,954
======= ==========
</TABLE>
***For the period from commencement of Series' investment operations, May 6,
1998 through June 30, 1998.
<TABLE>
<CAPTION>
Government Securities Series
Period Ended Year ended
June 30, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ...................................................... 6,084,014 $ 79,935,961 6,269,218 $ 79,600,457
Shares issued to shareholders in reinvestment of distributions ... 1,852,375 23,191,736 2,083,486 25,293,515
Shares reacquired ................................................ (3,989,764) (52,173,959) (8,394,026) (106,557,412)
---------- -------------- ---------- -------------
Net increase (decrease) ......................................... 3,946,625 $ 50,953,738 (41,322) $ (1,663,440)
========== ============== ========== =============
</TABLE>
<TABLE>
<CAPTION>
High Yield Series
Period ended Year ended
June 30, 1998 December 31, 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................................................... 9,803,764 $ 96,906,021 19,435,303 $ 181,713,288
Shares issued to shareholders in reinvestment of distributions .. 2,105,706 20,130,545 1,705,882 15,079,993
Shares reacquired ............................................... (4,433,852) (43,998,550) (14,128,975) (131,893,857)
---------- ------------ ----------- -------------
Net increase ................................................... 7,475,618 $ 73,038,016 7,012,210 $ 64,899,424
========== ============ =========== =============
</TABLE>
43
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
International Growth and Income Series
Period ended Year ended
June 30, 1998 December 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................................................... 2,663,589 $ 33,142,560 2,177,646 $ 23,608,560
Shares issued to shareholders in reinvestment of distributions . 153,974 1,998,589 48,440 519,278
Shares reacquired .............................................. (1,752,591) (21,694,091) (989,238) (10,727,142)
---------- ------------ --------- ------------
Net increase .................................................. 1,064,972 $ 13,447,058 1,236,848 $ 13,400,696
========== ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
MFS(R)/Foreign & Colonial Emerging Markets Equity Series
Period ended Year ended
June 30, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................................................... 1,144,076 $ 12,037,810 2,597,554 $30,304,756
Shares issued to shareholders in reinvestment of distributions . 71,423 759,938 685 7,806
Shares reacquired .............................................. (1,068,049) (11,197,927) (734,171) (8,603,757)
---------- ------------ --------- -----------
Net increase .................................................. 147,450 $ 1,599,821 1,864,068 $21,708,805
========== ============ ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Money Market Series
Period ended Year ended
June 30, 1998 December 31, 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................................................... 342,487,869 $342,487,869 795,411,183 $ 795,411,183
Shares issued to shareholders in reinvestment of distributions . 8,933,979 8,933,979 19,348,059 19,348,059
Shares reacquired .............................................. (331,008,200) (331,008,200) (883,864,334) (883,864,334)
------------ ------------ ------------ -------------
Net increase (decrease) ....................................... 20,413,648 $ 20,413,648 (69,105,092) $ (69,105,092)
============ ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
Strategic Income Series
Period ended June 30, 1998***
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ............................................................ 143,259 $1,439,420
Shares issued to shareholders in reinvestment of distributions ......... -- --
Shares reacquired ...................................................... (5,629) (56,422)
------- ----------
Net increase .......................................................... 137,630 $1,382,998
======= ==========
</TABLE>
***For the period from commencement of Series' investment operations, May 6,
1998 through June 30, 1998.
<TABLE>
<CAPTION>
World Asset Allocation(SM) Series
Period ended Year ended
June 30, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................................................... 1,123,180 $17,146,487 3,321,881 $ 47,471,104
Shares issued to shareholders in reinvestment of distributions .. 627,288 9,459,505 345,266 4,768,120
Shares reacquired ............................................... (843,904) 12,819,307) (801,606) (11,485,960)
--------- ----------- --------- ------------
Net increase ................................................... 906,564 $13,786,685 2,865,541 $ 40,753,264
========= =========== ========= ============
</TABLE>
<TABLE>
<CAPTION>
World Governments Series
Period ended Year ended
June 30, 1998 December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ..................................................... 390,440 $ 4,225,617 943,520 $ 10,115,726
Shares issued to shareholders in reinvestment of distributions .. 119,653 1,288,659 477,929 5,018,251
Shares reacquired ............................................... (1,671,327) (18,082,346) (3,720,826) (39,962,015)
---------- ------------- ---------- ------------
Net decrease ................................................... (1,161,234) $ (12,568,070) (2,299,377) $(24,828,038)
========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
World Total Return Series
Period ended Year ended
June 30, 1998 December 31, 1997
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold .................................................... 1,161,923 $ 18,010,305 2,439,728 $ 33,780,337
Shares issued to shareholders in reinvestment of distributions . 255,010 3,937,348 95,674 1,281,077
Shares reacquired .............................................. (443,436) (6,945,828) (485,744) (6,851,705)
--------- ------------ --------- ------------
Net increase .................................................. 973,497 $ 15,001,825 2,049,658 $ 28,209,709
========= ============ ========= ============
</TABLE>
44
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Zero Coupon Series, Portfolio 2000
Period ended Year ended
June 30, 1998 December 31, 1997
-------------------------- -----------------------------
<S> <C> <C> <C> <C>
Shares sold ...................................................... 32,274 $ 281,743 288,656 $ 2,515,659
Shares issued to shareholders in reinvestment of distributions ... 24,952 212,590 27,424 230,910
Shares reacquired ................................................ (60,452) (534,997) (398,721) (3,490,848)
------- ---------- -------- ------------
Net decrease .................................................... (3,226) $ (40,664) (82,641) $ (744,279)
======= ========== ======== ============
</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 in
order to manage exposure to market risks such as interest rates and foreign
currency exchange rates. These financial instruments include written options,
forward foreign currency exchange contracts, futures contracts, and swap
agreements.
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 June 30, 1998, is shown below
and on the following pages.
<TABLE>
<CAPTION>
Written Option Transactions -- World Asset Allocation(SM) Series
- ----------------------------------------------------------------
1998 Calls 1998 Puts
----------------------------------- ----------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ------------- ------------------ -------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Canadian Dollar ............................... -- $ -- 16,608 $ 276,801
Deutsche Marks/British Pounds ................. 20,230 101,373 -- --
Japanese Yen .................................. 1,423,136 224,592 812,255 81,533
Swiss Francs/Deutsche Marks ................... 15,752 109,845 -- --
Options written --
Canadian Dollar ............................... -- -- 10,001 37,415
Deutsche Marks/British Pounds ................. -- -- 14,247 78,899
Japanese Yen .................................. -- -- 8,092,095 327,742
Japanese Yen/New Zealand Dollar ............... 929,511 292,133 -- --
Norwegian Krona/Deutsche Marks ................ -- -- 109,652 38,566
Options terminated in closing transactions --
Deutsche Marks/British Pounds ................. -- -- (14,247) (78,899)
Japanese Yen .................................. -- -- (812,255) (81,533)
Norwegian Krona/Deutsche Marks ................ -- -- (109,652) (38,566)
Swiss Francs/Deutsche Marks ................... (15,752) (109,845) -- --
Options expired --
Canadian Dollar ............................... -- -- (16,608) (276,801)
Deutsche Marks/British Pounds ................. (20,230) (101,373) -- --
Japanese Yen .................................. (1,423,136) (224,592) (5,462,090) (282,877)
---------- ----------
Outstanding, end of period ..................... $ 292,133 $ 82,280
========== ==========
Options outstanding at end of period consist of:
Canadian Dollar ............................... -- -- 10,001 37,415
Japanese Yen .................................. -- -- 2,630,005 44,865
Japanese Yen/New Zealand Dollar ............... 929,511 292,133 -- --
---------- ----------
Outstanding, end of period ..................... $ 292,133 $ 82,280
========== ==========
</TABLE>
At June 30, 1998, the World Asset Allocation(SM) Series had sufficient cash
and/or securities at least equal to the value of the written options.
45
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Written Option Transactions -- World Governments Series
- -------------------------------------------------------
1998 Calls 1998 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 .................................. 1,367,105 $ 215,750 -- $ --
Options written --
Canadian Dollars .............................. -- -- 7,287 27,260
Japanese Government Bonds ..................... 1,348,800 20,723 2,701,000 76,358
Japanese Yen/Deutsche Marks ................... 1,304,443 303,356 -- --
Options terminated in closing transactions --
Japanese Government Bonds ..................... (1,348,800) (20,723) (2,701,000) (76,358)
Options expired--
Japanese Yen .................................. (1,367,105) (215,750) -- --
---------- ---------
Outstanding, end of period ..................... $ 303,356 $ 27,260
========== =========
Options outstanding at end of period consist of:
Canadian Dollars .............................. -- $ -- 7,287 $ 27,260
Japanese Yen/Deutsche Marks ................... 1,304,443 303,356 -- --
---------- ---------
Outstanding, end of period ..................... $ 303,356 $ 27,260
========== =========
</TABLE>
At June 30, 1998, the World Governments Series had sufficient cash and/or
securities at least equal to the value of the written options.
<TABLE>
<CAPTION>
Written Option Transactions -- World Total Return Series
- --------------------------------------------------------
1998 Calls 1998 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 .................................. 311,538 $ 49,165 -- $ --
Options written --
Canadian Dollars .............................. -- -- 2,497 9,343
Japanese Yen .................................. 434,300 6,673 869,700 24,586
Japanese Yen/Deutsche Marks ................... 366,467 85,224 -- --
Options terminated in closing transactions --
Japanese Yen .................................. (745,838) (55,838) (869,700) (24,586)
--------- ----------
Outstanding, end of period ..................... $ 85,224 $ 9,343
========= ==========
Options outstanding at end of period consist of:
Canadian Dollars .............................. -- $ -- 2,497 $ 9,343
Japanese Yen/Deutsche Marks ................... 366,467 85,224 -- --
--------- ----------
Outstanding, end of period ..................... $ 85,224 $ 9,343
========= ==========
</TABLE>
At June 30, 1998, the World Total Return Series had sufficient cash and/or
securities at least equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
- -------------------------------------------
<TABLE>
<CAPTION>
Contracts to Contracts Net Unrealized
Series Transaction Settlement Date Deliver/Receive at Value In Exchange for Depreciation
- ----------------------- ------------- ----------------- --------------- ----------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
International Purchases 9/25/98 CAD 510,775 $348,140 $356,828 $(8,688)
=======
Growth & Income Series
</TABLE>
Forward foreign currency exchange contract purchases and sales under master
netting agreements excluded above for International Growth and Income Series
amounted to a net payable of $5,135 with Bankers Trust, and a net receivable of
$11,412 with Merrill Lynch and $2,649 with Swiss Bank Corporation
International.
46
<PAGE>
Notes to Financial Statements -- continued
Forward Foreign Currency Exchange Contracts
- -------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts at Appreciation
Series Transaction Settlement Date Deliver/Receive Value In Exchange For (Depreciation)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
World Asset Allocation(SM) Sales 9/25/98 FRF 19,082,357 $ 3,167,482 $ 3,225,005 $ 57,523
Series 5/03/99 HKD 55,000,000 6,820,118 6,919,980 99,862
9/25/98 ITL 2,316,926,941 1,304,237 1,325,853 21,616
9/25/98 JPY 3,246,253,743 23,786,209 24,929,953 1,143,744
9/25/98 NLG 15,020,986 7,413,895 7,555,828 141,933
----------- ----------- ----------
$42,491,941 $43,956,619 $1,464,678
=========== =========== ==========
- ---------------------------------------------------------------------------------------------------------------------------------
Purchases 9/25/98 CAD 11,844,277 $ 8,073,006 $ 8,082,073 $ (9,067)
5/03/99 HKD 55,000,000 6,820,118 6,729,954 90,164
9/25/98 HPY 2,022,483,910 14,819,305 15,531,881 (712,576)
----------- ----------- ----------
$29,712,429 $30,343,908 $ (631,479)
=========== =========== ==========
</TABLE>
Forward foreign currency exchange contract purchases and sales under master
netting arrangements excluded above for World Asset Allocation(SM) Series
amounted to a net payable of $184,124 with Bankers Trust, $310,603 with Deutsche
Bank, $398,034 with Merrill Lynch and a net receivable of $82,573 with First
Boston and $505,282 with Swiss Bank Corporation.
Forward Foreign Currency Exchange Contracts
- -------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Contracts to Contracts Appreciation
Series Transaction Settlement Date Deliver/Receive at Value In Exchange for (Depreciation)
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
World Governments Series Sales 9/25/98 CAD $ 7,897,842 $ 5,383,133 $ 5,371,037 $ (12,096)
9/25/98 JPY 2,626,546,460 19,245,440 19,694,062 448,622
----------- ----------- ------------
$24,628,573 $25,065,099 $ 436,526
----------- ----------- ------------
- ---------------------------------------------------------------------------------------------------------------------------------
Purchases 9/25/98 CAD 19,898,975 $13,563,051 $13,901,466 $ (338,415)
9/25/98 JPY 5,098,683,058 37,359,476 38,947,997 (1,588,521)
9/25/98 NLG 20,687 10,210 10,405 (195)
----------- ----------- ------------
$50,932,737 $52,859,868 $ (1,927,131)
----------- ----------- ------------
</TABLE>
Forward foreign currency exchange contract purchases and sales under master
netting arrangements excluded above for World Government Series amounted to a
net payable of $218,574 with Deutsche Bank, $529,140 with Merrill Lynch,
$386,152 with Swiss Bank, and a net receivable of $129,934 with Bankers Trust
and $248,000 with First Boston.
Forward Foreign Currency Exchange Contracts
- -------------------------------------------
<TABLE>
<CAPTION>
Contracts to Contracts Net Unrealized
Series Transaction Settlement Date Deliver/Receive at Value In Exchange for Depreciation
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
World Total Return Series Purchases 9/25/98 CAD 4,813,037 $ 3,280,543 $ 3,362,397 $ (81,854)
9/25/98 JPY 904,894,767 6,630,417 6,945,299 (314,882)
9/25/98 NLG 3,213,185 1,585,929 1,616,290 (30,361)
----------- ----------- ----------
$11,496,889 $11,923,986 $ (427,097)
=========== =========== ==========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above for World Total Return Series amounted to a net payable of
$21,112 with Bankers Trust, $79,597 with Deutsche Bank, $57,329 with Merrill
Lynch, $100,923 with Swiss Bank Corporation, and a net receivable of $23,121
with First Boston. Closed forward foreign currency exchange contracts excluded
above amount to a net payable of $91,621 with Goldman Sachs.
At June 30, 1998, each Series had sufficient cash and/or securities at least
equal to the value of the forward currency exchange contracts.
47
<PAGE>
Notes to Financial Statements -- continued
Index Swaps -- World Asset Allocation(SM) Series
- ------------------------------------------------
<TABLE>
<CAPTION>
Notional Principal Cash Flows Cash Flows Unrealized
Expiration Amount of Contracts Paid by the Trust Received by the Trust Depreciation
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/1/99 3,500,000 Lehman High Yield Index Floating--1M Libor $ (13,513)
</TABLE>
(7) Restricted Securities
Each Series of the Trust is restricted from investing more than a certain amount
of its net assets in securities which are subject to legal or contractual
restrictions on resale. Such restrictions range between 0% and 5% of the Series'
net assets. At June 30, 1998, the High Yield Series, MFS[RegTM]/Foreign &
Colonial Emerging Market Equity Series and World Asset Allocation(SM) Series
owned the following restricted securities (consisting of 0.37%, 0.19% and 4.19%
of the net assets of each series, respectively) which may not be publicly sold
without registration under the Securities Act of 1933. 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>
Date of Share
Series Description Acquisition Amount Cost Value
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High Yield Series Airplane Pass Through Trust, 10,875,2019 3/13/96 700,000 $ 700,000 $ 790,685
Atlantic Gulf Communities Corp. warrants 9/25/95 30 -- 62
NEXTEL International, Inc. warrants 3/7/97 850 2,144 1,062
Merrill Lynch Mortgage Investors, Inc. 6/22/97 500,000 346,563 483,828
8.1615,2022 ---------- ----------
MFS(R)/Foreign & Colonial Bank Handlowy w Warszawie $1,048,707 $1,275,637
Emerging Market Equity ========== ==========
Series 7/9/97 2,118 $ 26,267 $ 40,421
========== ==========
World Asset Allocation(SM) Series Hong Leong Finance Ltd.
Jarvis Hotels PLC
Cargill, COLT 11/1/96 159,000 $ 452,604 $ 130,452
7/2/96 119,000 301,997 341,406
8/29/97 5,500,000 5,820,375 5,373,655
---------- ----------
$6,574,976 $5,845,513
========== ==========
</TABLE>
(8) Line of Credit
The Trust and other affiliated funds participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Series shares. Interest is charged to each Series, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter.
48
<PAGE>
Independent Auditors' Report
To The Trustees and Contract Owners of MFS/Sun Life Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Bond Series, Government Securities Series,
High Yield Series, International Growth and Income Series, MFS[RegTM]/Foreign &
Colonial Emerging Markets Equity Series, Money Market Series, Strategic Income
Series, World Asset Allocation(SM) Series, World Government Series, World Total
Return Series and Zero Coupon Series, Portfolio 2000, (each a portfolio of
MFS/Sun Life Series Trust), as of June 30, 1998, the related statements of
operations for the six months then ended, the statements of changes in net
assets for the six months then ended and for the year ended December 31, 1997,
and the financial highlights for the six months then ended and each of the years
in the five years ended December 31, 1997. 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 June
30, 1998 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 June
30, 1998, 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
August 7, 1998
----------------------------------------------
This MFS(R)/Sun Life Series Trust Semiannual Report is prepared for the general
information of contract owners. It is authorized for distribution to prospective
investors only when preceded or accompanied by the current prospectus.
49
<PAGE>
MFS(R)/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 (attorneys), Boston, Massachusetts
DAVID D. HORN*, Trustee
Former Senior Vice President and General Manager,
Sun Life Assurance Company of Canada,
Boston, Massachusetts
GARTH MARSTON, Trustee
Former Chairman, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS, Trustee
Former Vice Chairman, The Gillette Company,
Marblehead, Massachusetts
WILLIAM R. GUTOW, Trustee
Vice Chairman, Capitol Entertainment Management Company;
Real Estate Consultant, Dallas, Texas
J. KERMIT BIRCHFIELD, Trustee
Consultant; Chairman, Display Technology, Inc. (Manufacturer of liquid-crystal
display technology); Managing Director, Century Partners, Inc. (investments),
Gloucester, Massachusetts
Officers+
JAMES R. BORDEWICK, JR., Assistant Secretary
MARK E. BRADLEY, Assistant Treasurer
STEPHEN E. CAVAN, Secretary and Clerk
W. THOMAS LONDON, Treasurer
ELLEN MOYNIHAN, Assistant Treasurer
JAMES O. YOST, Assistant Treasurer
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+
JEAN O. ALESSANDRO
JOHN W. BALLEN
ARNAB KUMAR BANERJI
JOHN F. BRENNAN, JR.
STEPHEN C. BRYANT
DAVID M. CALABRO
JAMES J. CALMAS
JEFFREY CHOWDHRY
MITCHELL D. DYNAN
KENNETH J. ENRIGHT
RICHARD O. HAWKINS
GEOFFREY L. KURINSKY
JOHN D. LAUPHEIMER, JR.
DAVID R. MANNHEIM
PAUL M. McMAHON
LESLIE J. NANBURG
KEVIN R. PARKE
BERNARD A. SCOZZAFAVA
MAURA A. SHAUGHNESSY
TONI Y. SHIMURA
FREDERICK J. SIMMONS
D. RICHARD SMITH
JAMES T. SWANSON
(on behalf of the MFS World
Asset Allocation Committee)
*Affiliated with the Sponsor.
+Affiliated with the Investment Adviser. SUN-3A 8/98 178.5M
