MFS(R)/Sun Life Series Trust
ANNUAL REPORT [bullet] December 31, 1997
Government Securities Series
High Yield Series
International Growth and
Income Series
(formerly MFS(R)/International
Growth and Income)
Money Market Series
World Asset Allocation Series
World Governments Series
World Total Return Series
Zero Coupon Series, 2000 Portfolio
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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MFS Mourns Chairman's Passing
It is with deep regret that we inform you of the death on February 2, 1998, of
A. Keith Brodkin, Chairman and Chief Executive Officer of MFS Investment
ManagementSM. Mr. Brodkin joined MFS in 1970 and made enormous contributions to
the organization, including helping to build the firm's investment staff, which
will continue to manage all of the MFS investment portfolios. His leadership,
friendship, and wise counsel will be sorely missed.
Dear Contract Owners:
Thanks to a sustained period of relative stability and moderate growth, the U.S.
economy has produced thousands of new jobs, inflation has remained under
control, and the investment climate has -- for the most part -- been favorable.
The increased use of technology and other productivity enhancements, as well as
corporate restructuring and global competition, is improving companies' balance
sheets and helping control inflation. The rapid pace of growth seen in the first
quarter slowed to an annual rate of 3.3% in the second quarter and 3.5% in the
third. We believe this economic momentum will carry well into the first quarter
of 1998, as long-term interest rates have declined and the money supply is
increasing at a rapid rate. While economic growth in the United States continues
to be impressive, this is being partially offset by events in the Pacific Rim.
Thus, markets will most likely continue to focus on activity by the Federal
Reserve Board (the Fed) and its response to both U.S. and world events.
Global Outlook
The second half of 1997 brought turmoil to the world's investment markets as
concerns about Asia mounted and as liquidity, which has been high for the past
few years, began to dry up. While markets in Europe, the United States, and even
Latin America performed reasonably well, the cumulative effect of large
current-account deficits, followed by the collapse of several large financial
institutions and corporations, created a situation in Asia that could remain
unstable for some time. Although the Asian crisis affected other emerging
markets, valuations in several of them have become more attractive, and we
believe the long-term case for emerging markets remains intact. In Europe, the
uncertainty over economic union appears to have diminished somewhat. Growth has
begun accelerating on the continent and may exceed U.S. growth in 1998.
Bond Markets
The U.S. government bond market has benefited from the deflationary events in
Asia, while the high-yield and emerging-debt markets have come under severe
pressure. Inflation remains under control, and the Fed will most likely take a
wait-and-see attitude toward raising interest rates. As a result, our near-term
outlook for high-grade markets is neutral to moderately positive. At the same
time, high-yield markets, having gone through a substantial correction, could
offer reasonable value but require careful selection. Overall, fixed-income
markets appear to be reasonably valued.
Stock Market
The extreme volatility seen in the U.S. equity market this fall was, we believe,
the consequence of overvaluations that had been evident for some months. As a
result, the stock market has been vulnerable to some type of correction and has
been impacted in the near term by chaotic market conditions in emerging markets
and the Pacific Rim. In the face of all this, however, the equity market
continues to exhibit surprising strength, much of it the result of continued
gains in corporate earnings, a trend that could be an important indicator of the
market's future direction. Certainly the situation throughout Asia bears close
scrutiny because it appears to be clearly deflationary and raises the prospect
of trade wars developing throughout the area. We are not convinced that U.S.
markets have escaped totally from October's volatility. Thus, not only is the
near-term outlook for profits under question due to the Asian crisis, we also
believe equity valuations have risen to a point where a cautious investment
approach seems warranted, with a need for particular attention to be paid to the
effect of Pacific Rim volatility on the earnings of U.S. companies.
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
January 12, 1998
Government Securities Series
For the year ended December 31, 1997, the Series provided a total return of
8.72%. This compares to a 9.54% return for the Lehman Brothers
Government/Mortgage Index (the Lehman Index), an unmanaged index of U.S.
Treasury, government-agency, and mortgage-backed securities. The portfolio is
currently positioned for stable interest rates over the near term. We have
reduced both the Series' overweighting in mortgage-backed securities and
positions that anticipate a flatter yield curve. Yield-curve positioning could
present future opportunities as the market assesses U.S. growth and the degree
of global liquidity needs.
The portfolio duration (a measure of interest-rate sensitivity) is currently
4.2%, versus a duration of 4.3% for the Lehman Index. Cash positions are usually
low and are currently at 4%. The portfolio is 45% invested in U.S. Treasuries,
with a market weighting across the yield curve. The portfolio also contains an
15% government-agency allocation, which is mostly invested in intermediate-term,
government-agency debentures and Small Business Association loans.
The greatest change in the portfolio has been the reduction in the holdings of
U.S. agency mortgage-backed pass-through certificates. Last year, mortgages
outperformed duration-equivalent Treasuries by over 1%. This year, as rates have
declined, the possibility of an increase in mortgage prepayments will limit the
return potential of this sector. The Series currently has a 36% position in
mortgage-backed securities, with an emphasis on lower-coupon issues and issues
with shorter 15-year stated final maturities.
High Yield Series
For the year ended December 31, 1997, the Series provided a total return of
13.24%. This compares to a 12.76% return for the Lehman Brothers High Yield Bond
Index, an unmanaged index of publicly issued, noninvestment-grade debt. The
Series' largest weighting was in the telecommunications industry, which posted
the best returns in the high-yield market. In this industry, we have focused on
the bonds of competitive local exchange carriers
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(CLECs), which offer an array of telephone services and compete primarily with
the Baby Bells for business customers. We favored this sector because we believe
deregulation provides CLECs with many growth opportunities. In addition, these
companies have experienced strong customer demand because their new fiber optic
networks offer reliable low-cost service. The Series also benefited from
consolidation in the telecommunications sector because some of its holdings,
including Brooks Fiber and Orion Network Systems, were acquired by
investment-grade companies.
Emerging-market corporate and sovereign bond prices have weakened in response to
the Asian currency crisis. The Series benefited from an underweighting in this
sector. In addition, we have reduced positions in domestic companies with
significant export exposure to Asia. While we will look for investment
opportunities in this area as bond prices decline, we do not expect this sector
to be a significant component of the portfolio.
Given the high-yield market's strength over the past year, the Series'
performance was hindered by its overweighted position in defensive industries
such as consumer products. Going forward, we will continue to favor
higher-quality companies and avoid more speculative situations, given our
outlook for slower economic growth resulting from Asia's economic problems.
The past year was a robust one for the high-yield market. High-yield bonds were
once again one of the best-performing fixed-income asset classes, and new
issuance hit a record $119 billion, surpassing the previous record by $47
billion. The domestic economy continues to exhibit sound fundamentals and,
therefore, we expect the high-yield market's healthy performance to carry
through into 1998. At year-end, for example, the yield on the Salomon Brothers
High-Yield Bond Index, an unmanaged index of noninvestment-grade corporate
bonds, was 9.20%, compared to 5.73% for U.S. Treasury notes of comparable
maturity. (Principal value and interest on Treasury securities are guaranteed by
the U.S. government if held to maturity.) We believe that this spread of 3.47%
more than compensates investors for the credit risks associated with high-yield
bonds. We are excited about the prospects for the high-yield market in 1998 and,
as always, our investment process will be committed to developing rewarding
ideas through rigorous credit research.
International Growth and Income Series
(formerly MFS(R)/International Growth and Income)
For the year ended December 31, 1997, the Series provided a total return of
6.53%. This compares to a 7.27% return for the unmanaged Lipper International
Funds Index (the Lipper International Funds Index is an unmanaged,
net-asset-value-weighted index of the largest qualifying mutual funds within its
respective investment objectives, and is adjusted for the reinvestment of
capital gain distributions and income dividends. It is not possible to invest
directly in an index.) and to a 0.53% return for a blend (70% and 30%,
respectively) of the Morgan Stanley Capital International (MSCI) Europe,
Australia, Far East (EAFE) Index and the J.P. Morgan Global Government Bond
Index (the Morgan Index). The MSCI EAFE Index is an unmanaged index of
international stocks, while the Morgan Index is an unmanaged index of bonds
issued by 13 countries, excluding the United States, with remaining maturities
of at least one year.
Significant changes occurred in the portfolio in the last six months of 1997.
First of all, the Series is now almost entirely invested in equities. Second,
the Series is much more concentrated, with the top five sectors now accounting
for about 59% of assets, nearly double the level of six months ago. Consumer
staples and utilities and communications constitute the largest sectors, with
14% and 13.6% of assets, respectively. They are followed by financial services
at 12.2%, energy at 10.1%, and retailing at 8.6%. The top 10 holdings now
account for 25% of assets, versus 13% six months ago. These tend to be large
companies with steady growth.
Another important change was the reduction of our Japanese and other Far East
holdings, a move that, fortunately, took place before the recent wave of
selling. Holdings in Europe, meanwhile, have been increased, with the United
Kingdom the single largest market, at 23% of the portfolio. Emerging markets
represent just 3% of the portfolio. The Series has less emphasis on cyclical
stocks and more on steady growth stocks, a position that we believe should be
beneficial in the uncertain period ahead.
The Series is run on a bottom-up basis; that is, we approach each stock as a
potential purchase candidate, as opposed to a top-down approach that develops an
overview of broad economies and markets, then follows through with stock
selection. In fact, both approaches use a little of each method, but the
difference in emphasis is important, and we believe in the long-term benefits of
our approach. We do not expect such a major transformation of the portfolio to
be repeated any time soon.
Money Market Series
For the year ended December 31, 1997, the Series provided a total return of
5.06%. Interest rates on short-term (30 days and less) debt instruments rose
approximately 40 basis points (0.40%) over the past 12 months. The Fed raised
short-term interest rates on March 25, 1997, by 25 basis points (0.25%), from
5.25% to 5.50%. The federal funds' rate remained at 5.50% for the rest of 1997.
Because of this, we maintained average maturities between 40 and 45 days.
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 an effort to
provide maximum security against credit risk. (Principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to maturity.)
At the present time, approximately 62% of the portfolio is invested in U.S.
government or government-guaranteed issues, and the balance is invested in
corporate and bank issues. We expect short-term rates to be stable to slightly
lower over the next several months. The Series is neither insured nor guaranteed
by the U.S. government, and there can be no assurance that it will be able to
maintain a stable net asset value.
World Asset Allocation Series
For the year ended December 31, 1997, the Series provided a total return of
10.87%. This compares to 12-month returns for the following unmanaged indices:
33.36% for the Standard & Poor's 500 Composite Index (the S&P 500), a popular
index of common stock total return performance; 1.99% for the MSCI EAFE Index;
9.66% 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 6.35% for the J.P. Morgan Non-Dollar Government
Bond Index, an index of international bonds.
We still feel that the U.S. equity market is overvalued and, thus, have
maintained an underweighted position in U.S. stocks. Because the worldwide
markets have shown more week-to-week volatility in recent months, we have
pursued a more tactical allocation approach, changing weightings more quickly in
the wake
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of market turbulence, and then returning to our original weightings. This
occurred just recently with U.S stocks, as we doubled our 10% allocation in
October after the market downdraft and then returned to our original 10%
weighting in December. We have also made this type of tactical move with
emerging-market debt and with the U.S. bond market. Currently, 48% of the Series
is allocated to international stocks, 7% to U.S. stocks, 3% to high-yield U.S.
bonds, 4% to a commodity-linked note, and 24% to cash.
World Governments Series
For the year ended December 31, 1997, the Series provided a total return of
- -0.76%. This compares to a 0.24% return for the Salomon Brothers World
Government Bond Index, an unmanaged index of complete universes of government
bonds with remaining maturities of at least five years. The dominant event for
world bond markets in 1997 occurred late in October with the economic crisis in
Southeast Asia. The sudden collapse in places such as Thailand, South Korea, and
Hong Kong resulted in severe devaluations of their currency, bond, and stock
markets. One of the more noticeable global effects during this period has been
stronger bond markets in most developed countries, especially in the United
States, as capital has sought a flight to quality in both the U.S.
currency and bond markets.
By the end of 1997, all bond markets in the Salomon Index had registered
positive returns in local currency terms. The better performers were the United
Kingdom, Italy, Australia, and Ireland, all of which helped the portfolio's
performance. The laggards were primarily the core European countries such as
Germany, the Netherlands, and France. Looking forward specifically to the
European countries, we see little opportunity for further yield convergence
prior to European monetary union and, therefore, the higher yielders that have
performed so well over the past 18 months should begin to perform more in line
with Germany.
During the year, the portfolio's nominal returns were significantly helped by
the strong bond markets. However, weaker currencies in Europe and Japan,
relative to the U.S. dollar, detracted from these positive returns. Relative to
the Salomon Index, the portfolio benefited by being overweighted in the
better-performing markets such as Italy and Australia.
The Asian crisis has created concern that global growth will slow sharply in
1998 and has reinforced the market's confidence that inflation will remain low,
if not decline. There is little doubt that the recovery process in Asia will be
slow and painful, but the magnitude of its impact on the rest of the world
remains to be seen. We believe slower global growth and lower inflation will
support core markets such as the United States and Germany and provide the
opportunity for further price appreciation if the downturn is more severe than
the market currently believes. Since most developed bond markets have done so
well over the past seven months, further sustainable downward pressure on
interest rates will now have to come through monetary stimulus from one or all
three of the primary central banks (the United States, Germany, and Japan),
which we feel will not occur in the near future.
Regarding the foreign exchange markets, over the long term we remain
constructive on the U.S. dollar versus both the Japanese yen and the German
mark. The U.S. currency should continue to be supported by higher interest rates
and a stronger economy than either Japan's or Germany's. In addition, we would
look for the Australian dollar, and especially the Canadian dollar, to rebound
from their low 1997 levels.
World Total Return Series
For the year ended December 31, 1997, the Series provided a total return of
13.61%. 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 10.33% 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.
While the equity portion of the Series outperformed the MSCI World Index, it was
not a good year for bonds relative to stocks. One reason for the equity
portion's outperformance was that we generally avoided trouble areas such as the
Far East and were underweighted in Japan. Another reason for equity
outperformance was our significant position in pharmaceutical companies,
particularly those in the United States, which were outstanding performers.
Unfortunately, the bond portion of the Series, which accounts for about 40% of
assets, significantly underperformed comparative indices. Because of economic
uncertainties in several overseas economies, it just was not a good year for
foreign bonds.
Among regions, the Series was heavily weighted in Europe, particularly in some
of the smaller countries such as the Netherlands and Sweden. These countries
tend to spawn successful international companies, some of which have been very
attractive investments during the past 12 to 24 months. In Sweden, for example,
Astra has been a successful investment, while Ericsson, a telecommunications
company, Scandia, an insurance company, and Hennes & Maritz, a clothing
retailer, have also done well. We've actually sold the latter stock because its
price has surpassed our target level. In the Netherlands, IHC Caland, a company
that makes systems for oil dredging and shipping equipment, has also performed
well.
Although the pharmaceutical companies have done very well, and while some of
them have been sold because their prices went up so much, they still make up a
significant weighting for the Series. In the United States, this sector includes
companies like Eli Lilly, Schering Plough, and Bristol-Myers Squibb. It also
includes Japanese, Swedish, Swiss, and French drug companies, all of them
multinational.
The Series also has significant holdings in financial services and utilities and
communications. In many parts of the world, the biggest stocks are utilities and
bank and insurance companies. They tend to provide income. Also, in
faster-growing economies, utilities, which include telephone companies, are
growing at rates that are much more favorable than those in the United States.
There are very few U.S. utilities in the portfolio.
In the United Kingdom, the share has moved from 11% of Series assets to 14%. The
transition to the Labor government has been as smooth as one could hope for, and
a number of companies are performing well. One is British Aerospace, which may
benefit from the consolidation of the aerospace industry in Europe, as well as
from consolidation in the United States. Other companies of note include Lloyd's
Group, an innovative, consumer-driven bank, and Tomkins, a well-run conglomerate
that does not seem to be sufficiently appreciated by investors.
In the bond portion of the Series, we have focused on specific themes fairly
consistently, including the convergence of yields leading up to European
currency union. We have concentrated holdings in higher-yielding markets such as
Italy, Spain, Sweden,
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Denmark and, more recently, the United Kingdom, all of which have outperformed
core markets like Germany. Another theme has been the disinflationary,
slow-growth environment in Japan. While many investors have shunned the low
yields on Japanese bonds, these declining yields have provided and continue to
provide capital gains. In the dollar-bloc countries, we continue to emphasize
the higher-yielding markets of Australia, Canada, and New Zealand, all of which
have outperformed the U.S. market. Although we were mistaken in shortening our
portfolio duration, or sensitivity to changes in interest rates, during the
first half of the year, the duration has been increased since the summer,
helping the Series benefit from the subsequent decline in yields.
Zero Coupon Series, 2000 Portfolio
The total return for the Series was 6.98% for the year ended December 31, 1997,
as intermediate-term U.S. Treasury notes moved lower during the period, with
yields on three-year Treasuries ranging from 6.25% to 5.75%. 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.)
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Performance Summary
The information below and on the following pages illustrates the growth of a
hypothetical $10,000 investment for each Series during the period indicated.
Past performance is no guarantee of future results. These results do not reflect
the deduction of separate account charges. For returns that reflect the
deduction of separate account charges, please refer to the annual report for the
product being offered.
Government Securities Series
For the 10-year period ended December 31, 1997
[TABULAR REPRESENTATION OF LINE GRAPH]
[Line Chart Begin]
Government Lehman Brothers Consumer Price
Date Securities Series Govt./Mortgage Index Index--U.S.
- -------- ----------------- -------------------- --------------
12/31/87 10,000 10,000 10,000
12/31/89 12,139 12,329 10,924
12/31/91 15,311 15,576 11,946
12/31/93 17,778 18,236 12,631
12/31/95 20,454 20,893 13,289
12/31/97 22,603 23,728 14,034
[Line Chart End]
Average Annual Total Returns
as of December 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government Securities Series +8.72% + 9.15% +6.69% +8.50%
Consumer Price Index*+ +2.15% + 2.67% +2.69% +3.45%
Lehman Brothers Govt/Mortgage Index** +9.54% +10.19% +7.29% +9.02%
</TABLE>
*Source: CDA/Wiesenberger.
**Source: AIM.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
High Yield Series
For the 10-year period ended December 31, 1997
[TABULAR REPRESENTATION OF LINE GRAPH]
[Line Chart Begin]
Lehman Brothers Lehman Brothers
High Yield Consumer Price Corporate High Yield
Date Series Index--U.S. Bond Index Bond Index
- -------- ---------- -------------- --------------- ---------------
12/31/87 10,000 9,997 10,000 10,000
12/31/89 12,794 10,921 12,462 11,347
12/31/91 16,197 11,943 15,809 14,997
12/31/93 21,916 12,627 19,272 20,330
12/31/95 25,073 13,285 22,632 23,979
12/31/97 31,834 14,030 25,768 30,109
[Line Chart End]
Average Annual Total Returns
as of December 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Yield Series +13.24% +14.08% +11.32% +10.95%
Lehman Brothers Corp. Bond Index* + 8.36% +10.26% + 7.72% + 9.16%
Lehman Brothers High Yield Bond Index** +12.76% +14.38% +11.64% +11.65%
Consumer Price Index*+ + 2.15% + 2.67% + 2.69% + 3.45%
</TABLE>
*Source: CDA/Wiesenberger.
**Source: Lipper Analytical Services, Inc.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
5
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Performance Summary -- continued
International Growth and Income Series
For the period from October 1, 1995, through
December 31, 1997
[TABULAR REPRESENTATION OF LINE GRAPH]
[Line Chart Begin]
70% MSCI EAFE/
International 30% J.P. Morgan
Growth and Global Bond Lipper International
Date Income Series Index Funds Index
- ----- ------------- --------------- --------------------
10/95 10,000 10,000 10,104
12/95 10,130 10,549 10,643
6/96 10,570 10,861 10,919
12/96 10,620 11,197 11,917
6/97 11,252 11,954 13,992
12/97 11,313 11,257 12,762
[Line Chart End]
Average Annual Total Returns
as of December 31, 1997
1 Year Life of Series*
- -------------------------------------------------------------------------
International Growth and Income Series +6.53% + 5.64%
Lipper International Funds Index** +7.27% +10.81%
70% MSCI EAFE/
30% J.P. Morgan Global Bond Index+ +0.53% + 5.49%
*For the period from the commencement of the Series' investment operations,
October 2, 1995, through December 31, 1997.
**Source: Lipper Analytical Services, Inc.
+Source: AIM.
World Asset Allocation Series
For the period from December 1, 1994, through
December 31, 1997
[TABULAR REPRESENTATION OF LINE GRAPH]
<TABLE>
<CAPTION>
J.P. Morgan Lehman
World Asset S&P 500 Global Consumer Brothers MSCI
Allocation Composite Govt. Bond Price Aggregate EAFE
Date Series Index Index Index--U.S. Index Index
- -------- ----------- --------- ----------- ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
11/01/94 10,000 10,000 10,000 10,000 10,000 10,000
12/31/94 10,060 9,779 9,798 10,013 10,047 9,579
12/31/95 12,228 13,454 11,868 10,261 11,903 10,653
12/31/96 14,190 16,542 12,501 10,609 12,335 11,297
12/31/97 15,732 22,061 12,029 10,836 13,526 11,521
</TABLE>
Average Annual Total Returns
as of December 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Year Life of Series*
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
World Asset Allocation Series +10.87% +16.07% +15.47%
J.P. Morgan Global Govt. Bond Index+ - 3.77% + 8.10% + 6.01%
Lehman Brothers Aggregate Bond Index** + 9.66% +10.42% +10.06%
MSCI EAFE Index** + 1.99% + 6.35% + 4.60%
Standard & Poor's 500 Composite Index** +33.36% +31.15% +28.55%
Consumer Price Index#** + 2.15% + 2.67% + 2.58%
</TABLE>
*For the period from the commencement of the Series' investment operations,
November 7, 1994, through December 31, 1997.
**Source: CDA/Wiesenberger.
+Source: AIM.
#The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
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Performance Summary -- continued
World Governments Series
For the period from June 1, 1988, through
December 31, 1997
[TABULAR REPRESENTATION OF LINE GRAPH]
[Line Chart Begin]
Salomon
World Consumer Brothers J.P. Morgan
Governments Price World Govt. Global Govt.
Date Series Index--U.S. Bond Index Bond Index
- -------- ----------- ----------- ---------- ------------
06/01/88 10,000 10,000 10,000 9,911
12/31/89 11,442 10,732 10,818 11,139
12/31/91 14,896 11,736 14,034 14,373
12/31/93 17,798 12,408 16,779 16,870
12/31/95 19,672 13,055 20,436 20,386
12/31/97 20,432 13,787 21,229 21,582
[Line Chart End]
Average Annual Total Returns
as of December 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Life of Series*
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
World Governments Series -0.76% +6.31% +6.41% +7.68%
J.P. Morgan Global Government
Bond Index+ +1.40% +8.10% +7.51% +8.36%
Salomon Brothers World Government
Bond Index** +0.24% +7.34% +7.47% +8.02%
Consumer Price Index#** +2.15% +2.67% +2.69% +3.43%
</TABLE>
*For the period from the commencement of the Series' investment operations, May
16, 1988, through December 31, 1997.
+Source: AIM.
#The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
**Source: CDA/Wiesenberger.
World Total Return Series
For the period from December 1, 1994, through
December 31, 1997
[TABULAR REPRESENTATION OF LINE GRAPH]
[Line Chart Begin]
60% MSCI World Index/
World Consumer 40% J.P. Morgan
Total Return Price Global Govt.
Date Series Index--U.S. Bond Index
- -------- ------------ ----------- ---------------------
12/01/94 10,000 10,000 10,000
12/31/94 10,029 10,000 10,069
12/31/95 11,824 10,247 11,580
12/31/96 13,519 10,595 13,376
12/31/97 15,359 10,822 14,758
[Line Chart End]
Average Annual Total Returns
as of December 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Years Life of Series*
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
World Total Return Series +13.61% +15.26% +14.63%
60% MSCI World Index/
40% J.P. Morgan Global Govt Bond Index+ +10.33% +13.59% +11.96%
Consumer Price Index#** + 2.15% + 2.67% + 2.58%
</TABLE>
*For the period from the commencement of the Series' investment operations,
November 7, 1994, through December 31, 1997.
#The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
**Source: CDA/Wiesenberger.
+Source: AIM.
7
<PAGE>
Performance Summary -- continued
Zero Coupon Series, 2000 Portfolio
For the 10-year period ended December 31, 1997
[TABULAR REPRESENTATION OF LINE GRAPH]
[Line Chart Begin]
Zero Coupon Series, Consumer Price Merrill Lynch 7-10 Year
Date 2000 Portfolio Index--U.S. Treasury Index
- -------- ------------------- -------------- -----------------------
12/31/87 10,000 10,000 10,000
12/31/89 14,061 10,924 12,461
12/31/91 17,952 11,946 15,855
12/31/93 22,341 12,631 19,261
12/31/95 24,910 13,289 22,356
12/31/97 27,158 14,034 25,036
[Line Chart End]
Average Annual Total Returns
as of December 31, 1997
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Zero Coupon Series, 2000 Portfolio + 6.98% + 9.33% +6.94% +10.12%
Merrill Lynch 7-10 Year Treasury Index* +10.48% +11.27% +7.94% + 9.61%
Consumer Price Index+* + 2.15% + 2.67% +2.69% + 3.45%
</TABLE>
**Source: CDA/Wiesenberger.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
8
<PAGE>
Portfolio of Investments -- December 31, 1997
Government Securities Series
Bonds -- 95.4%
Principal Amount
Issuer (000 Omitted) Value
U.S. Government Guaranteed -- 62.6%
U.S. Treasury Obligations -- 44.6%
U.S. Treasury Notes, 5.75s, 2000 .......... $23,000 $ 23,028,750
U.S. Treasury Notes, 6.125s, 2007 ......... 13,490 13,863,133
U.S. Treasury Notes, 6.5s,
2002 - 2006 ............................. 48,450 50,198,756
U.S. Treasury Notes, 6.625s,
2002 - 2007 ............................. 28,656 29,846,818
U.S. Treasury Notes, 6.75s,
1999 - 2000 ............................. 15,250 15,546,473
U.S. Treasury Notes, 8s, 2001 ............. 10,600 11,323,768
U.S. Treasury Bonds, 8s, 2021 ............. 3,657 4,559,255
U.S. Treasury Notes, 8.875s, 1999 ......... 4,500 4,655,385
U.S. Treasury Bonds, 9.875s,
2015### ................................. 13,945 19,847,640
------------
$172,869,978
------------
Government National Mortgage
Association -- 16.2%
GNMA, 6.5s, 2024 .......................... $ 23 $ 22,616
GNMA, 7s, 2008 - 2027 ..................... 14,652 14,849,766
GNMA, 7.5s, 2009 - 2024 ................... 46,866 48,032,138
GNMA, 12.25s, 2015 ........................ 8 9,695
------------
$ 62,914,215
------------
Small Business
Administration -- 1.8%
SBA, 8.2s, 2005 ........................... $ 1,216 $ 1,258,879
SBA, 8.4s, 2007 ........................... 543 573,072
SBA, 8.7s, 2009 ........................... 3,312 3,576,344
SBA, 9.05s, 2009 .......................... 536 580,559
SBA, 9.65s, 2007 .......................... 334 361,420
SBA, 10.05s, 2009 ......................... 727 810,191
------------
$ 7,160,465
------------
Total U.S. Government Guaranteed ............................ $242,944,658
------------
U.S. Federal Agencies -- 32.8%
Aid to Israel, 5.625s, 2003 ............... $ 2,000 $ 1,975,260
Federal Home Loan Mortgage
Corp., 6.5s, 2027 ....................... 5,602 5,125,511
Federal Home Loan Mortgage
Corp., 6.72s, 2027 ...................... 10,279 10,391,043
Federal Home Loan Mortgage
Corp., 7.5s, 2001 - 2027 ................ 13,794 14,087,829
Federal Home Loan Mortgage
Corp., 8s, 2005 ......................... 6,478 6,546,975
Federal National Mortgage Assn.,
6.5s, 2012 .............................. 5,169 5,175,937
Principal Amount
Issuer (000 Omitted) Value
U.S. Federal Agencies -- continued
Federal National Mortgage Assn.,
6.97s, 2020 ............................. $ 586 $ 592,077
Federal National Mortgage Assn.,
7s, 2027 ................................ 6,391 6,372,970
Federal National Mortgage Assn.,
7.27s, 2005 ............................. 6,068 6,261,566
Federal National Mortgage Assn.,
7.5s, 2000 .............................. 5,444 5,497,617
Federal National Mortgage Assn.,
8s, 2005 - 2023 ......................... 20,311 12,200,451
Federal National Mortgage Assn.,
8.25s, 2001 ............................. 3,913 4,072,449
Financing Corp., 9.4s, 2018 ............... 4,845 6,573,308
Financing Corp., 9.8s, 2018 ............... 5,600 7,839,104
Resolution Funding Corp.,
8.875s, 2020 ............................ 6,000 7,927,500
Tennessee Valley Authority,
0s, 2042 ................................ 12,500 5,272,875
U.S. Department of Housing &
Urban Development, 6.83s, 2003 .......... 8,025 8,319,919
U.S. Department of Housing &
Urban Development, 6.92s, 2004 .......... 4,525 4,732,290
U.S. Department of Veterans Affairs,
7.5s, 2009 .............................. 6,812 7,150,471
U.S. Department of Veterans Affairs,
7.75s, 2014 ............................. 1,000 1,025,620
------------
Total U.S. Federal Agencies................................. $127,140,772
------------
Total Bonds (Identified Cost, $359,077,646)................. $370,085,430
------------
Repurchase Agreement -- 3.6%
Goldman Sachs, dated 12/31/97,
due 1/2/98, total to be received
$13,919,024 (secured by various
U.S. Treasury and Federal
Agency obligations in a jointly
traded account), at cost ................ $13,914 $ 13,914,000
------------
Total Investments
(Identified Cost, $372,991,646)............................. $383,999,430
Other Assets,
Less Liabilities -- 1.0%....................................... 3,732,456
-----------
Net Assets -- 100.0%.......................................... $387,731,886
============
See portfolio footnotes and notes to financial statements
9 - GSS
<PAGE>
Portfolio of Investments -- December 31, 1997
High Yield Series
Bonds -- 90.7%
Principal Amount
Issuer (000 Omitted) Value
U.S. Bonds -- 82.4%
Aerospace -- 2.6%
Airplane Pass-Through Trust,
10.875s, 2019 ........................... $ 700 $ 787,514
BE Aerospace, Inc., 9.875s, 2006 .......... 1,150 1,213,250
K & F Industries, Inc., 9.25s,
2007## .................................. 1,800 1,845,000
MOOG, Inc., 10s, 2006 ..................... 2,475 2,722,500
Wyman Gordon Co., 8s, 2007 ................ 500 511,250
------------
$ 7,079,514
------------
Building -- 1.4%
Building Materials Corp., 8s, 2007## $1,750 $ 1,715,000
Building Materials Corp., 8.625s,
2006 .................................... 400 413,000
Nortek, Inc., 9.25s, 2007 ................. 825 835,312
Nortek, Inc., 9.875s, 2004 ................ 775 792,438
UDC Homes, Inc., Trust, 14.5s,
2000 .................................... 7 3,644
------------
$ 3,759,394
------------
Business Services -- 1.6%
Iron Mountain, Inc., 10.125s, 2006 ........ $2,400 $ 2,640,000
Pierce Leahy Corp., 9.125s, 2007 .......... 675 702,000
Pierce Leahy Corp., 11.125s, 2006 ......... 943 1,065,590
------------
$ 4,407,590
------------
Chemicals -- 1.1%
Harris Chemical North America,
Inc., 10.25s, 2001 ...................... $1,100 $ 1,155,000
NL Industries, Inc., 11.75s, 2003 ......... 1,455 1,607,775
Sterling Chemicals, Inc., 11.25s,
2007 .................................... 175 175,000
------------
$ 2,937,775
------------
Coal -- 0.3%
AEI Holdings, Inc., 10s, 2007## ........... $ 675 $ 695,250
------------
Computer Software --
Systems -- 0.2%
Anacomp, Inc., 10.875s, 2004 .............. $ 675 $ 691,875
------------
Consumer Goods and
Services -- 4.0%
AAF-McQuay, Inc., 8.875s, 2003 ............ $1,125 $ 1,115,156
American Safety Razor Co.,
9.875s, 2005 ............................ 1,000 1,073,750
E & S Holdings Corp., 10.375s,
2006 .................................... 3,325 3,025,750
Kindercare Learning Centers, Inc.,
9.5s, 2009 .............................. 1,775 1,766,125
Reeves Industries, Inc., 11s, 2002** ...... 580 430,650
Remington Products Co. LLC, 11s,
2006 .................................... 475 400,188
Westpoint Stevens, Inc., 9.375s,
2005 .................................... 3,050 3,202,500
------------
$ 11,014,119
------------
Containers -- 3.8%
Gaylord Container Corp., 9.75s,
2007 .................................... $3,700 $ 3,570,500
Plastic Specialty & Technology
Corp., 11.25s, 2003 ..................... 140 149,800
Silgan Holdings, Inc., 9s, 2009 ........... 3,000 3,067,500
Stone Container Corp., 9.875s, 2001 ....... 2,750 2,756,875
U.S. Can Corp., 10.125s, 2006 ............. 1,000 1,057,500
------------
$ 10,602,175
------------
Corporate Asset Backed -- 0.2%
Merrill Lynch Mortgage Investors,
Inc., 8.171s, 2022+ ..................... $ 500 $ 477,578
------------
Principal Amount
Issuer (000 Omitted) Value
Defense Electronics -- 0.9%
L3 Communications Corp., 10.375s,
2007 ........................................ $ 625 $ 675,000
Stellex Industries, Inc., 9.5s, 2007## ........ 775 782,750
United Defense Industries, Inc.,
8.75s, 2007## ............................... 1,140 1,147,125
------------
$ 2,604,875
------------
Electronics -- 0.3%
Clark-Schwebel, Inc., 10.5s, 2006 ............. $ 800 $ 872,000
------------
Entertainment -- 2.1%
AMC Entertainment, Inc., 9.5s, 2009 ........... $2,050 $ 2,101,250
Cinemark USA, Inc., 9.625s, 2008 .............. 1,400 1,445,500
Hollywood Theaters, Inc., 10.625s,
2007## ...................................... 400 425,000
HorseShoe Gaming LLC, 9.375s,
2007 ........................................ 425 447,313
Plitt Theatres, Inc., 10.875s, 2004 ........... 1,200 1,297,500
------------
$ 5,716,563
------------
Food and Beverage Products -- 2.7%
Coca-Cola Bottling Group, Inc.,
9s, 2003 .................................... $ 250 $ 255,625
Delta Beverage Group, Inc., 9.75s,
2003 ........................................ 1,025 1,081,375
Friendly Ice Cream Corp., 10.5s,
2007## ...................................... 1,050 1,060,500
Keebler Corp., 10.75s, 2006 ................... 700 789,250
PMI Acquisition Corp., 10.25s, 2003 ........... 1,250 1,331,250
Specialty Foods Corp., 10.25s, 2001 ........... 1,550 1,526,750
Texas Bottling Group, Inc., 9s, 2003 .......... 1,250 1,287,500
------------
$ 7,332,250
------------
Forest and Paper Products -- 3.5%
Atlantis Group, Inc., 11s, 2003 ............... $ 900 $ 913,500
Calmar, Inc., 11.5s, 2005 ..................... 1,800 1,908,000
Florida Coast Paper Co. LLC,
12.75s, 2003 ................................ 1,225 1,298,500
Pacific Lumber Co., 10.5s, 2003 ............... 1,400 1,449,000
Speciality Paperboard, Inc., 9.375s,
2006 ........................................ 1,800 1,867,500
U.S. Timberlands, 9.625s, 2007 ................ 2,140 2,225,600
------------
$ 9,662,100
------------
Industrial -- 5.5%
Argo-Tech Corp., 8.625s, 2007## ............... $1,250 $ 1,246,875
Delco Remy International, Inc.,
8.625s, 2007 ................................ 600 606,750
Exide Corp., 10s, 2005 ........................ 2,300 2,438,000
Hayes Wheels International, Inc.,
9.125s, 2007 ................................ 1,200 1,242,000
Hayes Wheels International, Inc.,
11s, 2006 ................................... 1,050 1,170,750
Lear Corp., 9.5s, 2006 ........................ 2,750 3,025,000
Mark IV Industries, Inc., 7.5s, 2007 .......... 1,250 1,239,625
Oxford Automotive, Inc., 10.125s,
2007 ........................................ 1,350 1,414,125
Titan Wheel International, Inc.,
8.75s, 2007 ................................. 150 156,750
Venture Holdings Trust, 9.75s, 2004 ........... 975 970,125
Williams Scotsman, Inc., 9.875s,
2007 ........................................ 1,650 1,699,500
------------
$ 15,209,500
------------
Machinery -- 0.3%
AGCO Corp., 8.5s, 2006 ........................ $ 800 $ 818,000
------------
10 - HYS
<PAGE>
Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Media -- 4.9%
Albritton Communications Co.,
9.75s, 2007 ........................... $1,675 $ 1,712,687
Cablevision Systems Corp., 8.125s,
2009 .................................. 1,900 1,957,000
Charter Communications Southeast
LP, 11.25s, 2006 ...................... 1,420 1,562,000
Comcast Corp., 10.625s, 2012 ............ 200 247,714
Falcon Holdings Group, Inc., 11s,
2003# ................................. 2,274 2,450,554
Granite Broadcasting Corp.,
10.375s, 2005 ......................... 2,050 2,147,375
Intermedia Communications, Inc.,
0s to 2002, 11.125s to 2007 ........... 200 145,500
Intermedia Communications, Inc.,
8.875s, 2007## ........................ 800 822,000
Jones Intercable, Inc., 8.875s, 2007 1,000 1,045,000
Lenfest Communications, Inc.,
10.5s, 2006 ........................... 1,095 1,218,188
Marvel Holdings, Inc., 0s, 1998** ....... 1,165 46,600
------------
$ 13,354,618
------------
Medical and Health Technology
and Services -- 3.8%
Beverly Enterprises, Inc., 9s, 2006 ..... $2,550 $ 2,636,062
Physician Sales & Service, Inc.,
8.5s, 2007## .......................... 1,000 1,027,500
Quorum Health Group, Inc., 8.75s,
2005 .................................. 1,500 1,548,750
Tenet Healthcare Corp., 8s, 2005 ........ 3,550 3,612,125
Tenet Healthcare Corp., 8.625s,
2007 .................................. 550 567,875
Vencor, Inc., 8.625s, 2007 .............. 1,200 1,197,000
------------
$ 10,589,312
------------
Metals and Minerals -- 2.0%
Haynes International, Inc., 11.625s,
2004 .................................. $1,700 $ 1,938,000
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 .......................... 1,400 1,449,000
Kaiser Aluminum & Chemical Corp.,
10.875s, 2006 ......................... 400 434,000
Renco Metals, Inc., 11.5s, 2003 ......... 1,440 1,526,400
Wheeling Pittsburgh Corp., 9.25s,
2007## ................................ 275 265,375
------------
$ 5,612,775
------------
Oils -- 2.9%
AmeriGas Partners LP, 10.125s,
2007 .................................. $1,600 $ 1,736,000
Clark USA, Inc., 10.875s, 2005 .......... 1,740 1,894,425
Cross Timbers Oil Co., 8.75s, 2009 ...... 1,650 1,683,000
Giant Industries, Inc., 9s, 2007## ...... 1,005 997,462
Giant Industries, Inc., 9.75s, 2003 ..... 280 286,300
Petsec Energy, Inc., 9.5s, 2007 ......... 1,250 1,282,813
------------
$ 7,880,000
------------
Printing and Publishing -- 1.2%
Big Flower Press Holdings, Inc.,
8.875s, 2007## ........................ $ 975 $ 982,313
Day International Group, Inc.,
11.125s, 2005 ......................... 900 990,000
Golden Books Publishing, Inc.,
7.65s, 2002 ........................... 625 593,750
Transwestern Publishing Co. LP,
9.625s, 2007## ........................ 700 728,000
------------
$ 3,294,063
------------
Principal Amount
Issuer (000 Omitted) Value
Restaurants and Lodging -- 5.8%
Boyd Gaming Corp., 9.5s, 2007 ........... $2,600 $ 2,723,500
Casino America, Inc., 12.5s, 2003 ....... 1,025 1,112,125
Coast Hotels & Casinos, Inc., 13s,
2002 .................................. 600 678,000
Eldorado Resorts LLC, 10.5s, 2006 ....... 1,700 1,853,000
Grand Casinos, Inc., 9s, 2004## ......... 800 804,000
Grand Casinos, Inc., 10.125s, 2003 ...... 2,055 2,219,400
Griffin Gaming & Entertainment,
Inc., 0s, 2000 ........................ 300 309,750
Harveys Casinos Resorts, 10.625s,
2006 .................................. 650 706,062
Prime Hospitality Corp., 9.75s, 2007 .... 2,700 2,889,000
Red Roof Inns, Inc., 9.625s, 2003 ....... 1,700 1,759,500
Sam Houston Race Park Ltd., 11s,
2001** ................................ 187 93,658
Santa Fe Hotel, Inc., 11s, 2000 ......... 1,045 927,437
------------
$ 16,075,432
------------
Retail -- 1.6%
Finlay Fine Jewelry Corp., 10.625s,
2003 .................................. $1,750 $ 1,837,500
J. Crew Operating Corp., 10.375s,
2007## ................................ 575 500,250
Parisian, Inc., 9.875s, 2003 ............ 1,900 2,033,000
------------
$ 4,370,750
------------
Special Products and
Services -- 4.7%
Buckeye Cellulose Corp., 8.5s, 2005 ..... $1,850 $ 1,891,625
IMO Industries, Inc., 11.75s, 2006 ...... 1,585 1,751,425
Interlake Corp., 12s, 2001 .............. 2,175 2,381,625
Interlake Corp., 12.125s, 2002 .......... 350 367,500
International Knife & Saw, Inc.,
11.375s, 2006 ......................... 1,000 1,082,500
Polymer Group, Inc., 9s, 2007 ........... 2,550 2,543,625
Synthetic Industries, Inc., 9.25s, 2007 1,850 1,942,500
Thermadyne Industries Holdings
Corp., 10.25s, 2002 ................... 139 143,865
Thermadyne Industries Holdings
Corp., 10.75s, 2003 ................... 800 844,000
------------
$ 12,948,665
------------
Steel -- 3.8%
Alaska Steel Holdings Corp.,
9.125s, 2006 .......................... $1,525 $ 1,559,312
Armco, Inc., 9s, 2007 ................... 1,200 1,176,000
Commonwealth Aluminum Corp.,
10.75s, 2006 .......................... 2,450 2,646,000
Envirosource, Inc., 9.75s, 2003## ....... 650 658,938
GS Technologies Operating, Inc.,
12.25s, 2005 .......................... 700 784,000
Keystone Consolidated Industries,
Inc., 9.625s, 2007## .................. 670 683,400
Republic Engineered Steels, Inc.,
9.875s, 2001 .......................... 635 603,250
WCI Steel, Inc., 10s, 2004 .............. 2,400 2,454,000
------------
$ 10,564,900
------------
Stores -- 1.7%
Affinity Group Holding, Inc., 11s,
2007 .................................. $1,000 $ 1,045,000
Cole National Group, Inc., 8.625s,
2007## ................................ 2,400 2,400,000
Cole National Group, Inc., 9.875s,
2006 .................................. 500 532,500
Proffitts, Inc., 8.125s, 2004 ........... 650 671,125
------------
$ 4,648,625
------------
11 - HYS
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Supermarkets -- 1.3%
Jitney-Jungle Stores of America,
Inc., 12s, 2006 .......................$1,100 $ 1,248,500
Marsh Supermarkets, Inc., 8.875s,
2007 .................................. 575 577,875
Pathmark Stores, Inc., 9.625s, 2003 150 138,000
Ralph's Grocery Co., 10.45s, 2004 ....... 850 960,500
Ralph's Grocery Co., 11s, 2005 .......... 475 540,250
------------
$ 3,465,125
------------
Telecommunications -- 17.8%
Acme Television LLC, 0s to 2000,
10.875s to 2004## .....................$1,150 $ 842,375
Century Communications Corp.,
8.375s, 2007 .......................... 1,000 985,000
Chancellor Media Corp., 8.75s, 2007 1,025 1,042,938
Comcast Cellular Holdings, Inc.,
9.5s, 2007 ............................ 1,170 1,216,800
Crown Castle International Corp., 0s
to 2002, 10.625s to 2007## ............ 1,150 721,625
Digital Television Services LLC,
12.5s, 2007## ......................... 1,450 1,624,000
EchoStar Communications Corp., 0s
to 1999, 12.875s to 2004 .............. 700 640,500
EchoStar Satellite Broadcasting
Corp., 0s to 2000, 13.125s to
2004 .................................. 2,325 1,929,750
Esat Holdings Ltd., 0s to 2002,
12.5s to 2007 ......................... 550 390,500
Fox/Liberty Networks LLC, Inc.,
8.875s, 2007## ........................ 1,750 1,745,625
FrontierVision Holdings LP, 0s to
2001, 11.875s to 2007 ................. 1,550 1,147,000
GCI, Inc., 9.75s, 2007 .................. 925 955,063
GlobalStar LP / Capital, 11.375s,
2004 .................................. 1,300 1,309,750
GST USA, Inc., 0s to 2000, 13.875s
to 2005 ............................... 285 219,450
Hollinger International Publishing,
Inc., 9.25s, 2007 ..................... 2,300 2,415,000
ICG Holdings, Inc., 0s to 2001, 12.5
to 2006 ............................... 2,875 2,170,625
Intermedia Capital Partners IV, LP,
11.25s, 2006 .......................... 1,375 1,519,375
ITC Deltacom, Inc., 11s, 2007 ........... 1,050 1,147,125
Knology Holdings, Inc., 0s to 2002,
11.875s to 2007## ..................... 53 280,875
McCaw International Ltd., 0s to
2002, 13s to 2007 ..................... 850 493,000
Metrocall, Inc., 9.75s, 2007## .......... 25 24,500
Mobile Telecommunication
Technologies Corp., 13.5s, 2002 ....... 950 1,102,000
NEXTEL Communications, Inc., 0s
to 2002, 9.75s to 2007## .............. 2,285 1,402,419
NEXTEL Communications, Inc., 0s
to 1999, 9.75s to 2004 ................ 1,835 1,633,150
Nextlink Communications, Inc.,
9.625s, 2007 .......................... 1,225 1,264,812
Orion Network Systems, Inc., 0s to
2002, 12.5s to 2007 ................... 950 684,000
Orion Network Systems, Inc.,
11.25s, 2007 .......................... 1,000 1,133,750
Outdoor Systems, Inc., 8.875s,
2007 .................................. 1,500 1,567,500
Paging Network, Inc., 8.875s, 2006 ...... 40 39,200
Perry-Judds, Inc., 10.625s, 2007## ...... 500 520,000
Principal Amount
Issuer (000 Omitted) Value
Telecommunications -- continued
Qwest Communications
International, Inc., 0s to 2002,
9.47s to 2007## .......................$1,200 $ 819,000
Qwest Communications
International, Inc., 10.875s, 2007 .... 950 1,080,625
RCN Corp., 0s to 2002, 11.125s to
2007## ................................ 2,750 1,725,625
Sprint Spectrum LP, 0s to 2001,
12.5s to 2006 ......................... 2,650 2,053,750
Sprint Spectrum LP, 11s, 2006 ........... 950 1,066,375
Star Choice Communications, Inc.,
13s, 2005 ............................. 1,150 1,184,500
Sygnet Wireless, Inc., 11.5s, 2006 ...... 1,250 1,325,000
T/SF Communications Corp.,
10.375s, 2007## ....................... 125 123,750
Teleport Communications Group,
Inc., 0s to 2001, 11.125s to 2007 ..... 1,850 1,507,750
Teleport Communications Group,
Inc., 9.875s, 2006 .................... 900 1,015,875
Telesystem International Wireless,
Inc., 0s to 2002, 10.5s to 2007## 1,025 568,875
Telesystem International Wireless,
Inc., 0s to 2002, 13.25s to
2007## ................................ 1,625 1,027,812
Teletrac Holdings, Inc., 14s, 2007 ...... 800 760,000
Western Wireless Corp., 10.5s, 2007 ..... 1,375 1,485,000
Young Broadcasting, Inc., 8.75s,
2007 .................................. 1,000 990,000
------------
$ 48,901,644
------------
Transportation -- 0.1%
Moran Transportation Co., 11.75s,
2004 ..................................$ 300 $ 335,250
------------
Utilities -- Electric -- 0.4%
CalEnergy, Inc., 7.63s, 2007 ............$ 500 $ 504,610
El Paso Electric Co., 8.9s, 2006 ........ 500 546,705
------------
$ 1,051,315
------------
Total U.S. Bonds.......................................... $226,973,032
------------
Foreign Bonds -- 8.2%
Brazil -- 0.1%
Voto-Votorantim Overseas Trust,
8.5s, 2005 ............................$ 580 $ 530,700
------------
Canada -- 3.2%
Acetex, Inc., 9.75s, 2003
(Chemicals) ...........................$ 875 $ 905,625
CHC Helicopter Corp., 11.5s, 2002
(Aerospace) ........................... 550 584,375
Hurricane Hydrocarbons, 11.75s,
2004 (Oils)## ......................... 250 237,500
Metronet Communications Corp., 0s
to 2002, 10.75s to 2007
(Telecommunications)## ................ 1,300 793,000
Metronet Communications Corp., 12s,
2007 (Telecommunications)## ........... 650 747,500
PCI Chemicals Canada, Inc., 9.25s,
2007 (Chemicals)## .................... 1,200 1,194,000
Repap New Brunswick, Inc.,
10.625s, 2005 (Forest and Paper
Products) ............................. 2,075 1,971,250
Rogers Cablesystems, Inc., 9.625s,
2002 (Telecommunications) ............. 250 265,625
Rogers Cablesystems, Inc., 10.125s,
2012 (Telecommunications) ............. 2,030 2,212,700
------------
$ 8,911,575
------------
12 - HYS
<PAGE>
Foreign Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Indonesia -- 0.9%
Indah Kiat Finance Mauritius Ltd.,
10s, 2007 (Forest and Paper
Products)## ...........................$ 2,825 $ 2,401,250
------------
Luxembourg -- 0.5%
Millicom International Cellular
Communications Corp., 0s to
2001, 13.25s to 2006
(Telecommunications) ..................$ 1,660 $ 1,220,100
------------
Poland -- 0.1%
PTC International Finance BV, 0s to
2002, 10.75s to 2007
(Information, Paging and
Technology)## .........................$ 525 $ 336,000
------------
United Kingdom -- 3.4%
Bell Cablemedia PLC, 0s to 2000,
11.875s to 2005
(Telecommunications) ..................$ 1,000 $ 886,120
Colt Telecommunications Group
PLC, 0s to 2001, 12s to 2006
(Telecommunications) .................. 3,150 2,464,875
Dialog Corp. PLC, 11s, 2007
(Telecommunications)## ................ 650 677,625
Diamond Cable Communications
Corp. PLC, 0s to 2000, 11.75s to
2005 (Media) .......................... 150 116,625
Diamond Cable Communications
Corp. PLC, 0s to 2002, 10.75s to
2007 (Media) .......................... 1,950 1,350,375
Esprit Telecom Group PLC, 11.5s,
2007 (Telecommunications)## ........... 150 154,500
Newsquest Capital PLC, 11s, 2006
(Printing and Publishing) ............. 825 926,063
Telewest PLC, 9.625s, 2006
(Telecommunications) .................. 1,475 1,556,125
Videotron Holdings PLC, 0s to 2000,
11s to 2005 (Telecommunications) ...... 1,350 1,194,061
------------
$ 9,326,369
------------
Total Foreign Bonds ....................................... $ 22,725,994
------------
Total Bonds
(Identified Cost, $242,490,851) ......................... $249,699,026
------------
Stocks -- 0.1% Shares
Apparel and Textiles -- 0.1%
Ithaca Industries, Inc.* ................ 60,000 $ 202,500
------------
Building
Atlantic Gulf Communities Corp.+* ....... 30 $ 135
------------
Consumer Goods and Services
Ranger Industries, Inc.* ................ 8,952 $ 6,159
------------
Restaurants and Lodging
SHRP Equity, Inc.* ...................... 45 $ --
------------
Telecommunications
NEXTEL Communications, Inc.* ............ 2,246 $ 58,396
------------
Total Stocks
(Identified Cost, $1,141,831) ............................ $ 267,190
------------
Convertible Preferred Stock -- 0.2%
Issuer Shares Value
ICG Funding LLC, 6.75%
(Telecommunications)##*
(Identified Cost, $400,000)............ 8,000 $ 440,000
------------
Preferred Stock -- 3.8%
Consumer Goods
and Services -- 0.1%
Renaissance Cosmetics, Inc., 14s#........ 793 $ 396,500
------------
Entertainment -- 1.1%
Time Warner, Inc., 10.25s ............... 2,597 $ 2,934,610
------------
Oils -- 0.3%
Clark USA, Inc., 11.5s##* ............... 650 $ 689,000
------------
Printing and Publishing -- 0.8%
Primedia, Inc., 11.625s* ................ 15,715 $ 1,677,572
Primedia, Inc., 10s* .................... 4,000 417,000
------------
$ 2,094,572
------------
Telecommunications -- 1.5%
American Communications Services
12.75s*## ............................. 450 $ 453,375
Cablevision Systems Corp. 11.125s*....... 15,059 1,739,314
Chancellor Media Corp. 12s* ............. 10,588 1,185,856
Hyperion Telecommunications, 12.875s .... 600 604,500
NEXTEL Communications, Inc., 13s##* ..... 206 234,840
------------
$ 4,217,885
------------
Total Preferred Stock
(Identified Cost, $8,822,236) ....................... $ 10,332,567
------------
Warrants -- 0.1%
Atlantic Gulf Communities Corp.
(Building)* ........................... 2 $ --
Crystal Oil Co., $0.10 (Oil & Gas)*...... 36,780 --
Crystal Oil Co., $0.125 (Oil & Gas)*..... 36,779 --
Esat Holdings Ltd.
(Telecommunications)* ................. 550 19,250
Globalstar Telecommunications
(Telecommunications)##* ............... 1,300 132,600
ICO, Inc. (Telecommunications)* ......... 25,000 16,500
McCaw International Ltd.
(Telecommunication)* .................. 850 1,062
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
Teletrac Holdings, Inc.
(Telecommunications) * ................ 800 44,000
------------
Total Warrants
(Identified Cost, $216,964) ......................... $ 245,419
------------
Short-Term Obligations -- 3.3%
Principal Amount
(000 Omitted)
Federal Home Loan Bank, due 1/21/98 .... $1,800 $ 1,794,500
Federal Home Loan Mortgage
Corp., due 1/02/98-1/09/98 ........... 7,375 7,372,297
------------
Total Short-Term Obligations,
at Amortized Cost .............................. $ 9,166,797
------------
Total Investments
(Identified Cost, $262,238,678) ................ $270,150,999
Other Assets,
Less Liabilities -- 1.8% ............................ 5,055,992
------------
Net Assets -- 100.0% ............................. $275,206,991
============
See portfolio footnotes and notes to financial statements
13 - HYS
<PAGE>
Portfolio of Investments -- December 31, 1997
International Growth & Income Series
Stocks -- 96.0%
Issuer Shares Value
Australia -- 6.4%
Australia & New Zealand Banking
Group (Banks and Credit Cos.) ....... 96,920 $ 640,274
Fosters Brewing Group
(Beverages) ......................... 424,800 808,131
QBE Insurance Group Ltd.
(Insurance) ......................... 286,350 1,288,550
Seven Network Ltd. (Entertainment)..... 151,300 548,060
------------
$ 3,285,015
------------
Austria -- 0.4%
Austria Tabak AG (Tobacco)* ........... 4,700 $ 208,409
------------
Brazil -- 2.0%
Companhia Cervejaria Brahma,
ADR (Beverages) ..................... 16,960 $ 240,620
Hunter Douglas NV, ADR
(Consumer Goods and Services)*....... 13,380 468,941
Unibanco Uniao De Barncos, ADR
(Banks and Credit Cos.)* ............ 9,480 305,137
------------
$ 1,014,698
------------
Canada -- 3.6%
Canadian National Railway Co.
(Railroads) ......................... 24,930 $ 1,177,942
Westcoast Energy Inc.
(Utilities - Gas) ................... 29,800 685,400
------------
$ 1,863,342
------------
Chile -- 0.4%
Enersis S.A., ADR
(Utilities - Electric) .............. 7,260 $ 210,540
------------
Finland -- 0.7%
Huhtamaki Oy Group
(Conglomerate) ...................... 8,300 $ 343,158
------------
France -- 10.0%
Chargeurs S.A. (Apparels and
Textiles) ........................... 7,120 $ 426,064
Elf Aquitaine S.A. (Oils) ............. 3,200 372,340
Pin Printemps Redo (Consumer
Goods and Services) ................. 1,990 1,062,149
Sanofi (Medical and Health
Products) ........................... 5,750 640,376
Total S.A., ADR (Oils) ................ 16,890 937,395
TV Francaise (Broadcasting) ........... 9,320 952,759
Union des Assurances Federale
S.A. (Insurance) .................... 5,550 728,807
------------
$ 5,119,890
------------
Germany -- 6.5%
adidas AG (Apparel and Textiles) ...... 7,220 $ 950,613
Henkel KGaa (Chemicals) ............... 17,300 1,092,682
Prosieben Media AG
(Entertainment)* .................... 7,080 330,952
Volkswagen AG (Automotive) ............ 800 450,529
Wella AG (Cosmetics) .................. 680 516,527
------------
$ 3,341,303
------------
Greece -- 0.8%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................ 19,240 $ 394,757
------------
Hong Kong -- 1.4%
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) .............. 107,000 $ 406,679
Wharf Holdings Ltd. (Real Estate) ..... 50,000 109,698
Wing Hang Bank Ltd. (Banks and
Credit Cos.) ........................ 76,000 214,803
------------
$ 731,180
------------
Issuer Shares Value
Italy -- 4.6%
Eni S.P.A, ADR (Oils) ................. 7,400 $ 422,263
Instituto Nazionale delle
Assicurazioni (Insurance) ........... 278,630 565,142
Telecom Italia S.P.A.
(Telecommunications)* ............... 145,400 641,652
Telecom Italia S.P.A., Saving Shares
(Telecommunications) ................ 255,200 726,255
------------
$ 2,355,312
------------
Japan -- 11.8%
Canon, Inc. (Office Equipment) ........ 45,000 $ 1,051,822
Eisai Co. Ltd. (Pharmaceuticals) ...... 16,000 244,810
Fuji Photo Film Co. (Photographic
Products) ........................... 5,000 192,219
Kirin Beverage Corp. (Beverages) ...... 55,000 913,425
Nippon Broadcasting
(Broadcasting) ...................... 8,000 317,392
Osaka Sanso Kogyo Ltd.
(Chemicals) ......................... 56,000 60,280
Rohm Co. (Electronics) ................ 6,000 613,563
Sony Corp. (Electronics) .............. 11,500 1,025,681
Takeda Chemical Industries
(Pharmaceuticals) ................... 35,000 1,001,076
Terumo Corp. (Pharmaceuticals) ........ 21,000 310,011
Tokyo Broadcasting System, Inc.
(Broadcasting) ...................... 13,000 164,924
Ushio, Inc. (Electronics) ............. 25,000 167,038
------------
$ 6,062,241
------------
Mexico -- 0.5%
TV Azteca, S.A. de C.V., ADR
(Broadcasting)* ..................... 10,820 $ 244,126
------------
Netherlands -- 8.6%
Akzo Nobel NV (Chemicals) ............. 4,260 $ 735,164
Benckiser NV (Consumer Goods
and Services)* ...................... 6,800 281,627
IHC Caland NV (Transportation)* ....... 13,550 703,653
Koninklijke Ahold NV, ADR
(Food/Retail) ....................... 22,570 589,641
Koninklijke Ten Cate (Diversified
Operations)* ........................ 8,500 267,277
Philips Electronics NV
(Manufacturing) ..................... 6,840 410,576
Royal Dutch Petroleum Co., ADR
(Oils) .............................. 18,920 1,025,228
Wolters Kluwer NV (Publishing) ........ 3,150 407,239
------------
$ 4,420,405
------------
Peru -- 0.7%
Telefonica del Peru S.A., ADR
(Telecommunications) ................ 14,700 $ 342,694
------------
Portugal -- 1.7%
Banco Totta E Acores (Banks and
Credit Cos.) ........................ 15,200 $ 298,791
Telecel - Comunicacaoes Pessoais
S.A. (Telecommunications)* .......... 5,480 584,514
------------
$ 883,305
------------
Singapore -- 0.6%
Singapore Press Holdings Ltd.
(Publishing) ........................ 23,000 $ 288,869
------------
South Korea -- 0.1%
Korea Electric Power Corp.
(Utilities - Electric) .............. 8,100 $ 75,027
------------
14 - IGI
<PAGE>
Stocks -- continued
Issuer Shares Value
Spain -- 4.6%
Iberdrola SA (Utilities - Electric) ... 81,440 $ 1,073,552
Aceralia Corp Side (Iron and
Steel)* ............................. 5,200 63,932
Acerinox S.A. (Iron and Steel) ........ 3,040 451,103
Repsol S.A. (Oils) .................... 18,500 790,598
-----------
$ 2,379,185
-----------
Sweden -- 4.3%
Astra AB (Pharmaceuticals) ............ 47,200 $ 794,603
Skandia Forsakrings AB
(Insurance) ......................... 17,830 842,035
Telefonaktiebolaget LM Ericsson
(Telecommunications) ................ 15,720 586,552
-----------
$ 2,223,190
-----------
Switzerland -- 3.1%
Ciba Specialty AG (Chemicals)* ........ 4,820 $ 575,187
Novartis AG (Pharmaceuticals) ......... 627 1,019,128
-----------
$ 1,594,315
-----------
United Kingdom -- 23.2%
ASDA Group PLC (Supermarkets) .........312,800 $ 921,621
Avis Europe PLC (Auto Rental)## .......200,630 574,263
Bank Of Scotland (Banks and Credit
Cos.) ............................... 58,930 536,077
Booker PLC (Food-Wholesale) ........... 59,750 314,524
British Aerospace PLC (Aerospace
and Defense) ........................ 55,980 1,597,711
British Petroleum PLC, ADR (Oils) ..... 15,500 1,235,156
Compass Group PLC
(Food - Catering)## ................. 85,050 1,047,905
Diageo PLC (Diversifie
Operations) ......................... 62,500 572,665
Kwik-Fit Holdings PLC (Automotive
Repair Centers) .....................151,330 878,750
Lloyds TSB Group PLC (Banks and
Credit Cos.) ........................ 43,910 572,120
Lucas Varity (Diversified
Operations) .........................173,800 614,687
PowerGen PLC (Utilities - Electric) ... 89,820 1,170,210
Tomkins PLC (Diversified
Operations) .........................286,250 1,356,138
Williams Holdings (Diversified
Operations) ......................... 98,460 547,447
-----------
$11,939,274
-----------
Total Stocks
(Identified Cost, $47,934,339) ......................... $49,320,235
-----------
Warrants
Eaux (Cie General) (Utilities - Water)
(France)*, (Identified Cost, $0).......2,160 $ 1,468
-----------
Short-Term Obligations -- 5.7%
Principal Amount
(000 Omitted)
Federal Home Loan Mortgage
Corp., due 1/02/98, at Amortized
Cost ........................... $2,910 $ 2,909,616
-----------
Total Investments
(Identified Cost, $50,843,955)............... $52,231,319
Other Assets,
Less Liabilities -- (1.7)% ...................... (863,216)
-----------
Net Assets -- 100.0% .......................... $51,368,103
===========
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1997
Money Market Series
Commercial Paper -- 37.8%
Principal Amount
Issuer (000 Omitted) Value
Associates Corp. of North America,
due 1/22/98 ......................... $ 7,000 $ 6,976,725
AT&T Corp., due 2/23/98 - 2/24/98 ..... 13,000 12,890,127
Bank of America, FSB, due 1/20/98...... 9,000 8,972,925
Bankers Trust of New York Corp.,
due 1/12/98 - 1/15/98 ............... 9,000 8,983,799
du Pont (E. I.) de Nemours & Co.,
due 2/13/98 - 3/06/98 ............... 12,000 11,897,140
Duke Power Co., due 1/15/98 ........... 7,000 6,984,619
Ford Motor Credit Corp., due
1/08/98 ............................. 10,000 9,988,897
General Electric Capital Corp., due
1/13/98 - 4/23/98 ................... 13,400 13,260,557
General Motors Acceptance Corp.,
due 1/29/98 ......................... 8,600 8,562,676
Goldman Sachs Group LP, due
1/07/98 - 4/06/98 ................... 13,000 12,929,845
Merrill Lynch & Co., Inc., due
2/19/98 ............................. 10,000 9,923,778
Nationsbank Corp., due
1/09/98 - 2/12/98 ................... 11,600 11,548,961
Procter & Gamble Co., due 2/05/98...... 5,600 5,568,422
------------
Total Commercial Paper, at Amortized Cost .......... $128,488,471
------------
U.S. Government and Agency
Obligations -- 61.6%
Federal Farm Credit Bank, due
1/02/98 - 8/12/98 ................... $22,584 $ 22,308,738
Federal Home Loan Bank, due
1/05/98 - 2/20/98 ................... 25,100 24,979,051
Federal Home Loan Mortgage
Corp., due 1/02/98 - 3/02/98 ........ 60,000 59,751,821
Federal National Mortgage Assn.,
due 1/16/98 - 5/05/98 ............... 89,973 89,253,117
Student Loan Marketing Assn., due
1/27/98 ............................. 8,200 8,167,961
Tennessee Valley Authority, due
1/28/98 ............................. 5,000 4,979,188
------------
Total U.S. Government and Agency Obligations,
at Amortized Cost ................................ $209,439,876
------------
Total Investments, at Amortized Cost ............... $337,928,347
Other Assets,
Less Liabilities -- 0.6% .............................. 2,131,887
------------
Net Assets -- 100.0% ............................... $340,060,234
============
See portfolio footnotes and notes to financial statements
15 - IGI
<PAGE>
Portfolio of Investments -- December 31, 1997
World Asset Allocation Series
Stocks -- 55.5%
Issuer Shares Value
U.S. Stocks -- 7.1%
Aerospace -- 0.1%
Allied Signal, Inc. ................... 2,600 $ 101,238
Raytheon Co. .......................... 1,200 59,175
------------
$ 160,413
------------
Banks and Credit Companies -- 0.3%
Bank of New York, Inc. ................ 1,000 $ 57,812
BankBoston Corp. ...................... 600 56,363
CCB Financial Corp. ................... 100 10,750
Compass Bancshares, Inc. .............. 1,300 56,875
Fleet Financial Group, Inc. ........... 600 44,963
PNC Bank Corp. ........................ 900 51,356
Washington Mutual, Inc. ............... 700 44,669
Wells Fargo & Co. ..................... 200 67,887
------------
$ 390,675
------------
Business Services -- 0.4%
Cendant Corp.* ........................ 6,600 $ 226,875
Computer Sciences Corp.* .............. 1,000 83,500
First Data Corp. ...................... 2,300 67,275
Ikon Office Solutions, Inc. ........... 1,300 36,562
Service Master Company* ............... 900 26,325
------------
$ 440,537
------------
Cellular Telephones -- 0.1%
Telephone & Data Systems, Inc. ........ 1,600 $ 74,500
------------
Chemicals -- 0.1%
Air Products & Chemicals, Inc. ........ 1,200 $ 98,700
------------
Computer Software -- Personal
Computers -- 0.2%
Compaq Computer Corp. ................. 1,600 $ 90,300
Microsoft Corp.* ...................... 900 116,325
------------
$ 206,625
------------
Computer Software -- Services -- 0.1%
Compuware Corp.* ...................... 4,700 $ 150,400
------------
Computer Software -- Systems -- 0.4%
BMC Software, Inc.* ................... 2,800 $ 183,750
Cadence Design Systems, Inc.* ......... 2,000 49,000
Computer Associates
International, Inc. ................. 3,750 198,281
Oracle Systems Corp.* ................. 3,650 81,441
------------
$ 512,472
------------
Consumer Goods and Services -- 0.9%
Clorox Co. ............................ 400 $ 31,625
Philip Morris Cos., Inc. .............. 3,600 163,125
RJR Nabisco Holdings Corp. ............ 2,300 86,250
Service Corp. International ........... 3,300 121,893
Tyco International Ltd. ............... 14,558 656,020
UST, Inc. ............................. 1,700 62,794
------------
$ 1,121,707
------------
Electrical Equipment -- 0.1%
General Electric Co. .................. 1,600 $ 117,400
------------
Electronics -- 0.1%
Altera Corp.* ......................... 800 $ 26,500
Analog Devices, Inc.* ................. 900 24,919
Intel Corp. ........................... 800 56,200
------------
$ 107,619
------------
Entertainment -- 0.6%
CBS Corp. ............................. 1,200 $ 35,325
Clear Channe
Communications, Inc.* ............... 1,700 135,044
Harrah's Entertainment, Inc.* ......... 2,400 45,300
HBO & Co. ............................. 2,500 120,000
Issuer Shares Value
U.S. Stocks -- continued
Entertainment -- continued
LIN Television Corp.* ................. 5,300 $ 288,850
Mirage Resorts, Inc.* ................. 3,900 88,725
Viacom, Inc., "B"* .................... 1,900 78,731
------------
$ 791,975
------------
Financial Institutions -- 0.2%
American Express Co. .................. 1,300 $ 116,025
Associates First Capital Corp., "A" ... 1,200 85,350
Union Planters Corp. .................. 900 61,144
------------
$ 262,519
------------
Food and Beverage Products -- 0.1%
McCormick & Co., Inc. ................. 2,800 $ 78,400
PepsiCo, Inc. ......................... 1,400 51,013
------------
$ 129,413
------------
Insurance -- 0.6%
Allstate Corp. ........................ 1,400 $ 127,225
Chubb Corp. ........................... 1,600 121,000
Conseco, Inc. ......................... 3,300 149,944
Lincoln National Corp. ................ 2,300 179,687
Progressive Corp. ..................... 500 59,937
Provident Cos., Inc. .................. 1,000 38,625
Reliastar Financial Corp. ............. 600 24,713
Torchmark, Inc. ....................... 1,400 58,888
------------
$ 760,019
------------
Medical and Health Products -- 0.5%
Boston Scientific Corp.* .............. 900 $ 41,288
Bristol-Myers Squibb Co.### ........... 4,300 406,887
McKesson Corp. ........................ 400 43,275
Pfizer, Inc. .......................... 1,400 104,387
------------
$ 595,837
------------
Medical and Health Technology
and Services -- 0.4%
AmeriSource Health Corp.,"A"* ......... 1,600 $ 93,200
HEALTHSOUTH Corp.* .................... 2,800 77,700
Shared Medical Systems ................ 1,200 79,200
Tenet Healthcare Corp.* ............... 3,900 129,187
United Healthcare Corp. ............... 2,900 144,094
------------
$ 523,381
------------
Oil Services -- 0.1%
Noble Drilling Corp.* ................. 2,500 $ 76,563
------------
Railroads -- 0.1%
Burlington Northern Santa Fe
Railway Co. ......................... 400 $ 37,175
Wisconsin Central
Transportation Corp.* ............... 2,200 51,425
------------
$ 88,600
------------
Restaurants and Lodging -- 0.1%
Promus Hotel Corp.* ................... 1,572 $ 66,024
------------
Special Products and Services -- 0.1%
Royal Caribbean Cruises Ltd. .......... 1,500 $ 79,969
------------
Stores -- 0.6%
CVS Corp. ............................. 2,300 $ 147,344
Office Depot, Inc.* ................... 4,200 100,537
Rite Aid Corp. ........................ 8,300 487,106
------------
$ 734,987
------------
Supermarkets -- 0.3%
Meyer (Fred), Inc.* ................... 4,500 $ 163,687
Safeway, Inc.* ........................ 2,900 183,425
------------
$ 347,112
------------
16 - WAA
<PAGE>
Stocks -- continued
Issuer Shares Value
U.S. Stocks -- continued
Telecommunications -- 0.2%
Bay Networks, Inc.,* ......................... 2,800 $ 71,575
Cellular Communications
International* ............................. 800 37,400
Cisco Systems, Inc.* ......................... 1,700 94,775
Newell Co. ................................... 2,100 89,250
----------
$ 293,000
----------
Utilities -- Electric -- 0.1%
AES Corp.* ................................... 1,600 $ 74,600
----------
Utilities -- Telephone -- 0.2%
AT&T Corp. ................................... 2,600 $ 159,250
MCI Communications Corp. ..................... 3,400 145,562
----------
$ 304,812
----------
U.S. Government Guaranteed -- 0.1%
Federal National Mortgage Assn ............... 3,000 $ 171,188
----------
Total U.S. Stocks ......................................... $8,681,047
----------
Foreign Stocks -- 48.4%
Australia -- 1.8%
QBE Insurance Group Ltd.
(Insurance) ................................ 319,448 $1,437,488
Seven Network Ltd. (Entertainment) ........... 203,000 735,335
----------
$2,172,823
----------
Canada -- 1.7%
Canadian National Railway Co.
(Railroads) ................................ 44,500 $2,102,625
----------
Chile -- 0.8%
Chilectra S.A., ADR
(Utilities -- Electric) .................... 40,000 $1,022,840
----------
Finland -- 1.0%
Huhtamaki Oy Group
(Conglomerate) ............................. 15,000 $ 620,165
TT Tieto Oy (Computer Software --
Systems) .................................. 5,900 664,578
----------
$1,284,743
----------
France -- 2.8%
Alcatel Alsthom, ADR
(Telecommunications) ....................... 3,700 $ 93,656
Total S.A., "B" (Oils)* ...................... 6,730 732,738
TV Francaise (Broadcasting) .................. 10,100 1,032,497
Union des Assurances Federales
S.A. (Insurance) ........................... 12,100 1,588,929
----------
$3,447,820
----------
Germany -- 3.0%
adidas AG (Apparel and Textiles) ............. 5,900 $ 776,817
Henkel Kgaa (Chemicals) ...................... 25,300 1,597,969
Schering Plough Corp.
(Pharmaceuticals) .......................... 2,200 136,675
Volkswagen AG (Automotive) ................... 600 337,896
Wella AG (Cosmetics) ......................... 1,150 873,539
----------
$3,722,896
----------
Hong Kong -- 1.2%
Li & Fung Ltd. (Wholesale) ................... 304,000 $ 425,682
Liu Chong Hing Bank
(Banks and Credit Cos.) .................... 157,000 228,961
Peregrine Investment Holdings
(Finance) .................................. 169,000 119,959
Wing Hang Bank Ltd. ..........................
(Banks and Credit Cos.) .................... 261,000 737,678
----------
$1,512,280
----------
Issuer Shares Value
Foreign Stocks -- continued
Hungary -- 0.3
Magyar Tavkozlesi Rt.
(Telecommunications)* ........................ 13,000 $ 338,000
-----------
Indonesia -- 0.6
Gulf Indonesia Resources Ltd.*
(Oil Services) ............................... 5,100 $ 112,200
PT Indosat (Telecommunications) ................ 84,000 157,211
PT Indosat, ADR
(Telecommunications) ......................... 22,000 424,875
-----------
$ 694,286
-----------
Ireland -- 0.1%
Elan Corp., PLC, ADR
(Health Products)* ........................... 1,200 $ 61,425
-----------
Italy -- 1.1%
ERG S.P.A. (Oils)* ............................. 116,000 $ 432,170
Instituto Nazionale delle
Assicurazioni (Insurance) .................... 159,000 322,498
Telecom Italia Mobile S.P.A., Saving
Shares (Telecommunications) .................. 211,000 600,469
-----------
$ 1,355,137
-----------
Japan -- 9.1%
Canon, Inc. (Office Equipment) ................. 53,000 $ 1,238,813
Eisai Co. Ltd. (Pharmaceuticals) ............... 48,000 734,430
Fuji Photo Film Co. (Photographic
Products) .................................... 25,000 961,095
Kinki Coca-Cola Bottling Co.
(Beverages) .................................. 20,000 213,747
Kirin Beverage Corp. (Beverages) ............... 38,000 631,093
Nippon Broadcasting
(Broadcasting) ............................... 8,000 317,392
Nitto Denko Corp. (Industrial Goods
and Services) ................................ 51,000 882,285
NTT Data Communications Systems
Co. (Telecommunications) ..................... 11 594,572
Osaka Sanso Kogyo Ltd.
(Chemicals) .................................. 105,000 113,025
Rohm Co. (Electronics) ......................... 6,000 613,563
Sankyo Co. Ltd. (Pharmaceuticals) .............. 27,000 612,410
Sony Corp. (Electronics) ....................... 17,700 1,578,656
Takeda Chemical Industries
(Pharmaceuticals) ............................ 37,000 1,058,281
TDK Corp. (Electronics) ........................ 8,000 605,259
Tokyo Broadcasting System, Inc.
(Broadcasting) ............................... 51,000 647,009
Ushio, Inc. (Electronics) ...................... 54,000 360,803
-----------
$11,162,433
-----------
Malaysia -- 0.2%
New Straits Times Press Berhad
(Printing and Publishing) .................... 153,500 $ 190,934
-----------
Mexico -- 0.2%
TV Azteca, S.A. de C.V., ADR
(Broadcasting)* .............................. 12,400 $ 279,775
-----------
Netherlands -- 4.0%
Akzo Nobel N.V. (Chemicals) .................... 11,600 $ 2,001,856
Benckiser (Consumer Goods and
Services)* ................................... 21,800 902,863
IHC Caland N.V. (Transportation)* .............. 7,893 409,885
Koninklijke AhrenA Groep N.V.
(Diversified Operations)* .................... 26,564 835,288
Royal Dutch Petroleum Co. (Oils) ............... 14,500 796,648
-----------
$ 4,946,540
-----------
17 -- WAA
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
Issuer Shares Value
Foreign Stocks -- continued
Peru -- 0.5%
Telefonica del Peru S.A., ADR
(Telecommunications) ............................. 26,500 $ 617,781
----------
Philippines
Alsons Cement Corp.
(Building Materials)## ........................... 943,000 $ 47,150
----------
Poland -- 0.1%
KGHM Polska Miedz S.A., GD
(Metals and Minerals)*## ......................... 17,600 $ 120,560
----------
Portugal -- 2.2%
Banco Espirito Santo e Comercial
de Lisboa S.A.
(Banks and Credit Cos.) .......................... 27,000 $ 804,346
Banco Totta E Acores
(Banks and Credit Cos.) .......................... 49,000 963,209
Portugal Telecom S.A.
(Utilities -- Telephone) ......................... 7,900 366,962
Telecel -- Comunicacaoes Pessoais
S.A. (Telecommunications)* ....................... 5,000 533,315
----------
$2,667,832
----------
Singapore -- 0.7
Singapore Finance (Finance) ........................ 217,000 $ 148,542
Hong Leong Finance Ltd.
(Finance)+ ....................................... 159,000 170,357
Mandarin Oriental International Ltd.
(Restaurants and Lodgings) ....................... 337,690 226,252
Overseas Union Bank (Finance) ...................... 91,000 349,375
----------
$ 894,526
----------
Spain -- 1.5%
Aceralia Corp. Side (Steel) ........................ 6,400 $ 78,685
Acerinox S.A. (Iron and Steel) ..................... 5,600 830,980
Repsol S.A. (Oils) ................................. 21,000 897,436
----------
$1,807,101
----------
Sweden -- 2.6%
Astra AB (Pharmaceuticals) ......................... 69,933 $1,177,308
Skandia Forsakrings AB (Insurance) ................. 20,100 949,237
Forenings Sparbanken AB, "A"
(Banks and Credit Cos.) .......................... 45,000 1,024,275
----------
$3,150,820
----------
Switzerland -- 2.1%
Ciba Specialty AG (Chemicals)* ..................... 12,258 $1,462,789
Novartis AG (Pharmaceuticals) ...................... 700 1,137,782
----------
$2,600,571
----------
United Kingdom -- 10.3
ASDA Group PLC (Supermarkets) ...................... 458,000 $1,349,432
Avis Europe PLC (Auto Rental)## .................... 239,000 684,089
British Aerospace PLC (Aerospace
and Defense)* .................................... 74,000 2,112,015
British Petroleum PLC (Oils)* ...................... 95,337 1,263,087
British Petroleum PLC, ADR (Oils) .................. 1,200 95,625
Capital Radio PLC (Broadcasting) ................... 19,800 161,226
Carlton Communicatons PLC
(Broadcasting) ................................... 70,000 541,205
Corporate Services Group PLC
(Business Services) .............................. 162,500 569,375
Danka Business Systems, ADR
(Business Services) .............................. 3,400 54,188
Diageo PLC (Food and Beverages) .................... 82,000 751,337
Jarvis Hotels PLC (Restaurants and
Lodging)+ ........................................ 163,000 402,202
Kwik-Fit Holdings PLC (Automotive
Repair Centers) .................................. 139,000 807,152
Issuer Shares Value
Foreign Stocks -- continued
United Kingdom -- continued
Lloyds TSB Group PLC (Banks and
Credit Cos.) ............................... 93,505 $ 1,218,312
Lucas Variety ................................ 155,000 548,196
PowerGen PLC (Utilities - Electric) .......... 81,945 1,067,612
Tomkins PLC (Diversified
Operations) ................................ 230,000 1,089,648
-----------
$12,714,701
-----------
Venezuela -- 0.5%
Compania Anonima Nacional
Telefonos de Venezuela, ADR
(Telecommunications) ....................... 14,100 $ 586,913
-----------
Total Foreign Stocks ...................................... $59,502,512
-----------
Total Stocks
(Identified Cost, $63,032,318) .......................... $68,183,559
-----------
Preferred Stock -- 0.3%
Time Warner, Inc., 10.25##
(Entertainment)
(Identified Cost, $273,698) ................ 282 $ 318,660
-----------
Bonds -- 12.7%
Principal Amount
(000 Omitted)
U.S. Bonds -- 9.3%
Aerospace -- 0.2%
BE Aerospace, Inc., 9.875s, 2006 ............. $250 $ 263,750
----------
Automotive -- 0.4%
Hayes Wheels International, Inc.,
9.125s, 2007 ............................... $500 $ 517,500
----------
Building -- 0.5%
Building Materials Corp., 8s, 2007## $300 $ 294,000
Nortek, Inc., 9.25s, 2007 .................... 60 60,750
Nortek, Inc., 9.875s, 2004 ................... 200 204,500
----------
$ 559,250
----------
Chemicals -- 0.7%
Harris Chemical North America,
Inc., 10.25s, 2001 ......................... $500 $ 525,000
NL Industries, Inc., 11.75s, 2003 ............ 250 276,250
----------
$ 801,250
----------
Consumer Goods
and Services -- 0.9
E & S Holdings Corp., 10.375s,
2006 ....................................... $200 $ 182,000
Iron Mountain, Inc., 10.125s, 2006 ........... 500 550,000
Kindercare Learning Centers, Inc.,
9.5s, 2009 ................................. 100 99,500
Westpoint Stevens, Inc., 9.375s
2005 ....................................... 250 262,500
----------
$1,094,000
----------
Containers -- 0.4
Gaylord Container Corp., 9.75s,
2007 ....................................... $500 $ 482,500
----------
Entertainment -- 0.3%
AMC Entertainment, Inc., 9.5s, 2009 .......... $ 50 $ 51,250
Cinemark USA, Inc., 9.625s, 2008 ............. 250 258,125
----------
$ 309,375
----------
Finance -- 0.4%
APP International Finance Co.,
11.75s, 2005 ............................... $500 $ 462,500
----------
Food and Beverage
Products -- 0.4%
Borden, Inc., 9.25s, 2019 .................... $530 $ 553,262
----------
18 - WAA
<PAGE>
Bonds -- continued
Principal Amount
(000 Omitted)
Forest and Paper Products -- 0.8%
Silgan Holdings, Inc., 9s, 2009 ........ $500 $ 511,250
Stone Container Corp., 9.875s, 2001 .... 500 501,250
------------
$ 1,012,500
------------
Industrial -- 0.2%
AGCO Corp., 8.5s, 2006 ................. $225 $ 230,063
------------
Media -- 0.4%
Comcast Cellular Holdings, Inc.,
9.5s, 2007 ........................... $500 $ 520,000
------------
Medical and Health Technology
and Services -- 0.2%
Tenet Healthcare Corp., 8.625s,
2007 ................................. $ 60 $ 61,950
Tenet Healthcare Corp., 10.125s,
2005 ................................. 140 152,950
------------
$ 214,900
------------
Metals and Minerals -- 0.4%
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 ......................... $500 $ 517,500
------------
Oil Services -- 0.1%
Falcon Drilling, Inc., 8.875s, 2003 .... $150 $ 157,500
------------
Special Products and
Services -- 0.9%
IMO Industries, Inc., 11.75s, 2006 ..... $250 $ 276,250
Polymer Group, Inc., 9s, 2007 .......... 500 498,750
Thermadyne Industries Holdings
Corp., 10.75s, 2003 .................. 300 316,500
------------
$ 1,091,500
------------
Steel -- 0.4%
Alaska Steel Holdings Corp.,
9.125s, 2006 ......................... $250 $ 255,625
WCI Steel, Inc., 10s, 2004 ............. 250 255,625
------------
$ 511,250
------------
Stores -- 0.2%
Revlon, Inc., 10.5s, 2003 .............. $200 $ 213,000
------------
Supermarkets -- 0.4%
Pathmark Stores, Inc., 9.625s, 2003 .... $250 $ 230,000
Ralph's Grocery Co., 10.45s, 2004 ...... 200 226,000
------------
$ 456,000
------------
Telecommunications -- 1.1%
Cablevision Systems Corp., 9.25s,
2005 ................................. $250 $ 265,000
Chancellor Media Corp., 8.75s,
2007 ................................. 250 254,375
EchoStar Satellite Broadcasting
Corp., Principal Stripped, 0s to
2000, 13.125s, 2004## ................ 350 290,500
Jones Intercable, Inc., 8.875s, 2007 ... 250 261,250
NEXTEL Communications, Inc., 0s
to 2002, 9.75s, 2007## ............... 150 92,062
Teleport Communications Group,
Inc., 0s to 2001, 11.125s, 2007 ...... 275 224,125
------------
$ 1,387,312
------------
Total U.S. Bonds ........................................ $ 11,354,912
------------
Principal Amount
(000 Omitted)
Foreign Bonds -- 3.4%
Brazil -- 0.6%
Federal Republic of Brazil, 6.813s,
2001 ................................. $ 785 $ 747,712
------------
Canada -- 0.4%
Rogers Cantel, Inc., 9.375s, 2008 ...... $ 250 $ 263,750
Gulf Canada Resources Ltd., 9.25s,
2004 ................................. 250 263,655
------------
$ 527,405
------------
Indonesia -- 0.4%
PT Indah Kiat Pulp & Paper Corp.,
8.875s, 2000## ....................... $ 500 $ 444,465
------------
Mexico -- 0.5%
United Mexican States, 11.5s, 2026...... $ 500 $ 592,000
------------
Philippines -- 0.7%
Bangko Sentral NG Philipinas, 8.6s,
2027(Bank) ........................... $ 1,000 $ 806,600
------------
Russia -- 0.7%
Ministry of Finance, Russia, 10s,
2007 ................................. $ 1,000 $ 926,500
------------
United Kingdom -- 0.1%
Colt Telecom Group PLC, 8.875s,
2007 ................................DEM 300 $ 170,075
------------
Total Foreign Bonds ............................ $ 4,214,757
------------
Total Bonds
(Identified Cost, $15,511,505) ............... $ 15,569,669
------------
Convertible Bond -- 0.2%
Exide Corp., 2.9s, 2005##, ###
(Identified Cost $242,000) ........... $ 400 $ 259,500
------------
Contingent Promissory
Note -- 4.4%
Cargill, interest rate linked to
commodity index, matures in
2002, (Illiquid) (Identified Cost,
$5,527,500)+ ........................ $5,500,000 $ 5,444,138
------------
Shares
Rights -- 0.2%
Merrill Lynch & Co., Inc.* ............. 900 $ 65,644
Gillette Co.* .......................... 1,300 130,569
Kroger Co.* ............................ 1,500 55,406
------------
Total Rights
(Identified Cost, $243,714) .................... $ 251,619
------------
WarrantsForeign Stocks
Peregrine Investment Holdings
(Finance)*, (Identified Cost,
$1,215) .............................. 9,800 $ 13
------------
19 - WAA
<PAGE>
Call Options Purchased -- 0.4%
Principal Amount
Issuer/Expiration Month/Price (000 Omitted) Value
Deutsche Marks/British Pounds/
March/2.775 .......................... $ 20,986 $ 23,588
Finnish Markka/Deutsche Marks/
January/2.8804 ....................... 52,438 --
Japanese Yen
April/130 ............................ 2,876,169 506,206
------------
Total Call Options Purchased
(Premiums Paid, $489,795) .......................... $ 529,794
------------
Put Options Purchased -- 0.1%
Australian Dollar/
December/0.71 ........................ $ 7,220 $ 22,071
Canadian Dollar
May/1.43 ............................. 17,210 137,644
------------
Total Put Options Purchased
(Premiums Paid, $328,283) .......................... $ 159,715
------------
Short-Term Obligations -- 24.0%
Federal Home Loan Mortgage
Corp., due 1/09/98 - 1/14/98 ......... $ 9,640 $ 9,625,608
Federal Home Loan Bank, due
1/14/98 .............................. 6,280 6,267,323
Federal Farm Credit Bank, due
1/12/98 .............................. 4,490 4,482,139
Federal National Mortgage Assn.,
due 1/13/98 .......................... 4,250 4,241,939
Ford Motor Credit Corp.,
due 1/02/98 .......................... 4,900 4,899,081
------------
Total Short-Term Obligations,
at Amortized Cost .................................. $ 29,516,090
------------
Total Investments
(Identified Cost, $115,166,118) .................... $120,232,757
Call Options Written -- (0.5)%
Principal Amount
of Contracts
Issuer/Expiration Month/Strike Price (000 Omitted)
Swiss Francs/Deutsche Marks/
March/0.847 .......................... 15,752 $ (496,960)
Detusche Marks/British Pounds/
March/2.675 .......................... 20,230 (2,812)
Japanese Yen/May/119 ................... 1,423,136 (115,274)
------------
Total Call Options Written
(Premiums Received $435,810) ....................... $ (615,046)
------------
Put Options Written -- (0.4)%
Japanese Yen/May/132 ................... 812,255 $ (106,405)
Canadian Dollar/May/1.38 ............... 16,608 (414,171)
------------
Total Put Options Written
(Premiums Received $358,334) ....................... $ (520,576)
------------
Other Assets,
Less Liabilities -- 3.1% ............................... $ 3,815,269
------------
Net Assets -- 100.0% ................................. $122,912,404
============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1997
World Governments Series
Bonds -- 93.2%
Principal Amount
Issuer (000 Omitted) Value
U.S. Bonds -- 42.6%
U.S. Treasury Notes, 5.75s, 2003 ....... $ 15,240 $ 15,249,449
U.S. Treasury Notes, 5.875s, 2004 ...... 5,800 5,850,750
U.S. Treasury Notes, 6.5s, 2005 ........ 20,450 21,319,125
U.S. Treasury Notes, 6.625s, 2002 ...... 4,445 4,590,840
------------
Total U.S. Bonds ...................................... $ 47,010,164
------------
Foreign Bonds -- 50.6%
Germany -- 13.4%
Federal Republic of Germany, 6.25s,
2006 ................................... DEM 16,144 $ 9,531,877
Treuhandanstalt, 6s, 2003 ................ 9,086 5,298,903
------------
$ 14,830,780
------------
Italy -- 5.5%
Republic of Italy, 8.5s, 2004 ............ ITL 5,595,000 $ 3,657,405
Republic of Italy, 9.5s, 1999 ............ 4,105,000 2,424,679
------------
$ 6,082,084
------------
Japan -- 18.8%
Federal National Mortgage Assn.,
2.125s, 2007 ........................... JPY 1,070,000 $ 8,375,880
International Bank for Reconstruction and
Development, 4.5s, 2003 ................ 932,000 8,305,305
Japan Development Bank, 2.875s, 2006 ..... 490,000 4,065,124
------------
$ 20,746,309
------------
Spain -- 3.1%
Government of Spain, 7.35s, 2007 ......... ESP 457,400 $ 3,377,122
------------
Sweden -- 1.9%
Kingdom of Sweden, 6s, 2005 .............. SEK 16,900 $ 2,146,066
------------
United Kingdom -- 7.9%
U.K Treasury Stock, 7.75s, 2006 .......... GBP 2,230 $ 3,996,207
U.K Treasury Stock, 10s, 2003 ............ 2,450 4,687,682
------------
$ 8,683,889
------------
Total Foreign Bonds ................................... $ 55,866,250
------------
Total Bonds
(Identified Cost, $103,253,923) ..................... $102,876,414
------------
Put Options Purchased -- 0.4%
Australian Dollars/December/0.740 ........ AUD 6,545 $ 20,010
Japanese Yen/May/130 ..................... JPY 2,762,931 486,276
------------
Total Put Options Purchased
(Premium Paid, $443,574) ............................ $ 506,286
------------
Commercial Paper -- 4.2%
Associates Corp. of North America, due
1/02/98, at Amortized Cost ............. 4,600 $ 4,599,144
------------
Total Investments
(Identified Cost, $108,296,641) ..................... $107,981,844
Call Option Written -- (0.1)%
Principal Amount
of Contracts
Issuer/Expiration Month/Strike Price (000 Omitted)
Japanese Yen/May/119
Total Call Option Written
(Premium Received, $215,750) ......... JPY 1,367,105 $ (110,736)
------------
Other Assets,
Less Liabilities -- 2.3% ................................ 2,514,983
------------
Net Assets -- 100.0% .................................. $110,386,091
============
See portfolio footnotes and notes to financial statements
20 - WGS
<PAGE>
Portfolio of Investments -- December 31, 1997
World Total Return Series
Stocks -- 58.9%
Issuer Shares Value
Foreign Stocks -- 40.9%
Australia -- 2.0%
Australia & New Zealand Banking
Group (Banks and Credit Cos.)* ...... 21,279 $ 140,574
Fosters Brewing Group Ltd.
(Beverages) ......................... 201,700 383,710
Q.B.E Insurance Group Ltd.
(Insurance) ......................... 163,386 735,222
Seven Network Ltd. (Entertainment) .... 55,720 201,837
------------
$ 1,461,343
------------
Austria -- 0.3%
Austria Tabakwerke AG (Tobacco)* ...... 4,300 $ 190,672
------------
Brazil -- 0.5%
Companhia Cervejaria Brahma,
ADR (Beverages) ..................... 8,624 $ 122,353
Uniao de Bancos Brasileiros S.A.
(Banks and Credit Cos.)* ............ 6,800 218,875
------------
$ 341,228
------------
Canada -- 1.3%
Canadian National Railway Co.
(Railroads) ......................... 12,357 $ 583,868
Westcoast Energy Inc.
(Utilities-Gas) ..................... 15,458 355,534
------------
$ 939,402
------------
Chile -- 0.2%
Enersis S.A., ADR
(Utilities - Electric) .............. 4,043 $ 117,247
------------
Finland -- 0.3%
Huhtamaki OY (Conglomerate) ........... 4,822 $ 199,362
------------
France -- 4.4%
Elf Aquitaine S.A. (Oils) ............. 2,942 $ 342,320
Chargeurs S.A. (Apparels and
Textiles) ........................... 3,586 214,588
Pin Printemps Redo (Retail) ........... 1,143 610,069
Sanofi S.A. (Medical and Health
Products) ........................... 4,700 523,437
Total S.A. ADR (Oils) ................. 9,552 530,136
TV Francaise (Entertainment) .......... 4,696 480,060
Union des Assurances Federales
S.A. (Insurance) .................... 3,354 440,436
------------
$ 3,141,046
------------
Germany -- 3.1%
adidas AG (Apparel and Textiles) ...... 4,094 $ 539,032
Henkel Kgaa (Chemicals) ............... 9,432 595,733
ProSieben Media AG
(Entertainment)* .................... 4,084 190,905
Schering Plough Corp.
(Pharmaceuticals) ................... 7,564 469,913
Wella AG (Cosmetics) .................. 600 455,760
------------
$ 2,251,343
------------
Greece -- 0.3%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................ 10,715 $ 219,845
------------
Hong Kong -- 0.6%
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) .............. 60,500 $ 229,945
Wharf Holdings Ltd. (Real Estate) ..... 62,000 136,026
Wing Hang Bank Ltd. (Banks and
Credit Cos.) ........................ 16,000 45,222
------------
$ 411,193
------------
Issuer Shares Value
Foreign Stocks -- continued
Italy -- 1.3%
ENI, S.P.A., ADR (Oils) ............... 3,859 $ 220,204
Instituto Nazionale delle
Assicurazioni (Insurance) ........... 75,291 152,712
Telecom Italia S.P.A.
(Telecommunications)* ............... 72,813 321,325
Telecom Italia S.P.A., Saving Shares
(Telecommunications) ................ 74,850 213,010
------------
$ 907,251
------------
Japan -- 5.3%
Canon, Inc. (Office Equipment) ........ 28,000 $ 654,467
Eisai Co., Ltd. (Pharmaceuticals) ..... 11,000 168,307
Fuji Photo Film Co. (Photographic
Products) ........................... 3,000 115,332
Kirin Beverage Corp. (Beverages) ...... 31,000 514,839
Nippon Broadcasting System
(Broadcasting) ...................... 5,000 198,370
Osaka Sanso Kogyo Ltd.
(Chemicals) ......................... 20,000 21,529
Rohm Company Ltd. (Electronics) ....... 2,000 204,521
Sony Corp. (Electronics) .............. 11,100 990,005
Takeda Chemical Industries
(Pharmaceuticals) ................... 18,000 514,839
Terumo Corp. (Pharmaceuticals) ........ 12,000 177,149
Tokyo Broadcasting System, Inc.
(Broadcasting) ...................... 11,000 139,551
Ushio, Inc. (Electronics) ............. 12,000 80,178
------------
$ 3,779,087
------------
Mexico -- 0.2%
TV Azteca, S.A. de C.V., ADR
(Broadcasting)* ..................... 6,032 $ 136,097
------------
Netherlands -- 4.0%
Akzo Nobel NV (Chemicals) ............. 3,314 $ 571,909
Benckiser NV (Consumer Goods
and Services)* ...................... 6,200 256,778
Hunter Douglas NV (Consumer
Goods and Services)* ................ 10,900 382,022
IHC Caland NV (Marine Equipment) ...... 6,508 337,961
Koninklijke Ahold NV, ADR
(Food/Retail) ....................... 13,502 352,740
Koninklijke Ten Cate (Diversified
Operations)* ........................ 7,400 232,688
Royal Dutch Petroleum Co., ADR
(Oils) .............................. 10,589 573,791
Wolters Kluwer NV (Publishing)* ....... 1,529 197,673
------------
$ 2,905,562
------------
Peru -- 0.3%
Telefonica del Peru S.A., ADR
(Telecommunications) ................ 10,822 $ 252,288
------------
Portugal -- 0.8%
Banco Totta & Acores, S.A. (Banks
and Credit Cos.) .................... 11,700 $ 229,991
Telecel - Comunicacaoes Pessoais,
S.A. (Telecommunications)* .......... 3,071 327,562
------------
$ 557,553
------------
Singapore -- 0.2%
Singapore Press Holdings Ltd.
(Publishing) ........................ 14,000 $ 175,833
------------
South Korea -- 0.1%
Korea Electric Power Corp., ADR
(Utilities - Electric) .............. 7,352 $ 73,980
------------
21 -- WTR
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
Issuer Shares Value
Spain -- 2.0%
Aceralia Corporacion Siderurgica,
S.A. (Steel)* ....................... 4,500 $ 55,325
Acerinox S.A. (Iron and Steel) ........ 1,722 255,526
Iberdrola S.A. (Utilities - Electric) . 51,665 681,054
Repsol S.A. (Oils) .................... 10,644 454,872
------------
$ 1,446,777
------------
Sweden -- 1.6%
Astra AB (Pharmaceuticals) ............ 21,027 $ 353,985
Skandia Forsakrings AB (Insurance) .... 9,499 448,597
Telefonaktiebolaget LM Ericsson
(Telecommunications Equipment) ...... 9,172 342,230
------------
$ 1,144,812
------------
Switzerland -- 1.4%
Ciba Specialty Chemicals AG
(Chemicals)* ........................ 3,570 $ 426,020
Novartis AG (Pharmaceuticals) ......... 345 560,764
------------
$ 986,784
------------
United Kingdom -- 10.7%
ASDA Group PLC (Retail) ............... 200,424 $ 590,521
Avis Europe PLC (Auto Rental)## ....... 183,525 525,303
Bank Of Scotland (Banks and Credit
Cos.)* .............................. 30,878 280,892
Booker PLC (Food - Wholesale)* ........ 48,213 253,793
British Aerospace PLC (Aerospace
and Defense)* ....................... 29,957 854,995
British Petroleum PLC, ADR (Oils) ..... 11,312 901,425
Compass Group PL
(Food - Catering)## ................. 47,196 581,504
Diageo PLC (Beverages) ................ 37,967 347,878
Kwik-Fit Holdings PLC (Automotive
Repair Centers) ..................... 77,992 452,888
Lloyds TSB Group PLC (Banks and
Credit Cos.)* ....................... 39,958 520,628
LucasVarity PLC (Automotive) .......... 136,700 483,473
PowerGen PLC (Utilities - Electric)* .. 43,525 567,061
Tomkins PLC (Diversified
Operations) ......................... 181,890 861,722
Williams Holdings (Manufacturing) ..... 86,649 481,777
------------
$ 7,703,860
------------
Total Foreign Stocks ........................... $ 29,342,565
------------
U.S. Stocks -- 18.0%
Aerospace -- 0.6%
General Dynamics Corp. ................ 2,694 $ 232,863
Lockheed Martin Corp. ................. 2,181 214,828
------------
$ 447,691
------------
Banks and Credit Companies -- 0.8%
Norwest Corp. ......................... 14,378 $ 555,350
------------
Business Machines -- 1.0%
Digital Equipment Corp.* .............. 3,950 $ 146,150
International Business Machines Corp. 5,225 546,339
------------
$ 692,489
------------
Chemicals -- 0.4%
Air Products & Chemicals, Inc. ........ 2,800 $ 230,300
Praxair, Inc. ......................... 1,651 74,295
------------
$ 304,595
------------
Construction Services -- 0.3%
Martin Marietta Materials, Inc. ....... 5,558 $ 203,214
------------
Consumer Goods and Services -- 2.8%
Philip Morris Cos., Inc. .............. 21,726 $ 984,460
Tyco International Ltd. ............... 22,920 1,032,833
------------
$ 2,017,293
------------
Issuer Shares Value
U.S. Stocks -- continued
Electrical Equipment -- 1.0%
General Electric Co. .................. 9,500 $ 697,063
------------
Financial Institutions -- 1.7%
American Express Co. .................. 9,059 $ 808,516
Federal Home Loan Mortgage Corp. ...... 10,693 448,437
------------
$ 1,256,953
------------
Food and Beverage Products -- 0.3%
McCormick & Co., Inc. ................. 7,199 $ 201,572
------------
Insurance -- 2.0%
Allstate Corp. ........................ 8,718 $ 792,248
CIGNA Corp. ........................... 2,099 363,258
ReliaStar Financial Corp. ............. 7,658 315,414
------------
$ 1,470,920
------------
Machinery -- 0.5%
Deere & Co., Inc. ..................... 6,683 $ 389,702
------------
Medical and Health Products -- 1.7%
Bristol-Myers Squibb Co. .............. 7,556 $ 714,987
Eli Lilly & Co. ....................... 5,170 359,961
Warner-Lambert Co. .................... 980 121,520
------------
$ 1,196,468
------------
Oils -- 1.5%
Exxon Corp. ........................... 7,081 $ 433,269
USX-Marathon Group .................... 18,990 640,912
------------
$ 1,074,181
------------
Printing and Publishing -- 0.6%
Gannett Co., Inc. ..................... 6,436 $ 397,825
------------
Utilities -- Electric -- 0.8%
Sierra Pacific Resources .............. 14,500 $ 543,750
------------
Utilities -- Gas -- 0.8%
Coastal Corp. ......................... 9,800 $ 606,988
------------
Utilities -- Telephone -- 1.2%
Sprint Corp. .......................... 15,200 $ 891,100
------------
Total U.S. Stocks.................................. $ 12,947,154
------------
Total Stocks
(Identified Cost, $35,047,878)................... $ 42,289,719
------------
Bonds -- 36.9%
Principal Amount
(000 Omitted)
U.S. Bonds -- 23.7%
Banks and Credit Companies -- 2.3%
International Bank of Reconstruction
and Development, 4.5s, 2003 ......... $188,000 $ 1,675,319
------------
Federal National
Mortgage Association -- 2.3%
FNMA, 2.125s, 2007 .................... $210,000 $ 1,643,864
------------
Telecommunications -- 0.8%
WorldCom, Inc., 8.875s, 2006 .......... $ 478 $ 514,290
------------
U.S. Treasury Obligations -- 18.3%
U.S. Treasury Notes, 6.5s, 2005 ....... $ 8,100 $ 8,444,250
U.S. Treasury Notes, 6.625s, 2002 ..... 4,560 4,709,614
------------
$ 13,153,864
------------
Total U.S. Bonds ...................................... $ 16,987,337
------------
Foreign Bonds -- 13.2%
Germany -- 5.3%
Federal Republic of Germany,
6.25s, 2006 ......................... DEM 4,088 $ 2,413,672
Treuhandanstalt, 6s, 2003 ............. 2,354 1,372,839
------------
$ 3,786,511
------------
22 - WTR
<PAGE>
Bonds -- continued
Principal Amount
Issuer (000 Omitted) Value
Foreign Bonds -- continued
Italy -- 1.8%
Republic of Italy, 9.5s, 1999 .........ITL 855,000 $ 505,018
Republic of Italy, 8.5s, 2004 ......... 1,170,000 764,819
------------
$ 1,269,837
------------
Japan -- 1.1%
Japan Development Bank, 2.875s,
2006 ................................JPY 100,000 $ 829,617
------------
Spain -- 1.2%
Government of Spain, 7.35s, 2007 ......ESP 115,820 $ 855,134
------------
Sweden -- 0.7%
Kingdom of Sweden, 6s, 2005 .........SEK 2,100 $ 266,671
Kingdom of Sweden, 13s, 2001 ........ 1,700 263,125
------------
$ 529,796
------------
United Kingdom -- 3.1%
United Kingdom Treasury, 7.75s,
2006 ................................GBP 980 $ 1,756,181
United Kingdom Treasury, 10s, 2003 240 459,202
------------
$ 2,215,383
------------
Total Foreign Bonds ............................... $ 9,486,278
------------
Total Bonds
(Identified Cost, $26,748,665) .................... $ 26,473,615
------------
Put Options
Purchased -- 0.1%
Principal Amount
of Contracts
Issuer/Expiration Month/Price (000 Omitted)
Japanese Yen/April/130
(Premiums Paid, $97,252) .................. $629,621 $ 110,814
------------
Short-Term
Obligations -- 4.3%
Ford Motor Credit Corp., due
1/02/98, at Amortized Cost .............. $ 3,100 $ 3,099,419
------------
Total Investments
(Identified Cost, $64,993,214) .......................... $ 71,973,567
Call Options Written
Issuer/Expiration Month/Price
Japanese Yen/May/119
(Premiums Received $49,165)................ 311,538 $ (25,234)
Other Assets,
Less Liabilities -- (0.2)% ...................... (125,140)
------------
Net Assets -- 100.0% .......................... $ 71,823,193
============
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- December 31, 1997
Zero Coupon Series, 2000 Portfolio
U.S. Government Guaranteed -- 99.8%
Principal Amount
Issuer (000 Omitted) Value
Treasury Investment
Growth Receipts -- 4.7%
Series 18, due 2/15/01 .......................$ 97 $ 81,314
Series 12, due 5/15/01 ....................... 22 18,176
Series 15, due 8/15/01 ....................... 88 71,669
------------
Total Treasury Investment Growth
Receipts (Identified Cost, $152,790) .................... $ 171,159
------------
U.S. Treasury Securities Stripped
Interest Payments -- 95.1%
Generic Coupons, due 5/15/00 .................$ 742 $ 650,155
Generic Coupons, due 8/15/00 ................. 115 99,256
Generic Coupons, due 11/15/00 ................3,067 2,611,245
Generic Coupons, due 5/15/01 ................. 91 75,260
------------
Total U.S. Treasury Securities Stripped
Interest Payments (Identified Cost,
$3,314,048) ........................................... $ 3,435,916
------------
Total Investments
(Identified Cost, $3,466,838) ......................... $ 3,607,075
Other Assets,
Less Liabilites -- 0.2% .................................. 7,013
------------
Net Assets -- 100.0% ..................................... $ 3,614,088
============
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.
+ 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 ESP = Spanish Pesetas JPY = Japanese Yen
CAD = Canadian Dollars FRF = French Francs NLG = Dutch Guilders
CHF = Swiss Francs GBP = British Pounds SEK = Swedish Kronar
DEM = Deutsche Marks ITL = Italian Lire
23 - ZCS
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1997
<TABLE>
<CAPTION>
Government High
Securities Yield
Series Series
------------- ------------
<S> <C> <C>
Assets:
Investments --
Unaffiliated issuers, at cost .......................................................... $ 372,991,646 $262,238,678
Unrealized appreciation ................................................................ 11,007,784 7,912,321
------------- ------------
Total investments, at value .......................................................... $ 383,999,430 $270,150,999
Cash .................................................................................... 4,460 225,790
Foreign currency, at value (identified cost, $13,298) ................................... -- --
Net receivable for forward foreign currency exchange contracts to sell .................. -- --
Receivable for Trust shares sold ........................................................ 179,701 80,286
Receivable for investments sold ......................................................... -- --
Interest and dividends receivable ....................................................... 3,878,932 5,188,737
Other assets ............................................................................ 3,369 1,732
------------- ------------
Total assets ......................................................................... $ 388,065,892 $275,647,544
------------- ------------
Liabilities:
Payable for Trust shares reacquired ..................................................... $ 181,165 $ 371,840
Payable for investments purchased ....................................................... -- --
Payable for daily variation margin on open futures contracts ............................ 66,500 --
Net payable for forward foreign currency exchange contracts to purchase ................. -- --
Net payable for foreign currency exchange contracts closed or subject to master netting
agreements ............................................................................. -- --
Payable to affiliates --
Management fee ......................................................................... 5,830 5,668
Administrative fee ..................................................................... 159 113
Accrued expenses and other liabilities .................................................. 80,352 62,932
------------- ------------
Total liabilities .................................................................... $ 334,006 $ 440,553
------------- ------------
Net assets ............................................................................... $ 387,731,886 $275,206,991
============= ============
Net assets consist of:
Paid-in capital ......................................................................... $ 364,191,972 $250,356,901
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies ..................................................................... 10,958,048 7,912,321
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... (11,343,140) (3,084,636)
Accumulated undistributed net investment income ......................................... 23,925,006 20,022,405
------------- ------------
Total ............................................................................... $ 387,731,886 $275,206,991
============= ============
Shares of beneficial interest outstanding ............................................... 29,732,643 28,340,323
============= ============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 13.04 $ 9.71
============= ============
</TABLE>
<TABLE>
<CAPTION>
International
Growth and Money
Income Market
Series Series
-------------- ------------
<S> <C> <C>
Assets:
Investments --
Unaffiliated issuers, at cost .......................................................... $ 50,843,955 $337,928,347
Unrealized appreciation ................................................................ 1,387,364 --
------------ ------------
Total investments, at value .......................................................... $ 52,231,319 $337,928,347
Cash .................................................................................... 6,893 71,534
Foreign currency, at value (identified cost, $13,298) ................................... 13,298 --
Net receivable for forward foreign currency exchange contracts to sell .................. 835,063 --
Receivable for Trust shares sold ........................................................ 13,926 2,512,725
Receivable for investments sold ......................................................... 116,197 --
Interest and dividends receivable ....................................................... 79,619 --
Other assets ............................................................................ 314 4,591
------------ ------------
Total assets ......................................................................... $ 53,296,629 $340,517,197
------------ ------------
Liabilities:
Payable for Trust shares reacquired ..................................................... $ 25,260 $ 368,847
Payable for investments purchased ....................................................... 1,293,003 --
Payable for daily variation margin on open futures contracts ............................ -- --
Net payable for forward foreign currency exchange contracts to purchase ................. 532,622 --
Net payable for foreign currency exchange contracts closed or subject to master netting
agreements ............................................................................. 44,954 --
Payable to affiliates --
Management fee ......................................................................... 1,400 4,660
Administrative fee ..................................................................... -- 140
Accrued expenses and other liabilities .................................................. 31,287 83,316
------------ ------------
Total liabilities .................................................................... $ 1,928,526 $ 456,963
------------ ------------
Net assets ............................................................................... $ 51,368,103 $340,060,234
============ ============
Net assets consist of:
Paid-in capital ......................................................................... $ 48,046,107 $340,060,234
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies ..................................................................... 1,642,699 --
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... 1,405,646 --
Accumulated undistributed net investment income ......................................... 273,651 --
------------ ------------
Total ............................................................................... $ 51,368,103 $340,060,234
============ ============
Shares of beneficial interest outstanding ............................................... 4,597,858 340,060,234
============ ============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 11.17 $ 1.00
============ ============
</TABLE>
See notes to financial statements
24
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1997 -- continued
<TABLE>
<CAPTION>
World
Asset World
Allocation Governments
Series Series
----------------- ----------------
<S> <C> <C>
Assets:
Investments --
Unaffiliated issuers, at cost .......................................................... $ 115,166,118 $108,296,641
Unrealized appreciation (depreciation) ................................................. 5,066,639 (314,797)
------------- ------------
Total investments, at value .......................................................... $ 120,232,757 $107,981,844
Cash .................................................................................... 112,949 39,817
Foreign currency, at value (identified cost, $3) ........................................ -- --
Net receivable for forward foreign currency exchange contracts to sell .................. 2,911,900 971,842
Net receivable for foreign currency exchange contracts closed or subject to master
netting agreements ..................................................................... -- 2,311,058
Receivable for Trust shares sold ........................................................ 27,084 6,305
Receivable for investments sold ......................................................... 4,461,165 5,476,252
Interest and dividends receivable ....................................................... 429,592 1,962,488
Other assets ............................................................................ 677 1,249
------------- ------------
Total assets ......................................................................... $ 128,176,124 $118,750,855
------------- ------------
Liabilities:
Payable for Trust shares reacquired ..................................................... $ 715,054 $ 10,551
Payable for investments purchased ....................................................... 1,244,978 5,406,446
Written options outstanding, at value (premiums received, $794,144, $215,750, and
$49,165, respectively) ................................................................. 1,135,622 110,736
Payable for daily variation margin on open futures contracts ............................ 350 --
Net payable for forward foreign currency exchange contracts to purchase ................. 1,289,575 2,770,761
Net payable for foreign currency exchange contracts closed or subject to master netting 1,135,622 110,736
agreements ............................................................................. 814,974 --
Payable to affiliates --
Management fee ......................................................................... 2,540 2,270
Administrative fee ..................................................................... 50 45
Accrued expenses and other liabilities .................................................. 60,577 63,955
------------- ------------
Total liabilities .................................................................... $ 5,263,720 $ 8,364,764
------------- ------------
Net assets ............................................................................... $ 122,912,404 $110,386,091
============= ============
Net assets consist of:
Paid-in capital ......................................................................... $ 109,001,224 $110,593,679
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies ..................................................................... 5,526,359 262,440
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... 5,038,164 (1,073,573)
Accumulated undistributed net investment income ......................................... 3,346,657 603,545
------------- ------------
Total ............................................................................... $ 122,912,404 $110,386,091
============= ============
Shares of beneficial interest outstanding ............................................... 8,454,750 10,292,744
============= ============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 14.54 $ 10.72
============= ============
</TABLE>
<TABLE>
<CAPTION>
World Zero
Total Coupon
Return Series,
Series 2000 Portfolio
------------ --------------
<S> <C> <C>
Assets:
Investments --
Unaffiliated issuers, at cost .......................................................... $ 64,993,214 $3,466,838
Unrealized appreciation (depreciation) ................................................. 6,980,353 140,237
------------ ----------
Total investments, at value .......................................................... $ 71,973,567 $3,607,075
Cash .................................................................................... 97,120 134
Foreign currency, at value (identified cost, $3) ........................................ 3 --
Net receivable for forward foreign currency exchange contracts to sell .................. 78,518 --
Net receivable for foreign currency exchange contracts closed or subject to master
netting agreements ..................................................................... 310,514 --
Receivable for Trust shares sold ........................................................ 46,196 --
Receivable for investments sold ......................................................... 1,583,850 --
Interest and dividends receivable ....................................................... 525,978 13,576
Other assets ............................................................................ 331 38
------------ ----------
Total assets ......................................................................... $ 74,616,077 $3,620,823
------------ ----------
Liabilities:
Payable for Trust shares reacquired ..................................................... $ 56,254 $ 93
Payable for investments purchased ....................................................... 2,343,037 --
Written options outstanding, at value (premiums received, $794,144, $215,750, and
$49,165, respectively) ................................................................. 25,234 --
Payable for daily variation margin on open futures contracts ............................ -- --
Net payable for forward foreign currency exchange contracts to purchase ................. 308,781 --
Net payable for foreign currency exchange contracts closed or subject to master netting
agreements ............................................................................. -- --
Payable to affiliates --
Management fee ......................................................................... 1,475 25
Administrative fee ..................................................................... 30 1
Accrued expenses and other liabilities .................................................. 58,073 6,616
------------ ----------
Total liabilities .................................................................... $ 2,792,884 $ 6,735
------------ ----------
Net assets ............................................................................... $ 71,823,193 $3,614,088
============ ==========
Net assets consist of:
Paid-in capital ......................................................................... $61,358,112 $3,307,733
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies ..................................................................... 7,074,487 140,237
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... 1,879,055 (46,472)
Accumulated undistributed net investment income ......................................... 1,511,539 212,590
------------ ----------
Total ............................................................................... $ 71,823,193 $3,614,088
============ ==========
Shares of beneficial interest outstanding ............................................... 4,886,889 405,641
============ ==========
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 14.70 $ 8.91
============ ==========
</TABLE>
See notes to financial statements
25
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Year Ended December 31, 1997
<TABLE>
<CAPTION>
Government High
Securities Yield
Series Series
---------------- --------------
<S> <C> <C>
Net investment income:
Income --
Interest ........................................................................... $ 26,439,882 $21,692,978
Dividends .......................................................................... -- 286,592
Foreign taxes withheld ............................................................. -- --
------------ -----------
Total investment income ........................................................... $ 26,439,882 $21,979,570
------------ -----------
Expenses --
Investment advisory fee ............................................................ $ 2,066,478 $ 1,720,706
Trustees' compensation ............................................................. 6,411 6,563
Administrative fee ................................................................. 43,905 27,158
Custodian fee ...................................................................... 131,612 88,169
Auditing fees ...................................................................... 43,294 45,042
Printing ........................................................................... 38,078 34,807
Legal fees ......................................................................... 1,438 1,359
Miscellaneous ...................................................................... 35,210 5,986
------------ -----------
Total expenses .................................................................... $ 2,366,426 $ 1,929,790
Fees paid indirectly ............................................................... (11,180) (19,008
------------ -----------
Net expenses ...................................................................... $ 2,355,246) $ 1,910,782
------------ -----------
Net investment income ............................................................ $ 24,084,636 $20,068,788
------------ -----------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................ $ (1,283,074) $ 6,023,183
Written option transactions ........................................................ -- --
Futures contracts .................................................................. (475,779) --
Foreign currency transactions ...................................................... -- 4,711
------------ -----------
Net realized gain (loss) on investments and foreign currency transactions ........ $ (1,758,853) $ 6,027,894
------------ -----------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................ $ 9,305,884 $ 2,792,621
Written options .................................................................... -- --
Futures contracts .................................................................. (49,736) --
Translation of assets and liabilities in foreign currencies ........................ -- --
------------ -----------
Net unrealized gain on investments and foreign currency translation ............... $ 9,256,148 $ 2,792,621
------------ -----------
Net realized and unrealized gain on investments and foreign currency ............. $ 7,497,295 $ 8,820,515
------------ -----------
Increase in net assets from operations .......................................... $ 31,581,931 $28,889,303
============ ===========
</TABLE>
<TABLE>
<CAPTION>
International
Growth and Money
Income Market
Series Series
-------------- -------------
<S> <C> <C>
Net investment income:
Income --
Interest ........................................................................... $ 417,447 $ 21,570,890
Dividends .......................................................................... 755,322 --
Foreign taxes withheld ............................................................. (91,521) --
---------- -----------
Total investment income ........................................................... $1,081,248 $ 21,570,890
---------- ------------
Expenses --
Investment advisory fee ............................................................ $ 427,422 $ 1,946,081
Trustees' compensation ............................................................. 7,657 6,563
Administrative fee ................................................................. 5,264 46,028
Custodian fee ...................................................................... 57,514 154,803
Auditing fees ...................................................................... 26,742 29,679
Printing ........................................................................... 11,222 57,469
Legal fees ......................................................................... 1,434 1,157
Miscellaneous ...................................................................... 832 7,703
---------- ------------
Total expenses .................................................................... $ 538,087 $ 2,249,483
Fees paid indirectly ............................................................... (3,017) (26,652)
---------- ------------
Net expenses ...................................................................... $ 535,070 $ 2,222,831
---------- ------------
Net investment income ............................................................ $ 546,178 $ 19,348,059
---------- ------------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................ $ 928,292 $ --
Written option transactions ........................................................ (7,922) --
Futures contracts .................................................................. -- --
Foreign currency transactions ...................................................... 245,811 ------------
---------- $ --
Net realized gain (loss) on investments and foreign currency transactions ........ $1,166,181 ------------
----------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................ $ 767,568 $ --
Written options .................................................................... 34,187 --
Futures contracts .................................................................. -- --
Translation of assets and liabilities in foreign currencies ........................ 262,988 --
---------- ------------
Net unrealized gain on investments and foreign currency translation ............... $1,064,743 $ --
---------- ------------
Net realized and unrealized gain on investments and foreign currency ............. $2,230,924 $ --
---------- ------------
Increase in net assets from operations .......................................... $2,777,102 $ 19,348,059
========== ============
</TABLE>
See notes to financial statements
26
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Year Ended December 31, 1997 -- continued
<TABLE>
<CAPTION>
World
Asset World
Allocation Governments
Series Series
-------------- ------------
<S> <C> <C>
Net investment income:
Income --
Interest ........................................................................... $3,199,099 $ 7,784,921
Dividends .......................................................................... 1,088,151 --
Foreign taxes withheld ............................................................. (99,433) --
---------- -----------
Total investment income ........................................................... $4,187,817 $ 7,784,921
---------- -----------
Expenses --
Investment advisory fee ............................................................ $ 786,866 $ 916,874
Trustees' compensation ............................................................. 7,563 13,126
Administrative fee ................................................................. 12,740 14,128
Custodian fee ...................................................................... 82,708 113,932
Auditing fees ...................................................................... 66,441 34,518
Printing ........................................................................... -- 22,497
Legal fees ......................................................................... 1,632 1,407
Miscellaneous ...................................................................... 13,611 6,012
---------- -----------
Total expenses .................................................................... $ 971,561 $ 1,122,494
Fees paid indirectly ............................................................... (7,751) (7,664)
Reduction of expenses by investment adviser ........................................ -- --
---------- -----------
Net expenses ...................................................................... $ 963,810 $ 1,114,830
---------- -----------
Net investment income ............................................................ $3,224,007 $ 6,670,091
---------- -----------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................ $4,751,581 $(5,707,061)
Written option transactions ........................................................ 230,502 (865,530)
Futures contracts .................................................................. 86,757 --
Foreign currency transactions ...................................................... 75,728 (1,158,676)
---------- -----------
Net realized gain (loss) on investments and foreign currency transactions ......... $5,144,568 $(7,731,267)
---------- -----------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................ $1,037,653 $(3,472,776)
Written options .................................................................... (341,581) 1,386,409
Futures contracts .................................................................. (4,429) --
Translation of assets and liabilities in foreign currencies ........................ 851,257 1,615,490
---------- -----------
Net unrealized gain (loss) on investments and foreign currency translation ........ $1,542,900 $ (470,877)
---------- -----------
Net realized and unrealized gain (loss) on investments and foreign currency ...... $6,687,468 $(8,202,144)
---------- -----------
Increase (decrease) in net assets from operations ............................... $9,911,475 $(1,532,053)
========== ===========
</TABLE>
<TABLE>
<CAPTION>
World Zero
Total Coupon
Return Series
Series 2000 Portfolio
---------- --------------
<S> <C> <C>
Net investment income:
Income --
Interest ........................................................................... $1,542,612 $231,696
Dividends .......................................................................... 638,955 --
Foreign taxes withheld ............................................................. (49,406) --
---------- --------
Total investment income ........................................................... $2,132,161 $231,696
---------- --------
Expenses --
Investment advisory fee ............................................................ $ 409,708 $ 9,326
Trustees' compensation ............................................................. 8,751 6,563
Administrative fee ................................................................. 6,646 430
Custodian fee ...................................................................... 62,391 6,183
Auditing fees ...................................................................... 71,020 5,255
Printing ........................................................................... 11,798 131
Legal fees ......................................................................... 1,613 1,032
Miscellaneous ...................................................................... 957 1,064
---------- --------
Total expenses .................................................................... $ 572,884 $ 29,984
Fees paid indirectly ............................................................... (3,965) (1,420)
Reduction of expenses by investment adviser ........................................ -- (9,477)
---------- --------
Net expenses ...................................................................... $ 568,919 $ 19,087
---------- --------
Net investment income ............................................................ $1,563,242 $212,609
---------- --------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................ $2,027,572 $ 15,490
Written option transactions ........................................................ (42,742) --
Futures contracts .................................................................. -- --
Foreign currency transactions ...................................................... (254,541) --
---------- --------
Net realized gain (loss) on investments and foreign currency transactions ......... $1,730,289 $ 15,490
---------- --------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................ $3,625,463 $ 24,136
Written options .................................................................... 121,152 --
Futures contracts .................................................................. -- --
Translation of assets and liabilities in foreign currencies ........................ 216,522 --
---------- --------
Net unrealized gain (loss) on investments and foreign currency translation ........ $3,963,137 $ 24,136
---------- --------
Net realized and unrealized gain (loss) on investments and foreign currency ...... $5,693,426 $ 39,626
---------- --------
Increase (decrease) in net assets from operations ............................... $7,256,668 $252,235
========== ========
</TABLE>
See notes to financial statements
27
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1997
<TABLE>
<CAPTION>
Government High
Securities Yield
Series Series
----------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
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 on investments and foreign currency translation ........... 9,256,148 2,792,621
------------- -------------
Increase 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 Trust 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>
International Money
Growth and Market
Income Series Series
--------------- -----------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ......................................................... $ 546,178 $ 19,348,059
Net realized gain (loss) on investments and foreign currency transactions ..... 1,166,181 --
Net unrealized gain on investments and foreign currency translation ........... 1,064,743 --
----------- -------------
Increase in net assets from operations ....................................... $ 2,777,102 $ 19,348,059
----------- -------------
Distributions declared to shareholders --
From net investment income .................................................... $ (423,484) $ (19,348,059)
From net realized gain on investments and foreign currency transactions ....... (95,794) --
----------- -------------
Total distributions declared to shareholders ................................. $ (519,278) $ (19,348,059)
----------- -------------
Net increase (decrease) in net assets from Trust share transactions ............ $13,400,696 $ (69,105,092)
----------- -------------
Total increase (decrease) in net assets ..................................... $15,658,520 $ (69,105,092)
Net assets:
At beginning of year .......................................................... 35,709,583 409,165,326
----------- -------------
At end of year ................................................................ $51,368,103 $ 340,060,234
=========== =============
Accumulated undistributed net investment income included in net assets
at end of year ................................................................ $ 273,651 $ --
=========== =============
</TABLE>
<TABLE>
<CAPTION>
World
Asset World
Allocation Governments
Series Series
---------------- ----------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
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 Trust 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,
Series 2000 Portfolio
------------ ---------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
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 Trust 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
28
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1996
<TABLE>
<CAPTION>
Government High
Securities Yield
Series Series
------------- -------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ............................................................... $ 25,438,222 $ 15,046,156
Net realized gain (loss) on investments and foreign currency transactions ........... (2,503,740) 1,384,999
Net unrealized gain (loss) on investments and foreign currency translation .......... (16,642,829) 3,497,778
------------- -------------
Increase in net assets from operations ............................................. $ 6,291,653 $ 19,928,933
------------- -------------
Distributions declared to shareholders --
From net investment income .......................................................... $ (22,253,356) $ (12,135,750
------------- -------------
Total distributions declared to shareholders ...................................... $ (22,253,356) $ (12,135,750
------------- -------------
Net increase in net assets from Trust share transactions ............................. $ 30,220,653 $ 34,904,919
------------- -------------
Total increase in net assets ...................................................... $ 14,258,950 $ 42,698,102
------------- -------------
Net assets:
At beginning of year ................................................................ 368,847,960 153,800,155
------------- -------------
At end of year ...................................................................... $ 383,106,910 $ 196,498,257
============= =============
Accumulated undistributed net investment income included in net assets at end of year $ 25,296,723 $ 15,005,880
============= =============
<CAPTION>
International
Growth and Money
Income Market
Series Series
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ............................................................... $ 521,020 $ 15,990,553
Net realized gain (loss) on investments and foreign currency transactions ........... (34,218) --
Net unrealized gain (loss) on investments and foreign currency translation .......... 462,310 --
----------- -------------
Increase in net assets from operations ............................................. $ 949,112 $ 15,990,553
----------- -------------
Distributions declared to shareholders --
From net investment income .......................................................... $ -- $ (15,990,553)
----------- -------------
Total distributions declared to shareholders ...................................... $ -- $ (15,990,553)
----------- -------------
Net increase in net assets from Trust share transactions ............................. $27,581,643 $ 126,411,218
----------- -------------
Total increase in net assets ...................................................... $28,530,755 $ 126,411,218
----------- -------------
Net assets:
At beginning of year ................................................................ 7,178,828 282,754,108
----------- -------------
At end of year ...................................................................... $35,709,583 $ 409,165,326
=========== =============
Accumulated undistributed net investment income included in net assets at end of year $ 391,197 $ --
=========== =============
</TABLE>
<TABLE>
<CAPTION>
World
Asset World
Allocation Governments
Series Series
------------ -------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ................................................................... $ 1,477,075 $ 8,742,832
Net realized gain (loss) on investments and foreign currency transactions ............... 3,345,414 (7,775,092)
Net unrealized gain (loss) on investments and foreign currency translation .............. 2,569,102 5,531,505
------------ -------------
Increase in net assets from operations ................................................. $ 7,391,591 $ 6,499,245
------------ -------------
Distributions declared to shareholders --
From net investment income .............................................................. $ (458,860) $ (20,261,198)
From net realized gain on investments and foreign currency transactions ................. (864,253) --
------------ -------------
Total distributions declared to shareholders .......................................... $ (1,323,113) $ (20,261,198)
------------ -------------
Net increase (decrease) in net assets from Trust share transactions ...................... $ 45,083,914 $ 3,039,193
------------ -------------
Total increase (decrease) in net assets ............................................... $ 51,152,392 $ (10,722,760)
Net assets:
At beginning of year .................................................................... 25,863,393 152,487,192
------------ -------------
At end of year .......................................................................... $ 77,015,785 $ 141,764,432
============ =============
Accumulated undistributed net investment income included in net assets at end of year .... $ 1,592,920 $ 4,976,757
============ =============
<CAPTION>
World Zero
Total Coupon
Return Series,
Series 2000 Portfolio
----------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations --
Net investment income ................................................................... $ 863,604 $ 230,919
Net realized gain (loss) on investments and foreign currency transactions ............... 514,043 (3,785)
Net unrealized gain (loss) on investments and foreign currency translation .............. 2,454,550 (145,491)
----------- ----------
Increase in net assets from operations ................................................. $ 3,832,197 $ 81,643
----------- ----------
Distributions declared to shareholders --
From net investment income .............................................................. $ (432,723) $ (168,674)
From net realized gain on investments and foreign currency transactions ................. -- --
----------- ----------
Total distributions declared to shareholders .......................................... $ (432,723) $ (168,674)
----------- ----------
Net increase (decrease) in net assets from Trust share transactions ...................... $20,452,480 $ (191,783)
----------- ----------
Total increase (decrease) in net assets ............................................... $23,851,954 $ (278,814)
Net assets:
At beginning of year .................................................................... 13,785,938 4,615,856
----------- ----------
At end of year .......................................................................... $37,637,892 $4,337,042
=========== ==========
Accumulated undistributed net investment income included in net assets at end of year .... $ 769,012 $ 230,891
=========== ==========
</TABLE>
See notes to financial statements
29
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights
<TABLE>
<CAPTION>
Government Securities Series
------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ............................ $ 12.8672 $ 13.3900 $ 12.1219 $ 13.0951 $ 13.0059
--------- --------- --------- --------- ---------
Income from investment operations# --
Net investment income .......................................... $ 0.8109 $ 0.8445 $ 0.8311 $ 0.6366 $ 0.5742
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................. 0.2490 (0.6620) 1.2183 (0.9238) 0.5220
--------- --------- --------- --------- ---------
Total from investment operations ............................. $ 1.0599 $ 0.1825 $ 2.0494 $ (0.2872) $ 1.0962
--------- --------- --------- --------- ---------
Less distributions declared to shareholders --
From net investment income ..................................... $ (0.8865) $ (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 ................. $ (0.8865) $ (0.7053) $ (0.7813) $ (0.6860) $ (1.0070)
--------- --------- --------- --------- ---------
Net asset value -- end of year .................................. $ 13.0406 $ 12.8672 $ 13.3900 $ 12.1219 $ 13.0951
========= ========= ========= ========= =========
Total return[dbldag] ............................................ 8.72% 1.65% 17.66% (2.21)% 8.70%
Ratios (to average net assets)/Supplemental data:
Expenses## ..................................................... 0.63% 0.63% 0.63% 0.62% 0.63%
Net investment income .......................................... 6.38% 6.60% 6.59% 6.01% 5.92%
Portfolio turnover .............................................. 182% 57% 80% 90% 96%
Net assets at end of year (000 omitted) ......................... $ 387,732 $ 383,107 $ 368,848 $347,150 $310,521
</TABLE>
<TABLE>
<CAPTION>
High Yield Series
------------------------------------------------------------------
Year Ended December 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ............................ $ 9.2131 $ 8.9222 $ 8.1860 $ 9.1120 $ 8.3279
--------- --------- --------- -------- --------
Income from investment operations# --
Net investment income .......................................... $ 0.8206 $ 0.8012 $ 0.7891 $ 0.8226 $ 0.5915
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ............................. 0.3319 0.2131 0.5494 (1.0387) 0.8242
--------- --------- --------- -------- --------
Total from investment operations ............................. $ 1.1525 $ 1.0143 $ 1.3385 $(0.2161) $ 1.4157
--------- --------- --------- -------- --------
Less distributions from net investment income ................... $ (0.6548) $ (0.7234) $ (0.6023) $(0.7099) $(0.6316)
--------- --------- --------- -------- --------
Net asset value -- end of year .................................. $ 9.7108 $ 9.2131 $ 8.9222 $ 8.1860 $ 9.1120
========= ========= ========= ======== ========
Total return[dbldag] ............................................ 13.24% 12.12% 16.93% (2.16)% 17.68%
Ratios (to average net assets)/Supplemental data:
Expenses## ..................................................... 0.84% 0.84% 0.87% 0.86% 0.88%
Net investment income .......................................... 8.70% 9.01% 9.17% 8.94% 8.76%
Portfolio turnover .............................................. 130% 88% 66% 82% 53%
Net assets at end of year (000 omitted) ......................... $ 275,207 $ 196,498 $ 153,800 $102,194 $ 97,884
</TABLE>
# 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.).
If the charges had been included, the results would have been lower.
See notes to financial statements
30
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
International Growth and
Income Series
-----------------------------------------------
Year Ended December 31,
------------------------ Period Ended
1997 1996 December 31, 1995**
-------- -------- -------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year .............................................. $10.6247 $10.1282 $10.0000****
-------- -------- --------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.1356 $ 0.2326 $ 0.0295
Net realized and unrealized gain on investments and foreign currency transactions 0.5497 0.2639 0.0987
-------- -------- --------
Total from investment operations ............................................... $ 0.6853 $ 0.4965 $ 0.1282
-------- -------- --------
Less distributions declared to shareholders --
From net investment income ....................................................... $(0.1124) $ -- $ --
From net realized gain on investments and foreign currency transactions .......... 0.0254) -- --
-------- -------- --------
Total distributions declared to shareholders .................................... $(0.1378) $ -- $ --
-------- -------- --------
Net asset value -- end of year .................................................... $11.1722 $10.6247 $10.1282
======== ======== ========
Total return[dbldag] .............................................................. 6.53% 4.84% 1.30%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.22% 0.97% 1.50%+
Net investment income ............................................................ 1.24% 2.21% 1.64%+
Portfolio turnover ................................................................ 194% 51% --
Average commission rate### ........................................................ $ 0.0289 $ 0.0173 --
Net assets at end of year (000 omitted) ........................................... $ 51,368 $ 35,710 $ 7,179
</TABLE>
** 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.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Expenses are calculated without reduction for fees paid indirectly.
### Average commission rate is calculated for fiscal years beginning on or
after September 1, 1995.
[dbldag] The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.)
and Sun Life (N.Y.). Inclusion of these charges would reduce the total
return figures for all periods shown. [sec]The investment adviser
voluntarily waived all or a portion of its advisory fee for the
International Growth and 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>
Year Ended Period Ended
December 31, 1996 December 31, 1995**
------------------- --------------------
<S> <C> <C>
Net investment income .......... $0.2101 $0.0119
Ratios (to average net assets):
Expenses## .................... 1.16% 2.48%+
Net investment income ......... 2.02% 0.66%+
</TABLE>
See notes to financial statements
31
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Money Market Series
----------------------------------------------------------------
Year Ended December 31,
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each year): 1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
Net asset value -- beginning of year ......................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- --------- --------- ---------
Income from investment operations# -- ........................ $ 0.0495 $ 0.0483 $ 0.0520 $ 0.0363 $ 0.0256
--------- --------- --------- --------- ---------
Less distributions from net investment income ................ $ (0.0495) $ (0.0483) $ (0.0520) $ (0.0363) $ (0.0256
--------- --------- --------- --------- ---------
Net asset value -- end of year ............................... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
========= ========= ========= ========= =========
Total return[dbldag] ......................................... 5.06% 4.95% 5.44% 3.69% 2.59%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................. 0.57% 0.56% 0.59% 0.58% 0.58%
Net investment income ....................................... 4.94% 4.82% 5.30% 3.74% 2.60%
Net assets at end of year (000 omitted) ...................... $ 340,060 $ 409,165 $ 282,754 $ 252,175 $ 142,464
</TABLE>
<TABLE>
<CAPTION>
World Asset Allocation Series
---------------------------------------
Year Ended December 31,
---------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year): 1997 1996 1995
--------- -------- --------
Net asset value -- beginning of year .............................................. $ 13.7794 $12.2250 $10.0579
--------- -------- --------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.4412 $ 0.3731 $ 0.4205
Net realized and unrealized gain on investments and foreign currency transactions 1.0178 1.5563 1.7540
--------- -------- --------
Total from investment operations ............................................... $ 1.4590 $ 1.9294 $ 2.1745
--------- -------- --------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.2242) $(0.1300) $(0.0074)
From net realized gain on investments and foreign currency transactions .......... ( 0.4765) (0.2450) --
--------- -------- --------
Total distributions declared to shareholders ................................... $ (0.7007) $(0.3750) $(0.0074)
--------- -------- --------
Net asset value -- end of year .................................................... $ 14.5377 $13.7794 $12.2250
========= ======== ========
Total return[dbldag] .............................................................. 10.87% 16.04% 21.56%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.92% 0.94% 0.67%
Net investment income ............................................................ 3.06% 2.84% 3.70%
Portfolio turnover ................................................................ 162% 154% 146%
Average commission rate### ........................................................ $ 0.0260 $ 0.0233 $ --
Net assets at end of year (000 omitted) ........................................... $ 122,912 $ 77,016 $ 25,863
</TABLE>
<TABLE>
<CAPTION>
World Asset Allocation
Series
----------------------
Period Ended
Per share data (for a share outstanding throughout each year): December 31, 1994**
----------------------
<S> <C>
Net asset value -- beginning of year .............................................. $10.0000****
--------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0220
Net realized and unrealized gain on investments and foreign currency transactions 0.0359
--------
Total from investment operations ............................................... $ 0.0579
--------
Less distributions declared to shareholders --
From net investment income ....................................................... $ --
From net realized gain on investments and foreign currency transactions .......... --
--------
Total distributions declared to shareholders ................................... $ --
--------
Net asset value -- end of year .................................................... $10.0579
========
Total return[dbldag] .............................................................. 0.60%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.50%+
Net investment income ............................................................ 3.13%+
Portfolio turnover ................................................................ 2%
Average commission rate### ........................................................ $ --
Net assets at end of year (000 omitted) ........................................... $ 3,003
</TABLE>
** 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.
+ 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.
### Average commission rate is calculated for fiscal years beginning on or
after September 1, 1995.
[dbldag] The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.)
and Sun Life (N.Y.).
Inclusion of these charges would reduce the total return figures for
all periods shown.
[sec] The investment adviser voluntarily waived all or a portion of its
advisory fee for the World Asset Allocation 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>
World Asset Allocation Series
------------------------------------------
Year Ended Period Ended
December 31, 1995 December 31, 1994**
------------------- --------------------
<S> <C> <C>
Net investment income .......... $ 0.3716 $ 0.0041
Ratios (to average net assets):
Expenses## .................... 1.11% 4.05%+
Net investment income ......... 3.27% 0.58%+
</TABLE>
See notes to financial statements
32
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Governments Series
------------------------
Year Ended December 31,
------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each year): 1997 1996
-------- --------
Net asset value -- beginning of year ........................................... $11.2582 $12.4866
-------- --------
Income from investment operations# --
Net investment income ......................................................... $ 0.5770 $ 0.6882
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ................................................................. (0.6754) (0.2081)
-------- --------
Total from investment operations ............................................ $(0.0984) $ 0.4801
-------- --------
Less distributions declared to shareholders --
From net investment income .................................................... $(0.3742) $(1.7085)
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 ................................ $(0.4351) $(1.7085)
-------- --------
Net asset value -- end of year ................................................. $10.7247 $11.2582
======== ========
Total return[dbldag] ........................................................... (0.76)% 4.66%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................................... 0.91% 0.90%
Net investment income ......................................................... 5.43% 6.00%
Portfolio turnover ............................................................. 344% 390%
Net assets at end of year (000 omitted) ........................................ $110,386 $141,764
</TABLE>
<TABLE>
<CAPTION>
World Governments Series
------------------------------------
Year Ended December 31,
------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year): 1995 1994 1993
-------- -------- --------
Net asset value -- beginning of year ........................................... $11.3769 $13.0212 $11.7966
-------- -------- --------
Income from investment operations# --
Net investment income ......................................................... $ 0.8031 $ 0.6095 $ 0.5352
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ................................................................. 0.9511 (1.2295) 1.5819
-------- -------- --------
Total from investment operations ............................................ $ 1.7542 $(0.6200) $ 2.1171
-------- -------- --------
Less distributions declared to shareholders --
From net investment income .................................................... $(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 ................................ $(0.6445) $(1.0243) $(0.8925)
-------- -------- --------
Net asset value -- end of year ................................................. $12.4866 $11.3769 $13.0212
======== ======== ========
Total return[dbldag] ........................................................... 15.69% (4.46)% 18.84%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................................... 0.89% 0.90% 0.95%
Net investment income ......................................................... 6.67% 6.06% 6.01%
Portfolio turnover ............................................................. 329% 269% 173%
Net assets at end of year (000 omitted) ........................................ $152,487 $139,155 $135,085
</TABLE>
# 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
33
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Total Return Series
--------------------------------------
Year Ended December 31,
--------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year): 1997 1996 1995
--------- --------- ---------
Net asset value -- beginning of year .............................................. $ 13.2657 $ 11.8346 $ 10.0405
--------- --------- ---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.3979 $ 0.4131 $ 0.4437
Net realized and unrealized gain on investments and foreign currency transactions 1.3759 1.2480 1.3564
--------- --------- ---------
Total from investment operations ............................................... $ 1.7738 $ 1.6611 $ 1.8001
--------- --------- ---------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.1756) $ (0.2300) $ (0.0060)
From net realized gain on investments and foreign currency transactions .......... ( 0.1668) -- --
--------- --------- ---------
Total distributions declared to shareholders .................................... $ (0.3424) $ (0.2300) $ (0.0060)
--------- --------- ---------
Net asset value -- end of year .................................................... $ 14.6971 $ 13.2657 $ 11.8346
========= ========= =========
Total return[dbldag] .............................................................. 13.61% 14.33% 17.89%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.04% 0.96% 0.77%
Net investment income ............................................................ 2.85% 3.33% 4.01%
Portfolio turnover ................................................................ 171% 148% 146%
Average commission rate### ........................................................ $ 0.0250 $ 0.0229 $ --
Net assets at end of year (000 omitted) ........................................... $ 71,823 $ 37,638 $ 13,786
</TABLE>
<TABLE>
<CAPTION>
World Total Return Series
-------------------------
Period Ended
Per share data (for a share outstanding throughout each year): December 31, 1994**
-------------------------
<S> <C>
Net asset value -- beginning of year .............................................. $ 10.0000***
---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0247
Net realized and unrealized gain on investments and foreign currency transactions 0.0158
---------
Total from investment operations ............................................... $ 0.0405
---------
Less distributions declared to shareholders --
From net investment income ....................................................... $ --
From net realized gain on investments and foreign currency transactions .......... --
---------
Total distributions declared to shareholders .................................... $ --
---------
Net asset value -- end of year .................................................... $ 10.0405
=========
Total return[dbldag] .............................................................. 0.40%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.50%+
Net investment income ............................................................ 3.31%+
Portfolio turnover ................................................................ 1%
Average commission rate### ........................................................ $ --
Net assets at end of year (000 omitted) ........................................... $ 1,384
</TABLE>
** 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.
+ 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.
### Average commission rate is calculated for fiscal years beginning on or
after September 1, 1995.
[dbldag] The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.)
and Sun Life (N.Y.).
Inclusion of these charges would reduce the total return figures for
all periods shown.
[sec] The investment adviser voluntarily waived all or a portion of its
advisory fee for the 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:
Year Ended Period Ended
December 31, 1995 December 31, 1994**
----------------- -------------------
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)%+
See notes to financial statements
34
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Zero Coupon Series, 2000 Portfolio
-----------------------------------------------------
Year Ended December 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $ 8.8822 $ 9.0619 $ 7.9573 $11.1167 $11.0966
-------- -------- -------- -------- --------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.4949 $ 0.2094 $ 0.4340 $ 0.3807 $ 0.6921
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. 0.0896 (0.0528) 1.1038 (1.1094) 0.8997
-------- -------- -------- -------- --------
Total from investment operations ........................................ $ 0.5845 $ 0.1566 $ 1.5378 $(0.7287) $ 1.5918
-------- -------- -------- -------- --------
Less distributions --
From net investment income ................................................ $(0.5571) $(0.3363) $(0.4332) $(0.6250) $(0.8915)
From net realized gain on investments ..................................... -- -- -- (1.8057) (0.6802)
-------- -------- -------- -------- --------
Total distributions ..................................................... $(0.5571) $(0.3363) $(0.4332) $(2.4307) $(1.5717)
-------- -------- -------- -------- --------
Net asset value -- end of year ............................................. $ 8.9096 $ 8.8822 $ 9.0619 $ 7.9573 $11.1167
======== ======== ======== ======== ========
Total return[dbldag] ....................................................... 6.98% 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% 0.50%
Net investment income ..................................................... 5.67% 5.20% 5.16% 4.93% 5.48%
Portfolio turnover ......................................................... 0% 2% 27% 12% 65%
Net assets at end of year (000 omitted) .................................... $ 3,614 $ 4,337 $ 4,616 $ 3,280 $ 3,547
</TABLE>
# 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 waived all or a portion of its
advisory fee for the Zero Coupon Series, 2000 Portfolio 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:
Year Ended Year Ended
December 31, 1997 December 31, 1996
----------------- -----------------
Net investment income .......... $ 0.4728 $ 0.2045
Ratios (to average net assets):
Expenses## .................... 0.80% 0.62%
Net investment income ......... 5.38% 5.08%
See notes to financial statements
35
<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 separate Series (the Series) of shares:
Capital Appreciation Series, Conservative Growth Series, Emerging Growth Series,
Government Securities Series*, High Yield Series*, Managed Sectors Series,
MFS/Foreign & Colonial Emerging Markets Equity Series, International Growth
Series, International Growth and Income Series*, Money Market Series*, Research
Series, Research Growth and Income Series, Total Return Series, Utilities
Series, Value Series, World Asset Allocation Series*, World Governments Series*,
World Growth Series, World Total Return Series*, and Zero Coupon Series, 2000
Portfolio*. The High Yield Series, World Asset Allocation Series, World
Governments 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 interest rate
swaps, 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 constitutes fair value. The Trust's use
of amortized cost is subject to the Trust's compliance with certain conditions
as specified under Rule 2a-7 of the Investment Company Act of 1940. Futures
contracts, options, and options on futures contracts listed on commodities
exchanges are 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 securities purchased in a repurchase transaction be transferred
to the custodian in a manner sufficient to enable the Trust to obtain those
securities in the event of a default under the repurchase agreement. The
investment advisor monitors, on a daily basis, the value of the securities
transferred to ensure that the value, including accrued interest, of the
securities under each repurchase agreement is greater than amounts owed to the
Series under each such repurchase agreement. Certain Series of the Trust, along
with other affiliated entities of Massachusetts Financial Services Company
(MFS), may utilize a joint trading account for the purpose of entering into one
or more repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - Certain Series of the Trust may also 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.
36
<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. Upon entering such
contracts, the Series is required to deposit either in cash or securities an
amount equal to a certain percentage of the contract amount. Subsequent payments
are made or received by the Series each day, depending on the daily fluctuations
in the value of the underlying security, and are recorded for financial
statement purposes as unrealized gains or losses by the 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 for financial statement purposes 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.
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.
As appropriate based on its investments, certain Series of the Trust use the
effective interest method for reporting interest income on payment-in-kind (PIK)
bonds. Legal fees and other related expenses incurred to preserve and protect
the value of a security owned are added to the cost of the security; other legal
fees are expensed. Capital infusions, which are generally non-recurring 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' average daily 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 or portfolio of the Trust intends to
comply with the provisions of the Internal Revenue Code (the Code) applicable to
regulated investment companies and to distribute to shareholders all of its
taxable income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series files a tax
return annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Series' tax return. 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. For the year ended December 31, 1997, the following amounts were
reclassified due to permanent differences between book and tax accounting for
currency transactions and paydown securities. These changes had no effect on the
net assets or net asset value per share.
37
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Government High International Money
Securities Yield Growth and Market
Series Series Income Series Series
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease):
Paid-in capital ......................................................... $ 3,208 $ 148,896 $ 586 $ --
Accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions .......................................... 159,630 (176,626) 239,654 --
Accumulated undistributed net investment income ......................... (162,838) 27,730 (240,240) --
</TABLE>
<TABLE>
<CAPTION>
World Asset World World Zero Coupon
Allocation Governments Total Return Series, 2000
Series Series Series Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Increase (decrease):
Paid-in capital ......................................................... $ -- $ 20 $ -- $ --
Accumulated undistributed net realized gain (loss) on investments and
foreign currency transactions .......................................... (55,458) 6,727,673 163,660 --
Accumulated undistributed net investment income ......................... 55,458 (6,727,693) (163,660) --
</TABLE>
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 2001 2002 2003
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Government Securities Series ............... $11,390,846 $ -- $ -- $ -- $ -- $7,137,094 $78,697
High Yield Series .......................... 2,859,465 -- -- -- -- -- --
Money Market Series ........................ 1,285 -- -- -- -- 755 --
World Government Series .................... 78,143 -- -- -- -- -- --
Zero Coupon Series, 2000 Portfolio ......... 31,191 -- -- -- -- 6,954 20,451
</TABLE>
<TABLE>
<CAPTION>
Portion Expiring December 31,
-----------------------------
2004 2005
- ----------------------------------------------------------------------------
<S> <C> <C>
Government Securities Series ............... $1,721,078 $2,453,977
High Yield Series .......................... 701,562 2,157,903
Money Market Series ........................ 530 --
World Government Series .................... -- 78,143
Zero Coupon Series, 2000 Portfolio ......... 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 expenses in excess of the expense limitation indicated below,
calculated based on the average daily net assets of each Series for the fiscal
year. Investment advisory fees and expense limitations are as follows:
<TABLE>
<CAPTION>
Investment Expense
Advisory Fees Limitations
------------------------------------------------------------------------------
<S> <C> <C>
Government Securities Series ................... 0.55% 1.25%
High Yield Series .............................. 0.75% 1.25%
International Growth and Income Series ......... 0.975%* N/A
Money Market Series ............................ 0.50% 0.60%
World Asset Allocation Series .................. 0.75%* N/A
World Government* Series ....................... 0.75%* 1.25%
World Total Return Series ...................... 0.75%* N/A
Zero Coupon Series, 2000 Portfolio ............. 0.25% 0.50%
</TABLE>
*The advisory fee for the World Asset Allocation 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 assumed expenses for the period
ended December 31, 1997, amounting to $9,477 for the Zero Coupon Series, 2000
Portfolio.
Administrator - Effective March 1, 1997, 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 remuneration 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 High International Money
Securities Yield Growth and Market
Series Series Income Series Series+
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases
U.S. government securities ........................... $658,316,825 $ -- $ -- $12,587,553,348
============ ============ =========== ===============
Investments (non-U.S. government securities) ......... $ -- $349,915,957 $92,511,824 $ 1,220,826,850
============ ============ =========== ===============
Sales
U.S. government securities ........................... $667,605,324 $ -- $ -- $12,648,739,000
============ ============ =========== ===============
Investments (non-U.S. government securities) ......... $ -- $281,757,478 $77,567,493 $ 1,249,365,000
============ ============ =========== ===============
</TABLE>
38
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
World Asset World World Zero Coupon
Allocation Governments Total Return Series,
Series Series Series 2000 Portfolio
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases
U.S. government securities ........................... $ 11,900,781 $180,187,239 $21,929,472 $ --
============ ============ =========== =========
Investments (non-U.S. government securities) ......... $131,909,657 $218,716,767 $88,076,843 $ --
============ ============ =========== =========
Sales
U.S. government securities ........................... $ 11,945,625 $142,310,144 $13,300,013 $ 991,884
============ ============ =========== =========
Investments (non-U.S. government securities) ......... $106,572,594 $280,445,248 $68,018,200 $ --
============ ============ =========== =========
</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>
International
Government High Growth and Money
Securities Yield Income Market
Series Series Series Series
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost ....................................... $372,993,677 $262,463,849 $ 50,848,657 $337,928,347
============ ============ ============ ============
Gross unrealized appreciation ........................ $ 12,255,214 $ 11,548,793 $ 3,882,276 $ --
Gross unrealized depreciation ........................ (1,249,461) (3,861,643) (2,499,614) --
------------ ------------ ------------ ------------
Net unrealized appreciation ......................... $ 11,005,753 $ 7,687,150 $ 1,382,662 $ --
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
World
Asset World World Zero Coupon
Allocation Government Total Return Series,
Series Series Series 2000 Portfolio
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost ...................................... $115,262,387 $108,296,641 $ 65,004,449 $3,466,838
============ ============ ============ ==========
Gross unrealized appreciation ....................... $ 9,421,234 $ 1,147,169 $ 8,190,135 $ 140,237
Gross unrealized depreciation ....................... (4,450,864) (1,461,966) (1,221,017) --
------------ ------------ ------------ ----------
Net unrealized appreciation (depreciation) ......... $ 4,970,370 $ (314,797) $ 6,969,118 $ 140,237
============ ============ ============ ==========
</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 years ended December 31, 1997, and
December 31, 1996, are presented below.
<TABLE>
<CAPTION>
Government Securities Series
Year ended Year ended
December 31, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................................................ 6,269,218 $ 79,600,457 8,676,674 $ 112,083,996
Shares issued to shareholders in reinvestment of distributions ......... 2,083,486 25,293,515 1,815,119 22,253,356
Shares reacquired ......................................................(8,394,026) (106,557,412) (8,264,354) (104,116,699)
---------- ------------- ---------- -------------
Net increase (decrease) ............................................... (41,322) $ (1,663,440) 2,227,439 $ 30,220,653
========== ============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
High Yield Series
Year ended Year ended
December 31, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................................................ 19,435,303 $ 181,713,288 14,159,075 $ 125,642,522
Shares issued to shareholders in reinvestment of distributions ......... 1,705,882 15,079,993 1,441,300 12,135,750
Shares reacquired ...................................................... (14,128,975) (131,893,857) (11,510,196) (102,873,353)
----------- ------------- ----------- -------------
Net increase .......................................................... 7,012,210 $ 64,899,424 4,090,179 $ 34,904,919
=========== ============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
International Growth and Income Series
Year ended Year ended
December 31, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ............................................................ 2,177,646 $ 23,608,560 3,257,415 $ 7,169,348
Shares issued to shareholders in reinvestment of distributions ......... 48,440 519,278 -- --
Shares reacquired ...................................................... (989,238) (10,727,142) (605,202) (1,575,255)
--------- ------------ --------- -----------
Net increase .......................................................... 1,236,848 $ 13,400,696 2,652,213 $ 5,594,093
========= ============ ========= ===========
</TABLE>
+Purchases and sales of investments for Money Market Series consist solely of
short-term obligations.
39
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Money Market Series
Year ended Year ended
December 31, 1997 December 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................................................... 795,411,183 $795,411,183 753,646,599 $ 753,646,599
Shares issued in connection with the acquisition of the
Sun Growth Variable Annuity Fund .................................. -- -- 666,549 666,549
Shares issued to shareholders in reinvestment of distributions ...... 19,348,059 19,348,059 15,990,553 15,990,553
Shares reacquired ................................................... (883,864,334) (883,864,334) (643,892,483) (643,892,483)
------------ ------------ ------------ -------------
Net increase (decrease) ............................................ (69,105,092) $(69,105,092) 126,411,218 $ 126,411,218
============ ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
World Asset Allocation Series
Year ended Year ended
December 31, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ......................................................... 3,321,881 $ 47,471,104 3,944,274 $ 51,249,975
Shares issued to shareholders in reinvestment of distributions ...... 345,266 4,768,120 102,487 1,323,113
Shares reacquired ................................................... (801,606) (11,485,960) (573,164) (7,489,174)
--------- ------------ --------- ------------
Net increase ....................................................... 2,865,541 $ 40,753,264 3,473,597 $ 45,083,914
========= ============ ========= ============
</TABLE>
<TABLE>
<CAPTION>
World Governments Series
Year ended Year ended
December 31, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................................ 943,520 $ 10,115,726 1,205,318 $ 13,862,543
Shares issued to shareholders in reinvestment of distributions ..... 477,929 5,018,251 1,907,834 20,261,198
Shares reacquired .................................................. (3,720,826) (39,962,015) (2,733,139) (31,084,548)
---------- ------------ ---------- ------------
Net increase (decrease) ........................................... (2,299,377) $(24,828,038) 380,013 $ 3,039,193
========== ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
World Total Return Series
Year ended Year ended
December 31, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................................ 2,439,728 $33,780,337 1,881,285 $23,046,802
Shares issued to shareholders in reinvestment of distributions ..... 95,674 1,281,077 36,211 432,723
Shares reacquired .................................................. (485,744) (6,851,705) (245,154) (3,027,045)
--------- ----------- --------- -----------
Net increase ...................................................... 2,049,658 $28,209,709 1,672,342 $20,452,480
========= =========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Zero Coupon Series, 2000 Portfolio
Year ended Year ended
December 31, 1997 December 31, 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ........................................................ 288,656 $ 2,515,659 21,232 $ 188,206
Shares issued to shareholders in reinvestment of distributions ..... 27,424 230,910 19,961 168,674
Shares reacquired .................................................. (398,721) (3,490,848) (62,281) (548,663)
-------- ------------ ------- ----------
Net decrease ...................................................... (82,641) $ (744,279) (21,088) $ (191,783)
======== ============ ======= ==========
</TABLE>
40
<PAGE>
Notes to Financial Statements -- continued
(6) Financial Instruments
Certain Series of the Trust may trade financial instruments with
off-balance-sheet risk in the normal course of their investing activities and to
assist in managing exposure to market risks such as interest rates and foreign
currency exchange rates. These financial instruments include written options,
forward foreign currency exchange contracts, and futures contracts.
The notional or contractual amounts of these instruments represent the
investment the Series have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at December 31, 1997, is shown on
the following pages.
Written Option Transactions -- International Growth & Income Series
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Calls 1997 Puts
------------------------------- ----------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Swiss Francs/Deutsche Marks ................ 371 $ 1,125 824 $ 10,166
Japanese Government Bond Options ........... -- -- 156,000 10,432
Deutsche Marks/British Pounds .............. 547 2,097 566 7,297
Options written --
Australian Dollars ......................... 174 1,175 -- --
British Pounds ............................. -- -- 439 3,313
Deutsche Marks ............................. -- -- 1,217 2,041
Japanese Government Bond Options ........... 74,000 1,498 339,000 19,022
Japanese Yen ............................... 215,193 18,932 -- --
Options terminated in closing transactions --
Australian Dollars ......................... (174) (1,175) -- --
British Pounds ............................. -- -- (439) (3,313)
Deutsche Marks ............................. -- -- (1,217) (2,041)
Deutsche Marks/British Pounds .............. -- -- (566) (7,297)
Japanese Government Bond Options ........... (74,000) (1,498) (495,000) (29,454)
Japanese Yen ............................... (215,193) (18,932) -- --
Swiss Francs/Deutsche Marks ................ -- -- (824) (10,166)
Options exercised --
Options expired --
Swiss Francs/Deutsche Marks ................ (371) (1,125) -- --
Deutsche Marks/British Pounds .............. (547) (2,097) -- --
-------- --------- -------- --------
Outstanding, end of period -- $ -- -- $ --
======== ========= ======== ========
</TABLE>
At December 31, 1997, the International Growth & Income Series had sufficient
cash and/or securities at least equal to the value of the written options.
41
<PAGE>
Notes to Financial Statements -- continued
Written Option Transactions -- World Asset Allocation Series
- ------------------------------------------------------------
<TABLE>
<CAPTION>
1997 Calls 1997 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 Government Bonds ..................... -- $ 132,000 $ 12,640 --
Options written --
Australian Dollars ............................ 2,121 14,329 -- --
Canadian Dollars .............................. -- -- 16,608 276,801
Deutsche Marks ................................ -- -- 14,907 24,990
Deutsche Marks/British Pounds ................. 35,160 149,091 31,966 111,916
Finnish Marks/Deutsche Marks .................. -- -- 54,615 45,537
Japanese Government Bonds ..................... -- -- 35,000 3,357
Japanese Yen .................................. 5,617,675 727,437 2,708,209 202,669
Norwegian Krona/Deutsche Marks ................ -- -- 34,067 46,407
Swiss Francs/Deutsche Marks ................... 21,200 146,586 -- --
Options terminated in closing transactions --
Australian Dollars ............................ (2,121) (14,329) -- --
Deutsche Marks ................................ -- -- (14,907) (24,990)
Deutsche Marks/British Pounds ................. (14,930) (47,718) (31,966) (111,916)
Finnish Markkas/Deutsche Marks ................ -- -- (54,615) (45,537)
Japanese Government Bonds ..................... -- -- (167,000) (15,997)
Japanese Yen .................................. (3,103,406) (458,919) (1,284,371) (87,820)
Swiss Francs/Deutsche Marks ................... (5,448) (36,741) -- --
Options expired --
Norwegian Krona/Deutsche Marks ................ -- -- (34,067) (46,407)
Japanese Yen .................................. (1,091,133) (43,926) (611,583) (33,316)
---------- ----------- ----------- ---------
Outstanding, end of period ..................... 1,459,118 $ 435,810 828,863 $ 358,334
========== =========== =========== =========
Options outstanding at end of period consist of:
Canadian Dollars .............................. -- -- 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 -- --
---------- ----------- ----------- ---------
Outstanding, end of period 1,459,118 $ 435,810 828,863 $ 358,334
========== =========== =========== =========
</TABLE>
At December 31, 1997, the World Asset Allocation Series had sufficient cash
and/or securities at least equal to the value of the written options.
Written Option Transactions -- World Governments Series
- -------------------------------------------------------
<TABLE>
<CAPTION>
1997 Calls 1997 Puts
--------------------------------- -----------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Deutsche Marks/British Pounds ................. 18,724 $ 71,744 39,219 $608,589
Swiss Francs/Deutsche Marks ................... 12,776 38,771 28,241 348,689
Options written --
Australian Dollars ............................ 3,272 22,102 -- --
Deutsche Marks ................................ -- -- 22,975 38,516
Italian Lire .................................. 11,179,772 45,692 11,866,913 46,720
Japanese Yen .................................. 6,860,056 890,373 -- --
Options terminated in closing transactions --
Deutsche Marks ................................ -- -- (22,975) (38,516)
Deutsche Marks/British Pounds ................. -- -- (39,219)
(608,589)
Italian Lire .................................. (11,179,772) (45,692) (11,866,913) (46,720)
Japanese Yen .................................. (5,492,951) (674,623) -- --
Swiss Francs/Deutsche Marks ................... -- -- (28,241)
(348,689)
Australian Dollars ............................ (3,272) (22,102) -- --
Options expired --
Deutsche Marks/British Pounds ................. (18,724) (71,744) -- --
Swiss Francs/Deutsche Marks ................... (12,776) (38,771) -- --
----------- --------- ----------- --------
Outstanding, end of period ..................... 1,367,105 $ 215,750 -- $ --
=========== ========= =========== ========
Options outstanding at end of period consist of:
Japanese Yen .................................. 1,367,105 $ 215,750 -- --
----------- --------- ----------- --------
Outstanding, end of period 1,367,105 $ 215,750 -- $ --
=========== ========= =========== ========
</TABLE>
At December 31, 1997, the World Governments Series had sufficient cash and/or
securities at least equal to the value of the written options.
42
<PAGE>
Notes to Financial Statements -- continued
Written Option Transactions -- World Total Return Series
- --------------------------------------------------------
<TABLE>
<CAPTION>
1997 Calls 1997 Puts
--------------------------------- -----------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Deutsche Marks/British Pounds ................. 1,747 $ 6,694 1,807 $23,292
Japanese Government Bonds ..................... -- -- 118,000 9,006
Swiss Francs/Deutsche Marks ................... 1,194 3,623 2,639 32,577
Options written --
Australian Dollars ............................ 1,541 $ 7,522 -- $ --
British Pounds ................................ -- -- 1,110 8,372
Deutsche Marks ................................ -- -- 2,851 4,779
Deutsche Marks/British Pounds ................. -- -- 2,042 4,294
Japanese Government Bonds ..................... -- -- 960,000 58,813
Japanese Yen .................................. 1,724,620 179,284 270,024 18,463
Japanese Yen/Deutsche Marks ................... 315,422 30,409 351,197 22,982
Options terminated in closing transactions --
Australian Dollars ............................ (1,541) $ (7,522) -- $ --
British Pounds ................................ -- -- (1,110) (8,372)
Deutsche Marks ................................ -- -- (2,851) (4,779)
Deutsche Marks/British Pounds ................. -- -- (3,849) (27,586)
Japanese Government Bonds ..................... -- -- (1,078,000) (67,819)
Japanese Yen .................................. (1,413,082) 130,119) (270,024) (18,463)
Japanese Yen/Deutsche Marks ................... -- -- (351,197) (22,982)
Swiss Francs/Deutsche Marks ................... -- -- (2,639) (32,577)
Options expired --
Swiss Francs/Deutsche Marks ................... (1,194) $ (3,623) -- $ --
Deutsche Marks/British Pounds ................. (1,747) (6,694) -- --
Japanese Yen/Deutsche Marks ................... (315,422) (30,409) -- --
---------- -------- ---------- --------
Outstanding, end of period ..................... 311,538 $ 49,165 -- $ --
========== ======== ========== ========
Options outstanding at end of period consist of:
Japanese Yen .................................. 311,538 $ 49,165 -- $ --
---------- -------- ---------- --------
Outstanding, end of period 311,538 $ 49,165 -- $ --
========== ======== ========== ========
</TABLE>
At December 31, 1997, the World Total Return Series had sufficient cash and/or
securities at least equal to the value of the written options.
43
<PAGE>
Notes to Financial Statements -- continued
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>
International Sales 1/07/98 - 5/15/98 CAD 2,181,463 $1,525,728 $ 1,559,570 $ 33,842
Growth & Income Series
1/07/98 - 5/15/98 CHF 839,140 578,977 593,363 14,386
1/07/98 DEM 755,511 420,554 421,885 1,331
1/07/98 ESP 16,369,306 107,628 112,977 5,349
3/16/98 FRF 15,700,000 2,620,817 2,729,818 109,001
1/07/98 GBP 148,081 243,534 244,763 1,229
3/16/98 JPY 480,000,000 3,731,040 4,400,965 669,925
---------- ----------- ----------
$9,228,278 $10,063,341 $ 835,063
========== =========== ==========
-----------------------------------------------------------------------------------------------------
Purchases 1/07/98 - 5/15/98 CAD 2,105,881 $1,472,733 $ 1,484,872 $ (12,139)
1/07/98 CHF 530,263 363,889 366,479 (2,590)
1/07/98 - 5/15/98 DEM 1,511,022 844,184 869,883 (25,699)
1/07/98 ESP 16,369,306 107,628 112,166 (4,538)
3/16/98 FRF 15,700,000 2,620,817 2,567,121 53,696
1/07/98 - 5/15/98 GBP 296,162 485,556 488,625 (3,069)
3/16/98 JPY 480,000,000 3,731,040 4,269,323 (538,283)
---------- ----------- ----------
$9,625,847 $10,158,469 $ (532,622)
========== =========== ==========
</TABLE>
At December 31, 1997, 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 $13,850 with Bankers Trust,
$36,585 with Merrill Lynch, $30,862 with Swiss Bank Corporation International,
and a net receivable of $34,312 with Deutsche Bank and $2,031 with First Boston.
44
<PAGE>
Notes to Financial Statements -- continued
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 Asset Allocation Series Sales 1/07/98 - 5/15/98 CAD 5,355,248 $ 3,748,451 $ 3,831,168 $ 82,717
1/07/98 - 5/15/98 CHF 11,798,739 8,169,471 8,150,536 (18,935)
1/07/98 - 5/15/98 DEM 23,391,100 13,064,798 13,260,314 195,516
1/07/98 ESP 643,725,632 4,232,496 4,284,820 52,324
1/07/98 - 5/15/98 FRF 26,310,669 4,390,527 4,485,708 95,181
1/07/98 GBP 2,033,458 3,344,219 3,363,339 19,120
1/07/98 - 5/15/98 JPY 3,898,854,519 30,118,856 32,576,500 2,457,644
5/15/98 NLG 9,117,876 4,536,708 4,549,838 13,130
1/07/98 SEK 46,401,306 5,851,622 5,866,825 15,203
----------- ----------- ------------
$77,457,149 $80,369,048 $ 2,911,900
=========== =========== ============
---------------------------------------------------------------------------------------------------
Purchases 1/07/98 CAD 2,677,624 $ 1,871,024 $ 1,861,076 $ 9,948
1/07/98 CHF 4,611,796 3,164,808 3,209,322 (44,514)
1/07/98 DEM 12,539,285 6,979,968 6,979,962 6
5/18/98 ESP 184,025,069 1,214,934 1,226,016 (11,082)
1/07/98 FRF 13,155,334 2,187,364 2,200,993 (13,629)
1/07/98 - 5/15/98 GBP 4,066,916 6,667,675 6,743,292 (75,617)
1/07/98 JPY 1,903,009,312 14,641,754 15,459,211 (817,457)
1/07/98 NLG 9,117,876 4,502,307 4,516,483 (14,176)
1/07/98 - 5/15/98 SEK 76,668,049 9,681,061 10,004,115 (323,054)
----------- ----------- ------------
$50,910,895 $52,200,470 $ (1,289,575)
=========== =========== ============
</TABLE>
Forward foreign currency exchange contract purchases and sales under master
netting agreements excluded above for World Asset Allocation Series amounted to
a net payable of $319,013 with Bankers Trust, $598,197 with Deutsche Bank,
$1,130,355 with Swiss Bank Corporation International, and a net receivable of
$969,003 with First Boston, $55,646 with Merrill Lynch. Closed forward currency
exchange contracts excluded above amount to a net receivable of $207,942 with
Goldman Sachs.
45
<PAGE>
Notes to Financial Statements -- continued
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 1/07/98 CAD 14,642,920 $ 10,231,930 $ 10,181,292 $ (50,638)
1/07/98 - 5/15/98 CHF 18,608,833 12,864,259 12,999,269 135,010
1/07/98 DEM 26,290,240 14,634,410 14,680,724 46,314
1/07/98 ESP 1,740,216,464 11,441,921 11,897,578 455,657
1/07/98 GBP 6,026,659 9,911,425 10,020,003 108,578
1/07/98 JPY 1,054,403,238 8,112,579 8,389,468 276,889
1/07/98 NLG 20,687 10,215 10,247 32
------------ ------------ ------------
$ 67,206,739 $ 68,178,581 $ 971,842
============ ============ ============
--------------------------------------------------------------------------------------------------------
Purchases 1/07/98 - 5/15/98 CAD 29,285,839 $ 20,498,872 $ 20,915,094 $ (416,222)
1/07/98 - 5/15/98 CHF 18,608,833 12,864,259 13,165,238 (300,979)
1/07/98 - 5/15/98 DEM 52,580,481 29,375,873 30,270,146 (894,273)
1/07/98 - 5/15/98 ESP 2,161,779,662 14,225,083 14,560,358 (335,275)
1/07/98 - 5/15/98 GBP 9,818,612 16,108,944 16,251,238 (142,294)
1/07/98 JPY 988,980,006 7,609,212 8,290,900 (681,688)
5/15/98 NLG 20,687 10,293 10,323 (30)
------------ ------------ ------------
$100,692,536 $103,463,297 $ (2,770,761)
============ ============ ============
</TABLE>
Forward foreign currency exchange contract purchases and sales under master
netting arrangements World Governments Series excluded above amounted to a net
payable of $676,633 with Swiss Bank Corporation International, and a net
receivable of $1,222,021 with Bankers Trust, $149,846 with Deutsche Bank,
$1,057,171 with First Boston, and $558,653 with Merrill Lynch.
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 Total Return Series Sales 5/15/98 CAD 284,457 $ 199,448 $ 198,228 $ (1,220)
5/15/98 CHF 1,754,075 1,221,459 1,239,218 17,759
1/07/98 DEM 10,455,417 5,819,987 5,836,989 17,002
1/07/98 FIM 7,545,164 1,386,899 1,414,109 27,210
1/07/98 JPY 104,544,557 804,366 817,137 12,771
1/07/98 NLG 3,213,185 1,586,635 1,591,631 4,996
----------- ----------- ----------
$11,018,794 $11,097,312 $ 78,518
=========== =========== ==========
-------------------------------------------------------------------------------------------------------
Purchases 5/15/98 CAD 3,371,215 $ 2,363,741 $ 2,350,917 $ 12,824
5/15/98 CHF 763,097 531,386 535,093 (3,707)
1/07/98 - 5/15/98 DEM 20,910,834 11,682,549 11,903,098 (220,549)
5/18/98 ESP 188,913,755 1,247,209 1,258,586 (11,377)
5/15/98 GBP 148,572 242,825 244,104 (1,279)
1/07/98 - 5/15/98 NLG 7,840,559 3,883,705 3,968,398 (84,693)
----------- ----------- ----------
$19,951,415 $20,260,196 $ (308,781)
=========== =========== ==========
</TABLE>
Forward foreign currency exchange contract purchases and sales under master
netting arrangements and closed forward foreign currency exchange contracts for
World Total Return Series amounted to a net payable of $325,723 with Swiss Bank
Corporation, and a net receivable of $305,259 with Bankers Trust, $284,780 with
Deutsche Bank, $3,157 with First Boston, $121,537 with Merrill Lynch, and
$36,007 with Morgan Stanley. Closed forward currency exchange contracts excluded
above amount to a net payable of $125,568 with Goldman Sachs, and a net
receivable of $11,065 with American International Group Trading.
At December 31, 1997, each Series had sufficient cash and/or securities to cover
any commitments under those contracts.
46
<PAGE>
Notes to Financial Statements -- continued
Futures Contracts -- Government Securities Series
- -------------------------------------------------
Unrealized
Description Expiration Contracts Position Depreciation
- ----------------------------------------------------------------------------
US Treasury Bonds March 98 112 Short (49,736)
At December 31, 1997 Government Securities Series had sufficient cash and/or
securities to cover any commitments under these contracts.
Futures Contracts -- World Asset Allocation Series
Unrealized
Description Expiration Contracts Position Depreciation
- ----------------------------------------------------------------------------
S&P 500 Index March 98 15 Long (4,429)
At December 31, 1997 World Asset Allocation Series had sufficient cash and/or
securities to cover any commitments under these contracts.
(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 December 31, 1997, the High Yield Series and World Asset
Allocation Series owned the following restricted securities (consisting of 0.17%
and 4.90% 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 Shares/
Series Description Acquisition Par Amount Cost Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High Yield Series Atlantic Gulf Communities Corp. 9/25/95 30 $ -- $ 135
Merrill Lynch Mortgage Investors, Inc.,
8.171s, 2002 6/22/94 500 346,563 477,578
---------- ----------
$ 346,563 $ 477,713
========== ==========
World Asset Allocation Series Hong Leong Finance Ltd. 11/1/96 159,000 $ 452,604 $ 170,357
Jarvis Hotels PLC 7/2/96 163,000 419,353 402,202
Cargill Commodity 8/29/97 5,500,000 5,527,500 5,444,138
---------- ----------
$6,399,457 $6,016,697
========== ==========
</TABLE>
(8) Name Change
Effective September 30, 1997, MFS[RegTM]/Foreign & Colonial International Growth
and Income Series terminated its investment subadvisory agreement with Foreign
and Colonial Management Limited and changed its name to International Growth and
Income Series.
47
<PAGE>
Independent Auditors' Report
To The Trustees and Shareholders of MFS/Sun Life Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Government Securities Series, High Yield
Series, International Growth and Income Series, Money Market Series, World Asset
Allocation Series, World Government Series, World Total Return Series and Zero
Coupon Series, 2000 Portfolio, (each a portfolio of MFS/Sun Life Series Trust as
of December 31, 1997, the related statements of operations for the year then
ended, the statements of changes in net assets for the years ended December 31,
1997 and 1996, and the financial highlights for each of the years in the
five-year period 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
December 31, 1997 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Trust at
December 31, 1997, 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.
DELIOTTE & TOUCHE LLP
Boston, Massachusetts
February 6, 1998
----------------------------------------------
This MFS/Sun Life Series Trust Annual 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 for the
MFS/Sun Life Series Trust and any product being offered.
48
<PAGE>
Federal Income Tax Information on Distributions
Dividends Received Deduction
For the year ended December 31, 1997, the percentage of distributions from
income eligible for the 70% dividends received deduction for corporations below
was as follows:
<TABLE>
<CAPTION>
Dividends Received
Deduction
<S> <C>
World Asset Allocation Series ......... 1.59%
World Total Return Series ............. 11.35
</TABLE>
Foreign Tax Credit
The International Growth and Income Series had interest and dividends from
foreign countries of $962,939 and taxes paid to foreign countries were $91,598.
The World Asset Allocation Series had interest and dividends from foreign
countries of $885,331 and taxes paid to foreign countries were $91,594.
The World Total Return Series had interest and dividends from foreign countries
of $1,244,656 and taxes paid to foreign countries were $45,144.
The Series below have designated the following long-term capital gain
distributions:
<TABLE>
<CAPTION>
Long-Term
Capital Gains
<S> <C>
World Asset Allocation Series ......... $760,191
World Governments Series .............. 197,228
World Total Return Series ............. 341,191
</TABLE>
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,
Boston, Massachusetts
DAVID D. HORN*, Trustee
Former Senior Vice President and General Manager,
Sun Life Assurance Company of Canada,
Wellesley Hills, Massachusetts
GARTH MARSTON, Trustee
Former Chairman, Retired, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS, Trustee
Former Vice Chairman, Retired, The Gillette Company,
Marblehead, Massachusetts
WILLIAM R. GUTOW
Vice Chairman, Capitol Entertainment Management Company
(Blockbuster Video Franchise), Dallas, Texas
J. KERMIT BIRCHFIELD, Member
Consultant, Display Technology, Inc.
(Manufacturer of liquid-crystal display technology),
Gloucester, Massachusetts
Officers+
W. THOMAS LONDON, Treasurer
MARK E. BRADLEY, Assistant Treasurer
ELLEN MOYNIHAN, Assistant Treasurer
JAMES O. YOST, Assistant Treasurer
STEPHEN E. CAVAN, Secretary and Clerk
JAMES R. BORDEWICK, JR., Assistant Secretary
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
Custodian and Dividend Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110-1617
Portfolio Managers+
JEAN O. ALLESSANDRO
JOHN W. BALLEN
ARNAB KUMAR BANERJI
STEPHEN C. BRYANT
DAVID M. CALABRO
JAMES J. CALMAS
MITCHELL D. DYNAN
KENNETH J. ENRIGHT
RICHARD O. HAWKINS
JOHN D. LAUPHEIMER, JR.
DAVID R. MANNHEIM
PAUL M. McMAHON
KEVIN R. PARKE
BERNARD SCOZZAFAVA
MAURA A. SHAUGHNESSY
TONI Y. SHIMURA
FREDERICK J. SIMMONS
JAMES T. SWANSON
(on behalf of the MFS World
Asset Allocation Committee)
The Research Committee
*Affiliated with the Sponsor.
+Affiliated with the Investment Adviser. SUN-2B 2/98 190M
