MFS(R)/Sun Life Series Trust
SEMIANNUAL REPORT [bullet] June 30, 1998
Capital Opportunities Series
(formerly Value Series)
Equity Income Series
International Growth Series
(formerly MFS(R)/Foreign & Colonial International Growth Series)
Massachusetts Investors Growth Stock Series
New Discovery Series
Research Growth and Income Series
Research International Series
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Letter from the Chairman
Dear Contract Owners:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly accepted
measures, equity valuations appear to have risen to a point at which the stock
market has become more vulnerable to changes in the investment environment such
as rising inflation and interest rates or a slowing economy. As a result, while
we continue to hold a favorable long-term outlook for the equity markets, we
also believe that a significant market correction is possible and that such a
correction would be a healthy near-term event.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive
than most fixed-income investments, while low inflation helps control
companies' costs, such as for raw materials, wages, and benefits. The near-term
outlook for a continuation of this environment appears relatively favorable.
However, this year has seen a marked slowdown in corporate earnings. This means
that as equity prices continue to rise, price-to-earnings (P/E) ratios, or the
amount an investor pays for a stock in relation to the company's earnings per
share, also go up. A year ago, the average P/E ratio for stocks in the
unmanaged Standard & Poor's 500 Composite Index stood at approximately 22; this
summer, the average P/E ratio was 32% higher, at about 29. In some cases, such
as with some of the newer companies associated with the Internet, P/E ratios
have soared to levels that are unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 4% to 6% this year. However, just as no one can predict market
cycles, so too no one can predict economic cycles -- except to say that these
cycles do exist and that an economic slowdown at some point is inevitable.
Internationally, the economic turmoil in Asia continues to be a concern to us,
and we believe the United States has yet to see the full impact of this crisis.
There have been brief periods when some Asian economies appeared to improve,
but the situation remains quite dynamic and could turn worse before getting
better. While the crisis has affected all countries in Asia, Japan was a major
factor behind the turmoil as excesses in its banking and real estate sectors
have led to severe currency problems. In the long run, Japan will be the engine
that drives the region's eventual recovery, thus it warrants closer investor
scrutiny. At the same time, the Asian turmoil has had the beneficial effect of
moderating U.S. growth and keeping inflation in check, which has helped
establish a favorable interest-rate environment.
Countering the situation in Asia has been the greater-than-expected strength of
European economies. As Europe moves toward economic union, these countries have
benefited from a convergence of interest rates to lower levels, a rapid
expansion of manufacturing and service businesses, and an increasingly strong
consumer sector. This has helped American exporters offset some of their Asian
losses, while providing numerous investment opportunities in developed and
emerging European markets.
Given the uncertainty arising from these conflicting developments, we believe
it is prudent to remind investors of the need to take a long-term view and to
diversify their investments across a range of asset classes. This includes
portfolios that focus on bonds and international investments as well as on the
U.S. stock market. The likelihood of an eventual market correction also makes
it important for us to use original, bottom-up research to find companies that
we think can keep growing or gain market share in the face of the occasional
downturn. To help achieve this, and to provide the broadest possible coverage
of industry sectors and individual companies, MFS continues to increase its
number of full-time research analysts. These analysts thoroughly investigate
each company's earnings potential and position in its industry as well as the
overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation.
Every year, both fixed-income and equity managers meet with thousands of credit
issuers and companies. They also attend many presentations, closely follow
sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to
both the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders -- regardless of changes in the
overall market environment.
A discussion of the performance and current investment strategy for each of the
Series is presented here and on the following pages. The performance figures
provided in the discussion do not reflect the deduction of any separate account
charges. The results would have been lower had those charges been deducted. We
appreciate your support and welcome any questions or comments you may have.
On behalf of the Board of Trustees,
/s/ John D. McNeil
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John D. McNeil
Chairman
July 13, 1998
Management Review and Outlook
Capital Opportunities Series
For the six months ended June 30, 1998, the Series provided a total return of
18.90%, which compares to a 17.71% return for the Standard & Poor's 500
Composite Index (the S&P 500), a popular, unmanaged index of common stock total
return performance.
In May 1998, the name of the Series was changed from Value Series to Capital
Opportunities Series. The investment objective has not changed.
A combination of good sector selection and individual stock performance
resulted in significant outperformance of the Series relative to the S&P 500.
The top three performing sectors of the S&P 500 over the past six months were
autos and housing, retailing, and leisure. The Series was significantly
overweighted in retailing and leisure while slightly underweighted in autos and
housing. The three worst-performing sectors of the S&P 500 were transportation,
energy, and industrials. The Series was significantly underweighted in energy
and industrials but slightly overweighted in transportation.
Several of the Series' top holdings also significantly outperformed the S&P
500, with particularly strong performance from Cellular Communications
International, Tyco International, Fred Meyer,
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Management Review and Outlook -- continued
and American Tower Systems. The Series' international exposure also contributed
significantly to performance. Telecom Italia, Banco Totta, Alcatel, Henkel, and
Wella were all strong performers.
Financial services, an industry in which we believe valuations are reasonable
and earnings growth rates of 13% to 15% remain achievable, makes up the Series'
largest sector. We have focused on the insurance and banking industries, in
which positive fundamentals and reasonable valuations, along with industry
consolidation, have driven stock performance.
The next-largest sector is leisure, which includes broadcasting and cable,
entertainment, toys, printing and publishing, gaming and lodging, and
restaurants. While the Series has no specific industry focus in this sector,
three individual stocks -- American Tower, a broadcaster; Harrah's, a gaming
company; and Promus Hotel -- make up the bulk of our weighting.
In health care, our focus has shifted from the pharmaceutical industry to the
health maintenance organizations (HMOs). While the fundamental outlook for the
pharmaceuticals continues to be very good, we believe valuations are more than
counteracting these prospects. On the other hand, we believe the fundamentals
in the HMO industry are just starting to improve after several years of dismal
results. Pricing trends are picking up, and medical cost trends are being
maintained at the same 3% to 4% annual growth rate as the past few years. We
believe this should result in substantial future earnings improvements.
Equity Income Series
The Series commenced operations on May 6, 1998, and from that date through June
30, 1998, provided a total return of -0.30%.
The Series invests in what we regard as good-quality, large-capitalization
companies with attractive yields and the opportunity to grow dividends.
Companies with solid franchises that appear to be underappreciated by the
market are appropriate holdings for this portfolio. Often, these companies have
lost a former leadership position, they may be at the bottom of a cyclical
trend in their industry, or they may be in the early stages of a major
restructuring.
For example, Rubbermaid, a current holding, fell out of favor when the company
failed to grow earnings for three years. But now, with new management at the
head of the key household products business, the company is poised to reap the
benefits of recent restructuring efforts, cheaper plastics prices, and an
improved retail and competitive environment. Throughout this tough period,
Rubbermaid's key franchise -- high-quality household products geared toward
convenience -- has maintained its leadership position. Another current holding,
Archer Daniels Midland, is weathering a trough in the agricultural cycle. As
the cycles for corn and soybean processing bottom out and begin to improve, the
company is also closing the chapter on allegations of price fixing. Finally,
Lincoln National, another holding, is in the midst of completing its
transformation from a multiline insurance company with unpredictable earnings
to a diversified financial services company with leading positions in the life
insurance, annuity, and investment management business.
The Series' top sectors include utilities and communications, financial
services, consumer staples, and energy. Among utilities, we have investments in
telephone, electric, and gas companies. All of them are being impacted
favorably by deregulation and heightened competition. These developments are
leading to more consolidation, which can lead to significant appreciation in
the stock prices of companies acquired as well as augmented growth rates for
companies that are acquiring.
In financial services, our focus is weighted toward insurance companies over
banks because the restructuring and consolidation that have already benefited
banking stocks are now impacting insurance companies.
Although the Series has some investments in overseas companies, all of them are
large-cap, blue-chip European stocks. The same restructuring and consolidation
trends that have supported stock prices in the United States are unfolding in
Europe.
International Growth Series
For the six months ended June 30, 1998, the Series provided a total return of
8.42%, which compares to a 17.12% return for the Morgan Stanley Capital
International (MSCI) Europe, Australia, Far East (EAFE) Index, an unmanaged,
market-capitalization-weighted total return index of developed-country global
stock markets, excluding the United States, Canada, and the South African
mining component. Investments in foreign and emerging markets may provide
superior returns but also involve greater risk than U.S. investments.
In September 1997, the Series changed its name from MFS(R)/Foreign & Colonial
International Growth Series to International Growth Series. The investment
objective has not changed.
Generally, the investment picture in the developed markets improved during the
first part of 1998 thanks in large part to the strength of European economies.
Europe is in the early stages of a growth cycle similar to what the United
States has experienced. In Europe earnings growth is accelerating, while growth
is slowing in the United States. In addition, European companies have begun to
restructure, outsource, and create greater corporate efficiencies, which has
added steam to corporate earnings growth. Europe looks like it is headed toward
a "virtuous cycle" that would result in higher consumer confidence, higher
employment, and strong demand, just like the current U.S. situation. Europe is
earlier in the cycle than the United States is; therefore, we think it may be
able to sustain this growth rate for an additional year or two, while U.S.
growth slows.
In developed markets, about 17% of assets are in financial services, a sector
which is made up mostly of European banking and insurance concerns but includes
no Japanese firms. As interest rates have fallen, stock markets have risen,
with bank stocks a prime beneficiary. The top holdings in this sector are not
household names necessarily but those that we feel have the best prospects for
growth, such as Anglo Irish Bank in Ireland. The consumer staples sector is our
second largest and is comprised of companies such as Benckiser in the
Netherlands and Henkel in Germany. Our third-largest sector, utilities and
communications, features stocks such as Telecomunicacoes Brasileiras
(Telebras), which is benefiting from deregulation and privatization in Brazil.
Slightly less than 10% of assets are invested in basic materials. Here we've
focused on European specialty chemical companies in the midst of a wave of
consolidation and restructuring that is benefiting their stock prices. Some of
the biggest names include Akzo Nobel and Ciba Specialty. A recent example of
the consolidation going on in this market is Akzo Nobel's proposed acquisition
of Courtalds, a British chemical company. Today, Akzo Nobel is growing faster
than many of it peers, and its stock is trading at a discount when compared to
its earnings growth rate.
Technology is our fifth-largest sector and represents a little less than 9% of
assets. Our investments here are concentrated mostly in Japanese companies that
serve global markets, such as Sony
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Management Review and Outlook -- continued
and Canon. These stocks are more keyed to what's happening in the world than to
their own economy.
Emerging markets, which had been doing well prior to the Asian crisis, took a
big hit in the wake of that crisis and were responsible for the Series'
underperformance in comparison to the MSCI EAFE Index, which does not include
emerging markets. The Asian turmoil has been compounded by Japan's currency
problems. As a result, the Series is making only focused investments in Japan
and is underweighted in the region compared to the MSCI EAFE Index. Our
emerging market stock holdings had been heaviest in India and China, both of
which experienced severe difficulties. Beginning in late 1997, we have adjusted
the portfolio to take advantage of better value in South Africa, Mexico, and
Brazil.
Regarding the Asian economic turmoil, we believe the situation will stabilize
in two or three years. Whether Asian economies stabilize at high or low levels,
however, is too difficult to call right now. We continue to invest in stocks of
companies that we think have good business models and that can survive
political and local economic shocks. Unfortunately, most of the countries in
Southeast Asia don't have many companies that meet that test. Indonesia is a
perfect example. Its market is depressed, its currency is unstable, and the
cost to hedge (to eliminate currency risk) is high.
Massachusetts Investors Growth Stock Series
The Series commenced operations on May 6, 1998, and from that date through June
30, 1998, provided a total return of 6.20%.
The Series seeks companies that have strong sales growth and that do not depend
on pricing power to boost earnings, as well as companies whose growth patterns
can overcome obstacles such as the Asian turmoil. In isolated sectors such as
technology Asia has had an impact, but, in general, our stocks have seen little
effect from Asia.
Technology is the Series' largest sector weighting and includes Microsoft,
Computer Associates, and Cisco Systems. Financial services, the next-largest
sector, continues to be a strong industry. Low inflation, driven by the
currency crisis in Asia, and stable or declining interest rates help this
industry. Holdings here include asset gatherers such as Morgan Stanley, Dean
Witter and Franklin Resources that stand to benefit from people's saving and
investing for retirement.
The Series also has holdings in retailing, which is benefiting from a strong
consumer sector and consolidation, and in pharmaceuticals, a sector which
continues to introduce new products at a great pace. For example, more people
are taking cholesterol-lowering drugs, and Bristol-Myers Squibb, which makes
one of the best-selling drugs in this area, is a big position in the Series.
Looking ahead, we continue to be optimistic about the market. Earnings drive
stock prices, and the earnings for the companies we own continue to be
favorable because they're in strong industries, they have strong positions in
those industries, and they have strong product cycles. A global recession that
affects the earnings power of these companies could reverse that earnings
trend, but we don't anticipate such a reversal in the foreseeable future. There
are signs of a slowdown but, because of their unique positions, the companies
we own are staying ahead of it.
New Discovery Series
The Series commenced operations on May 6, 1998, and from that date through June
30, 1998, provided a total return of 5.20%.
The portfolio invests in small-capitalization companies that we believe are
positioned to become major enterprises over a period of three-to-five years
based on their abilities to produce sustainable and predictable growth in
sales, revenues, and earnings. In choosing stocks, we are careful to assure
that the prices we're paying are in line with the companies' actual fundamental
strengths and long-term growth prospects. We seek companies that are enjoying
growth driven by innovation and creativity rather than by the temporary boost
of a booming economy.
When investing in smaller companies, thorough research is essential because
smaller companies are generally followed on Wall Street by fewer analysts than
are larger corporations. Simply put, the depth of information about any small
company that is available to investors is limited. Our staff of more than 30
research analysts helps us gain an informational edge that enables us to
discover promising young stocks early.
Much of the economic growth in the United States has been driven by technology
companies. Technology stocks comprise about 23% of the equities in the
portfolio and, in choosing investments here, we seek out stocks that, spurred
by the growing demand for all types of technology, we believe can sustain long-
term growth. We are holders of PMC-Sierra, for example, which makes an
integrated circuit for transmitting voice and data over a wide area. This
company is benefiting from the Internet boom and the growing demand for
multimedia applications. The company's high margins, leading market share, and
ability to compete effectively in a fast-growing market sector have made it an
attractive investment for the portfolio.
Another stock that is a byproduct of the growth of technology in our lives is
Learning Tree International. Learning Tree provides information technology
training to technology professionals. The pace of change in technology is so
rapid that even professionals can find their skills becoming obsolete. We owned
the stock at its initial public offering and it performed exceptionally well in
the months following, driven by great demand for training on Microsoft's
then-leading edge version of Windows NT. As that product cycle ran its course,
we sold the companies stock because our research indicated that the company
couldn't sustain its lofty valuations, despite its underlying fundamental
strength. It remains a leader in a vibrant market and is investing to extend
that leadership. We feel the stock is now attractively priced, and we are
adding to our position because we expect solid long-term earnings growth and
believe the company's franchise is strong.
Another stock that we feel is particularly promising is TMP Worldwide, which
runs a Web site on the Internet called The Monster Board. The Monster Board is
the biggest online meeting place for job seekers and employers. TMP is
leveraging its leadership in Yellow Pages and recruitment advertising to create
a successful online business.
One of the stocks that we find most attractive in the portfolio is Catalina
Marketing, which runs a network that issues instant coupons at supermarket
checkouts. The company has long-term contracts with about 1,100 supermarkets in
the United States. As a customer's goods are scanned, the Catalina system
identifies the customer as a potential target for coupons for complementary or
competitive products. The system then issues an appropriate coupon at the
register.
Finally, as we approach the end of the century, our investment decisions must
take into account the looming Year 2000 problem for makers and consumers of
technology. This issue presents
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Management Review and Outlook -- continued
both an opportunity and a risk. We do not invest in companies whose main line
of business is fixing Year 2000 problems because this will only provide them
with short-term earnings growth that will likely disappear after the turn of
the century. However, companies that can use their Year 2000 expertise as an
entree and a proving ground for additional work are better candidates for the
portfolio. At the same time, the Year 2000 problem creates a potential
investment risk for companies that rely heavily on older-generation computer
systems. These companies will need to spend vast amounts of time and money to
update their software. We are carefully reviewing the action plans of portfolio
companies that might be vulnerable to this risk.
Globally, the Asian crisis has had little impact on the portfolio, as most of
the companies we invest in are focused on selling products and services to the
U.S. economy. Any damage to the portfolio has been more a reflection of
investor psychology than any real fundamental change. In Europe, while few
companies are dependent on international trade, the reduction of trade barriers
between European nations could help smaller companies sell globally earlier in
their life cycles. This could help their markets expand and their earnings
grow.
Research Growth and Income Series
For the six months ended June 30, 1998, the Series provided a total return of
17.03%, which compares to a 17.71% return for the S&P 500.
The portfolio's slight underperformance relative to the S&P 500 over the past
six months can be attributed to our underweightings in the health care and
technology sectors, both of which performed very well. Additionally, the Series
was overweighted in the financial services sector, in which some stocks
underperformed relative to the market.
The sector weightings within the Series have not shifted a great deal since the
end of 1997, as the analysts continue to believe in the long-term performers in
which the portfolio is currently invested. The only dramatic shift came in the
consumer staples sector, which was reduced to 4.4% as we sold off positions in
Coca-Cola and Philip Morris. Our food and beverage analyst was concerned that
Coca-Cola's significant Asian exposure could have negative implications for the
company, and that the demise of the congressional tobacco settlement created
potential legislative uncertainty and difficulties for Philip Morris.
Financial services remains the largest sector in the Series because our
analysts believe that companies will continue to benefit from the corporate
cost-cutting, consolidation, slow growth, and low inflation taking place in the
sector. Top performers in this industry over the past six months included Chase
Manhattan, Nationwide Financial Services, BankBoston, Comerica, and First
Union.
The Series' second-largest sector is health care, which we regard as a strong
growth area of the economy. Within this sector, the portfolio is overweighted
in medical services and managed care companies such as United Healthcare, HBO &
Co., and Tenet Healthcare, as well as in pharmaceutical companies. In the
managed care industry, our analysts believe that after years of poor pricing
the cycle has finally turned and should translate into substantial growth in
gross margins for these companies over the next two to three years. Our
pharmaceutical analyst continues to look for companies that are focused on new
product development and feature strong growth, such as Bristol-Myers Squibb and
American Home Products. All of these health care companies performed very well
over the first six months of 1998.
The most significant underweighting in the portfolio is technology, a sector in
which our analysts have focused on only those companies that have dominant
positions within their industries, such as Microsoft, IBM, and Cisco Systems.
We will continue to search for companies that participate in markets that avoid
commodity pricing and in which proprietary expertise is a major differentiator.
In these areas demand has remained strong, and we have found strong growth
opportunities. Microsoft continues to be the largest single holding in the
portfolio and performed very well over the past six months, during which the
company introduced new products and posted strong earnings.
Going forward, the short-term market outlook appears to call for more modest
returns than we've seen in the recent past. In this environment, stock-picking,
rather than a focus on the overall market, has become a key to long-term
investment performance. It appears that selected companies in the technology,
financial services, and health care industries still have reasonable valuations
and strong opportunities for long-term growth and superior investment returns.
The Series will seek to take advantage of a favorable business climate to add
attractively valued companies to the portfolio.
Research International Series
The Series commenced operations on May 6, 1998, and from that date through June
30, 1998, provided a total return of -0.80%.
The Series is a growth-oriented "best ideas" portfolio of stocks of companies
located around the world. The Series invests at least 65% of assets primarily
in well-established companies whose principal activities are outside the United
States. The Series may invest 25% of assets in companies located in emerging
markets. Investments in foreign and emerging markets may provide superior
returns but also involve greater risk than U.S. investments.
The basic premise of the investment process is to give our team of more than 30
analysts, who are experts in particular sectors or areas of the world, the
freedom to invest in their best ideas. The committee of analysts meets on a
weekly basis to discuss the current investment environment and to evaluate
proposed changes to the portfolio. New ideas are presented by individual
analysts and are critically evaluated by the committee. Ideas approved by a
majority of the committee are included in the portfolio and, if necessary, a
corresponding sale of another stock is agreed upon to keep the portfolio at a
manageable number of investments. The overriding goal is to make sure that at
any given point in time the portfolio includes only the best ideas of each
analyst. Regional or sector weightings are more a product of our
research-intensive, bottom-up approach to stock-picking than of asset
allocation based on a top-down view of geographic regions. In other words, we
pick quality stocks rather than try to guess where the next hot market will be.
Europe is in the early stages of a growth cycle similar to what the United
States has experienced. In Europe earnings growth is accelerating, while growth
is slowing in the United States. In addition, European companies have begun to
restructure, outsource, and create greater corporate efficiencies, which has
added steam to corporate earnings growth. Europe looks like it is headed toward
a "virtuous cycle" that would result in higher consumer confidence, higher
employment, and strong demand, just like the current U.S. situation. Europe is
earlier in the cycle than the United States is; therefore, we think it may be
able to sustain this growth rate over the next few years. To eliminate the
differences in accounting for corporate earnings, we look at the cash flows
companies generate in relation to their stock prices. Based
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Management Review and Outlook -- continued
on that equation, European stocks are generally cheaper than their counterparts
in the United States and have high growth rates.
The first phase of European monetary union (EMU) will extend the growth trend
by eliminating currency issues from trade and introducing new competitive
pressures for countries in the region. The cost of doing business in EMU
countries will become more standardized, sparking increased competition that
should further drive the restructuring and outsourcing trends.
Regarding emerging market investments, specifically Asia, we believe the
situation will stabilize in two or three years. Whether Asian economies
stabilize at high or low levels, however, is too difficult to call right now.
We continue to invest in stocks of companies that we think have good business
models and that can survive political and local economic shocks. For example,
the Japanese company Sony is a top 10 holding because it serves global markets
and its stock performance is more keyed to what's happening in the world than
to its own economy.
In Latin America, telecommunications companies such as Telecomunicacoes
Brasileiras (Telebras) remain attractive given the low penetration rates of
phone service in the region, the pent-up demand for modern telecommunications
services, and the potential for efficiency improvements within those companies.
Some of the Series' other best ideas in Europe include Henkel, a German firm
that is in the process of reinventing itself by divesting of noncore businesses
in order to focus on its strength in chemicals and consumer products. The
company's cost-cutting should lead to increased efficiency and a stronger
balance sheet, and these improvements have been reflected in the share price.
Another important holding is ING, a Dutch financial services company. Banks and
insurance companies are consolidating across Europe and ING is a major player
in this process. Through consolidation, ING is building a Global franchise with
excellent prospects for revenue growth and cost containment. SEMA, a U.K.-based
information technology firm, is helping companies improve their computer and
networking infrastructures by exploiting the trend to outsourcing, by which
companies look to outside vendors to manage their technology needs. In helping
European companies prepare to compete more effectively in the global economy,
SEMA has been a strong performer for the portfolio.
The Series will continue to seek fundamentally strong companies to add
throughout the year. The portfolio continues to be based upon the research
analysts' best ideas within their industries or regional areas of expertise.
Because we rely on careful, in-depth fundamental analysis of companies' growth
prospects, our regional weightings will be driven by the quality of individual
stocks in any geographical area.
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The opinions expressed in this report are those of the portfolio managers and
are only through the end of the period of the report as stated on the cover.
The managers' views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
5
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Performance Summary
Because MFS(R)/Sun Life Series Trust is designed for investors with
long-term goals, we have provided cumulative results as well as the average
annual total returns for the applicable time periods.
Average Annual and Cumulative Total Rates of Return through June 30, 1998
Capital Opportunities Series
<TABLE>
<CAPTION>
6 Months 1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +18.90% +34.87% +66.99%
- -----------------------------------------------------------------------------
Average Annual Total Return -- +34.87% +28.05%
- -----------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
June 3, 1996, through June 30, 1998.
Equity Income Series
<TABLE>
<CAPTION>
10 Years/Life*
- -------------------------------------------
<S> <C>
Cumulative Total Return -0.30%
- -------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
International Growth Series(1)
<TABLE>
<CAPTION>
6 Months 1 Year 10 Years/Life*
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +8.42% +2.68% +4.83%
- --------------------------------------------------------------------------
Average Annual Total Return -- +2.68% +2.30%
- --------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
June 3, 1996, through June 30, 1998.
Massachusetts Investors Growth Stock Series
<TABLE>
<CAPTION>
10 Years/Life*
- -------------------------------------------
<S> <C>
Cumulative Total Return +6.20%
- -------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
New Discovery Series(2)
<TABLE>
<CAPTION>
10 Years/Life*
- -------------------------------------------
<S> <C>
Cumulative Total Return +5.20%
- -------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
Research Growth and Income Series
<TABLE>
<CAPTION>
6 Months 1 Year 10 Years/Life*
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Cumulative Total Return +17.03% +26.43% +28.97%
- -----------------------------------------------------------------------------
Average Annual Total Return -- +26.43% +25.21%
- -----------------------------------------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 13, 1997, through June 30, 1998.
Research International Series(1)
<TABLE>
<CAPTION>
10 Years/Life*
- -------------------------------------------
<S> <C>
Cumulative Total Return -0.80%
- -------------------------------------------
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and shares, when
redeemed, may be worth more or less than their original cost. Past performance
is no guarantee of future results. Performance results reflect any applicable
expense subsidies and waivers, without which the results would have been less
favorable. Subsidies and waivers may be rescinded at any time. See the
prospectus for details.
Returns shown do not reflect the deduction of the mortality and expense risk
charges and administration fees. Please refer to the annuity product's annual
report for performance that reflects the deduction of the fees and charges
imposed by insurance company separate accounts.
(1) Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility.
(2) Investing in small or emerging growth companies involves greater risk than
is customarily associated with more-established companies. These risks may
increase share price volatility.
6
<PAGE>
Portfolio of Investments -- June 30, 1998
Capital Opportunities Series
Stocks -- 89.9%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 76.1%
Aerospace -- 0.5%
Raytheon Co., "A" ...................................................... 13,500 $ 777,937
------------
Airlines -- 0.2%
Southwest Airlines Co. ................................................. 12,900 $ 382,163
------------
Automotive -- 0.1%
Hayes Lemmerz International, Inc.*...................................... 3,700 $ 147,075
------------
Banks and Credit Companies -- 3.8%
Fleet Financial Group, Inc. ............................................ 18,269 $ 1,525,461
National City Corp. .................................................... 21,800 1,547,800
PNC Bank Corp. ......................................................... 26,200 1,409,888
Wells Fargo & Co. ...................................................... 3,982 1,469,358
------------
$ 5,952,507
------------
Business Machines -- 0.8%
Affiliated Computer Services,
Inc., "A"* ........................................................... 32,400 $ 1,247,400
------------
Business Services -- 2.3%
Ceridian Corp.* ........................................................ 14,500 $ 851,875
Computer Sciences Corp. ................................................ 29,500 1,888,000
Galileo International, Inc. ............................................ 17,800 802,112
------------
$ 3,541,987
------------
Cellular Telephones -- 0.9%
Century Telephone Enterprises, Inc. .................................... 30,450 $ 1,396,894
------------
Chemicals -- 0.5%
Cambrex Corp. .......................................................... 29,944 $ 786,030
------------
Computer Software -- Systems -- 4.4%
Computer Associates
International, Inc. .................................................. 63,236 $ 3,513,550
Oracle Corp.* .......................................................... 67,200 1,650,600
Synopsys, Inc.* ........................................................ 36,128 1,652,856
------------
$ 6,817,006
------------
Construction Services -- 0.9%
Martin Marietta Materials, Inc. ........................................ 29,650 $ 1,334,250
------------
Consumer Goods and Services -- 9.0%
Black & Decker Corp. ................................................... 20,300 $ 1,238,300
Hertz Corp., "A" ....................................................... 8,100 358,931
Philip Morris Cos., Inc. ............................................... 30,989 1,220,192
Tyco International Ltd. ................................................ 179,506 11,308,879
------------
$ 14,126,302
------------
Containers -- 1.0%
Stone Container Corp.* ................................................. 101,054 $ 1,578,969
------------
Electrical Equipment -- 1.3%
Cooper Industries, Inc. ................................................ 24,000 $ 1,318,500
GTECH Holdings Corp.* .................................................. 20,000 673,750
------------
$ 1,992,250
------------
Electronics -- 1.2%
Analog Devices, Inc.* .................................................. 44,480 $ 1,092,540
Lattice Semiconductor Corp.* ........................................... 25,400 721,519
------------
$ 1,814,059
------------
Energy -- 0.5%
BJ Services Co.* ....................................................... 26,600 $ 773,063
------------
Entertainment -- 3.5%
Casino America, Inc.* .................................................. 9,400 $ 32,900
Citadel Communications Corp. ........................................... 1,400 22,400
Gemstar International Group Ltd.* ...................................... 6,500 243,344
Harrah's Entertainment, Inc.* .......................................... 146,064 3,395,988
Jacor Communications, Inc.* ............................................ 14,700 867,300
Mediaone Group, Inc.* .................................................. 16,300 716,181
Telemundo Group, Inc.* ................................................. 6,465 275,167
------------
$ 5,553,280
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- continued
Financial Institutions -- 2.0%
Federal Home Loan Mortgage Corp. ....................................... 66,333 $ 3,121,797
------------
Food and Beverage Products -- 4.1%
Archer-Daniels-Midland Co. ............................................. 37,600 $ 728,500
Bestfoods Co. .......................................................... 25,400 1,474,787
Beverly Enterprises, Inc.* ............................................. 92,200 1,273,512
Cordant Technologies, Inc. ............................................. 18,990 875,914
McCormick & Co., Inc. .................................................. 14,800 528,638
Nabisco Holdings Corp., "A" ............................................ 21,000 757,313
Whitman Corp. .......................................................... 30,700 704,181
------------
$ 6,342,845
------------
Insurance -- 7.0%
Annuity and Life Re Holdings Ltd.*...................................... 48,000 $ 1,062,000
CIGNA Corp. ............................................................ 19,843 1,369,167
ESG Re Ltd. ............................................................ 59,400 1,284,525
Hartford Financial Services
Group, Inc. .......................................................... 6,915 790,903
LaSalle Reassurance Holdings Ltd. ...................................... 18,800 712,050
Life Re Corp. .......................................................... 9,200 762,450
Lincoln National Corp. ................................................. 8,409 768,372
Nationwide Financial Services,
Inc., "A" ............................................................ 31,600 1,611,600
Reliastar Financial Corp. .............................................. 36,899 1,771,152
Travelers Group, Inc. .................................................. 12,300 745,688
------------
$ 10,877,907
------------
Machinery -- 0.3%
Lear Corp.* ............................................................ 9,900 $ 507,994
------------
Medical and Health Products -- 0.2%
Datascope Corp.* ....................................................... 13,900 $ 369,219
------------
Medical and Health Technology
and Services -- 6.6%
Columbia/HCA Healthcare Corp. .......................................... 83,400 $ 2,429,025
MedPartners, Inc.* ..................................................... 144,900 1,159,200
Mid Atlantic Medical Services, Inc.*.................................... 67,200 772,800
Tenet Healthcare Corp.* ................................................ 49,170 1,536,563
United Healthcare Corp. ................................................ 44,923 2,852,610
Wellpoint Health Networks, Inc., "A"*................................... 21,500 1,591,000
------------
$ 10,341,198
------------
Oil Services -- 0.8%
EVI Weatherford, Inc.* ................................................. 35,120 $ 1,303,830
------------
Oils -- 0.8%
Enron Oil & Gas Co. .................................................... 58,265 $ 1,179,866
------------
Pollution Control -- 1.3%
Republic Services, Inc. ................................................ 13,800 $ 331,200
Waste Management, Inc. ................................................. 46,300 1,620,500
------------
$ 1,951,700
------------
Printing and Publishing -- 0.2%
Scripps (E.W.) Howard, Inc. ............................................ 5,600 $ 306,950
------------
Railroads -- 0.4%
Wisconsin Central
Transportation Corp.* ................................................ 28,430 $ 621,906
------------
Restaurants and Lodging -- 3.3%
Outback Steakhouse, Inc.* .............................................. 7,800 $ 304,200
Promus Hotel Corp.* .................................................... 126,832 4,883,032
------------
$ 5,187,232
------------
Special Products and Services -- 0.2%
Newport News Shipbuilding, Inc. ........................................ 10,027 $ 268,222
------------
</TABLE>
7-COS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- continued
Stores -- 3.9%
Office Depot, Inc.* .................................................... 11,600 $ 366,125
Rite Aid Corp. ......................................................... 93,160 3,499,322
Sears, Roebuck & Co. ................................................... 36,600 2,234,888
------------
$ 6,100,335
------------
Supermarkets -- 6.2%
Giant Food Inc., "A" ................................................... 38,100 $ 1,640,681
Meyer (Fred), Inc.* .................................................... 129,500 5,503,750
Safeway, Inc.* ......................................................... 63,374 2,578,530
------------
$ 9,722,961
------------
Telecommunications -- 7.9%
American Tower Corp., "A"* ............................................. 90,929 $ 2,267,542
Cellular Communications
International* ....................................................... 109,122 5,442,460
Global TeleSystems Group, Inc.* ........................................ 30,900 1,506,375
Intermedia Communications, Inc.* ....................................... 19,800 830,362
L-3 Communications Holding, Inc.*....................................... 300 9,806
Sprint Corp. ........................................................... 31,662 2,232,171
------------
$ 12,288,716
------------
Total U.S. Stocks ......................................................................... $118,713,850
------------
Foreign Stocks -- 13.8%
Australia -- 0.6%
News Corporation Ltd. (Multimedia)...................................... 28,200 $ 905,925
------------
Bermuda -- 2.0%
Ace Ltd. ............................................................... 40,500 $ 1,579,500
Exel Ltd., (Insurance) ................................................. 20,300 1,579,594
------------
$ 3,159,094
Canada -- 0.8%
Canadian National Railway Co.
(Railroads) .......................................................... 22,566 $ 1,198,819
------------
France -- 3.3%
Alcatel Alsthom Compagnie
(Telecommunications) ................................................. 9,877 $ 2,008,190
Sanofi S.A.
(Medical and Health Products) ........................................ 26,800 3,147,213
------------
$ 5,155,403
------------
Germany -- 0.7%
Henkel KGaA (Chemicals) ................................................ 4,543 $ 448,893
Wella AG (Cosmetics) ................................................... 581 649,665
------------
$ 1,098,558
------------
Hong Kong -- 0.4%
Cafe De Coral Holding Co.
(Restaurants and Lodging) ............................................ 551,000 $ 188,492
Dah Sing Financial Group
(Banks and Credit Cos.) .............................................. 129,200 150,106
Liu Chong Hing Bank
(Banks and Credit Cos.) .............................................. 185,000 157,620
Wing Hang Bank Ltd.
(Banks and Credit Cos.) .............................................. 127,500 170,351
------------
$ 666,569
------------
Italy -- 0.8%
Telecom Italia S.p.A.
(Telecommunications) ................................................. 247,900 $ 1,199,089
------------
Malaysia
New Straits Times Press Berhad
(Printing and Publishing) ............................................ 147,000 $ 54,940
Tanjong PLC (Entertainment) ............................................ 21,000 29,305
------------
$ 84,245
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks --continued
Netherlands -- 2.4%
Akzo Nobel N.V. (Chemicals) ............................................ 6,863 $ 1,523,913
Benckiser N.V., "B"
(Consumer Goods and Services)* ....................................... 15,420 947,234
Elsag Bailey Process Automation
N.V. (Machinery)* .................................................... 51,900 1,248,843
------------
$ 3,719,990
------------
Portugal -- 0.6%
Banco Pinto & Sotto Mayor, S.A.
(Banks and Credit Cos.)[dbldag] ...................................... 48,670 $ 1,004,292
------------
Singapore -- 0.2%
Hong Leong Finance Ltd. (Finance)+ ..................................... 149,800 $ 122,904
Overseas Union Bank (Finance) .......................................... 56,000 123,186
------------
$ 246,090
------------
South Korea -- 0.2%
SK Telecom Ltd.
(Telecommunications) ................................................. 442 $ 200,223
SK Telecom Ltd., ADR
(Telecommunications) ................................................. 10,178 56,615
------------
$ 256,838
------------
United Kingdom -- 1.8%
Booker PLC (Food -- Wholesale) ......................................... 133,100 $ 548,367
British Petroleum PLC, ADR (Oils) ...................................... 18,253 1,610,827
LucasVarity PLC (Automotive) ........................................... 181,500 720,527
------------
$ 2,879,721
------------
Total Foreign Stocks ........................................................................ $ 21,574,633
------------
Total Stocks
(Identified Cost, $122,863,361) ........................................................... $140,288,483
------------
Short-Term Obligations -- 10.1%
Principal Amount
(000 Omitted)
Federal Home Loan Mortgage
Corp., due 8/06/98 ................................................... $ 5,200 $ 5,171,764
Federal National Mortgage Assn.,
due 7/15/98 .......................................................... 4,600 4,590,268
Student Loan Marketing Assn.,
due 7/01/98 .......................................................... 6,000 6,000,000
------------
Total Short-Term Obligations, at Amortized Cost ............................................. $ 15,762,032
------------
Total Investments
(Identified Cost, $138,625,393) ........................................................... $156,050,515
Other Assets,
Less Liabilities 63,286
------------
Net Assets -- 100.0% ........................................................................ $156,113,801
============
</TABLE>
See portfolio footnotes and notes to financial statements
8-COS
<PAGE>
Portfolio of Investments -- June 30, 1998
Equity Income Series
Stocks -- 86.8%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 75.4%
Aerospace -- 2.0%
Allied Signal, Inc. ...................................................... 181 $ 8,032
General Dynamics Corp. ................................................... 253 11,765
Lockheed-Martin Corp. .................................................... 141 14,928
Raytheon Co., "A" ........................................................ 39 2,247
-------
$36,972
-------
Automotive -- 1.4%
TRW, Inc. ................................................................ 458 $25,018
-------
Banks and Credit Companies -- 3.0%
Bank of New York, Inc. ................................................... 143 $ 8,678
Compass Bancshares, Inc. ................................................. 79 3,565
National City Corp. ...................................................... 275 19,525
PNC Bank Corp. ........................................................... 409 22,010
-------
$53,778
-------
Building -- 0.7%
Sherwin Williams Co. ..................................................... 378 $12,521
-------
Business Machines -- 0.8%
International Business
Machines Corp. ......................................................... 130 $14,926
-------
Business Services -- 1.0%
First Data Corp. ......................................................... 551 $18,355
-------
Cellular Telephones -- 0.4%
Century Telephone Enterprises, Inc. ...................................... 150 $ 6,881
-------
Conglomerate -- 0.6%
Eastern Enterprises ...................................................... 261 $11,190
-------
Consumer Goods and Services -- 4.2%
International Flavours ................................................... 325 $14,117
Kimberly-Clark Corp. ..................................................... 358 16,423
Philip Morris Cos., Inc. ................................................. 553 21,775
Rubbermaid, Inc. ......................................................... 652 21,638
Tyco International Ltd. .................................................. 22 1,386
-------
$75,339
-------
Electrical Equipment -- 1.5%
Cooper Industries, Inc. .................................................. 60 $ 3,296
General Electric Co. ..................................................... 199 18,109
Hubbell, Inc. ............................................................ 126 5,245
-------
$26,650
-------
Entertainment -- 1.0%
Viacom, Inc., "B"* ....................................................... 311 $18,116
-------
Financial Institutions -- 0.7%
Federal Home Loan Mortgage Corp. ......................................... 282 $13,272
-------
Food and Beverage Products -- 3.5%
Archer-Daniels-Midland Co. ............................................... 1,183 $22,920
Hormel Foods Corp. ....................................................... 693 23,952
Nabisco Holdings Corp., "A" .............................................. 147 5,301
Smucker J M Co. .......................................................... 466 11,359
-------
$63,532
-------
Forest and Paper Products -- 0.8%
Union Camp Corp.(2)....................................................... 275 $13,647
-------
Insurance -- 10.8%
American General Corp. ................................................... 271 $19,292
Chubb Corp. .............................................................. 193 15,512
CIGNA Corp. .............................................................. 260 17,940
Equitable Cos., Inc. ..................................................... 259 19,409
Hartford Financial Services
Group, Inc. ............................................................ 150 17,156
Jefferson Pilot Corp. .................................................... 322 18,656
Lincoln National Corp. ................................................... 199 18,184
ReliaStar Financial Corp. ................................................ 186 8,928
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- continued
Insurance -- continued
Torchmark Corp. .......................................................... 578 $ 26,443
Transamerica Corp. ....................................................... 282 32,465
--------
$193,985
--------
Machinery -- 1.1%
Federal Signal Corp. ..................................................... 804 $ 19,547
--------
Medical and Health Products -- 2.0%
American Home Products Corp. ............................................. 205 $ 10,609
Bristol-Myers Squibb Co. ................................................. 219 25,171
--------
$ 35,780
--------
Oil Services -- 1.0%
Valero Energy Corp. ...................................................... 549 $ 18,254
--------
Oils -- 6.9%
Amoco Corp. .............................................................. 457 $ 19,023
Atlantic Richfield Co. ................................................... 231 18,047
Exxon Corp. .............................................................. 361 25,744
Mobil Corp. .............................................................. 219 16,781
Texaco, Inc. ............................................................. 280 16,712
Unocal Corp. ............................................................. 338 12,083
USX-Marathon Group ....................................................... 495 16,985
--------
$125,375
--------
Printing and Publishing -- 0.4%
Gannett Co., Inc. ........................................................ 91 $ 6,467
--------
Real Estate Investment Trusts -- 2.4%
Federal Realty Investment Trust .......................................... 73 $ 1,756
Highwoods Properties, Inc. ............................................... 47 1,519
Kilroy Realty Corp. ...................................................... 246 6,150
Mid-America Apartment
Communities, Inc. ...................................................... 45 1,184
Prime Group Realty Trust ................................................. 534 9,145
SL Green Realty Corp. .................................................... 532 11,970
TriNet Corporate Realty Trust, Inc. ...................................... 353 12,002
--------
$ 43,726
--------
Stores -- 2.9%
Penney (J.C.) Co. ........................................................ 142 $ 10,269
Rite Aid Corp. ........................................................... 651 24,453
Sears, Roebuck & Co. ..................................................... 304 18,563
--------
$ 53,285
--------
Supermarkets -- 1.0%
Kroger Co.* .............................................................. 440 $ 18,865
--------
Telecommunications -- 5.5%
Alltel Corp. ............................................................. 406 $ 18,879
Bell Atlantic Corp. ...................................................... 235 10,722
GTE Corp. ................................................................ 485 26,978
SBC Communications, Inc. ................................................. 374 14,960
Sprint Corp. ............................................................. 387 27,284
--------
$ 98,823
--------
Utilities -- Electric -- 9.6%
Houston Industries, Inc. ................................................. 568 $ 17,537
Atmos Energy Corp. ....................................................... 653 19,917
Cinergy Corp. ............................................................ 535 18,725
Florida Progress Corp. ................................................... 440 18,095
GPU, Inc. ................................................................ 474 17,923
Illinova Corp. ........................................................... 617 18,510
Nevada Power Company ..................................................... 879 22,634
New Century Energies, Inc. ............................................... 282 12,813
Nipsco Industries, Inc. .................................................. 309 8,652
Scana Corp. .............................................................. 624 18,603
--------
$173,409
--------
</TABLE>
9-EIS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- continued
Utilities -- Gas -- 10.2%
AGL Resources, Inc. .............................. 969 $ 19,259
Coastal Corp. .................................... 296 20,664
Colonial Gas Co. ................................. 653 18,692
Columbia Gas System, Inc. ........................ 259 14,407
Connecticut Energy Group ......................... 684 19,066
Consolidated Natural Gas Co. ..................... 291 17,133
Fall River Gas Co. ............................... 617 8,947
KN Energy, Inc. .................................. 17 921
Marketspan Corp.* ................................ 336 10,059
National Fuel Gas Co. ............................ 510 22,217
NICOR, Inc. ...................................... 461 18,498
UGI Corp. ........................................ 559 13,905
----------
$ 183,768
----------
Total U.S. Stocks ................................................... $1,378,673
----------
Foreign Stocks -- 11.4%
Bermuda -- 1.9%
Ace Ltd. (Insurance) ............................. 465 $ 18,135
Mid Ocean Ltd. (Insurance) ....................... 219 17,192
----------
$ 35,327
France -- 1.0%
Sanofi S.A.
(Medical and Health Products) .................. 159 $ 18,672
----------
Germany -- 1.3%
Bayer AG (Chemicals) ............................. 284 $ 14,683
Henkel KGaA (Chemicals) .......................... 87 8,597
----------
$ 23,280
----------
Netherlands -- 2.4%
Akzo Nobel N.V. (Chemicals) ...................... 57 $ 12,657
Elsag Bailey Process Automation
N.V. (Machinery)* .............................. 849 20,429
ING Groep N.V.
(Financial Services)* .......................... 156 10,203
----------
$ 43,289
----------
Switzerland -- 0.6%
Nestle SA
(Food and Beverage Products) ................... 5 $ 10,706
----------
United Kingdom -- 4.2%
Booker PLC (Food -- Wholesale) ................... 3,577 $ 14,737
British Petroleum PLC, ADR (Oils) ................ 364 32,123
Glaxo Wellcome PLC, ADR
(Medical and Health Products) .................. 349 20,874
Zeneca Group
(Medical and Health Products) .................. 203 8,709
----------
$ 76,443
----------
Total Foreign Stocks ................................................ $ 207,717
----------
Total Stocks
(Identified Cost, $1,568,505) ..................................... $1,569,198
----------
Convertible Preferred Stock -- 4.7%
U.S. Stocks -- 3.8%
Consumer Goods and Services -- 0.8%
Newell Financial Trust Co.* ...................... 10 $ 578
Newell Financial Trust I *## ..................... 251 14,495
----------
$ 15,073
----------
Food and Beverage Products -- 0.7%
Suiza Capital Trust II ## ........................ 261 $ 12,724
----------
Insurance -- 0.9%
Life Re Capital Trust II ......................... 208 $ 15,860
----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- continued
Telecommunications -- 0.9%
IXC Communications, Inc. ## ...................... 337 $ 16,176
----------
Utilities -- Electric -- 0.5%
Houston Industries, Inc.* ........................ 121 $ 9,014
----------
Total U.S. Stocks ................................................... $ 68,847
----------
Foreign Stocks -- 0.9%
Switzerland -- 0.9%
Swiss Life Finance Ltd.
(Insurance)## .................................. 13,000 $ 15,470
----------
Total Convertible Preferred Stock
(Identified Cost, $83,142) ........................................ $ 84,317
----------
Convertible Bond -- 0.6%
Principal Amount
(000 Omitted)
Business Machines -- 0.6%
Xerox Corp., 0s, 2018 ##
(Identified Cost $11,440) ...................... $ 20 $ 11,400
----------
Rights -- 0.2%
Shares Value
Stores -- 0.2%
CVS Corp.*
(Identified Cost, $2,938) ...................... 40 $ 3,053
----------
Short-Term Obligations -- 56.4%
Principal Amount
(000 Omitted)
Federal Farm Credit Bank,
due 7/06/98 .................................... $ 100 $ 99,924
Federal Home Loan Bank,
due 7/08/98 .................................... 100 99,892
Federal Home Loan Mortgage
Corp., due 8/06/98 ............................. 220 218,805
Student Loan Marketing Assn.,
due 7/01/98 .................................... 600 600,000
----------
Total Short-Term Obligations, at Amortized Cost ..................... $1,018,621
----------
Total Investments
(Identified Cost, $2,684,646 ) .................................... $2,686,589
Other Assets,
Less Liabilities -- (48.7)% (880,136)
----------
Net Assets -- 100.0% .................................................. $1,806,453
==========
</TABLE>
See portfolio footnotes and notes to financial statements
10-EIS
<PAGE>
Portfolio of Investments -- June 30, 1998
International Growth Series
Stocks -- 94.0%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Argentina -- 0.5%
Siderca S.A. (Steel) ................................................... 33,000 $ 56,108
Telecom S.A., ADR
(Telecommunications) ................................................. 4,000 119,250
----------
$ 175,358
----------
Australia -- 2.6%
QBE Insurance Group Ltd.
(Insurance) .......................................................... 145,318 $ 512,974
Seven Network Ltd. (Entertainment)...................................... 87,000 261,852
Tab Ltd. (Gaming)* ..................................................... 43,700 64,411
----------
$ 839,237
----------
Brazil -- 3.1%
Centrais Eletricas Brasileiras S.A.,
ADR (Utilities - Electric) ........................................... 4,050 $ 59,171
Centrais Geradoras S.A.
(Telecommunications)* ................................................ 405 2,936
Companhia Electrict est Rio de
Janeiro (Utilities - Electric)* ...................................... 312,000 153,774
Companhia Paranaense de Energia,
ADR (Utilities - Electric) ........................................... 18,600 172,050
Light Service Electric S.A.
(Utilities - Electric) ............................................... 124,000 38,063
Petroleo Brasileiro S.A., Preferred
(Oils) ............................................................... 802,000 149,096
Telecomunicacoes Brasileiras S.A.,
ADR (Telecommunications) ............................................. 3,425 373,967
Telecomunicacoes do Rio de
Janeiro S.A.
(Telecommunications)* ................................................ 544,000 40,924
Telecomunicacoes do Rio de
Janeiro S.A., Preferred, "B"
(Telecommunications)* ................................................ 544,000 32,358
----------
$1,022,339
----------
Canada -- 4.0%
Canadian National Railway Co.
(Railroads) .......................................................... 19,800 $1,051,875
Legacy Hotel Real Estate
Investment Trust (Real Estate
Investment Trust)*## ................................................. 7,300 42,705
T. Eaton Co., LTD. (Consumer
Goods and Services)* ................................................. 21,000 213,630
----------
$1,308,210
----------
Chile -- 1.0%
Chilectra S.A., ADR
(Utilities - Electric) ............................................... 15,500 $ 331,700
----------
China -- 0.6%
Huaneng Power International Inc.,
ADR (Utilities - Electric)* .......................................... 6,900 $ 92,719
Wuxi Little Swan Co., Ltd.
(Appliances) ......................................................... 101,000 89,833
----------
$ 182,552
----------
Egypt -- 0.7%
Suez Cement Co. (Construction) ......................................... 1,900 $ 35,180
Suez Cement Co., GDR
(Construction)## ..................................................... 10,390 188,579
----------
$ 223,759
----------
Finland -- 4.3%
Helsingin Puhelin Oyj
(Telecommunications) ................................................. 5,400 $ 250,943
Huhtamaki Oy Group (Conglomerate) ...................................... 3,900 223,170
Pohjola Insurance Group (Insurance) .................................... 9,500 472,637
TT Tieto Oy
(Computer Software - Systems) ........................................ 6,300 478,760
----------
$1,425,510
----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
France -- 6.2%
Television Francaise (Entertainment) ................................... 3,700 $ 572,615
Thomson CSF (Electronics) .............................................. 9,000 341,895
Total S.A., "B" (Oils) ................................................. 4,000 519,283
Union des Assurances Federales
S.A. (Insurance) ..................................................... 3,900 613,874
----------
$2,047,667
----------
Germany -- 6.4%
Adidas-Salomon AG
(Apparel and Textiles) ............................................... 1,850 $ 322,073
Henkel KGaA (Chemicals) ................................................ 10,200 1,007,861
SKW Trostberg AG ....................................................... 6,000 215,887
Wella AG (Cosmetics) ................................................... 500 559,092
----------
$2,104,913
----------
Greece -- 1.6%
Attica Enterprises S.A., GDR
(Transportation) ..................................................... 11,412 $ 164,598
Hellenic Bottling (Beverages) .......................................... 4,300 132,799
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................................................. 9,444 242,018
----------
$ 539,415
----------
Hong Kong -- 0.8%
Guangdong Kelon Electric Holdings
(Consumer Goods and Services) ........................................ 74,000 $ 58,272
Li & Fung Ltd. (Wholesale) ............................................. 8,000 12,909
New World Development Co.
(Real Estate)* ....................................................... 25,000 48,409
Peregrine Investment Holdings
(Finance)* ........................................................... 49,000 0
Wharf Holdings Ltd. (Real Estate)* ..................................... 13,000 12,838
Wing Hang Bank Ltd.
(Banks and Credit Cos.) .............................................. 85,000 113,567
----------
$ 245,995
----------
Hungary -- 0.4%
Richter Gedeon Rt.
(Pharmaceuticals) .................................................... 1,615 $ 129,743
----------
India -- 0.9%
Mahanagar Telephone Nigam Ltd.,
GDR (Telecommunications)*## .......................................... 6,000 $ 62,850
Reliance Industries Ltd.
(Conglomerate)*## .................................................... 11,000 70,400
State Bank of India (Banks and
Credit Cos.) ......................................................... 1,050 12,075
State Bank of India, GDR
(Bank and Credit Cos.)## ............................................. 4,300 49,450
Videsh Sanchar Nigam Ltd., GDR
(Telecommunications)## ............................................... 8,290 84,558
----------
$ 279,333
----------
Ireland -- 2.0%
Anglo Irish Bank Corp. PLC
(Banks and Credit Cos.)* ............................................. 250,294 $ 672,160
----------
Israel -- 0.4%
Makhteshim-Agam Industries Ltd.
(Chemicals)* ......................................................... 39,190 $ 124,798
----------
Italy -- 1.9%
Banca Carige S.p.A.
(Banks and Credit Cos.) .............................................. 25,000 $ 223,300
ERG S.p.A. (Oils)* ..................................................... 53,000 212,119
Telecom Italia Mobile S.p.A.
(Telecommunications) ................................................. 33,000 201,636
----------
$ 637,055
----------
</TABLE>
11-IGS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Japan -- 10.9%
Canon, Inc. (Office Equipment) ......................................... 18,000 $ 410,364
Eisai Co. Ltd. (Pharmaceuticals) ....................................... 15,000 205,182
Kinki Coca-Cola Bottling Co.
(Beverages) .......................................................... 9,000 109,430
Kirin Beverage Corp. (Beverages) ....................................... 18,000 339,364
Nitto Denko Corp. (Industrial Goods
and Services) ........................................................ 1,000 15,090
NTT Data Corp.
(Telecommunications) ................................................. 8 290,077
Osaka Sanso Kogyo Ltd.
(Chemicals) .......................................................... 35,000 72,194
Rohm Co. (Electronics) ................................................. 2,000 206,268
Sankyo Co. Ltd. (Pharmaceuticals)....................................... 7,000 160,093
Sony Corp. (Electronics) ............................................... 8,300 717,848
Takeda Chemical Industries
(Pharmaceuticals) .................................................... 12,000 320,475
TDK Corp.
(Special Products and Services) ...................................... 3,000 222,552
Tokyo Broadcasting System, Inc.
(Entertainment) ...................................................... 17,000 190,707
Ushio, Inc. (Electronics) .............................................. 40,000 318,448
----------
$3,578,092
----------
Malaysia -- 1.1%
New Straits Times Press Berhad
(Printing and Publishing) ............................................ 68,000 $ 25,414
Tanjong PLC (Entertainment) ............................................ 232,000 323,747
----------
$ 349,161
----------
Mauritius -- 0.3%
State Bank of Mauritius Ltd. (Banks
and Credit Cos.) ..................................................... 166,000 $ 111,124
----------
Mexico -- 1.1%
Grupo Financiero Banamex, "B"
(Finance)* ........................................................... 80,000 $ 155,954
Grupo Television S.A. de C.V., GDR
(Entertainment)* ..................................................... 3,300 124,163
Sanluis Corporacion S.A. de C.V.
(Conglomerate) ....................................................... 19,000 74,078
----------
$ 354,195
----------
Netherlands -- 10.3%
Akzo Nobel N.V. (Chemicals) ............................................ 4,900 $1,088,033
Benckiser N.V.
(Consumer Goods and Services)*........................................ 14,000 860,005
IHC Caland N.V.
(Marine Equipment)* .................................................. 3,459 194,478
ING Groep N.V.
(Financial Services)* ................................................ 9,186 600,823
Koninklijke Ahrend Groep N.V.
(Consumer Goods and Services)*........................................ 9,407 306,715
Royal Dutch Petroleum Co. (Oils) ....................................... 6,100 337,874
----------
$3,387,928
----------
Pakistan -- 0.1%
Hub Power Co. Ltd., GDR
(Utilities - Electric) ............................................... 4,000 $ 27,880
----------
Peru -- 1.3%
Ferreyros S.A. (Construction) .......................................... 159,000 $ 214,821
Telefonica del Peru S.A., ADR
(Telecommunications) ................................................. 10,400 212,550
----------
$ 427,371
----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Poland -- 0.8%
Bank Handlowy w Warszawie
(Banks and Credit Cos.)+ ............................................. 2,261 $ 43,150
Bank Handlowy w Warszawie, GDR
(Banks and Credit Cos.)## ............................................ 11,600 221,560
----------
$ 264,710
----------
Portugal -- 3.2%
Banco Espirito Santo e Comercial
de Lisboa S.A. (Banks and Credit
Cos.)* ............................................................... 1,657 $ 49,707
Banco Pinto & Sotto Mayor, S.A.
(Banks and Credit Cos.)[dbldag] ...................................... 23,840 491,932
Mota and Companhia S.A.
(Construction) ....................................................... 2,500 42,183
Portugal Telecom S.A.
(Utilities - Telephone) .............................................. 8,900 471,208
----------
$1,055,030
----------
Russia -- 0.6%
Lukoil Oil Co., ADR (Oils) ............................................. 970 $ 32,592
Rostelecom, ADR
(Telecommunications)* ................................................ 3,800 50,825
Rostelecom, GDR
(Telecommunications)* ................................................ 2,100 93,975
Unified Energy Systems, GDR
(Utilities - Electric)* .............................................. 2,528 32,611
----------
$ 210,003
----------
Singapore -- 1.2%
Hong Leong Finance Ltd. (Finance)+ ..................................... 50,000 $ 41,023
Overseas Union Bank (Finance) .......................................... 162,000 356,361
----------
$ 397,384
----------
South Africa -- 1.2%
JD Group Ltd. (Stores)* ................................................ 23,013 $ 153,036
Real Africa Holdings Ltd.
(Conglomerate)* ...................................................... 67,767 232,667
Real Africa Holdings Ltd., ADR
(Conglomerate)* ...................................................... 6,692 12,380
----------
$ 398,083
----------
Spain -- 2.1%
Acerinox S.A. (Iron and Steel) ......................................... 2,100 $ 279,307
Repsol S.A. (Oils) ..................................................... 7,200 396,274
----------
$ 675,581
----------
Sweden -- 4.5%
Astra AB (Pharmaceuticals) ............................................. 21,600 $ 430,106
Saab AB, "B" (Aerospace)* .............................................. 48,000 504,947
Skandia Forsakrings AB
(Insurance) .......................................................... 14,600 208,441
Volvo AB (Automobiles) ................................................. 11,100 330,150
----------
$1,473,644
----------
Switzerland -- 4.0%
Barry Callebaut AG
(Food Products)* ..................................................... 500 $ 107,850
Ciba Specialty AG (Chemicals) .......................................... 3,942 506,401
Clariant AG (Chemicals) ................................................ 580 382,203
Novartis AG (Pharmaceuticals) .......................................... 190 316,333
----------
$1,312,787
----------
Taiwan -- 0.3%
Fubon Insurance Ltd., GDR
(Insurance)*## ....................................................... 5,900 $ 102,512
----------
</TABLE>
12-IGS
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Thailand -- 0.1%
Thai Farmers Bank
(Banks and Credit Cos.) .............................................. 35,000 $ 31,042
-----------
Turkey -- 0.5%
Akbank (Banks and Credit Cos.)* ........................................ 2,925,326 $ 94,503
Akbank, Bonus Shares
(Banks and Credit Cos.) .............................................. 2,548,303 82,324
-----------
$ 176,827
-----------
United Kingdom -- 12.6%
ASDA Group PLC (Supermarkets) .......................................... 142,000 $ 487,330
Avis Europe PLC (Auto Rental)## ........................................ 73,000 330,383
British Aerospace PLC
(Aerospace and Defense) .............................................. 87,596 670,646
British Petroleum PLC (Oils)* .......................................... 38,235 557,402
Diageo PLC
(Food & Beverage Products) ........................................... 17,868 211,607
Kwik-Fit Holdings PLC
(Automotive Repair Centers) .......................................... 29,500 239,141
Lloyds TSB Group PLC
(Banks and Credit Cos.)* ............................................. 26,516 370,858
LucasVarity PLC (Automotive) ........................................... 138,000 547,838
Next PLC (Retail) ...................................................... 39,500 339,313
Tomkins PLC (Conglomerate) ............................................. 74,000 401,463
-----------
$ 4,155,981
-----------
Venezuela -- 0.4%
Compania Anonima Nacional
Telefonos de Venezuela, ADR
(Telecommunications) ................................................. 5,500 $ 137,500
-----------
Total Stocks
(Identified Cost, $29,385,673) .................................................. $30,916,579
-----------
Rights
Brazil
Telecomunicacoes do Rio de
Janeiro (Telecommunications)
(Identified Cost, $0) ................................................ 4,906 $ --
-----------
Warrants
Hong Kong
Wharf Holdings (Real Estate)
(Identified Cost, $0)................................................. 650 $ 30
-----------
Short-Term Obligations -- 7.3%
Principal Amount
(000 Omitted)
Federal Home Loan Bank,
due 7/01/98 .......................................................... $ 220 $ 220,000
Federal National Mortgage Assn.,
due 7/01/98 - 7/07/98 ................................................ 1,360 1,358,962
Student Loan Marketing Assn.,
due 7/01/98 .......................................................... 830 830,000
-----------
Total Short-Term Obligations, at Amortized Cost ................................... $ 2,408,962
-----------
Total Investments
(Identified Cost, $31,794,635) .................................................. $33,325,571
Other Assets,
Less Liabilities -- (1.3)% (423,920)
-----------
Net Assets -- 100.0% .............................................................. $32,901,651
===========
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- June 30, 1998
Massachusetts Investors Growth Stock Series
U.S. Stocks -- 83.8%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 80.6%
Advertising
Young & Rubicam, Inc.* ................................................... 130 $ 4,160
----------
Aerospace -- 2.9%
Gulfstream Aerospace Corp.* .............................................. 2,652 $ 123,318
United Technologies Corp. ................................................ 1,988 183,890
----------
$ 307,208
----------
Banks and Credit Companies -- 2.5%
Firstar Corp. ............................................................ 365 $ 13,870
Fleet Financial Group, Inc. .............................................. 185 15,448
National City Corp. ...................................................... 915 64,965
Norwest Corp. ............................................................ 822 30,722
State Street Corp. ....................................................... 549 38,155
Washington Mutual, Inc. .................................................. 729 31,666
Wells Fargo & Co. ........................................................ 186 68,634
----------
$ 263,460
----------
Business Machines -- 1.2%
Affiliated Computer Services,
Inc., "A"* ............................................................. 1,835 $ 70,647
Sun Microsystems, Inc.* .................................................. 1,282 55,687
----------
$ 126,334
----------
Business Services -- 1.8%
AccuStaff, Inc.* ......................................................... 1,114 $ 34,812
Ceridian Corp.* .......................................................... 366 21,503
Computer Sciences Corp. .................................................. 737 47,168
DST Systems, Inc.* ....................................................... 931 52,136
First Data Corp. ......................................................... 178 5,930
Fiserv, Inc.* ............................................................ 544 23,103
----------
$ 184,652
----------
Chemicals -- 0.5%
Sigma-Aldrich Corp. ...................................................... 1,470 $ 51,634
----------
Computer Software -- Personal
Computers -- 5.2%
Autodesk, Inc. ........................................................... 369 $ 14,252
Microsoft Corp.* ......................................................... 4,954 536,890
----------
$ 551,142
----------
Computer Software -- Services
Unigraphics Solutions, Inc.* ............................................. 131 $ 1,834
----------
Computer Software -- Systems -- 11.9%
BMC Software, Inc.* ...................................................... 5,873 $ 305,029
Cadence Design Systems, Inc.* ............................................ 6,423 200,719
Computer Associates
International, Inc. .................................................... 6,637 368,768
Compuware Corp.* ......................................................... 2,025 103,528
Inktomi Corp.* ........................................................... 155 6,161
Oracle Corp.* ............................................................ 10,831 266,037
----------
$1,250,242
----------
Consumer Goods and Services -- 5.5%
Clorox Co. ............................................................... 368 $ 35,098
Dial Corp. ............................................................... 561 14,551
Kimberly-Clark Corp. ..................................................... 372 17,066
Ralston-Ralston Purina Group ............................................. 130 15,186
Revlon, Inc., "A"* ....................................................... 548 28,153
Service Corp. International .............................................. 1,472 63,112
Tyco International Ltd. .................................................. 6,423 404,649
----------
$ 577,815
----------
Electrical Equipment -- 1.3%
General Electric Co. ..................................................... 1,470 $ 133,770
----------
</TABLE>
13-MIS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Electronics -- 0.5%
Altera Corp.* .......................................................... 477 $ 14,101
Analog Devices, Inc.* .................................................. 370 9,088
Intel Corp. ............................................................ 364 26,982
----------
$ 50,171
----------
Entertainment -- 5.4%
Capstar Broadcasting Corp,"A"* ......................................... 79 $ 1,985
CBS Corp. .............................................................. 4,396 139,573
Chancellor Media Corp.* ................................................ 370 18,373
Clear Channel
Communications, Inc.* ................................................ 550 60,019
Citadel Communications Corp. ........................................... 100 1,600
Cox Radio, Inc., "A"* .................................................. 550 23,787
Harrah's Entertainment, Inc.* .......................................... 4,363 101,439
Hearst-Argyle Television, Inc.* ........................................ 200 8,000
Jacor Communications, Inc.* ............................................ 774 45,666
Mirage Resorts, Inc.* .................................................. 3,018 64,321
Time Warner, Inc. ...................................................... 553 47,247
Univision Communications, Inc., "A"* 1,287 47,941
Young Broadcasting, Inc., "A"* ......................................... 184 11,960
----------
$ 571,911
----------
Financial Institutions -- 10.0%
American Express Co. ................................................... 550 $ 62,700
Associates First Capital Corp., "A" .................................... 5,996 460,942
CIT Group, Inc., "A" ................................................... 368 13,800
Federal National Mortgage Assn. ........................................ 2,019 122,654
Federated Investors, Inc., "B"* ........................................ 133 2,461
Franklin Resources, Inc. ............................................... 2,752 148,608
Heller Financial, Inc., "A"* ........................................... 185 5,550
Merrill Lynch & Co., Inc. .............................................. 369 34,040
Morgan Stanley Dean Witter & Co. ....................................... 2,199 200,934
----------
$1,051,689
----------
Financial Services -- 0.1%
Travelers Group, Inc. .................................................. 258 $ 15,641
----------
Insurance -- 0.9%
Allstate Corp. ......................................................... 366 $ 33,512
American International Group, Inc. ..................................... 184 26,864
Lincoln National Corp. ................................................. 371 33,900
----------
$ 94,276
----------
Medical and Health Products -- 3.7%
American Home Products Corp. ........................................... 922 $ 47,713
Biomet, Inc. ........................................................... 366 12,101
Bristol-Myers Squibb Co. ............................................... 1,285 147,695
Johnson & Johnson ...................................................... 179 13,201
King Pharmaceuticals, Inc.* ............................................ 222 3,108
McKesson Corp. ......................................................... 366 29,738
Schering Plough Corp. .................................................. 1,467 134,414
----------
$ 387,970
----------
Medical and Health Technology
and Services -- 2.5%
Health Management Associates,
Inc., "A"* ........................................................... 180 $ 6,019
HealthSouth Corp.* ..................................................... 4,710 125,698
Total Renal Care Holdings, Inc.* ....................................... 364 12,558
United Healthcare Corp. ................................................ 1,836 116,586
----------
$ 260,861
----------
Oils -- 0.5%
Exxon Corp. ............................................................ 700 $ 49,919
----------
Printing and Publishing -- 1.4%
Gannett Co., Inc. ...................................................... 1,468 $ 104,320
Pulitzer Publishing Co. ................................................ 65 5,801
Scripps (E.W.) Howard, Inc. ............................................ 267 14,635
Tribune Co. ............................................................ 314 21,607
----------
$ 146,363
----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Restaurants and Lodging -- 3.4%
Cendant Corp.* ......................................................... 4,205 $ 87,779
Hilton Hotels Corp. .................................................... 1,469 41,867
Marriott International, Inc., "A" ...................................... 735 23,796
McDonalds Corp. ........................................................ 321 22,149
Promus Hotel Corp.* .................................................... 4,784 184,184
----------
$ 359,775
----------
Stores -- 9.7%
CVS Corp. .............................................................. 9,551 $ 371,892
General Nutrition Cos., Inc.* .......................................... 920 28,635
Home Depot, Inc. ....................................................... 1,467 121,853
Liz Claiborne, Inc. .................................................... 368 19,228
Office Depot, Inc.* .................................................... 4,402 138,938
Rite Aid Corp. ......................................................... 5,693 213,843
Wal-Mart Stores, Inc. .................................................. 2,018 122,594
----------
$1,016,983
----------
Supermarkets -- 3.4%
Meyer (Fred), Inc.* .................................................... 2,169 $ 92,182
Safeway, Inc.* ......................................................... 6,474 263,411
----------
$ 355,593
----------
Telecommunications -- 6.3%
AirTouch Communications, Inc.* ......................................... 554 $ 32,374
Amdocs Ltd.* ........................................................... 143 2,163
Cisco Systems, Inc.* ................................................... 2,203 202,814
Global TeleSystems Group, Inc.* ........................................ 129 6,289
Lucent Technologies, Inc. .............................................. 1,471 122,369
MCI Communications Corp. ............................................... 3,531 205,239
Qwest Communications
International, Inc. * ................................................ 1,343 46,837
Sprint Corp. ........................................................... 180 12,690
WorldCom, Inc.* ........................................................ 556 26,931
----------
$ 657,706
----------
Total U.S. Stocks ........................................................................... $8,471,109
----------
Foreign Stocks -- 3.2%
France -- 0.3%
Alcatel Alsthom Compagnie
(Telecommunications) ................................................. 117 $ 23,789
Alcatel Alsthom Compagnie, ADR
(Telecommunications) ................................................. 185 7,527
----------
$ 31,316
----------
Germany -- 0.3%
SAP AG, ADR
(Computer Software - Systems) ........................................ 38 $ 8,597
SAP AG, ADR
(Computer Software - Systems)## ...................................... 100 22,400
----------
$ 30,997
----------
Japan -- 0.8%
Canon, Inc., ADR
(Office Equipment) ................................................... 653 $ 14,937
Sony Corp. (Electronics) ............................................... 400 34,595
Sony Corp., ADR (Electronics) .......................................... 367 31,585
----------
$ 81,117
----------
Netherlands -- 0.3%
ING Groep N.V.
(Financial Services)* ................................................ 329 $ 21,519
ING Groep N. V., ADR
(Financial Services) ................................................. 182 11,898
----------
$ 33,417
----------
Switzerland -- 0.2%
Nestle AG
(Food and Beverage Products) ......................................... 10 $ 21,412
----------
</TABLE>
14-MIS
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
United Kingdom -- 1.3%
British Petroleum PLC, ADR (Oils) . 1,420 $ 125,315
Sema Group PLC
(Computer Software - Systems) ... 1,307 15,369
-----------
$ 140,684
-----------
Total Foreign Stocks ..................... $ 338,943
-----------
Total Stocks
(Identified Cost, $8,401,806) .......... $ 8,810,052
-----------
Rights -- 0.1%
Stores -- 0.1%
CVS Corp.*
(Identified Cost, $10,020) ...... 137 $ 10,455
-----------
Short-Term Obligations -- 23.3%
Principal Amount
(000 Omitted)
Federal Home Loan Bank,
due 7/08/98 ..................... $ 625 $ 624,335
Federal National Mortgage Assn.,
due 7/01/98 - 7/08/98 ........... 740 739,747
Student Loan Marketing Assn.,
due 7/01/98 ..................... 980 980,000
Tennessee Valley Authority,
due 7/24/98 ..................... 100 99,655
-----------
Total Short-Term Obligations,
at Amortized Cost ...................... $ 2,443,737
-----------
Total Investments
(Identified Cost, $10,855,563) ......... $11,264,244
Other Assets,
Less Liabilities -- (7.2)% (757,376)
-----------
Net Assets -- 100.0% ..................... $10,506,868
===========
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- June 30, 1998
New Discovery Series
Stocks -- 80.1%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 78.7%
Advertising -- 0.7%
TMP Worldwide, Inc.* ................................................... 655 $ 22,843
--------
Airlines -- 1.2%
Atlas Air, Inc.* ....................................................... 680 $ 22,993
Skywest, Inc. .......................................................... 460 12,880
--------
$ 35,873
--------
Auto Parts -- 0.3%
Brooks Automation, Inc.* ............................................... 593 $ 7,709
--------
Biotechnology -- 1.5%
IDEXX Laboratories, Inc.* .............................................. 1,795 $ 44,651
--------
Business Machines -- 2.6%
Affiliated Computer Services,
Inc., "A"* ........................................................... 2,078 $ 80,003
--------
Business Services -- 17.7%
AccuStaff, Inc.* ....................................................... 1,020 $ 31,875
BISYS Group, Inc.* ..................................................... 902 36,982
Catalina Marketing Corp.* .............................................. 466 24,203
Ceridian Corp.* ........................................................ 291 17,096
DST Systems, Inc.* ..................................................... 735 41,160
Envoy Corp.* ........................................................... 172 8,149
Fiserv, Inc.* .......................................................... 743 31,554
Global Directmail Corp.* ............................................... 1,122 14,165
Interim Services, Inc.* ................................................ 1,198 38,486
Learning Tree International, Inc.* ..................................... 2,003 40,310
May & Speh, Inc.* ...................................................... 1,256 24,963
Memberworks, Inc.* ..................................................... 468 15,093
Meta Group, Inc.* ...................................................... 819 18,120
NOVA Corp.* ............................................................ 629 22,487
Paymentech, Inc.* ...................................................... 708 14,558
Personnel Group of America, Inc.* ...................................... 911 18,220
PMT Services, Inc.* .................................................... 1,058 26,913
Policy Management Systems Corp.*........................................ 490 19,232
Professional Detailing, Inc.* .......................................... 282 7,015
Renaissance Worldwide, Inc.* ........................................... 704 15,312
Robert Half International, Inc.* ....................................... 265 14,807
Splash Technology Holdings, Inc.* ...................................... 755 12,977
Superior Services, Inc.* ............................................... 518 15,572
Technology Solutions Co.* .............................................. 948 30,040
--------
$539,289
--------
Chemicals -- 0.8%
Sigma-Aldrich Corp. .................................................... 719 $ 25,255
--------
Computer Hardware -- Systems -- 0.5%
International Specialty
Products, Inc.* ...................................................... 814 $ 15,161
--------
Computer Software -- Personal
Computers -- 0.5%
Intuit, Inc.* .......................................................... 240 $ 14,700
--------
Computer Software -- Services -- 0.2%
Concentric Network Corp.* .............................................. 210 $ 6,366
International Integration, Inc.* ....................................... 10 172
--------
$ 6,538
--------
Computer Software -- Systems -- 10.3%
American Business Information,
Inc., "A"* ........................................................... 1,151 $ 17,553
American Business Information,
Inc., "B"* ........................................................... 230 3,680
Aspen Technology, Inc.* ................................................ 610 30,805
Black Box Corp.* ....................................................... 376 12,478
Cadence Design Systems, Inc.* .......................................... 1,659 51,844
Compuware Corp.* ....................................................... 353 18,047
</TABLE>
15-NDS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Computer Software -- Systems
-- continued
Comverse Technology, Inc.* ............................................. 203 $ 10,531
Edify Corp.* ........................................................... 400 4,050
Harbinger Corp.* ....................................................... 411 9,941
Security Dynamics Technologies, Inc.* .................................. 944 17,464
Sterling Software, Inc.* ............................................... 1,009 29,829
SunGard Data Systems, Inc.* ............................................ 709 27,208
Synopsys, Inc.* ........................................................ 700 32,025
Transaction System Architects,
Inc., "A"* ........................................................... 504 19,404
USCS International, Inc.* .............................................. 889 18,391
Vantive Corp.* ......................................................... 465 9,532
--------
$312,782
--------
Conglomerates -- 0.5%
Sodexho Marriott Services, Inc.* ....................................... 564 $ 16,356
--------
Construction Services -- 0.6%
Martin Marietta Materials, Inc. ........................................ 386 $ 17,370
--------
Consumer Goods and Services -- 1.3%
Alternative Resources Corp.* ........................................... 865 $ 10,704
Dial Corp. ............................................................. 534 13,851
Revlon, Inc., "A"* ..................................................... 144 7,398
Sportsline USA, Inc.* .................................................. 200 7,313
--------
$ 39,266
--------
Electrical Equipment -- 1.6%
Barnett, Inc.* ......................................................... 331 $ 6,703
Belden, Inc. ........................................................... 568 17,395
Cable Design Technologies Corp.* ....................................... 1,214 25,038
--------
$ 49,136
--------
Electronics -- 4.5%
Analog Devices, Inc.* .................................................. 519 $ 12,748
BMC Industries, Inc. ................................................... 672 5,880
Burr-Brown Corp.* ...................................................... 885 18,585
Lattice Semiconductor Corp.* ........................................... 527 14,970
Microchip Technology, Inc.* ............................................ 390 10,189
Photronics, Inc.* ...................................................... 887 19,570
PMC-Sierra, Inc.* ...................................................... 373 17,484
Sipex Corp.* ........................................................... 1,122 24,123
VLSI Technology, Inc.* ................................................. 736 12,351
--------
$135,900
--------
Entertainment -- 2.9%
Citadel Communications Corp. ........................................... 100 $ 1,600
Cox Radio, Inc., "A"* .................................................. 104 4,498
Gemstar International Group Ltd.* ...................................... 998 37,363
Harrah's Entertainment, Inc.* .......................................... 724 16,833
Heftel Broadcasting Corp., "A"* ........................................ 307 13,738
Jacor Communications, Inc.* ............................................ 288 16,992
--------
$ 91,024
--------
Financial Institutions -- 1.2%
ARM Financial Group, Inc., "A" ......................................... 75 $ 1,659
Conning Corp. .......................................................... 345 6,728
Student Loan Corp. ..................................................... 164 7,718
Waddell & Reed Financial, Inc., "A"..................................... 842 20,155
--------
$ 36,260
--------
Food and Beverage Products -- 0.7%
Earthgrains Co. ........................................................ 223 $ 12,460
Mondavi (Robert) Corp.* ................................................ 331 9,392
--------
$ 21,852
--------
Insurance -- 1.2%
Annuity and Life Re Holdings Ltd.* ..................................... 448 $ 9,912
Executive Risk, Inc. ................................................... 214 15,783
Life Re Corp. .......................................................... 127 10,525
--------
$ 36,220
--------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Medical and Health Products -- 2.7%
AmeriSource Health Corp.,"A"* .......................................... 494 $ 32,450
Datascope Corp.* ....................................................... 431 11,448
King Pharmaceuticals, Inc.* ............................................ 660 9,240
PSS World Medical, Inc.* ............................................... 2,070 30,274
--------
$ 83,412
--------
Medical and Health Technology
and Services -- 7.2%
Concentra Managed Care, Inc.* .......................................... 1,163 $ 30,238
Cytyc Corp.* ........................................................... 923 15,056
Hologic, Inc.* ......................................................... 739 13,441
IDX Systems Corp.* ..................................................... 385 17,734
Mid Atlantic Medical Services, Inc.*.................................... 1,262 14,513
NCS Healthcare, Inc., "A"* ............................................. 720 20,520
Orthodontic Centers of
America, Inc.* ....................................................... 312 6,533
Quorum Health Group, Inc.* ............................................. 577 15,290
Renal Care Group, Inc.* ................................................ 322 14,188
Steris Corp.* .......................................................... 283 17,997
Total Renal Care Holdings, Inc.* ....................................... 1,306 45,057
Transition Systems, Inc.* .............................................. 285 3,028
Virgin Islands Technologies, Inc.* ..................................... 527 5,962
--------
$219,557
--------
Oil Services -- 0.6%
Dril-Quip, Inc.* ....................................................... 105 $ 2,756
Global Industries, Inc.* ............................................... 810 13,669
National Oilwell, Inc.* ................................................ 100 2,681
--------
$ 19,106
--------
Oils -- 0.7%
Newfield Exploration Co.* .............................................. 822 $ 20,447
--------
Printing and Publishing -- 1.5%
Applied Graphics
Technologies, Inc.* .................................................. 200 $ 9,150
Scholastic Corp.* ...................................................... 883 35,210
--------
$ 44,360
--------
Restaurants and Lodging -- 1.5%
Buffets, Inc.* ......................................................... 1,589 $ 24,927
Capstar Hotel Co.* ..................................................... 563 15,764
Friendly Ice Cream Corp.* .............................................. 260 4,388
--------
$ 45,079
--------
Special Products and Services -- 1.2%
Caliber Learning Network, Inc.* ........................................ 494 $ 7,595
Equity Corp. International* ............................................ 719 17,256
Watsco, Inc. ........................................................... 310 10,908
--------
$ 35,759
--------
Stores -- 7.1%
AnnTaylor Stores Corp.* ................................................ 625 $ 13,242
BJ's Wholesale Club, Inc.* ............................................. 334 13,569
Copart, Inc.* .......................................................... 717 16,581
CSK Auto Corp.* ........................................................ 1,202 30,350
Duane Reade, Inc.* ..................................................... 691 20,730
Gymboree Corp.* ........................................................ 691 10,473
Mazel Stores, Inc.* .................................................... 406 6,496
Party City Corp.* ...................................................... 920 27,025
Petco Animal Supplies, Inc.* ........................................... 1,540 30,704
Regis Corp. ............................................................ 707 20,901
Viking Office Products, Inc.* .......................................... 868 27,233
--------
$217,304
--------
Technology -- 0.9%
Galileo Technology Ltd. ................................................ 2,032 $ 27,432
--------
</TABLE>
16-NDS
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Telecommunications -- 4.5%
Allegiance Telecom, Inc.* .............................................. 100 $ 1,500
American Tower Corp., "A"* ............................................. 505 12,594
Aspect Telecommunications Corp.*........................................ 750 20,531
Hyperion Telecommunications,
Inc., "A"* ........................................................... 959 15,044
Intermedia Communications, Inc.* ....................................... 622 26,085
IXC Communications, Inc.* .............................................. 320 15,520
Lightbridge, Inc.* ..................................................... 783 6,656
Natural Microsystems Corp.* ............................................ 523 8,368
Nextlink Communications, Inc., "A"*..................................... 446 16,892
Transaction Network Services, Inc.*..................................... 676 14,238
----------
$ 137,428
----------
Total U.S. Stocks ........................................................................ $2,398,072
----------
Foreign Stocks -- 1.4%
Netherlands -- 1.4%
Brunel International N.V.
(Human Resources)* ................................................... 178 $ 7,386
Elsag Bailey Process Automation
N.V. (Machinery)* .................................................... 1,496 35,997
----------
Total Foreign Stocks ..................................................................... $ 43,383
----------
Total Stocks
(Identified Cost, $2,347,017) .......................................................... $2,441,455
----------
Short-Term Obligations -- 34.0%
Principal Amount
(000 Omitted)
Federal Home Loan Mortgage
Corp., due 8/06/98 ................................................... $ 100 $ 99,457
Federal National Mortgage Assn.,
due 7/01/98 .......................................................... 100 100,000
Student Loan Marketing Assn.,
due 7/01/98 .......................................................... 835 835,000
----------
Total Short-Term Obligations,
at Amortized Cost ...................................................................... $1,034,457
----------
Total Investments
(Identified Cost, $3,381,474) .......................................................... $3,475,912
----------
Shares
Securities Sold Short (0.8%)
Dell Computer Corp.* ................................................... 100 $ (9,281)
Gateway 2000, Inc.* .................................................... 300 (15,188)
----------
Total Securities Sold Short
(Proceeds Received, $21,083) ........................................................... $ (24,469)
----------
Other Assets,
Less Liabilities -- (13.3)% (404,077)
----------
Net Assets -- 100.0% ..................................................................... $3,047,366
==========
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- June 30, 1998
Research Growth and Income Series
Stocks -- 89.6%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 81.5%
Aerospace -- 2.3%
Lockheed-Martin Corp. .................................................... 1,530 $ 161,989
United Technologies Corp. ................................................ 3,565 329,762
----------
$ 491,751
----------
Automotive -- 0.9%
Ford Motor Co. ........................................................... 3,100 $ 182,900
----------
Banks and Credit Companies -- 7.6%
BankBoston Corp. ......................................................... 2,850 $ 158,531
Chase Manhattan Corp. .................................................... 4,460 336,730
Comerica, Inc. ........................................................... 3,375 223,594
Compass Bancshares, Inc. ................................................. 7,020 316,777
Fleet Financial Group, Inc. .............................................. 2,545 212,508
National City Corp. ...................................................... 2,300 163,300
PNC Bank Corp. ........................................................... 2,540 136,684
Washington Mutual, Inc. .................................................. 1,900 82,531
----------
$1,630,655
----------
Business Machines -- 1.6%
International Business
Machines Corp. ......................................................... 2,215 $ 254,310
Sun Microsystems, Inc.* .................................................. 2,210 95,997
----------
$ 350,307
----------
Cellular Telephones -- 1.9%
Century Telephone Enterprises, Inc. ...................................... 9,065 $ 415,857
----------
Chemicals -- 2.0%
Air Products & Chemicals, Inc. ........................................... 4,900 $ 196,000
Cambrex Corp. ............................................................ 2,600 68,250
DuPont (E. I.) de Nemours
& Co., Inc. ............................................................ 1,400 104,475
Sigma-Aldrich Corp. ...................................................... 2,000 70,250
----------
$ 438,975
----------
Computer Software --
Personal Computers -- 3.2%
Microsoft Corp.* ......................................................... 6,290 $ 681,679
----------
Computer Software -- Systems -- 0.4%
Computer Associates
International, Inc. .................................................... 900 $ 50,006
Oracle Corp.* ............................................................ 1,740 42,739
----------
$ 92,745
----------
Consumer Goods and Services -- 9.0%
Black & Decker Corp. ..................................................... 2,400 $ 146,400
Clorox Co. ............................................................... 1,425 135,909
Colgate-Palmolive Co. .................................................... 2,850 250,800
Gillette Co. ............................................................. 5,700 323,119
Kimberly-Clark Corp. ..................................................... 3,450 158,269
Procter & Gamble Co. ..................................................... 2,040 185,767
Revlon, Inc., "A"* ....................................................... 1,530 78,604
Service Corp. International .............................................. 5,280 226,380
Tyco International Ltd. .................................................. 7,000 441,000
----------
$1,946,248
----------
Electrical Equipment -- 1.7%
Cooper Industries, Inc. .................................................. 900 $ 49,444
General Electric Co. ..................................................... 3,400 309,400
----------
$ 358,844
----------
Energy -- 0.6%
Energy East Corp. ........................................................ 3,200 $ 133,200
----------
Engineering -- Construction -- 0.8%
United Dominion Industries Ltd. .......................................... 5,100 $ 170,212
----------
</TABLE>
17-RGI
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Entertainment -- 1.6%
CBS Corp. ................................................................ 3,100 $ 98,425
Viacom, Inc., "B"* ....................................................... 4,400 256,300
-----------
$ 354,725
-----------
Financial Institutions -- 4.9%
Beneficial Corp. ......................................................... 3,200 $ 490,200
CIT Group, Inc., "A" ..................................................... 2,970 111,375
Federal National Mortgage Assn. .......................................... 5,090 309,217
First Union Corp. ........................................................ 802 46,717
Morgan (J.P.) & Co. ...................................................... 700 81,987
Pimco Advisors Holdings LP ............................................... 600 20,475
-----------
$ 1,059,971
-----------
Food and Beverage Products -- 0.8%
Archer-Daniels-Midland Co. ............................................... 8,700 $ 168,562
-----------
Insurance -- 7.7%
Allstate Corp. ........................................................... 1,640 $ 150,162
Chubb Corp. .............................................................. 2,395 192,498
CIGNA Corp. .............................................................. 1,515 104,535
Conseco, Inc. ............................................................ 3,150 147,263
Hartford Financial Services
Group, Inc. ............................................................ 1,665 190,434
Hartford Life, Inc., "A" ................................................. 1,400 79,713
Lincoln National Corp. ................................................... 2,420 221,127
Nationwide Financial Services,
Inc., "A" .............................................................. 3,950 201,450
ReliaStar Financial Corp. ................................................ 3,940 189,120
Torchmark Corp. .......................................................... 1,930 88,298
Travelers Group, Inc. .................................................... 1,670 101,244
-----------
$ 1,665,844
-----------
Machinery -- 1.2%
Eaton Corp. .............................................................. 1,000 $ 77,750
Federal Signal Corp. ..................................................... 7,300 177,481
-----------
$ 255,231
-----------
Medical and Health Products -- 5.1%
American Home Products Corp. ............................................. 6,200 $ 320,850
Boston Scientific Corp.* ................................................. 2,450 175,481
Bristol-Myers Squibb Co. ................................................. 5,270 605,721
-----------
$ 1,102,052
-----------
Medical and Health Technology
and Services -- 5.4%
Cardinal Health, Inc. .................................................... 3,360 $ 315,000
HealthSouth Corp.* ....................................................... 5,396 144,006
Medtronic, Inc. .......................................................... 5,700 363,375
United Healthcare Corp. .................................................. 5,400 342,900
-----------
$ 1,165,281
-----------
Metals and Minerals -- 0.7%
Aluminum Cos. of America ................................................. 1,020 $ 67,256
Minerals Technologies, Inc. .............................................. 1,800 91,575
-----------
$ 158,831
-----------
Oils -- 4.7%
Chevron Corp. ............................................................ 2,500 $ 207,656
Exxon Corp. .............................................................. 5,700 406,481
Texaco, Inc. ............................................................. 4,200 250,688
USX-Marathon Group ....................................................... 4,195 143,941
-----------
$ 1,008,766
-----------
Pollution Control -- 0.4%
Browning Ferris Industries, Inc. ......................................... 2,250 $ 78,188
-----------
Railroads
Wisconsin Central
Transportation Corp.* .................................................. 100 $ 2,188
-----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Real Estate Investment Trusts -- 2.9%
Beacon Capital Partners, Inc.*## ......................................... 5,100 $ 102,000
Highwoods Properties, Inc. ............................................... 3,000 96,937
Kilroy Realty Corp. ...................................................... 3,600 90,000
Patriot American Hospitality, Inc. ....................................... 4,000 95,750
SL Green Realty Corp. .................................................... 4,600 103,500
Starwood Lodging Trust ................................................... 1,888 91,214
TriNet Corporate Realty Trust, Inc. ...................................... 1,660 56,440
-----------
$ 635,841
-----------
Restaurants and Lodging -- 0.2%
FelCor Suite Hotels, Inc. ................................................ 1,400 $ 43,925
-----------
Special Products and Services
Newport News Shipbuilding, Inc. .......................................... 300 $ 8,025
-----------
Stores -- 5.7%
CVS Corp. ................................................................ 5,700 $ 221,944
Lowes Co., Inc. .......................................................... 4,480 181,720
Penney (J.C.), Co. ....................................................... 3,920 283,465
Rite Aid Corp. ........................................................... 8,160 306,510
Sears, Roebuck & Co. ..................................................... 3,900 238,143
-----------
$ 1,231,782
-----------
Supermarkets -- 0.1%
Meyer (Fred), Inc.* ...................................................... 325 $ 13,813
-----------
Telecommunications -- 4.0%
Cincinnati Bell, Inc. .................................................... 8,145 $ 233,150
Cisco Systems, Inc.* ..................................................... 3,100 285,394
Sprint Corp. ............................................................. 4,920 346,860
-----------
$ 865,404
-----------
Utilities -- Electric -- 2.5%
CMS Energy Corp., "G" .................................................... 3,160 $ 139,040
New Century Energies, Inc. ............................................... 1,130 51,345
Sierra Pacific Resources ................................................. 5,200 188,825
Unicom Corp. ............................................................. 4,485 157,255
-----------
$ 536,465
-----------
Utilities -- Gas -- 1.6%
Columbia Gas System, Inc. ................................................ 3,150 $ 175,219
KN Energy, Inc. .......................................................... 3,100 167,981
-----------
$ 343,200
-----------
Total U.S. Stocks ...................................................................... $17,747,467
-----------
Foreign Stocks -- 8.1%
Bermuda -- 0.7%
Ace Ltd. (Insurance) ..................................................... 4,000 $ 156,000
-----------
France -- 1.1%
Alcatel Alsthom Compagnie, ADR
(Telecommunications) ................................................... 5,600 $ 227,850
-----------
Germany -- 1.1%
Henkel KGaA (Chemicals) .................................................. 2,500 $ 247,025
-----------
Hong Kong -- 0.4%
Hutchison Whampoa Ltd.
(Conglomerate) ......................................................... 15,000 $ 79,197
-----------
Italy -- 0.6%
ENI S.p.A, ADR (Oils) .................................................... 1,900 $ 123,500
-----------
Japan -- 0.9%
Sony Corp., ADR (Electronics) ............................................ 2,240 $ 192,780
-----------
Netherlands -- 0.5%
ING Groep N.V.
(Financial Services)* .................................................. 1,712 $ 111,976
-----------
Sweden -- 0.9%
Skandia Forsakrings AB (Insurance) ....................................... 14,050 $ 200,588
-----------
Switzerland -- 0.4%
Nestle AG
(Food and Beverage Products) ........................................... 41 $ 87,788
-----------
</TABLE>
18-RGI
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
United Kingdom -- 1.5%
British Petroleum PLC, ADR (Oils) . 3,588 $ 316,641
Lloyds TSB Group PLC
(Banks and Credit Cos.)* ........ 42 587
-----------
$ 317,228
-----------
Total Foreign Stocks ................... $ 1,743,932
-----------
Total Stocks
(Identified Cost, $17,502,568) ....... $19,335,399
-----------
Short-Term Obligations -- 8.5%
Principal Amount
(000 Omitted)
Federal Home Loan Mortgage
Corp., due 7/01/98 .............. $1,330 $ 1,330,000
Federal National Mortgage Assn.,
due 7/01/98 ..................... 500 500,000
-----------
Total Short-Term Obligations,
at Amortized Cost .................... $ 1,830,000
-----------
Total Investments
(Identified Cost, $19,332,568) ....... $21,165,399
Other Assets,
Less Liabilities -- 1.9% 410,490
-----------
Net Assets -- 100.0% ..................... $21,575,889
===========
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio of Investments -- June 30, 1998
Research International Series
Stocks -- 79.9%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- 78.4%
Australia -- 0.9%
QBE Insurance Group Ltd.
(Insurance) ....................... 1,018 $ 3,594
Tab Ltd. (Gaming)* .................. 800 1,179
--------
$ 4,773
--------
Brazil -- 2.2%
Companhia Cervejaria Brahma,
ADR (Beverages) ................... 59 $ 737
Telecomunicacoes Brasileiras S.A.,
ADR (Telecommunications) .......... 105 11,465
--------
$ 12,202
--------
Canada -- 2.5%
Canadian National Railway Co.
(Railroads) ....................... 158 $ 8,394
Perigee, Inc.
(Investment Counseling)*## ........ 7 91
T. Eaton Co., Ltd.
(Consumer Goods and Services)*..... 504 5,127
--------
$ 13,612
--------
Chile -- 1.1%
Chilectra S.A., ADR
(Utilities - Electric) ............ 158 $ 3,381
Embotelladora Andina S.A.
(Consumer Goods and Services)...... 161 2,516
--------
$ 5,897
--------
Finland -- 2.1%
Helsingin Puhelin Oyj
(Telecommunications) .............. 107 $ 4,972
Pohjola Insurance Group
(Insurance) ....................... 57 2,836
TT Tieto Oy
(Computer Software - Systems) ..... 48 3,648
--------
$ 11,456
--------
France -- 7.2%
Alcatel Alsthom Compagnie
(Telecommunications) .............. 32 $ 6,506
Compagnie Generale de
Geophysique S.A., ADR
(Oil Services)* ................... 185 5,434
Dassault Systemes S.A.
(Computer Software - Systems) ..... 44 2,071
Sanofi S.A.
(Medical and Health Products) ..... 48 5,637
Television Francaise (Entertainment) 53 8,202
Thomson CSF (Electronics) ........... 98 3,723
Total S.A., "B" (Oils) .............. 48 6,232
Union des Assurances Federales
S.A. (Insurance) .................. 12 1,889
--------
$ 39,694
--------
Germany -- 6.1%
Adidas-Salomon AG
(Apparel and Textiles) ............ 16 $ 2,786
Henkel KGaA (Chemicals) ............. 153 15,115
Mannesmann AG
(Industrial Products) ............. 37 3,799
SAP AG, Preferred
(Computer Software - Systems) ..... 9 6,103
Wella AG (Consumer Goods and
Services) ......................... 5 5,591
--------
$ 33,394
--------
</TABLE>
19-RIS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Greece -- 1.0%
Athens Medic Center, GDR
(Medical and Health Technology
and Services) ........................................................ 150 $ 2,952
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................................................. 104 2,665
--------
$ 5,617
--------
Ireland -- 2.7%
Allied Irish Banks PLC
(Banks and Credit Cos.)* ............................................. 371 $ 5,384
Anglo Irish Bank Corp. PLC
(Banks and Credit Cos.)* ............................................. 3,578 9,608
--------
$ 14,992
--------
Italy -- 6.3%
Banca Carige S.p.A.
(Banks and Credit Cos.)* ............................................. 549 $ 4,904
Banca Nazionale del Lavoro
(Banks and Credit Cos.)* ............................................. 124 3,276
ERG S.p.A. (Oils)* ..................................................... 1,086 4,346
Industrie Natuzzi S.p.A., ADR
(Consumer Goods and Services) ........................................ 206 5,356
Mediaset S.p.A. (Broadcasting
Services) ............................................................ 809 5,159
Telecom Italia Mobile Di Risp S.p.A.
(Telecommunications)* ................................................ 1,087 7,995
Telecom Italia S.p.A., Saving Shares
(Telecommunications) ................................................. 1,051 3,545
--------
$ 34,581
--------
Japan -- 6.5%
Canon, Inc., ADR
(Special Products and Services) ...................................... 226 $ 5,170
Fujimi, Inc. (Electronics) ............................................. 100 3,676
Meitec Corp.
(Computer Software - Systems) ........................................ 100 3,474
Osaka Sanso Kogyo Ltd.
(Chemicals) .......................................................... 1,000 2,063
Sony Corp., ADR (Electronics) .......................................... 175 15,061
TDK Corp., ADR (Electronics) ........................................... 82 6,109
--------
$ 35,553
--------
Netherlands -- 13.8%
Akzo Nobel N.V. (Chemicals) ............................................ 57 $ 12,657
Benckiser N.V., "B" (Consumer
Goods and Services)* ................................................. 194 11,917
Brunel International N.V.
(Human Resources)* ................................................... 148 6,141
Fugro N.V. (Engineering)* .............................................. 158 6,284
Hunter Douglas N.V., ADR
(Consumer Goods and Services)*........................................ 165 8,953
IHC Caland N.V.
(Marine Equipment)* .................................................. 57 3,205
ING Groep N.V.
(Financial Services)* ................................................ 231 15,109
Koninklijke Ahold N.V.
(Supermarkets) ....................................................... 69 2,213
Koninklijke Ahrend Groep N.V.
(Consumer Goods and Services) ........................................ 295 9,618
--------
$ 76,097
--------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Portugal -- 2.3%
Banco Pinto & Sotto Mayor, S.A.
(Banks and Credit Cos.)[dbldag] ...................................... 110 $ 2,270
BPI - Soc Gestora
(Banks and Credit Cos.) .............................................. 146 4,707
Portugal Telecom S.A.
(Utilities - Telephone) .............................................. 105 5,559
--------
$ 12,536
--------
Spain -- 1.4%
Acerinox S.A. (Iron and Steel) ......................................... 32 $ 4,256
Telefonica de Espana
(Utilities - Telephone) .............................................. 73 3,371
--------
$ 7,627
--------
Sweden -- 5.3%
Securitas AB (Security Services) ....................................... 174 $ 8,509
Skandia Forsakrings AB (Insurance) ..................................... 659 9,409
Sparbanken Sverige AB, "A"
(Banks and Credit Cos.) .............................................. 91 2,735
Volvo AB (Automotive) .................................................. 295 8,774
--------
$ 29,427
--------
Switzerland -- 1.0%
Barry Callebaut AG
(Food Products)* ..................................................... 12 $ 2,588
Hiestand Holding AG
(Food Products)* ..................................................... 9 3,093
--------
$ 5,681
--------
United Kingdom -- 16.0%
Bank of Scotland J.P.
(Banks and Credit Cos.)* ............................................. 356 $ 3,984
Booker PLC (Food - Wholesale) .......................................... 1,195 4,923
British Aerospace PLC
(Aerospace and Defense)* ............................................. 921 7,051
British Petroleum PLC (Oils)* .......................................... 797 11,619
HSBC Holdings PLC
(Financial Services)* ................................................ 14 355
Jarvis Hotels PLC
(Restaurants and Lodging)+ ........................................... 1,895 5,437
Kwik-Fit Holdings PLC
(Automotive Repair Centers) .......................................... 725 5,877
Lloyds TSB Group PLC
(Banks and Credit Cos.)* ............................................. 469 6,560
LucasVarity PLC (Automotive) ........................................... 2,668 10,592
Sema Group PLC (Computer
Software - Systems) .................................................. 761 8,949
Taylor Nelson Sofres PLC
(Market Research) .................................................... 2,564 5,260
Thomson Travel Group PLC
(Travel Services)* ................................................... 1,527 4,763
Tomkins PLC (Conglomerate) ............................................. 614 3,331
Williams PLC (Diversified
Manufacturing Operations) ............................................ 1,488 9,556
--------
$ 88,257
--------
Total Foreign Stocks ............................................................... $431,396
--------
</TABLE>
20-RIS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 1.5%
Electronics -- 0.9%
Amkor Technology, Inc.* .................................................. 523 $ 4,887
--------
Telecommunications -- 0.6%
Global TeleSystems Group, Inc.* .......................................... 73 $ 3,559
--------
Total U.S. Stocks ............................................................. $ 8,446
--------
Total Stocks
(Identified Cost, $441,312) ................................................. $439,842
--------
Short-Term Obligations -- 38.1%
Principal Amount
(000 Omitted)
Federal Home Loan Mortgage
Corp., due 8/06/98 ..................................................... $ 60 $ 59,674
Federal National Mortgage Assn.,
due 7/01/98 ............................................................ 90 90,000
Student Loan Marketing Assn.,
due 7/01/98 ............................................................ 60 60,000
--------
Total Short-Term Obligations,
at Amortized Cost ........................................................... $209,674
--------
Total Investments
(Identified Cost, $650,986) ................................................. $649,516
Other Assets,
Less Liabilities -- (18.0)% (99,185)
--------
Net Assets -- 100.0% .......................................................... $550,331
========
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
[dbldag] Security valued by or at the direction of the Trustees
21-RIS
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- June 30, 1998
<TABLE>
<CAPTION>
Capital Equity
Opportunities Income
Assets: Series Series
Investments -- ------------- ----------
<S> <C> <C>
Unaffiliated issuers, at cost ......................................................... $138,625,393 $2,684,646
Unrealized appreciation ............................................................... 17,425,122 1,943
------------ ----------
Total investments, at value ........................................................ $156,050,515 $2,686,589
Cash .................................................................................... 496,851 11,625
Foreign currency, at value (identified cost, $79,061, $15, $71,220 and $57, respectively) 78,113 15
Receivable for investments sold ......................................................... 1,047,386 2,192
Receivable for Series shares sold ....................................................... 362,735 4,872
Receivable from investment adviser ...................................................... -- 5,588
Interest and dividends receivable ....................................................... 173,325 1,119
Other assets ............................................................................ 574 --
------------ ----------
Total assets ....................................................................... $158,209,499 $2,712,000
------------ ----------
Liabilities:
Payable for investments purchased ....................................................... 2,034,613 902,012
Payable for Series shares reacquired .................................................... 26 19
Net payable for foreign currency exchange contracts subject to master netting agreements 35,034 --
Payable to affiliates --
Investment advisory fee ................................................................ 9,559 64
Administrative fee ..................................................................... 191 1
Accrued expenses and other liabilities .................................................. 16,275 3,451
------------ ----------
Total liabilities .................................................................. $ 2,095,698 $ 905,547
------------ ----------
Net assets ....................................................................... $156,113,801 $1,806,453
============ ==========
Net assets consist of:
Paid-in capital ......................................................................... $130,169,715 $1,803,101
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies .................................................................... 17,388,660 1,936
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions .......................................................................... 8,178,003 (451)
Accumulated undistributed net investment income ......................................... 377,423 1,867
------------ ----------
Total ............................................................................ $156,113,801 $1,806,453
============ ==========
Shares of beneficial interest outstanding ............................................... 9,820,519 181,274
============ ==========
Net asset value, offering price and redemption price per share (net assets [divided by]
shares of beneficial interest outstanding) ............................................. $15.90 $9.97
====== =====
<CAPTION>
Massachusetts
Investors
International Growth
Growth Stock
Assets: Series Series
Investments -- ------------ -------------
<S> <C> <C>
Unaffiliated issuers, at cost ......................................................... $31,794,635 $10,855,563
Unrealized appreciation ............................................................... 1,530,936 408,681
----------- -----------
Total investments, at value ........................................................ $33,325,571 $11,264,244
Cash .................................................................................... 17,686 5,351
Foreign currency, at value (identified cost, $79,061, $15, $71,220 and $57, respectively) 71,017 57
Receivable for investments sold ......................................................... 68,864 11,550
Receivable for Series shares sold ....................................................... 88,234 219,318
Receivable from investment adviser ...................................................... -- 8,245
Interest and dividends receivable ....................................................... 55,235 1,766
Other assets ............................................................................ 166 --
----------- -----------
Total assets ....................................................................... $33,626,773 $11,510,531
----------- -----------
Liabilities:
Payable for investments purchased ....................................................... 675,420 995,481
Payable for Series shares reacquired .................................................... 6,516 3
Net payable for foreign currency exchange contracts subject to master netting agreements 24,469 --
Payable to affiliates --
Investment advisory fee ................................................................ 2,609 567
Administrative fee ..................................................................... 40 11
Accrued expenses and other liabilities .................................................. 16,068 7,601
----------- -----------
Total liabilities .................................................................. $ 725,122 $ 1,003,663
----------- -----------
Net assets ....................................................................... $32,901,651 $10,506,868
=========== ===========
Net assets consist of:
Paid-in capital ......................................................................... $31,778,670 $10,082,548
Unrealized appreciation on investments and translation of assets and liabilities in
foreign currencies ..................................................................... 1,506,086 408,677
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions .......................................................................... (448,811) 4,391
Accumulated undistributed net investment income ......................................... 65,706 11,252
----------- -----------
Total ............................................................................ $32,901,651 $10,506,868
=========== ===========
Shares of beneficial interest outstanding ............................................... 3,169,129 989,468
=========== ===========
Net asset value, offering price and redemption price per share (net assets [divided by]
shares of beneficial interest outstanding) ............................................. $10.38 $10.62
====== ======
</TABLE>
See notes to financial statements
22
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- June 30, 1998 -- continued
<TABLE>
<CAPTION>
New
Discovery
Assets: Series
Investments -- -----------
<S> <C>
Unaffiliated issuers, at cost .......................................................... $3,381,474
Unrealized appreciation (depreciation) ................................................. 94,438
----------
Total investments, at value ........................................................ $3,475,912
Cash .................................................................................... 31,683
Deposits with brokers for securities sold short ......................................... 21,083
Foreign currency, at value (identified cost, $0, $38 and $165, respectively) ............ --
Receivable for investments sold ......................................................... 119,114
Receivable for Series shares sold ....................................................... 47,651
Interest and dividends receivable ....................................................... 46
Receivable from investment adviser ...................................................... 6,104
Other assets ............................................................................ --
----------
Total assets ....................................................................... $3,701,593
----------
Liabilities:
Payable for investments purchased ....................................................... $ 625,549
Securities sold short, at value (proceeds received, $21,083) ............................ 24,469
Payable for Series shares reacquired .................................................... 19
Payable to affiliates --
Investment advisory fee ................................................................ 195
Administrative fee ..................................................................... --
Accrued expenses and other liabilities .................................................. 3,995
----------
Total liabilities .................................................................. $ 654,227
----------
Net assets ....................................................................... $3,047,366
==========
Net assets consist of:
Paid-in capital ......................................................................... $2,950,763
Unrealized appreciation (depreciation) on investments and translation of assets and
liabilities in foreign currencies ...................................................... 91,052
Accumulated undistributed net realized gain on investments and foreign currency
transactions ........................................................................... 3,233
Accumulated undistributed net investment income ......................................... 2,318
----------
Net assets ....................................................................... $3,047,366
==========
Shares of beneficial interest outstanding ............................................... 289,864
==========
Net asset value, offering price and redemption price per share (net assets [divided by]
shares of beneficial interest outstanding) ............................................. $10.51
======
<CAPTION>
Research
Growth and Research
Income International
Assets: Series Series
Investments -- ------------ -------------
<S> <C> <C>
Unaffiliated issuers, at cost .......................................................... $19,332,568 $650,986
Unrealized appreciation (depreciation) ................................................. 1,832,831 (1,470)
----------- --------
Total investments, at value ........................................................ $21,165,399 $649,516
Cash .................................................................................... 3,805 12,682
Deposits with brokers for securities sold short ......................................... -- --
Foreign currency, at value (identified cost, $0, $38 and $165, respectively) ............ 38 165
Receivable for investments sold ......................................................... 152,908 4,351
Receivable for Series shares sold ....................................................... 355,304 67,901
Interest and dividends receivable ....................................................... 26,624 92
Receivable from investment adviser ...................................................... -- 4,629
Other assets ............................................................................ 42 --
----------- --------
Total assets ....................................................................... $21,704,120 $739,336
----------- --------
Liabilities:
Payable for investments purchased ....................................................... $ 121,524 $186,522
Securities sold short, at value (proceeds received, $21,083) ............................ -- --
Payable for Series shares reacquired .................................................... 40 --
Payable to affiliates --
Investment advisory fee ................................................................ 1,293 34
Administrative fee ..................................................................... 26 --
Accrued expenses and other liabilities .................................................. 5,348 2,449
----------- --------
Total liabilities .................................................................. $ 128,231 $189,005
----------- --------
Net assets ....................................................................... $21,575,889 $550,331
=========== ========
Net assets consist of:
Paid-in capital ......................................................................... $19,463,807 $548,809
Unrealized appreciation (depreciation) on investments and translation of assets and
liabilities in foreign currencies ...................................................... 1,832,824 (1,425)
Accumulated undistributed net realized gain on investments and foreign currency
transactions .......................................................................... 204,052 2,380
Accumulated undistributed net investment income ......................................... 75,206 567
----------- --------
Net assets ....................................................................... $21,575,889 $550,331
=========== ========
Shares of beneficial interest outstanding ............................................... 1,682,423 55,564
=========== ========
Net asset value, offering price and redemption price per share (net assets [divided by]
shares of beneficial interest outstanding) ............................................. $12.82 $9.90
====== =====
</TABLE>
See notes to financial statements
23
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Period Ended June 30, 1998
<TABLE>
<CAPTION>
Capital Equity
Opportunities Income
Net investment income: Series Series*
Income -- ------------- ---------
<S> <C> <C>
Interest ........................................................................... $ 312,250 $ 1,049
Dividends .......................................................................... 610,362 1,383
Foreign taxes withheld ............................................................. (38,767) (11)
----------- --------
Total investment income ........................................................... $ 883,845 $ 2,421
----------- --------
Expenses --
Investment advisory fees ........................................................... $ 461,774 $ 416
Trustees' fees ..................................................................... 3,473 1,673
Administrative fees ................................................................ 9,223 8
Custodian fees ..................................................................... 25,471 17
Printing fees ...................................................................... 2,402 1,700
Auditing fees ...................................................................... 5,015 2,200
Legal fees ......................................................................... 415 --
Miscellaneous ...................................................................... -- 138
----------- --------
Total expenses .................................................................... $ 507,773 $ 6,152
Waiver of expenses by investment adviser ........................................... -- (5,588)
Fees paid indirectly ............................................................... (1,609) (10)
----------- --------
Net expenses ...................................................................... $ 506,164 $ 554
----------- --------
Net investment income ............................................................ $ 377,681 $ 1,867
----------- --------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................ $ 8,645,479 $ (442)
Foreign currency transactions ...................................................... 873 (9)
----------- --------
Net realized gain (loss) on investments and foreign currency transactions ........ $ 8,646,352 $ (451)
----------- --------
Change in unrealized appreciation (depreciation) on --
Investments ........................................................................ $10,365,591 $ 1,943
Translation of assets and liabilities in foreign currencies ........................ (38,870) (7)
----------- --------
Net unrealized gain on investments and foreign currency translation ............... $10,326,721 $ 1,936
----------- --------
Net realized and unrealized gain on investments and foreign currency ............. $18,973,073 $ 1,485
----------- --------
Increase in net assets from operations .......................................... $19,350,754 $ 3,352
=========== ========
<CAPTION>
Massachusetts
Investors
International Growth
Growth Stock
Net investment income: Series Series*
Income -- ------------- -------------
<S> <C> <C>
Interest ........................................................................... $ 54,360 $16,272
Dividends .......................................................................... 361,945 2,038
Foreign taxes withheld ............................................................. (36,860) (64)
---------- -------
Total investment income ........................................................... $ 379,445 $18,246
---------- -------
Expenses --
Investment advisory fees ........................................................... $ 139,783 $ 5,246
Trustees' fees ..................................................................... 3,473 1,673
Administrative fees ................................................................ 2,146 105
Custodian fees ..................................................................... 19,410 116
Printing fees ...................................................................... 2,391 5,000
Auditing fees ...................................................................... 17,315 2,700
Legal fees ......................................................................... 668 200
Miscellaneous ...................................................................... 1,185 315
---------- -------
Total expenses .................................................................... $ 186,371 $15,355
Waiver of expenses by investment adviser ........................................... -- (8,245)
Fees paid indirectly ............................................................... (3,760) (116)
---------- -------
Net expenses ...................................................................... $ 182,611 $ 6,994
---------- -------
Net investment income ............................................................ $ 196,834 $11,252
---------- -------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................ $ 26,180 $ 4,397
Foreign currency transactions ...................................................... 55,001 (6)
---------- -------
Net realized gain (loss) on investments and foreign currency transactions ........ $ 81,181 $ 4,391
---------- -------
Change in unrealized appreciation (depreciation) on --
Investments ........................................................................ $1,775,394 $408,681
Translation of assets and liabilities in foreign currencies ........................ (88,935) (4)
---------- --------
Net unrealized gain on investments and foreign currency translation ............... $1,686,459 $408,677
---------- --------
Net realized and unrealized gain on investments and foreign currency ............. $1,767,640 $413,068
---------- --------
Increase in net assets from operations .......................................... $1,964,474 $424,320
========== ========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
See notes to financial statements
24
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Period Ended June 30, 1998 -- continued
<TABLE>
<CAPTION>
Research
New Growth and Research
Discovery Income International
Net investment income: Series* Series Series*
Income -- --------- ---------- -------------
<S> <C> <C> <C>
Interest ........................................................................... $ 4,881 $ 29,796 $ 653
Dividends .......................................................................... 154 104,154 303
Foreign taxes withheld ............................................................. -- (1,003) (40)
------- ---------- -------
Total investment income ........................................................... $ 5,035 $ 132,947 $ 916
------- ---------- -------
Expenses --
Investment advisory fees ........................................................... $ 1,956 $ 48,272 $ 233
Trustees' fees ..................................................................... 1,673 3,474 1,673
Administrative fees ................................................................ 29 968 3
Custodian fees ..................................................................... 83 5,078 15
Printing fees ...................................................................... 2,000 -- 100
Auditing fees ...................................................................... 2,700 2,000 2,750
Legal fees ......................................................................... 200 519 50
Miscellaneous ...................................................................... 263 679 155
------- ---------- -------
Total expenses .................................................................... $ 8,904 $ 60,989 $ 4,979
Waiver of expenses by investment adviser ........................................... (6,104) -- (4,629)
Fees paid indirectly ............................................................... (83) (2,646) (1)
------- ---------- -------
Net expenses ...................................................................... $ 2,717 $ 58,343 $ 349
------- ---------- -------
Net investment income ............................................................ $ 2,318 $ 74,604 $ 567
------- ---------- -------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................ $ 3,235 $ 204,782 $ 2,382
Foreign currency transactions ...................................................... (2) (541) (2)
------- ---------- -------
Net realized gain on investments and foreign currency transactions ............... $ 3,233 $ 204,241 $ 2,380
------- ---------- -------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................ $94,438 $1,615,566 $(1,470)
Translation of assets and liabilities in foreign currencies ........................ -- (18) 45
Securities sold short .............................................................. (3,386) -- --
------- ---------- -------
Net unrealized gain (loss) on investments and foreign currency translation ........ $91,052 $1,615,548 $(1,425)
------- ---------- -------
Net realized and unrealized gain on investments and foreign currency ............. $94,285 $1,819,789 $ 955
------- ---------- -------
Increase in net assets from operations .......................................... $96,603 $1,894,393 $ 1,522
======= ========== =======
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
See notes to financial statements
25
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Period Ended June 30, 1998
<TABLE>
<CAPTION>
Capital Equity
Opportunities Income
Increase (decrease) in net assets: Series Series*
From operations -- ------------- ----------
<S> <C> <C>
Net investment income ................................................................. $ 377,681 $ 1,867
Net realized gain (loss) on investments and foreign currency transactions ............. 8,646,352 (451)
Net unrealized gain on investments and foreign currency translation ................... 10,326,721 1,936
------------ ----------
Increase in net assets from operations ............................................... $ 19,350,754 $ 3,352
------------ ----------
Distributions declared to shareholders --
From net investment income ............................................................ $ (531,468) $ --
From net realized gain on investments and foreign currency transactions ............... (5,113,199) --
------------ ----------
Total distributions declared to shareholders ......................................... $ (5,644,667) $ --
------------ ----------
Net increase in net assets from Series share transactions .............................. $ 54,664,121 $1,803,101
------------ ----------
Total increase in net assets ........................................................ $ 68,370,208 $1,806,453
Net assets:
At beginning of year .................................................................. 87,743,593 --
------------ ----------
At end of year ........................................................................ $156,113,801 $1,806,453
============ ==========
Accumulated undistributed net investment income included in net assets at end of year .. $ 377,423 $ 1,867
============ ==========
<CAPTION>
Massachusetts
Investors
International Growth
Growth Stock
Increase (decrease) in net assets: Series Series*
From operations -- ------------- -------------
<S> <C> <C>
Net investment income ................................................................. $ 196,834 $ 11,252
Net realized gain (loss) on investments and foreign currency transactions ............. 81,181 4,391
Net unrealized gain on investments and foreign currency translation ................... 1,686,459 408,677
----------- -----------
Increase in net assets from operations ............................................... $ 1,964,474 $ 424,320
----------- -----------
Distributions declared to shareholders --
From net investment income ............................................................ $ (255,305) $ --
From net realized gain on investments and foreign currency transactions ............... -- --
----------- -----------
Total distributions declared to shareholders ......................................... $ (255,305) $ --
----------- -----------
Net increase in net assets from Series share transactions .............................. $ 7,791,376 $10,082,548
----------- -----------
Total increase in net assets ........................................................ $ 9,500,545 $10,506,868
Net assets:
At beginning of year .................................................................. 23,401,106 --
----------- -----------
At end of year ........................................................................ $32,901,651 $10,506,868
=========== ===========
Accumulated undistributed net investment income included in net assets at end of year .. $ 65,706 $ 11,252
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Research
New Growth and Research
Discovery Income International
Increase (decrease) in net assets: Series* Series Series*
From operations -- ---------- ----------- -------------
<S> <C> <C> <C>
Net investment income ................................................................ $ 2,318 $ 74,604 $ 567
Net realized gain on investments and foreign currency transactions ................... 3,233 204,241 2,380
Net unrealized gain (loss) on investments and foreign currency translation ........... 91,052 1,615,548 (1,425)
---------- ----------- --------
Increase in net assets from operations .............................................. $ 96,603 $ 1,894,393 $ 1,522
---------- ----------- --------
Distributions declared to shareholders --
From net investment income ........................................................... $ -- $ (19,103) $ --
From net realized gain on investments and foreign currency transactions .............. -- (62,914) --
---------- ----------- --------
Total distributions declared to shareholders ....................................... $ -- $ (82,017) $ --
---------- ----------- --------
Net increase in net assets from Series share transactions ............................. $2,950,763 $13,223,523 $548,809
---------- ----------- --------
Total increase in net assets ....................................................... $3,047,366 $15,035,899 $550,331
Net assets:
At beginning of year ................................................................. -- 6,539,990 --
---------- ----------- --------
At end of year ....................................................................... $3,047,366 $21,575,889 $550,331
========== =========== ========
Accumulated undistributed net investment income included in net assets at end of year . $ 2,318 $ 75,206 $ 567
========== =========== ========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998 through June 30, 1998.
See notes to financial statements
26
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1997
<TABLE>
<CAPTION>
Research
Capital International Growth and
Opportunities Growth Income
Increase (decrease) in net assets: Series Series Series*
From operations -- ------------- ------------- ----------
<S> <C> <C> <C>
Net investment income .............................................................. $ 551,870 $ 192,764 $ 19,895
Net realized gain (loss) on investments and foreign currency transactions .......... 4,627,129 (576,797) 62,535
Net unrealized gain (loss) on investments and foreign currency translation ......... 6,587,920 (102,443) 217,276
----------- ----------- ----------
Increase (decrease) in net assets from operations ................................. $11,766,919 $ (486,476) $ 299,706
----------- ----------- ----------
Distributions declared to shareholders --
From net investment income ......................................................... $ (65,700) $ (24,244) $ --
From net realized gain on investments and foreign currency transactions ............ (222,129) -- --
----------- ----------- ----------
Total distributions declared to shareholders ..................................... $ (287,829) $ (24,244) $ --
----------- ----------- ----------
Net increase in net assets from Series share transactions ........................... $59,564,648 $18,386,603 $6,240,284
----------- ----------- ----------
Total increase in net assets ..................................................... $71,043,738 $17,875,883 $6,539,990
Net assets:
At beginning of year ............................................................... 16,699,855 5,525,223 --
----------- ----------- ----------
At end of year ..................................................................... $87,743,593 $23,401,106 $6,539,990
=========== =========== ==========
Accumulated undistributed net investment income included in net assets at end of year $ 531,210 $ 124,177 $ 19,705
=========== =========== ==========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 13, 1997, through December 31, 1997.
See notes to financial statements
27
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights
<TABLE>
<CAPTION>
Equity
Income
Capital Opportunities Series Series
------------------------------------------------ ---------
Six Months Year Period Period
Ended Ended Ended Ended
June 30, December 31, December 31, June 30,
1998 1997 1996* 1998**
Per share data (for a share outstanding throughout each period): ------------ ------------ ------------ ----------
<S> <C> <C> <C> <C>
Net asset value -- beginning of period .............................. $13.9339 $11.0055 $10.0000 $10.0000
-------- -------- -------- --------
Income from investment operations# --
Net investment income [sec] ........................................ $ 0.0472 $ 0.1466 $ 0.0916 $ 0.0266
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ............................................. 2.5745 2.8785 0.9139 (0.0613)
-------- -------- -------- --------
Total from investment operations ................................. $ 2.6217 $ 3.0251 $ 1.0055 $(0.0347)
-------- -------- -------- --------
Less distributions declared to shareholders --
From net investment income ......................................... $(0.0620) $(0.0221) $ -- $ --
From net realized gain on investments and foreign currency
transactions ...................................................... (0.5969) (0.0746) -- --
-------- -------- -------- --------
Total distributions declared to shareholders ..................... $(0.6589) $(0.0967) $ -- $ --
-------- -------- -------- --------
Net asset value -- end of period .................................... $15.8967 $13.9339 $11.0055 $ 9.9653
======== ======== ======== ========
Total return[dbldag] ................................................ 18.90%++ 27.57% 10.10%++ (0.30)%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ........................................................... 0.83%+## 0.77% 0.60%+ 1.00%+
Net investment income .............................................. 0.61%+ 1.15% 1.75%+ 3.37%+
Portfolio turnover .................................................. 60% 129% 52% 2%
Net assets, end of period (000 omitted) ............................. $156,114 $ 87,744 $ 16,700 $ 1,806
<CAPTION>
International Growth Series
---------------------------------------------------
Six Months Year Period
Ended Ended Ending
June 30, December 31, December 31,
1998 1997 1996*
Per share data (for a share outstanding throughout each period): ------------ ------------ ------------
<S> <C> <C> <C>
Net asset value -- beginning of period ................................ $ 9.6480 $ 9.8213 $10.0000
-------- -------- --------
Income from investment operations# --
Net investment income [sec] .......................................... $ 0.0715 $ 0.1201 $ 0.0748
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ............................................... 0.7509 (0.2747) (0.2535)
-------- --------- --------
Total from investment operations ................................... $ 0.8224 $(0.1546) $(0.1787)
-------- --------- --------
Less distributions declared to shareholders --
From net investment income ........................................... $(0.0885) $(0.0187) $ --
From net realized gain on investments and foreign currency
transactions ........................................................ -- -- --
-------- -------- --------
Total distributions declared to shareholders ....................... $(0.0885) $(0.0187) $ --
-------- -------- --------
Net asset value -- end of period ...................................... $10.3819 $ 9.6480 $ 9.8213
======== ======== ========
Total return[dbldag] .................................................. 8.42%++ (1.64)% (1.70)%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses ............................................................. 1.30%+## 1.11% 1.50%+
Net investment income ................................................ 1.37%+ 1.23% 1.47%+
Portfolio turnover .................................................... 25% 261% 3%
Net assets, end of period (000 omitted) ............................... $ 32,902 $ 23,401 $ 5,525
</TABLE>
* For the period from the commencement of the Series' investment
operations, June 3, 1996, through December 31, 1996.
** For the period from the commencement of the Series' investment
operations, May 6, 1998, through June 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Series' expenses are calculated without reduction for fees paid
indirectly.
[dbldag] The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.)
and Sun Life (N.Y.). Inclusion of these charges would reduce the total
return figures for all periods shown.
[sec] The investment adviser voluntarily agreed to maintain the expenses of
the Equity Income Series, exclusive of investment advisory fees, at not
more than 0.25% of average daily net assets. The investment adviser
voluntarily agreed to maintain the expenses of the International Growth
Series at not more than 1.50% of average daily net assets. To the
extent actual expenses were over this limitation, the net investment
income (loss) per share would have been:
<TABLE>
<CAPTION>
Equity
Income
Capital Opportunities Series Series International Growth Series
---------------------------------------- ----------- -----------------------------------------
Six Months Year Period Period Six Months Year Period
Ended Ended Ended Ended Ended Ended Ending
June 30, December 31, December 31, June 30, June 30, December 31, December 31,
1998 1997 1996* 1998** 1998 1997 1996*
---------- ------------ ------------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net investment income (loss) ...... -- $0.1296 $0.0537 $(0.0531) -- $0.1036 $0.0265
Ratios (to average net assets):
Expenses## ....................... -- 0.90% 1.35%+ 11.10%+ -- 1.28% 2.50%+
Net investment income (loss) ..... -- 1.03% 1.02%+ (6.73)%+ -- 1.06% 0.46%+
</TABLE>
See notes to financial statements
28
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Massachusetts
Investors
Growth New
Stock Discovery
Series Series
------------- ----------
Period Period
Ended Ended
June 30, June 30,
1998** 1998**
Per share data (for a share outstanding throughout each period): ------------- ----------
<S> <C> <C>
Net asset value -- beginning of period ................................ $10.0000 $10.0000
-------- --------
Income from investment operations# --
Net investment income [sec] .......................................... $ 0.0233 $ 0.0100
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ............................................... 0.5954 0.5030
-------- --------
Total from investment operations ................................... $ 0.6187 $ 0.5130
-------- --------
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 period ...................................... $10.6187 $10.5130
======== ========
Total return[dbldag] .................................................. 6.20%++ 5.20%++
Ratios (to average net assets)/Supplemental data:[sec]
Expenses ............................................................. 1.00%+ 1.25%+
Net investment income ................................................ 1.61%+ 1.07%+
Portfolio turnover .................................................... 1% 24%
Net assets, end of period (000 omitted) ............................... $ 10,507 $ 3,047
<CAPTION>
Research
Research Growth and International
Income Series Series
----------------------------- -------------
Six Months Period Period
Ended Ended Ended
June 30, December 31, June 30,
1998 1997* 1998**
Per share data (for a share outstanding throughout each period): --------- ------------ -------------
<S> <C> <C> <C>
Net asset value -- beginning of period ................................ $11.0208 $10.0000 $10.0000
-------- -------- --------
Income from investment operations# --
Net investment income [sec] .......................................... $ 0.0696 $ 0.0821 $ 0.0247
Net realized and unrealized gain (loss) on investments and foreign
currency transactions ............................................... 1.7981 0.9387 (0.1202)
-------- -------- --------
Total from investment operations ................................... $ 1.8677 $ 1.0208 $(0.0955)
-------- -------- --------
Less distributions declared to shareholders --
From net investment income ........................................... $(0.0150) $ -- $ --
From net realized gain on investments and foreign currency
transactions ........................................................ (0.0492) -- --
-------- -------- --------
Total distributions declared to shareholders ....................... $(0.0642) $ -- $ --
-------- -------- --------
Net asset value -- end of period ...................................... $12.8243 $11.0208 $ 9.9045
======== ======== ========
Total return[dbldag] .................................................. 17.03%++ 10.20%++ (0.80)%++
Ratios (to average net assets)/Supplemental data:[sec]
Expenses ............................................................. 0.95%+## 1.50%+ 1.50%+
Net investment income ................................................ 1.16%+ 1.19%+ 2.43%+
Portfolio turnover .................................................... 46% 29% 9%
Net assets, end of period (000 omitted) ............................... $ 21,576 $ 6,540 $ 550
</TABLE>
* For the period from the commencement of the Series' investment
operations, May 13, 1997, through December 31, 1997.
** For the period from the commencement of the Series' investment
operations, May 6, 1998, through June 30, 1998.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Series' expenses are calculated without reduction for fees paid
indirectly.
[dbldag] The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.)
and Sun Life (N.Y.). Inclusion of these charges would reduce the total
return figures for all periods shown.
[sec] The investment adviser voluntarily agreed to maintain the expenses of
the Massachusetts Investors Growth Stock Series, New Discovery Series,
and Research International Series, exclusive of investment advisory
fees, at not more than 0.25%, 0.35%, and 0.50%, respectively, of
average daily net assets. The investment adviser voluntarily agreed to
maintain the expenses of the Research Growth and Income Series at not
more than 1.50% of average daily net assets. To the extent actual
expenses were over this limitation, the net investment income (loss)
per share would have been:
<TABLE>
<CAPTION>
Massachusetts
Investors
Growth New Research
Stock Discovery Research Growth and International
Series Series Income Series Series
------------ ----------- --------------------------- ---------------
Period Period Six Months Period Period
Ended Ended Ended Ended Ended
June 30, June 30, June 30, December 31, June 30,
1998** 1998** 1998 1997* 1998**
------------ ----------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Net investment income (loss) .......... $0.0142 $(0.0241) $ -- $0.0614 $(0.1772)
Ratios (to average net assets):
Expenses## ........................... 2.20%+ 4.10%+ -- 1.83%+ 21.37%+
Net investment income (loss) ......... 0.41%+ (1.748)%+ -- 0.84%+ (17.44)%+
</TABLE>
See notes to financial statements
29
<PAGE>
MFS/Sun Life Series Trust
Notes to Financial Statements
(1) Business and Organization
The Trust is organized as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company consisting of twenty-six separate Series (the Series) of
shares: Bond Series, Capital Appreciation Series, Capital Opportunities Series*
(formerly Value Series), Conservative Growth Series, Emerging Growth Series,
Equity Income Series*, Government Securities Series, High Yield Series,
International Growth Series*, International Growth & Income Series, Managed
Sectors Series, Money Market Series, Massachusetts Investors Growth Stock
Series*, MFS/Foreign & Colonial Emerging Markets Series, New Discovery Series*,
Research Series, Research Growth & Income Series*, Research International
Series*, Strategic Income Series, Total Return Series, Utilities Series, World
Asset Allocation Series, World Government Series, World Growth Series, World
Total Return Series, and Zero Coupon Series, 2000 Portfolio. The Managed
Sectors Series, Utilities Series, and World Growth Series are non-diversified
as that term is defined in the Investment Company Act of 1940, as amended. The
shares of each Series are sold only to variable accounts established by Sun
Life Assurance Company of Canada (U.S) and Sun Life Insurance and Annuity
Company of New York to Trust benefits under variable contracts issued by such
companies.
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 and forward contracts, are valued on
the basis of valuations furnished by dealers or by a pricing service with
consideration to factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data, without exclusive reliance upon
exchange or over-the-counter prices. Short-term obligations, which mature in 60
days or less, are valued at amortized cost, which approximates market value.
Securities for which there are no such quotations or valuations are valued at
fair value as determined in good faith by or at the direction of the Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates
of such transactions. Gains and losses attributable to foreign currency
exchange rates on sales of securities are recorded for financial statement
purposes as net realized gains and losses on investments. Gains and losses
attributable to foreign exchange rate movements on income and expenses are
recorded for financial statement purposes as foreign currency transaction gains
and losses. That portion of both realized and unrealized gains and losses on
investments that results from fluctuations in foreign currency exchange rates
is not separately disclosed.
Short Sales - Certain Series' may enter into short sales. A short sale
transaction involves selling a security which the Series does not own with the
intent of purchasing it later at a lower price. The Series will realize a gain
if the security price decreases and a loss if the security price increases
between the date of the short sale and the date on which the Series must
replace the borrowed security. Losses can exceed the proceeds from short sales
and can be greater than losses from the actual purchase of a security. The
amount of any gain will be decreased, and the amount of any loss increased, by
the amount of the premium, dividends, or interest each Series may be required
to pay in connection with a short sale. Whenever a Series engages in short
sales, its custodian segregates cash or marketable securities in an amount
that, when combined with the amount of proceeds deposited with the broker in
connection with the short sale, at least equals the current market value of the
security sold short.
Forward Foreign Currency Exchange Contracts - Certain Series' 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. Each
Series may enter into forward contracts for hedging purposes as well as for
non-hedging purposes. For hedging purposes, each Series may enter into
contracts to deliver or receive foreign currency it will receive from or
require for its normal investment activities. Each 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 non-hedging purposes, each Series may enter into contracts with the intent
of changing the relative exposure of each Series' portfolio of securities to
different currencies to take advantage of anticipated changes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded as unrealized
until the contract settlement date. On contract 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.
30
<PAGE>
Notes to Financial Statements -- continued
Fees Paid Indirectly - Each Series' custody fee is calculated as a percentage
of each Series' month end net assets. The fee is reduced according to an
arrangement that measures the value of cash deposited with the custodian by
each Series. This amount is shown as a reduction of expenses on the Statement
of Operations.
Tax Matters and Distributions - Each Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. 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. Each 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 each Series' tax
return.
Distributions to shareholders are recorded on the ex-dividend date. Each Series
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 net realized gains.
At December 31, 1997, the International Growth Series, for federal income tax
purposes, had a capital loss carryforward of $523,753 which may be applied
against any net taxable realized gains of each succeeding year until the
earlier of its utilization or expiration on December 31, 2004, ($7,804) and
December 31, 2005 ($515,949).
(3) Transactions with Affiliates
Investment Adviser - The Trust has an investment advisory agreement with
Massachusetts Financial Services Company (MFS), an indirect subsidiary of Sun
Life Assurance Company of Canada (U.S.), to provide overall investment advisory
and administrative services, and general office facilities. The management fee
is computed daily and paid monthly based on average net assets of each Series.
The agreements also provide that each Series will be reimbursed for other
expenses, exclusive of investment advisory fees, in excess of the expense
limitation indicated below, calculated based on average net assets of each
Series. Investment advisory fees and expense limitations are as follows:
<TABLE>
<CAPTION>
Other
Investment Expense
Advisory Fees Limitations
--------------------------------------------------------------------------------------
<S> <C> <C>
Capital Opportunities Series ........................ 0.75%* N/A
Equity Income Series ................................ 0.75% 0.25%
International Growth Series ......................... 0.975%* N/A
Massachusetts Investors Growth Stock Series ......... 0.75% 0.25%
New Discovery Series ................................ 0.90% 0.35%
Research Growth and Income Series ................... 0.75% N/A
Research International Series ....................... 1.00% 0.50%
</TABLE>
* The advisory fee for the Capital Opportunities Series is 0.75% of the first
$300 million of average net assets and 0.675% of the average net assets in
excess of $300 million. The advisory fee for the International Growth Series
is 0.975% of the first $500 million of average net assets and 0.925% of the
average net assets in excess of $500 million.
Administrator - Each Series has an administrative services agreement with MFS
to provide each 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 each Series' average daily net
assets:
<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.
31
<PAGE>
Notes to Financial Statements -- continued
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
<TABLE>
<CAPTION>
Massachusetts
Capital Equity International Investors
Opportunities Income Growth Growth Stock
Series Series Series Series
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Purchases
U.S. government securities ........................... $ -- $ 13,258 $ -- $ 125,305
============= ========== =========== ==========
Investments (non-U.S. government securities) ......... $112,891,914 $1,675,784 $14,739,562 $8,371,501
============= ========== =========== ==========
Sales
Investments (non-U.S. government securities) ......... $ 68,051,913 $ 22,575 $ 6,821,793 $ 103,727
============= ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Research
New Growth and Research
Discovery Income International
Series Series Series
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Purchases
Investments (non-U.S. government securities) ......... $2,726,003 $16,990,369 $462,108
========== =========== ========
Sales
Investments (non-U.S. government securities) ......... $ 406,404 $ 5,628,830 $ 23,178
========== =========== ========
</TABLE>
The cost and unrealized appreciation or depreciation in value of the
investments owned by each Series, as computed on a federal income tax basis,
are as follows:
<TABLE>
<CAPTION>
Massachusetts
Capital Equity International Investors
Opportunities Income Growth Growth Stock
Series Series Series Series
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Aggregate cost ........................ $138,625,393 $2,684,646 $31,794,635 $10,855,563
============ ========== =========== ===========
Gross unrealized appreciation ......... $ 21,295,890 $ 15,231 $ 4,618,650 $ 471,916
Gross unrealized depreciation ......... (3,870,768) (13,288) (3,087,714) (63,235)
------------ ---------- ----------- -----------
Net unrealized appreciation .......... $ 17,425,122 $ 1,943 $ 1,530,936 $ 408,681
============ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Research
New Growth and Research
Discovery Income International
Series Series Series
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Aggregate cost ...................................... $3,381,474 $19,332,568 $650,986
========== =========== ========
Gross unrealized appreciation ....................... $ 147,763 $ 2,019,360 $ 5,034
Gross unrealized depreciation ....................... (53,325) (186,529) (6,504)
---------- ----------- --------
Net unrealized appreciation (depreciation) ......... $ 94,438 $ 1,832,831 $ (1,470)
========== =========== ========
</TABLE>
(5) Shares of Beneficial Interest
Each Series' 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 were as follows:
<TABLE>
<CAPTION>
Capital Opportunities Series
--------------------------------------------------------------
Six Months Ended June 30, 1998 Year Ended December 31, 1997
------------------------------- ----------------------------
Shares Amount Shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................................... 3,666,528 $56,748,479 4,923,312 $61,333,766
Shares issued to shareholders in reinvestment of distributions 356,806 5,644,667 24,748 287,829
Shares reacquired ............................................. (499,932) (7,729,025) (168,345) (2,056,947)
--------- ----------- --------- -----------
Net increase ................................................. 3,523,402 $54,664,121 4,779,715 $59,564,648
========= =========== ========= ===========
<CAPTION>
Equity Income Series
---------------------------
Period Ended June 30, 1998*
-------------- ------------
Shares Amount
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ................................................... 181,344 $1,803,798
Shares issued to shareholders in reinvestment of distributions -- --
Shares reacquired ............................................. (70) (697)
------- ----------
Net increase ................................................. 181,274 $1,803,101
======= ==========
</TABLE>
<TABLE>
<CAPTION>
International Growth Series
---------------------------------------------------------------
Six Months Ended June 30, 1998 Year Ended December 31, 1997
-------------------------------- -----------------------------
Shares Amount Shares Amount
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................................... 915,167 $ 9,567,889 2,306,580 $22,635,372
Shares issued to shareholders in reinvestment of distributions 23,001 255,305 2,469 24,244
Shares reacquired ............................................. (194,532) (2,031,818) (446,133) (4,273,013)
-------- ----------- --------- -----------
Net increase ................................................. 743,636 $ 7,791,376 1,862,916 $18,386,603
======== =========== ========= ===========
<CAPTION>
Massachusetts
Investors Growth Stock Series
-----------------------------
Period Ended June 30, 1998*
-----------------------------
Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ................................................... 1,007,057 $10,259,523
Shares issued to shareholders in reinvestment of distributions -- --
Shares reacquired ............................................. (17,589) (176,975)
--------- -----------
Net increase ................................................. 989,468 $10,082,548
========= ===========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
32
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
New Discovery Series Research Growth and Income Series
--------------------------- ---------------------------------
Period Ended June 30, 1998* Six Months Ended June 30, 1998
--------------------------- ---------------------------------
Shares Amount Shares Amount
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold ................................................... 290,840 $2,960,506 1,148,216 $13,954,773
Shares issued to shareholders in reinvestment of distributions -- -- 6,598 82,017
Shares reacquired ............................................. (976) (9,743) (65,812) (813,267)
------- ---------- --------- -----------
Net increase ................................................. 289,864 $2,950,763 1,089,002 $13,223,523
======= ========== ========= ===========
<CAPTION>
Research Growth and Income Series
---------------------------------
Period Ended
December 31, 1997**
---------------------------------
Shares Amount
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ................................................... 625,995 $6,579,170
Shares issued to shareholders in reinvestment of distributions -- --
Shares reacquired ............................................. (32,574) (338,886)
------- ----------
Net increase ................................................. 593,421 $6,240,284
======= ==========
</TABLE>
<TABLE>
<CAPTION>
Research International Series
------------------------------
Period Ended June 30, 1998*
------------------------------
Shares Amount
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold ............................................................ 56,133 $554,331
Shares issued to shareholders in reinvestment of distributions ......... -- --
Shares reacquired ...................................................... (569) (5,522)
------ --------
Net increase .......................................................... 55,564 $548,809
====== ========
</TABLE>
* For the period from the commencement of the Series' investment operations,
May 6, 1998, through June 30, 1998.
** For the period from the commencement of the Series' investment operations
May 13, 1997, through December 31, 1997.
(6) Line of Credit
The Series and other affiliated series participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Series shares. Interest is charged to each Series, based on its borrowings, at
a rate equal to the bank's base rate. In addition, a commitment fee, based on
the average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter.
(7) Financial Instruments
Certain Series of the Trust may trade financial instruments with
off-balance-sheet risk in the normal course of its investing activities in
order to manage exposure to market risks such as interest rates and foreign
currency exchange rates. These financial instruments include forward foreign
currency exchange contracts. The notional or contractual amounts of these
instruments represent the investment each Series has in particular classes of
financial instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions are
considered.
Forward foreign currency purchases and sales under master netting agreements
amounted to net payables of $20,962 with Deutsche Bank and $3,507 with Merrill
Lynch for the International Growth Series, and a net payable of $35,034 with
Merrill Lynch for the Capital Opportunities Series, at June 30, 1998.
At June 30, 1998, each Series had sufficient cash and/or securities to cover
any commitments under these contracts.
(8) Restricted Securities
Each Series of the Trust is restricted from investing more than a certain
amount in securities which are subject to legal or contractual restrictions on
resale. Such restrictions range from between 0% and 15% of the Series' net
assets. At June 30, 1998, the Capital Opportunities Series, International
Growth Series and Research International Series owned the following restricted
securities (constituting 0.08%, 0.39% and 0.99% of the net assets of each
Series, respectively) which may not be publicly sold without registration under
the Securities Act of 1933. Each Series does not have the right to demand that
such securities be registered. The value of these securities is determined by
valuations furnished by dealers or by a pricing service, or if not available,
are valued at fair value as determined in good faith by or at the direction of
the Trustees.
<TABLE>
<CAPTION>
Series Description Date of Acquisition Share Amount Cost Value
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Capital Opportunities Series Hong Leong Finance Ltd. 3/26/98-6/9/98 149,800 $238,504 $122,904
========
International Growth Series Bank Handlowy w Warszawie 7/03/97 2,261 28,302 43,150
Hong Leong Finance Ltd. 9/11/97 50,000 102,261 41,023
-------- ========
$130,563 $ 84,173
======== ========
Research International Series Jarvis Hotels PLC 5/21/98-6/30/98 1,895 5,587 $ 5,437
========
</TABLE>
(9) Name Change
Effective April 30, 1998, Value Series changed its name to Capital
Opportunities Series.
33
<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 Capital Opportunities Series,
Equity Income Series, International Growth Series, Massachusetts Investors
Growth Stock Series, New Discovery Series, Research Growth and Income Series,
and Research International Series (each a portfolio of MFS/Sun Life Series
Trust) as of June 30, 1998, the related statements of operations for the period
then ended, the statements of changes in net assets for the period then ended
and the year ended December 31, 1997, and the financial highlights for the
period ended June 30, 1998 and each of the periods in the two-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
June 30, 1998 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Trust at June
30, 1998, the results of its operations, the changes in its net assets, and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 7, 1998
---------------------------------------------
This MFS(R)/Sun Life Series Trust Semiannual Report is prepared for the
general information of contract owners. It is authorized for distribution to
prospective investors only when preceded or accompanied by a current
prospectus.
34
<PAGE>
MFS(R)/Sun Life Series Trust
500 Boylston Street, Boston, MA 02116-3741
Trustees
JOHN D. McNEIL*, Chairman and Trustee
Chairman, Sun Life Assurance Company of Canada,
Toronto, Ontario, Canada
SAMUEL ADAMS, Trustee
Partner, Warner & Stackpole (attorneys),
Boston, Massachusetts
J. KERMIT BIRCHFIELD, Trustee
Consultant; Chairman, Display Technology, Inc. (manufacturer of liquid-crystal
display technology); Managing Director, Century Partners, Inc., (investments),
Gloucester, Massachusetts
WILLIAM R. GUTOW, Trustee
Vice Chairman, Capitol Entertainment Management Company; Real Estate Consultant
Dallas, Texas
DAVID D. HORN*, Trustee
Former Senior Vice President and General Manager,
Sun Life Assurance Company of Canada,
Boston, Massachusetts
GARTH MARSTON, Trustee
Former Chairman, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS, Trustee
Former Vice Chairman, The Gillette Company,
Marblehead, Massachusetts
Officers+
JAMES R. BORDEWICK, JR., Assistant Secretary
MARK E. BRADLEY, Assistant Treasurer
STEPHEN E. CAVAN, Secretary and Clerk
W. THOMAS LONDON, Treasurer
ELLEN MOYNIHAN, Assistant Treasurer
JAMES O. YOST, Assistant Treasurer
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
Custodian and Dividend Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110-1617
Portfolio Managers+
JEAN O. ALESSANDRO
JOHN W. BALLEN
ARNAB KUMAR BANERJI
JOHN F. BRENNAN, JR.
STEPHEN C. BRYANT
DAVID M. CALABRO
JAMES J. CALMAS
JEFFREY CHOWDHRY
MITCHELL D. DYNAN
KENNETH J. ENRIGHT
RICHARD O. HAWKINS
GEOFFREY L. KURINSKY
JOHN D. LAUPHEIMER, JR.
DAVID R. MANNHEIM
PAUL M. McMAHON
LESLIE J. NANBURG
KEVIN R. PARKE
BERNARD A. SCOZZAFAVA
MAURA A. SHAUGHNESSY
TONI Y. SHIMURA
FREDERICK J. SIMMONS
D. RICHARD SMITH
JAMES T. SWANSON
(on behalf of the MFS World
Asset Allocation Committee)
The Research Committee
* Affiliated with the Sponsor.
+ Affiliated with the Investment Adviser. SUN-3C 8/98 178.5M
