MFS[R]/Sun Life Series Trust
ANNUAL REPORT o December 31, 1998
Bond Series
Government Securities Series
High Yield Series
International Growth and Income Series
MFS [RegTM]/Foreign & Colonial Emerging
Markets Equity Series
Money Market Series
Strategic Income Series
World Asset Allocation Series
World Governments Series
World Total Return Series
Zero Coupon Series, Portfolio 2000
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MFS Celebrates its Diamond Anniversary!
March 21, 1999, marks the 75th anniversary of
MFS' invention of the mutual fund. The mutual
fund industry has brought the power of investing
to every American, offering them the opportunity
for college degrees, home ownership, and
comfortable retirement. Imagine today's world
without mutual funds. We
couldn't. And while the years
ahead will bring a number
of challenges, our 75 years
of experience will help
guide a new generation of
investors into the future.
MFS 75 year
EXPERIENCE THE FUTURE [sm]
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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Letter from the Chairman
Dear Contract Owners:
In 1999, MFS celebrates its 75th anniversary. The nation's first mutual fund --
our Massachusetts Investors Trust (MIT) -- was introduced to the public on March
21, 1924. Since then, MFS Investment Management[RegTM], the company that grew
out of that original fund, has helped guide investors through many economic and
investment cycles, primarily by focusing on the long-term opportunities created
by an expanding global economy. As of December 31, 1998, MFS manages nearly $100
billion, and the firm's 2,000 people serve almost four million investors and
their financial advisers worldwide.
One of the elements in the success of MIT did not exist before our founders
invented it in 1924. That is daily redemption. This feature, through which new
shares were created when people invested in MIT and were redeemed when people
sold, was an important change. As a result, the price of a mutual fund's shares
wasn't determined by supply and demand, but by the value of the securities owned
by the portfolio.
Another factor in our growth was the development of one of the industry's first
internal research departments in 1932. Unlike companies that rely on Wall Street
research reports, which can be used by many investors at the same time, MIT's
managers built its long-term track record by visiting companies, talking to
managers and competitors, and "kicking the tires" so they could judge the
quality and potential of each company's products and services for themselves.
Today, MFS has more than 100 full-time portfolio managers, stock analysts, and
credit analysts who track the equity and bond markets. That number includes over
35 equity analysts who specialize in industries such as aviation, media,
technology, automobiles, and utilities.
While MIT introduced the daily redemption feature, that was not our only
invention. We also established the nation's first global bond fund, the first
high-yield municipal bond fund, and the first high-yield municipal closed-end
bond fund. MFS also was among the leaders in the mutual fund industry in
introducing variable annuity accounts.
We are proud of the record of MIT and of all the products offered by MFS, but we
are also proud of our long-standing relationship with financial advisers. Not
only do we believe investors can benefit from the advice of these experts but,
as was shown during the market volatility of 1998, people who work with
financial advisers are less likely to abandon their carefully designed,
long-term investment strategies.
Our ability to service your investment and information needs is also extremely
important to us. The Sun Life Annuity Service Center handles millions of
transactions and phone calls every year. Supporting the work of financial
advisers, promptly sending out statements and confirmations, and answering
hundreds of investors' questions every day are crucial elements in maintaining
long-term relationships with our contract owners.
If there is a common thread running through these milestones, it is our
unswerving commitment to providing you with the best possible investment
management and contract owner service, just as we have done for the past 75
years.
As we celebrate this anniversary, it is also a time for MFS to look ahead and
build on our 75 years of innovation and experience to help meet your investment
needs in the next century. We appreciate your confidence and welcome any
questions or comments you may have.
On behalf of the Board of Trustees,
John D. McNeil
/s/--------------------------
John D. McNeil
Chairman
Board of Trustees
January 15, 1999
Management Review and Outlook
Bond Series
The Series commenced operations on May 6, 1998, and from that date through
December 31, 1998, provided a total return of 6.90%. From June 1, 1998, through
December 31, 1998, the Lehman Brothers Government/Corporate Bond Index (the
Lehman Index) returned 5.50%. The Lehman Index is an unmanaged,
market-value-weighted index of U.S. Treasury and government-agency securities
(excluding mortgage-backed securities) and investment-grade debt obligations of
domestic corporations.
The Series' underperformance was due to its overweighting in corporate bonds and
the resultant underweighting in U.S. Treasury securities. The selloff in
emerging markets sparked weakness in all other sectors as investors opted for
the lower risk of Treasury securities at the expense of corporate securities.
(Principal value and interest on Treasury securities are guaranteed by the U.S.
government if held to maturity.) The past year's volatility has helped create
some good values in the bond markets. Yield spreads in the high-yield and
high-grade markets are as high as they've been since the last recession in
1990-91. Among industries, we continue to focus on the media and entertainment
sector, which has benefited from consolidations over the past few years.
Companies are using increased revenue streams from these acquisitions to retire
the debt they took on during the asset-accumulation phase. As a result, their
credit quality continues to improve. We think credits that have risen from the
top of the below-investment-grade range, that is, "BB" as rated by Standard &
Poor's Corp., to "BBB," the lowest rung of investment-grade status (crossovers),
should continue their ascent. Holdings in the Series include Telecommunications,
Inc., Time Warner, News America Holdings, Continental Cablevision, and Qwest
Communications, a recent addition. Also, we continue to have about 15% of assets
in the utility sector, to which we've added Calenergy. The company recently
acquired MidAmerica Energy Holdings, and we think the combined entity has an
investment-grade profile. This puts it into the category of crossover bonds,
that is, bonds that don't have investment-grade ratings yet but that we expect
to be upgraded in the next 12 to 18 months. Buying crossover bonds is a core
strategy of the portfolio.
The duration of the Series continues to be longer than its normal 5.8 to 5.9
years. At the end of the year, the duration was about 10% longer, at 6.6 years.
This reflects our general view that the Federal Reserve Board's (the Fed's)
easing of monetary policy could cause long-term rates to move a little lower. A
longer duration could help the portfolio achieve a higher total return when
interest rates fall.
Looking ahead, we believe the fixed-income markets are going to continue to be
volatile for a few months. The corporate market is going to have tremendous
supply. With interest rates as low as they are, companies can issue bonds at 6%,
a level that has not
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Management Review and Outlook -- continued
been seen since the 1960s. Also, the markets are trying to figure out whether
the economy is going to weaken and, if it does, how bad it will be. We don't
know the answer yet because the effects of the Asian slowdown haven't worked
their way through the whole economy. More information will be available in the
first quarter of 1999, but as long as people are comfortable with the idea that
we're not going into a recession and that any slowdown is not as bad as they
feared, then the spread markets (that is, the markets with higher yield spreads
over Treasuries) will start to improve. So we think it's a time to be selective
in adding corporate securities.
Government Securities Series
For the 12 months ended December 31, 1998, the Series provided a total return of
8.70%, compared to a return of 8.72% for the Lehman Brothers Government/Mortgage
Index (the Lehman Index), an unmanaged index of U.S. Treasury,
government-agency, and mortgage-backed securities.
The Series' performance has, on balance, been favorably impacted by the
investment market turmoil. U.S. Treasuries proved to be the investment of choice
for investors who shifted their allocations away from potentially riskier asset
classes such as stocks, and prices of Treasuries appreciated. Government-agency
securities, however, have also felt the negative effects of the flight to
quality and did not keep up with Treasuries. This caused a slight drag on the
Series' performance during the sharp rally in Treasuries in August.
However, this does not mean other government-agency and mortgage-backed
securities are less safe, relatively speaking. They continue to enjoy, if not
explicit, at least implicit backing from the U.S. Treasury. Agency securities
continue to represent very good value over the long term. In turbulent markets,
they will often be overlooked as the focus shifts to the Treasury market. In
this environment, investors are able to purchase government-agency securities at
very attractive yield spreads to Treasuries. So it becomes a good opportunity to
acquire higher-yielding, quality securities. (Principal value and interest on
Treasury securities are guaranteed by the U.S. government if held to maturity.)
While we have somewhat decreased our exposure to mortgage-backed securities
because declining interest rates have led to quick increases in mortgage
prepayment rates, Ginnie Mae (Government National Mortgage Association)
securities have shown good value versus other types of mortgage securities.
Ginnie Maes have smaller loan balances and are less sensitive to prepayments
than securities such as Fannie Maes (Federal National Mortgage Association) and
Freddie Macs (Federal Home Loan Mortgage Corporation). We've also found value in
15-year securities. Even if interest rates come down a little, people with
15-year loans probably won't refinance into new 15-year loans, because when they
add up the extra interest costs of extending their mortgages they will probably
prefer to pay off their current mortgages. So we're selectively buying these
mortgages.
High Yield Series
For the 12 months ended December 31, 1998, the Series provided a total return of
0.58%, compared to a return of 1.60% for the Lehman Brothers High Yield Bond
Index, an unmanaged index of noninvestment-grade corporate debt. Over the same
period, the Lipper High Yield Bond Fund Index returned 0.17%. Lipper Indices are
unmanaged, net-asset-value-weighted index of the largest qualifying mutual funds
within their respective investment objectives, adjusted for the reinvestment of
capital gain distributions and income dividends.
The past year was a volatile one for the high-yield market. During the first
half of the year, high-yield bonds were the best-performing domestic
fixed-income asset class. However, in the third quarter, the high-yield market
posted its worst performance in eight years due to renewed concerns that
economic problems in Asia and Russia would negatively impact the U.S. economy.
The second interest-rate cut by the Fed on October 15 helped restore confidence
in the high-yield market and was the catalyst for a price recovery in the fourth
quarter.
Although this recovery was modest, we think the high-yield market still offers
good long-term value. As of December 31, 1998, the yield on the Lehman Brothers
High Yield Bond Index was 10.5% compared to 4.7% for comparable U.S. Treasury
yields, resulting in a spread of 5.8%. The spread began 1998 at 3.5% and has
risen to its widest level since 1991 as a result of lower high-yield bond prices
and investors' flight to quality. Given our cautious outlook for corporate
earnings in 1999 and the historically high yield levels available in the market
today, we believe the high-yield market remains an attractive asset class.
The Series' performance benefited from an overweighted position in the media
sector, particularly in the bonds of cable television companies. Valuations for
these companies rose substantially based on the growing perception that their
networks are a cost-effective way to deliver Internet and telephone services to
residential consumers. The Series also benefited from being underweighted in the
energy sector, which was one of the high-yield market's worst-performing sectors
due to the severe decline in oil prices. Performance was negatively impacted by
our cyclical holdings, as paper and steel prices declined in response to the
Asian economic crisis.
Throughout 1998, our investment strategy became more conservative. Going
forward, we expect credit problems will increase among the riskier high-yield
companies as corporate profits decline due to slower economic growth. Therefore,
we have been adding higher-quality companies to the Series and have reduced our
cyclical exposure by selling bonds of some paper, metal, and general industrial
companies. One of the major challenges facing investors in 1999 will be
determining how individual companies are impacted by global economic events.
Therefore, we believe that careful credit selection will remain crucial to the
Series' relative performance.
International Growth and Income Series
For the 12 months ended December 31, 1998, the Series provided a total return of
21.68%. This compares to a 12.66% return for the unmanaged Lipper International
Funds Index and to a 20.33% return for the Morgan Stanley Capital International
(MSCI) Europe, Australia, Far East (EAFE) Index. The MSCI EAFE Index is an
unmanaged, market-capitalization-weighted total return index of developed
country global stock markets, excluding the United States, Canada, and the South
African mining component.
The performance of the Series was helped by the "flight to quality" of both
fixed-income and equity investments. This has worked in the Series' favor
because we have stressed large-cap, quality growth and income stocks. For
example, European companies such as Compass, a British caterer, and
Pinault-Printemps Redoute, a French retailer that has benefited from new
management, have helped performance. Also, the Series has had a very small
exposure to emerging markets, and we have avoided many of the more economically
sensitive stocks.
Although a little less than 10% of the Series' assets are invested in Japan,
that weighting is less than half the Japanese weighting of the MSCI EAFE Index.
The Series has a mixture of export-
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Management Review and Outlook -- continued
oriented Japanese stocks such as Canon, Rohm, and Olympus Optical and companies
that we think should respond favorably to a strong economy that has yet to
materialize, such as Kirin Beverage and Tokyo Broadcasting. Another holding,
Takeda Chemical Industries, a major pharmaceutical company, has both domestic
and export sales.
Going forward, while low inflation and low interest rates have helped contribute
to a favorable investment environment, we believe the biggest risk to
international markets in the next few months is the possibility of more trouble
from some of the emerging markets, which could cause further deterioration in
global business activity. Another major risk is that Japan may not be able to
start growing again. Japan is the world's second-largest economy, and it's just
too much a part of the world's business activity to be ignored. So investors
need to be aware that these risks are still out there.
MFS[RegTM]/Foreign & Colonial Emerging Markets Equity Series
For the year ended December 31, 1998, the Series provided a total return of
- -29.98%. This compares to a -26.87% return for the Lipper Emerging Markets Funds
Index, and to a -23.81% return for the MSCI Emerging Markets Free (EMF) Index, a
broad, unmanaged, market-capitalization-weighted index of equities in emerging
markets.
Although the Series benefited from overweightings in Egypt, Morocco, and
Mauritius, as well as from underweightings in Brazil and Malaysia,
overweightings in Russia and Turkey hurt performance, as did underweightings in
Greece and Taiwan.
Until recently emerging markets had enjoyed the fastest growth in the world,
driven by a combination of cheap labor, new technology applications, and access
to cheap capital. The first two factors are now in greater abundance than ever,
but access to capital has, for the past year, been notably absent. However, it
is now in the interest of the major world economic powers to stabilize the
global financial system. Thus, we believe that further interest-rate cuts will
be forthcoming from the group of seven major industrialized countries, or G7. It
is worth remembering that even a marginal change in sentiment can have a
dramatic impact on emerging market performance. For example, from the end of
August to the end of November, emerging markets, as represented by the MSCI EMF
Index, rallied by 26.7% in U.S. dollar terms.
Although we see signs in some places that the problems in Asia are being
addressed, the Series remains significantly underweighted in Asia with, for
example, zero exposure in Malaysia and Indonesia, both of which have rejected
market demands for economic reform. In contrast, corporate South Korea has
finally started to restructure due to pressure from a new government and an
International Monetary Fund (IMF) rescue package. A debt rescheduling agreement
was signed in early 1998, and a number of the Korean "Chaebol" conglomerates
have started to reorganize. Thailand has also reacted positively to IMF demands,
and its macroeconomic picture has gradually improved during 1998, with interest
rates declining.
China, meanwhile, continues to be one of the best economic stories in the
region. Its government has correctly concluded that economic recovery will be
driven domestically rather than by exports and is attempting to grow through
infrastructure spending. It is uncertain how soon the effects of this will feed
through to corporate China, but we believe companies like Huaneng Power will be
among the first to benefit. Elsewhere, although Singapore's role as one of the
main service centers in Asia could continue to hamper growth, its corporate
sector is strong, and no bankruptcies are expected. We think valuations are
still attractive, and there are encouraging signs on the corporate governance
front, with Singapore Press providing the first-ever example of a share buyback
in the country.
Meanwhile, economic problems seem to have deepened in Russia, which experienced
a series of crises over the past year, with two changes of prime minister and
President Yeltsin looking increasingly marginalized. Weak oil prices threw the
country's fiscal viability into question, and the intransigence of the Russian
parliament jeopardized attempts at reform. By summer, it became clear that the
Russians would not be able to maintain control in the debt markets without
substantial assistance from the IMF and the G7. Eventually, a package was agreed
to, but it turned out to be too little too late. The Russian government,
realizing its predicament, reacted by devaluing its currency and suspending
interest payments on ruble-denominated debt. The latest government is working on
a plan to reschedule the entire ruble-denominated sovereign debt. It is unclear
how successful this will be but, with the stock market at such depressed levels,
the potential for substantial gains exists. As a result, the Series retains a
small exposure to the Russian market.
Given this environment, stock selection has proved to be particularly
challenging in emerging markets. However, there have been several notable
success stories throughout the portfolio. SNI, Morocco's second-largest
conglomerate, increased 11.5% in U.S. dollar terms, while the state Bank of
Mauritius, that country's second-largest commercial bank, increased 7.4%. In
Argentina, Telecom Argentina, an integrated telecommunications provider,
increased 2.7%.
Looking ahead, our outlook for emerging markets remains mixed. As world growth
slows, the uncertainty created by the deflationary outlook has given investors
an extreme aversion to risk. The credit crunch across most of Asia has deepened
with the worsening of Japan's financial crisis, and the cost of capital has
risen sharply. Although market volatility is likely to persist in the short
term, we believe that the current environment presents investors with some
outstanding long-term buying opportunities. The Series remains fully invested to
take advantage of what we see as a positive medium-term outlook, with a slight
bias away from Asia toward Latin America and the European, Middle Eastern, and
African regions.
Money Market Series
Interest rates on short-term (90-day) securities fell approximately 40 basis
points (0.40%) during the past 12 months ended December 31, 1998. The federal
funds rate began the year at 5.50% and ended it having declined 75 basis points
(0.75%). Because of this, we targeted 50 days as the Series' average maturity.
We continue to limit the Series' investments to securities issued or guaranteed
by the U.S. Treasury or agencies or instrumentalities of the U.S. government, as
well as to the highest quality corporate and bank issues, in order to provide
maximum security against credit risk. On December 31, 1998, approximately 70% of
the portfolio was invested in U.S. government or government-guaranteed issues,
with the balance invested in corporate and bank issues. We expect lower
short-term interest rates over the next several months.
Investments in the Series are neither insured nor guaranteed by the Federal
Deposit Insurance Corporation or any other govern-
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Management Review and Outlook -- continued
ment agency. Although the series seeks to preserve the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Series.
Strategic Income Series
The Series commenced operations on May 6, 1998, and from that date through
December 31, 1998, provided a total return of 0.40%. From June 1, 1998, through
December 31, 1998, the Lehman Brothers Government/Corporate Bond Index, an
unmanaged, market-value-weighted index of all debt obligations of the U.S.
Treasury and U.S. government agencies and of all publicly issued fixed-rate,
nonconvertible, investment-grade domestic corporate debt, returned 6.24%. The
Salomon Brothers World Government Bond Index, an unmanaged index of government
bonds with remaining maturities of at least five years, returned 12.39% for the
period, and the Credit Suisse First Boston High Yield Index, an unmanaged,
trader-priced portfolio constructed to mirror the high-yield debt market,
returned -3.08%.
Most multisector bond funds, including this one, have had a difficult 12 months.
Macroeconomic events such as Russia's default on its debt, currency problems in
Brazil, and continuing bad economic news from Japan, the world's second-largest
economy, caused capital flight from all of the higher-yielding asset classes
toward high-quality Treasury securities, which hurt the Series' performance.
One of the portfolio's strongest individual performers in the past year was
Jacor Communications, a broadcast communications company. Jacor was bought out
by Clear Channel Communications and, as a result, its bonds benefited from a
strong credit-rating upgrade and a subsequent boost in value.
From a sector standpoint, we adjusted the portfolio mid-year to reduce our
emerging market exposure, and we also reduced our high-yield exposure. We have
since selectively added to our emerging market position, as some members of this
asset class have begun to show renewed strength. We also increased our U.S.
government exposure. At the same time, we reviewed the portfolio for securities
that might have credit risk not supported by the underlying fundamentals. While
we didn't find many of these, we replaced the ones we did find with securities
that we felt offered less risk. Currently, the Series is allocated 1.3% in
high-yield corporate bonds, 32.4% U.S. government securities, 32.2% high-grade
corporate bonds, 24.1% emerging market debt, and 0.6% cash. The remainder is
comprised of preferred stocks and other fixed-income investments.
The Fed's decision to lower interest rates shows it clearly feels that there is
a potential for slow growth, recession, and deflation. No longer is inflation a
serious concern. This has hurt the Series by compressing yields. On the upside,
each rate reduction by the Fed and foreign central banks adds liquidity to the
world economy, which is a positive signal for the U.S. economy. We think there
could be additional rate cuts in the future.
Regarding recent turmoil in global markets, more volatility in the equity
markets would likely produce some good bargains in the high-yield sector. We
believe investors have oversold high-yield securities recently, though this does
not necessarily point to a quick recovery in that sector. If this scenario plays
out, however, we will add slowly to our holdings in this asset class.
We believe the overall climate for fixed-income investing is very good. One of
the benefits of owning bonds, especially in a volatile market, is
diversification. In times of economic stress, bonds tend to behave in a manner
opposite that of stocks, so investors who have diversified their portfolios with
bond investments can benefit when the equity markets get choppy. Also, there is
a worldwide shortage of yield. Interest rates are falling in Europe, Asia, and
the United States, so people are looking for ways to replace savings at whatever
yields they can find, and frequently they turn to bonds for that. In addition,
U.S. government securities are scarce, which should help that asset class
support higher prices. Also, the aging populations in the United States, Asia,
and Europe are creating added demand for fixed-income investments. Finally, the
lack of inflation worldwide benefits bond holders as interest rates decline and
bond values rise.
Our bond portfolios were created in the latter half of this century and were
built on the same principles that MFS used to build its equity portfolios:
Original ResearchSM, company and fundamental focus, and long-term value. When
you consider that our first equity portfolio, Massachusetts Investors Trust, was
also the nation's first mutual fund and that it has never missed a quarterly
dividend payment through wars, depressions, recessions, oil crises, political
turmoil, and social upheaval, that gives us a very high bar of achievement to
match. Of course, investors should bear in mind that past performance is no
guarantee of future results. We'd like to see our fixed-income portfolios build
their own tradition of stability and long-term value.
World Asset Allocation Series
For the year ended December 31, 1998, the Series provided a total return of
6.60%. This compares to annual returns for the following unmanaged indices:
28.58% for the Standard & Poor's 500 Composite Index (the S&P 500), a popular
index of common stock total return performance; 20.33% for the MSCI EAFE Index;
8.68% for the Lehman Brothers Aggregate Bond Index, an index of government and
corporate bonds including U.S. Treasury, government-agency, corporate, and
mortgage-backed securities; and 18.28% for the J.P. Morgan Non-Dollar Government
Bond Index, an index of international bonds.
The past year has been among the most volatile in recent memory. We were
prepared for this volatility and weathered it well thanks to our substantial
cash position, which offset some of the upheaval in the stock markets. Bond
volatility was driven by problems in the mortgage-backed market and we spurned
this market, preferring to hold U.S. Treasuries instead, which have appreciated
in price during this rocky period.
Currently, we are underweighted in equities because of what we see as a
continued trend toward weaker corporate earnings in the United States and
abroad. Our equity holdings are overweighted in European stocks and
underweighted in U.S. stocks. This reflects our thinking that European monetary
union (EMU) will catalyze growth and that the economic cycle in Europe is at a
more favorable stage of development than that of the United States, which is in
its late stages. We also own some long-term Treasury bonds because we anticipate
interest rates falling around the world and a flight to quality that should
boost the prices of those assets. Our investments in high-yield corporate bonds
result from our opinion that the U.S. economy, while slowing, will remain
durable and that these bonds have been sold off at an overly aggressive rate
that has not been supported by a corresponding slowdown. As a result, we have
been able to find what we feel are good bargains in high-yield bonds.
We remain committed to meeting the Series' objective of providing competitive
total returns with relatively low volatility over a reasonable business cycle,
while seeking to mitigate market risks through research and broad
diversification.
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Management Review and Outlook -- continued
World Governments Series
For the 12 months ended December 31, 1998, the Series provided a total return of
15.46%. This compares to a 15.29% return for the Salomon Brothers World
Government Bond Index (the Salomon Index).
Almost all the activity in the global fixed-income universe during 1998 occurred
in the last six months of the year. In many respects, the third quarter was a
historic one, highlighted by Russia's devaluation and domestic debt
restructuring. By late September, extreme volatility existed in many financial
markets, primarily due to the partial liquidation of a large U.S. hedge fund and
continued uncertainty in the Asian markets.
As concerns over a global recession increased, bond markets were dominated by a
flight to quality. Largely due to the Fed's lowering short-term interest rates
for the first time since 1996, yields on 10-year U.S., German, and Japanese
bonds fell approximately 100 basis points (1.00%) during the third quarter. In
fact, U.S. Treasury yields fell to their lowest level in over 30 years.
After such a volatile third quarter, more stability and normalcy returned during
the fourth quarter. Helped by further interest-rate cuts by the Fed and by most
European central banks, along with approval for an increase in funding for the
IMF, credit spreads began to contract. Longer-term interest rates in most
developed markets actually edged slightly higher after reaching historic lows
during the third quarter.
Japan, however, was the exception, as both government bond yields and the yen
were quite volatile toward the end of the year. First, the yen appreciated 17%
against the U.S. dollar due to central bank support and massive unwinding of
leveraged positions. Second, 10-year Japanese interest rates increased from
0.75% to 1.70% as concerns grew over larger budget deficits and possible new
issuance of debt.
During the year, the Series performed well both in nominal terms and relative to
the Salomon Index. Although 1998 will be remembered as the worst year since 1990
for credit risk, this portfolio benefited by being invested in secure global
government bonds. All countries within the Salomon Index registered positive
returns when measured in local currency. The Series benefited by being
overweighted in the better performers, namely the United Kingdom and the noncore
European countries.
In addition, underweighting the Japanese bond market for most of the year
enhanced performance, although it was somewhat constrained during the first half
by having a lower duration than the Salomon Index. However, the duration was
lengthened by the beginning of the third quarter and was thus well positioned
for the significant rally that ensued. In addition, a weaker U.S. dollar helped
to produce higher returns, both in absolute terms and relative to the Salomon
Index.
As we begin 1999, many unresolved global issues overhang the financial markets,
notably the financial stability of both Brazil and Russia. In addition, the
launch of the euro, as well as the impending impeachment trial in Washington,
obviously bears close scrutiny. However, similar to 1998, we believe global
growth and inflation should continue to fall, which will be positive for most
bond markets. In addition, both the Fed and the new European central bank are
ready to again provide liquidity in case another credit crisis develops. We
believe bond markets such as the United Kingdom and Greece should continue to
perform well in this environment.
World Total Return Series
For the 12 months ended December 31, 1998, the Series provided a total return of
18.37%. This compares to that of a benchmark made up of a combination of the
MSCI World Index (60%) and the J.P. Morgan Global Government Bond Index (40%),
which returned 21.0% for the same period. The MSCI World Index is an unmanaged
index of global equities. Over the same period, the Lipper Global Flexible Fund
Index returned 8.99%.
The Series performed well in 1998 for a number of reasons. First, the general
flight to quality in both the equity and fixed-income markets benefited the
portfolio. In the bond market, for example, we have invested in high-grade
sovereign bonds from a relatively limited number of countries. The stock markets
have also favored large, higher-quality companies, particularly in the United
States and Europe. That trend too helps the Series, because our equity assets
were in stocks that we would characterize as being very high quality, by which
we mean companies that are large and financially strong and that have histories
of profitability and of leadership in their markets. We also emphasize stocks
that have high liquidity in the markets in which they trade.
The Series was also helped by the fact that we sold what few emerging market
stocks were in the portfolio well before the bottom started falling out of those
markets in 1997.
The Series' equity assets are broadly spread among several industries, with less
concentration than in some other periods. That, too, is part of our effort to
avoid volatility. Banks and insurance companies make up the bulk of the
financial services category, which also includes companies like American Express
and the Federal Home Loan Mortgage Corporation, or Freddie Mac. In some cases,
such as with Allied Irish Bank, we bought the stock as a way of participating in
a robust economy. The Irish economy is strong and is experiencing minimal
inflation with an excellent outlook, and Irish banks are benefiting from that.
Other stocks that performed exceedingly well were Compass, a British food
services company that manages cafeterias and provides food services to hospitals
and other institutions, and Pinault-Printemps Redoute, a French retailer that
has benefited from new management.
In the fixed-income portion, the Series' emphasis on high-quality bonds has
helped performance. When the flight to quality began in the third quarter, all
the spread products, that is, bonds with higher yields than equivalent-duration
U.S. Treasuries, underperformed. This helped the portfolio, since it invests
only in sovereign debt of the leading industrialized countries. For most of the
year, 50% to 55% of the bond position was invested in the U.S. Treasury market.
Zero Coupon Series, Portfolio 2000
The total return for the Series was 7.28% for the 12 months ended December 31,
1998. During the period, intermediate-term U.S. Treasury notes fell, with yields
on two-year Treasuries ranging from 5.50% to 4.50%. The portfolio consists of
discounted coupon or principal payments that are stripped from U.S. Treasury
securities in order to provide a predictable and compounded rate of return. With
no interest payments prior to maturity, these portfolios are more sensitive to
interest-rate changes than are comparable-maturity bond funds. While there will
be fluctuations within the portfolio subject to interest-rate moves, all
portfolio holdings are guaranteed by the U.S. Treasury at maturity. (While the
guarantees do not apply to the individual units of the Series, they assure a
specified return to contract owners who hold their units to the maturity of the
Series.)
5
<PAGE>
Management Review and Outlook -- continued
-----------------------------------
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.
All of the portfolios, except Zero Coupon Series, Portfolio 2000, are actively
managed, and current holdings may be different.
6
<PAGE>
Performance Summary
The information below and on the following pages illustrates the growth of a
hypothetical $10,000 investment for each Series during the period indicated.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. It
is not possible to invest directly in an index. Results do not reflect the
deduction of separate account charges. (See Notes to Performance Summary for
more information.)
Bond Series
(For the period from June 1, 1998, through December 31, 1998)
[Begin Line Chart]
<TABLE>
<CAPTION>
Lehman Brothers
Government Consumer
/Corporate Price Bond
Bond Index Index--U.S. Series
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
6/98 10000 10000 10000
12/98 10624 10086 10690
</TABLE>
[End Line Chart]
<TABLE>
<CAPTION>
10 Years/Life
- --------------------------------------------------------------------
<S> <C>
Bond Series* +6.90%
Lehman Brothers Government/Corporate Bond Index** +5.50%
Consumer Price Index+** +0.86%
</TABLE>
* For the period from the commencement of the Series' Investment operations,
May 6, 1998, through December 31, 1998.
**Source: CDA/Wiesenberger. "Life" refers to the period from June 1, 1998,
through December 31, 1998.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Government Securities Series (1)
(For the 10-year period ended December 31, 1998)
[Begin Line Chart]
<TABLE>
<CAPTION>
Lehman
Brothers
Consumer Government Government
Price Securities /Mortgage
Index--U.S. Series Index
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
12/88 10000 10000 10000
12/90 11104 12289 11775
12/98 11772 15201 14601
12/94 12423 16324 15649
12/96 13162 19324 19367
12/98 13627 22837 23925
</TABLE>
[End Line Chart]
Average Annual Total Returns
as of December 31, 1998
Government Securities Series(1)
(For the 10-year period ended December 31, 1998)
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Government Securities Series +8.70% +6.30% +6.69% +8.61%
Lehman Brothers Government/Mortgage Index* +8.72% +7.29% +7.18% +9.13%
Consumer Price Index**+ +1.80% +2.30% +2.41% +3.14%
</TABLE>
*Source: Lipper Analytical Services, Inc.
**Source: CDA/Wiesenberger.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
7
<PAGE>
Performance Summary -- continued
High Yield Series(2)
(For the 10-year period ended December 31, 1998)
[Begin Line Chart]
<TABLE>
<CAPTION>
Lehman Lehman
Brothers Brothers High
Consumer Price High Yield Corporate Yield
Index--U.S. Bond Index Bond Index Series
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/88 10000 10000 10000 10000
12/90 11104 12213 9116 8484
12/94 11772 15732 15426 14386
12/96 12423 15950 18410 16563
12/98 13627 25600 27236 24732
</TABLE>
[End Line Chart]
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years/Life
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
High Yield Series +0.58% +8.49% +7.88% + 9.48%
Average high yield fund* -0.44% +8.21% +7.37% + 9.34%
Lehman Brothers Corporate Bond Index++** +8.51% +7.30% +7.73% + 9.86%
Lehman Brothers High Yield Bond Index* +1.60% +8.46% +8.53% +10.52%
Consumer Price Index**+ +1.80% +2.30% +2.41% + 3.14%
</TABLE>
*Source: Lipper Analytical Services, Inc.
++Effective immediately, the Lehman Brothers Corporate Bond Index will no
longer be used as a benchmark because we believe it does not reflect the
Series' investment policies and objectives.
**Source: CDA/Wiesenberger.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
International Growth and Income Series(3)
(For the period from November 1, 1995,
through December 31, 1998)
[Begin Line Chart]
<TABLE>
<CAPTION>
70% MSCI
EAFE/30%
International Consumer Lipper JPM Global MSCI
Growth and Price International Goverment EAFE
Income Series Index--U.S. Funds Index Bond Index Index
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
11/95 10000 10000 10000 10230 10000
12/96 10062 10319 11775 11169 11378
12/97 11314 10494 12628 11378 11612
12/98 13767 10683 14227 13528 13974
</TABLE>
[End Line Chart]
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 3 Year 10 Years/Life
------------ ------------ --------------
<S> <C> <C> <C>
International Growth and Income Series* +21.68% +10.77% +10.35%
Lipper International Funds Index# +12.66% +11.40% +12.13%
70% MSCI EAFE/30% J.P. Morgan
Global Government Bond Index#++ +19.87% + 7.98% + 8.47%
MSCI EAFE Index** +20.33% + 9.31% +11.14%
Consumer Price Index**+ + 1.80% + 2.30% + 2.11%
</TABLE>
*For the period from the commencement of the Series' investment operations,
October 2, 1995, through December 31, 1998.
#Source: Lipper Analytical Services, Inc. "Life" refers to the period from
November 1, 1995, through December 31, 1998.
++Effective immediately, the 70% MSCI EAFE/30% J.P. Morgan Global Bond Index
will no longer be used as a benchmark because we believe the MSCI EAFE Index
better reflects the Series' investment policies and objectives.
**Source: CDA/Wiesenberger. "Life" refers to the period from November 1, 1995,
through December 31, 1998.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
8
<PAGE>
Performance Summary -- continued
MFS[R]/Foreign & Colonial Emerging
Markets Equity Series(3)
(For the period from July 1, 1996,
through December 31, 1998)
[Begin Line Chart]
<TABLE>
<CAPTION>
Lipper
MFS/F&C Consumer Emerging
Emerging Markets Pricev MSCI Markets
Equity Series Index--U.S. EMF Index Funds Index
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
7/97 10000 10000 10000 9420
12/96 10000 10125 9507 9853
12/97 11046 10297 8251 8844
12/98 7735 10483 6286 6467
</TABLE>
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 10 Years/Life
- --------------------------------------------------------------------------------
<S> <C> <C>
MFS[RegTM]/F&C Emerging Markets Equity Series* -29.98% - 9.50%
Lipper Emerging Markets Funds Index# -26.87% -16.00%
MSCI EMF Index** -23.81% -16.94%
Consumer Price Index**+ + 1.80% + 1.89%
</TABLE>
*For the period from the commencement of the Series' investment operations,
June 5, 1996, through December 31, 1998.
#Source: Lipper Analytical Services, Inc. "Life" refers to the period from
July 1, 1996, through December 31, 1998.
**Source: CDA/Wiesenberger. "Life" refers to the period from July 1, 1996,
through December 31, 1998.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Strategic Income Series
(For the period from June 1, 1998,
through December 31, 1998)
[Start line chart]
<TABLE>
<CAPTION>
Salomon
Lehman Brothers Credit Suisse
Consumer Brothers World First
Strategic Price Government/Corporate Goverment Boston High
Income Series Index--U.S. Bond Index Bond Index Yield Index
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6/98 10000 10000 10000 10000 10000
12/98 10040 10086 10624 11239 9663
</TABLE>
[End line chart]
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
10 Years/Life
--------------
<S> <C>
Strategic Income Series* + 0.40%
Average multisector income fund# - 1.69%
Lehman Brothers Government/Corporate Bond Index** + 6.24%
Credit Suisse First Boston High Yield Index# - 3.08%
Salomon Brothers World Government Bond Index** +12.39%
Consumer Price Index+** + 0.86%
</TABLE>
*Forthe period from the commencement of the Series' investment operations, May
6, 1998, through December 31, 1998.
#Source: Lipper Analytical Services, Inc.
**Source: CDA/Wiesenberger. "Life" refers to the period from June 1, 1998,
through December 31, 1998.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
9
<PAGE>
Performance Summary -- continued
World Asset Allocation Series(3)
(For the period from December 1, 1994,
through December 31, 1998)
<TABLE>
<CAPTION>
World J.P. Morgan Lehman J.P.
Asset Consumer Non-Dollar Brothers S&P 500 Morgan Global
Allocation Price Government Aggregate Composite Government
Series Index--U.S. Bond Index Bond Index Index Bond Index
<S> <C> <C> <C> <C> <C> <C>
12/94 10000 10000 10000 10000 10000 10000
12/95 12229 10247 11228 12112 13962 11931
12/96 14190 10595 11942 12758 17167 12456
12/97 15732 10775 12187 12277 22895 12621
12/98 16771 10969 14666 14521 29437 14565
</TABLE>
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 3 Years 10 Years/Life
------------ ------------ --------------
<S> <C> <C> <C>
World Asset Allocation Series* + 6.60% +11.10% +13.28%
Standard & Poor's 500 Composite Index** +28.58% +28.23% +30.25%
Lehman Brothers Aggregate Bond Index** + 8.68% + 7.29% + 9.95%
J.P. Morgan Global Government Bond Index#++ +15.31% + 6.88% + 9.71%
J.P. Morgan Non-Dollar Government Bond Index# +18.28% + 6.23% + 9.56%
MSCI EAFE Index** +20.33% + 9.31% + 9.83%
Consumer Price Index+** + 1.80% + 2.30% + 2.29%
</TABLE>
*Forthe period from the commencement of the Series' investment operations,
November 7, 1994, through December 31, 1998.
**Source: CDA/Wiesenberger. "Life" refers to the period from December 1, 1994,
through December 31, 1998.
#Source: AIM. "Life" refers to the period from December 1, 1994, through
December 31, 1998.
++Effective immediately, the J.P. Morgan Global Government Bond Index will no
longer be used as a benchmark because we believe it does not reflect the
Series' investment policies and objectives.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
World Governments Series(1)
(For the 10-year period ended December 31, 1998)
[Begin line chart]
<TABLE>
<CAPTION>
Salomon J.P. Morgan
World Consumer World Brothers Global
Goverment Price Government Government
Series Index--U.S. Bond Index Bond Index
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/88 10000 10000 10000 9901
12/90 12456 11104 11685 11938
12/92 14380 11772 14284 14409
12/94 16328 12423 16557 16383
12/96 19769 13162 20426 20407
12/98 22652 13627 23607 23421
</TABLE>
[End line chart]
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years/Life
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
World Governments Series +15.46% +6.24% +5.80% +8.52%
Salomon Brothers World Government
Bond Index** +15.29% +6.20% +7.84% +8.97%
J.P. Morgan Global Government
Bond Index# +15.31% +6.88% +8.09% +9.09%
Consumer Price Index+** + 1.80% +2.30% +2.41% +3.14%
</TABLE>
**Source: CDA/Wiesenberger.
#Source: AIM.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
10
<PAGE>
Performance Summary -- continued
World Total Return Series(3)
(For the period from December 1, 1994,
through December 31, 1998)
[Begin line chart]
<TABLE>
<CAPTION>
60%
MSCI World
Index/40% Lipper
Morgan Global Global
World Total Consumer Price Government Flexible
Return Series Index--U.S. Bond Index Fund Index
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
12/94 10000 10000 10066 10009
12/95 11837 10247 12103 11730
12/96 13533 10595 13269 12448
12/97 15375 10775 14634 15081
12/98 18200 10969 17755 16437
</TABLE>
[End line chart]
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 3 Years 10 Years/Life
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
World Total Return Series* +18.37% +15.42% +15.53%
Average global flexible fund# +10.61% +11.79% +12.95%
60% MSCI World Index/40% J.P. Morgan Global
Government Bond Index# +21.00% +13.70% +15.10%
Lipper Global Flexible Fund Index + 8.99% +11.90% +12.95%
Consumer Price Index+** + 1.80% + 2.30% +12.29%
</TABLE>
*Forthe period from the commencement of the Series' investment operations,
November 7, 1994, through December 31, 1998.
**Source: CDA/Wiesenberger. "Life" refers to the period from December 1, 1994,
through December 31, 1998.
#Source: Lipper Analytical Services, Inc. "Life" refers to the period from
December 1, 1994, through December 31, 1998.
+The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
Zero Coupon Series, Portfolio 2000(3)
(For the 10-year period ended December 31, 1998)
[Begin line chart]
<TABLE>
<CAPTION>
Merill
Lynch
Zero 7-10 Year
Coupon Series, Consumer Price Treasury
Portfolio 2000 Index--U.S. Index
- -----------------------------------------------------------------
<S> <C> <C> <C>
12/88 10000 10000 10000
12/90 12813 11104 12583
12/92 16710 11772 15983
12/94 17878 12423 16949
12/96 21842 13162 21132
12/98 25066 13627 26081
</TABLE>
[End line chart]
Average Annual Total Returns
as of December 31, 1998
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Zero Coupon Series, Portfolio 2000 + 7.28% +5.36% +5.45% + 9.62%
Merrill Lynch 7-10 Year Treasury Index+ +12.39% +7.97% +7.88% +10.13%
Consumer Price Index+* + 1.80% +2.30% +2.41% + 3.14%
</TABLE>
+Source: CDA/Wiesenberger.
*The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
(1) Government guarantees apply to individual securities only and not to prices
and yields of shares in a managed portfolio.
(2) Lower-rated securities may provide greater returns, but they are also
associated with greater-than-average risk. These risks may increase unit
price volatility.
(3) Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably
affected by changes in interest rates and currency exchange rates, market
conditions, and the economic and political conditions of the countries where
investments are made. These risks may increase share price volatility.
NOTES TO PERFORMANCE SUMMARY
All results are historical and assume the reinvestment of dividends and capital
gains. Investment return and principal value will fluctuate, and units, 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.
11
<PAGE>
Portfolio of Investments -- December 31, 1998
Bond Series
Bonds -- 91.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 88.1%
Airlines
Northwest Airlines, Inc., 7.625s,
2005 ................................................................ $ 10 $ 9,480
Northwest Airlines, Inc., 8.7s, 2007................................... 2 1,971
-----------
$ 11,451
-----------
Apparel and Textiles
Jones Apparel, 6.25s, 2001## .......................................... $ 12 $ 11,942
-----------
Automotive
Federal Mogul Corp., 7.5s, 2004 ....................................... $ 5 $ 5,048
-----------
Banks and Credit Companies -- 0.4%
Bayerische Landesbank NY, 5.875s,
2008 ................................................................ $ 71 $ 71,765
-----------
Building -- 2.6%
Building Materials Corporation
America, 8s, 2008## ................................................. $ 510 $ 511,913
-----------
Consumer Goods and Services -- 0.2%
Protection One Alarm Monit Inc.,
7.375s, 2005## ...................................................... $ 35 $ 35,205
-----------
Corporate Asset Backed -- 3.7%
Amresco Residential Securities
Mortgage Loan, 5.94s, 2015 .......................................... $ 91 $ 90,972
Contimortgage Home Equity Loan
Trust, 6.19s, 2014 .................................................. 125 125,664
Money Store Trust, 6.87s, 2039 ........................................ 500 506,707
-----------
$ 723,343
-----------
Entertainment -- 6.7%
News America Holdings, Inc., 7.75s,
2045 ................................................................ $ 20 $ 21,180
News America Holdings, Inc., 8s,
2016 ................................................................ 5 5,507
News America Holdings, Inc.,
8.875s, 2023 ........................................................ 40 48,486
News America Holdings, Inc., 9.5s,
2024 ................................................................ 10 12,877
Seagram Joseph E & Sons Inc.,
7.5s, 2018 .......................................................... 220 220,893
Seagram Joseph E & Sons Inc., 9s,
2021 ................................................................ 30 34,348
Time Warner Inc., 6.625s, 2029 ........................................ 240 249,600
Time Warner Pass-Through Asset
Trust, 6.1s, 2001## ................................................. 480 487,733
Time Warner, Inc., 7.57s, 2024 ........................................ 40 45,274
Viacom, Inc., 6.75s, 2003 ............................................. 175 180,049
-----------
$ 1,305,947
-----------
Financial Institutions -- 3.6%
Associates Corp., 5.75s, 2003 ......................................... $ 500 $ 504,125
Goldman Sachs Group, 6.2s, 2001........................................ 90 91,366
GS Escrow Corp., 6.75s, 2001## ........................................ 65 63,477
GS Escrow Corp., 7.125s, 2005## ....................................... 45 44,340
-----------
$ 703,308
-----------
Federal National Mortgate Association -- 0.4%
FNMA, 4.75s, 2003 ..................................................... $ 75 $ 74,039
-----------
Forest and Paper Products -- 2.6%
Georgia-Pacific, 9.95s, 2002 .......................................... $ 455 $ 507,480
-----------
Government National Mortgage Association -- 8.4%
GNMA, 7s, 2028 ........................................................ $ 521 $ 532,746
GNMA, 7.5s, 2027 ...................................................... 964 993,960
GNMA, 8s, 2027 ........................................................ 112 116,336
-----------
$ 1,643,042
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Insurance
Conseco, Inc., 6.4s, 2001 ............................................. $ 3 $ 2,890
-----------
Medical and Health Products -- 0.1%
Bausch & Lomb, Inc., 6.5s, 2005 ....................................... $ 10 $ 9,726
Bausch & Lomb, Inc., 7.125s, 2028...................................... 10 9,341
-----------
$ 19,067
-----------
Medical and Health Technology
and Services -- 0.3%
Columbia/HCA Healthcare Corp.,
7.69s, 2025 ......................................................... $ 11 $ 9,969
Tenet Healthcare Corp., 8s, 2005 ...................................... 50 50,750
-----------
$ 60,719
-----------
Oil Services -- 1.4%
Mcdermott, Inc., 9.375s, 2002 ......................................... $ 75 $ 78,038
Petroleum Geo Services A/S, 6.25s,
2003## .............................................................. 195 191,783
-----------
$ 269,821
-----------
Oils -- 2.6%
Husky Oil Ltd., 8.9s, 2028 ............................................ $ 30 $ 30,971
Occidental Petroleum Corp., 6.75s,
2002 ................................................................ 475 475,596
-----------
$ 506,567
-----------
Railroads -- 2.4%
Union Pacific Corp., 6.34s, 2003 ...................................... $ 465 $ 467,511
-----------
Stores -- 4.9%
Dillards, Inc., 7.13s, 2018 ........................................... $ 10 $ 10,228
Saks, Inc., 7.25s, 2004 ............................................... 300 301,374
Saks, Inc., 7.5s, 2010 ................................................ 510 490,977
Saks, Inc., 8.25s, 2008 ............................................... 145 154,623
-----------
$ 957,202
-----------
Supermarkets -- 3.6%
Safeway, Inc., 5.875s, 2001 ........................................... $ 700 $ 702,632
-----------
Telecommunications -- 8.0%
Cable & Wireless Communications,
6.75s, 2008 ......................................................... $ 400 $ 407,184
Comcast Cable Communications I,
6.2s, 2008 .......................................................... 450 455,625
Continental Cablevision, Inc., 11s,
2007 ................................................................ 200 214,820
MCI Worldcom, Inc., 7.55s, 2004 ....................................... 5 5,452
Newcourt Credit Group Inc., 7.125s,
2003## .............................................................. 225 222,898
Qwest Communications
International, Inc., 7.5s, 2008## ................................... 50 51,938
TCI Communications Financing III,
9.65s, 2027 ......................................................... 25 30,871
TCI Communications, Inc., 7.125s,
2028 ................................................................ 25 27,244
Tele-Communications, Inc., 7.875s,
2013 ................................................................ 135 158,162
-----------
$ 1,574,194
-----------
U.S. Treasury Obligations -- 30.8%
U.S. Treasury Bonds, 5.25s, 2028 ...................................... $ 156 $ 159,705
U.S. Treasury Bonds, 6.125s, 2027...................................... 270 302,230
U.S. Treasury Bonds, 6.375s, 2027...................................... 1,530 1,758,536
U.S. Treasury Notes, 4.75s, 2008 ...................................... 18 18,141
U.S. Treasury Notes, 5.625s, 2008 ..................................... 2,380 2,539,531
U.S. Treasury Notes, 5.875s, 2005 ..................................... 140 149,341
U.S. Treasury Notes, 6.125s, 2007 ..................................... 1,000 1,092,190
U.S. Treasury Notes, 6.5s, 2005 ....................................... 25 27,476
-----------
$ 6,047,150
-----------
</TABLE>
12-BDS
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Utilities -- Electric -- 2.9%
BVPS II Funding Corp., 8.89s, 2017..................................... $ 50 $ 59,275
CalEnergy Co., Inc., 6.96s, 2003 ...................................... 350 353,808
CalEnergy Co., Inc., 7.23s, 2005 ...................................... 25 25,464
CalEnergy Co., Inc., 7.52s, 2008 ...................................... 35 36,637
Cleveland Electric Illuminating Co.,
9s, 2023 ............................................................ 40 44,030
Commonwealth Edison Co., 6.95s,
2018 ................................................................ 5 5,180
GGIB Funding Corp., 7.43s, 2011 ....................................... 29 30,588
Niagara Mohawk Power Corp.,
8.75s, 2022 ......................................................... 5 5,453
Northeast Utilities, 8.58s, 2006 ...................................... 8 8,360
Waterford 3 Funding Entergy Corp.,
8.09s, 2017 ......................................................... 2 2,168
-----------
$ 570,963
-----------
Utilities -- Gas -- 2.5%
Coastal Corp., 7.42s, 2037 ............................................ $ 15 $ 15,845
Coastal Corp., 7.75s, 2035 ............................................ 5 5,503
Marlin Water Trust & Capital, 7.09s,
2001## .............................................................. 360 359,640
NGC Corp. Capital Trust I, 8.316s,
2027 ................................................................ 35 35,471
Salton Sea Funding Corp., 7.84s,
2010 ................................................................ 40 45,980
Tennessee Gas Pipeline Co., 7s,
2028 ................................................................ 15 15,305
-----------
$ 477,744
-----------
Total U.S. Bonds .................................................................... $17,260,943
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- 3.0%
Colombia -- 0.1%
Republic of Colombia, 12.243s,
2005 ................................................................ $ 18 $ 16,470
-----------
Finland -- 0.7%
UPM Kymmene Corp., 7.45s, 2027
(Forest and Paper Products)## ....................................... $ 140 $ 140,115
-----------
Greece -- 0.9%
Hellenic Republic, 8.6s, 2008 ......................................... GRD43,000 $ 170,373
-----------
Sweden -- 1.3%
Svenska Handelsbanken, 7.125s,
2049 (Banks and Credit Cos.)## ...................................... $ 250 $ 249,736
-----------
Total Foreign Bonds ........................................................................... $ 576,694
-----------
Total Bonds
(Identified Cost, $17,786,444)............................................................... $17,837,637
-----------
Short-Term Obligations -- 6.1%
Federal Home Loan Mortgage
Corp., due 1/04/99, at Amortized
Cost ................................................................ 1,200 $ 1,199,550
-----------
Total Investments
(Identified Cost, $18,985,994) .............................................................. $19,037,187
Other Assets,
Less Liabilities -- 2.8%
557,576
-----------
Net Assets -- 100.0% .......................................................................... $19,594,763
===========
</TABLE>
See portfolio footnotes and notes to financial statements.
13-BDS
<PAGE>
Portfolio of Investments -- December 31, 1998
Government Securities Series
Bonds -- 98.7%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Government Guaranteed -- 65.9%
U.S. Treasury Obligations -- 48.6%
U.S. Treasury Bonds, 10.375s,
2012 ............................................................... $11,300 $ 15,590,497
U.S. Treasury Bonds, 9.875s, 2015..................................... 13,945 20,974,117
U.S. Treasury Bonds, 8s, 2021 ........................................ 3,657 4,889,519
U.S. Treasury Bonds, 6.125s, 2027..................................... 6,000 6,716,220
U.S. Treasury Bonds, 6.375s, 2027..................................... 4,400 5,057,228
U.S. Treasury Bonds, 6.625s, 2027..................................... 16,850 19,930,348
U.S. Treasury Bonds, 3.625s, 2028..................................... 20,111 19,507,476
U.S. Treasury Bonds, 5.25s, 2028 ..................................... 6,750 6,910,312
U.S. Treasury Notes, 4.625s, 2000 .................................... 15,000 15,023,400
U.S. Treasury Notes, 8s, 2001 ........................................ 37,600 40,379,016
U.S. Treasury Notes, 6.5s, 2002 ...................................... 14,750 15,572,755
U.S. Treasury Notes, 5.5s, 2003 ...................................... 13,600 14,005,508
U.S. Treasury Notes, 6.5s, 2006 ...................................... 28,700 31,834,614
U.S. Treasury Notes, 4.75s, 2008 ..................................... 6,000 6,046,860
------------
$222,437,870
------------
Government National Mortgage
Association -- 16.1%
GNMA, 6.5s, 2003 -- 2028 ............................................. $14,213 $ 14,355,315
GNMA, 7s, 2008 -- 2026 ............................................... 10,070 10,313,010
GNMA, 7.5s, 2008 -- 2027 ............................................. 38,024 39,199,548
GNMA, 8s, 2026 -- 2027 ............................................... 9,562 9,938,177
GNMA, 12.25s, 2015 ................................................... 8 9,029
------------
$ 73,815,079
------------
Small Business
Administration -- 1.2%
SBA, 8.2s, 2005 ...................................................... $ 522 $ 546,378
SBA, 8.4s, 2007 ...................................................... 428 452,272
SBA, 9.65s, 2007 ..................................................... 204 220,589
SBA, 8.7s, 2009 ...................................................... 2,853 3,123,482
SBA, 9.05s, 2009 ..................................................... 418 457,346
SBA, 10.05s, 2009 .................................................... 459 513,435
------------
$ 5,313,502
------------
Total U.S. Government Guaranteed ....................................................... $301,566,451
------------
U.S. Federal Agencies -- 32.8%
Aid to Israel, 5.625s, 2003 .......................................... $ 2,000 $ 2,040,400
Federal Home Loan Mortgage
Corp., 7.5s, 2001 .................................................. 2,419 2,458,555
Federal Home Loan Mortgage
Corp., 5.125s, 2003 ................................................ 5,500 5,498,295
Federal Home Loan Mortgage
Corp., 6.163s, 2027 ................................................ 6,751 6,780,559
Federal Home Loan Mortgage
Corp., 6.5s, 2028 .................................................. 20,471 20,617,832
Federal National Mortgage Assn.,
8.25s, 2001 ........................................................ 3,879 3,991,692
Federal National Mortgage Assn.,
7.27s, 2005 ........................................................ 6,007 6,350,902
Federal National Mortgage Assn.,
8s, 2005 ........................................................... 8,457 9,114,892
Federal National Mortgage Assn.,
6.839s, 2011 ....................................................... 4,200 4,339,125
Federal National Mortgage Assn.,
6s, 2013 ........................................................... 7,069 7,086,271
Federal National Mortgage Assn.,
7.726s, 2020 ....................................................... 85 84,701
Federal National Mortgage Assn.,
6.5s, 2027 ......................................................... 22,725 22,874,075
Financing Corp., 9.4s, 2018 .......................................... 4,845 6,892,788
Financing Corp., 9.8s, 2018 .......................................... 5,600 8,236,368
Financing Corp., 10.35s, 2018 ........................................ 5,100 7,851,603
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Government Guaranteed -- continued
U.S. Federal Agencies -- continued
Resolution Funding Corp., 8.875s,
2020 ............................................................... $ 6,000 $ 8,431,860
Tennessee Valley Authority, 0s,
2042 ............................................................... 12,500 5,990,625
U.S. Department of Housing &
Urban Development, 6.83s, 2003...................................... 8,025 8,522,710
U.S. Department of Housing &
Urban Development, 6.92s, 2004...................................... 4,525 4,878,131
U.S. Department of Veterans Affairs,
7.5s, 2009 ......................................................... 6,812 7,207,913
U.S. Department of Veterans Affairs,
7.75s, 2014 ........................................................ 583 585,286
------------
Total U.S. Federal Agencies ......................................................... $149,834,583
------------
Total Bonds
(Identified Cost, $433,812,452) ................................................... $451,401,034
------------
Repurchase Agreement -- 0.2%
Goldman Sachs, dated 12/31/98,
due 1/4/99, total to be received
$1,181,617 (secured by various
U.S. Treasury and Federal
Agency obligations in a jointly
traded account), at cost ........................................... $ 1,181 $ 1,181,000
------------
Total Investments
(Identified Cost, $434,993,452) ................................................... $452,582,034
Other Assets,
Less Liabilities -- 1.1%
4,891,954
------------
Net Assets -- 100.0% ................................................................ $457,473,988
============
</TABLE>
See portfolio footnotes and notes to financial statements.
14-GSS
<PAGE>
Portfolio of Investments -- December 31, 1998
High Yield Series
Bonds -- 91.9%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 82.4%
Aerospace -- 4.1%
Airplane Pass-Through Trust,
10.875s, 2019+ ..................................................... $ 700 $ 744,408
Argo Tech Corp., 8.625s, 2007 ........................................ 1,500 1,425,000
BE Aerospace, Inc., 8s, 2008 ......................................... 850 833,000
BE Aerospace, Inc., 9.5s, 2008## ..................................... 1,400 1,477,000
BE Aerospace, Inc., 9.875s, 2006 ..................................... 1,150 1,198,875
K & F Industries, Inc., 9.25s, 2007 .................................. 1,975 1,994,750
L-3 Communications Corp., 8s,
2008## ............................................................. 800 806,000
L-3 Communications Corp., 8.5s,
2008 ............................................................... 975 1,014,000
L-3 Communications Corp.,
10.375s, 2007 ...................................................... 925 1,015,187
MOOG, Inc., 10s, 2006 ................................................ 1,575 1,614,375
Stellex Industries, Inc., 9.5s, 2007 ................................. 700 603,750
United Defense Industries, Inc.,
8.75s, 2007 ........................................................ 690 695,175
------------
$ 13,421,520
------------
Building -- 3.8%
AAF- McQuay, Inc., 8.875s, 2003 ...................................... $ 1,125 $ 1,092,656
American Standard, Inc., 7.375s,
2008 ............................................................... 1,725 1,725,000
American Standard, Inc., 7.625s,
2010 ............................................................... 1,200 1,212,000
Building Materials Corp., 8.625s,
2006 ............................................................... 1,250 1,293,750
Building Materials Corp., 8s, 2007 ................................... 1,750 1,723,750
Nortek, Inc., 9.25s, 2007 ............................................ 2,370 2,452,950
Schuff Steel Co., 10.5s, 2008 ........................................ 1,205 1,069,437
UDC Homes, Inc., 0s, 2000 ............................................ 7 3,644
Williams Scotsman, Inc., 9.875s,
2007 ............................................................... 1,650 1,683,000
------------
$ 12,256,187
------------
Business Services -- 2.2%
Anacomp, Inc., 10.875s, 2004 ......................................... $ 1,700 $ 1,751,000
Convergent Communications, Inc.,
13s, 2008 .......................................................... 1,075 516,000
Iron Mountain, Inc., 10.125s, 2006 ................................... 2,400 2,604,000
Pierce Leahy Corp., 11.125s, 2006..................................... 943 1,032,585
Pierce Leahy Corp., 9.125s, 2007 ..................................... 675 705,375
Unisystem Corp., 7.875s, 2008 ........................................ 500 530,000
------------
$ 7,138,960
------------
Chemicals -- 1.3%
NL Industries, Inc., 11.75s, 2003 .................................... $ 2,800 $ 2,968,000
Sterling Chemicals, Inc., 11.25s,
2007 ............................................................... 1,350 1,120,500
------------
$ 4,088,500
------------
Consumer Goods and Services -- 4.2%
American Safety Razor Co., 9.875s,
2005 ............................................................... $ 1,000 $ 1,030,000
General Binding Corp., 9.375s,
2008 ............................................................... 1,075 1,081,719
Kindercare Learning Centers, Inc.,
9.5s, 2009 ......................................................... 1,775 1,766,125
Polymer Group, Inc., 9s, 2007 ........................................ 2,550 2,518,125
Polymer Group, Inc., 8.75s, 2008 ..................................... 500 488,750
Remington Products Co. LLC, 11s,
2006 ............................................................... 1,065 785,437
Revlon Consumer Products Corp.,
8.125s, 2006 ....................................................... 2,175 2,077,125
Revlon Consumer Products Corp.,
8.625s, 2008 ....................................................... 455 414,050
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Consumer Goods and
Services -- continued
Samsonite Corp., 10.75s, 2008 ........................................ $ 550 $ 473,000
Synthetic Industries, Inc., 9.25s,
2007 ............................................................... 3,100 3,193,000
------------
$ 13,827,331
------------
Container, Forest and Paper
Products -- 5.5%
Applied Extrusion Technologies,
Inc., 11.5s, 2002 .................................................. $ 950 $ 983,250
Atlantis Plastics, Inc., 11s, 2003 ................................... 525 522,375
Ball Corp., 7.75s, 2006## ............................................ 1,225 1,286,250
Ball Corp., 8.25s, 2008## ............................................ 1,160 1,215,100
Buckeye Cellulose Corp., 8.5s,
2005 ............................................................... 1,525 1,540,250
Florida Coast Paper Co. LLC,
12.75s, 2003 ....................................................... 1,675 854,250
Gaylord Container Corp., 9.75s,
2007 ............................................................... 2,250 1,935,000
Gaylord Container Corp., 9.875s,
2008 ............................................................... 835 605,375
Graham Packaging/GPC Capital
Co., 8.75s, 2008 ................................................... 920 929,200
Silgan Holdings, Inc., 9s, 2009 ...................................... 3,000 3,037,500
Speciality Paperboard, Inc., 9.375s,
2006 ............................................................... 1,800 1,818,000
U.S. Can Corp., 10.125s, 2006 ........................................ 1,000 1,030,000
U.S. Timberlands, 9.625s, 2007 ....................................... 2,140 2,166,750
------------
$ 17,923,300
------------
Corporate Asset Backed -- 0.1%
Merrill Lynch Mortgage Investors,
Inc., 8.335s, 2022+ ................................................ $ 500 $ 472,734
------------
Energy -- 5.1%
AEI Resources, Inc./AEI Holdings,
Inc., 10.5s, 2005## ................................................ $ 975 $ 972,562
AmeriGas Partners LP, 10.125s,
2007 ............................................................... 1,600 1,612,000
Cheasapeake Energy Corp., 9.625s,
2005 ............................................................... 2,525 1,944,250
Clark Refining & Marketing, Inc.,
8.625s, 2008## ..................................................... 1,300 1,282,125
Clark USA, Inc., 10.875s, 2005 ....................................... 1,740 1,618,200
Continental Resources, Inc., 10.25s,
2009## ............................................................. 1,625 1,348,750
Giant Industries, Inc., 9s, 2007 ..................................... 1,005 932,138
Gulfmark Offshore, Inc., 8.75s,
2008 ............................................................... 50 48,750
HS Resources, Inc., 9.25s, 2006 ...................................... 2,250 2,087,500
P&L Coal Holdings Corp., 8.875s,
2008## ............................................................. 550 561,000
P&L Coal Holdings Corp., 9.625s,
2008## ............................................................. 1,500 1,522,500
Petsec Energy, Inc., 9.5s, 2007 ...................................... 1,450 754,000
Pool Energy Services Co., 8.625s,
2008 ............................................................... 1,475 1,253,750
Pride Petroleum Services, Inc.,
9.375s, 2007 ....................................................... 750 682,500
Wiser Oil Co., 9.5s, 2007 ............................................ 175 108,500
------------
$ 16,728,525
------------
Entertainment -- 1.8%
AMC Entertainment, Inc., 9.5s,
2009 ............................................................... $ 2,425 $ 2,473,500
Cinemark USA, Inc., 9.625s, 2008 ..................................... 1,900 1,990,250
</TABLE>
15-HYS
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Entertainment -- continued
Hollywood Theaters, Inc., 10.625s,
2007## ............................................................. $ 400 $ 279,000
Regal Cinemas, Inc., 9.5s, 2008##..................................... 1,025 1,058,313
------------
$ 5,801,063
------------
Food and Beverage Products -- 1.0%
Delta Beverage Group, Inc., 9.75s,
2003 ............................................................... $ 55 $ 57,338
Friendly Ice Cream Corp., 10.5s,
2007 ............................................................... 1,050 1,063,125
Specialty Foods Corp., 10.25s,
2001 ............................................................... 2,175 2,001,000
------------
$ 3,121,463
------------
Gaming and Hotels -- 4.5%
Boyd Gaming Corp., 9.5s, 2007++++ .................................... $ 2,450 $ 2,425,500
Casino America, Inc., 12.5s, 2003 .................................... 1,025 1,132,625
Circus Circus Enterprises, Inc.,
6.45s, 2006 ........................................................ 750 674,010
Coast Hotels & Casinos, Inc., 13s,
2002 ............................................................... 600 675,000
Eldorado Resorts LLC, 10.5s, 2006..................................... 1,700 1,802,000
Lady Luck Gaming Corp., 11.875s,
2001 ............................................................... 3,450 3,484,500
Prime Hospitality Corp., 9.75s,
2007 ............................................................... 1,600 1,608,000
Red Roof Inns, Inc., 9.625s, 2003 .................................... 1,125 1,136,250
Santa Fe Hotel, Inc., 11s, 2000 ...................................... 1,045 992,750
Station Casinos, Inc., 8.875s,
2008## ............................................................. 900 904,500
------------
$ 14,835,135
------------
Industrial -- 7.4%
Allied Waste North America, 7.875s,
2009## ............................................................. $ 1,750 $ 1,771,875
Buckeye Technologies, Inc., 8s,
2010 ............................................................... 550 528,000
Day International Group, Inc.,
11.125s, 2005 ...................................................... 1,200 1,266,000
Envirosource, Inc., 9.75s, 2003 ...................................... 1,107 993,533
Furon Co., 8.125s, 2008 .............................................. 1,150 1,138,500
Grove Worldwide LLC/Capital, Inc.,
9.25s, 2008## ...................................................... 400 360,000
Hayes Wheels International, Inc.,
11s, 2006 .......................................................... 1,050 1,165,500
Hayes Wheels International, Inc.,
9.125s, 2007 ....................................................... 2,200 2,299,000
Haynes International, Inc., 11.625s,
2004 ............................................................... 775 705,250
IMO Industries, Inc., 11.75s, 2006 ................................... 1,585 1,600,850
Interlake Corp., 12s, 2001 ........................................... 2,175 2,316,375
Interlake Corp., 12.125s, 2002 ....................................... 350 353,500
International Knife & Saw, Inc.,
11.375s, 2006 ...................................................... 1,325 1,359,781
Johnstown America Industries,
11.75s, 2005 ....................................................... 830 873,575
Mark IV Industries, Inc., 7.75s,
2006 ............................................................... 250 243,125
Newcor, Inc., 9.875s, 2008 ........................................... 1,525 1,418,250
Numatics, Inc., 9.625s, 2008 ......................................... 330 311,025
Oxford Automotive, Inc., 10.125s,
2007 ............................................................... 950 978,500
Simonds Industries, Inc., 10.25s,
2008## ............................................................. 1,200 1,224,000
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Industrial -- continued
Talon Automotive Group, Inc.,
9.625s, 2008 ....................................................... $ 300 $ 288,000
Thermadyne Holdings Corp., 0s to
2003, 12.5s to 2008 ................................................ 2,900 1,276,000
Thermadyne Manufacturing/ Capital
Corp., 9.875s, 2008 ................................................ 1,950 1,808,625
------------
$ 24,279,264
------------
Media -- 14.7%
Acme Television LLC, 0s to 2000,
10.875s to 2004 .................................................... $ 1,150 $ 918,563
Adelphia Communications Corp.,
8.375s, 2008## ..................................................... 2,400 2,484,000
Allbritton Communications Co.,
9.75s, 2007 ........................................................ 1,300 1,371,500
Avalon Cable Holdings LLC, 0s to
2003, 11.875s to 2008## ............................................ 1,950 1,092,000
Avalon Cable of Michigan, 9.375s,
2008## ............................................................. 525 535,500
Big Flower Press Holdings, Inc.,
8.875s, 2007 ....................................................... 875 883,750
Big Flower Press Holdings, Inc.,
8.625s, 2008 ....................................................... 1,125 1,125,000
Chancellor Media Corp., 8.75s,
2007 ............................................................... 650 666,250
Chancellor Media Corp., 8s,
2008## ............................................................. 2,000 2,040,000
Charter Communications Southeast
LP, 11.25s, 2006 ................................................... 1,420 1,590,400
Classic Cable, Inc., 9.875s, 2008##................................... 1,050 1,097,250
Classic Cable, Inc., 13.25s, 2009 .................................... 775 476,625
Comcast Corp., 10.625s, 2012 ......................................... 200 256,552
CSC Holdings, Inc., 8.125s, 2009 ..................................... 1,900 2,035,945
Cumulus Media, Inc., 10.375s,
2008 ............................................................... 675 715,500
Digital Television Services, Inc.,
12.5s, 2007 ........................................................ 1,450 1,573,250
EchoStar Satellite Broadcasting
Corp., 0s to 2000, 13.125s to
2004 ............................................................... 2,325 2,319,187
Fox/Liberty Networks LLC, Inc.,
8.875s, 2007 ....................................................... 2,475 2,524,500
Frontiervision LP, 0s to 2001,
11.875s to 2007 .................................................... 1,300 1,085,500
Frontiervision Operating Partnership
LP, 11s, 2006 ...................................................... 575 636,094
Golden Books Publishing, Inc.,
7.65s, 2002** ...................................................... 625 196,650
Granite Broadcasting Corp.,
10.375s, 2005 ...................................................... 1,650 1,662,375
Granite Broadcasting Corp., 8.875s,
2008 ............................................................... 940 893,000
Hollinger International Publishing,
Inc., 9.25s, 2007 .................................................. 2,300 2,415,000
Intermedia Capital Partners IV, LP,
11.25s, 2006 ....................................................... 1,375 1,546,875
Jacor Communications Co., 8s,
2010 ............................................................... 825 862,125
Lenfest Communications, Inc.,
10.5s, 2006 ........................................................ 1,345 1,573,650
Liberty Group Operating, Inc.,
9.375s, 2008 ....................................................... 1,145 1,102,063
</TABLE>
16-HYS
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Media -- continued
LIN Holdings Corp., 0s to 2003, 10s
to 2008 ............................................................ $ 300 $ 207,000
LIN Televison Corp., 8.375s, 2008 .................................... 1,450 1,435,500
NTL, Inc., 0s to 2003, 9.75s to
2008## ............................................................. 2,650 1,613,187
NTL, Inc., 0s to 2003, 12.375s to
2008## ............................................................. 2,850 1,738,500
Outdoor Systems, Inc., 8.875s,
2007 ............................................................... 1,500 1,601,250
Telemundo Holdings, Inc., 0s to
2003, 11.5s to 2008## .............................................. 2,825 1,624,375
Transwestern Publishing Co.,
9.625s, 2007 ....................................................... 700 728,875
United International Holdings, Inc.,
10.75s, 2008 ....................................................... 2,050 1,086,500
World Color Press, Inc., 8.375s,
2008## ............................................................. 1,075 1,080,375
Young Broadcasting, Inc., 8.75s,
2007 ............................................................... 1,000 1,005,000
------------
$ 47,799,666
------------
Medical and Health Technology
and Services -- 4.3%
Alaris Medical Systems, Inc., 9.75s,
2006 ............................................................... $ 1,500 $ 1,530,000
Alaris Medical Systems, Inc., 0s to
2003, 11.125s to 2008## ............................................ 1,400 763,000
Beverly Enterprises, Inc., 9s, 2006 .................................. 1,550 1,581,000
Fresenius Medical Care Capital
Trust, 7.875s, 2008 ................................................ 2,550 2,524,500
Oxford Health Plans, Inc., 11s,
2005## ............................................................. 1,900 1,833,500
Pharmerica, Inc., 8.375s, 2008 ....................................... 1,125 1,009,687
Prime Medical Services, Inc., 8.75s,
2008 ............................................................... 2,425 2,279,500
Tenet Healthcare Corp., 8.625s,
2007 ............................................................... 1,000 1,045,000
Tenet Healthcare Corp., 7.625s,
2008## ............................................................. 740 751,100
Tenet Healthcare Corp., 8.125s,
2008## ............................................................. 750 768,750
------------
$ 14,086,037
------------
Metals and Minerals -- 2.4%
Acme Metals, Inc., 10.875s, 2007 ..................................... $ 700 $ 56,000
Alaska Steel Holdings Corp.,
9.125s, 2006 ....................................................... 1,280 1,340,800
Commonwealth Aluminum Corp.,
10.75s, 2006 ....................................................... 1,650 1,584,000
Doe Run Resources Corp., 11.25s,
2005 ............................................................... 1,000 800,000
Jorgensen (Earle M.) Co., 9.5s,
2005 ............................................................... 960 914,400
Kaiser Aluminum & Chemical Corp.,
9.875s, 2002 ....................................................... 1,400 1,386,000
Metal Management, Inc., 10s, 2008..................................... 1,400 840,000
WCI Steel, Inc., 10s, 2004 ........................................... 1,000 990,000
Wheeling Pittsburgh Corp., 9.25s,
2007 ............................................................... 25 23,500
------------
$ 7,934,700
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Retail -- 3.0%
Affinity Group Holding, Inc., 11s,
2007 ............................................................... $ 1,000 $ 1,032,500
Cole National Group, Inc., 8.625s,
2007 ............................................................... 2,100 2,058,000
Finlay Enterprises, Inc., 9s, 2008 ................................... 450 387,000
Finlay Fine Jewelry Corp., 8.375s,
2008 ............................................................... 1,325 1,166,000
J.Crew Operating Corp., 10.375s,
2007 ............................................................... 1,150 977,500
Musicland Group, Inc., 9s, 2003 ...................................... 500 477,500
Musicland Group, Inc., 9.875s,
2008 ............................................................... 1,550 1,519,000
Southland Corp., 5s, 2003 ............................................ 2,350 2,068,000
------------
$ 9,685,500
------------
Supermarkets -- 1.0%
Jitney-Jungle Stores of America,
Inc., 12s, 2006 .................................................... $ 485 $ 538,350
Pathmark Stores, Inc., 11.625s,
2002 ............................................................... 1,825 1,742,875
Pathmark Stores, Inc., 9.625s, 2003................................... 450 436,500
Penn Traffic Co., 8.625s, 2003 ....................................... 1,200 576,000
------------
$ 3,293,725
------------
Telecommunications -- 14.9%
Allegiance Telecommunications,
Inc., 0s to 2003, 11.75s to 2008 ................................... $ 1,100 $ 517,000
Allegiance Telecommunications,
Inc., 12.875s, 2008 ................................................ 1,025 1,004,500
American Cellular Corp., 10.5s,
2008## ............................................................. 1,125 1,091,250
AMSC Acquisition Co., Inc., 12.25s,
2008 ............................................................... 1,425 862,125
Centennial Cellular Operating Co.,
10.75s, 2008 ....................................................... 1,725 1,733,625
DTI, Inc., 0s to 2003, 12.5s to 2008 2,400 612,000
Esat Holdings Ltd., 0s to 2002,
12.5s to 2007 ...................................................... 550 363,000
Exodus Communications, Inc.,
11.25s, 2008## ..................................................... 2,500 2,512,500
Flag Ltd., 8.25s, 2008 ............................................... 115 112,700
GCI, Inc., 9.75s, 2007 ............................................... 925 915,750
Global Crossings Holdings Ltd.,
9.625s, 2008## ..................................................... 1,300 1,365,000
ICG Holdings, Inc., 0s to 2001,
12.55s to 2006 ..................................................... 2,525 1,818,000
Intermedia Communications, Inc.,
8.875s, 2007 ....................................................... 800 772,000
Intermedia Communications, Inc.,
0s to 2002, 11.25s to 2007 ......................................... 365 248,200
ITC Deltacom, Inc., 11s, 2007 ........................................ 682 746,790
ITC Deltacom, Inc., 8.875s, 2008 ..................................... 700 703,500
ITC Deltacom, Inc., 9.75s, 2008## .................................... 1,500 1,552,500
Level 3 Communications, Inc.,
9.125s, 2008 ....................................................... 2,475 2,453,344
Metromedia Fiber Network, Inc.,
10s, 2008## ........................................................ 1,575 1,622,250
MJD Communications, Inc., 9.5s,
2008 ............................................................... 1,000 992,500
Nextel Communications, Inc., 0s to
1999, 9.75s to 2004 ................................................ 585 567,450
</TABLE>
17-HYS
<PAGE>
Portfolio of Investments -- continued
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- continued
Telecommunications -- continued
Nextel Communications, Inc., 0s to
2002, 9.75s to 2007 ................................................ $ 785 $ 478,850
Nextel Communications, Inc., 0s to
2003, 9.95s to 2008 ................................................ 950 570,000
Nextel International, Inc., 0s to
2003, 12.125 to 2008 ............................................... 2,675 1,197,062
Nextlink Communications, Inc.,
9.625s, 2007 ....................................................... 1,225 1,182,125
Nextlink Communications, Inc.,
10.75s, 2008## ..................................................... 775 782,750
Northeast Optic Network, 12.75s,
2008 ............................................................... 850 833,000
Pagemart Wireless, Inc., 0s to 2003,
11.25s to 2008 ..................................................... 1,500 720,000
Paging Network, Inc., 8.875s, 2006.................................... 190 172,900
Pathnet, Inc., 12.25s, 2008 .......................................... 250 175,000
Pinnacle Holdings, Inc., 0s to 2003,
10s to 2008 ........................................................ 1,925 1,155,000
Psinet, Inc., 10s, 2005 .............................................. 1,000 980,000
Psinet, Inc., 11.5s, 2008## .......................................... 550 574,750
Qwest Communications
International, Inc., 10.875s, 2007.................................. 731 829,685
Qwest Communications
International, Inc., 7.25s, 2008##.................................. 1,050 1,078,875
Qwest Communications
International, Inc., 7.5s, 2008## .................................. 1,800 1,869,750
RCN Corp., 0s to 2002, 11.25s to
2007 ............................................................... 1,950 1,131,000
Rural Cellular Corp., 9.625s, 2008 ................................... 800 802,000
Spectrasite Holdings, Inc., 0s to
2003, 12s to 2008## ................................................ 2,825 1,440,750
Sprint Spectrum LP, 11s, 2006 ........................................ 850 981,750
Telesystem International Wireless,
Inc., 0s to 2002, 10.5s to 2007 .................................... 1,325 495,219
Telesystem International Wireless,
Inc., 0s to 2002, 13.25s to 2007 ................................... 1,625 690,625
Time Warner Telecommunications
LLC, 9.75s, 2008 ................................................... 2,000 2,090,000
Triton PCS, Inc., 0s to 2003, 11s to
2008 ............................................................... 2,750 1,237,500
Verio, Inc., 10.375s, 2005 ........................................... 625 609,375
Verio, Inc., 11.25s, 2008## .......................................... 775 782,750
Viatel, Inc., 11.25s, 2008 ........................................... 1,200 1,164,000
Viatel, Inc., 0s to 2003, 12.5s to
2008 ............................................................... 425 238,000
Western Wireless Corp., 10.5s,
2007 ............................................................... 1,665 1,739,925
------------
$ 48,568,625
------------
Transportation -- 0.1%
Moran Transportation Co., 11.75s,
2004 ............................................................... $ 300 $ 324,375
------------
Utilities -- Electric -- 1.0%
CalEnergy Co., Inc., 7.52s, 2008 ..................................... $ 1,000 $ 1,046,780
El Paso Electric Co., 8.9s, 2006 ..................................... 500 554,380
Esi Tractebel Acquisition Corp.,
7.99s, 2011 ........................................................ 525 521,719
Niagara Mohawk Power Corp.,
7.625s, 2005 ....................................................... 1,000 1,053,390
------------
$ 3,176,269
------------
Total U.S. Bonds ....................................................................... $268,762,879
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- 9.5%
Belgium -- 0.1%
Hermes Europe Railtel B V, 10.375s,
2009 (Telecommunications)## ........................................ $ 500 $ 506,250
------------
Bulgaria -- 0.2%
Bulgaria National Republic, 6.688s,
2011 ............................................................... $ 1,200 $ 804,000
------------
Canada -- 3.4%
Clearnet Communications, Inc., 0s
to 2000, 14.75s to 2005
(Telecommunications) ............................................... $ 1,025 $ 872,531
International Utility Structures,
10.75s, 2008 (Utilities-Electric) .................................. 1,000 937,500
Metronet Communications Corp., 0s
to 2002, 10.75s to 2007
(Telecommunications) ............................................... 4,845 2,997,000
Metronet Communications Corp.,
12s, 2007 (Telecommunications) ..................................... 650 721,500
PCI Chemicals Canada, Inc., 9.25s,
2007 (Chemicals) ................................................... 1,705 1,329,900
Repap New Brunswick, Inc., 9s,
2004 (Container, Forest and
Paper Products) .................................................... 1,875 1,687,500
Rogers Cablesystems, Inc., 9.625s,
2002 (Media) ....................................................... 250 268,750
Rogers Cablesystems, Inc.,
10.125s, 2012 (Media) .............................................. 2,030 2,243,150
------------
$ 11,057,831
------------
Greece -- 0.2%
Fage Dairy Industries SA, 9s, 2007
(Food and Beverages) ............................................... $ 675 $ 570,375
------------
Luxembourg -- 0.5%
Millicom International Cellular
Communications Corp., 0s to
2001, 13.5s to 2006
(Telecommunications) ............................................... $ 2,360 $ 1,652,000
------------
Mexico -- 0.3%
Satelites Mexicanos SA de C V,
10.125s, 2004
(Telecommunications)## ............................................. $ 1,250 $ 996,875
------------
Netherlands -- 0.7%
Versatel Telecom B.V., 13.25s, 2008
(Telecommunications)## ............................................. $ 2,250 $ 2,227,500
------------
Poland -- 0.1%
PTC International Finance B.V., 0s to
2002, 10.75s to 2007
(Telecommunications) ............................................... $ 525 $ 356,344
------------
Thailand -- 0.2%
Jasmine Submarine Telecom Ltd.,
8.483s, 2011 (Industrial)## ........................................ $ 797 $ 661,431
------------
United Kingdom -- 3.8%
Colt Telecommunications Group
PLC, 0s to 2001,12s to 2006
(Telecommunications) ............................................... $ 3,800 $ 3,173,000
Dialog Corp. PLC, 11s, 2007
(Telecommunications) ............................................... 1,300 1,290,250
Diamond Cable Communications
Corp. PLC, 0s to 2000, 11.75s to
2005 (Media) ....................................................... 150 123,375
Dolphin Telecom PLC, 0s to 2003,
11.5s to 2008
(Telecommunications)# .............................................. 2,750 797,500
</TABLE>
18-HYS
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- continued
United Kingdom -- continued
Esat Telecom Group PLC, 0s to
2002, 12.5s to 2007
(Telecommunications) ................ $ 1,200 $ 792,000
Esat Telecom Group PLC, 11.875s,
2008 (Telecommunications)## ......... 1,575 1,590,750
Esprit Telecom Group PLC, 11.5s,
2007 (Telecommunications)## ......... 700 714,000
Espirit Telecom Group PLC,
10.875s, 2008
(Telecommunications) ................ 1,700 1,708,500
Telewest PLC, 9.625s, 2006
(Media) ............................. 1,475 1,504,500
Telewest PLC, 11.25s, 2008
(Media)## ........................... 500 556,250
------------
$ 12,250,125
------------
Total Foreign Bonds ................................... $ 31,082,731
------------
Total Bonds
(Identified Cost, $312,016,651) ..................... $299,845,610
------------
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
Preferred Stocks -- 3.2%
Consumer Goods and Services
Renaissance Cosmetics, Inc., 14% 850 $ 0
-----------
Energy -- 0.2%
Clark USA, Inc., 11.5s ................................................... 726 $ 580,800
-----------
Media -- 1.3%
CSC Holdings, Inc., 11.125s .............................................. 15,688 $ 1,729,602
Primedia, Inc., 10s ...................................................... 4,000 392,000
Primedia, Inc., 8.625s* .................................................. 23,750 2,303,774
-----------
$ 4,425,376
-----------
Telecommunications -- 1.7%
Crown Castle International Corp.,
12.75s* ................................................................ 1,525 $ 1,528,812
E Spire Communications, Inc.,
12.75s ................................................................. 508 248,920
Global Crossing Holdings Ltd.,
10.5s##* ............................................................... 10,750 1,037,375
ICG Funding LLC, 6.75s* .................................................. 14,500 755,813
Nextel Communications, Inc., 13s* ........................................ 232 220,400
Rural Cellular Corp., 11.375s ............................................ 1,718 1,580,560
Viatel, Inc., 10s* ....................................................... 840 50,400
-----------
$ 5,422,280
-----------
Total Preferred Stocks
(Identified Cost, $10,982,599) ................................................ $10,428,456
-----------
</TABLE>
Warrants* -- 0.5%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Allegiance Telecommunications, Inc.
(Telecommunications) ................. 1,550 $ 2,712
American Mobile Satellite Corp.
(Telecommunications)## ............... 1,425 5,529
Colt Telecommunications Group
PLC (Telecommunications)## ........... 3,150 1,345,522
Convergent Communications, Inc.
(Business Services) .................. 4,300 43
Crystal Oil Co., $0.10 (Energy)......... 36,780 0
Crystal Oil Co., $0.125 (Energy)........ 36,779 0
DTI, Inc. (Telecommunications) ......... 12,000 600
Esat Holdings Ltd.
(Telecommunications)## ............... 550 36,575
ICO, Inc. (Oil Services) ............... 25,000 15,250
Knology Holdings, Inc.
(Telecommunications)## ............... 525 1,053
Loral Orion Network Systems, Inc.
(Telecommunications) ................. 1,000 8,000
Loral Orion Network Systems, Inc.
(Telecommunications) ................. 1,100 19,800
McCaw International Ltd.
(Telecommunications)## ............... 850 1,063
Metronet Communications Corp.
(Telecommunications)## ............... 650 19,500
Pathnet, Inc. (Business Services)##..... 250 2,500
Renaissance Cosmetics, Inc.
(Consumer Goods and Services)......... 689 0
Versatel Telecom B V
(Telecommunications) ................. 2,250 22,500
----------
Total Warrants
(Identified Cost, $816,292) ................. $1,480,647
----------
</TABLE>
<TABLE>
<CAPTION>
Shares
<S> <C> <C>
Stocks
Building
Atlantic Gulf Communities Corp.+* .. 30 $ 23
------------
Consumer Goods and Services
Ranger Industries, Inc.* ........... 8,952 $ 2,596
------------
Total Stocks
(Identified Cost, $334,710) ............. $ 2,619
------------
Short-Term Obligations -- 1.9%
Principal Amount
(000 Omitted)
Federal Home Loan Mortgage
Corp., due 1/04/99, at Amortized
Cost ............................. $6,235 $ 6,232,662
------------
Total Investments
(Identified Cost, $330,382,914) ......... $317,989,994
------------
Other Assets,
Less Liabilities -- 2.5% 8,242,363
------------
Net Assets -- 100.0% ...................... $326,232,357
============
</TABLE>
See portfolio footnotes and notes to financial statements
19-HYS
<PAGE>
Portfolio of Investments -- December 31, 1998
International Growth & Income Series
Stocks -- 93.8%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- 82.3% Australia -- 2.6% QBE Insurance Group Ltd.
(Insurance)* ........................................................ 301,263 $ 1,242,688
Seven Network Ltd. (Entertainment)..................................... 227,620 746,959
-----------
$ 1,989,647
-----------
Austria -- 0.7%
Austria Tabak AG (Tobacco) ............................................ 6,790 $ 520,216
-----------
Canada -- 2.6%
Canadian National Railway Co.
(Railroads) ......................................................... 37,580 $ 1,949,463
-----------
Chile -- 0.3%
Enersis S.A., ADR (Utilities-Electric)................................. 7,470 $ 192,819
-----------
Finland -- 0.8%
Helsingin Puhelin Oyj
(Telecommunications) ................................................ 10,230 $ 608,200
-----------
France -- 11.4%
Pinault-Printemps Redoute (Retail) .................................... 13,250 $ 2,529,449
Sanofi S.A. (Medical and Health
Products) ........................................................... 8,210 1,350,112
SEITA (Tobacco) ....................................................... 26,200 1,639,110
Television Francaise
(Entertainment) ..................................................... 5,150 915,944
Thomson CSF (Aerospace and
Defense) ............................................................ 10,630 456,019
Total S.A., ADR (Oils) ................................................ 11,810 587,547
Union des Assurances Federales
S.A. (Insurance) .................................................... 8,300 1,100,831
-----------
$ 8,579,012
-----------
Germany -- 6.2%
Henkel KGaA (Chemicals) ............................................... 21,060 $ 1,881,259
Mannesmann AG (Conglomerate) .......................................... 9,440 1,080,959
Volkswagen AG (Automotive) ............................................ 14,530 1,158,567
Wella AG (Cosmetics)* ................................................. 620 516,667
-----------
$ 4,637,452
-----------
Greece -- 1.1%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................................................ 32,148 $ 854,908
-----------
Hong Kong -- 1.1%
Dairy Farm International Holdings
Ltd. (Supermarkets) ................................................. 282,000 $ 324,300
Hong Kong Electric Holdings Ltd.
(Utilities-Electric) ................................................ 154,000 467,149
-----------
$ 791,449
-----------
Ireland -- 0.6%
Allied Irish Banks PLC (Banks and
Credit Cos.) ........................................................ 25,800 $ 458,812
-----------
Italy -- 7.4%
ENI S.p.A., ADR (Oils) ................................................ 11,330 $ 767,607
Instituto Nazionale delle
Assicurazioni (Insurance) ........................................... 419,890 1,109,858
San Paolo Imi S.p.A. (Banks and
Credit Cos.)* ....................................................... 23,565 416,676
Telecom Italia Mobile S.p.A.
(Telecommunications) ................................................ 219,120 1,379,949
Telecom Italia Mobile S.p.A., Saving
Shares (Telecommunications) ......................................... 361,580 1,703,459
Unione Immobiliare S.p.A. (Real
Estate)* ............................................................ 419,790 219,123
-----------
$ 5,596,672
-----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- continued
Japan -- 9.2%
Canon, Inc. (Office Equipment) ........................................ 67,000 $ 1,426,600
Kirin Beverage Corp. (Beverages) ...................................... 64,000 1,258,332
Olympus Optical Co. Ltd. (Photo
Equipment and Supplies) ............................................. 42,000 481,026
Osaka Sanso Kogyo Ltd.
(Chemicals) ......................................................... 56,000 107,142
Rohm Co. (Electronics) ................................................ 6,000 544,349
Takeda Chemical Industries Co.
(Pharmaceuticals) ................................................... 53,000 2,032,710
Terumo Corp. (Pharmaceuticals) ........................................ 30,000 703,580
Tokyo Broadcasting System, Inc.
(Broadcasting) ...................................................... 20,000 222,712
Ushio, Inc. (Electronics) ............................................. 19,000 166,011
-----------
$ 6,942,462
-----------
Netherlands -- 10.5%
Akzo Nobel N.V. (Chemicals) ........................................... 17,210 $ 782,897
Benckiser N.V., "B" (Consumer
Goods and Services) ................................................. 15,240 997,350
Equant N.V. (Telecommunications)*...................................... 3,300 223,781
Hunter Douglas N.V., ADR
(Consumer Goods and Services)*....................................... 19,300 638,712
IHC Caland N.V. (Marine
Equipment)* ......................................................... 13,021 540,377
ING Groep N.V. (Financial
Services)* .......................................................... 12,150 740,183
Koninklijke Ahold N.V., ADR
(Supermarkets) ...................................................... 35,074 1,297,738
Royal Dutch Petroleum Co., ADR
(Oils) .............................................................. 28,650 1,371,619
Wolters Kluwer N.V. (Publishing)* ..................................... 6,218 1,329,286
-----------
$ 7,921,943
-----------
Portugal -- 1.4%
Banco Pinto & Sotto Mayor S.A.
(Banks and Credit Cos.) ............................................. 37,823 $ 716,025
Electricidade de Portugal S.A.
(Utilities-Electric) ................................................ 16,920 371,965
-----------
$ 1,087,990
-----------
South Korea -- 0.3%
Korea Electric Power Corp. (Utilities-
Electric) ........................................................... 10,320 $ 256,280
-----------
Spain -- 4.4%
Iberdrola S.A. (Utilities -- Electric) ................................ 122,560 $ 2,292,980
Telefonica de Espana (Utilities --
Telephone) ......................................................... 23,510 1,045,368
-----------
$ 3,338,348
-----------
Sweden -- 3.5%
Astra AB (Pharmaceuticals) ............................................ 71,110 $ 1,444,969
Saab AB "B" (Aerospace and
Defense)* ........................................................... 75,090 786,041
Volvo AB (Automotive) ................................................. 17,570 402,465
-----------
$ 2,633,475
-----------
Switzerland -- 2.2%
Ciba Specialty AG (Chemicals) ......................................... 2,980 $ 249,509
Clariant AG (Chemicals) ............................................... 674 315,040
Nestle S.A. (Food and Beverage
Products) ........................................................... 375 816,345
UBS AG (Banks and Credit Cos.)* ....................................... 1,000 307,244
-----------
$ 1,688,138
-----------
</TABLE>
20-GIS
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- continued
United Kingdom -- 16.0%
Allied Zurich PLC (Insurance)* ........................................ 22,375 $ 335,731
Avis Europe PLC (Auto Rental)## ....................................... 242,340 1,009,065
British Aerospace PLC (Aerospace
and Defense)* ....................................................... 212,526 1,808,630
British Petroleum PLC, ADR (Oils) ..................................... 21,930 2,083,350
Compass Group PLC
(Food-Catering) ..................................................... 188,460 2,147,812
Lloyds TSB Group PLC (Banks and
Credit Cos.) ........................................................ 46,680 663,639
LucasVarity PLC (Automotive) .......................................... 193,830 646,305
Rentokil Initial PLC (Conglomerate) ................................... 45,200 341,169
Reuters Group PLC (Business
Services) ........................................................... 52,800 556,196
Reuters Group PLC, ADR (Business
Services) ........................................................... 1,200 76,050
Tomkins PLC (Conglomerate)* ........................................... 265,540 1,259,843
Williams PLC (Conglomerate) ........................................... 127,450 727,308
Zeneca Group PLC (Medical and
Health Products) .................................................... 8,900 387,118
-----------
$12,042,216
-----------
Total Foreign Stocks ........................................................................ $62,089,502
-----------
U.S. Stocks -- 11.5%
Business Machines -- 1.2%
Xerox Corp. ........................................................... 7,470 $ 881,460
-----------
Consumer Goods and Services -- 3.0%
Newell Co. ............................................................ 8,600 $ 354,750
Philip Morris Cos., Inc. .............................................. 36,110 1,931,885
-----------
$ 2,286,635
-----------
Electronics -- 1.1%
AMP, Inc. ............................................................. 15,928 $ 829,251
-----------
Financial Institutions -- 1.1%
Associates First Capital Corp., "A" ................................... 19,000 $ 805,125
-----------
Food and Beverage Products -- 0.5%
Anheuser Busch Cos., Inc. ............................................. 5,900 $ 387,188
-----------
Insurance -- 1.0%
ReliaStar Financial Corp. ............................................. 16,820 $ 775,822
-----------
Oil Services -- 0.3%
Conoco, Inc., "A"* .................................................... 9,500 $ 198,313
-----------
Restaurants and Lodging -- 1.3%
McDonalds Corp. ....................................................... 12,550 $ 961,644
-----------
Retail -- 1.2%
Albertsons, Inc. ...................................................... 14,380 $ 915,826
-----------
Stores -- 0.8%
Rite Aid Corp. ........................................................ 12,880 $ 638,365
-----------
Total U.S. Stocks ........................................................................... $ 8,679,629
-----------
Total Stocks
(Identified Cost, $59,567,451) ............................................................ $70,769,131
-----------
</TABLE>
Preferred Stock -- 0.7%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Prosieben Media AG
(Entertainment)
(Identified Cost $ 512,546) ........................................ 10,630 $ 490,713
-----------
Rights
Telefonica S.A.
(Telecommunications)* (Identified
Cost, $19,716)....................................................... 23,510 $ 20,874
-----------
Warrants*
Vivendi (Utilities-Water) (Identified
Cost, $369).......................................................... 2,360 $ 6,117
-----------
Short-Term Obligations -- 4.9%
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Home Loan Mortgage
Corp., due 1/04/99, at Amortized
Cost ............................ $3,670 $ 3,668,624
-----------
Total Investments
(Identified Cost, $63,768,706) ............................................................ $74,955,459
Other Assets,
Less Liabilities -- 0.6% 454,949
-----------
Net Assets -- 100.0% .......................................................................... $75,410,408
===========
</TABLE>
See portfolio notes and notes to financial statements
21-GIS
<PAGE>
Portfolio of Investments -- December 31, 1998
MFS/Foreign & Colonial Emerging Markets Equity Series
Stocks -- 97.2%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Argentina -- 3.7%
Banco de Galicia y Buenos Aires
S.A. de C.V., ADR (Banks and
Credit Cos.) ........................................................ 3,456 $ 60,912
Perez Companc S.A. (Oils) ............................................. 22,728 96,231
Siderca S.A. (Steel) .................................................. 33,000 37,656
Telecom Argentina S.A., ADR
(Telecommunications) ................................................ 1,250 34,375
Telefonica de Argentina, ADR
(Uitlities - Telephone) ............................................. 5,220 145,834
YPF Sociedad Anonima, ADR (Oils)....................................... 9,300 259,818
-----------
$ 634,826
-----------
Brazil -- 13.4%
Banco Bradesco S.A., Preferred
(Banks and Credit Cos.) ............................................. 11,817,000 $ 65,541
CEMIG, Preferred
(Utilities - Electric) .............................................. 7,550,014 143,750
Centrais Eletricas Brasileiras S.A.,
Preferred, "B" (Utilities - Electric)................................ 17,289,000 332,040
Companhia Cervejaria Brahma,
Preferred (Beverages) ............................................... 192,000 83,921
Companhia Paranaense de Energia,
Preferred "B" (Utilities - Electric)................................. 8,898,000 64,083
Companhia Vale do Rio Doce,
Preferred (Mining) .................................................. 4,600 0
Embratel Participacoes S.A.
(Telecommunications)* ............................................... 6,767,283 58,822
Itausa Investimentos Itau S.A.,
Preferred (Conglomerate) ............................................ 169,000 93,734
ITC Ltd., GDR (Conglomerate)## ........................................ 3,200 71,280
ITC Ltd., GDR (Conglomerate)* ......................................... 6,000 132,000
Petroleo Brasileiro S.A., Preferred (Oils)............................. 1,791,000 203,118
Tele Centro Sul Participacoes S.A.
(Telecommunications)* ............................................... 6,767,283 44,816
Tele Norte Lests Participacoes S.A.
(Telecommunications)* ............................................... 6,767,283 55,460
Tele Sudeste Celular Participacoes
S.A. (Telecommunications)* .......................................... 6,767,283 19,047
Telebras Telecomunicacoes
Brasileiras S.A.
(Telecommunications)* ............................................... 5,491,000 245,459
Telebras Telecomunicacoes
Brasileiras S.A., Preferred
(Telecommunications)* ............................................... 3,028,000 222,087
Telecomunicacoes do Rio de
Janeiro S.A.
(Telecommunications) ................................................ 796,000 21,745
Telerj Tel Rio de Janero S.A.,
Preferred "B"
(Telecommunications)* ............................................... 796,000 18,780
Telesp Celular Participacoes S.A.
(Telecommunications)* ............................................... 6,767,283 29,131
Telesp Participacoes S.A.
(Telecommunications)* ............................................... 8,627,285 110,698
Unibanco S.A. (Banks and
Credit Cos.) ........................................................ 2,559,000 88,972
Vale do Rio Doce Cia, Preferred
(Mining) ............................................................ 14,500 186,051
-----------
$ 2,290,535
-----------
China -- 2.0%
Huaneng Power International, Inc.,
ADR (Utilities - Electric)* ......................................... 18,500 $ 268,250
Qingling Motors Co. (Automotive) ...................................... 448,000 78,647
-----------
$ 346,897
-----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Egypt -- 3.3%
Eastern Tobacco Co. (Consumer
Goods and Services) ................................................. 2,500 $ 57,621
Egypt Gas (Utilities - Gas) ........................................... 1,000 74,303
Egypt Trust (Real Estate
Investment Trust)* .................................................. 19,600 190,120
Egyptian International
Pharmaceutical Industries Co.
(Pharmaceuticals) ................................................... 1,500 75,427
Madinet Nasar City (Housing) .......................................... 1,900 57,441
Misr Elgadida for Housing and
Reconstruction (Housing) ............................................ 790 62,198
Misr International Bank (Banks and
Credit Cos.) ........................................................ 1,050 20,399
National Societe Generale Bank
(Banks and Credit Cos.) ............................................. 1,700 31,054
-----------
$ 568,563
-----------
Finland -- 0.2%
AO Mosenergo, ADR
(Conglomerate) ...................................................... 17,360 $ 32,550
-----------
Greece -- 4.0%
Alpha Credit Bank (Banks and
Credit Cos.) ........................................................ 1,750 $ 182,527
Attica Enterprises S.A., GDR
(Transportation) .................................................... 4,000 35,838
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................................................ 5,860 155,834
Intracom S.A. (Telecommunications)..................................... 1,200 54,614
National Bank of Greece, GDR
(Banks and Credit Cos.) ............................................. 700 157,416
Panafon Hellenic Telecom S.A.
(Telecommunications)* ............................................... 1,500 40,157
Titan Cement Co., GDR (Building
Materials) .......................................................... 700 53,721
-----------
$ 680,107
-----------
Hong Kong -- 1.2%
Guangdong Kelon Electric Holdings
(Consumer Goods and Services)........................................ 154,000 $ 137,163
Zhenhai Refining and Chemical Co.,
Ltd. (Oils) ......................................................... 494,000 75,882
-----------
$ 213,045
-----------
Hungary -- 6.6%
Magyar Olaj Es Gazipari KT
(Utilities - Gas) ................................................... 5,590 $ 152,678
Magyar Tavkozlesi Rt., ADR
(Telecommunications) ................................................ 18,085 539,159
Mol Magyar Olaj Es Gazipari KT,
GDR (Oils)## ........................................................ 10,000 275,000
Otp Bank (Banks and Credit Cos.) ...................................... 3,185 158,955
-----------
$ 1,125,792
-----------
India -- 4.3%
Bajaj Auto Ltd., GDR (Automotive) ..................................... 700 $ 10,850
Bajaj Auto Ltd., GDR
(Automotive)## ...................................................... 1,150 17,825
EIH Ltd., GDR (Restaurants and
Lodging) ............................................................ 1,250 6,563
EIH Ltd., GDR (Restaurants and
Lodging)## .......................................................... 6,450 33,862
Formula System (1985) Ltd.
(Computer-Software)* ................................................ 3,306 81,960
Industrial Credit & Investment Corp.
of India Ltd., GDR (Finance)## ...................................... 7,620 49,911
</TABLE>
22-FCE
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
India -- continued
Mahanagar Telephone Nigam Ltd.,
GDR (Telecommunications)## .......................................... 13,500 $ 164,700
Reliance Industries Ltd., GDR
(Diversified Operations)* ........................................... 27,250 152,600
State Bank of India, GDR (Banks
and Credit Cos.)## .................................................. 18,950 155,390
Videsh Sanchar Nigam Ltd., GDR
(Telecommunications)## .............................................. 5,580 66,960
-----------
$ 740,621
-----------
Israel -- 4.0%
Bank Hapoalim (Banks and Credit
Cos.) ............................................................... 64,625 $ 117,127
Bezek Israeli Telecommunications
Corp. Ltd. (Telecommunications)*..................................... 27,280 85,293
Discount Investment Corp.
(Finance) ........................................................... 3,507 93,273
ECI Telecom Ltd.
(Telecommunications) ................................................ 4,750 169,219
Makhteshim-Agan Industries Ltd.
(Chemicals)* ........................................................ 38,197 82,743
Super Sol Ltd. (Supermarkets) ......................................... 23,687 58,894
Teva Pharmaceutical Industries Ltd.,
ADR (Pharmaceuticals) ............................................... 1,950 79,341
-----------
$ 685,890
-----------
Japan -- 0.7%
Softbank Corp., GDR (Computer-
Software) ........................................................... 4,500 $ 119,250
-----------
Jordan -- 1.1%
Arab Bank Corp. (Banks and Credit
Cos.) ............................................................... 600 $ 181,100
-----------
Mauritius -- 2.0%
Mauritius Commercial Bank Ltd.
(Banks and Credit Cos.) ............................................. 18,140 $ 79,220
New Mauritius Hotels Ltd.
(Restaurants and Lodging) ........................................... 30,360 65,066
Rogers & Co. Ltd. (Conglomerate) ...................................... 11,000 76,061
State Bank of Mauritius Ltd. (Banks
and Credit Cos.) .................................................... 164,990 119,423
-----------
$ 339,770
-----------
Mexico -- 10.1%
Cemex S.A. (Construction) ............................................. 22,840 $ 49,241
Cifra S.A. de C.V. (Retail) ........................................... 111,180 134,723
Corporacion GEO S.A. de C.V.
(Housing)*## ........................................................ 10,400 115,544
Desc S.A. de C.V., "B"
(Conglomerate) ...................................................... 75,000 64,223
Fomento Economico Mexicano
(Beverages) ......................................................... 4,000 106,500
Grupo Carso S.A., "A1"
(Conglomerate) ...................................................... 79,700 270,817
Grupo Financiero Banamex, "B"
(Finance)* .......................................................... 42,000 55,135
Grupo Financiero Bancomer (Banks
and Credit Cos.) .................................................... 190,000 40,675
Grupo Modelo S.A. de C.V.
(Brewery) ........................................................... 42,000 89,064
Grupo Television S.A. de C.V., GDR
(Entertainment)* .................................................... 5,800 143,187
Kimberly-Clark de Mexico SA de
C.V. (Forest and Paper Products)..................................... 48,000 153,166
Organiz Soriana S.A., "B" (Real
Estate) ............................................................. 25,000 80,784
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Mexico -- continued Telefonos de Mexico S.A.
(Utilities -- Telephone) ............................................ 175,000 $ 431,182
-----------
$ 1,734,241
-----------
Morocco -- 1.4%
Banque Marocaine Commerce
(Banks and Credit Cos.) ............................................. 1,250 $ 93,301
Brasseries Maroc (Consumer Goods
and Services) ....................................................... 111 31,459
Ona Omnium Nord Africain S.A.
(Conglomerate) ...................................................... 500 58,306
Societe Nationale d'Investissement
(Conglomerate) ...................................................... 500 53,493
-----------
$ 236,559
-----------
Peru -- 2.8%
Alicorp S.A. (Consumer Goods and
Services)* .......................................................... 71,352 $ 11,309
Compania de Minas Buenaventura,
ADR (Mining) ........................................................ 7,100 92,300
Credicorp Ltd. Holdings Co. (Banks
and Credit Cos.) .................................................... 9,632 86,688
Telefonica del Peru S.A., ADR
(Telecommunications) ................................................ 23,050 292,447
-----------
$ 482,744
-----------
Poland -- 4.7%
Bank Handlowy w Warszawie, GDR
(Banks and Credit Cos.)## ........................................... 5,780 $ 74,851
Bank Rozwoju Eksportu S.A. (Banks
and Credit Cos.) .................................................... 4,300 99,372
BIG Bank Gdanski S.A., GDR
(Banks and Credit Cos.) ............................................. 7,650 103,658
Elektrim Spolka Akcyjna S.A.
(Electrical Equipment) .............................................. 16,106 174,616
Orbis S.A. (Restaurants and
Lodging) ............................................................ 10,819 85,194
Telekomunikacja Polska S.A., GDR
(Telecommunications)* ............................................... 24,540 125,154
Telekomunikacja Polska S.A., GDR
(Telecomunications)*## .............................................. 15,800 80,580
WBK Wielkopolski S.A. (Consumer
Goods and Services) ................................................. 8,400 52,964
-----------
$ 796,389
-----------
Portugal -- 0.2%
Sonae Investimentos-Sociedade
Gestora de Participacoes Sociais
S.A. (Conglomerate) ................................................. 750 $ 36,406
-----------
Russia -- 1.9%
Surgutneftegaz, ADR (Oil and Gas)...................................... 45,400 $ 153,225
Lukoil Oil Co., ADR (Oils) ............................................ 8,130 131,706
Unified Energy Systems, GDR
(Utilities-Electric) ................................................ 5,896 17,983
Vimpel-Communications, ADR
(Telecommunications)* ............................................... 2,261 29,251
-----------
$ 332,165
-----------
Singapore -- 2.9%
City Developments Ltd. (Real
Estate) ............................................................. 9,000 $ 39,012
DBS Land Ltd. (Real Estate) ........................................... 28,000 41,249
Development Bank of Singapore
Ltd. (Banks and Credit Cos.) ........................................ 7,000 63,231
Natsteel Electronics Ltd.
(Electronics) ....................................................... 6,000 15,277
</TABLE>
23-FCE
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Singapore -- continued
Overseas Union Bank Ltd. (Banks
and Credit Cos.) ...................................................... 20,000 $ 87,299
Singapore Press Holdings Ltd.
(Publishing)* ......................................................... 16,200 176,781
Singapore Telecommunications, Ltd.
(Telecommunications) .................................................. 54,000 82,498
-----------
$ 505,347
-----------
South Africa -- 10.2%
Anglo American Corp. of South
Africa Ltd. (Mining) .................................................. 10,293 $ 289,963
DeBeers Centenary AG
(Diamonds -- Precious Stones) ......................................... 6,924 88,234
Dimension Data Holdings Ltd.
(Finance) ............................................................. 43,793 186,021
Imperial Holdings Ltd.
(Conglomerate) ........................................................ 16,215 99,183
JD Group Ltd. (Retail)* ................................................. 13,670 60,389
Liberty Life Association of Africa
Ltd. (Insurance) ...................................................... 12,156 167,299
Nedcor Ltd. (Banks and Credit
Cos.) ................................................................. 17,035 289,440
Real Africa Holdings Ltd.
(Conglomerate) ........................................................ 61,819 161,755
Sanlam Ltd. (Finance)* .................................................. 44,820 44,550
Sasol Ltd. (Oils) ....................................................... 12,640 47,785
South African Breweries Ltd.
(Brewery) ............................................................. 18,293 308,328
-----------
$ 1,742,947
-----------
South Korea -- 6.9%
Pohang Iron & Steel Co. Ltd., ADR
(Steel) ............................................................... 27,720 $ 467,775
Samsung Electronics Co. Ltd., GDR
(Electronics)## ....................................................... 11,818 454,993
SK Telecom Ltd., ADR
(Telecommunications) .................................................. 24,617 250,786
-----------
$ 1,173,554
-----------
Taiwan -- 3.0%
Taipei Fund (Finance)* .................................................. 59 $ 507,400
-----------
Thailand -- 2.5%
Bangkok Expressway (Public
Through Fares) ........................................................ 62,000 $ 61,658
Electricity Generating Public Co.
Ltd. (Utilties -- Electric) ........................................... 46,000 125,166
PTT Exploration and Production
Public Co. Ltd., ADR (Oils) ........................................... 22,600 159,823
Thai Farmers Bank (Banks and
Credit Cos.) .......................................................... 42,000 74,254
-----------
$ 420,901
-----------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Turkey -- 4.1%
Akbank (Banks and Credit Cos.) .......................................... 4,704,036 $ 95,529
Arcelik A.S. (Consumer Goods and
Services) ............................................................. 2,812,124 81,200
Cimsa Cimento Sanayi Ve Ticaret
A.S. (Building Materials) ............................................. 2,026,678 48,231
Haci Omer Sabanci Holdings A.S.,
ADR (Conglomerate)## .................................................. 13,613 51,049
Turkiye Is Bankasi (Banks and
Credit Cos.) .......................................................... 4,890,100 127,237
Vestel Electronic (Electronics)* ........................................ 1,139,100 93,976
Yapi ve Kredi Bankasi (Banks and
Credit Cos.) .......................................................... 17,726,700 205,307
-----------
$ 702,529
-----------
Total Stocks
(Identified Cost, $20,784,989) ..........................................................
$16,630,128
-----------
Rights
Banco Bradesco Exp. 2/10/99
(Banks and Credit Cos.)*
(Identified Cost, $0).................................................. 489,804 $ 2,473
-----------
Short-Term Obligations -- 2.6%
Principal Amount
(000 Omitted)
Federal Home Loan Mortgage, due
1/04/99, at Amortized Cost ............................................ $ 450 $ 449,831
-----------
Total Investments
(Identified Cost, $21,234,820) .......................................................... $17,082,432
Other Assets,
Less Liabilities -- 0.2%
36,416
-----------
Net Assets -- 100.0% ...................................................................... $17,118,848
===========
</TABLE>
See portfolio footnotes and notes to financial statements
24-FCE
<PAGE>
Portfolio of Investments -- December 31, 1998
Money Market Series
Commercial Paper -- 30.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
American Express Credit Corp., due
2/26/99 .............................................................. $ 7,000 $ 6,945,011
American General Corp., due
2/08/99 .............................................................. 7,000 6,961,947
Archer Daniels Midland Co., due
4/05/99 .............................................................. 5,615 5,541,693
Associates Corp. of North America,
due 2/09/99 .......................................................... 7,000 6,961,173
BankAmerica Corp., due 1/15/99 ......................................... 7,000 6,985,627
CIT Group Holdings, Inc., due
1/13/99 .............................................................. 7,800 7,786,142
Duke Power Co., due 2/10/99 ............................................ 7,000 6,960,178
Emerson Electric Co., due 2/11/99 ...................................... 7,000 6,959,740
Ford Motor Credit Corp., due
2/16/99 .............................................................. 7,000 6,951,253
General Electric Capital Corp., due
3/11/99-4/21/99 ...................................................... 14,000 13,824,018
General Reinsurance Corp., due
2/05/99 .............................................................. 7,000 6,965,156
Goldman Sachs Group LP, due
1/14/99 .............................................................. 7,000 6,986,603
Lucent Technologies, Inc., due
2/04/99-2/12/99 ...................................................... 14,000 13,924,664
Merrill Lynch & Co., Inc., due
1/21/99 .............................................................. 7,000 6,979,778
Metropolitan Life Funding, Inc., due
1/25/99 .............................................................. 10,000 9,965,800
Salomon Smith Barney Holdings
Inc., due 1/26/99-2/01/99 ............................................ 14,000 13,943,350
UBS Finance Delaware, Inc., due
2/23/99 .............................................................. 7,000 6,947,648
------------
Total Commercial Paper, at Amortized Cost ............................................. $141,589,781
------------
</TABLE>
U.S. Government and
Agency Obligations -- 69.5%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Federal Farm Credit Bank, due
1/22/99-6/28/99 ...................................................... $ 27,570 $ 27,206,913
Federal Home Loan Bank, due
1/04/99-4/12/99 ...................................................... 84,488 83,960,832
Federal Home Loan Mortgage
Corp., due 1/04/99-3/12/99 ........................................... 133,549 133,153,126
Federal National Mortgage Assn.,
due 1/19/99-4/06/99 .................................................. 64,798 64,290,624
Student Loan Marketing Assn., due
2/16/99 .............................................................. 5,000 4,970,292
Tennessee Valley Authority, due
1/07/99 .............................................................. 10,000 9,991,817
------------
Total U.S. Government and Agency Obligations, at
Amortized Cost ......................................................................... $323,573,604
------------
Total Investments, at Amortized Cost ..................................................... $465,163,385
Other Assets,
Less Liabilities -- 0.1% 381,541
------------
Net Assets -- 100.0% ..................................................................... $465,544,926
============
</TABLE>
See portfolio footnotes and notes to financial statements.
25-MKS
<PAGE>
Portfolio of Investments -- December 31, 1998
Strategic Income Series
Bonds -- 91.4%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 63.9%
Building Materials -- 2.0%
Building Materials Corp., 8.625s,
2006 .................................... $ 150 $ 155,250
----------
Business Services -- 2.7%
Unisystem Corp., 7.875s, 2008 ............. $ 50 $ 53,000
Pierce Leahy Corp., 9.125s, 2007 .......... 150 156,750
----------
$ 209,750
----------
Chemicals -- 2.1%
NL Industries, Inc., 11.75s, 2003 ......... $ 150 $ 159,000
----------
Consumer Goods and Services -- 0.3%
Hayes Wheels International, Inc.,
9.125s, 2007 ............................ $ 25 $ 26,125
----------
Containers -- 0.6%
Gaylord Container Corp., 9.75s,
2007, "B" ............................... $ 50 $ 43,000
----------
Energy -- 1.0%
Cheasapeake Energy Corp., 9.625s,
2005 .................................... $ 100 $ 77,000
----------
Information, Paging and Technology -- 1.9%
NEXTEL Communications, Inc., 0s
to 2003, 9.95s to 2008 .................. $ 250 $ 150,000
----------
Media -- 8.1%
Charter Communications Southeast
LP, 11.25s, 2006 ........................ $ 150 $ 168,000
EchoStar Communications Corp., 0s
to 1999, 12.875s to 2004 ................ 100 102,500
Frontiervision Operating Partnership
LP, 11s, 2006 ........................... 100 110,625
Hollinger International Publishing,
Inc., 9.25s, 2007 ....................... 100 105,000
Lenfest Communications, Inc.,
10.5s, 2006 ............................. 125 146,250
----------
$ 632,375
----------
Metals and Minerals -- 2.9%
P&L Coal Holdings Corp., 9.625s,
2008 .................................... $ 225 $ 228,375
----------
Retail -- 0.6%
Revlon Consumer Products Corp.,
8.625s, 2008 ............................ $ 50 $ 45,500
----------
Supermarkets -- 1.3%
Marsh Supermarkets, Inc., 8.875s,
2007 .................................... $ 100 $ 104,500
----------
Telecommunications -- 1.5%
Century Communications Corp.,
9.5s, 2005 .............................. $ 100 $ 113,000
----------
U.S. Government Guaranteed -- 34.6%
U.S. Treasury Bonds, 5.25s, 2028 .......... $1,000 $1,023,750
U.S. Treasury Bonds, 6.375s, 2027.......... 200 229,874
U.S. Treasury Bonds, 10.375s,
2012 .................................... 750 1,034,767
U.S. Treasury Notes, 4.75s, 2008 .......... 400 402,500
----------
$2,690,891
----------
Utilities -- Electric -- 4.3%
Niagara Mohawk Power Corp.,
7.25s, 2002, "D" ........................ $ 100 $ 101,124
Aes Corporation, 8s, 2008 ................. 100 99,000
CSC Holdings, Inc., 9.25s, 2005 ........... 125 134,375
----------
$ 334,499
----------
Total U.S. Bonds ................................................ $4,969,265
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Foreign Bonds -- 27.5%
Argentina -- 2.6%
Argentina Global, 11s, 2006 ............... $ 100 $ 98,000
Republic of Argentina, 11s, 2005 .......... 100 99,500
----------
$ 197,500
----------
Bermuda -- 0.6%
Flag Ltd., 8.25s, 2008
(Telecommunications) .................... $ 50 $ 49,000
----------
Brazil -- 4.5%
Federal Republic of Brazil, 5s, 2014....... $ 589 $ 350,342
----------
Canada -- 0.9%
Metronet Communications Corp., 0s
to 2003, 9.95s to 2008
(Telecommunications) .................... $ 75 $ 45,000
Repap New Brunswick, Inc., 9s,
2004 (Forest and Paper
Products) ............................... 25 22,500
----------
$ 67,500
----------
Greece -- 1.1%
Antenna TV SA, 9s, 2007
(Telecommunications) .................... $ 100 $ 87,500
----------
Mexico -- 11.4%
Grupo Industrial Durango SA,
12.625s, 2003 (Forest and Paper
Products) ............................... $ 500 $ 437,500
Sanluis Corp., 8.875s, 2008
(Mining) ................................ 100 75,000
TFM SA De CV 0s to 2002, 11.75 to
2009 (Railroad) ......................... 150 80,813
United Mexican States, 8.625s,
2008 .................................... 100 91,250
United Mexican States, 11.375s,
2016 .................................... 200 204,800
----------
$ 889,363
----------
Panama -- 1.2%
Republic of Panama, 8.875s, 2027........... $ 100 $ 93,500
----------
Russia -- 0.6%
Vnesheconombank USSR, 6.625s,
2015 (Banks and Credit Cos.) ............ $ 400 $ 42,000
----------
South Korea -- 2.0%
Kookmin Bank, 6.35s, 2006 ................. $ 250 $ 157,500
----------
United Kingdom -- 2.6%
Telewest PLC, 9.625s, 2006
(Media) ................................. $ 100 $ 102,000
U.K. Treasury Bonds, 8.5s, 2005 ........... 50 102,976
----------
$ 204,976
----------
Total Foreign Bonds ............................................... $2,139,181
----------
Total Bonds
(Identified Cost, $7,194,079) ................................... $7,108,446
----------
Preferred Stock -- 1.9%
Shares
CSC Holdings, Inc., 11.125%,
(Media) (Identified Cost,
$136,250)................................ 1,319 $ 145,420
----------
Convertible Bond -- 1.0%
Silicon Graphics, Inc., 5.25s, 2004
(Computer Hardware --Systems)
(Identified Cost, $83,500)............... 100 $ 82,625
----------
</TABLE>
26-SIS
<PAGE>
Warrants*
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Republic of Argentina, Expire
9/19/27 (Identified Cost, $240)......... 100 $ 4,500
----------
Put Options Purchased -- 0.3%
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Deutsche Marks/November/1.95 .............. DEM 43 $ 1,777
Deutsche Marks/November/1.95 .............. 23 991
Japanese Yen/March/125 .................... JPY 77,306 4,020
Japanese Yen/May/85 ....................... 94,705 284
Swedish Krone/British Pounds/
March/12.5 .............................. SEK 3,188 1,278
Japanese Yen/February/112 ................. JPY 69,266 13,022
----------
Total Put Options Purchased
(Identified Cost, $27,854) .............................. $ 21,372
----------
Total Investments
(Identified Cost, $7,441,923) ........................... $7,362,363
</TABLE>
Put Options Written--(0.2)%
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
<S> <C> <C>
Japanese Yen/May/64.82 JPY 28,888 $ (6,471)
Japanese Yen/February/108 JPY 66,793 (5,343)
-----------
Total Put Options Written
(Premium Received $8,777) ............................... $ (11,814)
Other Assets,
Less Liabilities -- 5.6% 429,880
-----------
Net Assets -- 100.0% ...................................... $ 7,780,429
===========
</TABLE>
See portfolio footnotes and notes to financial statements.
27-SIS
<PAGE>
Portfolio of Investments -- December 31, 1998
World Asset Allocation Series
Stocks -- 64.2%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
U.S. Stocks -- 18.5%
Agricultural Products
Monsanto Co.* 700 $ 34,300
------------
Banks and Credit Companies -- 0.2%
Northern Trust Corp. ................................................. 1,600 $ 139,700
Wells Fargo Co.* ..................................................... 3,800 151,763
------------
$ 291,463
------------
Biotechnology -- 0.4%
Guidant Corp. ........................................................ 4,200 $ 463,050
------------
Business Services -- 1.3%
Affiliated Computer Services, Inc.,
"A"* ............................................................... 9,500 $ 427,500
Ceridian Corp.* ...................................................... 6,000 418,875
Computer Sciences Corp. .............................................. 3,000 193,312
DST Systems, Inc.* ................................................... 2,500 142,656
Policy Management Systems Corp.*...................................... 6,900 348,450
SunGard Data Systems, Inc.* .......................................... 3,400 134,938
------------
$ 1,665,731
------------
Computer Software --
Personal Computers -- 1.1%
Microsoft Corp.* ..................................................... 7,900 $ 1,095,631
Network Associates, Inc.* ............................................ 4,900 324,625
------------
$ 1,420,256
------------
Computer Software -- Services -- 0.4%
Compuware Corp.* ..................................................... 2,800 $ 218,750
EMC Corp.* ........................................................... 3,900 331,500
------------
$ 550,250
------------
Computer Software -- Systems -- 1.2%
BMC Software, Inc.* .................................................. 4,920 $ 219,248
Cadence Design Systems, Inc.* ........................................ 7,700 229,075
Computer Associates International,
Inc. ............................................................... 8,900 379,362
Oracle Corp.* ........................................................ 11,850 511,031
Synopsys, Inc.* ...................................................... 3,300 179,025
------------
$ 1,517,741
------------
Consumer Goods and Services -- 1.9%
Clorox Co. ........................................................... 1,200 $ 140,175
Dial Corp. ........................................................... 5,500 158,813
Galileo International, Inc. .......................................... 2,200 95,700
Philip Morris Cos., Inc. ............................................. 7,000 374,500
Procter & Gamble Co. ................................................. 2,700 246,544
Tyco International Ltd. .............................................. 17,258 1,301,900
------------
$ 2,317,632
------------
Electronics -- 0.7%
Analog Devices, Inc.* ................................................ 7,300 $ 229,038
Intel Corp. .......................................................... 3,700 438,681
Lattice Semiconductor Corp.* ......................................... 3,500 160,672
Teradyne, Inc.* ...................................................... 1,600 67,800
------------
$ 896,191
------------
Entertainment -- 1.4%
CBS Corp. ............................................................ 5,000 $ 163,750
HBO & Co. ............................................................ 2,500 71,719
Jacor Communications, Inc.* .......................................... 3,800 244,625
MediaOne Group, Inc.* ................................................ 5,500 258,500
Time Warner, Inc. .................................................... 7,800 484,087
Univision Communications, Inc.* ...................................... 3,500 126,656
Viacom, Inc., "B"* ................................................... 4,000 296,000
Walt Disney Co. ...................................................... 3,000 90,000
------------
$ 1,735,337
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Financial Institutions -- 1.3%
American Express Co. ................................................. 1,500 $ 153,375
Associates First Capital Corp., "A" .................................. 12,500 529,688
Citigroup Inc. ....................................................... 3,900 193,050
Freddie Mac .......................................................... 7,900 509,056
Morgan Stanley Dean Witter & Co. ..................................... 3,800 269,800
------------
$ 1,654,969
------------
Food and Beverage Products -- 0.3%
Anheuser Busch Cos., Inc. ............................................ 2,900 $ 190,312
Hershey Foods Corp. .................................................. 2,000 124,375
Ralston-Ralston Purina Co. ........................................... 1,800 58,275
------------
$ 372,962
------------
Insurance -- 0.7%
CIGNA Corp. .......................................................... 500 $ 38,656
Equitable Cos., Inc. ................................................. 3,600 208,350
Lincoln National Corp. ............................................... 1,800 147,263
Progressive Corp. .................................................... 2,200 372,625
ReliaStar Financial Corp. ............................................ 3,000 138,375
------------
$ 905,269
------------
Medical and Health Products -- 1.2%
American Home Products Corp. ......................................... 3,500 $ 197,094
Bristol-Myers Squibb Co. ............................................. 2,200 294,387
McKesson Corp. ....................................................... 3,000 237,187
Pfizer, Inc. ......................................................... 2,900 363,769
Schering Plough Corp. ................................................ 6,200 342,550
Warner-Lambert Co. ................................................... 1,800 135,338
------------
$ 1,570,325
------------
Medical and Health Technology
and Services -- 0.8%
Cardinal Health, Inc. ................................................ 4,950 $ 375,581
HealthSouth Corp.* ................................................... 14,700 226,931
United Healthcare Corp. .............................................. 8,200 353,113
------------
$ 955,625
------------
Oil Services -- 0.1%
Conoco, Inc.* ........................................................ 3,800 $ 79,325
------------
Printing and Publishing -- 0.1%
Scholastic Corp.* .................................................... 2,500 $ 134,063
------------
Special Products and Services -- 0.1%
McDonalds Corp. ...................................................... 1,800 $ 137,925
------------
Stores -- 2.2%
BJ's Wholesale Club, Inc.* ........................................... 4,700 $ 217,669
CVS Corp. ............................................................ 6,300 346,500
Dayton Hudson Corp. .................................................. 2,600 141,050
Linens 'N Things, Inc.* .............................................. 1,500 59,437
Lowes Co., Inc. ...................................................... 4,900 250,819
Office Depot, Inc.* .................................................. 9,000 332,437
Rite Aid Corp. ....................................................... 16,700 827,694
TJX Cos., Inc. ....................................................... 7,200 208,800
Wal-Mart Stores, Inc. ................................................ 4,100 333,894
------------
$ 2,718,300
------------
Supermarkets -- 0.5%
Meyer (Fred), Inc.* .................................................. 10,500 $ 632,625
------------
Telecommunications -- 2.5%
3Com Corp.* .......................................................... 2,900 $ 129,956
Alltel Corp. ......................................................... 6,000 358,875
Ascend Communications, Inc.* ......................................... 5,300 348,475
Century Telephone Enterprises, Inc.................................... 5,650 381,375
Cisco Systems, Inc.* ................................................. 4,200 389,812
Lucent Technologies, Inc. ............................................ 2,800 308,000
MCI WorldCom, Inc.* .................................................. 8,600 617,050
Newell Co. ........................................................... 1,500 61,875
Qwest Communications
International, Inc.* ............................................... 1,900 95,000
</TABLE>
28-AAS
<PAGE>
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Telecommunications -- continued
SBC Communications, Inc. ............................................. 6,200 $ 332,475
Tellabs, Inc.* ....................................................... 2,600 178,263
------------
$ 3,201,156
------------
Utilities -- Gas -- 0.1%
Columbia Energy Group ................................................ 3,000 $ 173,250
------------
Total U.S. Stocks ......................................................................... $ 23,427,745
------------
Foreign Stocks -- 45.7% Australia -- 1.7% QBE Insurance Group Ltd.
(Insurance)* ....................................................... 376,580 $ 1,553,364
Seven Network Ltd. (Entertainment).................................... 193,900 636,304
------------
$ 2,189,668
------------
Brazil -- 0.2%
Companhia Electricas est Rio de ......................................
Janeiro (Utilities -- Electric)* ..................................... 655,700 $ 217,119
------------
Canada -- 1.2%
Canadian National Railway Co.
(Railroads) ........................................................ 30,200 $ 1,566,625
------------
Finland -- 2.8%
Helsingin Puhelin Oyj
(Telecommunications) ............................................... 23,100 $ 1,373,354
Nokia Corp., ADR
(Telecommunications) ............................................... 1,100 132,481
Pohjola Insurance Group
(Insurance) ........................................................ 17,500 954,577
Tieto Corp. (Computer Software --
Systems) .......................................................... 24,000 1,068,969
------------
$ 3,529,381
------------
France -- 4.8%
Pernod Ricard Co. (Beverages) ........................................ 9,900 $ 642,363
Television Francaise
(Entertainment) .................................................... 8,000 1,422,826
Thomson CSF (Aerospace and
Defense) ........................................................... 36,000 1,544,374
Total S.A., "B" (Oils) ............................................... 11,600 1,173,581
Union des Assurances Federales
S.A. (Insurance) ................................................... 9,900 1,313,040
------------
$ 6,096,184
------------
Germany -- 2.7%
Henkel KGaA (Chemicals) .............................................. 19,300 $ 1,724,041
Mannesmann AG (Conglomerate) ......................................... 9,300 1,064,928
Wella AG (Cosmetics)* ................................................ 695 579,167
------------
$ 3,368,136
------------
Greece -- 0.8%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ............................................... 36,688 $ 975,640
------------
Ireland -- 0.8%
Allied Irish Banks PLC (Banks and
Credit Cos.) ....................................................... 50,400 $ 896,284
Elan Corp., PLC, ADR (Health
Products) * ........................................................ 1,767 122,917
------------
$ 1,019,201
------------
Italy -- 2.6%
ERG S.p.A. (Oils) .................................................... 162,100 $ 560,488
Mediaset S.p.A. (Entertainment) ...................................... 143,000 1,160,349
Telecom Italia Mobile S.p.A., Saving
Shares (Telecommunications) ........................................ 349,000 1,644,193
------------
$ 3,365,030
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Japan -- 6.7%
AFLAC, Inc. (Insurance) .............................................. 1,800 $ 79,200
Canon, Inc. (Office Equipment) ....................................... 53,000 1,128,505
Fujitsu Ltd. (Electronics) ........................................... 18,000 238,847
Kinki Coca-Cola Bottling Co.
(Beverages) ........................................................ 24,000 317,193
Kirin Beverage Corp. (Beverages) ..................................... 42,000 825,780
NTT Data Corp.
(Telecommunications) ............................................... 117 578,707
Olympus Optical Co. Ltd.
(Photo Equipment and Supplies) ..................................... 116,000 1,328,549
Osaka Sanso Kogyo Ltd.
(Chemicals) ........................................................ 83,000 158,799
Rohm Co., (Electronics) .............................................. 5,000 453,624
Sankyo Co. Ltd. (Medical and
Health Products) ................................................... 15,000 326,662
Sony Corp. (Electronics) ............................................. 14,000 1,015,870
Takeda Chemical Industries Co.
(Pharmaceuticals) .................................................. 29,000 1,112,238
Tokyo Broadcasting System, Inc.
(Broadcasting) ..................................................... 39,000 434,288
Ushio, Inc. (Electronics) ............................................ 58,000 506,771
------------
$ 8,505,033
------------
Netherlands -- 5.4%
Akzo Nobel N.V. (Chemicals) .......................................... 34,800 $ 1,583,081
Benckiser N.V., "B" (Consumer
Goods and Services) ................................................ 38,000 2,486,832
IHC Caland N.V. (Marine
Equipment)* ........................................................ 11,272 467,792
ING Groep N.V. (Financial
Services)* ......................................................... 26,412 1,609,031
Koninklijke Ahold N.V. ADR
(Supermarkets)* .................................................... 12,000 443,096
Koninklijke Ahrend Groep N.V.
(Consumer Goods and Services)*...................................... 10,100 230,535
------------
$ 6,820,367
------------
Norway -- 0.5%
Storebrand ASA (Insurance) ........................................... 85,900 $ 650,141
------------
Portugal -- 1.2%
Banco Pinto & Sotto Mayor S.A.
(Banks and Credit Cos.) ............................................ 64,704 $ 1,224,907
Telecel -- Comunicacaoes Pessoais
S.A. (Telecommunications) .......................................... 1,600 326,569
------------
$ 1,551,476
------------
Spain -- 0.7%
Repsol S.A. (Oils) ................................................... 15,700 $ 837,496
------------
Sweden -- 3.3%
Astra AB (Pharmaceuticals) ........................................... 62,433 $ 1,268,651
Saab AB, "B" (Aerospace)* ............................................ 192,100 2,010,899
Volvo AB (Automotive) ................................................ 38,300 877,315
------------
$ 4,156,865
------------
Switzerland -- 2.2%
Amoco Corp. (Oils) ................................................... 21,100 $ 1,244,900
Barry Callebaut AG
(Food Products) .................................................... 4,400 999,491
Novartis AG (Medical and Health
Products) .......................................................... 300 589,734
------------
$ 2,834,125
------------
United Kingdom -- 8.1%
Avis Europe PLC (Auto Rental)## ...................................... 218,000 $ 907,717
British Aerospace PLC (Aerospace
and Defense)* ...................................................... 351,419 2,990,631
</TABLE>
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
United Kingdom -- continued
British Petroleum PLC (Oils)* .......................................... 30,111 $ 447,562
British Petroleum PLC, ADR (Oils) ...................................... 837 79,515
Capital Radio PLC (Broadcasting) ....................................... 28,400 275,610
Kwik-Fit Holdings PLC (Automotive
Repair Centers) ...................................................... 56,500 452,237
Lloyds TSB Group PLC (Banks and
Credit Cos.) ......................................................... 36,554 519,680
LucasVarity PLC (Automotive) ........................................... 316,900 1,056,668
Next PLC (Stores) ...................................................... 205,000 1,676,568
Reuters Group PLC, ADR (Business
Services) ............................................................ 2,000 126,750
SmithKline-Beecham PLC, ADR
(Medical and Health Products) ........................................ 2,100 145,950
Tomkins PLC (Conglomerate)* ............................................ 199,000 944,146
Zeneca Group PLC (Medical and
Health Products) ..................................................... 13,700 595,900
------------
$ 10,218,934
------------
Total Foreign Stocks ............................................................ $ 57,901,421
------------
Total Stocks
(Identified Cost, $68,527,297) ................................................ $ 81,329,166
------------
</TABLE>
Bonds -- 25.2%
<TABLE>
<CAPTION>
Principal Amount
(000 Omitted)
<S> <C> <C>
U.S. Bonds -- 17.1%
Aerospace -- 0.4%
BE Aerospace, Inc., 8s, 2008 ......................................... $ 500 $ 490,000
----------
Building -- 0.3%
Nortek, Inc., 9.25s, 2007 ............................................ $ 60 $ 62,100
Building Materials Corp., 8s, 2007 ................................... 300 295,500
----------
$ 357,600
----------
Consumer Goods and
Services -- 1.2%
Kindercare Learning Centers, Inc.,
9.5s, 2009 ......................................................... $ 100 $ 99,500
Revlon Consumer Products Corp.,
8.625s, 2008 ....................................................... 1,000 910,000
Revlon Consumer Products Corp.,
8.125s, 2006 ....................................................... 500 477,500
----------
$1,487,000
----------
Containers -- 0.8%
Gaylord Container Corp., 9.75s,
2007 ............................................................... $ 575 $ 494,500
Ball Corp., 8.25s, 2008## ............................................ 500 523,750
----------
$1,018,250
----------
Electrical Equipment -- 0.6%
Williams Scotsman, Inc., 9.875s,
2007 ............................................................... $ 700 $ 714,000
----------
Entertainment -- 0.2%
AMC Entertainment, Inc., 9.5s, 2009................................... $ 50 $ 51,000
Cinemark USA, Inc., 9.625s, 2008 ..................................... 250 261,875
----------
$ 312,875
----------
Finance -- 0.3%
APP International Finance Co.,
11.75s, 2005 ....................................................... $ 500 $ 330,000
----------
Food and Beverage Products -- 0.6%
Specialty Foods Corp., 10.25s,
2001 ............................................................... $ 300 $ 276,000
Borden, Inc., 9.25s, 2019 ............................................ 530 545,142
----------
$ 821,142
----------
Forest and Paper Products -- 0.4%
Silgan Holdings, Inc., 9s, 2009 ...................................... $ 500 $ 506,250
----------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Treasury Obligations -- 6.2%
U.S. Treasury Bonds, 6.375s, 2027..................................... $ 6,800 $ 7,815,716
------------
Industrial -- 0.6%
Hayes Wheels International, Inc.,
9.125s, 2007 ....................................................... $ 500 $ 522,500
IMO Industries, Inc., 11.75s, 2006 ................................... 250 252,500
------------
$ 775,000
------------
Insurance -- 0.3%
American Standard, Inc., 7.375s,
2008 ............................................................... $ 350 $ 350,000
------------
Media -- 0.8%
Fox/Liberty Networks LLC, Inc.,
8.875s, 2007 ....................................................... $ 300 $ 306,000
Hollinger International Publishing,
Inc., 9.25s, 2007 .................................................. 700 735,000
------------
$ 1,041,000
------------
Medical and Health Technology
and Services
Tenet Healthcare Corp., 8.625s,
2007 ............................................................... $ 60 $ 62,700
------------
Retail -- 0.2%
Musicland Group, Inc., 9.875s,
2008 ............................................................... $ 250 $ 245,000
------------
Supermarkets -- 0.6%
Pathmark Stores, Inc., 9.625s, 2003................................... $ 750 $ 727,500
------------
Telecommunications -- 3.4%
CSC Holdings, Inc., 9.25s, 2005 ...................................... $ 250 $ 268,750
Jacor Communications Co., 8s,
2010 ............................................................... 1,000 1,045,000
Qwest Communications
International, Inc., 7.5s, 2008## .................................. 500 519,375
Chancellor Media Corp., Louisiana,
8.125s, 2007 ....................................................... 500 500,000
Flag Ltd., 8.25s, 2008 ............................................... 900 882,000
Level 3 Communications, Inc.,
9.125s, 2008 ....................................................... 500 495,625
Nextel Communications, Inc., 0s to
2002, 9.75s to 2007 ................................................ 150 91,500
Pagemart Wireless, Inc., 0s to 2003,
11.25s to 2008 ..................................................... 400 192,000
Western Wireless Corp., 10.5s, 2007................................... 250 261,250
------------
$ 4,255,500
------------
Utilities -- Electric -- 0.2%
Esi Tractebel Acquisition Corp.,
7.99s, 2011 ........................................................ $ 300 $ 298,125
------------
Total U.S. Bonds ..................................................................... $ 21,607,658
------------
Foreign Bonds -- 8.1%
Argentina -- 1.5%
Argentina Global, 11s, 2006 .......................................... $ 2,000 $ 1,960,000
------------
Brazil -- 0.6%
Federal Republic of Brazil, 6.125s,
2006 ............................................................... $ 1,200 $ 769,560
------------
Canada -- 0.6%
Rogers Cablesystems, Inc., 9.625s,
2002 (Telecommunications) .......................................... $ 700 $ 752,500
------------
Ecuador -- 0.3%
Republic of Ecuador, 3.25s, 2015 ..................................... $ 1,018 $ 409,944
------------
Mexico -- 3.5%
Satelites Mexicanos SA De CV,
10.125s, 2004
(Telecommunications)## ............................................. $ 800 $ 638,000
</TABLE>
30-AAS
<PAGE>
Bonds -- continued
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Mexico -- continued
United Mexican States, 11.375s,
2016 ............................................................... $ 300 $ 307,200
United Mexican States, 6.201s,
2019 ............................................................... 2,500 2,031,250
United Mexican States, 6.25s, 2019.................................... 500 390,650
United Mexican States, 11.5s, 2026.................................... 1,000 1,070,000
-----------
$ 4,437,100
-----------
Russia -- 0.7%
Ministry of Finance, 10s, 2007 ....................................... $ 680 $ 183,600
Ministry of Finance, 12.75s, 2028##................................... 270 81,000
Vnesheconombank USSR, 5.969s,
2015 (Banks and Credit Cos.) ....................................... 4,632 486,315
Russia Principal Loans, 5.969s,
2020+** ............................................................ 2,500 150,000
Vnesheconombank USSR, 5.969s,
2015 (Banks and Credit Cos.)## ..................................... 88 9,210
-----------
$ 910,125
-----------
Singapore -- 0.4%
Fullerton Global Corp., 0s, 2003 ..................................... $ 500 $ 471,250
-----------
United Kingdom -- 0.5%
Colt Telecom Group PLC, 8.875s,
2007 (Telecommunications) .......................................... DEM 300 $ 184,532
Middleweb PLC Bankers Trust,
10.5s, 2008
(Telecommunications)## ............................................. GBP 250 389,842
-----------
$ 574,374
-----------
Total Foreign Bonds .................................................................. $10,284,853
-----------
Total Bonds
(Identified Cost, $35,853,590) ..................................................... $31,892,511
-----------
Preferred Stock -- 0.6%
Shares
Primedia, Inc. (Printing &
Publishing)* (Identified Cost,
$742,500)........................................................... 7,500 $ 727,507
-----------
Floating Rate Demand Notes -- 4.2%
Principal Amount
(000 Omitted)
Cargill, COLT (Commodity Option
Linked Trading)+, (Identified Cost,
$6,007,740)......................................................... $ 5,500 $ 5,343,983
-----------
Call Options Purchased -- 0.2%
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Deutsche Marks/British Pounds/
January/2.637 ........................... DEM 10,795 $ 130
Japanese Yen/February/112 ................. JPY 1,113,026 209,249
Swedish Krone/British Pounds/
March/12.5 .............................. SEK 51,220 20,539
------------
Total Call Options Purchased
(Premiums Paid, $290,630)................................. $ 229,918
------------
Put Options Purchased -- 0.1%
Deutsche Marks/British Pounds/
January/2.8065 .......................... DEM 11,489 $ 13,488
Deutsche Marks/November/1.95 .............. 798 32,722
Deutsche Marks/November/1.95 .............. 432 18,235
Japanese Yen/March/125 .................... JPY 1,242,217 64,595
Japanese Yen/Deutsche Marks/
May/85 .................................. 1,634,840 4,905
------------
Total Put Options Purchased
(Premiums Paid, $312,677) ................................ $ 133,945
------------
</TABLE>
Short-Term Obligations -- 4.0%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
General Electric Capital Corp., due
1/04/99, at Amortized Cost ....... $ 5,000 $ 4,997,908
------------
Total Investments
(Identified Cost, $116,732,342) ................... $124,654,938
------------
Call Options Written -- (0.2)%
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Japanese Yen/February/108 ................. JPY 1,073,275 $ (85,862)
Japanese Yen/Deutsche Marks/May/
64.82 ................................... JPY 498,684 (111,705)
---------
Total Call Options Written
(Premiums Received, $145,160) ............................ $(197,567)
---------
Put Options Written
</TABLE>
<TABLE>
<CAPTION>
Description/Expiration Month/Strike Price
<S> <C> <C>
Hong Kong Dollars/June/8.5 ................ HKD 30,324 $ --
Hong Kong Dollars/June/9 .................. 30,000 --
Total Put Options Written
(Premiums Received, $198,989) ....................... $ --
------------
Other Assets,
Less Liabilities -- 1.7% 2,183,240
------------
Net Assets -- 100.0% .................................. $126,640,611
============
</TABLE>
See portfolio footnotes and notes to financial statements.
31-AAS
<PAGE>
Portfolio of Investments -- December 31, 1998
World Governments Series
Bonds -- 95.7%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
U.S. Bonds -- 36.4%
U.S. Treasury Notes, 5.375s, 2003 ....................................... $ 16,300 $16,773,678
U.S. Treasury Notes, 5.625s, 2008 ....................................... 18,150 19,366,594
-----------
Total U.S. Bonds ........................................................................ $36,140,272
-----------
Foreign Bonds -- 59.3%
Canada -- 2.0%
Government of Canada, 5.25s,
2008 .................................................................. $ 2,000 $ 2,009,060
-----------
Denmark -- 2.0%
Kingdom of Denmark, 7s, 2007 ............................................ DKK 10,436 $ 1,970,588
-----------
Germany -- 12.2%
Federal Republic of Germany, 6s,
2007 .................................................................. DEM 17,643 $12,084,609
-----------
Greece -- 2.9%
Hellenic Republic, 8.6s, 2008 ........................................... GRD 210,000 $ 832,054
Hellenic Republic, 8.9s, 2003 ........................................... 530,000 1,984,544
-----------
$ 2,816,598
-----------
Italy -- 7.0%
Republic of Italy, 6.75s, 2007 .......................................... ITL 9,665,000 $ 6,967,532
-----------
Japan -- 10.0%
Federal National Mortgage Assn.,
2.125s, 2007 .......................................................... JPY 650,000 $ 5,791,086
International Bank for
Reconstruction and Development,
2s, 2008 .............................................................. 470,000 4,148,034
-----------
$ 9,939,120
-----------
New Zealand -- 3.0%
Government of New Zealand, 8s,
2004 .................................................................. NZD 5,000 $ 2,969,489
-----------
Sweden -- 2.3%
Kingdom of Sweden, 6s, 2005 ............................................. SEK 16,900 $ 2,310,430
-----------
United Kingdom -- 17.9%
UK Treasury, 6.5s, 2003 ................................................. GBP 990 $ 1,799,152
UK Treasury, 7.25s, 2007 ................................................ 7,954 15,972,418
-----------
$17,771,570
-----------
Total Foreign Bonds ..................................................................... $58,838,996
-----------
Total Bonds
(Identified Cost, $90,600,343) ........................................................ $94,979,268
-----------
Call Options Purchased -- 0.2%
</TABLE>
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Deutsche Marks/British Pounds/
January/2.637 ........................... DEM 9,163 $ 110
Japanese Yen/February/112 ................. JPY 891,169 167,540
Swedish Krone/British Pounds/
March/12.5 .............................. SEK 41,010 16,445
------------
Total Call Options Purchased
(Identified Cost, $236,140) ............................. $ 184,095
------------
</TABLE>
Put Options Purchased -- 0.1%
<TABLE>
<CAPTION>
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted) Value
<S> <C> <C>
Deutsche Marks/November/1.95 .............. DEM 651 $ 26,698
Deutsche Marks/British Pounds/
January/2.8065 .......................... 9,752 11,449
Japanese Yen/March/125 .................... JPY 994,608 51,720
Japanese Yen/Deutsche Marks/
May/85 .................................. 1,309,450 3,928
-----------
Total Put Options Purchased
(Identified Cost, $235,889) .............................. $ 93,795
-----------
<CAPTION>
Short-Term Obligations -- 2.4%
Principal Amount
Issuer (000 Omitted)
<S> <C> <C>
Ford Motor Credit Corp. due
1/04/99 at Amortized Cost ............... $ 2,385 $ 2,384,002
-----------
Total Investments
(Identified Cost, $93,456,374) ........................... $97,641,160
-----------
<CAPTION>
Call Options Written -- (0.2)%
Principal Amount
of Contract
Description/Expiration Month/Strike Price (000 Omitted)
<S> <C> <C>
Japanese Yen/February/108 ................. JPY 859,341 $ (68,747)
Japanese Yen/Deutsche Marks/May/
64.82 ................................... 399,429 (89,472)
-----------
Total Call Options Written
(Premiums Received $116,243) ............................. $ (158,219)
-----------
Other Assets,
Less Liabilities -- 1.8% 1,737,066
-----------
Net Assets -- 100.0% ....................................... $99,220,007
===========
</TABLE>
See portfolio footnotes and notes to financial statements.
32-WGS
<PAGE>
Portfolio of Investments -- December 31, 1998
World Total Return Series
Stocks -- 57.6%
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Foreign Stocks -- 38.6%
Australia -- 1.2%
QBE Insurance Group Ltd.
(Insurance)* ........................................................ 240,645 $ 992,643
Seven Network Ltd. (Entertainment) 73,430 240,968
------------
$ 1,233,611
------------
Austria -- 0.4%
Austria Tabak AG (Tobacco) ............................................ 5,620 $ 430,576
------------
Canada -- 1.1%
Canadian National Railway Co.
(Railroads) ......................................................... 21,657 $ 1,123,457
------------
Chile -- 0.2%
Enersis S.A., ADR (Utilities -
Electric) ........................................................... 6,143 $ 158,566
------------
Finland -- 0.3%
Helsingin Puhelin Oyj
(Telecommunications) ................................................ 5,800 $ 344,825
------------
France -- 5.8%
Pinault-Printemps Redoute (Retail) .................................... 7,215 $ 1,377,356
Sanofi S.A. (Medical and Health
Products) ........................................................... 5,620 924,194
SEITA (Tobacco) ....................................................... 20,800 1,301,278
Television Francaise (Entertainment) 4,096 728,487
Thomson CSF (Aerospace and
Defense) ............................................................ 8,320 356,922
Total S.A., ADR (Oils) ................................................ 9,792 487,152
Union des Assurances Federales
S.A. (Insurance) .................................................... 4,484 594,714
------------
$ 5,770,103
------------
Germany -- 2.9%
Henkel KGaA (Chemicals) ............................................... 8,932 $ 797,883
Mannesmann AG (Conglomerate) .......................................... 7,990 914,922
Volkswagen AG (Automotive) ............................................ 8,110 646,661
Wella AG (Cosmetics)* ................................................. 592 493,333
------------
$ 2,852,799
------------
Greece -- 0.4%
Hellenic Telecommunication
Organization S.A., GDR
(Telecommunications) ................................................ 15,762 $ 419,157
------------
Hong Kong -- 0.5%
Dairy Farm International Holdings
Ltd. (Supermarkets) ................................................. 231,000 $ 265,650
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) .............................................. 79,500 241,158
------------
$ 506,808
------------
Ireland -- 0.4%
Allied Irish Banks PLC (Banks and
Credit Cos.) ........................................................ 20,500 $ 364,560
------------
Italy -- 2.1%
ENI S.p.A., ADR (Oils) ................................................ 5,039 $ 341,392
Instituto Nazionale delle
Assicurazioni (Insurance) ........................................... 99,171 262,130
San Paolo Imi S.p.A. (Banks and
Credit Cos.)* ....................................................... 20,030 354,170
Telecom Italia Mobile S.p.A., Saving
Shares (Telecommunications) ......................................... 98,440 463,766
Telecom Italia S.p.A.
(Telecommunications) ................................................ 95,583 601,952
Unione Immobiliare S.p.A.
(Real Estate)* ...................................................... 99,271 51,817
------------
$ 2,075,227
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Japan -- 3.8%
Canon, Inc. (Office Equipment) ........................................ 37,000 $ 787,824
Kirin Beverage Corp. (Beverages) ...................................... 37,000 727,473
Olympus Optical Co. Ltd. (Photo
Equipment & Supplies) ............................................... 35,000 400,855
Osaka Sanso Kogyo Ltd.
(Chemicals) ......................................................... 21,000 40,178
Rohm Co. (Electronics) ................................................ 2,000 181,450
Takeda Chemical Industries Co.
(Pharmaceuticals) ................................................... 25,000 958,826
Terumo Corp. (Pharmaceuticals) ........................................ 16,000 375,242
Tokyo Broadcasting System, Inc.
(Broadcasting) ...................................................... 15,000 167,034
Ushio, Inc. (Electronics) ............................................. 15,000 131,062
------------
$ 3,769,944
------------
Netherlands -- 5.3%
Akzo Nobel N.V. (Chemicals) ........................................... 14,176 $ 644,878
Benckiser N.V., "B" (Consumer
Goods and Services) ................................................. 12,100 791,859
Hunter Douglas N.V., ADR
(Consumer Goods and Services)*....................................... 13,200 436,840
IHC Caland N.V. (Marine
Equipment)* ......................................................... 10,380 430,774
ING Groep N.V. (Financial
Services)* .......................................................... 10,354 630,770
Koninklijke Ahold N.V., ADR
(Supermarkets) ...................................................... 18,227 674,399
Royal Dutch Petroleum Co., ADR
(Oils) .............................................................. 13,929 666,851
Wolters Kluwer N.V. (Publishing)* ..................................... 4,696 1,003,912
------------
$ 5,280,283
------------
Portugal -- 0.8%
Banco Pinto & Sotto Mayor, S.A.
(Banks and Credit Cos.) ............................................. 27,034 $ 511,779
Electricidade de Portugal S.A.
(Utilities -- Electric) ............................................. 14,140 310,850
------------
$ 822,629
------------
South Korea -- 0.1%
Korea Electric Power Corp., ADR
(Utilities -- Electric) ............................................. 7,652 $ 120,041
------------
Spain -- 2.1%
Iberdrola S.A. (Utilities -- Electric) ................................ 68,005 $ 1,272,308
Telefonica de Espana (Utilities --
Telephone)* ........................................................ 18,040 802,145
------------
$ 2,074,453
------------
Sweden -- 1.4%
Astra AB (Pharmaceuticals) ............................................ 27,597 $ 560,777
Saab AB, "B" (Aerospace and
Defense)* ........................................................... 59,115 618,815
Volvo AB (Automotive) ................................................. 11,780 269,837
------------
$ 1,449,429
------------
Switzerland -- 1.4%
Ciba Specialty AG (Chemicals) ......................................... 2,270 $ 190,062
Clariant AG (Chemicals) ............................................... 430 200,990
Nestle S.A. (Food and Beverage
Products) ........................................................... 330 718,384
UBS AG (Banks and Credit Cos.)* ....................................... 900 276,520
------------
$ 1,385,956
------------
United Kingdom -- 8.4%
Allied Zurich PLC (Insurance)* ........................................ 17,235 $ 258,607
Avis Europe PLC (Auto Rental)## ....................................... 199,305 829,874
British Aerospace PLC (Aerospace
and Defense)* ....................................................... 145,614 1,239,198
</TABLE>
33-WTRS
<PAGE>
Portfolio of Investments -- continued
Stocks -- continued
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
United Kingdom -- continued
British Petroleum PLC, ADR (Oils) ..................................... 14,912 $ 1,416,640
Compass Group PLC (Food --
Catering) .......................................................... 114,492 1,304,824
Lloyds TSB Group PLC (Banks and
Credit Cos.) ........................................................ 34,958 496,990
LucasVarity PLC (Automotive) .......................................... 139,890 466,448
Rentokil Initial PLC (Conglomerate).................................... 36,500 275,502
Reuters Group PLC (Business
Services) ........................................................... 31,600 332,875
Reuters Group PLC, ADR (Business
Services) ........................................................... 2,600 164,775
Tomkins PLC (Conglomerate)* ........................................... 159,240 755,507
Williams PLC (Conglomerate) ........................................... 98,840 564,042
Zeneca Group PLC (Medical and
Health Products) .................................................... 7,400 321,873
------------
$ 8,427,155
------------
Total Foreign Stocks ........................................................................ $ 38,609,579
------------
U.S. Stocks -- 19.0%
Banks and Credit Companies -- 0.8%
Wells Fargo Co.* ...................................................... 18,888 $ 754,339
------------
Business Machines -- 2.0%
International Business Machines
Corp. ............................................................... 7,045 $ 1,301,564
Xerox Corp. ........................................................... 6,260 738,680
------------
$ 2,040,244
------------
Construction Services -- 0.4%
Martin Marietta Materials, Inc. ....................................... 6,898 $ 428,969
------------
Consumer Goods and Services -- 3.6%
Newell Co. ............................................................ 7,100 $ 292,875
Philip Morris Cos., Inc. .............................................. 30,276 1,619,766
Tyco International Ltd. ............................................... 23,020 1,736,571
------------
$ 3,649,212
------------
Electrical Equipment -- 1.0%
General Electric Co. .................................................. 9,900 $ 1,010,419
------------
Electronics -- 0.7%
AMP Inc. .............................................................. 12,837 $ 668,326
------------
Financial Institutions -- 2.8%
American Express Co. .................................................. 11,939 $ 1,220,763
Associates First Capital Corp., "A" ................................... 15,600 661,050
Federal Home Loan Mortgage Corp. 14,043 904,896
------------
$ 2,786,709
------------
Food and Beverage Products -- 0.5%
Anheuser-Busch Cos., Inc. ............................................. 4,800 $ 315,000
McCormick & Co., Inc. ................................................. 5,299 179,172
------------
$ 494,172
------------
Insurance -- 1.2%
Allstate Corp. ........................................................ 14,836 $ 573,040
ReliaStar Financial Corp. ............................................. 13,998 645,658
------------
$ 1,218,698
------------
Medical and Health Products -- 1.8%
Bristol-Myers Squibb Co. .............................................. 7,556 $ 1,011,087
Schering Plough Corp. ................................................. 10,728 592,722
Warner-Lambert Co. .................................................... 3,240 243,608
------------
$ 1,847,417
------------
Oil Services -- 0.5%
Conoco Inc., "A"* ..................................................... 7,900 $ 164,912
Exxon Corp. ........................................................... 4,061 296,961
------------
$ 461,873
------------
Printing and Publishing -- 0.5%
Gannett Co., Inc. ..................................................... 8,466 $ 546,057
------------
</TABLE>
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Restaurants and Lodging -- 0.7%
McDonalds Corp. ....................................................... 9,780 $ 749,392
------------
Stores -- 0.5%
Rite Aid Corp. ........................................................ 9,610 $ 476,296
------------
Supermarkets -- 0.8%
Albertson's Inc. ...................................................... 11,790 $ 750,876
------------
Telecommunications -- 0.5%
Sprint Corp. .......................................................... 4,760 $ 400,435
Sprint PCS* ........................................................... 2,380 55,038
------------
$ 455,473
------------
Utilities -- Electric -- 0.7%
Sierra Pacific Resources .............................................. 17,390 $ 660,820
------------
Total U.S. Stocks ........................................................................... $ 18,999,292
------------
Total Stocks
(Identified Cost, $44,588,806) .............................................................. $ 57,608,871
------------
</TABLE>
Bonds -- 37.5%
<TABLE>
<CAPTION>
Principal Amount
(000 Omitted)
<S> <C> <C>
Foreign Bonds -- 20.8%
Canada -- 1.8%
Government of Canada, 5.25s, 2008 $ 1,800 $ 1,808,154
-----------
Denmark -- 0.7%
Kingdom of Denmark, 7s, 2007 .......................................... DKK 3,650 $ 689,215
-----------
Germany -- 5.4%
Federal Republic of Germany, 6s,
2007 ................................................................ DEM 7,870 $ 5,390,573
-----------
Greece -- 1.1%
Republic of Greece, 7.74s, 2008 ....................................... GRD 90,000 $ 356,595
Hellenic Republic, 8.9s, 2003 ......................................... 200,000 748,884
-----------
$ 1,105,479
-----------
Italy -- 2.0%
Republic of Italy, 6.75s, 2007 ........................................ ITL 2,740,000 $ 1,975,276
-----------
Japan -- 1.9%
International Bank for
Reconstruction & Development,
2s, 2008 ............................................................ JPY 220,000 $ 1,941,633
-----------
New Zealand -- 1.2%
Government of New Zealand, 8s,
2006 ................................................................ NZD 830 $ 506,144
Government of New Zealand, 8s,
2004 ................................................................ 1,110 651,799
-----------
$ 1,157,943
-----------
Sweden -- 0.6%
Kingdom of Sweden, 6s, 2005 ........................................... SEK 4,300 $ 587,861
-----------
United Kingdom -- 6.1%
United Kingdom Treasury, 7.25s,
2007 ................................................................ GBP 3,043 $ 6,110,644
-----------
Total Foreign Bonds ............................................................................ $20,766,778
-----------
U.S. Bonds -- 16.7%
U.S. Treasury Obligations -- 16.7%
U.S. Treasury Notes, 5.625s, 2008 ..................................... $ 8,390 $ 8,952,382
U.S. Treasury Notes, 5.375s, 2003 ..................................... 7,520 7,738,531
-----------
Total U.S. Bonds ............................................................................... $16,690,913
-----------
Total Bonds
(Identified Cost, $36,277,531) ............................................................... $37,457,691
-----------
Preferred Stock -- 0.3%
Shares
Prosieben Media AG
(Entertainment) (Identified Cost,
$242,842) ........................................................... 5,394 $ 249,004
</TABLE>
34-WTRS
<PAGE>
Rights
<TABLE>
<CAPTION>
Issuer Shares Value
<S> <C> <C>
Telefonica S.A. (Telecommunications)*
(Identified Cost, $15,017) ............ 18,040 $ 16,017
-----------
Call Options Purchased
Principal Amount
of Contracts
Description/Expiration Month/Strike Price (000 Omitted)
Deutsche Marks/British Pounds/
January/2.637 ......................... DEM 3,121 $ 37
Swedish Krone/British Pounds/
March/12.5 ............................ SEK 16,302 6,537
-----------
Total Call Options Purchased
(Premiums Paid, $32,690) .............................. $ 6,574
-----------
Put Options Purchased
Deutsche Marks/November/1.95 ............ DEM 247 $ 10,143
Deutsche Marks/British Pounds/
January/2.8065 ........................ 3,321 3,899
-----------
Total Put Options Purchased
(Premiums Paid, $34,604) .............................. $ 14,042
-----------
Short-Term Obligations -- 3.8%
Principal Amount
Issuer (000 Omitted)
Federal Home Loan Mortgage
Corp., due 1/04/99, at Amortized
Cost .................................. $ 3,800 $ 3,798,575
-----------
Total Investments
(Identified Cost, $84,990,065) ........................ $99,150,774
-----------
Other Assets,
Less Liabilities -- 0.8% 804,608
-----------
Net Assets -- 100.0% .................................... $99,955,382
===========
</TABLE>
See portfolio footnotes and notes to financial statements.
Portfolio of Investments -- December 31, 1998
Zero Coupon Series, 2000 Portfolio
U.S. Government Guaranteed -- 100.1%
<TABLE>
<CAPTION>
Principal Amount
Issuer (000 Omitted) Value
<S> <C> <C>
Treasury Investments
Growth Receipts -- 5.3%
Series 18, due 2/15/01 ............................. $ 97 $ 88,029
Series 12, due 5/15/01 ............................. 22 19,733
Series 15, due 8/15/01 ............................. 88 77,995
-----------
Total Treasury Investment Growth Receipts
(Identified Cost, $167,258) ....................................... $ 185,757
-----------
U.S. Treasury Securities Stripped
Interest Payments -- 94.8%
Generic Coupons, due 5/15/00 ....................... $ 617 $ 579,826
Generic Coupons, due 8/15/00 ....................... 93 86,417
Generic Coupons, due 11/15/00 ...................... 2,778 2,552,677
Generic Coupons, due 5/15/01 ....................... 81 72,700
-----------
Total U.S. Treasury Securities Stripped
Interest Payments (Identified Cost, $3,151,375) ................... $ 3,291,620
-----------
Total Investments
(Identified Cost, $3,318,633) ..................................... $ 3,477,377
-----------
Other Assets,
Less Liabilites -- (0.1)% (3,898)
-----------
Net Assets -- 100.0% ................................................ $ 3,473,479
===========
</TABLE>
See portfolio footnotes and notes to financial statements
Portfolio Footnotes:
*Non-income producing security.
**Non-income producing security-in default.
#Payment-in-kind security.
##SEC Rule 144A restriction.
###Security segregated as collateral for open futures contracts.
+Restricted security
++Security valued by or at the direction of the Trustees.
++++Inverse floating rate security.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
<TABLE>
<S> <C> <C>
AUD=Australian Dollars GRD=Greek Drachma NOK=Norwegian Kroner
DEM=Deutsche Marks HKD=Hong Kong Dollars NZD=New Zealand
DKK=Danish Kroner ITL=Italian Lire Dollars
FRF=French Francs JPY=Japanese Yen SEK=Swedish Krone
GBP=British Pounds NLG=Dutch Guilders ZAR=South African Rand
</TABLE>
35-ZOO
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1998
<TABLE>
<CAPTION>
Government
Bond Securities
Assets: Series Series
Investments -- ---------------- ---------------
<S> <C> <C>
Unaffiliated issuers, at cost ....................................................... $ 18,985,994 $434,993,452
Unrealized appreciation (depreciation) .............................................. 51,193 17,588,582
------------ ------------
Total investments, at value ....................................................... $ 19,037,187 $452,582,034
Cash ................................................................................. 10,357 186
Foreign currency, at value (identified cost, ($1,864 and $83,492, respectively)) ..... -- --
Receivable for investments sold ...................................................... 103,672 --
Receivable for Series shares sold .................................................... 244,988 481,148
Interest and dividends receivable .................................................... 197,972 4,577,552
Receivable from investment advisor ................................................... 15,701 --
Other assets ......................................................................... -- 2,547
------------ ------------
Total assets ...................................................................... $ 19,609,877 $457,643,467
============ ============
Liabilities:
Payable for investment purchased ..................................................... $ -- $ --
Payable for Series shares reacquired ................................................. 4 88,267
Net payable for forward foreign currency exchange contracts subject to master
netting agreements .................................................................. 7 --
Payable to affiliates --
Investment advisory fee ............................................................. 316 6,889
Accrued expenses and other liabilities ............................................... 14,787 74,323
------------ ------------
Total liabilities ................................................................. $ 15,114 $ 169,479
------------ ------------
Net assets ............................................................................ $ 19,594,763 $457,473,988
============ ============
Net assets consist of:
Paid-in capital ...................................................................... $ 19,092,344 $422,240,378
Unrealized appreciation (depreciation) on investments and translation of assets
and liabilities in foreign currencies ............................................... 51,091 17,588,582
Accumulated undistributed net realized gain (loss) on investments and foreign
currency transactions ............................................................... 165,561 (7,000,614)
Accumulated undistributed net investment income (loss) ............................... 285,767 24,645,642
------------ ------------
Total ............................................................................ $ 19,594,763 $457,473,988
============ ============
Shares of beneficial interest outstanding ............................................ 1,833,052 34,153,642
============ ============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) ................. $ 10.69 $ 13.39
============ ============
<CAPTION>
International
High Growth and
Yield Income
Assets: Series Series
Investments -- ---------------- ---------------
<S> <C> <C>
Unaffiliated issuers, at cost ....................................................... $ 330,382,914 $ 63,768,706
Unrealized appreciation (depreciation) .............................................. (12,392,920) 11,186,753
------------- ------------
Total investments, at value ....................................................... $ 317,989,994 $ 74,955,459
Cash ................................................................................. 6,168 11,416
Foreign currency, at value (identified cost, ($1,864 and $83,492, respectively)) ..... -- 1,935
Receivable for investments sold ...................................................... 397,000 169,645
Receivable for Series shares sold .................................................... 2,395,776 185,827
Interest and dividends receivable .................................................... 6,000,039 127,811
Receivable from investment advisor ................................................... -- --
Other assets ......................................................................... 1,810 338
------------- ------------
Total assets ...................................................................... $ 326,790,787 $ 75,452,431
============= ============
Liabilities:
Payable for investment purchased ..................................................... $ 500,000 $ --
Payable for Series shares reacquired ................................................. 9,074 7,833
Net payable for forward foreign currency exchange contracts subject to master
netting agreements .................................................................. -- --
Payable to affiliates --
Investment advisory fee ............................................................. 6,652 1,998
Accrued expenses and other liabilities ............................................... 42,704 32,192
------------- ------------
Total liabilities ................................................................. $ 558,430 $ 42,023
------------- ------------
Net assets ............................................................................ $ 326,232,357 $ 75,410,408
============= ============
Net assets consist of:
Paid-in capital ...................................................................... $ 319,460,604 $ 61,965,922
Unrealized appreciation (depreciation) on investments and translation of assets
and liabilities in foreign currencies ............................................... (12,392,920) 11,191,946
Accumulated undistributed net realized gain (loss) on investments and foreign
currency transactions ............................................................... (8,641,895) 1,736,793
Accumulated undistributed net investment income (loss) ............................... 27,806,568 515,747
------------- ------------
Total ............................................................................ $ 326,232,357 $ 75,410,408
============= ============
Shares of beneficial interest outstanding ............................................ 35,601,322 5,719,220
============= ============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) ................. $ 9.16 $ 13.19
============= ============
<CAPTION>
MFS/Foreign
& Colonial Money
Emerging Markets Market
Assets: Equities Series Series
Investments -- ------------------ -----------------
<S> <C> <C>
Unaffiliated issuers, at cost ....................................................... $ 21,234,820 $ 465,163,385
Unrealized appreciation (depreciation) .............................................. (4,152,388) --
------------ -------------
Total investments, at value ....................................................... $ 17,082,432 $ 465,163,385
Cash ................................................................................. 11,542 13,755
Foreign currency, at value (identified cost, ($1,864 and $83,492, respectively)) ..... 81,162 --
Receivable for investments sold ...................................................... 8,763 --
Receivable for Series shares sold .................................................... 5,074 2,483,193
Interest and dividends receivable .................................................... 31,984 --
Receivable from investment advisor ................................................... -- --
Other assets ......................................................................... 159 3,241
------------ -------------
Total assets ...................................................................... $ 17,221,116 $ 467,663,574
============ =============
Liabilities:
Payable for investment purchased ..................................................... $ 73,039 $ --
Payable for Series shares reacquired ................................................. 10,376 2,070,561
Net payable for forward foreign currency exchange contracts subject to master
netting agreements .................................................................. -- --
Payable to affiliates --
Investment advisory fee ............................................................. 586 6,284
Accrued expenses and other liabilities ............................................... 18,267 41,803
------------ -------------
Total liabilities ................................................................. $ 102,268 $ 2,118,648
------------ -------------
Net assets ............................................................................ $ 17,118,848 $ 465,544,926
============ =============
Net assets consist of:
Paid-in capital ...................................................................... $ 26,022,996 $ 465,544,926
Unrealized appreciation (depreciation) on investments and translation of assets
and liabilities in foreign currencies ............................................... (4,155,005) --
Accumulated undistributed net realized gain (loss) on investments and foreign
currency transactions ............................................................... (4,745,014) --
Accumulated undistributed net investment income (loss) ............................... (4,129) --
------------ -------------
Total ............................................................................ $ 17,118,848 $ 465,544,926
============ =============
Shares of beneficial interest outstanding ............................................ 2,285,481 465,544,926
============ =============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) ................. $ 7.49 $ 1.00
============ =============
</TABLE>
See notes to financial statements
36
<PAGE>
MFS/Sun Life Series Trust
Statements of Assets and Liabilities -- December 31, 1998 -- continued
<TABLE>
<CAPTION>
Strategic
Income
Assets: Series
Investments -- --------------
<S> <C>
Unaffiliated issuers, at cost .......................................................... $7,441,923
Unrealized appreciation (depreciation) ................................................. (79,560)
----------
Total investments, at value .......................................................... $7,362,363
Cash .................................................................................... 16,812
Net receivable for forward foreign currency exchange contracts to purchase .............. 3,599
Net receivable for forward foreign currency exchange contracts subject to master
netting agreements ..................................................................... 26,125
Receivable for investments sold ......................................................... 434,683
Receivable for Series shares sold ....................................................... 240,779
Interest and dividends receivable ....................................................... 127,453
Receivable from investment advisor ...................................................... 3,495
Other assets ............................................................................ --
----------
Total assets ......................................................................... $8,215,309
==========
Liabilities:
Payable to custodian .................................................................... $ --
Payable for investments purchased ....................................................... 416,412
Payable for Series shares reacquired .................................................... 41
Payable for daily variation margin on open futures contracts ............................ --
Net payable for forward foreign currency exchange contracts to sell ..................... --
Net payable for forward foreign currency exchange contracts to purchase ................. --
Written options outstanding, at value (premiums received $8,777, $344,149, $116,243,
respectively) .......................................................................... 11,814
Payable to affiliates --
Investment advisory fee ................................................................ 154
Accrued expenses and other liabilities .................................................. 6,459
----------
Total liabilities .................................................................... $ 434,880
----------
Net assets ............................................................................... $7,780,429
==========
Net assets consist of:
Paid-in capital ......................................................................... $7,652,749
Unrealized appreciation (depreciation) on investments and translation of assets and
liabilities in
foreign currencies ..................................................................... (52,878)
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... 45,806
Accumulated undistributed net investment income ......................................... 134,752
----------
Total ............................................................................... $7,780,429
==========
Shares of beneficial interest outstanding ............................................... 774,644
==========
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 10.04
==========
<CAPTION>
World World
Asset Governments
Assets: AllocationSeries Series
Investments -- ------------------ ----------------
<S> <C> <C>
Unaffiliated issuers, at cost .......................................................... $116,732,342 $ 93,456,374
Unrealized appreciation (depreciation) ................................................. 7,922,596 4,184,786
------------ ------------
Total investments, at value .......................................................... $124,654,938 $ 97,641,160
Cash .................................................................................... 165,074 6,438
Net receivable for forward foreign currency exchange contracts to purchase .............. 419,130 34,300
Net receivable for forward foreign currency exchange contracts subject to master
netting agreements ..................................................................... 21,199 447,981
Receivable for investments sold ......................................................... 1,447,425 68,429
Receivable for Series shares sold ....................................................... 62,457 35,795
Interest and dividends receivable ....................................................... 871,534 1,431,795
Receivable from investment advisor ...................................................... -- --
Other assets ............................................................................ -- 792
------------ ------------
Total assets ......................................................................... $127,641,757 $ 99,666,690
============ ============
Liabilities:
Payable to custodian .................................................................... $ -- $ --
Payable for investments purchased ....................................................... 222,414 145,213
Payable for Series shares reacquired .................................................... 128,674 80,951
Payable for daily variation margin on open futures contracts ............................ 57,694 --
Net payable for forward foreign currency exchange contracts to sell ..................... 324,542 15,340
Net payable for forward foreign currency exchange contracts to purchase ................. -- --
Written options outstanding, at value (premiums received $8,777, $344,149, $116,243,
respectively) .......................................................................... 197,567 158,219
Payable to affiliates --
Investment advisory fee ................................................................ 2,591 2,028
Accrued expenses and other liabilities .................................................. 67,664 44,932
------------ ------------
Total liabilities .................................................................... $ 1,001,146 $ 446,683
------------ ------------
Net assets ............................................................................... $126,640,611 $ 99,220,007
============ ============
Net assets consist of:
Paid-in capital ......................................................................... $115,126,020 $ 86,391,518
Unrealized appreciation (depreciation) on investments and translation of assets and
liabilities in
foreign currencies ..................................................................... 7,743,198 4,633,609
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... (2,026,306) 2,592,542
Accumulated undistributed net investment income ......................................... 5,797,699 5,602,338
------------ ------------
Total ............................................................................... $126,640,611 $ 99,220,007
============ ============
Shares of beneficial interest outstanding ............................................... 8,767,177 8,114,751
============ ============
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 14.44 $ 12.23
============ ============
<CAPTION>
World Zero Coupon
Total Return Series,
Assets: Series 2000 Portfolio
Investments -- ----------------- ---------------
<S> <C> <C>
Unaffiliated issuers, at cost .......................................................... $ 84,990,065 $3,318,633
Unrealized appreciation (depreciation) ................................................. 14,160,709 158,744
------------- ----------
Total investments, at value .......................................................... $ 99,150,774 $3,477,377
Cash .................................................................................... 82,301 --
Net receivable for forward foreign currency exchange contracts to purchase .............. -- --
Net receivable for forward foreign currency exchange contracts subject to master
netting agreements ..................................................................... 58,455 --
Receivable for investments sold ......................................................... 98,482 --
Receivable for Series shares sold ....................................................... 3,921 --
Interest and dividends receivable ....................................................... 638,378 --
Receivable from investment advisor ...................................................... -- 13,628
Other assets ............................................................................ 472 24
------------- ----------
Total assets ......................................................................... $ 100,032,783 $3,491,029
============= ==========
Liabilities:
Payable to custodian .................................................................... $ -- $ 10,564
Payable for investments purchased ....................................................... -- --
Payable for Series shares reacquired .................................................... 1,996 80
Payable for daily variation margin on open futures contracts ............................ --
Net payable for forward foreign currency exchange contracts to sell ..................... 5,356 --
Net payable for forward foreign currency exchange contracts to purchase ................. 11,367 --
Written options outstanding, at value (premiums received $8,777, $344,149, $116,243,
respectively) .......................................................................... -- --
Payable to affiliates --
Investment advisory fee ................................................................ 2,039 24
Accrued expenses and other liabilities .................................................. 56,643 6,882
------------- ----------
Total liabilities .................................................................... $ 77,401 $ 17,550
------------- ----------
Net assets ............................................................................... $ 99,955,382 $3,473,479
============= ==========
Net assets consist of:
Paid-in capital ......................................................................... $ 78,868,631 $3,135,139
Unrealized appreciation (depreciation) on investments and translation of assets and
liabilities in
foreign currencies ..................................................................... 14,212,409 158,744
Accumulated undistributed net realized gain (loss) on investments and foreign currency
transactions ........................................................................... 4,450,759 (27,046)
Accumulated undistributed net investment income ......................................... 2,423,583 206,642
------------- ----------
Total ............................................................................... $ 99,955,382 $3,473,479
============= ==========
Shares of beneficial interest outstanding ............................................... 6,019,237 387,267
============= ==========
Net asset value, offering price and redemption price per share
(net assets [divided by] shares of beneficial interest outstanding) .................... $ 16.61 $ 8.97
============= ==========
</TABLE>
See notes to financial statements
37
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Period Ended December 31, 1998
<TABLE>
<CAPTION>
Government High
Bond Securities Yield
Net investment income: Series* Series Series
Income -- ------------ --------------- ----------------
<S> <C> <C> <C>
Interest ................................................................ $345,266 $27,345,375 $ 29,923,882
Dividends ............................................................... -- -- 491,627
Foreign taxes withheld .................................................. -- -- --
-------- ----------- -------------
Total investment income ................................................ $345,266 $27,345,375 $ 30,415,509
-------- ----------- -------------
Expenses --
Investment advisory fee ................................................. $ 35,258 $ 2,338,710 $ 2,382,137
Trustees' compensation .................................................. 4,500 6,300 6,300
Administrative fee ...................................................... 453 52,457 39,527
Custodian fees .......................................................... 6,406 131,319 94,148
Auditing fees ........................................................... 11,952 48,965 51,995
Legal fees .............................................................. 1,424 1,045 1,321
Printing fees ........................................................... 1,814 25,332 22,959
Miscellaneous ........................................................... 956 18,649 2,043
-------- ----------- -------------
Total expenses ......................................................... $ 62,763 $ 2,622,777 $ 2,600,430
Reduction of expenses by investment advisor ............................. (2,021) -- --
Fees paid indirectly .................................................... (1,979) (9,376) (64,645)
-------- ----------- -------------
Net expenses ........................................................... $ 58,763 $ 2,613,401 $ 2,535,785
-------- ----------- -------------
Net investment income ................................................. $286,503 $24,731,974 $ 27,879,724
-------- ----------- -------------
Realized and unrealized gain (loss) on investments and foreign currency
transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ................................................. $165,561 $ 4,565,665 $ (5,523,558)
Foreign currency transactions ........................................... (736) -- 1,283
Futures contracts ....................................................... -- (309,472) --
-------- ----------- -------------
Net realized gain (loss) on investments and
foreign currency transactions ........................................ $164,825 $ 4,256,193 $ (5,522,275)
-------- ----------- -------------
Change in unrealized appreciation (depreciation) --
Investments ............................................................. $ 51,193 $ 6,580,798 $ (20,305,241)
Translation of assets and liabilities in foreign currencies ............. (102) -- --
Futures contracts ....................................................... -- 49,736 --
-------- ----------- -------------
Net unrealized gain (loss) on investments and
foreign currency translation .......................................... $ 51,091 $ 6,630,534 $ (20,305,241)
-------- ----------- -------------
Net realized and unrealized gain (loss) on
investments and foreign currency ..................................... $215,916 $10,886,727 $ (25,827,516)
-------- ----------- -------------
Increase (decrease) in net assets from
operations .......................................................... $502,419 $35,618,701 $ 2,052,208
======== =========== =============
<CAPTION>
International MFS/Foreign
Growth and & Colonial Money
Income Emerging Markets Market
Net investment income: Series Equity Series Series
Income -- --------------- ------------------ --------------
<S> <C> <C> <C>
Interest ................................................................ $ 183,263 $ 42,203 $21,598,959
Dividends ............................................................... 1,213,885 515,367 --
Foreign taxes withheld .................................................. (126,813) (32,611) --
----------- ------------ -----------
Total investment income ................................................ $ 1,270,335 $ 524,959 $21,598,959
----------- ------------ -----------
Expenses --
Investment advisory fee ................................................. $ 636,309 $ 257,540 $ 1,980,067
Trustees' compensation .................................................. 6,256 6,300 7,952
Administrative fee ...................................................... 8,045 2,670 48,752
Custodian fees .......................................................... 62,307 24,518 106,741
Auditing fees ........................................................... 29,785 26,898 34,465
Legal fees .............................................................. 962 1,075 916
Printing fees ........................................................... 8,495 5,288 32,012
Miscellaneous ........................................................... 2,632 17 --
----------- ------------ -----------
Total expenses ......................................................... $ 754,791 $ 324,306 $ 2,210,905
Reduction of expenses by investment advisor ............................. -- -- --
Fees paid indirectly .................................................... (2,694) (15,221) (11,093)
----------- ------------ -----------
Net expenses ........................................................... $ 752,097 $ 309,085 $ 2,199,812
----------- ------------ -----------
Net investment income ................................................. $ 518,238 $ 215,874 $19,399,147
----------- ------------ -----------
Realized and unrealized gain (loss) on investments and foreign currency
transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ................................................. $ 1,814,959 $ (4,720,319) $ --
Foreign currency transactions ........................................... 238,635 (128,853) --
Futures contracts ....................................................... -- -- --
----------- ------------ ------------
Net realized gain (loss) on investments and
foreign currency transactions ........................................ $ 2,053,594 $ (4,849,172) $ --
----------- ------------ -----------
Change in unrealized appreciation (depreciation) --
Investments ............................................................. $ 9,799,389 $ (2,879,365) $ --
Translation of assets and liabilities in foreign currencies ............. (250,142) (1,349) --
Futures contracts ....................................................... -- -- --
----------- ------------ ------------
Net unrealized gain (loss) on investments and
foreign currency translation .......................................... $ 9,549,247 $ (2,880,714) $ --
----------- ------------ -----------
Net realized and unrealized gain (loss) on
investments and foreign currency ..................................... $11,602,841 $ (7,729,886) $ --
----------- ------------ -----------
Increase (decrease) in net assets from
operations .......................................................... $12,121,079 $ (7,514,012) $19,399,147
=========== ============ ===========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through December 31, 1998.
See notes to financial statements
38
<PAGE>
MFS/Sun Life Series Trust
Statements of Operations -- Period Ended December 31, 1998 -- continued
<TABLE>
<CAPTION>
Strategic World Asset
Income Allocation
Net investment income: Series* Series
Income -- ------------ ----------------
<S> <C> <C>
Interest .............................................................................. $ 206,246 $ 4,181,452
Dividends ............................................................................. -- 1,310,668
Foreign taxes withheld ................................................................ -- (131,417)
--------- ------------
Total investment income .............................................................. $ 206,246 $ 5,360,703
--------- ------------
Expenses --
Investment advisory fee ............................................................... $ 19,850 $ 979,428
Trustees' compensation ................................................................ 4,500 5,300
Administrative fee .................................................................... 217 16,537
Custodian fees ........................................................................ 4,671 92,843
Auditing fees ......................................................................... 5,450 57,043
Legal fees ............................................................................ 1,113 4,569
Printing fees ......................................................................... 1,205 18,457
Miscellaneous ......................................................................... 613 4,829
--------- ------------
Total expenses ....................................................................... $ 37,619 $ 1,179,006
Reduction of expenses by investment advisor ........................................... (3,495) --
Fees paid indirectly .................................................................. (1,040) (7,183)
--------- ------------
Net expenses ......................................................................... $ 33,084 $ 1,171,823
--------- ------------
Net investment income ............................................................... $ 173,162 $ 4,188,880
--------- ------------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................... $ 45,805 $ (3,381,512)
Foreign currency transactions ......................................................... (33,261) 2,730,395
Futures contracts ..................................................................... -- 324,176
Written options transactions .......................................................... (5,148) 993,763
Swaps ................................................................................. -- (9,625)
--------- ------------
Net realized gain on investments and foreign currency transactions ................... $ 7,396 $ 657,197
--------- ------------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................... $ (79,560) $ 2,855,957
Translation of assets and liabilities in foreign currencies ........................... 29,719 (686,101)
Futures contracts ..................................................................... -- (441,078)
Written options ....................................................................... (3,037) 488,060
--------- ------------
Net unrealized gain (loss) on investments and foreign
currency translation ................................................................ $ (52,878) $ 2,216,838
--------- ------------
Net realized and unrealized gain (loss) on investments and foreign currency $ (45,482) $ 2,874,035
--------- ------------
Increase in net assets from operations ............................................. $ 127,680 $ 7,062,915
========= ============
<CAPTION>
World World
Governments Total Return
Net investment income: Series Series
Income -- -------------- --------------
<S> <C> <C>
Interest .............................................................................. $ 5,716,882 $ 2,072,493
Dividends ............................................................................. -- 930,705
Foreign taxes withheld ................................................................ -- (77,295)
----------- -----------
Total investment income .............................................................. $ 5,716,882 $ 2,925,903
----------- -----------
Expenses --
Investment advisory fee ............................................................... $ 760,995 $ 653,391
Trustees' compensation ................................................................ -- 5,525
Administrative fee .................................................................... 12,758 10,680
Custodian fees ........................................................................ 63,901 68,157
Auditing fees ......................................................................... 41,015 53,268
Legal fees ............................................................................ 688 485
Printing fees ......................................................................... 16,751 9,996
Miscellaneous ......................................................................... 416 5,190
----------- -----------
Total expenses ....................................................................... $ 896,524 $ 806,692
Reduction of expenses by investment advisor ........................................... -- --
Fees paid indirectly .................................................................. (2,611) (5,210)
----------- -----------
Net expenses ......................................................................... $ 893,913 $ 801,482
----------- -----------
Net investment income ............................................................... $ 4,822,969 $ 2,124,421
----------- -----------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................... $ 3,991,598 $ 5,383,575
Foreign currency transactions ......................................................... 99,785 (342,199)
Futures contracts ..................................................................... -- --
Written options transactions .......................................................... 1,039,215 255,299
Swaps ................................................................................. -- --
----------- -----------
Net realized gain on investments and foreign currency transactions ................... $ 5,130,598 $ 5,296,675
----------- -----------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................... $ 4,499,583 $ 7,180,356
Translation of assets and liabilities in foreign currencies ........................... 18,576 (18,503)
Futures contracts ..................................................................... -- --
Written options ....................................................................... (146,990) (23,931)
----------- -----------
Net unrealized gain (loss) on investments and foreign
currency translation ................................................................ $ 4,371,169 $ 7,137,922
----------- -----------
Net realized and unrealized gain (loss) on investments and foreign currency $ 9,501,767 $12,434,597
----------- -----------
Increase in net assets from operations ............................................. $14,324,736 $14,559,018
=========== ===========
<CAPTION>
Zero
Coupon Series
Net investment income: 2000 Portfolio
Income -- ---------------
<S> <C>
Interest .............................................................................. $ 224,199
Dividends ............................................................................. --
Foreign taxes withheld ................................................................ --
---------
Total investment income .............................................................. $ 224,199
---------
Expenses --
Investment advisory fee ............................................................... $ 8,778
Trustees' compensation ................................................................ 6,300
Administrative fee .................................................................... 440
Custodian fees ........................................................................ 4,213
Auditing fees ......................................................................... 10,465
Legal fees ............................................................................ 1,001
Printing fees ......................................................................... 163
Miscellaneous ......................................................................... 958
---------
Total expenses ....................................................................... $ 32,318
Reduction of expenses by investment advisor ........................................... (13,628)
Fees paid indirectly .................................................................. (1,133)
---------
Net expenses ......................................................................... $ 17,557
---------
Net investment income ............................................................... $ 206,642
---------
Realized and unrealized gain (loss) on investments and foreign currency transactions:
Realized gain (loss) (identified cost basis) --
Investment transactions ............................................................... $ 19,426
Foreign currency transactions ......................................................... --
Futures contracts ..................................................................... --
Written options transactions .......................................................... --
Swaps ................................................................................. --
---------
Net realized gain on investments and foreign currency transactions ................... $ 19,426
---------
Change in unrealized appreciation (depreciation) --
Investments ........................................................................... $ 18,507
Translation of assets and liabilities in foreign currencies ........................... --
Futures contracts ..................................................................... --
Written options ....................................................................... --
---------
Net unrealized gain (loss) on investments and foreign
currency translation ................................................................ $ 18,507
---------
Net realized and unrealized gain (loss) on investments and foreign currency $ 37,933
---------
Increase in net assets from operations ............................................. $ 244,575
=========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through December 31, 1998.
See notes to financial statements
39
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Period Ended December 31, 1998
<TABLE>
<CAPTION>
Government
Bond Securities
Increase (decrease) in net assets: Series* Series
From operations -- -------------- -----------------
<S> <C> <C>
Net investment income ............................................................. $ 286,503 $ 24,731,974
Net realized gain (loss) on investments and foreign currency transactions ......... 164,825 4,256,193
Net unrealized gain (loss) on investments and foreign currency translation ........ 51,091 6,630,534
----------- -------------
Increase (decrease) in net assets from operations ................................ $ 502,419 $ 35,618,701
----------- -------------
Distributions declared to shareholders --
From net investment income ........................................................ $ -- $ (23,191,736)
From net realized gain on investments and foreign currency transactions ........... -- --
In excess of net realized gain on investments and foreign currency transactions ... -- --
From paid-in capital .............................................................. -- --
----------- -------------
Total distributions declared to shareholders ..................................... $ -- $ (23,191,736)
----------- -------------
Net increase in net assets from Series share transactions .......................... $19,092,344 $ 57,315,137
----------- -------------
Total increase (decrease) in net assets ......................................... $19,594,763 $ 69,742,102
Net assets --
At beginning of period ............................................................ -- 387,731,886
----------- -------------
At end of period .................................................................. $19,594,763 $ 457,473,988
=========== =============
Accumulated undistributed net investment income (loss) included in net
assets at end of period ........................................................... $ 285,767 $ 24,645,642
=========== =============
<CAPTION>
High International
Yield Growth and
Increase (decrease) in net assets: Series Income Series
From operations -- ---------------- ---------------
<S> <C> <C>
Net investment income ............................................................. $ 27,879,724 $ 518,238
Net realized gain (loss) on investments and foreign currency transactions ......... (5,522,275) 2,053,594
Net unrealized gain (loss) on investments and foreign currency translation ........ (20,305,241) 9,549,247
------------- ------------
Increase (decrease) in net assets from operations ................................ $ 2,052,208 $ 12,121,079
------------- ------------
Distributions declared to shareholders --
From net investment income ........................................................ $ (20,130,545) $ (586,185)
From net realized gain on investments and foreign currency transactions ........... -- (1,412,404)
In excess of net realized gain on investments and foreign currency transactions ... -- --
From paid-in capital .............................................................. -- --
------------- ------------
Total distributions declared to shareholders ..................................... $ (20,130,545) $ (1,998,589)
------------- ------------
Net increase in net assets from Series share transactions .......................... $ 69,103,703 $ 13,919,815
------------- ------------
Total increase (decrease) in net assets ......................................... $ 51,025,366 $ 24,042,305
Net assets --
At beginning of period ............................................................ 275,206,991 51,368,103
------------- ------------
At end of period .................................................................. $ 326,232,357 $ 75,410,408
============= ============
Accumulated undistributed net investment income (loss) included in net
assets at end of period ........................................................... $ 27,806,568 $ 515,747
============= ============
<CAPTION>
MFS/Foreign
& Colonial Money
Emerging Markets Market
Increase (decrease) in net assets: Equity Series Series
From operations -- ------------------ -----------------
<S> <C> <C>
Net investment income ............................................................. $ 215,874 $ 19,399,147
Net realized gain (loss) on investments and foreign currency transactions ......... (4,849,172) --
Net unrealized gain (loss) on investments and foreign currency translation ........ (2,880,714) --
------------ -------------
Increase (decrease) in net assets from operations ................................ $ (7,514,012) $ 19,399,147
------------ -------------
Distributions declared to shareholders --
From net investment income ........................................................ $ (302,910) $ (19,399,147)
From net realized gain on investments and foreign currency transactions ........... (215,066) --
In excess of net realized gain on investments and foreign currency transactions ... (115,045) --
From paid-in capital .............................................................. (126,919) --
------------ -------------
Total distributions declared to shareholders ..................................... $ (759,940) $ (19,399,147)
------------ -------------
Net increase in net assets from Series share transactions .......................... $ 1,211,349 $ 125,484,692
------------ -------------
Total increase (decrease) in net assets ......................................... $ (7,062,603) $ 125,484,692
Net assets --
At beginning of period ............................................................ 24,181,451 340,060,234
------------ -------------
At end of period .................................................................. $ 17,118,848 $ 465,544,926
============ =============
Accumulated undistributed net investment income (loss) included in net
assets at end of period ........................................................... $ (4,129) $ --
============ =============
</TABLE>
<TABLE>
<CAPTION>
World
Strategic Asset
Income Allocation
Increase (decrease) in net assets: Series* Series
From operations -- -------------- ----------------
<S> <C> <C>
Net investment income .......................................................... $ 173,162 $ 4,188,880
Net realized gain on investments and foreign currency transactions ............. 7,396 657,197
Net unrealized gain (loss) on investments and foreign currency translation ..... (52,878) 2,216,838
---------- ------------
Increase in net assets from operations ........................................ $ 127,680 $ 7,062,915
---------- ------------
Distributions declared to shareholders --
From net investment income ..................................................... $ -- $ (4,297,027)
From net realized gain on investments and foreign currency transactions ........ -- (5,162,478)
------------ ------------
Total distributions declared to shareholders .................................. $ -- $ (9,459,505)
------------ ------------
Net increase (decrease) in net assets from Series share transactions ............ $7,652,749 $ 6,124,797
------------ ------------
Total increase (decrease) in net assets ...................................... $7,780,429 $ 3,728,207
Net assets:
At beginning of period ......................................................... -- 122,912,404
------------ ------------
At end of period ............................................................... $7,780,429 $126,640,611
============ ============
Accumulated undistributed net investment income included in net assets at
end of period .................................................................. $ 134,752 $ 5,797,699
============ ============
<CAPTION>
World
World Total
Governments Return
Increase (decrease) in net assets: Series Series
From operations -- ---------------- ----------------
<S> <C> <C>
Net investment income .......................................................... $ 4,822,969 $ 2,124,421
Net realized gain on investments and foreign currency transactions ............. 5,130,598 5,296,675
Net unrealized gain (loss) on investments and foreign currency translation ..... 4,371,169 7,137,922
------------- ------------
Increase in net assets from operations ........................................ $ 14,324,736 $ 14,559,018
------------- ------------
Distributions declared to shareholders --
From net investment income ..................................................... $ (1,288,659) $ (1,714,056)
From net realized gain on investments and foreign currency transactions ........ -- (2,223,292)
------------- ------------
Total distributions declared to shareholders .................................. $ (1,288,659) $ (3,937,348)
------------- ------------
Net increase (decrease) in net assets from Series share transactions ............ $ (24,202,161) $ 17,510,519
------------- ------------
Total increase (decrease) in net assets ...................................... $ (11,166,084) $ 28,132,189
Net assets:
At beginning of period ......................................................... 110,386,091 71,823,193
------------- ------------
At end of period ............................................................... $ 99,220,007 $ 99,955,382
============= ============
Accumulated undistributed net investment income included in net assets at
end of period .................................................................. $ 5,602,338 $ 2,423,583
============= ============
<CAPTION>
Zero
Coupon
Series
Increase (decrease) in net assets: 2000 Portfolio
From operations -- ---------------
<S> <C>
Net investment income .......................................................... $ 206,642
Net realized gain on investments and foreign currency transactions ............. 19,426
Net unrealized gain (loss) on investments and foreign currency translation ..... 18,507
----------
Increase in net assets from operations ........................................ $ 244,575
----------
Distributions declared to shareholders --
From net investment income ..................................................... $ (212,590)
From net realized gain on investments and foreign currency transactions ........ --
----------
Total distributions declared to shareholders .................................. $ (212,590)
----------
Net increase (decrease) in net assets from Series share transactions ............ $ (172,594)
----------
Total increase (decrease) in net assets ...................................... $ (140,609)
Net assets:
At beginning of period ......................................................... 3,614,088
----------
At end of period ............................................................... $3,473,479
==========
Accumulated undistributed net investment income included in net assets at
end of period .................................................................. $ 206,642
==========
</TABLE>
*For the period from the commencement of the Series' investment operations,
May 6, 1998, through December 31, 1998.
See notes to financial statements
40
<PAGE>
MFS/Sun Life Series Trust
Statements of Changes in Net Assets -- Year Ended December 31, 1997
<TABLE>
<CAPTION>
Government High
Securities Yield
Increase (decrease) in net assets: Series Series
From operations -- ----------------- -----------------
<S> <C> <C>
Net investment income .......................................................... $ 24,084,636 $ 20,068,788
Net realized gain (loss) on investments and foreign currency transactions ...... (1,758,853) 6,027,894
Net unrealized gain (loss) on investments and foreign currency translation ..... 9,256,148 2,792,621
------------- -------------
Increase (decrease) in net assets from operations ............................. $ 31,581,931 $ 28,889,303
------------- -------------
Distributions declared to shareholders --
From net investment income ..................................................... $ (25,293,515) $ (15,079,993)
From net realized gain on investments and foreign currency transactions ........ -- --
------------- -------------
Total distributions declared to shareholders .................................. $ (25,293,515) $ (15,079,993)
------------- -------------
Net increase (decrease) in net assets from Series share transactions ............ $ (1,663,440) $ 64,899,424
------------- -------------
Total increase (decrease) in net assets ...................................... $ 4,624,976 $ 78,708,734
Net assets:
At beginning of year ........................................................... 383,106,910 196,498,257
------------- -------------
At end of year ................................................................. $ 387,731,886 $ 275,206,991
============= =============
Accumulated undistributed net investment income included in net assets at
end of year .................................................................... $ 23,925,006 $ 20,022,405
============= =============
<CAPTION>
MFS[RegTM]/Foreign
International & Colonial
Growth and Emerging Markets
Increase (decrease) in net assets: Income Series Equity Series
From operations -- --------------- -------------------
<S> <C> <C>
Net investment income .......................................................... $ 546,178 $ 237,924
Net realized gain (loss) on investments and foreign currency transactions ...... 1,166,181 289,612
Net unrealized gain (loss) on investments and foreign currency translation ..... 1,064,743 (1,318,521)
----------- ------------
Increase (decrease) in net assets from operations ............................. $ 2,777,102 $ (790,985)
----------- ------------
Distributions declared to shareholders --
From net investment income ..................................................... $ (423,484) $ (7,806)
From net realized gain on investments and foreign currency transactions ........ (95,794) --
----------- ------------
Total distributions declared to shareholders .................................. $ (519,278) $ (7,806)
----------- ------------
Net increase (decrease) in net assets from Series share transactions ............ $13,400,696 $ 21,708,805
----------- ------------
Total increase (decrease) in net assets ...................................... $15,658,520 $ 20,910,014
Net assets:
At beginning of year ........................................................... 35,709,583 3,271,437
----------- ------------
At end of year ................................................................. $51,368,103 $ 24,181,451
=========== ============
Accumulated undistributed net investment income included in net assets at
end of year .................................................................... $ 273,651 $ 302,110
=========== ============
<CAPTION>
Money
Market
Increase (decrease) in net assets: Series
From operations -- -----------------
<S> <C>
Net investment income .......................................................... $ 19,348,059
Net realized gain (loss) on investments and foreign currency transactions ...... --
Net unrealized gain (loss) on investments and foreign currency translation ..... --
-------------
Increase (decrease) in net assets from operations ............................. $ 19,348,059
-------------
Distributions declared to shareholders --
From net investment income ..................................................... $ (19,348,059)
From net realized gain on investments and foreign currency transactions ........ --
-------------
Total distributions declared to shareholders .................................. $ (19,348,059)
-------------
Net increase (decrease) in net assets from Series share transactions ............ $ (69,105,092)
-------------
Total increase (decrease) in net assets ...................................... $ (69,105,092)
Net assets:
At beginning of year ........................................................... 409,165,326
-------------
At end of year ................................................................. $ 340,060,234
=============
Accumulated undistributed net investment income included in net assets at
end of year .................................................................... $ --
=============
</TABLE>
<TABLE>
<CAPTION>
World
Asset
Allocation
Increase (decrease) in net assets: Series
From operations -- ----------------
<S> <C>
Net investment income ............................................................... $ 3,224,007
Net realized gain (loss) on investments and foreign currency transactions ........... 5,144,568
Net unrealized gain (loss) on investments and foreign currency translation .......... 1,542,900
------------
Increase (decrease) in net assets from operations .................................. $ 9,911,475
------------
Distributions declared to shareholders --
From net investment income .......................................................... $ (1,525,728)
From net realized gain on investments and foreign currency transactions ............. (3,242,392)
in excess of net realized gain on investments and foreign currency transactions ..... --
------------
Total distributions declared to shareholders ....................................... $ (4,768,120)
------------
Net increase (decrease) in net assets from Series share transactions ................. $ 40,753,264
------------
Total increase (decrease) in net assets ........................................... $ 45,896,619
Net assets:
At beginning of year ................................................................ 77,015,785
------------
At end of year ...................................................................... $122,912,404
============
Accumulated undistributed net investment income included in net assets at
end of year ......................................................................... $ 3,346,657
============
<CAPTION>
World
World Total
Governments Return
Increase (decrease) in net assets: Series Series
From operations -- ----------------- ----------------
<S> <C> <C>
Net investment income ............................................................... $ 6,670,091 $ 1,563,242
Net realized gain (loss) on investments and foreign currency transactions ........... (7,731,267) 1,730,289
Net unrealized gain (loss) on investments and foreign currency translation .......... (470,877) 3,963,137
------------- ------------
Increase (decrease) in net assets from operations .................................. $ (1,532,053) $ 7,256,668
------------- ------------
Distributions declared to shareholders --
From net investment income .......................................................... $ (4,315,610) $ (657,055)
From net realized gain on investments and foreign currency transactions ............. (632,661) (624,021)
in excess of net realized gain on investments and foreign currency transactions ..... (69,979) --
------------- ------------
Total distributions declared to shareholders ....................................... $ (5,018,250) $ (1,281,076)
------------- ------------
Net increase (decrease) in net assets from Series share transactions ................. $ (24,828,038) $ 28,209,709
------------- ------------
Total increase (decrease) in net assets ........................................... $ (31,378,341) $ 34,185,301
Net assets:
At beginning of year ................................................................ 141,764,432 37,637,892
------------- ------------
At end of year ...................................................................... $ 110,386,091 $ 71,823,193
============= ============
Accumulated undistributed net investment income included in net assets at
end of year ......................................................................... $ 603,545 $ 1,511,539
============= ============
<CAPTION>
Zero
Coupon
Series
Increase (decrease) in net assets: Portfolio 2000
From operations -- ---------------
<S> <C>
Net investment income ............................................................... $ 212,609
Net realized gain (loss) on investments and foreign currency transactions ........... 15,490
Net unrealized gain (loss) on investments and foreign currency translation .......... 24,136
----------
Increase (decrease) in net assets from operations .................................. $ 252,235
----------
Distributions declared to shareholders --
From net investment income .......................................................... $ (230,910)
From net realized gain on investments and foreign currency transactions ............. --
in excess of net realized gain on investments and foreign currency transactions ..... --
----------
Total distributions declared to shareholders ....................................... $ (230,910)
----------
Net increase (decrease) in net assets from Series share transactions ................. $ (744,279)
----------
Total increase (decrease) in net assets ........................................... $ (722,954)
Net assets:
At beginning of year ................................................................ 4,337,042
----------
At end of year ...................................................................... $3,614,088
==========
Accumulated undistributed net investment income included in net assets at
end of year ......................................................................... $ 212,590
==========
</TABLE>
See notes to financial statements
41
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights
<TABLE>
<CAPTION>
Bond Series
---------------------
Period ended
December 31, 1998***
---------------------
Per share data (for a share outstanding throughout the period):
<S> <C>
Net asset value -- beginning of period ............................................ $ 10.0000****
------------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.3306
Net realized and unrealized gain on investments and foreign currency transactions 0.3591
------------
Total from investment operations ............................................... $ 0.6897
------------
Net asset value -- end of period .................................................. $ 10.6897
============
Total return++ .................................................................... 6.90%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.03%+
Net investment income ............................................................ 4.88%+
Portfolio turnover ................................................................ 161%
Net assets at end of period (000 omitted) ......................................... $ 19,595
</TABLE>
<TABLE>
<CAPTION>
Government Securities Series
----------------------------
Year Ended December 31,
---------------------------
1998 1997
------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $ 13.0406 $ 12.8672
--------- ---------
Income from investment operations# --
Net investment income ..................................................... $ 0.7663 $ 0.8109
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. 0.3211 0.2490
--------- ---------
Total from investment operations ........................................ $ 1.0874 $ 1.0599
--------- ---------
Less distributions declared to shareholders --
From net investment income ................................................ $ (0.7334) $ (0.8865)
From net realized gain on investments and foreign currency transactions ... -- --
--------- ---------
Total distributions declared to shareholders ............................ $ (0.7334) $ (0.8865)
--------- ---------
Net asset value -- end of year ............................................. $ 13.3946 $ 13.0406
========= =========
Total return++ ............................................................. 8.70% 8.72%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................................ 0.62% 0.63%
Net investment income ..................................................... 5.82% 6.38%
Portfolio turnover ......................................................... 107% 182%
Net assets at end of year (000 omitted) .................................... $ 457,474 $ 387,732
<CAPTION>
Government Securities Series
--------------------------------------------
Year Ended December 31,
--------------------------------------------
1996 1995 1994
------------- ------------- ----------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $ 13.3900 $ 12.1219 $ 13.0951
--------- --------- ---------
Income from investment operations# --
Net investment income ..................................................... $ 0.8445 $ 0.8311 $ 0.6366
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. ( 0.6620) 1.2183 ( 0.9238)
--------- --------- ---------
Total from investment operations ........................................ $ 0.1825 $ 2.0494 $ (0.2872)
--------- --------- ---------
Less distributions declared to shareholders --
From net investment income ................................................ $ (0.7053) $ (0.7813) $ (0.4959)
From net realized gain on investments and foreign currency transactions ... -- -- (0.1901)
--------- --------- ---------
Total distributions declared to shareholders ............................ $ (0.7053) $ (0.7813) $ (0.6860)
--------- --------- ---------
Net asset value -- end of year ............................................. $ 12.8672 $ 13.3900 $ 12.1219
========= ========= =========
Total return++ ............................................................. 1.65% 17.66% (2.21)%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................................ 0.63% 0.63% 0.62%
Net investment income ..................................................... 6.60% 6.59% 6.01%
Portfolio turnover ......................................................... 57% 80% 90%
Net assets at end of year (000 omitted) .................................... $ 383,107 $ 368,848 $347,150
</TABLE>
<TABLE>
<CAPTION>
High Yield Series
-----------------------------
Year Ended December 31,
-----------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $ 9.7108 $ 9.2131
--------- ---------
Income from investment operations# --
Net investment income ..................................................... $ 0.8380 $ 0.8206
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. (0.7526) 0.3319
--------- ---------
Total from investment operations ........................................ $ 0.0854 $ 1.1525
--------- ---------
Less distributions from net investment income .............................. $ (0.6327) $ (0.6548)
--------- ---------
Net asset value -- end of year ............................................. $ 9.1635 $ 9.7108
========= =========
Total return++ ............................................................. 0.58% 13.24%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................................ 0.82% 0.84%
Net investment income ..................................................... 8.78% 8.70%
Portfolio turnover ......................................................... 135% 130%
Net assets at end of year (000 omitted) .................................... $ 326,232 $ 275,207
<CAPTION>
High Yield Series
----------------------------------------------
Year Ended December 31,
----------------------------------------------
1996 1995 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $ 8.9222 $ 8.1860 $ 9.1120
--------- --------- ---------
Income from investment operations# --
Net investment income ..................................................... $ 0.8012 $ 0.7891 $ 0.8226
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. 0.2131 0.5494 (1.0387)
--------- --------- ---------
Total from investment operations ........................................ $ 1.0143 $ 1.3385 $(0.2161)
--------- --------- ---------
Less distributions from net investment income .............................. $ (0.7234) $ (0.6023) $(0.7099)
--------- --------- ---------
Net asset value -- end of year ............................................. $ 9.2131 $ 8.9222 $ 8.1860
========= ========= =========
Total return++ ............................................................. 12.12% 16.93% (2.16)%
Ratios (to average net assets)/Supplemental data:
Expenses## ................................................................ 0.84% 0.87% 0.86%
Net investment income ..................................................... 9.01% 9.17% 8.94%
Portfolio turnover ......................................................... 88% 66% 82%
Net assets at end of year (000 omitted) .................................... $ 196,498 $ 153,800 $102,194
</TABLE>
+Annualized.
++Not annualized.
***For the period from the commencement of the Series' investment operations,
May 6, 1998, through December 31, 1998.
****Net asset value on date of commencement of operations.
#Per share data are based on average shares outstanding.
##Each of the Series' has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent. For fiscal years
ending after September 1, 1995, Series' expenses are calculated without
reduction for this expense offset arrangement.
++The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
[sec]The investment adviser voluntarily waived all or a portion of its advisory
fee for the Bond Series for the period indicated. If these fees had been
incurred by the Series, the net investment income per share and the ratios
would have been:
<TABLE>
<CAPTION>
Bond Series
Period
ended
December 31, 1998
------------------
<S> <C>
Net investment income .......... $ 0.3282
Ratios (to average net assets):
Expenses## .................... 1.07%+
Net investment income ......... 4.84%+
</TABLE>
See notes to financial statements
42
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
International Growth and
Income Series
-----------------------------------------
Year Ended December 31,
-----------------------------------------
1998 1997 1996
------------- ------------- -------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 11.1722 $ 10.6247 $ 10.1282
--------- --------- ----------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0983 $ 0.1356 $ 0.2326
Net realized and unrealized gain on investments and foreign currency transactions 2.3104 0.5497 0.2639
--------- --------- ----------
Total from investment operations ............................................... $ 2.4087 $ 0.6853 $ 0.4965
--------- --------- ----------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.1160) $ (0.1124) $ --
From net realized gain on investments and foreign currency transactions .......... ( 0.2795) ( 0.0254) --
--------- --------- ----------
Total distributions declared to shareholders .................................... $ (0.3955) $ (0.1378) $ --
--------- ---------
----------
Net asset value -- end of period .................................................. $ 13.1854 $ 11.1722 $ 10.6247
========= ========= ==========
Total return++ .................................................................... 21.68% 6.53% 4.84%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.16% 1.22% 0.97%
Net investment income ............................................................ 0.79% 1.24% 2.21%
Portfolio turnover ................................................................ 54% 194% 51%
Net assets at end of period (000 omitted) ......................................... $ 75,410 $ 51,368 $ 35,710
<CAPTION>
International Growth
and
Income Series
--------------------
Period Ended
December 31, 1995**
--------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 10.0000****
------------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0295
Net realized and unrealized gain on investments and foreign currency transactions 0.0987
------------
Total from investment operations ............................................... $ 0.1282
------------
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 .................................................. $ 10.1282
============
Total return++ .................................................................... 1.30%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.50%+
Net investment income ............................................................ 1.64%+
Portfolio turnover ................................................................ --
Net assets at end of period (000 omitted) ......................................... $ 7,179
</TABLE>
<TABLE>
<CAPTION>
MFS[RegTM]/Foreign & Colonial
Emerging Markets
Equity Series
-----------------------------
Year Ended December 31,
-----------------------------
1998 1997
--------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ................................................... $ 11.0359 $ 10.0013
----------- ---------
Income from investment operations# --
Net investment income[sec] .............................................................. $ 0.0934 $ 0.1638
Net realized and unrealized gain (loss) on investments and foreign currency transactions (3.2974) 0.8773
----------- ---------
Total from investment operations ...................................................... $ (3.2040) $ 1.0411
----------- ---------
Less distributions declared to shareholders --
From net investment income .............................................................. $ (0.1362) $ (0.0065)
From net realized gain on investments and foreign currency transactions ................. (0.0967) --
In excess of net realized gain on investments and foreign currency transactions ......... (0.0517) --
From paid-in capital .................................................................... (0.0571) --
----------- ---------
Total distributions declared to shareholders ........................................... $ (0.3417) $ (0.0065)
----------- ---------
Net asset value -- end of period ......................................................... $ 7.4902 $ 11.0359
=========== =========
Total return++ ........................................................................... (29.98)% 10.46%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................................................. 1.59% 1.07%
Net investment income ................................................................... 1.03% 1.38%
Portfolio turnover ....................................................................... 92% 69%
Net assets at end of period (000 omitted) ................................................ $ 17,119 $ 24,181
<CAPTION>
MFS[RegTM]/Foreign &
Colonial
Emerging Markets
Equity Series
-------------------
Period Ended
December 31, 1996*
-------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ................................................... $ 10.0000****
------------
Income from investment operations# --
Net investment income[sec] .............................................................. $ 0.0706
Net realized and unrealized gain (loss) on investments and foreign currency transactions ( 0.0693)
------------
Total from investment operations ...................................................... $ 0.0013
------------
Less distributions declared to shareholders --
From net investment income .............................................................. $ --
From net realized gain on investments and foreign currency transactions ................. --
In excess of net realized gain on investments and foreign currency transactions ......... --
From paid-in capital .................................................................... --
------------
Total distributions declared to shareholders ........................................... $ --
------------
Net asset value -- end of period ......................................................... $ 10.0013
============
Total return++ ........................................................................... 0.00%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................................................. 1.55%+
Net investment income ................................................................... 0.77%+
Portfolio turnover ....................................................................... 4%
Net assets at end of period (000 omitted) ................................................ $ 3,271
</TABLE>
+Annualized.
++Not annualized.
*For the period from the commencement of the Series' investment operations,
June 5, 1996, through December 31, 1996.
**For the period from the commencement of the Series' investment operations,
October 2, 1995, through December 31, 1995.
****Net asset value on date of commencement of operations.
#Per share data are based on average shares outstanding.
##Each of the Series has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent. The Series'
expenses are calculated without reduction for this expense offset
arrangement.
++The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
[sec]The investment adviser voluntarily waived all or a portion of its advisory
fee for the International Growth and Income Series and MFS[RegTM]/Foreign &
Colonial Emerging Markets Equity Series for the periods indicated. If these
fees had been incurred by the Series, the net investment income (loss) per
share and the ratios would have been:
<TABLE>
<CAPTION>
International Growth MFS[RegTM]/Foreign & Colonial
and Income Series Emerging Markets Equity Series
----------------------------------------- ---------------------------------------
Year ended Period ended Year ended Period ended
December 31, 1996 December 31, 1995** December 31, 1997 December 31, 1996*
------------------- --------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Net investment income (loss) ......... $ 0.2101 $ 0.0119 $ 0.1552 $ (0.0975)
Ratios (to average net assets):
Expenses## .......................... 1.16% 2.48%+ 1.55% 3.38%+
Net investment income ............... 2.02% 0.66%+ 0.90% (1.12)%+
</TABLE>
See notes to financial statements
43
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Money Market Series
-----------------------------
Year Ended December 31,
-----------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ......................... $ 1.0000 $ 1.0000
--------- ---------
Income from investment operations# -- ........................ $ 0.0494 $ 0.0495
--------- ---------
Less distributions from net investment income ................ $ (0.0494) $ (0.0495)
--------- ---------
Net asset value -- end of year ............................... $ 1.0000 $ 1.0000
========= =========
Total return++ ............................................... 5.02% 5.06%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................. 0.56% 0.57%
Net investment income ....................................... 4.94% 4.94%
Net assets at end of year (000 omitted) ...................... $ 465,545 $ 340,060
<CAPTION>
Money Market Series
--------------------------------------------
Year Ended December 31,
--------------------------------------------
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ......................... $ 1.0000 $ 1.0000 $ 1.0000
--------- --------- ---------
Income from investment operations# -- ........................ $ 0.0483 $ 0.0520 $ 0.0363
--------- --------- ---------
Less distributions from net investment income ................ $ (0.0483) $ (0.0520) $ (0.0363)
--------- --------- ---------
Net asset value -- end of year ............................... $ 1.0000 $ 1.0000 $ 1.0000
========= ========= =========
Total return++ ............................................... 4.95% 5.44% 3.69%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................. 0.56% 0.59% 0.58%
Net investment income ....................................... 4.82% 5.30% 3.74%
Net assets at end of year (000 omitted) ...................... $ 409,165 $ 282,754 $ 252,175
</TABLE>
<TABLE>
<CAPTION>
Strategic Income Series
------------------------
Period ended
December 31, 1998***
------------------------
<S> <C>
Per share data (for a share outstanding throughout the period):
Net asset value -- beginning of period ................................................... $ 10.0000****
------------
Income from investment operations# --
Net investment income[sec] .............................................................. $ 0.4206
Net realized and unrealized gain (loss) on investments and foreign currency transactions (0.3767)
------------
Total from investment operations ....................................................... $ 0.0439
------------
Net asset value -- end of period ......................................................... $ 10.0439
============
Total return++ ........................................................................... 0.40%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## .............................................................................. 1.29%+
Net investment income ................................................................... 6.52%+
Portfolio turnover ....................................................................... 182%
Net assets at end of period (000 omitted) ................................................ $ 7,780
</TABLE>
<TABLE>
<CAPTION>
World Asset Allocation
Series
---------------------------
Year Ended December 31,
---------------------------
1998 1997
------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 14.5377 $ 13.7794
--------- ---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.4686 $ 0.4412
Net realized and unrealized gain on investments and foreign currency transactions 0.5338 1.0178
--------- ---------
Total from investment operations ............................................... $ 1.0024 $ 1.4590
--------- ---------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.4975) $ (0.2242)
From net realized gain on investments and foreign currency transactions .......... ( 0.5977) ( 0.4765)
--------- ---------
Total distributions declared to shareholders ................................... $ (1.0952) $ (0.7007)
--------- ---------
Net asset value -- end of period .................................................. $ 14.4449 $ 14.5377
========= =========
Total return++ .................................................................... 6.60% 10.87%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.90% 0.92%
Net investment income ............................................................ 3.21% 3.06%
Portfolio turnover ................................................................ 163% 162%
Net assets at end of period (000 omitted) ......................................... $ 126,641 $ 122,912
<CAPTION>
World Asset Allocation Series
-----------------------------
Year Ended December 31,
---------------------------
1996 1995
------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 12.2250 $ 10.0579
--------- ---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.3731 $ 0.4205
Net realized and unrealized gain on investments and foreign currency transactions 1.5563 1.7540
--------- ---------
Total from investment operations ............................................... $ 1.9294 $ 2.1745
--------- ---------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.1300) $ (0.0074)
From net realized gain on investments and foreign currency transactions .......... ( 0.2450) --
--------- ---------
Total distributions declared to shareholders ................................... $ (0.3750) $ (0.0074)
--------- ---------
Net asset value -- end of period .................................................. $ 13.7794 $ 12.2250
========= =========
Total return++ .................................................................... 16.04% 21.56%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.94% 0.67%
Net investment income ............................................................ 2.84% 3.70%
Portfolio turnover ................................................................ 154% 146%
Net assets at end of period (000 omitted) ......................................... $ 77,016 $ 25,863
<CAPTION>
World Asset
Allocation Series
--------------------
Period Ended
December 31, 1994**
--------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 10.0000****
------------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0220
Net realized and unrealized gain on investments and foreign currency transactions 0.0359
------------
Total from investment operations ............................................... $ 0.0579
------------
Less distributions declared to shareholders --
From net investment income ....................................................... $ --
From net realized gain on investments and foreign currency transactions .......... --
------------
Total distributions declared to shareholders ................................... $ --
------------
Net asset value -- end of period .................................................. $ 10.0579
============
Total return++ .................................................................... 0.60%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.50%+
Net investment income ............................................................ 3.13%+
Portfolio turnover ................................................................ 2%
Net assets at end of period (000 omitted) ......................................... $ 3,003
</TABLE>
+Annualized.
++Not annualized.
**For the period from the commencement of the Series' investment operations,
November 7, 1994, through December 31, 1994.
***For the period from the commencement of the Series' investment operations,
May 6, 1998, through December 31, 1998.
****Net asset value on date of commencement of operations.
#Per share data are based on average shares outstanding.
##Each of the Series' has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent. For fiscal years
ending after September 1, 1995, the Series' expenses are calculated without
reduction for this expense offset arrangement.
++The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
[sec]The investment adviser voluntarily waived all or a portion of its advisory
fee for the Strategic Income Series and World Asset Allocation Series for
the periods indicated. If these fees had been incurred by the Series, the
net investment income per share and the ratios would have been:
<TABLE>
<CAPTION>
Strategic Income Series World Asset Allocation Series
------------------------- ----------------------------------------
Period Ended Year Ended Period Ended
December 31, 1998*** December 31, 1995 December 31, 1994**
------------------------- ------------------- --------------------
<S> <C> <C> <C>
Net investment income .......... $ 0.4122 $ 0.3716 $ 0.0041
Ratios (to average net assets):
Expenses## .................... 1.42%+ 1.11% 4.05%+
Net investment income ......... 6.41%+ 3.27% 0.58%+
</TABLE>
See notes to financial statements
44
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Governments Series
------------------------------
Year Ended December 31,
------------------------------
1998 1997
------------- ----------------
<S> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ........................................... $ 10.7247 $ 11.2582
--------- ---------
Income from investment operations# --
Net investment income ......................................................... $ 0.5302 $ 0.5770
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ................................................................. 1.1118 (0.6754)
--------- ---------
Total from investment operations ............................................ $ 1.6420 $ (0.0984)
--------- ---------
Less distributions declared to shareholders --
From net investment income .................................................... $ (0.1396) $ (0.3742)
From net realized gain on investments and foreign currency transactions ....... -- (0.0548)
In excess of net realized gain on investments and foreign currency transactions -- (0.0061)
--------- ---------
Total distributions declared to shareholders ................................ $ (0.1396) $ (0.4351)
--------- ---------
Net asset value -- end of year ................................................. $ 12.2271 $ 10.7247
========= =========
Total return++ ................................................................. 15.46% (0.76)%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................................... 0.88% 0.91%
Net investment income ......................................................... 4.75% 5.43%
Portfolio turnover ............................................................. 315% 344%
Net assets at end of year (000 omitted) ........................................ $ 99,220 $110,386
<CAPTION>
World Governments Series
--------------------------------------------
Year Ended December 31,
--------------------------------------------
1996 1995 1994
------------- ------------- ----------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ........................................... $12.4866 $11.3769 $ 13.0212
-------- -------- ---------
Income from investment operations# --
Net investment income ......................................................... $ 0.6882 $ 0.8031 $ 0.6095
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ................................................................. (0.2081) 0.9511 (1.2295)
-------- -------- ---------
Total from investment operations ............................................ $ 0.4801 $ 1.7542 $ (0.6200)
-------- -------- ---------
Less distributions declared to shareholders --
From net investment income .................................................... $(1.7085) $(0.0058) $ (0.8823)
From net realized gain on investments and foreign currency transactions ....... -- (0.6387) (0.1420)
In excess of net realized gain on investments and foreign currency transactions -- -- --
-------- -------- ---------
Total distributions declared to shareholders ................................ $(1.7085) $(0.6445) $ (1.0243)
-------- -------- ---------
Net asset value -- end of year ................................................. $11.2582 $12.4866 $ 11.3769
======== ======== =========
Total return++ ................................................................. 4.66% 15.69% (4.46)%
Ratios (to average net assets)/Supplemental data:
Expenses## .................................................................... 0.90% 0.89% 0.90%
Net investment income ......................................................... 6.00% 6.67% 6.06%
Portfolio turnover ............................................................. 390% 329% 269%
Net assets at end of year (000 omitted) ........................................ $141,764 $152,487 $139,155
</TABLE>
#Per share data are based on average shares outstanding.
##Each of the Series' has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent. For fiscal years
ending after September 1, 1995, the Series' expenses are calculated without
reduction for this expense offset arrangement.
++The total return information shown above does not reflect
expenses that apply to the separate accounts established by Sun Life of
Canada (U.S.) and Sun Life (N.Y.).
Inclusion of these charges would reduce the total return figures for all
periods shown.
See notes to financial statements
45
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
World Total Return Series
---------------------------
Year Ended December 31,
---------------------------
1998 1997
------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 14.6971 $ 13.2657
--------- ---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.3813 $ 0.3979
Net realized and unrealized gain on investments and foreign currency transactions 2.2629 1.3759
--------- ---------
Total from investment operations ............................................... $ 2.6442 $ 1.7738
--------- ---------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.3201) $ (0.1756)
From net realized gain on investments and foreign currency transactions .......... ( 0.4152) ( 0.1668)
--------- ---------
Total distributions declared to shareholders .................................... $ (0.7353) $ (0.3424)
--------- ---------
Net asset value -- end of period .................................................. $ 16.6060 $ 14.6971
========= =========
Total return++ .................................................................... 18.37% 13.61%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.93% 1.04%
Net investment income ............................................................ 2.44% 2.85%
Portfolio turnover ................................................................ 141% 171%
Net assets at end of period (000 omitted) ......................................... $ 99,955 $ 71,823
<CAPTION>
World Total Return Series
----------------------------
Year Ended December 31,
---------------------------
1996 1995
------------- -------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 11.8346 $ 10.0405
--------- ---------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.4131 $ 0.4437
Net realized and unrealized gain on investments and foreign currency transactions 1.2480 1.3564
--------- ---------
Total from investment operations ............................................... $ 1.6611 $ 1.8001
--------- ---------
Less distributions declared to shareholders --
From net investment income ....................................................... $ (0.2300) $ (0.0060)
From net realized gain on investments and foreign currency transactions .......... -- --
--------- ---------
Total distributions declared to shareholders .................................... $ (0.2300) $ (0.0060)
--------- ---------
Net asset value -- end of period .................................................. $ 13.2657 $ 11.8346
========= =========
Total return++ .................................................................... 14.33% 17.89%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 0.96% 0.77%
Net investment income ............................................................ 3.33% 4.01%
Portfolio turnover ................................................................ 148% 146%
Net assets at end of period (000 omitted) ......................................... $ 37,638 $ 13,786
<CAPTION>
World Total Return
Series
--------------------
Period Ended
December 31, 1994**
--------------------
<S> <C>
Per share data (for a share outstanding throughout each period):
Net asset value -- beginning of period ............................................ $ 10.0000****
------------
Income from investment operations# --
Net investment income[sec] ....................................................... $ 0.0247
Net realized and unrealized gain on investments and foreign currency transactions 0.0158
------------
Total from investment operations ............................................... $ 0.0405
------------
Less distributions declared to shareholders --
From net investment income ....................................................... $ --
From net realized gain on investments and foreign currency transactions .......... --
------------
Total distributions declared to shareholders .................................... $ --
------------
Net asset value -- end of period .................................................. $ 10.0405
============
Total return++ .................................................................... 0.40%++
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ....................................................................... 1.50%+
Net investment income ............................................................ 3.31%+
Portfolio turnover ................................................................ 1%
Net assets at end of period (000 omitted) ......................................... $ 1,384
</TABLE>
+Annualized.
++Not annualized.
**For the period from the commencement of the Series' investment operations,
November 7, 1994, through December 31, 1994.
****Net asset value on date of commencement of operations.
#Per share data are based on average shares outstanding.
##Each of the Series' has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent. For fiscal years
ending after September 1, 1995, the Series' expenses are calculated without
reduction for this expense offset arrangement.
++The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
[sec]The investment adviser voluntarily waived all or a portion of its advisory
fee for the World Total Return Series for the periods indicated. If these
fees had been incurred by the Series, the net investment income (loss) per
share and the ratios would have been:
<TABLE>
<CAPTION>
Year Ended Period Ended
December 31, 1995 December 31, 1994**
------------------- --------------------
<S> <C> <C>
Net investment income (loss) ......... $ 0.3972 $ (0.0405)
Ratios (to average net assets):
Expenses## .......................... 1.19% 6.93%+
Net investment income ............... 3.59% (2.12)%+
</TABLE>
See notes to financial statements
46
<PAGE>
MFS/Sun Life Series Trust
Financial Highlights -- continued
<TABLE>
<CAPTION>
Zero Coupon Series, Portfolio
2000
-----------------------------
Year Ended December 31,
-----------------------------
1998 1997
-------------- --------------
<S> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $ 8.9096 $ 8.8822
--------- ---------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.5225 $ 0.4949
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. 0.0960 0.0896
--------- ---------
Total from investment operations ........................................ $ 0.6185 $ 0.5845
--------- ---------
Less distributions --
From net investment income ................................................ $ (0.5589) $ (0.5571)
From net realized gain on investments ..................................... -- --
--------- ---------
Total distributions ..................................................... $ (0.5589) $ (0.5571)
--------- ---------
Net asset value -- end of year ............................................. $ 8.9692 $ 8.9096
========= =========
Total return++ ............................................................. 7.28% 6.98%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ................................................................ 0.53% 0.54%
Net investment income ..................................................... 5.88% 5.71%
Portfolio turnover ......................................................... 0% 0%
Net assets at end of year (000 omitted) .................................... $ 3,473 $ 3,614
<CAPTION>
Zero Coupon Series, Portfolio 2000
----------------------------------------------
Year Ended December 31,
----------------------------------------------
1996 1995 1994
-------------- -------------- ----------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value -- beginning of year ....................................... $ 9.0619 $ 7.9573 $ 11.1167
--------- --------- ---------
Income from investment operations# --
Net investment income[sec] ................................................ $ 0.2094 $ 0.4340 $ 0.3807
Net realized and unrealized gain (loss) on investments and foreign currency
transactions ............................................................. (0.0528) 1.1038 (1.1094)
--------- --------- ---------
Total from investment operations ........................................ $ 0.1566 $ 1.5378 $ (0.7287)
--------- --------- ---------
Less distributions --
From net investment income ................................................ $ (0.3363) $ (0.4332) $ (0.6250)
From net realized gain on investments ..................................... -- -- (1.8057)
--------- --------- ---------
Total distributions ..................................................... $ (0.3363) $ (0.4332) $ (2.4307)
--------- --------- ---------
Net asset value -- end of year ............................................. $ 8.8822 $ 9.0619 $ 7.9573
========= ========= =========
Total return++ ............................................................. 1.91% 19.88% (6.99)%
Ratios (to average net assets)/Supplemental data[sec]:
Expenses## ................................................................ 0.53% 0.52% 0.53%
Net investment income ..................................................... 5.23% 5.18% 4.95%
Portfolio turnover ......................................................... 2% 27% 12%
Net assets at end of year (000 omitted) .................................... $ 4,337 $ 4,616 $ 3,280
</TABLE>
#Per share data are based on average shares outstanding.
##Each of the Series' has an expense offset arrangement which reduces the
Series' custodian fee based upon the amount of cash maintained by the
Series with its custodian and dividend disbursing agent. For fiscal years
ending after September 1, 1995, the Series' expenses are calculated without
reduction for this expense offset arrangement.
++The total return information shown above does not reflect expenses that
apply to the separate accounts established by Sun Life of Canada (U.S.) and
Sun Life (N.Y.). Inclusion of these charges would reduce the total return
figures for all periods shown.
[sec]The investment adviser voluntarily agreed to maintain expenses of the
Zero Coupon Series, Portfolio 2000 at not more than 0.50% of average daily
net assets for the periods indicated. To the extent actual expenses were
over/under this limitation, the net investment income per share and the
ratios would have been:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net investment income .......... $ 0.4879 $ 0.4728 $ 0.2045
Ratios (to average net assets):
Expenses## .................... 0.92% 0.80% 0.62%
Net investment income ......... 5.49% 5.38% 5.08%
</TABLE>
See notes to financial statements
47
<PAGE>
MFS/Sun Life Series Trust
Notes to Financial Statements
(1) Organization
The Trust is organized as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended, as an open-end, management
investment company consisting of twenty-six separate Series (the Series) of
shares: Bond Series*, Capital Appreciation Series, Capital Opportunities Series
(formerly Value Series), Conservative Growth Series, Emerging Growth Series,
Equity Income Series, Government Securities Series*, High Yield Series*,
International Growth Series, International Growth and Income Series*, Managed
Sectors Series, MFS[RegTM]/Foreign & Colonial Emerging Markets Equity Series*,
Money Market Series*, Massachusetts Investors Growth Stock Series, New Discovery
Series, Research Series, Research Growth and Income Series, Research
International Series, Strategic Income Series*, Total Return Series, Utilities
Series, World Asset Allocation(SM) Series*, World Governments Series*, World
Growth Series, World Total Return Series*, and Zero Coupon Series, Portfolio
2000*. The High Yield Series, Managed Sector Series, Strategic Income Series,
Utilities Series, World Asset Allocation(SM) Series, World Governments Series,
World Growth Series, and World Total Return Series are nondiversified as that
term is defined in the Investment Company Act of 1940, as amended. The shares of
each Series are sold only to variable accounts established by Sun Life Assurance
Company of Canada (U.S.) and Sun Life Insurance and Annuity Company of New York
to fund benefits under variable annuity contracts issued by such companies.
The Series' denoted with an asterisk above are included within these financial
statements.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues 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. Money
market instruments are valued at amortized cost, which the Trustees have
determined in good faith approximates fair value. The Trust's use of amortized
cost is subject to the Trust's compliance with certain conditions as specified
under Rule 2a-7 of the Investment Company Act of 1940. Futures contracts,
options, and options on futures contracts listed on commodities exchanges are
reported at market value using closing settlement prices. Over-the-counter
options on securities are valued by brokers. Over-the-counter currency options
are valued through the use of a pricing model which takes into account foreign
currency exchange spot and forward rates, implied volatility, and short-term
repurchase rates. Securities for which there are no such quotations or
valuations are valued at fair value as determined in good faith by or at the
direction of the Trustees.
Repurchase Agreements - Certain Series of the Trust may enter into repurchase
agreements with institutions that the Trust's investment adviser has determined
are creditworthy. Each repurchase agreement is recorded at cost. Such Series
require that the collateral in a repurchase transaction be transferred to the
custodian in a manner sufficient to enable the Trust to obtain those securities
in the event of a default under the repurchase agreement. The investment advisor
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the Series
under each such repurchase agreement. Certain Series of the Trust, along with
other affiliated entities of Massachusetts Financial Services Company (MFS), may
utilize a joint trading account for the purpose of entering into one or more
repurchase agreements.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that result from fluctuations in foreign currency exchange rates is not
separately disclosed.
Written Options - Certain Series of the Trust may write call or put options in
exchange for a premium. The premium is initially recorded as a liability which
is subsequently adjusted to the current value of the options contract. When a
written option expires, the Series realizes a gain equal to the amount of the
premium received. When a written call option is exercised or closed, the premium
received is offset against the proceeds to determine the realized gain or loss.
When a written put option is exercised, the premium reduces the cost basis of
the security purchased by the Series. The Series, as writer of an option, may
have no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable change
in the price of the securities underlying the written option. In general,
written call options may serve as a partial hedge against decreases in value in
the underlying securities to the extent of the premium received. Written options
may also be used as part of an income producing strategy reflecting the view of
the Series' management on the direction of interest rates.
Futures Contracts - Certain Series of the Trust may enter into futures contracts
for the delayed delivery of securities or currency, or contracts based on
financial indices at a fixed price on a future date. In entering such contracts,
the Series is required to deposit with the broker, either in cash or securi-
48
<PAGE>
Notes to Financial Statements -- continued
ties an amount equal to a certain percentage of the contract amount. Subsequent
payments are made or received by the Series each day, depending on the daily
fluctuations in the value of the contract, and are recorded for financial
statement purposes as unrealized gains or losses by the Series. The Series'
investment in futures contracts is designed to hedge against anticipated future
changes in interest or exchange rates or securities prices. Investments in
interest rate futures for purposes other than hedging may be made to modify the
duration of the portfolio without incurring the additional transaction costs
involved in buying and selling the underlying securities. Investments in
currency futures for purposes other than hedging may be made to change the
Series' relative position in one or more currencies without buying and selling
portfolio assets. Investments in equity index contracts or contracts on related
options for purposes other than hedging may be made when the Series has cash on
hand and wishes to participate in anticipated market appreciation while the cash
is being invested. Should interest or exchange rates or securities prices move
unexpectedly, the Series may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
Forward Foreign Currency Exchange Contracts - Certain Series of the Trust may
enter into forward foreign currency exchange contracts for the purchase or sale
of a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
Series will enter into forward contracts for hedging purposes as well as for
nonhedging purposes. For hedging purposes, the Series may enter into contracts
to deliver or receive foreign currency it will receive from or require for its
normal investment activities. The Series may also use contracts in a manner
intended to protect foreign currency-denominated securities from declines in
value due to unfavorable exchange rate movements. For nonhedging purposes, the
Series may enter into contracts with the intent of changing the relative
exposure of the Series' portfolio of securities to different currencies to take
advantage of anticipated changes. The forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded as unrealized until the contract settlement
date. On contractual settlement date, the gains or losses are recorded as
realized gains or losses on foreign currency transactions.
Swap Agreements - Certain Series of the Trust may enter into swap agreements. A
swap is an exchange of cash payments between a Series and another party which is
based on a specific financial index. Cash payments are exchanged at specified
intervals and the expected income or expense is recorded on the accrual basis.
The value of the swap is adjusted daily and the change in value is recorded as
unrealized appreciation or depreciation. Risks may arise upon entering into
these agreements from the potential inability of counterparties to meet the
terms of their contract and from unanticipated changes in the value of the
financial index on which the swap agreement is based. The Series uses swaps for
both hedging and non-hedging purposes. For hedging purposes, the Series may use
swaps to reduce its exposure to interest and foreign exchange rate fluctuations.
For non-hedging purposes, the Series may use swaps to take a position on
anticipated changes in the underlying financial index.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
original issue discounts are amortized or accreted for financial statement and
tax reporting purposes as required by federal income tax regulations. Dividends
received in cash are recorded on the ex-dividend date. Dividend and interest
payments received in additional securities are recorded on the ex-dividend or
ex-interest date in an amount equal to the value of the security on such date.
The High Yield Series can invest up to 100% of its portfolio in high-yield
securities rated below investment grade. Investments in high-yield securities
involve greater degrees of credit and market risk than investments in
higher-rated securities, and tend to be more sensitive to economic conditions.
Certain Series of the Trust use the effective interest method for reporting
interest income on payment-in-kind (PIK) bonds. Legal fees and other related
expenses incurred to preserve and protect the value of a security owned are
added to the cost of the security; other legal fees are expensed. Capital
infusions, which are generally nonrecurring or incurred to protect or enhance
the value of high-yield debt securities, are reported as an addition to the cost
basis of the security. Costs that are incurred to negotiate the terms or
conditions of capital infusions or that are expected to result in a plan of
reorganization are reported as realized losses. Ongoing costs incurred to
protect or enhance an investment, or costs incurred to pursue other claims or
legal actions, are expensed.
Fees Paid Indirectly - The Series' custody fee is calculated as a percentage of
the Series' month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Series. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - Each Series' policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided. The Series' file tax
returns annually using tax accounting methods required under provisions of the
Code, which may differ from generally accepted accounting principles, the basis
on which these financial statements are prepared. Accordingly, the amount of net
investment income and net realized gain reported on these financial statements
may differ from that reported on the Series' tax returns. Foreign taxes have
been provided for on interest and dividend income earned on foreign investments
in accordance with the applicable country's tax rates and to the extent
unrecoverable, are recorded as a reduction of investment income.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis and requires that only distributions in excess of tax basis
earnings and profits are reported in the financial statements as a tax return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. For the year ended December 31, 1998, MFS/Foreign & Colonial Emerging
Markets Equity Series had a tax return of capital of $126,919.
For the year ended December 31, 1998, the following amounts were reclassified
due to permanent differences between book and tax accounting for currency
transactions and paydown securities. These changes had no effect on the net
assets or net asset value per share.
49
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
MFS/Foreign
& Colonial
International Emerging
Bond Government High Yield Growth and Markets
Series Securities Series Series Income Equity Series
--------- ------------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Increase (decrease):
Paid-in capital ............................... $ -- $ 733,269 $ -- $ -- $ --
Accumulated undistributed net realized gain on
investments and foreign currency transactions 736 86,333 (34,984) (310,043) 219,203
Accumulated undistributed net investment income (736) (819,602) 34,984 310,043 (219,203)
<CAPTION>
Money World Asset World World
Market Strategic Allocation Governments Total
Series Income Series Series Series Return
-------- --------------- --------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Increase (decrease):
Paid-in capital ............................... $-- $ -- $ -- $ -- $ --
Accumulated undistributed net realized gain on
investments and foreign currency transactions -- 38,410 (2,559,189) (1,464,483) (501,679)
Accumulated undistributed net investment income -- (38,410) 2,559,189 1,464,483 501,679
<CAPTION>
Zero
Coupon
Series,
Portfolio
2000
------------
<S> <C>
Increase (decrease):
Paid-in capital ............................... $ --
Accumulated undistributed net realized gain on
investments and foreign currency transactions --
Accumulated undistributed net investment income --
</TABLE>
At December 31, 1998, the following Series had a capital loss carryforward for
federal income tax purposes which may be applied against any net taxable
realized gains of each succeeding year until the earlier of its utilization or
expiration.
<TABLE>
<CAPTION>
Total Carryover 1999 2000 2001
----------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Government Securities Series ............................. $6,997,081 $ -- $ -- $ --
High Yield Series ........................................ 8,489,633 -- -- --
MFS/Foreign & Colonial Emerging Markets Equity Series..... 4,745,012 -- -- --
Money Market Series ...................................... 1,161 -- -- --
World Asset Allocation Series ............................
Zero Coupon Series, Portfolio 2000 ....................... 12,172 -- -- --
<CAPTION>
2002 2003 2004 2005 2006
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Government Securities Series ............................. $2,746,862 $ 78,697 $1,721,078 $2,450,444 $ --
High Yield Series ........................................ 701,562 2,157,903 -- -- 5,630,168
MFS/Foreign & Colonial Emerging Markets Equity Series..... -- -- -- -- 4,745,012
Money Market Series ...................................... 631 -- 530 -- --
World Asset Allocation Series ............................
Zero Coupon Series, Portfolio 2000 ....................... -- 8,386 3,786 -- --
</TABLE>
(3) Transactions with Affiliates
The Trust has an investment advisory agreement with Massachusetts Financial
Services Company (MFS), an indirect subsidiary of Sun Life Assurance Company of
Canada, to provide overall investment advisory and administrative services and
general office facilities. Investment advisory fees are computed daily and paid
monthly at an effective annual rate based on a percentage of each Series'
average daily net assets. The agreements also provide that each Series will be
reimbursed for operating expenses and other expenses, exclusive of investment
advisory fees, in excess of the expense limitation indicated below, calculated
based on the average daily net assets of each Series for the fiscal year.
Investment advisory fees and expense limitations respectively, are as follows:
<TABLE>
<CAPTION>
Total Other
Investment Expense Expense
Advisory Fees Limitations Limitations
--------------- ------------- ------------
<S> <C> <C> <C>
Government Securities Series ....................................... 0.55% N/A N/A
High Yield Series .................................................. 0.75% N/A N/A
International Growth and Income Series ............................. 0.975%* N/A N/A
MFS[RegTM]/Foreign & Colonial Emerging Markets Equity Series ....... 1.25% N/A N/A
Money Market Series ................................................ 0.50% N/A N/A
World Asset Allocation(SM) Series .................................. 0.75%* N/A N/A
World Governments Series ........................................... 0.75%* 1.25% N/A
World Total Return Series .......................................... 0.75%* N/A N/A
Zero Coupon Series, Portfolio 2000 ................................. 0.25% 1.25% N/A
Bond Series ........................................................ 0.60% N/A 0.40%
Strategic Income Series ............................................ 0.75% N/A 0.50%
</TABLE>
*The advisory fee for the World Asset Allocation(SM) Series, World Governments
Series, and World Total Return Series is 0.75% of the first $300 million of
average daily net assets of each of the Series and 0.675% of the average daily
net assets of each Series in excess of $300 million. The advisory fee for the
International Growth and Income Series is reduced to 0.925% of the average
daily net assets in excess of $500 million.
Under an expense limitation agreement, MFS assumed expenses for the period ended
December 31, 1998, amounting to $2,021, $3,495, and $13,628 for the Bond Series,
Strategic Income Series, and the Zero Coupon Series, Portfolio 2000.
Administrator - Each Series has an administrative services agreement with MFS to
provide the Series with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, each Series pays MFS an administrative fee
at the following annual percentages of the Series' average daily net assets,
provided that the administrative fee is not assessed on Series assets that
exceed $3 billion:
<TABLE>
<S> <C>
First $1 billion................ 0.0150%
Next $1 billion................. 0.0125%
Next $1 billion................. 0.0100%
In excess of $3 billion......... 0.0000%
</TABLE>
The Trust pays no compensation directly to its Trustees or officers who are
affiliated with MFS or Sun Life Assurance Company of Canada (U.S.), all of whom
receive renumeration for their services to the Trust from MFS or Sun Life
Assurance Company of Canada. Certain officers and Trustees of the Trust are
officers or directors of MFS or Sun Life Assurance Company of Canada.
50
<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>
Government
Securities High Yield
Bond Series Series Series
------------- --------------- ---------------
<S> <C> <C> <C>
Purchases
U.S. government securities .................. $13,903,657 $506,465,104 $ --
=========== ============ ============
Investments (non-U.S. government securities) $16,009,906 $ -- $473,489,712
=========== ============ ============
Sales
U.S. government securities .................. $ 6,270,030 $435,885,391 $ --
=========== ============ ============
Investments (non-U.S. government securities) $ 6,022,932 $ -- $401,531,945
=========== ============ ============
<CAPTION>
International MFS[RegTM]/Foreign &
Growth and Money Market Colonial Emerging
Income Series Series+ Markets Equity Series
--------------- ------------------ ----------------------
<S> <C> <C> <C>
Purchases
U.S. government securities .................. $ -- $15,272,122,114 $ --
=========== =============== ===========
Investments (non-U.S. government securities) $43,949,315 $ 1,177,489,490 $19,316,557
=========== =============== ===========
Sales
U.S. government securities .................. $ -- $16,339,678,000 $ --
=========== =============== ===========
Investments (non-U.S. government securities) $33,598,218 $ 4,297,525 $18,332,393
=========== =============== ===========
</TABLE>
+Purchases and sales of investments for Money Market Series consist solely of
short-term obligations.
<TABLE>
<CAPTION>
World Asset
Strategic Income Allocation
Series Series
------------------ ---------------
<S> <C> <C>
Purchases
U.S. government securities ........................... $ 1,382,925 $ 57,491,809
=========== ============
Investments (non-U.S. government securities) ......... $12,068,328 $156,524,452
=========== ============
Sales
U.S. government securities ........................... $ 1,206,565 $ 50,445,835
=========== ============
Investments (non-U.S. government securities) ......... $ 4,890,800 $136,114,008
=========== ============
<CAPTION>
World Zero Coupon
Governments World Total Series,
Series Return Series Portfolio 2000
--------------- --------------- ---------------
<S> <C> <C> <C>
Purchases
U.S. government securities ........................... $177,077,559 $56,170,300 $ --
============ =========== ========
Investments (non-U.S. government securities) ......... $125,857,362 $75,818,322 $ --
============ =========== ========
Sales
U.S. government securities ........................... $189,541,685 $53,154,062 $391,831
============ =========== ========
Investments (non-U.S. government securities) ......... $129,090,617 $64,591,136 $ --
============ =========== ========
</TABLE>
The cost and unrealized appreciation or depreciation in value of the investments
owned by the Fund, as computed on a federal income tax basis, are as follows:
<TABLE>
<CAPTION>
Government
Bond Series Securities Series
--------------- -------------------
<S> <C> <C>
Aggregate cost .................................. $18,986,000 $434,993,452
=========== ============
Gross unrealized appreciation ................... $ 170,944 $ 18,231,478
=========== ============
Gross unrealized depreciation ................... $ (119,757) $ (642,896)
=========== ============
Net unrealized appreciation (depreciation) ..... $ 51,187 $ 17,588,582
=========== ============
<CAPTION>
International MFS/Foreign &
High Yield Growth and Money Market Colonial Emerging
Series Income Series Series Markets Equity Series
----------------- --------------- -------------- ----------------------
<S> <C> <C> <C> <C>
Aggregate cost .................................. $ 330,535,176 $ 63,792,482 $465,163,385 $ 21,234,820
============= ============ ============ ============
Gross unrealized appreciation ................... $ 7,963,849 $ 13,177,922 $ -- $ 1,280,126
============= ============ ============ ============
Gross unrealized depreciation ................... $ (20,509,031) $ (2,014,945) $ -- $ (5,432,514)
============= ============ ============ ============
Net unrealized appreciation (depreciation) ..... $ (12,545,182) $ 11,162,977 $ -- $ (4,152,388)
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
World Asset
Strategic Income Allocation
Series Series
------------------ ---------------
<S> <C> <C>
Aggregate cost .................................... $7,503,539 $116,732,342
========== ============
Gross unrealized appreciation ..................... $ 116,516 $ 15,085,717
========== ============
Gross unrealized depreciation ..................... $ (199,114) $ (9,370,093)
========== ============
Net unrealized appreciation (depreciation) ....... $ (82,598) $ 5,713,624
========== ============
<CAPTION>
World
World Total Zero Coupon
Governments Return Series,
Series Series Portfolio 2000
--------------- ---------------- ---------------
<S> <C> <C> <C>
Aggregate cost .................................... $93,456,374 $ 84,993,809 $3,333,507
=========== ============ ==========
Gross unrealized appreciation ..................... $ 4,905,788 $ 15,175,640 $ 143,870
=========== ============ ==========
Gross unrealized depreciation ..................... $ (762,978) $ (1,018,675) $ --
=========== ============ ==========
Net unrealized appreciation (depreciation) ....... $ 4,142,810 $ 14,156,965 $ 143,870
=========== ============ ==========
</TABLE>
(5) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest without par value.
Transactions in Trust shares during the periods ended December 31, 1998 and
December 31, 1997, are presented below.
<TABLE>
<CAPTION>
Bond Series
Period ended December 31,
1998***
------------------------------
<S> <C> <C>
Shares sold ............................................................ 2,318,393 $ 24,240,231
Shares issued to shareholders in reinvestment of distributions ......... -- --
Shares reacquired ...................................................... (485,341) (5,147,887)
--------- ------------
Net increase .......................................................... 1,833,052 $ 19,092,344
========= ============
</TABLE>
***For the period from the commencement of the Series' investment operations,
May 6, 1998, through December 31, 1998.
51
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Government Securities Series
Year Ended
December 31, 1998
----------------------------------
<S> <C> <C>
Shares sold ............................................................ 13,540,558 $ 178,146,550
Shares issued to shareholders in reinvestment of distributions ......... 1,852,375 23,191,736
Shares reacquired ...................................................... (10,971,934) (144,023,149)
----------- -------------
Net increase (decrease) ............................................... 4,420,999 $ 57,315,137
=========== =============
<CAPTION>
Government Securities Series
Year ended
December 31, 1997
---------------------------------
<S> <C> <C>
Shares sold ............................................................ 6,269,218 $ 79,600,457
Shares issued to shareholders in reinvestment of distributions ......... 2,083,486 25,293,515
Shares reacquired ...................................................... (8,394,026) (106,557,412)
---------- -------------
Net increase (decrease) ............................................... (41,322) $ (1,663,440)
========== =============
</TABLE>
<TABLE>
<CAPTION>
High Yield Series
Year ended
December 31, 1998
----------------------------------
<S> <C> <C>
Shares sold ............................................................ 19,323,267 $ 182,977,758
Shares issued to shareholders in reinvestment of distributions ......... 2,105,706 20,130,546
Shares reacquired ...................................................... (14,167,974) (134,004,601)
----------- -------------
Net increase .......................................................... 7,260,999 $ 69,103,703
=========== =============
<CAPTION>
High Yield Series
Year ended
December 31, 1997
----------------------------------
<S> <C> <C>
Shares sold ............................................................ 19,435,303 $ 181,713,288
Shares issued to shareholders in reinvestment of distributions ......... 1,705,882 15,079,993
Shares reacquired ...................................................... (14,128,975) (131,893,857)
----------- -------------
Net increase .......................................................... 7,012,210 $ 64,899,424
=========== =============
</TABLE>
<TABLE>
<CAPTION>
International Growth and Income
Series
Year ended
December 31, 1998
--------------------------------
<S> <C> <C>
Shares sold ............................................................ 4,247,634 $ 52,324,284
Shares issued to shareholders in reinvestment of distributions ......... 153,975 1,998,589
Shares reacquired ...................................................... (3,280,247) (40,403,058)
---------- ------------
Net increase .......................................................... 1,121,362 $ 13,919,815
========== ============
<CAPTION>
International Growth and Income
Series
Year ended
December 31, 1997
------------------------------
<S> <C> <C>
Shares sold ............................................................ 2,177,646 $ 23,608,560
Shares issued to shareholders in reinvestment of distributions ......... 48,440 519,278
Shares reacquired ...................................................... (989,238) (10,727,142)
--------- ------------
Net increase .......................................................... 1,236,848 $ 13,400,696
========= ============
</TABLE>
<TABLE>
<CAPTION>
MFS/Foreign & Colonial Emerging
Markets Equity Series
Year ended
December 31, 1998
--------------------------------
<S> <C> <C>
Shares sold ............................................................ 1,812,274 $ 17,009,645
Shares issued to shareholders in reinvestment of distributions ......... 71,423 759,940
Shares reacquired ...................................................... (1,789,384) (16,558,236)
---------- ------------
Net increase .......................................................... 94,313 $ 1,211,349
========== ============
<CAPTION>
MFS/Foreign & Colonial
Emerging Markets
Equity Series
Year ended
December 31, 1997
----------------------------
<S> <C> <C>
Shares sold ............................................................ 2,597,554 $30,304,756
Shares issued to shareholders in reinvestment of distributions ......... 685 7,806
Shares reacquired ...................................................... (734,171) (8,603,757)
--------- -----------
Net increase .......................................................... 1,864,068 $21,708,805
========= ===========
</TABLE>
<TABLE>
<CAPTION>
Money Market Series
Year ended
December 31, 1998
-----------------------------------
<S> <C> <C>
Shares sold ............................................................ 814,050,457 $ 814,050,457
Shares issued to shareholders in reinvestment of distributions ......... 19,399,147 19,399,147
Shares reacquired ...................................................... (707,964,912) (707,964,912)
------------ -------------
Net increase (decrease) ............................................... 125,484,692 $ 125,484,692
============ =============
<CAPTION>
Money Market Series
Year ended
December 31, 1997
-----------------------------------
<S> <C> <C>
Shares sold ............................................................ 795,411,183 $ 795,411,183
Shares issued to shareholders in reinvestment of distributions ......... 19,348,059 19,348,059
Shares reacquired ...................................................... (883,864,334) (883,864,334)
------------ -------------
Net increase (decrease) ............................................... (69,105,092) $ (69,105,092)
============ =============
</TABLE>
<TABLE>
<CAPTION>
Strategic Income Series
Period ended December 31,
1998***
------------------------------
<S> <C> <C>
Shares sold ............................................................ 1,127,549 $11,109,024
Shares issued to shareholders in reinvestment of distributions ......... -- --
Shares reacquired ...................................................... (352,905) (3,456,275)
--------- -----------
Net increase .......................................................... 774,644 $ 7,652,749
========= ===========
</TABLE>
***For the period from the commencement of the Series' investment operations,
May 6, 1998, through December 31, 1998.
<TABLE>
<CAPTION>
World Asset Allocation Series
Year ended
December 31, 1998
--------------------------------
<S> <C> <C>
Shares sold ............................................................ 1,735,664 $ 25,786,468
Shares issued to shareholders in reinvestment of distributions ......... 627,288 9,459,505
Shares reacquired ...................................................... (2,050,525) (29,121,176)
---------- ------------
Net increase .......................................................... 312,427 $ 6,124,797
========== ============
<CAPTION>
World Asset Allocation Series
Year ended
December 31, 1997
------------------------------
<S> <C> <C>
Shares sold ............................................................ 3,321,881 $ 47,471,104
Shares issued to shareholders in reinvestment of distributions ......... 345,266 4,768,120
Shares reacquired ...................................................... (801,606) (11,485,960)
--------- ------------
Net increase .......................................................... 2,865,541 $ 40,753,264
========= ============
</TABLE>
52
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
World Governments Series
Year ended
December 31, 1998
--------------------------------
<S> <C> <C>
Shares sold ............................................................ 751,460 $ 8,474,446
Shares issued to shareholders in reinvestment of distributions ......... 119,653 1,288,659
Shares reacquired ...................................................... (3,049,106) (33,965,266)
---------- ------------
Net decrease .......................................................... (2,177,993) $(24,202,161)
========== ============
<CAPTION>
World Governments Series
Year ended
December 31, 1997
--------------------------------
<S> <C> <C>
Shares sold ............................................................ 943,520 $ 10,115,726
Shares issued to shareholders in reinvestment of distributions ......... 477,929 5,018,251
Shares reacquired ...................................................... (3,720,826) (39,962,015)
---------- ------------
Net decrease .......................................................... (2,299,377) $(24,828,038)
========== ============
</TABLE>
<TABLE>
<CAPTION>
World Total Return Series
Year ended
December 31, 1998
--------------------------------
<S> <C> <C>
Shares sold ............................................................ 1,900,268 $ 29,501,676
Shares issued to shareholders in reinvestment of distributions ......... 255,010 3,937,348
Shares reacquired ...................................................... (1,022,930) (15,928,505)
---------- ------------
Net increase .......................................................... 1,132,348 $ 17,510,519
========== ============
<CAPTION>
World Total Return Series
Year ended
December 31, 1997
----------------------------
<S> <C> <C>
Shares sold ............................................................ 2,439,728 $33,780,337
Shares issued to shareholders in reinvestment of distributions ......... 95,674 1,281,077
Shares reacquired ...................................................... (485,744) (6,851,705)
--------- -----------
Net increase .......................................................... 2,049,658 $28,209,709
========= ===========
</TABLE>
<TABLE>
<CAPTION>
Zero Coupon Series, 2000
Portfolio
Year ended
December 31, 1998
-----------------------------
<S> <C> <C>
Shares sold ............................................................ 94,914 $ 837,608
Shares issued to shareholders in reinvestment of distributions ......... 24,952 212,590
Shares reacquired ...................................................... (138,240) (1,222,792)
-------- -----------
Net decrease .......................................................... (18,374) $ (172,594)
======== ===========
<CAPTION>
Zero Coupon Series, 2000
Portfolio
Year ended
December 31, 1997
-----------------------------
<S> <C> <C>
Shares sold ............................................................ 288,656 $ 2,515,659
Shares issued to shareholders in reinvestment of distributions ......... 27,424 230,910
Shares reacquired ...................................................... (398,721) (3,490,848)
-------- -----------
Net decrease .......................................................... (82,641) $ (744,279)
======== ===========
</TABLE>
(6) Financial Instruments
Certain Series of the Trust may trade financial instruments with
off-balance-sheet risk in the normal course of their investing activities in
order to manage exposure to market risks such as interest rates and foreign
currency exchange rates. These financial instruments include written options,
forward foreign currency exchange contracts, futures contracts, and swap
agreements.
The notional or contractual amounts of these instruments represent the
investment the Series have in particular classes of financial instruments and do
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at December 31, 1998, is shown
below and on the following pages.
53
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Written Option Transactions -- World Asset Allocation Series
1998 Calls 1998 Puts
----------------------------------- ----------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ------------- ------------------ -------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Canadian Dollars .............................. -- $ -- 16,608 $ 276,801
Deutsche Marks/British Pounds ................. 20,230 101,373 -- --
Japanese Yen .................................. 1,423,136 224,592 812,255 81,533
Swiss Francs/Deutsche Marks ................... 15,752 109,845 -- --
Options written --
Australian Dollars ............................ 7,699 130,179 4,626 57,252
British Pounds ................................ 3,606 27,725 -- --
Canadian Dollars .............................. 21,952 110,716 10,001 37,415
Deutsche Marks ................................ 28,084 42,137 25,862 132,413
Deutsche Marks/British Pounds ................. 10,834 52,003 25,798 139,632
Hong Kong Dollars ............................. -- -- 60,324 198,989
Japanese Yen .................................. 8,537,029 569,127 11,602,654 433,228
Japanese Yen/Deutsche Marks ................... 498,684 59,695 -- --
Japanese Yen/New Zealand Dollars .............. 1,885,580 400,574 -- --
Norwegian Kroner/Deutsche Marks ............... -- -- 109,652 38,566
South African Rand ............................ 9,233 43,036 46,737 104,629
Options terminated in closing transactions --
Australian Dollars ............................ (7,699) (130,179) (4,626) (57,252)
British Pounds ................................ (3,606) (27,725) -- --
Canadian Dollars .............................. (5,620) (43,802) (10,001) (37,415)
Deutsche Marks ................................ (28,084) (42,137) (25,862) (132,413)
Deutsche Marks/British Pounds ................. (10,834) (52,003) (25,798) (139,632)
Japanese Yen .................................. (7,463,754) (483,662) (8,113,041) (250,598)
Japanese Yen/New Zealand Dollars .............. (1,885,580) (400,574) -- --
Norwegian Kroner/Deutsche Marks ............... -- -- (109,652) (38,566)
Swiss Francs/Deutsche Marks ................... (15,752) (109,845) -- --
South African Rand ............................ (9,233) (43,036) (9,679) (32,985)
Options expired --
Canadian Dollars .............................. (16,332) (66,914) (16,608) (276,801)
Deutsche Marks/British Pounds ................. (20,230) (101,373) -- --
Japanese Yen .................................. (1,423,136) (224,592) (4,301,868) (264,163)
South African Rand ............................ -- -- (37,058) (71,644)
---------- ----------
Outstanding, end of period ..................... $ 145,160 $ 198,989
========== ==========
Options outstanding at end of period consist of:
Hong Kong Dollars ............................. -- $ -- 60,324 $ 198,989
Japanese Yen .................................. 1,073,275 85,465 -- --
Japanese Yen/Deutsche Marks ................... 498,684 59,695 -- --
---------- ----------
Outstanding, end of period ..................... $ 145,160 $ 198,989
========== ==========
</TABLE>
At December 31, 1998, the World Asset Allocation Series had sufficient cash
and/or securities at least equal to the value of the written options.
54
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Written Option Transactions -- World Governments Series
1998 Calls 1998 Puts
---------------------------------- ---------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Japanese Yen .................................. 1,367,105 $ 215,750 -- $ --
Options written --
Australian Dollars ............................ 5,747 100,225 3,824 47,326
British Pounds ................................ 2,953 22,699 -- --
Canadian Dollars .............................. 18,280 94,401 7,287 27,261
Deutsche Marks/British Pounds ................. 9,196 44,141 9,803 51,131
Japanese Government Bonds ..................... 1,348,800 20,723 2,701,000 76,358
Japanese Yen .................................. 6,180,104 483,703 895,921 47,327
Japanese Yen/Deutsche Marks ................... 1,703,872 351,170 -- --
Options terminated in closing transactions --
Australian Dollars ............................ (4,378) (82,354) (3,824) (47,326)
British Pounds ................................ (2,953) (22,699) -- --
Canadian Dollars .............................. (4,859) (37,873) (7,287) (27,261)
Deutsche Marks/British Pounds ................. (9,196) (44,141) (18) (6,990)
Japanese Government Bonds ..................... (1,348,800) (20,723) (2,701,000) (76,358)
Japanese Yen .................................. (1,229,731) (121,082) -- --
Options expired --
Canadian Dollars .............................. (13,421) (56,528) -- --
Deutsche Marks/British Pounds ................. -- -- (9,785) (44,141)
Japanese Yen .................................. (1,367,105) (215,750) (895,921) (47,327)
Japanese Yen/Deutsche Marks ................... (1,304,443) (303,356) -- --
Options exercised --
Australian Dollars ............................ (1,369) (17,871) -- --
Japanese Yen .................................. (4,091,032) (294,192) -- --
---------- ---------
Outstanding, end of period ..................... $ 116,243 $ --
========== =========
Options outstanding at end of period consist of:
Japanese Yen .................................. 859,341 $ 68,429 -- $ --
Japanese Yen/Deutsche Marks ................... 399,429 47,814 -- --
---------- ---------
$ 116,243 $ --
========== =========
</TABLE>
At December 31, 1998, the World Governments Series had sufficient cash and/or
securities at least equal to the value of the written options.
<TABLE>
<CAPTION>
Written Option Transactions -- World Total Return Series
1998 Calls 1998 Puts
---------------------------------- ---------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ------------ ------------------ ------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period --
Japanese Yen .............................. 311,538 $ 49,165 -- $ --
Options written --
Australian Dollars ........................ 2,043 35,252 1,331 16,468
British Pounds ............................ 1,033 7,939 -- --
Canadian Dollars .......................... 6,511 33,440 2,497 9,343
Deutsche Marks/British Pounds ............. 3,132 15,033 3,340 17,811
Japanese Government Bonds ................. 434,300 6,673 869,700 24,586
Japanese Yen .............................. 1,870,998 137,042 346,404 18,299
Japanese Yen/Deutsche Marks ............... 366,467 85,224 -- --
Options terminated in closing transactions--
Australian Dollars ........................ (1,491) (28,047) (1,331) (16,468)
British Pounds ............................ (1,033) (7,939) -- --
Canadian Dollars .......................... (1,731) (13,492) (2,497) (9,343)
Deutsche Marks/British Pounds ............. (3,132) (15,033) (7) (2,778)
Japanese Government Bonds ................. (434,300) (6,673) (869,700) (24,586)
Japanese Yen .............................. (390,106) (30,600) -- --
Options Expired --
Canadian Dollars .......................... (4,780) (19,948) -- --
Deutsche Marks/British Pounds ............. (3,433) (15,033)
Japanese Yen .............................. (311,538) (49,165) (346,404) (18,299)
Japanese Yen/Deutsche Marks ............... (366,467) (85,224) -- --
Options Exercised --
Australian Dollars ........................ (552) (7,205) -- --
Japanese Yen .............................. (1,480,892) (106,442) -- --
---------- ---------
Outstanding, end of period ................. $ -- $ --
========== =========
</TABLE>
55
<PAGE>
Notes to Financial Statements -- continued
<TABLE>
<CAPTION>
Written Option Transactions -- Strategic Income Series
1998 Calls 1998 Puts
-------------------------------- ------------------------------
Principal Amounts Principal Amounts
of Contracts of Contracts
(000 Omitted) Premiums (000 Omitted) Premiums
------------------- ---------- ------------------ ---------
<S> <C> <C> <C> <C>
Options written --
Japanese Yen ...................... -- $ -- 95,681 $8,777
------ ------- ------ ------
Outstanding, end of period ......... -- $ -- 95,681 $8,777
====== ======= ====== ======
</TABLE>
Forward Foreign Currency Exchange Contracts -- Bond Series
Forward foreign currency purchases and sales under master netting agreements
amounted to a net payable of $7 with Merrill Lynch at December 31, 1998.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Series Transaction Settlement Date
- -------------------------------------------------------------
<S> <C> <C> <C>
Strategic Income Series Purchases 3/15/99 AUD
3/15/99 JPY
<CAPTION>
Net Unrealized
Contracts to Contracts at Appreciation
Series Deliver/Receive Value In Exchange For (Depreciation)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Strategic Income Series 132,333 $ 80,914 $ 81,649 $ (735)
15,234,290 135,591 131,257 4,334
--------- --------- --------
$ 216,505 $ 212,906 $ 3,599
========= ========= ========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $107 with First Boston, and a net
receivable of $916 with Deutsche Bank and $25,316 with Merrill Lynch at December
31, 1998.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Series Transaction Settlement Date
- --------------------------------------------------------------------
<S> <C> <C> <C>
World Asset Allocation Series Sales 3/15/99 AUD
1/15/99 FIM
3/15/99 FRF
5/03/99 HKD
3/15/99 NLG
3/15/99 SGD
--------------------------------
Purchases 3/15/99 AUD
5/03/99 HKD
3/15/99 JPY
3/15/99 NZD
<CAPTION>
Net Unrealized
Contracts to Contracts at Appreciation
Series Deliver/Receive Value In Exchange For (Depreciation)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
World Asset Allocation Series 1,719,398 $ 1,051,323 $ 1,076,773 $ 25,450
15,717,496 3,085,719 2,880,192 (205,527)
19,195,604 3,443,562 3,450,399 6,837
55,000,000 7,088,296 6,919,979 (168,317)
13,228,190 7,063,287 7,076,434 13,147
7,067,081 4,311,907 4,315,775 3,868
----------- ----------- ----------
$26,044,094 $25,719,552 $ (324,542)
=========== =========== ==========
------------------------------------------------------------
1,715,874 $ 1,049,169 $ 1,058,693 $ (9,524)
55,000,000 7,088,296 6,729,954 358,342
244,796,198 2,178,774 2,109,130 69,644
66,309 34,883 34,215 668
----------- ----------- ----------
$10,351,122 $ 9,931,992 $ 419,130
=========== =========== ==========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $106,128 with Merrill Lynch,
$314,630 with First Boston and a net payable of $399,559 with Deutsche Bank at
December 31, 1998.
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Series Transaction Settlement Date
- ----------------------------------------------------------------
<S> <C> <C> <C>
World Governments Series Sales 3/15/98 AUD
3/15/98 DKK
3/15/98 NZD
----------------------------------
Purchases 3/15/98 AUD
3/15/98 JPY
3/15/98 NLG
<CAPTION>
Net Unrealized
Contracts to Contracts at Appreciation
Series Deliver/Receive Value In Exchange For (Depreciation)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
World Governments Series 1,459,446 $ 892,376 $ 913,978 $ 21,602
12,813,785 2,018,097 2,026,343 8,246
5,859,644 3,082,566 3,037,378 (45,188)
----------- ----------- ---------
$ 5,993,039 $ 5,977,699 $ (15,340)
=========== =========== =========
------------------------------------------------------------
3,862,150 $ 2,361,505 $ 2,382,946 $ (21,441)
196,001,411 1,744,483 1,688,721 55,762
20,687 11,046 11,067 (21)
----------- ----------- ---------
$ 4,117,034 $ 4,082,734 $ 34,300
=========== =========== =========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $361,314 with Merrill Lynch,
$63,293 with First Boston, and $23,374 with Deutsche Bank at December 31, 1998.
56
<PAGE>
Notes to Financial Statements -- continued
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
Series Transaction Settlement Date
- ---------------------------------------------------------------
<S> <C> <C> <C>
World Total Return Series Sales 3/15/99 AUD
3/15/99 DKK
3/15/99 NZD
-------------------------------
Purchases 3/15/99 AUD
3/15/99 NLG
<CAPTION>
Net Unrealized
Contracts to Contracts at Appreciation
Series Deliver/Receive Value In Exchange For (Depreciation)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
World Total Return Series 497,036 $ 303,912 $ 311,269 $ 7,357
4,481,632 705,831 708,715 2,884
2,318,142 1,219,498 1,203,901 (15,597)
---------- ---------- ---------
$2,229,241 $2,223,885 $ (5,356)
========== ========== =========
-----------------------------------------------------------
1,472,374 $ 900,281 $ 908,455 $ (8,174)
3,213,185 1,715,703 1,718,896 (3,193)
---------- ---------- ---------
$2,615,984 $2,627,351 $ (11,367)
========== ========== =========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $7,836 with Deutsche Bank,
$19,714 with First Boston and $30,905 with Merrill Lynch at December 31, 1998.
Futures Contracts -- World Asset Allocation Series
<TABLE>
<CAPTION>
Unrealized
Appreciation
Description Expiration Contracts Position (Depreciation)
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nikkei 225 3/11/99 34 Short $ 177,234
DAX Index 3/18/99 19 Short (335,813)
FTSE 100 3/19/99 41 Short (114,164)
CAC 40 Index 3/31/99 115 Short (174,783)
----------
$ (441,078)
</TABLE>
At December 31, 1998, the Series had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
(7) Restricted Securities
Each Series of the Trust is restricted from investing more than a certain amount
of its net assets in securities which are subject to legal or contractual
restrictions on resale. Such restrictions range between 0% and 15% of the
Series' net assets. At December 31, 1998, the High Yield Series and World Asset
Allocation(SM) Series owned the following restricted securities (consisting of
0.37% and 4.33% of the net assets of each series, respectively) which may not be
publicly sold without registration under the Securities Act of 1933. The Trust
does not have the right to demand that such securities be registered. The value
of these securities is determined by valuations supplied by a pricing service or
brokers, or, if not available, in good faith by or at the direction of the
Trustees.
<TABLE>
<CAPTION>
Date of Principal/Share
Series Description Acquisition Amount Cost Value
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
High Yield Series Airplane Pass Through Trust, 10.875, 2019 3/13/96 700,000 $ 700,000 $ 744,408
Atlantic Gulf Communities Corp. 9/25/95 30 -- 23
Merrill Lynch Mortgage Investors, Inc.,
8.335, 2022 6/22/97 500,000 346,563 472,734
---------- ----------
$1,046,563 $1,217,165
========== ==========
World Asset Allocation
Series Cargill, COLT 8/29/97 5,500,000 $5,527,500 $5,343,983
Russian Principal Loans, 5.969s, 2020 10/31/97 2,500,000 1,392,187 150,000
---------- ----------
$6,919,687 $5,493,983
========== ==========
</TABLE>
(8) Line of Credit
The Trust and other affiliated funds participate in a $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of
Series shares. Interest is charged to each Series, based on its borrowings, at a
rate equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fees allocated to
each Series for the year ended December 31, 1998, are as follows:
<TABLE>
<CAPTION>
Commitment Fee
- -------------------------------------------------------------------------
<S> <C>
Bond Series $ 128
Government Securities 970
High Yield Series 1,264
International Growth and Income Series 256
MFS/Foreign & Colonial Emerging Markets Equity Series 62
Money Market Series 8,715
Strategic Income Series --
World Asset Allocation Series 502
World Governments Series 416
World Total Return Series 362
Zero Coupon Series, Portfolio 2000 14
</TABLE>
57
<PAGE>
Independent Auditors' Report
To The Trustees and Contract Owners of MFS/Sun Life Series Trust:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Bond Series, Government Securities Series,
High Yield Series, International Growth and Income Series, MFS[RegTM]/Foreign &
Colonial Emerging Markets Equity Series, Money Market Series, Strategic Income
Series, World Asset Allocation(SM) Series, World Government Series, World Total
Return Series and Zero Coupon Series, Portfolio 2000, (each a portfolio of
MFS/Sun Life Series Trust), as of December 31, 1998, the related statements of
operations for the year then ended, the statements of changes in net assets for
the years ended December 31, 1998 and 1997, and the financial highlights for
each of the years in the five-year period ended December 31, 1998. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
December 31, 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 each of the
respective portfolios of the MFS/Sun Life Series Trust at December 31, 1998, the
results of their operations, the changes in their net assets, and their
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 4, 1999
----------------------------------------------
This MFS [RegTM]/Sun Life Series Trust Annual Report is prepared for the general
information of contract owners. It is authorized for distribution to prospective
investors only when preceded or accompanied by the current prospectus.
58
<PAGE>
Federal Tax Information
Dividends Received Deduction
For the year ended December 31, 1998, the amount of distributions from income
eligible for the 70% dividends received deduction for corporations was as
follows:
<TABLE>
<CAPTION>
Dividends
Received
Deduction
----------
<S> <C>
World Asset Allocation Series 1.59%
World Total Return Series 10.21%
</TABLE>
Foreign Tax Credit
For the year ended December 31, 1998, interest and dividends from foreign
countries and taxes paid to foreign countries were as follows:
<TABLE>
<CAPTION>
Interest
and Dividends Taxes
--------------- -----------
<S> <C> <C>
International Growth and Income Series $1,152,376 $127,672
World Asset Allocation Series 1,196,497 131,417
World Total Return Series 1,549,897 78,608
MFS/Foreign & Colonial Emerging Markets Equity Series 516,104 28,587
</TABLE>
Federal Income Tax Information on Distributions
The Series below have designated the following long-term capital gain
distributions:
<TABLE>
<CAPTION>
Long-Term
Capital Gains
--------------
<S> <C>
International Growth and Income Series $1,412,404
MFS/Foreign & Colonial Emerging Markets Equity Series 162,905
World Asset Allocation Series 2,902,113
World Total Return Series 1,936,278
</TABLE>
59
<PAGE>
MFS Prepares for the Year 2000
[Year 2000 Logo]
MFS Investment Management[RegTM] is committed to the effective use of technology
in managing investments, delivering high-quality service to our fund
shareholders, and supporting the financial advisers who sell our products. With
that in mind, we created a separately funded Year 2000 Program Management Office
in 1996 composed of a specialized staff reporting directly to MFS senior
management.
The Year 2000 (Y2K) problem arose because date fields in computers and software
applications have traditionally used two-digit codes. Since the dawn of the
computer age, the implied first two digits have been "1" and "9." In the year
2000, that can no longer be the case because computer applications may assume
"00" refers to 1900. Our team of dedicated business and technology managers,
working with outside experts, is taking reasonable steps to ascertain the Y2K
compliance of MFS' internal systems. We are also working with our vendors to
seek reasonable assurances that their systems are or will be compliant.
MFS realizes that investors are also concerned about whether the companies in
the Funds' portfolios are addressing their internal Y2K issues. As MFS'
portfolio managers and research analysts meet with the managements of portfolio
companies as part of the MFS[RegTM] Original Research(SM) process, one of the
many factors they may consider is a company's Y2K preparedness.
Year 2000 compliance is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K phenomenon.
While MFS is making an effort to ensure the integrity of its internal systems,
there are significant systems interdependencies in the domestic and foreign
securities markets, external vendor systems, and the internal business
environments of its portfolio companies. There can be no assurance that the
steps MFS has taken will be sufficient to avoid any adverse impact on the Funds.
However, MFS will continue to review and test its internal systems.
<PAGE>
Year 2000 and Beyond
[SUN LIFE LOGO] Sun Life
Assurance Company
of Canada (U.S.)
The potentional hazard of computers having difficulty dealing with the year 2000
has been widely reported in the media. Essentially, the "Y2K" problem stems from
some computer software being written in a way that will handle only two digits
of a year rather than the full four digits. This becomes a problem when 2000 is
perceived as simply "00", with the result that the computer software interprets
the date as 1900 rather than 2000.
Sun Life began working on this problem in 1995 when a Company strategy for
dealing with the issue was approved by our systems management. It was apparent
that effective support from senior management was a key component to
successfully correcting Sun Life's systems. For this reason, in early 1996 Sun
Life's chairman and CEO delivered a clear mandate to make Y2K a top priority.
Since that time we have inventoried and assessed nearly 2000 systems around the
Company.
The vast majority of Sun Life's systems have already been tested, and, based on
these tests, have been certified as compliant. The current target date for
completion of Sun Life's certification program is the end of the first quarter
of 1999. Even though relatively few Y2K bugs were actually found during
analysis, it has been Sun Life's policy to test every system before it can be
certified as compliant. The price tag for this massive project has been steep --
over $100 million (Cdn). However, we consider the money well spent when it means
that Sun Life can move into the year 2000 and beyond confident that our systems
will support Sun Life's position as a leader in the financial services industry.
The preceding is a Year 2000 Readiness Disclosure pursuant to the Year 2000
Readiness Disclosure Act enacted by the United States Congress on October 19,
1998.
<PAGE>
MFS[RegTM]/Sun Life Series Trust
500 Boylston Street, Boston, MA 02116-3741
Trustees
JOHN D. McNEIL*, Chairman and Trustee
Chairman, Sun Life Assurance Company of Canada,
Toronto, Ontario, Canada
SAMUEL ADAMS, Trustee
Partner, Warner & Stackpole (attorneys), Boston, Massachusetts
DAVID D. HORN*, Trustee
Former Senior Vice President and General Manager,
Sun Life Assurance Company of Canada,
Boston, Massachusetts
GARTH MARSTON, Trustee
Former Chairman, The Provident Institution for Savings,
Boston, Massachusetts
DERWYN F. PHILLIPS, Trustee
Former Vice Chairman, The Gillette Company,
Marblehead, Massachusetts
WILLIAM R. GUTOW, Trustee
Vice Chairman, Capitol Entertainment Management Company;
Real Estate Consultant, Dallas, Texas
J. KERMIT BIRCHFIELD, Trustee
Consultant; Chairman, Display Technology, Inc. (manufacturer of liquid-crystal
display technology); Managing Director, Century Partners, Inc. (investments),
Gloucester, Massachusetts
Officers+
JAMES R. BORDEWICK, JR., Assistant Secretary
MARK E. BRADLEY, Assistant Treasurer
STEPHEN E. CAVAN, Secretary and Clerk
W. THOMAS LONDON, Treasurer
ELLEN MOYNIHAN, Assistant Treasurer
JAMES O. YOST, Assistant Treasurer
Investment Adviser
Massachusetts Financial Services Company
500 Boylston Street, Boston, MA 02116-3741
Custodian and Dividend Disbursing Agent
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110-2875
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110-1617
Portfolio Managers+
JEAN O. ALESSANDRO
DAVID A. ANTONELLI
ARNAB KUMAR BANERJI
JOHN F. BRENNAN, JR.
STEPHEN C. BRYANT
DAVID M. CALABRO
JEFFREY CHOWDHRY
CHRISTIAN A. FELIPE
GEOFFREY L. KURINSKY
JOHN D. LAUPHEIMER, JR.
DAVID R. MANNHEIM
PAUL M. McMAHON
STEVEN E. NOTHERN
LISA B. NURME
BERNARD A. SCOZZAFAVA
MAURA A. SHAUGHNESSY
TONI Y. SHIMURA
FREDERICK J. SIMMONS
BRIAN E. STACK
JAMES T. SWANSON
(on behalf of the MFS World
Asset Allocation Committee)
*Affiliated with the Sponsor.
+Affiliated with the Investment Adviser. SUN-2A 2/99 192M
