<PAGE>
[Logo] MFS(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
MFS(R) GLOBAL ASSET
ALLOCATION FUND
(FORMERLY MFS(R) WORLD ASSET ALLOCATION FUND)
ANNUAL REPORT O AUGUST 31, 1998
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DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 43)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 11
Portfolio of Investments .................................................. 14
Financial Statements ...................................................... 24
Notes to Financial Statements ............................................. 31
Independent Auditors' Report .............................................. 41
Trustees and Officers ..................................................... 45
HIGHLIGHTS
o FOR THE 12 MONTHS ENDED AUGUST 31, 1998, CLASS A SHARES OF THE FUND
PROVIDED A TOTAL RETURN AT NET ASSET VALUE OF -1.72%, CLASS B SHARES
-2.23%, CLASS C SHARES -2.21%, AND CLASS I SHARES -1.21%. (PAST
PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. SEE PERFORMANCE SUMMARY FOR
MORE INFORMATION.)
o A SIGNIFICANT CHANGE IN THE FUND'S HOLDINGS WAS MADE THIS JULY WHEN ITS
EXPOSURE TO INTERNATIONAL AND U.S. EQUITIES WAS REDUCED, BASED ON RESEARCH
SUGGESTING A POTENTIAL GLOBAL RECESSION AND THAT EQUITIES WOULD SUFFER AS
A RESULT OF DECLINING EARNINGS BY COMPANIES AROUND THE WORLD.
o THE FUND HAS REDUCED ITS EXPOSURE TO THE MOST VOLATILE EMERGING MARKETS.
WE ANTICIPATE THAT PRICES COULD COME DOWN FURTHER IN EMERGING MARKETS AND
AT SOME POINT THEY MAY ONCE AGAIN PROVIDE A BUYING OPPORTUNITY.
o ON AUGUST 24, 1998, THE NAME OF THE FUND WAS CHANGED TO MFS(R) GLOBAL
ASSET ALLOCATION FUND. THE FUND'S INVESTMENT OBJECTIVE REMAINS THE SAME.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
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[Photo of Jeffrey L. Shames]
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Jeffrey L. Shames
Dear Shareholders,
In the coming year, MFS will celebrate its 75th anniversary. In 1924, our
Massachusetts Investors Trust, the nation's first mutual fund, opened to the
public and helped launch a revolution in investing that continues today. In
the 75 years since, MFS has grown with its investors not only through bear
markets, economic and political turmoil, wars, and oil shortages, but also
through long periods of growth and prosperity. We are very proud of our record
of investment management and service to shareholders throughout
our history.
One of the best ways for us to serve our shareholders is to help them understand
some of the reasons behind developments in the investment markets and, when
necessary, to take a more cautious outlook. This is particularly important
during periods of market volatility such as we are experiencing this year, when
equity prices do not follow a straight course. In light of this summer's
volatility, it is clear that equity valuations have risen to a point at which
stock prices have become vulnerable to changes in the investment environment
such as a slowing economy, earnings disappointments, and global economic and
political turmoil. While we continue to hold a favorable long-term outlook for
the equity markets, we also believe that this market correction is overdue and
could continue for several months. However, in our view, this is a healthy
near-term event that should rid the financial system of excesses that have
developed.
Currently, equity investors seem to be focused on the slowdown in corporate
earnings and, more recently, on the continuing uncertainty overseas,
particularly in Russia and some of the emerging markets. In the second
quarter, for example, average earnings growth for companies in the Standard &
Poor's 500 Composite Index (the S&P 500), a popular, unmanaged index of common
stock total return performance, was about 3%, well below what people were
expecting a year ago. As a result of this and continuing concerns about Asia
and emerging markets, the stock markets pulled back from the record-high
levels set in mid-July. This retreat has helped correct some -- but not all --
of the overvaluations that have been building in the markets for some time.
Prior to July, equity prices had been rising without a corresponding increase
in corporate earnings. As a result, price-to-earnings (P/E) ratios, or the
amount investors paid for stocks in relation to companies' earnings per share,
also went up. A year ago this July, the average P/E ratio for stocks in the
S&P 500 stood at approximately 23; this July, it was at about 28, and it
declined to approximately 25 by early September. If this summer's downturn
helps create more reasonable valuations, we believe it could provide a sounder
long-term foundation for the equity markets. On another positive note,
interest rates have been relatively stable for several months as inflation has
remained low. In an environment of low interest rates, stocks become more
attractive than most fixed-income investments, while low inflation helps
control companies' costs.
Internationally, the economic turmoil in Asia continues to be a concern to us,
while Russia is facing political gridlock and economic uncertainty and Latin
American economies are feeling substantial pressure. We believe the United
States has yet to see the full impact of this crisis. There have been brief
periods of improvement in a few countries but, for the most part, most of
these economies are still very weak and the situation could turn worse before
getting better. At the same time, the Asian turmoil has had the beneficial
effect of moderating U.S. growth and keeping inflation in check, which has
helped establish a favorable interest-rate environment.
Countering the situation in Asia has been the growing strength of European
economies, although European equity markets have also seen some volatility this
summer. But as these countries move toward economic union, they are benefiting
from a convergence of interest rates to lower levels, a rapid expansion of
manufacturing and service businesses, and an increasingly strong consumer
sector. This has helped American exporters offset some of their Asian losses
while providing investment opportunities in developed and emerging European
markets.
Given the uncertainty arising from these conflicting developments, we believe
that it is prudent to remind investors of the need to take a long-term view and
to diversify their investments across a range of asset classes. This includes
portfolios that focus on bond and international investments as well as on the
U.S. stock market. At MFS, we also believe our decades-long commitment to
original, company-by-company research gives us an advantage by helping us find
companies that we think can keep growing or gain market share during periods of
turmoil. To help fulfill this commitment and to provide the broadest possible
coverage of industry sectors and individual companies, MFS continues to increase
its number of full-time research analysts, who thoroughly investigate each
company's earnings potential and position in its industry as well as the overall
prospects for that industry.
We also use active portfolio management on the fixed-income side, using our
extensive research and credit analysis to help reduce the potential for price
declines and enhance the opportunity for appreciation. Every year, both fixed-
income and equity managers meet with thousands of credit issuers and
companies. They also attend many presentations, closely follow sources of
industry research, and keep track of competitors.
As we have for 75 years, we will continue to apply this discipline of
thorough, bottom-up research to both the equity and fixed-income markets
because we believe it offers the best potential for providing favorable long-
term performance for our shareholders -- regardless of changes in the overall
market environment.
We appreciate your confidence and welcome any questions or comments you may
have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
September 14, 1998
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
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[Photo of James T. Swanson]
- ---------------------------
James T. Swanson
Dear Shareholders,
For the 12 months ended August 31, 1998, Class A shares of the Fund provided a
total return of -1.72%, Class B shares -2.23%, Class C shares -2.21%, and
Class I shares -1.21%. These returns assume the reinvestment of distributions
but exclude the effects of any sales charges and compare to returns of 8.05%
for the Standard & Poor's 500 Composite Index (the S&P 500), a popular,
unmanaged index of common stock total return performance; 0.13% for the Morgan
Stanley Capital International EAFE (Europe, Australia, Far East) Index, an
index of international stocks; 10.48% 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 7.62% for
the J.P. Morgan Non-Dollar Government Bond Index, an international bond index.
The past 12 months have been marked by a series of widely varied world
economic events. The strength of the U.S. and European stock markets has been
offset by continuing troubles in Asia and Japan and Russia's current economic
turmoil. The problems in these regions are now impacting corporate earnings
both domestically and abroad, and we've witnessed a corresponding weakness in
stock prices. However, the Fund was prepared for these events, and our
relative performance over the past year has held up despite the global
pressures. We believe the Fund's flexible investment philosophy may provide
additional protection for investors in a choppy international environment.
A significant change to the portfolio came in July of this year when the Asset
Allocation Committee moved to reduce the Fund's exposure to international and
U.S. equities, based on research we gathered from our emerging market
analysts. This research suggested that we might be moving closer to a global
recession and that equities would suffer as a result of declining earnings by
companies around the world. The assets that we removed from the equity markets
were placed in long-duration U.S. Treasury bonds, which have been
outperforming the market thanks in large part to a global flight to the credit
quality and safety they represent. We will shift assets in and out of U.S.
Treasuries on an ongoing basis, with the intent of selectively moving back
into equities as we uncover good opportunities based on our fundamental
research.
We have reduced exposure to the most volatile of emerging markets but we will
be watchful for buying opportunities when world fears subside.
The appeal of this Fund in turbulent times is that it is managed without any
attempt to guess or time world financial markets. The Fund has sought to
balance its long-term and short-term performance by employing a strategy of
shifting relatively expensive assets to relatively cheap assets. In this way
we seek to avoid the peaks and valleys created by month-to-month volatility in
the world's stock and credit markets. Our investments are not highly
correlated and therefore will often move independently of each other. So, in
troubled times, asset allocation funds may provide an attractive investment
option for people concerned about volatility. MFS' commitment to worldwide
research gives us access to a rich source of information to which Fund
shareholders would not ordinarily be privy.
Respectfully,
/s/ James T. Swanson
James T. Swanson
On behalf of the Asset
Allocation Committee
<PAGE>
Management Review and Outlook -- continued
U.S. STOCK MARKET -- 14%
Our holdings in U.S. equities range across a variety of industries and
incorporate both value and growth strategies. Major holdings in the portfolio
include Rite Aid, Tyco International, Microsoft, BMC Software, and WorldCom.
Currently, our top four sectors are technology (23.2% of U.S. equities),
retailing (17.8%), health care (13.3%), and leisure (11.0%). Our Fund
positioning remains conservative, with a focus on companies that we view as
being insulated from rapidly weakening foreign economies. We believe this
positioning is increasingly important in an environment of low inflation,
declining investor confidence, and lowered earnings expectations.
-- Stephen Pesek
LARGEST HOLDINGS AS OF 8/31/98
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Tyco International (Computer software -- systems) 5.8%
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Rite Aid Corp. (Drug stores) 5.5%
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Microsoft Corp. (Computer software) 3.7%
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CVS Corp. (Drug stores) 2.4%
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Affiliated Computer (Information processing services) 2.3%
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INTERNATIONAL STOCK MARKETS -- 44%
The key components of the recent bull market were low inflation, low interest
rates, and growing corporate earnings. While we are heartened by the
persistent lack of inflation on the world scene, early this summer we saw a
marked trend toward lower corporate earnings resulting from a "ripple effect"
from the troubled economies in Asia. This development affected how we
allocated our international equity resources and, as noted above, we reduced
our international stock exposure to roughly 35% of assets. We've shifted our
focus toward what we believe are steady-earning companies that are less
impacted by economic cycles and that represent better values today. Overall,
the Fund's international equities are invested roughly 75% in Europe, 20% in
Asia/Pacific, and 5% in the Americas, mostly in Canada. The Asian investments
are largely in globally oriented companies with leading franchises in their
markets and include names like Sony. We have made an almost complete exit from
the rest of the region, except for our investments in Japan.
While slowing, we still see the earnings growth rates and stock valuations of
European companies as being superior to those in the rest of the world. Our top
sector is European financial services stocks (we own no Japanese financial
stocks), with a bias toward insurance companies rather than banks. Our next
largest sectors are consumer staples, technology, and retail. European defense
industry stocks are another area in which we've found good companies with steady
earnings growth that are being positively affected by structural changes in
their industry such as restructuring and consolidation and that are relatively
sheltered from fluctuating economic cycles. We've invested in British Aerospace,
Saab Aerospace, and Thomson CSF in this industry, and these stocks now comprise
about 6% of the portfolio's international equity assets.
-- David R. Mannheim
LARGEST HOLDINGS AS OF 8/31/98
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Canadian National Railway (Transportation -- Canada) 3.3%
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AKZO Nobel N.V. (Chemicals -- Netherlands) 2.8%
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Benckiser N.V. (Consumer products -- Netherlands) 2.8%
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Henkel KGaA (Consumer products -- Germany) 2.3%
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Sony Corp. (Electronics and entertainment -- Japan) 2.2%
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U.S. HIGH YIELD CORPORATE BOND MARKET -- 10%
High-yield bond prices have declined in response to weakness in equity and
emerging market bond prices caused by renewed concerns about the ramifications
of the economic problems in Asia and Russia. As has historically been the
case, high-yield bond prices have been less volatile than equity prices. For
example, while the S&P 500 recently fell 12%, the high-yield portion of the
Fund was off less than 3% from its peak.
As a result of lower high-yield bond prices and the flight to quality caused
by the economic problems in Asia, the spread between the yield on high-yield
bonds and U.S. Treasury securities has risen to its widest level in three
years. Currently, the high-yield market yields 9.8% compared to 5.4% for the
10-year Treasury, for a spread of 4.4%. At the beginning of the year, the
spread was 3.5%. We believe 4.4% is an attractive spread because the economic
environment remains favorable for owning high-yield bonds given the general
outlook for moderate economic growth and low inflation. (While high-yield
bonds may offer higher current income, they are also associated with greater-
than-average risk when compared to treasury securities.)
Our largest weighting remains in the telecommunications industry. We believe
that many competitive local exchange carriers continue to represent good value
given their growth opportunities and the higher yields available in this sector.
We have a preference for local exchange carriers such as Colt
Telecommunications, which has extensive fiber networks and experienced
management.
Our portfolio remains underweighted in the energy sector, but we have added to
this sector as yield spreads have widened in response to depressed oil prices.
-- Robert J. Manning
LARGEST HOLDINGS AS OF 8/31/98
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Iron Mountain, Inc. (Document storage and retrieval) 0.6%
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Silgan, Inc. (Metal and glass containers) 0.5%
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Hayes Wheels International, Inc. (Automotive parts) 0.5%
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Building Materials Corp. (Building products retailer) 0.5%
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Gaylord Container, Inc. (Packaging) 0.5%
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U.S. GOVERNMENT BOND MARKET -- 13%
The U.S. government bond market turned in a strong performance during the past
12 months. Both the flight to quality from emerging markets and the
continuation of extremely positive inflation news in the United States made
this asset class the best performing in the fixed-income arena. Interest rates
on 10-year U.S. Treasury bonds fell from 6.38% at the beginning of the year to
around 5.00% at the end of August.
With the problems in the global markets of Asia, Russia, and Latin America,
the Federal Reserve Board has changed from leaning toward raising rates to
possibly reducing rates in upcoming months. As spreads on high-yield and
investment-grade corporates have widened to recession-type levels and mortgage
prepayments have soared due to lower mortgage rates, we have redeployed
domestic assets to the Treasury market.
In early 1998, we moved from a 0% allocation in U.S. government bonds to
around 10%. If we see signs of a further slowdown in the pace of U.S. economic
activity, we will again increase our allocation to this sector.
-- Geoffrey L. Kurinsky
INTERNATIONAL BOND MARKETS -- 4%
Given the prospects for global economic recovery and with yields at cyclical
lows, we reduced the global fixed-income allocation to zero in favor of
domestic fixed-income investments. The past several months have been dominated
by the crisis that began late last year in Asia and then spread to Russia and
Latin America. The flight to quality has now affected virtually all debt,
equity, and currency markets worldwide. Global growth estimates have been
revised downward for all developed countries. Although European monetary union
remains on schedule for January 1999, the probable short-term convergence
interest rate is lower than had been expected. After making significant gains
against European currencies, the U.S. dollar has given up all of its gains.
Monetary conditions in Japan are expected to remain extremely accommodative
for an extended period due to the poor health of the financial sector, but
repatriation as well as massive position liquidation has resulted in a short-
term strengthening of the yen. Lastly, within the dollar bloc, Australian, New
Zealand, and Canadian yield spreads versus the United States have widened
significantly. As commodity exporters, these countries are expected to suffer
from fears of global deflation even though they exhibited respectable growth
earlier this year.
-- Leslie J. Nanberg
The opinions expressed in this report are those of the members of the Asset
Allocation Committee and are only through the end of the period of the report
as stated on the cover. The committee's views are subject to change at any
time based on market and other conditions, and no forecasts can
be guaranteed.
<PAGE>
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PORTFOLIO MANAGERS' PROFILES
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THE ASSET ALLOCATION COMMITTEE CONSISTS OF MESSRS. JOHN W. BALLEN,
LESLIE J. NANBERG, JEFFREY L. SHAMES, AND JAMES T. SWANSON. THE
INDIVIDUALS RESPONSIBLE FOR MANAGING THE ASSETS IN THE ASSET CLASSES ARE
AS FOLLOWS:
GEOFFREY L. KURINSKY JOINED MFS IN 1987 IN THE FIXED INCOME DEPARTMENT
AND WAS NAMED ASSISTANT VICE PRESIDENT IN 1988, VICE PRESIDENT IN 1989,
AND SENIOR VICE PRESIDENT IN 1993. A GRADUATE OF THE UNIVERSITY OF
MASSACHUSETTS AND THE BOSTON UNIVERSITY GRADUATE SCHOOL OF MANAGEMENT,
HE HAS MANAGED THE INVESTMENT-GRADE FIXED-INCOME PORTION OF THE
PORTFOLIO SINCE THE FUND'S INCEPTION.
DAVID R. MANNHEIM JOINED MFS IN 1988 AS A RESEARCH SPECIALIST AND WAS
NAMED INVESTMENT OFFICER IN 1990, ASSISTANT VICE PRESIDENT -- INVESTMENT
IN 1991, VICE PRESIDENT -- INVESTMENTS IN 1992, AND SENIOR VICE
PRESIDENT IN 1997. A GRADUATE OF AMHERST COLLEGE AND THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, HE HAS MANAGED THE
INTERNATIONAL STOCK PORTION OF THE PORTFOLIO SINCE THE FUND'S INCEPTION.
ROBERT J. MANNING JOINED MFS IN 1984 AS A RESEARCH ANALYST IN THE HIGH
YIELD BOND DEPARTMENT AND WAS NAMED VICE PRESIDENT -- INVESTMENTS IN
1988, SENIOR VICE PRESIDENT 1993, AND HIGH YIELD FIXED INCOME DEPARTMENT
HEAD IN 1997. A GRADUATE OF THE UNIVERSITY OF LOWELL AND THE BOSTON
COLLEGE GRADUATE SCHOOL OF MANAGEMENT, HE HAS MANAGED THE HIGH-YIELD
FIXED-INCOME PORTION OF THE PORTFOLIO SINCE JUNE 1997.
LESLIE J. NANBERG JOINED MFS IN 1980 AND WAS NAMED ASSISTANT VICE
PRESIDENT -- INVESTMENTS IN 1981, VICE PRESIDENT -- INVESTMENTS IN 1983,
AND SENIOR VICE PRESIDENT IN 1986. A GRADUATE OF THE UNIVERSITY OF
ILLINOIS, NORTHWESTERN UNIVERSITY, AND THE NORTHWESTERN UNIVERSITY
GRADUATE SCHOOL OF MANAGEMENT, HE IS A CHARTERED FINANCIAL ANALYST AND A
MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY, INC., AS WELL AS THE
FINANCIAL ANALYSTS FEDERATION. HE HAS MANAGED THE INTERNATIONAL FIXED-
INCOME PORTION OF THE PORTFOLIO SINCE THE FUND'S INCEPTION.
STEPHEN PESEK JOINED MFS IN 1994 AS AN INDUSTRY SPECIALIST AND THAT YEAR
WAS NAMED VICE PRESIDENT -- INVESTMENTS. A GRADUATE OF THE UNIVERSITY OF
PENNSYLVANIA AND COLUMBIA UNIVERSITY, HE IS A CHARTERED FINANCIAL
ANALYST AND HAS MANAGED THE U.S. EQUITY PORTION OF THE PORTFOLIO SINCE
SEPTEMBER 1997.
JAMES T. SWANSON JOINED MFS IN 1985 AS VICE PRESIDENT -- INVESTMENTS AND
WAS NAMED SENIOR VICE PRESIDENT IN 1989. A GRADUATE OF COLGATE
UNIVERSITY AND THE HARVARD UNIVERSITY GRADUATE SCHOOL OF BUSINESS
ADMINISTRATION, HE IS A CHARTERED FINANCIAL ANALYST AND HAS OVERSEEN
MFS(R) GLOBAL ASSET ALLOCATION FUND SINCE ITS INCEPTION.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS LONG-TERM TOTAL RETURN THROUGH INVESTMENTS IN
EQUITY AND FIXED-INCOME SECURITIES, PLUS LOW SHARE
PRICE VOLATILITY AND RISK COMPARED TO AN AGGRESSIVE
EQUITY/FIXED-INCOME FUND.
COMMENCEMENT OF
INVESTMENT OPERATIONS: JULY 22, 1994
CLASS INCEPTION: CLASS A JULY 22, 1994
CLASS B JULY 22, 1994
CLASS C JULY 22, 1994
CLASS I JANUARY 7, 1997
SIZE: $282.2 MILLION NET ASSETS AS OF AUGUST 31, 1998
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary for more information.)
It is not possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from August 1, 1994, through August 31, 1998)
MFS
Global
Asset S&P Lehman Consumer
Allocation 500 Brothers MSCI Price
Fund -- Composite Aggregate EAFE Index
Class A Index Bond Index Index -- U.S.
---------- --------- ---------- ----- -------
8/94 $ 9,524 $10,000 $10,000 $10,000 $10,000
8/95 10,844 12,643 11,144 10,320 10,303
8/96 12,387 15,010 11,601 11,166 10,598
8/97 14,328 21,112 12,765 12,211 10,836
8/98 14,081 22,821 14,110 12,227 11,011
AVERAGE ANNUAL TOTAL RETURNS THROUGH AUGUST 31, 1998
<TABLE>
CLASS A
<CAPTION>
1 Year 3 Years 10 Years/Life*
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Return - 1.72% + 9.10% +10.00%
- ---------------------------------------------------------------------------------------------------
SEC Results - 6.39% + 7.34% + 8.70%
- ---------------------------------------------------------------------------------------------------
CLASS B
1 Year 3 Years 10 Years/Life*
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return - 2.23% + 8.50% + 9.32%
- ---------------------------------------------------------------------------------------------------
SEC Results - 5.71% + 7.66% + 8.95%
- ---------------------------------------------------------------------------------------------------
CLASS C
1 Year 3 Years 10 Years/Life*
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return - 2.21% + 8.53% + 9.37%
- ---------------------------------------------------------------------------------------------------
SEC Results - 3.08% + 8.53% + 9.37%
- ---------------------------------------------------------------------------------------------------
CLASS I
1 Year 3 Years 10 Years/Life*
- ---------------------------------------------------------------------------------------------------
Average Annual Total Return - 1.21% + 9.39% +10.21%
- ---------------------------------------------------------------------------------------------------
COMPARATIVE INDICES
1 Year 3 Years 10 Years/Life
- ---------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index+ +10.48% + 8.19% + 8.79%
- ---------------------------------------------------------------------------------------------------
MSCI EAFE Index+ + 0.13% + 5.81% + 5.05%
- ---------------------------------------------------------------------------------------------------
J.P. Morgan Non-Dollar Government Bond Index** + 7.62% + 4.39% + 7.13%
- ---------------------------------------------------------------------------------------------------
Standard & Poor's 500 Composite Index+ + 8.05% +21.76% +22.38%
- ---------------------------------------------------------------------------------------------------
Consumer Price Index+# + 1.61% + 2.24% + 2.39%
- ---------------------------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, July 22, 1994, through
August 31, 1998.
+Source: CDA/Wiesenberger. "Life" refers to the period from August 1, 1994, through August 31,
1998.
**Source: Lipper Analytical Services, Inc. "Life" refers to the period from August 1, 1994, through
August 31, 1998.
#The Consumer Price Index is published by the U.S. Bureau of Labor Statistics and measures the cost
of living (inflation).
</TABLE>
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
I results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of I. Because operating
expenses of A are greater than those of I, I performance generally would have
been higher than A performance. The A performance included in the
I performance has been adjusted to reflect the fact that I have no initial
sales charge.
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. All results are historical and assume
the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
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.
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 1998
FIVE LARGEST STOCK SECTORS
FINANCIAL SERVICES 14.0%
TECHNOLOGY 13.4%
CONSUMER STAPLES 10.5%
RETAILING 10.3%
HEALTH CARE 9.0%
Portfolio information is as of August 31, 1998. The portfolio is actively
managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- August 31, 1998
Stocks - 57.8%
<CAPTION>
- ------------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. Stocks - 14.3%
Aerospace - 0.1%
Gulfstream Aerospace Corp.* 8,300 $ 291,538
- ------------------------------------------------------------------------------------------------------
Biotechnology - 0.1%
Monsanto Co. 4,400 $ 240,625
- ------------------------------------------------------------------------------------------------------
Broadcasting - 0.2%
Heftel Broadcasting Corp., "A"* 9,700 $ 293,425
Jacor Communications, Inc.* 4,200 247,800
------------
$ 541,225
- ------------------------------------------------------------------------------------------------------
Business Machines - 0.3%
Affiliated Computer Services, Inc., "A"* 29,900 $ 977,356
- ------------------------------------------------------------------------------------------------------
Business Services - 0.6%
Ceridian Corp.* 14,000 $ 679,000
CKE Restaurants, Inc. 11,400 353,400
Computer Sciences Corp. 13,900 786,219
------------
$ 1,818,619
- ------------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.3%
Dell Computer Corp.* 1,000 $ 100,000
EMC Corp.* 18,300 826,931
------------
$ 926,931
- ------------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.7%
Compaq Computer Corp. 11,500 $ 321,281
Microsoft Corp.* 16,100 1,544,594
------------
$ 1,865,875
- ------------------------------------------------------------------------------------------------------
Computer Software - Systems - 1.4%
BMC Software, Inc.* 23,000 $ 973,187
Cadence Design Systems, Inc.* 24,400 515,450
Computer Associates International, Inc. 20,550 554,850
Compuware Corp.* 19,900 904,206
Oracle Corp.* 18,500 368,844
Policy Management Systems Corp.* 13,800 576,150
------------
$ 3,892,687
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 1.5%
Clorox Co. 1,000 $ 96,437
Dial Corp. 6,200 120,900
Philip Morris Cos., Inc. 12,900 536,156
Revlon, Inc., "A"* 15,500 558,969
Service Corp. International 16,200 548,775
Tyco International Ltd. 43,420 2,409,810
------------
$ 4,271,047
- ------------------------------------------------------------------------------------------------------
Containers
Sealed Air Corp.* 1,200 $ 43,200
- ------------------------------------------------------------------------------------------------------
Electrical Equipment - 0.2%
General Electric Co. 7,000 $ 560,000
- ------------------------------------------------------------------------------------------------------
Entertainment - 1.0%
CBS Corp. 5,400 $ 140,400
MediaOne Group, Inc.* 13,400 549,400
Mirage Resorts, Inc.* 15,300 227,588
Time Warner, Inc. 10,300 827,862
Univision Communications, Inc., "A"* 14,200 378,075
Viacom, Inc., "B"* 12,300 610,388
------------
$ 2,733,713
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 0.3%
Federal Home Loan Mortgage Corp. 13,900 $ 549,050
Morgan Stanley, Dean Witter & Co. 3,600 209,025
------------
$ 758,075
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.1%
Hershey Foods Corp. 3,200 $ 224,000
McCormick & Co., Inc. 3,000 87,187
McDonalds Corp. 2,300 128,944
------------
$ 440,131
- ------------------------------------------------------------------------------------------------------
Insurance - 0.9%
American International Group, Inc. 1,500 $ 115,969
Conseco, Inc. 7,480 206,635
Equitable Cos., Inc. 5,300 303,094
Life Re Corp. 4,700 421,825
Lincoln National Corp. 6,800 584,800
Progressive Corp. 2,600 253,337
ReliaStar Financial Corp. 16,600 651,550
------------
$ 2,537,210
- ------------------------------------------------------------------------------------------------------
Insured Health Care Revenue
Humana, Inc.* 4,500 $ 58,500
- ------------------------------------------------------------------------------------------------------
Medical and Health Products - 1.3%
American Home Products Corp. 6,300 $ 315,787
Boston Scientific Corp.* 2,300 159,275
Bristol-Myers Squibb Co. 5,400 528,525
Cardinal Health, Inc. 4,900 428,750
Guidant Corp. 1,800 111,150
McKesson Corp. 3,500 262,500
Pfizer, Inc. 3,000 279,000
Schering Plough Corp. 9,100 782,600
Warner-Lambert Co. 11,100 724,275
------------
$ 3,591,862
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.6%
Columbia/HCA Healthcare Corp. 8,900 $ 200,806
HBO & Co. 18,900 401,625
HealthSouth Corp.* 30,600 579,488
United Healthcare Corp. 15,800 570,775
------------
$ 1,752,694
- ------------------------------------------------------------------------------------------------------
Office Equipment - 0.3%
Office Depot, Inc.* 20,500 $ 522,750
Xerox Corp. 2,800 245,875
------------
$ 768,625
- ------------------------------------------------------------------------------------------------------
Printing and Publishing - 0.1%
Scholastic Corp.* 8,700 $ 337,125
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.2%
Cendant Corp.* 41,900 $ 484,469
- ------------------------------------------------------------------------------------------------------
Retail - 0.8%
BJ's Wholesale Club, Inc.* 13,300 $ 448,875
Fred Meyer, Inc.* 23,600 927,775
Lowes Co., Inc. 18,800 659,175
TJX Cos., Inc. 6,000 133,875
------------
$ 2,169,700
- ------------------------------------------------------------------------------------------------------
Stores - 1.2%
CVS Corp. 27,600 $ 1,003,950
Linens ' N Things, Inc.* 3,200 74,800
Rite Aid Corp. 63,200 2,287,050
------------
$ 3,365,800
- ------------------------------------------------------------------------------------------------------
Supermarkets - 0.5%
Giant Food Inc., "A" 8,400 $ 357,000
Kroger Co.* 4,500 202,500
Safeway, Inc.* 20,002 787,579
------------
$ 1,347,079
- ------------------------------------------------------------------------------------------------------
Telecommunications - 1.4%
AirTouch Communications, Inc.* 1,700 $ 95,625
Ascend Communications, Inc.* 11,900 418,731
Century Telephone Enterprises, Inc. 17,650 800,869
Cisco Systems, Inc.* 9,750 798,281
Global TeleSystems Group, Inc.* 7,200 230,400
Lucent Technologies, Inc. 4,200 297,675
Networks Associates Inc.* 9,000 290,250
WorldCom, Inc.* 23,700 970,219
------------
$ 3,902,050
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.1%
AES Corp.* 9,600 $ 261,600
- ------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.1%
Sprint Corp. 5,600 $ 375,550
- ------------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 40,313,286
- ------------------------------------------------------------------------------------------------------
Foreign Stocks - 43.5%
Australia - 1.6%
Q.B.E. Insurance Group Ltd. (Insurance) 887,668 $ 2,835,797
Seven Network Ltd. (Entertainment) 553,000 1,612,366
------------
$ 4,448,163
- ------------------------------------------------------------------------------------------------------
Bermuda - 0.1%
Ace Ltd. (Insurance) 13,000 $ 377,000
- ------------------------------------------------------------------------------------------------------
Brazil - 0.7%
Companhia Electricas est Rio de Janeiro
(Utilities - Electric)* 1,804,600 $ 567,340
Companhia Paranaense de Energia, ADR
(Utilities - Electric) 108,000 594,000
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 11,500 812,906
------------
$ 1,974,246
- ------------------------------------------------------------------------------------------------------
Canada - 2.2%
Canadian National Railway Co. (Railroads) 118,500 $ 5,339,906
T. Eaton Co., Ltd. (Stores)* 122,000 754,431
------------
$ 6,094,337
- ------------------------------------------------------------------------------------------------------
Chile - 0.6%
Chilectra S.A., ADR (Utilities - Electric) 101,900 $ 1,636,514
- ------------------------------------------------------------------------------------------------------
Finland - 2.1%
Tieto Corp. (Computer Software - Systems) 53,200 $ 1,689,394
Helsingin Puhelin Oyj (Telecommunications) 28,300 1,200,004
Huhtamaki Oy Group (Food and Beverage Products) 21,700 993,107
Pohjola Insurance Group (Insurance) 52,800 1,952,852
------------
$ 5,835,357
- ------------------------------------------------------------------------------------------------------
France - 4.0%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 17,400 $ 525,262
Television Francaise (Broadcasting) 18,100 2,682,391
Thomson CSF (Aerospace) 73,000 2,496,668
Total S.A., "B" (Oils) 23,800 2,393,116
Union des Assurances Federales S.A. (Insurance) 23,700 3,214,922
------------
$ 11,312,359
- ------------------------------------------------------------------------------------------------------
Germany - 2.3%
Henkel KGaA (Chemicals) 46,300 $ 3,711,370
Wella AG (Consumer Goods and Services)* 3,000 2,728,823
------------
$ 6,440,193
- ------------------------------------------------------------------------------------------------------
Greece - 0.5%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 58,888 $ 1,364,246
- ------------------------------------------------------------------------------------------------------
Hong Kong
Li & Fung Ltd. (Wholesale) 134,000 $ 157,372
Peregrine Investment Holdings (Finance) 509,000 --
------------
$ 157,372
- ------------------------------------------------------------------------------------------------------
Ireland
Elan Corp., PLC, ADR (Medical and Health Products) * 1,989 $ 116,854
- ------------------------------------------------------------------------------------------------------
Italy - 1.1%
ERG S.P.A. (Oils) 295,000 $ 967,102
Mediaset S.P.A. (Entertainment) 182,000 1,046,759
Telecom Italia S.P.A., Saving Shares
(Telecommunications) 306,000 1,107,879
------------
$ 3,121,740
- ------------------------------------------------------------------------------------------------------
Japan - 7.4%
Canon, Inc. (Office Equipment) 109,000 $ 2,210,085
Eisai Co. Ltd. (Medical and Health Products) 86,000 1,022,505
Kinki Coca-Cola Bottling Co. (Food and Beverage
Products) 56,000 602,406
Kirin Beverage Corp. (Food and Beverage Products) 108,000 1,819,108
NTT Data Corp (Telecommunications) 450 1,617,834
Olympus Optical Co. (Conglomerate) 157,000 1,688,889
Osaka Sanso Kogyo Ltd. (Chemicals) 206,000 335,315
Rohm Co. (Electronics) 14,000 1,426,752
Sankyo Co. Ltd. (Medical and Health Products) 44,000 955,980
Sony Corp. (Electronics) 50,000 3,648,266
Takeda Chemical Industries (Medical and Health
Products) 67,000 1,749,682
TDK Corp. (Electronics) 17,000 1,177,849
Tokyo Broadcasting System, Inc. (Entertainment) 93,000 881,953
Ushio, Inc. (Electronics) 216,000 1,803,822
------------
$ 20,940,446
- ------------------------------------------------------------------------------------------------------
Netherlands - 5.7%
Akzo Nobel N.V. (Chemicals) 112,000 $ 4,606,292
Benckiser N.V. "B" (Consumer Goods and Services) 80,000 4,570,853
IHC Caland N.V. (Marine Equipment)* 19,599 941,226
ING Groep N.V. (Finance)* 56,133 3,311,748
Koninklijke Ahrend Groep N.V. (Consumer Goods and
Services)* 69,028 1,581,059
Royal Dutch Petroleum Co. (Oils) 25,000 1,109,993
------------
$ 16,121,171
- ------------------------------------------------------------------------------------------------------
Norway - 0.3%
Storebrand ASA (Insurance) 153,000 $ 931,241
- ------------------------------------------------------------------------------------------------------
Portugal - 1.8%
Banco Espirito Santo e Comercial de Lisboa S.A
(Banks and Credit Cos.) 8,937 $ 265,378
Banco Pinto & Sotto Mayor, S.A. (Banks and Credit
Cos.) 144,200 2,766,093
Banco Pinto & Sotto Mayor, S.A., new shares (Banks
and Credit Cos.)* 14,420 276,610
Portugal Telecom S.A. (Utilities - Telephone) 40,500 1,853,470
------------
$ 5,161,551
- ------------------------------------------------------------------------------------------------------
Singapore - 0.2%
Hong Leong Finance Ltd. (Finance)+ 770,000 $ 456,136
- ------------------------------------------------------------------------------------------------------
Spain - 0.7%
Repsol S.A. (Oils) 43,000 $ 1,938,230
- ------------------------------------------------------------------------------------------------------
Sweden - 2.9%
Astra AB (Medical and Health Products) 126,000 $ 2,051,786
Saab Aerospace AB, "B" (Aerospace)* 350,000 2,914,963
Skandia Forsakrings AB (Insurance) 93,600 1,320,571
Volvo AB (Automotive) 65,250 1,808,737
------------
$ 8,096,057
- ------------------------------------------------------------------------------------------------------
Switzerland - 1.0%
Barry Callebaut AG (Food and Beverage Products)* 4,500 $ 1,027,326
Novartis AG (Medical and Health Products) 1,095 1,703,670
------------
$ 2,730,996
- ------------------------------------------------------------------------------------------------------
United Kingdom - 8.3%
ASDA Group PLC (Supermarkets) 813,500 $ 2,317,547
Avis Europe PLC (Automotive)## 465,000 1,870,193
British Aerospace PLC (Aerospace)* 502,716 3,251,862
British Petroleum PLC (Oils)* 242,271 3,059,193
British Petroleum PLC, ADR (Oils) 2,167 158,462
Capital Radio PLC (Broadcasting) 56,000 594,038
Jarvis Hotels PLC (Restaurants and Lodging)+ 293,800 590,820
Kwik-Fit Holdings PLC (Automotive) 179,000 1,163,876
Lloyds TSB Group PLC (Banks and Credit Cos.) 153,719 1,836,704
LucasVarity PLC (Automotive) 888,000 3,154,794
Next PLC (Stores) 412,700 3,063,799
Tomkins PLC (Conglomerate)* 592,000 2,450,421
------------
$ 23,511,709
- ------------------------------------------------------------------------------------------------------
Total Foreign Stocks $122,765,918
- ------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $160,483,280) $163,079,204
- ------------------------------------------------------------------------------------------------------
Bonds - 27.8%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED) VALUE
- ------------------------------------------------------------------------------------------------------
U.S. Bonds - 23.5%
Building - 0.6%
Building Materials Corp., 8s, 2007 $ 1,525 $ 1,460,187
Nortek, Inc., 9.25s, 2007 250 246,875
------------
$ 1,707,062
- ------------------------------------------------------------------------------------------------------
Business Services - 0.6%
Iron Mountain, Inc., 10.125s, 2006 $ 1,500 $ 1,545,000
- ------------------------------------------------------------------------------------------------------
Chemicals - 0.4%
Sterling Chemicals, Inc., 11.25s, 2007 $ 1,150 $ 1,035,000
- ------------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.8%
Hayes Wheels International, Inc., 9.125s, 2007 $ 1,500 $ 1,515,000
Kindercare Learning Centers, Inc., 9.5s, 2009 650 637,000
------------
$ 2,152,000
- ------------------------------------------------------------------------------------------------------
Containers - 0.5%
Silgan Holdings, Inc., 9s, 2009 $ 1,500 $ 1,515,000
- ------------------------------------------------------------------------------------------------------
Entertainment - 0.7%
Allbritton Communications Co., 9.75s, 2007 $ 1,000 $ 1,030,000
AMC Entertainment, Inc., 9.5s, 2009 100 94,000
Cinemark USA, Inc., 9.625s, 2008 1,000 980,000
------------
$ 2,104,000
- ------------------------------------------------------------------------------------------------------
Finance - 0.7%
APP International Finance Co., 11.75s, 2005 $ 1,500 $ 795,000
Williams Scotsman, Inc., 9.875s, 2007 1,300 1,280,500
------------
$ 2,075,500
- ------------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.9%
Borden, Inc., 9.25s, 2019 $ 2,000 $ 2,090,360
Specialty Foods Corp., 10.25s, 2001 700 560,000
------------
$ 2,650,360
- ------------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.8%
Gaylord Container Corp., 9.75s, 2007 $ 1,675 $ 1,407,000
U.S. Timberlands, 9.625s, 2007 900 906,750
------------
$ 2,313,750
- ------------------------------------------------------------------------------------------------------
Industrial - 0.8%
AGCO Corp., 8.5s, 2006 $ 650 $ 633,750
Esi Tractebel, 7.99s, 2011## 700 675,500
IMO Industries, Inc., 11.75s, 2006 750 817,500
------------
$ 2,126,750
- ------------------------------------------------------------------------------------------------------
Media - 0.7%
Fox/Liberty Networks LLC, Inc., 8.875s, 2007 $ 700 $ 647,500
Hollinger International Publishing, Inc., 9.25s, 2007 1,300 1,287,000
-----------------
$ 1,934,500
- ------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.1%
Tenet Healthcare Corp., 8.625s, 2007 $ 240 $ 240,000
- ------------------------------------------------------------------------------------------------------
Real Estate - 0.5%
Prime Hospitality Corp., 9.25s, 2006 $ 1,300 $ 1,313,000
- ------------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.1%
Red Roof Inns, Inc., 9.625s, 2003 $ 250 $ 252,500
- ------------------------------------------------------------------------------------------------------
Retail - 0.3%
Musicland Group, Inc., 9.875s, 2008 $ 750 $ 720,000
- ------------------------------------------------------------------------------------------------------
Supermarkets - 0.2%
Pathmark Stores, Inc., 9.625s, 2003 $ 750 $ 697,500
- ------------------------------------------------------------------------------------------------------
Telecommunications - 1.4%
CSC Holdings, Inc., 9.25s, 2005 $ 750 $ 772,500
Level 3 Communications Inc., 9.125s, 2008## 1,500 1,342,500
NEXTEL Communications, Inc., 0s to 2002, 9.75s, 2007 850 484,500
Pagemart Wireless, Inc., 0s to 2003, 11.25s to 2008 1,200 672,000
Western Wireless Corp., 10.5s, 2007 750 789,375
------------
$ 4,060,875
- ------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 13.4%
U.S. Treasury Bonds, 6.125s, 2027 $ 34,000 $ 37,766,520
- ------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 66,209,317
- ------------------------------------------------------------------------------------------------------
Foreign Bonds - 4.3%
Bermuda - 0.2%
Flag Limited, 8.25s, 2008 (Telecommunications)## $ 600 $ 558,000
- ------------------------------------------------------------------------------------------------------
Canada - 0.4%
Rogers Cablesystems, Inc., 9.625s, 2002
(Telecommunications) $ 1,300 $ 1,339,000
- ------------------------------------------------------------------------------------------------------
Mexico - 0.6%
United Mexican States, 11.5s, 2026 $ 2,000 $ 1,634,000
- ------------------------------------------------------------------------------------------------------
Philippines - 0.8%
Bangko Sentral Ng Philipinas, 8.6s, 2027
(Banks & Credit Cos.) $ 3,000 $ 2,317,500
- ------------------------------------------------------------------------------------------------------
Russia - 1.3%
Ministry of Finance, Russia, 10s, 2007 $ 1,350 $ 297,000
Ministry of Finance, Russia, 12.75s, 2028## 560 133,000
Russia Principal Loans, 3.313s, 2020+ 10,750 1,128,750
Vnesheconombank, 6.625s, 2015 15,548 2,099,006
------------
$ 3,657,756
- ------------------------------------------------------------------------------------------------------
United Kingdom - 0.6%
Colt Telecom Group PLC, 8.875s, 2007
(Telecommunications) GBP 1,000 $ 568,505
Middleweb PLC, 10.5s, 2008(Media)## 750 1,055,754
------------
$ 1,624,259
- ------------------------------------------------------------------------------------------------------
Venezuela - 0.4%
Republic of Venezuela - DCB, 6.625s, 2007 VEB 2,714 $ 1,058,569
- ------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 12,189,084
- ------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $94,876,093) $ 78,398,401
- ------------------------------------------------------------------------------------------------------
Contingent Promissory Note - 5.8%
- ------------------------------------------------------------------------------------------------------
Cargill COLT (Commodity Open Linked Trading), due 2002
(Identified Cost $17,085,000), (Illiquid) $ 17,000 $ 16,357,131
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 7.0%
- ------------------------------------------------------------------------------------------------------
Federal Farm Credit Bank, due 9/01/98 $ 5,000 $ 5,000,000
Federal Home Loan Mortgage Corp., due 9/04/98 - 9/16/98 10,940 10,923,917
Federal National Mortgage Association Discount
Notes, 5.49s, 1998 4,000 3,998,170
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 19,922,087
- ------------------------------------------------------------------------------------------------------
Call Options Purchased - 0.2%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- ------------------------------------------------------------------------------------------------------
Japanese Yen/September/140 $2,819,109 $ 126,860
Japanese Yen/September/142 5,750,160 379,510
Norwegian Krone/Deutsche Marks/October/4.35 87,594 14,891
- ------------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $338,269) $ 521,261
- ------------------------------------------------------------------------------------------------------
Put Options Purchased
- ------------------------------------------------------------------------------------------------------
U.S. Dollars/Australian Dollars/December/0.74
(Premiums Paid, $50,341) $ 19,606 $ 255
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $292,755,070) $278,278,339
- ------------------------------------------------------------------------------------------------------
Put Options Written - (0.1)%
- ------------------------------------------------------------------------------------------------------
Hong Kong Dollars/June/9 HKD 72,600 $ (271,669)
Japanese Yen/March/170 JPY 6,310,348 (63,104)
- ------------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $380,704) $ (334,773)
- ------------------------------------------------------------------------------------------------------
Call Options Written - (0.1)%
- ------------------------------------------------------------------------------------------------------
Japanese Yen/September/142
(Premiums Received, $427,825) JPY 5,750,160 $ (427,825)
- ------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.6% 4,656,525
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $282,172,266
- ------------------------------------------------------------------------------------------------------
*Non-income producing security.
##SEC Rule 144A restriction.
+Restricted security.
Abbreviations have been used throughout this report to indicate amounts shown
in currencies other than the U.S. dollar. A list of abbreviations is shown
below.
AUD = Australian Dollars ITL = Italian Lire
CAD = Canadian Dollars JPY = Japanese Yen
CHF = Swiss Francs NLG = Dutch Guilders
DEM = Deutsche Marks SEK = Swedish Kronor
FRF = French Francs SGD = Singapore Dollars
GBP = British Pounds VEB = Venezuelan Bolivars
HKD = Hong Kong Dollars ZAR = South African Rands
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
AUGUST 31, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $292,755,070) $278,278,339
Cash 19,721
Premium receivable on options written 416,261
Net receivable for forward foreign currency exchange
contracts sold 3,633,531
Net receivable for forward foreign currency exchange
contracts subject to master netting agreements 514,539
Receivable for Fund shares sold 317,969
Receivable for investments sold 1,099,911
Interest and dividends receivable 2,582,189
Receivable for daily variation margin on open futures
contracts 986,426
Receivable for swap agreements 472,469
Deferred organization expenses 8,236
Other assets 4,149
------------
Total assets $288,333,740
------------
Liabilities:
Payable for foreign currency, at value (identified cost, $317) $ 310
Payable for Fund shares reaquired 1,354,248
Payable for investments purchased 162,561
Net payable for forward foreign currency exchange
contracts to purchase 3,447,156
Written options outstanding, at value (premiums received,
$808,529) 762,598
Payable to affiliates -
Management fee 14,215
Distribution fee 259,568
Accrued expenses and other liabilities 160,818
------------
Total liabilities $ 6,161,474
------------
Net assets $282,172,266
============
Net assets consist of:
Paid-in capital $277,952,509
Unrealized depreciation on investments and translation of
assets and liabilities in foreign currencies (8,378,276)
Accumulated undistributed net realized gain on
investments and foreign currency transactions 9,534,810
Accumulated undistributed net investment income 3,063,223
------------
Total $282,172,266
============
Shares of beneficial interest outstanding 17,288,083
============
Class A shares:
Net asset value per share
(net assets of $97,007,235 / 5,931,211 shares of
beneficial interest outstanding) $16.36
======
Offering price per share (100 / 95.25) of net asset value
per share) $17.18
======
Class B shares:
Net asset value and offering price per share
(net assets of $147,881,567 / 9,068,429 shares of
beneficial interest outstanding) $16.31
======
Class C shares:
Net asset value and offering price per share
(net assets of $37,248,280 / 2,286,290 shares of
beneficial interest outstanding) $16.29
======
Class I shares:
Net asset value per share
(net assets of $35,184 / 2,153 shares of beneficial
interest outstanding) $16.34
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- -------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1998
- -------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 10,295,162
Dividends 3,443,499
Foreign taxes withheld (379,890)
------------
Total investment income $ 13,358,771
------------
Expenses -
Management fee $ 2,008,668
Trustees' compensation 31,999
Shareholder servicing agent fee 396,341
Distribution and service fee (Class A) 566,331
Distribution and service fee (Class B) 1,712,293
Distribution and service fee (Class C) 502,456
Administrative fee 47,410
Printing 46,411
Postage 73,103
Custodian fee 226,699
Auditing fees 55,429
Legal fees 10,389
Amortization of organization expenses 8,983
Miscellaneous 251,018
------------
Total expenses $ 5,937,530
Fees paid indirectly (53,302)
------------
Net expenses $ 5,884,228
------------
Net investment income $ 7,474,543
------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 11,887,860
Written option transactions 2,878,916
Foreign currency transactions 4,265,689
Futures contracts 14,612
------------
Net realized gain on investments and foreign
currency transactions 19,047,077
------------
Change in unrealized appreciation (depreciation) --
Investments $(34,776,613)
Written options 1,201,401
Translation of assets and liabilities in foreign currencies (1,021,128)
Futures contracts 4,869,369
Swap agreements 472,469
------------
Net unrealized loss on investments and foreign currency
translations $(29,254,502)
------------
Net realized and unrealized loss on investments and
foreign currency $(10,207,425)
------------
Decrease in net assets from operations $ (2,732,882)
============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statements of Changes in Net Assets
<CAPTION>
- -------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1998 1997
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,474,543 $ 6,576,284
Net realized gain on investments and foreign currency
transactions 19,047,077 21,501,570
Net unrealized gain (loss) on investments and foreign
currency translations (29,254,502) 13,721,560
------------ ------------
Increase (decrease) in net assets from operations $ (2,732,882) $ 41,799,414
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (4,262,705) $ (2,207,631)
From net investment income (Class B) (5,657,934) (2,457,334)
From net investment income (Class C) (1,631,022) (857,364)
From net investment income (Class I) (1,557) (256)
From net realized gain on investments and foreign
currency transactions (Class A) (8,352,846) (5,984,967)
From net realized gain on investments and foreign
currency transactions (Class B) (12,932,341) (9,094,467)
From net realized gain on investments and foreign
currency transactions (Class C) (3,894,361) (2,927,754)
From net realized gain on investments and foreign
currency transactions (Class I) (2,636) --
------------ ------------
Total distributions declared to shareholders $(36,735,402) $(23,529,773)
------------ ------------
Fund share (principal) transactions -
Net increase (decrease) in net assets from Fund share
transactions $(15,290,427) $ 74,522,757
------------ ------------
Total increase (decrease) in net assets $(54,758,711) $ 92,792,398
Net assets:
At beginning of year 336,930,977 244,138,579
------------ ------------
At end of year (including accumulated undistributed net
investment income of $3,063,223 and $2,805,009,
respectively) $282,172,266 $336,930,977
============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1998 1997 1996 1995 1994*
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $18.75 $17.68 $16.63 $15.33 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.47 $ 0.46 $ 0.43 $ 0.55 $ 0.04
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (0.69) 2.19 1.85 1.17 0.29
------ ------ ------ ------ ------
Total from investment operations $(0.22) $ 2.65 $ 2.28 $ 1.72 $ 0.33
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.72) $(0.40) $(0.49) $(0.37) $ --
From net realized gain on investments and
foreign currency transactions (1.45) (1.18) (0.74) (0.05) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(2.17) $(1.58) $(1.23) $(0.42) $ --
------ ------ ------ ------ ------
Net asset value - end of period $16.36 $18.75 $17.68 $16.63 $15.33
====== ====== ====== ====== ======
Total return(+) (1.72)% 15.67% 14.23% 11.48% 2.20%++
Ratios (to average net assets)/Supplemental
data(S):
Expenses## 1.44% 1.43% 1.48% 1.47% 1.50%+
Net investment income 2.57% 2.51% 2.45% 3.49% 2.43%+
Portfolio turnover 127% 128% 202% 118% 1%
Net assets at end of period (000 omitted) $97,007 $111,959 $86,457 $58,663 $25,254
* For the period from the commencement of the Fund's investment operations, July 22, 1994, through August 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
(S) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or distribution
fee, respectively, for certain of the periods indicated. If these fees had been incurred by the Fund, the net investment
income per share and the ratios would have been:
Net investment income -- $ 0.45 $ 0.42 $ 0.52 $ 0.02
Ratios (to average net assets)
Expenses## -- 1.46% 1.53% 1.67% 2.62%+
Net investment income -- 2.48% 2.40% 3.29% 1.31%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1998 1997 1996 1995 1994**
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $18.70 $17.63 $16.58 $15.31 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.38 $ 0.36 $ 0.32 $ 0.43 $ 0.02
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (0.69) 2.19 1.85 1.17 0.29
------ ------ ------ ------ ------
Total from investment operations $(0.31) $ 2.55 $ 2.17 $ 1.60 $ 0.31
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.63) $(0.30) $(0.38) $(0.28) $ --
In excess of net investment income -- -- (0.74) (0.05) --
From net realized gain on investments
and foreign currency transactions (1.45) (1.18) -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(2.08) $(1.48) $(1.12) $(0.33) $ --
------ ------ ------ ------ ------
Net asset value - end of period $16.31 $18.70 $17.63 $16.58 $15.31
====== ====== ====== ====== ======
Total return (2.23)% 15.01% 13.58% 10.65% 2.07%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.94% 1.98% 2.10% 2.24% 2.57%+
Net investment income 2.06% 1.96% 1.83% 2.75% 1.39%+
Portfolio turnover 127% 128% 202% 118% 1%
Net assets at end of period (000 omitted) $147,882 $166,865 $124,399 $83,601 $26,495
** For the period from the commencement of the Fund's offering of Class B shares, July 22, 1994, through August 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
(S) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or distribution fee,
respectively, for certain of the periods indicated. If these fees had been incurred by the Fund, the net investment income
per share and the ratios would have been:
Net investment income -- -- -- -- $ 0.01
Ratios (to average net assets)
Expenses## -- -- -- -- 3.21%+
Net investment income -- -- -- -- 0.75%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1998 1997 1996 1995 1994***
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $18.67 $17.62 $16.58 $15.31 $15.00
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.38 $ 0.36 $ 0.33 $ 0.46 $ 0.03
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions (0.70) 2.18 1.85 1.16 0.28
------ ------ ------ ------ ------
Total from investment operations $(0.32) $ 2.54 $ 2.18 $ 1.62 $ 0.31
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.61) $(0.31) $(0.40) $(0.30) $ --
From net realized gain on investments
and foreign currency transactions (1.45) (1.18) (0.74) (0.05) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(2.06) $(1.49) $(1.14) $(0.35) $ --
------ ------ ------ ------ ------
Net asset value - end of period $16.29 $18.67 $17.62 $16.58 $15.31
====== ====== ====== ====== ======
Total return (2.21)% 15.06% 13.62% 10.72% 2.07%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.94% 1.96% 2.03% 2.18% 2.50%+
Net investment income 2.06% 2.00% 1.89% 2.91% 1.68%+
Portfolio turnover 127% 128% 202% 118% 1%
Net assets at end of period (000 omitted) $37,248 $58,074 $33,283 $19,325 $3,435
*** For the period from the commencement of the Fund's offering of Class C shares, July 22, 1994, through August 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid
indirectly.
(S) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or distribution
fee, respectively, for certain of the periods indicated. If these fees had been incurred by the Fund, the net investment
income per share and the ratios would have been:
Net investment income -- -- -- -- $ 0.02
Ratios (to average net assets)
Expenses## -- -- -- -- 3.18%+
Net investment income -- -- -- -- 1.00%+
See notes to financial statements
</TABLE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 1998 1997****
- ----------------------------------------------------------------------------------------------------------
CLASS I
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $18.74 $17.56
------ ------
Income from investment operations# -
Net investment income $ 0.57 $ 0.28
Net realized and unrealized gain (loss) on investments and
foreign currency transactions (0.70) 1.16
------ ------
Total from investment operations $(0.13) $ 1.44
------ ------
Less distributions declared to shareholders -
From net investment income $(0.82) $(0.26)
From net realized gain on investments and foreign currency
transactions (1.45) --
------ ------
Total distributions declared to shareholders $(2.27) $(0.26)
------ ------
Net asset value - end of period $16.34 $18.74
====== ======
Total return (1.21)% 8.22%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.94% 0.97%+
Net investment income 3.07% 3.43%+
Portfolio turnover 127% 128%
Net assets at end of period (000 omitted) $35 $34
**** For the period from the inception of Class I, January 7, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund's expenses are calculated without reduction for fees paid indirectly.
See notes to financial statements
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Global Asset Allocation Fund (the Fund) is a non-diversified series of MFS
Series Trust I (the Trust). 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.
(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 - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, forward contracts,
and swap agreements, are valued on the basis of valuations furnished by
dealers or by a pricing service with consideration to factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other
market data, without exclusive reliance upon exchange or over-the-counter
prices. Short-term obligations, which mature in 60 days or less, are valued at
amortized cost, which approximates market value. Non-U.S. dollar denominated
short-term obligations are valued at amortized cost as calculated in the
foreign currency and translated into U.S. dollars at the closing daily
exchange rate. Futures contracts and options 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. 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.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Deferred Organization Expenses - Costs incurred by the Fund in connection with
its organization have been deferred and are being amortized on a straight-line
basis over a five-year period beginning on the date of commencement of Fund
operations.
Written Options - The Fund 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 Fund 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 Fund. The Fund, 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 Fund's management on the direction of interest
rates.
Futures Contracts - The Fund 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 Fund is
required to deposit with the broker either in cash or securities an amount
equal to a certain percentage of the contract amount. Subsequent payments are
made or received by the Fund 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 Fund. The Fund's 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 Fund's 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 Fund 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 Fund may not achieve the anticipated benefits of the futures
contracts and may realize a loss.
Forward Foreign Currency Exchange Contracts - The Fund 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 Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Swap Agreements - The Fund may enter into swap agreements. A swap is an
exchange of cash payments between the Fund 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 Fund uses swaps for
both hedging and non-hedging purposes. For hedging purposes, the Fund may use
swaps to reduce its exposure to interest and foreign exchange rate
fluctuations. For non-hedging purposes, the Fund 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 premiums
and 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 Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's 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 Fund files a tax return annually using tax accounting methods required
under provisions of the Code, which may differ from generally accepted
accounting principles, the basis on which these financial statements are
prepared. Accordingly, the amount of net investment income and net realized
gain reported on these financial statements may differ from that reported on
the Fund's tax return and, consequently, the character of distributions to
shareholders reported in the financial highlights may differ from that
reported to shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended August 31, 1998, $4,336,889 was reclassified from accumulated
undistributed net realized gain on investments to accumulated net investment
income due to differences between book and tax accounting for currency
transactions. This change had no effect on the net assets or net asset value per
share. At August 31, 1998, accumulated undistributed net investment income and
realized gain on investments and foreign currency transactions under book
accounting were different from tax accounting due to temporary differences in
accounting for wash sales and futures transactions.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.60%
of average daily net assets.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive
remuneration for their services to the Fund from MFS. Certain officers and
Trustees of the Fund are officers or directors of MFS, MFS Fund Distributors,
Inc. (MFD), and MFS Service Center, Inc. (MFSC). The Fund has an unfunded
defined benefit plan for all of its independent Trustees and Mr. Bailey.
Included in Trustees' compensation is a net periodic pension expense of $8,561
for the year ended August 31, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$55,821 for the year ended August 31, 1998, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class
C shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as
follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.50%
per annum of its average daily net assets attributable to Class A shares in
order that MFD may pay expenses on behalf of the Fund related to the
distribution and servicing of its shares. These expenses include a service fee
paid to each securities dealer that enters into a sales agreement with MFD of
up to 0.25% per annum of the Fund's average daily net assets attributable to
Class A shares which are attributable to that securities dealer and a
distribution fee to MFD of up to 0.25% per annum of the Fund's average daily
net assets attributable to Class A shares. MFD retains the service fee for
accounts not attributable to a securities dealer, which amounted to $35,113
for the year ended August 31, 1998. Fees incurred under the distribution plan
during the year ended August 31, 1998, were 0.50% of average daily net assets
attributable to Class A shares on an annualized basis.
The Fund's distribution plan provides that the Fund will pay MFD a
distribution fee of 0.75% per annum, and a service fee of up to 0.25% per
annum, of the Fund's average daily net assets attributable to Class B and
Class C shares. MFD will pay to securities dealers that enter into a sales
agreement with MFD all or a portion of the service fee attributable to Class B
and Class C shares, and will pay to such securities dealers all of the
distribution fee attributable to Class C shares. The service fee is intended
to be consideration for services rendered by the dealer with respect to Class
B and Class C shares. MFD retains the service fee for accounts not
attributable to a securities dealer, which amounted to $36,677 and $9,661 for
Class B and Class C shares, respectively, for the year ended August 31, 1998.
Fees incurred under the distribution plan during the year ended August 31,
1998, were 1.00% of average daily net assets attributable to Class B and Class
C shares on an annualized basis, respectively.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months
following purchase. A contingent deferred sales charge is imposed on
shareholder redemptions of Class B shares in the event of a shareholder
redemption within six years of purchase. MFD receives all contingent deferred
sales charges. Contingent deferred sales charges imposed during the year ended
August 31, 1998, were $802, $272,987, and $12,392 for Class A, Class B, and
Class C shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of the
average daily net assets at an effective annual rate of 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. government securities $102,356,883 $ 67,527,805
------------ --------------
Investments (non-U.S. government securities) $259,085,989 $343,855,145
------------ --------------
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:
Aggregate cost $294,756,664
------------
Gross unrealized appreciation $ 24,076,943
Gross unrealized depreciation (40,555,268)
------------
Net unrealized depreciation $(16,478,325)
============
</TABLE>
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
YEAR ENDED AUGUST 31, 1998 YEAR ENDED AUGUST 31, 1997
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 5,609,590 $ 103,919,937 5,682,250 $104,763,615
Shares issued to shareholders
in reinvestment of distributions 663,135 11,483,111 420,579 7,433,254
Shares reacquired (6,312,593) (117,203,453) (5,021,414) (93,197,777)
---------- ------------- ---------- ------------
Net increase (decrease) (39,868) $ (1,800,405) 1,081,415 $ 18,999,092
========== ============= ========== ============
Class B Shares
YEAR ENDED AUGUST 31, 1998 YEAR ENDED AUGUST 31, 1997
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 1,697,015 $ 31,460,117 2,743,292 $ 50,100,639
Shares issued to shareholders
in reinvestment of distributions 919,190 15,824,754 554,995 9,772,491
Shares reacquired (2,472,223) (45,203,383) (1,428,097) (26,314,959)
---------- ------------- ---------- ------------
Net increase 143,982 $ 2,081,488 1,870,190 $ 33,558,171
========== ============= ========== ============
Class C Shares
YEAR ENDED AUGUST 31, 1998 YEAR ENDED AUGUST 31, 1997
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 574,075 $ 10,640,951 1,647,309 $ 30,004,358
Shares issued to shareholders
in reinvestment of distributions 220,230 3,793,114 173,083 3,043,659
Shares reacquired (1,618,988) (30,011,782) (598,498) (11,114,875)
---------- ------------- ---------- ------------
Net increase (decrease) (824,683) $ (15,577,717) 1,221,894 $ 21,933,142
========== ============= ========== ============
Class I Shares
YEAR ENDED AUGUST 31, 1998 PERIOD ENDED AUGUST 31, 1997*
----------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------
Shares sold 107 $ 2,021 2,194 $ 39,686
Shares issued to shareholders
in reinvestment of distributions 241 4,186 13 255
Shares reacquired -- -- (402) (7,589)
---------- ------------- ---------- ------------
Net increase 348 $ 6,207 1,805 $ 32,352
========== ============= ========== ============
</TABLE>
*For the period from the inception of Class I, January 7, 1997, through August
31, 1997.
(6) Line of Credit The Fund 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 Fund shares. Interest is charged to each fund, 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 fee allocated to the Fund for the year ended August 31, 1998, was
$2,124.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the normal
course of its investing activities in order to manage exposure to market risks
such as interest rates and foreign currency exchange rates. These financial
instruments include written options, forward foreign currency exchange
contracts, swap agreements, and futures contracts. The notional or contractual
amounts of these instruments represent the investment the Fund has in particular
classes of financial instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with these
instruments is meaningful only when all related and offsetting transactions are
considered.
<TABLE>
Written Option Transactions
<CAPTION>
1998 CALLS 1998 PUTS
------------------------------- -------------------------------
PRINCIPAL PRINCIPAL
AMOUNTS AMOUNTS
OF CONTRACTS OF CONTRACTS
(000 OMITTED) PREMIUMS (000 OMITTED) PREMIUMS
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
OUTSTANDING, BEGINNING OF PERIOD -
Finnish Marks/Deutsche Marks -- $ -- 170,385 $ 142,065
Norwegian Krona/Deutsche Marks -- -- 114,683 156,225
Swiss Francs/Deutsche Marks 55,447 386,669 -- --
Options written -
Canadian Dollar -- -- 70,513 851,807
Deutsche Marks 67,350 101,054 64,801 331,780
Deutsche Marks/British Pounds 58,908 295,191 100,119 461,419
Hong Kong Dollars -- -- 72,600 273,056
Japanese Yen 23,205,974 2,537,359 31,268,501 1,343,483
Japanese Yen/New Zealand Dollars 2,293,526 720,822 -- --
Norwegian Krona/Deutsche Marks -- -- 263,877 92,809
Options terminated in closing transactions -
Canadian Dollar -- -- (25,021) (93,608)
Finnish Marks/Deutsche Marks -- -- (170,385) (142,065)
Deutsche Marks (67,350) (101,054) (64,801) (331,780)
Deutsche Marks/British Pounds (58,908) (295,191) (64,964) (266,739)
Japanese Yen (17,455,814) (2,109,534) (24,958,153) (1,235,835)
Japanese Yen/New Zealand Dollars (2,293,526) (720,822) -- --
Norwegian Krona/Deutsche Marks -- -- (378,560) (249,034)
Swiss Francs/Deutsche Marks (55,447) (386,669) -- --
Options expired -
Canadian Dollar -- -- (45,492) (758,199)
Deutsche Marks/British Pounds -- -- (35,155) (194,680)
----------- ------------
OUTSTANDING, END OF PERIOD $ 427,825 $ 380,704
=========== ============
Options outstanding at end of period
consist of:
Hong Kong Dollar -- -- 72,600 273,056
Japanese Yen 5,750,160 427,825 6,310,348 107,648
----------- ------------
OUTSTANDING, END OF PERIOD $ 427,825 $ 380,704
=========== ============
</TABLE>
At August 31, 1998, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
<TABLE>
Forward Foreign Currency Exchange Contracts
<CAPTION>
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales
9/25/98 CAD 4,128,194 $ 2,817,880 $ 2,631,329 $ 186,551
9/02/98 CHF 49,103,326 33,108,850 34,016,222 (907,372)
9/25/98 DEM 136,091,956 75,922,026 77,478,009 (1,555,983)
9/25/98 FRF 48,922,928 8,267,968 8,306,767 (38,799)
9/25/98 GBP 7,950,000 13,366,932 13,305,971 60,961
5/03/99 HKD 134,708,000 16,948,666 16,495,545 453,121
9/25/98 ITL 6,183,953,963 3,538,743 3,557,673 (18,930)
9/25/98 JPY 11,939,761,041 89,945,597 84,779,970 5,165,627
9/25/98 NLG 38,304,281 19,267,711 19,310,467 (42,756)
10/14/98 SGD 32,712,565 18,777,339 18,448,034 329,305
9/11/98 ZAR 49,702,679 7,652,041 7,650,235 1,806
------------ ------------ -----------
$289,613,753 $285,980,222 $ 3,633,531
============ ============ ===========
Purchases
9/25/98 AUD 8,632,740 $ 4,865,585 $ 4,936,529 $ 70,944
9/25/98 CAD 36,694,189 25,044,543 23,389,018 (1,655,525)
9/02/98 CHF 51,648,347 35,423,142 35,781,489 358,347
9/25/98 DEM 137,070,490 77,058,792 78,035,094 976,302
9/25/98 GBP 7,950,000 13,224,825 13,305,971 81,146
5/03/99 HKD 134,708,000 16,481,196 16,495,545 14,349
9/25/98 JPY 8,402,940,104 62,824,200 59,666,271 (3,157,929)
9/25/98 SEK 32,518,037 4,024,754 4,045,446 20,692
10/14/98 SGD 15,499,884 8,831,842 8,741,056 (90,786)
9/11/98 ZAR 22,410,250 3,526,674 3,461,978 (64,696)
------------ ------------ -----------
$251,305,553 $247,858,397 $(3,447,156)
============ ============ ===========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net payable of $564,039 with Deutsche Bank,
$1,057,052 with Merrill Lynch and $1,036,398 with Bankers Trust and a net
receivable of $900,889 with C.S. First Boston and $ 2,271,139 with Swiss Bank
at August 31, 1998.
At August 31, 1998, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
<TABLE>
Futures Contracts
<CAPTION>
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DAX Index September 1998 41 Short $1,250,343
CAC Index September 1998 190 Short 484,044
FTSE Index September 1998 70 Short 174,642
Nikkei Index September 1998 118 Short 503,887
S&P 500 Index September 1998 25 Short (1,074,290)
S&P 500 Index December 1998 70 Long 3,530,743
----------
$4,869,369
==========
</TABLE>
At August 31, 1998, the Fund had sufficient cash and/or securities to cover
margin requirements on open futures contracts.
<TABLE>
Swap Agreements
Interest Rate Swaps
<CAPTION>
CASH FLOWS CASH FLOWS
NOTIONAL PRINCIPAL PAID BY RECEIVED BY UNREALIZED
EXPIRATION AMOUNT OF CONTRACT THE TRUST THE TRUST APPRECIATION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
3/1/99 11,000,000 Lehman High Floating - $472,469
Yield Index 1M Libor
</TABLE>
(8) Restricted Securities
The Fund may invest not more than 15% of its net assets in securities which are
subject to legal or contractual restrictions on resale. At August 31, 1998, the
Fund owned the following restricted securities (constituting 0.37% of net
assets) which may not be publicly sold without registration under the Securities
Act of 1933. The Fund does not have the right to demand that such securities be
registered. The value of these securities is determined by valuations furnished
by dealers or by a pricing service, or if not available, are valued at fair
value as determined in good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF SHARE
DESCRIPTION ACQUISITION AMOUNT COST VALUE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hong Leong Finance Ltd. 6/12/95 770,000 $2,346,470 $ 456,136
Jarvis Hotels 7/02/96 293,800 728,892 590,820
----------
$1,046,956
==========
</TABLE>
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of the MFS Series Trust I and the Shareholders of MFS Global
Asset Allocation Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Global Asset Allocation Fund (the Fund) formerly MFS World Asset Allocation
Fund, including the schedule of portfolio investments, as of August 31, 1998,
and the related statement of operations for the year then ended, the statement
of changes in net assets for each of the two years in the period then ended,
and the financial highlights for each of the four years in the period then
ended, and for the period from July 22, 1994 (commencement of operations) to
August 31, 1994. These financial statements and financial highlights are the
responsibility of the Fund'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 securities owned at August
31, 1998, by correspondence with the custodian and brokers or by other
appropriate auditing procedures where replies from brokers were not received. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of MFS
Global Asset Allocation Fund at August 31, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the four
years in the period then ended, and for the period from July 22, 1994
(commencement of operations) to August 31, 1994, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Boston, Massachusetts
October 7, 1998
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 1999, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR
1998.
THE FUND HAS DESIGNATED $12,220,306 AS A CAPITAL GAIN DIVIDEND.
FOR THE YEAR ENDED AUGUST 31, 1998, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS CAME TO 2.32%.
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) Global Asset Allocation Fund
<S> <C>
Trustees Secretary
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991),
MFS Investment Management Assistant Secretary
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
Custodian
Lawrence H. Cohn, M.D. - Chief of Cardiac State Street Bank and Trust Company
Surgery, Brigham and Women's Hospital; Professor
of Surgery, Harvard Medical School Auditors
Ernst & Young LLP
The Hon. Sir J. David Gibbons, KBE - Chief
Executive Officer, Edmund Gibbons Ltd.; Investor Information
Chairman, Colonial Insurance Company, Ltd. For MFS stock and bond market outlooks, call
toll free: 1-800-637-4458 anytime from a
Abby M. O'Neill - Private Investor touch-tone telephone.
Walter E. Robb, III - President and Treasurer, For information on MFS mutual funds, call your
Benchmark Advisors, Inc. (corporate financial financial adviser or, for an information kit,
consultants); President, Benchmark call toll free: 1-800-637-2929 any business day
Consulting Group, Inc. (office services) from 9 a.m. to 5 p.m. Eastern time (or leave a
message anytime).
Arnold D. Scott* - Senior Executive
Vice President, Director, and Secretary, Investor Service
MFS Investment Management MFS Service Center, Inc.
P.O. Box 2281
Jeffrey L. Shames* - Chairman, Chief Boston, MA 02107-9906
Executive Officer, and Director,
MFS Investment Management For general information, call toll free:
1-800-225-2606 any business day from
J. Dale Sherratt - President, Insight Resources, 8 a.m. to 8 p.m. Eastern time.
Inc. (acquisition planning specialists)
For service to speech- or hearing-impaired, call
Ward Smith - Former Chairman (until 1994), toll free: 1-800-637-6576 any business day from
NACCO Industries (holding company) 9 a.m. to 5 p.m. Eastern time. (To use this
service, your phone must be equipped with a
Investment Adviser Telecommunications Device for the Deaf.)
Massachusetts Financial Services Company
500 Boylston Street For share prices, account balances, and
Boston, MA 02116-3741 exchanges, call toll free: 1-800-MFS-TALK
(1-800-637-8255) anytime from a touch-tone
Distributor telephone.
MFS Fund Distributors, Inc.
500 Boylston Street World Wide Web
Boston, MA 02116-3741 www.mfs.com
Asset Allocation Committee
John W. Ballen*
Leslie J. Nanberg*
Jeffrey L. Shames*
James T. Swanson*
Treasurer
W. Thomas London*
Assistant Treasurers
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
----------------
MFS(R) Global Asset Allocation Bulk Rate
Fund U.S. Postage
Paid
MFS
[Logo MFS(R) ----------------
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
500 Boylston Street
Boston, MA 02116-3741
(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MWA-2 10/98 41M 88/288/388/888
