<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) GLOBAL ASSET
ALLOCATION FUND
ANNUAL REPORT o AUGUST 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 9
Portfolio of Investments .................................................. 13
Financial Statements ...................................................... 23
Notes to Financial Statements ............................................. 30
Independent Auditors' Report .............................................. 39
Trustees and Officers ..................................................... 41
MFS ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
--------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- make us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flows, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have been
early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as front-line workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flows, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes each manager will have when they read the daily notes is, "I
could never perform as well at any other investment company, because nowhere
else could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in it's
January 10, 2000 issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people tend to stick around -- the average
MFS tenure of our portfolio managers is 11 years, with over 16 years in the
investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the
company.
We also have scale. Our research analyst team is over 35 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance,
by finding opportunities before they are generally recognized by the market and
by avoiding mistakes whenever possible. Original Research does, we believe, make
a difference.
As always, we appreciate your confidence in MFS 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 15, 2000
A prospectus containing more complete information on any MFS product, including
all charges and expenses, can be obtained from your investment professional.
Please read it carefully before you invest or send money. Investments in mutual
funds will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Joseph C. Flaherty, Jr.]
Joseph C. Flaherty, Jr.
Dear Shareholders,
For the 12 months ended August 31, 2000, Class A shares of the fund provided a
total return of 20.81%, Class B shares 20.20%, Class C shares 20.20%, and Class
I shares 20.40%. These returns assume the reinvestment of any distributions but
exclude the effects of any sales charges and compare to returns over the same
period for the fund's benchmarks: 9.81% for the Morgan Stanley Capital
International Europe, Australasia, Far East Index (MSCI EAFE), an unmanaged
index of international stocks; 7.56% for the Lehman Brothers Aggregate Bond
Index, an unmanaged index of U.S. Treasury, government-agency, corporate, and
mortgage-backed securities; and -6.34% for the J.P. Morgan Non-Dollar
Government Bond Index, an unmanaged aggregate of actively traded government
bonds issued by 12 countries (excluding the United States), with remaining
maturities of at least one year. During the same period, the average global
flexible portfolio fund tracked by Lipper Inc., an independent firm that reports
mutual fund performance, returned 16.45%.
Q. THE FUND'S RELATIVE PERFORMANCE VERSUS ITS BENCHMARKS WAS VERY GOOD OVER
THE PAST 12 MONTHS. WHAT WERE THE PRIMARY FACTORS?
A. The fund's strategy of utilizing quantitative measures and in-depth
fundamental analysis to create a well-diversified portfolio of stocks and
bonds worked well during the period. To set the overall asset allocation, we
use MFS proprietary quantitative models to evaluate each market's current
valuations and economic strength compared to historical levels. Based on
that information, we then allocate the portfolio to focus on what we see as
growing economies and undervalued markets that have encouraging prospects.
Once we set an overall asset allocation, however, our stock and bond picking
is based on extensive bottom-up research and analysis.
Q. HOW WOULD YOU DESCRIBE THE CURRENT MARKET ENVIRONMENT?
A. During the past few years, diversification has generally hurt investors'
returns; however, given the exceptional strength of the U.S. equity market
over the past 10 years and the prospects for slower growth in the United
States, we think the environment is ideal for a broadening of global market
strength. We are currently finding many attractive growth opportunities in
Europe, Japan, and the United States across a wide range of industries. In
addition, corporate restructuring and industry consolidation has continued
to spread worldwide, which could spur additional interest in international
equities. As a result, we believe one of the best ways to take advantage of
these international opportunities and global economic growth is to maintain
a well-diversified portfolio of domestic and foreign investments.
Q. HOW DID THE FUND'S DOMESTIC AND INTERNATIONAL EQUITY HOLDINGS PERFORM
DURING THE PERIOD?
A. On the equity side, our focus on valuations, fundamental business strengths,
economic variables such as interest rates, and risk-adjusted total returns
led us to slightly underweight the fund's exposure to equities relative to
our benchmarks. During a period of high volatility and weakness for stocks,
this strategy worked to our advantage. The fund's overweighting in Japanese
stocks relative to the MSCI EAFE Index also continued to be a major theme
affecting performance. Early in the period, performance was aided by
superior returns from positions in Japanese technology and
telecommunications stocks such as Hitachi, Canon, and NTT Mobile. The
portfolio received a similar boost from U.S. and European telecommunications
and technology stocks such as Corning, Vodafone Group, Micron Technology,
Oracle, and Cisco. During the second quarter of 2000, however, concerns
about valuations and the potential of a slowdown in global economic growth
caused a correction in technology and telecommunications stocks in many
countries. Persistent selling pressures subsequently reduced much of the
performance achieved by these stocks during the first three months of the
period.
Q. HOW DID YOU POSITION THE FUND'S FIXED-INCOME ASSETS DURING THE PERIOD? HOW
DID THIS POSITIONING AID PERFORMANCE?
A. On the bond side, our fixed-income holdings provided stability and generally
positive returns during a period of severe stock market volatility. During
the past six months, our bond positions generally outperformed the equity
component of the portfolio. Our decision to overweight the fund in U.S.
Treasuries and high-quality foreign government bonds aided performance. Our
longer-term Treasuries performed particularly well during the six-month
period while short-term Treasuries suffered in the rising interest-rate
environment. (Principal value and interest on Treasury securities are
guaranteed by the U.S. government if held to maturity.) Our positions in
long-term European government bonds, which outperformed their
shorter-maturity counterparts, also benefited performance. While our
exposure to emerging-market bonds was marginal, our favorable security
selection in that area generally contributed to total return.
Q. WHAT IS YOUR STRATEGY FOR THE FUND IN THE COMING MONTHS?
A. Looking forward, we'll continue to emphasize our disciplined quantitative
process. Once our quantitative models provide us with a macroeconomic view
of the general health and attractiveness of various regions, countries, and
industries, our fundamental research begins. As always, our focus is to
balance risk in the portfolio by holding what we believe is the best mix of
stocks and bonds. At the same time, our goal is to find the companies and
securities that we think offer attractive valuations, superior income
potential, and growth opportunities.
/s/ Joseph C. Flaherty, Jr.
Joseph C. Flaherty, Jr.
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
current only through the end of the period of the report as stated on the cover.
The manager'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 MANAGER'S PROFILE
-------------------------------------------------------------------------------
JOSEPH C. FLAHERTY, JR., IS VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R) AND
MANAGER OF THE QUANTITATIVE RESEARCH GROUP. HE IS PORTFOLIO MANAGER OF THE
GLOBAL ASSET ALLOCATION PORTFOLIOS OF OUR MUTUAL FUNDS AND VARIABLE ANNUITY
PRODUCTS.
JOE JOINED MFS AS A FIXED-INCOME QUANTITATIVE RESEARCH ASSOCIATE IN 1993 AND WAS
NAMED QUANTITATIVE RESEARCH ANALYST AND ASSISTANT VICE PRESIDENT IN 1996. HE
BECAME VICE PRESIDENT AND MANAGER OF THE QUANTITATIVE RESEARCH GROUP IN 1998 AND
PORTFOLIO MANAGER IN 1999. HE EARNED A BACHELOR OF SCIENCE DEGREE IN MECHANICAL
ENGINEERING FROM TUFTS UNIVERSITY IN 1984 AND AN M.B.A. IN FINANCE FROM BENTLEY
COLLEGE IN 1990.
ALL PORTFOLIO MANAGERS AT MFS INVESTMENT MANAGEMENT(R) ARE SUPPORTED BY AN
INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL RESEARCH(R), A
GLOBAL, COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING SECURITIES.
-------------------------------------------------------------------------------
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 MFS
product is available from your investment professional, 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: $224.5 MILLION NET ASSETS AS OF AUGUST 31, 2000
-------------------------------------------------------------------------------
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.) It is not possible to invest directly
in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the fund's investment operations,
July 22, 1994, through August 31, 2000. Index information is from August 1,
1994.)
MFS Global J.P. Morgan Lehman
Asset Non-Dollar MSCI Brothers
Allocation Government EAFE Aggregate
Fund - Class A Bond Index Index Bond Index
-----------------------------------------------------------------------
1/94 $ 9,525 $10,000 $10,000 $10,000
8/94 9,735 9,945 10,239 10,012
8/95 10,852 11,647 10,320 11,144
8/96 12,396 12,658 11,166 11,601
8/97 14,338 12,303 12,211 12,761
8/98 14,092 13,240 12,227 14,110
8/99 15,824 13,920 15,409 14,222
8/00 19,117 13,038 16,922 15,297
TOTAL RATES OF RETURN THROUGH AUGUST 31, 2000
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years 5 Years Life*
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +20.81% +33.33% +76.16% +100.71%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +20.81% +10.06% +11.99% + 12.08%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +15.08% + 8.29% +10.91% + 11.19%
---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years 5 Years Life*
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +20.20% +31.24% +71.43% + 93.61%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +20.20% + 9.49% +11.38% + 11.42%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +16.20% + 8.64% +11.12% + 11.42%
---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS C
1 Year 3 Years 5 Years Life*
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +20.20% +31.25% +71.59% + 93.91%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +20.20% + 9.49% +11.40% + 11.45%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales Charge +19.20% + 9.49% +11.40% + 11.45%
---------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
1 Year 3 Years 5 Years Life*
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +20.40% +34.08% +77.67% +102.42%
---------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +20.40% +10.27% +12.18% + 12.23%
---------------------------------------------------------------------------------------------------------
<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years 5 Years Life*
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Average global flexible portfolio funds+ +16.45% +11.93% +13.00% + 12.73%
---------------------------------------------------------------------------------------------------------
J.P. Morgan Non-Dollar Government Bond Index# - 6.34% + 1.95% + 2.28% + 4.46%
---------------------------------------------------------------------------------------------------------
MSCI EAFE Index# + 9.81% +11.49% +10.39% + 9.03%
---------------------------------------------------------------------------------------------------------
Lehman Brothers Aggregate Bond Index# + 7.56% + 6.23% + 6.54% + 7.24%
---------------------------------------------------------------------------------------------------------
* For the period from the commencement of the fund's investment operations, July 22, 1994, through
August 31, 2000. Index information is from August 1, 1994.
+ Source: Lipper Inc.
# Source: Standard & Poor's Micropal, Inc.
(+) Average annual rates of return.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class I share performance includes the performance of the fund's Class A shares
for periods prior to their inception (blended performance). Class I share
blended performance has been adjusted to account for the fact that Class I
shares have no sales charge. This blended performance has not been adjusted to
take into account differences in class-specific operating expenses. Because
operating expenses of Class I shares are lower than those of Class A, the
blended Class I share performance is lower than it would have been had Class I
shares been offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers in
effect during the periods shown; without these, the results would have been less
favorable. See the prospectus for details. All results are historical and assume
the reinvestment of capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT
RETURNS MAY BE MORE OR LESS THAN THOSE SHOWN. 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. See the prospectus for
details.
PORTFOLIO CONCENTRATION AS OF AUGUST 31, 2000
PORTFOLIO STRUCTURE
Domestic Equity 32.2%
International Equity 25.8%
International Bonds 14.6%
U.S. Treasury Bonds 10.8%
Government Agency Bonds 7.2%
High Yield Corporate Bonds 6.5%
Emerging Markets Debt Bonds 1.9%
High Grade Corporate Bonds 1.0%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- August 31, 2000
<TABLE>
<CAPTION>
Stocks - 58.0%
--------------------------------------------------------------------------------------------------
ISSUER SHARES VALUE
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign Stocks - 30.6%
Australia - 1.0%
QBE Insurance Group Ltd. (Insurance)* 445,838 $ 2,222,886
--------------------------------------------------------------------------------------------------
Bermuda - 0.5%
Tycom Ltd. (Telecommunications)* 900 $ 37,462
FLAG Telecom Holdings Ltd. (Telecommunications)* 21,470 335,469
Global Crossing Ltd. (Telecommunications)* 25,090 754,268
------------
$ 1,127,199
--------------------------------------------------------------------------------------------------
Brazil - 0.3%
Empresa Brasileira de Aeronautica S.A., ADR
(Aerospace and Defense)* 26,240 $ 716,680
--------------------------------------------------------------------------------------------------
Canada - 2.1%
BCE, Inc. (Telecommunications) 44,002 $ 986,793
Canadian National Railway Co. (Railroads) 53,600 1,577,850
Nortel Networks Corp. (Telecommunications) 20,582 1,678,720
Nortel Networks Corp. (Telecommunications) 7,090 579,390
------------
$ 4,822,753
--------------------------------------------------------------------------------------------------
China - 0.1%
China Telecom Ltd. (Telecommunications) 24,000 $ 184,651
--------------------------------------------------------------------------------------------------
Finland - 1.1%
HPY Holding - HTF Holding Oyj Abp (Telecommunications) 57,725 $ 2,192,436
Sonera Oyj (Telecommunications) 6,250 208,539
------------
$ 2,400,975
--------------------------------------------------------------------------------------------------
France - 3.6%
Alcatel Co. (Telecommunications)* 9,600 $ 784,177
Aventis S.A. (Pharmaceuticals) 11,000 824,838
Banque Nationale de Paris (Banks and Credit Cos.) 12,200 1,120,520
Business Objects S.A., ADR (Computer Software - Systems)* 770 88,165
Sanofi-Synthelabo S.A. (Medical and Health Products)* 37,400 1,822,062
Technip S.A. (Construction) 8,500 1,102,017
Total S.A., "B" (Oils) 8,800 1,304,904
Vivendi S.A. (Business Services) 13,500 1,102,150
------------
$ 8,148,833
--------------------------------------------------------------------------------------------------
Israel - 0.4%
Check Point Software Technologies Ltd. (Computer
Software - Services)* 5,840 $ 851,545
Partner Communications Co. Ltd., ADR (Cellular Telephones)* 3,900 37,050
------------
$ 888,595
--------------------------------------------------------------------------------------------------
Japan - 5.8%
Canon, Inc. (Special Products and Services) 60,000 $ 2,684,803
Fast Retailing Co. (Retail) 4,100 658,461
Fast Retailing-new shares (Retail)* 4,100 658,462
Fujitsu Ltd. (Computer Hardware - Systems) 46,000 1,333,396
Hitachi Ltd. (Electronics) 138,000 1,635,028
NTT Mobile Communications Network, Inc. (Telecommunications) 130 3,439,024
Sony Corp. (Electronics) 13,700 1,529,362
Tokyo Broadcasting System, Inc. (Entertainment) 32,000 1,146,717
------------
$ 13,085,253
--------------------------------------------------------------------------------------------------
Mexico - 0.5%
Grupo Iusacell S.A. de C.V., ADR (Telecommunications)* 12,970 $ 165,367
Grupo Television S.A. de C.V., GDR (Entertainment)* 15,800 1,023,050
------------
$ 1,188,417
--------------------------------------------------------------------------------------------------
Netherlands - 3.8%
Completel Europe N.V. (Telecommunications)* 1,450 $ 12,648
Akzo Nobel N.V. (Chemicals) 53,000 2,342,673
ASM Lithography Holding N.V. (Computer Software - Systems)* 3,910 149,069
ING Groep N.V. (Financial Services)* 20,101 1,344,956
KPN N.V. (Telecommunications)* 34,066 907,207
Libertel N.V. (Cellular Telecommunications)* 41,700 590,223
Philips Electronics N.V. (Electronics)* 32,204 1,566,064
Royal Dutch Petroleum Co. (Oils) 21,900 1,331,233
Versatel Telecommunications N.V. (Telecommunications)* 7,280 207,375
------------
$ 8,451,448
--------------------------------------------------------------------------------------------------
Portugal - 0.3%
Telecel - Comunicacoes Pessoais, S.A. (Cellular
Telecommunications)* 56,000 $ 736,471
--------------------------------------------------------------------------------------------------
Singapore - 1.4%
Chartered Semiconductor Manufacturing Co., ADR (Electronics)* 3,395 $ 288,151
Overseas Union Bank Ltd. (Banks and Credit Cos.) 277,206 1,401,658
Overseas-Chinese Banking Corp. Ltd. (Banks and
Credit Cos.) 115,000 795,362
Singapore Press Holdings Ltd. (Printing and Publishing) 37,000 595,664
------------
$ 3,080,835
--------------------------------------------------------------------------------------------------
South Korea - 0.8%
Samsung Electronics (Electronics) 6,860 $ 1,692,261
--------------------------------------------------------------------------------------------------
Sweden - 0.9%
Saab AB, "B" (Aerospace) 248,000 $ 1,997,711
Tele1 Europe Holdings AB (Telecommunications)* 1,170 14,385
------------
$ 2,012,096
--------------------------------------------------------------------------------------------------
Switzerland - 0.8%
Novartis AG (Medical and Health Products) 1,120 $ 1,693,988
--------------------------------------------------------------------------------------------------
United Kingdom - 7.2%
AstraZeneca Group PLC (Medical and Health Products) 29,444 $ 1,323,214
BAE Systems PLC (Aerospace)* 200,818 1,249,705
BP Amoco PLC (Oils)* 140,500 1,285,017
BP Amoco PLC, ADR (Oils) 12,750 704,438
Cable & Wireless Communications PLC, ADR (Telecommunications)* 39,275 725,257
Carlton Communications PLC (Broadcasting)* 87,200 948,692
CGU PLC (Insurance)* 61,821 950,582
Diageo PLC (Food and Beverage Products)* 115,246 982,994
Granada Media (Media)* 39,410 371,593
HSBC Holdings PLC (Banks and Credit Cos.)* 88,100 1,266,477
Next PLC (Retail) 75,700 683,021
Reckitt Benckiser PLC (Consumer Goods and Services) 78,700 938,413
Royal Bank of Scotland PLC (Banks and Credit Cos.)* 68,176 1,230,267
Vodafone Group PLC (Telecommunications)* 891,432 3,598,082
------------
$ 16,257,752
--------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 68,711,093
--------------------------------------------------------------------------------------------------
U.S. Stocks - 27.4%
Aerospace - 0.7%
Boeing Co. 23,840 $ 1,278,420
United Technologies Corp. 5,300 330,919
------------
$ 1,609,339
--------------------------------------------------------------------------------------------------
Automotive - 0.3%
Harley-Davidson, Inc. 14,310 $ 712,817
--------------------------------------------------------------------------------------------------
Biotechnology - 0.3%
Pharmacia Corp. 11,806 $ 691,389
--------------------------------------------------------------------------------------------------
Business Machines - 0.1%
Seagate Technology, Inc.* 2,750 $ 163,281
--------------------------------------------------------------------------------------------------
Business Services - 1.3%
BEA Systems, Inc.* 3,350 $ 228,009
Computer Sciences Corp.* 9,240 730,538
Thermo Electron Corp.* 8,020 186,465
VeriSign, Inc.* 8,466 1,683,676
------------
$ 2,828,688
--------------------------------------------------------------------------------------------------
Cellular Telephones - 0.4%
Sprint Corp. (PCS Group)* 19,230 $ 965,106
--------------------------------------------------------------------------------------------------
Computer Hardware - Systems - 0.4%
Compaq Computer Corp. 19,900 $ 677,844
Dell Computer Corp.* 4,300 187,587
------------
$ 865,431
--------------------------------------------------------------------------------------------------
Computer Software - Personal Computers - 0.3%
Mercury Interactive Corp.* 680 $ 83,088
Microsoft Corp.* 9,470 661,124
------------
$ 744,212
--------------------------------------------------------------------------------------------------
Computer Software - Services - 0.4%
EMC Corp.* 7,580 $ 742,840
Interwoven, Inc.* 800 76,800
Resonate Inc.* 10 441
TIBCO Software, Inc.* 1,150 117,228
------------
$ 937,309
--------------------------------------------------------------------------------------------------
Computer Software - Systems - 2.1%
Ariba, Inc.* 2,860 $ 450,092
Comverse Technology, Inc.* 3,540 325,459
Digex, Inc.* 3,310 280,316
E.piphany, Inc.* 2,830 294,320
Foundry Networks, Inc.* 130 12,098
I2 Technologies, Inc.* 1,340 226,711
Oracle Corp.* 23,120 2,102,475
Rational Software Corp.* 1,370 176,302
Siebel Systems, Inc.* 600 118,687
VERITAS Software Corp.* 5,477 660,321
------------
$ 4,646,781
--------------------------------------------------------------------------------------------------
Conglomerates - 0.5%
Tyco International Ltd. 19,910 $ 1,134,870
--------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.1%
Colgate-Palmolive Co. 6,860 $ 349,431
--------------------------------------------------------------------------------------------------
Drugs & Health Care - 0.1%
Celera Genomics Co.* 1,720 $ 186,513
--------------------------------------------------------------------------------------------------
Electrical Equipment - 0.7%
General Electric Co. 25,800 $ 1,514,138
--------------------------------------------------------------------------------------------------
Electronics - 3.8%
Altera Corp.* 5,660 $ 366,839
Analog Devices, Inc.* 7,830 786,915
DuPont Photomasks, Inc.* 3,490 264,804
Flextronics International Ltd.* 6,860 571,524
Intel Corp. 20,060 1,501,992
KLA-Tencor Corp.* 2,200 144,375
Lam Research Corp.* 7,670 231,059
Micron Technology, Inc.* 32,610 2,665,867
Novellus Systems, Inc.* 6,660 410,006
Tektronix, Inc. 7,850 598,072
Teradyne, Inc.* 4,220 273,509
Varian Semiconductor Equipment Associates, Inc.* 4,200 239,925
Veeco Instruments, Inc.* 4,380 392,557
------------
$ 8,447,444
--------------------------------------------------------------------------------------------------
Entertainment - 1.3%
Clear Channel Communications, Inc.* 12,972 $ 938,848
Infinity Broadcasting Corp., "A"* 23,820 902,183
Time Warner, Inc. 6,320 540,360
Viacom, Inc., "B"* 6,820 459,071
------------
$ 2,840,462
--------------------------------------------------------------------------------------------------
Financial Institutions - 1.9%
Citigroup, Inc. 14,986 $ 874,808
Donaldson, Lufkin & Jenrette, Inc. 2,890 255,765
Financial Federal Corp.* 10,730 228,012
Freddie Mac Corp. 11,400 480,225
Goldman Sachs Group, Inc. 3,770 482,796
Lehman Brothers Holdings, Inc. 1,300 188,500
Merrill Lynch & Co., Inc. 5,340 774,300
Morgan Stanley Dean Witter & Co. 9,070 975,592
------------
$ 4,259,998
--------------------------------------------------------------------------------------------------
Insurance - 1.1%
American International Group, Inc. 7,240 $ 645,265
Gallagher (Arthur J.) & Co. 9,060 443,940
Hartford Financial Services Group, Inc. 11,220 747,533
Marsh & McLennan Cos., Inc. 5,160 612,750
------------
$ 2,449,488
--------------------------------------------------------------------------------------------------
Machinery - 0.1%
Deere & Co., Inc. 9,870 $ 325,093
--------------------------------------------------------------------------------------------------
Media
Entravision Common Corp.* 250 $ 4,953
--------------------------------------------------------------------------------------------------
Medical and Health Products - 0.7%
American Home Products Corp. 7,390 $ 400,445
Bristol-Myers Squibb Co. 10,130 536,890
Pfizer, Inc. 12,647 546,983
------------
$ 1,484,318
--------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.4%
Health Management Associates, Inc., "A"* 23,330 $ 380,570
Illumina Inc.* 20 895
PE Corp. - PE Biosystems Group 4,610 453,509
Rosetta Inpharmatics Inc.* 10 354
------------
$ 835,328
--------------------------------------------------------------------------------------------------
Oil Services - 1.1%
Baker Hughes, Inc. 13,750 $ 502,734
Cooper Cameron Corp.* 3,920 305,025
Global Marine, Inc.* 22,250 718,953
Halliburton Co. 5,210 276,130
Noble Drilling Corp.* 7,170 347,745
Weatherford International, Inc.* 8,560 401,785
------------
$ 2,552,372
--------------------------------------------------------------------------------------------------
Oils - 0.9%
Conoco, Inc., "A" 16,850 $ 424,409
Santa Fe International Corp. 19,400 762,663
Transocean Sedco Forex, Inc. 13,030 778,542
------------
$ 1,965,614
--------------------------------------------------------------------------------------------------
Pharmaceuticals - 0.1%
Sepracor, Inc.* 1,650 $ 181,500
--------------------------------------------------------------------------------------------------
Retail - 1.2%
Best Buy Co., Inc.* 8,550 $ 527,962
CVS Corp. 22,430 832,714
RadioShack Corp. 11,650 687,350
Wal-Mart Stores, Inc. 15,270 724,371
------------
$ 2,772,397
--------------------------------------------------------------------------------------------------
Supermarkets - 0.5%
Safeway, Inc.* 22,320 $ 1,100,655
--------------------------------------------------------------------------------------------------
Telecommunications - 5.9%
Allegiance Telecom, Inc.* 6,170 $ 307,343
American Tower Corp., "A"* 13,180 478,599
AT&T Corp., "A"* 20,180 431,348
Avici Systems, Inc.* 30 4,494
Cabletron Systems, Inc.* 16,810 629,324
CIENA Corp.* 2,800 620,725
Cisco Systems, Inc.* 34,800 2,388,150
Corning, Inc. 6,460 2,118,476
Corvis Corp.* 280 29,068
Cox Communications, Inc.* 9,120 324,330
EchoStar Communications Corp.* 15,470 754,162
Emulex Corp.* 6,660 697,219
Metromedia Fiber Network, Inc., "A"* 18,340 732,454
MGC Communications, Inc.* 4,080 75,225
NEXTEL Communications, Inc.* 7,810 432,967
Nextlink Communications, Inc., "A"* 13,520 474,045
NTL, Inc.* 34,038 1,491,290
SBA Communcations Corp.* 3,800 169,575
Spectrasite Holdings, Inc.* 8,000 187,500
Time Warner Telecom, Inc.* 5,820 377,936
UnitedGlobalCom, Inc.* 6,160 236,005
Williams Communications Group, Inc.* 3,300 96,938
Winstar Communications, Inc.* 4,485 120,534
------------
$ 13,177,707
--------------------------------------------------------------------------------------------------
Telecommunications and Cable - 0.2%
Comcast Corp., "A"* 13,360 $ 497,660
--------------------------------------------------------------------------------------------------
Utilities - Electric - 0.5%
AES Corp.* 19,640 $ 1,252,050
--------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 61,496,344
--------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $102,056,091) $130,207,437
--------------------------------------------------------------------------------------------------
Bonds - 33.6%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------------------------------
U.S. Bonds - 23.8%
Building - 0.5%
American Standard, Inc., 7.375s, 2008 $ 1,225 $ 1,145,375
--------------------------------------------------------------------------------------------------
Container, Forest and Paper Products - 1.0%
Gaylord Container Corp., 9.75s, 2007 $ 175 $ 140,000
Riverwood International Corp., 10.25s, 2006 1,225 1,212,750
Silgan Holdings, Inc., 9s, 2009 900 819,000
------------
$ 2,171,750
--------------------------------------------------------------------------------------------------
Energy - 1.1%
P&L Coal Holdings Corp., 8.875s, 2008 $ 1,225 $ 1,203,563
P&L Coal Holdings Corp., 9.625s, 2008 1,250 1,206,250
------------
$ 2,409,813
--------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 7.1%
FNMA, 7.25s, 2010 $ 15,633 $ 16,016,477
--------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.8%
Borden, Inc., 9.25s, 2019### $ 2,000 $ 1,896,780
--------------------------------------------------------------------------------------------------
Media - 1.5%
Chancellor Media Corp., 8s, 2008 $ 1,225 $ 1,237,250
Echostar DBS Corp., 9.375s, 2009 1,225 1,209,688
United Pan Europe, 10.875s, 2009 1,200 1,020,000
------------
$ 3,466,938
--------------------------------------------------------------------------------------------------
Retail - 0.1%
Musicland Group, Inc., 9.875s, 2008 $ 250 $ 210,000
--------------------------------------------------------------------------------------------------
Telecommunications - 0.4%
Western Wireless Corp., 10.5s, 2007 $ 750 $ 780,000
--------------------------------------------------------------------------------------------------
Telecom - Wire Less - 0.6%
Crown Castle International Corp., 10.75s, 2011 $ 1,200 $ 1,248,000
--------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 10.7%
U.S. Treasury Notes, 5.5s, 2008### $ 7,767 $ 7,552,165
U.S. Treasury Notes, 6s, 2009 16,428 16,528,046
------------
$24,080,211
--------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 53,425,344
--------------------------------------------------------------------------------------------------
Foreign Bonds - 9.8%
Bermuda - 0.6%
Global Crossing Holdings Ltd., 9.625s, 2008
(Telecommunications) $ 1,225 $ 1,237,250
--------------------------------------------------------------------------------------------------
Brazil - 0.6%
Federal Republic of Brazil, 7.438s, 2009 $ 75 $ 66,000
Federal Republic of Brazil, 8s, 2014 287 221,645
Federal Republic of Brazil, 6s, 2024 90 61,875
Federal Republic of Brazil, 12.25s, 2030 485 459,538
Federal Republic of Brazil, 11s, 2040 733 602,892
------------
$ 1,411,950
--------------------------------------------------------------------------------------------------
Bulgaria - 0.3%
National Republic of Bulgaria, 7.063s, 2024 $ 735 $ 598,106
--------------------------------------------------------------------------------------------------
France - 0.2%
Republic of France, 4s, 2002 EUR 564 $ 492,163
--------------------------------------------------------------------------------------------------
Germany - 0.4%
Federal Republic of Germany, 5.375s, 2010 EUR 1,087 $ 969,993
--------------------------------------------------------------------------------------------------
Italy - 0.7%
Republic of Italy, 4s, 2004 EUR 679 $ 571,747
Republic of Italy, 5.5s, 2010 1,220 1,075,807
------------
$ 1,647,554
--------------------------------------------------------------------------------------------------
Panama - 0.3%
Republic of Panama, 8.875s, 2027 $ 735 $ 641,287
--------------------------------------------------------------------------------------------------
Qatar - 0.3%
State of Qatar, 9.75s, 2030## $ 750 $ 775,500
--------------------------------------------------------------------------------------------------
South Korea - 0.3%
Hanvit Bank, 12.75s, 2010 (Banks and Credit Cos.)## $ 615 $ 627,300
--------------------------------------------------------------------------------------------------
United Kingdom - 6.1%
Colt Telecom Group PLC, 8.875s, 2007 (Telecommunications) DEM 1,000 $ 431,533
OTE PLC, 6.125s, 2007 (Industrial)## EUR 980 850,693
Telewest Communications PLC, 9.625s, 2006
(Cable Television) 550 521,125
United Kingdom Treasury, 5s, 2004 GBP 2,486 3,502,722
United Kingdom Treasury, 5.75s, 2009 1,392 2,080,216
United Kingdom Treasury, 7.25s, 2007 3,929 6,243,164
------------
$ 13,629,453
--------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 22,030,556
--------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $76,130,972) $ 75,455,900
--------------------------------------------------------------------------------------------------
Call Options Purchased - 0.5%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
--------------------------------------------------------------------------------------------------
Euro/September/0.88 EUR 9,528 $ 27,432
Euro/October/0.96 10,744 789,378
Great British Pound/September/1.42 GBP 10,508 34,613
Japanese Yen/Euro/September/93.25 JPY 1,181,972 139,473
Japanses Yen/Euro/December/95 1,050,497 127,110
--------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $589,065) $ 1,118,006
--------------------------------------------------------------------------------------------------
Put Options Purchased - 0.1%
--------------------------------------------------------------------------------------------------
Australian Dollar/September/0.5925 AUD 3,533 $ 8,472
Australian Dollar/October/0.594 3,542 22,382
Australian Dollar/November/0.605 4,445 13,320
Euro/September/0.925 EUR 6,788 0
Euro/October/0.96 10,744 3,599
Euro/October/0.94 10,476 24,054
Japanese Yen/September/108 JPY 1,195,405 43,035
Japanese Yen/Euro/January/130 55,973 1,063
Japenese Yen/October/109 1,218,668 59,715
--------------------------------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $812,257) $ 175,640
--------------------------------------------------------------------------------------------------
Short-Term Obligation - 7.4%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED)
--------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Discount Notes,
due 9/01/00, at Amortized Cost $ 16,700 $ 16,700,000
--------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $196,288,385) $223,656,983
--------------------------------------------------------------------------------------------------
Call Options Written - (0.5)%
--------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED) VALUE
--------------------------------------------------------------------------------------------------
Australian Dollar/October/0.56 AUD 4,146 $ (29,796)
Australian Dollar/May/0.555 3,656 (62,313)
Canadian Dollar/September/1.4 CAD 14,837 0
Euro/September/0.9 EUR 6,604 (90,045)
Euro/September/0.96 10,744 (795,438)
Euro/November/0.86 6,207 (50,732)
Japanese Yen/Euro/September/93.25 JPY 1,181,972 (139,473)
--------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $854,152) $ (1,167,797)
--------------------------------------------------------------------------------------------------
Put Options Written
--------------------------------------------------------------------------------------------------
Australian Dollar/October/0.59 AUD 4,369 $ (39,487)
Euro/September/0.96 EUR 10,744 (709)
Euro/October/0.98 10,922 (2,534)
Japenese Yen/October/113 JPY 1,263,390 (10,107)
--------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $268,865) $ (52,837)
--------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 0.9% 2,032,801
--------------------------------------------------------------------------------------------------
Net Assets - 100.0% $224,469,150
--------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
### Security segregated as collateral for open futures contracts.
</TABLE>
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 GBP = British Pounds
BRL = Brazilian Real GRD = Greek Drachma
CAD = Canadian Dollars JPY = Japanese Yen
CHF = Swiss Francs PLN = Polish Zloty
CLP = Chilean Peso NZD = New Zealand Dollars
DEM = Deutsche Marks SEK = Swedish Kronor
DKK = Danish Kronor SGD = Singapore Dollar
EUR = Euro VEB = Venezuelan Bolivar
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
------------------------------------------------------------------------------
AUGUST 31, 2000
------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $196,288,385) $223,656,983
Investments of cash collateral for securities loaned, at
value and identified cost 6,695,525
Cash 31,078
Net receivable for forward foreign currency exchange
contracts to sell 1,622,668
Net receivable for forward foreign currency exchange
contracts subject to master netting agreements 318,283
Receivable for fund shares sold 315,166
Receivable for investments sold 263,064
Interest and dividends receivable 1,161,819
Other assets 3,298
------------
Total assets $234,067,884
------------
Liabilities:
Payable to subcustodian for foreign currency, at value
(identified cost $40,223) $ 39,597
Net payable for forward foreign currency exchange contracts
to purchase 852,310
Payable for daily variation margin on open future contracts 171,470
Payable for fund shares reacquired 247,394
Payable for investments purchased 266,893
Collateral for securities loaned, at value 6,695,525
Written options outstanding, at value
(premiums received, $1,123,017) 1,220,634
Payable to affiliates -
Management fee 3,726
Distribution and service fee 5,240
Administrative fee 113
Accrued expenses and other liabilities 95,832
------------
Total liabilities $ 9,598,734
------------
Net assets $224,469,150
============
Net assets consist of:
Paid-in capital $178,813,390
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 27,389,678
Accumulated undistributed net realized gain on investments
and foreign currency transactions 14,287,214
Accumulated undistributed net investment income 3,978,868
------------
Total $224,469,150
============
Shares of beneficial interest outstanding 11,616,869
==========
Class A shares:
Net asset value per share
(net assets of $83,280,030 / 4,299,190 shares of
beneficial interest outstanding) $19.37
======
Offering price per share (100 / 95.25 of net asset
value per share) $20.34
======
Class B shares:
Net asset value and offering price per share
(net assets of $117,421,584 / 6,085,499 shares of
beneficial interest outstanding) $19.30
======
Class C shares:
Net asset value and offering price per share
(net assets of $23,767,410 / 1,232,173 shares of
beneficial interest outstanding) $19.29
======
Class I shares:
Net asset value per share
(net assets of $126.20 / 6.590 shares of
beneficial interest outstanding) $19.15
======
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, 2000
------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 6,337,276
Dividends 2,013,504
Foreign taxes withheld (131,639)
-----------
Total investment income $ 8,219,141
-----------
Expenses -
Management fee $ 1,349,808
Trustees' compensation 44,131
Shareholder servicing agent fee 224,968
Distribution and service fee (Class A) 407,454
Distribution and service fee (Class B) 1,201,287
Distribution and service fee (Class C) 233,332
Administrative fee 31,288
Custodian fee 155,632
Printing 60,355
Postage 26,504
Auditing fees 36,042
Legal fees 3,562
Miscellaneous 176,018
-----------
Total expenses $ 3,950,381
Fees paid indirectly (36,524)
-----------
Net expenses $ 3,913,857
-----------
Net investment income $ 4,305,284
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $25,246,660
Written option transactions (601,413)
Futures contracts (6,610,588)
Foreign currency transactions 9,139,043
-----------
Net realized gain on investments and foreign currency
transactions $27,173,702
-----------
Change in unrealized appreciation (depreciation) -
Investments $ 9,699,930
Written options 946,211
Futures 688,094
Translation of assets and liabilities in foreign
currencies (648,729)
-----------
Net unrealized gain on investments and foreign
currency translation $10,685,506
-----------
Net realized and unrealized gain on investments
and foreign currency $37,859,208
-----------
Increase in net assets from operations $42,164,492
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 4,305,284 $ 5,491,965
Net realized gain on investments and foreign currency transactions 27,173,702 1,527,023
Net unrealized gain on investments and foreign currency translation 10,685,506 25,082,448
------------- -------------
Increase in net assets from operations $ 42,164,492 $ 32,101,436
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,184,009) $ (3,664,797)
From net investment income (Class B) (4,107,829) (4,776,210)
From net investment income (Class C) (795,422) (1,137,215)
From net investment income (Class I) (1,100) (1,772)
From net realized gain on investments and foreign -- currency transactions (Class A) -- (5,161,038)
From net realized gain on investments and foreign -- currency transactions (Class B) -- (7,990,161)
From net realized gain on investments and foreign -- currency transactions (Class C) -- (2,008,247)
From net realized gain on investments and foreign -- currency transactions (Class I) -- (2,125)
------------- -------------
Total distributions declared to shareholders $ (8,088,360) $ (24,741,565)
------------- -------------
Net decrease in net assets from fund share transactions $ (35,007,342) $ (64,131,777)
------------- -------------
Total decrease in net assets $ (931,210) $ (56,771,906)
Net assets:
At beginning of period 225,400,360 282,172,266
------------- -------------
At end of period (including accumulated undistributed net investment income
of $3,978,868 and $4,248,907, respectively) $ 224,469,150 $ 225,400,360
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------
CLASS A
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.67 $16.36 $18.75 $17.68 $16.63
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.41 $ 0.40 $ 0.47 $ 0.46 $ 0.43
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 3.01 1.51 (0.69) 2.19 1.85
------ ------ ------ ------ ------
Total from investment operations $ 3.42 $ 1.91 $(0.22) $ 2.65 $ 2.28
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.72) $(0.66) $(0.72) $(0.40) $(0.49)
From net realized gain on investments
and foreign currency transactions -- (0.94) (1.45) (1.18) (0.74)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.72) $(1.60) $(2.17) $(1.58) $(1.23)
------ ------ ------ ------ ------
Net asset value - end of period $19.37 $16.67 $16.36 $18.75 $17.68
====== ====== ====== ====== ======
Total return(+) 20.81% 12.29% (1.72)% 15.67% 14.23%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.43% 1.44% 1.44% 1.43% 1.48%
Net investment income 2.23% 2.38% 2.57% 2.51% 2.45%
Portfolio turnover 144% 184% 127% 128% 202%
Net assets at end of period (000 omitted) $83,280 $79,908 $97,007 $111,959 $86,457
(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
Ratios (to average net assets):
Expenses## -- -- -- 1.46% 1.53%
Net investment income -- -- -- 2.48% 2.40%
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charges had been included, the results
would have been lower.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
----------------------------------------------------------------------------------------------------------------------------
CLASS B
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.60 $16.31 $18.70 $17.63 $16.58
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.32 $ 0.32 $ 0.38 $ 0.36 $ 0.32
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 3.00 1.48 (0.69) 2.19 1.85
------ ------ ------ ------ ------
Total from investment operations $ 3.32 $ 1.80 $(0.31) $ 2.55 $ 2.17
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.62) $(0.57) $(0.63) $(0.30) $(0.38)
In excess of net investment income -- -- -- -- (0.74)
From net realized gain on investments
and foreign currency transactions -- (0.94) (1.45) (1.18) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.62) $(1.51) $(2.08) $(1.48) $(1.12)
------ ------ ------ ------ ------
Net asset value - end of period $19.30 $16.60 $16.31 $18.70 $17.63
====== ====== ====== ====== ======
Total return 20.20% 11.67% (2.23)% 15.01% 13.58%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.93% 1.94% 1.94% 1.98% 2.10%
Net investment income 1.72% 1.91% 2.06% 1.96% 1.83%
Portfolio turnover 144% 184% 127% 128% 202%
Net assets at end of period (000 omitted) $117,422 $121,009 $147,882 $166,865 $124,399
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS C
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.59 $16.29 $18.67 $17.62 $16.58
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.31 $ 0.32 $ 0.38 $ 0.36 $ 0.33
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 3.01 1.49 (0.70) 2.18 1.85
------ ------ ------ ------ ------
Total from investment operations $ 3.32 $ 1.81 $(0.32) $ 2.54 $ 2.18
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.62) $(0.57) $(0.61) $(0.31) $(0.40)
From net realized gain on investments
and foreign currency transactions -- (0.94) (1.45) (1.18) (0.74)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.62) $(1.51) $(2.06) $(1.49) $(1.14)
------ ------ ------ ------ ------
Net asset value - end of period $19.29 $16.59 $16.29 $18.67 $17.62
====== ====== ====== ====== ======
Total return 20.20% 11.65% (2.21)% 15.06% 13.62%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.93% 1.94% 1.94% 1.96% 2.03%
Net investment income 1.72% 1.93% 2.06% 2.00% 1.89%
Portfolio turnover 144% 184% 127% 128% 202%
Net assets at end of period (000 omitted) $23,767 $24,438 $37,248 $58,074 $33,283
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
-------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31, 2000 1999 1998 1997*
-------------------------------------------------------------------------------------------------------------------------
CLASS I
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $16.63 $16.34 $18.74 $17.56
------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.33 $ 0.48 $ 0.57 $ 0.28
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 3.01 1.50 (0.70) 1.16
------ ------ ------ ------
Total from investment operations $ 3.34 $ 1.98 $(0.13) $ 1.44
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.82) $(0.75) $(0.82) $(0.26)
From net realized gain on investments and
foreign currency transactions -- (0.94) (1.45) --
------ ------ ------ ------
Total distributions declared to shareholders $(0.82) $(1.69) $(2.27) $(0.26)
------ ------ ------ ------
Net asset value - end of period $19.15 $16.63 $16.34 $18.74
====== ====== ====== ======
Total return 20.40% 12.73% (1.21)% 8.22%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.99% 0.94% 0.94% 0.97%+
Net investment income 1.93% 2.84% 3.07% 3.43%+
Portfolio turnover 144% 184% 127% 128%
Net assets at end of period (000 omitted) -- $45 $35 $34
* For the period from the commencement of the fund's offering of Class I shares, January 7, 1997, through August 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
</TABLE>
See notes to financial statements.
<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. The fund can
invest in foreign securities. Investments in foreign securities are vulnerable
to the effects of changes in the relative values of the local currency and the
U.S. dollar and to the effects of changes in each country's legal, political,
and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, forward contracts, and swap agreements,
are valued on the basis of valuations furnished by dealers or by a pricing
service with consideration to factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data, without exclusive
reliance upon exchange or over-the-counter prices. Short-term obligations,
which mature in 60 days or less, are valued at amortized cost, which
approximates market value. Futures contracts and options listed on commodities
exchanges are reported at market value using closing settlement prices.
Over-the-counter options on securities are valued by brokers. Over-the-counter
currency options are valued through the use of a pricing model which takes into
account foreign currency exchange spot and forward rates, implied volatility,
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued in good faith, at fair value, by the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
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 option 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.
Security Loans - State Street Bank and Trust Company ("State Street") and Chase
Manhattan Bank ("Chase"), as lending agents, may loan the securities of the fund
to certain qualified institutions (the "Borrowers") approved by the fund. The
loans are collateralized at all times by cash and/or U.S. Treasury securities in
an amount at least equal to the market value of the securities loaned. State
Street and Chase provides the fund with indemnification against Borrower
default. The fund bears the risk of loss with respect to the investment of cash
collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the fund and the lending agents. Income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for in
the same manner as other dividend and interest income.
At August 31, 2000, the value of securities loaned was $5,825,408. These loans
were collateralized by U.S. Treasury securities of $11,052 and cash of
$6,695,525 which was invested in the following short-term obligations:
SHARES/ AMORTIZED
PRINCIPAL COST
AMOUNT AND VALUE
------------------------------------------------------------------------------
Navigator Securities lending Prime Portfolio 5,343,725 $5,343,725
Salomon Smith Barney Inc. 1,351,800 1,351,800
----------
Total investments of cash collateral for
securities loaned $6,695,525
==========
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 may 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 discount is
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.
Some securities may be purchased on a "when-issued" or "forward delivery" basis,
which means that the securities will be delivered to the fund at a future date,
usually beyond customary settlement time.
Fees Paid Indirectly - The fund's custody 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 total 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 net taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
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 only distributions in excess of tax basis earnings and profits are
reported in the financial statements as distributions from paid-in 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, 2000, $3,513,037 was reclassified to accumulated
undistributed net investment income from accumulated undistributed net realized
gain on investments and foreign currency transactions due to differences between
book and tax accounting for foreign currency transactions. This change had no
effect on the net assets or net asset value per share. At August 31, 2000,
accumulated undistributed net investment income 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
currency.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that differ in their respective distribution and service fees.
All shareholders bear the common expenses of the fund based on daily net assets
of each class, without distinction between share classes. Dividends are declared
separately for each class. 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
the fund's average daily net assets.
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. Included in Trustees' compensation is a net
periodic pension expense of $12,308 for the year ended August 31, 2000.
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 incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$22,468 for the year ended August 31, 2000, 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 $21,253 for the year ended August 31, 2000.
Fees incurred under the distribution plan during the year ended August 31, 2000,
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 $25,871 and $39,387 for Class B and Class C shares, respectively,
for the year ended August 31, 2000. Fees incurred under the distribution plan
during the year ended August 31, 2000, were 1.00% of average daily net assets
attributable to Class B and Class C shares, on an annualized basis.
Certain Class A 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, 2000,
were $2,410, $225,114, and $1,362 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 annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
PURCHASES SALES
-------------------------------------------------------------------------------
U.S. government securities $ 32,657,304 $ 73,887,667
------------ ------------
Investments (non-U.S. government securities) $266,561,794 $282,927,249
------------ ------------
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 $196,843,126
------------
Gross unrealized appreciation $ 35,997,951
Gross unrealized depreciation (9,184,094)
------------
Net unrealized appreciation $ 26,813,857
============
(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. Transactions in
fund shares were as follows:
<TABLE>
<CAPTION>
Class A shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,699,499 $ 31,019,656 16,688,497 $ 279,541,657
Shares issued to shareholders
in reinvestment of distributions 154,764 2,840,580 491,452 8,020,670
Shares reacquired (2,348,488) (42,806,593) (18,317,745) (308,025,633)
------------- ------------- ------------- -------------
Net decrease (494,225) $ (8,946,357) (1,137,796) $ (20,463,306)
============= ============= ============= =============
<CAPTION>
Class B shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 538,910 $ 9,966,349 700,045 $ 11,627,770
Shares issued to shareholders
in reinvestment of distributions 196,070 3,585,300 677,063 11,008,381
Shares reacquired (1,937,422) (35,355,885) (3,157,596) (52,665,663)
------------- ------------- ------------- -------------
Net decrease (1,202,442) $ (21,804,236) (1,780,488) $ (30,029,512)
============= ============= ============= =============
<CAPTION>
Class C shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 155,065 $ 2,920,775 300,463 $ 4,987,004
Shares issued to shareholders
in reinvestment of distributions 31,294 572,472 137,612 2,237,218
Shares reacquired (427,005) (7,699,996) (1,251,546) (20,872,773)
------------- ------------- ------------- -------------
Net decrease (240,646) $ (4,206,749) (813,471) $ (13,648,551)
============= ============= ============= =============
<CAPTION>
Class I shares
YEAR ENDED AUGUST 31, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 237 $ 3,937 396 $ 6,605
Shares issued to shareholders
in reinvestment of distributions 63 1,097 239 3,891
Shares reacquired (3,028) (55,034) (53) (904)
------------- ------------- ------------- -------------
Net increase (decrease) (2,728) $ (50,000) 582 $ 9,592
============= ============= ============= =============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. 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,
2000, was $1,989. The fund had no borrowings during the year.
(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.
Written Option Transactions
NUMBER OF
CONTRACTS PREMIUMS
-------------------------------------------------------------------------------
Outstanding, beginning of period 7 $ 884,731
Options written 38 4,076,862
Options terminated in closing transactions (19) (2,899,142)
Options exercised (6) (594,546)
Options expired (9) (344,888)
--- ---------
Outstanding end of period 11 $ 1,123,017
=== ===========
At August 31, 2000, the fund had sufficient cash and/or securities at least
equal to the value of the written options.
Forward Foreign Currency Exchange Contracts
<TABLE>
<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 9/13/00 AUD 6,586,040 $ 3,798,356 $ 3,796,441 $ 1,915
06/05/01 BRL 13,836,702 7,013,922 7,155,560 (141,638)
11/13/00 CLP 799,385,194 1,408,608 1,413,402 (4,794)
9/13/00 DKK 1,209,221 155,088 144,094 10,994
9/13/00 EUR 22,836,792 21,502,080 20,274,961 1,227,119
9/13/00 GBP 8,007,826 11,954,849 11,617,882 336,967
9/13/00 GRD 585,678,455 1,657,502 1,540,055 117,447
9/13/00 JPY 891,833,097 8,300,034 8,379,087 (79,053)
9/13/00 NZD 7,383,236 3,233,857 3,153,424 80,433
9/13/00 SEK 46,767,123 5,411,296 4,960,219 451,077
9/13/00 SGD 5,158,482 2,978,338 3,001,054 (22,716)
10/05/00 DEM 4,893,483,274 6,727,979 7,083,062 (355,083)
----------- ----------- ----------
$74,141,909 $72,519,241 $1,622,668
=========== =========== ==========
Purchases 9/13/00 AUD 6,235,968 $ 3,680,477 $ 3,594,646 $ (85,831)
9/29/00 - 06/05/01 BRL 22,064,316 11,331,629 11,647,842 316,213
9/13/00 CHF 5,602,070 3,273,537 3,219,508 (54,029)
11/13/00 CLP 799,385,194 1,445,281 1,413,402 (31,879)
9/13/00 EUR 20,257,918 18,925,756 18,225,096 (700,660)
9/13/00 GBP 8,475,858 12,776,257 12,296,911 (479,346)
9/13/00 JPY 1,525,010,982 14,317,654 14,328,016 10,362
9/13/00 NZD 315,379 148,239 134,700 (13,539)
9/25/00 PLN 9,575,242 2,192,636 2,171,257 (21,379)
10/05/00 VEB 4,893,483,274 6,875,283 7,083,061 207,778
----------- ----------- ----------
$74,966,749 $74,114,439 $ (852,310)
=========== =========== ==========
</TABLE>
At August 31, 2000, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net receivable of $949,830 with
Deutsche Bank and a net payable of $73,276 with Chase and $141,961 with First
Boston and $416,310 with Merrill Lynch.
At August 31, 2000, the fund had sufficient cash and/or securities to cover any
commitments under these contracts.
Futures Contracts
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
--------------------------------------------------------------------------------
CAC Index September 2000 31 Short $ (24,522)
DAX Index September 2000 10 Short 27,503
FTSE Index September 2000 171 Short (377,851)
Nikkei Index September 2000 168 Long (56,533)
S&P 500 Index September 2000 19 Long 157,556
S&P 500 Barra Growth Index September 2000 55 Short (532,543)
S&P 500 Barra Value Index September 2000 78 Long 145,658
Japanese Government Bonds December 2000 15 Long (126,078)
---------
$(786,810)
=========
At August 31, 2000, the fu nd had sufficient cash and/or securities to cover any
margin requirements under these contracts.
<PAGE>
REPORT OF ERNST & YOUNG, 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), including the schedule of portfolio
investments, as of August 31, 2000, 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
five years in the period then ended. 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 auditing standards generally accepted
in the United States. 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 and financial highlights. Our procedures included
confirmation of securities owned at August 31, 2000, 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, 2000, 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 five
years in the period then ended, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
Boston, Massachusetts
October 9, 2000
<PAGE>
-------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
-------------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING THE
FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 2000.
FOR THE YEAR ENDED AUGUST 31, 2000, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS IS 2.41%.
-------------------------------------------------------------------------------
<PAGE>
MFS(R) GLOBAL ASSET ALLOCATION FUND
<TABLE>
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Marshall N. Cohan+ - Private Investor Mark E. Bradley*
Robert R. Flaherty*
Lawrence H. Cohn, M.D.+ - Chief of Cardiac Laura F. Healy*
Surgery, Brigham and Women's Hospital; Ellen Moynihan*
Professor of Surgery, Harvard Medical School
SECRETARY
The Hon. Sir J. David Gibbons, KBE+ - Chief Stephen E. Cavan*
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Colonial Insurance Company, Ltd. ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Abby M. O'Neill+ - Private Investor
CUSTODIAN
Walter E. Robb, III+ - President and Treasurer, State Street Bank and Trust Company
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting AUDITORS
Group, Inc. (office services) Ernst & Young LLP
Arnold D. Scott* - Senior Executive INVESTOR INFORMATION
Vice President, Director, and Secretary, For information on MFS mutual funds, call
MFS Investment Management your investment professional or, for an
information kit, call toll free: 1-800-637-2929
Jeffrey L. Shames* - Chairman and Chief any business day from 9 a.m. to 5 p.m.
Executive Officer, MFS Investment Eastern time (or leave a message anytime).
Management
INVESTOR SERVICE
J. Dale Sherratt+ - President, Insight Resources, MFS Service Center, Inc.
Inc. (acquisition planning specialists) P.O. Box 2281
Boston, MA 02107-9906
Ward Smith+ - Former Chairman (until 1994),
NACCO Industries (holding company) For general information, call toll free:
1-800-225-2606 any business day from
INVESTMENT ADVISER 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired,
Boston, MA 02116-3741 call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use
DISTRIBUTOR this service, your phone must be equipped with
MFS Fund Distributors, Inc. a Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges,
or stock and bond outlooks, call toll free:
CHAIRMAN AND PRESIDENT 1-800-MFS-TALK (1-800-637-8255) anytime
Jeffrey L. Shames* from a touch-tone telephone.
PORTFOLIO MANAGER WORLD WIDE WEB
Joseph C. Flaherty, Jr.* www.mfs.com
TREASURER
James O. Yost*
+ Independent Trustee
*MFS Investment Management
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MFS(R) GLOBAL ASSET ALLOCATION FUND BULK RATE
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MWA-2 10/00 27.6M 88/288/388/888
