<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) GLOBAL ASSET
ALLOCATION FUND
SEMIANNUAL REPORT o FEBRUARY 29, 2000
- --------------------------------------------------------------------------------
MUTUAL FUND GIFT KITS (see page 39)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 4
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 11
Financial Statements ...................................................... 23
Notes to Financial Statements ............................................. 30
Trustees and Officers ..................................................... 41
MFS(R) 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
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
One could easily argue that the Internet represents the greatest technological
development most of us may see in our lifetimes. There is no disputing that this
new communication medium is changing forever the way we work, play, and shop.
One might also argue that investing in this new technology represents the
investment opportunity of a lifetime. The question for any investor is whether
and how to take advantage of it.
The popular press, it seems, would have us believe that by surfing the Web, we
can learn everything we need to know about investing. Indeed, there is no doubt
that Internet-delivered information and brokerage services enable individual
investors to be well informed and to trade at bargain prices. But we believe the
numbers and facts argue that, for most of us, mutual funds purchased through an
investment professional will continue to be one of the best products for
long-term investing in this new millennium.
According to a survey by the Investment Company Institute, the national
association of American investment companies, 44% of American households own
stock or bond mutual funds, while only 25.5% own individual stocks.(1) Of course
that doesn't tell us how well they did owning those funds or stocks, but another
statistic gives us a clue. In the third quarter of 1999, during a period of
volatility in the greatest bull market in history, a quarter of the 7,500 stocks
tracked by Morningstar, a popular rating service, lost more than 20% of their
value. But during the same period, fewer than 1% of the mutual funds tracked by
Morningstar -- 6 out of 10,000 funds -- were down by a similar amount.(2) So an
investor's chance of picking one of those losing stocks was about 25 times
greater than his or her chance of picking an equally losing fund.
The numbers also show that a majority of Americans seek professional advice when
buying mutual funds. Outside of employer-sponsored retirement plans,
approximately 68% of fund shareholders state that their primary method of
purchasing shares is through an investment professional.(1)
Why do we at MFS(R) believe that mutual funds plus professional advice will
continue to define the best course of action for many investors? Let's look at
some of the characteristics of a successful long-term investment approach:
o HAVING A PLAN AND STICKING TO IT: Our experience is that successful investors
-- those whose lives are enriched by the fruits of their investing -- share
two characteristics. They have a plan for reaching their monetary goals, and
they stick with that plan through up as well as down markets. And for many
investors, working with an investment professional may be the best way to
develop a plan. Although the Internet abounds with calculators for developing
all sorts of investment plans, none has your investment professional's high
level of experience and an understanding of your unique situation. And no
calculator can counsel you during a down market, when you may be tempted to
abandon your goals and your plan.
o DIVERSIFICATION: Few investors can afford to own a large number of holdings,
so poor performance of one company can potentially drag down their entire
portfolio. This is especially true when investing in volatile new areas such
as the Internet. On the other hand, a diversified mutual fund that owns
dozens or even hundreds of holdings is better positioned to survive a
disappointment in one or several investments.
o GOOD IN A DOWN MARKET: As we enter the tenth year of the greatest bull market
in history, it's easy to forget that market downturns are an almost
inevitable part of investing. Few mutual funds, of course, are going to be up
when the overall market is down. But as the numbers above from the third
quarter of 1999 demonstrate, mutual funds may be less likely to suffer the
extreme downturns experienced by a large number of individual holdings when
the market heads south.
o MFS ORIGINAL RESEARCH(R): The Internet is one of the greatest research tools
ever invented, but it's still not the same as being eyeball to eyeball with
the management of a company and discussing their plans for their firm's
future.
o GOOD PERFORMANCE AT AN ACCEPTABLE LEVEL OF RISK: Investing in individual
stocks or bonds does indeed offer the potential of exhilarating performance
that few mutual funds even attempt. The downside is that the most exciting
investments are also likely to be the ones that give you sleepless nights.
The diversification and professional management of mutual funds help make
them inherently less risky than individual stock picking, and funds are
available in a wide range of risk profiles.
We believe that now, more than ever, mutual funds sold by an investment
professional may offer many investors the best way to participate in whatever
investment opportunities the new millennium may bring. The combination of
professional portfolio management and professional advice recognizes the key
reason that investors give us their money: because they don't want to make a
hobby or a second profession out of investing; they simply want their money to
work for them so they have a better likelihood of realizing their dreams.
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)
March 15, 2000
- --------------
(1) Source: Investment Company Institute.
(2) Source: Morningstar CEO Don Phillips' keynote address at The Baltimore Sun's
Dollars and Sense Conference, 10/99. In the period 7/1/99 through 9/ 30/99,
of the 7,500 stocks tracked by Morningstar, 1,865 lost 20% or more; of the
10,000 mutual funds tracked by Morningstar, six lost 20% or more. Mutual
fund results are at net asset value; if sales charges had been reflected,
results would have been lower.
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.
For the six months ended February 29, 2000, the Fund's Class A shares provided a
total return of 18.11%, Class B shares 17.81%, Class C shares 17.80%, and Class
I shares 17.37%. 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: 4.11% for the Standard & Poor's 500 Composite
Index (the S&P 500), a popular, unmanaged index of common stock total return
performance; 13.77% for the Morgan Stanley Capital International Europe,
Australia, Far East Index (MSCI EAFE), an unmanaged index of international
stocks; 1.92% for the Lehman Brothers Aggregate Bond Index, an unmanaged index
of U.S. Treasury, government-agency, corporate, and mortgage-backed securities;
and -4.61% 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. For the same
period, the average global flexible fund tracked by Lipper Inc., an independent
firm that reports mutual fund performance, returned 13.84%.
Q. WHAT IS THE INVESTMENT PHILOSOPHY OR STRATEGY OF THE FUND?
A. In an effort to deliver high risk-adjusted returns, the Fund employs a blend
of quantitative and fundamental research. The top-down asset allocation of
the Fund is based on an MFS-proprietary quantitative model that uses a set
of valuation, macroeconomic, and technical factors to identify, and attempt
to capitalize on, changing opportunities in global equity and fixed-income
markets. Within each market, bottom-up individual security selection is done
by our team of MFS portfolio managers, and is based on the firm's long
tradition of MFS Original Research(R).
Q. WHAT IS THE FUND'S CURRENT ASSET ALLOCATION?
A. As of February 29, 2000, the weightings were 26% U.S. equities, 34%
international equities, 10% international bonds, 2% emerging market debt, 7%
U.S. high-yield bonds, and 21% U.S. government bonds.*
Q. THE FUND'S RELATIVE PERFORMANCE VERSUS ITS BENCHMARKS HAS IMPROVED DURING
THE PAST SIX MONTHS. WHAT WERE THE PRIMARY FACTORS?
A. While the portfolio's asset allocation remained somewhat defensive, we have
increased the Fund's exposure to equities, resulting in increased holdings
in technology and telecommunications stocks, which performed very well
during the period. The Fund also benefited from strong security selection
and timely asset allocation shifts in the fixed-income market.
Q. HOW DID THE FUND'S DOMESTIC AND INTERNATIONAL EQUITY HOLDINGS PERFORM
DURING THE PERIOD?
A. Outside of technology and telecommunications, performance was generally flat
or mixed. Fortunately, however, our fundamental bottom-up research led us to
commit a significant portion of the Fund's assets to technology and
telecommunications stocks. Among the Fund's holdings in these sectors were
Cable & Wireless, NTT Mobile Communications, Cisco, Oracle, Telecom Italia
Mobile, and Sun Microsystems. In the face of tough competition, which has
reduced the ability to increase prices, many companies have looked to
productivity-enhancing new technologies to improve earnings and profit
margins. As a result, increased corporate spending in these areas has
provided a huge boost to these stocks. In addition, the outlook for
accelerating technology and capital spending appears favorable due to
continued global economic strength.
Q. FOLLOWING A DIFFICULT 1999 FOR THE BOND MARKET, HOW ARE THE FUND'S
FIXED-INCOME ASSETS POSITIONED?
A. A majority of the Fund's fixed-income assets were invested overseas in 1999
as we saw slower economic growth outside the United States, which generally
leads to a lower interest-rate environment and, therefore, higher bond
prices. We have carried this strategy into the new year, but in a less
pronounced way, as interest rates in the United States have increased
substantially and growth has accelerated in other parts of the world. During
the period, we were relatively successful in shifting assets between the
U.S. high-yield market and emerging market debt in response to changing
economic trends, business cycles, and credit risk factors. We will continue
to look for opportunities to perform similar asset shifts as the global
marketplace continues to change and evolve.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND IN THE COMING MONTHS?
A. Due to persistent signs of economic growth around the world, interest-rate
concerns will continue to weigh on the markets. Slow growth in certain
regions of the world has contributed to the environment of steady growth and
low inflation that we've enjoyed for the last several years in the United
States. However the accelerating growth we're starting to see in other areas
of the world could lead to inflationary pressures and increases in the cost
of capital, neither of which is positive for the equity markets. On the
other hand, it may take substantially higher interest rates to lure
investors away from equities as interest rates are still relatively low by
historical standards. The technology-driven economy has become less
sensitive to higher rates, and investor confidence in the global equity
market's ability to produce strong returns remains high. Another major trend
fueling impressive equity performance over the past few years remains in
place -- companies continue to invest in productivity-enhancing technologies
to improve profit margins in the face of limited pricing power (the
inability to raise prices). Each of these factors leads us to believe that
we may continue to see extreme volatility in 2000. Nevertheless, it could
turn out to be another good year for equities, and we believe the Fund's
emphasis on broad global diversification and risk management can help smooth
out some of the bumps along the way.
/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.
It is not possible to invest directly in an index.
* The portfolio is actively managed, and current holdings may be different.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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Joseph C. Flaherty, Jr., is Vice President of MFS Investment Management(R) and
manager of the Quantitative Research Group. He is portfolio manager of MFS(R)
Global Asset Allocation Fund and the Global Asset Allocation Series offered
through MFS(R)/Sun Life annuity products.
Mr. Flaherty 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. Mr. Flaherty 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 other 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: $233.8 MILLION NET ASSETS AS OF FEBRUARY 29, 2000
PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for the
applicable time periods. Investment results reflect the percentage change in net
asset value, including reinvestment of dividends. (See Notes to Performance
Summary.)
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH FEBRUARY 29, 2000
<TABLE>
<CAPTION>
CLASS A
6 Months 1 Year 3 Years 5 Years Life*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge +18.11% +21.68% +36.31% +94.28% +96.22%
- -------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +21.68% +10.88% +14.20% +12.78%
- -------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +15.90% + 9.09% +13.10% +11.80%
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
6 Months 1 Year 3 Years 5 Years Life*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge +17.81% +21.13% +34.14% +88.80% +89.76%
- -------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +21.13% +10.29% +13.55% +12.11%
- -------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +17.13% + 9.46% +13.31% +12.00%
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* For the period from the commencement of the Fund's investment operations, July 22, 1994, through February 29, 2000.
<CAPTION>
CLASS C
6 Months 1 Year 3 Years 5 Years Life*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge +17.80% +21.10% +34.15% +89.04% +90.04%
- -------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +21.10% +10.29% +13.58% +12.14%
- -------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Including
Sales Charge -- +20.10% +10.29% +13.58% +12.14%
- -------------------------------------------------------------------------------------------------------------------------
<CAPTION>
CLASS I
6 Months 1 Year 3 Years 5 Years Life*
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cumulative Total Return Excluding
Sales Charge +17.37% +21.24% +36.78% +95.37% +97.33%
- -------------------------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding
Sales Charge -- +21.24% +11.00% +14.33% +12.89%
- -------------------------------------------------------------------------------------------------------------------------
*For the period from the commencement of the Fund's investment operations, July 22, 1994, through February 29, 2000.
</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 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,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details.
All results are historical and assume the reinvestment of dividends and capital
gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. 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 FEBRUARY 29, 2000
FIVE LARGEST STOCK SECTORS
TECHNOLOGY 32.0%
UTILITIES & COMMUNICATIONS 26.1%
FINANCIAL SERVICES 6.5%
LEISURE 7.2%
INDUSTRIAL GOODS & SERVICES 5.4%
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- February 29, 2000
<TABLE>
<CAPTION>
Stocks - 60.1%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 26.2%
Advertising - 0.1%
Avenue A, Inc.* 100 $ 7,200
Young & Rubicam, Inc. 5,590 282,295
------------
$ 289,49
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Automotive - 0.3%
Fairchild Semiconductor International Co.* 9,120 $ 344,280
Harley-Davidson, Inc. 5,600 381,500
------------
$ 725,780
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Broadcasting - 0.1%
Radio One, Inc.* 1,430 $ 94,023
Spanish Broadcasting Systems, Inc.* 1,875 35,859
------------
$ 129,882
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Business Machines - 0.8%
Sun Microsystems, Inc.* 18,640 $ 1,775,460
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Business Services - 0.3%
Airnet Commerce Corp.* 120 $ 7,020
Bea Systems, Inc.* 1,790 226,547
Digimarc Corp.* 2,720 156,400
First Data Corp. 6,950 312,750
Official Payments Corp.* 100 3,587
------------
$ 706,304
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Cellular Telephones - 0.4%
Sprint Corp. (PCS Group)* 18,300 $ 947,025
TeleCorp PCS, Inc.* 120 5,512
------------
952,537
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Computer Software - Personal Computers - 0.7%
America Online, Inc.* 6,250 $ 368,750
Mercury Interactive Corp.* 530 51,079
Microsoft Corp.* 14,740 1,317,387
------------
$ 1,737,216
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Computer Software - Services - 0.4%
Chordiant Software, Inc.* 60 $ 2,100
EMC Corp.* 7,340 873,460
Informatica Corp.* 100 17,150
Intertrust Technologies Corp.* 150 12,741
Lightspan Partnership, Inc.* 100 1,100
Metasolv Software, Inc.* 60 5,287
------------
$ 911,838
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Computer Software - Systems - 3.5%
Agile Software Corp.* 160 $ 22,890
Ariba, Inc.* 740 195,730
BMC Software, Inc.* 12,460 573,160
Cadence Design Systems, Inc.* 27,800 554,263
Computer Associates International, Inc. 4,000 257,250
Compuware Corp.* 14,270 315,724
Comverse Technology, Inc.* 1,880 370,125
Digex, Inc.* 2,720 440,640
Foundry Networks, Inc.* 140 19,556
Liberate Technologies* 500 50,938
Mirae Corp. 3,250 42,453
Network Associates, Inc.* 6,170 187,799
Open TV Corp.* 80 14,800
Oracle Corp.* 56,730 4,212,202
Rational Software Corp.* 1,210 86,061
VERITAS Software Corp.* 4,105 812,277
------------
$ 8,155,868
- --------------------------------------------------------------------------------------------------
Conglomerates - 0.8%
Sodexho Marriott Services, Inc. 2,730 $ 30,371
Tyco International Ltd. 45,530 1,727,295
------------
$ 1,757,666
- --------------------------------------------------------------------------------------------------
Consumer Goods and Services - 0.3%
Colgate-Palmolive Co. 10,020 $ 522,919
Galileo International, Inc. 6,990 118,830
Organic, Inc.* 30 1,024
------------
$ 642,773
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Electrical Equipment - 0.4%
General Electric Co. 7,810 $ 1,032,384
- --------------------------------------------------------------------------------------------------
Electronics - 3.2%
Altera Corp.* 6,140 $ 489,665
Analog Devices, Inc.* 8,590 1,348,630
DuPont Photomasks, Inc.* 2,230 130,455
E Tek Dynamics, Inc.* 1,200 327,900
Flextronics International Ltd.* 13,850 843,119
Helix Technology Corp. 2,880 204,840
Intel Corp. 3,810 430,530
Intersil Holding Corp.* 140 8,312
KLA-Tencor Corp.* 2,950 229,916
Lam Research Corp.* 1,450 226,381
LSI Logic Corp.* 4,480 287,000
Novellus Systems, Inc.* 10,820 641,761
Photronics, Inc.* 4,030 171,527
SCI Systems, Inc.* 7,680 309,120
SDL, Inc.* 1,100 451,000
Tektronix, Inc. 11,200 649,600
Teradyne, Inc.* 2,720 236,640
Varian Semiconductor Equipment Associates, Inc.* 6,920 402,225
Veeco Instruments, Inc.* 2,600 213,525
------------
$ 7,602,146
- --------------------------------------------------------------------------------------------------
Entertainment - 1.9%
CBS Corp.* 12,840 $ 764,782
Clear Channel Communications, Inc.* 14,182 944,876
Comcast Corp., "A" 21,630 919,275
Infinity Broadcasting Corp., "A"* 35,850 1,144,959
Macromedia, Inc.* 1,810 156,452
Mediacom Communications Corp.* 730 12,456
Radio Unica Communications Co.* 130 1,828
Time Warner, Inc. 3,320 283,860
Univision Communications, Inc., "A"* 2,230 227,181
------------
$ 4,455,669
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Financial Institutions - 0.9%
Citigroup, Inc. 12,000 $ 620,250
Financial Federal Corp.* 8,700 148,988
Goldman Sachs Group, Inc. 3,760 347,800
Merrill Lynch & Co., Inc. 3,710 380,275
Morgan Stanley Dean Witter & Co. 9,660 680,426
------------
$ 2,177,739
- --------------------------------------------------------------------------------------------------
Forest and Paper Products - 0.1%
Bowater, Inc. 2,490 $ 122,477
- --------------------------------------------------------------------------------------------------
Insurance - 0.2%
Aon Corp. 170 $ 3,559
Gallagher (Arthur J.) & Co. 2,620 133,948
Marsh & McLennan Cos., Inc. 3,240 250,695
------------
$ 388,202
- --------------------------------------------------------------------------------------------------
Internet - 0.5%
724 Solutions Inc.* 750 $ 141,187
Allaire Corp.* 560 72,450
Buy.Com, Inc.* 400 5,600
C Bridge Internet Solutions, Inc.* 40 2,105
CacheFlow, Inc.* 80 9,740
Digital Insight Corp.* 95 5,985
eSPEED, Inc.* 140 8,671
FreeMarkets, Inc.* 20 3,484
Gigamedia Ltd.* 580 40,636
Internap Network Services Corp.* 420 40,740
Lante Corp.* 100 7,975
Mediaplex, Inc.* 60 5,010
MedicaLogic, Inc.* 80 2,970
Neoforma Common, Inc.* 160 9,520
Niku Corp. 110 7,590
OnDisplay, Inc.* 10 900
Retek, Inc.* 60 3,638
SciQuest.com, Inc.* 50 3,744
VeriSign, Inc.* 3,010 761,530
Via Net.Works, Inc.* 1,280 84,480
Vicinity Corp.* 230 9,315
webMethods, Inc.* 40 12,322
------------
$ 1,239,592
- --------------------------------------------------------------------------------------------------
Machinery - 0.2%
Deere & Co., Inc. 10,490 $ 375,018
- --------------------------------------------------------------------------------------------------
Medical and Health Products - 0.3%
American Home Products Corp. 11,310 $ 491,985
Pharmacia & Upjohn, Inc. 5,690 270,986
------------
$ 762,971
- --------------------------------------------------------------------------------------------------
Medical and Health Technology and Services - 0.2%
Health Management Associates, Inc., "A"* 38,340 $ 412,155
PE Corp. 200 48,800
------------
$ 460,955
- --------------------------------------------------------------------------------------------------
Oil Services - 0.7%
Cooper Cameron Corp.* 6,830 $ 377,357
Global Marine, Inc.* 18,500 415,094
Halliburton Co. 9,600 366,600
Noble Drilling Corp.* 10,400 374,400
------------
$ 1,533,451
- --------------------------------------------------------------------------------------------------
Oils - 0.3%
Conoco, Inc., "A" 11,780 $ 226,029
EOG Resources, Inc. 11,480 175,070
Transocean Sedco Forex, Inc.* 9,430 371,895
------------
$ 772,994
- --------------------------------------------------------------------------------------------------
Restaurants and Lodging - 0.2%
Cendant Corp.* 14,360 $ 255,788
Wendy's International, Inc. 11,880 187,110
------------
$ 442,898
- --------------------------------------------------------------------------------------------------
Special Products and Services
Harmonic Lightwaves, Inc.* 580 $ 79,424
- --------------------------------------------------------------------------------------------------
Stores - 1.2%
Costco Wholesale Corp.* 16,850 $ 836,181
CVS Corp. 15,530 543,550
Office Depot, Inc.* 27,920 340,275
Tandy Corp. 8,880 337,995
Wal-Mart Stores, Inc. 17,250 839,860
------------
$ 2,897,861
- --------------------------------------------------------------------------------------------------
Supermarkets - 0.4%
Kroger Co.* 19,330 $ 287,534
Safeway, Inc.* 14,380 554,529
------------
$ 842,063
- --------------------------------------------------------------------------------------------------
Telecommunications - 7.3%
Alamosa PCS Holdings, Inc.* 180 $ 6,525
Allegiance Telecom, Inc.* 2,310 228,401
American Tower Corp., "A"* 2,440 120,170
Ancor Communications, Inc.* 5,135 307,458
Apropos Technology, Inc.* 30 1,436
AT&T Corp.* 11,660 609,235
Avanex Corp.* 110 22,921
Cabletron Systems, Inc.* 15,100 739,900
Cablevision Systems Corp., "A"* 300 19,256
Carrier 1* 130 20,304
Choice One Communications, Inc.* 130 7,800
Cisco Systems, Inc.* 27,930 3,691,997
Copper Mountain Networks, Inc.* 3,100 269,506
Corning, Inc. 7,940 1,492,720
Cox Communications, Inc.* 13,170 598,412
Cypress Communications, Inc.* 230 5,362
Dobson Communications Corp.* 470 8,930
EchoStar Communications Corp.* 1,180 134,520
Eloquent, Inc.* 40 1,345
Emulex Corp.* 900 144,000
Firstcom Corp.* 8,120 299,933
Impsat Corp.* 530 19,444
JDS Uniphase Corp.* 800 210,900
Level 3 Communications, Inc.* 1,510 171,951
Metromedia Fiber Network, Inc., "A"* 8,970 644,859
MGC Communications, Inc.* 760 52,440
Motorola, Inc. 6,020 1,026,410
Network Solutions, Inc.* 2,760 889,928
Next Level Communications, Inc.* 60 8,070
NEXTEL Communications, Inc.* 6,060 828,705
Nextel Partners, Inc.* 260 8,320
Nextlink Communications, Inc., "A"* 3,350 369,128
Nortel Networks Corp. 6,520 726,980
NTL, Inc.* 17,010 1,556,415
QUALCOMM, Inc.* 1,200 170,925
Qwest Communications International, Inc.* 10,390 481,836
Spectrasite Holdings, Inc.* 9,270 232,330
Telaxis Communications Corp.* 70 5,464
Tritel, Inc.* 90 2,858
UnitedGlobalCom, Inc.* 2,200 229,900
Williams Communications Group, Inc.* 5,330 237,185
Winstar Communications, Inc.* 4,870 376,816
------------
$ 16,980,995
- --------------------------------------------------------------------------------------------------
Utilities - Electric - 0.5%
AES Corp.* 14,790 $ 1,239,587
- --------------------------------------------------------------------------------------------------
Total U.S. Stocks $ 61,191,245
- --------------------------------------------------------------------------------------------------
Foreign Stocks - 33.9%
Australia - 1.0%
Publishing & Broadcasting Ltd. (Publishing) 35,600 $ 332,614
QBE Insurance Group Ltd. (Insurance)* 436,896 1,988,314
------------
$ 2,320,928
- --------------------------------------------------------------------------------------------------
Bermuda - 0.6%
Flag Telecom Holdings Ltd. (Telecommunications)* 16,090 $ 460,576
Global Crossing Ltd. (Telecommunications)* 19,940 929,703
------------
$ 1,390,279
- --------------------------------------------------------------------------------------------------
Canada - 1.1%
BCE, Inc. (Telecommunications) 10,160 $ 1,111,159
Canadian National Railway Co. (Railroads) 61,600 1,451,450
------------
$ 2,562,609
- --------------------------------------------------------------------------------------------------
Finland - 1.8%
Helsingin Puhelin Oyj (Telecommunications) 26,700 $ 2,857,303
Nokia Corp., ADR (Telecommunications) 7,080 1,404,052
------------
$ 4,261,355
- --------------------------------------------------------------------------------------------------
France - 5.1%
Aventis S.A. (Pharmaceuticals) 13,600 $ 694,923
Banque Nationale de Paris (Banks and Credit Cos.) 7,700 608,733
Bouygues S.A. (Construction) 470 391,955
Castorama-Dubois Investisse (Stores) 5,300 1,121,585
Pernod Ricard Co. (Beverages) 18,100 916,136
Sanofi-Synthelabo S.A. (Medical and Health Products)* 36,600 1,411,089
STMicroelectronics Co. (Electronics)* 3,300 655,395
Technip (Building) 7,300 799,509
Television Francaise (Entertainment) 1,700 1,106,304
Total S.A., "B" (Oils) 14,300 1,895,661
Union des Assurances Federales S.A. (Insurance) 5,020 510,597
Vivendi (Business Services) 16,340 1,921,914
------------
$ 12,033,801
- --------------------------------------------------------------------------------------------------
Germany - 0.3%
Henkel KGaA, Preferred (Chemicals) 14,700 $ 769,271
- --------------------------------------------------------------------------------------------------
Greece - 0.6%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 45,988 $ 1,368,967
- --------------------------------------------------------------------------------------------------
Hong Kong - 0.1%
China Telecom Ltd. (Telecommunications) 26,000 $ 239,708
- --------------------------------------------------------------------------------------------------
Israel - 0.2%
Partner Communications Co. Ltd., ADR (Cellular
Telephones)* 22,040 $ 374,680
- --------------------------------------------------------------------------------------------------
Italy - 1.5%
Telecom Italia Mobile S.P.A. (Telecommunications) 74,920 $ 1,022,060
Telecom Italia Mobile S.P.A., Saving Shares
(Telecommunications) 479,000 2,484,504
------------
$ 3,506,564
- --------------------------------------------------------------------------------------------------
Japan - 6.8%
Canon, Inc. (Special Products and Services) 60,000 $ 2,495,904
Daiwa Securities Group, Inc. (Banks and Credit Cos.) 26,000 412,980
Fast Retailing Co. (Retail) 4,100 1,166,257
Fujitsu Ltd. (Computer Hardware - Systems) 17,000 564,810
Hitachi Ltd. (Electronics) 184,000 2,510,614
Nippon Telegraph & Telephone Co. (Utilities -
Telephone) 113 1,563,444
NTT Mobile Communications Network, Inc.
(Telecommunications) 131 5,282,450
Sony Corp. (Electronics) 3,400 1,005,826
Toshiba Corp. (Electronics) 126,000 1,028,782
------------
$ 16,031,067
- --------------------------------------------------------------------------------------------------
Mexico - 0.1%
Nuevo Grupo Iusacell S.A. de C.V., ADR
(Telecommunications)* 8,300 $ 176,375
- --------------------------------------------------------------------------------------------------
Netherlands - 3.2%
Akzo Nobel N.V. (Chemicals) 45,100 $ 1,739,671
Fox Kids Europe N.V. (Telecommunications)* 3,920 97,694
ING Groep N.V. (Financial Services)* 23,047 1,166,974
KPN N.V. (Telecommunications)* 22,460 2,859,369
Libertel N.V. (Cellular Telephones)* 39,330 822,821
Versatel Telecom (Telecommunication)* 13,900 842,922
------------
$ 7,529,451
- --------------------------------------------------------------------------------------------------
Norway - 0.3%
Schibsted ASA (Publishing) 5,800 $ 169,672
Stepstone ASA (Internet) 11,160 42,641
Storebrand ASA (Insurance) 84,300 513,349
------------
$ 725,662
- --------------------------------------------------------------------------------------------------
Portugal - 1.0%
Banco Pinto & Sotto Mayor S.A. (Banks and Credit Cos.) 43,600 $ 980,250
Telecel - Comunicacoes Pessoais, S.A.
(Telecommunications)* 56,000 1,301,149
------------
$ 2,281,399
- --------------------------------------------------------------------------------------------------
Singapore - 1.0%
Chartered Semiconductor Manufacturing Co., ADR
(Electronics)* 7,435 $ 656,139
DBS Group Holdings Ltd. (Financial Services)* 46,846 579,118
Overseas Union Bank Ltd. (Banks and Credit Cos.) 147,206 653,584
Overseas-Chinese Banking Corp. Ltd. (Banks and
Credit Cos.) 55,000 347,939
------------
$ 2,236,780
- --------------------------------------------------------------------------------------------------
Spain - 0.4%
Repsol S.A. (Oils) 46,700 $ 884,711
- --------------------------------------------------------------------------------------------------
Sweden - 1.0%
Ericsson LM, ADR (Telecommunications) 2,480 $ 238,080
Saab AB, "B" (Aerospace) 248,000 2,140,620
------------
$ 2,378,700
- --------------------------------------------------------------------------------------------------
Switzerland - 0.4%
Nestle S.A. (Food and Beverage Products) 600 $ 1,013,085
- --------------------------------------------------------------------------------------------------
United Kingdom - 7.4%
AstraZeneca Group PLC (Medical and Health Products) 47,344 $ 1,572,360
BP Amoco PLC (Oils)* 134,000 1,034,132
British Aerospace PLC (Aerospace)* 197,733 972,854
British Telecommunications PLC (Telecommunications)* 88,572 1,544,617
Cable & Wireless Communications PLC
(Telecommunications) 142,000 2,404,641
Cable & Wireless Communications PLC, ADR
(Telecommunications) 26,000 538,356
Carlton Communicatons PLC (Broadcasting)* 6,900 77,752
CGU PLC (Insurance)* 95,000 1,131,964
Diageo PLC (Food and Beverage Products)* 101,200 774,612
National Westminster (Finance)* 35,100 666,400
NDS Group PLC, ADR (Internet)* 170 12,644
Next PLC (Stores) 116,300 959,939
Thus PLC (Internet)* 23,500 232,911
United News & Media PLC (Broadcasting) 119,800 1,595,738
Vodafone Group PLC (Telecommunications)* 683,372 3,823,276
------------
$ 17,342,196
- --------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 79,427,588
- --------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $101,039,190) $140,618,833
- --------------------------------------------------------------------------------------------------
Bonds - 34.4%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------
U.S. Bonds - 22.6%
Banks and Credit Companies - 0.1%
Hanvit Bank, 12.75s, 2010## $ 350 $ 357,438
- --------------------------------------------------------------------------------------------------
Building - 1.4%
American Standard, Inc., 7.375s, 2008 $ 1,250 $ 1,134,375
Building Materials Corp., 8s, 2007 1,250 1,134,375
Nortek, Inc., 9.875s, 2004 1,000 980,000
------------
$ 3,248,750
- --------------------------------------------------------------------------------------------------
Container, Forest and Paper Products - 0.7%
Gaylord Container Corp., 9.75s, 2007 $ 175 $ 163,187
Riverwood International Corp., 10.25s, 2006 675 675,000
Silgan Holdings, Inc., 9s, 2009 900 859,500
------------
$ 1,697,687
- --------------------------------------------------------------------------------------------------
Energy - 0.9%
Ocean Energy, Inc., 8.875s, 2007 $ 1,075 $ 1,048,125
P&L Coal Holdings Corp., 9.625s, 2008 1,250 1,146,875
------------
$ 2,195,000
- --------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 2.1%
FNMA, 5.25s, 2009 $ 5,546 $ 4,825,907
- --------------------------------------------------------------------------------------------------
Food and Beverage Products - 0.8%
Borden, Inc., 9.25s, 2019### $ 2,000 $ 1,821,220
- --------------------------------------------------------------------------------------------------
Printing and Publishing - 0.3%
Hollinger International Publishing, 9.25s, 2007 $ 650 $ 614,250
- --------------------------------------------------------------------------------------------------
Retail - 0.1%
Musicland Group, Inc., 9.875s, 2008 $ 250 225,625
- --------------------------------------------------------------------------------------------------
Telecommunications - 1.5%
Adelphia Communications Corp., 9.375s, 2009 $ 625 $ 600,000
Charter Communications Holdings, 8.25s, 2007 1,250 1,146,875
NEXTEL Communications, Inc., 9.375s, 2009 625 610,937
NEXTEL Communications, Inc., 0s to 2002, 9.75s, 2007 425 304,938
Western Wireless Corp., 10.5s, 2007 750 783,750
------------
$ 3,446,500
- --------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 14.7%
U.S. Treasury Notes, 5.5s, 2008### $ 20,000 $ 18,618,800
U.S. Treasury Notes, 6s, 2009 16,428 15,804,229
------------
$ 34,423,029
- --------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 52,855,406
- --------------------------------------------------------------------------------------------------
Foreign Bonds - 11.8%
Argentina - 0.1%
Republic of Argentina, 0s, 2001 $ 275 $ 237,188
- --------------------------------------------------------------------------------------------------
Bermuda - 0.5%
Global Crossing Holdings Ltd., 9.625s, 2008
(Telecommunications) $ 1,250 $ 1,218,750
- --------------------------------------------------------------------------------------------------
Brazil - 0.3%
Federal Republic of Brazil, 5s, 2014 $ 328 $ 241,171
Federal Republic of Brazil, 7s, 2012 320 237,600
Federal Republic of Brazil, 12.75s, 2020 300 294,600
------------
$ 773,371
- --------------------------------------------------------------------------------------------------
Bulgaria - 0.3%
National Republic of Bulgaria, 7.063s, 2024 $ 800 $ 660,000
- --------------------------------------------------------------------------------------------------
Germany - 0.7%
Federal Republic of Germany, 5.375s, 2010 EUR 1,785 $ 1,704,564
- --------------------------------------------------------------------------------------------------
Grand Cayman Islands - 0.4%
Enersis S.A., 7.4s, 2016 (Electronics) $ 270 $ 230,559
Pemex Finance Ltd., 9.69s, 2009 (Finance) 560 586,712
------------
$ 817,271
- --------------------------------------------------------------------------------------------------
Greece - 0.7%
Republic of Greece, 6s, 2006 GRD 576,000 $ 1,639,721
- --------------------------------------------------------------------------------------------------
Hong Kong - 0.1%
Bangkok Bank PLC, 9.025s, 2029 (Banks & Credit Cos.)## $ 280 $ 221,200
- --------------------------------------------------------------------------------------------------
Italy - 0.5%
Republic of Italy, 4s, 2004 EUR 1,255 $ 1,153,925
- --------------------------------------------------------------------------------------------------
Mexico - 0.3%
United Mexican States, 11.375s, 2016 $ 230 $ 272,838
United Mexican States, 11.5s, 2026 325 405,437
------------
$ 678,275
- --------------------------------------------------------------------------------------------------
Panama - 0.1%
Republic of Panama, 4s, 2016 $ 262 $ 217,815
- --------------------------------------------------------------------------------------------------
Poland - 0.3%
Netia Holdings B.V., 10.25s, 2007
(Telecommunications) $ 670 $ 591,275
- --------------------------------------------------------------------------------------------------
Turkey - 0.2%
Republic of Turkey, 11.875s, 2030 $ 350 $ 364,000
- --------------------------------------------------------------------------------------------------
United Kingdom - 7.3%
Colt Telecom Group PLC, 8.875s, 2007
(Telecommunications) DEM 1,000 $ 497,883
OTE PLC, 6.125s, 2007 (Industrial)## EUR 980 946,424
Telewest Communications PLC, 9.625s, 2006 (Media) $ 550 552,750
United Kingdom Treasury, 7.25s, 2007 GBP 8,849 15,162,969
------------
4 17,160,026
- --------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 27,437,381
- --------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $82,373,383) $ 80,292,787
- --------------------------------------------------------------------------------------------------
Call Options Purchased - 0.1%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- --------------------------------------------------------------------------------------------------
Canadian Dollars/September/1.4518 CAD 15,386 $ 233,916
Japanese Yen/April/104.25 JPY 2,240,823 69,465
- --------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $685,336) $ 303,381
- --------------------------------------------------------------------------------------------------
Put Options Purchased - 0.7%
- --------------------------------------------------------------------------------------------------
Australian Dollars/August/0.66 AUD 8,300 $ 44,587
Great British Pounds/Euro/August/0.62 GBP 7,729 57,235
Great British Pounds/Euro/August/0.62 7,674 70,277
Euro/May/1.03 EUR 6,468 8,286
Euro/August/1.07 6,719 4,952
Euro/August/1.04 7,837 63,472
Japanese Yen/April/104.25 JPY 2,240,823 1,026,297
Japanese Yen/Euro/April/111.49 1,219,007 47,541
Japanese Yen/Euro/May/108.5 1,353,924 248,392
Japanese Yen/Euro/January/130 55,973 53,287
- --------------------------------------------------------------------------------------------------
Total Put Options Purchased (Premiums Paid, $1,412,029) $ 1,624,326
- --------------------------------------------------------------------------------------------------
Short-Term Obligation - 4.2%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
ISSUER (000 OMITTED)
- --------------------------------------------------------------------------------------------------
Student Loan Marketing Assn., due 3/01/00,
at Amortized Cost $ 9,700 $ 9,700,000
- --------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $195,209,938) $232,539,327
- --------------------------------------------------------------------------------------------------
Call Options Written - (0.5)%
- --------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
Australian Dollars/April/0.63 AUD 13,493 $ (340,123)
Australian Dollars/August/0.61 7,671 (165,959)
Canadian Dollars/September/1.4 CAD 14,837 (79,023)
Japanese Yen/January/98.6 JPY 1,059,689 (300,952)
Japanese Yen/Euro/April/101.1 1,105,405 (64,113)
Japanese Yen/Euro/May/102.6 1,280,300 (226,582)
- --------------------------------------------------------------------------------------------------
Total Call Options Written (Premiums Received, $1,194,488) $ (1,176,752)
- --------------------------------------------------------------------------------------------------
Put Options Written - (0.4)%
- --------------------------------------------------------------------------------------------------
Canadian Dollars/September/1.55 CAD 16,427 $ (13,848)
Euro/August/1.12 EUR 8,440 (8,330)
Japanese Yen/January/98.6 JPY 1,059,689 (830,796)
- --------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $741,817) $ (852,974)
- --------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.4% 3,318,664
- --------------------------------------------------------------------------------------------------
Net Assets - 100.0% 233,828,265
- --------------------------------------------------------------------------------------------------
* 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
CAD = Canadian Dollars GRD = Greek Drachma
CHF = Swiss Francs HKD = Hong Kong Dollars
DEM = Deutsche Marks JPY = Japanese Yen
DKK = Danish Kroner NZD = New Zealand Dollars
EUR = Euro ZAR = South African Rands
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Statement of Assets and Liabilities (Unaudited)
- ---------------------------------------------------------------------------------------
FEBRUARY 29, 2000
- ---------------------------------------------------------------------------------------
<S> <C>
Assets:
Investments, at value (identified cost, $195,209,938) $232,539,327
Investments of cash collateral for securities loaned, at value
(identified cost, $13,498,601) 13,498,601
Cash 2,784
Foreign currency, at value (identified cost, $989,165) 941,405
Net receivable for forward foreign currency exchange contracts to sell 2,785,374
Net receivable for forward foreign currency exchange contracts subject
to master netting agreements 1,753,236
Receivable for Fund shares sold 100,245
Receivable for investments sold 2,036,936
Receivable for options written 226,582
Interest and dividends receivable 1,219,467
Other assets 3,297
------------
Total assets $255,107,254
------------
Liabilities:
Net payable for forward foreign currency exchange contracts to purchase $ 2,112,722
Payable for daily variation margin on open futures contracts 352,055
Payable for Fund shares reacquired 757,214
Payable for investments purchased 2,366,486
Collateral for securities loaned, at value 13,498,601
Written options outstanding, at value (premiums received, $1,936,305) 2,029,726
Payable to affiliates -
Management fee 3,834
Distribution and service fee 5,396
Administrative fee 101
Accrued expenses and other liabilities 152,854
------------
Total liabilities $ 21,278,989
------------
Net assets $233,828,265
============
Net assets consist of:
Paid-in capital $188,703,200
Unrealized appreciation on investments and translation of asset and
liabilities in foreign currencies 38,241,679
Accumulated undistributed net realized gain on investments and foreign
currency transactions 5,269,155
Accumulated undistributed net investment income 1,614,231
------------
Total $233,828,265
============
Shares of beneficial interest outstanding 12,139,256
==========
Class A shares:
Net asset value per share
(net assets of $85,945,141 / 4,450,604 shares of beneficial interest
outstanding) $19.31
======
Offering price per share (100 / 95.25 of net asset value per share) $20.27
======
Class B shares:
Net asset value and offering price per share
(net assets of $124,494,397 / 6,472,353 shares of beneficial interest
outstanding) $19.23
======
Class C shares:
Net asset value and offering price per share
(net assets of $23,388,603 / 1,216,292 shares of beneficial interest
outstanding) $19.23
======
Class I shares:
Net asset value per share
(net assets of $124.23 / 6.507 shares of beneficial interest
outstanding) $19.09
======
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.
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations (Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS ENDED FEBRUARY 29, 2000
- -------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 3,029,894
Dividends 303,877
Foreign taxes withheld (13,527)
-----------
Total investment income $ 3,320,244
-----------
Expenses -
Management fee $ 674,858
Trustees' compensation 26,459
Shareholder servicing agent fee 112,476
Distribution and service fee (Class A) 201,775
Distribution and service fee (Class B) 604,547
Distribution and service fee (Class C) 116,514
Administrative fee 12,086
Custodian fee 79,720
Printing 41,183
Postage 10,906
Auditing fees 14,561
Legal fees 2,094
Miscellaneous 105,088
-----------
Total expenses $ 2,002,267
Fees paid indirectly (33,971)
-----------
Net expenses $ 1,968,296
-----------
Net investment income $ 1,351,948
-----------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $16,017,370
Written option transactions (824,143)
Futures contracts (3,909,661)
Foreign currency transactions 3,359,040
-----------
Net realized gain on investments and foreign
currency transactions $14,642,606
-----------
Change in unrealized appreciation -
Investments $19,612,961
Written options 950,408
Futures 102,158
Translation of assets and liabilities in foreign
currencies 871,980
-----------
Net unrealized gain on investments and foreign
currency translation $21,537,507
-----------
Net realized and unrealized gain on investments
and foreign currency $36,180,113
-----------
Increase in net assets from operations $37,532,061
===========
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- -----------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2000 AUGUST 31, 1999
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 1,351,948 $ 5,491,965
Net realized gain on investments and foreign currency
transactions 14,642,606 1,527,023
Net unrealized gain on investments and foreign currency
translation 21,537,507 25,082,448
------------- -------------
Increase in net assets from operations $ 37,532,061 $ 32,101,436
------------- -------------
Distributions declared to shareholders -
From net investment income (Class A) $ (1,550,237) $ (3,664,797)
From net investment income (Class B) (2,043,926) (4,776,210)
From net investment income (Class C) (391,364) (1,137,215)
From net investment income (Class I) (1,097) (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 $ (3,986,624) $ (24,741,565)
------------- -------------
Net decrease in net assets from Fund share transactions $ (25,117,532) $ (64,131,777)
------------- -------------
Total increase (decrease) in net assets $ 8,427,905 $ (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 $1,614,231 and $4,248,907,
respectively) $ 233,828,265 $ 225,400,360
============= =============
</TABLE>
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED --------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.67 $16.36 $18.75 $17.68 $16.63
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.13 $ 0.40 $ 0.47 $ 0.46 $ 0.43
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 2.85 1.51 (0.69) 2.19 1.85
------ ------ ------ ------ ------
Total from investment operations $ 2.98 $ 1.91 $(0.22) $ 2.65 $ 2.28
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.34) $(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 $(0.34) $(1.60) $(2.17) $(1.58) $(1.23)
------ ------ ------ ------ ------
Net asset value - end of period $19.31 $16.67 $16.36 $18.75 $17.68
====== ====== ====== ====== ======
Total return(+) 18.11%++ 12.29% (1.72)% 15.67% 14.23%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.45%+ 1.44% 1.44% 1.43% 1.48%
Net investment income 1.51%+ 2.38% 2.57% 2.51% 2.45%
Portfolio turnover 81% 184% 127% 128% 202%
Net assets at end of period (000 omitted) $85,945 $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%
+ Annualized.
++ Not annualized.
# 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,
SIX MONTHS ENDED ------------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.60 $16.31 $18.70 $17.63 $16.58
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.09 $ 0.32 $ 0.38 $ 0.36 $ 0.32
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 2.83 1.48 (0.69) 2.19 1.85
------ ------ ------ ------ ------
Total from investment operations $ 2.92 $ 1.80 $(0.31) $ 2.55 $ 2.17
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.29) $(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 $(0.29) $(1.51) $(2.08) $(1.48) $(1.12)
------ ------ ------ ------ ------
Net asset value - end of period $19.23 $16.60 $16.31 $18.70 $17.63
====== ====== ====== ====== ======
Total return 17.81%++ 11.67% (2.23)% 15.01% 13.58%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.94%+ 1.94% 1.94% 1.98% 2.10%
Net investment income 1.01%+ 1.91% 2.06% 1.96% 1.83%
Portfolio turnover 81% 184% 127% 128% 202%
Net assets at end of period (000 omitted) $124,494 $121,009 $147,882 $166,865 $124,399
+ 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>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ---------------------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997 1996
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS C
- ------------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $16.59 $16.29 $18.67 $17.62 $16.58
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.09 $ 0.32 $ 0.38 $ 0.36 $ 0.33
Net realized and unrealized gain (loss) on
investments and foreign currency
transactions 2.84 1.49 (0.70) 2.18 1.85
------ ------ ------ ------ ------
Total from investment operations $ 2.93 $ 1.81 $(0.32) $ 2.54 $ 2.18
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.29) $(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 $(0.29) $(1.51) $(2.06) $(1.49) $(1.14)
------ ------ ------ ------ ------
Net asset value - end of period $19.23 $16.59 $16.29 $18.67 $17.62
====== ====== ====== ====== ======
Total return 17.80%++ 11.65% (2.21)% 15.06% 13.62%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.94%+ 1.94% 1.94% 1.96% 2.03%
Net investment income 1.01%+ 1.93% 2.06% 2.00% 1.89%
Portfolio turnover 81% 184% 127% 128% 202%
Net assets at end of period (000 omitted) $23,389 $24,438 $37,248 $58,074 $33,283
+ 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>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED AUGUST 31,
SIX MONTHS ENDED ---------------------------------------------
FEBRUARY 29, 2000 1999 1998 1997*
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C>
Net asset value - beginning of period $16.63 $16.34 $18.74 $17.56
------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.18 $ 0.48 $ 0.57 $ 0.28
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 2.67 1.50 (0.70) 1.16
------ ------ ------ ------
Total from investment operations $ 2.85 $ 1.98 $(0.13) $ 1.44
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.39) $(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 $(0.39) $(1.69) $(2.27) $(0.26)
------ ------ ------ ------
Net asset value - end of period $19.09 $16.63 $16.34 $18.74
====== ====== ====== ======
Total return 17.37%++ 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 1.90%+ 2.84% 3.07% 3.43%+
Portfolio turnover 81% 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 (Unaudited)
(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 contracts listed on
commodities exchanges are reported at market value using closing settlement
prices. Over-the-counter options on securities are valued by brokers.
Over-the-counter currency options are valued through the use of a pricing model
which takes into account foreign currency exchange spot and forward rates,
implied volatility, and short-term repurchase rates. Securities for which there
are no such quotations or valuations are valued 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 options contract. When a written option
expires, the Fund realizes a gain equal to the amount of the premium received.
When a written call option is exercised or closed, the premium received is
offset against the proceeds to determine the realized gain or loss. When a
written put option is exercised, the premium reduces the cost basis of the
security purchased by the Fund. The Fund, as writer of an option, may have no
control over whether the underlying securities may be sold (call) or purchased
(put) and, as a result, bears the market risk of an unfavorable change in the
price of the securities underlying the written option. In general, written call
options may serve as a partial hedge against decreases in value in the
underlying securities to the extent of the premium received. Written options may
also be used as part of an income producing strategy reflecting the view of the
Fund's management on the direction of interest rates.
Futures Contracts - The Fund may enter into futures contracts for the delayed
delivery of securities or currency, or contracts based on financial indices at a
fixed price on a future date. In entering such contracts, the Fund is required
to deposit with the broker either in cash or securities an amount equal to a
certain percentage of the contract amount. Subsequent payments are made or
received by the Fund each day, depending on the daily fluctuations in the value
of the contract, and are recorded for financial statement purposes as unrealized
gains or losses by the Fund. The Fund's investment in futures contracts is
designed to hedge against anticipated future changes in interest or exchange
rates, or securities prices. Investments in 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 February 29, 2000, the value of securities loaned was $16,120,765. These
loans were collateralized by U.S. Treasury securities of $3,154,240 and cash of
$13,498,601 which was invested in the following short-term obligations:
ISSUER SHARES VALUE
- -----------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio 13,498,601 $13,498,601
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.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits be 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. At
August 31, 1999, the Fund, for federal income tax purposes, had a capital loss
carryforward of $8,012,942 which may be applied against any net taxable realized
gains of each succeeding year until the earlier of its utilization or expiration
on August 31, 2007.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on 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 and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $5,790 for the period ended
February 29, 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 pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$6,102 for the period ended February 29, 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 $11,457 for the period ended February 29,
2000. Fees incurred under the distribution plan during the period ended February
29, 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 $13,897 and $18,509 for Class B and Class C shares, respectively,
for the period ended February 29, 2000. Fees incurred under the distribution
plan during the period ended February 29, 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 period ended February 29,
2000, were $1,942, $130,144, and $898 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 $ 58,850,014 $ 61,746,827
------------- -------------
Investments (non-U.S. government securities) $ 110,112,452 $ 146,941,276
------------- -------------
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 $ 196,012,663
-------------
Gross unrealized appreciation $ 45,431,974
Gross unrealized depreciation (8,905,310)
-------------
Net unrealized appreciation $ 36,526,664
=============
(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
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 1,126,572 $ 20,023,211 16,688,497 $ 279,541,657
Shares issued to shareholders
in reinvestment of
distributions 79,433 1,379,519 491,452 8,020,670
Shares reacquired (1,548,816) (27,451,408) (18,317,745) (308,025,633)
------------- ------------- ------------- -------------
Net decrease (342,811) $ (6,048,678) (1,137,796) $ (20,463,306)
============= ============= ============= =============
<CAPTION>
Class B Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 256,400 $ 4,594,352 700,045 $ 11,627,770
Shares issued to shareholders
in reinvestment of
distributions 102,309 1,771,558 677,063 11,008,381
Shares reacquired (1,174,297) (20,866,535) (3,157,596) (52,665,663)
------------- ------------- ------------- -------------
Net decrease (815,588) $ (14,500,625) (1,780,488) $ (30,029,512)
============= ============= ============= =============
<CAPTION>
Class C Shares
SIX MONTHS ENDED FEBRUARY 29, 2000 YEAR ENDED AUGUST 31, 1999
--------------------------------- ---------------------------------
SHARES AMOUNT SHARES AMOUNT
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 53,912 $ 985,369 300,463 $ 4,987,004
Shares issued to shareholders
in reinvestment of
distributions 15,937 275,564 137,612 2,237,218
Shares reacquired (326,376) (5,779,161) (1,251,546) (20,872,773)
------------- ------------- ------------- -------------
Net decrease (256,527) $ (4,518,228) (813,471) $ (13,648,551)
============= ============= ============= =============
<CAPTION>
Class I Shares
SIX MONTHS ENDED FEBRUARY 29, 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 1,096 239 3,891
Shares reacquired (3,028) (55,034) (53) (904)
------------- ------------- ------------- -------------
Net increase (decrease) (2,728) $ (50,001) 582 $ 9,592
============= ============= ============= =============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the six months ended February 29, 2000, was $723. The Fund had no
borrowings during the period.
(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 16 2,456,595
Options terminated in closing transactions (11) (1,269,907)
Options exercised (1) (28,954)
Options expired (2) (106,160)
-- -----------
Outstanding, end of period 9 $ 1,936,305
== ===========
At February 29, 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>
Sales
3/15/00 AUD 11,497,406 $ 7,306,421 $ 7,071,736 $ 234,685
3/15/00 DKK 1,209,221 167,964 156,758 11,206
3/01/00 EUR 57,551,383 57,374,701 55,520,748 1,853,953
3/15/00 GBP 4,086,796 6,740,148 6,449,424 290,724
4/17/00 HKD 197,492,571 25,197,525 25,375,642 (178,117)
3/15/00 JPY 1,319,437,742 12,608,376 12,035,453 572,923
------------ ------------ -----------
$109,395,135 $106,609,761 $ 2,785,374
============ ============ ===========
Purchases
3/15/00 AUD 6,275,114 $ 4,046,194 $ 3,859,649 $ (186,545)
3/15/00 CHF 14,011,552 8,983,157 8,421,806 (561,351)
3/01/00 EUR 79,782,235 77,976,595 76,971,750 (1,004,845)
4/25/00 HKD 96,050,412 12,268,855 12,341,408 72,553
3/15/00 JPY 1,960,868,595 18,318,170 17,886,363 (431,807)
5/02/00 NZD 256,514 131,258 124,704 (6,554)
5/02/00 ZAR 29,326,675 4,595,518 4,601,345 5,827
------------ ------------ -----------
$126,319,747 $124,207,025 $(2,112,722)
============ ============ ===========
</TABLE>
At February 29, 2000, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $158,339 with
Merrill Lynch and $24,998 with Deutsche Bank, and a net receivable of $1,936,573
with First Boston.
At February 29, 2000, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
<TABLE>
<CAPTION>
Futures Contracts
UNREALIZED
APPRECIATION
DESCRIPTION EXPIRATION CONTRACTS POSITION (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CAC Index March 2000 215 Short $(174,016)
DAX Index March 2000 30 Short (66,612)
FTSE Index March 2000 127 Short (340,925)
Nikkei Index March 2000 183 Long 146,170
S&P 500 Index March 2000 26 Long 157,950
S&P 500 Barra Growth Index March 2000 55 Short (220,000)
S&P 500 Barra Value Index March 2000 78 Long 156,000
Japanese Government Bonds June 2000 4 Short $ (10,622)
---------
$(352,055)
=========
</TABLE>
At February 29, 2000, the Fund had sufficient cash and/or securities to cover
any commitments under these contracts.
<PAGE>
MFS(R) GLOBAL ASSET ALLOCATION FUND
TRUSTEES ASSISTANT TREASURERS
Mark E. Bradley*
Richard B. Bailey+ - Private Investor; Ellen Moynihan*
Former Chairman and Director (until James O. Yost*
1991), MFS Investment Management(R)
SECRETARY
Marshall N. Cohan+ - Private Investor Stephen E. Cavan*
Lawrence H. Cohn, M.D.+ - Chief of ASSISTANT SECRETARY
Cardiac Surgery, Brigham and Women's James R. Bordewick, Jr.*
Hospital; Professor of Surgery,
Harvard Medical School CUSTODIAN
State Street Bank and Trust Company
The Hon. Sir J. David Gibbons, KBE+ -
Chief Executive Officer, Edmund INVESTOR INFORMATION
Gibbons Ltd.; Chairman, Colonial For information on MFS mutual funds,
Insurance Company, Ltd. call your investment professional or,
for an information kit, call toll
Abby M. O'Neill+ - Private Investor free: 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time
Walter E. Robb, III+ - President and (or leave a message anytime).
Treasurer, Benchmark Advisors, Inc.
(corporate financial consultants); INVESTOR SERVICE
President, Benchmark Consulting Group, MFS Service Center, Inc.
Inc. (office services) P.O. Box 2281
Boston, MA 02107-9906
Arnold D. Scott* - Senior Executive
Vice President, Director, and For general information, call
Secretary, MFS Investment Management toll free: 1-800-225-2606 any
business day from 8 a.m. to 8 p.m.
Jeffrey L. Shames* - Chairman and Eastern time.
Chief Executive Officer, MFS
Investment Management For service to speech- or
hearing-impaired, call toll free:
J. Dale Sherratt+ - President, Insight 1-800-637-6576 any business day
Resources, Inc. (acquisition planning from 9 a.m. to 5 p.m. Eastern time.
specialists) (To use this service, your phone
must be equipped with a
Ward Smith+ - Former Chairman (until Telecommunications Device for the
1994), NACCO Industries (holding Deaf.)
company)
For share prices, account balances,
INVESTMENT ADVISER exchanges, or stock and bond
Massachusetts Financial Services Company outlooks, call toll free:
500 Boylston Street 1-800-MFS-TALK (1-800-637-8255)
Boston, MA 02116-3741 anytime from a touch-tone telephone.
DISTRIBUTOR WORLD WIDE WEB
MFS Fund Distributors, Inc. www.mfs.com
500 Boylston Street
Boston, MA 02116-3741
CHAIRMAN AND PRESIDENT
Jeffrey L. Shames*
PORTFOLIO MANAGER
Joseph C. Flaherty, Jr.*
TREASURER
W. Thomas London*
+Independent Trustee
*MFS Investment Management
<PAGE>
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-3 04/00 28M 88/288/388/888
