<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[graphic omitted]
MFS(R) GLOBAL TOTAL
RETURN FUND
(formerly MFS(R) World Total Return Fund)
ANNUAL REPORT o OCTOBER 31, 1998
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 8
Portfolio of Investments .................................................. 12
Financial Statements ...................................................... 19
Notes to Financial Statements ............................................. 26
Independent Auditors' Report .............................................. 35
Trustees and Officers ..................................................... 37
MFS CELEBRATES ITS DIAMOND ANNIVERSARY!
MARCH 21, 1999, MARKS THE 75TH ANNIVERSARY OF MFS' INVENTION OF
THE MUTUAL FUND. THE MUTUAL FUND INDUSTRY HAS BROUGHT THE POWER
OF INVESTING TO EVERY AMERICAN, OFFERING THEM THE OPPORTUNITY FOR
COLLEGE DEGREES, HOME OWNERSHIP, AND COMFORTABLE RETIREMENT.
IMAGINE TODAY'S WORLD WITHOUT MUTUAL
FUNDS. WE COULDN'T. AND WHILE THE MFS 75 YEARS
YEARS AHEAD WILL BRING A NUMBER OF [graphic omitted]
CHALLENGES, OUR 75 YEARS OF EXPERIENCE EXPERIENCE THE FUTURE(SM)
WILL HELP GUIDE A NEW GENERATION OF
INVESTORS INTO THE FUTURE.
- ------------------------------------------------------------------------------
NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
- ------------------------------------------------------------------------------
<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
In 1999, MFS celebrates its 75th anniversary. The nation's first mutual fund
- -- our Massachusetts Investors Trust (MIT) -- was introduced to the public on
March 21, 1924. Since then, MFS Investment Management(R), the company that grew
out of that original fund, has helped guide shareholders through many economic
and investment cycles, primarily by focusing on the long-term opportunities
created by an expanding global economy. As of October 31, 1998, MFS manages
nearly $87 billion, and the firm's 2,000 people serve 3.8 million investors and
their financial advisers worldwide. Meanwhile, MIT's assets have grown to over
$10 billion, and 56 mutual funds are offered in the MFS Family of Funds(R).
One of the elements to the success of MIT did not exist before our founders
invented it in 1924. That is liquidity. This innovation means that if you want
to sell your investment in any MFS mutual fund, you have the security of knowing
that you may do so immediately and the money may be exchanged into another MFS
fund or that you may add other MFS funds to your portfolio as your investment
needs change. If you need your money for other purposes, it can quickly be wired
or mailed to you. This daily redemption feature, through which new shares were
created when people invested in MIT and were redeemed when people sold, brought
another important change to the industry. Now, the price of a mutual fund's
shares wasn't determined by supply and demand, but by the value of the
securities owned by each portfolio.
Another factor in our growth was the development of one of the industry's first
in-house research departments in 1932. Unlike many other companies that rely on
Wall Street research reports, which can be used by many investors at the same
time, MIT's managers built its long-term track record by visiting companies,
talking to managers and competitors, and "kicking the tires" so they could judge
the quality and potential of each company's products and services for
themselves. Today, MFS has more than 100 full-time portfolio managers, stock
analysts, and credit analysts who track the equity and bond markets. That number
includes nearly 40 equity analysts who specialize in industries such as
aviation, media, technology, automobiles, and utilities.
While MIT was the first mutual fund, it was not our only invention. We also
established the nation's first global bond fund, first high-yield municipal bond
fund, and first high-yield municipal closed-end bond fund.
We are proud of the record of MIT and of the funds in the MFS Family of Funds,
but we are also proud of our long-standing relationship with financial advisers.
Not only do we believe investors can benefit from the advice of these experts
but, as was shown during the market volatility of 1998, people who work with
financial advisers are less likely to abandon their carefully designed,
long-term investment strategies.
Our ability to service your investment and information needs is also extremely
important to us. Today, the MFS Service Center handles millions of transactions
and phone calls every year. Supporting the work of financial advisers, promptly
sending out statements and confirmations, and answering hundreds of investors'
questions every day are crucial elements in maintaining long-term relationships
with our fund shareholders. That link to our investors has also been enhanced by
our site on the World Wide Web: WWW.MFS.COM. Since 1996, this site has given
investors and the general public access to up-to-date information about MFS
products and services, as well as market outlooks and retirement information.
The site has rapidly become one of our primary vehicles for communicating with
our investors and educating the public about mutual funds in general and MFS in
particular.
If there is a common thread running through these milestones, it is our
always-increasing commitment to providing you with the best possible investment
management and shareholder service, just as we have done for the past 75 years.
As we celebrate this anniversary, it is also a time for MFS to look ahead and
build on our 75 years of innovation and experience to help meet your investment
needs in the next century. We appreciate your confidence and welcome any
questions or comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
November 16, 1998
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Frederick J. Simmons]
Frederick J. Simmons
For the 12 months ended October 31, 1998, Class A shares of the Fund provided a
total return of 14.29%, Class B shares 13.57%, Class C shares 13.52%, and Class
I shares 14.78%. These returns include the reinvestment of distributions but
exclude the effects of any sales charges and compare to that of a benchmark made
up of 60% of the Morgan Stanley Capital International (MSCI) World Index and 40%
of the J.P. Morgan Global Government Bond Index (the Morgan Index), which
returned 14.92% for the same period. The MSCI World Index is a broad, unmanaged
index of global equities, while the Morgan Index is an aggregate of actively
traded government bonds issued by 13 countries, including the United States,
with remaining maturities of at least one year. The Fund's returns also compare
to a 3.07% return for the Lipper Global Flexible Fund Index as determined by
Lipper Analytical Services, Inc., an independent firm that reports mutual fund
performance. Effective August 24, 1998, the name of the Fund changed from MFS(R)
World Total Return Fund to MFS(R) Global Total Return Fund.
Q. COULD YOU TALK ABOUT SOME OF THE REASONS FOR THE FUND'S STRONG PERFORMANCE
RELATIVE TO ITS BENCHMARKS IN THE PAST YEAR?
A. There are several reasons the Fund has done well this year. First, there has
been a general flight to quality in both the equity and fixed-income markets
and that plays right into the hands of this Fund. In the bond market, for
example, we have invested in high-grade sovereign bonds from a relatively
limited number of countries. We made the decision quite purposely about a
year ago to be in just the highest-grade bonds, and it paid off. The stock
markets have also favored large, quality companies, particularly in the
United States and Europe. Again, that plays right into our hands, because
over 80% of our equity assets were in stocks that we would characterize as
very high quality.
Q. HOW DO YOU DEFINE HIGH QUALITY?
A. To us, high quality means stocks of companies that are large and financially
strong and that have a history of being profitable and of being leaders in
their markets. We also emphasize companies that have high liquidity in the
markets in which they trade.
Q. DID YOU HAVE MUCH EXPOSURE TO EMERGING MARKETS?
A. No, and this was another factor that contributed to performance because the
Fund experienced very little of the enormous pressure that stocks from these
regions underwent. We had sold what few emerging market stocks were in the
portfolio well before the bottom started falling out of those markets in
1997.
Q. ARE WE STARTING TO SEE SOME POSITIVE SIGNS THAT YOU THINK COULD LEAD TO
IMPROVEMENTS IN ASIA AND SOME OF THE EMERGING MARKETS?
A. We're seeing some very tentative signs, primarily involving government action
on broad economic issues, such as in Brazil. At the same time, there are some
indications of a further softening in the United States economy and in some,
though not all, of the European economies. However, the ability of Brazil to
deliver the goods has to be assigned at best a medium probability of success,
and the potential for slowdowns here and in Europe means it's a little early
to get too enthusiastic.
Q. YOUR BIGGEST WEIGHTING IS FINANCIAL SERVICES. COULD YOU TALK ABOUT WHY YOU
LIKE THAT SECTOR?
A. It is the biggest weighing, but one in which the Fund is significantly
smaller than the same sector in the MSCI World Index. Actually, equity assets
are spread quite broadly among industries right now, with less concentration
in any one sector than during previous periods. That, too, is part of our
effort to avoid too much volatility. Banks and insurance companies make up
the brunt of the financial services category, which also includes companies
like American Express and Freddie Mac (Federal Home Loan Mortgage
Corporation). In some cases, such as with Allied Irish Bank, stocks have been
bought as a way of participating in a robust economy. The Irish economy is
strong and is experiencing minimal inflation with an excellent outlook, and
Irish banks are benefiting from that.
Q. ANOTHER LARGE SECTOR IS CONSUMER STAPLES. WHAT DO YOU LIKE HERE?
A. One company we like here is Nestle. It's an excellent company that is poised
to undergo a period of renewed growth. While that growth is being masked
temporarily by currency swings, its business remains healthy.
Q. WHAT CAN YOU TELL US ABOUT YOUR HOLDINGS IN THE UNITED STATES?
A. The allocation to the U.S. market bottomed at about 30% of equities last
summer and is now up to about 35%. This number is up because so many people
invested in Europe that they reduced the number of opportunities. The Far
East, meanwhile, is still a difficult place to have any conviction about. So,
some money is finding its way back into the U.S. market.
Q. DO YOU THINK THE FEDERAL RESERVE BOARD'S RECENT INTEREST-RATE CUTS WILL HELP
OVERSEAS MARKETS AS WELL AS THOSE IN THE UNITED STATES?
A. Of course, yes. But it's not just the United States. England and Italy have
both cut rates, so everybody is trying to do their part. We think all of this
will help, particularly if it reduces the fear factor.
Q. COULD YOU TALK ABOUT SOME STOCKS THAT HAVE HELPED PERFORMANCE?
A. The Fund had a couple of stocks that did exceedingly well and made important
contributions to performance. One of them was Compass, a British food
services company that manages cafeterias and provides food services to
hospitals and other institutions. The other is Pinault-Printemps, a French
retailer.
Q. AND WHAT ABOUT INVESTMENTS THAT HAVE UNDERPERFORMED?
A. The two stocks that hurt performance the most this year were Sony and Ciba
Specialty Chemicals. Sony, of course, has been hurt by the recession in
Japan, while for Ciba it was a case of a softer European economy catching up
with it sooner than the company expected.
Q. WHAT ABOUT THE FUND'S BOND POSITION?
A. The emphasis on high-quality bonds particularly paid off in the third
quarter. That's when the flight to quality intensified and most of the spread
products, that is, bonds with higher yields than equivalent-duration U.S.
Treasuries, undeperformed. All this helped the Fund, which primarily invests
in sovereign debt of the leading industrialized countries. For most of the
year, about 50% to 55% of the bond position was invested in the U.S. Treasury
market. The current duration, meanwhile, is about 6 1/4 years, versus 5 1/2
years for the Morgan Index, which reflects our view of a stable to declining
interest-rate environment.
Q. LOOKING AHEAD, WHAT KIND OF ENVIRONMENT DO YOU SEE, AND HOW MIGHT YOU
POSITION THE FUND FOR IT?
A. We think what has produced good results for the Fund this year, such as our
investing in high-quality stocks and bonds and having limited exposure to
emerging markets, will remain true for the foreseeable future. One thing that
could change, however, is the extent to which the portfolio is geared to a
rapid economic expansion around the world. The challenge for us is to decide
when to build more economic sensitivity into the portfolio.
Q. FINALLY, AS YOU KNOW, 1999 MARKS THE 75th ANNIVERSARY OF MASSACHUSETTS
INVESTORS TRUST (MIT), THE FIRST MFS FUND AND, IN FACT, THE FIRST MUTUAL
FUND. HOW DO YOU SEE YOUR FUND FITTING INTO THE MIT/MFS TRADITION?
A. The one thing I would say is that MFS and MIT were built on foundations of
investing in high-quality companies and of being long-term investors. This
Fund is run entirely in keeping with that idea, as well as the idea that we
are investors, not speculators.
/s/ Frederick J. Simmons
Frederick J. Simmons
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and are
only through the end of the period of the report as stated on the cover. The
manager's views are subject to change at any time based on market and other
conditions, and no forecasts can be guaranteed.
<PAGE>
- -------------------------------------------------------------------------------
PORTFOLIO MANAGER'S PROFILE
- -------------------------------------------------------------------------------
FREDERICK J. SIMMONS IS A SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(R)
AND PORTFOLIO MANAGER OF MFS(R) GLOBAL TOTAL RETURN FUND, MFS(R) INTERNATIONAL
GROWTH AND INCOME FUND, MFS(R) MERIDIAN(SM) GLOBAL BALANCED FUND AND THE WORLD
TOTAL RETURN SERIES AND INTERNATIONAL GROWTH AND INCOME SERIES OFFERED THROUGH
MFS() R/SUN LIFE ANNUITY PRODUCTS. HE ALSO MANAGES THE NOMURA GLOBAL BALANCED
OPEN FUND AND THE NOMURA GN GLOBAL TOTAL RETURN FUND UNDER SUBADVISORY
AGREEMENTS WITH NOMURA ASSET MANAGEMENT CO. OF JAPAN.
MR. SIMMONS JOINED MFS IN 1971 AS AN INVESTMENT OFFICER IN THE RESEARCH
DEPARTMENT AND WAS NAMED ASSISTANT VICE PRESIDENT -- INVESTMENTS IN 1974, VICE
PRESIDENT -- INVESTMENTS IN 1975, AND SENIOR VICE PRESIDENT IN 1983. HE WAS
NAMED PORTFOLIO MANAGER OF MFS(R) WORLD TOTAL RETURN FUND IN 1991. PREVIOUSLY,
HE WAS PORTFOLIO MANAGER OF MFS(R) RESEARCH FUND AND OF MASSACHUSETTS INVESTORS
GROWTH STOCK FUND.
MR. SIMMONS GRADUATED WITH HONORS FROM THE AMOS TUCK SCHOOL OF BUSINESS
ADMINISTRATION OF DARTMOUTH COLLEGE. HE IS A CHARTERED FINANCIAL ANALYST, A
MEMBER OF THE BOSTON SECURITY ANALYSTS SOCIETY, INC., AND PAST PRESIDENT OF THE
ELECTRONIC ANALYSTS OF BOSTON.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
- -------------------------------------------------------------------------------
OBJECTIVE: SEEKS TOTAL RETURN: ABOVE-AVERAGE CURRENT INCOME
(COMPARED TO AN ALL-STOCK PORTFOLIO) AND OPPORTUNITIES
FOR LONG-TERM GROWTH OF CAPITAL AND INCOME.
COMMENCEMENT OF
INVESTMENT OPERATIONS: SEPTEMBER 4, 1990
CLASS INCEPTION: CLASS A SEPTEMBER 4, 1990
CLASS B SEPTEMBER 7, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $321.0 MILLION NET ASSETS AS OF OCTOBER 31, 1998
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and reflect
the percentage change in net asset value, including reinvestment of dividends.
Benchmark comparisons are unmanaged and do not reflect any fees or expenses. The
performance of other share classes will be greater than or less than the line
shown. (See Notes to Performance Summary for more information.) It is not
possible to invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from October 1, 1990, through October 31, 1998)
60% MSCI/
MFS Global S&P 500 40% J.P. Morgan Consumer Price
Total Return Composite Global Government Index
- Class A Index Bond Index - U.S.
- ---------------------------------------------------------------------------
10/90 $ 9,521 $10,000 $10,000 $10,000
10/92 12,396 13,293 12,430 10,686
10/94 15,185 17,450 15,834 11,266
10/96 19,498 27,380 19,875 11,929
10/98 25,784 44,127 25,480 12,344
AVERAGE ANNUAL TOTAL RETURNS THROUGH OCTOBER 31, 1998
CLASS A
1 Year 3 Years 5 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Average Annual Total Return +14.29% +15.35% +12.07% +13.06%
- -------------------------------------------------------------------------------
SEC Results + 8.86% +13.49% +10.98% +12.39%
- -------------------------------------------------------------------------------
CLASS B
1 Year 3 Years 5 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Average Annual Total Return +13.57% +14.61% +11.30% +12.58%
- -------------------------------------------------------------------------------
SEC Results + 9.57% +13.85% +11.04% +12.58%
- -------------------------------------------------------------------------------
CLASS C
1 Year 3 Years 5 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Average Annual Total Return +13.52% +14.63% +11.37% +12.63%
- -------------------------------------------------------------------------------
SEC Results +12.52% +14.63% +11.37% +12.63%
- -------------------------------------------------------------------------------
CLASS I
1 Year 3 Years 5 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Average Annual Total Return +14.78% +15.60% +12.21% +13.15%
- -------------------------------------------------------------------------------
COMPARATIVE INDICES
1 Year 3 Years 5 Years 10 Years/Life*
- -------------------------------------------------------------------------------
Average global flexible fund** + 4.39% +10.65% + 8.69% +10.28%
- -------------------------------------------------------------------------------
Standard & Poor's 500 Composite
Index+ +22.06% +25.99% +21.30% +20.15%
- -------------------------------------------------------------------------------
60% MSCI World Index
40% J.P. Morgan Global Government
Bond Index** +14.92% +12.88% +11.22% +11.29%
- -------------------------------------------------------------------------------
Lipper Global Flexible Fund
Index** + 3.07% +11.02% + 8.77% +10.38%
- -------------------------------------------------------------------------------
Consumer Price Index+# + 1.37% + 2.14% + 2.37% + 2.64%
- -------------------------------------------------------------------------------
* For the period from the commencement of the Fund's investment operations,
September 4, 1990, through October 31, 1998.
** Source: Lipper Analytical Services, Inc. "Life" refers to the period from
October 1, 1990, through October 31, 1998.
+ Source: CDA/Wiesenberger. "Life" refers to the period from October 1, 1990,
through October 31, 1998.
# The Consumer Price Index is published by the U.S. Bureau of Labor Statistics
and measures the cost of living (inflation).
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class B
share ("B") SEC results reflect the applicable contingent deferred sales charge
(CDSC), which declines over six years from 4% to 0%. Class C shares ("C") have
no initial sales charge but, like B, have higher annual fees and expenses than
A. C SEC results reflect the 1% CDSC applicable to shares redeemed within 12
months. Class I shares ("I") have no sales charge or Rule 12b-1 fees and are
only available to certain institutional investors.
B and C results include the performance and the operating expenses (e.g., Rule
12b-1 fees) of A for periods prior to the inception of B and C. Because
operating expenses of B and C are higher than those of A, B and C performance
generally would have been lower than A performance. The A performance included
in the B and C SEC performance has been adjusted to reflect the CDSC generally
applicable to B and C rather than the initial sales charge generally applicable
to A.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of I. Because operating expenses
of A are greater than those of I, performance generally would have been higher
than A performance. The A performance included in the I performance has been
adjusted to reflect the fact that I have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. 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. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
Investments in foreign and emerging market securities may provide superior
returns but also involve greater risk than U.S. investments. Investments in
foreign and emerging market securities may be favorably or unfavorably affected
by changes in interest rates and currency exchange rates, market conditions, and
the economic and political conditions of the countries where investments are
made. These risks may increase share price volatility.
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1998
FIVE LARGEST STOCK SECTORS
FINANCIAL SERVICES 15.4%
CONSUMER STAPLES 12.0%
HEALTH CARE 9.7%
INDUSTRIAL GOODS & SERVICES 9.6%
UTILITIES & COMMUNICATIONS 8.3%
TOP 10 STOCK HOLDINGS
PHILIP MORRIS COS., INC. 2.8% BRITISH AEROSPACE PLC 1.9%
Tobacco, food and beverage conglomerate Defense and aircraft company
TYCO INTERNATIONAL LTD. 2.6% SCHERING PLOUGH 1.9%
Security systems, packaging, and electronic Pharmaceutical company
equipment conglomerate
AMERICAN EXPRESS CO. 1.8%
PINAULT-PRINTEMPS-REDOUTE S.A. 2.1% Financial services company
French department store chain
IBERDROLA S.A. 1.7%
COMPASS GROUP PLC 2.0% Spanish electric utility
British commercial food catering company
COASTAL CORP. 1.7%
BRITISH PETROLEUM PLC 2.0% Oil exploration and
Oil exploration and production company production company
Portfolio information is as of October 31, 1998. The portfolio is actively
managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- October 31, 1998
Stocks - 54.7%
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ISSUER SHARES VALUE
- -----------------------------------------------------------------------------
U.S. Stocks - 18.9%
Aerospace - 0.2%
Lockheed-Martin Corp. 6,808 $ 758,241
- -----------------------------------------------------------------------------
Banks and Credit Companies - 0.7%
Norwest Corp. 62,000 $ 2,305,625
- -----------------------------------------------------------------------------
Business Machines - 1.6%
International Business Machines Corp. 20,990 $ 3,115,703
Xerox Corp. 20,000 1,937,500
------------
$ 5,053,203
- -----------------------------------------------------------------------------
Construction Services - 0.4%
Martin Marietta Materials, Inc. 24,386 $ 1,196,438
- -----------------------------------------------------------------------------
Consumer Goods and Services - 3.3%
Newell Co. 19,700 $ 866,800
Philip Morris Cos., Inc. 96,850 4,951,456
Tyco International Ltd. 76,760 4,754,323
------------
$ 10,572,579
- -----------------------------------------------------------------------------
Electrical Equipment - 0.9%
General Electric Co. 34,790 $ 3,044,125
- -----------------------------------------------------------------------------
Electronics - 0.5%
AMP, Inc. 42,304 $ 1,737,108
- -----------------------------------------------------------------------------
Financial Institutions - 1.8%
American Express Co. 37,070 $ 3,276,061
Federal Home Loan Mortgage Corp. 43,860 2,521,950
------------
$ 5,798,011
- -----------------------------------------------------------------------------
Food and Beverage Products - 0.2%
McCormick & Co., Inc. 17,790 $ 552,602
- -----------------------------------------------------------------------------
Insurance - 1.8%
Allstate Corp. 46,550 $ 2,004,559
ReliaStar Financial Corp. 44,440 1,947,028
Transamerica Corp. 17,830 1,854,320
------------
$ 5,805,907
- -----------------------------------------------------------------------------
Medical and Health Products - 2.3%
Bristol-Myers Squibb Co. 26,580 $ 2,938,751
Schering Plough Corp. 32,580 3,351,667
Warner-Lambert Co. 13,860 1,086,278
------------
$ 7,376,696
- -----------------------------------------------------------------------------
Oils - 0.9%
Conoco Inc.* 25,100 $ 624,363
Exxon Corp. 30,190 2,151,037
------------
$ 2,775,400
- -----------------------------------------------------------------------------
Printing and Publishing - 0.5%
Gannett Co., Inc. 25,730 $ 1,592,044
- -----------------------------------------------------------------------------
Restaurants and Lodging - 0.7%
McDonalds Corp. 34,940 $ 2,336,612
- -----------------------------------------------------------------------------
Stores - 0.4%
Rite Aid Corp. 32,080 $ 1,273,175
- -----------------------------------------------------------------------------
Supermarkets - 0.4%
Albertsons, Inc. 20,950 $ 1,164,034
- -----------------------------------------------------------------------------
Telecommunications - 0.4%
Sprint Corp. 15,190 $ 1,165,833
- -----------------------------------------------------------------------------
Utilities - Electric - 0.7%
Sierra Pacific Resources 58,180 $ 2,119,934
- -----------------------------------------------------------------------------
Utilities - Gas - 1.2%
Coastal Corp. 88,700 $ 3,126,675
KN Energy, Inc. 16,490 819,347
------------
$ 3,946,022
- -----------------------------------------------------------------------------
TOTAL U.S. STOCKS $ 60,573,589
- -----------------------------------------------------------------------------
Foreign Stocks - 35.8%
Australia - 1.1%
QBE Insurance Group Ltd. (Insurance)* 629,989 $ 2,491,244
Seven Network Ltd. (Entertainment) 300,770 886,383
------------
$ 3,377,627
- -----------------------------------------------------------------------------
Austria - 0.4%
Austria Tabak AG (Tobacco) 17,530 $ 1,233,448
- -----------------------------------------------------------------------------
Canada - 0.9%
Canadian National Railway Co. (Railroads) 57,080 $ 2,878,972
- -----------------------------------------------------------------------------
Chile - 0.1%
Enersis S.A., ADR (Utilities - Electric) 21,260 $ 443,802
- -----------------------------------------------------------------------------
Finland - 0.3%
Helsingin Puhelin Oyj (Telecommunications) 19,420 $ 1,064,110
- -----------------------------------------------------------------------------
France - 5.0%
Pin Printemps Redo (Retail) 22,100 $ 3,699,644
Sanofi S.A. (Medical and Health Products) 19,030 2,980,181
SEITA (Tobacco) 30,100 1,787,990
Thomson CSF (Aerospace and Defense) 27,930 970,315
Total S.A., ADR (Oils) 37,500 2,193,750
TV Francaise (Entertainment) 17,410 2,876,909
Union des Assurances Federales S.A. (Insurance) 12,450 1,557,539
------------
$ 16,066,328
- -----------------------------------------------------------------------------
Germany - 1.4%
Mannesmann AG (Conglomerate) 25,580 $ 2,517,078
Volkswagen AG (Automotive)* 26,000 1,954,120
------------
$ 4,471,198
- -----------------------------------------------------------------------------
Greece - 0.3%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 47,424 $ 1,078,048
- -----------------------------------------------------------------------------
Hong Kong - 0.3%
Hong Kong Electric Holdings Ltd.
(Utilities - Electric) 240,500 $ 881,999
- -----------------------------------------------------------------------------
Ireland - 0.3%
Allied Irish Banks PLC (Banks and Credit Cos.) 68,100 $ 977,530
- -----------------------------------------------------------------------------
Italy - 2.3%
ENI S.p.A., ADR (Oils) 16,450 $ 999,337
Instituto Nazionale delle Assicurazioni
(Insurance) 622,850 1,717,879
Istituto Mobiliare Italiano S.p.A
(Banks and Credit Cos.) 60,330 928,721
Telecom Italia S.p.A. (Telecommunications) 326,300 1,646,450
Telecom Italia S.p.A., Saving Shares
(Telecommunications) 568,700 2,018,416
------------
$ 7,310,803
- -----------------------------------------------------------------------------
Japan - 4.5%
Canon, Inc. (Special Products and Services) 102,000 $ 1,933,878
Eisai Co. Ltd. (Medical and Health Products) 36,000 565,847
Kirin Beverage Corp. (Beverages) 115,000 2,214,961
Olympus Optical Co. (Optical Goods) 110,000 1,134,996
Osaka Sanso Kogyo Ltd. (Chemicals) 146,000 233,500
Rohm Co. (Electronics) 14,000 1,239,897
Sony Corp. (Electronics) 33,600 2,137,919
Takeda Chemical Industries Co.
(Medical and Health Products) 81,000 2,639,639
Terumo Corp. (Medical Products) 48,000 1,011,178
Tokyo Broadcasting System, Inc. (Entertainment) 43,000 404,858
Ushio, Inc. (Electronics) 113,000 862,803
------------
$ 14,379,476
- -----------------------------------------------------------------------------
Netherlands - 5.0%
Akzo Nobel N.V. (Chemicals) 57,080 $ 2,219,251
Benckiser N.V., "B" (Consumer Goods and Services) 38,810 2,201,028
Hunter Douglas N.V., ADR
(Consumer Goods and Services)* 44,800 1,607,455
IHC Caland N.V. (Marine Equipment)* 34,368 1,555,238
ING Groep N.V. (Financial Services)* 32,949 1,595,132
Koninklijke Ahold N.V., ADR (Food/Retail) 52,093 1,741,860
Royal Dutch Petroleum Co., ADR (Oils) 42,610 2,098,542
Wolters Kluwer N.V. (Publishing)* 15,813 3,065,552
------------
$ 16,084,058
- -----------------------------------------------------------------------------
Portugal - 0.9%
Banco Pinto & Sotto Mayor S.A
(Banks and Credit Cos.) 89,390 $ 1,704,661
Elec De Portugal (Utilities - Electric) 44,500 1,113,152
------------
$ 2,817,813
- -----------------------------------------------------------------------------
South Korea - 0.1%
Korea Electric Power Corp. (Utilities - Electric) 17,350 $ 309,351
- -----------------------------------------------------------------------------
Spain - 1.8%
Iberdrola S.A. (Utilities - Electric) 193,660 $ 3,130,651
Telefonica de Espana (Utilities - Telephone) 60,830 2,749,085
------------
$ 5,879,736
- -----------------------------------------------------------------------------
Sweden - 1.3%
Astra AB (Pharmaceuticals) 106,120 $ 1,667,120
Saab AB, "B" (Aerospace)* 213,900 1,700,732
Volvo AB (Automotive) 39,290 849,015
------------
$ 4,216,867
- -----------------------------------------------------------------------------
Switzerland - 1.5%
Ciba Specialty AG (Chemicals) 7,670 $ 787,393
Clariant AG (Chemicals) 1,730 894,387
Nestle SA (Food and Beverage Products) 1,090 2,318,464
UBS AG (Banks and Credit Cos.)* 2,700 740,805
------------
$ 4,741,049
- -----------------------------------------------------------------------------
United Kingdom - 8.3%
Allied Zurich PLC (Insurance)* 56,785 $ 674,509
ASDA Group PLC (Supermarkets) 606,510 1,633,652
Avis Europe PLC (Auto Rental)## 659,620 2,880,249
British Aerospace PLC (Aerospace and Defense)* 466,200 3,447,388
British Petroleum PLC, ADR (Oils) 40,877 3,615,060
Compass Group (Food - Catering) 362,500 3,669,096
Lloyds TSB Group PLC (Banks and Credit Cos.) 117,665 1,451,794
LucasVarity PLC (Automotive) 643,950 2,197,748
Next PLC (Stores) 243,500 2,057,245
Reuters Group PLC (Business Services) 26,100 268,541
Reuters Group PLC, ADR (Business Services) 6,900 418,313
Tomkins PLC (Conglomerate)* 490,713 2,269,961
Williams PLC (Conglomerate) 338,564 2,111,320
------------
$ 26,694,876
- -----------------------------------------------------------------------------
TOTAL FOREIGN STOCKS $114,907,091
- -----------------------------------------------------------------------------
TOTAL STOCKS (IDENTIFIED COST, $127,761,707) $175,480,680
- -----------------------------------------------------------------------------
PREFERRED STOCK - 1.4%
- -----------------------------------------------------------------------------
Foreign Pref - 1.4%
Henkel KGaA (Chemicals) 30,120 $ 2,572,883
Prosieben Media AG (Entertainment) 16,010 821,521
Wella AG (Consumer Goods and Services)* 1,571 1,128,578
- -----------------------------------------------------------------------------
TOTAL PREFERRED STOCK (IDENTIFIED COST, $3,516,900) $ 4,522,982
- -----------------------------------------------------------------------------
BONDS - 38.9%
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
(000 OMITTED)
- -----------------------------------------------------------------------------
U.S. Bonds - 19.7%
U.S. Treasury Obligations - 19.7%
U.S. Treasury Notes 5.375s, 2003 $ 29,520 $ 30,825,374
U.S. Treasury Notes 5.625s, 2008 30,250 32,608,593
------------
$ 63,433,967
- -----------------------------------------------------------------------------
TOTAL U.S. BONDS $ 63,433,967
- -----------------------------------------------------------------------------
Foreign Bonds - 19.2%
Australia - 0.6%
Commonwealth of Australia 7.5s, 2005 AUD 2,710 $ 1,952,538
- -----------------------------------------------------------------------------
Canada - 2.0%
Government of Canada 5.25s, 2008 $ 6,400 $ 6,384,000
- -----------------------------------------------------------------------------
Denmark - 0.7%
Kingdom of Denmark 7s, 2007 DDK 12,723 $ 2,357,720
- -----------------------------------------------------------------------------
Germany - 5.9%
Germany Federal Republic 6s, 2007 DEM 28,035 $ 18,963,609
- -----------------------------------------------------------------------------
Italy - 2.3%
Republic of Italy 5.75s, 2002 ITL 5,710,000 $ 3,720,046
Republic of Italy 6.75s, 2007 5,080,000 3,600,686
------------
$ 7,320,732
- -----------------------------------------------------------------------------
New Zealand - 0.7%
Government of New Zealand 8s, 2004 NZD 3,870 $ 2,304,004
- -----------------------------------------------------------------------------
Sweden - 0.7%
Kingdom of Sweden 6s, 2005 SEK 15,800 $ 2,197,050
- -----------------------------------------------------------------------------
United Kingdom - 6.3%
United Kingdom Treasury 7.25s, 2007 GBP 10,338 $ 20,097,328
- -----------------------------------------------------------------------------
TOTAL FOREIGN BONDS $ 61,576,981
- -----------------------------------------------------------------------------
TOTAL BONDS (IDENTIFIED COST, $120,819,930) $125,010,948
- -----------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 4.5%
- -----------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
due 11/17/98 $ 8,100 $ 8,082,648
General Electric Capital Corp., due 11/02/98 6,200 6,199,015
- -----------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS, AT AMORTIZED COST $ 14,281,663
- -----------------------------------------------------------------------------
CALL OPTIONS PURCHASED
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- -----------------------------------------------------------------------------
Deutsche Marks/British Pounds/January/2.637 DEM 10,907 $ 30,670
Japanese Yen/U.S. Dollars/November/105 JPY 27,038 28,336
Japanese Yen/U.S. Dollars/November/105 JPY 9,013 7,381
- -----------------------------------------------------------------------------
TOTAL CALL OPTIONS PURCHASED (IDENTIFIED COST, $105,674) $ 66,387
- -----------------------------------------------------------------------------
PUT OPTIONS PURCHASED
- -----------------------------------------------------------------------------
Deutsche Marks/British Pounds/January/2.8065
(Premiums Paid, $72,198) DEM 11,608 $ 72,897
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS (IDENTIFIED COST, $266,558,072) $319,435,557
- -----------------------------------------------------------------------------
CALL OPTIONS WRITTEN
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- -------------------------------------------------------------------------------
Canadian Dollars/U.S. Dollars/December/1.535 CAD 5,264 $ (48,608)
Deutsche Marks/British Pounds/December/2.6465 DEM 10,946 (12,577)
Japanese Yen/U.S. Dollars/January/104.75 JPY 236,735 (10,653)
U.S. Dollars/Australian Dollars/January/0.63 AUD 5,211 (117,898)
- -----------------------------------------------------------------------------
TOTAL CALL OPTIONS WRITTEN (PREMIUMS RECEIVED, $240,290) $ (189,736)
- -----------------------------------------------------------------------------
PUT OPTIONS WRITTEN
- -----------------------------------------------------------------------------
PRINCIPAL
AMOUNT
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED) VALUE
- -----------------------------------------------------------------------------
Deutsche Marks/British Pounds/December/2.816
(Premiums Received, $52,538) DEM 11,647 $ (42,791)
- -----------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES - 0.5%
- -----------------------------------------------------------------------------
NET ASSETS - 100.0% $320,958,356
- -----------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars ITL = Italian Lira
CAD = Canadian Dollars JPY = Japanese Yen
DEM = Deutsche Marks NLG = Netherland Guilder
DKK = Danish Krone NZD = New Zealand Dollars
GBP = British Pounds SEK = Swedish Krona
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
OCTOBER 31, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $266,558,072) $319,435,557
Cash 1,248,885
Foreign currency, at value (identified cost, $9) 9
Net receivable for forward foreign currency exchange
contracts to purchase 2,201,695
Net receivable for forward foreign currency exchange
contracts closed or subject to master netting
agreements 623,230
Receivable for Fund shares sold 639,605
Receivable for investments sold 2,159,754
Interest and dividends receivable 3,374,326
Other assets 1,835
------------
Total assets $329,684,896
------------
Liabilities:
Payable for Fund shares reacquired $ 286,694
Payable for investments purchased 7,660,132
Net payable for forward foreign currency exchange
contracts to sell 267,605
Written options outstanding, at value (premiums received,
$292,828) 232,527
Payable to affiliates -
Management fee 15,096
Shareholder servicing agent fee 1,972
Distribution and service fee 93,044
Administrative fee 263
Accrued expenses and other liabilities 169,207
------------
Total liabilities $ 8,726,540
------------
Net assets $320,958,356
============
Net assets consist of:
Paid-in capital $243,551,361
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 55,547,267
Accumulated undistributed net realized gain on
investments and foreign currency transactions 22,141,394
Accumulated distributions in excess of net investment
income (281,666)
------------
Total $320,958,356
============
Shares of beneficial interest outstanding 22,015,460
==========
Class A shares:
Net asset value per share
(net assets of $174,575,986 / 11,964,354 shares of
beneficial interest outstanding) $14.59
======
Offering price per share (100 / 95.25 of net asset value
per share) $15.32
======
Class B shares:
Net asset value and offering price per share
(net assets of $113,965,594 / 7,825,190 shares of
beneficial interest outstanding) $14.56
======
Class C shares:
Net asset value and offering price per share
(net assets of $30,580,070 / 2,100,153 shares of
beneficial interest outstanding) $14.56
======
Class I shares:
Net asset value per share
(net assets of $1,836,706 / 125,763 shares of
beneficial interest outstanding) $14.60
======
On sales of $100,000 or more, the offering price of Class A shares is reduced. A
contingent deferred sales charge may be imposed on redemptions of Class A, Class
B, and Class C shares.
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
Statement of Operations
- --------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998
- --------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 7,261,179
Dividends 3,366,043
Foreign taxes withheld (265,868)
------------
Total investment income $ 10,361,354
------------
Expenses -
Management fee $ 2,460,267
Trustees' compensation 41,856
Shareholder servicing agent fee 343,831
Distribution and service fee (Class A) 576,416
Distribution and service fee (Class B) 1,055,351
Distribution and service fee (Class C) 265,404
Administrative fee 42,332
Custodian fee 218,272
Postage 56,173
Printing 46,670
Auditing fees 37,589
Legal fees 3,317
Miscellaneous 204,916
------------
Total expenses $ 5,352,394
Fees paid indirectly (51,316)
------------
Net expenses $ 5,301,078
------------
Net investment income $ 5,060,276
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 25,009,502
Written option transactions 1,112,827
Foreign currency transactions (2,853,473)
Swap transactions 95,191
------------
Net realized gain on investments and foreign
currency transactions $ 23,364,047
------------
Change in unrealized appreciation (depreciation) -
Investments $ 7,557,559
Written options (77,203)
Translation of assets and liabilities in
foreign currencies 2,239,413
Swap transactions (79,135)
------------
Net unrealized gain on investments and foreign
currency translation $ 9,640,634
------------
Net realized and unrealized gain on investments
and foreign currency $ 33,004,681
------------
Increase in net assets from operations $ 38,064,957
============
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 5,060,276 $ 5,160,435
Net realized gain on investments and foreign currency
transactions 23,364,047 13,079,421
Net unrealized gain on investments and foreign currency
translation 9,640,634 16,651,658
------------ ------------
Increase in net assets from operations $ 38,064,957 $ 34,891,514
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (2,035,201) $ (2,231,027)
From net investment income (Class B) (655,779) (816,452)
From net investment income (Class C) (177,479) (183,191)
From net investment income (Class I) (28,271) (21,797)
From net realized gain on investments and foreign
currency transactions (Class A) (10,168,017) (6,137,212)
From net realized gain on investments and foreign
currency transactions (Class B) (6,502,653) (3,460,672)
From net realized gain on investments and foreign
currency transactions (Class C) (1,566,438) (701,486)
From net realized gain on investments and foreign
currency transactions (Class I) (113,097) --
------------ ------------
Total distributions declared to shareholders $(21,246,935) $(13,551,837)
------------ ------------
Net increase in net assets from Fund share transactions $ 30,717,782 $ 36,203,831
------------ ------------
Total increase in net assets $ 47,535,804 $ 57,543,508
Net assets:
At beginning of period 273,422,552 215,879,044
------------ ------------
At end of period (including distributions in excess of net
investment income of ($281,666) and ($1,310,949),
respectively) $320,958,356 $273,422,552
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $13.84 $12.73 $11.57 $10.58 $11.19
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.28 $ 0.31 $ 0.34 $ 0.33 $ 0.30
Net realized and unrealized gain on
investments and foreign currency
transactions 1.57 1.61 1.46 0.79 0.15
------ ------ ------ ------ ------
Total from investment operations $ 1.85 $ 1.92 $ 1.80 $ 1.12 $ 0.45
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.18) $(0.21) $(0.63) $(0.08) $(0.25)
From net realized gain on investments and
foreign currency transactions (0.92) (0.60) (0.01) (0.05) (0.33)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.38)
From paid-in capital -- -- -- -- (0.10)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.10) $(0.81) $(0.64) $(0.13) $(1.06)
------ ------ ------ ------ ------
Net asset value - end of period $14.59 $13.84 $12.73 $11.57 $10.58
====== ====== ====== ====== ======
Total return(+) 14.29% 15.71% 16.06% 10.63% 4.10%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.51% 1.59% 1.63% 1.77% 1.76%
Net investment income 1.99% 2.35% 2.79% 3.06% 2.81%
Portfolio turnover 183% 143% 167% 160% 118%
Net assets at end of period (000 omitted) $174,576 $152,919 $129,843 $110,294 $99,870
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund has an expense offset arrangement which reduces the Fund's custodian
fee based upon the amount of cash maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses
are calculated without reduction for this expense offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
CLASS B
- ----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $13.82 $12.71 $11.52 $10.54 $11.19
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.19 $ 0.22 $ 0.25 $ 0.25 $ 0.25
Net realized and unrealized gain on
investments and foreign currency
transactions 1.56 1.62 1.46 0.77 0.13
------ ------ ------ ------ ------
Total from investment operations $ 1.75 $ 1.84 $ 1.71 $ 1.02 $ 0.38
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.09) $(0.13) $(0.47) $(0.03) $(0.24)
In excess of net investment income -- -- (0.04) -- --
From net realized gain on investments and
foreign currency transactions (0.92) (0.60) (0.01) (0.01) (0.32)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.38)
From paid-in capital -- -- -- -- (0.09)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.01) $(0.73) $(0.52) $(0.04) $(1.03)
------ ------ ------ ------ ------
Net asset value - end of period $14.56 $13.82 $12.71 $11.52 $10.54
====== ====== ====== ====== ======
Total return 13.57% 15.00% 15.29% 9.75% 3.38%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.16% 2.25% 2.34% 2.49% 2.49%
Net investment income 1.33% 1.70% 2.07% 2.34% 2.33%
Portfolio turnover 183% 143% 167% 160% 118%
Net assets at end of period (000 omitted) $113,966 $96,931 $71,788 $57,214 $47,677
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund has an expense offset arrangement which reduces the Fund's custodian
fee based upon the amount of cash maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses
are calculated without reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997 1996 1995 1994*
- ----------------------------------------------------------------------------------------------------------------------------
CLASS C
- ----------------------------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C> <C> <C> <C>
Net asset value - beginning of period $13.82 $12.72 $11.52 $10.53 $11.06
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.19 $ 0.23 $ 0.26 $ 0.27 $ 0.27
Net realized and unrealized gain (loss)
on investments and foreign currency
transactions 1.56 1.61 1.46 0.76 (0.29)
------ ------ ------ ------ ------
Total from investment operations $ 1.75 $ 1.84 $ 1.72 $ 1.03 $(0.02)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.09) $(0.14) $(0.51) $(0.03) $(0.12)
From net realized gain on investments and
foreign currency transactions (0.92) (0.60) (0.01) (0.01) (0.16)
In excess of net realized gain on
investments and foreign currency
transactions -- -- -- -- (0.18)
From paid-in capital -- -- -- -- (0.05)
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.01) $(0.74) $(0.52) $(0.04) $(0.51)
------ ------ ------ ------ ------
Net asset value - end of period $14.56 $13.82 $12.72 $11.52 $10.53
====== ====== ====== ====== ======
Total return 13.52% 14.97% 15.41% 9.84% (0.15)%++
Ratios (to average net assets)/Supplemental data:
Expenses## 2.16% 2.24% 2.27% 2.42% 2.39%+
Net investment income 1.33% 1.71% 2.14% 2.41% 2.51%+
Portfolio turnover 183% 143% 167% 160% 118%
Net assets at end of period (000 omitted) $30,580 $21,725 $14,248 $10,894 $10,903
* For the period from the inception of Class C, January 3, 1994, through October 31, 1994.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund has an expense offset arrangement which reduces the Fund's
custodian fee based upon the amount of cash maintained by the Fund with its custodian and dividend disbursing agent. The
Fund's expenses are calculated without reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ----------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1998 1997**
- ----------------------------------------------------------------------------------------------------------
CLASS I
- ----------------------------------------------------------------------------------------------------------
Per share data (for a share outstanding throughout each period):
<S> <C> <C>
Net asset value - beginning of period $13.86 $12.51
------ ------
Income from investment operations# -
Net investment income $ 0.33 $ 0.30
Net realized and unrealized gain on investments and foreign
currency transactions 1.56 1.21
------ ------
Total from investment operations $ 1.89 $ 1.51
------ ------
Less distributions declared to shareholders -
From net investment income $(0.23) $(0.16)
From net realized gain on investments and foreign currency
transactions (0.92) --
------ ------
Total distributions declared to shareholders $(1.15) $(0.16)
------ ------
Net asset value - end of period $14.60 $13.86
====== ======
Total return 14.78% 12.08%++
Ratios (to average net assets)/Supplemental data:
Expenses## 1.16% 1.24%+
Net investment income 2.33% 2.72%+
Portfolio turnover 183% 143%
Net assets at end of period (000 omitted) $1,837 $1,848
** For the period from the inception of Class I, January 2, 1997, through October 31, 1997.
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the
amount of cash maintained by the Fund with its custodian and dividend disbursing agent. The
Fund's expenses are calculated without reduction for this expense offset arrangement.
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Global Total Return Fund (the Fund) is a non-diversified series of MFS
Series Trust VI (the Trust). The Trust is organized as a Massachusetts business
trust and is registered under the Investment Company Act of 1940, as amended, as
an open-end management investment company.
(2) Significant Accounting Policies
General - The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - 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. Non-U.S. dollar denominated short-term obligations
are valued at amortized cost as calculated in the foreign currency and
translated into U.S. dollars at the closing daily exchange rate. Futures
contracts, options, and options on futures contracts listed on commodities
exchanges are reported at market value using closing settlement prices. Over-
the-counter options on securities are valued by brokers. Over-the-counter
currency options are valued through the use of a pricing model which takes into
account foreign currency exchange spot and forward rates, implied volatility,
and short-term repurchase rates. Securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or at the direction of the Trustees.
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.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties to
meet the terms of their contracts and from unanticipated movements in the value
of a foreign currency relative to the U.S. dollar. The Fund will enter into
forward contracts for hedging purposes as well as for non-hedging purposes. For
hedging purposes, the Fund may enter into contracts to deliver or receive
foreign currency it will receive from or require for its normal investment
activities. The Fund may also use contracts in a manner intended to protect
foreign currency denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains or
losses on foreign currency transactions.
Swap Agreements - The Fund may enter into swap agreements. A swap is an exchange
of cash payments between the Fund and another party which is based on a specific
financial index. Cash payments are exchanged at specified intervals and the
expected income or expense is recorded on the accrual basis. The value of the
swap is adjusted daily and the change in value is recorded as unrealized
appreciation or depreciation. Risks may arise upon entering into these
agreements from the potential inability of counterparties to meet the terms of
their contract and from unanticipated changes in the value of the financial
index on which the swap agreement is based. The Fund uses swaps for both hedging
and non-hedging purposes. For hedging purposes, the Fund may use swaps to reduce
its exposure to interest and foreign exchange rate fluctuations. For non-hedging
purposes, the Fund may use swaps to take a position on anticipated changes in
the underlying financial index.
Investment Transactions and Income - Investment transactions are recorded on the
trade date. Interest income is recorded on the accrual basis. All premium and
discount is amortized or accreted for financial statement and tax reporting
purposes as required by federal income tax regulations. Dividends received in
cash are recorded on the ex-dividend date. Dividend and interest payments
received in additional securities are recorded on the ex-dividend or ex-interest
date in an amount equal to the value of the security on such date. Some
securities may be purchased on a "when issued" of "forward delivery" basis,
which means that the securities will be delivered to the fund at a future date,
usually beyond customary settlement time.
Fees Paid Indirectly - The Fund's custody fee is calculated as a percentage of
the Fund's month end net assets. The fee is reduced according to an arrangement
that measures the value of cash deposited with the custodian by the Fund. This
amount is shown as a reduction of expenses on the Statement of Operations.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
The Fund files a tax return annually using tax accounting methods required under
provisions of the Code, which may differ from generally accepted accounting
principles, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain reported
on these financial statements may differ from that reported on the Fund's tax
return and, consequently, the character of distributions to shareholders
reported in the financial highlights may differ from that reported to
shareholders on Form 1099-DIV.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits are reported in the financial statements as a tax return of capital.
Differences in the recognition or classification of income between the financial
statements and tax earnings and profits, which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or net realized gains. During
the year ended October 31, 1998, $1,134,263 from accumulated distributions in
excess of net investment income and $322,777 from accumulated undistributed net
realized gain on investments and foreign currency transactions were reclassed to
paid in capital due to differences between book and tax accounting for paydowns
and currency transactions. This change had no effect on the net assets or net
asset value per share. At October 31, 1998, accumulated undistributed net
investment income (realized gain on investments and foreign currency
transactions) under book accounting were different from tax accounting due to
temporary differences in accounting for currency transactions.
Multiple Classes of Shares of Beneficial Interest - The Fund offers multiple
classes of shares, which differ in their respective distribution and service
fees. All shareholders bear the common expenses of the Fund based on average
daily net assets of each class, without distinction between share classes.
Dividends are declared separately for each class. No class has preferential
dividend rights; differences in per share dividend rates are generally due to
differences in separate class expenses. Class B shares will convert to Class A
shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65% of
average daily net assets and 5.00% of investment income.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee at
the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $9,617 for the year ended
October 31, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$55,441 for the year ended October 31, 1998, as its portion of the sales charge
on sales of Class A shares of the Fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The Fund's distribution plan provides that the Fund will pay MFD up to 0.35% 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 0.10% 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 $51,037 for the year ended October 31,
1998. Fees incurred under the distribution plan during the year ended October
31, 1998, were 0.35% 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 $27,755 and $21,867 for Class B and Class C shares, respectively,
for the year ended October 31, 1998. Fees incurred under the distribution plan
during the year ended October 31, 1998, were 1.00% of average daily net assets
attributable to both Class B and Class C shares.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended October 31,
1998, were $591, $143,197, and $4,390 for Class A, Class B, and Class C shares,
respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an effective annual rate of
0.1125%. Prior to January 1, 1998, the fee was calculated as a percentage of the
average daily net assets at an effective annual rate of 0.13%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions and
short-term obligations, were as follows:
PURCHASES SALES
- ----------------------------------------------------------------------------
U.S. government securities $256,407,092 $213,935,673
------------ ------------
Investments (non-U.S. government
securities) $298,151,553 $310,126,192
------------ ------------
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 $266,600,299
------------
Gross unrealized appreciation $ 57,736,992
Gross unrealized depreciation (4,901,734)
------------
Net unrealized appreciation $ 52,835,258
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
------------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 4,562,531 $ 64,549,008 2,549,188 $ 33,536,171
Shares issued to shareholders
in reinvestment of
distributions 851,079 11,252,564 596,268 7,592,322
Shares reacquired (4,495,909) (63,669,790) (2,296,772) (30,263,298)
------------ ------------- ------------ -------------
Net increase 917,701 $ 12,131,782 848,684 $ 10,865,195
============ ============= ============ =============
<CAPTION>
Class B Shares
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
------------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,053,125 $ 29,003,679 2,145,163 $ 28,207,084
Shares issued to shareholders
in reinvestment of
distributions 473,256 6,245,341 297,676 3,786,788
Shares reacquired (1,715,969) (23,999,209) (1,074,408) (14,221,906)
------------ ------------- ------------ -------------
Net increase 810,412 $ 11,249,811 1,368,431 $ 17,771,966
============ ============= ============ =============
<CAPTION>
Class C Shares
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
------------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 822,996 $ 11,685,593 681,359 $ 8,952,016
Shares issued to shareholders
in reinvestment of
distributions 106,700 1,409,153 55,143 702,127
Shares reacquired (401,733) (5,642,659) (284,443) (3,746,301)
------------ ------------- ------------ -------------
Net increase 527,963 $ 7,452,087 452,059 $ 5,907,842
============ ============= ============ =============
<CAPTION>
Class I Shares
YEAR ENDED OCTOBER 31, 1998 YEAR ENDED OCTOBER 31, 1997
------------------------------------- -----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,889 $ 96,595 155,509 $ 1,954,464
Shares issued to shareholders
in reinvestment of
distributions 10,688 141,367 1,606 21,797
Shares reacquired (25,193) (353,860) (23,736) (317,433)
------------ ------------- ------------ -------------
Net increase (decrease) (7,616) $ (115,898) 133,379 $ 1,658,828
============ ============= ============ =============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $805 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended October 31, 1998, was $2,123.
(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, and swap agreements. 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.
<PAGE>
<TABLE>
<CAPTION>
Written Option Transactions
1998 CALLS 1998 PUTS
--------------------------------- ---------------------------------
PRINCIPAL PRINCIPAL
AMOUNTS AMOUNTS
OF CONTRACTS OF CONTRACTS
(000 OMITTED) PREMIUMS (000 OMITTED) PREMIUMS
- ---------------------------------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF PERIOD -
<S> <C> <C> <C> <C>
Deutsche Marks/British Pounds 18,519 $ 92,800 20,423 $ 83,855
Japanese Government Bonds -- -- 218,000 14,221
Japanese Yen 1,244,174 237,921 -- --
Japanese Yen/Deutsche Marks 1,451,560 139,942 822,841 61,801
Options written -
Australian Dollars 7,117 122,896 4,651 57,558
British Pounds 3,599 27,672 -- --
Canadian Dollars 22,751 117,004 8,750 32,734
Deutsche Marks/British Pounds 10,946 52,539 11,647 52,538
Japanese Government Bonds 1,567,000 24,075 3,138,000 88,712
Japanese Yen 7,762,993 679,687 1,174,765 62,057
Japanese Yen/Deutsche Marks 1,374,463 319,640 -- --
Options terminated in closing transactions -
Australian Dollars (1,906) (24,872) (4,651) (57,558)
British Pounds (3,599) (27,672) -- --
Canadian Dollars (17,487) (72,251) (8,750) (32,734)
Deutsche Marks/British Pounds -- -- (20,423) (83,855)
Japanese Government Bonds (1,567,000) (24,075) (3,356,000) (102,933)
Japanese Yen (7,471,689) (667,673) -- --
Japanese Yen/Deutsche Marks -- -- (822,841) (61,801)
Options expired -
Deutsche Marks/British Pounds (18,519) (92,800) -- --
Japanese Yen (1,298,743) (204,961) (1,174,765) (62,057)
Japanese Yen/Deutsche Marks (2,826,023) (459,582) -- --
---------- ---------
OUTSTANDING, END OF PERIOD $ 240,290 $ 52,538
========== =========
OPTIONS OUTSTANDING AT END OF PERIOD
CONSIST OF:
Australian Dollars 5,211 $ 98,024 -- --
Canadian Dollars 5,264 44,753 -- --
Deutsche Marks/British Pounds 10,946 52,539 11,647 $ 52,538
Japanese Yen 236,735 44,974 -- --
---------- ---------
OUTSTANDING, END OF PERIOD $ 240,290 $ 52,538
========== =========
</TABLE>
At October 31, 1998, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
<PAGE>
Forward Foreign Currency Exchange Contracts
<TABLE>
<CAPTION>
NET
UNREALIZED
CONTRACTS TO CONTRACTS APPRECIATION
SETTLEMENT DATE DELIVER/RECEIVE IN EXCHANGE FOR AT VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sales
12/15/98 DKK 15,621,865 $ 2,449,835 $ 2,482,999 $ (33,164)
12/15/98 NZD 9,931,511 5,026,528 5,260,969 (234,441)
----------- ----------- ----------
$ 7,476,363 $ 7,743,968 $ (267,605)
=========== =========== ==========
Purchases
12/15/98 AUD 3,477,523 $ 2,068,430 $ 2,177,168 $ 108,738
12/15/98 CAD 9,261,735 6,007,960 6,008,522 562
12/15/98 JPY 1,820,843,906 13,904,743 15,754,310 1,849,567
12/15/98 NLG 17,994,159 9,454,686 9,660,158 205,472
12/15/98 NZD 5,279,970 2,759,577 2,796,933 37,356
----------- ----------- ----------
$34,195,396 $36,397,091 $2,201,695
=========== =========== ==========
</TABLE>
Forward foreign currency purchases and sales under master netting agreements
excluded above amounted to a net receivable of $605,647 with Merrill Lynch,
$24,750 with C.S. First Boston and a net payable of $7,167 with Deutsche Bank at
October 31, 1998.
At October 31, 1998, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust VI and Shareholders of MFS Global Total
Return Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Global Total Return Fund, including the schedule of portfolio investments as of
October 31, 1998, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two yeas in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of October 31, 1998 by correspondence with the custodian and
brokers or by other appropriate auditing procedures where replies from brokers
were not received. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
MFS Global Total Return Fund at October 31, 1998, the results of its operations
for the year then ended, the changes in its net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Boston, Massachusetts
December 9, 1998
<PAGE>
- -------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- -------------------------------------------------------------------------------
IN JANUARY 1999, SHAREHOLDERS WILL BE MAILED A FORM 1099 REPORTING THE FEDERAL
TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR YEAR 1998.
THE FUND HAS DESIGNATED $15,478,664 AS A CAPITAL GAIN DIVIDEND.
FOR THE YEAR ENDED OCTOBER 31, 1998, THE AMOUNT OF DISTRIBUTIONS FROM INCOME
ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR CORPORATIONS CAME TO
7.02%.
FOR THE YEAR ENDED OCTOBER 31, 1998, INCOME FROM FOREIGN SOURCES WAS $5,701,314,
AND FOREIGN TAXES WITHHELD WERE $270,481.
<PAGE>
<TABLE>
<CAPTION>
MFS(R) GLOBAL TOTAL RETURN FUND
<S> <C>
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director
(until 1991), MFS Investment Management Assistant Secretary
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
CUSTODIAN
Lawrence H. Cohn, M.D. - Chief of State Street Bank and Trust Company
Cardiac Surgery, Brigham and Women's
Hospital; Professor of Surgery, AUDITORS
Harvard Medical School Ernst & Young LLP
The Hon. Sir J. David Gibbons, KBE INVESTOR INFORMATION
- - Chief Executive Officer, Edmund For MFS stock and bond market outlooks,
Gibbons Ltd.; Chairman, Colonial call toll free: 1-800-637-4458 anytime
Insurance Company, Ltd. from a touch-tone telephone.
For information on MFS mutual funds,
Abby M. O'Neill - Private Investor call your financial adviser or, for an
information kit, call toll free:
Walter E. Robb, III - President and 1-800-637-2929 any business day from
Treasurer, Benchmark Advisors, Inc. 9 a.m. to 5 p.m. Eastern time (or leave
(corporate financial consultants); a message anytime).
President, Benchmark Consulting Group,
Inc. (office services) INVESTOR SERVICE
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive P.O. Box 2281
Vice President, Director, and Secretary, Boston, MA 02107-9906
MFS Investment Management
For general information, call toll free:
Jeffrey L. Shames* - Chairman, Chief 1-800-225-2606 any business day from
Executive Officer, and Director, 8 a.m. to 8 p.m. Eastern time.
MFS Investment Management
For service to speech- or hearing-impaired,
J. Dale Sherratt - President, Insight call toll free: 1-800-637-6576 any business
Resources, Inc. (acquisition planning day from 9 a.m. to 5 p.m. Eastern time.
specialists) (To use this service, your phone must be
equipped with a Telecommunications Device
Ward Smith - Former Chairman (until 1994), for the Deaf.)
NACCO Industries (holding company) For share prices, account balances, and
exchanges, call toll free: 1-800-MFS-TALK
INVESTMENT ADVISER (1-800-637-8255) anytime from a touch-tone
Massachusetts Financial Services Company telephone.
500 Boylston Street
Boston, MA 02116-3741 WORLD WIDE WEB
www.mfs.com
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
Frederick J. Simmons*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
----------------
MFS(R) Global Total Return 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)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MWT-2 12/98 38M 24/224/324/824
