<PAGE>
[LOGO] MFS (SM)
INVESTMENT MANAGEMENT
We invented the mutual fund(SM)
MFS(R) UTILTIES FUND
SEMIANNUAL REPORT o APRIL 30, 1998
[graphic omitted]
NOW TWO MFS(R) IRA CHOICES (see page 31)
<PAGE>
IN MEMORIAM
A. KEITH BRODKIN
1935 - 1998
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
MFS INVESTMENT MANAGEMENT(SM)
[Photo of A. Keith Brodkin] On February 2, 1998, Keith Brodkin, a friend
and leader to everyone at MFS, died unexpectedly
at age 62. His thoughtful letters to
shareholders on the markets and economy have
been an integral part of MFS shareholder reports
like this one for many years.
Keith joined MFS in 1970 as the firm's first fixed-income manager, managing the
bond portion of MFS(R) Total Return Fund. He went on to manage our first pure
bond fund, MFS(R) Bond Fund, when it was introduced in 1974, and he was
considered a pioneer in the art of active bond management.
Keith was named President and Chief Investment Officer of MFS in 1987 and four
years later became Chairman and Chief Executive Officer. During his stewardship,
MFS has achieved significant growth in total assets under management, rising
from some $25 billion in 1991 to the over $80 billion today entrusted to us by
three million individual and institutional investors worldwide. Under Keith's
leadership, MFS has carefully but steadily built its domestic and international
investment capabilities through the introduction of a range of new products and
a still-growing staff that now numbers over 100 equity and fixed-income
professionals.
Throughout his career, Keith was very active in a wide range of charitable
endeavors. He is survived by his wife and three children.
His leadership, friendship, and wise counsel will be sorely missed.
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 2
A Discussion with the Portfolio Manager ................................... 4
Portfolio Manager's Profile ............................................... 6
Fund Facts ................................................................ 7
Performance Summary ....................................................... 7
Portfolio Concentration ................................................... 9
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
Now two MFS(R) IRA choices ................................................ 31
The MFS Family of Funds(R) ................................................ 32
Trustees and Officers ..................................................... 33
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HIGHLIGHTS
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o FOR THE SIX MONTHS ENDED APRIL 30, 1998, CLASS A SHARES OF THE FUND PROVIDED
A TOTAL RETURN AT NET ASSET VALUE OF 22.57%, CLASS B SHARES 22.06%, CLASS C
SHARES 22.15%, AND CLASS I SHARES 22.81%. (SEE PERFORMANCE SUMMARY FOR MORE
INFORMATION.)
o ALTHOUGH PRICES OF UTILITY STOCKS ROSE SHARPLY AT THE END OF 1997 AS PEOPLE
FAVORED MORE-DEFENSIVE INVESTMENTS, UTILITY STOCKS HAVE UNDERPERFORMED THE
SURPRISINGLY STRONG EQUITY MARKET THIS YEAR.
o TELECOMMUNICATIONS STOCKS, MEANWHILE, HAVE PERFORMED FAIRLY WELL, MAINLY DUE
TO THE RAPID PACE OF MERGERS THAT HAVE BEEN ANNOUNCED OR PLANNED. WORLDCOM,
FOR EXAMPLE, IS IN THE PROCESS OF BUYING MCI, WHILE SOME OF THE FORMER "BABY
BELLS" ARE ALSO ANNOUNCING MERGERS OR ACQUISITIONS.
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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:
With the U.S. stock market well into its fourth year of record-breaking
advances, it is necessary to take a cautious outlook. By most commonly accepted
measures, equity valuations appear to have risen to a point at which the stock
market has become more vulnerable to changes in the investment environment such
as rising inflation and interest rates or a slowing economy. As a result, while
we continue to hold a favorable long-term outlook for the equity markets, we
also believe that a market correction is possible in the near term. In such a
correction, equity prices would remain relatively flat or decline, possibly for
an extended period.
Currently, equity investors seem to be primarily focused on interest rates,
which have been relatively stable for several months as inflation has remained
low. In an environment of low interest rates, stocks become more attractive than
most fixed-income investments, while low inflation helps control companies'
costs, such as for raw materials, wages, and benefits. The near-term outlook for
a continuation of this environment appears relatively favorable. However, this
year has seen a marked slowdown in corporate earnings. This means that as equity
prices continue to rise, price-to-earnings (P/E) ratios, or the amount an
investor pays for a stock in relation to the company's earnings per share, also
go up. A year ago, the average P/E ratio for stocks in the unmanaged Standard &
Poor's 500 Composite Index stood at approximately 21; this spring, the average
P/E was 33% higher, at about 28. In some cases, such as with some of the newer
companies associated with the Internet, P/Es have soared to levels that are
unlikely to be sustained.
As long as interest rates remain low and the economy continues to grow, it is
possible that some of these valuations can be supported. We expect corporate
earnings to grow 8% to 10% this year. However, just as no one can predict market
cycles, so too no one can predict economic cycles -- except to say that these
cycles do exist and that an economic slowdown at some point is inevitable.
Given this reality, we believe it is prudent to remind investors of the need to
take a long-term view and to diversify their investments across a range of asset
classes, including mutual funds that focus on bonds and international
investments as well as on the U.S. stock market. The likelihood of an eventual
market correction also makes it important for us to use original, bottom-up
research to find companies that we think can keep growing or gain market share
in the face of the occasional downturn. To help achieve this, and to provide the
broadest possible coverage of industry sectors and individual companies, MFS
continues to increase its number of full-time research analysts. These analysts
thoroughly investigate each company's earnings potential and position in its
industry as well as the overall prospects for that industry.
MFS also uses active portfolio management on the fixed-income side, taking
advantage of our extensive research and credit analysis to help reduce the
potential for price declines and enhance the opportunity for appreciation. Every
year, both fixed-income and equity managers meet with thousands of credit
issuers and companies. They also attend many presentations, closely follow
sources of industry research, and keep track of competitors.
We believe that applying this discipline of thorough, bottom-up research to both
the equity and fixed-income markets is the best way to provide favorable
long-term performance for our shareholders -- regardless of changes in the
overall market environment.
We appreciate your support and welcome any questions or comments you may have.
Respectfully,
/s/ Jeffrey Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management
May 14, 1998
JEFFREY L. SHAMES, A GRADUATE OF WESLEYAN UNIVERSITY AND THE MASSACHUSETTS
INSTITUTE OF TECHNOLOGY SLOAN SCHOOL OF MANAGEMENT, JOINED MFS IN 1983. AFTER
FOUR YEARS AS AN INDUSTRY ANALYST AND PORTFOLIO MANAGER, HE WAS NAMED CHIEF
EQUITY OFFICER IN 1987 AND PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS IN
1993. MR. SHAMES WAS APPOINTED CHAIRMAN AND CHIEF EXECUTIVE OFFICER IN FEBRUARY
1998.
<PAGE>
A DISCUSSION WITH THE PORTFOLIO MANAGER
[Photo of Maura A. Shaughnessy]
Maura A. Shaughnessy
For the six months ended April 30, 1998, Class A shares of the Fund provided a
total return of 22.57%, Class B shares 22.06%, Class C shares 22.15%, and Class
I shares 22.81%. These returns, which include the reinvestment of distributions
but exclude the effects of any sales charges, compare to a 19.29% return for the
Standard & Poor's Utility Index (the Utility Index), an unmanaged,
market-value-weighted, total return index of all utility stocks in the Standard
& Poor's 500 Composite Index (the S&P 500). For the same period, the S&P 500, an
unmanaged index of common stock total return performance, returned 22.49%.
Q. COULD YOU DISCUSS THE FUND'S PERFORMANCE OVER THE PAST SIX MONTHS?
A. Utility stocks performed quite well at the end of last year as many
investors took a more defensive posture to the market. This year, however,
gas and electric utility stocks have been weak, as earnings have been weaker
than expected. This earnings shortfall has mainly been driven by the very
warm winter weather we have had across the country. Hopefully, El Nino will
be a one-time event.
Q. HAVE ANY UTILITY SECTORS NOT UNDERPERFORMED?
A. Telecommunications stocks have done fairly well and have helped the
performance of the Fund. They have benefited from strong volume growth as a
result of increased voice traffic and Internet traffic. In addition,
consolidation is driving these stocks, as witnessed by the major deals in
the industry, including MCI/WorldCom, AT&T/Teleport, and SBC/Ameritech.
Q. WHAT ABOUT CONSOLIDATION AMONG THE GAS AND ELECTRIC UTILITIES?
A. There is very little of this happening now. There should be strong economic
and business reasons behind these deals, such as increased economies of
scale and the desire of companies to become energy suppliers, not just gas
or electric companies. However, there are large regulatory hurdles to
overcome when two utilities merge. This can cause delays that can last up to
two years. Until we have a change at the federal level and get rid of the
Public Utility Holding Company Act, it's unlikely that there will be much
consolidation. Once that changes -- and it won't this year, but hopefully
next year -- there will be more consolidation.
Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY?
A. We follow a bottom-up, eclectic investment process. We focus on talking to
companies and understanding fundamentals. The Fund is comprised of stock
picks, not sector bets. We'll look at ideas anywhere, domestically and
internationally.
Q. IN YOUR LAST REPORT, YOU TALKED ABOUT FINDING SOME GOOD VALUES IN LATIN
AMERICA. HOW DOES THAT REGION LOOK NOW?
A. That's been a difficult area. After the Asian crisis started last fall,
investors pulled out of all emerging markets, including Latin America.
Unfortunately, investors are still pulling money out of Latin America.
Longer term, we believe the privatization of the electric and
telecommunications industries in countries such as Brazil will help some of
the companies there.
Q. ARE THERE ANY NEW HOLDINGS YOU CAN TALK ABOUT?
A. One is Mannesmann, a cellular company in Germany that's also getting into
the local telephone business. It also has telecommunications operations in
France and Italy. In the United States, we've invested in some of the
smaller-capitalization gas companies such as Washington Gas and Light and
NUI Corp. And, we have added to some positions, such as KN Energy, a stock
we have owned for a long time. The company bought the MidCon natural gas
pipeline assets in the Midwest, a move that we think will contribute to KN's
earnings.
Q. WHAT ABOUT REAL ESTATE INVESTMENT TRUSTS, OR REITS?
A. They have also underperformed this year as investors have become concerned
about an oversupply of capital and changes in the tax laws affecting REITs.
We continue to own a diversified group of REITs, which currently look very
cheap relative to stocks and bonds.
/s/ Maura Shaughnessy
Maura A. Shaughnessy
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.
PORTFOLIO MANAGER'S PROFILE
MAURA A. SHAUGHNESSY IS A SENIOR VICE PRESIDENT OF MFS INVESTMENT MANAGEMENT(SM)
AND IS PORTFOLIO MANAGER OF MFS(R) UTILITIES FUND AND THE UTILITIES SERIES
OFFERED THROUGH MFS/SUN LIFE ANNUITY PRODUCTS. SHE IS ALSO A MEMBER OF THE
PORTFOLIO MANAGEMENT TEAM OF MFS(R) TOTAL RETURN FUND.
SHE JOINED MFS IN 1991 AS AN EQUITY ANALYST AND WAS PROMOTED TO VICE PRESIDENT
IN 1992 AND SENIOR VICE PRESIDENT IN 1998.
A GRADUATE OF COLBY COLLEGE AND THE AMOS TUCK SCHOOL OF BUSINESS AT DARTMOUTH
COLLEGE, SHE IS A CHARTERED FINANCIAL ANALYST.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other MFS
product is available from your financial adviser, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS CAPITAL GROWTH AND CURRENT INCOME (INCOME ABOVE
THAT AVAILABLE FROM A PORTFOLIO INVESTED ENTIRELY IN
EQUITIES).
COMMENCEMENT OF
INVESTMENT OPERATIONS: FEBRUARY 14, 1992
CLASS INCEPTION: CLASS A FEBRUARY 14, 1992
CLASS B SEPTEMBER 7, 1993
CLASS C JANUARY 3, 1994
CLASS I JANUARY 2, 1997
SIZE: $435.0 MILLION NET ASSETS AS OF APRIL 30, 1998
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.
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN THROUGH APRIL 30, 1998
CLASS A
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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Cumulative Total Returns +22.57% +42.45% +118.89% +142.57% +194.74%
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Average Annual Total
Returns -- +42.45% + 29.84% + 19.39% + 19.01%
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SEC Results -- +35.68% + 27.75% + 18.24% + 18.08%
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CLASS B
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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Cumulative Total Returns +22.06% +41.39% +113.82% +132.48% +182.80%
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Average Annual Total
Returns -- +41.39% + 28.83% + 18.38% + 18.22%
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SEC Results -- +37.39% + 28.23% + 18.16% + 18.22%
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*For the period from the commencement of the Fund's investment operations,
February 14, 1992, through April 30, 1998.
CLASS C
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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Cumulative Total Returns +22.15% +41.47% +113.82% +133.86% +184.59%
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Average Annual Total
Returns -- +41.47% + 28.83% + 18.52% + 18.34%
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SEC Results -- +40.47% + 28.83% + 18.52% + 18.34%
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CLASS I
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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Cumulative Total Returns +22.81% +42.91% +119.75% +143.59% +194.90%
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Average Annual Total
Returns -- +42.91% + 30.01% + 19.49% + 19.02%
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*For the period from the commencement of the Fund's investment operations,
February 14, 1992, through April 30, 1998.
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, 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.
The Fund may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
PORTFOLIO CONCENTRATION AS OF APRIL 30, 1998
LARGEST STOCK SECTORS
Utilities & Communications 80.0%
Financial Services 9.1%
Technology 4.0%
Industrial Goods & Services 2.5%
Energy 2.3%
Miscellaneous 2.1%
(Conglomerates, special products/services)
TOP 10 STOCK HOLDINGS
COLUMBIA GAS SYSTEM, INC. 3.6% SBC COMMUNICATIONS, INC. 2.3%
Natural gas production and Integrated telecommunications
pipeline company company
BELL ATLANTIC CORP. 3.0% CALENERGY CO., INC. 2.2%
Integrated telecommunications Natural gas energy and
company production company
KN ENERGY, INC. 2.9% GTE CORP. 2.1%
Natural gas services company Telecommunications company
WORLDCOM, INC. 2.8% CAROLINA POWER & LIGHT CO. 1.9%
Long-distance telephone provider Electric utility company
MANNESMANN AG 2.5% HELLENIC TELECOMMUNICATION
German industrial and telecommunications ORGANIZATION S.A., GDR 1.9%
company Greek telecommunications company
<PAGE>
PORTFOLIO OF INVESTMENTS (Unaudited) -- April 30, 1998
<TABLE>
<CAPTION>
Stocks - 79.2%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 56.0%
Conglomerates - 0.6%
Eastern Enterprises 62,100 $ 2,631,487
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Financial Services
Heller Financial, Inc. 5,500 $ 147,812
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Oils - 0.4%
Enron Oil & Gas Co. 77,900 $ 1,820,913
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Real Estate Investment Trusts - 7.0%
American General Hospitality Corp. 39,100 $ 979,944
Beacon Capital Partners, Inc.*## 161,300 3,226,000
Camden Property Trust 105,000 3,077,812
Carramerica Realty Corp. 100,000 2,925,000
Highwood Properties, Inc. 86,500 2,941,000
Hospitality Properties Trust 35,600 1,143,650
Kilroy Realty Corp. 87,600 2,321,400
Mid-America Apartment Communities, Inc. 47,100 1,254,038
National Health Investors, Inc. 33,200 1,116,350
Patriot American Hospitality, Inc. 106,700 2,694,175
Prime Group Realty Trust 49,900 1,044,781
Starwood Lodging Trust 50,000 2,509,375
Storage Trust Realty 62,400 1,513,200
Tower Realty Trust, Inc. 68,500 1,618,312
TriNet Corporate Realty Trust, Inc. 56,000 2,005,500
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$ 30,370,537
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Telecommunications - 8.7%
Cellular Communications International* 77,550 $ 3,412,200
Century Telephone Enterprises, Inc. 139,500 5,937,469
Cincinnati Bell, Inc. 120,300 4,601,475
Global TeleSystems Group, Inc.* 30,100 1,414,700
Intermedia Communications, Inc.* 41,700 3,043,448
IXC Communications Inc.* 85,500 4,264,313
MCI Communications Corp. 43,300 2,178,531
Nextlink Communications, Inc., "A"* 90,100 2,703,000
WorldCom, Inc.* 237,320 10,152,846
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$ 37,707,982
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Utilities - Electric - 19.6%
AES Corp.* 91,600 $ 5,055,175
Atmos Energy Corp. 10,000 294,375
Baltimore Gas & Electric Co. 63,200 1,990,800
CalEnergy Co., Inc.* 245,600 8,012,700
Carolina Power & Light Co. 162,100 6,980,431
Central Hudson Gas & Electric Corp. 40,000 1,612,500
Cinergy Corp. 107,400 3,745,575
CMS Energy Corp. 49,900 1,300,519
CMS Energy Corp., "G" 61,000 2,664,938
El Paso Electric Co.* 253,800 2,411,100
Florida Progress Corp. 112,000 4,550,000
GPU, Inc. 140,000 5,547,500
Illinova Corp. 217,200 6,638,175
LG & E Energy Corp. 70,800 1,876,200
Long Island Lighting Co. 62,000 1,856,125
New Century Energies, Inc. 105,800 5,025,500
Pacificorp 101,100 2,350,575
Public Service Co. of New Mexico 160,900 3,710,756
Public Service Enterprise Group 116,200 3,899,962
Scana Corp. 119,300 3,564,088
Sierra Pacific Resources 101,200 3,542,000
Texas Utilities Co. 58,400 2,336,000
TNP Enterprises, Inc. 35,400 1,141,650
Unicom Corp. 150,000 5,212,500
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$ 85,319,144
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Utilities - Gas - 12.3%
Coastal Corp. 92,700 $ 6,622,256
Columbia Gas System, Inc. 162,300 13,186,875
Consolidated Natural Gas Co. 71,700 4,122,750
Enron Corp. 79,800 3,925,163
Keyspan Energy Corp. 41,000 1,399,125
KN Energy, Inc. 181,000 10,622,437
National Fuel Gas Co. 96,000 4,416,000
NICOR, Inc. 52,000 2,128,750
NUI Corp. 104,500 2,677,813
Piedmont Natural Gas, Inc. 12,000 408,750
Questar Corp. 89,000 3,860,375
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$ 53,370,294
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Utilities - Telephone - 7.4%
Bell Atlantic Corp. 118,360 $ 11,074,057
BellSouth Corp. 39,000 2,503,313
GTE Corp. 131,500 7,684,531
LCI International, Inc.* 64,300 2,555,925
SBC Communications, Inc. 202,564 8,393,746
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$ 32,211,572
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Total U.S. Stocks $243,579,741
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Foreign Stocks - 23.2%
Brazil - 6.3%
CEMIG (Utilities - Electric) 56,700 $ 2,751,946
Companhia Electricas est Rio de Janeiro (Utilities -
Electric)* 5,853,100 4,248,424
Companhia Paranaense de Energia - COPEL, Preferred
"B" (Utilities - Electric)* 331,500 4,638,391
Companhia Riogrand Telecomunicacoes (Utilities -
Telephone) 3,713,000 4,903,043
Escelsa Espirito Santo (Utilities - Electric) 10,200 963,358
Espirito Santo Centrais Eletricas S.A. (Utilities -
Electric) 1,114,600 1,306,134
Telecomunicacoes Brasileiras S.A., ADR
(Telecommunications) 51,900 6,322,069
Telecomunicacoes Sao Paulo (Telecommunications) 6,520,000 2,217,997
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$ 27,351,362
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Canada - 1.6%
BCE, Inc. (Telecommunications) 81,000 $ 3,447,563
Bell Canada International, Inc. (Telecommunications)* 155,100 3,489,750
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$ 6,937,313
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Chile - 1.9%
Chilectra S.A., ADR (Utilities - Electric) 198,800 $ 5,467,000
Compania de Telecom de Chile, ADR (Utilities -
Telephone) 71,000 1,779,437
Empresa Nacional de Electricidad (Utilities -
Electric) 65,400 1,140,413
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$ 8,386,850
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China - 0.3%
Huaneng Power International, Inc., ADR (Utilities -
Electric)* 55,000 $ 1,210,000
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France - 0.6%
Alcatel Alsthom Compagnie, ADR (Telecommunications) 70,000 $ 2,537,500
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Germany - 2.8%
Deutsche Telekom AG, ADR (Utilities - Telephone) 5,000 $ 130,938
Mannesmann AG (Conglomerate) 11,800 9,363,722
VEBA AG (Oil and Gas) 42,200 2,789,033
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$ 12,283,693
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Greece - 1.6%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 238,320 $ 6,829,958
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Hong Kong - 0.6%
Hutchison Whampoa Ltd. (Conglomerate) 393,000 $ 2,429,777
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Italy - 1.3%
Telecom Italia S.p.A. (Telecommunications)* 584,900 $ 3,083,373
Telecom Italia S.p.A. (Telecommunications)* 362,600 2,711,697
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$ 5,795,070
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Japan - 0.5%
Nippon Telephone & Telegraph Co. (Utilities -
Telephone) 229 $ 2,003,016
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Peru - 0.2%
Luz del Sur S.A. (Utilities - Electric) 1,002,201 $ 1,020,990
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Portugal - 1.4%
Portugal Telecom S.A. (Utilities - Telephone) 73,700 $ 3,961,281
Telecel - Comunicacaoes Pessoais S.A.
(Telecommunications)* 12,100 2,171,053
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$ 6,132,334
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South Korea
SK Telecommunications (Telecommunications) 15 $ 8,847
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Spain - 2.6%
Endesa S.A., ADR (Utilities - Electric) 89,800 $ 2,177,650
Iberdrola S.A. (Utilities - Electric) 268,600 4,318,328
Telefonica de Espana S.A., ADR (Utilities -
Telephone) 24,163 3,018,865
Union Electrica Fenosa S.A. (Utilities - Electric) 143,100 1,849,905
------------
$ 11,364,748
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United Kingdom - 1.4%
Cable & Wireless Communications PLC
(Telecommunications)* 283,100 $ 2,055,938
Cable & Wireless PLC (Telecommunications) 116,000 4,074,500
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$ 6,130,438
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Venezuela - 0.1%
Compania Anonima Nacional Telefonos de Venezuela, ADR
(Telecommunications) 11,600 $ 388,600
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Total Foreign Stocks $100,810,496
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Total Stocks (Identified Cost, $300,308,127) $344,390,237
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Bonds - 11.6%
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PRINCIPAL AMOUNT
(000 OMITTED)
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U.S. Bonds - 11.1%
Banks and Credit Companies - 0.3%
Beaver Valley Funding Corp., 9s, 2017 $ 1,185 $ 1,340,922
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Conglomerates - 0.3%
News America Holdings, Inc., 8.875s, 2023 $ 1,000 $ 1,172,570
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Construction Services - 0.3%
Georgia Pacific Corp., 9.5s, 2022 $ 1,000 $ 1,128,000
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Entertainment - 0.9%
Circus Circus Enterprises, Inc., 6.45s, 2006 $ 1,000 $ 934,500
Hearst Argyle Television, Inc., 7.5s, 2027 1,500 1,563,150
Time Warner, Inc., 9.15s, 2023 1,200 1,470,660
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$ 3,968,310
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Financial Institutions - 0.2%
Goldman Sachs Group LP, 5.9s, 2003 $ 1,000 $ 979,660
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Forest and Paper Products - 0.1%
Boise Cascade Co., 7.43s, 2005 $ 450 $ 464,153
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Oils - 0.6%
Oryx Energy Co., 8.375s, 2004 $ 1,500 $ 1,604,400
Sun Co., Inc., 9s, 2024 1,000 1,210,720
------------
$ 2,815,120
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Telecommunications - 0.5%
Tele-Communications, Inc., 10.125s, 2001 $ 1,200 $ 1,317,180
WorldCom, Inc., 8.875s, 2006 1,000 1,089,970
------------
$ 2,407,150
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U.S. Government Agencies - 0.4%
Federal National Mortgage Association - 0.4%
FNMA, 6.5s, 2013 $ 1,677 $ 1,682,405
- -----------------------------------------------------------------------------------------
U.S. Government Guaranteed - 3.6%
Government National Mortgage Association - 0.8%
GNMA, 7s, 2027 $ 447 $ 452,795
GNMA, 7.5s, 2026 - 2026 1,445 1,484,236
GNMA, 8s, 2025 - 2026 1,354 1,402,636
------------
$ 3,339,667
- -----------------------------------------------------------------------------------------
U.S. Treasury Obligations - 2.8%
U.S. Treasury Bonds, 6.125s, 2027 $ 145 $ 148,352
U.S. Treasury Bonds, 9.875s, 2015 810 1,148,556
U.S. Treasury Bonds, 10.75s, 2005 400 517,188
U.S. Treasury Notes, 6.125s, 2007 420 431,353
U.S. Treasury Notes, 6.625s, 2002 500 516,405
U.S. Treasury Notes, 9.125s, 1999 9,085 9,404,428
------------
$ 12,166,282
- -----------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 15,505,949
- -----------------------------------------------------------------------------------------
Utilities - Electric - 2.6%
AEP Generating, 9.82s, 2022 $ 1,193 $ 1,537,607
Commonwealth Edison Co., 7.625s, 2007 500 528,965
Long Island Lighting Co., 8.2s, 2023 1,500 1,598,730
Long Island Lighting Co., 9s, 2022 900 1,023,948
Midland Cogeneration Venture Corp., 10.33s, 2002 370 399,077
Montana Power Co., 7.875s, 2026 500 557,490
Niagara Mohawk Power Corp., 8.5s, 2023 1,200 1,281,468
Salton Sea Funding Corp., 6.69s, 2000 627 629,699
Seabrook Station - Unit 1, 7.83s, 2019 916 955,823
Texas & New Mexico Power Co., 12.5s, 1999 1,000 1,038,750
Texas Utilities Co., 6.375s, 2008## 1,200 1,174,644
Utilicorp United, Inc., 8.45s, 1999 600 620,226
------------
$ 11,346,427
- -----------------------------------------------------------------------------------------
Utilities - Gas - 1.3%
Coastal Corp., 7.42s, 2037 $ 1,500 $ 1,541,595
NGC Corp. Capital Trust I, 8.316s, 2027 1,670 1,896,452
Tennessee Gas Pipeline Co., 7.625s, 2037 1,000 1,071,010
Texas Gas Transmission Corp., 7.25s, 2027 1,100 1,130,338
------------
$ 5,639,395
- -----------------------------------------------------------------------------------------
Total U.S. Bonds $ 48,450,061
- -----------------------------------------------------------------------------------------
Foreign Bonds - 0.5%
Argentina
Hidroelectrica Alicura , 8.375s, 1999
(Utilities - Electric)## $ 150 $ 149,250
- -----------------------------------------------------------------------------------------
Canada - 0.3%
Gulf Canada Resources, 9.25s, 2004 (Oils) $ 850 $ 891,777
Rogers Cablesystems, Inc., 10.125s, 2012
(Telecommunications) 200 217,000
------------
$ 1,108,777
- -----------------------------------------------------------------------------------------
Chile - 0.1%
Empresa Electric Guacolda S.A., 7.6s, 2001
(Utilities - Electric)## $ 500 $ 502,740
- -----------------------------------------------------------------------------------------
South Korea - 0.1%
Republic of Korea, 8.875s, 2008 $ 400 $ 398,960
- -----------------------------------------------------------------------------------------
Total Foreign Bonds $ 2,159,727
- -----------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $50,202,722) $ 50,609,788
- -----------------------------------------------------------------------------------------
Convertible Bonds - 2.9%
- -----------------------------------------------------------------------------------------
Financial Institutions - 0.6%
ADT Operations, Inc., 0s, 2010 $ 1,530 $ 2,291,175
- -----------------------------------------------------------------------------------------
Telecommunications - 2.3%
Cellular Commerce International, Inc., 6s, 2005## $ 5,880 $ 7,555,800
Cellular Communications, Inc., 9.5s, 2005## 3,326 2,527,189
------------
$ 10,082,989
- -----------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $9,119,567) $ 12,374,164
- -----------------------------------------------------------------------------------------
Convertible Preferred Stocks - 3.0%
- -----------------------------------------------------------------------------------------
SHARES
- -----------------------------------------------------------------------------------------
Insurance - 0.7%
Conseco, Inc., 7%## 63,300 $ 2,947,406
- -----------------------------------------------------------------------------------------
Telecommunications - 1.2%
IXC Communications, Inc., 6.75% 106,000 $ 5,247,000
- -----------------------------------------------------------------------------------------
Utilities - Electric - 1.1%
Calenergy Capital Trust III, 6.5% 35,000 $ 1,684,375
Calenergy Capital Trust III, 6.5%## 65,500 3,152,188
------------
$ 4,836,563
- -----------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $12,571,501) $ 13,030,969
- -----------------------------------------------------------------------------------------
Rights
- -----------------------------------------------------------------------------------------
Telefonica de Espana S.A. (Telecommunications)*
(Identified Cost, $0) 7 $ 16
- -----------------------------------------------------------------------------------------
Short-Term Obligations - 4.8%
- -----------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- -----------------------------------------------------------------------------------------
Associates Corp. of North America, due 5/01/98 $ 4,400 $ 4,400,000
Federal Home Loan Bank, due 5/20/98 5,500 5,484,383
Federal Home Loan Mortgage Corp., due 5/22/98 7,100 7,077,552
Federal National Mortgage Assn., due 5/06/98 4,050 4,046,985
- -----------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 21,008,920
- -----------------------------------------------------------------------------------------
Total Investments (Identified Cost, $393,210,837) $441,414,094
Other Assets, Less Liabilities - (1.5)% (6,457,974)
- -----------------------------------------------------------------------------------------
Net Assets - 100.0% $434,956,120
- -----------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- ------------------------------------------------------------------------------
APRIL 30, 1998
- ------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $393,210,837) $441,414,094
Foreign currency, at value (identified cost, $2,237) 2,226
Receivable for Fund shares sold 6,795,596
Receivable for investments sold 3,170,791
Interest and dividends receivable 2,308,062
Other assets 1,150
------------
Total assets $453,691,919
------------
Liabilities:
Cash overdraft $ 58,833
Distributions payable 171,104
Payable for Fund shares reacquired 659,668
Payable for investments purchased 17,606,652
Net payable for foreign currency exchange contracts
closed or subject to master netting agreements 20,074
Payable to affiliates -
Management fee 5,838
Shareholder servicing agent fee 1,310
Distribution and service fee 135,589
Administrative fee 175
Accrued expenses and other liabilities 76,556
------------
Total liabilities $ 18,735,799
------------
Net assets $434,956,120
============
Net assets consist of:
Paid-in capital $366,769,578
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 48,181,590
Accumulated undistributed net realized gain on
investments and foreign currency transactions 20,509,645
Accumulated distributions in excess of net investment
income (504,693)
------------
Total $434,956,120
============
Shares of beneficial interest outstanding 39,773,931
==========
Class A shares:
Net asset value per share
(net assets of $160,013,491 / 14,608,228 shares of
beneficial interest outstanding) $10.95
======
Offering price per share (100 / 95.25 of net value per
share) $11.50
======
Class B shares:
Net asset value and offering price per share
(net assets of $216,499,502 / 19,822,181 shares of
beneficial interest outstanding) $10.92
======
Class C shares:
Net asset value and offering price per share
(net assets of $57,377,682 / 5,246,359 shares of
beneficial interest outstanding) $10.94
======
Class I shares:
Net asset value, offering price, and redemption price
per share (net assets of $1,065,445 / 97,163 shares
of beneficial interest outstanding) $10.97
======
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 (Unaudited)
- ------------------------------------------------------------------------------
SIX MONTHS ENDED APRIL 30, 1998
- ------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 3,475,949
Interest 1,943,403
Foreign taxes withheld (90,216)
------------
Total investment income $ 5,329,136
------------
Expenses -
Management fee $ 889,701
Trustees' compensation 22,356
Shareholder servicing agent fee 177,586
Distribution and service fee (Class A) 151,408
Distribution and service fee (Class B) 718,913
Distribution and service fee (Class C) 184,854
Administrative fee 20,653
Custodian fee 70,662
Printing 22,752
Postage 19,597
Auditing fees 16,814
Legal fees 1,113
Miscellaneous 145,526
------------
Total expenses $ 2,441,935
Fees paid indirectly (23,134)
Preliminary reduction of expenses by investment adviser (135,428)
------------
Net expenses $ 2,283,373
------------
Net investment income $ 3,045,763
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $ 20,705,498
Foreign currency transactions (31,717)
------------
Net realized gain on investments and foriegn
currency transactions $ 20,673,781
------------
Change in unrealized appreciation (depreciation) -
Investments $ 34,867,501
Translation of assets and liabilities in foreign
currencies (22,140)
------------
Net unrealized gain on investments and foreign
currency translation $ 34,845,361
------------
Net realized and unrealized gain on investments
and foreign currency $ 55,519,142
------------
Increase in net assets from operations $ 58,564,905
============
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1998 OCTOBER 31, 1997
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 3,045,763 $ 4,492,110
Net realized gain on investments and foreign currency
transactions 20,673,781 29,198,342
Net unrealized gain on investments and foreign currency
translation 34,845,361 3,178,460
------------ ------------
Increase in net assets from operations $ 58,564,905 $ 36,868,912
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (1,727,053) $ (2,595,146)
From net investment income (Class B) (1,502,310) (1,850,367)
From net investment income (Class C) (383,910) (373,755)
From net investment income (Class I) (14,671) (23,347)
From net realized gain on investments and foreign
currency transactions (Class A) (12,514,640) (5,350,418)
From net realized gain on investments and foreign
currency transactions (Class B) (13,185,584) (4,454,053)
From net realized gain on investments and foreign
currency transactions (Class C) (3,245,184) (782,366)
From net realized gain on investments and foreign
currency transactions (Class I) (113,598) --
------------ ------------
Total distributions declared to shareholders $(32,686,950) $(15,429,452)
------------ ------------
Net increase in net assets from Fund share transactions $203,508,875 $ 65,677,277
------------ ------------
Total increase in net assets $229,386,830 $ 87,116,737
Net assets:
At beginning of period 205,569,290 118,452,553
------------ ------------
At end of period (including accumulated undistributed
(distributions in excess of) net investment income
of $(504,693) and $77,488, respectively) $434,956,120 $205,569,290
============ ============
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED ---------------------------------------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994 1993 1992*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of
period $10.39 $ 9.12 $ 8.20 $ 7.00 $ 7.86 $ 6.68 $ 6.33
------ ------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.13 $ 0.32 $ 0.38 $ 0.31 $ 0.33 $ 0.40 $ 0.17
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions 1.97 2.08 1.07 1.22 (0.63) 1.19 0.30
------ ------ ------ ------ ------ ------ ------
Total from investment
operations $ 2.10 $ 2.40 $ 1.45 $ 1.53 $(0.30) $ 1.59 $ 0.47
------ ------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.15) $(0.34) $(0.32) $(0.33) $(0.35) $(0.38) $(0.12)
From net realized gain on
investments and foreign
currency transactions (1.39) (0.79) (0.21) -- (0.21) (0.03) --
------ ------ ------ ------ ------ ------ ------
Total distributions
declared to shareholders $(1.54) $(1.13) $(0.53) $(0.33) $(0.56) $(0.41) $(0.12)
------ ------ ------ ------ ------ ------ ------
Net asset value - end of period $10.95 $10.39 $ 9.12 $ 8.20 $ 7.00 $ 7.86 $ 6.68
====== ====== ====== ====== ====== ====== ======
Total return(+) 22.57%++ 28.62% 18.41% 22.48% (3.89)% 24.39% 11.02%+
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.07%+ 1.10% 1.08% 0.83% 0.65% 0.65% 0.65%+
Net investment income 2.47%+ 3.27% 4.37% 4.30% 4.58% 4.57% 5.44%+
Portfolio turnover 56% 153% 137% 152% 115% 119% 63%
Net assets at end of period
(000 omitted) $160,013 $90,083 $60,345 $52,474 $42,027 $43,423 $12,859
* For the period from the commencement of the Fund's investment operations, February 14, 1992, through October 31, 1992.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to October 31, 1993, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results would
have been lower.
(S) The investment adviser and/or the distributor voluntarily waived a portion of their management fee and/or distribution fee,
respectively, for certain of the periods indicated. If the fee had been incurred by the Fund, the net investment income per
share and the ratios would have been:
Net investment income $ 0.13 $ 0.30 $ 0.34 $ 0.28 $ 0.28 $ 0.31 $ 0.13
Ratios (to average net assets):
Expenses## 1.16%+ 1.29% 1.42% 1.23% 1.41% 1.68% 2.63%+
Net investment income 2.38%+ 3.08% 4.03% 3.90% 3.82% 4.20% 3.46%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED -------------------------------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994 1993*
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.36 $ 9.10 $ 8.18 $ 6.98 $ 7.84 $ 7.83
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.09 $ 0.24 $ 0.31 $ 0.24 $ 0.25 $ 0.05
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions 1.97 2.08 1.07 1.22 (0.63) 0.01
------ ------ ------ ------ ------ ------
Total from investment operations $ 2.06 $ 2.32 $ 1.38 $ 1.46 $(0.38) $ 0.06
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.11) $(0.27) $(0.25) $(0.26) $(0.27) $(0.05)
From net realized gain on investments
and foreign currency transactions (1.39) (0.79) (0.21) -- (0.21) --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.50) $(1.06) $(0.46) $(0.26) $(0.48) $(0.05)
------ ------ ------ ------ ------ ------
Net asset value - end of period $10.92 $10.36 $ 9.10 $ 8.18 $ 6.98 $ 7.84
====== ====== ====== ====== ====== ======
Total return 22.06%++ 27.59% 17.50% 21.43% (4.92)% 0.69%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.83%+ 1.87% 1.89% 1.74% 1.72% 1.50%+
Net investment income 1.70%+ 2.49% 3.53% 3.33% 3.51% 1.80%+
Portfolio turnover 56% 153% 137% 152% 115% 119%
Net assets at end of period
(000 omitted) $216,500 $91,973 $49,877 $33,239 $19,774 $5,412
* For the period from the inception of Class B, September 7, 1993, through October 31, 1993.
+ Annualized.
++ Not annualized.
# Per share data for the periods subsequent to October 31, 1993, are based on average shares outstanding.
## For fiscal years ending after September 1, 1995, the Fund's expenses are calculated without reduction for fees paid indirectly.
(S) The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If the fee had
been incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.09 $ 0.22 $ 0.28 $ 0.21 $ 0.20 $(0.07)
Ratios (to average net assets):
Expenses## 1.92%+ 2.06% 2.23% 2.14% 2.48% 3.27%+
Net investment income 1.61%+ 2.30% 3.19% 2.93% 2.74% 1.53%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED -------------------------------------------------------
APRIL 30, 1998 1997 1996 1995 1994*
(UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.37 $ 9.10 $ 8.18 $ 6.99 $ 7.48
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.09 $ 0.24 $ 0.31 $ 0.24 $ 0.25
Net realized and unrealized gain (loss) on
investments and foreign currency transactions 1.98 2.09 1.07 1.21 (0.54)
------ ------ ------ ------ ------
Total from investment operations $ 2.07 $ 2.33 $ 1.38 $ 1.45 $(0.29)
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.11) $(0.27) $(0.25) $(0.26) $(0.20)
From net realized gain on investments and
foreign currency transactions (1.39) (0.79) (0.21) -- --
------ ------ ------ ------ ------
Total distributions declared to shareholders $(1.50) $(1.06) $(0.46) $(0.26) $(0.20)
------ ------ ------ ------ ------
Net asset value - end of period $10.94 $10.37 $ 9.10 $ 8.18 $ 6.99
====== ====== ====== ====== ======
Total return 22.15%++ 27.71% 17.57% 21.19% (3.87)%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.83%+ 1.85% 1.82% 1.81% 1.65%+
Net investment income 1.69%+ 2.47% 3.60% 3.32% 3.56%+
Portfolio turnover 56% 153% 137% 152% 115%
Net assets at end of period (000 omitted) $57,378 $22,788 $ 8,231 $4,943 $2,399
* 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's expenses are calculated without reduction for fees paid indirectly.
(S) The investment adviser voluntarily waived a portion of its management fee for certain of the periods indicated. If the fee
had been incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.09 $ 0.22 $ 0.28 $ 0.21 $ 0.20
Ratios (to average net assets):
Expenses## 1.92%+ 2.04% 2.16% 2.21% 2.41%+
Net investment income 1.60%+ 2.28% 3.26% 2.83% 2.80%+
</TABLE>
See notes to financial statements
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED PERIOD ENDED
APRIL 30, 1998 OCTOBER 31, 1997*
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Per share data (for a share outstanding throughout each period):
Net asset value - beginning of period $10.39 $ 8.90
------ ------
Income from investment operations# -
Net investment income(S) $ 0.14 $ 0.29
Net realized and unrealized gain on investments and
foreign currency transactions 1.99 1.48
------ ------
Total from investment operations $ 2.13 $ 1.77
------ ------
Less distributions declared to shareholders -
From net investment income $(0.16) $(0.28)
From net realized gain on investments and foreign
currency transactions (1.39) --
------ ------
Total distributions declared to shareholders $(1.55) $(0.28)
------ ------
Net asset value - end of period $10.97 $10.39
====== ======
Total return 22.81%++ 20.15%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.82%+ 0.86%+
Net investment income 2.72%+ 2.78%+
Portfolio turnover 56% 153%
Net assets at end of period (000 omitted) $ 1,065 $ 725
* 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's expenses are calculated without reduction for fees paid indirectly.
(S) The investment adviser voluntarily waived a portion of its management fee for the period indicated. If the fee had been
incurred by the Fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.14 $ 0.27
Ratios (to average net assets):
Expenses## 0.91%+ 1.05%+
Net investment income 2.63%+ 2.59%+
</TABLE>
See notes to financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(1) Business and Organization
MFS Utilities 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.
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. 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.
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.
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. Some securities may be
purchased on a "when-issued" or "forward delivery" basis, which means that the
securities will be delivered to the Fund at a future date, usually beyond
customary settlement time.
Fees Paid Indirectly - The Fund's custody fee is 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. Capital
gains taxes have been provided on unrealized and realized gains from securities
transactions in countries where such a capital gains tax is applicable. Realized
and unrealized gain is reported net of any capital gains tax in the Statement of
Operations.
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 the value
of settled shares outstanding 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 0.375% of
average daily net assets and 6.25% of investment income. The investment adviser
has voluntarily agreed to waive a portion of its fee, which is reflected as a
preliminary reduction of expenses in the Statement of Operations.
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 $4,016 for the six months
ended April 30, 1998.
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$256,554 for the six months ended April 30, 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 $19,524 for the six months ended April 30,
1998. Payment of the 0.10% per annum Class A distribution fee will commence on
such date as the Trustees of the Trust may determine. Fees incurred under the
distribution plan during the six months ended April 30, 1998, were 0.25% 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 up to 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 $12,506 and $3,213 for Class B and Class C shares, respectively, for
the six months ended April 30, 1998. Fees incurred under the distribution plan
during the six months ended April 30, 1998, were 1.00% and 1.00% of average
daily net assets attributable to Class B and Class C shares on an annualized
basis, respectively.
Certain Class A shares and Class C shares are subject to a contingent deferred
sales charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the six months ended April 30,
1998, were $631, $94,450, and $7,487 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 $ 16,087,948 $ 12,720,653
------------ ------------
Investments (non-U.S. government securities) $314,330,148 $149,681,323
------------ ------------
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 $393,210,837
------------
Gross unrealized appreciation $ 51,796,965
Gross unrealized depreciation (3,593,708)
------------
Net unrealized appreciation $ 48,203,257
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
Class A Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 YEAR ENDED OCTOBER 31, 1997
----------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 8,750,744 $ 89,752,845 7,819,925 $ 77,226,921
Shares issued to
shareholders in
reinvestment of
distributions 1,280,047 12,342,349 732,324 6,609,825
Shares transferred to Class I -- -- (120,449) (1,071,996)
Shares reacquired (4,095,360) (41,869,618) (6,378,092) (62,953,332)
---------- -------------- --------- -------------
Net increase 5,935,431 $ 60,225,576 2,053,735 $ 19,811,418
========== ============== ========= =============
Class B Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 YEAR ENDED OCTOBER 31, 1997
----------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 10,810,170 $ 111,283,027 4,757,161 $ 45,918,763
Shares issued to
shareholders in
reinvestment of
distributions 1,211,571 11,637,493 572,483 5,137,051
Shares reacquired (1,077,139) (11,081,866) (1,935,800) (18,320,311)
---------- -------------- --------- -------------
Net increase 10,944,602 $ 111,838,654 3,393,844 $ 32,735,503
========== ============== ========= =============
Class C Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 YEAR ENDED OCTOBER 31, 1997
----------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,083,379 $ 31,736,414 1,398,533 $ 13,601,081
Shares issued to
shareholders in
reinvestment of
distributions 258,584 2,487,978 97,304 875,586
Shares reacquired (292,606) (3,056,216) (202,885) (1,938,852)
---------- -------------- --------- -------------
Net increase 3,049,357 $ 31,168,176 1,292,952 $ 12,537,815
========== ============== ========= =============
Class I Shares
<CAPTION>
SIX MONTHS ENDED APRIL 30, 1998 PERIOD ENDED OCTOBER 31, 1997*
----------------------------------- ------------------------------------
SHARES AMOUNT SHARES AMOUNT
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 18,072 $ 192,215 12,797 $ 121,518
Shares transferred from
Class A -- -- 120,449 1,071,996
Shares issued to
shareholders in
reinvestment of
distributions 13,288 128,207 2,421 23,241
Shares reacquired (3,983) (43,953) (65,881) (624,214)
---------- -------------- --------- -------------
Net increase 27,377 $ 276,469 69,786 $ 592,541
========== ============== ========= =============
*For the period from the inception of Class I, January 2, 1997, through October 31, 1997.
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $805 million unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made to temporarily finance the repurchase of Fund shares.
Interest is charged to each fund, based on its borrowings, at a rate equal to
the bank's base rate. In addition, a commitment fee, based on the average daily
unused portion of the line of credit, is allocated among the participating funds
at the end of each quarter. The commitment fee allocated to the Fund for the six
months ended April 30, 1998, was $45.
(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 forward foreign currency exchange 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.
Forward Foreign Currency Exchange Contracts
Forward foreign currency purchases and sales under master netting agreements
amounted to a net payable of $20,074 with Merrill Lynch at April 30, 1998.
At April 30, 1998, the Fund had sufficient cash and/or securities to cover any
commitments under these contracts.
<PAGE>
<TABLE>
MFS(R) Utilities Fund
<S> <C>
Trustees Secretary
Stephen E. Cavan*
Richard B. Bailey* - Private Investor;
Former Chairman and Director (until 1991), Assistant Secretary
MFS Investment Management James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor Custodian
State Street Bank and Trust Company
Lawrence H. Cohn, M.D. - Chief of Cardiac Surgery,
Brigham and Women's Hospital; Professor of Surgery, Investor Information
Harvard Medical School For MFS stock and bond market outlooks,
call toll free: 1-800-637-4458 anytime from
The Hon. Sir J. David Gibbons, KBE - Chief a touch-tone telephone.
Executive Officer, Edmund Gibbons Ltd.
For information on MFS mutual funds, call your
Abby M. O'Neill - Private Investor financial adviser or, for an information kit, call
toll free: 1-800-637-2929 any business day from
Walter E. Robb, III - President and Treasurer, 9 a.m. to 5 p.m. Eastern time (or leave a message
Benchmark Advisors, Inc. (corporate financial anytime).
consultants); President, Benchmark Consulting
Group, Inc. (office services) Investor Service
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive Vice President, P.O. Box 2281
Director, and Secretary, MFS Investment Management Boston, MA 02107-9906
Jeffrey L. Shames* - Chairman, Chief Executive For general information, call toll free:
Officer, and Director, MFS Investment Management 1-800-225-2606 any business day from
8 a.m. to 8 p.m. Eastern time.
J. Dale Sherratt - President, Insight Resources,
Inc. (acquisition planning specialists) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from
Ward Smith - Former Chairman (until 1994), NACCO 9 a.m. to 5 p.m. Eastern time. (To use this service,
Industries (holding company) your phone must be equipped with a
Telecommunications Device for the Deaf.) For share
Investment Adviser prices, account balances, and exchanges, call toll
Massachusetts Financial Services Company free: 1-800-MFS-TALK (1-800-637-8255) anytime from
500 Boylston Street a touch-tone telephone.
Boston, MA 02116-3741
World Wide Web
Distributor www.mfs.com
MFS Fund Distributors, Inc.
500 Boylston Street For the fourth year in a row,
Boston, MA 02116-3741 MFS earned a #1 ranking in the
[Dalbar Logo] DALBAR, Inc. Broker/Dealer
Portfolio Manager Survey, Main Office Operations
Maura A. Shaughnessy* Service Quality Category. The
firm achieved a 3.42 overall score on a scale of 1
Treasurer to 4 in the 1997 survey. A total of 111 firms
W. Thomas London* responded, offering input on the quality of service
they received from 29 mutual fund companies
Assistant Treasurers nationwide. The survey contained questions about
Mark E. Bradley* service quality in 11 categories, including
Ellen Moynihan* "knowledge of operations contact," "keeping you
James O. Yost* informed," and "ease of doing business" with the
firm.
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
-----------------
MFS(R) UTILITIES FUND BULK RATE
U.S. POSTAGE
PAID
[Logo] MFS
INVESTMENT MANAGEMENT -----------------
We invented the mutual fund(SM)
500 Boylston Street
Boston, MA 02116-3741
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(C)1998 MFS Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MUF-3 6/98 42M 35/235/335/835
