<PAGE>
[Logo] M F S (R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) GLOBAL TOTAL
RETURN FUND
ANNUAL REPORT o OCTOBER 31, 1999
<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 .............................................. 34
MFS' Year 2000 Readiness Disclosure ....................................... 36
Trustees and Officers ..................................................... 37
MFS ORIGINAL RESEARCH(R)
MFS ORIGINAL RESEARCH(R)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
The current investment and economic environment bears little resemblance to
last year's. One year ago, global economies were floundering, and the crisis
in Asia threatened an already weak U.S. economy. Corporate earnings were flat,
and economists used the word "deflation" for the first time in recent memory.
Entering 1999, expectations for corporate earnings growth were lowered
dramatically. In an attempt to foster U.S. growth, the Federal Reserve Board
(the Fed) lowered interest rates.
As a result, this year the U.S. economy is booming and unemployment is low.
Many corporations are focused on improving their profitability, and investors
have been rewarded with positive surprises across a variety of industries. Our
analysts predict that corporate earnings growth for 1999
will average 12% - 15%.
Global economies also are showing signs of strength, and the Asian crisis
has passed. In fact, Japan's economic woes seem to have reached bottom.
Although the process is in its infancy, some Japanese corporations not only
are talking about restructuring and cost cutting, they also are beginning to
take action, looking within to become more competitive and improve returns on
equity. While still lagging the United States, Europe is beginning to
restructure and consolidate. These signs of international growth have
contributed to concerns that the U.S. economy now may be too strong.
In June, and again in August, the Fed raised rates by one-quarter of a
percentage point to help ward off the specter of inflation.
After an unprecedented four years of 20% annual returns in the U.S. equity
market, we fear that many investors have become accustomed to high returns and
have lost sight of the risks they take on to achieve them. In the current
market many investors are taking on additional risk - whether through day
trading or investing in speculative Internet stocks.
Risks are as much a part of the market today as they were one year ago.
We believe the market remains overvalued, with stocks priced 30% above our
analysts' earnings projections. And market narrowness has not abated; the top
25 stocks in the Standard & Poor's 500 Composite Index, a popular, unmanaged
index of common stock total return performance, are still the most overvalued.
Such extreme overvaluation makes the stock market sensitive to interest-rate
news and any negative earnings surprises. The Year 2000 (Y2K) computer problem
is another factor causing investor concern. While we believe corporate America
is well prepared to address any Y2K situations that may arise at year-end, no
one can predict investor behavior. In our opinion, it is investor behavior
that has the greatest potential to create market volatility.
We believe the best way to address Y2K and other market risks is
through our continuing commitment to MFS Original Research(R) and our
fundamental investment tenet of long-term investing. Whether markets
are up or down, MFS analysts focus on analyzing industries and visiting
companies to determine the long-term winners and the prices that will make
them attractive opportunities. Because all companies will not benefit equally
from the improving international environment, bottom-up research remains
critical to identifying those that we believe are successfully restructuring,
consolidating, and gaining market share.
Changes in market and economic conditions can't be predicted but should always
be expected. The changes we have seen over the past year only reinforce our
commitment to long-term planning and investing. We believe volatility helps to
create opportunity for long-term investors to buy solid companies at
attractive prices. For this reason, we are continuing to expand our domestic
and international capabilities to ensure that MFS has primary, in-house
research on companies worldwide. We believe that we have built the right
investment team, backed by MFS Original Research, to take advantage of those
opportunities for our shareholders.
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 15, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Frederick J. Simmons]
Frederick J. Simmons
For the 12 months ended October 31, 1999, Class A shares of the Fund provided
a total return of 4.96%, Class B shares 4.22%, Class C shares 4.23%, and Class
I shares 5.40%. These returns include the reinvestment of any distributions
but exclude the effects of any sales charges.
Over the same period, the Fund's returns compare to a 16.51% return for the
average global flexible fund portfolio tracked by Lipper Analytical Services,
Inc., an independent firm that reports mutual fund performance. The Fund's
returns also compare to returns of 18.51% for the Lipper Global Flexible Fund
Index, 25.67% for the Standard & Poor's 500 Composite Index (the S&P 500), and
13.16% for 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). The S&P 500 is a popular, unmanaged index of
common stock total return performance. The Lipper mutual fund indices are
unmanaged, net-asset-value- weighted indices of the largest qualifying mutual
funds within their respective investment objectives, adjusted for the
reinvestment of capital gain distributions and income dividends. The MSCI World
Index is a broad, unmanaged index of global equities. 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.
Q. WHY DID THE FUND UNDERPERFORM DURING ITS FISCAL YEAR?
A. Mainly because there was a convergence of events in the first quarter of
1999. First, a preponderance of the Fund's holdings were overseas
investments initiated in local currencies. With the U.S. dollar exhibiting
particular strength, the Fund's gains in overseas stocks were reduced when
translated back into dollars, and any declines in positions were magnified.
We don't use currency hedges in the equity portion of the portfolio to try
to offset these factors because hedging comes at costs that eat into the
Fund's returns, and we believe it's very difficult to predict short-term
currency movements. Second, earlier in 1999, the Fund held significantly
fewer investments in technology than those found in the indices or in our
competitors' portfolios. Technology stocks provided strong returns, but we
believed they were too highly valued. Historically, the Fund has held an
underweighted position in technology because of that sector's volatility.
For most of the period, we opted instead to hold an overweighted position in
consumer nondurables, such as food companies, because of our concerns
related to profit growth and a potential economic slowdown. Unfortunately,
this sector lagged as economies kept chugging along and investors were lured
by the sustained robust growth offered by the technology sector.
In the first quarter of 1999, the Fund's returns also were hurt by an
underweighted position in Japan relative to the indices and its competitors.
This underweighting has helped the Fund in the past but hurt it early in
1999 as Japanese stocks posted a strong recovery. Finally, emerging markets
staged a rally in the first few months of 1999 as those economies rebounded.
Our conservative approach precluded us from looking for investments outside
of developed countries.
Q. WHAT MOVES HAVE YOU MADE TO TRY TO IMPROVE PERFORMANCE?
A. During the second half of the period, we increased our weightings in
technology and in Japan. It's important for shareholders to note that these
moves were strictly the byproduct of bottom-up, company-by-company research
and were not based on decisions regarding technology as a sector or as a bet
on Japan's economy. That being said, we have been very carefully increasing
the Fund's technology holdings to about 11% at the end of the period, and
many of these opportunities were found in Japan. For example, we added
investments in large Japanese technology conglomerates such as Hitachi,
Fujitsu, and Toshiba. These companies were appealing because their
managements have taken steps to improve their profits regardless of the
direction of the Japanese economy. They have adopted Western concepts of
efficiency, looked to restructure by reducing head counts, and eliminated
cross-ownership of shares, for example. Other new investments in technology
included Rohm, a Japanese electronic-devices company, and Canon. In the
United States, we added Hewlett-Packard.
Q. FINANCIAL SERVICES STOCKS REPRESENT THE FUND'S LARGEST SECTOR ALLOCATION.
WHAT WAS THE STORY THERE?
A. First, let's remember that sector weightings are strictly a byproduct of
individual company research. Second, while the Fund's absolute weighting in
finance was large, that position was underweighted relative to the benchmark
made up of the MSCI World Index and the Morgan Index. I'd divide the sector
into three main areas: banking, insurance, and specialty companies. Banks
serve as a good way to help benefit from a particular country's economy. On
the insurance front, we've looked to invest in companies that are trying to
take advantage of the strong growth in retirement planning. An example would
be Skandia Forsakrings, the large Swedish insurance provider. Specialty
companies offer a unique array of products, and our investments included
American Express, Associates First Capital, and the Federal Home Loan
Mortgage Corporation (Freddie Mac).
Q. WHICH STOCKS PERFORMED WELL FOR THE FUND?
A. Some of the Fund's larger holdings were among its best performers, including
Japanese pharmaceutical company Takeda Chemical and German
telecommunications company Mannesmann. Utilities and telecommunications
stocks comprised about 14% of the Fund's assets at the end of the period.
That included two electric utilities, but for the most part revolved around
investments in the dynamic telecommunications industry. Tyco International,
a U.S. conglomerate, also performed well in spite of concerns related to the
company's accounting practices.
Q. CAN YOU PLEASE REVIEW HOW THE FUND'S REGIONAL ALLOCATIONS LOOKED AT THE
END OF THE PERIOD?
A. I'd separate the Fund's allocations into three main categories: the United
States, Europe, and Japan. We've significantly underweighted the United
States for some time now because valuations have expanded to the point where
that market now makes up about 50% of the total global market
capitalization. Before turning our focus back to the United States, we'd
like to see that situation come back into better balance, which could be
achieved by a strengthening in Japan. Japan's government has done nearly
everything it can to shake its economy out of the doldrums, with mixed
results at best.
Europe offered significant appeal because many companies enjoyed similar
growth rates to their American counterparts at significantly lower
valuations. In Europe, we're presently overweighted in France. This
allocation presents a classic example of our bottom-up research. Our
purchase of a significant number of French companies was not a reflection of
our feelings about the French economy or market. Rather, we selected these
investments based on the prospects of each company.
Investments in France included Television Francaise, insurance company Axa,
retailers Castorama-Dubois and Pinault-Printemps-Redoute, and beverage
company Pernod-Ricard.
Q. WHAT WAS THE STRUCTURE OF THE FUND'S BOND POSITION?
A. Our fixed-income holdings were focused on bonds issued by major governments
in Europe, the United States, and Japan. During the period, we assumed an
overall defensive posture by reducing the Fund's sensitivity to interest
rates. That was particularly the case in the United States, where we were
concerned about inflation. In Europe it was a bit different. There, we
thought the markets had priced in more inflation than we thought would
occur, so we were not as defensive regarding the interest-rate sensitivity
of our European fixed-income holdings. We favored Greece, the United
Kingdom, and Germany.
Q. WHAT IS YOUR OUTLOOK?
A. We are stock pickers, not economists, so our approach should stay the same
regardless of the economic backdrop. That being said, we feel as if
inflation will not be a problem. Interest rates may trend a bit higher, but
they shouldn't present a particularly onerous long-term obstacle. We think
that Japan looks poised to improve, Asia is back on its feet, the United
States is adding to its record-long economic and market expansion, and
Europe is doing fine. For our part, we will continue to look for companies
with solid management teams, paying particularly close attention to how
extended valuations become in the months ahead.
/s/ Frederick J. Simmons
Frederick J. Simmons
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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FREDERICK J. SIMMONS IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENTL(R) AND PORTFOLIO MANAGER OF MFSL(R) GLOBAL TOTAL RETURN FUND,
MFS(R) INTERNATIONAL GROWTH AND INCOME FUND, AND THE GLOBAL 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 IN 1974, VICE
PRESIDENT IN 1975, AND SENIOR VICE PRESIDENT IN 1983. 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.
ALL EQUITY PORTFOLIO MANAGERS BEGAN THEIR CAREERS AT MFS INVESTMENT
MANAGEMENT(R) AS RESEARCH ANALYSTS. OUR PORTFOLIO MANAGERS ARE SUPPORTED
BY AN INVESTMENT STAFF OF OVER 100 PROFESSIONALS UTILIZING MFS ORIGINAL
RESEARCH(R), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
This report is prepared for the general information of shareholders. It is
authorized for distribution to prospective investors only when preceded or
accompanied by a current prospectus. A prospectus containing more information,
including the exchange privilege and all charges and expenses, for any other
MFS product is available from your financial consultant, 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 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: $371.6 MILLION NET ASSETS AS OF OCTOBER 31, 1999
PERFORMANCE SUMMARY
The following information illustrates the historical performance of the Fund's
original share class in comparison to various market indicators. Performance
results include the deduction of the maximum applicable sales charge and
reflect the percentage change in net asset value, including reinvestment of
dividends. Benchmark comparisons are unmanaged and do not reflect any fees or
expenses. The performance of other share classes will be greater than or less
than the line shown. (See Notes to Performance Summary.) It is not possible to
invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
(For the period from the commencement of the Fund's investment operations,
September 4, 1990, through October 31, 1999. Index information is from
September 1, 1990.)
60% MSCI World
Index/40%
MFS Global Lipper Global S&P 500 J.P. Morgan
Total Return Flexible Composite Global Government
-- Class A Fund Index Index Bond Index
------------- ------------- -------- -----------------
10/90 $ 9,581 $10,000 $10,000 $10,000
10/91 11,012 11,277 12,646 11,497
10/93 14,662 14,122 15,982 14,076
10/95 16,887 15,711 20,990 16,656
10/97 22,677 20,856 34,411 20,847
10/99 27,203 25,476 52,746 27,109
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH OCTOBER 31, 1999
<TABLE>
<CAPTION>
CLASS A
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 4.96% +38.80% +78.22% +185.59%
- ----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales
Charge + 4.96% +11.55% +12.25% + 12.14%
- ----------------------------------------------------------------------------------------------------
Average Annual Total Return Including Sales
Charge - 0.03% + 9.75% +11.16% + 11.55%
- ----------------------------------------------------------------------------------------------------
<CAPTION>
CLASS B
1 Year 3 Years 5 Years Life*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 4.22% +36.11% +72.21% +174.03%
- ----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales
Charge + 4.22% +10.82% +11.48% + 11.64%
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Average Annual Total Return Including Sales
Charge + 0.39% +10.00% +11.22% + 11.64%
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<CAPTION>
CLASS C
1 Year 3 Years 5 Years Life*
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 4.23% +36.04% +72.46% +174.96%
- ----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales
Charge + 4.23% +10.80% +11.52% + 11.68%
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Average Annual Total Return Including Sales
Charge + 3.28% +10.80% +11.52% + 11.68%
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<CAPTION>
CLASS I
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge + 5.40% +40.29% +80.13% +188.65%
- ----------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales
Charge + 5.40% +11.95% +12.49% + 12.27%
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<CAPTION>
COMPARATIVE INDICES
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Average global flexible fund(+)+ +16.51% +11.51% +11.69% + 10.22%
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Lipper Global Flexible Index Fund(+)+ +18.51% +12.23% +12.09% + 10.74%
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Standard & Poor's 500 Composite Index(+)# +25.67% +26.52% +26.02% + 19.89%
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60% MSCI World Index/40% J.P. Morgan
Global Government Bond Index(+)# +13.16% +13.20% +12.73% + 11.49%
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* For the period from the commencement of the Fund's investment operations, September 4, 1990,
through October 31, 1999. Index information is from September 1, 1990.
(+) Average annual rates of return.
+ Source: Lipper Analytical Services, Inc.
# Source: Standard & Poor's Micropal, Inc.
</TABLE>
<PAGE>
NOTES TO PERFORMANCE SUMMARY
Class A Share Performance Including Sales Charge takes into account the
deduction of the maximum 4.75% sales charge. Class B Share Performance Including
Sales Charge takes into account the deduction of the applicable contingent
deferred sales charge (CDSC), which declines over six years from 4% to 0%. Class
C Share Performance Including Sales Charge takes into account the deduction of
the 1% CDSC applicable to Class C shares redeemed within 12 months. Class I
shares have no sales charge and are only available to certain institutional
investors.
Class B, C, and I share performance include the performance of the Fund's
Class A shares for periods prior to their inception (blended performance).
Class B and C blended performance has been adjusted to take into account the
CDSC applicable to Class B and C shares rather than the initial sales charge
(load) applicable to Class A shares. Class I share blended performance has
been adjusted to account for the fact that Class I shares have no sales
charge. These blended performance figures have not been adjusted to take into
account differences in class-specific operating expenses. Because operating
expenses of Class B and C shares are higher than those of Class A, the blended
Class B and C share performance is higher than it would have been had Class B
and C shares been offered for the entire period. Conversely, because operating
expenses of Class I shares are lower than those of Class A, the blended Class
I share performance is lower than it would have been had Class I shares been
offered for the entire period.
All performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and
waivers may be rescinded at any time. See the prospectus for details. All
results are historical and assume the reinvestment of dividends and
capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE IS NO
GUARANTEE OF FUTURE RESULTS.
Investments in foreign securities may provide superior returns but also
involve greater risk than U.S. investments. Investments in foreign and
emerging market securities may be favorably or unfavorably affected by changes
in interest rates and currency exchange rates, market conditions,
and the economic and political conditions of the countries where investments
are made. These risks may increase share price volatility. See the prospectus
for details.
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 1999
FIVE LARGEST STOCK SECTORS
FINANCIAL SERVICES 15.1%
UTILITIES & COMMUNICATIONS 14.4%
TECHNOLOGY 11.1%
CONSUMER STAPLES 11.0%
HEALTH CARE 10.0%
TOP 10 STOCK HOLDINGS
MANNESMANN AG 3.2% BP AMOCO PLC 2.3%
German industrial and British oil and petrochemical company
telecommunications company
CANADIAN NATIONAL RAILWAY CO. 2.1%
TAKEDA CHEMICAL INDUSTRIES CO. 3.1% Canadian railway/transportation company
Japanese pharmaceutical company
SEITA 2.1%
BRISTOL-MYERS SQUIBB CO. 2.6% French tobacco company
U.S. pharmaceutical products company
TYCO INTERNATIONAL, LTD. 2.1%
PINAULT-PRINTEMPS-REDOUTE S.A. 2.6% U.S. security systems, packaging, and
French department store chain electronic equipment conglomerate
TELEVISION FRANCAISE 2.6% WOLTERS KLUWER N.V. 2.1%
French television company Dutch publishing company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
PORTFOLIO OF INVESTMENTS -- October 31, 1999
<TABLE>
<CAPTION>
Stocks - 57.1%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 15.5%
Advertising - 0.3%
Young & Rubicam, Inc. 24,900 $ 1,139,175
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Auto Parts - 0.1%
Delphi Automotive Systems Corp. 30,900 $ 507,919
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Banks and Credit Companies - 0.4%
Wells Fargo Co. 29,500 $ 1,412,312
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Business Machines - 1.3%
Hewlett-Packard Co. 30,900 $ 2,288,531
International Business Machines Corp. 20,580 2,024,558
Xerox Corp. 22,100 618,800
------------
$ 4,931,889
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Construction Services - 0.3%
Martin Marietta Materials, Inc. 32,386 $ 1,261,030
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Consumer Goods and Services - 2.0%
Galileo International, Inc. 25,600 $ 769,600
Newell Rubbermaid, Inc. 32,700 1,132,238
Philip Morris Cos., Inc. 47,350 1,192,628
Tyco International, Ltd. 109,644 4,378,907
------------
$ 7,473,373
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Defense Electronics - 0.1%
Raytheon Co., "A" 10,800 $ 296,325
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Electrical Equipment - 1.3%
Cooper Industries, Inc. 31,700 $ 1,365,081
General Electric Co. 24,790 3,360,594
------------
$ 4,725,675
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Financial Institutions - 1.3%
American Express Co. 8,570 $ 1,319,780
Associates First Capital Corp., "A" 59,700 2,179,050
Federal Home Loan Mortgage Corp. 22,060 1,192,619
Goldman Sachs Group, Inc. 2,200 156,200
------------
$ 4,847,649
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Food and Beverage Products - 0.6%
Anheuser-Busch Cos., Inc. 33,500 $ 2,405,719
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Forest and Paper Products - 0.5%
Jefferson Smurfit Corp. 678,800 $ 1,768,827
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Insurance - 2.2%
Allstate Corp. 65,050 $ 1,870,187
American International Group, Inc. 35,875 3,692,883
ReliaStar Financial Corp. 62,640 2,689,605
------------
$ 8,252,675
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Medical and Health Products - 1.8%
Bristol-Myers Squibb Co. 70,560 $ 5,419,890
Pharmacia & Upjohn, Inc. 24,100 1,299,894
------------
$ 6,719,784
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Oils - 0.4%
Exxon Corp. 17,490 $ 1,295,353
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Printing and Publishing - 0.7%
Gannett Co., Inc. 33,030 $ 2,547,439
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Supermarkets - 0.5%
Albertsons, Inc. 54,150 $ 1,966,322
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Telecommunications - 1.0%
Bell Atlantic Corp. 46,700 $ 3,032,581
Partner Communication Co. Ltd., ADR* 31,825 501,244
------------
$ 3,533,825
- --------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.7%
Sierra Pacific Resources 118,051 $ 2,656,147
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Total U.S. Stocks $ 57,741,438
- --------------------------------------------------------------------------------------------------------
Foreign Stocks - 41.6%
Australia - 1.4%
Australia & New Zealand Banking Group Ltd. (Banks and
Credit Cos.)* 179,667 $ 1,184,793
QBE Insurance Group Ltd. (Insurance) 961,464 4,012,824
------------
$ 5,197,617
- --------------------------------------------------------------------------------------------------------
Canada - 1.7%
BCE, Inc. (Telecommunications) 32,400 $ 1,952,100
Canadian National Railway Co. (Railroads) 147,360 4,494,480
------------
$ 6,446,580
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Finland - 0.3%
Helsingin Puhelin Oyj (Telecommunications) 27,320 $ 1,297,024
- --------------------------------------------------------------------------------------------------------
France - 6.9%
Axa (Insurance) 10,000 $ 1,410,062
Castorama-Dubois Investisse (Stores) 10,600 3,174,353
Pernod-Ricard (Food and Beverage Products) 20,200 1,363,628
Pinault-Printemps-Redoute S.A. (Retail) 28,800 5,490,346
Rhone-Poulenc S.A. (Pharmaceuticals) 23,100 1,292,210
Sanofi-Synthelabo S.A. (Medical and Health Products)* 31,120 1,372,717
SEITA (Tobacco) 79,600 4,436,070
Television Francaise (Broadcasting) 17,610 5,518,043
Total Fina S.A., ADR (Oils) 21,800 1,453,787
------------
$ 25,511,216
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Germany - 3.3%
GfK AG (Business Services)* 2,960 $ 83,569
Henkel KGaA, Preferred (Chemicals) 42,520 2,883,782
HypoVereinsbank (Banks and Credit Cos.) 19,600 1,286,027
Mannesmann AG (Telecommunications) 42,880 6,740,706
Porsche AG, Preferred (Automotive) 400 1,089,355
------------
$ 12,083,439
- --------------------------------------------------------------------------------------------------------
Greece - 0.4%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 66,824 $ 1,416,620
- --------------------------------------------------------------------------------------------------------
Hong Kong - 0.3%
China Telecom (Hong Kong) Ltd. (Telecommunications) 372,000 $ 1,271,447
- --------------------------------------------------------------------------------------------------------
Italy - 1.0%
San Paolo - Imi S.p.A (Banks and Credit Cos.) 155,244 $ 2,011,106
Telecom Italia Mobile S.p.A., Saving Shares (Telecommunications) 371,700 1,289,781
Unione Immobiliare S.p.A. (Real Estate) 711,350 365,764
------------
$ 3,666,651
- --------------------------------------------------------------------------------------------------------
Japan - 11.1%
Canon, Inc. (Special Products and Services) 143,000 $ 4,047,687
East Japan Railway Co. (Railroads) 215 1,318,221
Fuji Heavy Industries Ltd. (Automotive) 140,000 1,190,175
Fujitsu Ltd. (Computer Hardware - Systems) 83,000 2,500,672
Hitachi Ltd. (Electronics) 326,000 3,525,254
Mitsubishi Motors Corp. (Automotive) 240,000 1,245,826
NTT Mobile Communications Network, Inc. (Telecommunications) 115 3,056,515
Olympus Optical Co. (Optical Goods) 142,000 1,921,128
Orix Corp. (Financial Services) 7,000 940,318
Rohm Co. (Electronics) 19,000 4,265,976
Secom Co. (Security Services) 17,000 1,823,642
Secom Co. - New (Security Services)* 17,000 1,810,593
Takeda Chemical Industries Co. (Pharmaceuticals) 113,000 6,494,627
Terumo Corp. (Medical Supplies) 67,000 2,037,901
Tokio Marine & Fire Insurance Co. Ltd. (Insurance) 206,000 2,698,043
Toshiba Corp. (Electronics) 160,000 1,007,100
Uni-Charm Corp. (Paper Products) 9,200 537,594
Ushio, Inc. (Electronics) 53,000 652,456
------------
$ 41,073,728
- --------------------------------------------------------------------------------------------------------
Mexico - 0.4%
Fomento Economico Mexicano S.A. de C.V., ADR (Food
and Beverage Products) 23,800 $ 780,938
Panamerican Beverage, Inc. "A" (Food and Beverage Products) 32,900 528,456
------------
$ 1,309,394
- --------------------------------------------------------------------------------------------------------
Netherlands - 4.1%
Akzo Nobel N.V. (Chemicals) 65,980 $ 2,840,335
Hunter Douglas N.V., ADR (Consumer Goods and Services)* 63,000 1,705,796
ING Groep N.V. (Financial Services) 21,949 1,294,292
Koninklijke Ahold N.V., ADR (Food/Retail) 34,696 1,073,408
Royal Dutch Petroleum Co., ADR (Oils) 27,410 1,642,887
STMicroelectronics Co. (Electronics) 15,775 1,385,049
Unilever N.V. (Food)* 15,253 1,017,184
Wolters Kluwer N.V. (Publishing) 132,752 4,434,736
------------
$ 15,393,687
- --------------------------------------------------------------------------------------------------------
South Korea - 0.1%
Korea Electric Power Corp. (Utilities - Electric) 17,350 $ 507,911
- --------------------------------------------------------------------------------------------------------
Spain - 1.8%
Banco Popular Espanol S.A. (Banks and Credit Cos.) 17,500 $ 1,177,680
Repsol-YPF, S.A. (Oils) 63,200 1,302,514
Telefonica Publicidad e Informacion S.A. (Telephone Services)* 12,700 276,830
Telefonica S.A. (Telecommunications) 240,390 3,953,326
------------
$ 6,710,350
- --------------------------------------------------------------------------------------------------------
Sweden - 1.0%
A-Com AB (Communications)* 16,200 $ 187,249
Saab AB, "B" (Aerospace) 283,700 2,209,125
Skandia Forsakrings AB (Insurance) 55,500 1,235,734
------------
$ 3,632,108
- --------------------------------------------------------------------------------------------------------
Switzerland - 1.3%
Clariant AG (Chemicals) 2,330 $ 1,019,891
Nestle S.A. (Food and Beverage Products) 1,890 3,646,542
------------
$ 4,666,433
- --------------------------------------------------------------------------------------------------------
United Kingdom - 6.5%
AstraZeneca Group PLC (Medical and Health Products) 29,863 $ 1,349,812
Avis Europe PLC (Auto Rental)* 530,020 2,281,139
Boots Co. PLC (Retail) 108,000 1,107,935
BP Amoco PLC, ADR (Oils) 85,754 4,952,294
British Aerospace PLC (Aerospace)* 180,739 1,068,840
British Telecommunications PLC (Telecommunications) 142,365 2,581,847
Cable & Wireless Communications PLC (Telecommunications) 112,400 1,178,000
Compass Group (Restaurants and Food Service) 401,100 4,282,764
Diageo PLC (Food and Beverage Products) 235,400 2,393,620
Rentokil Initial PLC (Environmental Services) 167,400 560,288
Reuters Group PLC (Business Services) 147,150 1,353,650
Sainsbury (J.) PLC (Retail) 180,700 1,084,935
------------
$ 24,195,124
- --------------------------------------------------------------------------------------------------------
Total Foreign Stocks $154,379,329
- --------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $171,258,550) $212,120,767
- --------------------------------------------------------------------------------------------------------
Bonds - 33.8%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- --------------------------------------------------------------------------------------------------------
U.S. Bonds - 17.6%
U.S. Federal Agencies - 0.5%
Federal National Mortgage Association, 1.75s, 2008 $ 190,000 $ 1,831,270
- --------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 17.1%
U.S. Treasury Notes, 6s, 2004 $ 4,875 $ 4,886,408
U.S. Treasury Notes, 7.875s, 2004 5,625 6,060,938
U.S. Treasury Notes, 5.875s, 2005 35,120 34,741,406
U.S. Treasury Notes, 5.625s, 2008 15,350 14,810,294
U.S. Treasury Notes, 3.875s, 2009 3,049 2,992,204
------------
$ 63,491,250
- --------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 65,322,520
- --------------------------------------------------------------------------------------------------------
Foreign Bonds - 16.2%
Australia - 2.5%
Commonwealth of Australia, 7.5s, 2005 AUD 13,721 $ 9,184,544
- --------------------------------------------------------------------------------------------------------
Canada - 0.8%
Government of Canada, 5s, 2004 CAD 4,544 $ 2,965,304
- --------------------------------------------------------------------------------------------------------
Denmark - 1.6%
Kingdom of Denmark, 7s, 2007 DKK 37,932 $ 5,886,537
- --------------------------------------------------------------------------------------------------------
France - 0.8%
Republic of France, 4s, 2009 EUR 3,167 $ 3,008,747
- --------------------------------------------------------------------------------------------------------
Germany - 4.1%
Federal Republic of Germany, 3.75s, 2009 EUR 6,936 $ 6,582,119
Federal Republic of Germany, 4.5s, 2009 8,483 8,505,104
------------
$ 15,087,223
- --------------------------------------------------------------------------------------------------------
Greece - 1.1%
Hellenic Republic, 8.9s, 2003 GRD 648,000 $ 2,143,199
Hellenic Republic, 8.7s, 2005 413,000 1,396,898
Hellenic Republic, 8.6s, 2008 193,000 671,245
------------
$ 4,211,342
- --------------------------------------------------------------------------------------------------------
Italy - 1.1%
Republic of Italy, 6.75s, 2007 EUR 3,579 $ 4,090,774
- --------------------------------------------------------------------------------------------------------
Sweden - 0.8%
Kingdom of Sweden, 6s, 2005 SEK 24,600 $ 3,063,701
- --------------------------------------------------------------------------------------------------------
United Kingdom - 3.4%
United Kingdom Treasury, 6.5s, 2003 GBP 5,000 $ 8,320,274
United Kingdom Treasury, 6.75s, 2004 2,624 4,435,447
------------
$ 12,755,721
- --------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 60,253,893
- --------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $131,016,243) $125,576,413
- --------------------------------------------------------------------------------------------------------
Short-Term Obligations - 7.2%
- --------------------------------------------------------------------------------------------------------
Federal Home Loan Bank Corp., due 11/01/99,
at Amortized Cost $ 27,000 $ 27,000,000
- --------------------------------------------------------------------------------------------------------
Other Short-Term Obligations - 0.3%
- --------------------------------------------------------------------------------------------------------
SHARES
- --------------------------------------------------------------------------------------------------------
Navigator Securities Lending Prime Portfolio
(Identified Cost, $1,207,061) 1,207,061 $ 1,207,061
- --------------------------------------------------------------------------------------------------------
Call Options Purchased - 0.1%
- --------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
OF CONTRACTS
ISSUER/EXPIRATION MONTH/STRIKE PRICE (000 OMITTED)
- --------------------------------------------------------------------------------------------------------
Japanese Government Bonds/February/130.2 JPY 490,000 $ 102,024
Japanese Government Bonds/February/128 430,000 151,833
- --------------------------------------------------------------------------------------------------------
Total Call Options Purchased (Premiums Paid, $200,516) $ 253,857
- --------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $330,682,370) $366,158,098
- --------------------------------------------------------------------------------------------------------
Put Options Written
- --------------------------------------------------------------------------------------------------------
Japanese Government Bonds/February/130.2 JPY (490,000) $ (67,703)
Japanese Government Bonds/February/128 (430,000) (30,944)
------------
- --------------------------------------------------------------------------------------------------------
Total Put Options Written (Premiums Received, $200,516) $ (98,647)
- --------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - 1.5% 5,521,253
- --------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $371,580,704
- --------------------------------------------------------------------------------------------------------
* Non-income producing security.
Abbreviations have been used throughout this report to indicate amounts shown in
currencies other than the U.S. dollar. A list of abbreviations is shown below.
AUD = Australian Dollars GRD = Greek Drachma
CAD = Canadian Dollars JPY = Japanese Yen
DKK = Danish Kroner NZD = New Zealand Dollars
EUR = Euro SEK = Swedish Krona
GBP = British Pounds
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
OCTOBER 31, 1999
- -------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $330,682,370) $366,158,098
Cash 216,340
Net receivable for forward foreign currency exchange
contracts to purchase 26,110
Net receivable for forward foreign currency exchange
contracts to sell 214,817
Receivable for Fund shares sold 370,224
Receivable for investments sold 5,576,011
Interest and dividends receivable 3,803,313
Other assets 3,809
------------
Total assets $376,368,722
------------
Liabilities:
Payable for Fund shares reacquired 1,157,926
Payable for investments purchased 1,850,460
Collateral for securities loaned, at value 1,207,061
Net payable for forward foreign currency exchange
contracts subject to master netting agreements 183,614
Written options outstanding, at value (premiums received,
$200,516) 98,647
Payable to affiliates -
Management fee 23,026
Shareholder servicing agent fee 3,022
Distribution and service fee 20,167
Administrative fee 453
Accrued expenses and other liabilities 243,642
------------
Total liabilities $ 4,788,018
------------
Net assets $371,580,704
============
Net assets consist of:
Paid-in capital $308,147,274
Unrealized appreciation on investments and translation of
assets and liabilities in foreign currencies 35,624,967
Accumulated undistributed net realized gain on
investments and foreign currency transactions 27,154,402
Accumulated undistributed net investment income 654,061
------------
Total $371,580,704
============
Shares of beneficial interest outstanding 26,604,889
==========
Class A shares:
Net asset value per share
(net assets of $187,780,475/13,428,318 shares of
beneficial interest outstanding) $13.98
======
Offering price per share (100 / 95.25 of net asset value
per share) $14.68
======
Class B shares:
Net asset value and offering price per share
(net assets of $130,413,174/9,347,140 shares of
beneficial interest outstanding) $13.95
======
Class C shares:
Net asset value and offering price per share
(net assets of $51,799,603/3,716,201 shares of
beneficial interest outstanding) $13.94
======
Class I shares:
Net asset value, offering price, and redemption price per share
(net assets of $1,587,452/113,230 shares of beneficial
interest outstanding) $14.02
======
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, 1999
- -------------------------------------------------------------------------------
Net investment income:
Income -
Interest $ 8,368,667
Dividends 3,746,338
Foreign taxes withheld (313,766)
------------
Total investment income $ 11,801,239
------------
Expenses -
Management fee $ 2,970,395
Trustees' compensation 42,269
Shareholder servicing agent fee 384,766
Distribution and service fee (Class A) 656,742
Distribution and service fee (Class B) 1,286,756
Distribution and service fee (Class C) 484,733
Administrative fee 46,677
Custodian fee 273,152
Postage 51,979
Printing 45,200
Auditing fees 41,495
Legal fees 7,310
Miscellaneous 283,810
------------
Total expenses $ 6,575,284
Fees paid indirectly (34,564)
------------
Net expenses $ 6,540,720
------------
Net investment income $ 5,260,519
------------
Realized and unrealized gain (loss) on investments:
Realized gain (identified cost basis) -
Investment transactions $ 26,652,163
Written option transactions 357,583
Foreign currency transactions 3,448,176
------------
Net realized gain on investments and foreign
currency transactions $ 30,457,922
------------
Change in unrealized appreciation (depreciation) -
Investments $(17,401,757)
Written options 41,568
Translation of assets and liabilities in foreign currencies (2,562,111)
------------
Net unrealized loss on investments and foreign
currency translation $(19,922,300)
------------
Net realized and unrealized gain on investments and
foreign currency $ 10,535,622
------------
Increase in net assets from operations $ 15,796,141
============
See notes to financial statements.
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1999 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets:
From operations -
Net investment income $ 5,260,519 $ 5,060,276
Net realized gain on investments and foreign currency
transactions 30,457,922 23,364,047
Net unrealized gain (loss) on investments and foreign
currency translation (19,922,300) 9,640,634
------------ ------------
Increase in net assets from operations $ 15,796,141 $ 38,064,957
------------ ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (3,114,718) $ (2,035,201)
From net investment income (Class B) (1,553,313) (655,779)
From net investment income (Class C) (558,400) (177,479)
From net investment income (Class I) (34,089) (28,271)
From net realized gain on investments and foreign
currency transactions (Class A) (11,788,156) (10,168,017)
From net realized gain on investments and foreign
currency transactions (Class B) (7,739,436) (6,502,653)
From net realized gain on investments and foreign
currency transactions (Class C) (2,444,103) (1,566,438)
From net realized gain on investments and foreign
currency transactions (Class I) (120,309) (113,097)
In excess of net investment income (Class A) (1,421,757) --
In excess of net investment income (Class B) (709,031) --
In excess of net investment income (Class C) (254,890) --
In excess of net investment income (Class I) (15,560) --
------------ ------------
Total distributions declared to shareholders $(29,753,762) $(21,246,935)
------------ ------------
Net increase in net assets from Fund share transactions $ 64,579,969 $ 30,717,782
------------ ------------
Total increase in net assets $ 50,622,348 $ 47,535,804
Net assets:
At beginning of year 320,958,356 273,422,552
------------ ------------
At end of year (including accumulated undistributed net
investment income and distributions in excess of net
investment income of $654,061 and $281,666, respectively) $371,580,704 $320,958,356
============ ============
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS A
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each year):
Net asset value - beginning of year $14.59 $13.84 $12.73 $11.57 $10.58
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.25 $ 0.28 $ 0.31 $ 0.34 $ 0.33
Net realized and unrealized gain on
investments and foreign currency
transactions 0.45 1.57 1.61 1.46 0.79
------ ------ ------ ------ ------
Total from investment operations $ 0.70 $ 1.85 $ 1.92 $ 1.80 $ 1.12
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.24) $(0.18) $(0.21) $(0.63) $(0.08)
From net realized gain on investments
and foreign currency transactions (0.96) (0.92) (0.60) (0.01) (0.05)
In excess of net investment income (0.11) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.31) $(1.10) $(0.81) $(0.64) $(0.13)
------ ------ ------ ------ ------
Net asset value - end of year $13.98 $14.59 $13.84 $12.73 $11.57
====== ====== ====== ====== ======
Total return(+) 4.96% 14.29% 15.71% 16.06% 10.63%
Ratios (to average net assets)/Supplemental data:
Expenses## 1.48% 1.51% 1.59% 1.63% 1.77%
Net investment income 1.74% 1.99% 2.35% 2.79% 3.06%
Portfolio turnover 109% 183% 143% 167% 160%
Net assets at end of year (000 Omitted) $187,780 $174,576 $152,919 $129,843 $110,294
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS B
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each year):
Net asset value - beginning of year $14.56 $13.82 $12.71 $11.52 $10.54
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.16 $ 0.19 $ 0.22 $ 0.25 $ 0.25
Net realized and unrealized gain on
investments and foreign currency
transactions 0.45 1.56 1.62 1.46 0.77
------ ------ ------ ------ ------
Total from investment operations $ 0.61 $ 1.75 $ 1.84 $ 1.71 $ 1.02
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.18) $(0.09) $(0.13) $(0.47) $(0.03)
From net realized gain on investments and
foreign currency transactions (0.96) (0.92) (0.60) (0.01) (0.01)
In excess of net investment income (0.08) -- -- (0.04) --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.22) $(1.01) $(0.73) $(0.52) $(0.04)
------ ------ ------ ------ ------
Net asset value - end of year $13.95 $14.56 $13.82 $12.71 $11.52
====== ====== ====== ====== ======
Total return 4.22% 13.57% 15.00% 15.29% 9.75%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.14% 2.16% 2.25% 2.34% 2.49%
Net investment income 1.13% 1.33% 1.70% 2.07% 2.34%
Portfolio turnover 109% 183% 143% 167% 160%
Net assets at end of year (000 Omitted) $130,413 $113,966 $96,931 $71,788 $57,214
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------
CLASS C
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each year):
Net asset value - beginning of year $14.56 $13.82 $12.72 $11.52 $10.53
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income $ 0.16 $ 0.19 $ 0.23 $ 0.26 $ 0.27
Net realized and unrealized gain on
investments and foreign currency
transactions 0.45 1.56 1.61 1.46 0.76
------ ------ ------ ------ ------
Total from investment operations $ 0.61 $ 1.75 $ 1.84 $ 1.72 $ 1.03
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.19) $(0.09) $(0.14) $(0.51) $(0.03)
From net realized gain on investments and
foreign currency transactions (0.96) (0.92) (0.60) (0.01) (0.01)
In excess of net investment income (0.08) -- -- -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.23) $(1.01) $(0.74) $(0.52) $(0.04)
------ ------ ------ ------ ------
Net asset value - end of year $13.94 $14.56 $13.82 $12.72 $11.52
====== ====== ====== ====== ======
Total return 4.23% 13.52% 14.97% 15.41% 9.84%
Ratios (to average net assets)/Supplemental data:
Expenses## 2.14% 2.16% 2.24% 2.27% 2.42%
Net investment income 1.13% 1.33% 1.71% 2.14% 2.41%
Portfolio turnover 109% 183% 143% 167% 160%
Net assets at end of year (000 Omitted) $51,800 $30,580 $21,725 $14,248 $10,894
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS -- continued
<TABLE>
<CAPTION>
Financial Highlights - continued
- -------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED
----------------------------- OCTOBER 31,
1999 1998 1997*
- -------------------------------------------------------------------------------------------------------------------------
CLASS I
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding throughout each year):
Net asset value - beginning of year $14.60 $13.86 $12.51
------ ------ ------
Income from investment operations# -
Net investment income $ 0.29 $ 0.33 $ 0.30
Net realized and unrealized gain on investments and
foreign currency transactions 0.49 1.56 1.21
------ ------ ------
Total from investment operations $ 0.78 $ 1.89 $ 1.51
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.28) $(0.23) $(0.16)
From net realized gain on investments and foreign
currency transactions (0.96) (0.92) --
In excess of net investment income (0.12) -- --
------ ------ ------
Total distributions declared to shareholders $(1.36) $(1.15) $(0.16)
------ ------ ------
Net asset value - end of year $14.02 $14.60 $13.86
====== ====== ======
Total return 5.40% 14.78% 12.08%+
Ratios (to average net assets)/Supplemental data:
Expenses## 1.13% 1.16% 1.24%+
Net investment income 2.08% 2.33% 2.72%+
Portfolio turnover 109% 183% 143%
Net assets at end of year (000 Omitted) $1,587 $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.
## Ratios do not reflect expense reductions from certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Business and Organization
MFS Global Total Return Fund (the Fund) is a nondiversified 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. The Fund
can invest in foreign securities. Investments in foreign securities are
vulnerable to the effects of changes in the relative values of the local
currency and the U.S. dollar and to the effects of changes in each country's
legal, political, and economic environment.
Investment Valuations - Debt securities (other than short-term obligations
which mature in 60 days or less), including listed issues, 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. 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. Securities for which there are no such quotations or valuations are
valued in good faith by the Trustees.
Repurchase Agreements - The Fund may enter into repurchase agreements with
institutions that the Fund's investment adviser has determined are
creditworthy. Each repurchase agreement is recorded at cost. The Fund requires
that the securities collateral in a repurchase transaction be transferred to
the custodian in a manner sufficient to enable the Fund to obtain those
securities in the event of a default under the repurchase agreement. The Fund
monitors, on a daily basis, the value of the collateral to ensure that its
value, including accrued interest, is greater than amounts owed to the Fund
under each such repurchase agreement. The Fund, along with other affiliated
entities of Massachusetts Financial Services Company (MFS), may utilize a
joint trading account for the purpose of entering into one or more repurchase
agreements.
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.
Security Loans - State Street Bank and Trust Company ("State Street"), as
agent, may loan the securities of the fund to certain brokers (the
"Borrowers") approved by the Fund. The loans are collateralized at all times
by cash and U.S. Treasury securities in an amount at least equal to the market
value of the securities loaned. State Street provides the Fund with
indemnification against Borrower default. The Fund bears the risk of loss with
respect to the investment of cash collateral.
At October 31, 1999, the value of securities loaned was $1,051,875. These
loans were collateralized by cash of $1,207,061. On loans collateralized by
U.S. Treasury securities, a fee is received from the Borrower, and is
allocated between the Fund and State Street. Income from securities lending is
included in interest income on the Statement of Operations. The dividend and
interest income earned on the securities loaned is accounted for in the same
manner as other dividend and interest income.
Forward Foreign Currency Exchange Contracts - The Fund may enter into forward
foreign currency exchange contracts for the purchase or sale of a specific
foreign currency at a fixed price on a future date. Risks may arise upon
entering into these contracts from the potential inability of counterparties
to meet the terms of their contracts and from unanticipated movements in the
value of a foreign currency relative to the U.S. dollar. The Fund may enter
into forward contracts for hedging purposes as well as for non-hedging
purposes. For hedging purposes, the Fund may enter into contracts to deliver
or receive foreign currency it will receive from or require for its normal
investment activities. The Fund may also use contracts in a manner intended to
protect foreign currency-denominated securities from declines in value due to
unfavorable exchange rate movements. For non-hedging purposes, the Fund may
enter into contracts with the intent of changing the relative exposure of the
Fund's portfolio of securities to different currencies to take advantage of
anticipated changes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded as unrealized until the contract settlement date. On
contract settlement date, the gains or losses are recorded as realized gains
or losses on foreign currency transactions.
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.
The Fund uses the effective interest method for reporting interest income on
payment-in-kind (PIK) bonds. Legal fees and other related expenses incurred to
preserve and protect the value of a security owned are added to the cost of
the security; other legal fees are expensed. Capital infusions made directly
to the security issuer, which are generally non-recurring, incurred to protect
or enhance the value of high-yield debt securities, are reported as additions
to the cost basis of the security. Costs that are incurred to negotiate the
terms or conditions of capital infusions or that are expected to result in a
plan of reorganization are reported as realized losses. Ongoing costs incurred
to protect or enhance an investment, or costs incurred to pursue other claims
or legal actions, are expensed.
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. During the period, the Fund's custodian fees were reduced by $34,564
under this arrangement.
Tax Matters and Distributions - The Fund's policy is to comply with the
provisions of the Internal Revenue Code (the Code) applicable to regulated
investment companies and to distribute to shareholders all of its taxable
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is provided.
Distributions to shareholders are recorded on the ex-dividend date. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis and requires that only distributions in excess of tax basis earnings and
profits be reported in the financial statements as distributions from paid-in
capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits, which result in
temporary over-distributions for financial statement purposes, are classified
as distributions in excess of net investment income or net realized gains.
During the year ended October 31, 1999, $3,336,966 and $15,944 were
reclassified from accumulated undistributed net realized gain on investments
and foreign currency transactions to accumulated undistributed net investment
income and paid-in capital, respectively, due to differences between book and
tax accounting for currency differences. This change had no effect on the net
assets or net asset value per share. At October 31, 1999, 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 daily net
assets of each class, without distinction between share classes. Dividends are
declared separately for each class. Differences in per share dividend rates
are generally due to differences in separate class expenses. Class B shares
will convert to Class A shares approximately eight years after purchase.
(3) Transactions with Affiliates
Investment Adviser - The Fund has an investment advisory agreement with
Massachusetts Financial Services Company (MFS) to provide overall investment
advisory and administrative services, and general office facilities. The
management fee is computed daily and paid monthly at an annual rate of 0.65%
of the Fund's average daily net assets and 5.00% of investment income.
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
$11,934 for the year ended October 31, 1999.
Administrator - The Fund has an administrative services agreement with MFS to
provide the Fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the Fund pays MFS an administrative fee
at the following annual percentages of the Fund's average daily net assets:
First $1 billion 0.0150%
Next $1 billion 0.0125%
Next $1 billion 0.0100%
In excess of $3 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$95,622 for the year ended October 31, 1999, 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 $52,890
for the year ended October 31, 1999. Fees incurred under the distribution plan
during the year ended October 31, 1999, 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 $28,659 and $18,506 for
Class B and Class C shares, respectively, for the year ended October 31, 1999.
Fees incurred under the distribution plan during the year ended October 31,
1999 were 1.00% of average daily net assets attributable to Class B and Class
C shares, respectively, on an annualized basis.
Certain Class A and Class C shares are subject to a contingent deferred sales
charge in the event of a shareholder redemption within 12 months following
purchase. A contingent deferred sales charge is imposed on shareholder
redemptions of Class B shares in the event of a shareholder redemption within
six years of purchase. MFD receives all contingent deferred sales charges.
Contingent deferred sales charges imposed during the year ended October 31,
1999, were $7,922, $194,261, and $16,022 for Class A, Class B, and Class C
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the Fund's average daily net assets at an annual rate of 0.10%.
Prior to April 1, 1999, the fee was calculated as a percentage of the Fund's
average daily net assets at an annual rate of 0.1125%.
(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 $109,492,194 $104,213,453
------------ ------------
Investments (non-U.S. government
securities) $286,412,491 $268,220,144
------------ ------------
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 $330,969,434
------------
Gross unrealized appreciation $ 50,199,079
Gross unrealized depreciation (15,010,415)
------------
Net unrealized appreciation $ 35,188,664
============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
-------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,527,402 $ 134,146,764 4,562,531 $ 64,549,008
Shares issued to shareholders
in reinvestment of distributions 1,085,836 15,052,372 851,079 11,252,564
Shares reacquired (9,149,274) (128,731,794) (4,495,909) (63,669,790)
---------- ------------- ---------- ------------
Net increase 1,463,964 $ 20,467,342 917,701 $ 12,131,782
========== ============= ========== ============
<CAPTION>
Class B Shares
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
-------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 3,001,659 $ 42,221,918 2,053,125 $ 29,003,679
Shares issued to shareholders
in reinvestment of distributions 605,278 8,397,365 473,256 6,245,341
Shares reacquired (2,084,987) (29,223,273) (1,715,969) (23,999,209)
---------- ------------- ---------- ------------
Net increase 1,521,950 $ 21,396,010 810,412 $ 11,249,811
========== ============= ========== ============
<CAPTION>
Class C Shares
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
-------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 2,526,464 $ 35,622,025 822,996 $ 11,685,593
Shares issued to shareholders
in reinvestment of distributions 162,826 2,255,584 106,700 1,409,153
Shares reacquired (1,073,242) (14,982,438) (401,733) (5,642,659)
---------- ------------- ---------- ------------
Net increase 1,616,048 $ 22,895,171 527,963 $ 7,452,087
========== ============= ========== ============
<CAPTION>
Class I Shares
YEAR ENDED OCTOBER 31, 1999 YEAR ENDED OCTOBER 31, 1998
-------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 9,498 $ 132,481 6,889 $ 96,595
Shares issued to shareholders
in reinvestment of distributions 12,261 169,958 10,688 141,367
Shares reacquired (34,292) (480,993) (25,193) (353,860)
---------- ------------- ---------- ------------
Net decrease (12,533) $ (178,554) (7,616) $ (115,898)
========== ============= ========== ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in an $820 million unsecured
line of credit provided by a syndication of banks under a line of credit
agreement. Borrowings may be made to temporarily finance the repurchase of Fund
shares. Interest is charged to each fund, based on its borrowings, at a rate
equal to the bank's base rate. In addition, a commitment fee, based on the
average daily unused portion of the line of credit, is allocated among the
participating funds at the end of each quarter. The commitment fee allocated to
the Fund for the year ended October 31, 1999, was $2,597. The Fund had no
borrowings during the year.
(7) Financial Instruments
The Fund trades financial instruments with off-balance-sheet risk in the
normal course of its investing activities in order to manage exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include written options, forward foreign currency
exchange contracts, swap agreements, and futures contracts. The notional or
contractual amounts of these instruments represent the investment the Fund has
in particular classes of financial instruments and does not necessarily
represent the amounts potentially subject to risk. The measurement of the
risks associated with these instruments is meaningful only when all related
and offsetting transactions are considered.
Written Option Transactions
NUMBER OF
CONTRACTS
(000 OMITTED) PREMIUMS
- -------------------------------------------------------------------------------
OUTSTANDING, BEGINNING OF YEAR 269,803 $ 292,828
Options written 5,150,664 743,182
Options terminated in closing transactions (2,767,050) (512,318)
Options exercised (26) (9,901)
Options expired (1,733,391) (313,275)
----------
OUTSTANDING, END OF YEAR $ 200,516
==========
There were no outstanding financial instruments with off-balance-sheet risk at
the end of the period.
At October 31, 1999, the Fund had sufficient cash and/or securities at least
equal to the value of the written options.
<TABLE>
Forward Foreign Currency Exchange Contracts
<CAPTION>
NET
UNREALIZED
SETTLEMENT CONTRACTS TO IN EXCHANGE CONTRACTS APPRECIATION
DATE DELIVER/RECEIVE FOR AT VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sales 12/01/99 AUD 14,904,616 $ 9,735,396 $ 9,500,391 $235,005
12/01/99 DKK 46,483,827 6,542,963 6,592,369 (49,406)
12/01/99 NZD 1,084,721 578,862 549,644 29,218
----------- ----------- --------
$16,857,221 $16,642,404 $214,817
=========== =========== ========
Purchases 12/01/99 JPY 73,220,343 $ 679,476 $ 705,586 $ 26,110
----------- ----------- --------
</TABLE>
At October 31, 1999, forward foreign currency purchases and sales under master
netting agreements excluded above amounted to a net payable of $118,844 with
C.S. First Boston, $40,545 with Merrill Lynch and $24,225 with Deutsche Bank.
At October 31, 1999, 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 the MSF Series Trust VI and the 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, 1999, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with 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, 1999, 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, 1999, 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.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 9, 1999
<PAGE>
- --------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
- --------------------------------------------------------------------------------
IN JANUARY 2000, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 1999.
THE FUND HAS DESIGNATED $17,513,437 AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED OCTOBER 31, 1999.
FOR THE YEAR ENDED OCTOBER 31, 1999, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS IS 20.66%.
FOR THE YEAR ENDED OCTOBER 31, 1999, INCOME FROM FOREIGN SOURCES WAS
$6,530,421, AND THE FUND DESIGNATED A FOREIGN TAX CREDIT OF $310,962.
<PAGE>
MFS' YEAR 2000 READINESS DISCLOSURE
MFS Investment Management(R), as an investment adviser and
on behalf of the MFS funds, is committed to the effective
use of technology in managing our portfolio investments,
delivering high-quality service to MFS fund shareholders, [Graphic Omitted]
retirement plan participants, and MFS' institutional
clients, and supporting the financial consultants who sell
our products.
MFS can now say that it is ready for the Year 2000. Our testing has demonstrated
that MFS' computer hardware and software will recognize "00" as the Year 2000
and will not confuse those digits with 1900. All of our critical business
applications and processes have been successfully tested, and we have adopted
companywide policies that will help us maintain our readiness through the
remainder of the year. Any new technology that is brought into the company
before the end of the year will be held to the same stringent standards as our
current technology. We have also developed a vendor readiness survey, contacted
over 700 of our vendors, and established an ongoing process to review responses,
as well as to review readiness statements of new vendors and products.
MFS recognizes that fund shareholders and institutional clients also are
concerned about whether the companies whose securities are held in their
portfolios are addressing Y2K issues. As part of the MFS Original Research(R)
process of evaluating portfolio investments, one of the many relevant factors
that MFS' portfolio managers and research analysts may consider is a company's
Y2K readiness.
Y2K readiness is an enormously complex, worldwide issue. No company or
institution can guarantee that it will be unaffected by the Y2K issue. While MFS
is taking significant steps to protect the integrity of its internal systems,
there can be no assurance that these steps will be sufficient to avoid any
adverse impact on MFS fund shareholders, retirement plan participants, or
institutional clients.
If you have further questions regarding MFS' Year 2000 Readiness Program, please
visit our Web site at www.mfs.com, call our toll-free line, 1-800-637-4406, or
write to the MFS Year 2000 Program Management Office by e-mail at [email protected] or
by letter at 500 Boylston Street, Boston, MA 02116-3741.
<PAGE>
MFS(R) GLOBAL TOTAL RETURN FUND
<TABLE>
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Richard B. Bailey - Private Investor; Former Mark E. Bradley*
Chairman and Director (until 1991), MFS Investment Ellen Moynihan*
Management* James O. Yost*
Marshall N. Cohan+ - Private Investor SECRETARY
Stephen E. Cavan*
Lawrence H. Cohn, M.D.+ - Chief of Cardiac
Surgery, Brigham and Womens Hospital; Professor of ASSISTANT SECRETARY
Surgery, Harvard Medical School James R. Bordewick, Jr.*
The Hon. Sir J. David Gibbons, KBE+ - Chief CUSTODIAN
Executive Officer, Edmund Gibbons Ltd.; Chairman, State Street Bank and Trust Company
Colonial Insurance Company, Ltd.
AUDITORS
Abby M. ONeill+ - Private Investor Ernst & Young LLP
Walter E. Robb, III+ - President and Treasurer, INVESTOR INFORMATION
Benchmark Advisors, Inc. (corporate financial For information on MFS mutual funds, call your
consultants); President, Benchmark Consulting financial consultant or, for an information kit,
Group, Inc. (office services) call toll free: 1-800-637-2929 any business day
from 9 a.m. to 5 p.m. Eastern time (or leave a
Arnold D. Scott* - Senior Executive Vice message anytime).
President, Director, and Secretary, MFS Investment
Management INVESTOR SERVICE
MFS Service Center, Inc.
Jeffrey L. Shames* - Chairman and Chief Executive P.O. Box 2281
Officer, MFS Investment Management Boston, MA 02107-9906
J. Dale Sherratt+ - President, Insight Resources, For general information, call toll free:
Inc. (acquisition planning specialists) 1-800-225-2606 any business day from 8 a.m. to 8
p.m. Eastern time.
Ward Smith+ - Former Chairman (until 1994), NACCO
Industries (holding company) For service to speech- or hearing-impaired, call
toll free: 1-800-637-6576 any business day from 9
INVESTMENT ADVISER a.m. to 5 p.m. Eastern time. (To use this service,
Massachusetts Financial Services Company your phone must be equipped with a
500 Boylston Street Telecommunications Device for the Deaf.)
Boston, MA 02116-3741
For share prices, account balances, exchanges, or
DISTRIBUTOR MFS stock and bond market outlooks, call toll
MFS Fund Distributors, Inc. 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
CHAIRMAN AND PRESIDENT www.mfs.com
Jeffrey L. Shames*
PORTFOLIO MANAGER
Frederick J. Simmons*
TREASURER
W. Thomas London*
+ Independent Trustee
* MFS Investment Management
</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)1999 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116
MWT-2 12/99 42M 24/224/324/824
