<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
75 YEARS
WE INVENTED THE MUTUAL FUND(R)
[Graphic Omitted]
MFS(R) UTILITIES FUND
SEMIANNUAL REPORT o APRIL 30, 1999
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DIVERSIFYING YOUR INVESTMENT PORTFOLIO (see page 31)
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<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 3
Performance Summary ....................................................... 7
Portfolio of Investments .................................................. 10
Financial Statements ...................................................... 17
Notes to Financial Statements ............................................. 24
MFS' Year 2000 Readiness Disclosure ....................................... 30
Trustees and Officers ..................................................... 33
MFS(R) ORIGINAL RESEARCH(SM)
RESEARCH HAS BEEN CENTRAL TO INVESTMENT MANAGEMENT AT MFS
SINCE 1932, WHEN WE CREATED ONE OF THE FIRST IN-HOUSE
RESEARCH DEPARTMENTS IN THE MUTUAL FUND (SM)
INDUSTRY. ORIGINAL RESEARCH(SM) AT MFS IS MORE ORIGINAL RESEARCH
THAN JUST CRUNCHING NUMBERS AND CREATING
ECONOMIC MODELS: IT'S GETTING TO KNOW MFS
EACH SECURITY AND EACH COMPANY PERSONALLY.
MAKES A DIFFERENCE
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
LETTER FROM THE CHAIRMAN
[Photo of Jeffrey L. Shames]
Jeffrey L. Shames
Dear Shareholders,
Over 75 years ago, MFS invented the mutual fund, giving Americans greater
access to the investment markets. Since then, we have been guided by a number
of fundamental principles, including diversification and professional
management backed by MFS(R) Original Research(SM), a process by which we seek
long-term investment opportunities.
We have found that these principles have matched those of our shareholders. In a
recent survey for MFS by Roper Starch Worldwide, Inc., a major consumer research
firm, over 60% of mutual fund shareholders said they are investing for long-term
goals such as retirement. The survey also showed that investors realize that the
extraordinary stock market gains of the past few years cannot be sustained.
These views certainly seem to have guided investors during last year's market
correction. Beginning with the collapse of Asian markets at the end of 1997 and
continuing with the volatility in U.S. markets through October of 1998, only 7%
of mutual fund investors took money out of the stock market.
We are even more pleased that MFS investors reacted calmly to last year's
market turmoil, indicating their commitment to diversification. As a result,
throughout the late summer and fall of 1998, daily purchases of MFS stock and
bond funds were well ahead of redemptions.
Over the past year or so, however, diversified investment programs have not
financially rewarded investors. A very narrow band of about 25 stocks
representing the largest U.S. growth companies has, until recently, vastly
outperformed the rest of the market. In 1998, for example, the return on the
Standard & Poor's 500 Composite Index (a popular, unmanaged index of common
stock total return performance) increased 28.58%. However, over half of the
stocks in the index returned less than 10%, including 198 stocks that posted
negative returns.
While 1997 and 1998 were good years for large-company growth stocks, 1996 was
dominated by the mid-sized value category. Prices of value stocks do not fully
reflect the companies' underlying values or future prospects. In 1995, the
best-performing sector was small-company growth stocks. We believe this change
of market leadership shows that while diversification may not provide the best
performance in the short run, it should benefit investors over the long term. In
fact, as 1999 progresses, we are seeing signs of renewed strength from a broader
group of industries, including electric utilities and paper products and
chemical companies. We believe our diversified MFS Family of Funds(R), supported
by Original Research, is well positioned to benefit from a broader market.
Most mutual fund investors refrain from trying to predict short-term trends.
Despite the large stock market gains of the past several years, the Roper Starch
survey shows that people do not see performance as the only reason to invest.
These investors also cite a desire to put investment decisions in the hands of
experts, a belief that mutual funds can be less risky than other investments,
and an appreciation of the convenience of mutual fund investing.
We appreciate the fact that our fund shareholders and their advisers share our
belief that mutual fund investing is not a way to speculate in the markets but
is a way to use the investment markets to help them work toward their long-term
goals. Our goal at MFS is to offer professionally managed investment products
with the potential to sustain returns over a variety of market cycles.
We thank you for 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)
May 17, 1999
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Maura A. Shaughnessy]
Maura A. Shaughnessy
For the six months ended April 30, 1999, Class A shares of the Fund provided a
total return of 13.41%, Class B shares 13.03%, Class C shares 13.02%, and
Class I shares 13.63%. These returns include the reinvestment of distributions
but exclude the effects of any sales charges.
For the same period, the average utility fund tracked by Lipper Analytical
Services, Inc., an independent firm that reports mutual fund performance,
returned 11.95%. The Fund's results also compare to a -2.68% 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.
Q. WHY HAS THE FUND BEEN PERFORMING SO WELL? CAN YOU GIVE SOME SPECIFIC STOCK
EXAMPLES?
A. The Fund has benefited from consolidation. Among our top 10 holdings are
names such as Frontier Corp., which was the old Rochester Telephone.
Frontier is a company with new management and a strategy of focusing on the
growth sectors of telecommunications (web hosting, etc.). Recently,
Frontier was bought out by Global Crossing, and the stock price has reacted
quite favorably to the news. Another example of a successful position in
the telecommunications sector is MediaOne. I hadn't held much in the cable
sector up until the past year or so. The story of the cable companies was
one of tough regulation and overspending. Typically, they weren't
generating the cash flow that was expected. That has changed, and you see
some of the better companies surviving, including MediaOne. That company
has been the object of multiple buyout offers. First Comcast, which I
believe is one of the best-run companies in the cable industry, made an
offer. AT&T then stepped up with an even larger offer. We've seen
MediaOne's stock price rise based on the proposed buyout.
A consolidation story from the energy sector is El Paso Energy's takeover of
Sonat, which created one of the country's largest natural gas companies. We
own both Sonat and El Paso, and prices of the stocks have increased since the
deal was announced in early March. Another stock from the energy sector that
has performed well is Enron. Enron is the biggest player in the trading of
both natural gas and electricity. In addition, Enron has benefited from its
leadership position in the business of energy outsourcing.
Q. CAN YOU GIVE US A COUPLE OF NAMES FROM THE FUND THAT HAVE NOT BEEN STRONG
PERFORMERS OVER THE PAST SIX MONTHS?
A. KN Energy has had a tough time recently. It bought a pipeline from
Occidental Petroleum called MidCon and leveraged up the balance sheet. Then
the commodity environment collapsed. Because commodity prices were unable
to support the leverage KN had taken on, the company's earnings collapsed.
I think the CEO, Larry Hall, realized that he didn't have the management
talent that he thought he did to help guide the company through this tough
time. He is now selling out to Sempra Energy at what I believe looks like
the bottom. This deal hasn't closed yet, and KN Energy's stock has been
flat for a couple of months. Meanwhile, Sempra's stock -- which we do not
own in the portfolio -- has significantly declined.
Columbia Energy is another disappointment. For reasons that are both market
based and management based, Columbia has not made its earnings estimates for
the past two quarters. Now, they are attempting a hostile bid in an industry
in which hostile bids generally are not done. They are attempting a hostile
takeover of Consolidated Natural Gas, which Dominion Resources has already
bid on. Columbia's management has not done a good job explaining its plans,
and the stock price has suffered as a result.
Q. YOU'VE TALKED ABOUT CONSOLIDATION. WHAT DO YOU THINK ABOUT THE MERGER THAT
TELECOM ITALIA AND DEUTSCHE TELEKOM ARE TRYING TO WORK OUT?
A. Telecom Italia has been a good stock for the Fund for the past several
years, but it remains to be seen how well these two corporate cultures can
work together. Also, the deal would give the German government a
significant ownership position in the combined company, and I'm not sure
how well that would be received by the Italians. These factors have created
a lot of uncertainty about the deal; therefore, I have reduced the position
in the Fund.
Q. LOOKING FORWARD, DO YOU SEE THE CONSOLIDATION TREND CONTINUING?
A. The telecommunications sector is all about consolidation. Certain gas and
electric companies also are continuing to consolidate. It's just a matter
of time and a matter of how wisely the managements approach these
acquisitions. Recently, some of the mergers in the gas and electric
industries have not made much strategic or financial sense, so the stocks
involved have been weak. Hopefully, people have learned their lessons from
some of the deals that have just happened, and we will see consolidation
that makes more sense going forward.
Q. DO YOU FORESEE ANY CHANGES IN THE FUND'S SECTOR ALLOCATIONS GOING FORWARD?
A. I may increase my weighting in natural gas stocks. As a sector, the
valuations have never been more compelling. We have had unseasonably warm
winters the past couple of years, which has negatively impacted natural gas
demand. However, I believe the supply-demand ratio will be more attractive
going forward, perhaps by this fall. A return to any sort of normal weather
pattern should get these stocks going again. When people start filling up
their gas storage, we could have a very tight market, which would benefit
companies such as Coastal Corp. I have been increasing the Fund's position
in this pipeline, exploration, and production company over the past six
months. A stronger market for natural gas stocks would also benefit other
names in the portfolio, including El Paso and Williams.
/s/ Maura A. Shaughnessy
Maura A. Shaughnessy
Portfolio Manager
The opinions expressed in this report are those of the portfolio manager and
are current only through the end of the period of the report as stated on the
cover. The manager's views are subject to change at any time based on market
and other conditions, and no forecasts can be guaranteed.
It is not possible to invest directly in an index.
<PAGE>
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PORTFOLIO MANAGER'S PROFILE
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MAURA A. SHAUGHNESSY IS A SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R) AND PORTFOLIO MANAGER OF MFS(R) CAPITAL OPPORTUNITIES FUND,
MFS(R) UTILITIES FUND, MFS(R) UTILITIES SERIES AND MFS(R) CAPITAL
OPPORTUNITIES SERIES (BOTH PART OF MFS(R) VARIABLE INSURANCE TRUST(SM)),
AND THE UTILITIES SERIES AND CAPITAL OPPORTUNITIES SERIES OFFERED THROUGH
MFS(R)/SUN LIFE ANNUITY PRODUCTS.
MS. SHAUGHNESSY JOINED MFS IN 1991 AS A RESEARCH ANALYST AND BECAME VICE
PRESIDENT AND PORTFOLIO MANAGER IN 1992 AND SENIOR VICE PRESIDENT IN 1998.
A GRADUATE OF COLBY COLLEGE AND THE AMOS TUCK SCHOOL OF BUSINESS
ADMINISTRATION OF DARTMOUTH COLLEGE, SHE IS A CHARTERED FINANCIAL ANALYST.
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(R) ORIGINAL
RESEARCH(SM), A COMPANY-ORIENTED, BOTTOM-UP PROCESS OF SELECTING
SECURITIES.
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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: $1.1 BILLION NET ASSETS AS OF APRIL 30, 1999
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PERFORMANCE SUMMARY
Because mutual funds are designed for investors with long-term goals, we have
provided cumulative results as well as the average annual total returns for
the applicable time periods. Investment results reflect the percentage change
in net asset value, including reinvestment of dividends. (See Notes to
Performance Summary for more information.)
<TABLE>
AVERAGE ANNUAL AND CUMULATIVE TOTAL RATES OF RETURN
THROUGH APRIL 30, 1999
CLASS A
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +13.41% +13.00% +92.79% +157.24% +233.11%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +13.00% +24.46% + 20.80% + 18.16%
- -----------------------------------------------------------------------------------------------------------------
SEC Results -- + 7.63% +22.45% + 19.63% + 17.36%
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</TABLE>
<TABLE>
CLASS B
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +13.03% +12.30% +88.55% +146.77% +217.18%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +12.30% +23.54% + 19.80% + 17.36%
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SEC Results -- + 8.30% +22.88% + 19.60% + 17.36%
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* For the period from the commencement of the Fund's investment operations, February 14, 1992, through
April 30, 1999.
</TABLE>
<PAGE>
<TABLE>
CLASS C
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +13.02% +12.18% +88.50% +147.07% +218.74%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +12.18% +23.53% + 19.83% + 17.44%
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SEC Results -- +11.18% +23.53% + 19.83% + 17.44%
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</TABLE>
<TABLE>
CLASS I
<CAPTION>
6 Months 1 Year 3 Years 5 Years 10 Years/Life*
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<S> <C> <C> <C> <C> <C>
Cumulative Total Return +13.63% +13.37% +94.19% +159.16% +235.55%
- -----------------------------------------------------------------------------------------------------------------
Average Annual Total Return -- +13.37% +24.76% + 20.98% + 18.28%
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* For the period from the commencement of the Fund's investment operations, February 14, 1992, through
April 30, 1999.
</TABLE>
NOTES TO PERFORMANCE SUMMARY
Class A share ("A") SEC results include the maximum 4.75% sales charge. Class
B share ("B") SEC results reflect the applicable contingent deferred sales
charge (CDSC), which declines over six years from 4% to 0%. Class C shares
("C") have no initial sales charge but, like B, have higher annual fees and
expenses than A. C SEC results reflect the 1% CDSC applicable to shares
redeemed within 12 months. Class I shares ("I") have no sales charge or Rule
12b-1 fees and are only available to certain institutional investors.
B and C results include the performance and the operating expenses
(e.g., Rule 12b-1 fees) of A for periods prior to the inception of B and C.
Because operating expenses of B and C are higher than those of A, B and C
performance generally would have been lower than A performance. The A
performance included in the B and C SEC performance has been adjusted to
reflect the CDSC generally applicable to B and C rather than the initial sales
charge generally applicable to A.
I results include the performance and the operating expenses (e.g., Rule 12b-1
fees) of A for periods prior to the inception of I. Because operating expenses
of A are greater than those of I, I performance generally would have been
higher than A performance. The A performance included in the I performance has
been adjusted to reflect the fact that I have no initial sales charge.
Performance results reflect any applicable expense subsidies and waivers,
without which the results would have been less favorable. Subsidies and waivers
may be rescinded at any time. See the prospectus for details. All results are
historical and assume the reinvestment of dividends and capital gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN
REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE
IS NO GUARANTEE OF FUTURE RESULTS.
The Fund may focus its investments in certain sectors, thereby increasing its
vulnerability to any single economic, political, or regulatory development.
See the prospectus for details.
PORTFOLIO CONCENTRATION AS OF APRIL 30, 1999
FIVE LARGEST STOCK SECTORS
UTILITIES AND COMMUNICATIONS 85.6%
TECHNOLOGY 4.0%
LEISURE 3.4%
FINANCIAL SERVICES 3.3%
CONGLOMERATES, SPECIAL PRODUCTS/SERVICES 3.3%
TOP 10 STOCK HOLDINGS
GTE CORP. 3.4% SBC COMMUNICATIONS, INC. 2.6%
Telecommunications company Integrated telecommunications company
FRONTIER CORP. 3.1% BELL ATLANTIC CORP. 2.5%
Internet and data transmission services Integrated telecommunications company
company
COLUMBIA ENERGY GROUP 2.4%
INTERMEDIA COMMUNICATIONS, INC. 2.8% Natural gas production and pipeline
Local telephone exchange company company
DUKE ENERGY 2.7% COASTAL CORP. 2.4%
Electric and natural gas company Oil and natural gas company
MCI WORLDCOM, INC. 2.7% CINCINNATI BELL, INC. 2.4%
Telecommunications company Telephone services company
The portfolio is actively managed, and holdings are subject to change.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS (Unaudited) - April 30, 1999
<CAPTION>
Stocks - 85.8%
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 70.4%
Business Machines - 0.5%
Motorola, Inc. 61,800 $ 4,951,725
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Computer Software - Services
Informatica Corp. 850 $ 24,012
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Conglomerates - 1.0%
Eastern Enterprises 316,100 $ 11,359,844
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Entertainment - 2.8%
MediaOne Group, Inc.* 243,500 $ 19,860,469
Time Warner, Inc. 150,600 10,542,000
--------------
$ 30,402,469
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Real Estate Investment Trusts - 3.0%
Camden Property Trust 181,300 $ 4,895,100
CarrAmerica Realty Corp. 181,300 4,487,175
Equity Residential Properties Trust 119,000 5,503,750
Kilroy Realty Corp. 126,500 2,980,656
Koger Equity, Inc. 118,200 1,736,063
Mack-Cali Realty Corp. 143,800 4,448,812
SL Green Realty Corp. 181,700 3,611,288
TriNet Corporate Realty Trust, Inc. 185,200 5,081,425
--------------
$ 32,744,269
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Special Products and Services - 1.8%
MCN Energy Group, Inc. 782,200 $ 15,595,112
USEC, Inc. 349,600 4,348,150
--------------
$ 19,943,262
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Telecommunications - 21.0%
AirTouch Communications, Inc.* 24,400 $ 2,278,350
Allegiance Telecom, Inc.* 53,000 2,438,000
Alltel Corp. 202,400 13,649,350
Ameritech Corp. 43,100 2,949,656
Bell Atlantic Corp. 424,720 24,474,490
Century Telephone Enterprises, Inc. 247,500 9,961,875
Cincinnati Bell, Inc. 1,037,700 23,477,963
Global Telesystems Group, Inc.## 94,800 5,237,700
GTE Corp. 505,300 33,823,519
Intermedia Communications, Inc.## 870,300 28,012,781
MCI WorldCom, Inc.* 321,175 26,396,570
Net Perceptions, Inc.* 1,200 31,650
NEXTEL Communications, Inc.* 81,100 3,320,031
NTL, Inc.* 19,400 1,479,250
PSINet, Inc.* 99,100 5,004,550
SBC Communications, Inc. 466,200 26,107,200
Sprint Corp. 172,100 17,651,006
Winstar Communications, Inc. 45,800 2,227,025
--------------
$ 228,520,966
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Utilities - Electric - 24.5%
AES Corp.* 150,800 $ 7,540,000
Allegheny Energy, Inc. 273,200 9,305,875
Atmos Energy Corp. 592,199 14,953,025
BEC Energy 445,700 18,942,250
Calpine Corp. 126,100 5,375,012
CMS Energy Corp. 461,000 20,284,000
CMS Energy Corp., "G" 206,200 4,317,313
DQE, Inc. 323,300 13,315,919
Duke Energy Corp. 473,400 26,510,400
El Paso Electric Co.* 618,100 4,944,800
FirstEnergy Corp. 334,900 9,942,344
FPL Group, Inc. 202,700 11,427,212
Illinova Corp. 245,000 6,431,250
Midamerica Energy Holdings Co. 699,500 22,515,156
NiSource, Inc. 612,900 17,007,975
Peco Energy Co. 321,700 15,260,644
Pinnacle West Capital Corp. 399,900 15,521,119
Public Service Co. of New Mexico 277,700 4,963,887
Sierra Pacific Resources 340,800 12,141,000
Texas Utilities Co. 451,100 17,931,225
Unicom Corp. 194,300 7,541,269
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$ 266,171,675
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Utilities - Gas - 11.9%
Coastal Corp. 625,500 $ 23,925,375
Columbia Energy Group 498,300 23,949,544
Connecticut Energy Group 100,400 3,752,450
Dynegy, Inc. 77,900 1,353,512
El Paso Energy Corp. 352,100 12,939,675
Energen Corp. 241,200 4,160,700
Enron Corp. 134,500 10,121,125
KN Energy, Inc. 606,800 12,515,250
National Fuel Gas Co. 75,300 3,294,375
NICOR, Inc. 203,600 7,405,950
NUI Corp. 119,700 2,595,994
ONEOK, Inc. 91,200 2,547,900
Sonat, Inc. 80,100 2,863,575
Washington Gas Light Co. 160,100 3,772,356
Williams Cos., Inc. 297,000 14,033,250
--------------
$ 129,231,031
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Utilities - Telephone - 3.9%
Frontier Corp. 550,500 $ 30,380,719
U.S. West, Inc. 227,200 11,885,400
--------------
$ 42,266,119
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Total U.S. Stocks $ 765,615,372
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Foreign Stocks - 15.4%
Brazil - 0.8%
Companhia Electricas est Rio de Janeiro
(Utilities - Electric)* 7,436,500 $2,015,918
Companhia Energetica do Ceara, Preferred "A"
(Utilities - Electric) 693,300 1,921,193
Companhia Riogrand Telecomunicacoes (Utilities - Telephone) 6,134 2,420,383
Espirito Santo Centrais Eletricas S.A. (Utilities - Electric) 10,200 368,675
Espirito Santo Centrais Eletricas S.A., Preferred
"B" (Utilities - Electric) 3,915 1,839,390
--------------
$ 8,565,559
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Canada - 1.8%
BCE, Inc. (Telecommunications) 176,100 $ 8,045,569
Northern Telecom Ltd. (Telecommunications) 164,100 11,189,569
--------------
$ 19,235,138
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Chile - 0.5%
Chilectra S.A., ADR (Utilities - Electric) 283,180 $ 6,088,370
- ------------------------------------------------------------------------------------------------------
Denmark - 0.2%
Tele Danmark, ADR (Telecommunications) 35,100 $ 1,790,100
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Finland - 0.5%
Helsingin Puhelin Oyj (Telecommunications) 83,100 $ 3,501,038
Helsingin Puhelin Oyj (Telecommunications)* 675 1,817,469
--------------
$ 5,318,507
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Germany - 2.2%
Mannesmann AG (Conglomerate) 140,300 $ 18,458,597
VEBA AG (Oil and Gas) 92,500 5,069,114
--------------
$ 23,527,711
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Greece - 1.1%
Hellenic Telecommunication Organization S.A., GDR
(Telecommunications) 458,640 $ 10,645,272
STET Hellas Telecommunications S.A., ADR
(Telecommunications)* 72,200 1,949,400
--------------
$ 12,594,672
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Hungary - 1.1%
Magyar Tavkozlesi Rt., ADR (Telecommunications)* 423,900 $ 11,922,188
- ------------------------------------------------------------------------------------------------------
Italy - 2.0%
Telecom Italia Mobile S.p.A. (Telecommunications) 384,400 $ 1,286,665
Telecom Italia Mobile S.p.A. (Telecommunications) 1,066,000 6,348,327
Telecom Italia S.p.A. (Telecommunications) 1,319,500 14,030,134
--------------
$ 21,665,126
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Japan - 0.5%
NTT Mobile Communication Network, Inc.
(Telecommunications) 90 $ 5,277,708
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Netherlands - 1.1%
Equant N.V. (Computer Software - Services)* 128,300 $ 11,450,775
United Pan-Europe Communications N.V. (Telecommunications)* 7,800 403,153
--------------
$ 11,853,928
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Spain - 2.8%
Telefonica de Espana S.A., ADR (Telecommunications) 125,247 $ 17,456,300
Union Electrica Fenosa S.A. (Utilities - Electric) 973,200 12,937,513
--------------
$ 30,393,813
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United Kingdom - 0.8%
Colt Telecom Group PLC, ADR (Telecommunications)* 46,100 $ 3,520,888
Orange PLC (Telecommunications) 388,100 5,242,798
--------------
$ 8,763,686
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Total Foreign Stocks $ 166,996,506
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Total Stocks (Identified Cost, $853,453,756) $ 932,611,878
- ------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 1.1%
- ------------------------------------------------------------------------------------------------------
Telecommunications - 1.1%
PSINet, Inc., 6.75% 150,100 $ 7,730,150
Qwest Trends Trust, 5.75%## 61,400 4,605,000
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Total Convertible Preferred Stocks (Identified Cost, $10,068,450) $ 12,335,150
- ------------------------------------------------------------------------------------------------------
Preferred Stock - 0.6%
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.6%
KN Energy, Inc., 8.25% (Identified Cost, $7,577,786) 176,029 $ 6,073,001
- ------------------------------------------------------------------------------------------------------
Bonds - 5.8%
- ------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
- ------------------------------------------------------------------------------------------------------
U.S. Bonds - 5.2%
Banks and Credit Companies - 0.2%
Beaver Valley Funding Corp., 9s, 2017 $ 1,185 $ 1,347,997
Midland Funding Corp. I, 10.33s, 2002 1,234 1,307,919
--------------
$ 2,655,916
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 0.3%
Salton Sea Funding Corp., 6.69s, 2000 $ 312 $ 314,487
Salton Sea Funding Corp., 7.84s, 2010 1,110 1,207,491
Salton Sea Funding Corp., 8.3s, 2011 1,610 1,698,711
--------------
$ 3,220,689
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Oils - 0.2%
Oryx Energy Co., 8.375s, 2004 $ 1,500 $ 1,594,290
- ------------------------------------------------------------------------------------------------------
Telecommunications - 1.1%
Intermedia Communications, Inc., 12.25s, 2009## $ 17,850 $ 11,245,500
WorldCom, Inc., 8.875s, 2006 720 773,453
--------------
$ 12,018,953
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U.S. Federal Agencies - 0.3%
Federal Home Loan Mortgage Corporation - 0.1%
FHLMC Gold, 6.5s, 2099 $ 1,300 $ 1,292,681
- ------------------------------------------------------------------------------------------------------
Federal National Mortgage Association - 0.2%
FNMA, 6s, 2013 $ 2,134 $ 2,113,733
- ------------------------------------------------------------------------------------------------------
Total U.S. Federal Agencies $ 3,406,414
- ------------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 0.8%
Government National Mortgage Association - 0.8%
GNMA, 7s, 2027 - 2028 $ 2,405 $ 2,439,808
GNMA, 7.5s, 2025 - 2028 5,302 5,464,818
GNMA, 8s, 2025 - 2027 938 974,395
- ------------------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 8,879,021
- ------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.0%
AEP Generating, 9.82s, 2022 $ 3,776 $ 4,677,111
California Infrastructure, 6.17s, 2003 3,678 3,711,323
CE Generation LLC, 7.416s, 2018## 1,520 1,531,400
CMS Energy Corp., 6.75s, 2004## 2,050 2,011,849
CMS Panhandle Holding Co., 6.5s, 2009## 1,300 1,283,750
Connecticut Light & Power Co., 8.59s, 2003 1,000 1,027,760
Illinois Power Special Purpose Trust, 5.26s, 2003 2,100 2,088,844
Midamerican Funding LLC, 6.927s, 2029## 1,230 1,203,678
Midland Cogeneration Venture Corp., 10.33s, 2002 324 343,274
Niagara Mohawk Power Corp., 8.5s, 2023 1,200 1,313,100
Seabrook Station, 7.83s, 2019 862 912,197
Toledo Edison Co., 9.5s, 2001 1,385 1,464,873
Utilicorp United, Inc., 8.45s, 1999 600 609,192
--------------
$ 22,178,351
- ------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.3%
Columbia Gas Systems, Inc., 6.39s, 2000 $ 2,245 $ 2,261,680
Texas Gas Transmission Corp., 7.25s, 2027 1,100 1,082,653
--------------
$ 3,344,333
- ------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 57,297,967
- ------------------------------------------------------------------------------------------------------
Foreign Bonds - 0.6%
Canada - 0.1%
Gulf Canada Resources Ltd., 9.25s, 2004 (Oils) $ 850 $ 873,868
Rogers Cablesystems, Inc., 10.125s, 2012
(Telecommunications) 200 222,500
--------------
$ 1,096,368
- ------------------------------------------------------------------------------------------------------
Chile - 0.2%
Empresa Electric Guacolda S.A., 7.6s, 2001
(Utilities - Electric)## $ 1,500 $ 1,429,140
- ------------------------------------------------------------------------------------------------------
United Kingdom - 0.3%
Telewest Communications PLC, 5.25s, 2007
(Telecommunications)## $ 2,129 $ 3,595,052
- ------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 6,120,560
- ------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $62,299,139) $ 63,418,527
- ------------------------------------------------------------------------------------------------------
Convertible Bonds - 3.3%
- ------------------------------------------------------------------------------------------------------
Financial Institutions - 1.8%
ADT Operations, Inc., 0s, 2010 $ 9,010 $ 19,776,950
- ------------------------------------------------------------------------------------------------------
Financial Services - 0.6%
Bell Atlantic Financial Services, Inc., 4.25s, 2005## $ 6,100 $ 6,710,000
- ------------------------------------------------------------------------------------------------------
Telecommunications - 0.9%
Global Telesystems Group, Inc., 5.75s, 2010 $ 7,460 $ 10,024,375
- ------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $29,015,208) $ 36,511,325
- ------------------------------------------------------------------------------------------------------
Short-Term Obligations - 4.5%
- --------------------------------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp, due 5/06/99 $ 8,400 $ 8,394,552
Federal National Mortgage Assn., due 5/19/99 - 5/20/99 19,609 19,561,932
General Electric Capital Corp., due 5/03/99 10,000 9,997,255
Student Loan Marketing Assn., due 5/03/99 10,525 10,522,193
- ------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 48,475,932
- ------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $1,010,890,271) $1,099,425,813
Other Assets, Less Liabilities - (1.1)% (12,127,654)
- ------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $1,087,298,159
- ------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
See notes to financial statements
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities (Unaudited)
- --------------------------------------------------------------------------------
APRIL 30, 1999
- --------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $1,010,890,271) $1,099,425,813
Cash 8,432
Receivable for Fund shares sold 7,424,918
Receivable for investments sold 7,775,437
Interest and dividends receivable 3,291,054
Other assets 7,706
--------------
Total assets $1,117,933,360
--------------
Liabilities:
Distributions payable $ 513,914
Payable for Fund shares reacquired 5,442,204
Payable for investments purchased 24,071,909
Payable to affiliates -
Management fee 14,955
Shareholder servicing agent fee 2,987
Distribution and service fee 334,802
Administrative fee 448
Accrued expenses and other liabilities 253,982
--------------
Total liabilities $ 30,635,201
--------------
Net assets $1,087,298,159
==============
Net assets consist of:
Paid-in capital $ 955,580,399
Unrealized appreciation on investments and translation
of assets
and liabilities in foreign currencies 88,489,949
Accumulated undistributed net realized gain on
investments
and foreign currency transactions 47,161,260
Accumulated distributions in excess of net investment
income (3,933,449)
--------------
Total $1,087,298,159
==============
Shares of beneficial interest outstanding 95,683,603
==============
Class A shares:
Net asset value per share
(net assets of $370,969,048 / 32,589,114 shares of
beneficial interest outstanding) $11.38
======
Offering price per share (100 / 95.25 of net asset
value per share) $11.95
======
Class B shares:
Net asset value and offering price per share
(net assets of $553,444,844 / 48,759,247 shares of
beneficial interest outstanding) $11.35
======
Class C shares:
Net asset value and offering price per share
(net assets of $161,523,743 / 14,215,874 shares of
beneficial interest outstanding) $11.36
======
Class I shares:
Net asset value, offering price, and redemption
price per share (net assets of $1,360,524 / 119,368
shares of beneficial interest outstanding) $11.40
======
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, 1999
- --------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 10,907,852
Interest 3,998,200
Foreign taxes withheld (177,684)
------------
Total investment income $ 14,728,368
------------
Expenses -
Management fee $ 2,684,273
Trustees' compensation 19,730
Shareholder servicing agent fee 527,347
Distribution and service fee (Class A) 471,049
Distribution and service fee (Class B) 2,270,729
Distribution and service fee (Class C) 623,860
Administrative fee 50,648
Custodian fee 178,395
Interest expense 40,570
Printing 52,404
Postage 71,554
Auditing fees 8,136
Legal fees 1,020
Miscellaneous 763,862
------------
Total expenses $ 7,763,577
Fees paid indirectly (40,624)
Reduction of expenses by investment adviser (291,798)
------------
Net expenses $ 7,431,155
------------
Net investment income $ 7,297,213
------------
Realized and unrealized gain on investments:
Realized gain (identified cost basis) -
Investment transactions $ 51,380,586
Foreign currency transactions 200,866
------------
Net realized gain on investments and foreign currency
transactions $ 51,581,452
------------
Change in unrealized appreciation -
Investments $ 62,444,863
Translation of assets and liabilities in foreign currencies 26,178
------------
Net unrealized gain on investments and foreign
currency translation $ 62,471,041
------------
Net realized and unrealized gain on investments and
foreign currency $114,052,493
------------
Increase in net assets from operations $121,349,706
============
See notes to financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Statement of Changes in Net Assets
- -------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31, 1998
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 7,297,213 $ 9,071,521
Net realized gain on investments and foreign currency
transactions 51,581,452 43,877,107
Net unrealized gain on investments and foreign currency
translation 62,471,041 12,682,679
-------------- ------------
Increase in net assets from operations $ 121,349,706 $ 65,631,307
-------------- ------------
Distributions declared to shareholders -
From net investment income (Class A) $ (5,106,481) $ (4,357,952)
From net investment income (Class B) (4,474,297) (4,035,339)
From net investment income (Class C) (1,226,421) (1,060,616)
From net investment income (Class I) (18,136) (28,949)
In excess of net investment income (Class A) -- (134,059)
In excess of net investment income (Class B) -- (216,882)
In excess of net investment income (Class C) -- (52,495)
In excess of net investment income (Class I) -- (1,891)
From net realized gain on investments and foreign
currency transactions (Class A) (19,331,261) (12,514,640)
From net realized gain on investments and foreign
currency transactions (Class B) (22,418,158) (13,185,584)
From net realized gain on investments and foreign
currency transactions (Class C) (5,964,171) (3,245,184)
From net realized gain on investments and foreign
currency transactions (Class I) (67,729) (113,598)
-------------- ------------
Total distributions declared to shareholders $ (58,606,654) $(38,947,189)
-------------- ------------
Net increase in net assets from Fund share transactions $ 242,016,872 $550,284,827
-------------- ------------
Total increase in net assets $ 304,759,924 $576,968,945
Net assets:
At beginning of period 782,538,235 205,569,290
-------------- ------------
At end of period (including accumulated distributions in
excess of net investment income of $3,933,449 and
$405,327, respectively) $1,087,298,159 $782,538,235
============== ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
<CAPTION>
Financial Highlights
- ------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED --------------------------------------------------------------------
APRIL 30, 1999 1998 1997 1996 1995 1994
(UNAUDITED)
- ------------------------------------------------------------------------------------------------------------------------------
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $10.76 $10.39 $ 9.12 $ 8.20 $ 7.00 $ 7.86
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.11 $ 0.27 $ 0.32 $ 0.38 $ 0.31 $ 0.33
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.27 1.78 2.08 1.07 1.22 (0.63)
------ ------ ------ ------ ------ ------
Total from investment operations $ 1.38 $ 2.05 $ 2.40 $ 1.45 $ 1.53 $(0.30)
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.15) $(0.27) $(0.34) $(0.32) $(0.33) $(0.35)
From net realized gain on
investments and foreign currency
transactions (0.61) (1.39) (0.79) (0.21) -- (0.21)
In excess of net investment income -- (0.02) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.76) $(1.68) $(1.13) $(0.53) $(0.33) $(0.56)
------ ------ ------ ------ ------ ------
Net asset value - end of period $11.38 $10.76 $10.39 $ 9.12 $ 8.20 $ 7.00
====== ====== ====== ====== ====== ======
Total return(+) 13.41%++ 22.13% 28.62% 18.41% 22.48% (3.89)%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.11%+ 1.05% 1.10% 1.08% 0.83% 0.65%
Net investment income 2.02%+ 2.60% 3.27% 4.37% 4.30% 4.58%
Portfolio turnover 91% 124% 153% 137% 152% 115%
Net assets at end of period (000
omitted) $370,969 $324,098 $90,083 $60,345 $52,474 $42,027
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
(+) Total returns for Class A shares do not include the applicable sales charge. If the charge had been included, the results
would have been lower.
(S) The investment adviser voluntarily waived a portion of its management fee for the periods indicated. In addition, for the
year ended October 31, 1994, the investment adviser agreed to further reduce a portion of the Fund's expenses. If these
fees had not been waived, the net investment income per share and the ratios would have been:
Net investment income $ 0.11 $ 0.26 $ 0.30 $ 0.34 $ 0.28 $ 0.28
Ratios (to average net assets):
Expenses## 1.15%+ 1.15% 1.29% 1.42% 1.23% 1.41%
Net investment income 1.96%+ 2.50% 3.08% 4.03% 3.90% 3.82%
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31,
SIX MONTHS ENDED ----------------------------------------------------------------------
APRIL 30, 1999 1998 1997 1996 1995 1994
(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 $10.73 $10.36 $ 9.10 $ 8.18 $ 6.98 $ 7.84
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.06 $ 0.19 $ 0.24 $ 0.31 $ 0.24 $ 0.25
Net realized and unrealized gain
(loss) on investments and foreign
currency 1.28 1.79 2.08 1.07 1.22 (0.63)
------ ------ ------ ------ ------ ------
Total from investment operations $ 1.34 $ 1.98 $ 2.32 $ 1.38 $ 1.46 $(0.38)
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.11) $(0.20) $(0.27) $(0.25) $(0.26) $(0.27)
From net realized gain on
investments and foreign currency
transactions (0.61) (1.39) (0.79) (0.21) -- (0.21)
In excess of net investment income -- (0.02) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared to
shareholders $(0.72) $(1.61) $(1.06) $(0.46) $(0.26) $(0.48)
------ ------ ------ ------ ------ ------
Net asset value - end of period $11.35 $10.73 $10.36 $ 9.10 $ 8.18 $ 6.98
====== ====== ====== ====== ====== ======
Total return 13.03%++ 21.27% 27.59% 17.50% 21.43% (4.92)%
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.86%+ 1.80% 1.87% 1.89% 1.74% 1.72%
Net investment income 1.21%+ 1.85% 2.49% 3.53% 3.33% 3.51%
Portfolio turnover 91% 124% 153% 137% 152% 115%
Net assets at end of period (000
omitted) $553,445 $361,439 $91,973 $49,877 $33,239 $19,774
+ Annualized.
++ Not annualized.
# Per share data are based on average shares outstanding.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
(S) The investment adviser voluntarily waived a portion of its management fee for the periods indicated. In addition, for the
year ended October 31, 1994, the investment adviser agreed to further reduce a portion of the Fund's expenses. If these
fees had not been waived, the net investment income per share and the ratios would have been:
Net investment income $ 0.06 $ 0.18 $ 0.22 $ 0.28 $ 0.21 $ 0.20
Ratios (to average net assets):
Expenses## 1.93%+ 1.90% 2.06% 2.23% 2.14% 2.48%
Net investment income 1.15%+ 1.75% 2.30% 3.19% 2.93% 2.74%
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
PERIOD
YEAR ENDED OCTOBER 31, ENDED
SIX MONTHS ENDED --------------------------------------------------- OCTOBER 31,
APRIL 30, 1999 1998 1997 1996 1995 1994*
(UNAUDITED)
- -------------------------------------------------------------------------------------------------------------------------------
CLASS C
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of
period $10.75 $10.37 $ 9.10 $ 8.18 $ 6.99 $ 7.48
------ ------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.06 $ 0.19 $ 0.24 $ 0.31 $ 0.24 $ 0.25
Net realized and unrealized gain
(loss) on investments and
foreign currency 1.26 1.80 2.09 1.07 1.21 (0.54)
------ ------ ------ ------ ------ ------
Total from investment
operations $ 1.32 $ 1.99 $ 2.33 $ 1.38 $ 1.45 $(0.29)
------ ------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.10) $(0.20) $(0.27) $(0.25) $(0.26) $(0.20)
From net realized gain on
investments and foreign
currency transactions (0.61) (1.39) (0.79) (0.21) -- --
In excess of net investment
income -- (0.02) -- -- -- --
------ ------ ------ ------ ------ ------
Total distributions declared
to shareholders $(0.71) $(1.61) $(1.06) $(0.46) $(0.26) $(0.20)
------ ------ ------ ------ ------ ------
Net asset value - end of period $11.36 $10.75 $10.37 $ 9.10 $ 8.18 $ 6.99
====== ====== ====== ====== ====== ======
Total return 13.02%++ 21.25% 27.71% 17.57% 21.19% (3.87)%++
Ratios (to average net assets)/
Supplemental data(S):
Expenses## 1.86%+ 1.80% 1.85% 1.82% 1.81% 1.65%+
Net investment income 1.20%+ 1.85% 2.47% 3.60% 3.32% 3.56%+
Portfolio turnover 91% 124% 153% 137% 152% 115%
Net assets at end of period
(000 omitted) $161,524 $95,856 $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.
## The Fund has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash maintained
by the Fund with its custodian and dividend disbursing agent. For fiscal years ending after September 1, 1995, the Fund's
expenses are calculated without reduction for this expense offset arrangement.
(S) The investment adviser voluntarily waived a portion of its management fee for the periods indicated. In addition, for the
period ended October 31, 1994, the investment adviser agreed to further reduce a portion of the Fund's expenses. If these
fees had not been waived, the net investment income per share and the ratios would have been:
Net investment income $ 0.06 $ 0.18 $ 0.22 $ 0.28 $ 0.21 $ 0.20
Ratios (to average net assets):
Expenses## 1.94%+ 1.90% 2.04% 2.16% 2.21% 2.41%+
Net investment income 1.14%+ 1.75% 2.28% 3.26% 2.83% 2.80%+
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED PERIOD ENDED
APRIL 30, 1999 OCTOBER 31, 1998 OCTOBER 31, 1997*
(UNAUDITED)
- ---------------------------------------------------------------------------------------------------------------------------
CLASS I
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $10.78 $10.39 $ 8.90
------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.12 $ 0.30 $ 0.29
Net realized and unrealized gain on
investments and foreign currency 1.27 1.80 1.48
------ ------ ------
Total from investment operations $ 1.39 $ 2.10 $ 1.77
------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.16) $(0.29) $(0.28)
From net realized gain on investments
and foreign currency transactions (0.61) (1.39) --
In excess of net investment income -- (0.03) --
------ ------ ------
Total distributions declared to
shareholders $(0.77) $(1.71) $(0.28)
------ ------ ------
Net asset value - end of period $11.40 $10.78 $10.39
====== ====== ======
Total return 13.63%++ 22.52% 20.15%++
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.86%+ 0.80% 0.86%+
Net investment income 2.25%+ 2.84% 3.39%+
Portfolio turnover 91% 124% 153%
Net assets at end of period (000 omitted) $1,361 $1,145 $ 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 has an expense offset arrangement which reduces the Fund's custodian fee based upon the amount of cash
maintained by the Fund with its custodian and dividend disbursing agent. The Fund's expenses are calculated
without reduction for this expense offset arrangement.
(S) The investment adviser voluntarily waived a portion of its management fee for the periods indicated. If this fee
had not been waived, the net investment income per share and the ratios would have been:
Net investment income $ 0.12 $ 0.29 $ 0.27
Ratios (to average net assets):
Expenses## 0.91%+ 0.90% 1.05%+
Net investment income 2.19%+ 2.74% 3.20%+
See notes to financial statements
</TABLE>
<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. Investments
in foreign securities are vulnerable to the effects of changes in the relative
values of the local currency and the U.S. dollar and to the effects of changes
in each country's legal, political, and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues and forward contracts, 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.
Security Loans - The Fund may lend its securities to member banks of the
Federal Reserve System and to member firms of the New York Stock Exchange or
subsidiaries thereof. State Street Bank and Trust Company ("State Street"), as
agent, loans the securities to certain brokers (the "Borrowers") approved by
the Fund. The loans are collateralized at all times by 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.
At April 30, 1999, the value of securities loaned was $2,714,713. These loans
were collateralized by U.S. Treasury securities of $2,791,563. 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 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 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.
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 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 reduction of expenses in the Statement of Operations.
The Fund pays no compensation directly to its Trustees who are officers of the
investment adviser, or to officers of the Fund, all of whom receive remuneration
for their services to the Fund from MFS. Certain officers and Trustees of the
Fund are officers or directors of MFS, MFS Fund Distributors, Inc. (MFD), and
MFS Service Center, Inc. (MFSC). The Fund has an unfunded defined benefit plan
for all of its independent Trustees and Mr. Bailey. Included in Trustees'
compensation is a net periodic pension expense of $5,589 for the six months
ended April 30, 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
$412,866 for the six months ended April 30, 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 $22,407 for the six months ended April 30,
1999. 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, 1999, 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 $8,535 and $1,293 for Class B and Class C shares, respectively, for
the six months ended April 30, 1999. Fees incurred under the distribution plan
during the six months ended April 30, 1999, were 1.00% of each class' average
daily net assets attributable to Class B and Class C shares on an annualized
basis.
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,
1999, were $4,323, $377,928, and $43,146 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 0.10%. Prior to April 1, 1999, the fee was calculated as a percentage
of the average daily net assets at an effective 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 $ 54,502,247 $ 85,883,393
------------ ------------
Investments (non-U.S. government securities) $972,056,515 $767,111,577
------------ ------------
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 $ 1,010,890,271
---------------
Gross unrealized appreciation $ 127,002,977
Gross unrealized depreciation (38,467,435)
---------------
Net unrealized appreciation $ 88,535,542
===============
(5) Shares of Beneficial Interest
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
Class A Shares
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998
----------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 17,186,152 $ 184,408,127 27,132,195 $281,809,080
Shares issued to shareholders
in reinvestment of
distributions 1,451,336 15,183,868 1,483,437 14,492,448
Shares reacquired (16,155,171) (175,502,539) (7,181,632) (74,517,887)
----------- ------------- ---------- ------------
Net increase 2,482,317 $ 24,089,456 21,434,000 $221,783,641
=========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
Class B Shares
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998
----------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 17,069,537 $ 182,991,294 26,385,454 $275,542,126
Shares issued to shareholders
in reinvestment of
distributions 1,960,254 20,407,095 1,405,140 13,677,225
Shares reacquired (3,940,181) (42,317,997) (2,998,536) (31,238,443)
----------- ------------- ---------- ------------
Net increase 15,089,610 $ 161,080,392 24,792,058 $257,980,908
=========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
Class C Shares
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998
----------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 6,231,955 $ 66,944,089 7,452,847 $ 77,990,473
Shares issued to shareholders
in reinvestment of
distributions 452,842 4,719,957 304,674 2,974,079
Shares reacquired (1,389,618) (14,960,216) (1,033,828) (10,820,419)
----------- ------------- ---------- ------------
Net increase 5,295,179 $ 56,703,830 6,723,693 $ 70,144,133
=========== ============= ========== ============
</TABLE>
<TABLE>
<CAPTION>
Class I Shares
SIX MONTHS ENDED APRIL 30, 1999 YEAR ENDED OCTOBER 31, 1998
----------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 25,050 $ 271,692 33,150 $ 356,454
Shares issued to shareholders
in reinvestment of
distributions 7,407 77,609 14,702 143,189
Shares reacquired (19,313) (206,107) (11,414) (123,498)
----------- ------------- ---------- ------------
Net increase 13,144 $ 143,194 36,438 $ 376,145
=========== ============= ========== ============
</TABLE>
(6) Line of Credit
The Fund and other affiliated funds participate in a $720 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. At April 30, 1999, there were
no loans outstanding. The average dollar amount of borrowings was $1,413,126,
the weighted average interest rate on these borrowings was 5.71% and interest
expense incurred on the borrowings amounted to $40,570 for the six months
ended April 30, 1999. The commitment fee allocated to the Fund for the six
months ended April 30, 1999, was $3,896.
<PAGE>
<TABLE>
<S> <C>
MFS(R) UTILITIES FUND
TRUSTEES SECRETARY
Richard B. Bailey* - Private Investor; Stephen E. Cavan*
Former Chairman and Director (until 1991), MFS
Investment Management ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Marshall N. Cohan - Private Investor
CUSTODIAN
Lawrence H. Cohn, M.D. - Chief of Cardiac State Street Bank and Trust Company
Surgery, Brigham and Women's Hospital;
Professor of Surgery, Harvard Medical School INVESTOR INFORMATION
For MFS stock and bond market outlooks, call
The Hon. Sir J. David Gibbons, KBE - Chief toll free: 1-800-637-4458 anytime from a
Executive Officer, Edmund Gibbons Ltd.; touch-tone telephone.
Chairman, Colonial Insurance Company, 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
Walter E. Robb, III - President and Treasurer, from 9 a.m. to 5 p.m. Eastern time (or leave a
Benchmark Advisors, Inc. (corporate financial message anytime).
consultants); President, Benchmark Consulting
Group, Inc. (office services) INVESTOR SERVICE
MFS Service Center, Inc.
Arnold D. Scott* - Senior Executive P.O. Box 2281
Vice President, Director, and Secretary, Boston, MA 02107-9906
MFS Investment Management
For general information, call toll free:
Jeffrey L. Shames* - Chairman, Chief 1-800-225-2606 any business day from
Executive Officer, and Director, 8 a.m. to 8 p.m. Eastern time.
MFS Investment Management
For service to speech- or hearing-impaired,
J. Dale Sherratt - President, Insight call toll free: 1-800-637-6576 any business day
Resources, Inc. (acquisition planning from 9 a.m. to 5 p.m. Eastern time. (To use
specialists) Ward Smith - Former Chairman this service, your phone must be equipped with
(until 1994), NACCO Industries (holding a Telecommunications Device for the Deaf.) For
company) share prices, account balances, and exchanges,
call toll free: 1-800-MFS-TALK (1-800-637-8255)
INVESTMENT ADVISER anytime from a touch-tone telephone.
Massachusetts Financial Services Company
500 Boylston Street WORLD WIDE WEB
Boston, MA 02116-3741 www.mfs.com
DISTRIBUTOR
MFS Fund Distributors, Inc.
500 Boylston Street
Boston, MA 02116-3741
PORTFOLIO MANAGER
Maura A. Shaughnessy*
TREASURER
W. Thomas London*
ASSISTANT TREASURERS
Mark E. Bradley*
Ellen Moynihan*
James O. Yost*
*Affiliated with the Investment Adviser
</TABLE>
<PAGE>
MFS(R) UTILITIES 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 Fund Distributors, Inc., 500 Boylston Street, Boston, MA 02116-3741
MUF-3 6/99 119M 35/235/335/835
