<PAGE>
[Logo] M F S(R)
INVESTMENT MANAGEMENT
We invented the mutual fund(R)
[Graphic Omitted]
MFS(R) UTILITIES FUND
ANNUAL REPORT o OCTOBER 31, 2000
<PAGE>
TABLE OF CONTENTS
Letter from the Chairman .................................................. 1
Management Review and Outlook ............................................. 5
Performance Summary ....................................................... 10
Portfolio of Investments .................................................. 14
Financial Statements ...................................................... 22
Notes to Financial Statements ............................................. 29
Independent Auditors' Report .............................................. 35
Trustees and Officers ..................................................... 37
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,
If you've been reading our fund reports for any length of time, you've probably
sensed the pride we have in our research process. More than anything else, we
think MFS Original Research(R) -- and the performance results it has yielded for
shareholders -- makes us unique among investment management companies. We think
that uniqueness stems from three factors: philosophy, process, and people.
PHILOSOPHY
In over 75 years of managing mutual funds, we've developed a number of beliefs
about the best ways to invest over a variety of market conditions. First, we
believe in bottom-up research, which means we use a company-by-company,
one-security-at-a-time approach to building a portfolio. What we look for is the
truth about the fundamentals of a company's business -- things such as the
ability of management to execute its business plan, the ability of that plan to
be scaled up as the company grows, actual demand for the company's products and
services, cash flow, profits, and earnings.
Second, we believe that, over the long term, stock prices follow earnings. In
our view, stock prices are basically a multiple of projected earnings, with the
multiple increasing as the market perceives that a company has something
customers want and will continue to want. One of the major elements of Original
Research(SM) is doing our best to project a company's future earnings and
determine how much the market will pay for those earnings.
Third, we believe there are at least three ways to potentially achieve
competitive long-term performance: be early, uncover second chances, and avoid
mistakes. All of these are based on bottom-up research. In both domestic and
international markets, early discovery has historically been a hallmark of our
investment style. Some of the stocks with which MFS has been most successful are
those in which we've taken large positions before the market discovered or
believed in them. Similarly, some of our best fixed-income investments have
been early positions in companies or governments that our research revealed were
potential candidates for credit upgrades. (A credit upgrade causes the value of
a bond to rise because it indicates the market has increased confidence that
principal and interest on the bond will be repaid.)
"Second-chance" opportunities are companies whose stock prices have stumbled but
that we believe still have the potential to be market leaders. For example, a
quarterly earnings shortfall of a few cents may cause the market to temporarily
lose confidence in a company. If we believe the business remains fundamentally
strong, we may use the price decline as a buying opportunity.
Avoiding mistakes is another way we feel Original Research may help performance.
In fixed-income investing this means, among other things, trying to be better
than our peers at avoiding bond issuers that may default. In equity investing,
avoiding mistakes means we strive to know a company and its industry well enough
to distinguish truth from hype.
PROCESS
We acquire our information firsthand, by researching thousands of companies to
determine which firms may make good investments. Our analysis of an individual
company may include
o face-to-face contact with senior management as well as frontline workers
o analysis of the company's financial statements and balance sheets
o contact with the company's current and potential customers
o contact with the company's competitors
o our own forecasts of the company's future market share, cash flow, and
earnings
Our analysts and portfolio managers disseminate this information in the form of
daily notes e-mailed worldwide to all members of our investment team. This
ensures that our best ideas are shared throughout the company, without barriers
between equity and fixed-income, international and domestic, or value and growth
investment areas. We believe this allows each of our portfolio managers -- and
thus each of our investors -- to potentially benefit from any relevant item of
Original Research.
John Ballen, our President and Chief Investment Officer, has often said that the
thought he hopes managers will have when they read the daily notes is, "I could
never perform as well at any other investment company, because nowhere else
could the quality of the research be this good."
PEOPLE
Our team of research analysts and portfolio managers traces its roots back to
1932, when we created one of the first in-house research departments in the
industry. Today, we believe we have an investment team distinguished for its
unique blend of talent, continuity, and cohesiveness.
MFS' team culture and commitment to quality research have proven to be of
tremendous value in attracting some of the best and brightest talent from
leading business schools and from other investment management companies. Our
company culture was a key factor in our recognition by Fortune magazine in its
January 10, 2000, issue as one of the "100 Best Companies to Work For" in
America. As befits a great team, our people have tended to stick around -- the
average MFS tenure of our portfolio managers is 11 years, with over 16 years in
the investment industry. Contributing to this continuity is our policy that all
equity portfolio managers are promoted from within, after distinguishing
themselves first as research analysts. And because many of us who are now
managing funds or managing the company itself have been working together for
well over a decade, we have a cohesiveness, a shared philosophy of investing,
and a unity of purpose that we believe bodes well for the future of the company.
We also have scale. Our research analyst team is over 55 members strong and
growing. Each analyst is our in-house expert on a specific industry or group of
industries in a specific region of the globe. In pursuing their research, our
analysts and portfolio managers each year will visit more than 2,000 companies
throughout the world, meet with representatives from more than 3,000 companies
at one of our four worldwide offices, attend roughly 5,000 company presentations
sponsored by major Wall Street firms, and consult with over 1,000 analysts from
hundreds of U.S. and foreign brokerage houses.
All of this culminates in our analysts making buy and sell recommendations on a
wide range of potential investments for all of our portfolios. In the end, the
goal of Original Research is to try to give our portfolio managers an advantage
over their peers -- to enable our managers to deliver competitive performance by
finding opportunities before they are generally recognized by the market, and by
avoiding mistakes whenever possible. Original Research does, we believe, make a
difference.
As always, we appreciate your confidence in MFS and welcome any questions or
comments you may have.
Respectfully,
/s/ Jeffrey L. Shames
Jeffrey L. Shames
Chairman and Chief Executive Officer
MFS Investment Management(R)
November 16, 2000
A prospectus containing more complete information on any MFS product, including
charges and expenses, can be obtained from your investment professional. Please
read it carefully before you invest or send money. Investments in mutual funds
will fluctuate and may be worth more or less upon redemption.
The opinions expressed in this letter are those of Jeffrey L. Shames, and no
forecasts can be guaranteed.
<PAGE>
MANAGEMENT REVIEW AND OUTLOOK
[Photo of Maura A. Shaughnessy]
Maura A. Shaughnessy
For the year ended October 31, 2000, Class A shares of the fund provided a total
return of 25.88%, Class B shares 25.04%, Class C shares 24.91%, and Class I
shares 26.14%. These returns, which include the reinvestment of any
distributions but exclude the effects of any sales charges, compare to a 36.96%
return over the same period for the fund's benchmark, the Standard & Poor's
(S&P) Utility Index. The S&P Utility Index is an unmanaged,
market-value-weighted total return index of all electric and natural gas utility
stocks in the S&P 500 Composite Index. During the same period, the average
utility fund tracked by Lipper Inc., an independent firm that reports mutual
fund performance, returned 13.68%.
Q. WHY HAS THE UTILITIES SECTOR DONE SO WELL THIS PAST YEAR?
A. Electric and natural gas stocks have had a terrific run. The market's
volatility last spring propelled investors toward safe-haven sectors like
utilities. Then some big mergers within the industry attracted further
investor interest. Finally, a supply/demand imbalance became particularly
evident in California over the past summer as growth in generation failed to
keep up with demand. Those utilities that were able to sell excess capacity
to the open market, such as natural gas and electrics, did so at very
attractive prices, strengthening earnings and ultimately boosting stock
prices. However, telecommunications stocks -- which are not included in the
S&P Utility Index, but were included in the fund -- were down over the same
period.
Q. WHY DO YOU THINK TELECOM STOCKS HAVE HAD SUCH A TOUGH YEAR?
A. They certainly did get hammered on all fronts. The stocks of the established
phone service providers suffered as revenue and earnings growth in the local
and long-distance voice markets slowed. New entrants -- including the
competitive local exchange carriers (CLECs) and new long-distance carriers
-- cut into the market share of the incumbents while also forcing prices
down. The stocks of the new entrants, however, didn't fare much better. Two
of the CLECs filed for bankruptcy, which hurt stock prices for all the
start-ups. Once that happened, investors began worrying about whether some
of the new entrants would be able to raise the necessary capital to fund
their business plans. This sent stock prices even lower.
Q. GIVEN THIS ENVIRONMENT, DID YOU AVOID TELECOM STOCKS?
A. No. In fact, we kept about 50% of the fund's stock investments in telecom
throughout the year. We take a relative value approach, which means we're
always trying to buy companies that we think have good earnings growth
prospects and whose stocks are selling at reasonable prices compared to
their company's history, peers, and outlook. The downturn in the telecom
sector gave us a great opportunity to buy into what we believe are strong
companies whose stocks had been unfairly penalized. One of the names we
added to was wireless operator Vodafone. With its dominant market position
in Europe, economies of scale, and conservative balance sheet, we think
Vodafone is well-positioned to capitalize on the rapid growth of wireless
telecommunications. We also added to our stake in Qwest Communications,
which recently acquired US West, making it one of the largest fully
integrated telecom companies in the world. We expect Qwest to benefit from
its concentration in Internet-related businesses and from the synergies and
cost reductions associated with the US West merger.
Q. WITH SO MUCH IN TELECOM, HOW DID THE FUND MANAGE TO BEAT ITS LIPPER PEERS?
A. We typically keep a portion of the fund's assets in convertible securities
and bonds. This has helped us lock in a competitive dividend yield, and
allowed us to focus the remainder of the fund's assets on stocks with what
we see as strong growth prospects that often reinvest their capital in the
business, rather than paying it out in the form of a dividend.
Growth-oriented utilities were among the top performers this past year. Of
our stock investments, holdings in electrics and natural gas did quite well.
Q. WHICH STOCKS HAD THE BIGGEST IMPACT ON PERFORMANCE?
A. AES was a real winner, more than doubling in price during the past 12
months. As the largest and most diversified independent power producer
worldwide, it benefited greatly from the constrained supply/demand situation
here in the United States. Peco, which merged at the end of the period with
Unicom to form Exelon, was up over 60% for the year. One of the largest
electrics out there, Peco uses nuclear power to contain costs and generate
excess power, which it sold at favorable prices. Both Coastal and El Paso,
which are merging to form the largest natural gas pipelines in the country,
also did quite well and boosted performance.
Q. WERE ANY TOP NAMES DISAPPOINTMENTS?
A. Yes. We believe Verizon turned in weak results in part because of the
negative sentiment surrounding the telecom industry. But investors also
became concerned about the company's future growth, given its dependence on
revenues from voice traffic and an increasingly competitive environment.
Plus, Verizon has been slower than expected in ramping up its data-oriented
businesses. Williams Companies was another disappointment, despite strong
results in its energy services and pipeline businesses. The company has an
85% ownership interest in Williams Communications Group, which reported
higher-than-expected operating losses related to the build-out of its
telecom network. We held on to Williams because we expect its stock price to
rally once the overall outlook for the telecom sector improves.
Q. WHAT CHANGES DID YOU MAKE TO THE FUND DURING THE PERIOD?
A. Our international stake was reduced a bit over the past year. We cut our
stake in European telecom carriers last winter amid concerns that they might
have to overpay in the European wireless license auctions -- which is what
happened. We added a few new telecom investments, including Telefonos de
Mexico and China Mobile, both of which serve markets that are at early
stages of penetration for both wire line and wireless phone services. We
also slightly trimmed holdings in the natural gas area, paring back on names
such as Enron that have had strong runs.
Q. WHERE HAVE YOU BEEN BUYING MOST RECENTLY?
A. During the late summer and early fall, we built a sizable stake in Edison
International, an electric utility that services southern California. Power
shortages there this past summer had led to a spike in pricing. This caused
the government to cap the prices utilities could charge consumers -- even as
the utilities' costs soared. Edison ended up with unrecovered costs on its
balance sheet. The Wall Street Journal ran an article on the company,
suggesting that it might have to declare bankruptcy. This sent the stock
price tumbling and created a great buying opportunity. We believe Edison is
a well-managed utility that is unlikely to go out of business and we expect
the government to eventually lift the price cap and help the company recover
its losses.
Q. WHERE DO YOU EXPECT UTILITIES TO GO FROM HERE?
A. If the market remains volatile, we believe electric and natural gas
utilities will continue to benefit as investors favor more defensive
sectors. If the market gains momentum, we think we'll most likely see
investors shift into higher-growth sectors such as telecom. At some point,
we believe gains in electric and natural gas will most likely moderate even
as earnings prospects remain strong. We are confident that beaten-down
telecom stocks will eventually rally -- we just don't know when. We believe
the fund is in a strong position, regardless of which way the market moves.
/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 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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MAURA A. SHAUGHNESSY, CFA, IS SENIOR VICE PRESIDENT OF MFS INVESTMENT
MANAGEMENT(R). SHE IS PORTFOLIO MANAGER OF THE MULTI-CAP CORE AND
UTILITIES PORTFOLIOS OF OUR MUTUAL FUNDS AND VARIABLE ANNUITIES.
MAURA 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 (CFA). PRIOR TO JOINING MFS SHE WORKED FOR HARVARD MANAGEMENT
CO. AND THE FEDERAL RESERVE BANK.
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 GLOBAL, 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 charges and expenses, for any MFS product
is available from your investment professional, or by calling MFS at
1-800-225-2606. Please read it carefully before investing or sending money.
<PAGE>
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FUND FACTS
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OBJECTIVE: SEEKS 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: $2.6 BILLION NET ASSETS AS OF OCTOBER 31, 2000
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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 the 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,
February 14, 1992, through October 31, 2000. Index information is from
February 1, 1992.)
MFS Utilities Fund Standard & Poor's
- Class A Utility Index
---------------------------------------------------
10/92 $10,273 $11,041
10/94 12,274 12,148
10/96 17,801 17,360
10/98 27,961 24,164
10/00 43,311 33,755
<TABLE>
TOTAL RATES OF RETURN THROUGH OCTOBER 31, 2000
<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 +25.88% +89.17% +188.09% +354.71%
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Average Annual Total Return Excluding Sales Charge +25.88% +23.68% + 23.57% + 18.99%
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Average Annual Total Return Including Sales Charge +19.90% +21.69% + 22.37% + 18.32%
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<CAPTION>
CLASS B
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +25.04% +85.17% +177.60% +328.27%
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Average Annual Total Return Excluding Sales Charge +25.04% +22.80% + 22.65% + 18.17%
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Average Annual Total Return Including Sales Charge +21.04% +22.13% + 22.48% + 18.17%
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<CAPTION>
CLASS C
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Cumulative Total Return Excluding Sales Charge +24.91% +85.05% +177.86% +330.27%
----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +24.91% +22.77% + 22.68% + 18.23%
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Average Annual Total Return Including Sales Charge +23.91% +22.77% + 22.68% + 18.23%
----------------------------------------------------------------------------------------------------------
<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 +26.14% +90.78% +191.13% +359.50%
----------------------------------------------------------------------------------------------------------
Average Annual Total Return Excluding Sales Charge +26.14% +24.02% + 23.83% + 19.13%
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<CAPTION>
COMPARATIVE INDICES(+)
1 Year 3 Years 5 Years Life*
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<S> <C> <C> <C> <C>
Average utility fund** +13.68% +18.09% + 16.66% + 13.55%
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Standard & Poor's Utility Index# +36.96% +20.95% + 16.49% + 14.92%
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* For the period from the commencement of the fund's investment operations, February 14, 1992,
through October 31, 2000. Index information is from February 1, 1992.
(+) Average annual rates of return.
** Source: Lipper 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 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 includes 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 these the results would have been less favorable. See the prospectus for
details. All results are historical and assume the reinvestment of capital
gains.
INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE, AND SHARES, WHEN REDEEMED,
MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. MORE RECENT RETURNS MAY BE
MORE OR LESS THAN THOSE SHOWN. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE
RESULTS.
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.
Investments in foreign and emerging market securities may be unfavorably
affected by interest-rate and currency-exchange-rate changes, as well as
market, economic, and political conditions of the countries where investments
are made. There may be greater returns but also greater risk than with U.S.
investments.
This portfolio is nondiversified and has more risk than one that is diversified.
The portfolio invests in a limited number of companies and may have more risk
because a change in one security's value may have a more significant effect on
the portfolio's net asset value. An investment in the portfolio is not a
complete investment program.
PORTFOLIO CONCENTRATION AS OF OCTOBER 31, 2000
FIVE LARGEST STOCK SECTORS
UTILITIES & COMMUNICATIONS 89.3%
LEISURE 7.3%
SPECIAL PRODUCTS & SERVICES 2.2%
TECHNOLOGY 1.1%
BASIC MATERIALS 0.1%
TOP 10 STOCK HOLDINGS
EXELON CORP. 4.5% QWEST COMMUNICATIONS INTERNATIONAL,
Utility services company INC. 2.5%
Internet data communications company
VERIZON COMMUNICATIONS 3.9%
Telecommunications company EL PASO ENERGY CORP. 2.5%
Natural gas pipeline company
ALLTEL CORP. 3.2%
Information technology company AES CORP. 2.2%
Electric power plant operator
COASTAL CORP. 3.1%
Oil and natural gas company EDISON INTERNATIONAL 2.1%
Electric power plant operator
WILLIAMS COMPANIES, INC. 3.0%
Natural gas pipeline company ENRON CORP. 2.1%
Natural gas pipeline company
The portfolio is actively managed, and current holdings may be different.
<PAGE>
<TABLE>
PORTFOLIO OF INVESTMENTS -- October 31, 2000
Stocks - 75.8%
<CAPTION>
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ISSUER SHARES VALUE
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<S> <C> <C>
U.S. Stocks - 62.9%
Business Services - 0.4%
Adelphia Business Solutions* 208,200 $ 1,301,250
Nextel Partners, Inc.* 349,400 8,560,300
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$ 9,861,550
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Cellular Telephones - 1.4%
Sprint Corp. (PCS Group)* 659,200 $ 25,132,000
Voicestream Wireless Corp.* 85,800 11,282,700
--------------
$ 36,414,700
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Computer Software - Systems - 0.1%
Digex, Inc.* 82,500 $ 3,238,125
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Electric and Gas Utility Revenue - 0.2%
SCANA Corp. 198,788 $ 5,267,882
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Energy - 3.1%
Dynegy, Inc. 644,400 $ 29,843,775
Energy East Corp. 1,537,000 31,028,188
NRG Energy, Inc.* 686,400 17,846,400
Southern Energy, Inc.* 128,900 3,512,525
--------------
$ 82,230,888
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Metals and Minerals - 0.1%
USEC, Inc. 349,600 $ 1,791,700
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Oils - 2.7%
Coastal Corp. 945,100 $ 71,295,981
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Special Products and Services - 1.6%
MCN Energy Group, Inc. 1,718,600 $ 42,320,525
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Telecommunications - 17.0%
Allegiance Telecom, Inc.* 800,200 $ 25,156,288
Alltel Corp. 1,142,100 73,594,069
AT&T Corp.* 384,800 9,595,950
AT&T Corp., "A"* 589,200 10,605,600
BroadWing, Inc.* 1,341,064 37,885,058
Cox Communications, Inc.* 244,600 10,777,688
Focal Communications Corp.* 261,090 3,785,805
General Motors Corp., "H"* 399,600 12,947,040
McLeodUSA, Inc., "A"* 711,400 13,694,450
Metromedia Fiber Network, Inc., "A"* 897,420 17,050,980
Mpower Communications Corp.* 219,492 1,426,698
NTL, Inc.* 328,993 14,455,130
Qwest Communications International, Inc.* 1,187,300 57,732,462
SBC Communications, Inc. 745,071 42,981,283
UnitedGlobalCom, Inc.* 314,698 10,011,330
Verizon Communications 1,550,312 89,627,412
Williams Communications Group, Inc.* 259,600 4,753,925
Winstar Communications, Inc.* 449,300 8,761,350
--------------
$ 444,842,518
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Telecommunications and Cable - 1.2%
Comcast Corp., "A"* 773,700 $ 31,528,275
--------------------------------------------------------------------------------------------------------
Telecom - Wire Line - 1.3%
XO Communications, Inc.* 977,600 $ 32,978,725
--------------------------------------------------------------------------------------------------------
Utilities - Electric - 22.4%
AES Corp.* 916,500 $ 51,782,250
Allegheny Energy, Inc. 420,100 17,197,844
Atmos Energy Corp. 330,199 7,635,852
Calpine Corp.* 309,600 24,439,050
CMS Energy Corp. 818,995 22,112,865
Constellation Energy Group, Inc. 505,300 21,064,694
Duke Energy Corp. 392,000 33,883,500
Edison International 2,066,800 49,344,850
El Paso Electric Co.* 428,300 5,135,317
Entergy Corp. 460,200 17,631,412
Exelon Corp.* 1,730,062 104,019,978
FPL Group, Inc. 184,500 12,177,000
Keyspan Corp. 1,058,800 37,256,525
Montana Power Co. 734,600 20,752,450
NiSource, Inc. 752,500 18,765,469
Northeast Utilities, Co. 452,100 9,211,537
PG&E Corp. 1,030,700 27,764,481
Pinnacle West Capital Corp. 877,600 38,120,750
Public Service Enterprise Group 968,300 40,184,450
Reliant Energy, Inc. 517,700 21,387,481
Wisconsin Energy Corp. 295,100 5,551,569
--------------
$ 585,419,324
--------------------------------------------------------------------------------------------------------
Utilities - Gas - 11.4%
AGL Resources, Inc. 413,200 $ 8,418,950
Columbia Energy Group 303,800 21,854,613
El Paso Energy Corp. 915,900 57,415,481
Energen Corp. 460,000 13,167,500
Enron Corp. 595,900 48,901,044
Kinder Morgan, Inc. 858,500 33,105,906
MDU Resources Group, Inc. 329,400 9,634,950
National Fuel Gas Co. 238,800 12,805,650
NICOR, Inc. 655,600 23,150,875
Williams Companies, Inc. 1,657,960 69,323,452
--------------
$ 297,778,421
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Total U.S. Stocks $1,644,968,614
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Foreign Stocks - 12.9%
Australia - 0.5%
Cable & Wireless Optus Ltd. (Telecommunications) 6,248,400 $ 13,227,594
--------------------------------------------------------------------------------------------------------
Bermuda - 1.1%
Global Crossing Ltd. (Telecommunications)* 1,255,200 $ 29,654,100
--------------------------------------------------------------------------------------------------------
Brazil - 0.1%
Celular CRT Participacoes, Preferred (Telecommunications)* 1,059 $ 347,417
Companhia Riogrand Telecomunicacoes, Preferred, "A"
(Utilities - Telephone) 5,271 1,610,586
--------------
$ 1,958,003
--------------------------------------------------------------------------------------------------------
Canada - 1.5%
BCE, Inc. (Telecommunications) 698,100 $ 18,892,331
Nortel Networks Corp. (Telecommunications) 339,262 15,436,421
Telesystem International Wireless, Inc. (Telecommunications)* 423,500 4,340,875
--------------
$ 38,669,627
--------------------------------------------------------------------------------------------------------
China - 0.9%
China Mobile Ltd. (Telecommunications)* 3,804,000 $ 24,389,306
--------------------------------------------------------------------------------------------------------
Germany - 0.3%
VEBA AG (Oil and Gas) 178,300 $ 9,059,102
--------------------------------------------------------------------------------------------------------
Hungary - 0.4%
Magyar Tavkozlesi Rt., ADR (Telecommunications)* 399,200 $ 9,381,200
--------------------------------------------------------------------------------------------------------
Israel - 0.2%
Partner Communications Co. Ltd., ADR (Cellular Telephones)* 1,099,575 $ 6,597,450
--------------------------------------------------------------------------------------------------------
Japan - 0.5%
Tokyo Gas Co. Ltd. (Gas) 4,538,000 $ 11,854,537
--------------------------------------------------------------------------------------------------------
Mexico - 1.5%
Grupo Iusacell S.A. de C.V., ADR (Telecommunications)* 530,130 $ 6,891,690
Telefonos de Mexico S.A., ADR (Telecommunications) 606,080 32,690,440
--------------
$ 39,582,130
--------------------------------------------------------------------------------------------------------
Netherlands - 0.9%
Completel Europe N.V. (Telecommunications)* 682,070 $ 4,867,175
Completel Europe N.V. (Telecommunications)* 146,250 1,096,875
Libertel N.V. (Cellular Telecommunications)* 739,091 9,626,275
United Pan-Europe Communications N.V
(Telecommunications and Cable)* 418,500 7,332,761
--------------
$ 22,923,086
--------------------------------------------------------------------------------------------------------
Spain - 2.6%
Telefonica de Espana S.A., ADR (Telecommunications) 625,084 $ 36,215,804
Telefonica S.A. (Telecommunications)* 304,500 5,805,536
Union Electrica Fenosa S.A. (Utilities - Electric) 1,412,500 26,115,460
--------------
$ 68,136,800
--------------------------------------------------------------------------------------------------------
Sweden - 0.2%
Tele1 Europe Holdings AB (Telecommunications)* 550,360 $ 4,243,161
Tele1 Europe Holdings AB, ADR (Telecommunications)* 27,900 219,712
--------------
$ 4,462,873
--------------------------------------------------------------------------------------------------------
United Kingdom - 2.2%
Energis PLC (Telecommunications)* 1,533,000 $ 13,110,034
Vodafone Group PLC (Telecommunications)* 11,021,405 45,847,774
--------------
$ 58,957,808
--------------------------------------------------------------------------------------------------------
Total Foreign Stocks $ 338,853,616
--------------------------------------------------------------------------------------------------------
Total Stocks (Identified Cost, $1,818,811,726) $1,983,822,230
--------------------------------------------------------------------------------------------------------
Bonds - 12.1%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------------------------------------
U.S. Bonds - 12.0%
Banks and Credit Companies - 0.1%
Beaver Valley Funding Corp. II, 9s, 2017 $ 362 $ 373,885
Midamerican Funding LLC, 5.85s, 2001 1,315 1,309,262
Midamerican Funding LLC, 6.927s, 2029 1,230 1,076,971
Midland Cogeneration Venture Corp., 10.33s, 2002 205 208,399
Midland Funding Corp., 10.33s, 2002 779 794,025
--------------
$ 3,762,542
--------------------------------------------------------------------------------------------------------
Energy
Ocean Energy, Inc., 8.875s, 2007 $ 850 $ 860,625
--------------------------------------------------------------------------------------------------------
Financial Institutions - 0.1%
Salton Sea Funding Corp., 7.84s, 2010 $ 1,110 $ 1,080,940
Salton Sea Funding Corp., 8.3s, 2011 838 836,218
--------------
$ 1,917,158
--------------------------------------------------------------------------------------------------------
Medical and Health Technology and Services
Tenet Healthcare Corp., 8s, 2005 $ 985 $ 971,456
--------------------------------------------------------------------------------------------------------
Telecommunications - 0.7%
Intermedia Communications, Inc., 1s, 2009 $ 17,850 $ 11,468,625
Sprint Capital Corp., 7.625s, 2002 1,451 1,455,570
Sprint Spectrum LP, 11s, 2006 1,463 1,575,388
Telecomunicaciones de Puerto Rico, Inc., 6.65s, 2006 296 281,420
Telecomunicaciones de Puerto Rico, Inc., 6.8s, 2009 687 640,254
TXU Eastern Funding Co., 6.75s, 2009 1,488 1,340,605
WorldCom, Inc., 8.875s, 2006 720 742,968
--------------
$ 17,504,830
--------------------------------------------------------------------------------------------------------
U.S. Government Guaranteed - 7.3%
Government National Mortgage Association - 0.4%
GNMA, 7s, 2027 - 2028 $ 2,171 $ 2,140,246
GNMA, 7.5s, 2025 - 2028 4,116 4,132,301
GNMA, 8s, 2025 - 2030 4,246 4,318,025
--------------
$ 10,590,572
--------------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 6.9%
U.S. Treasury Bonds, 6.25s, 2030 $ 7,689 $ 8,188,785
U.S. Treasury Bonds, 10.375s, 2009 30,628 35,274,880
U.S. Treasury Notes, 5.75s, 2010 138,561 138,430,753
--------------
$ 181,894,418
--------------------------------------------------------------------------------------------------------
Total U.S. Government Guaranteed $ 192,484,990
--------------------------------------------------------------------------------------------------------
U.S. Federal Agencies - 3.1%
Federal Home Loan Mortgage Corp., 5s, 2004 $ 490 $ 468,793
Federal National Mortgage Assn., 7s, 2029 46,523 47,326,656
Federal National Mortgage Assn., 7.25s, 2010 31,198 32,338,599
--------------
$ 80,134,048
--------------------------------------------------------------------------------------------------------
Utilities - Electric - 0.6%
California Infrastructure, 6.17s, 2003 $ 993 $ 990,035
Connecticut Light & Power Co., 8.59s, 2003 1,000 998,550
Detroit Edison Co., 7.5s, 2005 3,647 3,691,818
Illinois Power Special Purpose Trust, 5.26s, 2003 1,235 1,226,305
Niagara Mohawk Power Corp., 7.75s, 2006 2,183 2,229,563
Niagara Mohawk Power Corp., 8.77s, 2018 1,481 1,536,597
NRG Energy South Central, 8.962s, 2016 703 723,160
NSTAR Co., 8s, 2010 2,443 2,464,621
Toledo Edison Co., 9.5s, 2001 1,385 1,395,858
--------------
$ 15,256,507
--------------------------------------------------------------------------------------------------------
Utilities - Gas - 0.1%
Columbia Gas Systems, Inc., 6.39s, 2000 $ 2,245 $ 2,242,283
--------------------------------------------------------------------------------------------------------
Total U.S. Bonds $ 315,134,439
--------------------------------------------------------------------------------------------------------
Foreign Bonds - 0.1%
Canada
Gulf Canada Resources Ltd., 9.25s, 2004 (Oils) $ 850 $ 863,813
--------------------------------------------------------------------------------------------------------
Netherlands - 0.1%
Completel Europe N.V., 0s to 2004, 14s to 2009
(Telecommunications) $ 2,927 $ 1,317,150
--------------------------------------------------------------------------------------------------------
Total Foreign Bonds $ 2,180,963
--------------------------------------------------------------------------------------------------------
Total Bonds (Identified Cost, $317,827,317) $ 317,315,402
--------------------------------------------------------------------------------------------------------
Convertible Preferred Stocks - 8.3%
--------------------------------------------------------------------------------------------------------
SHARES
--------------------------------------------------------------------------------------------------------
U.S. Convertible Preferred Stocks - 6.7%
Oils - 0.9%
Coastal Corp., 6.625% 560,000 $ 24,080,000
--------------------------------------------------------------------------------------------------------
Telecommunications - 2.9%
Cox Communications, Inc., 0.25% 147,100 $ 6,344,423
Cox Communications, Inc., 7.00% 301,700 17,649,450
Cox Communications, Inc., 7.75% 280,900 21,570,311
DECS Trust VI, 6.25% 110,100 4,053,056
UnitedGlobalCom, Inc., "C", 7.00% 295,420 12,223,003
UnitedGlobalCom, Inc., "D", 7.00% 115,020 3,594,375
XO Communications, Inc., 6.5% 61,200 9,505,890
--------------
$ 74,940,508
--------------------------------------------------------------------------------------------------------
Utilities - Electric - 2.7%
AES Trust III, 6.75% 285,700 $ 25,427,300
AES Trust VII, 6.00% 200,800 14,194,050
Calpine Capital Trust, 5.75% 71,600 9,880,800
CMS Energy Corp., 8.75% 489,300 15,474,112
Southern Energy, Inc., 6.25% 76,600 4,653,450
--------------
$ 69,629,712
--------------------------------------------------------------------------------------------------------
Utilities - Telephone - 0.6%
Williams Communications Group, Inc., 6.75% 412,300 $ 16,492,000
--------------------------------------------------------------------------------------------------------
Total U.S. Convertible Preferred Stocks $ 185,142,220
--------------------------------------------------------------------------------------------------------
Foreign Convertible Preferred Stocks - 1.2%
Bermuda - 1.2%
Global Crossing Ltd., 7.00% (Telecommunications)## 86,000 $ 13,631,000
Global Crossing Ltd., 7.00% (Telecommunications) 43,700 7,035,700
Global Crossing Ltd., 6.75% (Telecommunications) 57,300 11,732,175
--------------
$ 32,398,875
--------------------------------------------------------------------------------------------------------
Total Foreign Convertible Preferred Stocks $ 32,398,875
--------------------------------------------------------------------------------------------------------
Total Convertible Preferred Stocks (Identified Cost, $211,140,433) $ 217,541,095
--------------------------------------------------------------------------------------------------------
Convertible Bonds - 4.0%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------------------------------------
U.S. Convertible Bonds - 3.4%
Energy - 1.0%
Alliant Energy Resources, Inc., 7.25s to 2003, 2.5s
to 2030 $ 391 $ 24,943,329
--------------------------------------------------------------------------------------------------------
Financial Institutions - 1.2%
ADT Operations, Inc., 0s, 2010 $ 10,405 $ 32,255,500
--------------------------------------------------------------------------------------------------------
Telecommunications - 1.2%
Echostar Communications, 4.875s, 2007 $ 15,960 $ 18,693,948
Liberty Media Group, 4s, 2029## 5,776 5,884,300
NTL, Inc., 5.75s, 2009## 9,870 6,527,031
--------------
$ 31,105,279
--------------------------------------------------------------------------------------------------------
Total U.S. Convertible Bonds $ 88,304,108
--------------------------------------------------------------------------------------------------------
Foreign Convertible Bonds - 0.6%
Grand Cayman Islands - 0.2%
Hutchison Whampoa International Ltd., 2.875s, 2003
(Telecommunications) $ 5,600 $ 5,943,280
--------------------------------------------------------------------------------------------------------
Hong Kong - 0.1%
China Mobile Ltd., 2.25s, 2005 (Cellular Telephones) $ 2,956 $ 2,956,000
--------------------------------------------------------------------------------------------------------
United Kingdom - 0.3%
Telewest Finance Jersey Ltd., 6s, 2005 (Entertainment)+ $ 10,893 $ 7,557,019
--------------------------------------------------------------------------------------------------------
Total Foreign Convertible Bonds $ 16,456,299
--------------------------------------------------------------------------------------------------------
Total Convertible Bonds (Identified Cost, $100,128,004) $ 104,760,407
--------------------------------------------------------------------------------------------------------
Preferred Stock - 0.1%
--------------------------------------------------------------------------------------------------------
SHARES
--------------------------------------------------------------------------------------------------------
Telecommunications - 0.1%
Mpower Communications Corp.
(Identified Cost, $12,428,050) 241,200 $ 3,015,000
--------------------------------------------------------------------------------------------------------
Floating Rate Demand Notes - 0.1%
--------------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
(000 OMITTED)
--------------------------------------------------------------------------------------------------------
MM
Pacific Gas & Electric Co. due 10/31/01
at Amortized Cost and Value $ 2,976 $ 2,976,000
--------------------------------------------------------------------------------------------------------
Short-Term Obligations - 1.4%
--------------------------------------------------------------------------------------------------------
MM
American Express Credit Corp., due 11/01/00 $ 363 $ 363,000
Associates Corp. of North America, due 11/01/00 7,290 7,290,000
Chase Nassau Time Deposit, due 11/01/00 525 525,000
Ford Motor Credit Corp., due 11/01/00 8,280 8,280,000
General Electric Capital Corp., due 11/01/00 10,084 10,084,000
General Motors Acceptance Corp., due 11/01/00 8,151 8,151,000
Prudential Funding Corp., due 11/01/00 932 932,000
Salomon Smith Barney Holdings, Inc., due 11/01/00 206 206,000
--------------------------------------------------------------------------------------------------------
Total Short-Term Obligations, at Amortized Cost $ 35,831,000
--------------------------------------------------------------------------------------------------------
Total Investments (Identified Cost, $2,499,142,530) $2,665,261,134
--------------------------------------------------------------------------------------------------------
Other Assets, Less Liabilities - (1.8)% (47,879,624)
--------------------------------------------------------------------------------------------------------
Net Assets - 100.0% $2,617,381,510
--------------------------------------------------------------------------------------------------------
* Non-income producing security.
## SEC Rule 144A restriction.
+ Restricted security.
See notes to financial statements.
</TABLE>
<PAGE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
-------------------------------------------------------------------------------
OCTOBER 31, 2000
-------------------------------------------------------------------------------
Assets:
Investments, at value (identified cost, $2,499,142,530) $2,665,261,134
Investments of cash collateral for securities loaned,
at identified cost and value 207,550,803
Cash 60,769
Foreign currency, at value (identified cost, $90,813) 91,810
Receivable for investments sold 17,539,961
Receivable for fund shares sold 15,675,827
Interest and dividends receivable 10,685,658
Other assets 5,799
--------------
Total assets $2,916,871,761
--------------
Liabilities:
Distributions payable $ 2,215,898
Payable for investments purchased 87,132,619
Payable for fund shares reacquired 1,992,953
Collateral for securities loaned, at value 207,550,803
Payable to affiliates -
Management fee 34,981
Shareholder servicing agent fee 6,985
Distribution and service fee 51,658
Administrative fee 1,155
Accrued expenses and other liabilities 503,199
--------------
Total liabilities $ 299,490,251
--------------
Net assets $2,617,381,510
==============
Net assets consist of:
Paid-in capital $2,201,739,703
Unrealized appreciation on investments and translation
of assets and liabilities in foreign currencies 166,113,517
Accumulated undistributed net realized gain on
investments and foreign
currency transactions 235,535,308
Accumulated undistributed net investment income 13,992,982
--------------
Total $2,617,381,510
==============
Shares of beneficial interest outstanding 191,986,110
===========
Class A shares:
Net asset value per share
(net assets of $899,682,197 / 65,870,700 shares of
beneficial interest outstanding) $13.66
======
Offering price per share (100 / 95.25 of net asset
value per share) $14.34
======
Class B shares:
Net asset value and offering price per share
(net assets of $1,279,546,783 / 93,965,800 shares of
beneficial interest outstanding) $13.62
======
Class C shares:
Net asset value and offering price per share
(net assets of $433,997,637 / 31,845,905 shares of
beneficial interest outstanding) $13.63
======
Class I shares:
Net asset value, offering price, and redemption price per
share (net assets of $4,154,893 / 303,705 shares of
beneficial interest outstanding) $13.68
======
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, 2000
-------------------------------------------------------------------------------
Net investment income:
Income -
Dividends $ 81,778,110
Interest 19,804,619
Foreign taxes withheld (476,156)
------------
Total investment income $101,106,573
------------
Expenses -
Management fee $ 13,506,380
Trustees' compensation 47,746
Shareholder servicing agent fee 1,968,361
Distribution and service fee (Class A) 1,657,595
Distribution and service fee (Class B) 9,867,079
Distribution and service fee (Class C) 3,163,255
Administrative fee 291,703
Custodian fee 614,235
Printing 71,600
Postage 195,584
Auditing fees 31,228
Legal fees 8,783
Miscellaneous 1,480,288
------------
Total expenses $ 32,903,837
Fees paid indirectly (201,335)
Reduction of expenses by investment adviser (3,664,567)
------------
Net expenses $ 29,037,935
------------
Net investment income $ 72,068,638
------------
Realized and unrealized gain (loss) on investments:
Realized gain (loss) (identified cost basis) -
Investment transactions $239,790,964
Foreign currency transactions (566,249)
------------
Net realized gain on investments and foreign currency
transactions $239,224,715
------------
Change in unrealized appreciation (depreciation) -
Investments $ 63,602,179
Translation of assets and liabilities in foreign
currencies (76,751)
------------
Net unrealized gain on investments and foreign
currency translation $ 63,525,428
------------
Net realized and unrealized gain on investments and
foreign currency $302,750,143
------------
Increase in net assets from operations $374,818,781
============
See notes to financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Statement of Changes in Net Assets
<CAPTION>
----------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999
----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets:
From operations -
Net investment income $ 72,068,638 $ 14,848,769
Net realized gain on investments and foreign currency
transactions 239,224,715 127,939,149
Net unrealized gain on investments and foreign
currency translation 63,525,428 76,569,181
-------------- --------------
Increase in net assets from operations $ 374,818,781 $ 219,357,099
-------------- --------------
Distributions declared to shareholders -
From net investment income (Class A) $ (22,758,967) $ (8,787,769)
From net investment income (Class B) (26,218,595) (7,897,582)
From net investment income (Class C) (8,575,274) (2,253,120)
From net investment income (Class I) (84,014) (31,538)
In excess of net investment income (Class A) -- (182,692)
In excess of net investment income (Class B) -- (164,148)
In excess of net investment income (Class C) -- (46,830)
In excess of net investment income (Class I) -- (655)
From net realized gain on investments and foreign
currency transactions (Class A) (40,693,133) (19,331,261)
From net realized gain on investments and foreign
currency transactions (Class B) (63,117,808) (22,418,158)
From net realized gain on investments and foreign
currency transactions (Class C) (19,343,816) (5,964,171)
From net realized gain on investments and foreign
currency transactions (Class I) (126,624) (67,729)
-------------- --------------
Total distributions declared to shareholders $ (180,918,231) $ (67,147,653)
-------------- --------------
Net increase in net assets from fund share transactions $1,071,884,319 $ 416,848,960
-------------- --------------
Total increase in net assets $1,265,784,869 $ 569,058,406
Net assets:
At beginning of period 1,351,596,641 782,538,235
-------------- --------------
At end of period (including accumulated undistributed
net investment income of $13,992,982 and accumulated
distributions in excess of net investment income of $394,325) $2,617,381,510 $1,351,596,641
============== ==============
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS A
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $12.23 $10.76 $10.39 $ 9.12 $ 8.20
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.55 $ 0.21 $ 0.27 $ 0.32 $ 0.38
Net realized and unrealized gain on
investments and foreign currency 2.40 2.13 1.78 2.08 1.07
------ ------ ------ ------ ------
Total from investment operations $ 2.95 $ 2.34 $ 2.05 $ 2.40 $ 1.45
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.42) $(0.25) $(0.27) $(0.34) $(0.32)
From net realized gain on investments and
foreign currency transactions (1.10) (0.61) (1.39) (0.79) (0.21)
In excess of net investment income -- (0.01) (0.02) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.52) $(0.87) $(1.68) $(1.13) $(0.53)
------ ------ ------ ------ ------
Net asset value - end of period $13.66 $12.23 $10.76 $10.39 $ 9.12
====== ====== ====== ====== ======
Total return(+) 25.88% 23.05% 22.13% 28.62% 18.41%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 0.98% 1.05% 1.05% 1.10% 1.08%
Net investment income 4.11% 1.88% 2.60% 3.27% 4.37%
Portfolio turnover 113% 137% 124% 153% 137%
Net assets at end of period (000 Omitted) $899,682 $447,121 $324,098 $90,083 $60,345
(S) The investment adviser voluntarily waived a portion of its fee for the periods indicated. If this fee had been incurred by
the fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.53 $ 0.20 $ 0.26 $ 0.30 $ 0.34
Ratios (to average net assets):
Expenses## 1.16% 1.10% 1.15% 1.29% 1.42%
Net investment income 3.93% 1.83% 2.50% 3.08% 4.03%
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and 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>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS B
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $12.19 $10.73 $10.36 $ 9.10 $ 8.18
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.45 $ 0.12 $ 0.19 $ 0.24 $ 0.31
Net realized and unrealized gain on
investments and foreign currency 2.40 2.12 1.79 2.08 1.07
------ ------ ------ ------ ------
Total from investment operations $ 2.85 $ 2.24 $ 1.98 $ 2.32 $ 1.38
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.32) $(0.16) $(0.20) $(0.27) $(0.25)
From net realized gain on investments
and foreign currency transactions (1.10) (0.61) (1.39) (0.79) (0.21)
In excess of net investment income -- (0.01) (0.02) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.42) $(0.78) $(1.61) $(1.06) $(0.46)
------ ------ ------ ------ ------
Net asset value - end of period $13.62 $12.19 $10.73 $10.36 $ 9.10
====== ====== ====== ====== ======
Total return 25.04% 22.11% 21.27% 27.59% 17.50%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.73% 1.80% 1.80% 1.87% 1.89%
Net investment income 3.40% 1.08% 1.85% 2.49% 3.53%
Portfolio turnover 113% 137% 124% 153% 137%
Net assets at end of period (000 Omitted) $1,279,547 $691,115 $361,439 $91,973 $49,877
(S) The investment adviser voluntarily waived a portion of its fee for the periods indicated. If this fee had been incurred by
the fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.43 $ 0.11 $ 0.18 $ 0.22 $ 0.28
Ratios (to average net assets):
Expenses## 1.91% 1.85% 1.90% 2.06% 2.23%
Net investment income 3.22% 1.03% 1.75% 2.30% 3.19%
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, 2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------------------------
CLASS C
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $12.21 $10.75 $10.37 $ 9.10 $ 8.18
------ ------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.44 $ 0.12 $ 0.19 $ 0.24 $ 0.31
Net realized and unrealized gain on
investments and foreign currency 2.40 2.12 1.80 2.09 1.07
------ ------ ------ ------ ------
Total from investment operations $ 2.84 $ 2.24 $ 1.99 $ 2.33 $ 1.38
------ ------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.32) $(0.16) $(0.20) $(0.27) $(0.25)
From net realized gain on investments and
foreign currency transactions (1.10) (0.61) (1.39) (0.79) (0.21)
In excess of net investment income -- (0.01) (0.02) -- --
------ ------ ------ ------ ------
Total distributions declared to
shareholders $(1.42) $(0.78) $(1.61) $(1.06) $(0.46)
------ ------ ------ ------ ------
Net asset value - end of period $13.63 $12.21 $10.75 $10.37 $ 9.10
====== ====== ====== ====== ======
Total return 24.91% 22.18% 21.25% 27.71% 17.57%
Ratios (to average net assets)/Supplemental data(S):
Expenses## 1.73% 1.81% 1.80% 1.85% 1.82%
Net investment income 3.35% 1.08% 1.85% 2.47% 3.60%
Portfolio turnover 113% 137% 124% 153% 137%
Net assets at end of period (000 Omitted) $433,998 $211,924 $95,856 $22,788 $8,231
(S) The investment adviser voluntarily waived a portion of its fee for the periods indicated. If this fee had been incurred by
the fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.42 $ 0.11 $ 0.18 $ 0.22 $ 0.28
Ratios (to average net assets):
Expenses## 1.91% 1.86% 1.90% 2.04% 2.16%
Net investment income 3.17% 1.03% 1.75% 2.28% 3.26%
# Per share data are based on average shares outstanding.
## Ratios do not reflect expense reductions from directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
FINANCIAL STATEMENTS -- continued
Financial Highlights - continued
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
YEAR ENDED OCTOBER 31, PERIOD ENDED
------------------------------------------------ OCTOBER 31,
2000 1999 1998 1997*
------------------------------------------------------------------------------------------------------------------------
CLASS I
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per share data (for a share outstanding
throughout each period):
Net asset value - beginning of period $12.25 $10.78 $10.39 $ 8.90
------ ------ ------ ------
Income from investment operations# -
Net investment income(S) $ 0.57 $ 0.24 $ 0.30 $ 0.29
Net realized and unrealized gain on
investments and foreign currency 2.41 2.13 1.80 1.48
------ ------ ------ ------
Total from investment operations $ 2.98 $ 2.37 $ 2.10 $ 1.77
------ ------ ------ ------
Less distributions declared to shareholders -
From net investment income $(0.45) $(0.28) $(0.29) $(0.28)
From net realized gain on investments and
foreign currency transactions
(1.10) (0.61) (1.39) --
In excess of net investment income and
foreign currency transactions
-- (0.01) (0.03) --
------ ------ ------ ------
Total distributions declared to
shareholders $(1.55) $(0.90) $(1.71) $(0.28)
------ ------ ------ ------
Net asset value - end of period $13.68 $12.25 $10.78 $10.39
====== ====== ====== ======
Total return 26.14% 23.44% 22.52% 20.15%++
Ratios (to average net assets)/Supplemental data:
Expenses## 0.73% 0.80% 0.80% 0.86%+
Net investment income 4.38% 2.14% 2.84% 3.39%+
Portfolio turnover 113% 137% 124% 153%
Net assets at end of period (000 Omitted) $4,155 $1,437 $1,145 $725
(S) The investment adviser voluntarily waived a portion of its fee for the periods indicated. If this fee had been incurred by
the fund, the net investment income per share and the ratios would have been:
Net investment income $ 0.55 $ 0.23 $ 0.29 $ 0.27
Ratios (to average net assets:
Expenses## 0.91% 0.85% 0.90% 1.05%+
Net investment income 4.20% 2.09% 2.74% 3.20%+
* For the period from the inception of Class I shares, 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 directed brokerage and certain expense offset arrangements.
See notes to financial statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(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. The fund can
invest in foreign securities. Investments in foreign securities are vulnerable
to the effects of changes in the relative values of the local currency and the
U.S. dollar and to the effects of changes in each country's legal, political,
and economic environment.
Investment Valuations - Equity securities listed on securities exchanges or
reported through the NASDAQ system are reported at market value using last sale
prices. Unlisted equity securities or listed equity securities for which last
sale prices are not available are reported at market value using last quoted bid
prices. Debt securities (other than short-term obligations which mature in 60
days or less), including listed issues, 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 in good faith, at fair value, by the
Trustees.
Foreign Currency Translation - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investments, income, and expenses are converted into U.S.
dollars based upon currency exchange rates prevailing on the respective dates of
such transactions. Gains and losses attributable to foreign currency exchange
rates on sales of securities are recorded for financial statement purposes as
net realized gains and losses on investments. Gains and losses attributable to
foreign exchange rate movements on income and expenses are recorded for
financial statement purposes as foreign currency transaction gains and losses.
That portion of both realized and unrealized gains and losses on investments
that results from fluctuations in foreign currency exchange rates is not
separately disclosed.
Security Loans - State Street Bank and Trust Company ("State Street") and Chase
Manhattan Bank ("Chase"), as lending agents, may loan the securities of the fund
to certain qualified institutions (the "Borrowers") approved by the fund. The
loans are collateralized at all times by cash and U.S. Treasury securities in an
amount at least equal to the market value of the securities loaned. State Street
and Chase provide the fund with indemnification against Borrower default. The
fund bears the risk of loss with respect to the investment of cash collateral.
Cash collateral is invested in short-term securities. A portion of the income
generated upon investment of the collateral is remitted to the Borrowers, and
the remainder is allocated between the fund and the lending agents. On loans
collateralized by U.S. Treasury securities, a fee is received from the Borrower,
and is allocated between the fund and the lending agents. Income from securities
lending is included in interest income on the Statement of Operations. The
dividend and interest income earned on the securities loaned is accounted for in
the same manner as other dividend and interest income.
At October 31, 2000, the value of securities loaned was $203,516,389. These
loans were collateralized by U.S. Treasury securities of $3,256,008 and cash of
$207,550,803 which was invested in the following short-term obligations:
SHARES/ IDENTIFIED
PRINCIPAL COST AND
AMOUNT VALUE
---------------------------------------------------------------------------
Navigator Securities Lending Prime
Portfolio 201,754,800 $201,754,800
AT&T Corp. Due 7/19/2001 $ 2,000,000 2,000,000
Salomon Smith Barney, Inc., due 11/1/2000 $ 3,796,003 3,796,003
------------
Total investments of cash collateral for
securities loaned $207,550,803
============
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 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 $150,001
under this arrangement. The fund has entered into a directed brokerage
agreement, under which the broker will credit the fund a portion of the
commissions generated, to offset certain expenses of the fund. For the period,
the fund's custodian fees were reduced by $51,334 under this agreement. These
amounts are 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 net 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 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. During
the year ended October 31, 2000, accumulated undistributed net realized gain on
investments and foreign currency transactions was increased by $612,859,
accumulated undistributed net investment income was decreased by $44,481 and
paid-in capital was decreased by $568,378 due to differences between book and
tax accounting for non-taxable dividends, mortgage-backed securities and foreign
currency transactions. This change had no effect on the net assets or net asset
value per share.
Multiple Classes of Shares of Beneficial Interest - The fund offers multiple
classes of shares that 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 0.375% of
the fund's 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 shown as a reduction of total 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. Included in Trustees' compensation is a net
periodic pension expense of $15,662 for the year ended October 31, 2000.
Administrator - The fund has an administrative services agreement with MFS to
provide the fund with certain financial, legal, shareholder servicing,
compliance, and other administrative services. As a partial reimbursement for
the cost of providing these services, the fund incurs an administrative fee at
the following annual percentages of the fund's average daily net assets:
First $2 billion 0.0175%
Next $2.5 billion 0.0130%
Next $2.5 billion 0.0005%
In excess of $7 billion 0.0000%
Distributor - MFD, a wholly owned subsidiary of MFS, as distributor, received
$1,130,328 for the year ended October 31, 2000, as its portion of the sales
charge on sales of Class A shares of the fund.
The Trustees have adopted a distribution plan for Class A, Class B, and Class C
shares pursuant to Rule 12b-1 of the Investment Company Act of 1940 as follows:
The fund's distribution plan provides that the fund will pay MFD up to 0.35% 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 $61,846 for the year ended October 31,
2000. Payment of the 0.10% per annum Class A distribution fee will commence on
such a date as the Trustees of the Trust may determine. Fees incurred under the
distribution plan during the year ended October 31, 2000, 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 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 $36,601 and $7,398 for Class B and Class C shares, respectively, for
the year ended October 31, 2000. Fees incurred under the distribution plan
during the year ended October 31, 2000, were 1.00% and 1.00% of average daily
net assets attributable to Class B and Class C shares, respectively.
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,
2000, were $40,900, $1,468,783, and $76,083 for Class A, Class B, and Class C
shares, respectively.
Shareholder Servicing Agent - MFSC, a wholly owned subsidiary of MFS, earns a
fee for its services as shareholder servicing agent. The fee is calculated as a
percentage of the fund's average daily net assets at an annual rate of 0.10%.
(4) Portfolio Securities
Purchases and sales of investments, other than purchased option transactions
and short-term obligations, were as follows:
PURCHASES SALES
-------------------------------------------------------------------------------
U.S. government securities $ 466,678,518 $ 218,329,217
-------------- --------------
Investments (non-U.S. government securities) $2,665,805,605 $1,913,980,739
-------------- --------------
The cost and unrealized appreciation and depreciation in the value of the
investments owned by the fund, as computed on a federal income tax basis, are
as follows:
Aggregate cost $2,504,769,941
--------------
Gross unrealized appreciation $ 349,276,764
Gross unrealized depreciation (188,785,571)
--------------
Net unrealized appreciation $ 160,491,193
==============
(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, 2000 YEAR ENDED OCTOBER 31, 1999
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 35,843,648 $ 479,294,313 26,782,130 $296,199,639
Shares issued to shareholders
in reinvestment of distributions 4,142,162 50,937,598 1,705,504 18,153,918
Shares reacquired (10,670,235) (141,864,245) (22,039,306) (244,032,316)
----------- ------------- ----------- ------------
Net increase 29,315,575 $ 388,367,666 6,448,328 $ 70,321,241
=========== ============= =========== ============
<CAPTION>
Class B shares
YEAR ENDED OCTOBER 31, 2000 YEAR ENDED OCTOBER 31, 1999
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 41,191,474 $ 547,010,960 29,604,556 $328,295,994
Shares issued to shareholders
in reinvestment of distributions 5,783,657 70,344,204 2,190,312 23,087,105
Shares reacquired (9,688,575) (127,809,409) (8,785,261) (98,304,257)
----------- ------------- ----------- ------------
Net increase 37,286,556 $ 489,545,755 23,009,607 $253,078,842
=========== ============= =========== ============
<CAPTION>
Class C shares
YEAR ENDED OCTOBER 31, 2000 YEAR ENDED OCTOBER 31, 1999
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 17,474,404 $ 232,822,720 10,720,902 $119,141,707
Shares issued to shareholders
in reinvestment of distributions 1,600,604 19,520,304 513,712 5,429,977
Shares reacquired (4,588,512) (60,847,338) (2,795,900) (31,245,007)
----------- ------------- ----------- ------------
Net increase 14,486,496 $ 191,495,686 8,438,714 $ 93,326,677
=========== ============= =========== ============
<CAPTION>
Class I shares
YEAR ENDED OCTOBER 31, 2000 YEAR ENDED OCTOBER 31, 1999
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares sold 365,650 $ 4,953,504 55,017 $ 620,395
Shares issued to shareholders
in reinvestment of distributions 15,834 195,520 8,561 91,116
Shares reacquired (195,059) (2,673,812) (52,522) (589,311)
----------- ------------- ----------- ------------
Net increase 186,425 $ 2,475,212 11,056 $ 122,200
=========== ============= =========== ============
</TABLE>
(6) Line of Credit
The fund and other affiliated funds participate in a $1.1 billion unsecured line
of credit provided by a syndication of banks under a line of credit agreement.
Borrowings may be made for temporary financing needs. 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,
2000, was $15,525. The fund had no borrowings during the year.
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees of MFS Series Trust VI and Shareholders of MFS Utilities Fund:
We have audited the accompanying statement of assets and liabilities of MFS
Utilities Fund (the fund), including the schedule of portfolio investments, as
of October 31, 2000, 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 auditing standards generally accepted
in the United States. 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, 2000, 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 Utilities Fund at October 31, 2000, 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 accounting principles generally accepted
in the United States.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
December 8, 2000
<PAGE>
-------------------------------------------------------------------------------
FEDERAL TAX INFORMATION
-------------------------------------------------------------------------------
IN JANUARY 2001, SHAREHOLDERS WILL BE MAILED A FORM 1099-DIV REPORTING
THE FEDERAL TAX STATUS OF ALL DISTRIBUTIONS PAID DURING THE CALENDAR
YEAR 2000.
THE FUND HAS DESIGNATED $30,611,097 AS A CAPITAL GAIN DIVIDEND FOR THE
YEAR ENDED OCTOBER 31, 2000.
FOR THE YEAR ENDED OCTOBER 31, 2000, THE AMOUNT OF DISTRIBUTIONS FROM
INCOME ELIGIBLE FOR THE 70% DIVIDENDS RECEIVED DEDUCTION FOR
CORPORATIONS IS 13.08%.
-------------------------------------------------------------------------------
<PAGE>
<TABLE>
MFS(R) UTILITIES FUND
<S> <C>
TRUSTEES ASSISTANT TREASURERS
Marshall N. Cohan - Private Investor Mark E. Bradley*
Robert R. Flaherty*
Lawrence H. Cohn, M.D. - Chief of Cardiac Laura F. Healy*
Surgery, Brigham and Women's Hospital; Ellen Moynihan*
Professor of Surgery, Harvard Medical School
SECRETARY
The Hon. Sir J. David Gibbons, KBE - Chief Stephen E. Cavan*
Executive Officer, Edmund Gibbons Ltd.;
Chairman, Colonial Insurance Company, Ltd. ASSISTANT SECRETARY
James R. Bordewick, Jr.*
Abby M. O'Neill - Private Investor
CUSTODIAN
Walter E. Robb, III - President and Treasurer, State Street Bank and Trust Company
Benchmark Advisors, Inc. (corporate financial
consultants); President, Benchmark Consulting AUDITORS
Group, Inc. (office services) Ernst & Young LLP
Arnold D. Scott* - Senior Executive INVESTOR INFORMATION
Vice President, Director, and Secretary, For information on MFS mutual funds, call your
MFS Investment Management investment professional or, for an information
kit, call toll free: 1-800-637-2929 any
Jeffrey L. Shames* - Chairman and Chief business day from 9 a.m. to 5 p.m. Eastern time
Executive Officer, MFS Investment Management (or leave a message anytime).
J. Dale Sherratt - President, Insight INVESTOR SERVICE
Resources, Inc. (acquisition planning MFS Service Center, Inc.
specialists) P.O. Box 2281
Boston, MA 02107-9906
Ward Smith - Former Chairman (until 1994),
NACCO Industries (holding company) For general information, call toll free:
1-800-225-2606 any business day from
INVESTMENT ADVISER 8 a.m. to 8 p.m. Eastern time.
Massachusetts Financial Services Company
500 Boylston Street For service to speech- or hearing-impaired,
Boston, MA 02116-3741 call toll free: 1-800-637-6576 any business day
from 9 a.m. to 5 p.m. Eastern time. (To use
DISTRIBUTOR this service, your phone must be equipped with
MFS Fund Distributors, Inc. a Telecommunications Device for the Deaf.)
500 Boylston Street
Boston, MA 02116-3741 For share prices, account balances, exchanges,
or stock and bond outlooks, call toll free:
CHAIRMAN AND PRESIDENT 1-800-MFS-TALK (1-800-637-8255) anytime from a
Jeffrey L. Shames* touch-tone telephone.
PORTFOLIO MANAGER WORLD WIDE WEB
Maura A. Shaughnessy* www.mfs.com
TREASURER
James O. Yost*
+ Independent Trustee
* MFS Investment Management
</TABLE>
<PAGE>
MFS(R) UTILITIES FUND ------------
PRSRT STD
U.S. POSTAGE
[Logo] M F S(R) PAID
INVESTMENT MANAGEMENT MFS
We invented the mutual fund(R) ------------
500 Boylston Street
Boston, MA 02116-3741
(c)2000 MFS Investment Management.(R)
MFS(R) investment products are offered through MFS Fund Distributors, Inc.,
500 Boylston Street, Boston, MA 02116.
MUF-2 12/00 164M 35/235/335/835
